TrueCar Earnings: Revenue Up 7% on Improved Sales

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Online car-shopping service TrueCar (NASDAQ:TRUE) reported on Aug. 10 that it lost $6.6 million in the second quarter of 2018, or $0.07 per share, an improvement over the $8.1 million loss it posted in the second quarter of 2017.

Adjusted for stock-option expenses and one-time items, TrueCar had a net profit of $3.2 million, or $0.03 per share. That compares with income on the same basis of $1.1 million, or $0.01 per share, in the year-ago period. 

The company’s results were in line with its prior guidance. 

The raw numbers

Metric Q2 2018 Change vs. Q2 2017
Revenue $87.9 million 7%
Vehicles purchased (“units”) 250,269 3%
Adjusted EBITDA $8.7 million 17.6%
Franchise dealers 12,368 0.8%
Net income (loss) ($6.6 million) $1.5 million improvement
Net income (loss) per share ($0.07) $0.02 improvement
Adjusted net income per share $0.03 $0.02 improvement

Data source: TrueCar. EBITDA = earnings before interest, tax, depreciation, and amortization. Non-GAAP “adjusted” figures exclude employee stock option expenses and non-recurring costs. “Franchise dealers” = auto dealers that hold a “franchise” from an automaker, meaning they sell new vehicles. 

The entrance to TrueCar's offices in Santa Monica, California.

Image source: TrueCar.

What happened last quarter

A year ago, TrueCar seemed to be on an upswing. It posted solidly improved results in the first half of 2017 — but then it hit a speed bump: A key partner, USAA, redesigned its website, putting a heavy dent in TrueCar’s referrals. 

TrueCar’s results in the first quarter of 2018 were decidedly mixed, but the company returned to solid performance in the second quarter. All key metrics improved year over year. Adjusted EBITDA fell solidly within its guidance range ($8 million to $9 million), as did revenue (guidance: $87 million to $89 million). 

TrueCar beat its own guidance on one front: The total number of “units,” or vehicles purchased via TrueCar’s service, rose 3% to above the guidance range the company provided after the first quarter (243,000 to 248,000). 

Here are the other key metrics from TrueCar’s second-quarter report:

  • TrueCar’s website had an average of 7.8 million unique visitors per month, up 8% from 7.2 million in the second quarter of 2017.
  • A total of 250,269 vehicles were purchased via TrueCar’s service in the second quarter, up 3% from a year ago.
  • Monetization, or the average fee collected by TrueCar for a vehicle sold via its service, was $332 in the second quarter, versus $319 a year ago.
  • Average monthly transaction revenue per franchise dealer was $1,803, up from $1,709 a year ago.
  • TrueCar’s total number of franchise dealer partners rose to 12,368 as of the end of the second quarter, up from 12,205 a year earlier.

What TrueCar’s CEO said about the quarter

During TrueCar’s earnings call, CEO Chip Perry said that after several months of work, referrals from USAA’s redesigned website are improving.

One of our primary areas of focus coming out of 2017 was the level of unit volume coming from our largest affinity partner, USAA. As you will recall, units in our USAA channel started to show improvement at the end of the fourth quarter 2017 and into Q1 of 2018.

I’m pleased to report that we’re seeing this trend continue into the second quarter. While units in the overall quarter were down 5% year over year and flat to Q1, in June, year-over-year unit volume improved to down 3%. This recovery was driven by continued site improvements that made the USAA car-buying experience easier for members to access as well as by marketing support from this important partner. The USAA channel continues to recover, and we remain on track to see double-digit unit growth in the last two quarters of the year.

Looking ahead: TrueCar’s guidance 

TrueCar also released guidance for the third quarter and slightly revised its prior guidance for the full year. 

For Q3 2018:

  • Total units are expected to fall between 274,000 and 279,000 (Q3 2017: 253,527).
  • Revenue in the range of $93 million to $95 million (Q3 2017: $82.4 million).
  • Adjusted EBITDA between $10 million and $11 million (Q3 2017: $8.0 million).

TrueCar’s full-year 2018 guidance was mostly unchanged. It slightly narrowed the range of total units it expects for the full year, while reiterating its prior guidance for revenue and adjusted EBITDA. It still expects all three metrics to improve significantly year over year. 

  • Total units between 1,030,000 and 1,040,000 (Prior guidance: 1,030,000 to 1,050,000. 2017: 952,834).
  • Revenue in the range of $360 million to $365 million (2017: $323.1 million).
  • Adjusted EBITDA between $36 million and $40 million (2017: $28.9 million).

John Rosevear has no position in any of the stocks mentioned. The Motley Fool recommends TrueCar. The Motley Fool has a disclosure policy.

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