TrueCar(TRUE) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $44.8 million, an increase of $3.8 million or 9.2% year over year [5] - Adjusted EBITDA was negative $3.8 million, indicating ongoing challenges in profitability [5] - New unit sales volume increased by 23% year over year, significantly outpacing the industry's growth of 6.8% in new vehicle retail sales for the quarter [5] Business Line Data and Key Metrics Changes - The transition of OEM incentives from American Express to AAA auto buying side progressed rapidly, with AAA program revenue in March approaching previous levels seen with American Express [5] - Performance marketing campaigns have achieved the lowest cost per sale since 2022, effectively driving unit sales growth for dealer partners [5] Market Data and Key Metrics Changes - Approximately 50% of new vehicles retailed in the U.S. are imported, and tariffs are estimated to add about $4,500 in additional costs for new vehicles sold, equating to roughly 10% of the average pre-tariff new vehicle MSRP [9] - Despite the tariffs, there is no expected material impact on strong demand in the near term as dealers sell through pre-tariff inventory [10] Company Strategy and Development Direction - The company is focused on scaling the TC Plus product, which aims to enhance the car buying experience for consumers and dealers [6] - A pilot program with a singular dealer group is being utilized to co-create tools and solutions for broader rollout [6] - The company is also onboarding additional pilot dealer groups to expand consumer access to TC Plus [8] Management's Comments on Operating Environment and Future Outlook - Management expressed uncertainty regarding the impact of tariffs on vehicle supply and pricing, indicating that the operational response from OEMs will dictate changes in retail sales volumes [9][10] - The company refrained from providing financial guidance for Q2 and beyond due to high levels of uncertainty in market dynamics [11] Other Important Information - The company is taking steps to mitigate potential slowdowns in growth and aims to manage cash flow effectively in various scenarios [11] - The integration with dealer management systems (DMS) providers is critical for automating deal documentation and desking activities [7] Q&A Session Summary Question: Can you clarify the product enhancements mentioned in the letter? - Management highlighted the use of Gen AI for personalized email campaigns as an example of product enhancement aimed at improving consumer experience [15][16] Question: How should we think about changes to OEM incentive ad spending? - Management indicated that OEMs may need to support vehicle sales more, which could benefit the company, but the uncertainty makes it hard to predict [17] Question: How should we think about margins across the business? - Management noted that margins will be influenced by revenue mix and flexibility in the cost structure, with OEM revenue typically having the highest margin [20][24] Question: What is the status of the transition from American Express to AAA? - Management confirmed that the transition is progressing and nearing previous levels, though not yet fully complete [26] Question: What is the exposure to different OEMs regarding tariffs? - Management stated that not all OEMs will be impacted equally, and the company is focused on helping OEMs navigate their specific challenges [30][32] Question: Is there consideration for stock buybacks? - Management confirmed that stock buybacks are always considered as part of their capital allocation strategy [35] Question: Can you provide insight into dealer behavior amid uncertainty? - Management reported that dealer morale remains strong, and there are no significant red flags in the field despite the uncertainty [69][70]