Key Metrics & Traffic - Traffic increased by 18% year-over-year, reaching 92 million average monthly unique visitors in Q1 2021[6] - Total units decreased by 16% year-over-year[6] - Franchise dealer count decreased by 9% year-over-year, totaling 14,148 dealers[6] - Independent dealer count decreased by 12% year-over-year, totaling 3,702 dealers[6] Revenue Performance - Total revenue decreased by 30% year-over-year[11] - New Dealer Product Revenue decreased by 25% year-over-year[11] - OEM Incentives Revenue increased by 15% year-over-year[11] - Net Independent Revenue decreased by 41% year-over-year[11] - Net Franchise Revenue decreased by 36% year-over-year[11] Franchise & Independent Dealers - Franchise Dealer Count decreased by 11% year-over-year[15] - Franchise Revenue / Dealer decreased by 29% year-over-year[15] - Independent Dealer Count increased by 3% year-over-year[16] - Independent Revenue / Dealer decreased by 44% year-over-year[16] Q2 2021 Outlook - The company anticipates Q2 revenue between $65 million and $66 million[37]

[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents TrueCar, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and notes, detailing financial position and key accounting events [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets from $458.061 million at year-end 2020 to $442.271 million at the end of Q1 2021, primarily due to a reduction in 'Other current assets' Condensed Consolidated Balance Sheets ($ millions) | | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total current assets** | $311.843 | $324.938 | | **Total assets** | **$442.271** | **$458.061** | | **Total current liabilities** | $39.291 | $42.877 | | **Total liabilities** | **$70.079** | **$75.279** | | **Total stockholders' equity** | **$372.192** | **$382.782** | [Condensed Consolidated Statements of Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) For the three months ended March 31, 2021, revenues decreased to $65.105 million from $78.917 million in the prior-year period, resulting in a net loss of $8.418 million Condensed Consolidated Statements of Comprehensive Loss ($ millions) | | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Revenues** | $65.105 | $78.917 | | **Total costs and operating expenses** | $73.740 | $89.535 | | **Loss from operations** | ($8.635) | ($10.618) | | **Loss from continuing operations** | ($8.418) | ($10.390) | | **Net loss** | **($8.418)** | **($10.669)** | | **Loss per share, basic and diluted** | ($0.09) | ($0.10) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was $5.479 million in Q1 2021, while investing activities provided $4.684 million, and financing activities used $8.904 million, primarily for stock repurchases Condensed Consolidated Statements of Cash Flows ($ millions) | | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $5.479 | $5.550 | | **Net cash provided by (used in) investing activities** | $4.684 | ($3.505) | | **Net cash used in financing activities** | ($8.904) | ($0.724) | | **Net increase in cash and cash equivalents** | $1.259 | $1.321 | | **Cash and cash equivalents at end of period** | $274.573 | $182.855 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies and events, including the ALG divestiture, goodwill impairment, credit facility extension, stock repurchases, and litigation updates - On November 30, 2020, the Company completed the sale of its subsidiary ALG to J.D. Power for **$112.5 million** in cash, plus potential earnouts. The results of ALG are now reported as discontinued operations. A **$7.5 million** earnout was received in Q1 2021[39](index=39&type=chunk)[40](index=40&type=chunk) - In Q1 2020, the company recognized a non-cash goodwill impairment charge of **$10.2 million** (**$8.3 million** from continuing operations) due to economic disruption from COVID-19 and the announced termination of its USAA partnership[53](index=53&type=chunk)[130](index=130&type=chunk) - The company repurchased **1.7 million shares** of common stock for **$7.8 million** during Q1 2021 under its authorized share repurchase program. As of March 31, 2021, **$25.0 million** remained available for future repurchases[85](index=85&type=chunk) Disaggregation of Revenue ($ millions) | Revenue Category | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Dealer revenue | $62.057 | $73.798 | | OEM incentives revenue | $2.797 | $3.523 | | Other revenue | $0.251 | $1.596 | | **Total revenues** | **$65.105** | **$78.917** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's Q1 2021 financial performance, highlighting a 17.5% revenue decline to $65.1 million, key metric changes, COVID-19 impacts, and a strong liquidity position [Overview and COVID-19 Impact](index=26&type=section&id=Overview%20and%20COVID-19%20Impact) TrueCar operates a digital automotive marketplace, facing negative impacts from the COVID-19 pandemic, including vehicle inventory shortages and potential reductions in dealer demand for services - TrueCar is a digital automotive marketplace that connects consumers with Certified Dealers and provides data and analytics to consumers, dealers, and OEMs[95](index=95&type=chunk) - The business is negatively affected by the COVID-19 pandemic, particularly through supply-chain disruptions causing a global automotive semiconductor chip shortage, leading to automobile inventory shortages that may reduce dealer demand for services[97](index=97&type=chunk) [Key Metrics](index=28&type=section&id=Key%20Metrics) In Q1 2021, Average Monthly Unique Visitors grew 18.4% to 9.2 million, while Units sold decreased 15.8% to 165,858, primarily due to the USAA partnership termination and inventory shortages Key Operating Metrics | Metric | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Average Monthly Unique Visitors | 9,175,703 | 7,751,696 | +18.4% | | Units | 165,858 | 197,002 | -15.8% | | Monetization | $391 | $392 | -0.3% | | Franchise Dealer Count | 10,446 | 11,356 | -8.0% | | Independent Dealer Count | 3,702 | 4,193 | -11.7% | - The decrease in units was primarily attributed to the termination of the USAA partnership, which ended on September 30, 2020, and lower automobile inventory levels from the global semiconductor chip shortage[101](index=101&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Total revenues for Q1 2021 decreased by 17.5% to $65.1 million, mainly due to the USAA partnership termination, while operating expenses decreased across most categories, improving the loss from continuing operations - Revenues decreased by **$13.8 million** (**17.5%**) year-over-year, primarily due to an **$11.4 million** decrease in Auto Buying Program revenue resulting from the termination of the USAA partnership[119](index=119&type=chunk) - Sales and marketing expenses decreased by **$6.0 million** (**13.0%**) year-over-year, reflecting lower revenue share paid to affinity partners, reduced travel and conference expenses, and lower creative production costs[124](index=124&type=chunk) - General and administrative expenses