statements.

www.sec.gov. Forward-looking statements included herein speak only as of the date hereof and DealerTrack disclaims any obligation to revise or update such statements to refl ect events or circumstances after the date hereof or to refl ect the occurrence of unanticipated events or circumstances.

Advisor,

Partner,

Founder,

TNS, Inc.

Founder,

The idea behind DealerTrack is simple: provide technology that takes the ineffi ciencies out of the process of selling and fi nancing cars and trucks, and help our customers increase profi ts while reducing costs.

That simple idea has driven us to develop a broad and powerful network over the past six years that connects the vast majority of franchised auto dealers to the fi nancing sources, information providers and others who serve them. Through this network we deliver high-value, low cost, innovative, integrated software and data solutions to the retail auto industry.

In today’s environment of reduced new car margins, high gas prices, OEM diffi culties and slightly lower auto sales than in past years, dealers must adapt. There is a greater need for solutions that help dealers and industry participants fi nd new sources of profi t and operate more effi ciently--their survival may depend on it. From my years of running dealerships, I understand the challenges facing our customers. All of us at DealerTrack are committed to providing the right solutions to help them succeed in these demanding times.

We believe the key to DealerTrack’s success is our team’s unwavering focus on the needs and expectations of our customers. By meeting those expectations through consistent execution and frequent innovation, we delivered very strong performance and achieved strategic gains in 2006.

Chairman & CEODealerTrack Holdings, Inc.

Continued growth momentum over the past year enhanced the strength of our business. In 2006, revenues increased 44 percent to $173.3 million, with solid increases in both subscription and transaction services business. Net income increased over 300 percent to $19.3 million, and operating cash fl ow increased 41 percent to $45.5 million. We also completed a successful follow-on public offering in October, which provided an orderly distribution of shares held by early-stage investors and yielded over $60 million to fund potential acquisitions and investments in product development and strategic alliances.

Our growth strategy remains consistent, and includes expanding our customer base, cross-selling additional products and services, expanding our product and service offerings, and pursuing strategic acquisitions that enhance our network, increase our operating leverage and utilize our broad distribution channels. We continue to believe there is signifi cant market opportunity available to us as we convert traditional paper processes in the auto sales and fi nance process to faster, more accurate and more effi cient electronic processes. The relatively early stage of penetration for most of our products and services provides considerable opportunity for growth in our existing businesses.

Throughout the year, we expanded the reach of the DealerTrack network and our product and service offerings. Leveraging our core competence of integrating fi nancing sources, we connected our 305th lender at the end of 2006. Over 22,000 dealers were active in our network as of December 31, 2006, representing over 89 percent of franchise dealers and 7 percent of independent dealers. Those dealers, fi nancing sources and other providers generated over 71 million transactions processed through the DealerTrack network in 2006. Strong execution in sales and marketing efforts enabled us to grow the number of subscriptions in the network to approxiamately 21,600. By 2006 year end, over 10,000 dealers subscribed to one or more of our subscription products. Strategic acquisitions for the year included DealerWire, GlobalFax, and DealerWare, which provided additional technology and customer relationships.

We enjoy market leadership for most of our individual subscription products. The breadth of our network of dealers, fi nancing sources and other providers is unmatched. Integration between our subscription products and our transaction network provides unique competitive strengths in the marketplace. Our emphasis on integration and innovation differentiates DealerTrack’s offering to our customers.

I am truly proud of our achievements in our fi rst full year as a public company and I am excited about the opportunities ahead for DealerTrack. Capturing that future potential will be dependent on continuing to tap the energy, commitment and talent represented by DealerTrack’s more than 650 team members. We would not have achieved this level of success without our team members’ passion for excellence and drive for results. From the small group who launched the company early in 2001 to the hundreds of team members who have joined us since then, a hearty thank you for a job well done. The team’s tireless efforts on behalf of our customers and partners have sparked the beginning of a signifi cant technology and process transformation within the auto retail industry. We believe our role in this change will drive stockholder value for years to come, and we intend to keep our foot squarely on the pedal as we drive this transformation forward.

Sincerely,

Mark F. O’NeilChairman and CEO

DealerTrack is a leading provider of high-value, low-cost, innovative on-demand software and data solutions for the U.S. automotive retail industry. The DealerTrack network connects automotive dealers with their fi nancing sources and other service and information providers within the auto sales and fi nance process. DealerTrack was founded in 2001 to create a single, effi cient web-based connection between dealers and multiple fi nancing sources. Our products and services for dealers and other industry participants yield a mix of transaction and subscription services revenue. Our initial public offering occurred in December 2005, and we are listed on the NASDAQ Global Market (TRAK).

Chairman & CEODealerTrack Holdings, Inc.

Connected Porsche Financial Services to

DealerTrack network (ninth captive lender)

Acquired DealerWire

Launched SalesMaker (next generation

desking product),DealWatch and ExactID

(compliance tools)

Processed 100 millionth credit

application through DealerTrack network

Connected 225thfi nancing source

Acquired GlobalFax Released enhanced eMenu functionality to

support California Car Buyers’ Bill of Rights

Chrome released PC Carbook Plus

Signed UniversalWarranty Corporation

as 11th aftermarket provider to network

Acquired DealerWare

Connected 250th fi nancing source

DealerAccess launched WebsitePlus in Canada

ALG launched Fleet Residuals Guide and

Model

Completed publicoffering of 11.5 million

shares

Connected 275thfi nancing source

Launched “Out of Wallet” enhancement to

ExactID

Held 1st Innovation Conference for

DealerTrack customers

Connected 300th fi nancing source to

network

Had 5 connected aftermarket providers

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-K(Mark One)

¥ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

or

n 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 M04Lake 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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. Yes n No ¥

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of theAct. Yes n No ¥

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to such filing requirements for the past90 days. Yes ¥ No n

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not containedherein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. n

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-acceleratedfiler (as defined in Exchange Act Rule 12b-2.)

Large Accelerated Filer n Accelerated Filer ¥ Non-Accelerated Filer n

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct). Yes n No ¥

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2006, thelast business day of the registrant’s most recently completed second fiscal quarter, was approximately $473 million(based on the closing price for the registrant’s common stock on the NASDAQ Global Market of $22.11 per share).

At March 1, 2007, 39,569,595 million shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant intends to file a proxy statement pursuant to Regulation 14A within 120 days of the end of thefiscal year ended December 31, 2006. Portions of such proxy statement are incorporated by reference into Part III ofthis Annual Report on Form 10-K.

TABLE OF CONTENTS

Page

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchasesof Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Item 6. Selected Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . 30

Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . 51

Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . 88

Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

Item 13. Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

EX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS LLP

EX-31.1: CERTIFICATION

EX-31.2: CERTIFICATION

EX-32.1: CERTIFICATIONS

PART I

Item 1. Business

Certain statements in this Annual Report on Form 10-K are “forward-looking statements” within the meaningof Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”). These statements involve a number of risks, uncertaintiesand other factors that could cause our actual results, performance or achievements to be materially different fromany future results, performance or achievements expressed or implied by these forward-looking statements. Factorswhich 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 inevaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-lookingstatements. The forward-looking statements made herein are only made as of the date hereof and we will undertakeno 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 toDealerTrack Holdings, Inc., a Delaware corporation, and/or its subsidiaries.

Overview

DealerTrack is a leading provider of on-demand software, network and data solutions for the automotive retailindustry in the United States. Utilizing the Internet, we have built a network connecting automotive dealers withbanks, finance companies, credit unions and other financing sources, and other service and information providers,such as aftermarket providers and the major credit reporting agencies. We have established a network of activerelationships, which, as of December 31, 2006, consisted of over 22,000 automotive dealers, including over 89% ofall franchised dealers; over 300 financing sources, including the 20 largest independent financing sources in theUnited States; and a number of other service and information providers to the automotive retail industry. Our creditapplication processing product enables dealers to automate and accelerate the indirect automotive financing processby increasing the speed of communications between these dealers and their financing sources. We have leveragedour leading market position in credit application processing to address other inefficiencies in the automotive retailindustry value chain. We believe our proven network offers a competitive advantage for distribution of our softwareand data solutions. Our integrated subscription-based software products and services enable our automotive dealercustomers to compare various financing and leasing options and programs, sell insurance and other aftermarketproducts, analyze inventory, document compliance with certain laws and execute financing contracts electronically.We have created efficiencies for financing source customers by providing a comprehensive digital and electroniccontracting solution. In addition, we offer data and other products and services to various industry participants,including lease residual value and automobile configuration data.

We are a Delaware corporation formed in August 2001. We are organized as a holding company and conduct asubstantial amount of our business through our subsidiaries, including Automotive Lease Guide (alg), Inc., ChromeSystems, Inc., DealerAccess Canada Inc., DealerTrack Aftermarket Services, Inc., DealerTrack DigitalServices, Inc., DealerTrack, Inc. and webalg, inc.

We began our principal business operations in February 2001 with the introduction of our credit applicationprocessing product. Since then, we have added a significant amount of new dealers, financing sources and otherparticipants to the network, successfully closed over ten acquisitions and introduced several new products andservices. As a result, we have increased our total addressable market by enhancing our offering of products andservices, and expanding our network of relationships.

On October 12, 2006, we completed the public offering of 11,500,000 shares of our common stock at a price of$23.76 per share. In this offering, we sold 2,750,000 shares of our common stock and certain of our stockholderssold 8,750,000 shares of our common stock, including 1,500,000 shares of our common stock sold by the sellingstockholders in connection with the full exercise of the underwriters’ over-allotment option. We did not receive anyproceeds from the sale of shares of our common stock by the selling stockholders. The net proceeds to us from thesale of shares of our common stock in this offering were $61.6 million, after deducting the underwriting discountsand commissions, financial advisory fees and other expenses related to the public offering.

1

We maintain a website on the World Wide Web at www.dealertrack.com. We make available, free of chargethrough our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports onForm 8-K, including exhibits thereto, and any amendments to those reports filed or furnished pursuant toSection 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after the reports are electronicallyfiled with, or furnished to the Securities and Exchange Commission (the “SEC”). Our reports that are filed with, orfurnished to, the SEC are also available at the SEC’s website at www.sec.gov. You may also obtain copies of any ofour reports filed with, or furnished to, the SEC, free of charge, at the SEC’s public reference room at100 F Street, N.E., Washington, DC 20549.

Our Business

Dealers traditionally relied upon the fax and mail delivery method for processing their financing and insuranceofferings. This method produced lengthy processing times and increased the cost of assisting the consumer to obtainfinancing or insurance. For example, legacy paper systems required the consumer to fill out a paper creditapplication for the financing sources to which he or she applied. The dealers then faxed the credit application to eachfinancing source and awaited a series of return faxes. When a financing source approved the consumer’s creditapplication, the consumer manually signed a paper finance or lease contract with the dealer, who then delivered itwith ancillary documents to the financing source via mail or overnight courier. The financing source then manuallychecked the contract for any errors or omissions and if the contract or ancillary documents were accurate andcomplete, the financing source paid the dealer for the assignment of the contract. The cumbersome nature of thisprocess could limit the range of options available to consumers and delay the availability of financing. In addition,dealers consulting out-of-date paper program catalogues may not have been aware of all of the insurance programsand other aftermarket sales opportunities available to offer the consumer.

In an effort to address the inefficiencies in the traditional workflow processes, dealers have employedtechnology to manage their businesses. For example, dealers have made significant investments in dealershipmanagement system (“DMS”) software to streamline their back office functions, such as accounting, inventory,communications with manufacturers, parts and service, and have deployed customer relationship management(“CRM”) software to track consumer behavior and maintain active post-sale relationships with consumers toincrease aftermarket sales and future automobile sales. However, these DMS and CRM software systems typicallyreside within the physical dealership and have not historically been fully integrated with each other, resulting in newinefficiencies. For example, many DMS and CRM systems require additional manual entry of consumerinformation and manual tracking of consumer behavior at multiple points along the retail value chain. Theseinefficiencies slow the sales and customer management process, as different and sometimes contradictoryinformation is recorded on separate systems. In addition, key information about the consumer may not beprovided to the salesperson on the sales floor although it may exist in one of the dealers’ systems.

In contrast to most dealer legacy systems, our web-based solutions are open and flexible. Our networkimproves efficiency and reduces processing time for dealers, financing sources, and other participants, andintegrates the products and services of other information and service providers, such as credit reporting agenciesand aftermarket providers. We primarily generate revenue on either a transaction or subscription basis, dependingon the customer and the product or service provided.

Our Solutions

We believe our suite of integrated on-demand software, network and data solutions addresses many of theinefficiencies in the automotive retail value chain and delivers benefits to dealers, financing sources, aftermarketproviders, and other service and information providers.

Dealers

We offer franchised and independent dealers an integrated suite of on-demand sales and finance solutions thatsignificantly shorten financing processing times, allowing dealers to spend more time selling automobiles andaftermarket products. Our automated, web-based credit application processing product allows automotive dealers tooriginate and route their consumers’ credit application information. This product has eliminated the need to fax a

2

paper application to each financing source to which a consumer applies for financing. Once a dealer enters aconsumer’s information into our system, the dealer can distribute the credit application data electronically to one ormultiple financing sources and obtain credit decisions quickly and efficiently.

We also offer dealers a suite of subscription products and services that complements our credit applicationprocessing product and allows them to integrate and better manage their business processes across the automotiveretail industry value chain. We offer a product that provides a valuable pre-sales marketing and prospecting tool byproviding a secure credit application on a dealer’s website for a consumer to enter his or her own credit information.Another product allows the dealers to compare deal configurations from multiple financing and leasing sources on areal-time basis. We also offer a product that allows dealers and consumers to complete finance contractselectronically, which a dealer can transmit to participating financing sources for funding, further streamliningthe financing process and reducing transaction costs for both dealers and financing sources. Additionally, we offerproducts that allow dealers to consistently present to consumers the full array of insurance and other aftermarketproduct options they offer. Our products and services, when used together, forms an integrated sales and financesolution.

Financing Sources

Our on-demand credit application processing and electronic contracting products eliminate expensive andtime-consuming inefficiencies in legacy paper systems, and thereby decrease financing sources’ costs of originatingloans or leases. We also offer a contract-processing solution, which can provide financing sources with retailautomotive contracts and related documents in a digital or electronic format. We believe our solutions significantlystreamline the financing process and improve the efficiency and/or profitability of each financing transactions. Weelectronically transmit complete credit application and contract data, reducing costs and errors and improvingefficiency for both prime and non-prime financing sources. We also believe that our credit application processingproduct enables our financing source customers to increase credit originations. Our network is configured to enableour financing source customers to connect easily with dealers with whom they can establish new business relations.We believe that financing sources that utilize our solution experience a significant competitive advantage overfinancing sources that rely on the legacy paper and fax processes.

Aftermarket Providers

Our recently launched DealerTrack Aftermarket NetworkTM gives dealers access to real-time contract ratinginformation and quote generation and will provide digital contracting for aftermarket products and services. Theaftermarket sales and contracting process was previously executed through individual aftermarket providers’websites or through a cumbersome paper-based process prone to frequent delays and errors. Our on-demandconnection between dealers and aftermarket providers creates a faster process, improves accuracy, and eliminatesduplicate data entry for both dealers and aftermarket providers. We believe this more efficient process combinedwith the use of our on-demand electronic menu product will make it possible for dealers to more effectively sellaftermarket products and services. We expect that all categories of aftermarket products and services willparticipate in the network, including vehicle recovery systems, extended service contracts, chemical coatings,and credit life and disability insurance. We also believe that aftermarket providers will be able to acquire a broaderbase of dealer customers through our network. As of December 31, 2006, 18 aftermarket providers have agreed tojoin the DealerTrack Aftermarket Network.

Other Service and Information Providers

We believe that our software as a service model is a superior method of delivering products and services to ourcustomers. Our web-based solutions enable third-party service and information providers to deliver their productsand services more broadly and efficiently, which increases the value of our integrated solutions to our dealercustomers. We offer our third-party service and information providers a secure and efficient means of deliveringtheir data to our dealer and financing source customers. For example, the credit reporting agencies can providedealers with consumers’ credit reports electronically and integrate the delivery of the prospective consumers’ credit

3

reports with our credit application processing and other products. Used car value guides, such as those provided byBlack Book National Auto Research, or Black Book, Kelley Blue Book Co., Inc., or Kelley Blue Book, and theNational Automotive Dealers’ Association, or NADA, have been integrated with our web-based solutions, allowingthem to develop incremental subscription revenue streams without increased publishing costs.

Our Web-based Network

Our web-based network is independent and does not give any one financing source preference over any otherfinancing source. Each dealer sees its individualized list of available financing sources listed alphabetically, basedon our proprietary matching process, and can transmit credit application information simultaneously to multiplefinancing sources that they select. Financing sources’ responses to requests for financing through our network arepresented back to the dealer in their order of response. We believe that this neutral approach makes our networkmore appealing to both automotive dealers and independent financing sources than competitive alternatives thatfavor financing sources owned or controlled by one or more automobile manufacturers.

Our Growth Strategy

Our growth strategy is to leverage our position as a leading provider of on-demand software solutions to theU.S. automotive retail industry. Key elements of our growth strategy are:

Expand Our Customer Base

We intend to increase our market penetration by expanding our automotive dealer and financing sourcecustomer base through the efforts of our direct sales force. Although we currently enjoy active relationships withover 89% of all franchised dealers, approximately 7% of the 44,700 independent dealerships in the United States areactive in our network. We believe that we are well positioned to increase the number of these active dealerrelationships. While as of December 31, 2006 we had over 300 active financing source customers, we will focus onadding the captive financing affiliates of foreign automotive manufacturers, as well as select regional banks,financing companies and other financing sources to our network. We also intend to increase the number of otherservice and information providers in our network by adding, among others, insurance and other aftermarket serviceproviders. We have signed agreements with 18 aftermarket providers, which we anticipate will result in additionalintegrations in our network during 2007. In addition, we expect to increase the number of lead providers whodistribute their vehicle sales leads through our network to dealers. We currently have agreements with three leadproviders to use the DealerTrack network as their distribution channel for delivering leads to their dealer customers.

Sell Additional Products and Services to Our Existing Customers

We believe that we are well-positioned to increase the number of products and services purchased by ourexisting customers. Many of our subscription-based products and services were recently introduced to ourcustomers, and we believe there are opportunities to increase the sales of these products and services to dealersand financing sources. We believe that a significant market opportunity exists for us to sell additional products andservices to the approximately 52% of our over 22,000 active dealer customers as of December 31, 2006 that utilizeour credit application processing product, but have not yet purchased one or more of our subscription-basedproducts or services. Similarly, the over 300 financing sources that utilize our credit application product as ofDecember 31, 2006 represent a market opportunity for us to sell our electronic and digital contracting solution,which less than 10% of our financing source customers have implemented to date.

Expand Our Product and Service Offerings

We expect to expand our suite of products and services to address the evolving needs of our customers. Wehave identified a number of opportunities to leverage our network of relationships and our core competencies tobenefit dealers, financing sources and other service and information providers. As our implementation of theDealerTrack Aftermarket Network progresses throughout 2007, we expect to add a greater variety of insurance andother aftermarket products and services to be offered through our network. We also see opportunities to generate

4

additional revenue by aggregating automotive industry information we have collected and offering reporting of theaggregated information to dealers, financing sources and other industry participants.

Pursue Acquisitions and Strategic Alliances

We have augmented the growth of our business by completing strategic acquisitions. In executing ouracquisition strategy, we have focused on identifying businesses that we believe will increase our market share or thathave products, services and technology that are complementary to our product and service offerings. We believethat our success in completing these acquisitions and integrating them into our business has allowed us to maintainour leadership position in the industry, enhance our network of relationships and accelerate our growth. We intend tocontinue to grow and advance our business through acquisitions and strategic alliances. We believe that acquisitionsand strategic alliances will allow us to enhance our product and service offerings, sell new products using ournetwork, improve our technology and/or increase our market share.

5

Our Products and Services

We offer a broad suite of integrated solutions for the U.S. automotive retail industry that we believe improvesour customers’ operating efficiency in the pre-sales marketing and prospecting, sales, and finance and insurancestages of the automotive retail industry value chain. We typically charge for our products and services on either atransaction and/or subscription basis as indicated below. The following descriptions also include products that wehave introduced since the end of 2006.

SalesFinance and Insurance

Financing Aftermarket Sales Contracting

Data and Reporting

Stage Products and Services Subscription/Transaction

Pre-Sales Marketing andProspecting: • ALG Residual Value Guides • Subscription

• Chrome Carbook» • Subscription

• PC Carbook» • Subscription

• Carbook Fleet Edition • Subscription

• Lead Manager • Transaction

• WebsitePlusTM • Subscription

Sales: • Credit Reports • Transaction

• SalesMakerTM • Subscription

Finance and Insurance

Financing: • BookOut • Subscription

• ToolKitTM (includes our creditapplication processing product) • Transaction

• DealWatchTM • Subscription

• ExactIDTM • Transaction

Aftermarket Sales: • DealerTrack eMenuTM • Subscription

• DealerTrack AftermarketNetworkTM • Transaction

Contracting: • DealTransferTM • Subscription

• eContracting • Subscription and Transaction

• eDocs • Transaction

Data and Reporting: • Activity ReportsTM • Subscription

• ALG Data Services • Subscription and Transaction

• Chrome New Vehicle Data • Subscription

• Chrome VIN Search Data • Subscription

• InventoryPro (new in 2007) • Subscription

We generally charge dealers a monthly subscription fee for each of our subscription products and services. Wecharge a transaction fee to our financing source customers for each credit application that dealers submit to themand for each financing contract executed via our electronic contracting and digital contract processing solution, aswell as for any portfolio residual value analyses we perform for them. We charge a transaction fee to the dealer orcredit report provider for each fee-bearing credit report accessed by dealers. We charge a transaction fee to the

6

aftermarket provider for each aftermarket contract executed within our network. We charge a transaction fee to thelead provider for each sales lead distributed through our network to their dealer customers.

Pre-Sales Marketing and Prospecting

Chrome Carbook», PC Carbook» and Carbook Fleet Edition — Chrome Carbook, PC Carbook and CarbookFleet Edition provide automotive specification and pricing information. These products enable dealers, fleetmanagers, financial institutions and consumers to specify and price a new and used automobile online, which helpspromote standardized information among these parties and facilitates the initial contact between buyer and seller.We charge our dealer customers and other industry participants subscription fees to use these products.

Lead Manager — Internet lead providers connected to DealerTrack can distribute their leads directly todealers through the network. The growing use by dealers of the Internet for pre-sales and marketing activities hascreated a significant market of providers who collect, aggregate and “scrub” sales leads and distributes them todealers. As many dealers use DealerTrack frequently throughout the day, the network provides a more immediateand efficient distribution channel for dealers to see and respond to the leads. It also enables dealers to check whethercustomers have submitted a credit application as part of that lead. We charge our lead provider customerstransaction fees for each lead distributed through our network.

WebsitePlusTM — WebsitePlus enables visitors to a dealer’s website to submit credit application data onlinethat the dealer can then access by logging onto the DealerTrack website. This product provides dealers withvaluable consumer leads. It also expedites the sales and finance process because the dealer does not need to re-enterthe consumer’s credit information when the consumer enters the dealership. We charge our dealer customerssubscription fees to use this product.

Sales

Credit Reports — With Credit Reports, dealers can electronically access a consumer’s credit report preparedby each of Equifax Inc., Experian Information Solutions, Inc., TransUnion LLC and/or First Advantage CREDCO.The dealer can use the consumer’s credit report to determine an appropriate automobile and financing package forthat particular consumer. We charge our dealer customers or credit report provider’s transaction fees each time afee-bearing credit report is accessed by dealers.

SalesMakerTM — SalesMaker is a profit management system enabling dealers to search the hundreds of currentfinancing source programs in our database, and, within seconds, find the financing or lease program that is best for aconsumer and the most profitable for the dealership. SalesMaker also assists dealers in finding financing forconsumers with low credit scores, while maximizing their own profit. In addition, dealers can quickly pre-qualifyprospective consumers and then match the best financing source program against their available inventory. Wecharge our dealer customers subscription fees to use this product. SalesMaker represents the integration andenhancement of our previous DeskLink and FinanceWizard products.

Finance and Insurance

ALG Residual Value Guides — ALG Residual Value Guides are the industry standard for the residual valueforecasting of vehicles. New car residual values are available in a national percentage guide, as well as regionaldollar guides. Financing sources and dealers use ALG Residual Value Guides as the basis to create leasing programsfor new and used automotive leases. We charge our financing source customers, dealer customers and other industryparticipant’s subscription fees to use this product.

BookOut — With BookOut, a dealer can quickly and easily look up used automobile values by year/make/model or vehicle identification number for use in the credit application process. We currently offer separateBookOut subscriptions for data provided by Black Book, Kelley Blue Book and NADA. These products facilitatethe financing process by providing dealers with reliable valuation information about the relevant automobile. Wecharge our dealer customers subscription fees to use these products.

ToolKitTM — ToolKit facilitates the online credit application process by enabling dealers to transmit aconsumer’s credit application information to one or multiple financing sources and obtain credit decisions quickly

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and efficiently. Generally, our dealer customers maintain active relationships with numerous financing sources. Weoffer each financing source customer the option to provide other value-added services to dealers that facilitate thefinancing process, including dealer reserve statements, payoff quotes, prospect reports for consumers nearing theend of their current loan or lease and reports of current financing rates and programs. We charge our financingsource customers transaction fees for credit application data that dealers transmit to them through this product.

DealWatchTM — DealWatch provides automotive dealers with a safe and reliable method to sign, store andprotect customer and financing activity at the dealership. It also provides safeguards such as limited access tosensitive information based on a user’s role and permission to help reduce compliance risk by handling everycustomer financing deal consistently. We charge our dealer customers subscription fees to use this product.

ExactIDTM — ExactID assists dealers in validating each prospective customer’s identity and Office of ForeignAssets Control (OFAC) status. ExactID flags any potential OFAC match on the screen for immediate action andinforms dealers of what steps to take in the event of a positive match. ExactID also helps verify a customer’s identityby comparing their presented information against various data sources for inconsistencies. We charge our dealercustomers transaction fees for each of their customer screenings.

DealerTrack eMenuTM — DealerTrack eMenu allows dealers to consistently present consumers with the fullarray of insurance and other aftermarket product options they offer in a menu format. The product also creates anauditable record of the disclosures to consumers during the aftermarket sales process, helping to reduce dealers’potential legal risks. We charge our dealer customers subscription fees to use this product.

DealerTrack Aftermarket NetworkTM — The DealerTrack Aftermarket Network will provide real-time after-market contract rating and quote generation from participating providers of aftermarket products. Categories ofaftermarket products represented on the network will include extended service contracts, GAP, etch, credit life anddisability insurance, and vehicle recovery systems. Since the DealerTrack Aftermarket Network will be fullyintegrated in the DealerTrack network, we expect both dealers and aftermarket providers will benefit fromimproved accuracy and elimination of duplicate data entry. We will charge aftermarket providers transaction feesfor each aftermarket product that is transmitted by a dealer to the aftermarket provider in our network.

DealTransferTM — DealTransfer permits dealers to transfer transaction information directly between selectdealer management systems and our ToolKit product with just a few mouse clicks. This allows dealers to avoidreentering transaction information once the information is on any of the dealer’s systems. We charge our dealercustomers subscription fees to use this product.

eContracting and eDocs — Our eContracting product allows dealers to obtain electronic signatures andtransmit contracts and contract information electronically to financing sources that participate in eContracting.eContracting increases the speed of the automotive financing process by replacing the cumbersome papercontracting process with an efficient electronic process. Our eDocs digital contract processing service receivespaper-based contracts from dealers, digitizes the contracts and submits them electronically to the appropriatefinancing source. Together, eDocs and eContracting enable financing sources to create a 100% digital contractworkflow. We charge our dealer customers subscription fees to use the eContracting product and our participatingfinancing source customers pay transaction fees for each electronic or digital contract that we transmit electron-ically to them by eContracting or eDocs.

Data and Reporting

ActivityReportTM — ActivityReport provides dealers with reports about their financing and insurance oper-ations such as summaries of applications by type, term, amount and income, summaries of application statuses andapproval ratios by financing source, credit score range or user, summaries of applications, statuses and the contractbooking ratios by financing source, summaries of credit report activity by provider and score range and summariesof credit applications and credit reports by user. We charge our dealer customers subscription fees to use thisproduct.

ALG Data Services — ALG is the primary provider of vehicle residual value data to automotive industryparticipants, including manufacturers, banks and other financing sources, desking software companies andautomotive websites. We charge industry participants subscription or transaction fees for these data services.

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Chrome New Vehicle Data — Chrome New Vehicle Data identifies automobile prices, as well as the standardand optional equipment available on particular automobiles. Dealers provide Chrome’s data on their websites andfinancing sources use the data in making financing decisions. We charge our dealer and financing source customerssubscription fees to use this product.

Chrome VIN Search Data — Chrome VIN Search Data assists a dealer in identifying an individual or group ofautomobiles by using vehicle identification numbers. Chrome VIN Search Data facilitates sales of a dealer’s usedautomobile inventory by ensuring accurate descriptions and valuations for both consumer trade-ins and usedautomobile inventory. We charge our dealer customers subscription fees to use this product.

InventoryPro — With InventoryPro, a dealership can evaluate sales and inventory performance for either newor used vehicles by make, model and trim, including information about unit sales, costs, days to turn, and front-endgross profit. The InventoryPro product reviews actual vehicles on the dealership lot and provides specificrecommendations for vehicles that should be added or removed to improve a dealership’s profitability and returnon investment. It also enables dealers to connect with other member dealers to find your target vehicles or identifydealers interested in buying your overstock. We charge our dealer customers subscription fees to use this product.

International

Through DealerTrack’s subsidiary, DealerAccess Canada Inc., DealerTrack is a leading provider of on-demand credit application and contract processing services to the indirect automotive finance industry in Canada.We generally provide our Canadian customers with only our credit application and contract processing product. Webelieve we have the potential in the future to provide our Canadian customers with an integrated suite of productsand services similar to that which we offer domestic dealers. In the year ended December 31, 2006, our Canadianoperations generated less than 10% of our revenue.

On February 1, 2007, we purchased all of the outstanding shares of Curomax Corporation and subsidiariespursuant to that certain Shares Purchase Agreement, made as of January 16, 2007, for a cash purchase price ofapproximately $39.4 million (including estimated direct acquisition and restructuring costs of approximately$2.1 million). Under the terms of the shares purchase agreement, we have future contingent payment obligations ofapproximately $1.9 million in cash to be paid out based upon the achievement of certain operational objectives overthe next twenty-four months.

Technology

Our technology platform is robust, flexible and extendable and is designed to be integrated with a variety ofother technology platforms. We believe our open architecture is fully scalable and designed for high availability,reliability and security. Product development expense for the years ended December 31, 2006, 2005, and 2004 was$9.2 million, $5.6 million and $2.3 million, respectively. Our technology includes the following primarycomponents:

Web-Based Interface

Our customers access our on-demand application products and services through an easy-to-use web-basedinterface. Our web-based delivery method gives us control over our applications and permits us to makemodifications at a single central location. We can easily add new functionality and deliver new products to ourcustomers by centrally updating our software on a regular basis.

Partner Integration

We believe that our on-demand model is a uniquely suited method of delivering our products and services toour customers. Our customers can access our highly specialized applications on-demand, avoiding the expense anddifficulty of installing and maintaining them independently. Our financing source integration and partner inte-gration use XML encoded messages. We are a member of both Standards for Technology in Automotive Retail(“STAR”) and American Financial Services Association (“AFSA”) and are committed to supporting publishedstandards as they evolve.

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Infrastructure

Our technology infrastructure is hosted externally and consists of a production site and a disaster recovery site.We believe that the production site is fully redundant with no single point of major failure. Our customers depend onthe availability and reliability of our products and services and we employ system redundancy in order to minimizesystem downtime.

Security

We maintain high security standards with a layered firewall environment. Our communications are securedusing secure socket layer 128-bit encryption. We employ an intrusion detection system operating both externally toour website (outside the firewall), as well as internally. Our firewalls and intrusion detection system are bothmanaged and monitored continuously by an independent security management company. We also utilize acommercial software solution to securely manage user access to all of our applications. All incoming trafficmust be authenticated before it is authorized to be passed on to the application. Once a user has been authorized,access control to specific functions within the site is performed by the application. Our access control system ishighly granular and includes the granting and revocation of user permissions to functions on the site.

We maintain a certification from Cybertrust Inc., a leading industry security certification body. Thiscertification program entails a comprehensive evaluation of our security program, including extensive testingof our website’s perimeter defenses. As a result of this process, recommendations are made and implemented. Thecertification program requires continual monitoring and adherence to critical security policies and practices.

Customer Development and Retention

Sales

Our sales resources are focused on four primary areas: dealers, financing sources, aftermarket providers, andother industry providers. Our sales resources strive to increase the number of products and services purchased orused by existing customers and also to sell products and services to new customers. Our dealer sales resources focuson selling our subscription-based products and services to dealers through field sales and telesales efforts, and alsosupport the implementation subscription-based and transaction-based products for dealers. Financing sourcerelationships are managed by a team that also focused on adding more financing sources to our network andincreasing the use of our eContracting and eDocs solution. Relationships with our aftermarket providers aremanaged by another team that also focuses on adding more aftermarket providers to the network. Relationships withother providers (including automotive manufacturers) are managed across various areas of our company.

Training

We believe that dealership employees often require specialized training to take full advantage of our solutions.As a result, we have developed and made available extensive training for them. We believe that this training isimportant to enhancing the DealerTrack brand and reputation and increasing utilization of our products andservices. Training is conducted via telephone, the Internet and in person at the dealership. In training our dealers, weemphasize utilizing our network to help them increase profitability and efficiencies.

Marketing

Our marketing strategy is to establish our brand as the leading provider of automotive sales and financesolutions for dealers, financing sources, aftermarket providers and other information and service providers. Ourmarketing programs include a variety of advertising, online and direct marketing, events and public relationsactivities targeted at key executives and other decision makers within the automotive retail industry, such as:

• participation in, and sponsorship of, user conferences, trade shows and industry events;

• using our website to offer our services and to provide product and company information;

• cooperative marketing efforts with financing sources, aftermarket providers and other partners, includingjoint press announcements, joint trade show activities, channel marketing campaigns and joint seminars;

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• hosting events to publicize our products and services to existing customers and prospects;

• facsimile, direct mail and email campaigns;

• advertising in automotive trade magazines and other periodicals; and

• providing news updates through frequent press releases and publishing thought leadership in media outletsand DealerTrack publications.

Customer Service

We believe superior customer support is important to retaining and expanding our customer base. We have acomprehensive technical support program to assist our customers in maximizing the value they get from ourproducts and services and solving any problems or issues with our service. We provide telephone support, e-mailsupport and online information about our products and services. Our customer service group handles generalcustomer inquiries, such as questions about resetting passwords, how to subscribe to products and services, thestatus of product subscriptions and how to use our products and services, and is available to customers by telephone,e-mail or over the web. Our technical support specialists are extensively trained in the use of our products andservices.

Customers

Our primary customers are dealers and financing sources. Our network of financing sources includes thelargest national prime, near prime and non-prime financing sources; regional and local banks and credit unions. Asof December 31, 2006, we had over 300 connected financing sources. The top 20 independent financing sources inthe United States and currently nine automotive captive finance companies are among our customers. As ofDecember 31, 2006, we had over 22,000 automotive dealers actively using our network, including over 89% of thefranchised dealers in the United States. The subscription agreements with our dealers typically run for one to threeyears, with one-year automatic extensions. Our initial agreements with our financing source customers typically runfor two years, with one-year automatic extensions. No customer represented more than 10% of our revenue in theyear ended December 31, 2006.

Competition

The market for sales and finance solutions in the U.S. automotive retail industry is highly competitive,fragmented and subject to changing technology, shifting customer needs and frequent introductions of new productsand services. Our current principal competitors include:

• web-based automotive finance credit application processors, including CUDL and RouteOne;

• proprietary finance credit application processing systems, including those used and provided to dealers byAmerican 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 JATODynamics, Inc.;

• providers of services related to aftermarket products, including JM&A Group and the StoneEagle Group; and

• providers of inventory analytic tools, such as American Auto Exchange, First Look, LLC and ManheimAuctions, Inc.

DealerTrack also competes with warranty and insurance providers, as well as software providers, amongothers, in the market for menu-selling products and services. Some of our competitors may be able to devote greaterresources to the development, promotion and sale of their products and services than we can to ours, which couldallow them to respond more quickly than we can to new technologies and changes in customer needs. In particular,RouteOne, a joint venture formed and controlled by Chrysler Financial Corporation, Ford Motor Credit Corpo-ration, General Motors Acceptance Corporation and Toyota Financial Services, has relationships with these and

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other affiliated captive financing sources that are not part of our network. Our ability to remain competitive willdepend to a great extent upon our ability to execute our growth strategy, as well as our ongoing performance in theareas of product development and customer support.

Government Regulation

The indirect automotive financing and automotive retail industries are subject to extensive and complexfederal and state regulation. Our customers, such as banks, finance companies, savings associations, credit unionsand other financing sources, and automotive dealers, operate in markets that are subject to rigorous regulatoryoversight and supervision. Our customers must ensure that our products and services work within the extensive andevolving regulatory requirements applicable to them, including those under the Truth in Lending Act, the Gramm-Leach-Bliley Act (the “GLB Act”), the Federal Reserve’s Board’s Regulation P, the Interagency GuidelinesEstablishing Information Security Standards, the Interagency Guidance on Response Programs for UnauthorizedAccess to Customer Information and Customer Notice, the Federal Trade Commission’s (“FTC”) Privacy Rule,Safeguards Rule, and Consumer Report Information Disposal Rule, the Equal Credit Opportunity Act, Regula-tion AB, the regulations of the Federal Reserve Board, the Fair Credit Reporting Act (“FCRA”) and other state andlocal laws and regulations. In addition, entities such as the Federal Deposit Insurance Corporation, the Office of theComptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Administration and theFTC have the authority to promulgate rules and regulations that may impact our customers, which could placeadditional demands on us.

The role of our products and services in assisting our customers’ compliance with these requirements dependson a variety of factors, including the particular functionality, the interactive design, and the classification of thecustomer. We are not a party to the actual financing and lease transactions that occur in our network. Our financingsource and automotive dealer customers must assess and determine what applicable laws and regulations require ofthem and are responsible for ensuring that our network conforms to their regulatory needs.

Consumer Privacy and Data Security Laws

Consumer privacy and data security laws on the federal and state levels govern the privacy of consumerinformation generally and may apply to our business in our capacity as a service provider for regulated financialinstitutions and automotive dealers that are subject to the GLB Act and applicable regulations, including FTC’sPrivacy Rule, Safeguards Rule and Consumer Report Information Disposal Rule.

These laws and regulations restrict our customers’ ability to share nonpublic personal consumer informationwith non-affiliated companies, as well as with affiliates under certain circumstances. They also require certainstandards for information security plans and operations, including standards for consumer information protectionand disposal, and notices to consumers in the event of certain security breaches. If we, a financing source, anaftermarket provider or a dealer disclose consumer information provided through our network in violation of theselaws, regulations or applicable privacy policies, we may be subject to claims from such consumers or enforcementactions by state or federal regulatory authorities.

Legislation is pending on the federal level and in most states that could impose additional duties on us relatingto the collection, use or disclosure of consumer information, as well as obligations to secure that information orprovide notices in the event of an actual or suspected unauthorized access to or use of information contained withinour system. The FTC and federal banking regulators have also issued regulations requiring regulated financialinstitutions to obtain certain assurances and contractual protections relating to the security and disposal ofinformation maintained by service providers such as us.

While we believe our current business model is consistent with existing laws and regulations, emerging caselaw and regulatory enforcement initiatives, as well as the passage of new laws and regulations, may limit our abilityto use information to develop additional revenue streams in the future.

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Fair Credit Reporting Act

The FCRA imposes limitations on the collection, distribution and use of consumer report information andimposes various requirements on providers and users of consumer reports and any information contained in suchreports. Among other things, the FCRA limits the use and transfer of information that would otherwise be deemed aconsumer report under the FCRA, and imposes certain requirements on providers of information to credit reportingagencies and resellers of consumer reports with respect to ensuring the accuracy and completeness of theinformation and assisting consumers who dispute information on their consumer reports or seek to obtaininformation involving theft of their identity. The use of consumer report information in violation of the FCRAcould, among other things, result in a provider of information or reseller of consumer reports being deemed aconsumer reporting agency, which would subject the provider or reseller to all of the compliance requirementsapplicable to consumer reporting agencies contained in the FCRA and applicable regulations. While we believe wehave structured our business so that we will not be considered to be a consumer reporting agency, we may in thefuture determine that it is necessary for us to become a consumer reporting agency due to changing legal standards,customer needs, or for competitive reasons. If we are deemed to be, or elect to treat ourselves as, a consumerreporting agency, our operating costs would increase, which could adversely affect our business, prospects,financial condition and results of operations.

State Laws and Regulations

The GLB Act and the FCRA contain provisions that preempt some state laws to the extent the state laws seek toregulate the distribution and use of consumer information. The GLB Act does not limit states’ rights to enact privacylegislation that provides greater protections to consumers than those provided by the GLB Act. The FCRA generallyprohibits states from imposing any requirements with respect only to certain specified matters and it is possible thatsome state legislatures or agencies may limit the ability of businesses to disclose consumer information beyond thelimitations provided for in the GLB Act or the FCRA. For example, certain states permit consumers to “freeze” theircredit bureau files under certain circumstances. Our automotive dealer customers remain subject to the laws of theirrespective states in such matters as consumer protection and unfair and deceptive trade practices.

Revised Uniform Commercial Code Section 9-105, E-SIGN and UETA

In the United States, the enforceability of electronic transactions is primarily governed by the ElectronicSignatures in Global and National Commerce Act, a federal law enacted in 2000 that largely preempts inconsistentstate law, and the Uniform Electronic Transactions Act, a uniform state law that was finalized by the NationalConference of Commissioners on Uniform State Laws in 1999 and has been adopted by most states. Case law hasgenerally upheld the use of electronic signatures in commercial transactions and in consumer transactions whereproper notice is provided and consumer consents to electronic contracting are obtained. The Revised UniformCommercial Code Section 9-105 (“UCC 9-105”) provides requirements to perfect security interests in electronicchattel paper. These laws impact the degree to which the financing sources in our network use our eContractingproduct. We believe that our eContracting product enables the perfection of a security interest in electronic chattelpaper by meeting the transfer of “control” requirements of UCC 9-105. However, this issue has not been challengedin any legal proceeding. If a court were to find that our electronic contracting product is not sufficient to perfect asecurity interest in electronic chattel paper, or if existing laws were to change, our business, prospects, financialcondition and results of operations could be materially adversely affected. Federal and state regulatory require-ments imposed on our financing source customers, such as the SEC’s Regulation AB relating to servicers of assetsbacked securities, may also result in our incurring additional expenses to facilitate financing source compliance.

