TrueCar(US:TRUE)2024-08-06 20:57PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) These unaudited statements detail TrueCar's financial position as of June 30, 2024, showing increased revenue, reduced net loss, and improved operating cash flow, despite a decrease in total assets and stockholders' equity Condensed Consolidated Balance Sheets As of June 30, 2024, total assets and stockholders' equity decreased to $183.0 million and $143.9 million respectively, primarily due to reduced cash and operating losses, while total liabilities also declined Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $127,954 | $136,964 | | Total current assets | $153,903 | $163,082 | | Total assets | $183,014 | $204,320 | | Liabilities & Equity | | | | Total current liabilities | $28,861 | $28,978 | | Total liabilities | $39,130 | $44,105 | | Total stockholders' equity | $143,884 | $160,215 | Condensed Consolidated Statements of Comprehensive Loss For Q2 and H1 2024, revenues increased to $41.8 million and $82.8 million respectively, while net loss significantly narrowed to $13.5 million and $19.4 million compared to the prior year periods Financial Performance Summary (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $41,795 | $39,293 | $82,847 | $76,273 | | Loss from operations | $(15,189) | $(22,147) | $(22,674) | $(43,314) | | Net loss | $(13,520) | $(20,424) | $(19,368) | $(39,989) | | Net loss per share | $(0.15) | $(0.23) | $(0.21) | $(0.45) | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly improved to $46,000 in H1 2024, while investing and financing activities used $4.2 million and $4.9 million respectively, resulting in a $9.0 million net decrease in cash Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $46 | $(22,092) | | Net cash used in investing activities | $(4,181) | $(7,098) | | Net cash used in financing activities | $(4,875) | $(3,923) | | Net decrease in cash | $(9,010) | $(33,113) | Notes to Condensed Consolidated Financial Statements These notes detail the company's digital automotive marketplace business, significant accounting policies, a June 2023 restructuring, a $6.8 million lease impairment, share repurchase program details, and revenue disaggregation by source - The company operates as a digital automotive marketplace, offering pricing transparency and connecting consumers with Certified Dealers, alongside Trade, Payments, and Sell Your Car solutions27 - A Restructuring Plan initiated in June 2023 incurred $7.2 million in costs during 2023, with no further significant charges anticipated49 - A legal dispute over a terminated Santa Monica office lease led to the full impairment of the $6.8 million right-of-use asset as of June 30, 202451 Revenue Disaggregation (in thousands) | Revenue Stream | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Dealer revenue | $74,602 | $71,485 | | OEM incentives revenue | $7,872 | $4,546 | | Other revenue | $373 | $242 | | Total revenues | $82,847 | $76,273 | - The share repurchase program was increased by $54.2 million in February 2024, extending authorization to $100 million until December 31, 2026, with $98.8 million remaining available as of June 30, 202468 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's H1 2024 performance, noting an 8.6% revenue increase to $82.8 million, a narrowed net loss of $19.4 million, and positive Adjusted EBITDA of $1.0 million, despite challenging market conditions and the CDK Global cybersecurity incident Overview and Market Environment TrueCar, a leading automotive digital marketplace, is building an end-to-end online car buying experience, but faces headwinds from economic uncertainty, inventory shortages, rising interest rates, and the recent CDK Global cybersecurity incident - TrueCar is developing an end-to-end car buying experience to digitize more of the purchasing process76 - The business is impacted by economic uncertainty, inventory shortages, rising interest rates, and the CDK Global cybersecurity incident that disrupted dealer systems78 Key Metrics H1 2024 key metrics show a 9.1% decrease in average monthly unique visitors to 7.7 million, but a 5.5% increase in units sold to 167,807, with monetization per unit rising to $491 and a slight increase in franchise dealer count Key Operating Metrics Comparison | Metric | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Average Monthly Unique Visitors | 7,724,448 | 8,495,195 | -9.1% | | Units | 167,807 | 159,114 | +5.5% | | Monetization | $491 | $478 | +2.7% | | Franchise Dealer Count (end of period) | 8,274 | 8,152 | +1.5% | | Independent Dealer Count (end of period) | 3,200 | 3,489 | -8.3% | - The unit metric for Q2 and H1 2024 includes an estimated 1,220 vehicles purchased but unmatched due to the CDK outage8183 Results of Operations H1 2024 revenues increased 8.6% to $82.8 million, while total operating expenses decreased to $105.5 million due to restructuring, resulting in a significantly reduced loss from operations of $22.7 million - H1 