increased by **$0.6 million** (**4.9%**) year-over-year, mainly because the prior year period included a **$2.0 million** insurance settlement payment received by the company, which offset legal expenses[127](index=127&type=chunk) Reconciliation of Net Loss to Adjusted EBITDA ($ millions) | | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net loss | ($8.418) | ($10.669) | | Loss from continuing operations | ($8.418) | ($10.390) | | **Adjusted EBITDA** | **$2.093** | **$6.725** | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2021, TrueCar's principal source of liquidity was $274.6 million in cash and cash equivalents, deemed sufficient to fund operations for at least the next 12 months - Principal sources of liquidity at March 31, 2021, were cash and cash equivalents totaling **$274.6 million**[135](index=135&type=chunk) - In April 2021, the company amended its credit facility, extending the maturity date to April 12, 2024, providing a **$35.0 million** revolving line of credit with no outstanding amounts as of March 31, 2021[137](index=137&type=chunk) - Cash used in financing activities was **$8.9 million** for Q1 2021, primarily due to **$7.8 million** in payments for the repurchase of common stock[143](index=143&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states it does not have material exposure to market risks, with interest rate, inflation, and foreign currency exchange risks deemed minimal - The company does not believe it has material exposure to market risk from changes in interest rates, inflation, or foreign currency exchange rates[148](index=148&type=chunk) - Cash and cash equivalents of **$274.6 million** are held in bank deposits and short-term money market funds, carrying some interest rate risk, but fluctuations have not been significant[149](index=149&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2021, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[153](index=153&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[154](index=154&type=chunk) [PART II - OTHER INFORMATION](index=41&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 8 of the financial statements for details on legal proceedings, including the resolution of certain derivative suits and ongoing litigation - The company refers to Note 8 of the condensed consolidated financial statements for information on legal proceedings[156](index=156&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) The company outlines significant risks related to the pandemic, business and industry challenges, and common stock ownership, including supply chain disruptions, partnership termination, and regulatory complexities [Risks Related to the Coronavirus Pandemic](index=41&type=section&id=Risks%20Related%20to%20the%20Coronavirus%20Pandemic) The COVID-19 pandemic has materially and negatively affected the business through reduced car sales, dealer cancellations, operational disruptions, and increased forecasting difficulties - The COVID-19 pandemic has caused significant disruption, leading to reduced car sales, dealer suspensions, and a decline in units, which directly lowered revenue[158](index=158&type=chunk) - The pandemic has created forecasting difficulties, leading the company to withdraw its full-year 2020 guidance and provide only abbreviated guidance for Q1 2021[161](index=161&type=chunk) [Risks Related to Our Business and Industry](index=47&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) This section details numerous business and industry risks, including the adverse effects of the USAA partnership termination, low inventory levels, intense competition, and a complex regulatory framework - The termination of the partnership with USAA, which accounted for **29%** of units in 2019, has had and will continue to have a material adverse effect on the company's business, revenue, and operating results[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) - Low automobile inventory levels, caused by factors like semiconductor shortages, adversely impact the business by reducing dealers' willingness to use marketing services and lowering manufacturers' incentive spending[178](index=178&type=chunk)[179](index=179&type=chunk) - The company is subject to a complex framework of laws and regulations regarding motor vehicle sales, advertising, and brokering, which could subject it to claims, penalties, and challenges to its business model[193](index=193&type=chunk) - Evolving data privacy laws, such as the California Consumer Privacy Act (CCPA), impose significant compliance costs and potential liability, and could negatively impact business practices[203](index=203&type=chunk)[204](index=204&type=chunk) [Risks Related to Ownership of Our Common Stock](index=76&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Risks for stockholders include high stock price volatility, potential failure to meet public guidance, significant ownership concentration, and anti-takeover provisions, with no anticipated dividends in the foreseeable future - The trading price of the company's common stock has been and may continue to be volatile[236](index=236&type=chunk) - As of March 31, 2021, executive officers, directors, and holders of **5%** or more of common stock beneficially owned approximately **60%** of outstanding shares, allowing them to exercise significant control over corporate decisions[238](index=238&type=chunk) - The company has never paid cash dividends and does not anticipate doing so in the foreseeable future, intending to retain earnings for business expansion[242](index=242&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=83&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities and confirms no material change in the planned use of public offering proceeds, having repurchased 1.68 million shares for $7.8 million in Q1 2021 Share Repurchase Activity - Q1 2021 | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet Be Purchased | | :--- | :--- | :--- | :--- | | Jan 1 - Jan 31, 2021 | 1,683,692 | $4.63 | $25,000,004 | | Feb 1 - Feb 28, 2021 | — | N/A | $25,000,004 | | Mar 1 - Mar 31, 2021 | — | N/A | $25,000,004 | [Item 6. Exhibits](index=84&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including separation agreements, credit facility amendments, and CEO/CFO certifications [Signatures](index=87&type=section&id=Signatures) The report is signed and duly authorized by Michael D. Darrow, President & Chief Executive Officer, and Jantoon E. Reigersman, Chief Financial Officer, on May 6, 2021

TrueCar, Inc. (NASDAQ:TRUE) Q3 2020 Earnings Conference Call November 5, 2020 4:30 PM ET Company Participants Danny Vivier - Vice President of Investor Relations Mike Darrow - President and Chief Executive Officer Noel Watson - Chief Financial Officer Conference Call Participants Lee Krowl - B. Riley Securities Rajat Gupta - JPMorgan Marvin Fong - BTIG Nick Jones - Citigroup Operator Greetings, and welcome to TrueCar's Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. I will now turn th ...

