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TrueCar Inc (NASDAQ:TRUE)
Q3 2019 Earnings Call
Nov 7, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to TrueCar's Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Noel Watson. Thank you. You may begin.

Noel Watson -- Chief Financial Officer

Thank you, operator. Hello and welcome to TrueCar's third quarter 2019 earnings conference call. Joining me today is Mike Darrow, Interim President and Chief Executive Officer.

As a reminder, we will be making forward-looking statements on this call. In addition to our guidance for 2019, these forward-looking statements can be identified by the use of words such as believe, expect, plan, anticipate, will, intend, confident, and similar expressions. These forward-looking statements are not and should not be relied upon as a guarantee 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-K, our quarterly reports on Form 10-Q and our other reports and filings with the Securities and Exchange Commission for a discussion of the 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. In addition, we will also discuss certain GAAP and non-GAAP financial measures. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are set forth in the Investor Relations section of our website at true.com, and non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Now, I'll turn the call over to Mike.

Mike Darrow -- Interim President and Chief Executive Officer

Thank you, Noel, and good afternoon, everyone. I'd like to start by taking a moment to thank our employees for their continued hard work and dedication. It is truly an honor to work with each of you every day, and I believe the results that we're reporting today reflect well on your strong efforts. Before covering the details of the quarter, our Board of Directors has asked me to give you an update on its search for a new CEO. As you know, I am currently serving as the Interim CEO while the Board continues the process of evaluating candidates. The Board is pleased with the progress that the company has made under the new leadership team that it put in place after the departure of our former CEO and certain other executives over the last several months. The Board believes that the results we are reporting today reflect well on the new leadership team and that the company is getting on the right track to achieving its long-term goals. That said, the Board believes that the selection of our new CEO is an important decision that must not be rushed. With the assistance of an outside search firm, the Board continues to evaluate external candidates at the same time and evaluates the company's performance under my leadership. The Board wants you to know that it expects to wrap up this process before the end of the first quarter.

In the meantime, I'm very pleased with our third quarter results highlighted by revenue and adjusted EBITDA performance above the upper end of our guidance ranges. Perhaps more importantly, I can sense a change in the momentum here at TrueCar. Let me touch on just a few of the many exciting achievements in the quarter. First, product innovation continues at a rapid pace as we remain laser-focused on improving our customer experience ahead of our new brand campaign planned for early 2020. Second, truecar.com traffic is beginning to stabilize as evidenced by flat monthly unique visitors year-over-year in September. Third, we continue to grab share in the used car market with unit volumes up 20% year-over-year in the quarter. Fourth, our affinity business development pipeline is delivering nicely with several key additions in the past few months. And finally, our new dealer advertising products sponsored listings and TrueCar reach are being well received by the market. More than 500 dealers have adopted one of these products and we believe that we are delivering them tremendous value. For example, dealers who have adopted sponsored listings are on average receiving 3 times more leads and 5 times more vehicle detail page or VDP views for the vehicles in the program. Despite these exciting achievements, we recognize there's more work to do to return this business to sustainable double-digit growth. No work is more important that our efforts to improve our product. Let me provide a bit more detail on our progress.

First, we're giving consumers more control over when and how dealers contact them during the car buying journey. We've made significant progress against this goal by testing various options for consumers to engage and communicate with dealers. So far, we've learned that when you give consumers more control, they are more satisfied with their overall experience and convert to a car sale at a much higher rate. The experienced changes we plan to roll out in early 2020 will set the foundation for additional improvements over the course of next year. We believe the impact of these changes will improve customer satisfaction metrics and ensure higher lead quality for our partners. We are confident that an iterative approach, test, launch and improve will produce the best results for all of our stakeholders. Second, as we continue this iterative approach and move toward an experience, it gives consumers a greater level of control. We believe that we have the opportunity to more intelligently guide consumers through their car buying journey. In Q3, we began testing new machine learning capabilities with the near-term goal of improving dealer selection algorithm how we select the dealers, we introduced to consumers after they register on our site. This is just the first example augmenting that shows how we intend to leverage machine learning to more intelligently segment our audience customer tailor our marketing messages and provide a more valuable and personalized experience for our users. Third, we continue to focus on laying the foundation for future organic traffic growth. This past quarter, we significantly improved our internal linking across the site to ensure both users and search engines can more easily navigate the breadth and depth of our inventory and experience.

In addition, we are continuing to build more shopping content such as make their own set of pages and best of vehicle rankings, which are live in the site today. While these improvements are just the tip of the iceberg, we're already seeing the positive effects, including strong double-digit organic session growth year-over-year in the early part of Q4.