2024 revenue increased by $6.6 million (8.6%) year-over-year, driven by TCWS expansion, TCMS product introduction, and new OEM incentive programs102 - Sales and marketing expenses for H1 2024 decreased by $7.9 million (14.7%) due to reduced employee-related costs following the 2023 restructuring108 - Technology and development expenses for H1 2024 decreased by $10.5 million (40.2%), primarily due to lower employee-related costs post-restructuring110 - General and administrative expenses for H1 2024 increased by $1.4 million (5.7%), largely due to a $4.8 million net increase in impairment charges on right-of-use assets for office leases112 Liquidity and Capital Resources As of June 30, 2024, TrueCar maintained strong liquidity with $128.0 million in cash and cash equivalents, sufficient to fund operations for at least 12 months, and repurchased 425,009 shares for $1.2 million under its program with $98.8 million remaining authorization - Principal liquidity sources include cash and cash equivalents totaling $128.0 million as of June 30, 2024117 - The board increased the share repurchase program, raising remaining authorization to $100 million and extending it to December 31, 2026119 - Net cash provided by operating activities for H1 2024 was a minimal $46,000, a significant improvement from $22.1 million used in H1 2023123 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that its exposure to market risk, including changes in interest rates, inflation, and currency exchange rates, has not materially changed from the disclosures in its Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes in the company's exposure to market risk have occurred since the end of 2023130 Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2024, with no material changes in internal control over financial reporting during the quarter - The principal executive and financial officers concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2024132 - No material changes in internal control over financial reporting occurred during the quarter133 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company refers to Note 5 of the financial statements for information on legal proceedings, with the key ongoing matter being a lawsuit and cross-complaint with the landlord of its former Santa Monica headquarters over the termination of the lease - Details on legal proceedings are referenced in Note 5, "Commitments and Contingencies," within the financial statements135 Item 1A. Risk Factors The company outlines significant business, stock ownership, and general risks, including dependency on the automotive ecosystem, success of new offerings, dealer relationships, competition, regulatory complexities, stock price volatility, and potential impacts from catastrophic events - The business is sensitive to automotive ecosystem risks, including low inventory, supply chain issues, and the recent CDK Global cybersecurity incident disrupting dealer operations138 - Success heavily relies on the rollout and monetization of new offerings, especially the TrueCar+ end-to-end car-buying experience142 - The June 2023 restructuring, involving a 24% workforce reduction, may lead to unintended consequences such as employee attrition and loss of institutional knowledge145 - Maintaining dealer relationships, managing subscription rates, and expanding the dealer network are critical, as a significant portion of revenue is derived from dealers147 - The business is subject to a complex legal framework governing vehicle sales, advertising, and brokering, potentially leading to claims or challenges to its business model190 - The company faces significant competition from internet search engines, online automotive sites like CarGurus and Cars.com, and online retailers such as Carvana and CarMax187 - The stock price may remain volatile, and failure to meet publicly announced guidance could lead to a price decline241242 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the second quarter of 2024, TrueCar repurchased 425,009 shares of its common stock at an average price of $2.86 per share, with approximately $98.8 million remaining available for future repurchases under its program expiring December 31, 2026 Share Repurchase Activity (Q2 2024) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2024 | — | N/A | | May 2024 | — | N/A | | June 2024 | 425,009 | $2.86 | | Total | 425,009 | $2.86 | - As of June 30, 2024, approximately $98.8 million remained available under the company's share repurchase authorization264 Item 5. Other Information The company reported that during the second quarter of 2024, no director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2024266 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including amendments to corporate documents, a lease amendment, officer certifications required by the Sarbanes-Oxley Act, and XBRL data files - Key exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1) and Inline XBRL documents (101 series)269