TrueCar(TRUE) - 2022 Q4 - Annual Report

FORM 10-K Filing Information This section provides essential filing details for TrueCar, Inc.'s Form 10-K, including registrant identification and documents incorporated by reference Registrant Information This section provides TrueCar, Inc.'s basic registrant details, including its corporate name, SEC file number, address, phone, trading symbol (TRUE), and Accelerated Filer status - TrueCar, Inc.'s trading symbol is TRUE, listed on the Nasdaq Global Select Market[4] - The company is identified as an Accelerated Filer, not a Well-known seasoned issuer or Smaller reporting company[4] Market Value and Shares Outstanding | Metric | Data | | :--- | :--- | | Aggregate market value of common equity held by non-affiliates as of June 30, 2022 | $229,737,867 | | Number of shares of common stock outstanding as of February 17, 2023 | 88,693,998 shares | Documents Incorporated by Reference This section notes that specific portions of the 2023 Annual Meeting of Stockholders' Proxy Statement (Schedule 14A) are incorporated into Part III of this 10-K report - Portions of the Proxy Statement (Schedule 14A) for the 2023 Annual Meeting of Stockholders are incorporated by reference into Part III of this 10-K report[5] - The Proxy Statement will be filed with the SEC within 120 days after the fiscal year ended December 31, 2022[5] PART I This part covers the company's business operations, products, services, market environment, and the various risk factors impacting its performance and future prospects Item 1. Business TrueCar is a leading automotive digital marketplace that connects car buyers with a network of certified dealers and helps automakers effectively deploy incentives, aiming to digitize more of the car-buying process - TrueCar is a leading automotive digital marketplace, connecting car buyers with a network of certified dealers, committed to digitizing more of the car-buying process[20] - The company provides market pricing data and dealer connection services through its own-brand platforms (TrueCar website and mobile app) and partnerships with over 250 leading brands and organizations, including AARP, Sam's Club, Navy Federal Credit Union, and American Express[21] - TrueCar+ aims to provide an end-to-end car-buying experience, covering vehicle research, trade-ins, access to insurance and financing products, and completing transactions and paperwork from home, currently launched in Florida and five southeastern states (Alabama, Georgia, North Carolina, South Carolina, Tennessee)[38][39] Overview TrueCar is a leading automotive digital marketplace that provides consumers with a personalized and efficient car-buying experience through its certified dealer network and helps automakers effectively deploy incentives - TrueCar has built a diversified software ecosystem on a common technology infrastructure using proprietary data and analytics[21] - The company helps consumers understand vehicle pricing by providing VIN (Vehicle Identification Number) quotes and market average prices, and assists certified dealers in attracting informed car buyers in a cost-effective and measurable way[22] - TrueCar's certified dealer network primarily consists of franchised dealers selling all major new car brands and independent dealers selling used cars, covering all 50 states and the District of Columbia[23] Products and Services TrueCar offers comprehensive car-buying tools for consumers, from research and configuration to VIN quotes and Deal Builder, while providing dealers with a Dealer Portal and Access packages, and supporting manufacturers and affinity partners with incentive and member services - Consumers can research, compare, and discover vehicles through TrueCar's website, affinity partner websites, and mobile apps, accessing verified owner reviews, data-driven rankings, and editorial content[25] - TrueCar Deal Builder allows consumers to customize deals, including trade-ins, loan/lease payment estimates, and to learn about service and protection plans, send questions, schedule test drives, or arrange to complete transactions[30] - TrueCar Access packages provide dealers with Trade and Payments solutions, where the Trade solution offers instant third-party guaranteed trade-in valuations, and the Payments solution leverages digital retail technology to help consumers calculate accurate monthly payments[34] - TrueCar+ aims to provide an end-to-end car-buying experience, allowing consumers to complete all car-buying steps from research to delivery at home, currently launched in six states, and leveraging Digital Motors technology to expand lending coverage to over 1,500 auto lenders[38][39] Sales and Marketing TrueCar engages in consumer marketing through traditional and digital media, collaborates with affinity partners to promote car-buying programs, and supports its certified dealer network with data-driven insights to optimize dealer coverage and relationships - TrueCar's consumer marketing is conducted through its own website, mobile apps, and affinity partner websites, aiming to build brand awareness, provide transparent market pricing information, and enhance the car-buying experience[40] - The dealer solutions team supports the certified dealer network, optimizes brand and geographic coverage, and provides onboarding and support, helping dealers manage inventory and pricing through data-driven insights[42] Competition TrueCar faces intense competition in the automotive retail industry, primarily in consumer awareness and dealer marketing spend, from online automotive sites, automaker-owned sites, online auto retailers, and offline service providers - TrueCar's main competitors in consumer awareness include online automotive websites such as Google, Amazon Vehicles, Autotrader.com, eBay Motors, KBB.com, CarGurus.com, Cars.com, as well as automaker websites and online auto retailers (e.g., Carvana, Vroom, CarMax)[45] - In competing for automotive dealer marketing spend, TrueCar competes with online automotive content publishers like Edmunds and KBB.com, classified advertising websites such as Autotrader.com, CarGurus.com, and Cars.com, and internet advertising platforms like Google and Facebook[46] Technology TrueCar's technology platform leverages advanced data processing and analytics systems to provide car-buying information to consumers, dealers, and other parties, utilizing cloud-based infrastructure for availability, scalability, security, and performance - TrueCar's technology platform processes and analyzes automotive data using vehicle configurators, predictive consumer behavior modeling, and proprietary matching algorithms to enhance consumer and