NASDAQ:TRUE TrueCar Q3 2023 Earnings Report $1.58 +0.07 (+4.30%) As of 02:42 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast TrueCar EPS ResultsActual EPS-$0.07Consensus EPS -$0.11Beat/MissBeat by +$0.04One Year Ago EPSN/ATrueCar Revenue ResultsActual Revenue$41.15 millionExpected Revenue$41.16 millionBeat/MissMissed by -$10.00 thousandYoY Revenue GrowthN/ATrueCar Announcement DetailsQuarterQ3 2023Date11/6/2023TimeN/AConference Call DateTuesday, November 7, 2023Conference Call Time9:00AM ETUpcoming EarningsTrueCar's Q1 2025 earnings is scheduled for Monday, May 5, 2025, with a conference call scheduled on Tuesday, May 6, 2025 at 9:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by TrueCar Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 7, 2023 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00And welcome to the TrueCar Third Quarter 2023 Financial Results Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Mr. Jantoon Reigersman, President and Chief Executive Officer of TrueCar. Please go ahead, sir. Speaker 100:00:16Thank you, operator. Hello, everyone, and welcome to the TrueCar's Q3 2023 earnings conference call. Joining me today is Oliver Foley, our new Chief Financial Officer. I hope you all have had atir.trucar.com. Before we get started, I need to read our safe harbor. Speaker 100:00:44I want to remind you that we will be making forward looking Statements on this call, including statements regarding our revenue growth, expected adjusted EBITDA as well as aspirational goals regarding our 3 year plan. Forward looking statements can be identified by the use of words such as believe, expect, plan, target, anticipate, become, seek, will, intend, confident and similar expressions and are not and should not be relied on as guarantees of future performance or results. Actual results could differ materially from those contemplated by our forward looking statements. We caution you to review the Risk Factors section of our annual report on Form 10 ks, our quarterly reports on Form 10 Q and our reports and filings with the Securities and Exchange Commission for a discussion of factors that could cause our results to differ materially. The forward looking statements we make on this call are based on information available to us as of today's date, and we disclaim any obligation to update any forward looking statements except as required by law. Speaker 100:01:47In addition, we will also discuss certain GAAP and non GAAP financial measures. Reconciliation of all non GAAP measures to the most directly comparable GAAP measure are set forth in the Investor Relations section of our website at ir.trucar.com. The non GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. With that, I will provide a summary of the quarter as highlighted in our shareholder letter. This is an exciting quarter, okay? Speaker 100:02:19We have surpassed our guidance. We're back to year over year revenue growth for the first time in 9 quarters and achieved positive adjusted EBITDA a quarter earlier than originally indicated in our previous guidance. We have a clear vision and we are working hard to realize it. The macroeconomic environment is showing signs of improving and both consumers and dealers are in increasingly greater need of TrueCar's offerings. U. Speaker 100:02:44S. Monthly inventory exceeded 2,000,000 units for the first time since March 2021, a year over year increase of 50.3%. The percentage of new car sales over MSRP decreased to 39%, a decline of 37% year over year. And in September, average new car incentives climbed 129% year over year to $2,367 We still have a ways to go before the macroeconomic environment returns to historical norms, but it appears the tide has started to turn in our favor. We believe our focus on enabling transactions for both consumer and dealers through a more comprehensive journey rather than selling page views, impressions or ads will set us apart from our competition in new ways. Speaker 100:03:31Enabling the right consumer to find the right car with the right financing at the right dealer is essential to this experience, but actual online transaction enablement that includes the execution of key deal documents requires more than these components. Specifically, it requires an experience that integrates seamlessly with the processes and software relied upon by dealers, lenders and other third parties. Building out these 3rd party integrations is a complex challenge that requires time, but we're laser focused on meeting this challenge. We continue to make good progress on our product flow, having launched what we call our unified flow. This flow is designed to resemble traditional online commerce Checkout flow, whereby consumers are provided with relevant transaction details, landed costs and next steps to complete the purchase of the product they are buying. Speaker 100:04:24We have also successfully launched our economic cohort and our convenience cohort flows and we're well on the way to launch our EV flow in December. We continue to refine each of these 3 cohort flows as we reduce friction, eliminate unnecessary steps and learn from product focused groups and consumer behaviors. We truly have shifted the organization to a product testing mindset and talent base and the build out of this cohort flows is emblematic of that shift. Beyond these three cohort flows, we see revenue opportunities stemming from the possibility of regaining dealers we have lost over the past several years, expanding value added services to enhance dealer operations and further strengthening our OEM and affinity business. As we look forward, we believe we have tremendous growth opportunities, but we also know such growth cannot come overnight. Speaker 100:05:16We're building a company that can endure and sustain and it can help shape the automotive industry over time. This happens from the ground up, while making sure we have the right people in the right seats with the right focus and core values, all aimed towards pursuing both growth and profitability. For the Q4 of 2023, we reiterate our expectation of returning to double digit year over year revenue growth and breakeven or positive adjusted EBITDA. In the longer term, we're focused on the importance of sustained revenue growth and positive free cash flow. We are in pursuit of both. Speaker 100:05:52We understand the importance of the Rule of 40 as an indicator of healthy growing companies with good profitability metrics. We believe that what we need to do to drive long term shareholder value for all of you It's to simply execute and prove ourselves consistently. In light of this, we have established 3 year aspirational goals. By the end of 2026, we're pursuing in excess of $300,000,000 annual revenue and greater than 10% free