TrueCar Reports Second Quarter 2020 Financial Results

August 6, 2020

SANTA MONICA, Calif., Aug. 06, 2020 (GLOBE NEWSWIRE) -- TrueCar, Inc. (NASDAQ: TRUE) today announced its financial results for the second quarter ended June 30, 2020.

Second Quarter 2020 Financial Highlights

  • Second quarter total revenue of $62.7 million, down (28.8)% from a year ago.
  • Second quarter net loss of $(11.2) million, or $(0.10) per share, compared to net loss of $(24.1) million, or $(0.23) per share, in the second quarter of 2019.
  • Second quarter Non-GAAP net income(1) of $4.4 million, or $0.04 per share, compared to Non-GAAP net loss of $(2.2) million, or $(0.02) per share, in the second quarter of 2019.
  • Second quarter Adjusted EBITDA(2) of $10.9 million, representing an Adjusted EBITDA margin(3) of 17.4%, compared to Adjusted EBITDA of $3.7 million, representing an Adjusted EBITDA margin of 4.1%, in the second quarter of 2019.
  • $173.1 million of cash and cash equivalents on the balance sheet as of June 30, 2020.

Management Commentary

“We’ve just turned the corner on what was truly an unprecedented second quarter,” said Mike Darrow, TrueCar’s President and Chief Executive Officer. “In light of the situation around us, we are pleased by our results, highlighted by revenue and Adjusted EBITDA well above expectations. During the quarter, we successfully navigated the onset of COVID-19, executed a transformative strategic restructuring and formalized numerous cross-functional initiatives to support the USAA transition. We continue to believe unwavering focus on our core business will drive a better balance of sustainable growth and profitability that maximizes long-term shareholder value.”

     
     
(1) Non-GAAP net income (loss) is a Non-GAAP financial measure.  Refer to its definition and accompanying reconciliation to GAAP net loss below.
(2) Adjusted EBITDA is a Non-GAAP financial measure.  Refer to its definition and accompanying reconciliation to GAAP net loss below.
(3) Adjusted EBITDA margin is a Non-GAAP financial measure, calculated as Adjusted EBITDA divided by total revenue.
     

Key Operating Metrics

  • Average monthly unique visitors(4) increased 14.5% to 8.3 million in the second quarter of 2020, up from 7.2 million in the second quarter of 2019.
  • Units(5) were 189,068 in the second quarter of 2020, down 24.3% year-over-year.
  • Monetization(6) was $290 during the second quarter of 2020, compared to $333 during the second quarter of 2019.
  • Franchise dealer count(7) was 11,267 as of June 30, 2020, down from 11,356 as of March 31, 2020.
  • Independent dealer count(8) was 4,131 as of June 30, 2020, down from 4,193 as of March 31, 2020.

Business Outlook

Due to the uncertainty caused by the coronavirus pandemic, we will not be providing formal guidance for the third quarter ending September 30, 2020 or the full year ending December 31, 2020 at this time.

     
     
(4) We define a monthly unique visitor as an individual who has visited our website, one of our landing pages on our affinity group marketing partner sites or our mobile application within a calendar month. We calculate average monthly unique visitors as the sum of the monthly unique visitors divided by the number of months in the period.
(5) We define units as the number of automobiles purchased from TrueCar Certified Dealers that are matched to users of TrueCar.com, our mobile applications or the car-buying sites and mobile applications we maintain for our affinity group marketing partners.
(6) We define monetization as the average transaction revenue per unit, which we calculate by dividing all of our transaction revenue (dealer revenue and OEM incentives revenue) in a given period by the number of units in that period.
(7) We define franchise dealer count as the number of franchise dealers in the network of TrueCar Certified Dealers at the end of a given period. This number is calculated by counting the number of brands of new cars sold at each individual location, or rooftop, regardless of the size of the dealership that owns the rooftop.
(8) We define independent dealer count as the number of dealers in the network of TrueCar Certified Dealers at the end of a given period that exclusively sell used vehicles and are not directly affiliated with a new car manufacturer. This number is calculated by counting each location, or rooftop, individually, regardless of the size of the dealership that owns the rooftop.
     