dealer experiences[47] - The company's data processing and storage capabilities are primarily cloud-based and feature sufficient redundancy to optimize availability, scalability, security, and performance[48] Intellectual Property TrueCar protects its intellectual property through patents, copyrights, trademarks, service marks, domain names, trade secret laws, confidentiality procedures, and contractual restrictions, continuously seeking additional protections to strengthen its competitive position - As of December 31, 2022, TrueCar held 73 issued U.S. patents and 21 pending U.S. patent applications, along with 9 issued foreign patents[49] - The company has registered "TrueCar," "TrueCar+," and other related marks as trademarks, and protects proprietary technology and intellectual property through confidentiality agreements with employees, consultants, contractors, and business partners[51] Seasonality The automotive industry typically experiences higher car-buying volumes in the second and third quarters, a seasonal trend that affects TrueCar's business, though its impact has been less pronounced historically due to overall business growth and recent market disruptions - Consumer car-buying volumes in the automotive industry are typically higher in the second and third quarters of each year, partly due to new model releases, a trend that impacts TrueCar's business[52] Regulatory Matters TrueCar's business is subject to a complex framework of U.S. federal and state laws and regulations, particularly concerning auto sales, advertising, brokering, privacy, and data protection, posing potential compliance challenges and legal risks despite efforts to design compliant products and services - TrueCar's business is directly or indirectly subject to a complex framework of U.S. federal and state laws and regulations, particularly the highly regulated advertising and sale of new and used motor vehicles[52] - The company designs its products and services to avoid violating state brokering or "bird-dogging" statutes and strives to ensure website content complies with state advertising regulations[54] - TrueCar is also subject to evolving and potentially conflicting federal and state laws and regulations related to privacy, data protection, and personal information, which increase compliance complexity[60] Human Capital Resources As of December 31, 2022, TrueCar had 441 full-time employees and operates under a permanent remote work policy, prioritizing competitive compensation, benefits, and continuous talent development to attract, motivate, and retain high-quality staff - As of December 31, 2022, TrueCar had 441 full-time employees and operates under a dynamic work policy with permanent remote work[62] - The company attracts and retains high-quality employees, especially in technical roles like software engineers and data scientists, by offering competitive cash and equity compensation packages, along with health insurance and other benefits[63][64] - The company regularly measures and monitors employee morale, engagement, and culture (including diversity, equity, and inclusion) to support employees and respond to their concerns[66] Corporate Information TrueCar completed its initial public offering in May 2014, with its common stock listed on the Nasdaq Global Select Market under the ticker symbol "TRUE," and provides SEC periodic and current reports through its investor relations website - TrueCar completed its initial public offering in May 2014, with its common stock listed on the Nasdaq Global Select Market under the ticker symbol "TRUE"[67] - The company provides free access to its SEC periodic reports (10-Q and 10-K) and current reports (8-K) through its investor relations website (ir.truecar.com)[68] Item 1A. Risk Factors This section details numerous risks and uncertainties TrueCar faces, including those related to automotive inventory, business operations, product launches, macroeconomic conditions, competition, regulatory compliance, data security, management changes, intellectual property, financial performance, and common stock ownership - Low automotive inventory supply levels adversely affect TrueCar's business, operating results, and prospects, leading to increased competition for dealer marketing spend and reduced automaker incentive spending[72][74] - The successful launch of TrueCar+ products, providing an attractive value proposition, integrating existing and future products, and achieving profitability are crucial for the company's business, otherwise it may be adversely affected[79][81] - The company faces risks related to the automotive ecosystem, including rising interest rates, declining consumer demand, global supply chain challenges (such as automotive semiconductor shortages), and inflation, which are macroeconomic issues[106][109][110] - TrueCar's business is subject to a complex framework of legal and regulatory requirements, including vehicle sales, advertising, and brokering regulations, which could lead to claims, challenge its business model, or harm its business[177] - The company collects, processes, stores, shares, discloses, and uses personal information and other data, and failure to protect this information and data could harm the company's reputation and brand, and affect operating results[211][215] SUMMARY OF RISKS AFFECTING OUR BUSINESS This section outlines key risks to TrueCar's business, including automotive inventory shortages, declining lead quality, unsuccessful TrueCar+ launch, pandemic impacts, USAA partnership termination, limited dealer network growth, poor user experience, macroeconomic factors, manufacturer incentive program participation, affinity partner attrition, negative industry perceptions, executive turnover, data provider reliance, search engine traffic, marketing brand effectiveness, regulatory compliance, data privacy, and litigation risks - Low automotive inventory supply levels adversely affect TrueCar's business, operating results, and prospects, leading to increased competition for dealer marketing spend and reduced automaker incentive spending[16] - If the TrueCar+ product launch is unsuccessful or fails to provide an attractive value proposition, the company's business and prospects could be adversely affected[16] - The termination of the USAA Federal Savings Bank partnership adversely affected the company's business, and its negative financial impact may not be mitigated[16] - The company's business is affected by macroeconomic factors, including interest rates, inflation, consumer demand, and global supply chain challenges (such as automotive semiconductors)[16] - The company faces litigation and legal proceedings that