Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2018	Feb. 21, 2019	Jun. 29, 2018
Document and Entity Information
Entity Registrant Name	TrueCar, Inc.
Entity Central Index Key	0001327318
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Document Type	10-K
Entity Current Reporting Status	Yes
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus (Q1,Q2,Q3,FY)	FY
Amendment Flag	false
Entity Common Stock, Shares Outstanding		104,882,802
Entity Well-known Seasoned Issuer	Yes
Entity Shell Company	false
Entity Voluntary Filers	No
Entity Public Float			$ 934,840,357

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Current assets
Cash and cash equivalents	$ 196,128	$ 197,762
Accounts receivable, net of allowances of $3,382 and $3,030 at December 31, 2018 and 2017, respectively (includes related party receivables of $349 and $169 at December 31, 2018 and 2017, respectively)	47,760	39,169
Prepaid expenses	7,468	5,475
Other current assets	4,103	1,145
Total current assets	255,459	243,551
Property and equipment, net	61,511	70,710
Goodwill	73,311	53,270
Intangible assets, net	23,451	15,912
Other assets	7,228	1,391
Total assets	420,960	384,834
Current liabilities
Accounts payable (includes related party payables of $5,039 and $3,200 at December 31, 2018 and 2017, respectively)	26,305	18,620
Accrued employee expenses	4,349	6,568
Accrued expenses and other current liabilities (includes related party accrued expenses of $218 and $52 at December 31, 2018 and 2017, respectively)	10,908	12,790
Total current liabilities	41,562	37,978
Deferred tax liabilities	568	812
Lease financing obligation, net of current portion	22,987	29,129
Other liabilities	9,290	3,797
Total liabilities	74,407	71,716
Commitments and contingencies
Stockholders’ Equity
Preferred stock — $0.0001 par value; 20,000,000 shares authorized at December 31, 2018 and 2017, respectively; no shares issued and outstanding at December 31, 2018 and 2017	0	0
Common stock — $0.0001 par value; 1,000,000,000 shares authorized at December 31, 2018 and 2017, respectively; 104,337,508 and 100,428,656 shares issued and outstanding at December 31, 2018 and 2017, respectively	10	10
Additional paid-in capital	720,025	664,192
Accumulated deficit	(373,482)	(351,084)
Total stockholders’ equity	346,553	313,118
Total liabilities and stockholders’ equity	$ 420,960	$ 384,834

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Allowance for doubtful accounts receivable	$ 3,382	$ 3,030
Related party receivables	349	169
Related party payables	5,039	3,200
Related party accrued expense and other current liabilities	$ 218	$ 52
Preferred stock, par value (in dollar per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	1,000,000,000	1,000,000,000
Common stock, shares issued	104,337,508	100,428,656
Common stock, shares outstanding	104,337,508	100,428,656

Consolidated Statements of Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Income Statement [Abstract]
Revenues	$ 353,571	$ 323,149	$ 277,507
Costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization presented separately below)	31,154	28,227	25,167
Sales and marketing (includes related party expenses of $22,128, $16,531, and $13,910, for the years ended December 31, 2018, 2017, and 2016, respectively)	213,415	185,397	154,406
Technology and development	61,348	59,070	53,580
General and administrative	54,140	61,646	59,908
Depreciation and amortization	22,677	22,472	23,345
Total costs and operating expenses	382,734	356,812	316,406
Loss from operations	(29,163)	(33,663)	(38,899)
Interest income	3,314	1,260	376
Interest expense	(2,649)	(2,610)	(2,530)
Loss before income taxes	(28,498)	(35,013)	(41,053)
(Benefit from) / provision for income taxes	(177)	(2,164)	655
Net loss	$ (28,321)	$ (32,849)	$ (41,708)
Net loss per share, basic and diluted (in dollars per share)	$ (0.28)	$ (0.35)	$ (0.49)
Weighted average common shares outstanding, basic and diluted	102,149	94,865	84,483
Other comprehensive loss:
Comprehensive loss	$ (28,321)	$ (32,849)	$ (41,708)

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	APIC	Accumulated deficit
Increase (Decrease) in Stockholders' Equity
Cumulative-effect of accounting change adopted	$ 0		$ 627	$ (627)
Beginning balance (in shares) at Dec. 31, 2015		83,016,735
Beginning balance at Dec. 31, 2015	232,692	$ 8	508,584	(275,900)
Increase (Decrease) in Stockholders' Equity
Net loss	(41,708)			(41,708)
Stock-based compensation	25,751		25,751
Issuance of warrants relating to marketing agreements	46		46
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes (in shares)		3,142,792
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes	7,800	$ 1	7,799
Ending balance (in shares) at Dec. 31, 2016		86,159,527
Ending balance at Dec. 31, 2016	224,581	$ 9	542,807	(318,235)
Increase (Decrease) in Stockholders' Equity
Net loss	(32,849)			(32,849)
Issuance of common stock in follow-on offering, net of underwriting discounts and offering costs (in shares)		1,150,000
Issuance of common stock in follow-on offering, net of underwriting discounts and offering costs	17,398		17,398
Stock-based compensation	33,648		33,648
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes (in shares)		13,119,129
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes	$ 70,340	$ 1	70,339
Ending balance (in shares) at Dec. 31, 2017	100,428,656	100,428,656
Ending balance at Dec. 31, 2017	$ 313,118	$ 10	664,192	(351,084)
Increase (Decrease) in Stockholders' Equity
Cumulative-effect of accounting change adopted	5,923			5,923
Net loss	(28,321)			(28,321)
Stock-based compensation	39,109		39,109
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes (in shares)		3,908,852
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes	$ 16,724		16,724
Ending balance (in shares) at Dec. 31, 2018	104,337,508	104,337,508
Ending balance at Dec. 31, 2018	$ 346,553	$ 10	$ 720,025	$ (373,482)

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Cash flows from operating activities
Net loss	$ (28,321)	$ (32,849)	$ (41,708)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	22,661	22,391	23,169
Deferred income taxes	(244)	(2,182)	581
Bad debt expense and other reserves	1,688	1,385	1,285
Stock-based compensation	37,219	32,241	24,739
Common stock warrant expense	0	0	46
Non-cash interest expense on lease financing obligation	332	370	396
Write-off and loss on disposal of fixed assets	311	194	474
Changes in operating assets and liabilities:
Accounts receivable	(10,039)	(3,687)	(4,391)
Prepaid expenses	(1,964)	569	4
Other current assets	87	765	(846)
Other assets	(1,644)	162	(613)
Accounts payable	7,543	4,803	(4,552)
Accrued employee expenses	(2,177)	(2,683)	1,152
Accrued expenses and other current liabilities	(642)	(479)	1,531
Other liabilities	23	1,118	1,501
Net cash provided by operating activities	24,833	22,118	2,768
Cash flows from investing activities
Purchase of property and equipment	(17,099)	(19,809)	(16,639)
Cash received from lease financing obligation exit	800	0	0
Cash paid for acquisition, net of cash acquired	(26,891)	0	0
Net cash used in investing activities	(43,190)	(19,809)	(16,639)
Cash flows from financing activities
Proceeds from public offering, net of underwriting discounts and offering costs	0	17,398	0
Repurchase of common stock option awards	0	0	(100)
Proceeds from exercise of common stock options	19,757	73,543	9,112
Taxes paid related to net share settlement of equity awards	(3,034)	(3,209)	(1,312)
Proceeds from financing obligation drawdown	0	0	1,521
Net cash provided by financing activities	16,723	87,732	9,221
Net (decrease) increase in cash and cash equivalents	(1,634)	90,041	(4,650)
Cash and cash equivalents at beginning of period	197,762	107,721	112,371
Cash and cash equivalents at end of period	196,128	197,762	107,721
Cash paid during the year for:
Interest	2,323	2,099	2,133
Income taxes	30	43	82
Supplemental disclosures of non-cash activities
Stock-based compensation capitalized for software development	1,890	1,407	1,012
De-recognition of leased facility asset and lease financing obligation	6,889	0	0
Recognition of warrant asset and related liability	1,231	0	0
Contingent consideration	4,477	0	0
Capitalized assets included in accounts payable, accrued employee expenses and other accrued expenses	$ 312	$ 1,980	$ 1,078

Organization and Nature of Business	12 Months Ended
Organization and Nature of Business	Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization and Nature of Business	Organization and Nature of Business TrueCar, Inc. is an Internet-based information, technology, and communication services company. Hereinafter, TrueCar, Inc. and its wholly owned subsidiaries ALG, Inc., TrueCar Dealer Solutions, Inc. and DealerScience, LLC are collectively referred to as “TrueCar” or the “Company”; ALG, Inc. is referred to as “ALG,” TrueCar Dealer Solutions, Inc. is referred to as “TCDS” and DealerScience, LLC is referred to as “DealerScience.” TrueCar was incorporated in the state of Delaware in February 2005 and began business operations in April 2005. Its principal corporate offices are located in Santa Monica, California. TrueCar is a digital automotive marketplace that (i) provides pricing transparency about what other people paid for their cars and enables consumers to engage with TrueCar Certified Dealers who are committed to providing a superior purchase experience; (ii) empowers Certified Dealers to attract these informed, in-market consumers in a cost-effective, accountable manner; and (iii) allows automobile manufacturers (“OEMs”) to more effectively target their incentive spending at deep-in-market consumers during their purchase process. TrueCar has established a diverse software ecosystem on a common technology infrastructure, powered by proprietary data and analytics. Consumers access TrueCar’s platform through the TrueCar.com website and TrueCar mobile applications or through the car buying websites and mobile applications that TrueCar operates for its affinity group marketing partners (“Auto Buying Programs”). An affinity group is comprised of a network of members or employees that provides discounts to its members. ALG provides forecasts, consulting, and other services regarding determination of the residual value of an automobile at future given points in time, which are used to underwrite automotive loans and leases and by financial institutions to measure exposure and risk across loan, lease, and fleet portfolios. ALG also obtains automobile purchase data from a variety of sources and uses this data to provide consumers and dealers with highly accurate, geographically specific, real-time pricing information. Through our subsidiary TCDS, we provide our TrueCar Trade product, which gives consumers information on the value of their trade-in vehicles and enables them to obtain a guaranteed trade-in price before setting foot in the dealership. This valuation is, in turn, backed by a third-party guarantee to dealers that the vehicles will be repurchased at the indicated price if the dealer does not want to keep them. In addition, through TCDS, we act as an agent for DealerSync, Inc. (“DealerSync”) and in that capacity offer dealers its products and services, including a dealer website creation and management service and a software platform that assists dealers in managing, marketing and growing their business. Additionally, in December 2018, we acquired DealerScience, which, through TCDS, provides dealers with advanced digital retailing software tools that allow them to calculate accurate monthly payments, expedite vehicle desking, which is the process of presenting and agreeing upon financial terms and financing options, and streamline the consumer’s experience from shopping to showroom.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Basis of Presentation

