TrueCar, Inc. (NASDAQ: TRUE) today announced its financial
results for the first quarter ended March 31, 2019.
Management Commentary
“Despite our revised outlook for the remainder of the year, we
remain enthusiastic about the tremendous amount of innovation going
on across the Company," said Chip Perry, TrueCar's President and
Chief Executive Officer. “We continue to make significant
progress on product improvements, empowered by the completion of
Capsela, that are designed to enhance the consumer experience,
increase engagement, and fuel future revenue growth,” Mr. Perry
continued.
_____________________________________(1) Non-GAAP net (loss)
income is a Non-GAAP financial measure. Refer to its
definition and accompanying reconciliation to GAAP net (loss)
income below.
(2) Adjusted EBITDA is a Non-GAAP financial measure.
Refer to its definition and accompanying reconciliation to GAAP net
(loss) income below.
(3) Adjusted EBITDA margin is a Non-GAAP financial measure,
calculated as Adjusted EBITDA divided by total revenue.
(4) We define units as the number of automobiles purchased
from TrueCar Certified Dealers that are matched to users of
TrueCar.com and our mobile applications or the car buying sites and
mobile applications we maintain for our affinity group marketing
partners.
(5) We define franchise dealer count as the number of
franchise dealers in the network of TrueCar Certified Dealers at
the end of a given period. This number is calculated by counting
the number of brands of new cars sold at each individual location,
or rooftop, regardless of the size of the dealership that owns the
rooftop. Note that this number excludes Genesis franchises on
our program due to Hyundai’s transition of Genesis to a standalone
brand. In order to facilitate period over period comparisons, we
have continued to count each Hyundai franchise that also has a
Genesis franchise as one franchise dealer rather than two.
(6) We define independent dealer count as the number of dealers
in the network of TrueCar Certified Dealers at the end of a given
period that exclusively sell used vehicles and are not directly
affiliated with a new car manufacturer. This number is calculated
by counting the number of individual locations, or rooftops,
regardless of the size of the dealership that owns the rooftop.
First Quarter 2019 Financial Highlights
- Total revenue of $85.6 million.
- Net loss of $(14.4) million, or $(0.14) per share, compared to
a net loss of $(9.1) million, or $(0.09) per share, in the first
quarter of 2018.
- Non-GAAP net loss of $(0.4) million, or $0.00 per share,
compared to Non-GAAP net income of $0.8 million, or $0.01 per
share, in the first quarter of 2018.
- Adjusted EBITDA of $5.1 million, representing an Adjusted
EBITDA margin of 5.9%, compared to Adjusted EBITDA of $6.0 million,
representing an Adjusted EBITDA margin of 7.4%, in the first
quarter of 2018.
Key Operating Metrics
- Average monthly unique visitors(7) decreased 9% to 7.1
million in the first quarter of 2019, down from 7.8 million in the
first quarter of 2018.
- Units were 232,781 in the first quarter of 2019, compared
to 229,717 in the first quarter of 2018.
- Monetization(8) was $348 during the first quarter of 2019,
compared to $334 during the first quarter of 2018.
- Franchise dealer count was 12,675 as of March 31, 2019,
compared to 12,674 as of December 31, 2018.
- Independent dealer count was 3,854 as of March 31, 2019,
compared to 3,655 as of December 31, 2018.
Business Outlook
Our guidance for the second quarter ending June 30, 2019 is as
follows:
- Revenues are expected to be in the range of $88.5 million to
$90.5 million.
- Adjusted EBITDA is expected to be in the range of $4.0 million
to $6.0 million.(9)
Our guidance for the full year ending December 31, 2019 is
as follows:
- Revenues are expected to be in the range of $361 million to
$375 million.
- Adjusted EBITDA is expected to be in the range of $27.0 million
to $36.0 million.(9)
_____________________________________(7) We define a
monthly unique visitor as an individual who has visited our
website, our landing page on our affinity group marketing
partner sites or our mobile applications within a calendar month.
We calculate average monthly unique visitors as the sum of the
monthly unique visitors divided by the number of months in that
period.
(8) We define monetization as the average transaction
revenue per unit, which we calculate by dividing all of our dealer
revenue and OEM incentives revenue in a given period by the number
of units in that period.
(9) We are unable to provide reconciliations of
forward-looking Adjusted EBITDA without unreasonable effort because
of the uncertainty and potential variability in amount and timing
of stock-based compensation, certain transaction expenses and
certain litigation costs, which are reconciling items between GAAP
net (loss) income and Adjusted EBITDA and could significantly
impact GAAP results.