could have a material adverse effect on its business, financial condition, results of operations, and cash flows[18] Risks Related to Our Business and Industry This section details TrueCar's operational and market risks in the automotive industry, including inventory shortages from supply chain disruptions, declining lead quality and quantity, TrueCar+ launch challenges, ongoing pandemic impacts, negative effects of USAA partnership termination, difficulties in dealer network growth and revenue maintenance, impact of key dealer attrition on data and functionality, user car-buying experience challenges, macroeconomic factors (e.g., interest rates and inflation), manufacturer incentive program participation, affinity partner relationships, negative industry perceptions, executive and key talent loss, technological changes and consumer demand, limitations on product enhancements and complementary product growth, investment decisions not prioritizing short-term financial results, revenue growth and profitability, data provider reliance, search engine traffic, SMS communication features, marketing and brand building, market competition, regulatory compliance, data privacy, and climate change policies - Since 2020, the automotive industry has experienced declining inventory supply due to the pandemic and semiconductor chip shortages, increasing competition for dealer marketing spend and reducing manufacturer incentive spending, adversely affecting TrueCar's business[73][74] - If the TrueCar+ product launch is unsuccessful, fails to provide an attractive value proposition, or is not effectively integrated and monetized, the company's business and prospects will be adversely affected[79][81] - The termination of the USAA partnership had a material adverse effect on TrueCar's business, revenue, results of operations, and prospects, and the company may not be able to mitigate its negative financial impact[88][89] - The growth of the company's business is highly dependent on maintaining and increasing revenue from its certified dealer network, and failure to do so will harm its financial performance[89][97] - The company faces significant competition from existing and new competitors, which could affect its business and operating results, including online automotive websites, automakers, online auto retailers, and offline service providers[169][170][175] - The company collects, processes, stores, shares, discloses, and uses personal information and other data, and failure to protect this information and data could harm the company's reputation and brand, and affect operating results, especially under evolving privacy regulations like CCPA[211][213][215] - The company has a history of losses and may not achieve profitability in the future, with accumulated deficit of $512.5 million as of December 31, 2022, and a net loss of $118.7 million in 2022[255] Item 1B. Unresolved Staff Comments This section states that the company has no unresolved staff comments - The company has no unresolved staff comments[312] Item 2. Properties TrueCar's main office is leased in Santa Monica, California, and the company believes its current facilities are sufficient for near-term needs, with additional space available for operational expansion if required - TrueCar's main office is located in Santa Monica, California, and is leased[312] - The company believes its existing facilities are sufficient for near-term needs and can obtain additional space to support operational expansion if required[312] Item 3. Legal Proceedings This section refers to the disclosure regarding the company's significant pending legal proceedings in Note 11, "Commitments and Contingencies," to the consolidated financial statements in Part II, Item 8 of the report - For information regarding the company's significant pending legal proceedings, refer to the disclosure under Note 11, "Commitments and Contingencies," to the consolidated financial statements in Part II, Item 8 of the report[313] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable - Mine safety disclosures are not applicable[313] PART II This part details TrueCar's common stock market, related stockholder matters, issuer purchases of equity securities, management's discussion and analysis of financial condition and results of operations, market risk disclosures, financial statements, and controls and procedures Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section provides market information for TrueCar's common stock, including its Nasdaq listing, number of record holders, dividend policy, and share repurchase activities, noting no cash dividends since IPO and ongoing share repurchase programs - TrueCar's common stock has been listed on the Nasdaq Global Select Market since May 16, 2014, under the ticker symbol "TRUE," with an initial public offering price of $9.00 per share[316] - As of February 17, 2023, the company had 126 record holders of common stock, with a greater number of beneficial owners[317] - The company has never declared or paid cash dividends on its common stock and plans to retain future earnings to support business operations and expansion[318] 2022 Q4 Stock Repurchase Activity | 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 | | :--- | :--- | :--- | :--- | :--- | | October 1 - October 31, 2022 | 3,000,000 | $1.56 | 3,000,000 | $45,774,521 | | November 1 - November 30, 2022 | — | N/A | — | $45,774,521 | | December 1 - December 31, 2022 | — | N/A | — | $45,774,521 | - The company's board of directors has authorized a $150 million stock repurchase program, extended in July 2022 until September 30, 2024[320] Item 6. Reserved This section states that this item is reserved with no specific content - This item is reserved[326] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a detailed analysis of TrueCar's financial condition and operating results, covering company overview, market environment, key performance indicators, non-GAAP financial measures, financial statement presentation, components of operating results, specific performance results, liquidity and capital resources, contractual obligations, and critical accounting estimates, noting a decline in 2022 revenue and expanded net loss due to inventory shortages and macroeconomic factors - TrueCar generated $161.5 million in revenue and incurred a net loss of $118.7 million in 2022[332] - The company continues to be negatively impacted by the COVID-19 pandemic, insufficient inventory due to global automotive semiconductor chip shortages, and rising interest rates, which are macroeconomic factors[333][335] Key Performance Indicators | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Average