Conference Call Information

Members of our management will host a conference call today, August 6, 2020, to discuss our second quarter 2020 results at 4:30 p.m. Eastern Time. To participate, domestic callers should dial 1-877-407-0789 and international callers should dial 1-201-689-8562. A replay of the call may be accessed the same day from 7:30 p.m. Eastern Time on Thursday, August 6, 2020 until 11:59 p.m. Eastern Time on Thursday, August 20, 2020 by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering replay PIN 13706416. An archived version of the call will also be available upon completion on the Investor Relations section of our website at ir.true.com. We have used, and intend to continue to use, our Investor Relations website (ir.true.com), Twitter (@TrueCar) and Facebook (www.facebook.com/TrueCar) as means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.

Forward-Looking Statements

This press release contains forward-looking statements. All statements contained in this press release other than statements of historical fact are forward-looking statements, including statements regarding our ability to balance growth and profitability and to maximize shareholder value. These forward-looking statements are subject to a number of risks, uncertainties and assumptions that may prove incorrect, any of which could cause our results to differ materially from those expressed or implied by such forward-looking statements, and include, among others, those risks and uncertainties described under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission, or SEC, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the SEC and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 to be filed with the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. All forward-looking statements in this press release are based on information available to our management as of the date of this press release and except as required by law, management assumes no obligation to update those forward-looking statements, which speak only as of their respective dates.

Use of Non-GAAP Financial Measures

This earnings release includes the following Non-GAAP financial measures: Adjusted EBITDA, Adjusted EBITDA margin, Non-GAAP net income (loss) and Non-GAAP net income (loss) per share. We define Adjusted EBITDA as net loss adjusted to exclude interest income, depreciation and amortization, stock-based compensation, income (loss) from equity method investment, certain restructuring costs, certain executive departure costs, certain transaction expenses, certain litigation costs, changes in the fair value of contingent consideration, goodwill impairment and income taxes. We define Non-GAAP net income (loss) as net loss adjusted to exclude stock-based compensation, income (loss) from equity method investment, certain restructuring costs, certain executive departure costs, certain transaction expenses, certain litigation costs, changes in the fair value of contingent consideration and goodwill impairment. We have provided below a reconciliation of each of Adjusted EBITDA and Non-GAAP net income (loss) to net loss, the most directly comparable GAAP financial measure. Neither Adjusted EBITDA nor Non-GAAP net income (loss) should be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP.

We use Adjusted EBITDA and Non-GAAP net income (loss) as operating performance measures because each is (i) an integral part of our reporting and planning processes; (ii) used by our management and board of directors to assess our operational performance, and together with operational objectives, as a measure in evaluating employee compensation and bonuses; and (iii) used by our management to make financial and strategic planning decisions regarding future operating investments. We believe that using Adjusted EBITDA and Non-GAAP net income (loss) facilitates operating performance comparisons on a period-to-period basis because these measures exclude variations primarily caused by changes in the excluded items noted above. In addition, we believe that Adjusted EBITDA, Non-GAAP net income (loss) and similar measures are widely used by investors, securities analysts, rating agencies and other parties in evaluating companies as measures of financial performance and debt service capabilities.

Our use of each of Adjusted EBITDA and Non-GAAP net income (loss) has limitations as an analytical tool, and you should not consider either in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

  • Adjusted EBITDA does not reflect the receipt of interest or the payment of income taxes; 
  • neither Adjusted EBITDA nor Non-GAAP net income (loss) reflects changes in, or cash requirements for, our working capital needs; 
  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditures or any other contractual commitments;
  • neither Adjusted EBITDA nor Non-GAAP net income (loss) reflects the severance charges associated with a restructuring plan initiated and completed in the first quarter of 2019 and the second quarter of 2020 to improve efficiency and reduce expenses;
  • neither Adjusted EBITDA nor Non-GAAP net income (loss) reflects the legal, accounting, consulting and other third-party fees and costs we incurred in connection with the evaluation and negotiation of potential merger and acquisition transactions;
  • neither Adjusted EBITDA nor Non-GAAP net income (loss) reflects the costs to advance our claims in certain litigation or the costs to defend ourselves in various complaints filed against us;
  • neither Adjusted EBITDA nor Non-GAAP net income (loss) considers the potentially dilutive impact of shares issued or to be issued in connection with stock-based compensation; and
  • other companies, including companies in our own industry, may calculate Adjusted EBITDA and Non-GAAP net income (loss) differently than we do, limiting their usefulness as comparative measures.