PART I - FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements of TrueCar, Inc, including balance sheets, statements of comprehensive income, stockholders' equity, and cash flows [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The company's total assets and stockholders' equity slightly decreased from December 2019 to September 2020, alongside a reduction in total liabilities | Metric | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Total Assets | $397,549 | $421,687 | $(24,138) | -5.72% | | Total Liabilities | $75,646 | $94,416 | $(18,770) | -19.88% | | Total Stockholders' Equity | $321,903 | $327,271 | $(5,368) | -1.64% | | Current Assets | $259,803 | $239,741 | $20,062 | 8.37% | | Current Liabilities | $39,832 | $54,170 | $(14,338) | -26.47% | | Current assets of discontinued operations | $27,280 | $6,777 | $20,503 | 302.53% | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) TrueCar reported net income for Q3 2020, a significant improvement from a net loss in the prior-year period, driven by reduced operating expenses despite lower revenues | Metric (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenues | $77,247 | $85,785 | $214,718 | $250,162 | | Total Costs & Expenses| $67,512 | $94,987 | $226,467 | $301,140 | | Income (Loss) from Operations | $9,735 | $(9,202) | $(11,749) | $(50,978) | | Net Income (Loss) | $11,589 | $(7,652) | $(10,322) | $(46,077) | | Net Income (Loss) per Share, Basic (Continuing Operations) | $0.09 | $(0.08) | $(0.11) | $(0.46) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity slightly decreased due to net losses and common stock repurchases, partially offset by stock-based compensation | Metric (in thousands) | Dec 31, 2019 | Sep 30, 2020 | | :-------------------- | :----------- | :----------- | | Total Stockholders' Equity | $327,271 | $321,903 | | Net Loss (9 months) | N/A | $(10,669) | | Stock-based Compensation (9 months) | N/A | $6,559 | | Repurchase of Common Stock (3 months) | N/A | $(11,677) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company generated significantly more cash from operations in the first nine months of 2020 compared to 2019, while financing activities shifted to a use of cash | Metric (in thousands) | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Net Cash Provided by Operating Activities | $23,694 | $7,251 | | Net Cash Used in Investing Activities | $(9,158) | $(31,324) | | Net Cash (Used in) Provided by Financing Activities | $(17,371) | $408 | | Net Decrease in Cash and Cash Equivalents | $(2,835) | $(23,665) | | Cash and Cash Equivalents at End of Period | $178,699 | $172,463 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details the company's accounting policies, the divestiture of ALG, fair value measurements, goodwill impairment, and other key financial disclosures [Note 1. Organization and Nature of Business](index=12&type=section&id=Note%201.%20Organization%20and%20Nature%20of%20Business) TrueCar operates a digital automotive marketplace connecting consumers with dealers and OEMs, and is divesting its ALG subsidiary to focus on core operations - TrueCar is a digital automotive marketplace offering pricing transparency, connecting consumers with Certified Dealers, and enabling OEMs to target incentives[25](index=25&type=chunk) - ALG, a subsidiary providing residual value forecasts and automotive purchase data, is being sold to J.D. Power, with the transaction expected to close by the end of 2020[26](index=26&type=chunk) - TrueCar's Retail Solutions, offered through TCDS, combine TrueCar Trade (trade-in vehicle valuation) and Payments (monthly payment calculation via DealerScience technology)[27](index=27&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=12&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines key accounting policies, the impact of the COVID-19 pandemic, and the adoption of new guidance for credit losses and income taxes - The unaudited condensed consolidated financial statements are prepared in conformity with GAAP and SEC regulations, with ALG's historical results reported as discontinued operations due to its planned divestiture[28](index=28&type=chunk) - The **COVID-19 pandemic** has negatively impacted TrueCar's operations and customer base, leading to decreased demand for cars and potential delays in receivable payments[32](index=32&type=chunk) - Effective January 1, 2020, TrueCar adopted new accounting guidance for measuring credit losses based on expected losses, considering historical, current, and forecast information[35](index=35&type=chunk)[37](index=37&type=chunk) | Metric (in thousands) | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | | Allowances, at beginning of period | $10,304 | $6,591 | | Charged as a reduction of revenue | $1,581 | $6,939 | | (Reduction of) charged to bad debt expense | $(680) | $2,805 | | Write-offs, net of recoveries | $(2,752) | $(7,882) | | Allowances, at end of period | $8,453 | $8,453 | - TrueCar early adopted new FASB guidance on income taxes (ASU No. 2019-12) effective January 1, 2020, eliminating the exception for intraperiod tax allocation[41](index=41&type=chunk) [Note 3. Discontinued Operations](index=17&type=section&id=Note%203.%20Discontinued%20Operations) TrueCar agreed to sell its ALG subsidiary to J.D. Power for **$112.5 million** in cash, with potential earnouts, shifting focus to its core marketplace business - TrueCar agreed to sell its ALG subsidiary to J.D. Power for **$112.5 million cash** at closing, with potential earnouts of up to **$22.5 million** based on ALG's revenue metrics in 2020 and 2022[45](index=45&type=chunk) | Metric (in thousands) | Sep 30, 2020 | Dec 31, 2019 | | :----------------------------------- | :----------- | :----------- | | Total Assets of Discontinued Operations | $27,280 | $30,895 | | Total Liabilities of Discontinued Operations | $754 | $755 | | Metric (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenues | $5,221 | $4,770 | $13,961 | $14,050 | | Total Costs & Operating Expenses | $3,199 | $3,555 | $12,409 | $11,008 | | Income from Discontinued Operations, net of taxes | $2,000 | $1,157 | $1,853 | $2,555 | [Note 4. Fair Value Measurements](index=18&type=section&id=Note%204.