The Company’s accounting and financial reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of TrueCar and its wholly owned subsidiaries. Business acquisitions are included in the Company’s consolidated financial statements from the date of the acquisition. The Company’s purchase accounting resulted in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Assets and liabilities that are subject to judgment and use of estimates include sales allowances and allowances for doubtful accounts, contract assets, the fair value of a warrant asset and the related liability, the fair value of assets and liabilities assumed in business combinations, the fair value of the capitalized facility leases, the recoverability of goodwill and long-lived assets, valuation allowances with respect to deferred tax assets, useful lives associated with property and equipment and intangible assets, lease exit liabilities, contingencies, and the valuation and assumptions underlying stock-based compensation and other equity instruments. On an ongoing basis, the Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. In addition, the Company engaged valuation specialists to assist with management’s determination of the valuation of its capitalized facility leases, the fair values of assets and liabilities assumed in business combinations, the fair value of the warrant asset and related liability, and in periods prior to the Company’s initial public offering, valuation of common stock.

Segments

The Company has one operating segment. The Company’s chief operating decision maker (“CODM”) is the President and Chief Executive Officer and the Interim Chief Financial Officer and Chief Accounting Officer, who manage the Company’s operations based on consolidated financial information for purposes of evaluating financial performance and allocating resources.

The CODM reviews financial information on a consolidated basis, accompanied by information about dealer revenue, OEM incentives revenue, and forecasts, consulting and other revenue (Note 3). All of the Company’s principal operations, decision-making functions and assets are located in the United States.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Accounting standards describe a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:


•	Level 1 — Quoted prices in active markets for identical assets or liabilities or funds.


•	Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.


•	Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Fair Value Methods

Fair value is based on quoted market prices, if available. If listed prices or quotes are not available, fair value is based on internally-developed models that primarily use market-based or independently sourced market parameters as inputs.

For assets and liabilities measured at fair value, the following section describes the valuation methodologies, key inputs, and significant assumptions.

Cash equivalents, consisting primarily of money market instruments and debt securities, represent highly liquid investments with maturities of three months or less at purchase. Generally, market prices are used to determine the fair value of money market instruments and debt securities.

The carrying amounts of cash equivalents, accounts receivable, prepaid and other current assets, accounts payable, and accrued liabilities approximate fair value because of the short maturity of these items. The fair value of the Company’s revolving line of credit approximates carrying value based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements.

Certain assets, including the warrant asset, long-lived assets, goodwill, and intangible assets are also subject to measurement at fair value on a non-recurring basis if they are deemed to be impaired as a result of an impairment review. For the years ended December 31, 2018, 2017, and 2016, no impairments were identified on those assets required to be measured at fair value on a non-recurring basis.

The Company recorded a contingent consideration liability upon the acquisition of DealerScience in 2018 (Note 4). Contingent consideration is measured at fair value and is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair-value hierarchy. The valuation of contingent consideration uses assumptions the Company believes a market participant would make. The Company assesses these estimates on an ongoing basis as it obtains additional data impacting the assumptions. Changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized within the consolidated statements of comprehensive loss. The Company determined the fair value of the contingent consideration using the probability-adjusted discounted cash flow method. Because the DealerScience purchase agreement makes payment of the contingent consideration contingent on achievement of certain revenue milestones, the significant unobservable inputs used in the fair value measurement of contingent consideration are the probabilities of achieving those milestones and discount rates. Significant increases or decreases in the probabilities of achieving the milestones would result in a significantly higher or lower fair value measurement, respectively.

The following table summarizes the Company’s assets and liabilities at fair value on a recurring basis at December 31, 2018 and 2017 by level within the fair-value hierarchy. These assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):



	At December 31, 2018								At December 31, 2017
							Total Fair								Total Fair
	Level 1		Level 2		Level 3		Value		Level 1		Level 2		Level 3		Value
Assets:
Cash equivalents	$	192,207	$	—	$	—	$	192,207	$	195,584	$	—	$	—	$	195,584
Total Assets	$	192,207	$	—	$	—	$	192,207	$	195,584	$	—	$	—	$	195,584

Liabilities:
Contingent consideration, non-current	$	—	$	—	$	4,477	$	4,477	$	—	$	—	$	—	$	—
Total Liabilities	$	—	$	—	$	4,477	$	4,477	$	—	$	—	$	—	$	—

Concentrations of Credit and Business Risk

Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents and accounts receivable.

The Company, at times, maintains cash balances at financial institutions in excess of amounts insured by United States government agencies or payable by the United States government directly. The Company places its cash and cash equivalents with high credit quality financial institutions.

Credit is extended to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral or other security to support accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains an allowance for doubtful accounts based on these evaluations. No single customer comprised more than 10% of the Company’s total revenues for the years ended December 31, 2018, 2017, and 2016. No single customer comprised more than 10% of the Company’s accounts receivable balance at December 31, 2018 and 2017.

The Company’s single largest source of unique visitors and unit sales from affinity group marketing partners comes from its relationship with United Services Automobile Association (“USAA”), a related party (Note 14). Changes in the Company’s relationship with USAA and its promotion and marketing of the Company’s Auto Buying Programs may have a material adverse effect on the Company’s business, financial condition, results of operations, and cash flows.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original or remaining maturity at the date of purchase of three months or less to be cash equivalents. At December 31, 2018 and 2017, cash and cash equivalents were comprised of cash held in money market funds and checking accounts.

Accounts Receivable, Allowance for Doubtful Accounts, and Sales Allowances

The Company extends credit in the normal course of business to its customers and performs credit evaluations on a case-by-case basis. The Company does not obtain collateral or other security related to its accounts receivable.

Accounts receivable are recorded based on the amount due from the customer and do not bear interest. The Company reduces accounts receivable for sales allowances and its allowance for doubtful accounts. For contract assets, the Company records the assets net of sales allowances and an allowance for doubtful accounts, which are estimated in the same manner as for accounts receivable balances.

The Company establishes sales allowances at the time of revenue recognition based on its history of adjustments and credits provided to its network of dealers. Sales allowances relate primarily to credits issued where a dealer claims that an introduction was previously identified by the dealer from a source other than the Company. While the dealer is contractually obligated to pay the invoice, the Company may issue a credit against the invoice to maintain overall dealer relations. In assessing the adequacy of its sales allowances, the Company evaluates its history of adjustments and credits made through the date of the issuance of the financial statements. Estimated sales adjustments and credits and ultimate losses may vary from actual results which could be material to the financial statements; however, to date, actual sales allowances have been materially consistent with the Company’s estimates.

The Company determines its allowance for doubtful accounts based on its historical write-off experience and specific circumstances that make it likely that recovery will not occur in a particular case. The Company reviews the allowance for doubtful accounts each reporting period and assesses the aging of account balances, with an emphasis on those that are past due over ninety days. Account balances are charged off against the allowance when the Company determines that it is probable the receivable will not be recovered. The Company does not have any off-balance sheet credit exposure related to its customers.

The following table summarizes the changes in the allowance for doubtful accounts and sales allowances (in thousands):



	Year Ended December 31,
	2018			2017			2016
Allowances, at beginning of period	$	3,030		$	2,600		$	2,720
Charged as a reduction of revenue	8,703			7,734			7,042
Charged to bad debt expense in general and administrative expenses	1,688			1,385			1,285
Write-offs, net of recoveries	(10,039		)	(8,689		)	(8,447		)
Allowances, at end of period	$	3,382		$	3,030		$	2,600

Property and Equipment, net

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which is generally three years for computer hardware and software, five years for furniture and equipment, and over the shorter of the lease term or the useful life of the assets for leasehold improvements. Buildings are depreciated over a useful life of forty years. Maintenance and repairs are expensed as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the Company’s results of operations.

Build-to-Suit Leases

The Company establishes assets and liabilities for the fair value of the building and estimated construction costs incurred under lease arrangements when it is considered the owner (for accounting purposes only), or build-to-suit leases, to the extent it is involved in the construction of structural improvements or takes on construction risk. Upon completion of construction of facilities under build-to-suit leases, the Company assesses whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance, and if so, the leased facility and lease financing obligation are removed from the balance sheet. If the Company does not qualify for sale-leaseback accounting, then the facilities are accounted for as financing leases.

Software and Website Development Costs

The Company accounts for the costs of computer software obtained or developed for internal use in accordance with FASB ASC 350, Intangibles — Goodwill and Other. Computer software development costs and website development costs are expensed as incurred, except for internal use software or website development costs that qualify for capitalization as described below, and include certain employee related expenses, including salaries, bonuses, benefits and stock-based compensation expenses; costs of computer hardware and software; and costs incurred in developing features and functionality. These capitalized costs are included in property and equipment on the consolidated balance sheets.

The Company expenses costs incurred in the preliminary project and post-implementation stages of software development and capitalizes costs incurred in the application development stage and costs associated with significant enhancements to existing internal use software applications.

Software costs are amortized using the straight-line method over an estimated useful life of three years commencing when the software project is ready for its intended use.

Costs incurred related to less significant modifications and enhancements as well as maintenance are expensed as incurred.