Internet Regulation

We are subject to federal, state and local laws applicable to companies conducting business on the Internet.Today, there are relatively few laws specifically directed towards online services. However, due to the increasingpopularity and use of the Internet and online services, laws and regulations may be adopted with respect to theInternet or online services covering issues such as online contracts, user privacy, freedom of expression, pricing,fraud liability, content and quality of products and services, taxation, advertising, intellectual property rights andinformation security. Proposals currently under consideration with respect to Internet regulation by federal, state,

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local and foreign governmental organizations include, but are not limited to, the following matters: on-line content,user privacy, restrictions on email and wireless device communications, data security requirements, taxation, accesscharges and so-called “net neutrality”, liability for third-party activities such as unauthorized database access, andjurisdiction. Moreover, we do not know how existing laws relating to these issues will be applied to the Internet andwhether federal preemption of state laws will apply.

Intellectual Property

Our success depends, in large part, on our intellectual property and other proprietary rights. We rely on acombination of patent, copyright, trademark and trade secret laws, employee and third-party non-disclosureagreements and other methods to protect our intellectual property and other proprietary rights. In addition, welicense technology from third parties.

We have been issued a number of utility patents in the United States and have patent applications pending inthe United States, Canada and Europe, including patents that relate to a system and method for credit applicationprocessing and routing. We have both registered and unregistered copyrights on aspects of our technology. We havea U.S. federal registration for the mark “DealerTrack.” We also have U.S. federal registrations and pendingregistrations for several additional marks we use and claim common law rights in other marks we use. We also havefiled some of these marks in foreign jurisdictions. The duration of our various trademark registrations varies bymark and jurisdiction of registration. In addition, we rely, in some circumstances, on trade secrets law to protect ourtechnology, in part by requiring confidentiality agreements from our vendors, corporate partners, employees,consultants, advisors and others.

Industry Trends

The volume of new and used automobiles financed or leased by our participating financing source customers,special promotions by automobile manufacturers and the level of indirect financing by captive finance companiesnot available in our network impact our business. Our business may be affected by these and other seasonal andpromotional trends in the indirect automotive finance market.

Employees

As of December 31, 2006, we had a total of 670 employees. None of our employees is represented by a laborunion. We have not experienced any work stoppages and believe that our relations with our employees are good.

Item 1A. Risk Factors

You should carefully consider the following risk factors, as well as the more detailed descriptions of ourbusiness 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 adverselyaffect our business, prospects, financial condition or results of operations. Our business, prospects, financialcondition 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.

Competition in the automotive retail technology industry is intense. The indirect automotive retail financeindustry is highly fragmented and is served by a variety of entities, including web-based automotive finance creditapplication processors, the proprietary credit application processing systems of the financing source affiliates ofautomobile manufacturers, dealer management system providers, automotive retail sales desking providers andvehicle configuration providers. DealerTrack also competes with warranty and insurance providers, as well assoftware providers, among others, in the market for menu-selling products and services, compliance products andinventory analytics. Some of our competitors have longer operating histories, greater name recognition andsignificantly greater financial, technical, marketing and other resources than we do. Many of these competitors alsohave longstanding relationships with dealers and may offer dealers other products and services that we do notprovide. As a result, these companies may be able to respond more quickly to new or emerging technologies andchanges in customer demands or to devote greater resources to the development, promotion and sale of their

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products and services than we can to ours. We expect the market to continue to attract new competitors and newtechnologies, possibly involving alternative technologies that are more sophisticated and cost-effective than ourtechnology. There can be no assurance that we will be able to compete successfully against current or futurecompetitors or that competitive pressures we face will not materially adversely affect our business, prospects,financial condition and results of operations.

We may face increased competition from RouteOne and the captive financing source affiliates of themanufacturers that have formed RouteOne.

Our network of financing sources does not include the captive financing sources affiliated withDaimlerChrysler AG, Ford Motor Company, General Motors Corporation or Toyota Motor Corporation, whichhave formed RouteOne to operate as a direct competitor of ours to serve their respective franchised dealers.RouteOne has the ability to offer its dealers access to captive or other financing sources that are not in our network.RouteOne was launched in November 2003, and officially re-launched in July 2004. A significant number ofindependent financing sources, including some of the independent financing sources in our network, are partic-ipating on the RouteOne credit application processing and routing portal. If RouteOne increases the number ofindependent financing sources on its credit application processing and routing portal and/or offers products andservices that better address the needs of our customers or offer our customers a lower-cost alternative, our business,prospects, financial condition and results of operations could be materially adversely affected. In addition, if asubstantial amount of our current customers migrate from our network to RouteOne, our ability to sell additionalproducts and services to, or earn transaction services revenue from, these customers could diminish. RouteOne hasrepeatedly approached each of our largest financing source customers seeking to have them join the RouteOnecredit application processing and routing portal. Some of our financing source customers have engaged, areengaged and/or may in the future engage, in discussions with RouteOne regarding their participation on theRouteOne credit application processing and routing portal or may already have agreed to participate, or beparticipating, on this portal.

Some vendors of software products used by automotive dealers, including certain of our competitors, aredesigning their software and using financial incentives to make it more difficult for our customers to useour products and services.

Currently, some software vendors, including some of our competitors, have designed their software systems inorder to make it difficult to integrate with third-party products and services such as ours and others have announcedtheir intention to do so. Some software vendors also use financial or other incentives to encourage their customers topurchase such vendors’ products and services. These obstacles could make it more difficult for us to compete withthese vendors and could have a material adverse effect on our business, prospects, financial condition and results ofoperations. Further, we have agreements in place with various third-party software providers to facilitate integrationbetween their software and our network, and we cannot assure you that each of these agreements will remain inplace or that during the terms of these agreements these third parties will not increase the cost or level of difficulty inmaintaining integration with their software. Additionally, we integrate certain of our products and services withother third parties’ software programs. These third parties may design or utilize their software in a manner thatmakes it more difficult for us to continue to integrate our products and services in the same manner, or at all. Thesedevelopments could have a material adverse effect on our business, prospects, financial condition and results ofoperations.

Our systems and network may be subject to security breaches, interruptions, failures and/or other errorsor may be harmed by other events beyond our control.

Our systems may be subject to security breaches.

Our success depends on the confidence of dealers, financing sources, the major credit reporting agencies andour other network participants in our ability to transmit confidential information securely over the Internet andoperate our computer systems and operations without significant disruption or failure. We transmit substantialamounts of confidential information, including non-public personal information, over the Internet. Moreover, evenif our security measures are adequate, concerns over the security of transactions conducted on the Internet and

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commercial online services, which may be heightened by any well-publicized compromise of security, may detercustomers from using our products and services. If our security measures are breached and unauthorized access isobtained to confidential information, our network may be perceived as not being secure and financing sources ordealers may curtail or stop using our network. Any failure by, or lack of confidence in, our secure online productsand services could have a material adverse effect on our business, prospects, financial condition and results ofoperations.

Despite our focus on Internet security, we may not be able to stop unauthorized attempts to gain access to ordisrupt the transmission of communications among our network participants. Advances in computer capabilities,new discoveries in the field of cryptography, or other events or developments could result in a compromise or breachof the algorithms used by our products and services to protect certain data contained in our databases and theinformation being transferred.

Although we generally limit warranties and liabilities relating to security in financing source and dealercontracts, third parties may seek to hold us liable for any losses suffered as a result of unauthorized access to theirconfidential information or non-public personal information. We may not have limited our warranties and liabilitiessufficiently or have adequate insurance to cover these losses. We may be required to expend significant capital andother resources to protect against security breaches or to alleviate the problems caused. Our security measures maynot be sufficient to prevent security breaches, and failure to prevent security breaches could have a material adverseeffect on our business, prospects, financial condition and results of operations.

Our network may be vulnerable to interruptions or failures.

From time to time, we have experienced, and may experience in the future, network slowdowns andinterruptions. These network slowdowns and interruptions may interfere with our ability to do business. Althoughwe regularly back up data and take other measures to protect against data loss and system failures, there is still riskthat we may lose critical data or experience network failures. Such failures or disruptions may result in lost revenueopportunities for our customers, which could result in litigation against us or a loss of customers. This could have amaterial adverse effect on our business, prospects, financial condition and results of operations.

Undetected errors in our software may harm our operations.

Our software may contain undetected errors, defects or bugs. Although we have not suffered significant harmfrom any errors, defects or bugs to date, we may discover significant errors, defects or bugs in the future that we maynot be able to correct or correct in a timely manner. Our products and services are integrated with products andsystems developed by third parties. Complex third-party software programs may contain undetected errors, defectsor bugs when they are first introduced or as new versions are released. It is possible that errors, defects or bugs willbe found in our existing or future products and services or third-party products upon which our products andservices are dependent, with the possible results of delays in, or loss of market acceptance of, our products andservices, diversion of our resources, injury to our reputation, increased service and warranty expenses and paymentof damages.

Our systems may be harmed by events beyond our control.

Our computer systems and operations are vulnerable to damage or interruption from natural disasters, such asfires, floods and hurricanes, power outages, telecommunications failures, terrorist attacks, network service outagesand disruptions, “denial of service” attacks, computer viruses, break-ins, sabotage and other similar events beyondour control. The occurrence of a natural disaster or unanticipated problems at our facilities in the New Yorkmetropolitan area or at any third-party facility we utilize, such as our disaster recovery center in Waltham,Massachusetts, could cause interruptions or delays in our business, loss of data or render us unable to provide ourproducts and services. In addition, the failure of a third-party facility to provide the data communications capacityrequired by us, as a result of human error, bankruptcy, natural disaster or other operational disruption, could causeinterruptions to our computer systems and operations. The occurrence of any or all of these events could have amaterial adverse effect on our business, prospects, financial condition and results of operations.

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Our failure or inability to execute any element of our business strategy could adversely affect ouroperations.

Our business, prospects, financial condition and results of operations depend on our ability to execute ourbusiness strategy, which includes the following key elements:

• 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.

We may not succeed in implementing a portion or all of our business strategy and, even if we do succeed, ourstrategy may not have the favorable impact on operations that we anticipate. Our success depends on our ability toleverage our distribution channel and value proposition for dealers, financing sources and other service andinformation providers, offer a broad array of products and services, provide convenient, high-quality products andservices, maintain our technological position and implement other elements of our business strategy.

We may not be able to effectively manage the expansion of our operations or achieve the rapid executionnecessary to fully avail ourselves of the market opportunity for our products and services. If we are unable toadequately implement our business strategy, our business, prospects, financial condition and results of operationscould be materially adversely affected.

We have a very limited operating history.

We have a very limited operating history upon which you may evaluate our business and our prospects. Welaunched our business in February 2001. We will continue to encounter risks and difficulties frequently encounteredby companies in an early stage of development in new and rapidly evolving markets. In order to overcome theserisks and difficulties, we must, among other things:

• minimize security concerns;

• increase and retain the number of financing sources and automotive dealers that are active in our network;

• build brand recognition of our network products and services among dealership employees;

• prevent and respond quickly to service interruptions;

• develop our technology, new products and services;

• reduce the time involved in integrating new financing sources and other third parties into our network; and

• continue to attract, hire, motivate and retain qualified personnel.

If we fail to adequately address these risks and difficulties or fail in executing our business strategy, ourbusiness, prospects, financial condition and results of operations may be materially adversely affected.

Our budgeted operating costs are based on the anticipated growth of our future revenue, which is based on ourability to retain existing automotive dealer and financing source customers, integrate new automotive dealer andfinancing source customers and launch the products and services we have under development. We may not,however, be able to forecast growth accurately due to our limited operating history. If we do not grow as anticipatedand our expenditures are not reduced accordingly, our operating results could decline significantly, and we may notremain profitable.

Our revenue, operating results and profitability will vary from quarter to quarter, which may result involatility in our stock price.

Our revenue, operating results and profitability have varied in the past and are likely to continue to varysignificantly from quarter to quarter. This may lead to volatility in our stock price. These variations are due to

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several factors related to the number of transactions we process and to the number of subscriptions to our productsand services, including:

• the volume of new and used automobiles financed or leased by our participating financing source customers;

• the timing, size and nature of our subscriptions;

• automobile manufacturers or their captive financing sources offering special incentive programs such asdiscount pricing or low cost financing;

• the timing of our acquisitions of businesses, products and services;

• unpredictable sales cycles;

• the number of weekends, holidays and Mondays in a particular quarter;

• product and price competition regarding our products and services and those of our participating financingsources;

• changes in our operating expenses;

• the timing of introduction and market acceptance of new products, services or product enhancements by usor our competitors;

• foreign currency fluctuations; and

• personnel changes and fluctuations in economic and financial market conditions.

As a result of these fluctuations, we believe that period-to-period comparisons of our results of operations arenot necessarily meaningful. We cannot assure you that future revenue and results of operations will not varysubstantially from quarter to quarter. It is also possible that in future quarters, our results of operations will be belowthe expectations of equity research analysts, investors or our announced guidance. In any of these cases, the price ofour stock could be materially adversely affected.

We may be unable to develop and bring products and services in development and new products andservices to market in a timely manner.

Our success depends in part upon our ability to bring to market the products and services that we have indevelopment and offer new products and services that meet changing customer needs. The time, expense and effortassociated with developing and offering these new products and services may be greater than anticipated. Thelength of the development cycle varies depending on the nature and complexity of the product, the availability ofdevelopment, product management and other internal resources, and the role, if any, of strategic partners. If we areunable to develop and bring additional products and services to market in a timely manner, we could lose marketshare to competitors who are able to offer these additional products and services, which could also materiallyadversely affect our business, prospects, financial condition and results of operations.

Economic trends that affect the automotive retail industry may have a negative effect on our business.

Economic trends that negatively affect the automotive retail industry may adversely affect our business byreducing the amount of indirect automobile financing transactions that we earn revenue on, financing source orautomotive dealer customers that subscribe to our products and services or money that our customers spend on ourproducts and services. Purchases of new automobiles are typically discretionary for consumers and could beaffected by negative trends in the economy including negative trends relating to the cost of energy and gasoline. Areduction in the number of automobiles purchased by consumers could adversely affect our financing source anddealer customers and lead to a reduction in transaction volumes and in spending by these customers on oursubscription products and services. Any such reductions in transactions or subscriptions could have a materialadverse effect on our business, prospects, financial condition and results of operations.

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We are subject, directly and indirectly, to extensive and complex federal and state regulation and newregulations and/or changes to existing regulations may adversely affect our business.

The indirect automotive financing and automotive retail industries are subject to extensive and complexfederal and state regulation.

We are directly and indirectly subject to various laws and regulations. Federal laws and regulations governingprivacy of consumer information generally apply in the context of our business, such as the GLB Act, the FederalReserve Board’s implementing Regulation P, the Interagency Guidelines Establishing Information SecurityStandards, the Interagency Guidance on Response Programs for Unauthorized Access to Customer Informationand Customer Notice, the Junk Fax Prevention Act of 2005, the Can-Spam Act of 2003, and the FTC’s Privacy Rule,Safeguards Rule and Consumer Report Information Disposal Rule, as well as the FCRA. If we, or a financing sourceor dealer discloses or uses consumer information provided through our system in violation of these or other laws, orengage in other prohibited conduct, we may be subject to claims or enforcement actions by state or federalregulators. We cannot predict whether such claims or enforcement actions will arise or the extent to which, if at all,we may be held liable. Such claims or enforcement actions could have a material adverse effect on our businessprospects, financial condition and results of operations.

A majority of states have passed, or are currently contemplating, consumer protection, privacy, and datasecurity laws or regulations that may relate to our business. The FCRA contains certain provisions that explicitlypreempt some state laws to the extent the state laws seek to regulate certain specified areas, including theresponsibilities of persons furnishing information to consumer reporting agencies. Unlike the FCRA, however, theGLB Act does not limit the ability of the states to enact privacy legislation that provides greater protections toconsumers than those provided by the GLB Act. Some state legislatures or regulatory agencies have imposed, andothers may impose, greater restrictions on the disclosure of consumer information than are already contained in theGLB Act, Regulation P, the Interagency Guidelines or the FTC’s rules. Any such legislation or regulation couldadversely impact our ability to provide our customers with the products and services they require and that arenecessary to make our products and services attractive to them.

If a federal or state government or agency imposes additional legislative and/or regulatory requirements on usor our customers, or prohibits or limits our activities as currently conducted, we may be required to modify orterminate our products and services in that jurisdiction in a manner which could undermine our attractiveness oravailability to dealers and/or financing sources doing business in that jurisdiction.

The use of our electronic contracting product by financing sources is governed by relatively new laws.

In the United States, the enforceability of electronic transactions is primarily governed by the ElectronicSignatures in Global and National Commerce Act, a federal law enacted in 2000 that largely preempts inconsistentstate law, and the Uniform Electronic Transactions Act, a uniform state law that was finalized by the NationalConference of Commissioners on Uniform State Laws in 1999 and has now been adopted by most states. Case lawhas generally upheld the use of electronic signatures in commercial transactions and in consumer transactionswhere proper notice is provided and consumer consent to electronic contracting is obtained. UCC 9-105 providesrequirements to perfect security interests in electronic chattel paper. These laws impact the degree to which thefinancing sources in our network use our electronic contracting product. We believe that our electronic contractingproduct enables the perfection of a security interest in electronic chattel paper by meeting the transfer of “control”requirements of UCC 9-105. However, this issue has not been challenged in any legal proceeding. If a court were tofind that our electronic contracting product is not sufficient to perfect a security interest in electronic chattel paper,or if existing laws were to change, our business, prospects, financial condition and results of operations could bematerially adversely affected. Federal and state regulatory requirements imposed on our financing sourcecustomers, such as the SEC’s Regulation AB relating to servicers of asset backed securities, may also result inour incurring additional expenses to facilitate financing source compliance regarding the use of our electroniccontracting product.

New legislation or changes in existing legislation may adversely affect our business.

Our ability to conduct, and our cost of conducting, business may be adversely affected by a number oflegislative and regulatory proposals concerning aspects of the Internet, which are currently under consideration byfederal, state, local and foreign governments and various courts. These proposals include, but are not limited to, the

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following matters: on-line content, user privacy, taxation, access charges, and so-called “net-neutrality” liability ofthird-party activities and jurisdiction. Moreover, we do not know how existing laws relating to these issues will beapplied to the Internet. The adoption of new laws or the application of existing laws could decrease the growth in theuse of the Internet, which could in turn decrease the demand for our products and services, increase our cost of doingbusiness or otherwise have a material adverse effect on our business, prospects, financial condition and results ofoperations. Furthermore, government restrictions on Internet content or anti-“net neutrality” legislation could slowthe growth of Internet use and decrease acceptance of the Internet as a communications and commercial mediumand thereby have a material adverse effect on our business, prospects, financial condition and results of operations.

We utilize certain key technologies from, and integrate our network with, third parties and may be unableto replace those technologies if they become obsolete, unavailable or incompatible with our products orservices.

Our proprietary software is designed to work in conjunction with certain software from third-party vendors,including Microsoft, Oracle and eOriginal. Any significant interruption in the supply of such third-party softwarecould have a material adverse effect on our ability to offer our products unless and until we can replace thefunctionality provided by these products and services. In addition, we are dependent upon these third parties’ abilityto enhance their current products, develop new products on a timely and cost-effective basis and respond toemerging industry standards and other technological changes. There can be no assurance that we would be able toreplace the functionality provided by the third-party software currently incorporated into our products or services inthe event that such software becomes obsolete or incompatible with future versions of our products or services or isotherwise not adequately maintained or updated. Any delay in or inability to replace any such functionality couldhave a material adverse effect on our business, prospects, financial condition and results of operations. Furthermore,delays in the release of new and upgraded versions of third-party software products could have a material adverseeffect on our business, prospects, financial condition and results of operations.

We may be unable to adequately protect, and we may incur significant costs in defending, our intellectualproperty and other proprietary rights.

Our success depends, in large part, on our ability to protect our intellectual property and other proprietaryrights. We rely upon a combination of trademark, trade secret, copyright, patent and unfair competition laws, as wellas license agreements and other contractual provisions, to protect our intellectual property and other proprietaryrights. In addition, we attempt to protect our intellectual property and proprietary information by requiring certainof our employees and consultants to enter into confidentiality, non-competition and assignment of inventionsagreements. To the extent that our intellectual property and other proprietary rights are not adequately protected,third parties might gain access to our proprietary information, develop and market products and services similar toours, or use trademarks similar to ours. Existing U.S. federal and state intellectual property laws offer only limitedprotection. Moreover, the laws of Canada, and any other foreign countries in which we may market our products andservices in the future, may afford little or no effective protection of our intellectual property. If we resort to legalproceedings to enforce our intellectual property rights or to determine the validity and scope of the intellectualproperty or other proprietary rights of others, the proceedings could be burdensome and expensive, and we may notprevail. We are currently asserting our patent rights against RouteOne and Finance Express in separate proceedingsthat challenge their systems and methods for credit application processing and routing. There can be no assurancesthat we will prevail in these proceedings or that these proceedings will not result in certain of our patent rights beingdeemed invalid. The failure to adequately protect our intellectual property and other proprietary rights could have amaterial adverse effect on our business, prospects, financial condition and results of operations.

We own the Internet domain names “dealertrack.com,” “alg.com,” “chrome.com,” “dealeraccess.com” andcertain other domain names. The regulation of domain names in the United States and foreign countries maychange. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrarsor modify the requirements for holding domain names, any or all of which may dilute the strength of our domainnames. We may not acquire or maintain our domain names in all of the countries in which our websites may beaccessed or for any or all of the top-level domain names that may be introduced. The relationship betweenregulations governing domain names and laws protecting intellectual property rights is unclear. Therefore, we may

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not be able to prevent third parties from acquiring domain names that infringe or otherwise decrease the value of ourtrademarks and other intellectual property rights.

A license agreement we have with a financing source customer restricts our ability to utilize the technologylicensed under this agreement beyond the automotive finance industry.

An affiliate of JPMorgan claims certain proprietary rights with respect to certain technology developed as ofFebruary 1, 2001. We have an exclusive, perpetual, irrevocable, royalty-free license throughout the world to use thistechnology in connection with the sale, leasing and financing of automobiles only, and the right to market, distributeand sub-license this technology solely to automotive dealerships, consumers and financing sources in connectionwith the sale, leasing and financing of automobiles only. The license agreement defines “automobile” as a passengervehicle or light truck, snowmobiles, recreational vehicles, motorcycles, boats and other watercraft and commercialvehicles and excludes manufactured homes. We are limited in our ability to utilize the licensed technology beyondthe automotive finance industry.

Claims that we or our technologies infringe upon the intellectual property or other proprietary rights of athird party may require us to incur significant costs, enter into royalty or licensing agreements or developor license substitute technology.

We may in the future be subject to claims that our technologies in our products and services infringe upon theintellectual property or other proprietary rights of a third party. In addition, the vendors providing us withtechnology that we use in our own technology could become subject to similar infringement claims. Although webelieve that our products and services do not infringe any intellectual property or other proprietary rights, we cannotassure you that our products and services do not, or that they will not in the future, infringe intellectual property orother proprietary rights held by others. Any claims of infringement could cause us to incur substantial costsdefending against the claim, even if the claim is without merit, and could distract our management from ourbusiness. Moreover, any settlement or adverse judgment resulting from the claim could require us to pay substantialamounts, or obtain a license to continue to use the products and services that is the subject of the claim, and/orotherwise restrict or prohibit our use of the technology. There can be no assurance that we would be able to obtain alicense on commercially reasonable terms from the third party asserting any particular claim, if at all, that we wouldbe able to successfully develop alternative technology on a timely basis, if at all, or that we would be able to obtain alicense from another provider of suitable alternative technology to permit us to continue offering, and our customersto continue using, the products and services. In addition, we generally provide in our customer agreements forcertain products and services that we will indemnify our customers against third-party infringement claims relatingto technology we provide to those customers, which could obligate us to pay damages if the products and serviceswere found to be infringing. Infringement claims asserted against us, our vendors or our customers may have amaterial adverse effect on our business, prospects, financial condition and results of operations.

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 provide guarantees to subscribers of certain of our products and services that the data they receive throughthese products and services will be accurate. Additionally, general errors, defects or other performance problems inour products and services could result in financial or other damages to our customers. There can be no assurance thatany limitations of liability set forth in our contracts would be enforceable or would otherwise protect us fromliability for damages. We maintain general liability insurance coverage, including coverage for errors and omissionsin excess of the applicable deductible amount. There can be no assurance that this coverage will continue to beavailable on acceptable terms or in sufficient amounts to cover one or more large claims, or that the insurer will notdeny coverage for any future claim. The successful assertion of one or more large claims against us that exceedsavailable insurance coverage, or the occurrence of changes in our insurance policies, including premium increasesor the imposition of large deductible or co-insurance requirements, could have a material adverse effect on ourbusiness, prospects, financial condition and results of operations. Furthermore, litigation, regardless of its outcome,could result in substantial cost to us and divert management’s attention from our operations. Any contract liabilityclaim or litigation against us could, therefore, have a material adverse effect on our business, prospects, financial

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condition and results of operations. In addition, some of our products and services are business-critical for ourdealer and financing source customers and a failure or inability to meet a customer’s expectations could seriouslydamage our reputation and affect our ability to retain existing business or attract new business.

We have made strategic acquisitions in the past and intend to do so in the future. If we are unable to findsuitable 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 ofoperations.

Since 2001, we have acquired numerous businesses, including, most recently, our acquisition in February 2007of Curomax Corporation. As part of our ongoing business strategy to expand product offerings and acquire newtechnology, we frequently engage in discussions with third parties regarding, and enter into agreements relating to,possible acquisitions, strategic alliances and joint ventures. There may be significant competition for acquisitiontargets in our industry, or we may not be able to identify suitable acquisition candidates or negotiate attractive termsfor acquisitions. If we are unable to identify future acquisition opportunities, reach agreement with such thirdparties or obtain the financing necessary to make such acquisitions, we could lose market share to competitors whoare able to make such acquisitions, which could have a material adverse effect on our business, prospects, financialcondition and results of operations.

Even if we are able to complete acquisitions or enter into alliances and joint ventures that we believe will besuccessful, such transactions are inherently risky. Significant risks to these transactions include the following:

• 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.

If we are not successful in completing acquisitions in the future, we may be required to reevaluate ouracquisition strategy. We also may incur substantial expenses and devote significant management time and resourcesin seeking to complete acquisitions. In addition, we could use substantial portions of our available cash to pay all ora portion of the purchase prices of future acquisitions.

Any acquisitions that we complete may dilute your ownership interest in us, may have adverse effects onour business, prospects, financial condition and results of operations and may cause unanticipatedliabilities.

Future acquisitions may involve the issuance of our equity securities as payment, in part or in full, for thebusinesses or assets acquired. Any future issuances of equity securities would dilute our existing stockholders’ownership interests. Future acquisitions may also decrease our earnings or earnings per share and the benefitsderived by us from an acquisition might not outweigh or might not exceed the dilutive effect of the acquisition. Wealso may incur additional indebtedness or suffer adverse tax and accounting consequences in connection with anyfuture acquisitions.

We may not successfully integrate recent or future acquisitions.

The integration of acquisitions involves a number of risks and presents financial, managerial and operationalchallenges. We may have difficulty, and may incur unanticipated expenses related to, integrating management andpersonnel from these acquired entities with our management and personnel. Failure to successfully integrate recentacquisitions or future acquisitions could have a material adverse effect on our business, prospects, financialcondition and results of operations.

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Restrictive covenants in our credit facilities may restrict our ability to pursue our business strategies.

Our credit facilities contain restrictive covenants that limit our ability and our existing or future subsidiaries’abilities, among other things, to:

• access our, or our existing or future subsidiaries’, cash flow and value and, therefore, to pay interest and/orprincipal 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 orto 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’sassets;

• 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.

The agreement governing our credit facility also requires us and our subsidiaries to achieve specified financialand operating results and maintain compliance with specified financial ratios on a consolidated basis. Our and oursubsidiaries’ ability to comply with these ratios may be affected by events beyond our control.

If we breach the restrictive covenants or do not comply with these ratios, the lenders may have the right toterminate any commitments they have to provide further borrowings. This right, as well as the restrictive covenants,could limit our ability to plan for or react to market conditions or meet capital needs or otherwise restrict ouractivities or business plans and adversely affect our ability to finance our operations, strategic acquisitions,investments or alliances or other capital needs or to engage in other business activities that would be in our interest.

We are dependent on our key management, direct sales force and technical personnel for continuedsuccess.

We have grown significantly in recent years, and our management remains concentrated in a small number ofkey employees. Our future success depends to a significant extent on our executive officers and key employees,including members of our direct sales force and technology staff, such as our software developers and other seniortechnical personnel. We rely primarily on our direct sales force to sell subscription products and services toautomotive dealers. We may need to hire additional sales, customer service, integration and training personnel in thenear-term and beyond if we are to achieve revenue growth in the future. The loss of the services of any of theseindividuals or group of individuals could have a material adverse effect on our business, prospects, financialcondition and results of operations.

Competition for qualified personnel in the technology industry is intense and we compete for these personnelwith other technology companies that have greater financial and other resources than we do. Our future success willdepend in large part on our ability to attract, retain and motivate highly qualified personnel, and there can be noassurance that we will be able to do so. Any difficulty in hiring or retaining needed personnel, or increased costsrelated thereto could have a material adverse effect on our business, prospects, financial condition and results ofoperations.

If we fail to effectively manage our growth, our financial results could be adversely affected.

We have expanded our operations rapidly in recent years. For example, net revenue increased from$11.7 million for the year ended December 31, 2002 to $38.7 million, $70.0 million, $120.2 million and

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$173.3 million for the years ended December 31, 2003, 2004, 2005 and 2006, respectively. Our growth may place astrain on our management team, information systems and other resources. Our ability to successfully offer productsand services and implement our business plan requires oversight from our senior management, as well as adequateinformation systems and other resources. We will need to continue to improve our financial and managerialcontrols, reporting systems and procedures as we continue to grow and expand our business. As we grow, we mustalso continue to hire, train, supervise and manage new employees. We may not be able to hire, train, supervise andmanage sufficient personnel or develop management and operating systems to manage our expansion effectively. Ifwe are unable to manage our growth, our business, prospects, financial condition and results of operations could beadversely affected.

We may need additional capital in the future, which may not be available to us, and if we raise additionalcapital, it may dilute our stockholders’ ownership in us.

We may need to raise additional funds through public or private debt or equity financings in order to meetvarious objectives, such as:

• acquiring businesses, 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.

Any debt incurred by us could impair our ability to obtain additional financing for working capital, capitalexpenditures or further acquisitions. Covenants governing any debt we incur would likely restrict our ability to takespecific actions, including our ability to pay dividends or distributions on, or redeem or repurchase our capital stock,enter into transactions with affiliates, merge, consolidate or sell our assets or make capital expenditure investments.In addition, the use of a substantial portion of the cash generated by our operations to cover debt service obligationsand any security interests we grant on our assets could limit our financial and business flexibility.

Any additional capital raised through the sale of equity or convertible debt securities may dilute ourstockholders’ respective ownership percentages in us. Furthermore, any additional debt or equity financing wemay need may not be available on terms favorable to us, or at all. If future financing is not available or is notavailable on acceptable terms, we may not be able to raise additional capital, which could significantly limit ourability to implement our business plan. In addition, we may issue securities, including debt securities that may haverights, preferences and privileges senior to our common stock.

Our future success depends substantially on continued growth in the use of the Internet by automotivedealers and the indirect automotive finance industry.

The Internet is a relatively new commercial marketplace for automotive dealers, particularly for their financeand insurance department managers, and may not continue to grow. The market for web-based automotive financeis rapidly evolving and the ultimate demand for and market acceptance of web-based automotive finance remainsuncertain. Market acceptance of Internet automotive financing depends on financing sources’ and dealers’willingness to use the Internet for general commercial and financial services transactions. Other critical issuesconcerning the commercial use of the Internet, including reliability, security, cost, ease of use and access and qualityof service, may also impact the growth of Internet use by financing sources and dealers. Consequently, web-basedautomotive financing may not become as widely accepted as traditional methods of financing and electroniccontracting may not become as widely accepted as paper contracting. In either case our business, prospects,financial condition and results of operations could be materially adversely affected. If Internet use by automotivedealers and financing sources does not continue to grow, dealers may revert to traditional methods of commu-nication with financing sources, such as the fax machine, and thus, our business, prospects, financial condition andresults of operations could be materially adversely affected.

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Additionally, to the extent the Internet’s technical infrastructure or security concerns adversely affect itsgrowth, our business, prospects, financial condition and results of operations could be materially adversely affected.The Internet could also lose its commercial viability due to delays in the development or adoption of new standardsand protocols required to handle increased levels of activity or due to increased governmental regulation. Changesin or insufficient availability of telecommunication services could produce slower response times and adverselyaffect Internet use.

Insiders may have influence over us and could limit our other stockholders’ ability to influence the outcomesof key transactions, including a change of control.

Our stockholders that own more than 5% of our equity securities, directors and executive officers, and entitiesaffiliated with them, beneficially owned approximately 20% of the outstanding shares of our equity securities as ofMarch 1, 2007. Accordingly, these principal stockholders, directors and executive officers, and entities affiliatedwith them, if acting together, may be able to influence or control matters requiring approval by our stockholders,including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions.They may also have interests that differ from our other stockholders’ interests and may vote in a way adverse to theinterests of our other stockholders. The concentration of ownership may have the effect of delaying, preventing ordeterring a change of control of our company, could deprive our stockholders of an opportunity to receive apremium for their common stock as part of a sale of our company and might ultimately affect the market price of ourcommon stock.

Our financing source customers may elect to use competing third party services, either in addition to orinstead of our network.

Our financing source customers continue to receive credit applications and purchase retail installment salesand lease contracts directly from their dealer customers through traditional indirect financing methods, includingvia facsimile and other electronic means of communication, in addition to using our network. Many of our financingsource customers are involved in other ventures as participants and/or as equity holders, and such ventures or newlycreated ventures may compete with us and our network now and in the future. Continued use of alternative methodsto ours by these financing source customers may have a material adverse effect on our business, prospects, financialcondition and results of operations.

The requirements of being a public company may strain our resources and distract management.

As a newly public company, we have begun to, and will continue to incur significant legal, accounting,corporate governance and other expenses that we did not incur as a private company. We are now subject to therequirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), the NASDAQ StockMarket and other rules and regulations. These rules and regulations may place a strain on our systems and resources.The Exchange Act requires, among other things, that we file annual reports such as this Annual Report onForm 10-K, quarterly and current reports with respect to our business and financial condition. Sarbanes-Oxleyrequires, among other things, that we maintain effective disclosure controls and procedures and internal control overfinancial reporting. We did not have an internal audit group during 2006. In order to maintain and improve theeffectiveness of our disclosure controls and procedures and internal control over financial reporting, significantresources and management oversight will be required. As a result, management’s attention may be diverted fromother business concerns, which could have a material adverse effect on our business, prospects, financial conditionand results of operations. In addition, we may need to hire additional accounting staff with appropriate publiccompany experience and technical accounting knowledge and we cannot assure you that we will be able to do so in atimely fashion.

These rules and regulations may make it more difficult and more expensive for us to obtain director and officerliability insurance and we may be required to accept reduced policy limits and coverage or incur substantially highercosts to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualifiedindividuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoringdevelopments with respect to these rules, and we cannot predict or estimate the amount of additional costs we mayincur or the timing of such costs.

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Some provisions in our certificate of incorporation and by-laws may deter third parties from acquiring us.

Our fifth amended and restated certificate of incorporation and our amended and restated by-laws containprovisions that may make the acquisition of our company more difficult without the approval of our board ofdirectors, including, but not limited to, the following:

• 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 whichmay be issued without stockholder approval;

• our stockholders have only limited rights to amend our by-laws; and

• we require advance notice for stockholder proposals.

These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control ofour company. These provisions could also discourage proxy contests and make it more difficult for you and otherstockholders to elect directors of your choosing and cause us to take other corporate actions you desire. In addition,because our board of directors is responsible for appointing the members of our management team, these provisionscould in turn affect any attempt by our stockholders to replace current members of our management team.

In addition, we are subject to Section 203 of the Delaware General Corporation Law which, subject to certainexceptions, prohibits “business combinations” between a publicly-held Delaware corporation and an “interestedstockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more of aDelaware corporation’s voting stock, for a three-year period following the date that such stockholder became aninterested stockholder. Section 203 could have the effect of delaying, deferring or preventing a change in control ofour company that our stockholders might consider to be in their best interests.

The price of our common stock may be volatile.

The trading price of our common stock may fluctuate substantially. Factors that could cause fluctuations in thetrading price of our common stock include, but are not limited to:

• 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 ofequity 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 orinvolving the enforceability or order of priority of security interests of electronic chattel paper affecting ourelectronic contracting product; and

• additions or departures of key employees.

In the past, following periods of volatility in the market price of a company’s securities, securities class actionlitigation has often been brought against that company. Due to the potential volatility of our stock price, we maytherefore be the target of securities litigation in the future. Securities litigation could result in substantial costs anddivert management’s attention and resources from our business.

Item 1B. Unresolved Staff Comments

None.

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Item 2. Properties

Our corporate headquarters are located in Lake Success, New York, where we lease approximately53,000 square feet of office space. Our principal offices are located in Santa Barbara, California; Portland,Oregon; Wilmington, Ohio; Rosemont, Illinois; and Toronto, Canada.

We believe our existing facilities are adequate to meet our current requirements.

Item 3. Legal Proceedings

From time to time, we are a party to litigation matters arising in connection with the normal course of ourbusiness, none of which is expected to have a material adverse effect on us. In addition to the litigation mattersarising in connection with the normal course of our business, we are party to the litigation described below.

On January 28, 2004, we filed a Complaint and Demand for Jury Trial against RouteOne LLC (RouteOne) inthe United States District Court for the Eastern District of New York, Civil Action No. CV 04-322 (SJF). Thecomplaint seeks injunctive relief as well as damages against RouteOne for infringement of two patents owned by uswhich relate to computer implemented automated credit application analysis and decision routing inventions. Thecomplaint also seeks relief for RouteOne’s acts of copyright infringement, circumvention of technological measuresand common law fraud and unfair competition. Discovery has generally been completed and dispositive motionshave been briefed. The Court has not yet scheduled hearings for claim construction or on the dispositive motions.The parties are presently in discussions to resolve our claims of copyright infringement, circumvention oftechnological measures, and common law fraud and unfair competition. We intend to pursue our patent claimsvigorously.

On April 18, 2006, we filed a Complaint and Demand for Jury Trial against David Huber, Finance Express andthree of their unnamed dealer customers in the United States District Court for the Central District of California,Civil Action No. CV06-2335 AG (FMOx). The complaint seeks declaratory and injunctive relief, as well as,damages against the defendants for infringement of two patents owned by us that relate to computer implementedautomated credit application analysis and decision routing inventions. The complaint also seeks relief for FinanceExpress’s acts of copyright infringement, violation of the Lanham Act and violation of the California Business andProfessional Code. The defendants have made certain counterclaims in their answer. We believe these counter-claims to be without merit. Discovery has recently begun in connection with this action and a claim constructionhearing has been scheduled for April 23, 2007. We intend to pursue our claims and defend any counter claimsvigorously.

On October 27, 2006, we filed a Complaint and Demand for Jury Trial against RouteOne LLC, David Huber,and Finance Express in the United States District Court for the Central District of California, Civil ActionNo. 06-06864 DSF (PLAx). The complaint seeks declaratory and injunctive relief, as well as damages against thedefendants for joint and individual infringement of the same two patents that are the subject of the two afore-mentioned suits against Huber and Finance Express in the Central District of California, and RouteOne LLC in theEastern District of New York. Discovery has recently begun in connection with this action and a claim constructionhearing has been scheduled for June 19, 2007. We intend to pursue our claims vigorously.

On February 20, 2007, we filed a Complaint and Demand for Jury Trial against RouteOne LLC, David Huber,and Finance Express in the United States District Court for the Central District of California, Civil ActionNo. 07-215 CJC (CSx). The complaint seeks declaratory and injunctive relief, as well as damages against thedefendants for joint and individual infringement of a patent related to the two patents that are the subject of the threeafore-mentioned suits. The patent that is the subject matter of this litigation issued on February 20, 2007 andconcerns computer aided methods of managing credit applications. The Complaint and Demand for Jury Trial hasnot yet been served in this action. We intend to pursue our claims vigorously.

We believe that the potential liability from all current litigations will not have a material effect on our financialposition or results of operations when resolved in a future period.

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Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of our security holders during the fourth quarter of the year covered by thisAnnual Report on Form 10-K.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities

Market Information

As of March 1, 2007, there were 36 holders of record of our common stock. Our common stock is listed andtraded on the Nasdaq Global Market under the symbol “TRAK.” The following table sets forth the range of high andlow sales prices for the common stock since our public offering on December 13, 2005, as reported by the NasdaqGlobal Market. The quotations represent interdealer quotations, without adjustments for retail mark ups, markdowns, or commissions, and may not necessarily represent actual transactions.

High Low

Year Ended December 31, 2006Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29.98 $21.72

Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23.96 $18.80

Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24.18 $20.73

First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23.91 $19.96

Year Ended December 31, 2005Fourth Quarter (beginning on December 13, 2005) . . . . . . . . . . . . . . . . . . . . . . . $21.00 $19.20

Use of Proceeds

We commenced our initial public offering of our common stock on December 13, 2005 at a price to the publicof $17.00 per share. A total of 6,666,667 shares of our common stock were sold by us initially at an offering price tothe public of $17.00 per share, and an additional 1,500,000 shares of our common stock were sold under an over-allotment option that our underwriters exercised at $17.00 per share on December 22, 2005. In addition, the sellingstockholders sold 3,333,333 shares of our common stock. We did not receive any proceeds from the sellingstockholders’ sale of these shares. We received net proceeds of $126.1 million after the exercise of the over-allotment and after deducting the underwriting discounts and commissions, financial advisory fees and expenses ofthe offering.

We have broad discretion as to the use of these proceeds and may apply them to product development efforts,acquisitions or strategic alliances.

We used a portion of the net proceeds of $126.1 million from this offering to:

• pay in full the $25.0 million outstanding under our term loan facility and the $18.5 million outstanding underour 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;

• purchase assets of Global Fax L.L.C., Inc. for $24.6 million in cash;

• purchase assets of DealerWare LLC, Inc. for $5.1 million in cash; and

• subsequent to December 31, 2006, purchase all outstanding shares of Curomax Corporation for $37.2 millionin cash;

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As of December 31, 2006, we had remaining cash, cash equivalents and short-term investments of$171.2 million.

Dividend Policy

We have not paid any cash dividends on our common stock and currently intend to retain any future earningsfor use in our business. Additionally, our credit facility contains a restrictive covenant that prohibits us from payingdividends.

Repurchases

From time to time, in connection with the vesting of restricted common stock under our Incentive Award Plans,we may receive shares of our common stock from certain restricted common stockholders in consideration of thetax withholdings due upon the vesting of restricted common stock.

The following table sets forth the repurchases for the year ended December 31, 2006 (in thousands, except forshare and per share data):

Period

Total Numberof SharesPurchased

Average PricePaid per

Share

TotalNumber of

SharesPurchasedas Part ofPublicly

AnnouncedProgram

MaximumNumberof Shares

ThatMay Yet bePurchasedUnder theProgram

October 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,219 $25.22 n/a n/a

Item 6. Selected Consolidated Financial Data

The selected consolidated financial data as of December 31, 2006 and 2005 and for each of the three years inthe period ended December 31, 2006 have been derived from our consolidated financial statements and relatednotes thereto included elsewhere herein, which have been audited by PricewaterhouseCoopers LLP, an independentregistered public accounting firm. The selected historical consolidated financial data as of December 31, 2004,2003 and December 31, 2002 and for each of the two years in the period ended December 31, 2003 have beenderived from our audited consolidated financial statements and related notes thereto, which are not included in thisfiling, which have also been audited by PricewaterhouseCoopers LLP.

