```markdown PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) TrueCar, Inc. operates a digital automotive marketplace focused on transparency in car discovery, buying, and selling, providing market-based pricing data, connecting consumers with certified dealers, and offering targeted incentives from manufacturers - TrueCar's mission is to be the most transparent brand in automotive, improving how people discover, buy, and sell cars[8](index=8&type=chunk) - The company operates a diverse software ecosystem on a common technology infrastructure, powered by proprietary data and analytics, available on its website, mobile applications, and co-branded platforms for affinity group marketing partners (e.g., USAA, Chase, American Express, Consumer Reports, AARP, Sam's Club, AAA, IBM, Walmart)[9](index=9&type=chunk) - TrueCar benefits consumers by providing market-based pricing data, guaranteed savings off MSRP, and VIN-based offers, while benefiting TrueCar Certified Dealers by attracting informed, in-market consumers cost-effectively, and OEMs by enabling targeted incentive spending[10](index=10&type=chunk) - The network consists of over 16,000 TrueCar Certified Dealers, primarily new car franchises representing all major makes, and independent used vehicle dealers across all 50 states and D.C[11](index=11&type=chunk) - Subsidiary ALG provides forecasts and consulting services for automobile residual values, used for underwriting loans/leases and measuring financial institution exposure[12](index=12&type=chunk) - Subsidiary TCDS offers the TrueCar Trade product (powered by Accu-Trade) for guaranteed trade-in prices and acts as an agent for DealerSync, offering dealer website creation, management, and software platforms[13](index=13&type=chunk) - In **December 2018**, TrueCar acquired DealerScience, which provides advanced digital retailing software tools to dealers for calculating monthly payments, expediting vehicle desking, and streamlining the consumer experience[14](index=14&type=chunk) Overview Products and Services Sales and Marketing Competition Technology Intellectual Property Seasonality Regulatory Matters Employees Corporate Information Available Information [Item 1A. Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) Investing in TrueCar's common stock involves significant risks, including reliance on growing and optimizing the dealer network, maintaining positive relationships with industry participants, and providing a compelling user experience, alongside challenges in managing executive turnover, attracting qualified personnel, and effectively managing growth - Growth relies significantly on expanding and optimizing the TrueCar Certified Dealer network, increasing high-volume brand representation, managing dealer churn, and increasing dealer subscription rates, with failure to do so limiting growth[63](index=63&type=chunk)[64](index=64&type=chunk)[69](index=69&type=chunk) - Negative perceptions or strained relationships with key industry participants, including car dealers and automobile manufacturers, could harm growth and financial performance, as seen in past instances of dealer cancellations and contractual disputes[71](index=71&type=chunk)[73](index=73&type=chunk) - Inability to provide a compelling car-buying experience to users could lead to declining transactions and dealer participation, negatively impacting revenue and operations[78](index=78&type=chunk)[79](index=79&type=chunk) - Changes in management, including executive turnover, could adversely affect business execution, strategy, and financial results[83](index=83&type=chunk)[84](index=84&type=chunk)[86](index=86&type=chunk) - The company has a history of losses, with a net loss of **$28.3 million** in **2018** and an accumulated deficit of **$373.5 million**, indicating that profitability is not guaranteed and depends on revenue growth and cost management[98](index=98&type=chunk)[99](index=99&type=chunk) - The business is subject to a complex framework of federal and state laws and regulations concerning vehicle sales, advertising, and brokering, which are often unsettled and contradictory, highlighting ongoing compliance risks from past litigation and regulatory inquiries[121](index=121&type=chunk)[123](index=123&type=chunk)[127](index=127&type=chunk) - The automotive retail market is highly competitive and fragmented, with competition for consumer awareness and dealer marketing spend from