At December 31, 2018 and 2017, capitalized software costs were $86.0 million and $71.2 million, respectively, before accumulated amortization of $62.2 million and $48.8 million, respectively. During the years ended December 31, 2018 and 2017, the Company wrote off capitalized software costs of $0.1 million relating to the Company’s decision to abandon additional development activities relating to specific software projects. As these capitalized assets had never been placed in service, the write-off was recorded in technology and development expense and there was no accumulated amortization and no acceleration of amortization. During the years ended December 31, 2018 and 2017, the Company recorded accelerated amortization of $1.0 million and $1.7 million, respectively, related to software assets that were determined to have shortened useful lives due to upgrades to the Company’s technology infrastructure.

Expected amortization expense with respect to capitalized software costs at December 31, 2018 for each of the years through December 31, 2022 is as follows (in thousands):



Years ended December 31,
2019	$	11,416
2020	8,603
2021	3,698
2022	50
Total amortization expense	$	23,767

Intangible Assets Acquired in Business Combinations

The Company values assets acquired and liabilities assumed on each acquisition accounted for as a business combination, and allocates the purchase price to the tangible and intangible assets acquired and liabilities assumed based on its best estimate of fair value. Acquired intangible assets include: trade names, customer relationships, and developed technology. The Company determines the appropriate useful life of intangible assets by performing an analysis of cash flows based on historical experience of the acquired businesses. Intangible assets are amortized over their estimated useful lives based on the pattern in which the economic benefits associated with the asset are expected to be consumed, which to date has approximated the straight-line method of amortization. The estimated useful lives for trade names, customer relationships, and technology are generally, one to fifteen years, two to ten years, and three to ten years, respectively.

Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets with finite useful lives for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Such triggering events or changes in circumstances may include: a significant decrease in the market price of a long-lived asset, a significant adverse change in the extent or manner in which a long-lived asset is being used, a significant adverse change in legal factors or in the business climate, the impact of competition or other factors that could affect the value of a long-lived asset, a significant deterioration in the amount of revenue or cash flows expected to be generated from an asset group, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a long-lived asset, or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously-estimated useful life. The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable and the expected undiscounted future cash flows attributable to the asset group are less than the carrying amount of the asset group, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded. Fair value is determined based upon estimated discounted future cash flows. During the years ended December 31, 2018, 2017, and 2016, there were no impairment charges recorded on the Company’s long-lived assets.

Goodwill

Goodwill represents the excess of the aggregate purchase price paid over the fair value of the identifiable assets and liabilities acquired in the Company’s business combinations. Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Events or changes in circumstances that could trigger an impairment review include a significant adverse change in business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of use of the acquired assets or the Company’s overall business strategy, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations.

The Company has the option to assess goodwill for possible impairment by performing a qualitative analysis to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount or to perform the quantitative impairment test.

The quantitative test involves comparing the estimated fair value of a reporting unit with its respective book value, including goodwill. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. If, however, the fair value of the reporting unit is less than book value, an impairment loss is recognized in an amount equal to the excess.

The Company tests for goodwill impairment annually at December 31. During the years ended December 31, 2018, 2017, and 2016, there were no impairment charges recorded on goodwill. In 2018, we elected to conduct a quantitative goodwill assessment at December 31, 2018. The fair value significantly exceeded the carrying value and, accordingly, we concluded that there was no impairment of goodwill. In 2017, the Company qualitatively assessed whether it was more likely than not that the respective fair values of its reporting units are less than their carrying amounts, including goodwill. Based on this qualitative assessment, the Company determined that it was more likely than not that the fair values of the reporting units were greater than their carrying amounts. As such, performing the quantitative impairment test was unnecessary.

During the year ended December 31, 2018, goodwill increased $20.0 million as a result of the DealerScience acquisition. See Note 4 for further details.

Warrant

On November 19, 2018, TrueCar entered into a warrant agreement with DealerSync that entitles TrueCar to purchase up to 2,500,000 shares of DealerSync common stock at $1.60 per share. The warrant expires on November 19, 2020. The fair value was determined using a Monte-Carlo simulation. The Company recorded the fair value of the DealerSync warrant of $1.2 million in “other assets” and corresponding liabilities (the current portion of the liability of $0.2 million recorded in “accrued expenses and other current liabilities” and the non-current portion of $1.0 million recorded in “other liabilities”) in the consolidated balance sheet as of December 31, 2018, reflecting the benefit received as part of its commercial sales agent agreement with DealerSync. The Company will test recoverability of the warrant asset whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

Revenue Recognition

In May 2014, the FASB issued guidance related to revenue from contracts with customers. Under this guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The updated standard replaces all existing revenue recognition guidance under GAAP. The Company adopted the new revenue standard as of January 1, 2018 using the modified retrospective transition method. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue standard, while prior period amounts are not adjusted and continue to be reported in accordance with prior revenue guidance. See Note 3 for further details.

Under the new revenue standard, the Company recognizes revenue when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. The Company determines revenue recognition through the following steps:


•	Identification of the contract, or contracts, with a customer;


•	Identification of the performance obligations in the contract;


•	Determination of the transaction price;


•	Allocation of the transaction price to the performance obligations in the contract; and


•	Recognition of revenue when, or as, the performance obligation or obligations are satisfied.

Dealer Revenue

Dealer revenue is comprised of Auto Buying Program revenue as well as revenue from TrueCar Trade, DealerScience, and DealerSync.

Auto Buying Program revenues include fees paid by customers participating in the Company’s dealer network with which the Company has an agreement (“TrueCar Certified Dealers” or “Dealers”). TrueCar Certified Dealers pay the Company fees in one of three ways: on a per-vehicle basis for sales to Auto Buying Program users, on a per-introduction basis for sales to Auto Buying Program users, or under a subscription arrangement. Contracts are cancellable by the Dealer or the Company at any time. The Company does not provide significant Dealer financing terms.

The Company’s performance obligation to TrueCar Certified Dealers is the same for all payment types for our Auto Buying Program revenues: to provide Dealers with introductions to in-market consumers through the use of the TrueCar platform, so that those Dealers have the opportunity to sell vehicles to those consumers. Control transfers to Dealers upon delivery of introductions, which is the point at which the Company recognizes revenue.

When a user decides to proceed with a vehicle purchase through the Company, the user provides his or her name, address, email, and phone number during the process of obtaining a Guaranteed Savings Certificate, which gives the Company the identity and source of a TrueCar introduction provided to a specific Dealer before an actual sale occurs. After a sale occurs, the Company receives information regarding the sale, including the identity of the purchaser, through the Dealer Management System used by the Dealer that made the sale. The Company also receives information regarding vehicle sales from a variety of other data sources, including third-party car sales aggregators, car dealer networks, and other publicly available sources (collectively, “sales data”) and uses this sales data to further verify that a sale has occurred between an Auto Buying Program user and a TrueCar Certified Dealer, as well as to invoice the Dealer shortly after the completion of the sales transaction. Actual vehicle sales data is reported on a daily basis shortly following the date of sale.

Pay-Per-Sale. Under the old revenue standard, in years prior to 2018, the Company recognized revenue for fee arrangements based on a per-vehicle basis when the vehicle sale had occurred between the Auto Buying Program user and the Dealer. Under the new revenue standard for fee arrangements based on a pay-per-sale billing model, revenue for the Auto Buying Program is recognized when introductions are delivered to the Dealer and for the amount that the Company estimates it will be able to earn. To formulate this estimate, the Company uses the expected value method based primarily on an analysis of historical introductions that result in vehicle sales and further validated by subsequent actual sales information. Under the contractual terms and conditions of arrangements with TrueCar Certified Dealers that pay on a per-vehicle-sale basis, the Dealer is not obligated to pay the Company until a vehicle sale has occurred between the Auto Buying Program user and the Dealer, for which the introduction was provided to the Dealer by the Company. Contractually, the Dealers’ obligation to pay is not contingent on verification or acceptance of the transaction by the Dealer. As a result, revenue recognition occurs earlier than billing as an estimate of the variable consideration to be received is determined upon control transfer, resulting in a contract asset.

Pay-Per-Introduction. Under fee arrangements based on a pay-per-introduction billing model, revenue for the Auto Buying Program is recognized when introductions are delivered.

The Company also recognizes revenue from Dealers under subscription agreements. Subscription fee arrangements are short-term in nature with terms ranging from one to six months and are also cancellable by the Dealer or the Company at any time. Subscription arrangements fall into three types: flat-rate subscriptions, subscriptions subject to downward adjustment based on a minimum number of vehicle sales (“guaranteed sales”), and subscriptions based on introduction volume, including those subject to downward adjustment based on a minimum number of introductions (“guaranteed introductions”). For all subscription arrangements, the Company recognizes the fees as revenue when introductions are delivered by allocating a portion of the monthly subscription fee to each delivered introduction. For guaranteed sales and guaranteed introduction subscriptions, the amount allocated is adjusted at the end of each month for any credits, as described below. Total revenue recognized in any given month remains unchanged from the old revenue standard for subscription arrangements.

Flat-Rate Subscription. Under flat-rate subscription arrangements, fees are charged at a monthly flat rate regardless of the number of introductions provided by the Company to the Dealer or sales made to users of the Company’s platform by the Dealer.

Guaranteed-Sales Subscription. Under guaranteed-sales subscription arrangements, monthly fees are charged based on the number of guaranteed sales multiplied by a fixed amount per vehicle. To the extent that the actual number of vehicles sold by the Dealers to users of the Company’s platform is less than the number of guaranteed sales, the Company provides a credit to the Dealer. If the actual number of vehicles sold exceeds the number of guaranteed sales, the Company is not entitled to any additional fees. As of January 1, 2019, the Company no longer offers guaranteed sales subscription arrangements in California, and it transferred all California dealers from this billing method to flat-rate subscription arrangements before that date.

Guaranteed-Introductions Subscription. Under guaranteed-introductions subscription arrangements, monthly fees are charged based on a periodically-updated formula that considers, among other things, the introductions anticipated to be provided to the Dealer. To the extent that the number of actual introductions is less than the number of guaranteed introductions, the Company provides a credit to the Dealer. If the actual number of introductions provided exceeds the number guaranteed, the Company is not entitled to any additional fees.