And finally, we're making strides in improving consumer reengagement. Users who visit our site can now save their favorite vehicles and save their searches, register for price drops and new inventory alerts through both email and push notifications and receive personalized vehicle recommendations. As uplift funnel activity on this site continues to grow, we're leveraging targeted email campaigns and intelligent retargeting initiatives to reengage these shoppers.

The primary objective of all this activity is to provide consumers with the incremental value to help them find the right car at the right price from the right dealer. As our product experience continues to improve, we're excited by the opportunity to supplement its evolution with an end-to-end rebrand of TrueCar featuring a new corporate identity, web experience, brand taxonomy and omnichannel advertising campaign. The rebrand is designed to broaden appeal among two crucial segments, millennials and women. Research suggests millennials will represent approximately 40% of new car sales in 2020. It also points to women influencing or purchasing 80% or more of the vehicles sold in North America.

In our focus group testing, the new TrueCar logo and related brand materials that will roll out early next year outperformed our competition among both male and female consumers across the US, and they over-index among women specifically. The entire organization has rallied behind this initiative and are excited by the positive results that we expected to drive next year and into the future.

Next, I'd like to provide some high level commentary on our key priorities for 2020. The items I will highlight are by no means exhaustive, but represent areas that we believe provide the most opportunity in the near-term. First and foremost, we'll continue to build on the progress made this year by optimizing our consumer experience. As I mentioned earlier, this will include an iterative approach to providing consumers with a greater level of control over how and when dealers contact them. We will also maintain our heightened focus on improving vehicle pricing data, our core consumer value proposition.

Second, we will focus on accelerating the growth of our partner channel. Our robust network of partners is a clear differentiator in our industry. We've seen an acceleration of our business development activity, and we'll continue to invest in this area next year.

Third, we remain committed to capturing wallet share in the used car space. As SAAR level is off and new car margins tighten, we're looking to help our dealers continue to grow their used car business, which is a key profit center for them. We've seen tremendous success in used car throughout 2019 and are confident in our ability to roll that momentum into next year.

Fourth, we remain committed to reaccelerating the growth of our OEM business. We expect this business to remain unpredictable, but our relationships continue to deepen and grow as we look for solutions to current market challenges. As I've stated before, we will aggressively leverage ALG to position this product in the mind of the OEMs as a strategy for planning and not exclusively a tactic to react to a singular market issue.

Finally, we will accelerate toward our long-term vision of becoming the only true end-to-end shopping to showroom experience by introducing what we are calling Retail Solutions, which is our effort to enable consumers to configure their entire car deal online, including calculating an accurate trade-in value and monthly payment. At any point throughout the deal configuration process, consumers will be given the direct off-ramp into retail locations with introduction smoothly facilitated by TrueCar.

We've already taken substantial steps toward this vision by launching TrueCar Trade and acquiring DealerScience. Next year, our focus in this space will be twofold. First, to fully integrate our trade-in and core auto buying experiences to provide our car shopping consumers with an upfront guaranteed price on their trade-in as part of their online car buying journey. And secondly, to leverage DealerScience to provide consumers with transparent and accurate monthly payments, helping to drive transaction-ready consumers into showrooms. Accomplishing both of these goals will be a huge step toward seamlessly facilitating the digital shopping to showroom transition.

Before I wrap up, let me provide a quick update on USAA. To start, performance from the USAA channel is strong, underscored by a 11% year-over-year unit growth in the third quarter. In short, we are pleased with the progress of our contract discussions with USAA. We are negotiating a new agreement with USAA and are aligned with them on a timeline for completion, which gives us confidence we'll have a new agreement in place in advance of the expiration of our current agreement. Of course, when we do enter into a new agreement, we will announce development to the marketplace.

In closing, I'm pleased with the progress made in the third quarter and can feel the momentum in the business shifting. We remain laser-focused on executing against our near-term game plan with the goals of hitting our Q4 financial guidance, finalizing the new USAA contract, and launching Phase 1 of our evolving consumer experience in early 2020.

And with that, I'll now turn it over to Noel, our Chief Financial Officer.

Noel Watson -- Chief Financial Officer

Thank you, Mike, and good afternoon, everyone. I'd like to start by walking you through our financial results for the quarter and our outlook for the remainder of the year. Before jumping into details, I first wanted to note how excited I am with the progress the team here is making, which is clearly evidenced by our ability to drive results above our expectations for the quarter. As Mike has mentioned, we are improving execution on multiple fronts and are progressing against both near-term and longer-term initiatives.

Now turning to our detailed financial results, during the third quarter, total revenue of $90.6 million was $1.6 million above the high end of our guidance range and down 3% year-over-year. Franchise dealer revenue was down 2% year-over-year with franchise dealer count up 1% to 12,711 dealers. Monthly revenue per franchise dealer decreased by 5% during the quarter. Independent dealer revenue was up 14% compared to last year and independent dealer account increased 22% to 4,242 dealers with monthly revenue per independent dealer decreasing 8% as we continued to add smaller dealerships.