Monthly Unique Visitors | 7,371,898 | 8,636,501 | 8,354,082 | | Units Sold | 340,940 | 607,667 | 766,413 | | Monetization | $472 | $380 | $352 | | Franchised Dealers | 7,924 | 8,482 | 10,589 | | Independent Dealers | 4,148 | 4,013 | 3,794 | - Average monthly unique visitors decreased by 14.6% in 2022, primarily due to reduced marketing spend resulting from limited dealer inventory[338] - Units sold decreased by 43.9% in 2022, primarily due to low automotive inventory levels caused by global semiconductor chip shortages[341] - Monetization increased by 24.2% to $472 in 2022, driven by a higher mix of used car sales, increased monetization of franchised and independent dealer subscription agreements, and the addition of "Sell Your Car" and "Distance Retailing" products[343] - The number of franchised dealers decreased to 7,924 in 2022, primarily due to automotive inventory shortages leading some dealers to reduce marketing spend[345] Overview TrueCar is a leading automotive digital marketplace that aims to provide consumers with a personalized and efficient car-buying experience through its platform and partnerships with numerous affinity partners, while helping certified dealers and automakers connect more effectively with the market - TrueCar is a leading automotive digital marketplace, connecting car buyers with a network of certified dealers, committed to digitizing more of the car-buying process[328] - The company provides market pricing data and dealer connection services through its own-brand platforms and partnerships with affinity partners such as financial institutions, membership organizations, and large employer car-buying programs[329] - TrueCar generated $161.5 million in revenue and incurred a net loss of $118.7 million in 2022[332] Market Environment The market environment is significantly affected by the COVID-19 pandemic, insufficient inventory due to global automotive semiconductor chip shortages, and macroeconomic factors like Federal Reserve interest rate hikes, leading to restricted auto production, pressured consumer demand, and potential impacts on dealer and OEM collaboration - The COVID-19 pandemic led to a global automotive semiconductor chip shortage, forcing OEMs to reduce production and resulting in insufficient automotive inventory[333] - Inflation and Federal Reserve interest rate hikes have caused consumer concerns about the economic outlook, potentially reducing car-buying demand and increasing financing costs for dealers[333] - Inventory shortages and consumer demand pressures could lead existing certified dealers and OEMs to cancel or suspend services, and hinder new dealers and OEMs from joining the network[335] Key Metrics TrueCar's key metrics include average monthly unique visitors, units sold, monetization, and the number of franchised and independent dealers; in 2022, unique visitors and units sold declined, but monetization improved, while franchised dealer count decreased and independent dealer count increased - Key Performance Indicators | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Average Monthly Unique Visitors | 7,371,898 | 8,636,501 | 8,354,082 | | Units Sold | 340,940 | 607,667 | 766,413 | | Monetization | $472 | $380 | $352 | | Franchised Dealers | 7,924 | 8,482 | 10,589 | | Independent Dealers | 4,148 | 4,013 | 3,794 | - Average monthly unique visitors decreased by 14.6% year-over-year in 2022, primarily due to reduced marketing spend resulting from limited dealer inventory[338] - Units sold decreased by 43.9% year-over-year in 2022, primarily due to low automotive inventory levels caused by global semiconductor chip shortages[341] - Monetization increased by 24.2% year-over-year to $472 in 2022, primarily due to a higher mix of used car sales, increased monetization of franchised and independent dealer subscription agreements, and the addition of "Sell Your Car" and "Distance Retailing" products[343] - The number of franchised dealers decreased to 7,924 in 2022, while the number of independent dealers increased to 4,148[345][346] Non-GAAP Financial Measures This section defines Adjusted EBITDA as a non-GAAP financial measure and provides its reconciliation to net income (loss), used for evaluating operational performance and making financial strategic decisions, despite limitations in not reflecting interest, taxes, working capital needs, and capital expenditures - Adjusted EBITDA is defined as net income (loss) excluding interest income, depreciation and amortization, stock-based compensation, equity method investment (gain) loss (including impairment), specific litigation costs, restructuring costs, transaction costs, fair value adjustments to contingent consideration liability, goodwill impairment, other income, lease exit costs, right-of-use asset impairment, and income taxes[348] - The company uses Adjusted EBITDA as a measure of operating performance to facilitate period-to-period comparisons and as a tool for management to assess performance and make decisions[349] Reconciliation of Net (Loss) Income to Adjusted EBITDA (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net (Loss) Income | $(118,685) | $(38,329) | $76,544 | | Loss from Continuing Operations | $(118,685) | $(38,369) | $(19,839) | | Interest Income | $(2,565) | $(52) | $(462) | | Depreciation and Amortization | $16,520 | $16,279 | $20,547 | | Stock-Based Compensation | $17,681 | $20,395 | $23,077 | | Equity Method Investment (Gain) Loss | $(1,845) | $5,404 | $1,989 | | Specific Litigation Costs | — | — | $(1,939) | | Restructuring Charges | — | — | $8,346 | | Transaction Costs | $1,200 | — | — | | Fair Value Adjustment to Contingent Consideration Liability | $359 | $41 | $182 | | Goodwill Impairment | $59,775 | — | $8,264 | | Other Income | $(40) | $(667) | $(198) | | Lease Exit Costs | $214 | — | — | | Right-of-Use Asset Impairment | — | $1,652 | $2,136 | | Income Tax Provision (Benefit) | $(2,560) | $206 | $(6) | | Adjusted EBITDA | $(29,946) | $4,889 | $42,097 | Presentation of Financial Statements TrueCar's consolidated financial statements include accounts of its wholly-owned subsidiaries and are prepared in accordance with GAAP, reporting the historical performance of its ALG subsidiary as discontinued operations, and presenting financial results as a single operating segment while reviewing dealer products and services, OEM incentives, and other service revenues for business drivers - TrueCar's consolidated financial statements include the accounts of its wholly-owned subsidiaries and are prepared in accordance with FASB ASC 810—Consolidation[356] - The company reports the historical performance (including operating results and cash flows) of