TrueCar Trade. TrueCar Trade provides consumers with information on the value of their trade-in vehicles, while providing Dealers with introductions to these in-market consumers so that those Dealers have the opportunity to buy trade-in vehicles from those consumers. Dealers pay monthly subscription fees for access to TrueCar Trade that vary depending on the level of service selected. Depending on their subscription terms, some Dealers pay additional transaction fees for each vehicle purchased from a consumer that was introduced through TrueCar Trade. Subscription fees are recognized on a monthly basis, while transaction fees for vehicles purchased by a Dealer are estimated and recognized at the point in time the introduction between the Dealer and consumer occurs.

DealerScience and DealerSync. DealerScience and DealerSync revenues consist of monthly subscription fees paid by dealers for access to DealerScience’s and DealerSync’s products and services. DealerScience provides dealers with advanced digital retailing software tools that allow them to calculate accurate monthly payments, expedite vehicle desking, which is the process of presenting and agreeing upon financial terms and financing options, and streamline the consumers’ experience from shopping to showroom. DealerSync products and services include a dealer website creation and management service and a software platform that assists dealers in managing, marketing and growing their business. Subscription fees are recognized on a monthly basis.

OEM Incentives Revenue

The Company enters into arrangements with OEMs to promote the sale of their vehicles primarily through the offering of additional consumer incentives. These manufacturers pay a per-vehicle fee to the Company for promotion of the incentive after the sale of the vehicle has occurred between the Auto Buying Program user and the Dealer. Under the old revenue standard, in years prior to 2018, the Company recognized as revenue the per-vehicle incentive fee at the time the sale of the vehicle occurred between the Auto Buying Program user and the Dealer. Under the new revenue standard, the Company’s performance obligation to OEMs is to deliver incentive offers to consumers. Control transfers upon delivery of incentive offers, which is the point at which the Company recognizes revenue. The Company recognizes revenue for the amount that the Company estimates it will be able to earn. To formulate this estimate, the Company uses the expected value method based primarily on an analysis of historical incentive offers that result in vehicle sales and further validated by subsequent actual sales information. As a result, revenue recognition occurs earlier than billing as an estimate of the variable consideration to be received is determined upon control transfer, resulting in a contract asset.

Forecasts, Consulting and Other Revenues

Revenues are generated from the sale of forecasts of lease residual value data for new and used leased automobiles, guidebooks, and consulting projects. Sales are principally made to vehicle manufacturers, vehicle financing companies, investment banks, automobile dealers, and insurance companies.

Forecasts and consulting project sales arrangements may include multiple promises to deliver goods and services, such as sale of lease residual forecasts from guidebooks and consulting projects. For revenue arrangements containing multiple promises to transfer goods or services, the Company first determines which of the goods or services are distinct and therefore separate performance obligations. If multiple distinct performance obligations are identified, the total transaction price for a contract is allocated to each performance obligation on a relative standalone selling price basis. In most cases, the goods and services we promise to deliver are sold on a stand-alone basis, which is determined to be the standalone selling price.

Revenue allocated to each performance obligation from the sale of lease residual value forecasts, guidebooks, and consulting projects is recognized when each performance obligation is satisfied. Some residual value data is available via subscription with updated data provided as available during the subscription period or as part of discrete delivered data packages. Sales attributed to residual value data and guidebooks are recognized either over time during the subscription period or when the data or guidebooks are delivered, depending on the terms of the contract, and consulting projects are recognized when the project is delivered.

The Company has elected to use the practical expedient of not disclosing the remaining performance obligations for contracts that have durations of one year or less. The Company does not have significant remaining performance obligations in excess of one year.

Incremental Costs to Obtain a Contract

The new revenue standard requires the deferral of the recognition of incremental costs to obtain a contract, which the Company has identified as certain of its sales commissions paid to internal sales representatives for the sale of TrueCar’s services to Dealers. These costs are deferred and then amortized over the expected customer life, which has been determined to be three years based on an analysis of historical and expected customer life. Amortization expense is included within sales and marketing on the accompanying consolidated statements of comprehensive loss. Prior to adoption of the new revenue standard, sales commissions were expensed when incurred.

Cost of Revenue (exclusive of depreciation and amortization)

Cost of revenue includes expenses related to the fulfillment of the Company’s services, consisting primarily of data costs and licensing fees paid to third-party service providers and expenses related to operating the Company’s website and mobile applications, including those associated with its data centers, hosting fees, data processing costs required to deliver introductions to its network of TrueCar Certified Dealers, employee costs related to certain dealer operations, sales matching, and employee and consulting costs related to delivering data and consulting services to the Company’s customers. Cost of revenue excludes depreciation and amortization of software development costs and other hosting and data infrastructure equipment used to operate the Company’s platforms, which are included in the depreciation and amortization line item on its statement of comprehensive loss.

Sales and Marketing

Sales and marketing expenses consist primarily of: television, digital, and radio advertising; media production costs; affinity group partner marketing fees, which also includes loan subvention costs where the Company pays certain affinity group marketing partners a portion of consumers’ borrowing costs for car loan products offered by these affinity group marketing partners; common stock warrants issued to USAA; marketing sponsorship programs; and digital customer acquisition. In addition, sales and marketing expenses include employee-related expenses for sales, customer support, marketing, and public relations employees, including salaries, bonuses, benefits, severance, and stock-based compensation expenses; third-party contractor fees; and facilities costs.

Marketing and advertising costs promote our services and are expensed as incurred, except for media production costs which are expensed the first time the advertisement is aired. Marketing and advertising expenses were $75.9 million, $71.0 million, and $70.7 million for the years ended December 31, 2018, 2017 and 2016, respectively. Prepaid expenses include prepaid media costs of $1.3 million and $0.4 million at December 31, 2018 and 2017, respectively. Accrued marketing and advertising expenses were $1.8 million and $2.7 million at December 31, 2018 and 2017, respectively, and were included within accrued expenses and other current liabilities on the consolidated balance sheet.

Technology and Development

Technology and development expenses consist primarily of employee-related expenses for technology and development staff, including salaries, benefits, bonuses, severance, and stock-based compensation; the cost of certain third-party service providers; and facilities costs. Technology and development expenses are expensed as incurred.

General and Administrative

General and administrative expenses consist primarily of employee-related expenses for administrative, legal, finance, and human resource staffs, including salaries, benefits, bonuses, severance, and stock-based compensation; professional fees; insurance premiums; other corporate expenses; lease-exit charges; and facilities costs.

Stock-Based Compensation

The Company recognizes stock-based compensation expense related to employee stock options and restricted stock units based on the fair value of the awards on the grant date in accordance with the relevant standards. The Company estimates the grant-date fair value of option grants, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. Stock-based compensation for employee awards is recognized on a straight-line basis over the requisite period, except for performance-based awards which are recognized using the graded-vesting model.

Compensation expense for non-employee stock-based awards is recognized in accordance with FASB ASC 505, Equity — Equity-Based Payments to Non-Employees. Under this standard, stock option awards issued to non-employees are accounted for at fair value using the Black-Scholes option-pricing model. Management believes that the fair value of the stock options is more reliably measured than the fair value of the services received. The Company records compensation expense based on the then-current fair values of the stock options at each financial reporting date. Compensation recorded during the service period is adjusted in subsequent periods for changes in the stock options’ fair value until the earlier of the date at which the non-employee’s performance is complete or a performance commitment is reached, which is generally when the stock option vests.

For issuances of restricted stock units, the Company determines the fair value of the award based on the market value of its common stock at the date of grant.

Income Taxes

The Company accounts for income taxes under the asset and liability method, under which deferred tax assets and liabilities are determined based on the differences between the financial reporting and income tax bases of assets and liabilities and are measured using the tax rates that will be in effect when the differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.

The Company determines whether a tax position is more likely than not to be sustained upon examination based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties accrued related to unrecognized tax benefits, if any, in its income tax provision in the accompanying statements of comprehensive loss.

Comprehensive Loss

Comprehensive loss encompasses all changes in equity other than those arising from transactions with stockholders. For the years ended December 31, 2018, 2017 and 2016, the Company had no other comprehensive income (loss) items and accordingly, net loss equaled comprehensive loss.

Recent Accounting Pronouncements

In June 2018, the Financial Accounting Standards Board (“FASB”) issued new guidance to simplify the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation — Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods, and early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued guidance simplifying the test for goodwill impairment. This standard eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This guidance is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019, and early adoption is permitted. The Company early adopted this guidance for its 2018 annual impairment test. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In October 2016, the FASB issued new guidance which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This removes the exception to postpone recognition until the asset has been sold to an outside party. This standard became effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. It is required to be applied on a modified retrospective basis through a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued guidance amending the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The new guidance will be effective for public entities for annual periods beginning after December 15, 2018 and interim periods therein. Early adoption is permitted. Upon adoption, the Company will recognize the cumulative effect of adopting this guidance as an adjustment to the opening balance of accumulated deficit. Prior periods will not be retrospectively adjusted. As a result of adoption, the Company expects a material impact as right-of-use assets and lease liabilities are recognized on the consolidated balance sheet, primarily related to office facility leases. Additionally, the Company expects to recognize greater rent expense in operating expenses and less interest expense as the Company no longer expects to have any build-to-suit leases. The Company continues to evaluate the methods and impact of adopting this guidance on its consolidated financial statements.

Revenue Information

12 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

Revenue Information and Deferred Sales Commissions

Adoption of the New Revenue Standard

On January 1, 2018, the Company adopted the new revenue standard using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue standard, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting.

As a result of adopting the new revenue standard, the Company now recognizes transaction revenue earlier for certain of its dealer and OEM incentives arrangements based on estimated variable consideration to be received upon the occurrence of subsequent vehicle sales between the Auto Buying Program user and the Dealer. Upon adoption, the Company recorded a contract asset within other current assets to reflect revenues that would be recognized earlier under the new revenue standard, which is upon delivery of introductions, as well as a corresponding balance of revenue share paid to affinity marketing partners within accounts payable. The Company records contract assets net of sales allowances and an allowance for doubtful accounts, which are estimated in the same manner as for accounts receivable balances.

Also as a result of adoption of the new standard, the Company identified an impact related to the recognition of costs to obtain customer contracts. Prior to its adoption, sales commissions were expensed as incurred. Under the new revenue standard, certain sales commissions are deferred and recognized over a period of time. The Company recorded an adjustment within the consolidated balance sheet to capitalize these sales commissions as of January 1, 2018 within other assets to reflect the deferred costs that had been expensed under the prior accounting policy for sales commissions.