various players[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) - Reliance on Internet search engines for traffic means prominent search results are critical, and changes in algorithms or increased competition for keywords could reduce traffic and increase marketing costs[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) - The company relies heavily on Amazon Web Services for its technical infrastructure, meaning any disruption, interference, or unfavorable changes in terms could seriously harm operations[208](index=208&type=chunk)[209](index=209&type=chunk)[212](index=212&type=chunk) - Ownership concentration among executive officers, directors, and large stockholders (**85%** as of **Dec 31, 2018**) may limit new investors' influence on significant corporate decisions[238](index=238&type=chunk)[239](index=239&type=chunk) - The company does not expect to declare any dividends in the foreseeable future, intending to retain earnings for business operations and expansion, so investors should not purchase common stock expecting cash dividends[258](index=258&type=chunk) [Item 1B. Unresolved Staff Comments](index=40&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report - No unresolved staff comments[259](index=259&type=chunk) [Item 2. Properties](index=40&type=section&id=Item%202.%20Properties) TrueCar maintains its principal offices in Santa Monica, California, leasing approximately **38,000 square feet** at 120 Broadway (lease expires **December 2025**) and **34,000 sq ft** at 1401 Ocean Avenue (lease expires **2029**), with an additional **38,000 square feet** leased in Austin, Texas (lease expires **2027**) - Principal offices are in Santa Monica, California, with leases expiring in **December 2025** (**38,000 sq ft**) and **2029** (**34,000 sq ft**)[260](index=260&type=chunk) - Leases approximately **38,000 square feet** in Austin, Texas, expiring in **2027**[260](index=260&type=chunk) - Believes current facilities are adequate and additional space can be secured if needed[260](index=260&type=chunk) [Item 3. Legal Proceedings](index=40&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding material pending legal proceedings is incorporated by reference from Note 6, 'Commitments and Contingencies,' in the consolidated financial statements - Material pending legal proceedings are detailed in Note 6, 'Commitments and Contingencies,' of the consolidated financial statements[261](index=261&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[261](index=261&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=41&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) TrueCar's common stock has been listed on the Nasdaq Global Select Market under the symbol "TRUE" since **May 16, 2014**, with an IPO price of **$9.00** per share, and as of **February 21, 2019**, there were **114** holders of record - Common stock listed on Nasdaq Global Select Market under "TRUE" since **May 16, 2014**, with an IPO price of **$9.00** per share[263](index=263&type=chunk) - As of **February 21, 2019**, there were **114** holders of record of common stock[263](index=263&type=chunk) - The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future, with current credit facility terms restricting dividend payments[264](index=264&type=chunk) - No purchases of equity securities by the issuer or affiliated purchasers[265](index=265&type=chunk) [Item 6. Selected Financial Data](index=42&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides selected consolidated financial data for TrueCar, Inc. for the years ended December 31, 2014 through 2018, including statements of operations and balance sheet data, and reconciliations of non-GAAP financial measures like Adjusted EBITDA and Non-GAAP net income (loss) to net loss Consolidated Statements of Operations Data (2014-2018, in thousands) | Indicator | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $353,571 | $323,149 | $277,507 | $259,838 | $206,649 | | Cost of revenue | 31,154 | 28,227 | 25,167 | 23,657 | 17,513 | | Sales and marketing | 213,415 | 185,397 | 154,406 | 151,002 | 128,569 | | Technology and development | 61,348 | 59,070 | 53,580 | 48,021 | 36,563 | | General and administrative | 54,140 | 61,646 | 59,908 | 83,494 | 58,296 | | Depreciation and amortization | 22,677 | 22,472 | 23,345 | 17,646 | 13,213 | | **Total costs and operating expenses** | **382,734** | **356,812** | **316,406** | **323,820** | **254,154** | | Loss from