Conference Call Information
Members of our management will host a conference call
today, May 9, 2019, to discuss our first quarter 2019 results
at 4:30 p.m. Eastern Time. To participate, domestic callers
should dial 1-877-407-0789 and international callers should dial
1-201-689-8562. A replay of the call may be accessed the same day
from 7:30 p.m. Eastern Time on Thursday, May 9, 2019 until
11:59 p.m. Eastern Time on Thursday, May 23, 2019 by dialing
1-844-512-2921 (domestic) or 1-412-317-6671 (international) and
entering replay PIN 13690090. An archived version of the call will
also be available upon completion on the Investor Relations section
of our website at ir.truecar.com. We have used, and intend to
continue to use, our Investor Relations website (ir.truecar.com),
Twitter (@TrueCar) and Facebook (www.facebook.com/TrueCar) as means
of disclosing material non-public information and for complying
with our disclosure obligations under Regulation FD.
Forward-Looking Statements
This press release contains forward-looking statements. All
statements contained in this press release other than statements of
historical fact are forward-looking statements, including
statements regarding our future revenue growth potential and
opportunities; our outlook for the second quarter and full year
2019, including our expectations regarding future revenue and
adjusted EBITDA; and our ability to make product improvements that
enhance the consumer experience, increase engagement and grow
revenue. These forward-looking statements are subject to a number
of risks, uncertainties and assumptions that may prove incorrect,
any of which could cause our results to differ materially from
those expressed or implied by such forward-looking statements,
including our ability to maintain and improve our relationships
with, and perception among, car dealerships and grow our network of
Certified Dealers, on an overall basis, among dealers representing
high-volume brands and in important geographies; our ability to
anticipate market needs and develop new and enhanced products and
services to meet those needs, including new programs with
automobile manufacturers, and our ability to successfully monetize
them; our ability to increase the number of dealers participating
in our automotive trade-in program, expand its geographic coverage
and successfully monetize the TrueCar Trade product; our ability to
attract significant OEMs to participate, and remain participants,
in our OEM incentive programs; our dependence upon affinity group
marketing partners, especially USAA; fluctuations in the quality of
leads we provide to dealers; our ability to hire and retain a chief
financial officer and integrate him or her and other recent and
future additions to our management team; our ability to effectively
and timely integrate our operations with those of any business we
acquire and related factors, including the difficulties associated
with the integration and the achievement of the anticipated
benefits of the integration; our ability to comply with laws and
regulations directly or indirectly applicable to our business,
including newly-enacted and rapidly-changing data protection and
net neutrality laws and regulations and changes in applicable tax
laws and regulations; our ability to scale and compete effectively
in an increasingly competitive market and to grow and enhance our
brand; our ability to increase revenue from dealers on our
subscription pricing model; our reliance on cloud services for much
of our computing storage, bandwidth and other services; potential
undetected errors or vulnerabilities in the software on which our
products and internal systems rely; potential security breaches and
improper access to or disclosure of our data or user data, or other
hacking and phishing attacks on our systems; potential catastrophic
events or geopolitical conditions that disrupt our business;
political and macro-economic issues that affect the automobile
industry, including changes in interest rates, consumer demand and
import tariffs; our ability to attract, retain and integrate
qualified personnel; our ability to successfully resolve litigation
to which we are party; and other risks and uncertainties described
more fully under the heading “Risk Factors” in our Annual Report on
Form 10-K for the year ended December 31, 2018 filed with
the Securities and Exchange Commission, or SEC, and our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2019 to be
filed with the SEC. Moreover, we operate in a very competitive and
rapidly changing environment. New risks emerge from time to time.
It is not possible for our management to predict all risks, nor can
management assess the impact of all factors on our business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements we may make. All forward-looking
statements in this press release are based on information available
to our management as of the date of this press release and
except as required by law, management assumes no obligation to
update those forward-looking statements, which speak only as of
their respective dates.