cash flow. We realize these are ambitious goals, but if we meet them, we would have combined revenue growth and free cash flow margin of at least 40% by the end of 2026, which we believe would emphasize our financial health under the rule of 40 as well as the value accretion opportunity we believe we have ahead of us. Speaker 100:06:42We believe that we have the opportunity, the platform and the talent to execute our strategy and now the macro is turning in our favor. Join us in this journey as we reshape the car buying experience. Now, operator, let's open the call for questions from our analysts. Operator00:07:01Thank you. We will now begin the question and answer And the first question will come from Rajat Gupta with JPMorgan. Please go ahead. Speaker 200:07:34Great. Thanks for taking the question, Annette, Speaker 300:07:37on the execution in 3Q. Maybe just on the 3.26 targets, I mean, you have a target out there now and but it's still you're still calling it aspirational or ambitious. Maybe if you could give us some sense or like a bridge from how we get there from Today, it's going to be 100% organic, is it M and A and organic combined? And then how should we just think about the operating leverage from that revenue growth going forward as well. Maybe not to the 300, but like just going forward as well, how should we think about operating leverage with As revenue comes back in 2024, 2025 and beyond. Speaker 300:08:24I have a follow-up. Thanks. Speaker 100:08:26Absolutely. So, Rajat, thanks so much for the question. So, I'll go on the first part. The answer is organic. If you think of the overarching building blocks, Right. Speaker 100:08:40It's obviously like which is normal to an e commerce play is mitigate churn in no particular order, but mitigate churn, Get new dealers on board, expand the offering of dealers, obviously interesting opportunities in the OEM and affinity space And then obviously roll out the digital transaction effectively, right, TC Plus through that over And the ability to then increase monetization. So those are the rough building blocks you're looking at overarching. Your question is whether this is organic or includes M and A. This is pure organic, the way we're thinking about it and the opportunity we see ahead of us. And then the other part is operating leverage. Speaker 100:09:24I think we've always had very strong as an organization, and I think we've alluded to that in some of our last Conference calls as well, which is the cost base of this organization is relatively flat. Remember, it's really 3 buckets. It's people, it's marketing and it's effectively the fixed overhead charge. If you think marketing roughly, 50% as it stands today, it's 50% partner marketing, 50% effectively discretionary performance marketing from our end. So Would we over time like to deploy more in the marketing space? Speaker 100:10:01Obviously, as we launch Fully launched and nationwide launch more of the digital experience. The answer is yes. So So that's one bucket. And over time, if you think about adding people, really where you would add over time is more on the sales and service side more than anywhere else. And so I think you could assume that the cost structure is relatively stable, Obviously, somewhat growing in proportion to, obviously, the size of revenue growing, but overarching operating leverage should be really healthy and really strong as we also feel that we have a lot of monetization opportunities. Speaker 100:10:41Does that answer your question? Speaker 300:10:44Understood. No, that's helpful color. And then maybe just as a follow-up on capital allocation. You obviously have a significant amount of cash on the balance sheet. And Based on the EBITDA cadence here in the Q4 and into 2024, it looks like you will be generating Free cash flow very soon. Speaker 300:11:10How should we think about and you also mentioned that there's 100% organic opportunity here So is it reasonable to assume that you would take a more serious consideration towards buyback here In the near term, just in the context of the targets itself and the fact that you're already positive EBITDA? Thanks. Speaker 100:11:33Yes, it's a great question. The answer is we review all opportunity of capital allocation, obviously. Buybacks is one opportunity of several that we have. I do think that impacts of buybacks and are disproportionately greater once you have positive EPS. And so there's a consideration there also Around when if you do buybacks, when do you do buybacks and in what form do you do buybacks. Speaker 100:12:03But is buyback something that is on our menu of options and something that we consider seriously and we always continue consider seriously. The answer is absolutely yes. We do also know that, Look, we've gone through now. We've done 9 quarters of decline. This is the Q1 of positive. Speaker 100:12:21We know we want to prove ourselves obviously over the Couple of quarters. It's still a little bit of give and take in the broader macro. At the right time, will we address The broader cash balances, etcetera, in a more broad way, the answer is absolutely yes, but buybacks are always a consideration for us at at any point in time. Speaker 300:12:44Got it. Great. Thanks for the color. I'll jump back in queue. Operator00:12:49Thank you. The next question will come from Navi Khan with B. Riley Securities. Please go ahead. Speaker 400:12:57Hi. This is Ryan asking a question on behalf of Vivek Khan. Can you talk about conversions in United Flow compared to the traditional TrueCar experience? And then could you also talk about conversions between the convenience cohort and the economic cohort, please? Speaker 100:13:16Yes. So we have disclosed so first of all, the United so the United Flow, we've all launched this in the last couple of weeks. So it's Hard to give like definite answers across the board. I mean, we gave some indication obviously in the letter where, For example, on the economic flow, right, we exposed it to like 50,000 people, which 9,000 effectively Immediately, we started actually going through the proper flow and submit their information and properly engage. So these are attractive numbers. Speaker 100:13:52What we are seeing also is that because these flows are much more personalized, people are actually engaging. We also obviously see that we still have in certain areas too many steps or there are certain things that are unclear or Right. Like things that for us seem to be very obvious are not necessarily obvious for the consumers. And so we're clearing all that up. But in all honesty, there's it's a little bit too early to provide real like conversion metrics that are comparable at this stage because we We've only been doing this effectively for a couple of weeks. Speaker 