operations | (29,163) | (33,663) | (38,899) | (63,982) | (47,505) | | Interest income | 3,314 | 1,260 | 376 | 107 | 59 | | Interest expense | (2,649) | (2,610) | (2,530) | (443) | (380) | | Loss before income taxes | (28,498) | (35,013) | (41,053) | (64,305) | (47,789) | | (Benefit from) / provision for income taxes | (177) | (2,164) | 655 | 606 | 640 | | **Net loss** | **$(28,321)** | **$(32,849)** | **$(41,708)** | **$(64,911)** | **$(48,429)** | | Net loss per share, basic and diluted | $(0.28) | $(0.35) | $(0.49) | $(0.79) | $(0.68) | | Weighted average common shares outstanding | 102,149 | 94,865 | 84,483 | 81,914 | 70,837 | | Adjusted EBITDA | $32,890 | $28,884 | $15,039 | $7,572 | $10,884 | | Non-GAAP net income (loss) | $11,055 | $7,226 | $(11,115) | $(11,016) | $(3,290) | Stock-Based Compensation Expense by Category (2014-2018, in thousands) | Category | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Cost of revenue | $1,726 | $1,105 | $960 | $792 | $454 | | Sales and marketing | 13,950 | 10,353 | 5,837 | 4,493 | 4,743 | | Technology and development | 10,589 | 8,060 | 4,398 | 4,294 | 5,013 | | General and administrative | 10,954 | 12,723 | 13,544 | 32,984 | 19,123 | | **Total stock-based compensation expense** | **$37,219** | **$32,241** | **$24,739** | **$42,563** | **$29,333** | Selected Consolidated Balance Sheet Data (2014-2018, in thousands) | Indicator | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $196,128 | $197,762 | $107,721 | $112,371 | $147,539 | | Working capital | 213,897 | 205,573 | 117,549 | 113,855 | 145,666 | | Property and equipment, net | 61,511 | 70,710 | 66,941 | 71,390 | 30,731 | | Total assets | 420,960 | 384,834 | 294,448 | 302,374 | 296,952 | | Lease financing obligation | 22,987 | 29,129 | 28,833 | 26,987 | 6,093 | | Total stockholders' equity | 346,553 | 313,118 | 224,581 | 232,692 | 249,198 | Reconciliation of Net Loss to Adjusted EBITDA (2014-2018, in thousands) | Adjustment | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net loss | $(28,321) | $(32,849) | $(41,708) | $(64,911) | $(48,429) | | Interest income | (3,314) | (1,260) | (376) | (107) | (59) | | Interest expense | 2,649 | 2,610 | 2,530 | 443 | 380 | | Depreciation and amortization | 22,677 | 22,472 | 23,345 | 17,646 | 13,213 | | Stock-based compensation | 37,219 | 32,241 | 24,739 | 42,563 | 29,333 | | Warrant expense (reduction) | — | — | 46 | (803) | 9,808 | | IPO-related expenses | — | — | — | — | 3,717 | | Ticker symbol acquisition costs | — | — | — | — | 803 | | Certain litigation costs | 2,157 | 7,967 | 960 | 6,171 | 2,270 | | Legal settlement | — | — | — | — | (792) | | Severance charges | — | — | 1,783 | 3,732 | — | | Lease exit costs | — | (133) | 3,065 | 2,232 | — | | (Benefit from) / provision for income taxes | (177) | (2,164) | 655 | 606 | 640 | | **Adjusted EBITDA** | **$32,890** | **$28,884** | **$15,039** | **$7,572** | **$10,884** | Reconciliation of Net Loss to Non-GAAP Net Income (Loss) (2014-2018, in thousands) | Adjustment | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net loss | $(28,321) | $(32,849) | $(41,708) | $(64,911) | $(48,429) | | Stock-based compensation | 37,219 | 32,241 | 24,739 | 42,563 | 29,333 | | Warrant expense (reduction) | — | — | 46 | (803) | 9,808 | | IPO-related expenses | — | — | — | — | 3,717 | | Ticker symbol acquisition costs | — | — | — | — | 803 | | Certain litigation costs | 2,157 | 7,967 | 960 | 6,171 | 2,270 | | Legal settlement | — | — | — | — | (792) | | Severance charges | — | — | 1,783 | 3,732 | — | | Lease exit costs | — | (133) | 3,065 | 2,232 | — | | **Non-GAAP net income (loss)** | **$11,055** | **$7,226** | **$(11,115)** | **$(11,016)** | **$(3,290)** | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an in-depth analysis of TrueCar's financial condition and operational results, detailing key performance metrics, revenue components, operating expenses, liquidity, capital resources, contractual obligations, and critical accounting policies, including the impact of adopting new revenue recognition standards - TrueCar's mission is to be the most transparent brand in automotive, serving as a catalyst to improve how people discover, buy, and sell cars[294](index=294&type=chunk) - The company operates a diverse software ecosystem on a common technology infrastructure, powered by proprietary data and analytics, available on its website, mobile applications, and co-branded platforms for affinity