%20Fair%20Value%20Measurements) The company measures financial assets and liabilities at fair value, with cash equivalents classified as Level 1 and contingent consideration as Level 3 - Fair value is defined as the exchange price in an orderly transaction between market participants, categorized into Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[49](index=49&type=chunk)[50](index=50&type=chunk) | Metric (in thousands) | Sep 30, 2020 (Level 1) | Dec 31, 2019 (Level 1) | | :-------------------- | :--------------------- | :--------------------- | | Cash Equivalents | $167,658 | $174,429 | | Metric (in thousands) | Sep 30, 2020 (Level 3) | Dec 31, 2019 (Level 3) | | :-------------------------------- | :--------------------- | :--------------------- | | Contingent Consideration, current | $2,428 | $2,441 | | Contingent Consideration, non-current | $0 | $2,336 | | Total Liabilities | $2,428 | $4,777 | - Contingent consideration liabilities are measured using a discounted cash flow valuation technique, with unobservable inputs including the probability of achievement and discount rate[55](index=55&type=chunk) [Note 5. Goodwill](index=19&type=section&id=Note%205.%20Goodwill) TrueCar recognized an **$8.3 million** non-cash goodwill impairment charge in Q1 2020, triggered by market volatility, COVID-19, and the USAA partnership termination | Metric (in thousands) | Goodwill | | :-------------------- | :------- | | Balance at Dec 31, 2019 | $59,469 | | Impairment | $(8,264) | | Balance at Sep 30, 2020 | $51,205 | - A goodwill impairment test was performed as of March 31, 2020, due to stock price volatility, declining market capitalization, COVID-19 economic disruption, and the USAA partnership extension agreement[56](index=56&type=chunk)[57](index=57&type=chunk) - The impairment test resulted in a non-cash impairment charge of **$10.2 million** (including discontinued operations) during the three months ended March 31, 2020[57](index=57&type=chunk) [Note 6. Property and Equipment, net](index=20&type=section&id=Note%206.%20Property%20and%20Equipment,%20net) Net property and equipment decreased to **$23.8 million** at September 30, 2020, primarily due to accumulated depreciation | Metric (in thousands) | Sep 30, 2020 | Dec 31, 2019 | | :------------------------------------------ | :----------- | :----------- | | Computer equipment, software, and internally developed software | $64,411 | $55,844 | | Furniture and fixtures | $4,719 | $4,927 | | Leasehold improvements | $16,059 | $15,839 | | Less: Accumulated depreciation | $(61,400) | $(48,829) | | Total property and equipment, net | $23,789 | $27,781 | - Total depreciation and amortization expense for property and equipment was **$13.5 million** for the nine months ended September 30, 2020[58](index=58&type=chunk) [Note 7. Credit Facility](index=20&type=section&id=Note%207.%20Credit%20Facility) The company maintains a **$35.0 million** revolving credit facility, with **$31.9 million** available and no outstanding amounts as of September 30, 2020 - TrueCar has a **$35.0 million** revolving credit facility, with a **$10.0 million** subfacility for letters of credit, expiring on February 18, 2021[59](index=59&type=chunk) - The credit facility's interest rate is based on the prime rate or LIBOR, plus a spread determined by the company's adjusted quick ratio[60](index=60&type=chunk)[61](index=61&type=chunk) - As of September 30, 2020, TrueCar had no outstanding amounts under the credit facility and **$31.9 million** available, after accounting for **$3.1 million** in outstanding letters of credit[64](index=64&type=chunk)[66](index=66&type=chunk) [Note 8. Commitments and Contingencies](index=22&type=section&id=Note%208.%20Commitments%20and%20Contingencies) The company committed to a restructuring plan incurring **$8.3 million** in costs and is involved in various legal proceedings, most of which are resolved or not expected to result in a loss - TrueCar initiated a restructuring plan in May 2020, incurring approximately **$8.3 million** in costs during the nine months ended September 30, 2020, to enhance productivity and efficiency[67](index=67&type=chunk)[69](index=69&type=chunk) - The Milbeck Federal Securities Litigation was resolved in May 2020, with the **$28.25 million** settlement fully covered by insurance[71](index=71&type=chunk) - The California Derivative Litigation and Delaware Consolidated Derivative Litigation were resolved in October and September 2020, respectively, with **no anticipated loss** for TrueCar[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) - The Lee Derivative Litigation and Trademark Litigation are ongoing, but TrueCar does not believe a loss is probable or reasonably estimable as of September 30, 2020[75](index=75&type=chunk)[77](index=77&type=chunk) [Note 9. Stock-based Awards](index=26&type=section&id=Note%209.%20Stock-based%20Awards) Stock-based compensation expense decreased for the nine months ended September 30, 2020, with significant remaining expense to be recognized over the next few years | Metric | Sep 30, 2020 | Dec 31, 2019 | | :-------------------------------- | :----------- | :----------- | | Stock Options Outstanding | 10,906,883 | 10,625,980 | | Weighted-Average Exercise Price | $9.56 | $11.22 | | Non-vested Restricted Stock Units | 8,079,873 | 5,890,992 | | Metric (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Stock-based Compensation Expense | $5,607 | $6,805 | $17,632 | $30,260 | | Amount Capitalized to Internal Software Use | $293 | $394 | $992 | $1,304 | - Remaining stock-based compensation expense for unvested stock options was **$8.8 million** and for non-vested restricted stock units was **$33.4 million** as of September 30, 2020[80](index=80&type=chunk)[81](index=81&type=chunk) [Note 10. Income Taxes](index=27&type=section&id=Note%2010.