Use of Non-GAAP Financial Measures
This earnings release includes the following Non-GAAP financial
measures: Adjusted EBITDA, Adjusted EBITDA margin, Non-GAAP net
(loss) income and Non-GAAP net (loss) income per share. We
define Adjusted EBITDA as net loss adjusted to exclude interest
income, interest expense, depreciation and amortization,
stock-based compensation, severance charges, certain transaction
expenses, certain litigation costs, and income taxes. We define
Non-GAAP net (loss) income as net loss adjusted to exclude
stock-based compensation, severance charges, certain transaction
expenses, and certain litigation. We have provided below a
reconciliation of each of Adjusted EBITDA and Non-GAAP net (loss)
income to net loss, the most directly comparable GAAP
financial measure. Neither Adjusted EBITDA nor Non-GAAP net (loss)
income should be considered as an alternative to net loss or any
other measure of financial performance calculated and presented in
accordance with GAAP.
We use Adjusted EBITDA and Non-GAAP net (loss) income as
operating performance measures because each is (i) an integral part
of our reporting and planning processes; (ii) used by our
management and board of directors to assess our operational
performance, and together with operational objectives, as a measure
in evaluating employee compensation and bonuses; and (iii) used by
our management to make financial and strategic planning decisions
regarding future operating investments. We believe that using
Adjusted EBITDA and Non-GAAP net (loss) income facilitates
operating performance comparisons on a period-to-period basis
because these measures exclude variations primarily caused by
changes in the excluded items noted above. In addition, we believe
that Adjusted EBITDA, Non-GAAP net (loss) income and similar
measures are widely used by investors, securities analysts, rating
agencies and other parties in evaluating companies as measures of
financial performance and debt service capabilities.
Our use of each of Adjusted EBITDA and Non-GAAP net (loss)
income has limitations as an analytical tool, and you should not
consider either in isolation or as a substitute for analysis of our
results as reported under GAAP. Some of these limitations are:
- Adjusted EBITDA does not reflect the payment or receipt of
interest or the payment of income taxes;
- neither Adjusted EBITDA nor Non-GAAP net (loss) income reflects
changes in, or cash requirements for, our working capital
needs;
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized may have to be replaced
in the future, and Adjusted EBITDA does not reflect cash capital
expenditure requirements for such replacements or for new capital
expenditures or any other contractual commitments;
- neither Adjusted EBITDA nor Non-GAAP net (loss) income reflects
the severance charges associated with a restructuring plan
initiated and completed in the first quarter of 2019 to improve
efficiency and reduce expenses;
- neither Adjusted EBITDA nor Non-GAAP net (loss) income reflects
the legal, accounting, consulting and other third-party fees and
costs we incurred in connection with the evaluation and negotiation
of potential merger and acquisition transactions;
- neither Adjusted EBITDA nor Non-GAAP net (loss) income reflects
the costs to advance our claims in certain litigation or the costs
to defend ourselves in various complaints filed against us;
- neither Adjusted EBITDA nor Non-GAAP net (loss) income
considers the potentially dilutive impact of shares issued or to be
issued in connection with stock-based compensation; and
- other companies, including companies in our own industry, may
calculate Adjusted EBITDA and Non-GAAP net (loss) income
differently than we do, limiting their usefulness as comparative
measures.
Because of these limitations, you should consider Adjusted
EBITDA and Non-GAAP net (loss) income alongside other financial
performance measures, including our net loss, our other GAAP
results and various cash flow metrics. In addition, in evaluating
Adjusted EBITDA and Non-GAAP net (loss) income, you should be aware
that in the future we will incur expenses such as those that are
the subject of adjustments in deriving Adjusted EBITDA and Non-GAAP
net (loss) income and you should not infer from our presentation of
Adjusted EBITDA and Non-GAAP net (loss) income that our future
results will not be affected by these expenses or any unusual or
non-recurring items.
About TrueCar
TrueCar, Inc. (NASDAQ: TRUE) is a digital automotive
marketplace that provides comprehensive pricing transparency about
what other people paid for their cars and enables consumers to
engage with TrueCar Certified Dealers who are committed to
providing a superior purchase experience. TrueCar operates its own
branded site and its nationwide network of more than 16,000
Certified Dealers, and also powers car-buying programs for some of
the largest U.S. membership and service organizations, including
USAA, AARP, American Express, AAA and Sam's Club. Over one-half of
all new car buyers engage with the TrueCar network during their
purchasing process. TrueCar is headquartered in Santa Monica,
California, with an office in Austin, Texas. For more information,
go to www.truecar.com. Follow TrueCar on Facebook or Twitter.