its divested ALG subsidiary as discontinued operations[357] - The company reports financial results as a single operating segment, but its chief operating decision maker regularly reviews dealer, OEM incentive, and other service revenues for insights into business drivers[357] Components of Operating Results TrueCar's revenue primarily comprises dealer revenue and OEM incentive revenue, recognized based on various contract models (per unit sold, per referral, or subscription), while costs and operating expenses include cost of revenue, sales and marketing, technology and development, general and administrative, depreciation and amortization, goodwill impairment, interest income, other income, and income tax provision - TrueCar's revenue primarily consists of dealer revenue and OEM incentive revenue, with transaction revenue recognized based on anticipated vehicle sales[358] - Dealer revenue includes car buying program revenue and revenue from TrueCar Trade and DealerScience, with payment methods including per vehicle sold, per referral, or subscription models[358][359] - OEM incentive revenue comes from automakers to promote vehicle sales by providing additional consumer incentives to affinity partner members, with fees paid per vehicle[366] - Costs and operating expenses include data costs, licensing fees, website operating expenses (cost of revenue), advertising, marketing expenses (sales and marketing), employee-related expenses, third-party contractor fees (technology and development, general and administrative), and depreciation and amortization[368][369][370][371] - The company recorded a full valuation allowance against its net deferred tax assets as of December 31, 2022, and December 31, 2021, as it is more likely than not that they will not be realized[374] Results of Operations TrueCar's revenue decreased by 30.3% year-over-year to $161.5 million in 2022, primarily due to higher vehicle prices and limited new car inventory caused by semiconductor chip shortages, with net loss expanding from $38.3 million in 2021 to $118.7 million in 2022, mainly due to goodwill impairment and increased operating expenses, and Adjusted EBITDA declining from $4.9 million in 2021 to negative $29.9 million in 2022 - Consolidated Results of Operations Data (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenue | $161,524 | $231,698 | $278,678 | | Cost of Revenue | $16,213 | $22,239 | $21,549 | | Sales and Marketing | $104,534 | $136,479 | $151,915 | | Technology and Development | $46,090 | $41,432 | $44,930 | | General and Administrative | $44,087 | $48,747 | $49,989 | | Depreciation and Amortization | $16,520 | $16,279 | $20,547 | | Goodwill Impairment | $59,775 | — | $8,264 | | Operating Loss | $(125,695) | $(33,478) | $(18,516) | | Net (Loss) Income | $(118,685) | $(38,329) | $76,544 | | Adjusted EBITDA | $(29,946) | $4,889 | $42,097 | - Total revenue decreased by 30.3% ($70.2 million) in 2022 year-over-year, primarily due to pressure on close rates from higher vehicle prices and limited new car inventory[383] - Sales and marketing expenses decreased by 23.4% ($31.9 million) in 2022 year-over-year, primarily reflecting reduced brand media spending, lower revenue share with affinity marketing partners, and decreased stock-based compensation expense[389] - Technology and development expenses increased by 11.2% ($4.7 million) in 2022 year-over-year, primarily due to increased employee-related expenses for TrueCar+, product portfolio expansion, and core product enhancements[392] - The company recognized a $59.8 million non-cash goodwill impairment charge in 2022 due to further declines in market capitalization and ongoing macroeconomic disruptions[399] - Interest income increased by $2.5 million in 2022, primarily benefiting from rising interest rates[400] - The company recognized a $1.8 million gain in 2022 from the fair value adjustment of a derivative asset related to the sale of its equity investment in Accu-Trade[403] - Income tax benefit of $2.6 million in 2022 primarily reflected the release of a valuation allowance against a net deferred tax liability recorded in the Digital Motors acquisition accounting, providing a source of income for the realization of consolidated net deferred tax assets[406] Liquidity and Capital Resources As of December 31, 2022, TrueCar had $175.5 million in cash and cash equivalents but an accumulated deficit of $512.5 million; the company expects existing liquidity to support operations for the next 12 months, but future capital needs will depend on revenue levels, technology development spending, potential acquisitions, accounts receivable collection, and macroeconomic factors, potentially requiring additional financing - As of December 31, 2022, TrueCar's cash and cash equivalents totaled $175.5 million[410] - As of December 31, 2022, the company had an accumulated deficit of $512.5 million and expects to incur losses in the future[411] - The company believes existing liquidity is sufficient to support operations for at least the next 12 months, but future capital needs will depend on various factors, including revenue levels, technology and development spending, potential acquisitions, accounts receivable collection, and macroeconomic activity[411] - The company has a $35 million credit facility with Silicon Valley Bank, with $32.6 million available as of December 31, 2022, and no outstanding borrowings[413][624] - The company's board of directors has authorized a $150 million stock repurchase program, extended in July 2022 until September 30, 2024; as of December 31, 2022, the company had $45.8 million remaining under its future stock repurchase authorization[414] Consolidated Cash Flow Data (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | $(29,137) | $14,374 | $29,898 | | Net Cash Used in Investing Activities | $(8,028) | $(10,689) | $(10,277) | | Net Cash Used in Financing Activities | $(32,534) | $(38,086) | $(49,238) | | Net Cash Used in Continuing Operations | $(69,699) | $(34,401) | $(29,617) | | Net Cash Provided by Discontinued Operations | — | $6,304 | $121,397 | | Net (Decrease) Increase in Cash and Cash Equivalents | $(69,699) | $(28,097) | $91,780 | Contractual Obligations and Known Future Cash Requirements TrueCar's significant cash requirements include lease obligations and purchase obligations; as of December 31, 2022, the company had $26.6 million in fixed lease payment obligations and $22.3 million in purchase obligations - As of December 31, 2022, the company had $26.6 million in fixed lease payment obligations, with $5.6 million payable within 12 months[429] - As of December 31, 2022, the company had $22.3 million in purchase