The cumulative effects of the changes made to the Company’s January 1, 2018 consolidated balance sheet were as follows (in thousands):



	December 31, 2017			Adjustments Due to Adoption of New Revenue Standard		January 1, 2018

Assets
Other current assets	$	1,145		$	3,324	$	4,469
Other assets	1,391			2,962		4,353

Liabilities
Accounts payable	$	18,620		$	256	$	18,876
Accrued expenses and other liabilities	12,790			107		12,897

Stockholders’ Equity
Accumulated deficit	$	(351,084	)	$	5,923	$	(345,161	)

The impact of adoption of the new revenue standard on the Company’s consolidated statement of comprehensive loss and consolidated balance sheet was as follows (in thousands):



	Year Ended December 31, 2018
	As Reported			Balances Without Adoption of New Revenue Standard			Effect of Change Increase/(Decrease)

Revenues	$	353,571		$	353,575		$	(4	)
Sales and marketing	213,415			213,448			$	(33	)
Net loss	(28,321		)	(28,350		)	$	(29	)



	December 31, 2018
	As Reported			Balances Without Adoption of New Revenue Standard			Effect of Change Increase/(Decrease)

Assets
Other current assets	$	4,103		$	787		3,316
Other assets	7,228			4,015			$	3,213

Liabilities
Accounts payable	$	26,305		$	25,831		474
Accrued expenses and other liabilities	10,908			10,805			103

Stockholders’ Equity
Accumulated deficit	$	(373,482	)	$	(379,434	)	$	5,952

Deferred Sales Commissions

Deferred sales commissions within other assets were $3.2 million as of December 31, 2018. For the year ended December 31, 2018, under the new revenue standard, amortization expense for deferred sales commissions was $1.7 million and there was no impairment loss in relation to the costs capitalized in either period. Sales commission expenses under the old standard would have resulted in expenses of $2.0 million for the year ended December 31, 2018.

Contract Balances

The Company’s contract asset balance for estimated variable consideration to be received upon the occurrence of subsequent vehicle sales is included within other current assets and is distinguished from accounts receivable in that these amounts are conditional upon subsequent sales and not only upon the passage of time. Substantially all of the contract asset balances of $3.3 million at January 1, 2018 were transferred to accounts receivable during the year ended December 31, 2018 as vehicle sales occurred, with no significant changes in the estimate. A contract asset of $3.3 million was recorded as of December 31, 2018 for leads delivered where consideration to be received was still conditional upon subsequent vehicle sales.

Disaggregation of Revenue

The Company disaggregates revenue into three revenue streams: dealer revenue, OEM incentives revenue, and forecasts, consulting and other revenue. Prior to adoption of the new revenue standard, dealer revenue and OEM incentives revenue had been disclosed together as “transaction revenue.” The following table presents the Company’s revenue categories during the periods presented (in thousands):



	Year Ended December 31,
	2018		2017(1)		2016(1)
Dealer revenue	$	304,596	$	280,563	$	240,466
OEM incentives revenue	30,012		23,277		19,050
Forecasts, consulting and other revenue	18,963		19,309		17,991
Total revenues	$	353,571	$	323,149	$	277,507


(1)	Prior period amounts have not been adjusted under the modified retrospective method.

Business Combination

12 Months Ended

Dec. 31, 2018

Business Combinations [Abstract]

Business Combination

On December 7, 2018, the Company acquired the assets and assumed the liabilities of DealerScience for $27.9 million in cash and contingent cash consideration of up to $5.0 million based on achievement of future revenues. The acquisition of DealerScience allows the Company to more quickly expand into the digital retailing space in efforts to build out its end-to-end user experience. At the date of the acquisition, the Company assessed the probabilities of DealerScience meeting future revenues and recorded contingent consideration of $4.5 million. From the acquisition date through December 31, 2018, there were no significant changes to the value of the contingent consideration, which was recorded within other long-term liabilities as of December 31, 2018.

The Company recorded goodwill of $20.0 million, which represents the excess of the purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed. The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise from the Company’s acquisition of DealerScience. Goodwill attributed to the acquisition is deductible for income tax purposes.

The following table summarizes the allocation of the purchase consideration and the estimated fair value of the assets acquired and the liabilities assumed for the acquisition of DealerScience during the year ended December 31, 2018 (in thousands):



	DealerScience
Assets acquired
Cash	$	1,037
Accounts receivable	240
Prepaid expenses	29
Acquired technology	9,900
Customer relationships	1,500
Goodwill	20,041
Total assets acquired	$	32,747
Liabilities assumed	342
Net assets acquired	$	32,405
Consideration paid
Cash paid	$	27,928
Contingent consideration	4,477
Total consideration	$	32,405

The weighted average useful life of all identified acquired intangible assets is 5 years. The estimated useful lives for acquired technology and customer relationships are 6 years and 2 years, respectively.

For the year ended December 31, 2018, the Company incurred transaction costs of $0.4 million in connection with the DealerScience acquisition which were expensed as incurred and included in general and administrative expense in the accompanying consolidated statements of comprehensive loss.

The Company’s consolidated financial statements include the operating results of DealerScience from the date of acquisition of December 7, 2018 through December 31, 2018. Separate operating results and pro forma results of operations for DealerScience have not been presented as the effect of the acquisition is not material to the Company’s financial results.

Property and Equipment, net

12 Months Ended

Dec. 31, 2018

Property, Plant and Equipment [Abstract]

Property and Equipment, net

Property and equipment consisted of the following at December 31, 2018 and 2017 (in thousands):



	December 31,
	2018			2017
Computer equipment, software, and internally developed software	$	99,204		$	83,568
Furniture and fixtures	4,758			4,779
Leasehold improvements	8,602			8,342
Capitalized facility leases	30,632			39,302
	143,196			135,991
Less: Accumulated depreciation	(81,685		)	(65,281		)
Total property and equipment, net	$	61,511		$	70,710

The Company is considered the owner, for accounting purposes only, of one of its Santa Monica, California leased office spaces and, until the termination of the lease on December 31, 2018, was considered the owner, for accounting purposes only, of its San Francisco, California leased office space (collectively, the “Premises”), as it had taken on certain risks of construction build cost overages above normal tenant improvement allowances. Accordingly, at December 31, 2018 and 2017, the Company has capitalized $30.6 million and $39.3 million, respectively, related to the Premises, which represents the estimated fair value of the leased properties, additions for capitalized interest incurred during the construction periods, and capitalized costs related to improvements to the buildings. No interest costs related to the Premises were capitalized for the years ended December 31, 2018 and 2017. At December 31, 2018 and 2017, the Company had recorded accumulated amortization of $2.3 million and $2.2 million, respectively, for capitalized facility leases. Additionally, at December 31, 2018 and 2017, the Company recognized a corresponding lease financing obligation of approximately $24.8 million and $31.4 million, respectively. Refer to Note 8 for additional information.

Included in the table above are property and equipment of $1.1 million and $7.8 million as of December 31, 2018 and 2017, respectively, which are capitalizable but had not yet been placed in service. The $1.1 million and $7.8 million balances at December 31, 2018 and 2017, respectively, were comprised primarily of capitalized software not ready for its intended use.

Total depreciation and amortization expense of property and equipment was $18.8 million, $18.6 million, and $19.3 million for the years ended December 31, 2018, 2017, and 2016, respectively.

Amortization of internal use capitalized software development costs was $13.4 million, $13.5 million, and $14.7 million for the years ended December 31, 2018, 2017, and 2016, respectively.

Amortization of capitalized facility leases was $1.0 million for the years ended December 31, 2018, 2017 and 2016.

Intangible Assets

12 Months Ended

Dec. 31, 2018

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Intangible Assets

Intangible assets consisted of the following at December 31, 2018 and December 31, 2017 (in thousands, except years):



	At December 31, 2018
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
Acquired technology and domain name	$	40,990	$	(22,946	)	$	18,044
Customer relationships	7,800		(4,925		)	2,875
Tradenames	4,900		(2,368		)	2,532
Total	$	53,690	$	(30,239	)	$	23,451



	At December 31, 2017
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
Acquired technology and domain name	$	31,090	$	(19,911	)	$	11,179
Customer relationships	6,300		(4,425		)	1,875
Tradenames	4,900		(2,042		)	2,858
Total	$	42,290	$	(26,378	)	$	15,912

Amortization expense by asset type for the years ended December 31, 2018, 2017, and 2016 is shown below (in thousands):



	Year Ended December 31,
	2018		2017		2016
Acquired technology and domain name	$	3,034	$	3,035	$	3,041
Customer relationships	500		500		673
Trade names	327		327		327
Total amortization	$	3,861	$	3,862	$	4,041

Expected amortization expense with respect to intangible assets at December 31, 2018 for each of the five years through December 31, 2023 and thereafter is as follows (in thousands):



Years ended December 31,
2019	$	6,191
2020	6,187
2021	4,572
2022	1,977
2023	1,977
Thereafter	2,547
Total amortization expense	$	23,451