100:14:28So this is something that we would love to be able to talk about in some more detail obviously on the next call. But these are good questions. What we have seen though is that the engagement is very, very high and that the engagement in each of the cohorts of like given it's a Personalized flow is high. And so that obviously also shows that the demand is there and that the willingness to go through these flows is very high. But the actual conversion metrics is probably too early to talk about. Speaker 400:14:57Thank you. And then a follow-up is When would you expect for United Flow to go out to all regions, please? Speaker 100:15:05Yes. The United Flow We'll be live across in short order. What is most important though is remember that the United Flow, the unified flow, what happens is, it's not yet it doesn't include the final pieces of paperwork. So that's the piece that is still The last effectively, the last hiccup to get the full transaction online. And so we're working through that and that obviously that product development roadmap does not solely depend on us. Speaker 100:15:41But once we have done that, that at least the experience for the consumer is already fully baked in a full commerce effectively flow, but it will be online for pretty much everybody in short order. Yes. So it's going to be a new experience for people to go through the TrueCar flow. The piece that we have to finalize is the piece of paperwork. Thank you. Operator00:16:09The next question will come from Chris Pierce with Needham. Please go ahead. Speaker 200:16:14Hey, just 2. Can you help us think about some sort of upper bound on OEM incentive revenue, it's nice sequential growth again this quarter. And I just kind of want to get a sense of Should it be higher than it was pre COVID because of where inventories are or like should it normalize at some sort of level? I just don't know how to And I know it's going to be lumpy, but I just kind of get a sense of where this can go. Speaker 100:16:41Yes. I think, Chris, I think It's a good question. I think it's like I'll give you some obviously, it's tough to predict. But I'll give you some parameters, which is we obviously think that in a high interest rate world, Right. Some element of participation of OEMs and captives to support their consumers is important. Speaker 100:17:08There is also with relatively low brand loyalty, there is obviously also a great focus of OEMs To effectively somewhat like recapture customers they've lost over time, There is an interest obviously to help push their dealers with EV, etcetera. So long story short, I think there is A great emphasis of OEMs to support their relevant businesses, which is great. And obviously, there's a huge opportunity there because of the We can do between Affinity Partners, between our dealer partners and then obviously between the OEM. So do we see this as an increasing opportunity? The answer is yes. Speaker 100:17:57Do we see this as an opportunity that Historically, it was attractive to us and historically had growth opportunity. The answer is also yes, right? So Yes. We think that this is important to us. The other thing is also you're going to have the ability to help support OEMs really get in front of Right consumers in the right way. Speaker 100:18:18And so it's not just that you think about programs associated to rebates, for example, but even like go marketing Programs, etcetera, are all things that are possible. And so, yes, so the hard part is over the years to come, It's a little bit hard to assess what really the upper bound is. The issue the big issue of this is that these are often more lumpy programs, so it's a little Harder to predict, but do we know that there's a real willingness and do we also understand that there's a macro that effectively demands for a greater need of Support by the ODMs, the answer is also yes. So do we see the broader opportunity? And do we think that we have a unique value proposition within the area? Speaker 100:19:01The Yes, it's also yes. So it's hard to quantify what the actual upper bound is. Speaker 200:19:08Okay. And when you do one of these programs, do you also get dealer revenue because it leads to a transaction as well or is it just revenue on the marketing side from the OEM Speaker 100:19:20It depends very much on the programs, but the answer is in many cases, yes, both. Speaker 200:19:25Okay. Okay. So in theory, it's somewhat of a leading indicator on dealer revenue with a lumpy backdrop. So it's hard to model. Okay, perfect. Speaker 200:19:34Yes. And then the letter talks about regaining lost dealers. Can you just kind of touch on the game plan there? Are you seeing outreach from these dealers as inventories pile up? Or is it about you going to dealers talking about, hey, we're more Moving to subscription, here we have TC Plus. Speaker 200:19:52What's the push and the pull on that side of the world? Speaker 100:19:55Yes. Good question. I think the short answer is always, we have a bias towards action as a firm. So we will always engage and Be aggressive and proactive. We do see a really healthy portion of our dealers coming back on our network, So that's really good. Speaker 100:20:18And it's really mostly us reaching out and just reengaging and properly engaging. And it's also engaging in the different forms. So we haven't really spoken about it in this letter, but we have 2 tremendous leaders, 1 on the sales side and 1 on the service side. So we've also did a greater separation of the sales and service And the service programs associated to that, we've obviously been doing research and historically we've done research where It clearly show that NPS scores with dealers was very high if you touch them within 30 days, obviously, And negative if you touched them in 90 days. And so there are a lot of opportunities for us to just engage much more in a consulting forum and engage with providing insights and and engage with providing insights and training as opposed to trying to be there as a salesperson. Speaker 100:21:14And remember that one of the beauties of TrueCar is Speaker 500:21:16that we have a lot Speaker 100:21:18of data. We have a lot of insights. And we have insights not only on obviously the sales that happened at a respective dealership, but also loss sales or capture rates or all these type of things, so pretty much everything that happens Within the DMA of that respective dealer. And so there's a lot of opportunity for us to just have a different form of a dialogue. And this all sounds really not super sophisticated and it doesn't need to be sophisticated. Speaker 100:21:47It just means that you need to Engaging with the dealers the right way, which is exactly what we're doing now. And so, yes, so the short answer is it's very much