group marketing partners[295](index=295&type=chunk) - In **December 2018**, TrueCar acquired DealerScience to expand into digital retailing tools, streamlining the consumer experience from shopping to showroom[299](index=299&type=chunk) Key Metrics (Years Ended December 31, 2016-2018) | Metric | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Average Monthly Unique Visitors | 7,520,734 | 7,380,838 | 7,004,863 | | Units | 1,005,029 | 952,834 | 806,953 | | Monetization (per unit) | $333 | $319 | $322 | | Franchise Dealer Count (Ending) | 12,674 | 12,142 | 11,151 | | Independent Dealer Count (Ending) | 3,655 | 2,979 | 2,597 | - Average monthly unique visitors remained consistent at **~7.5 million** in 2018 vs. **~7.4 million** in 2017[303](index=303&type=chunk) - Units increased **5.5%** to **1,005,029** in 2018 from **952,834** in 2017, attributed to marketing, product enhancements, and growing dealer network[306](index=306&type=chunk) - Monetization increased to **$333** per unit in 2018 from **$319** in 2017, driven by pricing optimization and growth in OEM incentives[309](index=309&type=chunk) - Franchise dealer count increased to **12,674** at **Dec 31, 2018**, from **12,142** at **Dec 31, 2017**. Independent dealer count increased to **3,655** at **Dec 31, 2018**, from **2,979** at **Dec 31, 2017**[311](index=311&type=chunk)[312](index=312&type=chunk) Revenue Breakdown (Years Ended December 31, 2016-2018, in thousands) | Revenue Type | 2018 | 2017 | 2016 | % Change 2018 vs. 2017 | % Change 2017 vs. 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Dealer revenue | $304,596 | $280,563 | $240,466 | 8.6% | 16.7% | | OEM incentives revenue | 30,012 | 23,277 | 19,050 | 28.9% | 22.2% | | Forecasts, consulting and other revenue | 18,963 | 19,309 | 17,991 | (1.8)% | 7.3% | | **Total revenues** | **$353,571** | **$323,149** | **$277,507** | **9.4%** | **16.4%** | - Total revenues increased by **$30.4 million (9.4%)** in 2018 compared to 2017, primarily due to increases in dealer revenue and OEM incentives revenue[336](index=336&type=chunk) Operating Expenses as Percentage of Revenues (Years Ended December 31, 2016-2018) | Expense Category | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Cost of revenue | 9% | 9% | 9% | | Sales and marketing | 60% | 57% | 56% | | Technology and development | 17% | 18% | 19% | | General and administrative | 15% | 19% | 22% | | Depreciation and amortization | 6% | 7% | 8% | | Loss from operations | (8)% | (10)% | (14)% | | Net loss | (8)% | (10)% | (15)% | - Net loss for 2018 was **$28.3 million**, an improvement from **$32.8 million** in 2017 and **$41.7 million** in 2016[334](index=334&type=chunk) - Cash and cash equivalents totaled **$196.1 million** at **December 31, 2018**, providing primary liquidity[370](index=370&type=chunk) Consolidated Cash Flow Data (Years Ended December 31, 2016-2018, in thousands) | Cash Flow Activity | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $24,833 | $22,118 | $2,768 | | Net cash used in investing activities | $(43,190) | $(19,809) | $(16,639) | | Net cash provided by financing activities | $16,723 | $87,732 | $9,221 | | Net increase (decrease) in cash and cash equivalents | $(1,634) | $90,041 | $(4,650) | - Cash provided by operating activities increased to **$24.8 million** in 2018 from **$22.1 million** in 2017, driven by non-cash adjustments to net loss[373](index=373&type=chunk) - Cash used in investing activities increased to **$43.2 million** in 2018, primarily due to **$26.9 million** for an acquisition (DealerScience) and **$17.1 million** in property and equipment purchases[377](index=377&type=chunk) - Cash provided by financing activities was **$16.7 million** in 2018, mainly from stock option exercises, net of taxes[380](index=380&type=chunk) Contractual Obligations (as of December 31, 2018, in thousands) | Obligation Type | Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | More Than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Lease obligations | $62,596 | $9,220 | $15,861 | $14,983 | $22,532 | | Purchase obligations | 7,817 | 5,558 | 2,254 | 5 | — | | Contingent Consideration | 4,477 | — | 4,477 | — | — | | **Total** | **$74,890** | **$14,778** | **$22,592** | **$14,988** | **$22,532** | - The company adopted the new revenue standard (**ASC 606**) on **January 1, 2018**, using the modified retrospective method, impacting revenue recognition timing for certain dealer and OEM