Credit Facility	12 Months Ended
Credit Facility	Dec. 31, 2018
Debt Disclosure [Abstract]
Credit Facility	Credit Facility The Company is party to a third amended and restated loan and security agreement (the “Credit Facility”) with a financial institution that provides for advances under a $35.0 million revolving line of credit. In February 2018, the Company entered into a first amendment to the Credit Facility that, among other things, extended the expiration of the Credit Facility from February 18, 2018 to February 18, 2021. In December 2018, the Company entered into a second amendment to the Credit Facility to make certain other revisions that do not alter the borrowing amounts, interest rates, or required ratios. The Credit Facility provides a $10.0 million subfacility for the issuance of letters of credit and contained an increase option permitting the Company, subject to the lender’s consent, to increase the revolving credit facility by up to $15.0 million, to an aggregate maximum of $50 million. The Credit Facility bears interest, at the Company’s option, at either (i) the prime rate published by The Wall Street Journal, plus a spread of -0.25% to 0.50%, or (ii) a LIBOR rate determined in accordance with the terms of the Credit Facility, plus a spread of 1.75% to 2.50%. In each case, the spread is based on the Company’s adjusted quick ratio, which is a ratio of the Company’s cash and cash equivalents plus net billed accounts receivable to current liabilities plus all borrowings under the Credit Facility. Interest is due and payable quarterly in arrears for prime rate loans and on the earlier of the last day of each quarter or the end of an interest period, as defined in the Credit Facility, for LIBOR rate loans. The Company is also obligated to pay an unused revolving line facility fee of 0.0% to 0.20% per annum based on the Company’s adjusted quick ratio. The Credit Facility requires the Company to maintain an adjusted quick ratio of at least 1.5 to 1.00 on the last day of each quarter. If the adjusted quick ratio is not maintained, the Credit Facility requires the Company to maintain, as measured at each quarter end, a maximum consolidated leverage ratio 3.00 or 2.50 to 1.00, and a fixed charge coverage ratio of at least 1.25 to 1.00. Consolidated leverage ratio is a ratio of all funded indebtedness, including all capital lease obligations, plus all letters of credit under the facility to the Company’s Adjusted EBITDA for the trailing twelve months. Fixed charge coverage ratio is the ratio of the Company’s Adjusted EBITDA minus cash income taxes to its cash interest payments for the trailing twelve months. The Credit Facility also limits the Company’s ability to pay dividends. At December 31, 2018 and 2017, the Company was in compliance with the Credit Facility’s financial covenants. The Company’s future material domestic subsidiaries are required, upon the lender’s request, to become co-borrowers under the Credit Facility. Additionally, the Credit Facility contains acceleration clauses that accelerate any borrowings in the event of default. The Company’s obligations and those of its future material domestic subsidiaries are collateralized by substantially all of their respective assets, subject to certain exceptions and limitations. At December 31, 2018 and 2017, the Company had no outstanding amounts under the Credit Facility. At December 31, 2018 and 2017, the amount available was $31.0 million, reduced for letters of credit issued and outstanding under the subfacility of $4.0 million.

Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Office Lease Commitments

At December 31, 2018, the Company had various non-cancellable leases related to the Company’s office facilities which expire through 2030. At December 31, 2018, future minimum payments for obligations under non-cancellable lease obligations, and related sublease income, are as follows (in thousands):



Years ended December 31,	Lease Commitments		Sublease Income
2019	$	9,220	$	(2,180	)
2020	8,716		(1,282		)
2021	7,145		—
2022	7,362		—
2023	7,621		—
Thereafter	22,532		—
Total minimum lease payments	$	62,596	$	(3,462	)

The Company recorded rent expense, net of sublease income, of $4.9 million, $4.8 million, and $7.4 million for the years ended December 31, 2018, 2017, and 2016, respectively.

San Francisco Office Lease

In May 2014, the Company entered into a facility lease in San Francisco (the “San Francisco Office”) with total future minimum lease commitments over 10 years, beginning August 1, 2014, of $7.0 million. In conjunction with this lease, the Company was required to obtain an irrevocable standby letter of credit in the amount of $0.8 million for the benefit of the landlord. Beginning August 1, 2017 and continuing through August 1, 2020, the letter of credit was to be subject to an annual reduction to as little as $0.2 million.

The Company had concluded that it was deemed the owner (for accounting purposes only) of the San Francisco Office during the construction period under build-to-suit lease accounting. As the Company assumed control of the construction project in the third quarter of 2014, the Company recorded the fair value of the leased property in “Property and equipment, net” and a corresponding liability in “Lease financing obligations” on the accompanying consolidated balance sheets. The Company recognized increases in the asset as additional building costs were incurred during the construction period. Additionally, imputed interest during the construction period was capitalized. At December 31, 2017, the Company had capitalized $8.7 million in “Property and equipment, net” and a corresponding current and non-current lease financing obligation of $6.9 million.

Upon completion of the construction during the first quarter of 2015, the Company retained the fair value of the San Francisco Office lease property and the obligation on its balance sheet as it did not qualify for sales and leaseback accounting due to requirements to maintain collateral in the lease. The Company recorded the rent payments as a reduction of the lease financing obligation and imputed interest expense and ground rent as an operating expense. The fair value of the lease property was being depreciated over the building’s estimated useful life of forty years.

In July 2018, the Company reached an agreement with its landlord to terminate its lease effective December 31, 2018. Upon termination, the capitalized facility lease asset and the lease financing obligation of $6.9 million were both de-recognized.

Santa Monica Office Lease

In July 2014, the Company entered into a facility lease for one of its office spaces in Santa Monica (the “Santa Monica Office”) with total future minimum lease commitments over fifteen years, beginning in January 2015, of $36.0 million. The remaining future minimum lease commitments as of December 31, 2018 are included in the future minimum lease payments table above. In connection with this lease, the Company obtained an irrevocable standby letter of credit in the amount of $3.5 million for the benefit of the landlord. Beginning October 1, 2019 and continuing through October 1, 2025, the letter of credit is subject to an annual reduction to as little as $1.2 million.

The Company had concluded that it was deemed the owner (for accounting purposes only) of the Santa Monica Office during the construction period under build-to-suit lease accounting. As the Company assumed control of the construction project in the first quarter of 2015, the Company recorded the fair value of the leased property in “Property and equipment, net” and a corresponding liability in “Lease financing obligations” on the accompanying consolidated balance sheets. The Company recognized increases in the asset as additional building costs were incurred during the construction period. Additionally, imputed interest during the construction period was capitalized. At December 31, 2018 and 2017, the Company has capitalized $30.6 million in “Property and equipment, net” and a corresponding current and non-current lease financing obligation of $24.8 million and $24.5 million, respectively.

Upon completion of construction during the fourth quarter of 2015, the Company retained the fair value of the Santa Monica Office and the obligation on its balance sheet as it did not qualify for sales leaseback accounting due to requirements to maintain collateral in the lease. The Company records the rent payments as a reduction of the lease financing obligation and imputed interest expense; ground rent is recorded as an operating expense. The fair value of the lease property will be depreciated over the building’s estimated useful life of forty years. At the conclusion of the lease term, the Company will de-recognize both the then carrying values of the asset and financing obligation.

Lease Exit Costs

In December 2015, the Company consolidated its Santa Monica, California office locations. In accordance with accounting for exit and disposal activities, the Company recognized a liability for lease exit costs incurred when it no longer derived economic benefit from the related leases. The liability was recognized and measured based on a discounted cash flow model when the cease use date occurred. The liability was determined based on the remaining lease rental due, reduced by estimated sublease rental income that could be reasonably obtained for the properties. The lease terms of the spaces exited expire in 2020. The liability is recorded in accrued expenses and other current liabilities (current portion) and other liabilities (non-current portion) within the consolidated balance sheets. The costs are recorded in general and administrative expense in the consolidated statement of comprehensive loss. In 2015, the Company recorded an initial $2.2 million in lease exit costs. In 2016 and 2017, the Company updated its estimates of sublease rental income for the spaces exited in December 2015 and recorded an additional expense of $3.1 million and a benefit of $0.1 million, respectively, in lease exit costs due to changes in the local commercial real estate market observed in 2016 and 2017. In 2017, the Company completed subleasing the spaces. As of December 31, 2017, the Company recognized a total of $5.2 million in lease exit cost associated with these office locations. The Company did not incur any additional costs for the year ended December 31, 2018 and does not expect to incur significant additional charges in future periods related to these exits.

The following table presents a roll forward of the lease exit liability for the years ended December 31, 2018 and 2017 (in thousands):



	Lease Exit Costs
Accrual at December 31, 2016	$	2,657
Expense	(133		)
Cash Payments	(1,170		)
Accrual at December 31, 2017	$	1,354
Cash Payments	(571		)
Accrual at December 31, 2018	$	783

Legal Proceedings

From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. In accordance with authoritative guidance, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved is material. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available. The Company is not currently a party to any material legal proceedings, other than as described below.

On March 9, 2015, the Company was named as a defendant in a lawsuit filed in the U.S. District Court for the Southern District of New York (the “NY Lanham Act Litigation”). The complaint in the NY Lanham Act Litigation, purportedly filed on behalf of numerous automotive dealers who are not participating on the TrueCar platform, alleges that the Company violated the Lanham Act as well as various state laws prohibiting unfair competition and deceptive acts or practices related to the Company’s advertising and promotional activities. The complaint seeks injunctive relief in addition to over $250 million in damages as a result of the alleged diversion of customers from the plaintiffs’ dealerships to TrueCar Certified Dealers. On April 7, 2015, the Company filed an answer to the complaint. Thereafter, the plaintiffs amended their complaint, and on July 13, 2015, the Company filed a motion to dismiss the amended complaint. On January 6, 2016, the court granted in part and denied in part the Company’s motion to dismiss with respect to some, but not all, of the advertising and promotional activities challenged in the amended complaint. Discovery in this matter has been completed. On January 19, 2018, the Company filed a motion to exclude testimony from the plaintiffs’ damages expert. On April 10 and 11, 2018, the court held an evidentiary hearing on that motion. On May 9, 2018, the court granted the Company’s motion to exclude testimony from the plaintiffs’ damages expert. On July 2, 2018, the Company filed a motion for summary judgment seeking dismissal of the amended complaint in its entirety. The court has not yet ruled on that motion. The Company believes that the portions of the amended complaint that survived the Company’s motion to dismiss are without merit, and it intends to vigorously defend itself in this matter. The Company has not recorded an accrual related to this matter as of December 31, 2018, as it does not believe a loss is probable or reasonably estimable.