Because of these limitations, you should consider Adjusted EBITDA and Non-GAAP net income (loss) alongside other financial performance measures, including our net loss, our other GAAP results and various cash flow metrics. In addition, in evaluating Adjusted EBITDA and Non-GAAP net income (loss), you should be aware that in the future we will incur expenses such as those that are the subject of adjustments in deriving Adjusted EBITDA and Non-GAAP net income (loss) and you should not infer from our presentation of Adjusted EBITDA and Non-GAAP net  income (loss) that our future results will not be affected by these expenses or any unusual or non-recurring items.

About TrueCar

TrueCar is a leading automotive digital marketplace that enables car buyers to connect to our nationwide network of Certified Dealers. We are building the industry's most personalized and efficient car buying experience as we seek to bring more of the purchasing process online. Consumers who visit our marketplace will find a suite of vehicle discovery tools, price ratings and market context on new and used cars — all with a clear view of what's a great deal. When they are ready, TrueCar will enable them to connect with a local Certified Dealer who shares in our belief that truth, transparency and fairness are the foundation of a great car buying experience. As part of our marketplace, TrueCar powers car-buying programs for over 250 leading brands, including AARP, Sam's Club and American Express. Nearly half of all new-car buyers engage with TrueCar powered sites, where they buy smarter and drive happier. TrueCar is headquartered in Santa Monica, California, with offices in Austin, Texas and Boston, Massachusetts.

For more information, please visit www.truecar.com, and follow us on Facebook or Twitter. TrueCar media line: +1-844-469-8442 (US toll-free) | Email: pr@truecar.com

Investor Relations Contact:
Danny Vivier
Vice President, Investor Relations & Strategic Finance
investors@truecar.com
(424) 258-8771

Public Relations Contact: 
Shadee Malekafzali
shadee@truecar.com
(424) 258-8694


TRUECAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2020   2019   2020   2019
Revenues $ 62,685     $ 88,075     $ 146,211     $ 173,657  
Costs and operating expenses:              
Cost of revenue 6,859     8,332     14,080     17,268  
Sales and marketing 33,476     60,233     80,051     114,971  
Technology and development 13,103     16,045     25,319     31,699  
General and administrative 13,520     21,382     25,832     36,486  
Depreciation and amortization 6,425     6,767     12,696     13,182  
Goodwill impairment         10,187      
Total costs and operating expenses 73,383     112,759     168,165     213,606  
Loss from operations (10,698 )   (24,684 )   (21,954 )   (39,949 )
Interest income 72     966     605     1,967  
Loss from equity method investment (507 )   (273 )   (889 )   (273 )
Loss before income taxes (11,133 )   (23,991 )   (22,238 )   (38,255 )
Provision for (benefit from) income taxes 109     69     (327 )   170  
Net loss $ (11,242 )   $ (24,060 )   $ (21,911 )   $ (38,425 )
Net loss per share:              
Basic and diluted $ (0.10 )   $ (0.23 )   $ (0.20 )   $ (0.37 )
Weighted average common shares outstanding, basic and diluted 107,535     105,485     107,279     105,139  
                       

TRUECAR, INC. 
CONSOLIDATED BALANCE SHEETS 
(In thousands)
(Unaudited) 