incentive arrangements and deferring sales commissions[389](index=389&type=chunk)[397](index=397&type=chunk)[405](index=405&type=chunk)[565](index=565&type=chunk)[567](index=567&type=chunk) Overview Key Metrics Presentation of Financial Statements Components of Operating Results Results of Operations Quarterly Key Metrics and Results of Operations Liquidity and Capital Resources Critical Accounting Policies and Estimates Revenue Recognition Allowances for Doubtful Accounts Business Combinations Goodwill Impairment of Long-Lived Assets Software and Website Development Costs Stock-Based Compensation Income Taxes Recent Accounting Pronouncements [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=67&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) TrueCar does not believe it has material market risk exposure, with cash and cash equivalents carrying insignificant interest rate risk, and no derivatives used for management - No material market risk exposure requiring disclosure[428](index=428&type=chunk) - Cash and cash equivalents of **$196.1 million** at **December 31, 2018**, consist of bank deposits and short-term money market funds, carrying interest rate risk, but fluctuations have been insignificant[429](index=429&type=chunk) - No derivative financial instruments are used to manage interest rate risk, and no borrowings were outstanding under the credit facility at **December 31, 2018**[429](index=429&type=chunk)[430](index=430&type=chunk) - Inflation has not had a material effect on the business, but significant inflationary pressures could harm results if not offset by price increases[431](index=431&type=chunk) - Foreign currency exchange risk is currently insignificant due to primary U.S. operations, but will be reassessed with international expansion[432](index=432&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=71&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The required financial statements and supplementary data are presented in a separate section of this annual report, starting on page F-1, and are incorporated by reference - Financial statements and supplementary data are incorporated by reference from page F-1 onwards[433](index=433&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=71&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There are no changes in or disagreements with accountants on accounting and financial disclosure to report - None[433](index=433&type=chunk) [Item 9A. Controls and Procedures](index=71&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures as of **December 31, 2018**, concluding they were effective at a reasonable assurance level, and internal control over financial reporting was also deemed effective and audited by PricewaterhouseCoopers LLP - Disclosure controls and procedures were evaluated as effective at a reasonable assurance level as of **December 31, 2018**[435](index=435&type=chunk) - Management concluded that internal control over financial reporting was effective as of **December 31, 2018**, based on the COSO framework[437](index=437&type=chunk) - PricewaterhouseCoopers LLP audited and confirmed the effectiveness of internal control over financial reporting[438](index=438&type=chunk) - No material changes in internal control over financial reporting were identified during the **fourth quarter of 2018**[439](index=439&type=chunk) [Item 9B. Other Information](index=72&type=section&id=Item%209B.%20Other%20Information) There is no other information to report under this item - None[440](index=440&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=73&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance, including the Code of Business Conduct and Ethics, is incorporated by reference from the definitive Proxy Statement for the 2019 Annual Meeting of Stockholders - Information incorporated by reference from the 2019 Proxy Statement[442](index=442&type=chunk) - Code of Business Conduct and Ethics applicable to all officers, directors, and employees is available on the investor relations website[443](index=443&type=chunk) [Item 11. Executive Compensation](index=73&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the definitive Proxy Statement for the 2019 Annual Meeting of Stockholders - Information incorporated by reference from the 2019 Proxy Statement[444](index=444&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=73&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the definitive