On May 20, 2015, the Company was named as a defendant in a lawsuit filed by the California New Car Dealers Association in the California Superior Court for the County of Los Angeles (the “CNCDA Litigation”). The complaint sought declaratory and injunctive relief based on allegations that the Company was operating in the State of California as an unlicensed automobile dealer and autobroker. The complaint did not seek monetary relief. On July 20, 2015, the Company filed a “demurrer” to the complaint, which is a pleading that requests that the court dismiss the case. Thereafter, the plaintiffs amended their complaint, and on September 11, 2015, the Company filed a demurrer to the amended complaint. On December 7, 2015, the court granted the Company’s demurrer in its entirety, but afforded the CNCDA the opportunity to file a second amended complaint. The CNCDA filed a second amended complaint on January 4, 2016. The second amended complaint reiterated the claims in the prior complaints and added claims under theories based on the federal Lanham Act and California unfair competition law. On February 3, 2016, the Company filed a demurrer to the second amended complaint. On March 30, 2016, the court granted in part and denied in part the Company’s demurrer to the second amended complaint, dismissing the Lanham Act claim but declining to dismiss the balance of the claims at the demurrer stage of the litigation. On May 31, 2016, based on certain intervening developments in state law, the court announced that it would reconsider its March 30, 2016 order, and it invited the parties to file new briefs on the demurrer issues. On July 15, 2016, the court heard oral argument on reconsideration of the demurrer issues. On July 25, 2016, the court granted in part and denied in part the Company’s demurrer to the second amended complaint, just as it had done in its March 30, 2016 order. The litigation was previously scheduled for trial in August 2017. On April 3, 2017, the court indicated that the trial date would be postponed to a future date. On May 17, 2017, the court scheduled trial to begin on December 11, 2017. Prior to the commencement of trial, the parties entered into settlement negotiations, and on December 14, 2017, the parties entered into a binding Settlement Agreement and Release (the “CNCDA Settlement Agreement”) to fully resolve the litigation. Pursuant to the CNCDA Settlement Agreement, the litigation was dismissed with prejudice on December 21, 2017. In light of the full resolution of this matter pursuant to the CNCDA Settlement Agreement, the Company does not believe that an additional loss is probable.

On December 23, 2015, the Company was named as a defendant in a putative class action lawsuit filed by Gordon Rose in the California Superior Court for the County of Los Angeles. The complaint asserted claims for unjust enrichment, violation of the California Consumer Legal Remedies Act and violation of the California Business and Professions Code, based principally on factual allegations similar to those asserted in the NY Lanham Act Litigation and the CNCDA Litigation. The complaint sought an award of unspecified damages, interest, disgorgement, injunctive relief and attorney’s fees. In the complaint, the plaintiff sought to represent a class of California consumers defined as “[a]ll California consumers who purchased an automobile by using TrueCar, Inc.’s price certificate during the applicable statute of limitations.” On January 12, 2016, the court entered an order staying all proceedings in the case pending an initial status conference, which was scheduled for April 13, 2016. On March 16, 2016, the case was reassigned to a different judge. As a result of that reassignment, the initial status conference was rescheduled for and held on May 26, 2016. By stipulation, the stay of discovery was continued until a second status conference, which was scheduled for October 12, 2016. On July 13, 2016, the plaintiff amended his complaint. The amended complaint continues to assert claims for unjust enrichment, violation of the California Consumer Legal Remedies Act and violation of the California Business and Professions Code. The amended complaint retains the same proposed class definition as the initial complaint. Like the initial complaint, the amended complaint seeks an award of unspecified damages, punitive and exemplary damages, interest, disgorgement, injunctive relief and attorney’s fees. On September 12, 2016, the Company filed a demurrer to the amended complaint. On October 12, 2016, the court heard oral argument on the demurrer. On October 13, 2016, the court granted in part and denied in part the Company’s demurrer to the amended complaint, dismissing the unjust enrichment claim but declining to dismiss the balance of the claims at the demurrer stage of the litigation. At a status conference held on January 26, 2017, the court ruled that discovery could then proceed regarding matters related to class certification only. At a status conference held on July 25, 2017, the court set a deadline of January 8, 2018 for the filing of the plaintiff’s motion for class certification and provided that discovery could continue to proceed regarding matters related to class certification only at that time. Subsequently, the court extended to February 7, 2018 the deadline for the filing of plaintiff’s motion for class certification and for the completion of related discovery. On February 7, 2018, the plaintiff filed a motion for class certification. The court held a hearing on the plaintiff’s class certification motion on July 12, 2018 and denied the motion on July 27, 2018. On September 26, 2018, the plaintiff filed a notice of appeal and proceedings in the trial court have been stayed pending the resolution of the appeal. The Company believes that the amended complaint is without merit, and it intends to vigorously defend itself in this matter. The Company has not recorded an accrual related to this matter as of December 31, 2018 as the Company does not believe a loss is probable or reasonably estimable.

On June 30, 2017, the Company was named as a defendant in a putative class action lawsuit filed by Kip Haas in the U.S. District Court for the Central District of California. The complaint asserted claims for violation of the California Business and Professions Code, based principally on allegations of false and misleading advertising and unfair business practices. The complaint sought an award of unspecified damages, interest, injunctive relief and attorney’s fees. In the complaint, the plaintiff sought to represent a class of consumers defined as “[a]ll consumers, who, between the applicable statute of limitations and the present, obtained a TrueCar ‘guaranteed’ price” and “[a]ll consumers, who, between the applicable statute of limitations and the present, obtained a TrueCar ‘guaranteed’ price pertaining to a vehicle located at Riverside Mazda.” On or around October 23, 2017, the parties reached an agreement in principle to settle this matter on an individual (non-classwide) basis in exchange for the payment of an immaterial amount to Mr. Haas. On November 27, 2017, the parties entered into a binding Confidential Settlement Agreement and Mutual Release (the “Haas Settlement Agreement”) on the same financial terms agreed to in principle on or around October 23, 2017. Thereafter, the Company fully satisfied the financial terms of the Haas Settlement Agreement, and pursuant to the Haas Settlement Agreement, the litigation was dismissed with prejudice on December 1, 2017. In light of the full resolution of this matter pursuant to the Haas Settlement Agreement, and the Company does not believe that an additional loss beyond the above-noted immaterial payment is probable.

On October 18, 2017, the Company was named as a defendant in a lawsuit filed by Cox Automotive, Inc. (“Cox Automotive”) in the Supreme Court of the State of New York in the County of Nassau. As it relates to the Company, the complaint sought an award of unspecified damages, disgorgement, return of property taken or retained, injunctive relief and attorney’s fees. The complaint alleged that the Company engaged in tortious interference with a contractual relationship between Cox Automotive and one of its former employees, among other claims against the former Cox Automotive employee, who is also named as a defendant in the lawsuit. On October 20, 2017, the court granted a temporary restraining order prohibiting the Company from employing the former Cox Automotive employee pending the court’s ruling on Cox Automotive’s request for the entry of a preliminary injunction. On November 13, 2017, oral argument was held on Cox Automotive’s request for the entry of a preliminary injunction. On January 23, 2018, the court dissolved the temporary restraining order and denied the request by Cox Automotive for the entry of a preliminary injunction. On February 27, 2018, the parties filed a “stipulation of discontinuance,” which terminated the case. The Company was not required to make any monetary payment or provide any other consideration in exchange for the stipulation of discontinuance. In light of the termination of the litigation on this basis, the Company has not recorded an accrual related to this matter as of December 31, 2018, as the Company does not believe a loss is probable.

On March 30, 2018, the Company and one of its former officers were named as defendants in a putative securities class action filed by Leon Milbeck in the U.S. District Court for the Central District of California. The complaint sought an award of unspecified damages, interest, attorney’s fees and equitable relief based on allegations that the defendants made false or misleading statements about our business, operations, prospects and performance during a purported class period of February 16, 2017 through November 6, 2017 in violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. On June 27, 2018, the court appointed the Oklahoma Police Pension and Retirement Fund as lead plaintiff. The plaintiff filed an amended complaint on August 24, 2018. The amended complaint reiterated the claims in the prior complaint and added claims under Section 11 of the Exchange Act. The amended complaint also added our chief executive officer Chip Perry, our interim chief financial officer John Pierantoni, our former chief financial officer Michael Guthrie and our underwriters and directors who signed the registration statement for our secondary offering that occurred during the class period as defendants. On October 31, 2018, the plaintiff dismissed the underwriters from the litigation “without prejudice,” meaning that they could be reinstated as defendants at a later time, and on November 5, 2018, the Company filed a motion to dismiss the amended complaint, which the court denied on February 5, 2019. The Company believes that the amended complaint is without merit and intends to vigorously defend itself in this matter. The Company has not recorded an accrual related to this matter as of December 31, 2018 as the Company does not believe a loss is probable or reasonably estimable.

Employment Contracts

The Company has entered into employment contracts with certain executives of the Company. Employment under these contracts is at-will employment. However, under the provisions of the contracts, the Company would incur severance obligations of up to twelve months of the executive’s annual base salary for certain events, such as involuntary terminations.

In December 2015, pursuant to an executed separation agreement with the Company’s former CEO, the Company paid its former CEO: (i) a 2015 bonus of $0.1 million; (ii) severance of approximately $0.5 million, paid in approximately equal semi-monthly payments through December 31, 2016; and (iii) an annual fee of $0.1 million for limited advisory services to the Company during the period from his termination date to May 2018. Additionally, the Company continued to provide its former CEO health insurance benefits through the end of May 2018. At December 31, 2017, the remaining severance liability related to the former CEO was $0.1 million. At December 31, 2018, there was no remaining severance liability related to the former CEO.

For the year ended December 31, 2016, the Company incurred severance costs totaling $1.8 million related to an executive who terminated during the year, and several other employees whose terminations related to a reorganization of the Company’s product and technology teams. The reorganization of the Company’s product and technology teams was necessary to better align the Company’s resources during its transition from multiple software platforms to a unified architecture. Of the total severance costs, the Company recorded $1.3 million in technology and development and $0.5 million in sales and marketing in the Company’s consolidated statements of comprehensive loss for the year ended December 31, 2016. At December 31, 2017, there was no remaining severance liability related to these severance costs.

Indemnifications

In the ordinary course of business, the Company may provide indemnities of varying scope and terms to customers, vendors, lessors, investors, directors, officers, employees, and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or intellectual property infringement claims made by third parties. These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss provisions. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable. To date, there has not been a material claim paid by the Company, nor has the Company been sued in connection with these indemnification arrangements. At December 31, 2018 and 2017, the Company has not accrued a liability for these guarantees, because the likelihood of incurring a payment obligation, if any, in connection with these guarantees is not probable or reasonably estimable.