We completed acquisitions during the periods presented below, the operating results of which have beenincluded in our historical results of operations from the respective acquisition dates. These acquisitions havesignificantly affected our revenue, results of operations and financial condition. Accordingly, the results ofoperations for the periods presented may not be comparable due to these acquisitions.

The following selected consolidated financial data should be read in conjunction with “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in this AnnualReport on Form 10-K and “Financial Statements and Supplementary Data in Part II, Item 8 in this Annual Report onForm 10-K.”

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2006 2005 2004 2003 2002Year Ended December 31,

(In thousands, except per share and share amounts)

Consolidated Statements of Operations Data:

Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 173,272 $ 120,219 $ 70,044 $ 38,679 $ 11,711

Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . 20,739 9,831 7,722 (3,270) (16,954)

Income (loss) before (provision) benefit for income taxes . . . . . 26,133 8,528 7,661 (3,217) (16,775)

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,336 $ 4,468 $ 11,253 $ (3,289) $ (16,775)

Basic net income (loss) per share applicable to commonstockholders(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.54 $ 0.17 $ 0.45 $(1,000.30) $(23,334.99)

Diluted net income (loss) per share applicable to commonstockholders(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.51 $ 0.12 $ 0.02 $(1,000.30) $(23,334.99)

Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . 36,064,796 2,290,439 40,219 3,288 1,009

Weighted average shares outstanding assuming dilution . . . . . . . 37,567,488 3,188,180 1,025,248 3,288 1,009

2006 2005 2004 2003 2002As of December 31,

(In thousands)

Consolidated Balance Sheets Data:

Cash and cash equivalents and short-term investments . . . . . . . . $171,195 $103,264 $ 21,753 $ 16,790 $ 13,745

Working capital(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,817 101,561 24,421 15,640 13,444

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321,513 220,615 76,681 46,643 25,865

Capital lease obligations (short and long-term), due to acquirees(short and long-term) and other long-term liabilities . . . . . . . 10,103 9,984 7,999 1,100 —

Total redeemable convertible participating preferred stock . . . . . — — 72,226 72,226 53,226

Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,230) (20,566) (25,034) (36,287) (32,997)

Total stockholders’ equity (deficit) . . . . . . . . . . . . . . . . . . . . 284,337 186,671 (20,001) (33,608) (32,747)

(1) For the years ended December 31, 2005 and 2004, the basic and diluted earnings per share calculations includeadjustments to net income relating to preferred dividends earned, but not paid, and net income amountsallocated to the participating preferred stockholders in order to compute net income applicable to commonstockholders in accordance with SFAS No. 128, Earnings per Share and EITF 03-6, Participating Securitiesand the Two — Class Method under FASB No. 128 . For more detail, please see Note 2 to our consolidatedfinancial statements.

(2) Working capital is defined as current assets less current liabilities.

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 inconjunction with our consolidated financial statements and related notes thereto. In addition, you should read thesections 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

DealerTrack is a leading provider of on-demand software, network and data solutions for the automotive retailindustry in the United States. Utilizing the Internet, DealerTrack has built a network connecting automotive dealerswith banks, finance companies, credit unions and other financing sources, and other service and informationproviders, such as aftermarket providers and the major credit reporting agencies. We have established a network ofactive relationships, which, as of December 31, 2006, consisted of over 22,000 automotive dealers, including over89% of all franchised dealers in the United States; over 300 financing sources, including the 20 largest independentfinancing sources in the United States; and a number of other service and information providers to the automotiveretail industry. Our credit application processing product enables dealers to automate and accelerate the indirectautomotive financing process by increasing the speed of communications between these dealers and their financingsources. We have leveraged our leading market position in credit application processing to address other

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inefficiencies in the automotive retail industry value chain. We believe our proven network provides a competitiveadvantage for distribution of our software and data solutions. Our integrated subscription-based software productsand services enable our dealer customers to receive valuable consumer leads, compare various financing and leasingoptions and programs, sell insurance and other aftermarket products, analyze inventory, document compliance withcertain laws and execute financing contracts electronically. We have also created efficiencies for financing sourcecustomers by providing a comprehensive digital and electronic contracting solution. In addition, we offer data andother products and services to various industry participants, including lease residual value and automobileconfiguration data. We are a Delaware corporation formed in August 2001.

We are organized as a holding company and conduct a substantial amount of our business through oursubsidiaries including Automotive Lease Guide (alg), Inc., Chrome Systems, Inc., DealerAccess Canada Inc.,DealerTrack Aftermarket Services, Inc., DealerTrack Digital Services, Inc., DealerTrack, Inc., and webalg, inc.

We monitor our performance as a business using a number of measures that are not found in our consolidatedfinancial statements. These measures include the number of active dealers and financing sources in the DealerTracknetwork. We believe that improvements in these metrics will result in improvements in our financial performanceover time. We also view the acquisition and successful integration of acquired companies as important milestones inthe growth of our business as these acquired companies bring new products to our customers and expand ourtechnological capabilities. We believe that successful acquisitions will also lead to improvements in our financialperformance over time. In the near term, however, the purchase accounting treatment of acquisitions can have anegative impact on our net income as the depreciation and amortization expenses associated with acquired assets, aswell as particular intangibles (which tend to have a relatively short useful life), can be substantial in the first severalyears following an acquisition. As a result, we monitor our EBITDA and other business statistics as a measure ofoperating performance in addition to net income and the other measures included in our consolidated financialstatements.

The following is a table consisting of EBITDA and certain other business statistics that management iscontinually monitoring:

2006 2005 2004Year Ended December 31,

(In thousands, exceptfor non-financial data)

EBITDA and Other Business Statistics:EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,027 $32,594 $18,595

Capital expenditures, software and website development costs . . . . . . . . . . . . $10,605 $10,746 $ 4,407

Active dealers in our network as of end of the year(2) . . . . . . . . . . . . . . . . . . 22,147 21,155 19,150

Active financing sources in our network as of end of year(3) . . . . . . . . . . . . . 305 201 109

(1) EBITDA represents net income before interest (income) expense, taxes, depreciation and amortization. Wepresent EBITDA because we believe that EBITDA provides useful information with respect to the performanceof our fundamental business activities and is also frequently used by securities analysts, investors and otherinterested parties in the evaluation of comparable companies. We rely on EBITDA as a primary measure toreview and assess the operating performance of our company and management team in connection with ourexecutive compensation plan incentive payments. In addition, our credit agreement uses EBITDA (withadditional adjustments), in part, to measure our compliance with covenants such as interest coverage.

EBITDA has limitations as an analytical tool and you should not consider it in isolation, or as a substitute foranalysis of our results as reported under Generally Accepted Accounting Principles (GAAP). Some of theselimitations are:

• EBITDA does not reflect our cash expenditures or future requirements for capital expenditures orcontractual commitments;

• EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

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• EBITDA does not reflect the significant interest expense, or the cash requirements necessary to serviceinterest or principal payments, on our debts;

• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortizedwill often have to be replaced in the future, and EBITDA does not reflect any cash requirements for suchreplacements; and

• Other companies may calculate EBITDA differently than we do, limiting its usefulness as a comparativemeasure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available tous to invest in the growth of our business. We compensate for these limitations by relying primarily on ourGAAP results and using EBITDA only supplementally. EBITDA is a measure of our performance that is notrequired by, or presented in accordance with, GAAP. EBITDA is not a measurement of our financialperformance under GAAP and should not be considered as an alternative to net income, operating incomeor any other performance measures derived in accordance with GAAP or as an alternative to cash flow fromoperating activities as a measure of our liquidity.

The following table sets forth the reconciliation of EBITDA, a non-GAAP financial measure, to net income,our most directly comparable financial measure in accordance with GAAP.

2006 2005 2004Year Ended December 31,

(Dollars in thousands)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,336 $ 4,468 $11,253

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,289) (282) (54)

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268 1,585 115

Provision for (benefit from) income taxes . . . . . . . . . . . . . . . . . . . . 6,797 4,060 (3,592)

Depreciation of property and equipment and amortization ofcapitalized software and website costs . . . . . . . . . . . . . . . . . . . . 8,629 4,166 4,349

Amortization of acquired identifiable intangibles . . . . . . . . . . . . . . 17,286 18,597 6,524

EBITDA(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,027 $32,594 $18,595

(2) We consider a dealer to be active as of a date if the dealer completed at least one revenue-generating creditapplication processing transaction using the DealerTrack network during the most recently ended calendarmonth.

(3) We consider a financing source to be active in our network as of a date if it is accepting credit application dataelectronically from dealers in the DealerTrack network.

(4) For the year ended December 31, 2006, EBITDA includes $1.4 million in other income resulting from theDealerAccess purchase price adjustment, as described below under the section titled “Recent Events”.

Revenue

Transaction Services Revenue. Transaction services revenue consists of revenue earned from our financingsource customers for each credit application that dealers submit to them. We also earn transaction services revenuefrom financing source customers for each financing contract executed via our electronic contracting and digitalcontract processing solutions, as well as for any portfolio residual value analyses we perform for them. We also earntransaction services revenue from dealers or other service and information providers, such as aftermarket providers,vehicle sales lead distributors, and credit report providers, for each fee-bearing product accessed by dealers.

Subscription Services Revenue. Subscription services revenue consists of revenue earned from our custom-ers (typically on a monthly basis) for use of our subscription or license-based products and services. Some of thesesubscription services enable dealer customers to obtain valuable consumer leads, compare various financing andleasing options and programs, sell insurance and other aftermarket products, analyze inventory, and executefinancing contracts electronically.

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Over the last three years, our transaction services revenue has continued to grow, and we have derived anincreasing percentage of our net revenue from subscription fees. For the year ended December 31, 2006, 2005 and2004, we derived approximately 30.8%, 27.0% and 17.7% of our net revenue from subscription fees, respectively.

Cost of Revenue and Operating Expenses

Cost of Revenue. Cost of revenue primarily consists of expenses related to running our network infrastructure(including Internet connectivity and data storage), amortization expense on acquired intangible assets, compen-sation and related benefits for network personnel, amounts paid to third parties pursuant to contracts under which aportion of certain revenue is owed to those third parties (“revenue share”), direct costs (printing, binding, anddelivery) associated with our residual value guides, allocated overhead and amortization associated with capital-ization of software. We allocate overhead such as rent and occupancy charges, employee benefit costs anddepreciation expense to all departments based on headcount, as we believe this to be the most accurate measure. Asa result, a portion of general overhead expenses is reflected in our cost of revenue and each operating expensecategory.

During July 2006, we entered into a contractual arrangement with a third-party service provider that providesservices related to the integration between different software applications on an automotive dealer’s desktop. Aspart of the contractual terms we agreed to prepay approximately $1.1 million of the contract for various futureservices to be provided. During the fourth quarter of 2006, we were contacted by the third-party provider andnotified that they would be unable to perform under the terms of the contract and did not have the financialcapability to repay the $1.1 million. As of December 31, 2006, management concluded that this asset was impairedand wrote off the entire amount of $1.1 million during the fourth quarter of 2006 to cost of revenue. We may elect toinitiate foreclosure proceedings against the third-party service provider with respect to the provider’s intellectualproperty, which was pledged to guarantee the provider’s service obligations.

Product Development Expenses. Product development expenses consist primarily of compensation andrelated benefits, consulting fees and other operating expenses associated with our product development depart-ments. The product development departments perform research and development, as well as enhance and maintainexisting products.

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist pri-marily of compensation and related benefits, facility costs and professional services fees for our sales, marketingand administrative functions.

During the third quarter of 2006, we recorded a charge of approximately $5.8 million (includes $5.0 million innon-cash stock-based compensation and approximately $0.8 million in cash compensation expense) related to thedeparture of an executive officer. The $5.0 million in non-cash stock-based compensation expense was primarilydue to the May 26, 2005 modification of the executive officers’ original equity award terms (dated September 8,2003) that would take effect upon termination without cause. Of the $0.8 million in cash compensation, $0.2 millionwas payable on March 1, 2007 and the remaining portion of $0.6 million will be paid in equal installments over thesucceeding eighteen months.

Acquisitions

We have grown our business since inception through a combination of organic growth and acquisitions. Theoperating results of each business acquired have been included in our consolidated financial statements from therespective dates of acquisition.

On August 1, 2006, we acquired substantially all of the assets and certain liabilities of DealerWare L.L.C.(DealerWare) for a purchase price of $5.2 million in cash (including estimated direct acquisition costs ofapproximately $0.2 million). DealerWare is a provider of aftermarket menu-selling and other dealership software.

On May 3, 2006, we acquired substantially all of the assets and certain liabilities of Global Fax L.L.C. (GlobalFax) for a purchase price of $24.6 million in cash (including estimated direct acquisition costs of approximately$0.3 million). Global Fax provides outsourced document scanning, storage, data entry and retrieval services forautomotive financing customers.

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On February 2, 2006, we acquired substantially all of the assets and certain liabilities of WiredLogic, Inc.,doing business as DealerWire, Inc. (DealerWire), for a purchase price of $6.0 million in cash (including estimateddirect acquisition costs of approximately $0.1 million). DealerWire allows a dealership to evaluate its sales andinventory performance by vehicle make, model and trim, including information about unit sales, costs, days to turnand front-end gross profit.

On May 25, 2005, we acquired substantially all the assets and certain liabilities of Automotive Lease Guide(alg), LLC and Automotive Lease Guide (alg) Canada, Inc. (collectively, ALG) for a purchase price of $40.1 million(including direct acquisition costs of approximately $0.6 million) in cash and notes payable to ALG. Additionalconsideration of up to $11.3 million may be paid contingent upon certain future increases in revenue of ALG andanother of our subsidiaries through December 2009. Relating to the years ended December 31, 2006 and 2005, wepaid $0.2 million and $0.1 million of additional consideration, respectively. ALG’s products and services providelease residual value data for new and used leased automobiles, and guidebooks and consulting services relatedthereto, to manufacturers, financing sources, investment banks, automobile dealers and insurance companies.

On May 23, 2005, we acquired substantially all the assets and certain liabilities of North American AdvancedTechnology, Inc. (NAT) for a purchase price of $8.7 million (including direct acquisition costs of approximately$0.3 million) in cash. NAT’s products and services streamline and automate many traditionally time-consuming anderror-prone manual processes of administering aftermarket products, such as extended service contracts, andguaranteed asset protection coverage.

On May 10, 2005, we acquired substantially all the assets and certain liabilities of Chrome SystemsCorporation (Chrome) for a purchase price of $20.4 million (including direct acquisition costs of approximately$0.4 million) in cash. Chrome’s products and services collect, standardize and enhance raw automotive data anddeliver it in a format that is easy to use and tailored to specific industry requirements. Chrome’s products andservices enable dealers, manufacturers, financing sources, Internet portals, consumers and insurance companies toconfigure, compare, and price automobiles on a standardized basis. This provides more accurate valuations for bothconsumer trade-ins and dealers’ used automobile inventory.

On January 1, 2005, we purchased substantially all the assets of GO BIG! Software, Inc. (Go Big) for apurchase price of approximately $1.9 million in cash (including direct acquisition costs of approximately $50,000and additional contingent purchase price of $0.7 million). This acquisition expanded our product and serviceofferings to include an electronic menu selling tool to our automotive dealers.

Acquisition-Related Amortization Expense

All of the acquisitions described above have been recorded under the purchase method of accounting, pursuantto which the total purchase price, including direct acquisition costs, is allocated to the net assets acquired basedupon estimates of the fair value of those assets. Any excess purchase price is allocated to goodwill. During thefourth quarter of 2006, we completed the fair value assessment of the acquired assets, liabilities, identifiableintangibles and goodwill of Global Fax and DealerWare, which did not result in a material reclassification betweengoodwill and identifiable intangibles previously disclosed in our Quarterly Report on Form 10-Q for the thirdquarter of 2006.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of our operations are based onour consolidated financial statements, which have been prepared in accordance with accounting principlesgenerally accepted in the United States of America. The preparation of these consolidated financial statementsrequires management to make estimates and judgments that affect the amounts reported for assets, liabilities,revenue, expenses and the disclosure of contingent liabilities. A summary of our significant accounting policies ismore fully described in Note 2 to our consolidated financial statements.

Our critical accounting policies are those that we believe are both important to the portrayal of our financialcondition and results of operations and that involve difficult, subjective or complex judgments, often as a result ofthe need to make estimates about the effect of matters that are inherently uncertain. The estimates are based onhistorical experience and on various assumptions about the ultimate outcome of future events. Our actual results

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may differ from these estimates in the event unforeseen events occur or should the assumptions used in theestimation process differ from actual results.

We believe the following critical accounting policies affect our more significant judgments and estimates usedin the preparation of our consolidated financial statements:

Revenue Recognition

We recognize revenue in accordance with SAB No. 104, Revenue Recognition in Financial Statements andEITF, No. 00-21, Revenue Arrangements with Multiple Deliverables. In addition, for certain subscription productsand services we also recognize revenue under SOP 97-2, Software Revenue Recognition.

Transaction Services Revenue. Transaction services revenue includes revenue earned from our financingsource customers for each credit application that dealers submit to them. We also earn transaction services revenuefrom financing source customers for each financing contract executed via our electronic contracting and digitalcontract processing solution, as well as for any portfolio residual value analyses we perform for them. We also earntransaction services revenue from dealers or other service and information providers, such as credit report providers,for each fee-bearing product accessed by dealers.

We offer our web-based service to financing sources for the electronic receipt of credit application data andcontract data for automobile financing transactions in consideration for a transaction fee. This service is sold basedupon contracts that include fixed or determinable prices and that do not include the right of return or other similarprovisions or significant post service obligations. Credit application and digital and electronic contractingprocessing revenue is recognized on a per transaction basis, after customer receipt and when collectibility isreasonably assured. Set-up fees charged to the financing sources for establishing connections, if any, are recognizedratably over the expected customer relationship period of three or four years, depending on the type of customer.

Our credit report service provides our dealer customers the ability to access credit reports from several majorcredit reporting agencies or resellers online. We sell this service based upon contracts with the customer or creditreport provider, as applicable, that include fixed or determinable prices and that do not include the right of return orother similar provisions or other significant post-service obligations. We recognize credit report revenue on a pertransaction basis, when services are rendered and when collectibility is reasonably assured. We offer these creditreports on both a reseller and an agency basis. We recognize revenue from all but one provider of credit reports on anet basis due to the fact that we are not considered the primary obligor, and recognize revenue gross with respect toone of the providers as we have the risk of loss and are considered the primary obligor in the transaction.

Subscription Services Revenue. Subscription services revenue consists of revenue earned from our custom-ers (typically on a monthly basis) for use of our subscription or license-based products and services. Some of thesesubscription services enable dealer customers to obtain valuable consumer leads, compare various financing andleasing options and programs, sell insurance and other aftermarket products, analyze inventory and executefinancing contracts electronically. These subscription services are typically sold based upon contracts that includefixed or determinable prices and that do not include the right of return or other similar provisions or significant postservice obligations. We recognize revenue from such contracts ratably over the contract period. We recognize set-upfees, if any, ratably over the expected customer relationship of three or four years, depending on the type ofcustomer. For contracts that contain two or more products or services, we recognize revenue in accordance with theabove policy using relative fair value.

Our revenue is presented net of a provision for sales credits, which are estimated based on historical results,and established in the period in which services are provided.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of ourcustomers to make required payments. The amount of the allowance account is based on historical experience andour analysis of the accounts receivable balance outstanding. While credit losses have historically been within ourexpectations and the provisions established, we cannot guarantee that we will continue to experience the same creditloss rates that we have in the past. If the financial condition of our customers were to deteriorate, resulting in their

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inability to make payments, additional allowances may be required which would result in an additional expense inthe period that this determination was made.

Goodwill, Other Intangibles and Long-lived Assets

We record as goodwill the excess of purchase price over the fair value of the tangible and identifiableintangible assets acquired. Statement of Financial Accounting Standards No. 142, “Goodwill and Other IntangibleAssets” (SFAS No. 142), requires goodwill to be tested for impairment annually, as well as when an event or changein circumstance indicates an impairment may have occurred. Goodwill is tested for impairment using a two-stepapproach. The first step tests for impairment by comparing the fair value of our one reporting unit to our carryingamount to determine if there is potential goodwill impairment. If the fair value of the reporting unit is less than itscarrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill of thereporting unit is less than its carrying value.

SFAS No. 142 requires that goodwill be assessed at the operating segment or lower level. After considering thefactors included in SFAS No. 131 and EITF Topic No. D-101, we determined that the components of our oneoperating segment have similar economic characteristics, nature of products, distribution, shared resources and typeof customer such that the components should be aggregated into a single reporting unit for purposes of performingthe impairment test for goodwill. We estimate the fair value of our reporting unit using a market capitalizationapproach. From time to time an independent third-party valuation expert may be utilized to assist in thedetermination of fair value. Determining the fair value of a reporting unit is judgmental and often involves theuse of significant estimates and assumptions, such as cash flow projections and discount rates. We perform ourannual goodwill impairment test as of October 1 of every year or when there is a triggering event. Our estimate ofthe fair value of our reporting unit was in excess of its carrying value as of October 1, 2006, 2005 and 2004.

Long-lived assets, including fixed assets and intangible assets, are reviewed for impairment whenever eventsor changes in circumstances indicate that the carrying value may not be recoverable. In reviewing for impairment,the carrying value of such assets is compared to the estimated undiscounted future cash flows expected from the useof the assets and their eventual disposition. If such cash flows are not sufficient to support the asset’s recorded value,an impairment charge is recognized to reduce the carrying value of the long-lived asset to its estimated fair value.The determination of future cash flows, as well as the estimated fair value of long-lived assets involves significantestimates on the part of management. In order to estimate the fair value of a long-lived asset, we may engage a thirdparty to assist with the valuation. If there is a material change in economic conditions or other circumstancesinfluencing the estimate of our future cash flows or fair value, we could be required to recognize impairmentcharges in the future.

We evaluate the remaining useful life of our intangible assets on a periodic basis to determine whether eventsand circumstances warrant a revision to the remaining estimated amortization period. If events and circumstanceswere to change significantly, such as a significant decline in the financial performance of our business, we couldincur a significant non-cash charge to our income statement.

Income Taxes

We account for income taxes in accordance with the provisions of SFAS No. 109, “Accounting for IncomeTaxes,” (SFAS No. 109) which requires deferred tax assets and liabilities to be recognized for the future taxconsequences attributable to differences between the consolidated financial statement carrying amounts of assetsand liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets andliabilities are measured using enacted tax rates expected to apply to taxable income in the years in which thosetemporary differences are expected to be reversed. Deferred tax assets are reduced by a valuation allowance when,in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not berealized.

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Stock-Based Compensation

We maintain several share-based incentive plans. We grant stock options to purchase common stock and grantrestricted common stock. In January 2006, we began offering an employee stock purchase plan that allowsemployees to purchase our common stock at a 15% discount each quarter through payroll deductions.

Effective January 1, 2006, we adopted SFAS 123(R), which requires us to measure and recognize the cost ofemployee services received in exchange for an award of equity instruments. Under the provisions of SFAS 123(R),share-based compensation cost is measured at the grant date, based on the fair value of the award, and recognized asan expense over the requisite service period. Upon the adoption of SFAS No. 123(R), we did not have a cumulativeeffect of accounting change.

As permitted by SFAS 123(R), we elected the prospective transition method because we previously applied theminimum value method, as a private company, under FAS 123. Under this method, prior periods are not revised. Weuse the Black-Scholes and binomial lattice-based valuation pricing models, which requires extensive use ofaccounting judgment and financial estimates, including estimates of the expected term employees will retain theirvested stock options before exercising them, the estimated volatility of our stock price over the expected term, andthe number of expected options or restricted common stock that will be forfeited prior to the completion of theirvesting requirements. Application of alternative assumptions could produce significantly different estimates of thefair value of stock-based compensation and consequently, the related amounts recognized in our consolidatedstatements of operations. The provisions of SFAS No. 123(R) apply to new or modified stock awards on theeffective date. In March 2005, the SEC issued SAB No. 107 relating to SFAS No. 123(R). We have applied theprovisions of SAB No. 107 in our adoption.

In November 2005, the FASB issued FASB Staff Position (“FSP”) SFAS 123(R)-3, Transition Election Relatedto Accounting for the Tax Effects of Share-based Payment Awards, that provides an elective alternative transitionmethod of calculating the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent tothe adoption of SFAS No. 123(R) to the method otherwise required by paragraph 81 of SFAS No. 123(R). Weelected to calculate the pool of excess tax benefits using the long form method.

On December 13, 2005, we commenced an initial public offering of our common stock. Prior to our initialpublic offering, we measured awards using the minimum-value method for SFAS 123 pro forma disclosurepurposes. SFAS 123(R) requires that a company that measured awards using the minimum-value method forSFAS 123 prior to the filing of its initial public offering, but adopts SFAS 123(R) as a public company, should notrecord any compensation amounts measured using the minimum-value method in its financial statements. As aresult, we will continue to account for pre-initial public offering awards under APB No. 25 unless they are modifiedafter the adoption of SFAS 123(R). For post-initial public offering awards, compensation expense recognized afterthe adoption of SFAS 123(R) will be based on fair value of the awards on the day of grant.

On August 2 and November 2, 2006, the compensation committee of the board of directors granted long-termperformance equity awards (under the 2005 Incentive Award Plan) consisting of 565,000 shares and 35,000 sharesof restricted common stock, respectively, to certain executive officers and other employees. Each individual’s awardis allocated 50% to achieving earnings before interest, taxes, depreciation and amortization, as adjusted to reflectany future acquisitions (EBITDA Performance Award) and 50% to the market value of our common stock (MarketValue Award). The awards are earned upon our achievement of EBITDA and market-based targets for the fiscalyears 2007, 2008 and 2009, but will not vest unless the grantee remains continuously employed in active serviceuntil January 31, 2010. If an EBITDA Performance Award or Market Value Award is not earned in an earlier year, itcan be earned upon achievement of that target in a subsequent year. The awards will accelerate in full upon a changein control, if any. In accordance with FAS 123R, we valued the EBITDA Performance Award and the Market ValueAward using the Black-Scholes and binomial lattice-based valuation pricing models, respectively. The total fairvalue expense of the EBITDA Performance Award and Market Value Award is $5.8 million (prior to estimatedforfeitures) and $2.4 million (including estimated forfeitures), respectively. The expense recognition for theEBITDA Performance Award is taken when management believes with 100% certainty that the performance targetwill be achieved. As we are not 100% certain that the performance targets will be achieved, no expense has beenrecorded in regard to the EBITDA Performance Award as of December 31, 2006. We will re-evaluate this conditionat each balance sheet date. The total value of the Market Value Award is expensed on a straight-line basis from the

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date of grant over the applicable service period. As long as the service condition is satisfied, the expense is notreversed, even if the market conditions are not satisfied.

Prior to the effective date of SFAS No. 123(R), we applied APB No. 25 and related interpretations for our stockoption and restricted common stock grants. ABP No. 25 provides that the compensation expense is measured basedon the intrinsic value of the stock award at the date of grant.

Prior to our initial public offering in December 2005, we granted to certain of our employees, officers anddirectors options to purchase common stock at exercise prices that the board of directors believed, at the time ofgrant, were equal to or greater than the values of the underlying common stock and restricted common stock. Wealso granted shares of restricted common stock to certain of our officers and directors in 2005, prior to our initialpublic offering. The board of directors based its original determinations of fair market value based on all of theinformation available to it at the time of the grants. We did not obtain contemporaneous valuations for our commonstock at each of these dates in 2005 because we were focusing on building our business. In March 2003, we receiveda contemporaneous valuation (the “March 2003 valuation”) of our common stock in connection with ourstock-for-stock acquisition of Credit Online. In January 2005, we received a second contemporaneous valuation(the “January 2005 valuation”) of our common stock in connection with our grant of stock options to certainemployees. These valuations were part of the information used by our board of directors in its original determi-nations of the fair market value in connection with substantially all restricted common stock and stock option grantsin 2004 and 2005.

In connection with the preparation of our consolidated financial statements as of and for the nine months endedSeptember 30, 2005, we noted that the fair value of the common stock subject to the option awards granted sinceMay 2004, as determined by the board of directors at the time of grant, was less than the valuations that prospectiveunderwriters estimated could be obtained in an initial public offering in the later half of 2005, based on market andother conditions at the time. As a result, we determined in July 2005, subsequent to the date of these stocks andoption grants that certain of the awards granted during this time period had a compensatory element. We made thisdetermination by reassessing the fair value of our common stock for all stock and option awards granted subsequentto June 30, 2004 based, in part, on additional retrospective valuations prepared as of May 2004 (the “retrospectiveMay 2004 valuation”) and August 2004 (the “retrospective August 2004 valuation”). Our July 2005 reassessmentresulted in certain compensation charges reflected in our 2005 consolidated financial statements.

Significant Factors, Assumptions and Methodologies Used in Determining Fair Value

July 2004

In the retrospective May 2004 valuation, a combination of the Discounted Cash Flow (“DCF”) method and theGuideline Company method was used. The DCF method directly forecasts free cash flows expected to be generatedby a business as a going concern. We provided projections of income statements for the 2004-2009 periods to assistin the valuation. The assumptions underlying the projections were consistent with our business plan. However, therewas inherent uncertainty in these projections. The determination of future debt-free cash flows was based uponthese projections, which incorporated a weighted average cost of capital of 19% and, for purposes of calculating theterminal value, assumed a long-term growth rate of 4%. If a different weighted average cost of capital or long-termgrowth rate had been used, the valuations would have been different.

The Guideline Company method identifies business entities with publicly traded securities whose business andfinancial risks are the same as, or similar to, us being valued. The Guideline Company method was based uponrevenue, EBITDA and earnings per share of DealerTrack and multiplying these figures by the appropriate multiples.The market multiples were obtained through the market comparison method, where companies whose stock istraded in the public market were selected for comparison purposes and used as a basis for choosing reasonablemarket multiples for DealerTrack. For the Guideline Company method, we utilized the most recent (at that time)available trailing twelve-month revenue, EBITDA and earnings per share for stock and stock option grants fromApril 2004 through June 2005. The revenue, EBITDA and earnings per share multiples were derived from publicly

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traded companies that consisted of data processing and preparation, business services or computer programmingservices companies, with the following financial profiles:

• 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 sharemultiples ranging from 15.5 to 26.4.

The valuations considered that although we were a smaller company than some of those comparablecompanies, our higher historical growth rates and above-average returns made the use of the comparable companiesreasonable.

A weighted average of the DCF and Guideline Company methods, weighting the DCF method 40% and theGuideline Company method 60%, was divided by the number of fully diluted shares of our common stockoutstanding, assuming automatic conversion of all outstanding preferred stock. Discounts were then applied for theilliquidity and the junior status of the common shares.

We reassessed the fair value of the stock option awards issued in July 2004 based, in part, upon theretrospective May 2004 valuation. The retrospective May 2004 valuation was performed in April 2005 as partof our July 2005 reassessment of the value of our common stock for purposes of preparing our consolidatedfinancial statements. We chose May 2004 as an appropriate time to perform a second valuation as it was severalmonths prior to the LML acquisition that was completed in August 2004, and a significant amount of stock optionswere granted in May 2004. We believe that it is appropriate to group the May 2004 and July 2004 awards togetherfor valuation purposes as no material events transpired between May and July of 2004 that triggered a materialchange in the value of our common stock. The assessed fair value of the July 2004 awards is primarily based uponthe retrospective May 2004 valuation. However, we reduced the illiquidity discount used in the retrospective May2004 valuation (we utilized a 15% discount rate versus the 20-25% rate used in the retrospective May 2004valuation) and eliminated the 35% discount applied in the retrospective May 2004 valuation to account for thejunior status of our common shares primarily based upon the board of directors’ knowledge of an impending initialpublic offering. Our board placed no value on the liquidation preference of the preferred stock (and, therefore,applied no discount to the common stock to reflect its junior status) since the preferred stock’s liquidationpreference only provided a benefit to holders of preferred stock at enterprise values significantly lower than thevaluations being applied to our company at the time. In addition, our board took into account the likelihood that wewould be completing an initial public offering of our common stock in late 2005 and determined that the illiquiditydiscounts being applied were excessive. After these adjustments, we arrived at a value of $5.86 per share, which wasthe value we used for computing the compensation expense associated with the May and July 2004 option grants.

August 2004

We reassessed the fair value of the stock option awards issued in August 2004 based, in part, upon theretrospective August 2004 valuation. The retrospective August 2004 valuation used the same method of calculatingper share value as was used in the retrospective May 2004 valuation. The retrospective August 2004 valuation wasperformed in April 2005 as part of our July 2005 reassessment of the value of our common stock. We chose August2004 as an appropriate time to perform the third valuation as it was subsequent to the LML acquisition that wascompleted in August 2004, and a significant amount of stock options were granted in August 2004. The assessed fairvalue of the August 2004 awards is primarily based upon the retrospective August 2004 valuation. However, wereduced the illiquidity discount used in the retrospective August 2004 valuation (we utilized a 15% discount rateversus the 20%-25% rate used in the retrospective August 2004 valuation) and eliminated the 25% discount appliedin the retrospective August 2004 valuation to account for the junior status of our common shares primarily basedupon the board of directors’ knowledge of an impending initial public offering. After these adjustments, we arrived

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at a value of $6.73 per share, which was the value we used for computing the compensation expense associated withthe August 2004 option grants.

January, March and April 2005

We assessed the fair value of the stock option awards issued in January through April of 2005 based, in part,upon the contemporaneous January 2005 valuation. The January 2005 valuation used the same method ofcalculating per share value as the retrospective August 2004 and retrospective May 2004 valuations. We choseJanuary 2005 as an appropriate time to perform an additional valuation as we had achieved annual profitability forthe first time in 2004, we completed the acquisition of Go Big in January 2005 and we believe we had successfullyintegrated the LML acquisition by January 2005. No other material events occurred between January and April 2005that triggered a material change in the value of our equity. The assessed fair value of these option awards is primarilybased upon the contemporaneous January 2005 valuation. However, we reduced the illiquidity discount used in theJanuary 2005 valuation (we utilized a 5% discount versus the 20-25% used by the January 2005 valuation) andeliminated the 20% discount applied in the January 2005 valuation to account for the junior status of our commonshares primarily based upon the board of directors’ knowledge of an impending initial public offering. After theseadjustments, we arrived at a value of $8.60 per share, which was the value we used for computing the compensationexpense associated with the January, March and April 2005 option grants.

May, June and July 2005

We originally assessed the fair value of the stock option and restricted stock awards issued in May andJune 2005 based, in part, upon information provided to us in January 2005 by the three investment banking firmswho were discussing with us the possibility of completing an initial public offering in the later half of 2005. One ofthese investment banks is the affiliate of a related party to us. Each investment bank made clear that the prospectivevalues being discussed in January 2005 related to estimates of where an initial public offering would price in late2005, based on market and other conditions at the time, and were not intended to reflect our equity value at anyearlier date. Their estimates were based on the market approach, in large part on forecasted results for 2006 andcontinuously improving operating results during 2005. The board of directors derived an average of what the threeinvestment banks estimated our equity value would be in the context of an initial public offering in late 2005 andapplied an additional 5% illiquidity discount to arrive at the new fair value. Based on this methodology, weoriginally arrived at a value of $14.30 per share, which was the value we used for computing the compensationexpense associated with the May and June 2005 option grants and restricted stock awards.

We assessed the fair value of the stock option and restricted stock awards issued in July 2005 using the samemethod used in calculating the per share value for purposes of the May and June 2005 stock option and restrictedstock awards with two exceptions. First, in July, we revised our 2006 projections upward to reflect our improvingresults in the second quarter of 2005 and the further integration of the acquisitions of Chrome, NAT and ALG.Second, we did not apply a 5% illiquidity discount to the estimated fair market value of our common stock in Julybecause we filed a registration statement in July 2005. Based on this methodology, the board of directors arrived at afair market value of $18.00 per share, which was the value we used for computing the compensation expenseassociated with the July 2005 option grants and restricted stock awards.

In connection with the preparation of our consolidated financial statements for the nine months endedSeptember 30, 2005, the board of directors determined that there was an additional compensatory element relatingto the May and June 2005 stock option and restricted stock awards that should be reflected in our consolidatedfinancial statements. The board of directors used the per share value used in the July 2005 option grants andrestricted stock awards and applied a 5% illiquidity discount to arrive at a value of $17.10 for computing thecompensation expense associated with the May and June 2005 option grants and restricted stock awards.

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Significant Factors Contributing to the Difference between Fair Value as of the Date of Each Grant andEstimated IPO Price

From July 1, 2004 to September 30, 2005, the difference between the fair market value per share of $5.86 to$18.00 (as illustrated in the chart below) was attributable to our continued growth during this period, and theachievement of a number of important corporate milestones, including:

• In the third quarter of 2004, we completed our acquisition of LML, which expanded our customer base andproduct offerings;

• In the third quarter of 2004, we experienced continued profitability and a continued increase in our dealerand 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 andproduct offerings;

• In the first quarter of 2005, several prospective underwriters made presentations to our board of directorsregarding 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 expandedour 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 sourcecustomer base increased, as did the number of transactions processed and the number of productsubscriptions.

The table below summarizes the stock options and restricted common stock granted during 2004 and 2005 thatresulted in stock-based compensation expense:

Grant DateNumber of

Options

ExercisePrice Per

Share

Fair MarketValue

Per ShareIntrinsic Value

Per Share

Stock options: . . . . . . . May 2004 761,544 $ 2.80 $ 5.86 $ 3.06

July 2004 25,000 2.80 5.86 3.06

August 2004 699,450 2.80 6.73 3.93

May 2005 964,850 12.92 17.10 4.18

June 2005 30,000 12.92 17.10 4.18

July 2005 75,125 17.08 18.00 0.92

Total stock options 2,555,969

Restricted commonstock: . . . . . . . . . . . May 2005 101,000 n/a 17.10 17.10

June 2005 3,500 n/a 17.10 17.10

July 2005 3,500 n/a 18.00 18.00

December 2005 17,925 n/a 19.80 19.80

Total restricted common stock 125,925

Recent Events

DealerAccess Purchase Price Adjustment

In connection with the purchase of DealerAccess on January 1, 2004, we had a contractual agreement with theseller providing that (i) if the seller or any of its related parties submitted one or more on-line credit applicationsprior to December 31, 2006 in regard to purchases of vehicles, other than recreational or marine vehicles, to any

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third-party which offers services in Canada that are similar to our credit application portal services and (ii) theaggregate volume of the funded transactions submitted by the seller or any of its related parties to DealerAccessthrough the portal during the period beginning January 1, 2004 through December 31, 2006 is less than the volumedefined in the purchase agreement, then the purchase price would be adjusted downward.

We were made aware during 2006 that a party related to the seller began submitting on-line electronic creditapplications through a competing portal. After the contractual measurement period expired on December 31, 2006,we calculated the purchase price adjustment of $1.4 million. The adjustment was paid by the seller in February 2007.We recorded this purchase price adjustment to other income during the fourth quarter 2006, as DealerAccess had noremaining goodwill or identifiable intangibles from purchase accounting.

Curomax Acquisition

On February 1, 2007, we completed the purchase of all of the outstanding shares of Curomax Corporation andits subsidiaries (“Curomax”) pursuant to a Shares Purchase Agreement, made as of January 16, 2007, for a cashpurchase price of approximately $39.4 million (including estimated direct acquisition and restructuring costs ofapproximately $2.1 million). Under the terms of the Shares Purchase Agreement, we have future contingentpayment obligations of approximately $1.9 million in cash to be paid out based upon the achievement of certainoperational objectives over the subsequent twenty-four months. Currently, we are completing a fair valueassessment of the acquired assets, liabilities and identifiable intangibles, and at the conclusion of the assessmentthe purchase price will be allocated accordingly.

Results of Operations

The following table sets forth, for the periods indicated, the selected consolidated statements of operations dataexpressed as a percentage of revenue:

2006 2005 2004Year Ended December 31,

(% 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.9% 41.7% 42.4%

Product development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2% 4.6% 3.2%

Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.9% 45.5% 43.4%

Total operating costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88.0% 91.8% 89.0%

Income from operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.0% 8.2% 11.0%

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5% 0.2% 0.1%

Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.2)% (1.3)% (0.2)%

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.8% — —

Income before (provision) benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 15.1% 7.1% 10.9%

(Provision) benefit for income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.9)% (3.4)% 5.1%

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2% 3.7% 16.0%

2006 2005 2004

Year EndedDecember 31,

(% of net revenue)

(1) Related party revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.3% 24.1% 27.2%Related party cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1% 2.7% 4.7%

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Years Ended December 31, 2006 and 2005

Revenue

Total net revenue increased $53.1 million, or 44%, to $173.3 million for the year ended December 31, 2006from $120.2 million for the year ended December 31, 2005.

Transaction Services Revenue. Transaction services revenue increased $30.1 million, or 36%, to $112.7 mil-lion for the year ended December 31, 2006 from $82.6 million for the year ended December 31, 2005. The increasein transaction services revenue was primarily the result of an increase in the volume of transactions processedthrough our network. The increased volume of transactions processed was the result of the increase in financingsource customers active in our network to 305 as of December 31, 2006 from 201 as of December 31, 2005, theincrease in automobile dealers active in our network to 22,147 as of December 31, 2006 from 21,155 as ofDecember 31, 2005 and an increase in volume from existing customers.

Subscription Services Revenue. Subscription services revenue increased $21.0 million, or 65%, to $53.4 mil-lion for the year ended December 31, 2006 from $32.4 million for the year ended December 31, 2005. The increasein subscription services revenue was primarily the result of increased total subscriptions under contract as ofDecember 31, 2006 compared to December 31, 2005. The overall $21.0 million increase in subscription servicesrevenue was primarily the result of increased sales subscription products and services to existing customers.

Cost of Revenue and Operating Expenses

Cost of Revenue. Cost of revenue increased $20.7 million, or 41%, to $70.8 million for the year endedDecember 31, 2006 from $50.1 million for the year ended December 31, 2005. The $20.7 million increase wasprimarily the result of increased amortization and depreciation charges of $3.1 million primarily relating to theacquired identifiable intangibles of DealerWare, Global Fax and DealerWire, increased compensation and benefitsrelated costs of $8.2 million due to overall headcount additions including those from acquired companies, increasedrevenue share of $1.7 million, marketing promotions of $0.8 million, increased technology cost of $2.2 million,$2.1 million cost of revenue from our second quarter acquisition of Global Fax and $1.1 million related to theimpairment and write-off of a prepaid contract due to non-performance, as described above under the heading “Costof Revenue and Operating Expenses”.