Proxy Statement for the 2019 Annual Meeting of Stockholders - Information incorporated by reference from the 2019 Proxy Statement[444](index=444&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=73&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the definitive Proxy Statement for the 2019 Annual Meeting of Stockholders - Information incorporated by reference from the 2019 Proxy Statement[445](index=445&type=chunk) [Item 14. Principal Accounting Fees and Services](index=73&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the definitive Proxy Statement for the 2019 Annual Meeting of Stockholders - Information incorporated by reference from the 2019 Proxy Statement[446](index=446&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=74&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the 10-K report, including the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Comprehensive Loss, Stockholders' Equity, and Cash Flows, along with their related notes - Financial statements filed include Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Comprehensive Loss, Stockholders' Equity, and Cash Flows, with related notes[449](index=449&type=chunk) - All financial statement schedules are omitted as not required or information is included in consolidated financial statements[450](index=450&type=chunk) - Key exhibits include Membership Interest Purchase Agreements for DealerScience (**Dec 2018**) and Accu-Trade (**Feb 2019**)[451](index=451&type=chunk) - Other exhibits cover corporate governance documents (Certificate of Incorporation, Bylaws), investor rights, common stock warrants, indemnification agreements, equity incentive plans, office lease agreements, and amendments to the loan and security agreement with Silicon Valley Bank[452](index=452&type=chunk)[453](index=453&type=chunk)[454](index=454&type=chunk) [Item 16. Form 10-K Summary](index=80&type=section&id=Item%2016.%20Form%2010-K%20Summary) This section indicates that no Form 10-K Summary is provided - None[458](index=458&type=chunk) SIGNATURES [Signatures](index=81&type=section&id=SIGNATURES) The report was duly signed on behalf of TrueCar, Inc. by Chip Perry, President and Chief Executive Officer, and John Pierantoni, Interim Chief Financial Officer & Chief Accounting Officer, on **March 1, 2019** - Report signed by Chip Perry (President and CEO) and John Pierantoni (Interim CFO & Chief Accounting Officer) on **March 1, 2019**[461](index=461&type=chunk)[463](index=463&type=chunk) - Directors also signed, granting power of attorney for filing amendments[462](index=462&type=chunk)[463](index=463&type=chunk) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS [Report of Independent Registered Public Accounting Firm](index=83&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued an unqualified opinion on TrueCar, Inc.'s consolidated financial statements for **2018** and **2017**, and on the effectiveness of its internal control over financial reporting as of **December 31, 2018** - PricewaterhouseCoopers LLP issued an unqualified opinion on the consolidated financial statements for **2018** and **2017**[466](index=466&type=chunk)[467](index=467&type=chunk) - An unqualified opinion was also issued on the effectiveness of internal control over financial reporting as of **December 31, 2018**[467](index=467&type=chunk) - The report highlights a change in accounting principle for revenue recognition in **2018**[468](index=468&type=chunk) [Consolidated Balance Sheets](index=85&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets for TrueCar, Inc. as of December 31, 2018, and 2017, show total assets increased from **$384.8 million** in **2017** to **$421.0 million** in **2018**, driven by increases in accounts receivable, goodwill, and intangible assets, with total stockholders' equity growing from **$313.1 million** to **$346.6 million** Consolidated Balance Sheets (as of December 31, in thousands) | Asset/Liability | 2018 | 2017 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $196,128 | $197,762 | | Accounts receivable, net | 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** | | **Liabilities** | | | | Accounts payable | $26,305 | $18,620 | | Accrued employee expenses | 4,349 | 6,568 | | Accrued expenses and other current liabilities | 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** | | **Stockholders' Equity** | | | | Common stock | 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 