Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TrueCar Inc (TRUE, Financial) reported a 6.4% year-over-year revenue growth in Q2 2024, reaching $41.8 million.
- The company achieved adjusted EBITDA profitability of $0.1 million, marking a $5.4 million improvement year-over-year.
- TrueCar Inc (TRUE) launched the TrueCar+ pilot, enabling consumers to purchase vehicles entirely online, which is a significant milestone.
- The company expanded its franchise and independent dealer network, driven by strong growth in new dealer activations.
- TrueCar Inc (TRUE) observed a significant lift in the adoption rate of its enhanced subscription offering, driven by the integration of TCMS products.
Negative Points
- The CDK Global malware attack resulted in approximately $750,000 of lost revenue during the quarter.
- OEM incentive revenue declined 14% year-over-year and 38% sequentially due to timing issues and the CDK Global outage.
- Despite growth in dealer activations, dealer cancellations partially offset the gains.
- Gross margins declined sequentially due to expenses associated with the expanded TrueCar wholesale solutions product offering.
- The company faces challenges in achieving its long-term revenue growth target of 20%-plus, with current growth being limited by various factors.
Q & A Highlights
Q: Could you elaborate on the drivers behind the highest level of revenue activations and upgrades in the second quarter? Is it more company-specific adoption or industry trends?
A: Jantoon Reigersman, CEO: The macro environment is changing with inventory building up and affordability being a real issue, which makes focusing on unit sales crucial. Our sales team is doing a tremendous job after restructuring, and our TrueCar Marketing Solutions products have opened doors to more dealers. Oliver Foley, CFO: The expanded product offering has allowed us to address today's dealer challenges, getting us in front of more large enterprise accounts.
Q: Can you update us on what you've seen so far in the third quarter regarding OEM incentives revenue and any guidance for Q3?
A: Jantoon Reigersman, CEO: We are positive about Q3 as we've seen activation and engagement in OEM incentives. The CDK hack risk is limited to Q2. While I'm reluctant to provide specific guidance, we aim to achieve free cash flow breakeven by the end of the year and need to start accelerating revenue growth to hit our three-year plan.
Q: How should we think about the direct channel and advertising spend in the back half of the year?
A: Oliver Foley, CFO: We increased marketing spend to capture consumer demand and grow unit sales, achieving our objective in Q2. We will continue to spend aggressively on consumer acquisition to keep dealers on the platform and attract new ones, always aiming for efficiency.
Q: Can you explain the sequential decline in gross margins and the path for the rest of the year?
A: Oliver Foley, CFO: The decline is due to the expanded TrueCar wholesale solutions product offering, which has a lower margin profile. Jantoon Reigersman, CEO: The wholesale side is an enabler for TrueCar+, allowing us to provide a committed trade-in value and support the scalability of TrueCar+.
Q: Regarding the launch of TC+, did everything go as planned, and is the timeline for scaling in Q4 firm?
A: Jantoon Reigersman, CEO: We are learning a lot from the pilot phase, and while there are always improvements to be made, the flow is fundamentally good. We aim to scale TC+ by focusing on product fluidity, adding inventory, and expanding to other states. We don't expect revenue from TC+ this year as it's about proving the concept to stakeholders.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