Product Development Expenses. Product development expenses increased $3.6 million, or 64%, to$9.2 million for the year ended December 31, 2006 from $5.6 million for the year ended December 31, 2005.The $3.6 million increase was primarily the result of increased compensation and related benefit costs of$3.3 million, due to overall headcount additions including those from acquired companies.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased$17.8 million, or 33%, to $72.5 million for the year ended December 31, 2006 from $54.7 million for year endedDecember 31, 2005. The $17.8 million increase in selling, general and administrative expenses was primarily theresult of increased compensation and related benefit costs of approximately $15.2 million including $5.0 million innon-cash stock-based compensation and $0.8 million in cash compensation expense related to the departure of anexecutive officer, headcount additions, salary increases and the adoption of SFAS 123(R), $2.5 million in additionalexpenses associated with being a public company (primarily includes D&O insurance expense, SEC filing fees,NASDAQ fees, board of director fees, printing fees, annual meeting expenses, external accounting fees and costsassociated with Sarbanes-Oxley compliance), and $2.1 million related to marketing and travel expenses. Theseincreases are offset by a $0.8 million decrease in transition fees paid for certain ongoing services performed undercontract by selling parties of the acquired entities subsequent to the completion of the acquisitions, a $1.3 milliondecrease in professional fees and a $0.7 million decrease in recruiting and relocation expense.

Interest Income

Interest income increased $4.0 million to $4.3 million for the year ended December 31, 2006 from $0.3 millionfor the year ended December 31, 2005. The $4.0 million increase is primarily related to the interest income earnedon net cash proceeds from our public offerings in December 2005 and October 2006.

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Interest Expense

Interest expense decreased $1.3 million to $0.3 million for the year ended December 31, 2006 from$1.6 million for the year ended December 31, 2005. The $1.3 million decrease in interest expense is related tothe full repayment of the borrowings under our credit facilities during the fourth quarter of 2005 in connection withour initial public offering.

Other Income

As described above under the heading “Recent Events”, other income of $1.4 million for the year endedDecember 31, 2006 represents a reimbursement of purchase price from the seller of our DealerAccess acquisition.

Provision for Income Taxes

The provision for income taxes for the year ended December 31, 2006 of $6.8 million consisted primarily of$7.1 million of federal tax, $1.8 million of state and local income taxes, $0.6 million of adjustments due to thechange in tax rate, these amounts are offset by a Canadian tax benefit of $2.7 million. The $2.7 million net taxbenefit relating to our Canadian subsidiary consists primarily of the reversal of a deferred tax valuation allowance inthe amount of $3.7 million. The reversal of our Canadian subsidiary’s deferred tax valuation allowance during thethird quarter of 2006 was based on a number of factors, including a history of pre-tax income over a significantperiod and the level of projected future pre-tax income based on current operations. Based upon these factors, webelieve that it is more likely than not that our Canadian subsidiary will generate sufficient taxable income in thefuture to utilize the deferred tax asset outstanding as of December 31, 2006. Although these deferred tax assetsbegin to expire in 2008, we believe that they will be utilized prior to expiration. The provision for income taxes forthe year ended December 31, 2005 of $4.1 million consisted primarily of $2.7 million of federal and $0.9 million ofstate and local taxes on taxable income and $0.5 million of adjustments to the cumulative effective tax rate. Theeffective tax rate reflects the impact of the applicable statutory rate for federal and state income tax purposes for theperiod shown.

In the event that the future income streams that we currently project do not materialize, we may be required torecord a valuation allowance. Any increase in a valuation allowance would result in a charge that would adverselyimpact our operating performance.

Years Ended December 31, 2005 and 2004

Revenue

Total net revenue increased $50.2 million, or 72%, to $120.2 million for the year ended December 31, 2005from $70.0 million for the year ended December 31, 2004.

Transaction Services Revenue. Transaction services revenue increased $26.2 million, or 47%, to $82.6 mil-lion for the year ended December 31, 2005 from $56.4 million for the year ended December 31, 2004. The increasein transaction services revenue was primarily the result of an increase in the volume of transactions processedthrough our network. The increased volume of transactions processed was the result of the increase in financingsource customers active in our network to 201 as of December 31, 2005 from 109 as of December 31, 2004, theincrease in automobile dealers active in our network to 21,155 as of December 31, 2005 from 19,150 as ofDecember 31, 2004 and an increase in volume from existing customers.

Subscription Services Revenue. Subscription services revenue increased $20.0 million, or 162%, to$32.4 million for the year ended December 31, 2005 from $12.4 million for the year ended December 31,2004. The increase in subscription services revenue was primarily the result of increased total subscriptions undercontract as of December 31, 2005 compared to December 31, 2004. The overall $20.0 million increase insubscription services revenue was the result of an increase of $6.1 million in sales of existing subscription productsand services to customers, $13.4 million from acquisitions completed during 2005 and $0.5 million in the sale ofnew products and services to customers.

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Cost of Revenue and Operating Expenses

Cost of Revenue. Cost of revenue increased $20.4 million, or 69%, to $50.1 million for the year endedDecember 31, 2005 from $29.7 million for the year ended December 31, 2004. The $20.4 million increase wasprimarily the result of increased amortization and depreciation charges of $11.2 million primarily relating to theacquired identifiable intangibles of ALG, NAT, Chrome and Go Big, increased compensation and benefits relatedcosts of $5.2 million due to overall headcount additions including those from acquired companies, increasedrevenue share of $2.7 million, and cost of sales from newly acquired companies of $1.2 million. These increases areoffset by a $1.2 million decrease in transition fees paid for certain ongoing services performed under contract byselling parties of the acquired entities subsequent to the completion of the acquisition.

Product Development Expenses. Product development expenses increased $3.3 million, or 147%, to$5.6 million for the year ended December 31, 2005 from $2.3 million for the year ended December 31, 2004.The $3.3 million increase was primarily the result of increased compensation and related benefit costs of$3.0 million, due to overall headcount additions including those from acquired companies.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased$24.3 million, or 80%, to $54.7 million for the year ended December 31, 2005 from $30.4 million for the yearended December 31, 2004. The $24.3 million increase in selling, general and administrative expenses was primarilythe result of increased compensation and related benefit costs of approximately $13.2 million due to headcountadditions, $3.9 million related to travel and marketing expenses, $2.8 million in professional service fees, and$4.9 million in general administrative expenses and occupancy costs. These increases are offset by a $0.9 milliondecrease in transition fees paid for certain ongoing services performed under contract by selling parties of theacquired entities subsequent to the completion of the acquisition.

Interest Expense

Interest expense increased $1.5 million to $1.6 million for the year ended December 31, 2005 from $0.1 millionfor the year ended December 31, 2004. The $1.5 million increase in interest expense is primarily related to theborrowings under our credit facilities that were not outstanding at any point during 2004. All principal amounts thatwere outstanding during 2005 were repaid in full during the fourth quarter of 2005 in connection with our initialpublic offering.

(Provision) Benefit for Income Taxes

The provision for income taxes for the year ended December 31, 2005 of $4.1 million consisted primarily of$2.7 million of federal tax and $0.9 million of state and local income taxes and $0.5 million of adjustments due tothe change in tax rate. The benefit for income taxes for the year ended December 31, 2004 of $3.6 million consistedprimarily of $3.4 million of federal and $0.2 million of state and local taxes on taxable income. The effective tax ratereflects the impact of the applicable statutory rate for federal and state income tax purposes for the period shown.

In the event that the future income streams that we currently project do not materialize, we may be required torecord a valuation allowance. Any increase in a valuation allowance would result in a charge that would adverselyimpact our operating performance.

Quarterly Results of Operations

The following table presents our unaudited quarterly consolidated results of operations for each of the eightquarters ended December 31, 2006. The unaudited quarterly consolidated information has been prepared sub-stantially on the same basis as our audited consolidated financial statements. You should read the following tablespresenting our quarterly consolidated results of operations in conjunction with our audited consolidated financialstatements for our full years and the related notes. This table includes all adjustments, consisting only of normalrecurring adjustments, that we consider necessary for the fair statement of our consolidated financial position and

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operating results for the quarters presented. The operating results for any quarters are not necessarily indicative ofthe operating results for any future period.

FirstQuarter

SecondQuarter

ThirdQuarter

FourthQuarter(2)

(Unaudited)(In thousands, except for share and per share data)

2006Net revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,935 $ 43,414 $ 46,264 $ 45,659

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,816 26,125 27,136 26,352

Operating income . . . . . . . . . . . . . . . . . . . . . . . 4,645 7,290 2,404 6,400

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,436 4,655 5,566 5,679

Basic net income per share applicable tocommon stockholders(1) . . . . . . . . . . . . . . . . . 0.10 0.13 0.16 0.15

Diluted net income per share applicable tocommon stockholders(1) . . . . . . . . . . . . . . . . . $ 0.09 $ 0.13 $ 0.15 $ 0.14

Basic weighted average common sharesoutstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 35,268,289 35,402,769 35,547,699 38,027,280

Diluted weighted average common sharesoutstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 36,718,023 36,933,366 36,989,642 39,683,653

FirstQuarter

SecondQuarter

ThirdQuarter

FourthQuarter(3)

(Unaudited)(In thousands, except for share and per share data)

2005Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,271 $ 29,193 $ 34,380 $ 33,375

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,868 17,407 17,647 20,165

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,616 2,176 1,750 2,289

Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,069 1,068 649 682

Basic net income per share applicable to commonstockholders(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.08 0.04 0.03 0.03

Diluted net income per share applicable to commonstockholders(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.04 $ 0.02 $ 0.01 $ 0.02

Basic weighted average common sharesoutstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513,771 633,975 674,217 7,296,886

Diluted weighted average common sharesoutstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,139,458 1,261,611 1,635,148 8,394,814

(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) DealerAccess purchase price adjustment of $1.4 millionin other income and (ii) the write-off of a prepaid asset in the amount of $1.1 million in cost of revenue. Refer tosections above for further explanation.

(3) During the fourth quarter of 2005, we completed the fair value assessment of the acquired assets, liabilities,identifiable intangibles and goodwill of ALG, NAT, Chrome and Go Big. The final determination resulted inamounts that were previously classified as identifiable intangibles subsequently reclassified to goodwill duringthe fourth quarter of 2005. This change in estimate resulted in a decrease of $3.3 million in amortizationexpense related to acquired identifiable intangibles from $7.6 million during the three months endedSeptember 30, 2005 to $4.3 million recorded during the three months ended December 31, 2005.

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Liquidity and Capital Resources

Our liquidity requirements will continue to be for working capital, acquisitions, capital expenditures andgeneral corporate purposes. Our capital expenditures, software and website development costs for the year endedDecember 31, 2006 were $10.6 million, of which $6.9 million was in cash. We expect to finance our future liquidityneeds through working capital and cash flows from operations, however future acquisitions or other strategicinitiatives may require us to incur or seek additional financing. As of December 31, 2006, we had no amountsoutstanding under our available $25.0 million revolving credit facility.

As of December 31, 2006, we had $171.2 million of cash, cash equivalents and short-term investments and$168.8 million in working capital, as compared to $103.3 million of cash and cash equivalents and $101.6 million inworking capital as of December 31, 2005.

On October 12, 2006, we completed the public offering of 11,500,000 shares of our common stock at a price of$23.76 per share. In this offering, we sold 2,750,000 shares of our common stock and certain of our stockholderssold 8,750,000 shares of our common stock, including 1,500,000 shares of our common stock sold by the sellingstockholders in connection with the full exercise of the underwriters’ over-allotment option. We did not receive anyproceeds from the sale of shares of our common stock by the selling stockholders. The net proceeds to us from thesale of shares of our common stock in this offering was $61.6 million, after deducting the underwriting discountsand commissions, financial advisory fees and other expenses related to the public offering.

On December 16, 2005, we completed the initial public offering of 10,000,000 shares of our common stock atthe initial public offering price to the public of $17.00 per share. We sold 6,666,667 shares of common stock and theselling stockholders sold 3,333,333 shares of common stock. We did not receive any proceeds from the sale of theselling stockholders’ shares. In addition, on December 22, 2005, in connection with the full exercise of theunderwriters’ over-allotment option, we sold 1,500,000 additional shares of our common stock at the initial publicoffering price to the public of $17.00 per share. We received net proceeds of $126.1 million from the sale of the8,166,667 shares of common stock by us, after deducting the underwriting discounts and commissions, financialadvisory fees and other expenses related to the initial public offering.

The following table sets forth the components for the following periods:

2006 2005 2004Year Ended December 31,

(In thousands)

Net cash provided by operating activities . . . . . . . . . . . . . . . . . $ 45,489 $ 32,223 $ 17,162

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . (168,390) (77,197) (12,424)

Net cash provided by financing activities . . . . . . . . . . . . . . . . . 66,740 126,443 125

Operating Activities

Net cash provided by operating activities for the year ended December 31, 2006 was attributable to net incomeof $19.3 million, which includes depreciation and amortization of $25.9 million, amortization of stock-basedcompensation of $10.7 million (which includes SFAS 123(R) stock-based compensation of $3.7 million), anincrease to the provision for doubtful accounts and sales credits of $4.8 million, and an increase in accounts payableand accrued expenses (including related party) of $2.9 million, offset by a deferred tax benefit of $11.6 million,stock-based compensation windfall tax benefit of $2.3 million and an increase in accounts receivable (includingrelated party) of $4.3 million due to an overall increase in revenue. Net cash provided by operating activities for theyear ended December 31, 2005 was attributable to net income of $4.5 million, which includes a deferred taxprovision of $2.3 million, an increase in operating assets of $12.6 million primarily resulting from the increase inaccounts receivable (including related party) due to the overall increase in revenue, offset by depreciation andamortization of $22.8 million, amortization of deferred compensation of $2.0 million, the provision for doubtfulaccounts and sales credits of $3.7 million, and an increase in accounts payable and accrued expenses (includingrelated party) of $5.1 million and deferred revenue and other current/long-term liabilities of $3.5 million. Net cashprovided by operating activities for the year ended December 31, 2004 was primarily attributable to net income of$11.3 million, which includes a reversal of a deferred tax asset valuation of $4.7 million, an increase in operating

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assets of $5.3 million primarily resulting from an increase in accounts receivable (including related party) due to anoverall increase in revenue, offset by depreciation and amortization of $10.9 million, and an increase in accountspayable and accrued expenses (including related party) of $2.4 million.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2006 was attributable to capitalexpenditures of $3.2 million, an increase in capitalized software and web site development costs of $3.6 million,payment for net assets acquired of $37.5 million and the net purchase of short-term investments of $124.1 million.Net cash used in investing activities for the year ended December 31, 2005 was attributable to capital expendituresof $3.5 million, an increase in capitalized software and web site development costs of $7.3 million, and payment foracquisitions of $67.1 million, offset by funds released from escrow of $0.6 million. Net cash used in investingactivities for the year ended December 31, 2004 was attributable to capital expenditures of $1.8 million, an increasein capitalized software and web site development costs of $2.3 million, payments for acquired assets of $7.3 millionand funds released from escrow to third parties and other restricted cash of $1.0 million.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2006 was attributable to the receiptof cash proceeds from our public offering of $61.6 million, the exercise of employee stock options of $2.7 million,net proceeds from employee stock purchases under our employee stock purchase plan of $0.8 million and stock-based compensation windfall tax benefit of $2.3 million, offset by principal payments on notes payable and capitallease obligations of $0.7 million. Net cash provided by financing activities for the year ended December 31, 2005was attributable to the receipt of cash proceeds from our initial public offering of $126.1 million and the exercise ofemployee stock options of $1.5 million, net proceeds from bank indebtedness of $47.9 million, offset by repaymentof bank indebtedness of $48.5 million, and principal payments on capital lease obligations of $0.5 million. Net cashprovided by financing activities for the year ended December 31, 2004 was attributable to the receipt of proceedsfrom the exercise of employee stock options of $0.6 million, offset by principal payments on capital leaseobligations of $0.5 million.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2006:

TotalLess Than

1 Year 1-3 Years 4-5 YearsAfter

5 Years(In thousands)

Operating lease obligations . . . . . . . . . . . . . $16,292 $2,836 $5,993 $3,333 $4,130

Payments due to acquirees . . . . . . . . . . . . . . 6,008 2,627 3,381 — —

Payments due to departed executive . . . . . . . 766 479 287 — —

Total contractual cash obligation . . . . . . . . . $23,066 $5,942 $9,661 $3,333 $4,130

Payments due to acquirees are non-interest bearing and fixed in nature.

Pursuant to employment or severance agreements with certain employees, as of December 31, 2006 we have acommitment to pay severance of approximately $6.5 million in the event of termination without cause, as defined inthe agreements, as well as certain potential gross-up payments to the extent any such severance payment wouldconstitute an excess parachute payment under the Internal Revenue Code.

Credit Facility

On April 15, 2005 we and one of our subsidiaries, DealerTrack, Inc. entered into a $25.0 million revolvingcredit facility at an interest rate of LIBOR plus 150 basis points or prime plus 50 basis points. The revolving creditfacility is available for general corporate purposes (including acquisitions), subject to certain conditions. As ofDecember 31, 2006 we had no amounts outstanding and $25.0 million available for borrowings under this revolvingcredit facility, which matures on April 15, 2008.

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Our revolving credit facility contains restrictive covenants that limit our ability and our existing or futuresubsidiaries’ abilities, among other things, to:

• access our, or our existing or future subsidiaries’, cash flow and value and, therefore, to pay interest and/orprincipal 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 orto 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’sassets;

• 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.

In addition, our revolving credit facility includes other and more restrictive covenants and prohibits oursubsidiaries from prepaying our other indebtedness while indebtedness under our credit facilities is outstanding.The agreements governing our credit facilities also require us and our subsidiaries to achieve specified financial andoperating results and maintain compliance with specified financial ratios on a consolidated basis. As ofDecember 31, 2006, we are in compliance with all terms and conditions of our credit facility. Our and oursubsidiaries’ ability to comply with these ratios may be affected by events beyond our control.

Our revolving credit facility contains the following affirmative covenants, among others: delivery of financialstatements, reports, accountants’ letters, budgets, officers’ certificates and other information requested by thelenders; payment of other obligations; continuation of business and maintenance of existence and material rightsand privileges; compliance with laws and material contractual obligations; maintenance of property and insurance;maintenance of books and records; right of the lenders to inspect property and books and records; notices ofdefaults, bankruptcies and other material events; and compliance with laws.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or relationships with unconsolidated entities or financialpartnerships, such as entities often referred to as structured finance or special purpose entities, which are typicallyestablished for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limitedpurposes.

Industry Trends

Our business is impacted by the volume of new and used automobiles financed or leased by our participatingfinancing source customers, special promotions by automobile manufacturers and the level of indirect financing bycaptive finance companies not available in our network. Our business may be affected by these and other industryand promotional trends in the indirect automotive finance market.

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Effects of Inflation

Our monetary assets, consisting primarily of cash and cash equivalents, short-term investments and receiv-ables, and our non-monetary assets, consisting primarily of intangible assets and goodwill, which are not affectedsignificantly by inflation. We believe that replacement costs of equipment, furniture and leasehold improvementswill not materially affect our operations. However, the rate of inflation affects our expenses, which may not bereadily recoverable in the prices of products and services we offer.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of FinancialAccounting Standards No. 157, Fair Value Measurements (SFAS No. 157), which defines the fair value, establishesa framework for measuring fair value and expands disclosure about fair value measurements. This statement iseffective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periodswithin those fiscal years. Early adoption is encouraged, provided that we have not yet issued financial statements forthat fiscal year, including any financial statements for an interim period within that fiscal year. We are currentlyevaluating the impact that SFAS No. 157 may have on our financial condition or results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior YearMisstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108). This SABprovides guidance on the consideration of the effects of prior year misstatements in quantifying current yearmisstatements for the purpose of a materiality assessment. SAB 108 establishes an approach that requiresquantification of financial statement errors based on the effects of each company’s balance sheet and statementof operations and the related financial statement disclosures. The SAB permits existing public companies to recordthe cumulative effect of initially applying this approach by recording the necessary correcting adjustments to thecarrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to theopening balance of retained earnings, assuming the adjustments are not material. Any adjustments that areconsidered material would be corrected using the guidance in SFAS No. 154, Accounting Changes & AccountingErrors. SAB 108 is effective for the annual period ending after November 15, 2006. Additionally, the use of thecumulative effect transition method requires detailed disclosure of the nature and amount of each individual errorbeing corrected through the cumulative adjustment and how and when it arose. The adoption of this SAB did nothave a material impact on our consolidated financial condition or results of operations.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — anInterpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertain tax positions. Thisinterpretation requires companies to recognize in their financial statements the impact of a tax position, if thatposition is more likely than not of being sustained on audit, based on the technical merits of the position. Theprovisions of FIN 48 are effective for us on January 1, 2007. The adoption of this FASB Interpretation is notexpected to have a material impact on our consolidated financial condition or results of operations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exposure

We only have operations located in, and provide services to, customers in the United States and Canada. Ourearnings are affected by fluctuations in the value of the U.S. dollar as compared with the Canadian dollar. Foreigncurrency fluctuations have not had a material effect on our operating results or financial condition. Our exposure ismitigated, in part, by the fact that we incur certain operating costs in the same foreign currencies in which revenue isdenominated. The foreign currency exposure that does exist is limited by the fact that the majority of transactionsare paid according to our standard payment terms, which are generally short-term in nature.

Interest Rate Exposure

As of December 31, 2006, we had cash, cash equivalents and short-term investments of $171.2 million investedin highly liquid money market instruments and tax-free and tax advantaged auction rate preferred securities. Suchinvestments are subject to interest rate and credit risk. Our policy of investing in securities with original maturitiesof three months or less minimizes such risks and a change in market interest rates would not be expected to have amaterial impact on our financial condition and/or results of operations. As of December 31, 2006, we had noborrowings outstanding under our credit facilities. Any borrowings under our revolving credit facility would bearinterest at a variable rate equal to LIBOR plus a margin of 1.5% or Prime plus 0.5%.

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Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

Page

DEALERTRACK HOLDINGS, INC.:Report of Independent Registered Public Accounting Firm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Income . . . . . . . . . . . . . 58

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Schedule II — Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of DealerTrack Holdings, Inc.:

We have completed an integrated audit of DealerTrack Holdings, Inc. 2006 consolidated financial statementsand of its internal control over financial reporting as of December 31, 2006 and audits of its 2005 and 2004consolidated financial statements in accordance with the standards of the Public Company Accounting OversightBoard (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in allmaterial respects, the financial position of DealerTrack Holdings, Inc. and its subsidiaries at December 31, 2006 andDecember 31, 2005, and the results of their operations and their cash flows for each of the three years in the periodended December 31, 2006 in conformity with accounting principles generally accepted in the United States ofAmerica. In addition, in our opinion, the financial statement schedule listed in the accompanying index presentsfairly, in all material respects, the information set forth therein when read in conjunction with the relatedconsolidated financial statements. These financial statements and financial statement schedule are the responsi-bility of the Company’s management. Our responsibility is to express an opinion on these financial statements andfinancial statement schedule based on our audits. We conducted our audits of these statements in accordance withthe standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements, assessing the accounting principles used and significant estimates madeby management, and evaluating the overall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which itaccounts for share-based compensation in 2006.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control OverFinancial Reporting appearing under Item 9A, that the Company maintained effective internal control over financialreporting as of December 31, 2006 based on criteria established in Internal Control — Integrated Framework issuedby the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in allmaterial respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December 31, 2006, based on criteria established inInternal Control — Integrated Framework issued by the COSO. The Company’s management is responsible formaintaining effective internal control over financial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting. Our responsibility is to express opinions on management’s assessment and on theeffectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our auditof internal control over financial reporting in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects.An audit of internal control over financial reporting includes obtaining an understanding of internal control overfinancial reporting, evaluating management’s assessment, testing and evaluating the design and operating effec-tiveness of internal control, and performing such other procedures as we consider necessary in the circumstances.We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company’s internal control over financial reportingincludes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financial statements in accordance

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with generally accepted accounting principles, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of the company; and (iii) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’sassets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

/S/ PRICEWATERHOUSECOOPERS LLP

Melville, New YorkMarch 16, 2007

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DEALERTRACK HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

2006 2005December 31,

(In thousands,except share and per

share amounts)

ASSETSCurrent assets

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47,080 $103,264Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,115 —Accounts receivable — related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398 5,386Accounts receivable, net of allowances of $4,407 and $2,664 at December 31, 2006 and 2005,

respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,560 13,893Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,694 3,902Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,483 910

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,330 127,355Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,157 4,885Software and web site developments costs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,048 8,769Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,918 39,550Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,499 34,200Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 590Deferred taxes and other long-term assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,021 5,266

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $321,513 $220,615

LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilities

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,818 $ 2,367Accounts payable — related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,021Accrued compensation and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,111 7,589Accrued other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,978 8,674Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,166 3,267Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 42Due to acquirees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,440 1,447Capital leases payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 387

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,513 25,794

Capital leases payable — long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7Due to acquirees — long-term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,982 4,957Deferred revenue and other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,681 3,186

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,176 33,944

Commitments and contingencies (Note 13)Stockholders’ equity

Preferred stock, $0.01 par value; 10,000,000 shares authorized and no shares issued andoutstanding at December 31, 2006 and 2005, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . — —

Common stock, $0.01 par value; 175,000,000 shares authorized at December 31, 2006 and2005, respectively; 39,358,769 and 35,379,717 shares outstanding at December 31, 2006 and2005, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393 354

Treasury stock, at cost, 1,219 Shares at December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . (31) —Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,490 214,471Deferred stock-based compensation (APB 25 — deferred stock-based compensation) . . . . . . . . . (4,322) (7,745)Accumulated other comprehensive income (foreign currency) . . . . . . . . . . . . . . . . . . . . . . . . . 37 157Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,230) (20,566)

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284,337 186,671

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $321,513 $220,615

The accompanying notes are an integral part of these financial statements.

55

DEALERTRACK HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

2006 2005 2004Year Ended December 31,

(In thousands, except per share and shareamounts)

RevenueNet revenue(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 173,272 $ 120,219 $ 70,044

Operating costs and expensesCost of revenue(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,843 50,132 29,665

Product development(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,153 5,566 2,256

Selling, general and administrative(2) . . . . . . . . . . . . . . . . . . . . . . . 72,537 54,690 30,401

Total operating costs and expenses . . . . . . . . . . . . . . . . . . . . . 152,533 110,388 62,322Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,739 9,831 7,722

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,289 282 54

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (268) (1,585) (115)

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,373 — —

Income before (provision) benefit for income taxes. . . . . . . . . 26,133 8,528 7,661

(Provision) benefit for income taxes, net(3) . . . . . . . . . . . . . . . . . . (6,797) (4,060) 3,592

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,336 $ 4,468 $ 11,253

Basic net income per share applicable to commonstockholders(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.54 $ 0.17 $ 0.45

Diluted net income per share applicable to commonstockholders(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.51 $ 0.12 $ 0.02

Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . 36,064,796 2,290,439 40,219

Weighted average shares outstanding assuming dilution . . . . . 37,567,488 3,188,180 1,025,248

2006 2005 2004Year Ended December 31,

(In thousands)

(1) Related party revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33,380 $29,021 $19,070

Related party cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . 1,840 3,216 3,306

(2) Stock-based compensation expense recorded for the years ended December 31, 2006, 2005 and 2004 wasclassified as follows:

2006 2005 2004Year Ended December 31,

(In thousands)

Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,115 $ 295 $ 286

Product development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 95 84

Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . 9,200 1,600 1,263

(3) See Note 11 of these financial statements for further information.

(4) See Note 2 of these financial statements for earnings per share calculations.

The accompanying notes are an integral part of these financial statements.

56

DEALERTRACK HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

2006 2005 2004

Year EndedDecember 31,

(In thousands)

Cash flows from operating activitiesNet income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,336 $ 4,468 $ 11,253Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,915 22,763 10,873Deferred tax (benefit) provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,600) 2,301 (4,679)Amortization of deferred stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,676 1,990 1,633Provision for doubtful accounts and sales credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,838 3,664 476Gain on sale of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (53) (26) (33)Amortization of deferred interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 165 45Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 110 —Stock-based compensation windfall tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,317) — —Amortization of bank financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 411 —Changes in operating assets and liabilities, net of effects of acquisitions

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,290) (11,052) (2,717)Accounts receivable — related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,988 (1,687) (814)Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (501) (375) (1,808)Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,878 3,764 2,763Accounts payable — related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,021) 1,310 (316)Deferred revenue and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (193) 1,181 914Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 2,329 (456)Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357 399 —Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (217) 508 28

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,489 32,223 17,162Cash flows from investing activitiesCapital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,228) (3,453) (1,825)Funds released from/(placed into) escrow and other restricted cash . . . . . . . . . . . . . . . . . . 50 577 (984)Purchase of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (214,950) — —Sale of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,835 — —Capitalized software and web site development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,636) (7,293) (2,302)Proceeds from sale of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 31 5Payment for net assets acquired, net of acquired cash . . . . . . . . . . . . . . . . . . . . . . . . . . . (37,519) (67,059) (7,318)Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (168,390) (77,197) (12,424)Cash flows from financing activitiesPrincipal payments on capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (394) (492) (496)Principal payments on notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (315) — —Proceeds from the exercise of employee stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,685 1,469 621Proceeds from employee stock purchase plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849 — —Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31) — —Net proceeds from bank indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 47,899 —Repayment of bank indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (48,500) —Proceeds from public offerings, net of expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,617 126,067 —Stock-based compensation expense windfall tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . 2,317 — —Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 — —Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,740 126,443 125Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,161) 81,469 4,863Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . (23) 42 100Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,264 21,753 16,790End of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47,080 $103,264 $ 21,753

Supplemental disclosureNon cash investing and financing activities:

Conversion of redeemable convertible participating preferred stock to common stock. . . . $ — $ 72,226 $ —Assets acquired under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 280Acquisition of capitalized software through note payable . . . . . . . . . . . . . . . . . . . . . . . 2,608 — —Accrued capitalized hardware and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,133 — —Goodwill adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494 — —Deferred compensation expense reversal to equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 — —

Cash paid for:Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,707 $ 2,117 $ 1,071Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 1,417 115

The accompanying notes are an integral part of these financial statements.

57

DEALERTRACK HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) ANDCOMPREHENSIVE INCOME

Shares Amount Shares Amount Shares Amount

AdditionalPaid-InCapital

DeferredStock-Based

Compensation

AccumulatedOther

ComprehensiveIncome

AccumulatedDeficit

TotalStockholders’

Equity(Deficit)

ComprehensiveIncome

Preferred Stock Common StockCommon Stock,

In Treasury

(In thousands, except per share amounts)

Balance as ofJanuary 1, 2004 . . . — $— 13,690 — — — 2,679 (36,287) (33,608)

Exercise of stockoptions . . . . . . . . . — — 164,236 2 — — 619 — — — 621

Foreign currencytranslationadjustment . . . . . . . — — — — — — — — 100 — 100 $ 100

Deferred stock-basedcompensation . . . . . — — — — — — 5,153 (5,153) — — —

Stock-basedcompensationexpense . . . . . . . . . — — — — — — — 1,633 — — 1,633

Net income . . . . . . . . — — — — — — — — — 11,253 11,253 $11,253

Comprehensiveincome . . . . . . . . . $11,353

Balance as ofDecember 31, 2004 . . — — 177,926 2 — — 8,451 (3,520) 100 (25,034) (20,001)

Exercise of stockoptions . . . . . . . . . — — 511,610 5 — — 1,464 — — — 1,469

Tax benefit from theexercise of stockoptions . . . . . . . . . — — — — — — 395 — — — 395

Foreign currencytranslationadjustment . . . . . . . — — — — — — — — 57 — 57 $ 57

Deferred stock-basedcompensation . . . . . — — — — — — 4,010 (4,010) — — —

Issuance of restrictedstock grants . . . . . . — — 125,925 1 — — 2,204 (2,205) — —

Stock-basedcompensationexpense . . . . . . . . . — — — — — — — 1,684 — — 1,684

Restricted stockamortization . . . . . . — — — — — — — 306 — — 306

Conversion ofredeemableconvertibleparticipating preferredstock. . . . . . . . . . . — — 26,397,589 264 — — 71,962 — — — 72,226

Issuance of commonstock — initial publicoffering . . . . . . . . . — — 8,166,667 82 — — 125,985 — — — 126,067

Net income . . . . . . . . — — — — — — — — — 4,468 4,468 $ 4,468

Comprehensiveincome . . . . . . . . . $ 4,525

Balance as ofDecember 31, 2005 . . — $— 35,379,717 $354 — — $214,471 $(7,745) $ 157 $(20,566) $186,671

Exercise of stockoptions . . . . . . . . . 387,748 4 — — 2,681 — — — 2,685

Directors deferredcompensation stockunits . . . . . . . . . . . — — 14,917 0 — — 324 — — — 324

Issuances of commonstock under employeestock purchase plan . . — — 42,137 0 — — 849 — — — 849

Compensation expenserelated to theemployee stockpurchase plan . . . . . — — — — — — 150 — — — 150

Compensation expenserelated to thedeparture of anexecutive . . . . . . . . — — — — — — 4,892 112 — — 5,004

Tax benefit from theexercise of stockoptions and restrictedstock. . . . . . . . . . . — — — — — — 2,317 — — — 2,317

58

Shares Amount Shares Amount Shares Amount

AdditionalPaid-InCapital

DeferredStock-Based

Compensation

AccumulatedOther

ComprehensiveIncome

AccumulatedDeficit

TotalStockholders’

Equity(Deficit)

ComprehensiveIncome

Preferred Stock Common StockCommon Stock,

In Treasury

(In thousands, except per share amounts)

Foreign currencytranslationadjustment . . . . . . . — — — — — — — — (120) — (120) (120)

Treasury stock . . . . . . — — — — 1 (31) — — — (31)Issuance of restricted

stock grants . . . . . . — — 784,250 8 — — (7) — — — 1Restricted stock grant

reversal . . . . . . . . . — — — — — — (355) 355 — — —Stock-based

compensation expense(APB 25) . . . . . . . . — — — — — — — 1,877 — — 1,877

Stock-basedcompensation expense(FAS 123(R)) . . . . . — — — — — — 2,011 — — — 2,011

Restricted stock-basedcompensation expense(APB 25) . . . . . . . . — — — — — — — 472 — — 472

Restricted stock-basedcompensation expense(FAS 123(R)) . . . . . — — — — — — 1,162 — — — 1,162

Options and restrictedshare cancellations . . — — — — — — (625) 625 — — —

Issuance of commonstock — publicoffering . . . . . . . . . — — 2,750,000 27 — — 61,590 — — — 61,617

Other . . . . . . . . . . . . — — — — — — 30 (18) — — 12Net income . . . . . . . . — — — — — — — — — 19,336 19,336 19,336

Comprehensiveincome . . . . . . . . . — — — — — — — — — — — $19,216

Balance as ofDecember 31, 2006 . . — $— 39,358,769 $393 1 $(31) $289,490 $(4,322) $ 37 $ (1,230) $284,337

The accompanying notes are an integral part of these financial statements.

59

DEALERTRACK HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business Description

DealerTrack Holdings, Inc. is a leading provider of on-demand software, network and data solutions for theautomotive retail industry in the United States. Utilizing the Internet, DealerTrack has built a network connectingautomotive dealers with banks, finance companies, credit unions and other financing sources, and other service andinformation providers, such as aftermarket providers and the major credit reporting agencies. We have established anetwork of active relationships, which, as of December 31, 2006, consisted of over 22,000 dealers, including over89% of all franchised dealers in the United States; over 300 financing sources; including the 20 largest independentfinancing sources in the United States; and a number of other service and information providers to the automotiveretail industry. Our credit application processing product enables dealers to automate and accelerate the indirectautomotive financing process by increasing the speed of communications between these dealers and their financingsources. We have leveraged our leading market position in credit application processing to address otherinefficiencies in the automotive retail industry value chain. We believe our proven network provides a competitiveadvantage for distribution of our software and data solutions. Our integrated subscription-based software productsand services enable our dealer customers to receive valuable consumer leads, compare various financing and leasingoptions and programs, sell insurance and other aftermarket products, analyze inventory, document compliance withcertain laws and execute financing contracts electronically. We have also created efficiencies for financing sourcecustomers by providing a comprehensive digital and electronic contracting solution. In addition, we offer data andother products and services to various industry participants, including lease residual value and automobileconfiguration data.

2. Summary of Significant Accounting Policies

The consolidated financial statements of DealerTrack Holdings, Inc. have been prepared in accordance withaccounting principles generally accepted in the United States of America.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of DealerTrack Holdings, Inc. andits wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates and assumptions that affect theamounts reported and disclosed in the consolidated financial statements and the accompanying notes. Actual resultscould differ materially from these estimates.

On an on-going basis, we evaluate our estimates, including those related to accounts receivable allowance, fairvalue of acquired intangible assets and goodwill, useful lives of intangible assets and property and equipment andcapitalized software and web site development costs, deemed value of common stock (prior to our initial publicoffering) for the purposes of determining stock-based compensation expense (see below), FAS 123(R) volatility andforfeiture assumptions, and income taxes, among others. We base our estimates on historical experience and onother various assumptions that are believed to be reasonable, the results of which form the basis for makingjudgments about the carrying values of assets and liabilities.

Prior to our initial public offering, our board of directors determined the fair market value of our common andpreferred stock in the absence of a public market for these shares. For purposes of financial accounting for employeestock-based compensation expense and issuing preferred stock in acquisitions, prior to our initial public offering,management applied hindsight within each year to arrive at deemed values for the shares underlying the options thatare higher than the fair market values originally assigned by the board. These deemed fair values were determinedbased on a number of factors, including input from independent valuation firms, our historical and forecasted

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operating results and cash flows, and comparisons to publicly-held companies. The deemed values were used todetermine the amount of stock-based compensation expense recognized related to stock options, restricted commonstock and preferred stock issuances in acquisitions.

Revenue Recognition

We recognize revenue in accordance with SAB, No. 104, Revenue Recognition in Financial Statements andEITF No. 00-21, Revenue Arrangements with Multiple Deliverables. In addition, for certain subscription productsand services we also recognize revenue under SOP 97-2, Software Revenue Recognition.

Transaction Services Revenue. Transaction services revenue includes revenue earned from our financingsource customers for each credit application that dealers submit to them. We also earn transaction services revenuefrom financing source customers for each financing contract executed via our electronic contracting and digitalcontract processing solution, as well as for any portfolio residual value analyses we perform for them. We also earntransaction services revenue from dealers or other service and information providers, such as credit report providers,for each fee-bearing product accessed by dealers.

We offer web-based service to financing sources for the electronic receipt of credit application data andcontract data for automotive financing transactions in consideration for a transaction fee. This service is sold basedupon contracts that include fixed or determinable prices and that do not include the right of return or other similarprovisions or significant post service obligations. Credit application and digital and electronic contractingprocessing revenue is recognized on a per transaction basis, after customer receipt and when collectibility isreasonably assured. Set-up fees charged to the financing sources for establishing connections, if any, are recognizedratably over the expected customer relationship period of three or four years, depending on the type of customer.

Our credit report service provides our dealer customers the ability to access credit reports from several majorcredit reporting agencies or resellers online. We sell this service based upon contracts with the customer or reportprovider, as applicable, that include fixed or determinable prices and that does not include the right of return or othersimilar provisions or other significant post service obligations. We recognize credit report revenue on a pertransaction basis, when services are rendered and when collectibility is reasonably assured. We offer these creditreports on both a reseller and an agency basis. We recognize revenue from all but one provider of credit reports on anet basis due to the fact that we are not considered the primary obligor, and recognize revenue gross with respect toone of the providers as we have the risk of loss and are considered the primary obligor in the transaction.

Subscription Services Revenue. Subscription services revenue consists of revenue earned from our custom-ers (typically on a monthly basis) for use of our subscription or license-based products and services. Some of thesesubscription services enable dealer customers to obtain consumer leads, compare various financing and leasingoptions and programs, sell insurance and other aftermarket products, analyze inventory and execute financingcontracts electronically. These subscription services are typically sold based upon contracts that include fixed ordeterminable prices and that do not include the right of return or other similar provisions or significant post serviceobligations. We recognize revenue from such contracts ratably over the contract period. We recognize set-up fees, ifany, ratably over the expected customer relationship of three or four years, depending on the type of customer. Forcontracts that contain two or more products or services, we recognize revenue in accordance with the above policyusing relative fair value.

Our revenue is presented net of a provision for sales credits, which is estimated based on historical results, andestablished in the period in which services are provided.

Shipping Costs

Shipping charges billed to customers are included in net revenue, and the related shipping costs are included incost of revenue.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid investments purchased with original maturity ofthree months or less.

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Short-term Investments

We account for investments in marketable securities in accordance with SFAS No. 115, Accounting for CertainInvestments in Debt and Equity Securities.

Short-term investments as of December 31, 2006 consist of auction rate securities that are invested in tax-exempt and tax-advantaged securities. We classify investment securities as available for sale, and as a result, reportthe investments at fair value. There were no unrealized gains (losses) as of December 31, 2006.

Auction rate securities have long-term underlying maturities, but have interest rates that are reset every oneyear or less. The securities can be purchased or sold at any time, which creates a highly liquid market for thesesecurities. Our intent is not to hold these securities to maturity, but rather to use the interest rate reset feature toprovide liquidity as necessary. Our investment in these securities generally provides higher yields than moneymarket and other cash equivalent investments.

Translation of Non-U.S. Currencies

We have maintained business operations in Canada since January 1, 2004. The translation of assets andliabilities denominated in foreign currency into U.S. dollars is made at the prevailing rate of exchange at the balancesheet date. Revenue, costs and expenses are translated at the average exchange rates during the period. Translationadjustments are reflected in accumulated other comprehensive income on our consolidated balance sheets, whilegains and losses resulting from foreign currency transactions are included in our consolidated statements ofoperations. Amounts resulting from foreign currency transactions were not material for the years endedDecember 31, 2006, 2005 and 2004.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of ourcustomers to make required payments. The amount of the allowance account is based on historical experience andour analysis of the accounts receivable balance outstanding. While credit losses have historically been within ourexpectations and the provisions established, we cannot guarantee that we will continue to experience the same creditloss rates that we have in the past. If the financial condition of our customers were to deteriorate, resulting in theirinability to make payments, additional allowances may be required which would result in an additional expense inthe period that this determination was made.

Property, Equipment and Depreciation

Property and equipment are stated at cost less accumulated depreciation, which is provided for by charges toincome over the estimated useful lives of the assets using the straight-line method. Maintenance and repairs arecharged to operating expenses as incurred. Upon sale or other disposition, the applicable amounts of asset cost andaccumulated depreciation are removed from the accounts and the net amount, less proceeds from disposal, ischarged or credited to income.

Software and Web Site Development Costs and Amortization

We account for the costs of software and web site development costs developed or obtained for internal use inaccordance with SOP No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for InternalUse and EITF 00-2, Accounting for Web Site Development Costs. We capitalize costs of materials, consultants andpayroll and payroll-related costs incurred by employees involved in developing internal use computer software.Costs incurred during the preliminary project and post-implementation stages are charged to expense. Software andweb site development costs are amortized on a straight-line basis over estimated useful lives ranging from two tothree years. Capitalized software and web site development costs, net were $10.0 million and $8.8 million as ofDecember 31, 2006 and 2005, respectively. Amortization expense totaled $5.8 million, $2.0 million and $2.7 millionfor the years ended December 31, 2006, 2005 and 2004, respectively.