Statements of Comprehensive Loss](index=86&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) The consolidated statements of comprehensive loss show TrueCar's financial performance for the years ended December 31, 2018, 2017, and 2016, with revenues reaching **$353.6 million** in **2018**, and net losses of **$28.3 million** in **2018**, **$32.8 million** in **2017**, and **$41.7 million** in **2016** Consolidated Statements of Comprehensive Loss (Years Ended December 31, in thousands, except per share data) | Indicator | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Revenues | $353,571 | $323,149 | $277,507 | | Cost of revenue | 31,154 | 28,227 | 25,167 | | Sales and marketing | 213,415 | 185,397 | 154,406 | | Technology and development | 61,348 | 59,070 | 53,580 | | General and administrative | 54,140 | 61,646 | 59,908 | | Depreciation and amortization | 22,677 | 22,472 | 23,345 | | **Total costs and operating expenses** | **382,734** | **356,812** | **316,406** | | Loss from operations | (29,163) | (33,663) | (38,899) | | Interest income | 3,314 | 1,260 | 376 | | Interest expense | (2,649) | (2,610) | (2,530) | | Loss before income taxes | (28,498) | (35,013) | (41,053) | | (Benefit from) / provision for income taxes | (177) | (2,164) | 655 | | **Net loss** | **$(28,321)** | **$(32,849)** | **$(41,708)** | | Net loss per share, basic and diluted | $(0.28) | $(0.35) | $(0.49) | | Weighted average common shares outstanding | 102,149 | 94,865 | 84,483 | | Comprehensive loss | $(28,321) | $(32,849) | $(41,708) | [Consolidated Statements of Stockholders' Equity](index=87&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) The consolidated statements of stockholders' equity detail changes in equity for the years ended December 31, 2015, 2016, 2017, and 2018, showing total stockholders' equity increased from **$224.6 million** at the end of 2016 to **$313.1 million** at the end of 2017, and further to **$346.6 million** at the end of 2018, despite accumulated deficits Consolidated Statements of Stockholders' Equity (Years Ended December 31, in thousands, except share data) | Item | Dec 31, 2015 | Dec 31, 2016 | Dec 31, 2017 | Dec 31, 2018 | | :--- | :--- | :--- | :--- | :--- | | Common Shares | 83,016,735 | 86,159,527 | 100,428,656 | 104,337,508 | | Common Stock Amount | $8 | $9 | $10 | $10 | | Additional Paid-in Capital (APIC) | $508,584 | $542,807 | $664,192 | $720,025 | | Accumulated Deficit | $(275,900) | $(318,235) | $(351,084) | $(373,482) | | Total Stockholders' Equity | $232,692 | $224,581 | $313,118 | $346,553 | | Net loss | — | (41,708) | (32,849) | (28,321) | | Stock-based compensation | — | 25,751 | 33,648 | 39,109 | | Shares issued in connection with employee stock plans, net of shares withheld for employee taxes | — | 7,800 | 70,340 | 16,724 | | Issuance of common stock in follow-on offering, net | — | — | 17,398 | — | | Cumulative-effect of accounting change adopted as of January 1, 2018 | — | — | — | 5,923 | [Consolidated Statements of Cash Flows](index=88&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The consolidated statements of cash flows present the cash inflows and outflows from operating, investing, and financing activities for the years ended December 31, 2018, 2017, and 2016, showing net cash provided by operating activities increased to **$24.8 million** in **2018**, investing activities used **$43.2 million** in **2018**, and financing activities provided **$16.7 million** in **2018** Consolidated Cash Flow Data (Years Ended December 31, in thousands) | Cash Flow Activity | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $24,833 | $22,118 | $2,768 | | Net cash used in investing activities | $(43,190) | $(19,809) | $(16,639) | | 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 for interest | $2,323 | $2,099 | $2,133 | | Cash paid for income taxes | $30 | $43 | $82 | - Operating activities provided **$24.8 million** in **2018**, primarily due to non-cash adjustments to the net loss, including **$37.2 million** in stock-based compensation and **$22.7 million** in depreciation and amortization[373](index=373&type=chunk)[482](index=482&type=chunk) - Investing activities used **$43.2 million** in **2018**, mainly for the DealerScience acquisition (**$26.9 million**) and purchases of property and equipment (**$17.1 million**)[377](index=377&type=chunk)[482](index=482&type=chunk) - Financing activities provided **$16.7 million** in **2018**, largely from **$19.8 million** in proceeds from stock option exercises, net of taxes[380](index=380&type=chunk)[482](index=482&type=chunk) [Notes to Consolidated Financial Statements](index=89&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The Notes to Consolidated Financial Statements provide detailed information on TrueCar's accounting policies, financial statement components, and significant events, covering organization, accounting policies, business combinations, assets, credit facility, commitments, equity, stock-based awards, income taxes, employee benefits, related party transactions, and subsequent events [Note 1. Organization and Nature of Business](index=89&type=section&id=Note%201.%20Organization%20and%20Nature%20of%20Business) TrueCar, Inc. is a Delaware-incorporated Internet-based information, technology, and communication services company, founded in **February 2005**, operating a digital automotive marketplace that provides pricing transparency, connects consumers with certified dealers, and enables targeted OEM incentives - TrueCar, Inc. is a Delaware-incorporated Internet-based information, technology, and communication services company, founded in **February 2005**[483](index=483&type=chunk) - Operates a digital automotive marketplace providing pricing transparency, connecting consumers with TrueCar Certified Dealers, and enabling targeted OEM incentives[484](index=484&type=chunk) - Subsidiaries include ALG (residual value forecasts), TCDS (TrueCar Trade, DealerSync agent), and DealerScience (digital retailing tools, acquired **Dec 2018**)[485](index=485&type=chunk)[486](index=486&type=chunk)[487](index=487&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=91&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines TrueCar's significant accounting policies, including **GAAP** conformity, consolidation principles, extensive use of estimates, its **single operating segment**, fair value measurements, and concentrations of credit and business risk, along with policies for cash equivalents, accounts receivable, property and equipment, software development, intangible assets, goodwill, warrants, revenue recognition, and stock-based compensation - Financial statements conform to **GAAP**, requiring significant management estimates and assumptions[489](index=489&type=chunk)[491](index=491&type=chunk) - The company operates as a **single operating segment**, with the CODM reviewing consolidated financial information[492](index=492&type=chunk)[493](index=493&type=chunk) - Fair value measurements are categorized into **Level 1** (quoted prices), **Level 2** (observable inputs), and **Level 3** (unobservable inputs), with Contingent consideration from the DealerScience acquisition being a **Level 3** measurement[495](index=495&type=chunk)[496](index=496&type=chunk)[497](index=497&type=chunk)[502](index=502&type=chunk) - No single customer comprised more than **10%** of total revenues or accounts receivable for **2016-2018**. USAA is the largest affinity marketing partner and a significant stockholder, posing a concentration risk[507](index=507&type=chunk)[508](index=508&type=chunk) - Allowance for doubtful accounts and sales allowances are established based on historical write-off experience and specific circumstances[512](index=512&type=chunk)[513](index=513&type=chunk) Changes in 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 G&A | 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** | - Software and website development costs are capitalized during the application development stage and amortized over **three years**. Capitalized software costs were **$86.0 million** (net **$23.8 million** expected amortization) at **Dec 31, 2018**[517](index=517&type=chunk)[518](index=518&type=chunk) - Goodwill and long-lived assets are tested for impairment annually or when triggering events occur, with no impairment charges recorded for goodwill

TrueCar Inc. (NASDAQ:TRUE) Q4 2018 Earnings Conference Call February 14, 2019 4:30 PM ET Company Participants Alison Sternberg - SVP, IR Chip Perry - President and Chief Executive Officer John Pierantoni - Interim CFO and SVP, Chief Accounting Officer Conference Call Participants Steven Dyer - Craig-Hallum Shweta Khajuria - RBC Capital Markets Daniel Powell - Goldman Sachs Sameet Sinha - B. Riley FBR Kyle Evans - Stephens Inc. Daniel Kurnos - The Benchmark Company Nick Jones - Citigroup Naved Khan - SunTru ...