obligations, with $10.0 million payable within 12 months, primarily for data information, software-related licenses, and support services[430] Critical Accounting Estimates TrueCar's consolidated financial statements involve several critical accounting estimates and assumptions, including revenue recognition, sales allowances and bad debt reserves, fair value of assets and liabilities in business combinations, recoverability of goodwill and long-lived assets, valuation allowance for deferred tax assets, and capitalization and expensing of software and website development costs - Critical accounting estimates include revenue recognition, sales allowances and bad debt reserves, fair value of assets and liabilities in business combinations, recoverability of goodwill, long-lived assets, and equity method investments, income taxes, and expensing and capitalization of software and website development costs[431] Recent Accounting Pronouncements This section refers to the detailed information regarding recent accounting pronouncements in Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements - Detailed information regarding recent accounting pronouncements can be found in Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements[432] Item 7A. Quantitative and Qualitative Disclosures About Market Risk This section discloses TrueCar's market risks, primarily interest rate risk and inflation risk; the company believes it currently has no material market risk exposure requiring disclosure and does not use derivative financial instruments to manage interest rate risk - TrueCar believes it currently has no material market risk exposure requiring disclosure[433] - The company faces interest rate risk; as of December 31, 2022, with $175.5 million in cash and cash equivalents, a 25 basis point decrease in interest rates would result in an approximate $0.4 million reduction in annual interest income[434] - The company does not use derivative financial instruments to manage interest rate risk and does not believe inflation has a material impact on its business, financial condition, or results of operations, but significant declines in consumer demand or substantial cost increases due to inflation could be detrimental[434][436] Item 8. Financial Statements and Supplementary Data This section states that the required financial statements and supplementary data are contained in a separate section of this annual report, beginning on page F-1, and are incorporated by reference - The required financial statements and supplementary data are contained in a separate section of this annual report, beginning on page F-1, and are incorporated by reference[439] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This section states that the company has no changes in or disagreements with accountants on accounting and financial disclosure - The company has no changes in or disagreements with accountants on accounting and financial disclosure[439] Item 9A. Controls and Procedures This section discloses the effectiveness of TrueCar's disclosure controls and procedures and internal control over financial reporting; management assessed both as effective at a reasonable assurance level as of December 31, 2022 - As of December 31, 2022, TrueCar's disclosure controls and procedures were designed to a reasonable assurance level, and were deemed effective[441] - Management assessed that the company's internal control over financial reporting was effective as of December 31, 2022[442] - PricewaterhouseCoopers LLP has audited the effectiveness of the company's internal control over financial reporting as of December 31, 2022[443] - No material changes in internal control over financial reporting occurred during the fourth quarter of 2022[444] Item 9B. Other Information This section states that there is no other information to disclose - No other information needs to be disclosed[446] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection This section states that disclosure regarding foreign jurisdictions that prevent inspection is not applicable - Disclosure regarding foreign jurisdictions that prevent inspection is not applicable[446] PART III This part incorporates by reference information regarding TrueCar's directors, executive officers, corporate governance, executive compensation, security ownership, certain relationships and related transactions, and principal accounting fees and services from its 2023 Proxy Statement Item 10. Directors, Executive Officers and Corporate Governance This section's required information is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed within 120 days after December 31, 2022, and the company has adopted a code of conduct and ethics applicable to all directors, officers, and employees - The information required by this section is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders[448] - The company has adopted a code of conduct and ethics applicable to all directors, officers, and employees, available on its website[448] Item 11. Executive Compensation This section's required information is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed within 120 days after December 31, 2022 - The information required by this section is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders[449] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section's required information is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed within 120 days after December 31, 2022 - The information required by this section is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders[449] Item 13. Certain Relationships and Related Transactions, and Director Independence This section's required information is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed within 120 days after December 31, 2022 - The information required by this section is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders[449] Item 14. Principal Accounting Fees and Services This section's required information is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed within 120 days after December 31, 2022 - The information required by this section is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders[450] PART IV This part outlines the exhibits and financial statement schedules included in the report, confirms the absence of a Form 10-K summary, and provides the required signatures Item 15. Exhibits and Financial Statement Schedules This section lists financial statements, financial statement schedules, and exhibits filed as part of or incorporated by reference into the report, including the independent registered public accounting firm's report, consolidated financial statements, and various contracts