%20Income%20Taxes) The company's income tax provision reflects goodwill amortization and impairment, while a 2019 ownership change limited the use of net operating loss carryforwards - TrueCar early adopted ASU No. 2019-12 on January 1, 2020, eliminating the intraperiod tax allocation exception, which resulted in **no tax benefit** recorded in continuing operations for Q3 2020[85](index=85&type=chunk) | Metric (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Provision for (benefit from) income taxes | $38 | $(263) | $(132) | $(1,080) | - An ownership change as of December 31, 2019, is estimated to cause up to **$86.8 million** of federal and **$2.5 million** of state net operating loss carryforwards to expire unused[88](index=88&type=chunk) - The CARES Act and California legislation suspending NOL deductions for 2020-2022 did not materially impact TrueCar's results for the three and nine months ended September 30, 2020[89](index=89&type=chunk) [Note 11. Net Income (Loss) Per Share](index=28&type=section&id=Note%2011.%20Net%20Income%20(Loss)%20Per%20Share) TrueCar reported net income per share of **$0.09** from continuing operations for Q3 2020 and authorized a **$75 million** share repurchase program | Metric | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income (Loss) | $11,589 | $(7,652) | $(10,322) | $(46,077) | | Net Income (Loss) per share, basic (Continuing operations) | $0.09 | $(0.08) | $(0.11) | $(0.46) | | Weighted-average common shares outstanding, diluted | 110,011 | 106,239 | 107,418 | 105,510 | - As of September 30, 2020, **13.9 million anti-dilutive shares** were excluded from diluted EPS calculation[91](index=91&type=chunk) - In July 2020, the board authorized a **$75 million** open market stock repurchase program; for Q3 2020, **2.4 million shares** were repurchased for **$11.7 million**[92](index=92&type=chunk) [Note 12. Related Party Transactions](index=29&type=section&id=Note%2012.%20Related%20Party%20Transactions) The company's partnership with USAA, a significant affinity partner, ended on September 30, 2020, while an equity method investment in Accu-Trade continues - TrueCar's partnership with USAA Federal Savings Bank (USAA FSB) for its Car Buying Service ended on September 30, 2020, for which USAA FSB paid a **$20 million** transition services fee[93](index=93&type=chunk) | Metric (in thousands) | Sep 30, 2020 | Dec 31, 2019 | | :-------------------- | :----------- | :----------- | | Accounts Receivable from USAA | $10,013 | $209 | | Revenue from USAA (3 months) | $3,500 | N/A | | Revenue from USAA (9 months) | $9,100 | N/A | | Sales and Marketing Expense (9 months) | $2,000 | $17,501 | - TrueCar holds a **20% equity method investment** in Accu-Trade, with ongoing software and data licensing agreements[95](index=95&type=chunk) [Note 13. Revenue Information](index=30&type=section&id=Note%2013.%20Revenue%20Information) The company disaggregates revenue into dealer, OEM incentives, and other categories, with dealer revenue decreasing and OEM incentives revenue increasing in Q3 2020 | Revenue Category (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Dealer revenue | $68,229 | $81,270 | $192,076 | $237,061 | | OEM incentives revenue | $5,815 | $4,383 | $14,109 | $12,727 | | Other revenue | $3,203 | $132 | $8,533 | $374 | | Total revenues | $77,247 | $85,785 | $214,718 | $250,162 | - Contract asset balance for estimated variable consideration was **$2.8 million** at both September 30, 2020, and December 31, 2019[98](index=98&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes TrueCar's financial performance, highlighting the impact of COVID-19, key business metrics, non-GAAP measures, and results of operations [Overview](index=31&type=section&id=Overview) TrueCar operates a digital automotive marketplace, focusing on enhancing the online car buying experience while divesting its ALG subsidiary - TrueCar is a leading automotive digital marketplace aiming to personalize and streamline the car buying experience by bringing more of the process online[101](index=101&type=chunk) - The platform provides market-based pricing data and connects users with TrueCar Certified Dealers, also enabling OEMs to target incentives[101](index=101&type=chunk) - TrueCar's Retail Solutions, including Trade and Payments, are key offerings, while the ALG subsidiary is being sold to J.D. Power[101](index=101&type=chunk) | Metric (in millions) | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2020 | | :------------------- | :-------------------------- | :-------------------------- | | Revenues | $77.2 | $214.7 | | Net Income (Loss) from Continuing Operations | $9.6 | $(12.2) | [COVID-19 Pandemic](index=32&type=section&id=COVID-19%20Pandemic) The COVID-19 pandemic significantly disrupted business, leading to reduced revenues and operational uncertainties, prompting a shift to digital retail solutions - The COVID-19 pandemic has caused significant disruptions, including quarantines and business closures, negatively impacting TrueCar's operations, revenues, and cash flows[103](index=103&type=chunk)[105](index=105&type=chunk) - TrueCar implemented **'Buy from Home'** badging for dealers offering remote services and is accelerating investment in digital automotive retailing[104](index=104&type=chunk) - Uncertainties include the pandemic's duration, government actions, economic conditions, and vehicle inventory shortages, which could further impact future results[105](index=105&type=chunk) [Key Metrics](index=33&type=section&id=Key%20Metrics) Key metrics show increased user traffic but decreased unit sales and dealer counts in Q3 2020, primarily due to COVID-19 and the USAA partnership termination | Metric | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Average Monthly Unique Visitors | 9,505,721 | 7,695,650 | 8,512,563 | 7,341,470 | | Units | 213,869 | 267,821 | 599,939 | 750,458 | | Monetization | $346 | $320 | $344 | $333 | | Franchise Dealer Count | 10,745 | 12,711 | 10,745 | 12,711 | | Independent Dealer Count | 3,858 | 4,242 | 3,858 | 4,242 | - Average Monthly Unique Visitors **increased by 23.5%** (QoQ) and **16.0%** (YoY) due to improved search engine optimization and a surge in online browsing during COVID-19[109](index=109&type=chunk) - Units **decreased by 20.1%** (QoQ and YoY) due to the COVID-19 pandemic and the wind-down of the USAA partnership[110](index=110&type=chunk)[111](index=111&type=chunk) - Monetization **increased by 8.1%** (QoQ) and **3.3%** (YoY) driven by growth in OEM incentives revenue and pricing optimization[112](index=112&type=chunk) - Franchise