  June 30, 2020   December 31, 2019
Assets      
Current assets      
Cash and cash equivalents $ 173,086     $ 181,534  
Accounts receivable, net 41,540     44,888  
Prepaid expenses 8,311     7,215  
Other current assets 5,800     6,104  
Total current assets 228,737     239,741  
Property and equipment, net 27,775     29,797  
Operating lease right-of-use assets 33,062     36,064  
Goodwill 63,124     73,311  
Intangible assets, net 14,167     17,260  
Equity method investment 21,005     21,894  
Other assets 3,567     3,620  
Total assets $ 391,437     $ 421,687  
Liabilities and Stockholders’ Equity      
Current liabilities      
Accounts payable $ 10,017     $ 21,336  
Accrued employee expenses 10,364     5,969  
Operating lease liabilities, current 4,665     5,875  
Accrued expenses and other current liabilities 13,037     20,990  
Total current liabilities 38,083     54,170  
Deferred tax liabilities 386     783  
Operating lease liabilities, net of current portion 34,632     37,127  
Other liabilities 1,142     2,336  
Total liabilities 74,243     94,416  
Stockholders’ Equity      
Common stock 11     11  
Additional paid-in capital 771,156     759,322  
Accumulated deficit (453,973 )   (432,062 )
Total stockholders’ equity 317,194     327,271  
Total liabilities and stockholders’ equity $ 391,437     $ 421,687  
               

TRUECAR, INC. 
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA 
 (In thousands)
(Unaudited) 

  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2020   2019   2020   2019
Net loss $ (11,242 )   $ (24,060 )   $ (21,911 )   $ (38,425 )
Non-GAAP adjustments:              
Interest income (72 )   (966 )   (605 )   (1,967 )
Depreciation and amortization 6,425     6,767     12,696     13,182  
Stock-based compensation (1) 6,454     15,556     12,631     24,191  
Loss from equity method investment 507     273     889     273  
Certain litigation costs (2)     351     (1,939 )   1,279  
Executive departure costs (3)     4,681         4,681  
Restructuring charges (4) 8,514         8,514     3,280  
Transaction costs (5) 155     832     155     1,926  
Change in the fair value of contingent consideration 46     150     121     150  
Goodwill impairment (6)         10,187      
Provision for (benefit from) income taxes 109     69     (327 )   170  
Adjusted EBITDA $ 10,896     $ 3,653     $ 20,411     $ 8,740  


     
     
(1) The excluded amounts include stock-based compensation of $7.2 million incurred in the second quarter of 2019 associated with the acceleration of certain equity awards and the extension of the exercise period for certain vested stock options related to the departures of certain executives, including our former chief executive officer.
(2) The excluded amounts relate to legal costs incurred in connection with complaints filed by non-TrueCar dealers against TrueCar and consumer class action lawsuits. For the six months ended June 30, 2020, the excluded amount also includes a $2.0 million payment received from one of our insurance carriers in settlement of a lawsuit we brought in the fourth quarter of 2017 to recover insured legal fees. We believe the exclusion of these costs and recovery is appropriate to facilitate comparisons of our core operating performance on a period-to-period basis. Based on the nature of the specific claims underlying the excluded litigation matters, once these matters are resolved, we do not believe our operations are likely to entail defending against the types of claims raised by these matters. We expect the cost of defending these claims to continue to be significant pending that resolution.
(3) The excluded amounts represent severance charges associated with the separation of our former chief executive officer and the termination of executive-level employees in connection with the change in CEO of $4.6 million in the second quarter of 2019, as well as related recruiting fees of $0.1 million for the search for a new chief executive officer. We believe excluding the impact of these terminations and the associated chief executive officer recruiting fees is consistent with our use of these non-GAAP measures as we do not believe they are a useful indicator of our ongoing operating results.
(4) The excluded amounts represent charges associated with the restructuring plans undertaken in the first quarter of 2019 and the second quarter of 2020 to improve efficiency and reduce expenses. We believe excluding the impact of these charges is consistent with our use of these non-GAAP measures as we do not believe they are a useful indicator of our ongoing operating results.
(5) The excluded amounts represent external legal, accounting, consulting and other third-party fees and costs we incurred in connection with the evaluation and negotiation of potential merger and acquisition transactions. These expenses are included in general and administrative expenses in our consolidated statements of comprehensive loss. We consider these fees and costs, which are associated with potential merger and acquisition transactions outside the normal course of our operations, to be unrelated to our underlying results of operations and believe that their exclusion provides investors with a more complete understanding of the factors and trends affecting our business operations.
(6) The excluded amount represents a non-cash impairment charge we recognized on our goodwill during the first quarter of 2020.
     