and agreements - This report includes the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Stockholders' Equity, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[452] - All financial statement schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements and their notes[453] - Exhibits include various agreements such as the Membership Interest Purchase Agreement, Certificate of Incorporation, specimen stock certificate, warrants, credit agreement, equity incentive plans, and executive employment agreements[455][457][459] Item 16. Form 10-K Summary This section states that there is no Form 10-K summary - There is no Form 10-K summary[463] Signatures This section contains the report's signatures by authorized representatives of the registrant, including directors and officers, as required by the Securities Exchange Act of 1934 - The report was signed by Michael D. Darrow, President and Chief Executive Officer of TrueCar, Inc., on February 23, 2023[465][466] - Several directors and officers (including the Chief Financial Officer) also signed the report and authorized Michael D. Darrow, Jantoon E. Reigersman, and Jeffrey J. Swart as their attorneys-in-fact to sign any amendments[466][467] INDEX TO CONSOLIDATED FINANCIAL STATEMENTS This section provides an index to TrueCar's consolidated financial statements, including the independent auditor's report, balance sheets, income statements, statements of stockholders' equity, cash flow statements, and detailed notes Report of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP issued an unqualified opinion on TrueCar's consolidated financial statements for the years ended December 31, 2022, and 2021, and on the effectiveness of internal control over financial reporting as of December 31, 2022, highlighting revenue recognition for TrueCar's car buying program as a critical audit matter - PricewaterhouseCoopers LLP issued an unqualified opinion on TrueCar's consolidated financial statements for the years ended December 31, 2022, and 2021, and on the effectiveness of internal control over financial reporting as of December 31, 2022[471][472] - The auditors identified revenue recognition for TrueCar's car buying program as a critical audit matter due to the high degree of audit effort and evaluation of audit evidence involved[480][481] Consolidated Balance Sheets As of December 31, 2022, TrueCar's total assets were $251.5 million, a decrease from $387.7 million in 2021, with total liabilities at $54.3 million and stockholders' equity at $197.3 million, reflecting reduced cash and cash equivalents and goodwill impairment to zero - Consolidated Balance Sheets (in thousands) | Metric | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and Cash Equivalents | $175,518 | $245,217 | | Accounts Receivable, net | $13,786 | $16,710 | | Prepaid Expenses | $5,969 | $6,145 | | Other Current Assets | $2,562 | $1,866 | | Total Current Assets | $197,835 | $269,938 | | Property and Equipment, net | $18,902 | $19,155 | | Operating Lease Right-of-Use Assets | $16,940 | $23,605 | | Goodwill | — | $51,205 | | Intangible Assets, net | $13,969 | $4,950 | | Equity Method Investment | — | $14,500 | | Other Assets | $3,881 | $4,317 | | Total Assets | $251,527 | $387,670 | | Liabilities and Stockholders' Equity | | | | Accounts Payable | $8,655 | $11,364 | | Accrued Employee Expenses | $7,378 | $5,187 | | Operating Lease Liabilities (Current) | $4,514 | $5,253 | | Accrued Expenses and Other Current Liabilities | $10,232 | $9,677 | | Total Current Liabilities | $30,779 | $31,481 | | Deferred Tax Liability | — | $103 | | Operating Lease Liabilities (Non-Current) | $18,500 | $26,300 | | Other Liabilities | $4,981 | — | | Total Liabilities | $54,260 | $57,884 | | Common Stock | $9 | $10 | | Additional Paid-in Capital | $709,790 | $723,623 | | Accumulated Deficit | $(512,532) | $(393,847) | | Total Stockholders' Equity | $197,267 | $329,786 | | Total Liabilities and Stockholders' Equity | $251,527 | $387,670 | - As of December 31, 2022, cash and cash equivalents were $175.5 million, a decrease from $245.2 million as of December 31, 2021[483] - As of December 31, 2022, the goodwill balance was zero, compared to $51.2 million as of December 31, 2021, reflecting the 2022 goodwill impairment[483] - As of December 31, 2022, the accumulated deficit was $512.5 million, an increase from $393.8 million as of December 31, 2021[483] Consolidated Statements of Comprehensive Income (Loss) TrueCar reported a net loss of $118.7 million in 2022, a significant increase from a $38.3 million loss in 2021, with revenue declining from $231.7 million in 2021 to $161.5 million in 2022, primarily due to goodwill impairment and increased operating expenses - Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenue | $161,524 | $231,698 | $278,678 | | Cost of Revenue | $16,213 | $22,239 | $21,549 | | Sales and Marketing | $104,534 | $136,479 | $151,915 | | Technology and Development | $46,090 | $41,432 | $44,930 | | General and Administrative | $44,087 | $48,747 | $49,989 | | Depreciation and Amortization | $16,520 | $16,279 | $20,547 | | Goodwill Impairment | $59,775 | — | $8,264 | | Operating Loss | $(125,695) | $(33,478) | $(18,516) | | Interest Income | $2,565 | $52 | $462 | | Other Income | $40 | $667 | $198 | | Equity Method Investment (Gain) Loss | $1,845 | $(5,404) | $(1,989) | | Loss from Continuing Operations Before Income Taxes | $(121,245) | $(38,163) | $(19,845) | | Income Tax Provision (Benefit) | $(2,560) | $206 | $(6) | | Loss from Continuing Operations | $(118,685) | $(38,369) | $(19,839) | | Net Income from Discontinued Operations (after tax) | — | $40 | $96,383 | | Net (Loss) Income | $(118,685) | $(38,329) | $76,544 | | Earnings (Loss) Per Share, Basic and Diluted | | | | | Continuing Operations | $(1.30) | $(0.39) | $(0.19) | | Discontinued Operations | — | — | $0.91 | | Weighted-Average Common Shares Outstanding, Basic and Diluted | 91,452 | 97,352 | 106,315 | | Comprehensive (Loss) Income | $(118,685) | $(38,329) | $76,544 | - Net loss for 2022 was $118.7 million, a significant increase from $38.3 million in 2021[486] - Revenue for 2022 was $161.5 million, a 30.3% decrease from $231.7 million in 2021[486] - Goodwill impairment expense of $59.8 million in 2022 was one of the primary factors contributing to the expanded loss[486] - Basic and diluted loss per share from continuing operations was $1.30 in 2022, compared to $0.39 in 2021[486] Consolidated Statements of Stockholders' Equity As of December 31, 2022, TrueCar's total stockholders' equity was $197.3 million, a decrease from $329.8 million in 2021, primarily reflecting the net loss and common stock repurchases