proactive from us. We do have dealers call back in, but it's very much still proactive from us. And it's also much more focused on how do you actually do sales, How do you do handoff towards service? What does it actually mean to do service? Speaker 100:22:11How often do you touch dealers? What do you provide them? How are you the best Speaker 200:22:24Okay. Thank you. Operator00:22:31Our next Question will come from Marvin Fong with BTIG. Please go ahead. Speaker 500:22:37Good morning. Thanks for taking my questions and Congratulations Oliver on the new role. So first question, I'd just like to revisit the long term revenue and margin targets for 2026. You, Jonathan, you mentioned several of the building blocks. I mean, is it fair to say that TC Plus Is the largest component of how you plan to grow revenue? Speaker 500:23:03And Could you add some color on sort of the assumptions you have behind like adoption of TC Plus, like how many dealers will be part of that program, etcetera? Just maybe some more color would be very helpful. Thank you. Speaker 100:23:18Yes. So Marvin, great question. So the answer is, Interestingly enough, it's hard to predict adoption of a product like TC Plus. I actually think and I'm a firm believer, otherwise I wouldn't obviously be here, but like once TC Plus is actually fully, fully operational with the consumer and dealer I think this will be a huge There will be huge adoption of that product. Now it's hard to assess and it's hard to predict when and how and what form. Speaker 100:24:00But I do am a firm believer that we see that consumers really want to do full transactions online and we see that dealers really want to effectively expand their addressable markets and want to maintain or even increase their margins and do greater sales volumes. And so we think that there is a real value here to provide. As part of the planning, to answer your question, I actually think that there is a really big opportunity for a lot of the historical TrueCar revenue lines to come back to growth, Right. So whether this is just providing the current seats of products that we provide better, right focus on the EV side of things, focus on the OEM side of things, etcetera. So interestingly enough, And this the growth that we're looking into this aspirational model is not actually overly dependent on the TC Plus side because it's so hard to predict. Speaker 100:25:01So in many ways, there is a segment to DC plus and the piece of DC plus really, if you think about it holistically and you go back to the 30,000 foot view, One of the metrics you will start hearing us talk about more and more over time will be revenue per dealer. It is currently still a little bit of a murky number because obviously you have a lot of dealers inside and there's a long tail to the dealer. So at some We'll become a little bit more clear on that, but revenue per dealer is a metric that I've started talking about more and more internally as well as the concept of Proper like 2 sided marketplace where you match supply and demand. And so the revenue per dealer will be Obviously, we're seeking to move up pretty dramatically over the next couple of years. And one of the ways to move that up is not only to sell Better and more services to dealers, but also over time is to obviously add new product lines in there and one of those product lines will be TC Plus. Speaker 100:26:03Do I think that DC plus has huge opportunity? The answer is yes. Is this predominantly based on actually the more historical TrueCar? The answer is also yes. So it's actually less dependent on DC plus Speaker 500:26:14Got you. Okay, that's great. And I guess a follow-up just On dealer count, so I think the franchise dealer count declined for the first time after several quarters of positive growth. Could you just speak to what might have changed this quarter to kind of cause that That number, the reverse, but the prospect of the strike, which I think turned out to be less bad than most people thought. Did that Speaker 100:26:48Yes. And absolutely, it's a little bit of a wash and just murky right now. So we transited to this more service and sales organization part. And so we are working through that right now. There's a little bit of like shaking out of like also like historical dealers that are maybe a little bit less Quality oriented towards consumers, there's just a little bit of give or take happening as we're now prioritizing really our dealer customers and consumers. Speaker 100:27:29And so net net is you'll see this Wash happened a little bit. It might take a quarter or 2. It's a little bit murky in terms of shifting up and down. It's really about Focusing on the standard distribution of the dealers we really want to focus on that are our bread and butter and that really provide the right experiences and are the right forward leaning dealers. And so you will see that's always a little bit fluctuate, although I think that we've obviously hit the trough and this should start going up over time. Speaker 100:27:59There's a little bit of give and take if you look at any given month in terms of types of dealers coming on and coming off. What I really care about obviously is the type of dealers coming on and the type of dealers going off. And that's the piece we really are on like a hawk. So I'm less concerned about some of the dealers coming off as long as they are the dealers we are not necessarily looking to seek to Operator00:28:33This concludes our question and answer session. I would like to turn the conference back over to Mr. Rykersman for any closing remarks. Please go ahead, sir. Speaker 100:28:42Great. So thank you everyone. I would like to thank everybody for taking the time to participate today. I also would like to thank the team Thank you. With other people, none of these results are possible. Speaker 100:28:54So I really appreciate it, and we ask a lot of them. So with gratitude, thank you all and appreciate you everybody waking up early. Operator00:29:06The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallTrueCar Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) TrueCar Earnings HeadlinesTrueCar (TRUE) Just Flashed a Possible Pivot for Aggressive SpeculatorsApril 29 at 2:57 PM | msn.comTrueCar to Announce First Quarter 2025 Financial Results in Stockholder Letter on May 5April 22, 2025 | prnewswire.comWatch This Robotics Demo Before July 23rdJeff Brown, the tech legend who picked shares of Nvidia in 2016 before they jumped by more than 22,000%... Just did a demo of what Nvidia’s CEO said will be "the first multitrillion-dollar robotics industry."May 2, 2025 | Brownstone Research (Ad)The Most Discounted New Cars And SUVs You Can Buy In April 2025, According To Consumer ReportsApril 17, 2025 | msn.comScammers stole