Investor/Media Contact:Alison SternbergSenior
Vice President, Investor Relations and
Communications424-258-8771asternberg@truecar.com
TRUECAR,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except per share
data)(Unaudited)
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
Revenues |
$ |
85,582 |
|
|
$ |
81,061 |
|
Costs and operating
expenses: |
|
|
|
Cost of revenue |
8,936 |
|
|
7,452 |
|
Sales and marketing |
54,738 |
|
|
48,418 |
|
Technology and development |
15,654 |
|
|
15,594 |
|
General and administrative |
15,104 |
|
|
13,481 |
|
Depreciation and amortization |
6,415 |
|
|
5,175 |
|
Total costs and operating expenses |
100,847 |
|
|
90,120 |
|
Loss from operations |
(15,265 |
) |
|
(9,059 |
) |
Interest income |
1,001 |
|
|
604 |
|
Interest expense |
— |
|
|
(661 |
) |
Loss before income taxes |
(14,264 |
) |
|
(9,116 |
) |
(Benefit from) / provision for
income taxes |
101 |
|
|
(61 |
) |
Net loss |
$ |
(14,365 |
) |
|
$ |
(9,055 |
) |
Net loss per share: |
|
|
|
Basic and diluted |
$ |
(0.14 |
) |
|
$ |
(0.09 |
) |
Weighted average common shares
outstanding, basic and diluted |
104,788 |
|
|
100,571 |
|
|
|
|
|
|
|
TRUECAR,
INC.CONSOLIDATED BALANCE
SHEETS(In
thousands)(Unaudited)
|
March 31, 2019 |
|
December 31, 2018 |
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
179,898 |
|
|
$ |
196,128 |
|
Accounts receivable, net |
38,368 |
|
|
47,760 |
|
Prepaid expenses |
7,084 |
|
|
7,468 |
|
Other current assets |
7,777 |
|
|
4,103 |
|
Total current assets |
233,127 |
|
|
255,459 |
|
Property and equipment, net |
34,427 |
|
|
61,511 |
|
Operating lease right-of-use assets |
40,545 |
|
|
— |
|
Goodwill |
73,311 |
|
|
73,311 |
|
Intangible assets, net |
21,901 |
|
|
23,451 |
|
Equity method investment |
23,174 |
|
|
— |
|
Other assets |
7,112 |
|
|
7,228 |
|
Total assets |
$ |
433,597 |
|
|
$ |
420,960 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
20,609 |
|
|
$ |
26,305 |
|
Accrued employee expenses |
4,652 |
|
|
4,349 |
|
Operating lease liabilities, current |
6,849 |
|
|
— |
|
Accrued expenses and other current liabilities |
13,724 |
|
|
10,908 |
|
Total current liabilities |
45,834 |
|
|
41,562 |
|
Deferred tax liabilities |
640 |
|
|
568 |
|
Lease financing obligations, net of current portion |
— |
|
|
22,987 |
|
Operating lease liabilities, net of current portion |
41,601 |
|
|
— |
|
Other liabilities |
5,655 |
|
|
9,290 |
|
Total liabilities |
93,730 |
|
|
74,407 |
|
Stockholders’
Equity |
|
|
|
Common stock |
10 |
|
|
10 |
|
Additional paid-in capital |
731,394 |
|
|
720,025 |
|
Accumulated deficit |
(391,537 |
) |
|
(373,482 |
) |
Total stockholders’ equity |
339,867 |
|
|
346,553 |
|
Total liabilities and stockholders’ equity |
$ |
433,597 |
|
|
$ |
420,960 |
|
|
|
|
|
|
|
|
|
TRUECAR,
INC.RECONCILIATION OF NET LOSS TO ADJUSTED
EBITDA (In
thousands)(Unaudited)
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
Net loss |
$ |
(14,365 |
) |
|
$ |
(9,055 |
) |
Non-GAAP adjustments: |
|
|
|
Interest income |
(1,001 |
) |
|
(604 |
) |
Interest expense |
— |
|
|
661 |
|
Depreciation and amortization |
6,415 |
|
|
5,175 |
|
Stock-based compensation |
8,635 |
|
|
9,097 |
|
Certain litigation costs (1) |
928 |
|
|
799 |
|
Severance charges (2) |
3,280 |
|
|
— |
|
Transaction costs (3) |
1,094 |
|
|
— |
|
Provision for (benefit from) income taxes |
101 |
|
|
(61 |
) |
Adjusted EBITDA |
$ |
5,087 |
|
|
$ |
6,012 |
|
|
|
|
|
|
|
|
|
(1) The excluded amounts relate to legal costs incurred in
connection with complaints filed by non-TrueCar dealers and the
California New Car Dealers Association against us and consumer
class action lawsuits. We believe the exclusion of these costs is
appropriate to facilitate comparisons of our core operating
performance on a period-to-period basis. Based on the nature of the
specific claims underlying the excluded litigation matters, once
these matters are resolved, we do not believe our operations are
likely to entail defending against the types of claims raised by
these matters. We expect the cost of defending these claims may be
significant pending resolution.