in 2022 - Consolidated Statements of Stockholders' Equity (in thousands, except share data) | Metric | Common Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity | | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at December 31, 2019 | 106,865,830 | $11 | $759,322 | $(432,062) | $327,271 | | Net Income | — | — | — | $76,544 | $76,544 | | Repurchase of Common Stock | (9,282,485) | $(1) | $(42,334) | — | $(42,335) | | Stock-Based Compensation | — | — | $25,456 | — | $25,456 | | Shares Issued for Employee Equity Plans (net of tax withholdings) | 2,107,597 | — | $(4,154) | — | $(4,154) | | Balance at December 31, 2020 | 99,690,942 | $10 | $738,290 | $(355,518) | $382,782 | | Net Loss | — | — | — | $(38,329) | $(38,329) | | Repurchase of Common Stock | (6,137,734) | — | $(32,429) | — | $(32,429) | | Stock-Based Compensation | — | — | $21,691 | — | $21,691 | | Shares Issued for Employee Equity Plans (net of tax withholdings) | 2,660,035 | — | $(3,929) | — | $(3,929) | | Balance at December 31, 2021 | 96,213,243 | $10 | $723,623 | $(393,847) | $329,786 | | Net Loss | — | — | — | $(118,685) | $(118,685) | | Repurchase of Common Stock | (9,838,785) | $(1) | $(29,782) | — | $(29,783) | | Stock-Based Compensation | — | — | $18,700 | — | $18,700 | | Shares Issued for Employee Equity Plans (net of tax withholdings) | 2,064,630 | — | $(2,751) | — | $(2,751) | | Balance at December 31, 2022 | 88,439,088 | $9 | $709,790 | $(512,532) | $197,267 | - As of December 31, 2022, total stockholders' equity was $197.3 million, a decrease from $329.8 million as of December 31, 2021[489] - The net loss of $118.7 million in 2022 led to an increase in accumulated deficit from $393.8 million in 2021 to $512.5 million in 2022[489] - In 2022, the company repurchased and retired 9.8 million shares of common stock for $29.8 million[489] Consolidated Statements of Cash Flows TrueCar reported $29.1 million net cash used in operating activities, $8.0 million net cash used in investing activities, and $32.5 million net cash used in financing activities in 2022, resulting in a $69.7 million net decrease in cash and cash equivalents, with an ending balance of $175.5 million - Consolidated Cash Flow Data (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | $(29,137) | $14,374 | $29,898 | | Net Cash Used in Investing Activities | $(8,028) | $(10,689) | $(10,277) | | Net Cash Used in Financing Activities | $(32,534) | $(38,086) | $(49,238) | | Net Cash Used in Continuing Operations | $(69,699) | $(34,401) | $(29,617) | | Net Cash Provided by Discontinued Operations | — | $6,304 | $121,397 | | Net (Decrease) Increase in Cash and Cash Equivalents | $(69,699) | $(28,097) | $91,780 | | Cash and Cash Equivalents at Beginning of Year | $245,217 | $273,314 | $181,534 | | Cash and Cash Equivalents at End of Year | $175,518 | $245,217 | $273,314 | - Net cash used in operating activities was $29.1 million in 2022, primarily influenced by a $118.7 million loss from continuing operations, adjusted for non-cash items such as $59.8 million goodwill impairment and $17.7 million stock-based compensation expense[418] - Net cash used in investing activities was $8.0 million in 2022, primarily including $12.1 million for the Digital Motors acquisition and $11.7 million for investments in software and computer hardware, partially offset by $15.7 million received from the sale of equity investment in Accu-Trade[423] - Net cash used in financing activities was $32.5 million in 2022, primarily comprising $29.8 million for common stock repurchases and $2.9 million for taxes paid on net share settlement of equity awards[424] Notes to Consolidated Financial Statements This section provides detailed notes to TrueCar's consolidated financial statements, covering company organization, significant accounting policies, business combinations, leases, discontinued operations, revenue information, goodwill, property and equipment, intangible assets, credit facility, commitments and contingencies, stockholders' equity, stock-based awards, income taxes, employee benefit plans, and related party transactions - TrueCar acquired Digital Motors on May 31, 2022, for $15.5 million in cash and up to $8.0 million in contingent cash consideration, aiming to accelerate the provision of a digital car-buying experience[580] - The company recognized a $59.8 million non-cash goodwill impairment charge in 2022, resulting in a zero goodwill balance as of December 31, 2022[399][610] - In 2022, the company recognized a $1.8 million gain from the fair value adjustment of a derivative asset related to the sale of its equity investment in Accu-Trade[511] - As of December 31, 2022, the company had federal net operating loss carryforwards of $309.8 million and state net operating loss carryforwards of $242.0 million[665] - The company completed the sale of its ALG subsidiary on November 30, 2020, reporting its operating results and cash flows as discontinued operations[500][598] 1. Organization and Nature of Business TrueCar, Inc. is an internet information, technology, and communication services company that provides pricing transparency through its digital automotive marketplace, connecting consumers with certified dealers and automakers, and has divested its ALG subsidiary to focus on its core business - TrueCar, Inc. is an internet information, technology, and communication services company, incorporated in February 2005 and headquartered in Santa Monica, California[497] - The company provides pricing transparency, connects consumers with certified dealers, and helps OEMs effectively deploy incentives through its TrueCar.com website, mobile apps, and affinity partner car-buying websites[498] - TrueCar, through its subsidiary TCDS, offers Trade and Payments solutions and supports the Sell Your Car product, providing consumers with vehicle valuations and monthly payment calculations[499] - The company sold its ALG subsidiary, which provided automotive residual value forecasts and consulting services, to J.D. Power on November 30, 2020[500] 2. Summary of Significant Accounting Policies This section outlines TrueCar's accounting policies, including GAAP-based financial statement preparation, consolidation principles, use of estimates, single operating segment reporting, equity method investments, fair value measurements, concentrations of credit and business risk, cash and cash equivalents, accounts receivable and allowance for doubtful accounts, property and equipment, leases, and software and website development costs - The company prepares its consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and reports the results of its divested ALG subsidiary as discontinued