over $100k from car buyers by impersonating a Maine dealership with a fake websiteApril 17, 2025 | msn.comMercedes Denies Cutting Base Models, May Move Some Cars To U.S.April 6, 2025 | msn.comSee More TrueCar Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like TrueCar? Sign up for Earnings360's daily newsletter to receive timely earnings updates on TrueCar and other key companies, straight to your email. Email Address About TrueCarTrueCar (NASDAQ:TRUE) operates as an internet-based information, technology, and communication services company in the United States. It operates its platform on the TrueCar website and mobile applications. Its platform enables users to obtain market-based pricing data on new and used cars, and to connect with its network of TrueCar certified dealers. The company also offers forecast and consulting services regarding determination of the residual value of an automobile at given future points in time, which are used to underwrite automotive loans and leases, and by financial institutions to measure exposure and risk across loan, lease, and fleet portfolios. In addition, it provides TrueCar Trade, which gives consumers information on the value of their trade-in vehicles and enables them to obtain a guaranteed trade-in price before setting foot in the dealership; and DealerScience that provides dealers with advanced digital retailing software tools. The company was formerly known as Zag.com Inc. 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There are 6 speakers on the call. Operator00:00:00And welcome to the TrueCar Third Quarter 2023 Financial Results Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Mr. Jantoon Reigersman, President and Chief Executive Officer of TrueCar. Please go ahead, sir. Speaker 100:00:16Thank you, operator. Hello, everyone, and welcome to the TrueCar's Q3 2023 earnings conference call. Joining me today is Oliver Foley, our new Chief Financial Officer. I hope you all have had atir.trucar.com. Before we get started, I need to read our safe harbor. Speaker 100:00:44I want to remind you that we will be making forward looking Statements on this call, including statements regarding our revenue growth, expected adjusted EBITDA as well as aspirational goals regarding our 3 year plan. Forward looking statements can be identified by the use of words such as believe, expect, plan, target, anticipate, become, seek, will, intend, confident and similar expressions and are not and should not be relied on as guarantees of future performance or results. Actual results could differ materially from those contemplated by our forward looking statements. We caution you to review the Risk Factors section of our annual report on Form 10 ks, our quarterly reports on Form 10 Q and our reports and filings with the Securities and Exchange Commission for a discussion of factors that could cause our results to differ materially. The forward looking statements we make on this call are based on information available to us as of today's date, and we disclaim any obligation to update any forward looking statements except as required by law. Speaker 100:01:47In addition, we will also discuss certain GAAP and non GAAP financial measures. Reconciliation of all non GAAP measures to the most directly comparable GAAP measure are set forth in the Investor Relations section of our website at ir.trucar.com. The non GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. With that, I will provide a summary of the quarter as highlighted in our shareholder letter. This is an exciting quarter, okay? Speaker 100:02:19We have surpassed our guidance. We're back to year over year revenue growth for the first time in 9 quarters and achieved positive adjusted EBITDA a quarter earlier than originally indicated in our previous guidance. We have a clear vision and we are working hard to realize it. The macroeconomic environment is showing signs of improving and both consumers and dealers are in increasingly greater need of TrueCar's offerings. U. Speaker 100:02:44S. Monthly inventory exceeded 2,000,000 units for the first time since March 2021, a year over year increase of 50.3%. The percentage of new car sales over MSRP decreased to 39%, a decline of 37% year over year. And in September, average new car incentives climbed 129% year over year to $2,367 We still have a ways to go before the macroeconomic environment returns to historical norms, but it appears the tide has started to turn in our favor. We believe our focus on enabling transactions for both consumer and dealers through a more comprehensive journey rather than selling page views, impressions or ads will set us apart from our competition in new ways. Speaker 100:03:31Enabling the right consumer to find the right car with the right financing at the right dealer is essential to this experience, but actual online transaction enablement that includes the execution of key deal documents requires more than these components. Specifically, it requires an experience that integrates seamlessly with the processes and software relied upon by dealers, lenders and other third parties. Building out these 3rd party integrations is a complex challenge that requires time, but we're laser focused on meeting this challenge. We continue to make good progress on our product flow, having launched what we call our unified flow. This flow is designed to resemble traditional online commerce Checkout flow, whereby consumers are provided with relevant transaction details, landed costs and next steps to complete the purchase of the product they are buying. Speaker 100:04:24We have also successfully launched our economic cohort and our convenience cohort flows and we're well on the way to launch our EV flow in December. We continue to refine each of these 3 cohort flows as we reduce friction, eliminate unnecessary steps and learn from product focused groups and consumer behaviors. We truly have shifted the organization to a product testing mindset and talent base and the build out of this cohort flows is emblematic of that shift. Beyond these three cohort flows, we see revenue opportunities stemming from the possibility of regaining dealers we have lost over the past several years, expanding value added services to enhance dealer operations and further strengthening our OEM and affinity business. As we look forward, we believe we have tremendous growth opportunities, but we also know such growth cannot come overnight. Speaker 100:05:16We're building a company that can endure and sustain and it can help shape the automotive industry over time. This happens from the ground up, while making sure we have the right people in the right seats with the right focus and core values, all aimed towards pursuing both growth and profitability. For the Q4 of 