TRUECAR, INC. 
RECONCILIATION OF NET LOSS TO NON-GAAP NET INCOME (LOSS)
 (In thousands, except per share amounts)
(Unaudited) 

  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2020   2019   2020   2019
Net loss $ (11,242 )   $ (24,060 )   $ (21,911 )   $ (38,425 )
Non-GAAP adjustments:              
Stock-based compensation (1) 6,454     15,556     12,631     24,191  
Loss from equity method investment 507     273     889     273  
Certain litigation costs (2)     351     (1,939 )   1,279  
Executive departure costs (3)     4,681         4,681  
Restructuring charges (4) 8,514         8,514     3,280  
Transaction costs (5) 155     832     155     1,926  
Change in the fair value of contingent consideration 46     150     121     150  
Goodwill impairment (6)         10,187      
Non-GAAP net income (loss) (7) $ 4,434     $ (2,217 )   $ 8,647     $ (2,645 )
               
Non-GAAP net income (loss) per share:              
Basic $ 0.04     $ (0.02 )   $ 0.08     $ (0.03 )
Diluted $ 0.04     $ (0.02 )   $ 0.08     $ (0.03 )
               
Weighted average common shares outstanding:              
Basic 107,535     105,485     107,279     105,139  
Diluted 107,744     105,485     107,541     105,139  


     
     
(1) The excluded amounts include stock-based compensation of $7.2 million incurred in the second quarter of 2019 associated with the acceleration of certain equity awards and the extension of the exercise period for certain vested stock options related to the departures of certain executives, including our former chief executive officer.
(2) The excluded amounts relate to legal costs incurred in connection with complaints filed by non-TrueCar dealers against TrueCar and consumer class action lawsuits. For the six months ended June 30, 2020, the excluded amount also includes a $2.0 million payment received from one of our insurance carriers in settlement of a lawsuit we brought in the fourth quarter of 2017 to recover insured legal fees. We believe the exclusion of these costs and recovery is appropriate to facilitate comparisons of our core operating performance on a period-to-period basis. Based on the nature of the specific claims underlying the excluded litigation matters, once these matters are resolved, we do not believe our operations are likely to entail defending against the types of claims raised by these matters. We expect the cost of defending these claims to continue to be significant pending that resolution.
(3) The excluded amounts represent severance charges associated with the separation of our former chief executive officer and the termination of executive-level employees in connection with the change in CEO of $4.6 million in the second quarter of 2019, as well as related recruiting fees of $0.1 million for the search for a new chief executive officer. We believe excluding the impact of these terminations and the associated chief executive officer recruiting fees is consistent with our use of these non-GAAP measures as we do not believe they are a useful indicator of our ongoing operating results.
(4) The excluded amounts represent charges associated with the restructuring plans undertaken in the first quarter of 2019 and the second quarter of 2020 to improve efficiency and reduce expenses. We believe excluding the impact of these charges is consistent with our use of these non-GAAP measures as we do not believe they are a useful indicator of our ongoing operating results.
(5) The excluded amounts represent external legal, accounting, consulting and other third-party fees and costs we incurred in connection with the evaluation and negotiation of potential merger and acquisition transactions. These expenses are included in general and administrative expenses in our consolidated statements of comprehensive loss. We consider these fees and costs, which are associated with potential merger and acquisition transactions outside the normal course of our operations, to be unrelated to our underlying results of operations and believe that their exclusion provides investors with a more complete understanding of the factors and trends affecting our business operations.
(6) The excluded amount represents a non-cash impairment charge we recognized on our goodwill during the first quarter of 2020.
(7) There is no income tax impact related to the adjustments made to calculate Non-GAAP net income (loss) because of our available net operating loss carryforwards and the full valuation allowance recorded against our net deferred tax assets at June 30, 2020 and 2019.
     

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Source: TrueCar, Inc.