(2) The excluded amounts represent severance costs
associated with a restructuring plan initiated and completed in the
first quarter of 2019 to improve efficiency and reduce expenses. We
believe excluding the impact of these terminations is consistent
with our use of these non-GAAP measures as we do not believe they
are a useful indicator of our ongoing operating results.
(3) The excluded amounts represent external legal,
accounting, consulting and other third-party fees and costs we
incurred in connection with the evaluation and negotiation of
potential merger and acquisition transactions. These expenses are
included in general and administrative expenses in our consolidated
statements of comprehensive loss. We consider these fees and
costs, which are associated with potential merger and acquisition
transactions outside the normal course of our operations, to be
unrelated to our underlying results of operations and believe that
their exclusion provides investors with a more complete
understanding of the factors and trends affecting our business
operations. We also incurred $0.6 million of such transaction
expenses in the three months ended December 31, 2018 and will
recast our prior-period Adjusted EBITDA presented in previous
filings to reflect the exclusion of such expenses in future filings
that present Adjusted EBITDA figures for such three-month
period.
TRUECAR,
INC.RECONCILIATION OF NET LOSS TO NON-GAAP NET
(LOSS) INCOME (In thousands, except per share
amounts)(Unaudited)
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
Net loss |
$ |
(14,365 |
) |
|
$ |
(9,055 |
) |
Non-GAAP adjustments: |
|
|
|
Stock-based compensation |
8,635 |
|
|
9,097 |
|
Certain litigation costs (1) |
928 |
|
|
799 |
|
Severance charges (2) |
3,280 |
|
|
— |
|
Transaction costs (3) |
1,094 |
|
|
— |
|
Non-GAAP net (loss) income
(4) |
$ |
(428 |
) |
|
$ |
841 |
|
|
|
|
|
Non-GAAP net (loss) income per
share: |
|
|
|
Basic |
$ |
0.00 |
|
|
$ |
0.01 |
|
Diluted |
$ |
0.00 |
|
|
$ |
0.01 |
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
Basic |
104,788 |
|
|
100,571 |
|
Diluted |
104,788 |
|
|
103,001 |
|
(1) The excluded amounts relate to legal costs incurred in
connection with complaints filed by non-TrueCar dealers and the
California New Car Dealers Association against us and consumer
class action lawsuits. We believe the exclusion of these costs is
appropriate to facilitate comparisons of our core operating
performance on a period-to-period basis. Based on the nature of the
specific claims underlying the excluded litigation matters, once
these matters are resolved, we do not believe our operations are
likely to entail defending against the types of claims raised by
these matters. We expect the cost of defending these claims may be
significant pending resolution.
(2) The excluded amounts represent severance costs
associated with a restructuring plan initiated and completed in the
first quarter of 2019 to improve efficiency and reduce expenses. We
believe excluding the impact of these terminations is consistent
with our use of these non-GAAP measures as we do not believe they
are a useful indicator of our ongoing operating results.
(3) The excluded amounts represent external legal,
accounting, consulting and other third-party fees and costs we
incurred in connection with the evaluation and negotiation of
potential merger and acquisition transactions. These expenses are
included in general and administrative expenses in our consolidated
statements of comprehensive loss. We consider these fees and
costs, which are associated with potential merger and acquisition
transactions outside the normal course of our operations, to be
unrelated to our underlying results of operations and believe that
their exclusion provides investors with a more complete
understanding of the factors and trends affecting our business
operations. We also incurred $0.6 million of such transaction
expenses in the three months ended December 31, 2018 and will
recast our prior-period Non-GAAP net (loss) income presented in
previous filings to reflect the exclusion of such expenses in
future filings that present Non-GAAP net (loss) income figures for
such three-month period.
(4) There is no income tax impact related to the
adjustments made to calculate Non-GAAP net (loss) income
because of our available net operating loss carryforwards and
the full valuation allowance recorded against our net deferred tax
assets at March 31, 2019 and March 31, 2018.
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