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Goodwill, Other Intangibles and Long-lived Assets

We record as goodwill the excess of purchase price over the fair value of the tangible and identifiableintangible assets acquired. Statement of Financial Accounting Standards No. 142, Goodwill and Other IntangibleAssets (SFAS No. 142), requires goodwill to be tested for impairment annually as well as when an event or change incircumstance indicates an impairment may have occurred. Goodwill is tested for impairment using a two-stepapproach. The first step tests for impairment by comparing the fair value of our one reporting unit to their carryingamount to determine if there is a potential goodwill impairment. If the fair value of the reporting unit is less than itscarrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill of thereporting unit is less than its carrying value.

SFAS No. 142 requires that goodwill be assessed at the operating segment or lower level. After considering thefactors included in SFAS No. 131 and EITF Topic No. D-101, we determined that the components of our oneoperating segment have similar economic characteristics, nature of products, distribution, shared resources and typeof customer such that the components should be aggregated into a single reporting unit for purposes of performingthe impairment test for goodwill. We estimate the fair value of our reporting unit using a market capitalizationapproach. From time to time an independent third-party valuation expert may be utilized to assist in thedetermination of fair value. Determining the fair value of a reporting unit is judgmental and often involves theuse of significant estimates and assumptions. We perform our annual goodwill impairment test on October 1 ofevery year or when there is a triggering event. Our estimate of the fair value of the reporting unit was in excess of itscarrying value as of October 1, 2006, 2005 and 2004.

Long-lived assets, including property and equipment and intangible assets are reviewed for impairmentwhenever events or changes in circumstances indicate that the carrying value may not be recoverable. In reviewingfor impairment, the carrying value of such assets is compared to the estimated undiscounted future cash flowsexpected from the use of the assets and their eventual disposition. If such cash flows are not sufficient to support theasset’s recorded value, an impairment charge is recognized to reduce the carrying value of the long-lived asset to itsestimated fair value. The determination of future cash flows as well as the estimated fair value of long-lived assetsinvolves significant estimates on the part of management. In order to estimate the fair value of a long-lived asset, wemay engage a third party to assist with the valuation. If there is a material change in economic conditions or othercircumstances influencing the estimate of future cash flows or fair value, we could be required to recognizeimpairment charges in the future.

We evaluate the remaining useful life of intangible assets on a periodic basis to determine whether events andcircumstances warrant a revision to the remaining estimated amortization period.

During July 2006, we entered into a contractual arrangement with a third-party service provider that providesservices related to the integration between different software applications on an automotive dealer’s desktop. Aspart of the contractual terms we agreed to prepay approximately $1.1 million of the contract for various futureservices to be provided. During the fourth quarter of 2006, we were contacted by the third-party provider andnotified that they would be unable to perform under the terms of the contract and did not have the financialcapability to repay the $1.1 million . As of December 31, 2006, management concluded that this asset was impairedand wrote off the entire amount of $1.1 million during the fourth quarter of 2006 to cost of revenue. We may elect toinitiate foreclosure proceedings against the third-party service provider with respect to the provider’s intellectualproperty, which was pledged to guarantee the provider’s service obligations.

Income Taxes

We account for income taxes in accordance with the provisions of SFAS No. 109, Accounting for Income Taxes,(SFAS No. 109) which requires deferred tax assets and liabilities to be recognized for the future tax consequencesattributable to differences between the consolidated financial statement carrying amounts of assets and liabilities andtheir respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities aremeasured using enacted tax rates expected to apply to taxable income in the years in which those temporarydifferences are expected to be reversed. Deferred tax assets are reduced by a valuation allowance when, in the opinionof management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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Advertising Expenses

We expense the cost of advertising and promoting our services as incurred. Such costs are included in selling,general and administrative expenses in the consolidated statements of operations and totaled $0.9 million,$0.7 million and $0.4 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Concentration of Credit Risk

Our assets that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents, short-term investments and receivables from clients. We place our cash, cash equivalents and short-term investments withfinancial institutions. We regularly evaluate the creditworthiness of the issuers in which we invest. Our tradereceivables are spread over many customers. We maintain an allowance for uncollectible accounts receivable basedon expected collectibility and perform ongoing credit evaluations of customers’ financial condition. For the yearsended December 31, 2006 and 2005 no customer accounted for more than 10% of our accounts receivable. For theyears ended December 31, 2006, 2005 and 2004 no customer accounted for more than 10% of our revenue.

Our revenue is generated from customers associated with the automotive industry.

Net Income per Share

For the year ended December 31, 2006, we computed net income per share in accordance SFAS No. 128,Earnings per Share. For the years ended December 31, 2005 and 2004, we computed net income per share inaccordance with SFAS No. 128 and EITF No. 03-06, Participating Securities and the Two — Class Method underFASB Statement No. 128. Under the provisions of SFAS No. 128, basic earnings per share is calculated by dividingnet income by the weighted average number of common shares outstanding during the period. Diluted earnings pershare is calculated by dividing net income by the weighted average number of common shares outstanding,assuming dilution, during the period. The diluted earnings per share calculation assumes that (i) all stock optionswhich are in the money are exercised at the beginning of the period and the proceeds used by DealerTrack topurchase shares at the average market price for the period and (ii) if applicable, unvested awards that are consideredto be contingently issuable shares because they contain either a performance or market condition will be included indiluted earnings per share in accordance with SFAS No. 128 if dilutive and if their conditions (a) have been satisfiedat the reporting date or (b) would have been satisfied if the reporting date was the end of the contingency period.

The following table sets forth the computation of basic and diluted net income:

2006 2005 2004Year Ended December 31,

(In thousands, except share and per share amounts)

Numerator:Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,336 $ 4,468 $ 11,253Amount allocated to participating preferred stockholders

under two-class method(1) . . . . . . . . . . . . . . . . . . . . . . — (4,072) (11,235)

Net income applicable to common stockholders . . . . . . . $ 19,336 $ 396 $ 18

Denominator:Weighted average common stock outstanding (basic) . . . . 36,064,796 2,290,439 40,219Common equivalent shares from options to purchase

common stock, restricted stock and contingent Long-Term Incentive Equity Awards . . . . . . . . . . . . . . . . . . 1,502,692 897,741 985,029

Weighted average common stock outstanding (diluted) . . 37,567,488 3,188,180 1,025,248

Basic net income per share applicable to commonstockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.54 $ 0.17 $ 0.45

Diluted net income per share applicable to commonstockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.51 $ 0.12 $ 0.02

(1) Not applicable for the year ended December 31, 2006, as all outstanding participating preferred stock wasconverted into common stock upon our initial public offering in December 2005.

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The following is a summary of the securities outstanding during the respective periods that have been excludedfrom the diluted net income per share calculation because the effect would have been antidilutive:

2006 2005 2004Year Ended December 31,

Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 819,500 100,275 5,624

Restricted common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,667 — —

Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 24,765,127 24,765,127

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 879,167 24,865,402 24,770,751

Stock-Based Compensation

We maintain several share-based incentive plans. We grant stock options to purchase common stock and grantrestricted common stock. In January 2006, we began offering an employee stock purchase plan that allowsemployees to purchase our common stock at a 15% discount each quarter through payroll deductions. See Note 12for further disclosure on our share-based incentive plans.

Effective January 1, 2006, we adopted SFAS 123(R), which requires us to measure and recognize the cost ofemployee services received in exchange for an award of equity instruments. Under the provisions of SFAS 123(R),share-based compensation cost is measured at the grant date, based on the fair value of the award, and recognized asan expense over the requisite service period.

As permitted by SFAS 123(R), we elected the prospective transition method because we previously applied theminimum value method, as a private company, under FAS 123. Under this method, prior periods are not revised. Weuse the Black-Scholes and binomial lattice-based valuation pricing models, which requires extensive use ofaccounting judgment and financial estimates, including estimates of the expected term employees will retain theirvested stock options before exercising them, the estimated volatility of our stock price over the expected term, andthe number of expected options or restricted common stock that will be forfeited prior to the completion of theirvesting requirements. Application of alternative assumptions could produce significantly different estimates of thefair value of stock-based compensation and consequently, the related amounts recognized in our consolidatedstatements of operations. The provisions of SFAS No. 123(R) apply to new or modified stock awards on theeffective date. In March 2005, the SEC issued SAB No. 107 relating to SFAS No. 123(R). We have applied theprovisions of SAB No. 107 in our adoption.

In November 2005, the FASB issued FASB Staff Position (“FSP”) SFAS 123(R)-3, Transition Election Relatedto Accounting for the Tax Effects of Share-based Payment Awards, that provides an elective alternative transitionmethod of calculating the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent tothe adoption of SFAS No. 123(R) to the method otherwise required by paragraph 81 of SFAS No. 123(R). Weelected to calculate the pool of excess tax benefits using the long form method.

On December 13, 2005, we commenced an initial public offering of our common stock. Prior to our initialpublic offering, we measured awards using the minimum-value method for SFAS 123 pro forma disclosurepurposes. SFAS 123(R) requires that a company that measured awards using the minimum-value method forSFAS 123 prior to the filing of its initial public offering, but adopts SFAS 123(R) as a public company, should notrecord any compensation amounts measured using the minimum-value method in its financial statements. As aresult, we will continue to account for pre-initial public offering awards under APB No. 25 unless they are modifiedafter the adoption of SFAS 123(R). For post-initial public offering awards, compensation expense recognized afterthe adoption of SFAS 123(R) will be based on fair value of the awards on the day of grant.

Stock-based compensation expense recognized under SFAS No. 123(R) for the year ended December 31, 2006was $3.7 million, which consisted of stock-based compensation expense related to employee stock options,employee stock purchases and restricted common stock awards. For the year ended December 31, 2006, werecorded stock-based compensation expense of $7.0 million, in accordance with APB No. 25, using the intrinsicvalue approach to measure compensation expense.

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The following is the effect of adopting SFAS No. 123(R) as of January 1, 2006 (in thousands, except per shareamounts):

Year EndedDecember 31,

2006

Stock options, restricted common stock and employee stock purchase plancompensation expense recognized:

Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 753

Product development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252

Selling, general and administrative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,658

Total stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,663

Related deferred income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,429)

Decrease in net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,234

Decrease in basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.06

Decrease in diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.06

Upon the adoption of SFAS No. 123(R), we did not have a cumulative effect of accounting change.

Prior to the effective date of SFAS No. 123(R), we applied APB No. 25 and related interpretations for our stockoption and restricted common stock grants. ABP No. 25 provides that the compensation expense is measured basedon the intrinsic value of the stock award at the date of grant.

Prior to our initial public offering in December 2005, we granted certain of our employees, officers anddirectors options to purchase common stock at exercise prices that the board of directors believed, at the time ofgrant, were equal to or greater than the values of the underlying common stock and restricted common stock. Priorto our initial public offering, our board determined these values principally based on valuation reports. Under theprovisions of APB No. 25, in general, if the exercise price of stock awards granted to employees is equal to the fairmarket value of the underlying stock on the date of grant, no stock-based compensation cost is recognized. Inconnection with the preparation of the consolidated financial statements for our initial public offering we noted thatthe fair value of shares subject to a number of equity awards granted during several quarters prior to our initialpublic offering were significantly less than the valuations that our underwriters were discussing with us inconnection with our preparations for our initial public offering. Therefore, we reassessed the fair market value ofour common stock to determine whether the equity awards granted during this period had a compensatory elementthat should be reflected in our consolidated financial statements. The reassessed fair values were based oncontemporaneous and retrospective valuations performed and approved by the board of directors. The valuationsconsidered a number of factors including (i) business risks we faced and key company milestones; (ii) comparablecompany and industry analysis; and (iii) anticipated initial public offering price per share and the timing of theinitial public offering.

As a result of the above fair value reassessment, we recorded APB 25 deferred stock-based compensationexpense relating to stock option and restricted common stock grants during the year ended December 31, 2005 of$4.0 million and $2.2 million, respectively, and during the year ended December 31, 2004 we recorded APB 25deferred stock-based compensation expense relating to stock option grants of $5.2 million. For the years endedDecember 31, 2006, 2005 and 2004, we recorded APB 25 stock-based compensation expense relating to stockoption grants in the amount of $1.9 million (not including charge related to the departure of an executive officer,refer to Note 13), $1.7 million and $1.6 million, respectively. For the years ended December 31, 2006, 2005 and2004, we recorded APB 25 stock-based compensation expense relating to restricted common stock grants in theamount of $0.5 million (not including charge related to the departure of an executive officer, refer to Note 13),$0.3 million and zero, respectively. Subsequent to the effective date of our initial public offering, all options topurchase common stock have been granted with an exercise price equal to the fair market value of the underlyingstock on the date of grant, as quoted on the NASDAQ. Under the provisions of APB 25, no stock-basedcompensation was recognized related to these grants.

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The table below summarizes the stock options and restricted common stock granted during 2004 and 2005 thatresulted in stock-based compensation expense:

GrantDate

Numberof

Options/Shares

ExercisePricePer

Share

FairMarket

Value PerShare

IntrinsicValuePer

Share

Stock options: . . . . . . . . . . . . . . May 2004 761,544 $ 2.80 $ 5.86 $ 3.06

July 2004 25,000 2.80 5.86 3.06

August 2004 699,450 2.80 6.73 3.93

May 2005 964,850 12.92 17.10 4.18

June 2005 30,000 12.92 17.10 4.18

July 2005 75,125 17.08 18.00 0.92

Total stock options 2,555,969

Restricted common stock: . . . . . May 2005 101,000 n/a 17.10 17.10

June 2005 3,500 n/a 17.10 17.10

July 2005 3,500 n/a 18.00 18.00

December 2005 17,925 n/a 19.80 19.80

Total restrictedcommon stock 125,925

The intrinsic value per stock option is being recognized as compensation expense over the applicable vestingperiod. Additionally, the fair value of the restricted common stock is being recognized as compensation expenseover the applicable vesting period. For the year ended December 2006 and 2005, we recorded stock-basedcompensation expense relating to restricted stock grants in the amount of $1.9 million and $0.3 million,respectively.

For the year ended December 31, 2006, the fair market value of each option grant has been estimated on thedate of grant using the Black-Scholes Option Pricing Model with the following weighted-average assumptions:

Expected life (in years)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.25

Risk-free interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.41%

Expected volatility(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47%

Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0%

(1) For the year ended December 31, 2006, the expected lives of options were determined based on the “simplified”method under the provisions of SAB 107. Due to limited history, we believe we do not have appropriatehistorical experience to estimate future exercise patterns. As more information becomes available, we mayrevise this estimate on a prospective basis.

(2) For the year ended December 31, 2006 we estimated our expected volatility based on the historical volatility ofsimilar entities whose common shares are publicly traded.

Refer to Note 12 for the weighted-average assumptions used in determining the expense for our Long-TermIncentive Equity Awards.

Using the Black-Scholes Option Pricing Model, the estimated weighted average fair value of an option topurchase one share of common stock granted during 2006, 2005 and 2004 was $11.17, $5.66 and $3.42,respectively.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of FinancialAccounting Standards No. 157, Fair Value Measurements (SFAS No. 157), which defines the fair value, establishesa framework for measuring fair value and expands disclosure about fair value measurements. This statement is

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effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periodswithin those fiscal years. Early adoption is encouraged, provided that we have not yet issued financial statements forthat fiscal year, including any financial statements for an interim period within that fiscal year. We are currentlyevaluating the impact that SFAS No. 157 may have on our financial condition or results of operations.

In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108,Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year FinancialStatements (SAB 108). This SAB provides guidance on the consideration of the effects of prior year misstatementsin quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 establishes anapproach that requires quantification of financial statement errors based on the effects of each company’s balancesheet and statement of operations and the related financial statement disclosures. The SAB permits existing publiccompanies to record the cumulative effect of initially applying this approach by recording the necessary correctingadjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsettingadjustment recorded to the opening balance of retained earnings, assuming the adjustments are not material. Anyadjustments that are considered material would be corrected using the guidance in SFAS No. 154, AccountingChanges & Accounting Error . SAB 108 is effective for the annual period ending after November 15, 2006.Additionally, the use of the cumulative effect transition method requires detailed disclosure of the nature andamount of each individual error being corrected through the cumulative adjustment and how and when it arose. Theadoption of this SAB did not have a material impact on our consolidated financial condition or results of operations.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — anInterpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertain tax positions. Thisinterpretation requires companies to recognize in their financial statements the impact of a tax position, if thatposition is more likely than not of being sustained on audit, based on the technical merits of the position. Theprovisions of FIN 48 are effective for us on January 1, 2007. The adoption of this FASB Interpretation is notexpected to have a material impact on our consolidated financial condition or results of operations.

3. Business Combinations

DealerWare L.L.C. (DealerWare)

On August 1, 2006, we acquired substantially all of the assets and certain liabilities of DealerWare L.L.C.DealerWare is a provider of aftermarket menu-selling software and other dealership software. DealerWare’ssoftware suite also includes reporting and compliance solutions that complement DealerTrack’s existing products.The aggregate purchase price was $5.2 million in cash (including estimated direct acquisition costs of approx-imately $0.2 million). Certain DealerWare employees are eligible for a retention bonus if they remain employed byDealerTrack for twelve months from their start date or if employment is sooner terminated by DealerTrack withoutcause. As part of the asset purchase agreement, the DealerWare selling parties and DealerTrack are each liable for50% of the estimated $0.5 million retention bonus. The selling parties’ portion is held by us in escrow and recordedby us as a short-term liability, and our portion will be recorded as compensation expense at the earlier of thetermination without cause or the employees twelve-month anniversary. Amounts not paid from escrow will bereturned to the selling parties. This acquisition was recorded under the purchase method of accounting, resulting inthe total purchase price being allocated to the assets acquired and liabilities assumed according to their estimatedfair values at the date of acquisition as follows (in thousands):

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12

Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,200

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,942

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,154Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,154

We allocated the amounts to intangible assets and goodwill based on fair value appraisals as follows:approximately $1.3 million of the purchase price has been allocated to customer contracts and approximately$0.9 million to purchased technology. These intangibles are being amortized on a straight-line basis over eighteen

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months to three years based on each intangible’s estimated useful life. We also recorded approximately $2.9 millionin goodwill, which represents the remainder of the excess of the purchase price over the fair value of the net assetsacquired.

The results of DealerWare were included in our Consolidated Statement of Operations from the date of theacquisition.

Global Fax, L.L.C. (Global Fax)

On May 3, 2006, we acquired substantially all of the assets and certain liabilities of Global Fax, L.L.C. GlobalFax provides outsourced document scanning, storage, data entry, and retrieval services for automotive financingcustomers. The aggregate purchase price was $24.6 million in cash (including estimated direct acquisition costs ofapproximately $0.3 million). This acquisition was recorded under the purchase method of accounting, resulting inthe total purchase price being allocated to the assets acquired and liabilities assumed according to their estimatedfair values at the date of acquisition as follows (in thousands):

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,261

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537

Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,192

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,718

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,722

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (167)

Net assets acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,555

We allocated the amounts to intangible assets and goodwill based on fair value appraisals as follows:approximately $5.9 million of the purchase price has been allocated to customer contracts, $4.4 million to a partneragreement, $0.5 million to purchased technology and $0.4 million to non-compete agreements. These intangiblesare being amortized on a straight-line basis over two to five years based on each intangible’s estimated useful life.We also recorded approximately $11.7 million in goodwill, which represents the remainder of the excess of thepurchase price over the fair value of the net assets acquired.

The results of Global Fax were included in our Consolidated Statement of Operations from the date of theacquisition.

WiredLogic, Inc. (DealerWire»)

On February 2, 2006, we acquired substantially all of the assets and certain liabilities of WiredLogic, Inc.,doing business as DealerWire, Inc. DealerWire allows a dealership to evaluate its sales and inventory performanceby vehicle make, model and trim, including information about unit sales, costs, days to turn and front-end grossprofit. The aggregate purchase price was $6.0 million in cash (including estimated direct acquisition costs ofapproximately $0.1 million). The additional purchase consideration, if any, will be recorded as additional goodwillon our consolidated balance sheet when the contingency is resolved. This acquisition was recorded under the

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purchase method of accounting, resulting in the total purchase price being allocated to the assets acquired andliabilities assumed according to their estimated fair values at the date of acquisition as follows (in thousands):

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,262Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,734

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,055

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22)

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,033

We allocated the amounts to intangible assets and goodwill based on fair value appraisals as follows:approximately $1.3 million of the purchase price has been allocated to customer contracts, $0.7 million topurchased technology and $0.3 million to non-compete agreements. These intangibles are being amortized on astraight-line basis over two years based on each intangible’s estimated useful life. We also recorded approximately$3.7 million in goodwill, which represents the remainder of the excess of the purchase price over the fair value of thenet assets acquired. No pro forma information is included as the acquisition of DealerWire did not have a materialimpact on our consolidated results of operations.

The results of DealerWire were included in our Consolidated Statement of Operations from the date of theacquisition.

Automotive Lease Guide (alg), LLC and Automotive Lease Guide (alg) Canada, Inc. (collectively, ALG)

On May 25, 2005, we acquired substantially all the assets and certain liabilities of ALG for a purchase price of$40.1 million (including direct acquisition costs of approximately $0.6 million) in cash and notes payable to ALG.The amount of deferred purchase price payable to the prior owners of ALG is $0.8 million per year for 2006 through2010. Additional consideration of $11.3 million may be paid contingent upon certain future increases in revenue ofAutomotive Lease Guide (alg), Inc. and another of our subsidiaries through December 2009. For the years endedDecember 31, 2006 and 2005, we paid $0.2 million and $0.1 million of additional consideration. The remainingpotential contingent consideration as of December 31, 2006 is $11.0 million. The additional purchase priceconsideration was recorded as goodwill on our consolidated balance sheet. We did not acquire the equity interest inus owned by ALG as part of the acquisition. ALG’s products and services provide lease residual value data for newand used leased automobiles and guidebooks and consulting services related thereto, to manufacturers, financingsources, investment banks, automobile dealers and insurance companies. This acquisition was recorded under thepurchase method of accounting, resulting in the total purchase price being allocated to the assets acquired andliabilities assumed according to their estimated fair values at the date of acquisition as follows (in thousands):

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 95

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178

Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,450

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,921

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,225

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (88)

Net assets acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,137

We allocated the amounts to intangible assets and goodwill based on fair value appraisals as follows:approximately $12.8 million of the purchase price has been allocated to database and customer contracts,$8.5 million to the ALG trade name and $0.2 million to purchased technology. These intangibles are beingamortized on a straight-line basis over two to ten years based on each intangible’s estimated useful life. We also

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recorded approximately $17.9 million in goodwill, which represents the remainder of the excess of the purchaseprice over the fair value of the net assets acquired.

The results of ALG were included in our Consolidated Statement of Operations from the date of theacquisition.

North American Advanced Technology, Inc. (NAT)

On May 23, 2005, we acquired substantially all the assets and certain liabilities of NAT. NAT’s products andservices streamline and automate many traditionally time-consuming and error-prone manual processes ofadministering aftermarket products, such as extended service contracts, and guaranteed asset protection coverage.The purchase price was $8.7 million (including direct acquisition costs of approximately $0.3 million) in cash. Thisacquisition was recorded under the purchase method of accounting resulting in the total purchase price beingallocated to the assets acquired and liabilities assumed according to their fair value at the date of acquisition asfollows (in thousands):

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 490

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,830

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,497

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,886

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (161)

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,725

We allocated the amounts to intangible assets and goodwill based on fair value appraisals as follows:approximately $1.5 million of the purchase price has been allocated to customer contracts, $2.0 million to thetechnology and $0.3 million to non-compete agreements. These intangibles are being amortized on a straight-linebasis over three to five years based on each intangible’s estimated useful life. We also recorded approximately$4.5 million in goodwill, which represents the remainder of the excess of the purchase price over the fair value of thenet assets acquired.

The results of NATwere included in our Consolidated Statement of Operations from the date of the acquisition.

Chrome Systems Corporation (Chrome)

On May 10, 2005, we acquired substantially all the assets and certain liabilities of Chrome for a purchase priceof $20.4 million (including direct acquisition costs of approximately $0.4 million) in cash. Chrome’s products andservices enable dealers, manufacturers, financing sources, Internet portals, consumers and insurance companies toconfigure, compare, and price automobiles on a standardized basis. This provides more accurate valuations for bothconsumer trade-ins and dealers’ used automobile inventory. This acquisition was recorded under the purchasemethod of accounting resulting in the total purchase price being allocated to the assets acquired and liabilitiesassumed according to their fair value at the date of acquisition as follows (in thousands):

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,497

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,220

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,039

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,285

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (859)

Net assets acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,426

We allocated the amounts to intangible assets and goodwill based on fair value appraisals as follows:approximately $9.6 million of the purchase price has been allocated to technology, $3.1 million to database,

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$2.0 million to Chrome trade name and $1.5 million to customer contracts. These intangibles are being amortizedon a straight-line basis over one to five years based on each intangible’s estimated useful life. We also recordedapproximately $2.0 million in goodwill, which represents the remainder of the excess of the purchase price over thefair value of the net assets acquired.

The results of Chrome were included in our Consolidated Statement of Operations from the date of theacquisition.

GO BIG! Software, Inc. (Go Big)

On January 1, 2005, we acquired substantially all the assets and certain liabilities of Go Big for a purchaseprice of $1.9 million (including direct acquisition costs of approximately $50,000 and additional contingentpurchase price of $0.7 million) in cash. The additional purchase price consideration was recorded as goodwill onour consolidated balance sheet. This acquisition expanded our product and service offerings to provide an electronicmenu-selling tool to automotive dealers. This acquisition was recorded under the purchase method of accountingresulting in the total purchase price being allocated to the assets acquired and liabilities assumed according to theirfair value at the date of acquisition as follows (in thousands):

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43

Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,173

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,963

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38)

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,925

We allocated the amounts to intangible assets and goodwill based on fair value appraisals as follows:approximately $0.7 million of the purchase price has been allocated to customer contracts, $0.4 million totechnology and $0.1 million to non-compete agreements. These intangibles are being amortized on a straight-linebasis over two to three years based on each intangible’s estimated useful life. We also recorded approximately$0.7 million in goodwill, which represents the remainder of the excess of the purchase price over the fair value of thenet assets acquired.

The results of Go Big were included in our Consolidated Statement of Operations from the date of theacquisition.

Lease Marketing Ltd. and its Subsidiaries (collectively “LML”)

On August 1, 2004, we acquired substantially all the assets and certain liabilities of LML. This acquisitionprovided us with a significant enhancement to the capability of our network by allowing us to begin to offer dealersa more comprehensive solution to compare various financing and leasing options and programs. The aggregatepurchase price was $12.9 million in cash (including direct acquisition costs of approximately $0.5 million).$9.0 million of the purchase price (excluding direct acquisition costs) was payable at closing and the firstanniversary of the effective date. The remaining payment of $3.4 million is payable as follows: $0.9 million,$1.4 million and $1.1 million are payable on the second, third and fourth anniversaries of the effective date,respectively. Under the terms of the purchase agreement, we have future contingent payment obligations if certainincreases in subscribers to these desking products are met through July 2008. The additional purchase consid-eration, if any, will be recorded as additional goodwill on our consolidated balance sheet when the contingency isresolved. This acquisition was recorded under the purchase method of accounting resulting in the total purchase

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price being allocated to the assets acquired and liabilities assumed according to their fair value at the date ofacquisition as follows (in thousands):

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 177

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,140

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,400

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,900

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,020)

Net assets acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,880

We allocated the amounts to intangible assets and goodwill based on fair value appraisals as follows:approximately $7.2 million of the purchase price has been allocated to customer contracts, $1.7 million topurchased technology and $1.2 million to a non-compete agreement. These intangibles are being amortized on astraight-line basis over two to five years based on each intangible’s estimated useful life. We also recordedapproximately $7.4 million in goodwill, which represents the remainder of the excess of the purchase price over thefair value of the net assets acquired.

The results of LML were included in our Consolidated Statement of Operations from the date of theacquisition.

DealerAccess Inc. (dealerAccess)

On January 1, 2004, we acquired 100% of the outstanding common stock of DealerAccess, a company whosewholly-owned subsidiary, DealerAccess Canada, Inc., an Ontario, Canada corporation, offers credit applicationprocessing and credit bureau products and services similar to ours. This acquisition expanded our dealer andfinancing source customer base to Canada. The aggregate purchase price was $2.4 million in cash (including directacquisition costs of approximately $0.2 million). This acquisition was recorded under the purchase method ofaccounting resulting in the total purchase price being allocated to the assets acquired and liabilities assumedaccording to their fair value (in thousands):

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 698

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522

Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,977

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,197

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (837)

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,360

We allocated the amounts to intangible assets and goodwill based on fair value appraisals as follows:approximately $1.9 million of the purchase price has been allocated to customer contracts and $0.1 million to a non-compete agreement. The amounts allocated to customer contracts and the non-compete agreement are beingamortized on a straight-line basis over two years. We originally recorded approximately $0.7 million in goodwill,which during 2006 was adjusted to zero as we reversed to goodwill a purchase accounting valuation allowance thatwas established for an acquired deferred tax benefit that we utilized.

DealerAccess Purchase Price Adjustment

In connection with the purchase of DealerAccess on January 1, 2004, we had a contractual agreement with theseller providing that (i) if the seller or any of its related parties submitted one or more on-line credit applicationsprior to December 31, 2006 in regard to purchases of vehicles, other than recreational or marine vehicles, to anythird-party which offers services in Canada that are similar to the credit application portal services and (ii) theaggregate volume of the funded transactions submitted by the seller or any of its related parties to DealerAccess

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through the portal during the period beginning January 1, 2004 through December 31, 2006 is less than the volumedefined in the purchase agreement, then the purchase price would be adjusted downward.

We were made aware during 2006 that a party related to the seller began submitting on-line electronic creditapplications through a competing portal. After the contractual measurement period expired on December 31, 2006,we calculated the purchase price adjustment of $1.4 million. The adjustment was paid by the seller in February2007. We recorded this purchase price adjustment to other income during the fourth quarter 2006, as DealerAccesshad no remaining goodwill or identifiable intangibles from purchase accounting.

Unaudited Pro Forma Summary of Operations

The accompanying unaudited pro forma summary presents consolidated results of operations for DealerTrackas if the acquisitions of DealerWare, Global Fax, ALG, NAT and Chrome had been completed as of the beginning ofeach period presented. The pro forma information does not necessarily reflect the actual results that would havebeen achieved, nor is it necessarily indicative of our future consolidated results.

2006 2005Year Ended December 31,

(Unaudited)(In thousands, except per

share data)

Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $177,213 $138,567

Net income (loss) applicable to common stockholders . . . . . . . . . . . . . . . . . $ 19,284 $ (91)

Basic net income (loss) per share applicable to common stockholders . . . . . . $ 0.53 $ (0.04)

Diluted net income (loss) per share applicable to common stockholders . . . . $ 0.51 $ (0.03)

4. Related Party Transactions

Service Agreement with Related Parties — Financing Sources

We have entered into agreements with the automotive financing source affiliates of certain of our current andformer stockholders. Each has agreed to subscribe to and use our network to receive credit application data andtransmit credit decisions electronically and several have subscribed to our data services and other products. Underthe agreements to receive credit application data and transmit credit decisions electronically, the automotivefinancing source affiliates of our stockholders have “most favored nation” status, granting each of them the right tono less favorable pricing terms for certain of our products and services than those granted by us to other financingsources, subject to limited exceptions. The agreements of the automotive financing source affiliates of thesestockholders also restrict our ability to terminate such agreements.

The total amount of net revenue from these related parties for the years ended December 31, 2006, 2005 and2004 was $30.7 million, $27.0 million and $18.1 million, respectively. The total amount of accounts receivablefrom these related parties as of December 31, 2006 and 2005 was zero and $4.5 million, respectively.

During 2004, in connection with an eContracting subsidy program, subject to compliance with certainconditions, we agreed to pay development costs up to $150,000, marketing costs for agreed upon projects inconnection with promoting participation in eContracting up to a maximum amount of $50,000 and a one-timeutilization incentive payment of $50,000 to certain automotive financing source affiliates of our stockholders. Whenutilized in future periods, amounts paid for development costs and utilization incentives will be recorded againstrevenue. Amounts paid for marketing costs were recorded to selling, general and administrative expenses. We paid$0.5 million for development costs and utilization incentives and $0.1 million for marketing costs to related partiesduring 2004. We paid an additional $0.1 million for marketing costs to related parties during 2005. No amountswere paid during 2006.

We have entered into agreements with certain automotive finance affiliates of our stockholders whereby weshare a portion of our eContracting subscription revenue with each such party. The total amount of expense to theserelated parties for the years ended December 31, 2006 and 2005 were $0.1 million and $0.1 million, respectively.The total amount of accrued expenses to these related parties as of December 31, 2005 was $0.1 million.

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As a result of our October 12, 2006 public offering, we no longer had a financing source as a related party.

Service Agreements with Related Parties — Other Service and Information Providers

During 2003, we entered into an agreement with a stockholder who is a service provider for automotivedealers. Automotive dealer customers may subscribe to a product that, among other things, permits the electronictransfer of customer credit application data between our network and the related party’s dealer systems. We share aportion of the revenue earned from automobile dealer subscriptions for this product, with this related party, subjectto certain minimums. The total amount of expense to this related party for the years ended December 31, 2006, 2005and 2004 were $1.7 million, $2.6 million and $1.9 million, respectively. The total amount of accrued expenses tothis related party as of December 31, 2006 and 2005 were zero and $0.9 million, respectively. As of December 31,2006, this service provider did not own at least 5% of our shares and is no longer considered a related party.

During 2003, we entered into several agreements with stockholders or their affiliates that are service providersfor automotive dealers. Automotive dealers may utilize our network to access customer credit reports and customerleads provided by or through these related parties. We earn revenue, subject to certain maximums where applicable,from these related parties for each credit report or customer lead that is accessed using our web-based service; oneof these related parties has also subscribed to our data services products. The total amounts of net revenue fromthese related parties for the years ended December 31, 2006, 2005 and 2004 were $2.7 million, $1.9 million and$0.9 million. The total amount of accounts receivable from these related parties as of December 31, 2006 and 2005was $0.4 million and $0.8 million, respectively.

5. Property and Equipment

Property and equipment are recorded at cost and consist of the following (in thousands):

Estimated UsefulLife (Years) 2006 2005

December 31,

Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 $ 9,671 $ 9,470

Office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1,245 1,721

Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1,627 1,427

Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-7 636 460

13,179 13,078

Less: Accumulated depreciation and amortization . . . . . . . . . (7,022) (8,193)

Total property and equipment, net. . . . . . . . . . . . . . . . . . . . . $ 6,157 $ 4,885

Depreciation and amortization expense related to property and equipment was approximately $2.8 million,$2.1 million and $1.7 million for the years ended December 31, 2006, 2005 and 2004, respectively.

6. Intangible Assets

Intangible assets principally are comprised of customer contracts, database, trademarks, licenses, patents, non-competition agreements and a partner agreement. The amortization expense relating to intangible assets is recorded

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as a cost of revenue. As of December 31, the gross book value, accumulated amortization and amortization periodsof the intangible assets were as follows (in thousands):

GrossBookValue

AccumulatedAmortization

GrossBookValue

AccumulatedAmortization

AmortizationPeriod(Years)

December 31,2006

December 31,2005

Customer contracts . . . . . . . . . . . . $19,308 $(10,904) $22,150 $(15,160) 1-3

Database . . . . . . . . . . . . . . . . . . . 15,900 (6,666) 15,900 (3,873) 3-6

Trade names . . . . . . . . . . . . . . . . . 10,500 (3,428) 10,500 (2,365) 5-10

Patents/technology . . . . . . . . . . . . 16,031 (8,806) 15,591 (5,202) 2-5

Non-compete agreement . . . . . . . . 3,308 (1,738) 2,749 (1,139) 2-5

Partner agreement . . . . . . . . . . . . . 4,400 (206) — — 5

Other . . . . . . . . . . . . . . . . . . . . . . 900 (681) 900 (501) 5

Total . . . . . . . . . . . . . . . . . . . . . . $70,347 $(32,429) $67,790 $(28,240)

The amortization expense charged to income was $17.3 million in 2006, $18.6 million in 2005 and $6.5 millionin 2004.

Amortization expense that will be charged to income for the subsequent five years is estimated, based on theDecember 31, 2006 book value, to be $16.4 million in 2007, $8.6 million in 2008, $5.2 million in 2009, $3.7 millionin 2010, $1.6 million in 2011 and $2.4 million thereafter.

7. Goodwill

The changes in the carrying amount of goodwill in 2006 are as follows (in thousands):

Balance as of January 1, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,200

Acquisition of DealerWire (see Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,734

Acquisition of Global Fax (see Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,718

Acquisition of DealerWare (see Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,942

Purchase price adjustments — ALG (see Note 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306

Purchase price adjustments — Go Big (see Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361

Recognition of acquired tax benefits related to dealerAccess (see Note 3 and 11) . . . . . . . . (746)

Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16)

Balance as of December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $52,499

The changes in the carrying amount of goodwill in 2005 are as follows (in thousands):

Balance as of January 1, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,781

Acquisition of Go Big (see Note 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386

Acquisition of ALG (see Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,615

Acquisition of NAT (see Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,497

Acquisition of Chrome (see Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,039

Recognition of acquired tax benefits to Credit Online (see Note 11) . . . . . . . . . . . . . . . . . (2,444)

LML purchase price adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (674)

Balance as of December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,200

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8. Other Accrued Liabilities

Following is a summary of the components of other accrued liabilities (in thousands):

December 31,2006

December 31,2005

Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,167 $2,033

Software licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,184 —

Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,685 2,820Revenue share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,926 815

Servicing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 416

Public company costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625 —

Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489 —

Initial public offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 495

Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,774 —

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 2,095

Total other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,978 $8,674

9. Public Offerings

On October 12, 2006, we completed the public offering of 11,500,000 shares of our common stock at a price of$23.76 per share. In this offering, we sold 2,750,000 shares of our common stock and certain of our stockholderssold 8,750,000 shares of our common stock, including 1,500,000 shares of our common stock sold by the sellingstockholders in connection with the full exercise of the underwriters’ over-allotment option. We did not receive anyproceeds from the sale of shares of our common stock by the selling stockholders. We received net proceeds of$61.6 million after the exercise of the over-allotment, after deducting the underwriting discounts and commissions,financial advisory fees and expenses of the offering.

On December 16, 2005, we completed the initial public offering of 10,000,000 shares of our common stock atthe initial offering price to the public of $17.00 per share. In this offering, we sold 6,666,667 shares of commonstock and the selling stockholders sold 3,333,333 shares of common stock. We did not receive any proceeds from theselling stockholders’ sale of these shares. Of the shares sold by us, a total of $113.3 million in gross proceeds wasraised in the initial public offering. After deducting the underwriting discount and commissions of $7.9 million andoffering expenses of $3.0 million, net proceeds were $102.4 million.

In connection with and upon closing of our initial public offering, the following events occurred:

• On December 13, 2005, the effective date of the offering, our redeemable convertible participating preferredstock converted into 26,397,589 shares of our common stock. In connection with the conversion, all rightsand preferences of the convertible preferred stock terminated.

• The amended and restated certificate of incorporation authorized us to issue two classes of stock to bedesignated, respectively, common stock, par value $0.01 per share, and preferred stock, par value $0.01 pershare. 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 preferredstock.

• 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 sharesand zero to 175,000,000 and 10,000,000, respectively.

On December 22, 2005, in connection with the full exercise of the underwriters’ over-allotment option,1,500,000 additional shares of common stock were sold by us at the initial public offering price to the public of$17.00 per share. After deducting the underwriting discount of $1.8 million, net proceeds from the over-allotmentwere $23.7 million.

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10. 401(k) Plan

During 2001, we established a 401(k) plan, which covers substantially all employees meeting certain agerequirements in accordance with section 401(k) of the Internal Revenue Code. Under the provisions of the 401(k)plan, we have the ability to make matching contributions equal to a percentage of the qualifying portion of theemployee’s voluntary contribution, as well as an additional matching contribution at year end and a nonelectivecontribution. Contributions under such plans for the years ended December 31, 2006, 2005 and 2004 were$1.0 million, $0.5 million and $0.3 million, respectively.

11. Income Taxes

The components of our income before income taxes are as follows (in thousands):

2006 2005 2004Year Ended December 31,

United States. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23,554 $7,944 $7,856

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,579 584 (195)

$26,133 $8,528 $7,661

The provision (benefit) for income taxes consists of the following (in thousands):

2006 2005 2004Year Ended December 31,

Current tax:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,558 $ 908 $ 301

State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,839 851 787

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (1)

Total current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,397 1,759 1,087

Deferred tax:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,510) 1,631 (3,691)

State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (471) 670 (988)

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,619) — —

Total deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,600) 2,301 (4,679)

Provision (benefit) for income taxes, net . . . . . . . . . . . . . . . . . . . . . $ 6,797 $4,060 $(3,592)

Our provision for income taxes for the year ended December 31, 2006 includes approximately $206,000 ofadditional tax expense that relates to prior periods.

The benefit for income taxes recorded for the year ended December 31, 2004 of $3.6 million consistedprimarily of the reversal of a deferred tax valuation allowance in the amount of $4.7 million during the three monthsended December 31, 2004 offset by $0.3 million of federal alternative minimum tax and approximately $0.8 millionof state and local taxes on taxable income. The reversal of the deferred tax valuation allowance was based on anumber of factors, including our profits for the year ended December 31, 2004 and the level of projected futureearnings based on current operations. Based on these factors, we believe that it is more likely than not that we willgenerate sufficient taxable income in the future to be able to utilize a portion of our deferred tax asset outstanding asof December 31, 2004. As a result, we have reversed $5.9 million of the valuation allowance in the three monthsended December 31, 2004, recognizing $4.7 million as a benefit to our provision for income taxes, and $1.2 millionas an adjustment to goodwill. The goodwill adjustment was necessary since that portion of the reversal relates to netoperating losses acquired but not recognized at the date of acquisition of Credit Online Inc.

The conclusion that it is more likely than not that the net deferred tax asset of $5.9 million at December 31,2004 would be realized was based on evaluating the nature and weight of all of the available positive and negativeevidence in accordance with FAS No. 109. In reaching that conclusion, we balanced the weight of the evidence of

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cumulative losses as of December 31, 2004 against positive evidence including the recent positive earnings historybeginning in the fourth quarter of 2003 through the end of 2004; the expected level of earnings in 2005 and 2006; thelength of the carryforward periods applicable to the deferred tax assets; and the change in business activity in recentyears as compared to the initial years of operation.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts ofassets and liabilities for financial reporting purposes and the amounts used for income tax purposes using enactedtax rates in effect in the year in which the differences are expected to reverse.

Deferred tax assets and liabilities as of December 31, 2006 and 2005 consisted of the amounts shown below:

2006 2005December 31,

Deferred tax assets:

Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,256 $ 5,615

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395 243

Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,984 1,375

Acquired intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,097 4,458

Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433 424

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,037 1,588

21,202 13,703

Deferred tax liabilities:

Capitalized software and web site development . . . . . . . . . . . . . . . . . . . . . . . . (2,224) (3,436)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (561) (18)

18,417 10,249

Deferred tax asset valuation allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (214) (4,245)

$18,203 $ 6,004

As required by SFAS No. 109, the conclusion that it is more likely than not that the net deferred tax asset ofapproximately $18.2 million and $6.0 million at December 31, 2006 and 2005, respectively, would be realized wasbased on careful evaluation of the nature and weight of all of the available positive and negative evidence inaccordance with SFAS No. 109. In reaching our conclusion, we balanced the weight of both the negative andpositive evidence including cumulative losses; recent positive earnings; the expected level of future earnings; thelength of the carry forward periods applicable to the deferred tax assets; and the change in business activity in recentyears as compared to the initial years of operation.