2023, we reiterate our expectation of returning to double digit year over year revenue growth and breakeven or positive adjusted EBITDA. In the longer term, we're focused on the importance of sustained revenue growth and positive free cash flow. We are in pursuit of both. Speaker 100:05:52We understand the importance of the Rule of 40 as an indicator of healthy growing companies with good profitability metrics. We believe that what we need to do to drive long term shareholder value for all of you It's to simply execute and prove ourselves consistently. In light of this, we have established 3 year aspirational goals. By the end of 2026, we're pursuing in excess of $300,000,000 annual revenue and greater than 10% free cash flow. We realize these are ambitious goals, but if we meet them, we would have combined revenue growth and free cash flow margin of at least 40% by the end of 2026, which we believe would emphasize our financial health under the rule of 40 as well as the value accretion opportunity we believe we have ahead of us. Speaker 100:06:42We believe that we have the opportunity, the platform and the talent to execute our strategy and now the macro is turning in our favor. Join us in this journey as we reshape the car buying experience. Now, operator, let's open the call for questions from our analysts. Operator00:07:01Thank you. We will now begin the question and answer And the first question will come from Rajat Gupta with JPMorgan. Please go ahead. Speaker 200:07:34Great. Thanks for taking the question, Annette, Speaker 300:07:37on the execution in 3Q. Maybe just on the 3.26 targets, I mean, you have a target out there now and but it's still you're still calling it aspirational or ambitious. Maybe if you could give us some sense or like a bridge from how we get there from Today, it's going to be 100% organic, is it M and A and organic combined? And then how should we just think about the operating leverage from that revenue growth going forward as well. Maybe not to the 300, but like just going forward as well, how should we think about operating leverage with As revenue comes back in 2024, 2025 and beyond. Speaker 300:08:24I have a follow-up. Thanks. Speaker 100:08:26Absolutely. So, Rajat, thanks so much for the question. So, I'll go on the first part. The answer is organic. If you think of the overarching building blocks, Right. Speaker 100:08:40It's obviously like which is normal to an e commerce play is mitigate churn in no particular order, but mitigate churn, Get new dealers on board, expand the offering of dealers, obviously interesting opportunities in the OEM and affinity space And then obviously roll out the digital transaction effectively, right, TC Plus through that over And the ability to then increase monetization. So those are the rough building blocks you're looking at overarching. Your question is whether this is organic or includes M and A. This is pure organic, the way we're thinking about it and the opportunity we see ahead of us. And then the other part is operating leverage. Speaker 100:09:24I think we've always had very strong as an organization, and I think we've alluded to that in some of our last Conference calls as well, which is the cost base of this organization is relatively flat. Remember, it's really 3 buckets. It's people, it's marketing and it's effectively the fixed overhead charge. If you think marketing roughly, 50% as it stands today, it's 50% partner marketing, 50% effectively discretionary performance marketing from our end. So Would we over time like to deploy more in the marketing space? Speaker 100:10:01Obviously, as we launch Fully launched and nationwide launch more of the digital experience. The answer is yes. So So that's one bucket. And over time, if you think about adding people, really where you would add over time is more on the sales and service side more than anywhere else. And so I think you could assume that the cost structure is relatively stable, Obviously, somewhat growing in proportion to, obviously, the size of revenue growing, but overarching operating leverage should be really healthy and really strong as we also feel that we have a lot of monetization opportunities. Speaker 100:10:41Does that answer your question? Speaker 300:10:44Understood. No, that's helpful color. And then maybe just as a follow-up on capital allocation. You obviously have a significant amount of cash on the balance sheet. And Based on the EBITDA cadence here in the Q4 and into 2024, it looks like you will be generating Free cash flow very soon. Speaker 300:11:10How should we think about and you also mentioned that there's 100% organic opportunity here So is it reasonable to assume that you would take a more serious consideration towards buyback here In the near term, just in the context of the targets itself and the fact that you're already positive EBITDA? Thanks. Speaker 100:11:33Yes, it's a great question. The answer is we review all opportunity of capital allocation, obviously. Buybacks is one opportunity of several that we have. I do think that impacts of buybacks and are disproportionately greater once you have positive EPS. And so there's a consideration there also Around when if you do buybacks, when do you do buybacks and in what form do you do buybacks. Speaker 100:12:03But is buyback something that is on our menu of options and something that we consider seriously and we always continue consider seriously. The answer is absolutely yes. We do also know that, Look, we've gone through now. We've done 9 quarters of decline. This is the Q1 of positive. Speaker 100:12:21We know we want to prove ourselves obviously over the Couple of quarters. It's still a little bit of give and take in the broader macro. At the right time, will we address The broader cash balances, etcetera, in a more broad way, the answer is absolutely yes, but buybacks are always a consideration for us at at any point in time. Speaker 300:12:44Got it. Great. Thanks for the color. I'll jump back in queue. Operator00:12:49Thank you. The next question will come from Navi Khan with B. Riley Securities. Please go ahead. Speaker 400:12:57Hi. This is Ryan asking a question on behalf of Vivek Khan. Can you talk about conversions in United Flow compared to the traditional TrueCar experience? And then could you also talk about conversions between the convenience cohort and the economic cohort, please? Speaker 100:13:16Yes. So we have disclosed so first of all, the United so the United Flow, we've all launched this in the last couple of weeks. So it's Hard to give like definite answers across the board. I mean, we gave some indication obviously in the letter where, For example, on the economic flow, right, we exposed it to like 50,000 people, which 9,000 effectively Immediately, we