Purchase Obligations

At December 31, 2018, the Company had the following purchase obligations (in thousands):



	Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years
Purchase obligations	$	7,817	$	5,558	$	2,254	$	5	$	—

Purchase obligations include long-term agreements to purchase data information, software-related licenses, and support services, and other obligations that are enforceable and legally binding as of December 31, 2018. Purchase obligations exclude agreements that are cancelable without penalty.

Stockholders' Equity

12 Months Ended

Dec. 31, 2018

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Follow-on Public Offering

On January 19, 2017, the Company filed a shelf registration statement on Form S-3 under which the Company may, from time to time, sell securities up to a total dollar amount of $100 million, and selling stockholders may sell, from time to time, up to 20 million of shares of common stock (the “2017 Shelf Registration”). The 2017 Shelf Registration was declared effective by the SEC on February 6, 2017.

On April 26, 2017, the Company entered into an underwriting agreement to sell up to 1,150,000 shares of its common stock at $16.50 per share in a public offering (including shares subject to the underwriters’ option to purchase additional shares). The Company sold 1,150,000 shares in the offering with aggregate net proceeds to the Company of $17.4 million, net of underwriting discounts and commissions and offering costs of $1.6 million. Selling stockholders party to the underwriting agreement also sold an aggregate of 9,200,000 shares of common stock in the offering (including shares subject to the underwriters’ option to purchase additional shares). The Company did not receive any proceeds from the shares sold by the selling stockholders. The offering closed on May 2, 2017.

Warrants Issued to USAA

In May 2014, the Company extended our affinity group marketing agreement with USAA, the largest affinity partner and a significant stockholder of the Company. As part of the agreement, on May 1, 2014, the Company issued to USAA a warrant to purchase 1,458,979 shares of the Company’s common stock, which will be exercisable in two tranches. The first tranche of 392,313 shares has an exercise price of $7.95 per share and the second tranche of 1,066,666 shares has an exercise price of $15.00 per share. The warrant becomes exercisable based on the achievement of performance milestones based on the level of vehicle sales of USAA members through the Company’s auto buying platforms. The warrant terminates on the earlier of (i) the eighth anniversary of the date of issuance, (ii) the first anniversary of the termination of the USAA car-buying program, or (iii) the date on which the Company no longer operates the USAA car-buying program. In addition, the agreement provides for the Company to spend marketing program funds with the actual level of marketing spend to be mutually agreed upon by USAA and the Company, subject to limits based on the number of actual vehicle sales generated through the affinity group marketing program (Note 14).

For the years ended December 31, 2018 and 2017, there was no warrant expense recognized. For the year ended December 31, 2016, the Company recognized expense of $0.1 million related to warrants to purchase 10,666 shares of common stock that have been earned and are vested. The fair value of the warrants was based on the following assumptions using the Black-Scholes option-pricing model:



	Year Ended December 31,
		2016
Risk-free interest rate		1.13	%	to	1.98	%
Contractual life (years)		5.3		to	6.3
Expected volatility		46.7	%	to	48.8	%
Dividend yield		—

At December 31, 2018, there were 509,642 shares that were earned and outstanding under the warrant with an additional 949,337 remaining shares that are available for issuance upon the achievement of minimum performance milestones.

Reserve for Unissued Shares of Common Stock

The Company is required to reserve and keep available out of its authorized but unissued shares of common stock such number of shares sufficient for the exercise of all outstanding warrants, plus shares granted and available for grant under the Company’s equity incentive plans.

The number of shares of the Company’s common stock reserved for these purposes at December 31, 2018 is as follows:



	Number of Shares
Outstanding stock options	14,114,651
Outstanding restricted stock units	5,375,963
Outstanding common stock warrants	1,458,979
Additional shares available for grant under the equity plan	4,944,880
Total	25,894,473

Stock-based Awards

12 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Awards

The Company has four equity incentive plans: the Amended and Restated 2005 Stock Plan (the “2005 Plan”), the 2008 Stock Plan (the “2008 Plan”), the 2014 Equity Incentive Plan (the “2014 Plan”), and the 2015 Inducement Equity Incentive Plan (the “Inducement Plan”). In connection with the Company’s initial public offering in May 2014 (the “IPO”), the 2005 Plan and the 2008 Plan were terminated. Upon the IPO, the shares reserved for issuance under the 2014 Plan include (i) shares that have been reserved but not issued pursuant to any awards granted under the 2005 Plan, plus (ii) shares subject to stock options or similar awards granted under the 2005 Plan or the 2008 Plan that, after the registration date, expire or terminate without having been exercised in full and shares issued pursuant to awards granted under the 2005 Plan or the 2008 Plan are forfeited to or repurchased by the Company. In addition, the shares available for issuance under the 2014 Plan include an annual increase on January 1 of each year equal to the least of: (x) 10,000,000 shares; (y) 5% of the total outstanding shares of TrueCar common stock as of the last day of the previous fiscal year; or (z) such other amount as determined by the Company’s Board of Directors. As of December 31, 2018, the total number of shares available for future issuance under the 2014 Plan was 4,944,880 shares. In accordance with the evergreen provision, effective January 1, 2019, an additional 5,216,875 shares of common stock were authorized to be issued under the 2014 Plan. Under the Inducement Plan, there were 1,840,000 shares of common stock reserved for the issuance of nonqualified stock options. In December 2015, in conjunction with the hiring of the Company’s new president and CEO, the Company granted a stock option to purchase 1,840,000 shares of the Company’s common stock under the Inducement Plan that vest over a four year period and expire ten years from the date of grant. There are no shares available for future issuance under the Inducement Plan.

Under the 2014 Plan, the Company has the ability to issue incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, and performance shares. The exercise price of stock options granted under the 2014 Plan must at least equal the fair market value of the Company’s common stock on the date of grant. Stock options granted generally vest monthly over a four year period and expire ten years from the date of grant. Restricted stock units generally vest quarterly over a four to five year period.

Stock Options

A summary of the Company’s stock option activity for the year ended December 31, 2018 is as follows:



	Number of Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value ⁽¹⁾
					(in years)	(in millions)
Outstanding at December 31, 2017	16,714,216		$	12.46	7.7
Granted	1,692,999		9.78
Exercised	(2,182,903	)	9.05
Forfeited/expired	(2,109,661	)	14.77
Outstanding at December 31, 2018	14,114,651		$	12.32	7.0	$	5.8
Vested and expected to vest at December 31, 2018	14,114,651		$	12.32	7.0	$	5.8
Exercisable at December 31, 2018	8,301,337		$	11.42	6.1	$	4.3


(1)	The aggregate intrinsic value represents the excess of the closing price of the Company’s common stock of $9.06 on December 31, 2018 over the exercise price of in-the-money stock option awards.

At December 31, 2018, total remaining stock-based compensation expense for unvested option awards, including performance-based stock option awards, was $32.3 million, which is expected to be recognized over a weighted-average period of 2.4 years.

The weighted-average grant-date fair value per share of options granted for the years ended December 31, 2018, 2017, and 2016 was $4.60, $8.77, and $4.50, respectively. The Company recorded stock-based compensation expense for stock option awards of $16.0 million, $17.3 million, and $14.8 million, for the years ended December 31, 2018, 2017, and 2016, respectively.

The total intrinsic value of options exercised in 2018, 2017, and 2016 was $6.6 million, $120.4 million, and $8.5 million, respectively.

Restricted Stock Units

A summary of the Company’s restricted stock unit (“RSU”) activity for the year ended December 31, 2018 is as follows:



	Number of Shares		Weighted-Average Grant Date Fair Value
Non-vested — December 31, 2017	4,284,438		$	11.99
Granted	4,098,970		10.00
Vested	(1,999,633	)	10.86
Forfeited	(1,007,812	)	11.35
Non-vested — December 31, 2018	5,375,963		$	11.01

The total fair market value of RSUs that vested for the years ended December 31, 2018, 2017, and 2016 was $22.4 million, $25.6 million, and $11.8 million, respectively.

The weighted-average grant-date fair value of RSUs granted for the years ended December 31, 2018, 2017, and 2016 was $10.00, $18.26, and $7.37, respectively. For the years ended December 31, 2018, 2017, and 2016, the Company recorded $21.2 million, $14.9 million, and $9.9 million in compensation expense, respectively. At December 31, 2018, total remaining stock-based compensation expense for non-vested RSUs is $55.7 million, which is expected to be recognized over a weighted-average period of 2.8 years.

Valuation Assumptions and Stock-based Compensation Cost

The fair value of stock options granted to employees is estimated on the grant date using the Black-Scholes option-pricing model. This valuation model requires the Company to make assumptions and judgments about the variables used in the calculation, including the expected term, the volatility of the Company’s common stock, risk-free interest rate, and expected dividends. The Company uses the simplified method under the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate expected term for plain vanilla share options. For performance-based option awards, the Company determines the expected term based upon historical exercise and post-vesting cancellations, adjusted for expected future exercise behavior. The Company’s computation of volatility is based on an average of the historical volatilities of the common stock of several entities with characteristics similar to those of the Company. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The Company uses an expected dividend of zero, as it does not anticipate paying any dividends in the foreseeable future.

The fair value of each stock option award was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions:



	Year Ended December 31,
	2018		2017		2016
Risk-free interest rate	2.85	%	1.89	%	1.32	%
Expected term (years)	5.94		6.25		5.96
Expected volatility	46	%	47	%	49	%
Dividend yield	—		—		—

As a result of the Company’s early adoption of the revised share-based payment guidance in 2016, forfeitures are recognized as they occur. Prior to the adoption of this guidance, forfeitures were estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company recorded stock-based compensation cost relating to stock options and RSUs in the following categories on the accompanying consolidated statements of comprehensive loss (in thousands):



	Year Ended December 31,
	2018		2017		2016
Cost of revenue	$	1,726	$	1,105	$	960
Sales and marketing	13,950		10,353		5,837
Technology and development	10,589		8,060		4,398
General and administrative	10,954		12,723		13,544
Total stock-based compensation expense	37,219		32,241		24,739
Amount capitalized to internal-use software	1,890		1,407		1,012
Total stock-based compensation cost	$	39,109	$	33,648	$	25,751