For the year ended December 31, 2005, the deferred tax asset valuation allowance of $4.2 million represents avaluation allowance against the deferred tax assets of our Canadian operations. As of December 31, 2006 theremaining valuation allowance previously carried against the deferred tax assets of our Canadian operations wasreleased in its entirety. $0.7 million of this benefit was reflected as an adjustment to goodwill. The reversal of ourCanadian subsidiary’s deferred tax valuation allowance during the third quarter of 2006 was based on a number offactors, including a history of pre-tax income over a significant period and the level of projected future pre-taxincome based on current operations. Based upon these factors, we believe that it is more likely than not that ourCanadian subsidiary will generate sufficient taxable income in the future to utilize the deferred tax asset outstandingas of September 30, 2006. Although these deferred tax assets begin to expire in 2008, we believe that they will beutilized prior to expiration. In the event that the future income streams that we currently project do not materialize,we may be required to record a valuation allowance. Any increase in a valuation allowance would result in a chargethat would adversely impact our operating performance.

As of December 31, 2005, the $3.3 million valuation allowance previously carried against the net operatingloss carryforward of Credit Online Inc. was released in its entirety. This benefit was reflected as an adjustment togoodwill.

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As of December 31, 2006 and 2005, we had U.S. net operating loss carryforwards of $6.7 million and$7.6 million, respectively. As of December 31, 2006 and 2005, the utilization of $6.7 million and $7.6 million,respectively, of these loss carryforwards may be subject to limitation under Section 382 of the Internal RevenueCode. These losses are available to reduce future taxable income and expire in varying amounts beginning 2018.

As of December 31, 2006 and 2005, we had Canadian net operating loss carryforwards of $5.4 million and$8.4 million, respectively. These losses are available to reduce future taxable income and expire in varying amountsfrom 2007 to 2010.

The difference in income tax expense between the amount computed using the statutory federal income taxrate and our effective tax rate is primarily due to state taxes and the change in the valuation allowance. The effect ofchange in tax rate for 2006 and 2005 represents the tax impact of a change in the estimated effective tax rateapplicable to our deductible and taxable temporary differences for purpose of determining our deferred tax assetsand liabilities. The change in the estimated effective tax rate was made in order to reflect the tax rate at which ourtemporary differences are expected to reverse in future years.

The analysis of the effective tax rate for 2006, 2005 and 2004 is as follows:

2006 2005 2004Year Ended December 31,

Pre-tax book income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.0% 34.0% 34.0%

State taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.0% 10.7% (2.5)%

Foreign rate differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2% (2.3)% —

Deferred tax rate adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3% 5.6% —

Valuation allowance and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17.5)% (0.4)% (78.4)%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.0% 47.6% (46.9)%

We do not provide for deferred taxes on the temporary differences related to investments in foreign subsidiariessince such profits are considered to be permanently invested.

12. Stock Option and Deferred Compensation Plans

2001 Stock Option Plan

Options granted under the 2001 Stock Option Plan were all non-qualified stock options. Effective May 26,2005, no options are available for future grant under the 2001 Stock Option Plan.

2005 Incentive Award Plan

In May 2005, our board of directors adopted, and our stockholders approved, our 2005 Incentive Award Plan.3,100,000 shares of common stock are reserved for issuance under the 2005 Incentive Award Plan, as well as79,800 shares of common stock that were previously available for grant under the 2001 Stock Option Plan, and anyshares underlying any existing grants under our 2001 Stock Option Plan that are forfeited. The maximum number ofshares that may be subject to awards granted under the 2005 Incentive Award Plan to any individual in any fiscalyear is 750,000. As of December 31, 2006, 518,293 shares were available for future issuance.

Options granted under both the 2001 Stock Option Plan and 2005 Incentive Award Plan generally vest over aperiod of four years from the vesting commencement date, expire ten years from the date of grant (as defined by theplan document) and terminate, to the extent unvested, on the date of termination of employment, and to the extentvested, generally at the end of the three-month period following termination of employment, except in the case ofexecutive officers, who generally have a twelve-month period following termination of employment to exercise.

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The following table summarizes the activity under our stock option plans as of December 31, 2006:

Number ofShares

Weighted-AverageExercise Price

Balance as of January 1, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,554,551 $ 6.2216

Options Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 875,800 $21.5023

Options Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (387,748) $ 6.9244

Options Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (145,155) $15.7200

Balance as of December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,897,448 $ 9.2395

The intrinsic value of the stock options exercised during the year ended December 31, 2006 was approximately$6.3 million based upon an average stock price of $23.1368.

The following table summarizes information concerning currently outstanding and exercisable options as ofDecember 31, 2006:

Exercise Price Range

Number ofShares

Outstanding

Weighted-Average

RemainingContractualLife in Years

Weighted-AverageExercise

Price

AggregateIntrinsic

Value(’000)

NumberExercisable

Weighted-Average

RemainingContractualLife in Years

Weighted-AverageExercise

Price

AggregateIntrinsic

Value(’000)

Options Outstanding Options Exercisable

$2.80-$25.39 . . . . . . . . 3,897,448 7.0793 $9.2395 $54,163 2,129,706 6.2398 $4.7145 $39,233

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on ouraverage stock price of $23.1368 for the year ended December 31, 2006.

We have granted restricted common stock to certain employees and directors under the 2005 Incentive AwardPlan. The awards are subject to an annual cliff vest of three and four years from the date of grant.

A summary of the status of the non-vested shares as of December 31, 2006 and changes during the year endedDecember 31, 2006, is presented below:

Number ofShares

WeightedAverage GrantDate Fair Value

Restricted Common Stock

Non-vested as of January 1, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,925 $17.5094

Awards granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796,200 $19.8455

Awards vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48,323) $17.9331

Awards canceled/expired/forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,150) $20.1569

Non-vested as of December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . 858,652 $19.6050

As of December 31, 2006, there was $10.3 million and $12.0 million of unamortized APB 25 and FAS 123(R)stock-based compensation expense related to stock option and restricted common stock awards, respectively. Theunamortized stock-based compensation expense related to stock options is expected to be recognized on a straightline basis over an estimated period of four years. Of the $12.0 million of deferred stock-based compensationexpense related to restricted common stock awards, $4.1 million is expected to be recognized on a straight-line basisover an estimated period of three to four years. The remaining $7.9 million of deferred restricted common stock-based compensation relates to the long-term incentive equity awards. Refer to the section “Long-Term IncentiveEquity Awards”, in this footnote, for expense recognition information.

Employee Stock Purchase Plan

In May 2005, our board of directors adopted, and our stockholders approved, an Employee Stock PurchasePlan (ESPP). The ESPP became effective on December 14, 2005, upon the filing of a registration statement onForm S-8. The total number of shares of common stock reserved under the ESPP is 1,500,000 and the total number

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of shares available for future issuance as of December 31, 2006 under the ESPP is 1,457,863. For employees eligibleto participate on the first date of an offering period, the purchase price of shares of common stock under the ESPPwill be 85% of the fair market value of the shares on the last day of the offering period, which is the date of purchase.As of December 31, 2006, 42,137 shares of common stock were issued under the ESPP. The compensation expensethat we recorded for the year ended December 31, 2006 related to the ESPP was $0.2 million.

Employees’ Deferred Compensation Plan

In May 2005, our board of directors adopted our Employees’ Deferred Compensation Plan. The Employees’Deferred Compensation Plan is a non-qualified retirement plan. The Employees’ Deferred Compensation Planallows a select group of our management or highly compensated employees to elect to defer certain bonuses thatwould otherwise be payable to the employee. Amounts deferred under the Employees’ Deferred CompensationPlan are general liabilities of ours and are represented by bookkeeping accounts maintained on behalf of theparticipants. Such accounts are deemed to be invested in share units that track the value of our common stock.Distributions will generally be made to a participant following the participant’s termination of employment or otherseparation from service, following a change of control if so elected, or over a fixed period of time elected by theparticipant prior to the deferral. Distributions will generally be made in the form of shares of our common stock. OurEmployees’ Deferred Compensation Plan is intended to comply with Section 409A of the Internal Revenue Code.As of December 31, 2006, no deferred stock units were issued under the Employees’ Deferred Compensation Plan.As of December 31, 2006, there are 150,000 shares of common stock reserved and available for distribution underthe Employees’ Deferred Compensation Plan.

Directors’ Deferred Compensation Plan

In May 2005, our board of directors adopted our Directors’ Deferred Compensation Plan. The Directors’Deferred Compensation Plan is a non-qualified retirement plan. The Directors’ Deferred Compensation Plan allowseach board member to elect to defer certain fees that would otherwise be payable to the director. Amounts deferredunder the Directors’ Deferred Compensation Plan are general liabilities of ours and are represented by bookkeepingaccounts maintained on behalf of the participants. Such accounts are deemed to be invested in share units that trackthe value of our common stock. Distributions will generally be made to a participant following the participant’stermination of service following a change of control if so elected, or over a fixed period of time elected by theparticipant prior to the deferral. Distributions will generally be made in the form of shares of our common stock. OurDirectors’ Deferred Compensation Plan is intended to comply with Section 409A of the Internal Revenue Code. Asof December 31, 2006, 14,917 deferred stock units were recorded under a memo account and 75,000 shares ofcommon stock are reserved and available for distribution under the Directors’ Deferred Compensation Plan.

Long Term Incentive Equity Awards

On August 2 and November 2, 2006, the compensation committee of the board of directors granted long-termperformance equity awards (under the 2005 Incentive Award Plan) consisting of 565,000 shares and 35,000 sharesof restricted common stock, respectively, to certain executive officers and other employees. Each individual’s awardis allocated 50% to achieving earnings before interest, taxes, depreciation and amortization, as adjusted to reflectany future acquisitions (EBITDA Performance Award) and 50% to the market value of our common stock (MarketValue Award). The awards are earned upon our achievement of EBITDA and market-based targets for the fiscalyears 2007, 2008 and 2009, but will not vest unless the grantee remains continuously employed in active serviceuntil January 31, 2010. If an EBITDA Performance Award or Market Value Award is not earned in an earlier year, itcan be earned upon achievement of that target in a subsequent year. The awards will accelerate in full upon a changein control, if any. In accordance with FAS 123R, we valued the EBITDA Performance Award and the Market ValueAward using the Black-Scholes and binomial lattice-based valuation pricing models, respectively. The total fairvalue expense of the EBITDA Performance Award and Market Value Award is $5.8 million (prior to estimatedforfeitures) and $2.4 million (including estimated forfeitures), respectively. The expense recognition for theEBITDA Performance Award is taken when management believes with 100% certainty that the performance targetwill be achieved. As we are not 100% certain that the performance targets will be achieved, no expense has beenrecorded in regard to the EBITDA Performance Award as of December 31, 2006. We will re-evaluate this condition

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at each balance sheet date. The total value of the Market Value Award is expensed on a straight-line basis from thedate of grant over the applicable service period. As long as the service condition is satisfied, the expense is notreversed, even if the market conditions are not satisfied.

The fair value of the EBITDA Performance Award for the year ended December 31, 2006 has been estimatedon the date of grant using a Black-Scholes valuation pricing model with the following weighted-averageassumptions

August 2, 2006 November 2, 2006

Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.00% 40.00%

Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00% 0.00%

Expected life (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.42 3.16

Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.99% 4.91%

Weighted-average fair value of EBITDA Performance Award . . . . . $18.95 $25.39

The number of restricted common stock awards that management expects to be earned for the Market ValueAward for the year ended December 31, 2006 has been estimated on the date of grant using a binomial lattice-basedvaluation pricing model with the following weighted-average assumptions:

August 2, 2006 November 2, 2006

Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.00% 40.00%

Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00% 0.00%

Expected life (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.41-3.42 1.16-3.16

Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.83-4.99% 4.55-4.91%

Weighted-average fair value of Market Value Award . . . . . . . . . . . $ 18.95 $ 25.39

13. Commitments and Contingencies

Operating Leases

We lease our office space and various office equipment under cancelable and noncancelable operating leaseswhich expire on various dates through October 15, 2015. Total lease expense under operating leases was$2.9 million, $2.4 million and $1.0 million for the years ending December 31, 2006, 2005 and 2004, respectively.

Future minimum rental payments under the noncancelable operating leases are as follows (in thousands):

Years Ending December 31,

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,836

2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,297

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,006

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,690

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,640

Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,823

$16,292

Capital Leases

The following is an analysis of the leased property under capital leases by major property class (in thousands):

2006 2005As of December 31,

Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $— $ 1,526

Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (1,097)

$— $ 429

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Executive Severance Commitment

During the third quarter of 2006, we recorded a charge of approximately $5.8 million (includes $5.0 million innon-cash stock-based compensation and approximately $0.8 million in cash compensation expense) related to thedeparture of an executive officer. The $5.0 million in non-cash stock-based compensation expense was primarilydue to the May 26, 2005 modification of the executive officers’ original equity award terms (dated September 8,2003) that would take effect upon termination without cause. Of the $0.8 million in cash compensation, $0.2 millionwas payable on March 1, 2007 and the remaining portion of $0.6 million will be paid in equal installments over thesucceeding eighteen months.

Retail Sales Tax

The Ontario Ministry of Finance (the Ministry) has conducted a retail sales tax field audit on the financialrecords of our Canadian subsidiary, DealerAccess Canada, Inc., for the period from March 1, 2001 through May 31,2003. We received a formal assessment from the Ministry indicating unpaid Ontario retail sales tax totalingapproximately $0.2 million, plus interest. Although we are disputing the Ministry’s findings, the assessment,including interest, has been paid in order to avoid potential future interest and penalties.

As part of the purchase agreement dated, December 31, 2003, between us and Bank of Montreal for thepurchase of 100% of the issued and outstanding capital stock of DealerAccess, Bank of Montreal agreed toindemnify us specifically for this potential liability for all sales tax periods prior to January 1, 2004. As ofDecember 31, 2005, all amounts paid to the Ministry by us for this assessment have been reimbursed by the Bank ofMontreal under this indemnity.

We have undertaken a comprehensive review of the audit findings of the Ministry using external tax experts.Our position is that our financing source revenue transactions are not subject to Ontario retail sales tax. We filed aformal Notice of Objection with the Ministry on December 12, 2005. No further communication from the Ministryhas been received other than an acknowledgment of receipt of the Notice of Objection.

Based upon our comprehensive review and the contractual obligations of our customers, we do not believe ourservices are subject to sales tax and have not accrued any sales tax liability for the period subsequent toDecember 31, 2003 for our Canadian subsidiary. In the event we are obligated to charge sales tax, our Canadiansubsidiary’s contractual arrangements with its financing source customers obligate these customers to pay all salestaxes that are levied or imposed by any taxing authority by reason of the transactions contemplated under thecontractual arrangement. However, there is no assurance that any of our customers would be able to pay such salestaxes when due. In the event of any failure to pay sales tax, we would be required to pay the obligation, which couldhave a material adverse effect on our business, prospects, financial condition and results of operations.

Commitments

Pursuant to employment or severance agreements with certain employees, we have a commitment to payseverance of approximately $6.5 million as of December 31, 2006 and $7.5 million as of December 31, 2005, in theevent of termination without cause, as defined in the agreements, as well as certain potential gross-up payments tothe extent any such severance payment would constitute an excess parachute payment under the Internal RevenueCode.

We are a party to a variety of agreements pursuant to which we may be obligated to indemnify the other partywith respect to breach of contract, infringement and other matters. Typically, these obligations arise in the context ofagreements entered into by us, under which we customarily agree to hold the other party harmless against lossesarising from breaches of representations, warranties and/or covenants. In these circumstances, payment by us isgenerally conditioned on the other party making a claim pursuant to the procedures specified in the particularagreement, which procedures typically allow us to challenge the other party’s claims. Further, our obligations underthese agreements may be limited to indemnification of third-party claims only and limited in terms of time and/oramount. In some instances, we may have recourse against third parties for certain payments made by us.

It is not possible to predict the maximum potential amount of future payments under these or similaragreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each

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particular agreement. To date, we have not been required to make any such payment. We believe that if we were toincur a loss in any of these matters, it is not probable that such loss would have a material effect on our business orfinancial condition. It is possible; however, that such loss could have a material impact on our results of operationsin an individual reporting period.

Legal Proceedings

From time to time, we are a party to litigation matters arising in connection with the normal course of ourbusiness, none of which is expected to have a material adverse effect on us. In addition to the litigation mattersarising in connection with the normal course of our business, we are party to the litigation described below.

On January 28, 2004, we filed a Complaint and Demand for Jury Trial against RouteOne LLC (RouteOne) inthe United States District Court for the Eastern District of New York, Civil Action No. CV 04-322 (SJF). Thecomplaint seeks injunctive relief as well as damages against RouteOne for infringement of two patents owned by uswhich relate to computer implemented automated credit application analysis and decision routing inventions. Thecomplaint also seeks relief for RouteOne’s acts of copyright infringement, circumvention of technological measuresand common law fraud and unfair competition. Discovery has generally been completed and dispositive motionshave been briefed. The Court has not yet scheduled hearings for claim construction or on the dispositive motions.The parties are presently in discussions to resolve our claims of copyright infringement, circumvention oftechnological measures, and common law fraud and unfair competition. We intend to pursue our patent claimsvigorously.

On April 18, 2006, we filed a Complaint and Demand for Jury Trial against David Huber, Finance Express andthree of their unnamed dealer customers in the United States District Court for the Central District of California,Civil Action No. CV06-2335 AG (FMOx). The complaint seeks declaratory and injunctive relief, as well as,damages against the defendants for infringement of two patents owned by us that relate to computer implementedautomated credit application analysis and decision routing inventions. The complaint also seeks relief for FinanceExpress’s acts of copyright infringement, violation of the Lanham Act and violation of the California Business andProfessional Code. The defendants have made certain counterclaims in their answer. We believe these counter-claims to be without merit. Discovery has recently begun in connection with this action and a claim constructionhearing has been scheduled for April 23, 2007. We intend to pursue our claims and defend any counter claimsvigorously.

On October 27, 2006, we filed a Complaint and Demand for Jury Trial against RouteOne LLC, David Huber,and Finance Express in the United States District Court for the Central District of California, Civil ActionNo. 06-06864 DSF (PLAx). The complaint seeks declaratory and injunctive relief, as well as damages against thedefendants for joint and individual infringement of the same two patents that are the subject of the two afore-mentioned suits against Huber and Finance Express in the Central District of California, and RouteOne LLC in theEastern District of New York. Discovery has recently begun in connection with this action and a claim constructionhearing has been scheduled for June 19, 2007. We intend to pursue our claims vigorously.

We believe that the potential liability from all current litigations will not have a material effect on our financialposition or results of operations when resolved in a future period.

14. Segment Information

In accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information(SFAS No. 131) segment information is being reported consistent with our method of internal reporting. Inaccordance with SFAS No. 131, operating segments are defined as components of an enterprise for which separatefinancial information is available that is evaluated regularly by the chief operating decision maker in deciding howto allocate resources and in assessing performance. We have one reportable segment under SFAS No. 131. Forenterprise-wide disclosure, we are organized primarily on the basis of service lines. Based on the nature and class ofcustomer, as well as the similar economic characteristics, our product lines have been aggregated for disclosurepurposes. Revenue earned outside of the United States is less than 10% of our total net revenue.

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Supplemental disclosure of revenue by service type is as follows (in thousands):

2006 2005 2004Year Ended December 31,

Transaction services revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . $112,752 $ 82,637 $56,399

Subscription services revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,352 32,390 12,363

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,168 5,192 1,282

Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $173,272 $120,219 $70,044

15. Credit Facility

On April 15, 2005, we and one of our subsidiaries, DealerTrack, Inc. entered into a $25.0 million revolvingcredit facility at an interest rate of LIBOR plus 150 basis points or prime plus 50 basis points. The revolving creditfacility is available for general corporate purposes (including acquisitions), subject to certain conditions. As ofDecember 31, 2006 and December 31, 2005, we had no amounts outstanding and $25.0 million available forborrowings under this revolving credit facility, which matures on April 15, 2008.

Our revolving credit facility contains restrictive covenants that limit our ability and our existing or futuresubsidiaries’ abilities, among other things, to:

• access our, or our existing or future subsidiaries’, cash flow and value and, therefore, to pay interest and/orprincipal 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 orto 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’sassets;

• 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.

In addition, our revolving credit facility includes other and more restrictive covenants and prohibits oursubsidiaries from prepaying our other indebtedness while indebtedness under our credit facilities is outstanding.The agreements governing our credit facilities also require us and our subsidiaries to achieve specified financial andoperating results and maintain compliance with specified financial ratios on a consolidated basis. As of Decem-ber 31, 2006, we are in compliance with all terms and conditions of our credit facility. Our and our subsidiaries’ability to comply with these ratios may be affected by events beyond our control.

Our revolving credit facility contains the following affirmative covenants, among others: delivery of financialstatements, reports, accountants’ letters, budgets, officers’ certificates and other information requested by thelenders; payment of other obligations; continuation of business and maintenance of existence and material rightsand privileges; compliance with laws and material contractual obligations; maintenance of property and insurance;maintenance of books and records; right of the lenders to inspect property and books and records; notices ofdefaults, bankruptcies and other material events; and compliance with laws.

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16. Subsequent Events

Curomax Acquisition

On February 1, 2007, we completed the purchase of all of the outstanding shares of Curomax Corporation andits subsidiaries (“Curomax”) pursuant to a Shares Purchase Agreement, made as of January 16, 2007, for a cashpurchase price of approximately $39.4 million (including estimated direct acquisition and restructuring costs ofapproximately $2.1 million). Under the terms of the Shares Purchase Agreement, we have future contingentpayment obligations of approximately $1.9 million in cash to be paid out based upon the achievement of certainoperational objectives over the subsequent twenty-four months. Currently, we are completing a fair valueassessment of the acquired assets, liabilities and identifiable intangibles, and at the conclusion of the assessmentthe purchase price will be allocated accordingly.

Legal Proceedings

On February 20, 2007, we filed a Complaint and Demand for Jury Trial against RouteOne LLC, David Huber,and Finance Express in the United States District Court for the Central District of California, Civil ActionNo. 07-215 CJC (CSx). The complaint seeks declaratory and injunctive relief, as well as damages against thedefendants for joint and individual infringement of a patent related to the two patents that are the subject of the threeafore-mentioned suits. The patent that is the subject matter of this litigation issued on February 20, 2007 andconcerns computer aided methods of managing credit applications. The Complaint and Demand for Jury Trial hasnot yet been served in this action. We intend to pursue our claims vigorously.

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DEALERTRACK HOLDINGS, INC.

SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

Description

Balance atBeginning of

Period

AdditionsCharged toExpenses Deductions

OtherAdjustments

Balance atEnd ofPeriod

(In thousands)

As of December 31, 2006:

Allowance for doubtful accounts. . . . . . . . $ 1,531 1,527 (1,174) — $1,884

Allowance for sales credits . . . . . . . . . . . . $ 1,133 3,311 (1,921) — $2,523

Deferred tax valuation allowance . . . . . . . $ 4,245 214 (4,245)(1) — $ 214

As of December 31, 2005:

Allowance for doubtful accounts. . . . . . . . $ 640 1,181 (371) 81 $1,531

Allowance for sales credits . . . . . . . . . . . . $ 59 2,483 (1,409) — $1,133

Deferred tax valuation allowance . . . . . . . $ 7,700 — (3,455)(2) — $4,245

As of December 31, 2004:

Allowance for doubtful accounts. . . . . . . . $ 547 264 (211) 40 $ 640

Allowance for sales credits . . . . . . . . . . . . $ 69 212 (222) — $ 59

Deferred tax valuation allowance . . . . . . . $11,660 — (8,397)(3) 4,437 $7,700

(1) For the year ended December 31, 2006, the deferred tax asset valuation was reversed by $4.2 million. Includedin this reversal is a $0.7 million adjustment to goodwill relating to the net operating loss acquired but notrecognized at the date of acquisition of DealerAccess in January 2004. Please refer to Note 11 of the financialstatements for further information.

(2) For the year ended December 31, 2005, the deferred tax asset valuation was reversed by $3.5 million. Includedin this reversal is a $3.3 million adjustment to goodwill relating to a net operating loss acquired but notrecognized at the date of acquisition of Credit Online, Inc. in March 2003.

(3) For the year ended December 31, 2004, the deferred tax asset valuation was reversed by $8.4 million. Includedin this reversal is a $4.7 million benefit to our provision for income taxes, a $1.2 million adjustment to goodwillrelating to a net operating loss acquired but not recognized at the date of acquisition of Credit Online, Inc. inMarch 2003, coupled by a change in deferred tax assets of $2.5 million.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management conducted an evaluation, as of December 31, 2006, of the effectiveness of the design andoperation of our disclosure controls and procedures, (as such term is defined in Rules 13a- 15(e) and 15d- 15(e)under the Securities Exchange Act of 1934) under the supervision and with the participation of our chief executiveofficer and chief financial officer. In designing and evaluating our disclosure controls and procedures, we and ourmanagement recognize that any controls and procedures, no matter how well designed and operated, can provideonly reasonable assurance of achieving the desired control objectives, and our management necessarily wasrequired to apply its judgment in evaluating and implementing possible controls and procedures. Based upon thatevaluation, our chief executive officer and chief financial officer have concluded that they believe that as of the endof the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were effective atthe reasonable assurance level.

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Changes in Internal Control Over Financial Reporting

During the quarter ended December 31, 2006, there were no changes in our internal control over financialreporting that have materially affected, or are reasonably likely to materially affect, our internal control overfinancial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

DealerTrack management is responsible for establishing and maintaining adequate internal control overfinancial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.DealerTrack’s internal control over financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with accounting principles generally accepted in the United States of America. Because of its inherentlimitations, internal control over financial reporting may not prevent or detect misstatements. In addition,projections of any evaluation of effectiveness to future periods are subject to the risk that controls may becomeinadequate because of changes in conditions and that the degree of compliance with the policies or procedures maydeteriorate. Management assessed the effectiveness of our internal control over financial reporting as ofDecember 31, 2006. In making this assessment, management used the criteria set forth in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO). Management’s assessment was reviewed with the Audit Committee of the Board of Directors.

Based on its assessment of internal control over financial reporting, management has concluded that, as ofDecember 31, 2006, DealerTrack’s internal control over financial reporting was effective.

PricewaterhouseCoopers LLP, DealerTrack’s independent registered public accounting firm, has issued anattestation report on management’s assessment of DealerTrack’s internal control of financial reporting whichappears in Item 8.

Item 9B. Other Information

None.

PART III

Anything herein to the contrary notwithstanding, in no event whatsoever are the sections entitled “StockPerformance Graph,” “Nominating and Compensation Committee Report on Executive Compensation” and “AuditCommittee Report” to be incorporated by reference herein from our proxy statement in connection with its annualmeeting of stockholders expected to be held in the second quarter of 2007.

Item 10. Directors and Executive Officers of the Registrant

The information required to be furnished pursuant to this item will be set forth under the captions“Proposal One: Election of Directors,” “Executive Officers” and “Section 16(a) Beneficial Ownership ReportingCompliance” in the Proxy Statement to be filed with the SEC no later than 120 days after the close of our fiscal yearended December 31, 2006. If the Proxy Statement is not filed with the SEC by such time, such information will beincluded in an amendment to this Annual Report by such time.

Item 11. Executive Compensation

The information required to be furnished pursuant to this item will be set forth under the caption “ExecutiveCompensation” in the Proxy Statement to be filed with the SEC no later than 120 days after the close of our fiscalyear ended December 31, 2006. If the Proxy Statement is not filed with the SEC by such time, such information willbe included in an amendment to this Annual Report on Form 10-K by such time.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters

The information required to be furnished pursuant to this item will be set forth under the caption “SecurityOwnership of Certain Beneficial Owners and Management” in the Proxy Statement to be filed with the SEC no laterthan 120 days after the close of our fiscal year ended December 31, 2006. If the Proxy Statement is not filed with theSEC by such time, such information will be included in an amendment to this Annual Report on Form 10-K by suchtime.

Item 13. Certain Relationships and Related Transactions

The information required to be furnished pursuant to this item will be set forth under the caption “CertainRelationships and Transactions” in the Proxy Statement to be filed with the SEC no later than 120 days after theclose of our fiscal year ended December 31, 2006. If the Proxy Statement is not filed with the SEC by such time,such information will be included in an amendment to this Annual Report on Form 10-K by such time.

Item 14. Principal Accounting Fees and Services

The information required to be furnished pursuant to this item will be set forth under the caption “PrincipalAccountant Fees and Services” in the Proxy Statement to be filed with the SEC no later than 120 days after the closeof our fiscal year ended December 31, 2006. If the Proxy Statement is not filed with the SEC by such time, suchinformation will be included in an amendment to this Annual Report on Form 10-K by such time.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) The following documents are included in “Financial Statements and Supplementary Data” in Item 8 of thisAnnual Report on Form 10-K:

(1) Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2006 and 2005

Consolidated Statements of Operations for the three years ended December 31, 2006

Consolidated Statements of Cash Flows for the three years ended December 31, 2006

Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Income for each of thethree years ended December 31, 2006

Notes to Consolidated Financial Statements

(2) Financial Statement Schedules — Schedule II

(3) Exhibits

Number Description

3.1(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, amongDealerTrack 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 BrothersInc., as joint bookrunners, J.P. Morgan Securities Inc., Lehman Brothers Inc. and Wachovia SecuritiesInc., 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, asdocumentation 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 ChaseBank, 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 FirstAmerican 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 RealEstate 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 AmericanReal 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 CreditManagement 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 AmericanCorporation.

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Number Description

10.10(2) License Agreement, made and entered into as of February 1, 2001, by and between The Chase ManhattanBank 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(1) Employment Agreement, dated as of May 26, 2005, by and between Mark F. O’Neil and DealerTrackHoldings, Inc.

10.13(5) Employment Agreement, dated as of May 25, 2005, by and between John A. Blair and Automotive LeaseGuide (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(1) Employment Agreement, dated as of May 26, 2005, by and between Eric D. Jacobs and DealerTrackHoldings, Inc.

10.16* Employment Agreement, dated as of August 21, 2006, by and between Raj Sundaram and DealerTrack,Inc.

10.17* Employment Agreement, dated as of May 25, 2005, by and between Robert Cox and DealerTrack, 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(1) 2005 Incentive Award Plan, effective as of May 26, 2005.

10.24(8) First Amendment to the 2005 Incentive Award Plan, effective as of August 2, 2006.

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* 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* Letter Agreement, dated October 23, 2006, from DealerTrack, Inc. to Raj Sundaram regarding relocation.

10.35* Unfair Competition and Nonsolicitation Agreement, dated as of May 25, 2005, by and between RajSundaram and Automotive Lease Guide (alg), Inc.

10.36* Amendment No. 1 to Unfair Competition and Nonsoliciation Agreement, made as of August 21, 2006, byand 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 CMSIInc. and DealerTrack, Inc.

10.39(7) Shares Purchase Agreement, made as of January 16, 2007, among certain shareholders of CuromaxCorporation and all of the shareholders of 2044904 Ontario Inc., 2044903 Ontario Inc. and 2044905Ontario Inc. and 6680968 Canada Inc.

14.1(6) Code of Business Conduct and Ethics.

21.1* List of Subsidiaries.

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Number Description

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 toSection 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 toSection 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 adoptedpursuant 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 (FileNo. 333-126944) filed September 22, 2005.

(3) Incorporated by reference to Amendment No. 2 to our Registration Statement on Form S-1 (FileNo. 333-126944) filed October 12, 2005.

(4) Incorporated by reference to Amendment No. 3 to our Registration Statement on Form S-1 (FileNo. 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 Registration Statement on Form S-1 (File No. 333-136929) filed August 28,2006.

DealerTrack hereby files as part of this Form 10-K the exhibits listed in Item 15(a) (3) above. Exhibits whichare incorporated herein by reference can be inspected and copied at the public reference rooms maintained by theSEC in Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 forfurther information on the public reference rooms. SEC filings are also available to the public from commercialdocument retrieval services and at the Web site maintained by the SEC at http://www.sec.gov.

93

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, theRegistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: March 16, 2007

DealerTrack Holdings, Inc.(Registrant)

By: /s/ Robert J. Cox III

Robert J. Cox IIISenior Vice President, Chief Financial Officer

and Treasurer(Duly Authorized Officer andPrincipal Financial Officer)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has beensigned below by the following persons on behalf of the registrant and in the capacities and on the datesindicated.

Signature Title Date

/s/ Mark F. O’Neil

Mark F. O’Neil

Chairman of the Board, President and ChiefExecutive Officer (principal executive officer)

March 16, 2007

/s/ Robert J. Cox III

Robert J. Cox III

Senior Vice President, Chief Financial Officerand Treasurer (principal financial andaccounting officer)

March 16, 2007

/s/ Steven J. Dietz

Steven J. Dietz

Director March 16, 2007

/s/ Thomas R. Gibson

Thomas R. Gibson

Director March 16, 2007

/s/ Thomas F. Gilman

Thomas F. Gilman

Director March 16, 2007

Mary Cirillo-Goldberg

Director March 16, 2007

/s/ John J. McDonnell, Jr.

John J. McDonnell, Jr.

Director March 16, 2007

/s/ James David Power III

James David Power III

Director March 16, 2007

/s/ Howard L. Tischler

Howard L. Tischler

Director March 16, 2007

94

EXHIBIT 31.1

CERTIFICATION

I, Mark F. O’Neil, certify that:

1. I have reviewed this report on Form 10-K of DealerTrack Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to statea material fact necessary to make the statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report,fairly present in all material respects the financial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control overfinancial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and proceduresto be designed under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of theperiod covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board ofdirectors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal controlover financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting.

By: /s/ MARK F. O’NEIL

MARK F. O’NEILCHAIRMAN, PRESIDENT ANDCHIEF EXECUTIVE OFFICER

Date: March 16, 2007

EXHIBIT 31.2

CERTIFICATION

I, Robert J. Cox, certify that:

1. I have reviewed this report on Form 10-K of DealerTrack Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to statea material fact necessary to make the statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report,fairly present in all material respects the financial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control overfinancial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and proceduresto be designed under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of theperiod covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board ofdirectors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal controlover financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting.

By: /s/ ROBERT J. COX III

ROBERT J. COX IIISENIOR VICE PRESIDENT, CHIEF

FINANCIAL OFFICER AND TREASURER

Date: March 16, 2007

EXHIBIT 32.1

CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of DealerTrack Holdings, Inc. (the “Company”) on Form 10-K for theperiod ending December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the“Report”), we, Mark F. O’Neil, Chief Executive Officer of the Company, and Robert J. Cox, Chief Financial Officerof the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to our knowledge, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities ExchangeAct of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financialcondition and results of operations of the Company.

/s/ Mark F. O’Neil

Mark F. O’NeilChairman, President andChief Executive Officer

/s/ Robert J. Cox III

Robert J. Cox IIISenior Vice President,

Chief Financial Officer and Treasurer

Dated: March 16, 2007

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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K/AAmendment No. 1

(Mark One)

¥ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

or

n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT

For the transition period from to

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. Identification Number)

1111 Marcus Ave., Suite M04Lake 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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. Yes n No ¥

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of theAct. Yes n No ¥

Indicate by a check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the Registrant was requiredto file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¥ No n

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not containedherein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K/A or an amendment to this Form 10-K. n

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-acceleratedfiler. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer n Accelerated filer ¥ Non-accelerated filer n

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b 2 of the Exchange Act).Yes n No ¥

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2006, thelast business day of the registrant’s most recently completed second fiscal quarter, was approximately $473 million(based on the closing price for the registrant’s common stock on the NASDAQ Global Market of $22.11 per share).

At March 1, 2007, 39,569,595 million shares of the registrant’s common stock were outstanding.

(This page intentionally left blank)

EXPLANATORY NOTE

This Amendment No. 1 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31,2006 is filed solely to include the information required by Part III of Form 10-K that previously was to be incorporatedby reference to the registrant’s definitive proxy statement for the 2007 Annual Meeting of Stockholders. Except asdescribed above, no other amendments are being made to the Annual Report on Form 10-K. This Amendment No. 1does not reflect events occurring after the filing of the Form 10-K or modify or update the disclosure contained thereinin any way other than as required to reflect the amendments discussed above.

PART III

Item 10. Directors and Executive Officers of the Registrant.

Information About Our Board of Directors

Each of our directors is elected for a three-year staggered term. The eight members of our board of directors aredivided into three classes: Class I, Class II and Class III. One class of directors is elected at each Annual Meeting. Thefollowing table shows our current directors, when each class of directors is elected and how each director is classified:

Class Directors

Class I: Term expires 2009 and every three yearsthereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Messrs. Power and Tischler

Class II: Term expires 2007 and every three yearsthereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Messrs. Dietz, Gilman and McDonnell

Class III: Term expires 2008 and every three yearsthereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ms. Cirillo-Goldberg and Messrs. Gibson and

O’Neil

Mary Cirillo-Goldberg, 59, has served on our board of directors since December 2002 and as lead director fromMay 2005 to April 2006. Since September 2003, Ms. Cirillo-Goldberg has served as an advisor to Hudson Ventures, aventure capital fund. Ms. Cirillo-Goldberg served as the Chairman and Chief Executive Officer of OPCENTER, LLC,a privately held company that provides help desk, e-commerce and network operations services, from March 2000 toSeptember 2003. From June 1997 to March 2000, she served as Executive Vice President and Managing Director ofBankers Trust Corporation. Ms. Cirillo-Goldberg currently serves as a director of three publicly-held companies: ACELimited, Health Care Property Investors, Inc. and The Thomson Corporation.

Steven J. Dietz, 43, has served as on our board of directors since April 2002. Mr. Dietz is employed by GRPManagement Services, Inc., a private equity firm and affiliate of GRP II, L.P., GRP II Partners, L.P. and GRP IIInvestors, L.P., where he has been a Partner since 1996 when the firm was created. Prior to 1996, Mr. Dietz served as aSenior Vice President in the investment banking division of the Donaldson, Lufkin & Jenrette Securities Company.Mr. Dietz also serves as a director of several privately held companies, including UGO Networks, Inc., an Internetadvertising business, EMN8, Inc., a provider of automated self-service technologies, OnTech, Inc., a provider of self-heating solutions to the consumer packaged goods industry, Teleflip, Inc., a SMS message service provider, and Zag,Inc., a company whose technology and services solution is available on a private label basis to affinity and membershiporganizations as a way of improving the consumers’ car buying experience. Mr. Dietz served as a director and memberof the audit committee of Garden.com from 1998 until January 2001, when the company’s securities were no longerregistered pursuant to Section 12 of the Exchange Act. Mr. Dietz holds a BS in Finance from the University ofColorado.

Thomas R. Gibson, 64, has served on our board of directors since June 2005. Since 2004, Mr. Gibson has served asChairman Emeritus of Asbury Automotive Group, one of the nation’s largest automotive retailers. Mr. Gibson servedas Asbury’s Chairman from 1994 to 2003, Chief Executive Officer from 1994 to 1999 and interim Chief ExecutiveOfficer for a portion of 2001. Mr. Gibson also serves as a senior advisor to Cerberus Capital Management LP. Prior tojoining Asbury, he served as President and Chief Operating Officer of Subaru of America, Inc. and as Director ofMarketing Operations and General Manager of Import Operations for Chrysler. Mr. Gibson began his career in 1967with Ford Motor Company and held key marketing and field management positions in both the Lincoln-Mercury andFord divisions. Mr. Gibson also serves on the board of directors of IKON Office Solutions, which is publicly-held,DealerTire LLC, a privately held company, and Alliance Inspection Management (A.I.M.) a privately held motorvehicle inspection company. Mr. Gibson is a graduate of DePauw University and holds an MBA from Harvard BusinessSchool.

Thomas F. Gilman, 56, has served on our board of directors since February 2007. Mr. Gilman founded CEOSolutions LLC, a strategic and financial consulting firm providing advisory services on corporate strategy, acquisitionsand valuation to corporations and senior executives in automotive and other industries. He currently serves as a senior

1

advisor to Cerberus Capital Management LP. Mr. Gilman spent 27 years at Chrysler Corporation and its successor,DaimlerChrysler AG, and held financial positions in several of its domestic and international business units.Mr. Gilman’s executive roles included managing global dealer credit operations for Chrysler Corporation, servingas chief financial officer of Chrysler Financial Corporation, and leading strategy development and consolidation effortsas a member of the Chrysler Corporation/Daimler-Benz merger integration team. In 2001, Mr. Gilman joined AsburyAutomotive Group as senior vice president and chief financial officer, and led its initial public offering in 2002.Mr. Gilman is a member of the board of directors of Vesco Oil, a privately held oil distribution company. Mr. Gilmanholds a B.S. degree in Finance from Villanova University.

John J. McDonnell, Jr., 69, has served on our board of directors since July 2005. Mr. McDonnell is the founder ofTNS, Inc., a publicly-held leading provider of data communications services to processors of credit card, debit card andATM transactions worldwide. Mr. McDonnell served as Chairman and Chief Executive Officer of TNS, Inc. from April2001 to September 2006. Previously, he served as Chairman and Chief Executive Officer of PaylinX Corp., a softwareprovider for transaction processing from November 1999 until it was sold to CyberSource Corp. in September 2000.He remains a director of CyberSource, a publicly-held company. Prior to that, Mr. McDonnell was President, ChiefExecutive Officer and a director of Transaction Network Services, Inc. from the time he founded the company in 1990.Mr. McDonnell is also a founder of the Electronic Funds Transfer Association. Mr. McDonnell holds a BS in ElectricalEngineering from Manhattan College, an MSEE from Rensselaer Polytechnic Institute and an Honorary Doctorate ofHumane Letters from Marymount University.

Mark F. O’Neil, 48, has served as our Chairman of the Board, President and Chief Executive Officer since May2005 and has served on our board of directors since August 2001. From August 2001 to May 2005, Mr. O’Neil servedas our Chief Executive Officer and President. From February 2001 to May 2005 and since August 2006, Mr. O’Neil hasserved as President, and he continues to serve as Chairman of the Board, Chief Executive Officer and a director ofDealerTrack, Inc. Mr. O’Neil began his career at Intel Corporation, where he first developed knowledge of thetechnology industry. He subsequently worked for McKinsey & Co. before moving to the automotive industry in the late1980’s. Mr. O’Neil’s experience in the automotive industry includes serving as President of Ertley MotorWorld, adealer group based in Pennsylvania. From this traditional retail dealer group, Mr. O’Neil went on to co-found and leadthe development and rollout of CarMax, Inc., a publicly-held used automobile retailer. From June 2000 to January2001, Mr. O’Neil was President and Chief Operating Officer of Greenlight.com, an online automotive sales website.Mr. O’Neil also serves as a director of DealerTire LLC. Mr. O’Neil holds a BS in Industrial Engineering fromWorcester Polytechnic Institute and an MBA from Harvard Business School.