started actually going through the proper flow and submit their information and properly engage. So these are attractive numbers. Speaker 100:13:52What we are seeing also is that because these flows are much more personalized, people are actually engaging. We also obviously see that we still have in certain areas too many steps or there are certain things that are unclear or Right. Like things that for us seem to be very obvious are not necessarily obvious for the consumers. And so we're clearing all that up. But in all honesty, there's it's a little bit too early to provide real like conversion metrics that are comparable at this stage because we We've only been doing this effectively for a couple of weeks. Speaker 100:14:28So this is something that we would love to be able to talk about in some more detail obviously on the next call. But these are good questions. What we have seen though is that the engagement is very, very high and that the engagement in each of the cohorts of like given it's a Personalized flow is high. And so that obviously also shows that the demand is there and that the willingness to go through these flows is very high. But the actual conversion metrics is probably too early to talk about. Speaker 400:14:57Thank you. And then a follow-up is When would you expect for United Flow to go out to all regions, please? Speaker 100:15:05Yes. The United Flow We'll be live across in short order. What is most important though is remember that the United Flow, the unified flow, what happens is, it's not yet it doesn't include the final pieces of paperwork. So that's the piece that is still The last effectively, the last hiccup to get the full transaction online. And so we're working through that and that obviously that product development roadmap does not solely depend on us. Speaker 100:15:41But once we have done that, that at least the experience for the consumer is already fully baked in a full commerce effectively flow, but it will be online for pretty much everybody in short order. Yes. So it's going to be a new experience for people to go through the TrueCar flow. The piece that we have to finalize is the piece of paperwork. Thank you. Operator00:16:09The next question will come from Chris Pierce with Needham. Please go ahead. Speaker 200:16:14Hey, just 2. Can you help us think about some sort of upper bound on OEM incentive revenue, it's nice sequential growth again this quarter. And I just kind of want to get a sense of Should it be higher than it was pre COVID because of where inventories are or like should it normalize at some sort of level? I just don't know how to And I know it's going to be lumpy, but I just kind of get a sense of where this can go. Speaker 100:16:41Yes. I think, Chris, I think It's a good question. I think it's like I'll give you some obviously, it's tough to predict. But I'll give you some parameters, which is we obviously think that in a high interest rate world, Right. Some element of participation of OEMs and captives to support their consumers is important. Speaker 100:17:08There is also with relatively low brand loyalty, there is obviously also a great focus of OEMs To effectively somewhat like recapture customers they've lost over time, There is an interest obviously to help push their dealers with EV, etcetera. So long story short, I think there is A great emphasis of OEMs to support their relevant businesses, which is great. And obviously, there's a huge opportunity there because of the We can do between Affinity Partners, between our dealer partners and then obviously between the OEM. So do we see this as an increasing opportunity? The answer is yes. Speaker 100:17:57Do we see this as an opportunity that Historically, it was attractive to us and historically had growth opportunity. The answer is also yes, right? So Yes. We think that this is important to us. The other thing is also you're going to have the ability to help support OEMs really get in front of Right consumers in the right way. Speaker 100:18:18And so it's not just that you think about programs associated to rebates, for example, but even like go marketing Programs, etcetera, are all things that are possible. And so, yes, so the hard part is over the years to come, It's a little bit hard to assess what really the upper bound is. The issue the big issue of this is that these are often more lumpy programs, so it's a little Harder to predict, but do we know that there's a real willingness and do we also understand that there's a macro that effectively demands for a greater need of Support by the ODMs, the answer is also yes. So do we see the broader opportunity? And do we think that we have a unique value proposition within the area? Speaker 100:19:01The Yes, it's also yes. So it's hard to quantify what the actual upper bound is. Speaker 200:19:08Okay. And when you do one of these programs, do you also get dealer revenue because it leads to a transaction as well or is it just revenue on the marketing side from the OEM Speaker 100:19:20It depends very much on the programs, but the answer is in many cases, yes, both. Speaker 200:19:25Okay. Okay. So in theory, it's somewhat of a leading indicator on dealer revenue with a lumpy backdrop. So it's hard to model. Okay, perfect. Speaker 200:19:34Yes. And then the letter talks about regaining lost dealers. Can you just kind of touch on the game plan there? Are you seeing outreach from these dealers as inventories pile up? Or is it about you going to dealers talking about, hey, we're more Moving to subscription, here we have TC Plus. Speaker 200:19:52What's the push and the pull on that side of the world? Speaker 100:19:55Yes. Good question. I think the short answer is always, we have a bias towards action as a firm. So we will always engage and Be aggressive and proactive. We do see a really healthy portion of our dealers coming back on our network, So that's really good. Speaker 100:20:18And it's really mostly us reaching out and just reengaging and properly engaging. And it's also engaging in the different forms. So we haven't really spoken about it in this letter, but we have 2 tremendous leaders, 1 on the sales side and 1 on the service side. So we've also did a greater separation of the sales and service And the service programs associated to that, we've obviously been doing research and historically we've done research where It clearly show that NPS scores with dealers was very high if you touch them within 30 days, obviously, And negative if you touched them in 90 days. And so there are a lot of opportunities for us to just engage much more in a consulting forum and engage with providing insights and and engage with providing insights and training as opposed to trying to be there as a salesperson. Speaker 100:21:14And remember