and Independent Dealer Counts decreased due to the COVID-19 pandemic and the USAA partnership termination[114](index=114&type=chunk)[115](index=115&type=chunk) [Non-GAAP Financial Measures](index=35&type=section&id=Non-GAAP%20Financial%20Measures) The company uses Adjusted EBITDA and Non-GAAP net income to assess operating performance, excluding items like stock-based compensation and certain one-time costs - Adjusted EBITDA and Non-GAAP net income (loss) are non-GAAP measures used by management to assess operational performance and make strategic decisions[117](index=117&type=chunk) - Adjusted EBITDA excludes interest income, depreciation and amortization, stock-based compensation, and certain litigation, restructuring, and transaction costs[117](index=117&type=chunk) | Metric (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income (Loss) from Continuing Operations | $9,589 | $(8,809) | $(12,175) | $(48,632) | | Adjusted EBITDA | $20,489 | $3,056 | $36,026 | $6,458 | | Non-GAAP Net Income (Loss) | $15,347 | $(1,038) | $21,289 | $(6,082) | [Components of Operating Results](index=40&type=section&id=Components%20of%20Operating%20Results) Revenues primarily consist of dealer and OEM incentives, while operating expenses include cost of revenue, sales and marketing, and technology and development - Revenues are primarily derived from dealer revenue and OEM incentives revenue, with some revenue recognized based on expected vehicle sales[126](index=126&type=chunk) - Cost of revenue includes data costs, licensing fees, website operating expenses, and employee costs for dealer operations[127](index=127&type=chunk) - Sales and marketing expenses cover advertising, affinity group partner marketing fees, and employee-related costs[127](index=127&type=chunk) - TrueCar has a **full valuation allowance** against its net deferred tax assets, leading to an income tax expense significantly lower than the federal statutory rate[128](index=128&type=chunk) [Results of Operations](index=41&type=section&id=Results%20of%20Operations) The company's Q3 2020 results show improved operating income and net income compared to Q3 2019, driven by substantial reductions in operating expenses | Metric (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 19 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenues | $77,247 | $85,785 | $214,718 | $250,162 | | Total Costs & Operating Expenses | $67,512 | $94,987 | $226,467 | $301,140 | | Income (Loss) from Operations | $9,735 | $(9,202) | $(11,749) | $(50,978) | | Net Income (Loss) | $11,589 | $(7,652) | $(10,322) | $(46,077) | [Comparison of the Three and Nine Months Ended September 30, 2020 and 2019](index=42&type=section&id=Comparison%20of%20the%20Three%20and%20Nine%20Months%20Ended%20September%2030,%202020%20and%202019) Revenues decreased in Q3 and the first nine months of 2020 due to lower dealer revenue, but significant cost reductions led to improved operating results | Revenue Category (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Dealer revenue | $68,229 | $81,270 | $192,076 | $237,061 | | OEM incentives revenue | $5,815 | $4,383 | $14,109 | $12,727 | | Other revenue | $3,203 | $132 | $8,533 | $374 | | Total revenues | $77,247 | $85,785 | $214,718 | $250,162 | - Total revenues **decreased by $8.5 million (10.0%)** for Q3 2020 and **$35.4 million (14.2%)** for the nine months ended September 30, 2020, primarily due to a decline in dealer revenue[133](index=133&type=chunk)[134](index=134&type=chunk) | Expense Category (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Cost of Revenue | $4,664 | $6,982 | $16,403 | $21,558 | | Sales and Marketing | $36,254 | $57,430 | $115,366 | $171,122 | | Technology and Development | $10,162 | $12,782 | $34,861 | $43,899 | | General and Administrative | $11,315 | $12,842 | $36,252 | $48,938 | | Depreciation and Amortization | $5,117 | $4,951 | $15,321 | $15,623 | | Goodwill Impairment | $0 | $0 | $8,264 | $0 | - Operating expenses decreased across all categories, with sales and marketing seeing the largest reduction (**36.9% QoQ**, **32.6% YoY**) due to lower revenue share and media spend[138](index=138&type=chunk)[139](index=139&type=chunk) - A non-cash goodwill impairment charge of **$8.3 million** was recognized for the nine months ended September 30, 2020[147](index=147&type=chunk) - Income from discontinued operations, net of taxes, increased by **$0.9 million** for Q3 2020 but decreased by **$0.7 million** for the nine-month period[149](index=149&type=chunk)[150](index=150&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by **$178.7 million** in cash and equivalents and a **$35.0 million** revolving credit facility - As of September 30, 2020, TrueCar's primary liquidity source was **$178.7 million** in cash and cash equivalents[152](index=152&type=chunk)[153](index=153&type=chunk) - TrueCar has a **$35.0 million** revolving credit facility, with **$31.9 million** available as of September 30, 2020[154](index=154&type=chunk) | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $23,694 | $7,251 | | Net cash used in investing activities | $(9,158) | $(31,324) | | Net cash (used in) provided by financing activities | $(17,371) | $408 | | Net decrease in cash and cash equivalents | $(2,835) | $(23,665) | - Cash provided by operating activities for the nine months ended September 30, 2020, was **$16.1 million** (continuing operations), driven by non-cash adjustments to net loss[156](index=156&type=chunk) - Cash used in financing activities for the nine months ended September 30, 2020, was **$17.4 million**, primarily due to **$12.1 million** in common stock repurchases[159](index=159&type=chunk) [Critical Accounting Policies and Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Financial statements rely on key estimates, particularly for revenue recognition, goodwill, and stock-based compensation, with a **$10.2 million** goodwill impairment charge in Q1 2020 - The preparation of financial statements requires significant estimates and assumptions, including those related to revenue recognition, allowances, goodwill, and capitalized software development costs[163](index=163&type=chunk) - A non-cash goodwill impairment charge of **$10.2 million** was recognized in Q1 2020, triggered by stock price decline, COVID-19 disruption, and the USAA partnership termination[164](index=164&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company assesses its exposure to market risks and believes it has no material exposure requiring disclosure - TrueCar does not believe it has any material market risk exposure, including interest rate, inflation, or foreign currency exchange risk, that would require disclosure[166](index=166&type=chunk) - Cash and cash equivalents of **$178.7 million** at September 30, 2020, are primarily in bank deposits and short-term money market funds, carrying some interest rate risk[167](index=167&type=chunk) - Historically, TrueCar's operations are primarily in the United States, limiting foreign currency risk, though future international expansion could increase this exposure[170](index=170&type=chunk) [Item 4. Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2020 - As of September 30, 2020, TrueCar's disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level by management[171](index=171&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2020[172](index=172&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the detailed disclosure of legal proceedings under Note 8, 'Commitments and Contingencies,' in the financial statements - Legal proceedings are detailed in Note 8, 'Commitments and Contingencies,' of the condensed consolidated financial statements[174](index=174&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks that could adversely affect the company, including the COVID-19 pandemic, the USAA partnership termination, and market competition [Risks Related to the Coronavirus Pandemic](index=50&type=section&id=Risks%20Related%20to%20the%20Coronavirus%20Pandemic) The COVID-19 pandemic has severely disrupted business, causing reduced unit sales, dealer network contraction, and marketing challenges - The COVID-19 pandemic has materially and negatively affected TrueCar's business, leading to a drastic reduction in car purchases, with **units declining ~22% YoY** in Q2 and Q3 2020[176](index=176&type=chunk) - TrueCar supported subscription dealers with discounts and experienced dealer suspensions/cancellations, impacting revenue and timely collection of accounts receivable[176](index=176&type=chunk) - The pandemic creates uncertainty for long-term marketing campaigns and forecasting, leading to the **withdrawal of 2020 financial guidance**[177](index=177&type=chunk)[180](index=180&type=chunk) - Remote work due to COVID-19 increases cybersecurity risks, and the potential illness of management team members could adversely affect the business[180](index=180&type=chunk)[181](index=181&type=chunk) [Risks Related to Our Business and Industry](index=57&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) The company faces significant risks from the USAA partnership termination, challenges in growing dealer revenue, intense competition, and complex regulations - The termination of the USAA partnership, which accounted for **29% of units in 2019**, has materially adversely affected TrueCar's business, revenue, and operating results[184](index=184&type=chunk)[186](index=186&type=chunk) - Failure to complete the ALG divestiture or realize the full **$22.5 million** in contingent consideration could negatively impact TrueCar's stock price and divert resources[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - TrueCar's growth relies on maintaining and increasing dealer revenues, which is challenged by dealer churn and managing subscription rates[191](index=191&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) - The company faces intense competition from various online automotive sites, manufacturers, and offline classifieds[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk) - TrueCar is subject to a complex framework of federal and state laws concerning vehicle sales, advertising, brokering, and privacy[217](index=217&type=chunk)[218](index=218&type=chunk)[224](index=224&type=chunk) - Reliance on Internet search engines for traffic means that changes in search algorithms could reduce traffic and adversely affect the business[209](index=209&type=chunk)[210](index=210&type=chunk) [Risks Related to Ownership of Our Common Stock](index=83&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) TrueCar's common stock price has been volatile, and factors like substantial sales by existing stockholders and anti-takeover provisions could depress the price - The trading price of TrueCar's common stock has been volatile, fluctuating between **$1.98 and $6.47** in the nine months ended September 30, 2020[259](index=259&type=chunk)[260](index=260&type=chunk) - Sales of substantial amounts of common stock by existing stockholders, who collectively owned **~59%** as of Sep 30, 2020, could depress the market price[262](index=262&type=chunk)[263](index=263&type=chunk)[265](index=265&type=chunk) - Anti-takeover provisions in TrueCar's corporate documents and Delaware law could delay or prevent an acquisition[265](index=265&type=chunk)[266](index=266&type=chunk) - TrueCar does not expect to declare cash dividends in the foreseeable future, intending to retain earnings for business expansion[269](index=269&type=chunk) - The share repurchase program, authorized for up to **$75 million**, does not obligate the company to repurchase shares and may not enhance long-term stockholder value[269](index=269&type=chunk) [General Risk Factors](index=87&type=section&id=General%20Risk%20Factors) Operating as a public company incurs substantial costs, and the company may require additional capital, face disruptions from catastrophic events, and experience stock price impacts from analyst coverage - Operating as a public company incurs significant legal, accounting, and compliance expenses, requiring substantial management time[270](index=270&type=chunk) - TrueCar may need additional capital for growth, but funds may not be available on favorable terms[272](index=272&type=chunk) - Natural disasters, public health crises like COVID-19, and other catastrophic events could disrupt operations and negatively impact consumer