TrueCar(TRUE) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q2 2024, total revenue was $41.8 million, reflecting a year-over-year growth of 6.4% and a quarter-over-quarter growth of 1.8% [8] - Adjusted EBITDA profitability was achieved at$ 0.1 million, marking a $5.4 million improvement year-over-year [8] - The CDK Global malware attack is estimated to have caused approximately$ 750,000 in lost revenue during the quarter [9] Business Line Data and Key Metrics Changes - The launch of TrueCar+ on July 17, 2024, allows consumers to purchase over 3,000 vehicles online, marking a significant step in the company's service offerings [9][19] - Revenue from TrueCar Marketing Solutions products grew from zero to a $1 million quarterly run rate, indicating strong adoption among dealers [18] - OEM incentive revenue declined by 14% year-over-year and 37% sequentially due to timing issues related to new program activations [15] Market Data and Key Metrics Changes - New vehicle sales grew by 19.5% quarter-over-quarter, compared to an industry-wide growth of 8.9% [14] - The company is entering a market environment with increasing vehicle supply, which is expected to positively impact sales [13] Company Strategy and Development Direction - The company aims to return to$ 300 million in revenue by 2026, with a long-term growth target of over 20% [12][23] - Key strategies include activating new dealers, reducing dealer churn, growing average revenue per dealer, and expanding OEM partnerships [12] - The company is focused on enhancing its value proposition to dealers by providing better support and innovative solutions [12][63] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth profile of the business despite challenges posed by the CDK malware attack and market conditions [16][33] - The management highlighted the importance of adapting to changing dealer needs and market dynamics to drive sales efficiency [61] - There is optimism regarding the recovery of OEM incentive revenue in the second half of the year, driven by increased dealer engagement [33] Other Important Information - The company has a strong balance sheet with no debt and approximately $180 million in cash equivalents at the end of Q2 [24] - Share repurchases totaled 425,000 shares for$ 1.2 million during Q2, with an additional 1.26 million shares repurchased for $4.5 million in early July [24] Q&A Session Summary Question: Can you elaborate on the drivers behind the highest level of revenue activations and upgrades in Q2? - Management indicated that macro changes and improved sales team effectiveness contributed to the revenue activations, alongside the launch of new product offerings [27][30] Question: What updates can you provide on OEM incentives revenue and the impact of the CDK hack? - Management noted that the pressure on OEMs is increasing, and they are optimistic about revenue growth in the OEM segment despite the recent challenges [33] Question: How should we think about the direct channel and advertising spend in the back half of the year? - Management acknowledged that while advertising spend increased, the impact on unit growth may take time to materialize, and they remain focused on driving consumer demand [40][43] Question: Can you discuss the sequential decline in gross margins? - The decline was attributed to the expanded TrueCar wholesale solutions product offering, which has a lower margin profile compared to previous models [48] Question: What is the timeline for scaling TC+ and how has the initial launch gone? - Management reported that the initial launch has gone well, with ongoing learning and adjustments being made to improve the product before scaling [66][70]