that one of the beauties of TrueCar is Speaker 500:21:16that we have a lot Speaker 100:21:18of data. We have a lot of insights. And we have insights not only on obviously the sales that happened at a respective dealership, but also loss sales or capture rates or all these type of things, so pretty much everything that happens Within the DMA of that respective dealer. And so there's a lot of opportunity for us to just have a different form of a dialogue. And this all sounds really not super sophisticated and it doesn't need to be sophisticated. Speaker 100:21:47It just means that you need to Engaging with the dealers the right way, which is exactly what we're doing now. And so, yes, so the short answer is it's very much proactive from us. We do have dealers call back in, but it's very much still proactive from us. And it's also much more focused on how do you actually do sales, How do you do handoff towards service? What does it actually mean to do service? Speaker 100:22:11How often do you touch dealers? What do you provide them? How are you the best Speaker 200:22:24Okay. Thank you. Operator00:22:31Our next Question will come from Marvin Fong with BTIG. Please go ahead. Speaker 500:22:37Good morning. Thanks for taking my questions and Congratulations Oliver on the new role. So first question, I'd just like to revisit the long term revenue and margin targets for 2026. You, Jonathan, you mentioned several of the building blocks. I mean, is it fair to say that TC Plus Is the largest component of how you plan to grow revenue? Speaker 500:23:03And Could you add some color on sort of the assumptions you have behind like adoption of TC Plus, like how many dealers will be part of that program, etcetera? Just maybe some more color would be very helpful. Thank you. Speaker 100:23:18Yes. So Marvin, great question. So the answer is, Interestingly enough, it's hard to predict adoption of a product like TC Plus. I actually think and I'm a firm believer, otherwise I wouldn't obviously be here, but like once TC Plus is actually fully, fully operational with the consumer and dealer I think this will be a huge There will be huge adoption of that product. Now it's hard to assess and it's hard to predict when and how and what form. Speaker 100:24:00But I do am a firm believer that we see that consumers really want to do full transactions online and we see that dealers really want to effectively expand their addressable markets and want to maintain or even increase their margins and do greater sales volumes. And so we think that there is a real value here to provide. As part of the planning, to answer your question, I actually think that there is a really big opportunity for a lot of the historical TrueCar revenue lines to come back to growth, Right. So whether this is just providing the current seats of products that we provide better, right focus on the EV side of things, focus on the OEM side of things, etcetera. So interestingly enough, And this the growth that we're looking into this aspirational model is not actually overly dependent on the TC Plus side because it's so hard to predict. Speaker 100:25:01So in many ways, there is a segment to DC plus and the piece of DC plus really, if you think about it holistically and you go back to the 30,000 foot view, One of the metrics you will start hearing us talk about more and more over time will be revenue per dealer. It is currently still a little bit of a murky number because obviously you have a lot of dealers inside and there's a long tail to the dealer. So at some We'll become a little bit more clear on that, but revenue per dealer is a metric that I've started talking about more and more internally as well as the concept of Proper like 2 sided marketplace where you match supply and demand. And so the revenue per dealer will be Obviously, we're seeking to move up pretty dramatically over the next couple of years. And one of the ways to move that up is not only to sell Better and more services to dealers, but also over time is to obviously add new product lines in there and one of those product lines will be TC Plus. Speaker 100:26:03Do I think that DC plus has huge opportunity? The answer is yes. Is this predominantly based on actually the more historical TrueCar? The answer is also yes. So it's actually less dependent on DC plus Speaker 500:26:14Got you. Okay, that's great. And I guess a follow-up just On dealer count, so I think the franchise dealer count declined for the first time after several quarters of positive growth. Could you just speak to what might have changed this quarter to kind of cause that That number, the reverse, but the prospect of the strike, which I think turned out to be less bad than most people thought. Did that Speaker 100:26:48Yes. And absolutely, it's a little bit of a wash and just murky right now. So we transited to this more service and sales organization part. And so we are working through that right now. There's a little bit of like shaking out of like also like historical dealers that are maybe a little bit less Quality oriented towards consumers, there's just a little bit of give or take happening as we're now prioritizing really our dealer customers and consumers. Speaker 100:27:29And so net net is you'll see this Wash happened a little bit. It might take a quarter or 2. It's a little bit murky in terms of shifting up and down. It's really about Focusing on the standard distribution of the dealers we really want to focus on that are our bread and butter and that really provide the right experiences and are the right forward leaning dealers. And so you will see that's always a little bit fluctuate, although I think that we've obviously hit the trough and this should start going up over time. Speaker 100:27:59There's a little bit of give and take if you look at any given month in terms of types of dealers coming on and coming off. What I really care about obviously is the type of dealers coming on and the type of dealers going off. And that's the piece we really are on like a hawk. So I'm less concerned about some of the dealers coming off as long as they are the dealers we are not necessarily looking to seek to Operator00:28:33This concludes our question and answer session. I would like to turn the conference back over to Mr. Rykersman for any closing remarks. Please go ahead, sir. Speaker 100:28:42Great. So thank you everyone. I would like to thank everybody for taking the time to participate today. I also would like to thank the team Thank you. With other people, none of these results are possible. Speaker 100:28:54So I really appreciate it, and we ask a lot of them. So with gratitude, thank you all and appreciate you everybody waking up early. Operator00:29:06The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by