James David Power III, 75, has served on our board of directors since June 2002. Mr. Power has spent more than35 years at, is a founder of, and from 1996 until April 2005 served as the Chairman of the Board of J.D. Power andAssociates, a marketing information firm. Mr. Power also serves as a director of IMPCO Technologies, Inc., a publiccompany, which supplies alternative fuel products to the transportation, industrial and power generation industries. In1992, Mr. Power was a recipient of the Automotive Hall of Fame’s Distinguished Service Citation, awarded each yearto seven of the industry’s most accomplished leaders. Mr. Power holds honorary doctorate degrees from College of theHoly Cross, California Lutheran University, California State University, Northridge and College Misericordia. He alsoserves as an adjunct professor of marketing at California State University, Northridge. Mr. Power holds a BA from theCollege of the Holy Cross and an MBA from The Wharton School of Finance at the University of Pennsylvania.

Howard L. Tischler, 53, has served as lead director since April 2006 and on our board of directors since March2003. Since September 2005, Mr. Tischler has been employed by First Advantage Corporation, where he serves asGroup President of First Advantage Dealer Services. From 2001 until September 2005, Mr. Tischler was President andChief Executive Officer of First American Credit Management Solutions, Inc., or CMSI, which was a subsidiary ofThe First American Corporation, as well as Teletrack, Inc. From 1999 until our acquisition of Credit Online, Inc. fromCMSI in 2003, Mr. Tischler was President and Chief Executive Officer of Credit Online. Mr. Tischler currently serveson the Engineering Advisory Board at George Washington University. He holds a BS degree in Mathematics from theUniversity of Maryland and an MS degree in Engineering and Operations Research from The George WashingtonUniversity.

2

Information About Our Executive Officers

The following individuals were serving as our executive officers as of April 30, 2007:Name Age Title

Mark F. O’Neil . . . . . . . . . . . . . . . . . . . 48 Chairman of the Board, President and Chief ExecutiveOfficer

Robert J. Cox III . . . . . . . . . . . . . . . . . . 41 Senior Vice President, Chief Financial Officer andTreasurer

John A. Blair . . . . . . . . . . . . . . . . . . . . . 46 Chief Executive Officer — Automotive Lease Guide(alg), Inc.

Charles J. Giglia . . . . . . . . . . . . . . . . . . 55 Senior Vice President, and Chief InformationOfficer — DealerTrack, Inc.

Ana M. Herrera . . . . . . . . . . . . . . . . . . . 50 Senior Vice President, Human Resources —DealerTrack, Inc.

Eric D. Jacobs . . . . . . . . . . . . . . . . . . . . 40 Senior Vice President, General Counsel and Secretary

Richard McLeer . . . . . . . . . . . . . . . . . . 42 Senior Vice President, Strategy and Development —DealerTrack, Inc.

Raj Sundaram . . . . . . . . . . . . . . . . . . . . 40 Senior Vice President, Dealer Solutions —DealerTrack, Inc.

David P. Trinder . . . . . . . . . . . . . . . . . . 48 Senior Vice President, Network Solutions —DealerTrack, Inc.

Rick G. Von Pusch . . . . . . . . . . . . . . . . 45 Senior Vice President, Customer Development —DealerTrack, Inc.

Mark F. O’Neil has served as our Chairman of the Board, President and Chief Executive Officer since May 2005and has served as a member of the board of directors since August 2001. From August 2001 to May 2005, Mr. O’Neilserved as our Chief Executive Officer and President. From February 2001 to May 2005 and since August 2006,Mr. O’Neil has served as President, and he continues to serve as Chairman of the Board, Chief Executive Officer and adirector of DealerTrack, Inc. Mr. O’Neil began his career at Intel Corporation, where he first developed knowledge ofthe technology industry. He subsequently worked for McKinsey & Co. before moving to the automotive industry in thelate 1980’s. His experience in the automotive industry includes serving as President of Ertley MotorWorld, a dealergroup based in Pennsylvania. From this traditional retail dealer group, Mr. O’Neil went on to co-found and lead thedevelopment and rollout of CarMax, Inc., a publicly-held used automobile retailer. From June 2000 through January2001, Mr. O’Neil was President and Chief Operating Officer of Greenlight.com, an online automotive sales website.He also serves as a director of DealerTire LLC, a privately held company. Mr. O’Neil holds a BS in IndustrialEngineering from Worcester Polytechnic Institute and an MBA from Harvard Business School.

Robert J. Cox III has served as our Senior Vice President, Chief Financial Officer and Treasurer since November2004. From May 2002 to October 2004, Mr. Cox was our Vice President of Finance and Treasurer, from January 2002to April 2002, Mr. Cox served as our Vice President of Finance, Treasurer and Secretary, from August 2001 toDecember 2001, Mr. Cox served as our Director of Finance, Treasurer and Secretary, and from June 2001 to July 2001,Mr. Cox served as Director of Finance, Treasurer and Secretary for DealerTrack, Inc. In 1998, Mr. Cox joined TritonInternational, Inc., a facilities-based provider of wireless and wire-line telecommunications products, as its ExecutiveVice President and Chief Financial Officer and left in January 2001. In 1991, he joined Green Stamp America, Inc., areal estate investment company, as their Controller and was elevated to the position of Chief Financial Officer in 1996.Mr. Cox began his career at KPMG LLP in the audit practice. Mr. Cox holds a BS in Accounting from St. BonaventureUniversity and an MBA from the Columbia University Graduate School of Business and is a CPA.

John A. Blair has served as Chief Executive Officer of our Automotive Lease Guide (alg), Inc. subsidiary sinceMay 2005. Mr. Blair served as Chief Executive Officer of Automotive Lease Guide (alg), LLC, from 1996 until itsacquisition by us in May 2005 and President of our subsidiary, DealerTrack Data Services, Inc., from May 2005 toAugust 2006. Mr. Blair also served as Chief Executive Officer of webalg, Inc., the developer of PaymentTrack, fromMarch 2000 to March 2002, which was acquired by us in August 2001. Prior to joining ALG, Mr. Blair held marketingand management positions with Xerox Corporation and IBM Corporation. Mr. Blair holds a BA in Economics from theUniversity of California, Santa Barbara.

Charles J. Giglia has served as Senior Vice President and Chief Information Officer of DealerTrack, Inc. sinceJanuary 2003. From February 2001 until January 2003, Mr. Giglia served as Vice President and Chief InformationOfficer of DealerTrack, Inc. Previously, he served as a Vice President of the Chase Manhattan Bank, responsible forInternet development in its Diversified Consumer Services business. Prior to that, from 1980 to 1995, he served asonline delivery group project manager with responsibility for managing multiple service delivery applications.

3

Mr. Giglia holds a BS in Computer Science with a minor in Business and an MBA in Management InformationSystems, both from the New York Institute of Technology.

Ana M. Herrera has served as Senior Vice President, Human Resources, of DealerTrack, Inc. since May 2005.From September 2002 to May 2005, Ms. Herrera was Vice President of Human Resources at MeadWestvacoCorporation, where she led the global human resources function for the company’s Consumer Packaging Group. Priorto this, Ms. Herrera spent two years as a consultant, working on a wide range of human resources assignments for adiverse group of clients. Other previous experience includes having served as Vice President of Human Resources forRevlon Consumer Products Corporation’s International Division, and as, first, Director and later Vice President ofHuman Resources for Duracell Corporation. Ms. Herrera holds a BS in Business Administration from California StatePolytechnic University.

Eric D. Jacobs has served as our Senior Vice President, General Counsel and Secretary since January 2004 andPresident of dealerAccess Canada, Inc., our Canadian subsidiary, since August 2006. From April 2002 to December2003, Mr. Jacobs served as our Vice President, General Counsel and Secretary. Mr. Jacobs was an associate at theinternational law firm of O’Melveny & Myers LLP where he specialized in general corporate and securities law fromAugust 1998 to April 2002. Prior to becoming an attorney, Mr. Jacobs was an audit manager at KPMG LLP. Mr. Jacobsholds a BS in Business Administration with a major in Accounting, magna cum laude, from Rider University and a JD,with honors, from the Rutgers School of Law-Newark, and is a CPA.

Richard McLeer has served as Senior Vice President, Strategy & Development, of DealerTrack, Inc. since August2006. From April 2005 to August 2006, Mr. McLeer served as Vice President, Credit and Contract Solutions forDealerTrack, Inc., and served as our National Lender Development Manager from February 2001 to April 2005. From1996 to 2001, Mr. McLeer was Senior Vice President and National Product Director for the Bank of America AutoGroup, and previously held a variety of marketing, sales and business development positions at Bank of America. Priorto that, Mr. McLeer worked at Trans Union Corporation from 1993 to 1996. Other previous experience includes twoyears serving as controller of Ellesse, U.S.A., a division of Reebok, and four years in public accounting. Mr. McLeerholds a BS in Accounting from Hofstra University and is a CPA.

Rajesh (Raj) Sundaram has served as Senior Vice President, Dealer Solutions, of DealerTrack, Inc. since August2006. Mr. Sundaram served as President of Automotive Lease Guide (alg), Inc. and President of Automotive LeaseGuide (alg), LLC, from 2002 to until its acquisition by us in May 2005, and continued to hold those positions from May2005 to August 2006. Prior to joining ALG as Vice President and General Manager in 1999, Mr. Sundaram served asSenior Manager, Strategic Planning and Pricing at Nissan North America, Inc. from 1997 to 1999, and held variouspositions in financial planning including Finance Manager, Infiniti division at Nissan North America, Inc. from 1994 to1997. Mr. Sundaram previously held roles in the controller’s office of the Ford division of Ford Motor Company from1991 to 1994. Mr. Sundaram holds BS and MS degrees in Accounting from the University of Mumbai in India and anMBA in Finance from Lehigh University.

David P. Trinder has served as Senior Vice President, Network Solutions, of DealerTrack, Inc. and ChiefExecutive Officer of dealerAccess Canada, Inc., our Canadian subsidiary, since August 2006. Mr. Trinder served asPresident of DealerTrack Aftermarket Services, Inc. from June 2005 to August 2006 and Chief Executive Officer andPresident of dealerAccess Canada, Inc. from January 2004 to August 2006. Mr. Trinder served as President and ChiefExecutive Officer of dealerAccess Canada, Inc. from April 2002 until its acquisition by us in January of 2004. In theyears before joining dealerAccess Canada, Inc., Mr. Trinder built and operated two businesses in South Africa, andfollowed this as director of a venture capital fund that focused on IT investments. Mr. Trinder holds a Bachelor ofCommerce and an MBA from the University of Cape Town, South Africa, and is a South African CharteredAccountant.

Rick G. Von Pusch has served as Senior Vice President, Customer Development, of DealerTrack, Inc. sinceAugust 2006. From April 2006 to August 2006, Mr. Von Pusch served as President of Sales and Marketing at 5SquareSystems, a provider of CRM, desking and menu products. Mr. Von Pusch served as Vice President of U.S. Retail Salesat Reynolds and Reynolds Corporation from April 2005 to October 2005, Area Vice President from October 2001 toApril 2005 and held various positions in sales and sales management at Reynolds and Reynolds from 1988 to 2001.Mr. Von Pusch also was a sales representative for NCR Corporation from 1985-1987. Mr. Von Pusch holds a BA degreein Management Information Systems from the University of South Florida.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, directors and persons whobeneficially own more than 10% of either class of our common stock to file reports of ownership and changes ofownership with the SEC and to furnish us with copies of the reports they file. Based solely on our review of the reportsreceived by us, or written representations from certain reporting persons, we believe that during the period from

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January 1, 2006 through December 31, 2006 all reports were timely filed, except for (a) a Form 4 filing, which wassubsequently amended, to report a grant of options and restricted common stock that was received on January 3, 2006for each of Messrs. Blair, Cox, Giglia, Jacobs, O’Neil, Passione and Trinder, and Ms. Herrera; and (b) a Form 4 filingfor Messrs. Sundaram and Von Pusch to report a grant of options and restricted common stock that was received onNovember 2, 2006.

Code of Business Conduct and Ethics

We have adopted a “code of ethics,” as defined by regulations promulgated under the Securities Act of 1933, asamended, and the Securities Exchange Act of 1934, as amended, that applies to all of our directors and employees,including our principal executive officer, principal financial officer, principal accounting officer or controller, orpersons performing similar functions. A current copy of our Code of Business Conduct and Ethics is available on ourwebsite at www.dealertrack.com. A copy of our Code of Business Conduct and Ethics may also be obtained, free ofcharge, from us upon request directed to: DealerTrack Holdings, Inc., 1111 Marcus Avenue, Suite M04, Lake Success,NY 11042, Attention: Investor Relations. We intend to disclose any amendment to or waiver of a provision of the Codeof Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principalaccounting officer or controller, or persons performing similar functions, by posting such information on our website atwww.dealertrack.com and/or in our public filings with the Securities and Exchange Commission, or SEC.

Procedures for Security Holder Recommendations for Director Nominees

Candidates may come to the attention of the Nominating and Corporate Governance Committee through currentmembers of the board of directors, stockholders or other persons. These candidates are evaluated at regular or specialmeetings of the Nominating and Corporate Governance Committee. Stockholders wishing to recommend directorcandidates for consideration by the committee may do so by writing to the Secretary at 1111 Marcus Avenue,Suite M04, Lake Success, NY 11042 who will forward all recommendations to the committee. Stockholders mustsubmit the following information:

• the name, address and telephone number of the recommending stockholder;

• a representation that the stockholder is a record holder of our securities, or evidence of ownership;

• The number of shares owned by the recommending stockholder and the time period for which such shares havebeen held;

• a statement from the recommending stockholder as to whether the stockholder has a good faith intention tocontinue to hold the reported shares through the date of our next Annual Meeting;

• the name, age, business and residential address, educational background, current principal occupation oremployment, and principal occupation or employment for the preceding five full fiscal years of the proposeddirector candidate;

• a description of the qualifications and background of the proposed director candidate;

• a description of all arrangements or understandings between the recommending stockholder and the proposeddirector candidate;

• the consent of the proposed director candidate (i) to be named in the proxy statement and (ii) to serve as adirector if elected; and

• any other information regarding the proposed director candidate that is required to be included in a proxystatement filed pursuant to SEC rules.

The Nominating and Corporate Governance Committee may consider the following criteria in recommendingcandidates for election to the board of directors:

• personal and professional integrity, ethics and values;

• experience in corporate management, such as serving as an officer or former officer of a publicly-heldcompany;

• experience in the company’s industry and with relevant social policy concerns;

• experience as a board member of another publicly-held company;

• academic expertise in an area of the company’s operations; and

• practical and mature business judgment.

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Our Audit Committee

Our Audit Committee currently consists of Messrs. Dietz, Gibson, Gilman and McDonnell. Mr. Dietz currentlyserves as chairperson of the Audit Committee. Our board of directors has determined that each member of the AuditCommittee is independent and that Messrs. Gilman and Dietz are each audit committee financial experts, as defined bySEC rules, and have financial sophistication, in accordance with the applicable NASDAQ listing standards.

Item 11. Executive Compensation.

Non-Management Directors’ Compensation For Fiscal Year 2006

Directors who are also employees receive no fees for their services as directors. During 2006, all other directorsreceived the following compensation for their services:

Annual Fee: $25,000 per director.

Annual Committee Chair Retainer: $5,000 for the chair of each of our Compensation and Nominating andCorporate Governance Committees. $10,000 for the chair of our AuditCommittee.

Attendance Fee for Board Meetings: $2,000 for each board of directors meeting attended in person, $1,000 fortelephonic attendance. We also reimburse directors for their expenses toattend meetings.

Committee Member Retainer: $2,000 for each committee meeting attended, with the Audit and Com-pensation Committee chairs receiving $2,500 for each committee meet-ing attended.

Initial Equity Grant: Options to purchase 30,000 shares of our common stock upon becoming adirector. The grant vests in three equal annual installments commencingon the first anniversary of the grant date, subject to the director’s con-tinued service as a director.

Annual Equity Grant: 3,500 shares of restricted common stock each year on the date of ourAnnual Meeting. This grant vests in three equal annual installmentscommencing on the first anniversary of the grant date, subject to thedirector’s continued service as a director.

Effective January 1, 2007, we eliminated our board meeting attendance fees and committee chair and memberretainers, and increased our annual retainer for directors to $50,000.

Directors are eligible to participate in the Directors’ Deferred Compensation Plan, a non-qualified retirementplan. The Directors’ Deferred Compensation Plan allows our non-employee directors to elect to defer between zeroand 100% of the fees they would otherwise be entitled to receive in cash for services rendered as directors. Amountsdeferred under the Directors’ Deferred Compensation Plan are general liabilities of ours and are represented bybookkeeping accounts maintained on behalf of the participants. Such accounts are deemed to be invested in share unitsthat track the value of our common stock. Distributions will generally be made to a participant either following the endof the participant’s service on our board of directors, following a change of control if so elected, or at a specified timeelected by the participant prior to the deferral. Distributions will generally be made in the form of shares of ourcommon stock. Our Directors’ Deferred Compensation Plan is intended to comply with Section 409A of the InternalRevenue Code.

The following tables sets forth our non-management directors’ compensation for 2006. Mr. Gilman is notincluded in the table as he was not a director during 2006.

Name

Fees Earnedor Paid in

Cash(1)Stock

Awards(2)Option

Awards(3) Total

Mary Cirillo-Goldberg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $51,000 $34,023 $59,217 $144,240

Steven Dietz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,000 34,023 59,217 152,240

Thomas R. Gibson. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 34,023 41,800 135,823

John J. McDonnell, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 35,073 9,200 104,273

James David Powers III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 34,023 59,217 128,240

Howard L. Tischler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,000 34,023 59,217 130,240

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(1) The following directors deferred all or a portion of their 2006 cash compensation pursuant to our Directors’Deferred Compensation Plan and received deferred stock units. Each deferred stock unit converts into one share ofcommon stock upon the payment commencement date selected by the director.

NameCompensation

DeferredNumber of Deferred

Stock Units

Mary Cirillo-Goldberg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $51,000 2,177

Steven Dietz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,000 2,495

Thomas R. Gibson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 1,489

James David Power III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 1,796

Howard L. Tischler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,000 1,586

(2) This column represents the dollar amount recognized for financial statement reporting purposes with respect to the2006 fiscal year for the fair value of restricted common stock granted in 2006 as well as prior fiscal years inaccordance with FAS 123(R). For restricted common stock, fair value is calculated using the closing price of ourstock on the date of grant. For additional information, refer to note 2 of our financial statements in our AnnualReport on Form 10-K for the year ended December 31, 2006. These amounts reflect our accounting expense forthese awards, and do not correspond to the actual value that will be recognized by each director. Each director,except Mr. McDonnell, received a grant of 3,500 shares of restricted common stock on each of May 26, 2005 andJune 14, 2006 with a grant date fair value per share of $17.10 and $22.27, respectively. Mr. McDonnell’s received agrant of 3,500 shares of restricted common stock on each of July 28, 2005 and June 14, 2006 with a grant date fairvalue per share of $18.00 and $22.27, respectively. Each director had 5,834 shares of restricted common stockoutstanding as of December 31, 2006.

(3) This column represents the dollar amount recognized for financial statement reporting purposes with respect to the2006 fiscal year for the fair value of stock options granted in 2006 as well as prior fiscal years in accordance withFAS 123(R). Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related toservice-based vesting conditions. For additional information, refer to note 2 of our financial statements in ourAnnual Report on Form 10-K for the year ended December 31, 2006. These amounts reflect our accountingexpense for these awards, and do not correspond to the actual value that will be recognized by each director. Thefollowing chart shows the details for each director’s outstanding options as of December 31, 2006, including thegrant date fair value of each option computed in accordance with FAS 123(R). For awards granted prior toJanuary 1, 2006, the grant date fair value column represents the intrinsic value recorded under APB 25.

NameOption

Grant DateNumberGranted Exercise Price

Grant DateFair Value

OutstandingStock Options(Exercisable)

Mary Cirillo-Goldberg . . . . . . . . . . . . . . . 1/30/2003 6,250 $ 2.80 $ — 6,250

5/26/2005 50,000 12.92 4.18 30,000

Steven Dietz . . . . . . . . . . . . . . . . . . . . . . 5/26/2005 40,000 12.92 4.18 20,000

Thomas R. Gibson . . . . . . . . . . . . . . . . . . 6/29/2005 30,000 12.92 4.18 10,000

John J. McDonnell, Jr. . . . . . . . . . . . . . . 7/28/2005 30,000 17.08 0.92 10,000

James David Powers III . . . . . . . . . . . . . . 1/30/2003 6,250 2.80 — 6,2505/26/2005 50,000 12.92 4.18 30,000

Howard L. Tischler . . . . . . . . . . . . . . . . . 5/26/2005 40,000 12.92 4.18 20,000

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COMPENSATION DISCUSSION AND ANALYSIS

Overview

Our compensation philosophy is designed to support our key objective of creating value for our stockholders bygrowing our revenue and earnings before interest, taxes, depreciation and amortization, or EBITDA, increasing ourtotal market capitalization and growing our share price. Our Compensation Committee is responsible for establishingand approving our executive officers’ compensation.

Our Compensation Committee has established the following principles in determining the compensation of ourexecutive officers:

• to attract and retain high-performing executive talent by paying competitive compensation;

• to provide rewards consistent with performance by tying both our annual cash incentive program and our long-term equity incentive program to corporate performance; and

• to provide equity-based long term incentives which align management and stockholder interests.

We experienced a successful first year as a public company growing our revenue 44% year over year byconnecting 104 new lenders, growing our subscription business by 65% and launching several new products. For 2006,75% of our growth was considered organic and the other 25% came from acquisitions. Our market capitalizationincreased by $416 million from January 1, 2006 through December 31, 2006.

We believe that our compensation philosophy and strategy serve to align our team members and focus theexecutive team and the whole company on our vision and the achievement of our stated strategic objectives and goals.

Compensation Processes and Criteria

The Compensation Committee has established a number of processes, some of which are described below, toensure that our executive compensation achieves these objectives.

Peer Group Information and Benchmarking

In connection with compensation decisions, our Compensation Committee reviewed market compensation dataof our peer group provided by Ernst & Young, an independent compensation consultant that is retained by and reportsto the Compensation Committee. In early 2006, the Compensation Committee selected our peer group by initiallyreviewing industry peer companies used by equity research analysts in valuing us during our initial public offeringprocess. Companies from that list with total revenues similar to ours were selected. For each of these companies,analyst reports and public filings were reviewed to identify additional companies in a related SIC code and that fellwithin a certain revenue size range. Since we have limited direct competitors that are public companies, we made aneffort to focus on companies within the software industry who develop and market a product that facilitates someaspect of financial service or customer service functions for businesses. The Compensation Committee selected thefollowing 15 companies to serve as our peer group in 2006 for purposes of benchmarking our compensation: AutobytelInc., Digital Insight Corp., Digital River, Inc., f5 Networks Inc., Motive, Inc., RMO Software, Inc., NetworkEquipment Technologies, Inc., Open Solutions Inc., Radiant Systems, Inc., Salesforce.com, Inc., Tier Technologies,Inc., Websense, Inc., Witness Systems, Inc., Micromuse, Inc. and SeeBeyond, Inc.

We changed our peer group for 2007 for the following reasons: Micromuse, Inc. and SeeBeyond, Inc. wereremoved because they had been acquired; Network Equipment Technologies, Inc. was removed because its revenuesare much lower than ours; and Blackbaud, Inc. and Talx Corporation were added because their business models aresimilar to ours and they are viewed by the investment community as our comparables. We use the peer groupcompensation data primarily to ensure that the total direct compensation for executive management is within the broadmiddle range of comparative pay of the peer group companies while providing an opportunity for annual cash bonus toattain the 75th percentile when we exceed our targeted performance levels. While peer group market data provides auseful starting point for compensation decisions, our Compensation Committee also takes into account factors such aslevel of responsibility, prior experience and individual performance in arriving at final compensation decisions.

The elements of executive compensation include base salary, annual and long term incentive plans, and annualgrants of stock options and restricted common stock. Our executive compensation has a high proportion of total directcompensation delivered through pay-for-performance incentive and long-term equity compensation, equating to morecompensation at risk.

Assessment of Company and Individual Performance

Our Compensation Committee, in collaboration with senior management, establishes on an annual basis specificrevenue and EBITDA targets that determine the size of bonus payouts under our annual incentive bonus plan.

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Individual performance directly determines total direct compensation levels for our Chief Executive Officer andother executive officers. Our Compensation Committee meets with the Chief Executive Officer at the beginning of theyear to establish our Chief Executive Officer’s performance objectives (both individual and company) for the year. Atthe end of the year, the Compensation Committee conducts a performance review of the Chief Executive Officer basedon his achievement of the pre-established objectives. The overall performance of the Chief Executive Officer and thecompany are considered by the Compensation Committee in setting the Chief Executive Officer’s compensation.

For all other executive officers, the Compensation Committee receives a performance assessment and compen-sation recommendation from the Chief Executive Officer. The performance evaluation of the executive officers isbased on achievement of pre-established objectives.

Total Compensation Review

The Compensation Committee reviews each executive’s base pay, bonus and equity incentives annually with theguidance of the Compensation Committee’s independent consultant. In addition to these compensation elements, theCompensation Committee reviews the deferred compensation program and payments that would be required undervarious severance and change-in-control scenarios.

Components of Executive Compensation for 2006

Base Salary

Base salaries are pegged at the market median and are competitive with similar positions at our peer groupcompanies. The base salaries of all executive offers are reviewed annually against market data and adjusted to reflectindividual roles and performance. Adjustments to base salary are determined based upon market trends as well asindividual performance and experience. We may also increase the base salary of an executive officer during the year ifa change in the scope of the officer’s responsibilities justifies such consideration. In 2006, we increased the basesalaries of each of our named executive officers from 2005 by approximately 3.9%.

Annual Incentive Bonus Plan

Under our annual incentive bonus plan, our cash incentives are targeted at the 50th percentile of our peer group. Ifwe exceed our targets and achieve our stretch goals, the bonus amount is then targeted at the 75th percentile of our peergroup as we wish to provide rewards consistent with performance. For 2006, we had selected the followingperformance metrics under our annual incentive bonus plan: an EBITDA target of $45.1 million, a corporate-widerevenue target of $158.6 million as well as separate revenue targets for each of our business units. As a result ofacquisitions, the Compensation Committee increased the EBITDA target to $46.3 million and the revenue target to$165.7 million. Under this plan, no annual bonuses would have been paid had we not met our adjusted EBITDAthreshold of $41.7 million. We use EBITDA as our principal metric to review and assess our operating performanceand the performance of our management team as EBITDA provides useful information with respect to the performanceof our fundamental business activities and is also frequently used by equity research analysts and others in theevaluation of the company. Our EBITDA for 2006 was reported in Item 7 of our Annual Report on Form 10-K. Forexecutive officers with company-wide responsibility, we give equal weight to corporate revenue and EBITDA targets.Currently, these executive officers include Mr. O’Neil, our Chief Executive Officer, Mr. Cox, our Chief FinancialOfficer, and Mr. Jacobs, our General Counsel. For other executive officers who are responsible for business units,depending on position, we give different weights to corporate and business unit revenues. In each case, we also giveadditional weight to individual performance and attainment of individual goals. The bonus target amounts, expressedas a percentage of base salary, are established for executive officers each year, with a target range of 40% to 75% ofbase salary for 2006 and a maximum range of 60% to 150% of base salary for 2006, depending on position. As statedabove, no bonuses are payable if we do not meet the pre-determined EBITDA threshold amount. If we exceed ourEBITDA threshold amount and the respective revenue targets, we may increase or reduce the payouts by up to 5%depending on performance relative to specific subscription and transaction revenue targets. The actual reward to eachexecutive officer is further adjusted, up or down, depending on the Compensation Committee’s assessment of theindividual performance of such officer. In making this assessment, the Compensation Committee also considers theinput of our Chief Executive Officer with respect to all executive officers. In the case of our Chief Executive Officer,the Compensation Committee considers factors such as leadership, leadership development, talent management andsuccession planning. The Compensation Committee may adjust the financial metrics in appropriate circumstances.Our revenue and EBITDA in 2006 were $173.3 million and $48.0 million, respectively, surpassing our targets by 4.6%and 3.7%, respectively. Accordingly, the actual cash incentive bonuses awarded to executive officers ranged from 60%to 134% of base salary.

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Annual Equity Grants

In order to align our executive officers’ interests with those of our stockholders, the Compensation Committeemakes annual grants of stock options and restricted common stock each year to our executive officers, with stockoptions targeted to deliver approximately 50% of the total long-term incentive value and restricted common stocktargeted to deliver approximately 50% of the total long-term incentive value. These annual grants are targeted at themedian of the market, which is consistent with our general compensation philosophy to pay total direct compensationat the median of the market except in the case of exceptional performance. We use a mix of restricted common stockand nonqualified stock options in order to reduce dilution to our stockholders, manage compensation expense andprovide upside potential. We use nonqualified stock options instead of incentive stock options in order to preserve ourcompensation tax deduction. The annual equity grants also serve as a retention device as they are earned throughservice with us over a four-year period and the options have a ten-year term. These equity grants further the long-termperspective necessary for continued success in our business. Towards this end, we have also implemented shareownership requirements for the executive team equal to multiples of their base salary, which vary from six times to onetimes base salary. Each executive officer is expected to attain share ownership level within five years. Stock options arenot included in determining compliance with the share ownership requirement. Executive officers are expected toretain 25% of the net after-tax shares acquired pursuant to the exercise of a stock option until they achieve the minimumshare ownership position. The Compensation Committee reviews each executive officer’s compliance with theminimum share ownership requirement once a year. As of the end of 2006, each executive officer has met the minimumshare ownership requirement.

We typically make our annual stock option grants at the first regularly scheduled meeting of the CompensationCommittee of the year. Option grants to new hires are generally made at the first regularly scheduled CompensationCommittee meeting that follows the date of hire. We used to price our options at the higher of the closing price of ourcommon stock on the day preceding the date of grant or the closing price of our stock on the date of grant. On August 2,2006, we amended our plan to use the closing price of our stock on the date of grant.

Long-Term Equity Incentive Program

In August 2006, we implemented a performance-based long-term equity incentive program and made significantgrants of restricted common stock to our executive officers. These grants are targeted to deliver total directcompensation at the 75th percentile of our peer group upon the achievement of exceptional performance. Thesegrants will be fully earned only if in the next three fiscal years: (i) we achieve 22.5% annual growth for our EBITDAand market capitalization metrics as set forth below; and (ii) if the executive officers remain continuously employedwith us through January 31, 2010.

Performance GoalsEBITDA Market Cap

December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $56 million $ 928 million

December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $69 million $1,136 million

December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $85 million $1,400 million

Our objective for making these restricted common stock grants is to provide significant incentives to our executiveofficers to achieve our corporate goal of doubling our size in terms of EBITDA and market capitalization by the end of2009.

Employment Agreements

We have entered into employment agreements with each of our named executive officers. These agreementsprovide for a certain level of severance, generally two times base salary, pro rata annual cash incentive and limitedaccelerated vesting of equity grants (other than performance-based restricted common stock) in the event of atermination of employment by us without cause or by a named executive officer for good reason. In return, eachexecutive covenants not to compete or solicit our employees for two years from the date of termination. Severance isstopped if the executive violates these covenants during the two-year severance period. Additionally, should a namedexecutive officer procure subsequent employment during the period during which he or she is entitled to a severancepayment, then his or her future severance payments will be reduced to the lesser of (i) 50% of the executive’s salary or(ii) 50% of the executive’s base compensation received for subsequent employment, commencing on the date theexecutive commences providing services.

The employment agreements also provide change in control benefits. In the event we were to undergo a change incontrol, our employment agreements provide for 36 months of accelerated vesting for time-based stock option andrestricted common stock grants and full vesting of such grants in the event of termination within 12 months of thechange in control. Our performance-based restricted common stock grants provide for full acceleration upon a change

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in control. We believe that it is fair to provide for accelerated vesting because equity grants provide such a highproportion of our total compensation. Very often, senior management lose their jobs in connection with a change ofcontrol. By agreeing up front to protect our executive officers from losing their equity in the event of a change incontrol, we believe we can reinforce and encourage the continued attention and dedication of our executive officers totheir assigned duties without distraction in the face of an actual or threatened change in control. This protection alsoaligns the interests of our executive officers with that of our stockholders.

Our employment agreements also provide for a tax gross-up payment to our named executive officers in the eventthey become subject to the 20% golden parachute excise tax. We have agreed to this payment because it is marketpractice and because we believe that our named executive officers should be able to receive what they have bargainedfor without being subject to this punitive tax. Please see page [ ] for more information about our named executiveofficers’ employment agreements.

Upon his promotion in 2006 to Senior Vice President, Dealer Solutions, Mr. Sundaram signed an employmentagreement with the same terms as are our agreements with other named executive officers with one exception. At thetime of our acquisition of certain assets of Automotive Lease Guide (alg), LLC, Mr. Sundaram’s previous employer, weagreed to honor an existing arrangement that he had in regards to a promissory note owed to his former employer inorder to encourage Mr. Sundaram to remain with us after the acquisition.

Additionally, Mr. Sundaram’s promotion required him to move across the country to corporate headquarters inLake Success, New York. Accordingly, we entered into a relocation agreement with Mr. Sundaram that provided,among other things, reimbursement of his moving expenses, temporary housing expenses, forfeited tuition depositsand certain expenses in connection with the purchase and sale of his primary residence, as well as a car allowance. Allof these amounts are grossed up for taxes.

Perquisites

We believe that cash and equity compensation are the two key components in attracting and retaining manage-ment talent and therefore do not generally provide any substantial perquisites other than relocation expenses.

Deferred Compensation Plan

We have a deferred compensation plan that allows our executive officers to defer bonus compensation byinvesting it in deferred stock units based on the fair market value of our common stock on the date the bonuses wouldotherwise be paid. This plan provides a tax effective means of allowing our executive officers to invest in our stock andfulfills our objective of encouraging equity ownership. The first opportunity to participate in this plan was for the 2006bonus which was paid in 2007. Accordingly, no deferrals occurred in 2006.

401(k) Plan

We maintain a 401(k) plan which covers substantially all our employees. The 401(k) plan is an essential part of theretirement package needed to attract and retain employees in our industry. The 401(k) plan permits employees tocontribute up to the lesser of 20% of plan earnings or the annual dollar limit prescribed by the tax laws. We provide amatching contribution, the amount of which is determined at our discretion. For 2006, our matching contribution is50% of each employee’s contribution up to 6% of eligible pay. Our matching contribution vests incrementally over afive-year period.

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COMPENSATION COMMITTEE REPORT

This report is submitted by the Compensation Committee of the board of directors. The Compensation Committeehas reviewed the Compensation Discussion and Analysis and discussed that Analysis with management. Based on itsreview and discussion with management, the Compensation Committee has recommended to our board of directorsthat the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K/A for filing with theSecurities and Exchange Commission.

No portion of this Compensation Committee Report shall be deemed to be incorporated by reference into anyfiling under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, through anygeneral statement incorporating by reference in its entirety the Annual Report on Form 10-K/A in which this reportappears, except to the extent that the Company specifically incorporates this report or a portion of it by reference. Inaddition, this report shall not be deemed filed under either the Securities Act or the Exchange Act.

Respectfully submitted by the Compensation Committee,

Mary Cirillo-Goldberg (chairperson)John J. McDonnell, Jr.Thomas R. Gibson

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SUMMARY COMPENSATION TABLE

Name andPrincipal Position Year Salary

StockAwards(1)

OptionAwards(2)

Non-EquityIncentive Plan

Compensation(3)All Other

Compensation(4) Total

Mark F. O’Neil . . . . . . . . . . . . .Chairman and ChiefExecutive Officer

2006 $495,040 $369,913 $ 695,967 $660,000 $ 9,799 $2,230,719

Robert J. Cox III . . . . . . . . . . . .Senior Vice President,Chief Financial Officerand Treasurer

2006 260,000 126,370 204,412 198,000 6,500 795,282

John A. Blair . . . . . . . . . . . . . . .Chief Executive Officer— Automotive Lease

Guide (alg), Inc.

2006 260,000 51,569 86,098 215,000 84,997 697,664

Eric D. Jacobs . . . . . . . . . . . . . .Senior Vice President,General Counsel andSecretary

2006 260,000 112,433 150,595 208,000 6,600 737,628

Raj Sundaram . . . . . . . . . . . . . .Senior Vice President,Dealer Solutions —DealerTrack, Inc.

2006 235,527 49,879 61,780 169,000 199,659 715,845

Vincent Passione(5) . . . . . . . . . . .President — DealerTrack, Inc.

2006 255,333 310,070 4,892,344 — 993,789 6,451,536

(1) This column represents the dollar amount recognized for financial statement reporting purposes with respect to the2006 fiscal year for the fair value of restricted common stock granted in 2006 as well as prior fiscal years inaccordance with FAS 123(R). Pursuant to SEC rules, the amounts shown exclude the impact of estimatedforfeitures related to service-based vesting conditions. For restricted common stock, fair value is calculated usingthe closing price of our stock on the date of grant. For additional information, refer to notes 2 and 12 of ourconsolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2006. Seethe Grants of Plan-Based Awards Table for information on awards made during 2006. These amounts reflect thecompany’s accounting expense for these awards, and do not correspond to the actual value that will be recognizedby the named executives.

(2) This column represents the dollar amount recognized for financial statement reporting purposes with respect to the2006 fiscal year for the fair value of stock options granted in 2006 as well as prior fiscal years in accordance withFAS 123(R). Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related toservice-based vesting conditions. For additional information, refer to note 2 of our consolidated financialstatements in our Annual Report on Form 10-K for the year ended December 31, 2006. See the Grants ofPlan-Based Awards Table for information on options granted in 2006. These amounts reflect our accountingexpense for these awards, and do not correspond to the actual value that will be recognized by the namedexecutives.

(3) The amounts shown include awards earned under our incentive bonus plan in the year noted although suchamounts are payable in the subsequent year. The amounts shown exclude awards paid in the year noted but earnedin prior years. Mr. Cox elected to defer the payment of $39,600 of his award pursuant to our deferred compensationplan. Accordingly, on March 6, 2007, Mr. Cox acquired 1,309.52 deferred stock units through this deferral. Eachdeferred stock unit is the economic equivalent of one share of common stock.

(4) See the table below for additional information on all other compensation.

(5) Mr. Passione left the company effective August 31, 2006. In accordance with contractual obligations related to histerm of employment with us, a portion of Mr. Passione’s unvested equity awards were accelerated and becamefully exercisable, resulting in an accounting charge of $222,082 for his restricted common stock awards and$4,783,079 for his stock option awards.

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ALL OTHER COMPENSATION TABLE

The following table describes each component of the All Other Compensation column in the SummaryCompensation Table.Name 401(k) Match(1) Tax Gross-Up Relocation Other Total

Mark F. O’Neil . . . . . . . . . . . . . . . . . . . . . . $6,600 — — $ 3,199(4) $ 9,799

Robert J. Cox III . . . . . . . . . . . . . . . . . . . . 6,500 — — — 6,500

John A. Blair . . . . . . . . . . . . . . . . . . . . . . . — — — 84,997(5) 84,997

Eric D. Jacobs . . . . . . . . . . . . . . . . . . . . . . 6,600 — — — 6,600

Raj Sundaram . . . . . . . . . . . . . . . . . . . . . . . 5,686 $41,715(2) $68,258(3) 84,000(5) 199,659

Vincent Passione. . . . . . . . . . . . . . . . . . . . . 6,383 — — 987,406(6) 993,789

(1) This column reports our matching contributions to the named executive’s 401(k) savings account of 3.0% of pay upto the limitations imposed under IRS Rules. These contributions vest over a five year period.

(2) This amount includes amounts reimbursed for the payment of taxes on imputed income for Mr. Sundaram’srelocation expenses.

(3) This amount includes relocation expenses paid by the company including $35,258 for reimbursement fortemporary housing, $20,000 as a temporary car allowance and $13,000 as reimbursement for tuition forfeiteddue to his relocation.

(4) This amount represents the 15% discount received on shares purchased through our employee stock purchase plan.This discount is available to all employees.

(5) This amount includes an $84,000 payment pursuant to Messrs. Blair and Sundaram’s employment agreements thatis a reimbursement for interest due on a loan from Automotive Lease Guide (alg), LLC, their prior employer andthe company from which we purchased substantially all of the assets of ALG.

(6) This amount consists of severance paid in accordance with contractual obligations related to Mr. Passione’s term ofemployment with the company consisting of (a) $766,000 representing two years of severance; (b) $206,667representing the payment of his pro-rata 2006 bonus; and (c) $14,739 for the reimbursement of health insurancepremiums payable under COBRA.

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GRANTS OF PLAN-BASED AWARDS IN 2006

The following table provides information about equity and non-equity awards granted to the named executives in2006:

NameGrantDate Threshold Target Maximum Target

All OtherStock

Awards;Numberof Sharesof Stock

orUnits(3)

All OtherOption

Awards;Number ofSecurities

UnderlyingOptions(4)

Exerciseor BasePrice ofOption

Awards(5)

GrantDate FairValue of

Stock andOption

Awards(6)

Estimated Future Payouts UnderNon-Equity Incentive Plan Awards(1)

EstimatedFuturePayoutsUnderEquity

IncentivePlan

Awards(2)

Mark F. O’Neil . . . . . . 1/27/2006 $297,024 $371,280 $742,560 90,000 $20.68 $ 966,5011/27/2006 35,000 723,800

8/2/2006 170,000 2,247,400Robert J. Cox III . . . . . 1/27/2006 104,000 130,000 227,500 25,000 20.68 268,743

1/27/2006 12,000 248,1608/2/2006 60,000 793,200

John A. Blair . . . . . . . . 1/27/2006 104,395 130,494 260,987 18,000 20.68 193,3001/27/2006 9,000 186,120

8/2/2006 20,000 264,400Eric D. Jacobs . . . . . . . 1/27/2006 104,000 130,000 227,500 20,000 20.68 214,778

1/27/2006 10,000 206,8008/2/2006 50,000 661,000

Raj Sundaram . . . . . . . 1/27/2006 93,600 117,000 204,750 10,000 20.68 107,3891/27/2006 5,000 103,400

8/2/2006 35,000 462,70011/2/2006 10,000 253,90011/2/2006 20,000 25.39 265,092

Vincent Passione . . . . . 1/27/2006 168,520 220,000 347,573 33,300 20.68 357,6051/27/2006 15,000 310,200

(1) These columns show the potential value of the payout of the annual cash incentive bonuses for 2006 performancefor each named executive officer if the minimum, target and maximum performance levels are achieved. Thepotential payout is performance based and driven by company and individual performance. The actual amount ofthe annual cash incentive bonuses paid for 2006 performance is shown in the Summary Compensation Table underthe “Non-Equity Incentive Plan Compensation” column.

(2) This column shows the number of performance based restricted common stock awards granted in 2006 to each ofour named executive officers. These awards vest in full on January 31, 2010, provided that the executive officerremains employed on such date. The amount that will vest at such time is subject to the achievement of certain pre-established performance goals for fiscal years 2007, 2008 and 2009. These performance goals are equally based onboth our earnings before interest, taxes, depreciation and amortization, as adjusted, or EBITDA, and the marketvalue of our common stock, in each case as measured on the last day of the fiscal year.

(3) This column shows the number of shares of restricted common stock granted in 2006 to our named executiveofficers. These awards vest in four equal annual installments from date of grant.