spending[273](index=273&type=chunk) - Future equity offerings or convertible debt issuances could result in significant dilution for existing stockholders[274](index=274&type=chunk) - Changes in research or reports by securities analysts could cause TrueCar's stock price and trading volume to decline[274](index=274&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=89&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **2.4 million** shares for **$11.7 million** in Q3 2020 under its **$75 million** share repurchase program - No unregistered sales of equity securities were reported[275](index=275&type=chunk) - Proceeds from public offerings have been invested in short-term, investment-grade interest-bearing securities[275](index=275&type=chunk) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :--------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | July 1, 2020 — July 31, 2020 | 0 | N/A | N/A | N/A | | August 1, 2020 — August 31, 2020 | 428,159 | $5.01 | 428,159 | $72,856,374 | | September 1, 2020 — September 30, 2020 | 1,974,651 | $4.81 | 1,974,651 | $63,359,067 | - TrueCar repurchased **2.4 million shares** for **$11.7 million** during Q3 2020, under a **$75 million** share repurchase program, with **$63.4 million** remaining[276](index=276&type=chunk) [Item 6. Exhibits](index=90&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including organizational documents, employment agreements, certifications, and XBRL data files - Exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, employment agreements, separation agreements, Section 302 and 906 certifications, and various XBRL taxonomy documents[278](index=278&type=chunk)[279](index=279&type=chunk) [Signatures](index=91&type=section&id=Signatures) The report is signed by the President & Chief Executive Officer and the Chief Financial Officer & Chief Accounting Officer on November 6, 2020 - The report was signed by Michael D. Darrow, President & Chief Executive Officer, and Noel B. Watson, Chief Financial Officer & Chief Accounting Officer, on November 6, 2020[283](index=283&type=chunk)

Financial Data and Key Metrics Changes - Total revenue for Q2 2020 was $62.7 million, down 29% year-over-year due to unit pressure and subscription rate discounting [33] - Adjusted EBITDA was $10.9 million, representing 17% of revenue, up from $3.7 million or 4% of revenue in the same period last year [41] - GAAP net loss was $11.2 million or $0.10 per share, compared to a loss of $24.1 million or $0.23 per share in Q2 2019 [41] Business Line Data and Key Metrics Changes - Franchise dealer counts ended the quarter at 11,267, down 1% from Q1, showing resilience despite the pandemic [33] - Independent dealer counts ended June at 4,131, down just 62 dealers sequentially from Q1, with revenue per dealer down 44% year-over-year [34] - OEM revenue was $4.8 million, a 15% year-over-year improvement, driven by the expansion of certain luxury brand programs [34] Market Data and Key Metrics Changes - Monthly unique visitors to the site reached 8.3 million, up 15% year-over-year, driven by SEO traffic and improved marketing efficiency [35] - Total units sold in the quarter were approximately 189,000, down 24% year-over-year, with a strong recovery in May and June [36] - Used cars represented 45% of total units, up from 36% in the same period last year, attributed to SEO traffic growth and inventory shortages [37] Company Strategy and Development Direction - The company is focused on building a flexible online car-buying experience to enhance consumer confidence and streamline the purchasing process [14][15] - A strategic restructuring was initiated to support a leaner operating model, resulting in approximately $35 million of annualized fixed cost savings [12][32] - The company plans to accelerate its digital retailing tools and aims to introduce all three phases of its online car-buying experience by year-end [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in traffic and dealer engagement despite the challenges posed by COVID-19 [9][10] - The company anticipates a strong quarter-over-quarter rebound in total revenues as subscription discounts end and unit volumes recover [42] - There are uncertainties regarding the ongoing pandemic, but management is focused on supporting dealer customers and aligning monetization with value delivered [44][45] Other Important Information - The company announced the sale of its ALG business for up to $135 million, which includes an upfront cash payment of $112.5 million [31] - A $75 million share repurchase program was authorized to fortify the balance sheet and support ongoing operations [32] - The company formed a diversity equity inclusion committee to promote social justice and inclusivity within the organization [29] Q&A Session Summary Question: Dealer retention trends and inventory issues - Management noted a dip in dealer retention at the end of March but a strong recovery through the quarter, with few cancellations [47][48] Question: Progress on digital retailing initiative - Over 3,000 dealers have been onboarded to the digital retailing platform, with plans to increase penetration of these tools [49][50] Question: OEM incentives performance - OEM revenue performed well due to the addition of luxury brands and the transition of OEM partners to the military channel [51][52] Question: Cost structure post-restructuring - The strategic restructuring was proactive, aligning the cost structure with business needs, and no further significant cuts are expected [54][56] Question: Consumer response to buy-at-home functionality - There has been high consumer engagement with the buy-at-home product, indicating a shift towards low-contact transactions [56][57] Question: Marketing spend and rebuilding strategy - The company plans to gradually rebuild marketing spend, focusing on efficiencies learned during the pandemic [59][61] Question: Long-term impact of large dealers moving into digital space - Management sees this as a positive trend, believing that increased investment in digital retailing will benefit the company [68][69]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-36449 TRUECAR, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number ...