(4) This column shows the number of stock options granted in 2006 to the named executive officers. These optionsvest as follows: 25% of the shares subject to the option vest on the one year anniversary of the date of grant, and 1/36th of the remaining shares subject to the option vest each month thereafter, such that 100% of the shares subjectto the option will be fully vested four years after the date of grant.

(5) This column shows the exercise price for the stock options granted during 2006.

(6) This column shows the grant date fair value of restricted common stock computed in accordance with FAS 123(R)and the grant date fair value of stock options computed in accordance with FAS 123(R) granted to the namedexecutive officers during 2006.

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OUTSTANDING EQUITY AWARDS AT 2006 FISCAL YEAR END

The following table provides information on the current holdings of stock option and stock awards by the namedexecutives. This table includes unexercised and unvested option awards; unvested restricted common stock; andrestricted common stock with performance conditions that have not yet been satisfied. Each equity grant is shownseparately for each named executive. The vesting schedule for each grant is shown following this table, based on theoption or stock award grant date.

NameOption

Grant Date

Number ofSecurities

UnderlyingUnexercised

OptionsExercisable

Number ofSecurities

UnderlyingUnexercised

OptionsUnexercisable

OptionExercise

Price

OptionExpiration

Date

StockAward

Grant Date

Numberof Shares

or Units ofStock ThatHave NotVested(1)

MarketValue

of Sharesor Units ofStock ThatHave NotVested(2)

EquityIncentive

Plan Awards:Number ofUnearned

Shares,Units or

Other RightsThat Have

Not Vested(3)

EquityIncentive

Plan Awards:Market or

PayoutValue of

UnearnedShares,Units or

Other RightsThat Have

Not Vested(4)

Option Awards Stock Awards

Mark F. O’Neil . . . . 1/16/2002 224,941 — $ 3.12 1/15/2012 5/26/2005 22,500 $ 661,950

1/30/2003 192,240 5,212 2.80 1/29/2003 1/27/2006 35,000 1,029,700

5/3/2004 7,501 — 2.80 2/13/2011 8/2/2006 170,000 $5,001,400

5/3/2004 204,442 30,558 2.80 5/2/2014

8/18/2004 97,415 69,585 2.80 8/17/2014

5/26/2005 49,478 75,522 12.92 5/25/2015

1/27/2006 — 90,000 20.68 1/26/2016

Robert J. Cox III . . . 1/16/2002 25,781 — 3.12 1/15/2012 5/26/2005 7,500 220,650

1/30/2003 18,231 389 2.80 1/29/2013 1/27/2006 12,000 353,040

5/3/2004 11,697 0 2.80 6/26/2011 8/2/2006 60,000 1,765,200

5/3/2004 25,520 9,480 2.80 5/2/2014

8/18/2004 37,916 27,084 2.80 8/17/2014

5/26/2005 19,791 30,209 12.92 5/25/2015

1/27/2006 — 25,000 20.68 1/26/2016

John A. Blair . . . . . 5/26/2005 15,833 24,167 12.92 5/25/2015 1/27/2006 9,000 264,780

1/27/2006 — 18,000 20.68 1/26/2016 8/2/2006 20,000 588,400

Eric D. Jacobs . . . . 5/15/2002 26,250 — 2.80 5/14/2012 5/26/2005 7,500 220,650

1/30/2003 9,549 204 2.80 1/29/2013 1/27/2006 10,000 294,200

1/30/2004 28,749 16,251 2.80 1/29/2014 8/2/2006 50,000 1,471,000

8/18/2004 29,166 20,834 2.80 8/17/2014

5/26/2005 19,791 30,209 12.92 5/25/2015

1/27/2006 — 20,000 20.68 1/26/2016

Raj Sundaram . . . . . 5/26/2005 9,895 15,105 12.92 5/25/2015 1/27/2006 5,000 147,100

1/27/2006 — 10,000 20.68 1/26/2016 11/2/2006 10,000 294,200

11/2/2006 — 20,000 25.39 11/1/2016 8/2/2006 35,000 1,029,700

Vincent Passione . . . 10/23/2003 205,715 — 2.80 8/31/2007

1/30/2004 15,000 — 2.80 8/31/2007

8/18/2004 63,255 — 2.80 8/31/2007

(1) These awards vest in four equal annual installments from date of grant.

(2) The market value is based on the closing price of our stock as of December 31, 2006, which was $29.42.

(3) These are performance based restricted common stock awards that vest in full on January 31, 2010, provided thatthe executive officer remains employed on such date. The amount that will vest at such time is subject to theachievement of certain pre-established performance goals for fiscal years 2007, 2008 and 2009. These perfor-mance goals are equally based on both our earnings before interest, taxes, depreciation and amortization, asadjusted, or EBITDA, and the market value of our common stock, in each case as measured on the last day of thefiscal year.

(4) The market value is based on the closing price of our stock as of December 31, 2006, which was $29.42, withouttaking any discounts and assuming that targets are achieved (EBITDA and market cap).

Option Vesting Schedule

Except for grant dates set forth below, the vesting schedule for stock options is 25% of the shares subject to theoption vest on the one year anniversary of the date of grant, and 1/36th of the remaining shares subject to the option vest

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each month thereafter, such that 100% of the shares subject to the option will be fully vested four years after the date ofgrant.Stock Option Grant Date Vesting Schedule

1/30/2003. . . . . . . . . The vesting commencement date was January 1, 2003.

1/30/2004. . . . . . . . . 10,000 options vested immediately for Mr. Jacobs, the remaining 60,000 began vesting onJanuary 1, 2004.

5/3/2004 . . . . . . . . . 14,609 of Mr. Cox’s options were immediately vested. Of the remaining 41,016 options,6,016 vested in 14 equal monthly installments ending on June 27, 2005 and the remaining35,000 options had a vesting commencement date of January 1, 2004. 152,462 ofMr. O’Neil’s options were immediately vested. Of the remaining 262,491, 37,491 vestedin 10 equal monthly installments ending on February 14, 2005 and the remaining 225,000had a vesting commencement date of January 1, 2004.

OPTION EXERCISES AND STOCK VESTED IN FISCAL 2006

NameNumber of Shares

Acquired on ExerciseValue Realized

On ExerciseNumber of Shares

Acquired on VestingValue Realized on

Vesting

Option Awards Stock Awards

Mark F. O’Neil . . . . . . . . . . . . . . . . . — — 7,500(1) $159,000

Robert J. Cox III . . . . . . . . . . . . . . . — — 2,500(1) 53,000

John A. Blair . . . . . . . . . . . . . . . . . . — — — —

Eric D. Jacobs . . . . . . . . . . . . . . . . . — — 2,500(1) 53,000

Raj Sundaram. . . . . . . . . . . . . . . . . . — — — —

Vincent Passione . . . . . . . . . . . . . . . 110,000(2) $1,928,233 18,750(3) 405,750

(1) These shares vested on May 26, 2006 upon the lapse of restricted common stock. The closing price of our commonstock on that day was $21.20.

(2) On December 11, 2006, Mr. Passione exercised 39,745, 48,749 and 21,506 stock options with exercise prices of$2.80, $12.92 and $20.68, respectively. The closing price of our common stock on that day was $28.31.

(3) 3,750 of these shares vested on May 26, 2006 upon the lapse of restricted common stock. The closing price of ourcommon stock on that day was $21.20. On August 31, 2006, we accelerated the vesting of 15,000 of Mr. Passione’sshares of restricted common stock due to his departure from the company. The closing price of our common stockon that day was $21.75.

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POTENTIAL PAYMENTS UPON TERMINATION

The tables set forth below describe and quantify certain compensation that would become payable under existingplans and arrangements if the named executive officer’s employment had terminated on December 31, 2006, based onour closing stock price on that date. Due to the number of factors that affect the nature and amount of any benefitsprovided upon the events discussed below, any actual amounts paid or distributed may be different. Factors that couldaffect these amounts include the timing during the year of any such event and our stock price. None of our namedexecutive officers are entitled to any compensation in the event of a voluntary termination or an involuntarytermination for cause.

NameBase

Salary(1)

Short-Term

Incentives(2)Performance

Shares(3)Stock

Options(4)

RestrictedCommonStock(5)

HealthCare

280G TaxGross-Up Total

Compensation Benefits & Perquisites

Mark F. O’NeilInvoluntary or Good Reason

Termination . . . . . . . . . . . . . . $990,080 $600,000 $4,409,176 $ 956,150 $16,315 $ 6,971,721Death or Disability . . . . . . . . . $ 609,927 1,691,650 2,301,577

Change In Control . . . . . . . 990,080 600,000 5,001,400 4,837,058 1,691,650 16,315 $3,363,104 16,499,607Robert J. Cox IIIInvoluntary or Good Reason

Termination . . . . . . . . . . . . . . 520,000 152,000 1,555,443 323,620 14,369 2,565,432Death or Disability . . . . . . . . . 215,268 573,690 788,958

Change In Control . . . . . . . 520,000 152,000 1,765,200 1,700,558 573,690 14,369 1,285,459 6,011,276John A. BlairInvoluntary or Good Reason

Termination . . . . . . . . . . . . . . 521,994 218,750 240,383 132,390 16,315 1,063,637Death or Disability . . . . . . . . . 71,756 264,780 336,536

Change In Control . . . . . . . 521,994 218,750 588,400 556,070 264,780 16,315 2,166,309Eric D. JacobsInvoluntary or Good Reason

Termination . . . . . . . . . . . . . . 520,000 180,000 1,532,526 294,200 16,315 2,543,041Death or Disability . . . . . . . . . 179,390 514,850 694,240

Change In Control . . . . . . . 520,000 180,000 1,471,000 1,665,805 514,850 16,315 $1,099,499 5,467,469Raj SundaramInvoluntary or Good Reason

Termination . . . . . . . . . . . . . . 520,000 154,090 311,958 220,650 16,315 1,223,013Death or Disability . . . . . . . . . 125,573 441,300 566,873

Change In Control . . . . . . . 520,000 154,090 1,029,700 417,219 441,300 16,315 795,942 3,374,566

(1) 24 months base salary continuation calculated based on the salary in effect on the date of termination. Severancewill cease if the executive violates the non-compete provision of his employment agreement.

(2) A pro-rata bonus payment calculated based on the number of days during the fiscal year through the date oftermination, applied to actual bonus payment received for the prior fiscal year.

(3) The Death or Disability amounts represent accelerated vesting of a pro-rata portion of the performance sharesawarded in August 2006. The Change of Control amounts represent full vesting of the performance shares. Value isbased on $29.42, the closing price of our common stock on December 31, 2006.

(4) The Involuntary or Good Reason Termination amounts represent two years acceleration of the vesting of thenamed executive officer’s outstanding stock options (except for Mr. Blair who only receives one year ofacceleration). The Change of Control amounts represent full vesting of the named executive officer’s outstandingstock options. Value is based on $29.42, the closing price of our common stock on December 31, 2006.

(5) The Involuntary or Good Reason Termination amounts represent two years acceleration of the vesting of thenamed executive officer’s restricted common stock (except for Mr. Blair who only receives one year ofacceleration). The Death or Disability and Change of Control amounts represent full vesting of the namedexecutive officer’s restricted common stock. Value is based on $29.42, the closing price of our common stock onDecember 31, 2006.

Compensation Committee Interlocks and Insider Participation

During the fiscal year ended December 31, 2006 none of our executive officers served as: (i) a member of thecompensation committee (or other committee of the board of directors performing equivalent functions or, in theabsence of any such committee, the entire board of directors) of another entity, one of whose executive officers served

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on our Compensation Committee; (ii) a director of another entity, one of whose executive officers served on ourCompensation Committee; or (iii) a member of the compensation committee (or other committee of the board ofdirectors performing equivalent functions or, in the absence of any such committee, the entire board of directors) ofanother entity, one of whose executive officers served as a director on our board of directors. No member of ourCompensation Committee has ever been an employee of DealerTrack.

Employment Agreements with Named Executive Officers

Each of our named executive officers has entered into a written employment agreement with us or one of oursubsidiaries that governs the terms and conditions of his employment. Except as set forth below with regards toMr. Blair, each employment agreement with respect to the named executive officers provides:

• The initial term of employment is through June 30, 2007, and will automatically be extended for additional one-year periods unless either party notifies the other of non-extension at least 60 days prior to the end of a term.

• The annual base salary for 2007 for each of the named executive officers is as follows:2007 2006

Mark F. O’Neil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $510,000 $495,040

Robert J. Cox III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $280,000 $260,000

John A. Blair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $268,000 $260,000

Eric D. Jacobs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $270,000 $260,000

Raj Sundaram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $268,000 $260,000

• Each named executive officer is eligible to receive an annual performance-based cash bonus. Each year, theamount of such bonus, if any, is determined based upon our performance relative to certain performancebenchmark targets.

• Each named executive officer is prohibited from competing with us or soliciting our employees or customersduring the term of his employment and for a period of two years thereafter, and from disclosing our confidentialor proprietary information indefinitely.

• In the event that a named executive officer’s employment is terminated by us without “cause” or by theexecutive for “good reason,” the named executive officer will be entitled to continue to participate in our healthand welfare benefit plans for a period of one year following termination and to continue to be paid his basesalary for a period of two years following termination. Additionally, the named executive officer shall beentitled to receive a pro rata annual bonus based on the percentage of the year worked through the date oftermination. Notwithstanding the foregoing, in no event will any named executive officer be entitled to receiveany such payment or benefits after he or she violates any non-compete, non-disclosure or non-solicit covenant.“Cause” means any of the following: (i) the executive officer’s conviction for a felony, commission of fraud orembezzlement upon us; (ii) the executive officer’s commission of any willful act intended to injure ourreputation, business, or business relationships; (iii) the refusal or failure to perform his duties with us in acompetent and professional manner (in certain cases, with a cure period of ten business days); or (iv) the refusalor failure of the executive officer to comply with any of his material obligations under his employmentagreement (in certain cases, with a cure period of ten business days). “Good reason” means any of thefollowing: (i) a material breach by us of an executive officer’s employment agreement or in connection with ourstock incentive plans (which has not been cured within the allotted time); (ii) a material reduction of anexecutive officer’s title or duties or the assignment to the officer of any duties materially inconsistent with his orher then current position; (iii) any material reduction in the executive officer’s salary or benefits; (iv) the failureof any successor entity to assume the terms of the executive officer’s employment agreement upon a “change ofcontrol”; (v) relocation of the officer’s location a distance of at over fifty miles; or (vi) if we do not renew theexecutive officer’s employment agreement upon its expiration.

• In the event that a named executive officer’s employment is terminated by us without “cause” or by theexecutive for “good reason,” the named executive officer shall be credited with twenty-four months ofaccelerated vesting with respect to any options or other equity-based awards granted under the 2001 StockOption Plan or 2005 Incentive Award Plan. Upon a “change of control,” the named executive officer shallautomatically be credited with thirty-six months of accelerated vesting with respect to any options or otherequity-based awards granted under the 2001 Stock Option Plan or 2005 Incentive Award Plan. Further, in theevent that, within twelve months following a change of control, a named executive officer’s employment isterminated, he experiences a material negative change in his compensation or responsibilities or he is requiredto be based at a location more than 50 miles from his current work location, any remaining unvested options orother equity-based awards granted under the 2001 Stock Option Plan or 2005 Incentive Award Plan shall

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become fully vested. “Change of control” means any of the following: (i) certain transactions or series oftransactions in which a third party directly or indirectly acquires more than 50% of the total combined votingpower of our securities (other than through registered public offerings, employee benefit plans and transactionswith affiliates); (ii) over a two year period, our directors who were nominated by our stockholders or elected byour board cease to constitute a majority of our board; (iii) a merger, consolidation, reorganization, businesscombination, sale or other disposition of all or substantially all of our assets or the acquisition of assets or stockof another entity, in which our voting securities outstanding immediately before the transaction cease torepresent at least a majority of the combined voting power of the successor entity’s outstanding voting securitiesimmediately after the transaction, or after which a person or group beneficially owns voting securitiesrepresenting 50% or more of the combined voting power of the successor entity; provided, however, thatno person or group shall be deemed to beneficially own 50% or more of combined voting power of the successorentity solely as a result of the voting power held in us prior to the consummation of the transaction; or (iv) ourstockholder’s approval of a liquidation or dissolution. In the case of those named executive officers who haveentered into employment agreements with one of our subsidiaries rather than with the parent company, “changeof control” also means the occurrence of any of the above with respect to such subsidiary.

• Each named executive officer is entitled to a “gross-up payment” that, on an after-tax basis, is equal to the taxesimposed on the severance payment under the named executive officer’s employment agreement in the event anypayment or benefit to the named executive officer is considered an “excess parachute payment” and subject toan excise tax imposed by Section 4999 of the Internal Revenue Code.

• In the event that any of our named executive officers procures subsequent employment during the period duringwhich they are entitled to a severance payment, then their future severance payments shall be reduced to thelesser of (i) 50% of the executive’s salary or (ii) 50% of the executive’s base compensation received forsubsequent employment, commencing on the date the executive commences providing services in his newcapacity.

The following provisions of Mr. Blair’s employment agreement differ from those of our other named executiveofficers:

• Mr. Blair’s contract has a term of five years from May 25, 2005.

• In the event that Mr. Blair’s employment is terminated by us without “cause” or by him for “good reason,” heshall be credited with twelve months of accelerated vesting with respect to any stock options. Additionally, thevested portion of his stock options shall remain exercisable for nine months following the date of termination ofhis employment.

Messrs. Blair and Sundaram have the following additional provisions in their employment agreements:

• They each receive a monthly payment equal to 1/12 of $1,200,000 multiplied by the prime interest rate plus 1%,up to a maximum rate of 7% until the note described in the subsequent bullet point is issued.

• They are each eligible to receive additional compensation payable in the form of a note based on the fiscalperformance of certain data products. The note, when and if issued, will accrue interest monthly and is payablein full on June 30, 2010, although it can be prepaid at any time at our option.

• They each signed a separate Unfair Competition and Nonsolicitation Agreement in which they agreed not tosolicit from or compete with our ALG business for a period of 10 years from May 25, 2005.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of December 31, 2006 regarding the number of shares of ourcommon stock that may be issued under our equity compensation plans.

Number of Securitiesto be Issued Upon

Exercise ofOutstanding Options,Warrants and Rights

(a)

Weighted-AverageExercise Price of

OutstandingOptions, Warrants

and Rights(b)

Number of SecuritiesRemaining Availablefor Future Issuance

Under EquityCompensation Plans(Excluding Securities

in Column a)(c)

Equity compensation plans approved bystockholders Stock option plans(1) . . . . . . . . . . . . 3,897,448 $9.2395 518,293

2005 Employee Stock Purchase Plan . . . . . . . . . . . . — N/A 1,457,863

Equity compensation plans not approved bystockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,897,448 1,976,156

(1) Consists of the 2001 Stock Option Plan and the 2005 Incentive Award Plan.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Based on our review of information on file with the SEC and our stock records, the following table providescertain information about beneficial ownership of our common stock as of March 31, 2007 for: (i) each person (orgroup of affiliated persons) which is known by us to own beneficially more than 5% of our common stock, (ii) each ofour directors, (iii) each named executive officer, and (iv) all directors and current executive officers as a group. Unlessotherwise indicated, the address for those listed below is c/o DealerTrack Holdings, Inc., 1111 Marcus Ave., Suite M04,Lake Success, NY 11042. Except as indicated by footnote, and subject to applicable community property laws, thepersons named in the table have sole voting and investment power with respect to all shares of common stock shown asbeneficially owned by them.

SharesNumber of SharesBeneficially Owned

PercentOwned

Mark F. O’Neil(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,308,848 3.23%John A. Blair(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,947 *Robert J. Cox III(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,052 *Eric D. Jacobs(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222,040 *Vincent Passione(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465,405 1.17Raj Sundaram(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,789 *Mary Cirillo-Goldberg(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,335 *Steven J. Dietz(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,151,901 2.91%Thomas R. Gibson(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 *Thomas F. Gilman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —John J. McDonnell, Jr.(10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,000 *James David Power III(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,250 *Howard L. Tischler(12)(14). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,460,824 13.78%All current directors and current executive officers as a group (17 persons)(13) . . . . . . 9,468,697 22.97%First Advantage Corporation and related entities(14) 100 Carillon Parkway,

St. Petersburg, FL 33716 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,428,824 13.7%FMR Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,120,214 7.88%Fred Alger Management, Inc.(20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,030,000 5.12%

111 Fifth Avenue, New York, NY 10003

* Indicates less than 1%

(1) Includes 855,535 shares which Mr. O’Neil has the right to acquire within 60 days after March 31, 2007 upon theexercise of stock options. Also includes (i) 90,686 shares held by The Mark F. O’Neil Qualified Grantor RetainedAnnuity Trust, of which Mr. O’Neil is the trustee, (ii) 51,164 shares held by Monique O’Neil, the wife ofMr. O’Neil and (iii) 258,750 shares of restricted common stock. Monique O’Neil is also a limited partner of

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GRP II Partners. Through this partnership interest, she has an indirect financial interest in approximately1,164 shares of our common stock which is included in the total.

(2) Includes 25,998 shares which Mr. Blair has the right to acquire within 60 days after March 31, 2007 upon theexercise of stock options and 31,250 shares of restricted common stock.

(3) Includes 163,283 shares which Mr. Cox has the right to acquire within 60 days after March 31, 2007 upon theexercise of stock options and 88,500 shares of restricted common stock.

(4) Includes 137,041 shares which Mr. Jacobs has the right to acquire within 60 days after March 31, 2007 upon theexercise of stock options. Also includes (i) 6,134 shares held by The Eric D. Jacobs Grantor Retained AnnuityTrust, of which Mr. Jacobs is the trustee, and (ii) 74,000 shares of restricted common stock.

(5) Includes 200,000 shares which Mr. Passione has the right to acquire within 60 days after March 31, 2007 upon theexercise of stock options. Also includes 35,336 shares held by the 2005 Vincent Passione Grantor RetainedAnnuity Trust, of which Mr. Passione’s wife and sister are the trustees.

(6) Includes 15,832 shares which Mr. Sundaram has the right to acquire within 60 days after March 31, 2007 upon theexercise of stock options. Also includes 57,750 shares of restricted common stock.

(7) Includes 36,250 shares which Ms. Cirillo-Goldberg has the right to acquire within 60 days after March 31, 2007upon the exercise of stock options and 5,834 shares of restricted common stock.

(8) Includes 20,000 shares which Mr. Dietz has the right to acquire within 60 days after March 31, 2007 upon theexercise of stock options and 5,834 shares of restricted common stock. Also includes (i) 2,040,008 shares ofcommon stock held by GRP II, L.P., or GRP II, (ii) 145,589 shares of common stock held by GRP II Investors,L.P., or GRP II Investors, and (iii) 51,905 shares of common stock held by GRP II Partners, L.P., or GRP IIPartners. GRPVC, L.P., or GRPVC, is the general partner of each of GRP II and GRP II Partners and GRPManagement Services Corp., or GRP Management Services, is the general partner of GRPVC. Merchant Capital,Inc. is the general partner of GRP II Investors and is in turn an indirect wholly-owned subsidiary of Credit Suisse/First Boston, Inc. Mr. Dietz is Vice President of GRP Management Services. Mr. Dietz disclaims beneficialownership of these shares except to the extent of his pecuniary interest in such shares.

(9) Includes 10,000 shares which Mr. Gibson has the right to acquire within 60 days after March 31, 2007 upon theexercise of stock options and 5,834 shares of restricted common stock.

(10) Includes 10,000 shares which Mr. McDonnell has the right to acquire within 60 days after March 31, 2007 uponthe exercise of stock options and 5,834 shares of restricted common stock.

(11) Includes 36,250 shares which Mr. Power has the right to acquire within 60 days after March 31, 2007 upon theexercise of stock options and 5,834 shares of restricted common stock.

(12) Includes 20,000 shares which Mr. Tischler has the right to acquire within 60 days after March 31, 2007 upon theexercise of stock options and 5,834 shares of restricted common stock.

(13) Includes 1,618,384 shares which this group has the right to acquire within 60 days after March 31, 2007 upon theexercise of stock options and 734,750 shares of restricted common stock.

(14) Consists of 5,428,824 shares of common stock held by First American Credit Management Solutions, Inc., orCMSI, a direct, wholly-owned subsidiary of First Advantage Corporation, a publicly traded company. FirstAdvantage Corporation may be deemed a beneficial owner of the shares held by CMSI, however, it disclaimsbeneficial ownership except to the extent of its pecuniary interest. Mr. Howard L. Tischler is Group President ofFirst Advantage Dealer Services, an affiliate of CMSI. Mr. Tischler disclaims beneficial ownership of theseshares except to the extent of his pecuniary interest therein.

(15) The shares shown as beneficially owned by FMR Corp. were reported in its Schedule 13G filed with the SEC onFebruary 14, 2007.

(16) The shares shown as beneficially owned by Fred Alger Management, Inc. were reported in its Schedule 13G filedwith the SEC on February 12, 2007.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

DIRECTOR INDEPENDENCE

The Nominating and Corporate Governance Committee and our board of directors annually assess the inde-pendence of the non-management directors by reviewing the financial and other relationships between the directorsand us. This review is designed to determine whether these directors are independent under the criteria established byNASDAQ for independent board members. The Nominating and Governance Committee and our board of directorshave determined that all of our non-management directors are independent under those standards.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Policies and Procedures With Respect to Related Party Transactions

In accordance with its written charter, the Audit Committee, which is comprised of all independent directors, isresponsible for reviewing all related party transactions for potential conflict of interest situations on an ongoing basis,and the approval of the Audit Committee is required for all such transactions. The term “related party transactions”refers to transactions required to be disclosed in our filings with the SEC pursuant to Item 404 of Regulation S-K.

Transactions with Other Five Percent Stockholders

First American Credit Management Solutions, Inc.

Current Equity Ownership. CMSI owns an aggregate of 5,428,824 shares, or 13.7%, of our common stock.

Joint Marketing Agreement. We are a party with First Advantage CREDCO, or CREDCO, formerly know asFirst American CREDCO, an affiliate of CMSI, to a Joint Marketing Agreement, dated as of March 19, 2003, andamended as of December 1, 2004, under which automotive dealers may use our web-based network to, among otherthings, electronically access a CREDCO credit report on a prospective customer. We earn revenue from CREDCO on aper transaction basis, each time a report is accessed. The total revenue and accounts receivable from CREDCO as ofand for the year ended December 31, 2006 was $1.3 million (0.7% of our total revenue) and $0.2 million, respectively.

Under the Joint Marketing Agreement, we have agreed not to compete with CREDCO in certain circumstances inthe marketing of consumer credit reports to our automobile dealer customers.

CreditReportPlus Agreement. We are party to an agreement with CreditReportPlus, LLC, an affiliate of CMSI,under which our dealer customers will be provided Credit Report Plus as our preferred provider of certain functionalityrelated to credit reports. For the year ended December 31, 2006, revenue generated under this agreement was$0.8 million (0.5% of our total revenue).

CMSI Agreements. We are party to agreements with CMSI under which CMSI provides us with certainintegration, customer support and hosting services. Additionally, we use CMSI’s software product eValuate as averification tool with respect to data services and contract data. The total amount of expense for the year endedDecember 31, 2006 was approximately $27,322.

Non-Competition Agreement. As part of our acquisition of Credit Online, Inc. from CMSI, we entered into anon-competition agreement with CMSI and The First American Corporation, the former parent company of CMSI,under which we have agreed not to compete in the single financing source credit origination and/or credit decisioningsystem business and CMSI has agreed not to compete in the multi-financing source credit application processingbusiness and other related businesses defined in the agreement.

Bar None Agreement. In February 2006, we entered into an agreement with Bar None, Inc., an affiliate of CMSI,under which we provide integration with respect to leads for automotive dealers generated through Bar None. For theyear ended December 31, 2006, $0.3 million (0.2% of our total revenue) was earned from this agreement.

Director. Howard L. Tischler, Group President of First Advantage Dealer Services, an affiliate of CMSI, andfrom 2001 until September 2005, President and Chief Executive Officer of CMSI, has been our director since March2003 pursuant to our stockholders’ agreement, which terminated upon our initial public offering. CMSI no longer hasthe right to appoint a director to our board of directors. Mr. Tischler received 3,500 shares of restricted common stockfrom us on June 14, 2006, pursuant to our 2005 Incentive Award Plan.

Registration Rights

We are party to a Fourth Amended and Restated Registration Rights Agreement, dated March 19, 2003, amongACF Investment Corp., ADP, Inc., Capital One Auto Finance, Inc., DJR US, LLC, (formerly known as AutomotiveLease Guide (alg), LLC), First American Credit Management Solutions, Inc., GRP II, L.P., GRP II Investors, L.P.,GRP II Partners, L.P., J.P. Morgan Partners, Wells Fargo Financial, Inc., Wells Fargo Small Business InvestmentCompany, Inc., WFS Web Investments, Janet Clarke, Robert J. Cox III, Mary Cirillo-Goldberg and Mark F. O’Neilwhich provides for:

• An unlimited number of piggyback registrations pursuant to which we are required to register sales of a holder’sshares under the Securities Act when we undertake a public offering either on our own behalf or on behalf ofanother stockholder, subject to the discretion of the managing underwriter of the offering to decrease theamount that holders may register, with priority given, in the case of a public offering undertaken on our ownbehalf, first to the shares to be sold by us, then to shares to be sold by the holders exercising these piggybackregistration rights, and then to all other shares and, in the case of a public offering on behalf of another

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stockholder, first to the shares to be sold by such stockholder, then to shares to be sold by us, and then to all othershares;

• Two demand registrations pursuant to which we are required to register sales of a holder’s shares under theSecurities Act that would result in aggregate net proceeds of at least $30,000,000, subject to certain rights todelay up to 180 days the filing or effectiveness of any such registration statements; and

• One registration on Form S-3 (or equivalent short-form registration statement) per year pursuant to which weare required to register sales of a holder’s shares under the Securities Act, subject to the aggregate market value(at the time of a holder’s request) of the shares registered by such holder being no less than $5,000,000.

Generally, we have agreed to pay all expenses of any registration pursuant to the registration rights agreement,except that underwriters’ discounts and commissions shall be borne pro rata by the parties selling shares pursuant to theapplicable registration statement.

Earn Out Provision

In connection with our purchase of substantially all of the assets of Automotive Lease Guide (alg) LLC, we agreedto pay to DJR US, LLC (the former owner of the assets of Automotive Lease Guide (alg) LLC) $750,000 on each of thefirst through fifth anniversaries of the closing date of the acquisition. Additionally, we agreed to pay additionalconsideration of up to $11.3 million contingent upon certain future increases in revenue of ALG and another of oursubsidiaries through December 2009. In May 2006, we paid $750,000 to DJR as the annual payment and in January2007, we paid $0.2 million to DJR as additional consideration based on 2006 revenue. John A. Blair, our ChiefExecutive Officer, Automotive Lease Guide (alg), Inc., and Raj Sundaram, our Senior Vice President, DealerSolutions, DealerTrack, Inc., are both members of DJR US, LLC.

Former Five Percent Stockholders

Prior to the completion of our follow-on offering on October 12, 2006, the following financing source customersheld more than five percent of our outstanding shares of common stock.

• AmeriCredit Financial Services, Inc., through its affiliate ACF Investment Corp.;

• Capital One Auto Finance, Inc., in its own name and through Onyx Acceptance Corporation, through itsaffiliate Capital One Auto Finance, Inc.;

• JPMorgan Chase Bank, N.A., which does business through Chase Auto Finance as three financing sources,Chase Custom Finance (previously Bank One, N.A.), Chase Prime and Subaru Motor Finance, through itsaffiliate J.P. Morgan Partners;

• Wells Fargo & Company, through its affiliates Wells Fargo Financial, Inc. and Wells Fargo Small BusinessInvestment Company, Inc., and Wells Fargo Financial, Inc.; and

• WFS Financial, Inc., a subsidiary of Wachovia Corporation, through its affiliate WFS Web Investments.

We have entered into agreements with each of the automotive financing source affiliates of these entities. Eachhas agreed to subscribe to and use our network to receive credit application data and transmit credit decisionselectronically. Each agreement sets forth the responsibilities of each party with respect to the development of theinterface between our computer system and the financing source customers’ credit processing system and the termsand conditions governing our operation of and each financing source customers’ subscription to and use of our system.

Under these agreements, the automotive financing source affiliates have “most favored nation” status, grantingeach of them the right to no less favorable pricing terms for our products and services than those granted by us to otherfinancing sources, subject to limited exceptions. The agreements of these automotive financing source affiliates alsorestrict our ability to terminate such agreements.

ACF Investment Corp.

Financing Source Customer. AmeriCredit Financial Services, Inc., an affiliate of ACF Investment Corp., is oneof our financing source customers. For the year ended December 31, 2006, $6.4 million (3.7% of our total revenue) wasearned from AmeriCredit Financial Services, Inc.

Capital One Auto Finance, Inc.

Financing Source Customers. Capital One Auto Finance, Inc. and Onyx Acceptance Corporation, an affiliate ofCapital One Auto Finance, Inc., are two of our financing source customers. For the year ended December 31, 2006,$8.2 million (4.7% of our total revenue) was earned from Capital One Auto Finance, Inc. and Onyx AcceptanceCorporation, while it has been an affiliate of Capital One Auto Finance, Inc.

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J.P. Morgan Partners

Financing Source Customers. JPMorgan Chase Bank, N.A., which does business through Chase Auto Financeas three of our financing sources, Chase Custom Finance, Chase Prime and Subaru Motor Finance, is an affiliate ofJ.P. Morgan Partners. For the year ended December 31, 2006, $5.5 million (3.2% of our total revenue) was earned fromChase Auto Finance. We also provide web interface hosting services for Chase Auto Finance.

License Agreement. We license certain limited technology from an affiliate of J.P. Morgan Partners, which weobtained as a contributed asset during our initial capitalization. This license is royalty-free and perpetual. The licenseagreement restricts our ability to use this technology outside of the automotive finance industry. There are no paymentsor other ongoing consideration with respect to this license agreement.

Banking and Insurance. Since February 2001, JPMorgan Chase Bank, N.A. (successor by merger to Bank One,N.A.) has provided us with commercial banking and investment management services.

Credit Facilities. JPMorgan Chase Bank, N.A. is the administrative agent and letter of credit issuing bank and alender under our credit facilities.

Wells Fargo Small Business Investment Company, Inc. and Wells Fargo Financial, Inc.

Financing Source Customers. Wells Fargo & Company and Wells Fargo Financial, Inc., are both financingsource customers of ours. Wells Fargo & Company, Wells Fargo Financial, Inc. and Wells Fargo SBIC are affiliates ofeach other. For the year ended December 31, 2006, $7.6 million (4.4% of our total revenue) was earned from WellsFargo & Company and Wells Fargo Financial, Inc. We also provide web interface hosting services for Wells Fargo &Company.

Wachovia Corporation

Financing Source Customer. WFS Financial, Inc, an affiliate of WFS Web Investments, is one of our financingsource customers. For the year ended December 31, 2006 $0.4 million (0.2% of our total revenue) was earned fromWFS Financial, Inc.

Underwriting and Credit Facilities. Wachovia Capital Markets, LLC, an affiliate of the Wachovia Corporation,was one of the underwriters of our follow-on offering, which closed on October 12, 2006, and received approximately$0.2 million in fees from us in connection with such offering. In addition, Wachovia Bank, National Association, is alender under our credit facilities.

Item 14. Principal Accountant Fees and Services.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table represents the fees billed by PricewaterhouseCoopers LLP, or PWC, for 2006 and 2005:2006 2005

Audit fees(1): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,604,625 $2,973,615

Audit-related fees(2): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,600 31,669

Tax fees(3): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 68,650

All other fees(4): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 —

Total: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,702,225 $3,073,934

(1) Audit fees consisted of audit work performed on our consolidated financial statements, as well as work normallyperformed by the independent registered public accounting firm in connection with statutory and regulatoryfilings. Amounts for 2005 have been adjusted to include $742,626 billed in 2006 that had been accrued in 2005.

(2) Audit-related fees consisted of audits of our employee benefit plan, as well as work related to acquisitions.

(3) Tax fees are fees associated with tax compliance.

(4) All other fees related to work associated with Regulation AB compliance.

The Audit Committee has policies and procedures that require the pre-approval by the Audit Committee of all feespaid to, and all services performed by, our independent registered public accounting firm, unless entered into pursuantto the pre-approval policies and procedures established by the Audit Committee. At the beginning of each year, theAudit Committee approves the proposed services, including the nature, type and scope of service contemplated and therelated fees, to be rendered by the firm during the year. In addition, Audit Committee pre-approval is also required forthose engagements that may arise during the course of the year that are outside the scope of the initial services and fees

25

approved by the Audit Committee. For each category of proposed service, the independent registered publicaccounting firm is required to confirm that the provision of such services does not impair their independence.

All of the audit-related, tax and all other services provided by PwC to us in 2005 and 2006 were approved by theAudit Committee by means of specific pre-approvals or pursuant to the procedures set forth above.

PART IV

Item 15. Exhibits

15(a)(3) Exhibits

Exhibits are as set forth in the “List of Exhibits.”

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SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, theRegistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: April 30, 2007

DealerTrack Holdings, Inc.(Registrant)

By: /s/ Robert J. Cox III

Robert J. Cox IIISenior Vice President, Chief Financial Officer

and Treasurer(Duly Authorized Officer andPrincipal Financial Officer)

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EXHIBIT INDEX

Number Description

3.1(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, amongDealerTrack 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., asjoint bookrunners, J.P. Morgan Securities Inc., Lehman Brothers Inc. and Wachovia Securities Inc., asarrangers, JPMorgan Chase Bank, N.A., as administrative agent and letter of credit issuing bank, LehmanCommercial Paper Inc., as syndication agent, and Wachovia Bank, National Association, as documentationagent.

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 ChaseBank, 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 FirstAmerican 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 RealEstate 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 RealEstate 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 CreditManagement Solutions, Inc. and DealerTrack, Inc.

10.9(2) Non-Competition Agreement, dated as of March 19, 2003, by and among DealerTrack Holdings, Inc., CreditOnline, 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 ManhattanBank 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, JohnA. Blair and Raj Sundaram.

10.12(1) Employment Agreement, dated as of May 26, 2005, by and between Mark F. O’Neil and DealerTrackHoldings, Inc.

10.13(5) Employment Agreement, dated as of May 25, 2005, by and between John A. Blair and Automotive LeaseGuide (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(1) Employment Agreement, dated as of May 26, 2005, by and between Eric D. Jacobs and DealerTrackHoldings, Inc.

10.16+ Employment Agreement, dated as of August 21, 2006, by and between Raj Sundaram and DealerTrack, Inc.

10.17+ Employment Agreement, dated as of May 25, 2005, by and between Robert Cox and DealerTrack, 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(1) 2005 Incentive Award Plan, effective as of May 26, 2005.

10.24(8) First Amendment to the 2005 Incentive Award Plan, effective as of August 2, 2006.10.25(5) Form of Stock Option Agreement.

Number Description

10.26(5) Form of Restricted Stock Agreement.

10.27(1) Senior Executive Incentive Bonus Plan, effective as of May 26, 2005.

10.28+ 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+ Letter Agreement, dated October 23, 2006, from DealerTrack, Inc. to Raj Sundaram regarding relocation.

10.35+ Unfair Competition and Nonsolicitation Agreement, dated as of May 25, 2005, by and between RajSundaram and Automotive Lease Guide (alg), Inc.

10.36+ Amendment No. 1 to Unfair Competition and Nonsolicitation Agreement, made as of August 21, 2006, byand 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 CuromaxCorporation and all of the shareholders of 2044904 Ontario Inc., 2044903 Ontario Inc. and 2044905Ontario Inc. and 6680968 Canada Inc.

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 toSection 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 toSection 302 of the Sarbanes-Oxley Act of 2002.

31.3* Certification of Mark F. O’Neil pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 2002.

31.4* Certification of Robert J. Cox III pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant toSection 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 pursuantto Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.+ Previously filed.

(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 Registration Statement on Form S-1 (File No. 333-136929) filed August 28, 2006.

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Statements in this annual report regarding DealerTrack’s future growth, the benefi ts of the network, the development of DealerTrack’s products and services, the demand for DealerTrack’s products and services and all other statements in this document other than the recitation of historical facts are forward-looking statements (as defi ned in the Private Securities Litigation Reform Act of 1995). These statements involve a number of risks, uncertainties and other factors that could cause actual results, performance or achievements of DealerTrack to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

Factors that might cause such a difference include: the inability to execute any element of DealerTrack’s business strategy, including selling additional products and services to existing and new customers; DealerTrack’s success in expanding its customer base and product and service offerings; ability to conclude additional acquisitions; and other risks listed in the DealerTrack’s reports fi led with the SEC, including DealerTrack’s 2006 Form 10-K. These fi lings can be found on DealerTrack’s website at www.dealertrack.com and the SEC’s website at www.sec.gov. Forward-looking statements included herein speak only as of the date hereof and DealerTrack disclaims any obligation to revise or update such statements to refl ect events or circumstances after the date hereof or to refl ect the occurrence of unanticipated events or circumstances.

Mary Cirillo-GoldbergAdvisor, Hudson Ventures

Steven J. DietzPartner, GRP Management Services, Inc.

Thomas R. GibsonFormer Chairman, Asbury Automotive Group;Senior Advisor, Cerberus Operations Company

Thomas F. GilmanFounder, CEO Solutions LLC

John J. McDonnell Jr.Founder & former CEO, TNS, Inc.

Mark F. O’NeilChairman & CEO,DealerTrack Holdings, Inc.

James David Power IIIFounder, former Chairman of the Board,J.D. Power & Associates

Howard L. TischlerGroup President,First Advantage Dealer Services,First Advantage Corporation

Mark F. O’NeilChairman & CEO

John A. BlairSenior Vice President, Data Solutions; President, ALG and Chrome Systems

Robert J. Cox IIISenior Vice President, Chief Financial Offi cer & Treasurer

Charles J. GigliaSenior Vice President, Chief Information Offi cer,DealerTrack, Inc.

Ana M. HerreraSenior Vice President, Human Resources, DealerTrack, Inc.

Eric D. JacobsSenior Vice President, General Counsel & Secretary;President, DealerTrack Canada, Inc.

Richard McLeerSenior Vice President, Strategy & Corporate Development,DealerTrack, Inc.

Raj SundaramSenior Vice President, Dealer Solutions, DealerTrack, Inc.

David P. TrinderSenior Vice President, Network Solutions, DealerTrack, Inc.

Rick G. Von PuschSenior Vice President, Customer Development & Retention, DealerTrack, Inc.

NASDAQ Global Market: TRAK

American Stock Transfer & Trust Company6201 15th AvenueBrooklyn, NY 11219Phone: 1.800.937.5449

PricewaterhouseCoopers LLP300 Madison AvenueNew York, NY 10017

1111 Marcus Avenue, Suite M04Lake Success, NY 11042Phone: 1.516.734.3600

Liz ZaleInvestorRelations@dealertrack.comPhone: 1.516.734.3758http://ir.dealertrack.com

Annual Meeting of StockholdersWednesday, July 11, 2007 at 11 a.m. ETGarden City Hotel45 7th Street Garden City, NY 11530Phone: 1.877.549.0400

1111 Marcus Avenue, Suite M04Lake Success, NY 11042

www.dealertrack.com