New dealer product revenue, including revenue from Trade, DealerScience, Sponsored Listings, and TrueCar Reach was approximately $3 million during the quarter. OEM revenue of $4.4 million was down 54% from Q3 of '18. This decrease was primarily driven by the lack of recurring revenue from two of our larger OEM clients. We will begin to lap easier comparison in this revenue line in Q1 of 2020. Forecast, consulting, and other revenue was $4.9 million this quarter or flat year-over-year.

Turning to units, our total units were 267,821 were flat year-over-year. Units in the TrueCar branded channel were down 8% year-over-year. We continue to feel the impact of organic traffic loss in late 2018 with monthly unique visitors down 6% in the quarter. However, as Mike mentioned earlier in the call, we're beginning to see the positive impact of our SEO investments and along with the easier year-over-year compare, we expect traffic to our branded channel to return to growth in Q4. We are also optimistic about the potential of the new brand campaign we expect to launch in the first quarter of next year.

In our extended partner channel, units were roughly flat year-over-year. We expect the extended partner channel to return to growth in 2020 as we activated a handful of recently signed partners and identify opportunities to scale our existing high potential partners.

USAA channel units were up 11% year-over-year. We continue to see positive momentum in this channel, again fueled by strong used car performance. Total new car units were down 8% year-over-year while used car units were up 20%. Consistent with earlier quarters, the weakness in the branded channel is driving the decline in total new car units. Meanwhile, throughout 2019, improvements to our used car product experience have fueled growth across all channels. Monetization in Q3 of '19 was $320 per unit, down $11 per unit from last year, driven by a decline in OEM revenue. The decline was partially offset by an increase in revenue from new dealer products and an increasing mix of used car units.

Now turning to expenses and margins where all of the following metrics are on a non-GAAP basis unless otherwise stated. Gross profit was down $3.6 million from Q3 of '18 and gross margin was 91.3% in Q3 of '19 versus 92.2% in Q3 of last year. Technology and product expenses totaled $11.4 million or 12.6% of revenue in Q3 of '19 compared to $12.5 million or 13.4% [Phonetic] of revenue in Q3 of last year. Sales and marketing expenses were $55.3 million or 61% of revenue in Q3 of '19 compared to $53.2 million or 56.8% of revenue in Q3 of last year. Our blended cost per sale in Q3 ticked up slightly from $131 per unit last year to $132 per unit this year. We're pleased to see this metric normalize on a year-over-year basis thanks to improved efficiency from our branded channel media spend. Our sales headcount and other costs were $19.9 million in Q3 of '19, up 5% from $19.0 million this time last year. The increase in cost reflects one-time charges associated with the upcoming rebranding campaign announced by Mike earlier.

Moving on to G&A, where Q3 2019 expenses totaled $10.2 million or 11.2% of revenue compared to $10.6 million or 11.3% of revenue in Q3 of ' 18. Adjusted EBITDA was $5.9 million or 6.5% of revenue in Q3 of '19 compared to $10 million or 10.7% of revenue in Q3 of '18. The items excluded from adjusted EBITDA for Q3 of '19 primarily include depreciation and amortization of $6.1 million and stock-based compensation of $7.2 million,

GAAP net loss for the period was $7.7 million or $0.07 per share compared to a loss of $6.3 million or $0.06 per share last year. Non-GAAP net income was $0.5 million representing earnings of less than $0.01 per share compared to non-GAAP net income of $4.3 million or $0.04 per share this time last year. Our balance sheet continues to remain healthy with approximately $172 million in cash and no outstanding debt.

Now turning to guidance. Given our financial results in Q3, we are raising our guidance for the full year 2019 to a revised range of $351 million to $353 million or negative 1% to flat revenue growth year-over-year. This represents a $4.5 million adjustment upwards from the midpoint on the prior guidance range. For the full year 2019 adjusted EBITDA, we are also raising our guidance to a revised range of $15 million to $17 million or a 5% adjusted EBITDA margin. This represents a $4 million adjustment upwards from the midpoint of the prior guidance range. This revision reflects the benefit of a stronger top line guide in addition to active expense discipline.

I will now turn the call back over to Mike for final comments.

Mike Darrow -- Interim President and Chief Executive Officer

Thanks, Noel. We strongly believe that the delivery of our Q3 performance and the momentum we have going into Q4 will lay the groundwork for us to return to growth in 2020. I look forward to our next call where we'll be prepared to share more details about the launch of our new consumer experience and our new rebranding campaign. It's an exciting time here at TrueCar and I look forward to sharing with all of you the company's continuing progress.

And with that, let's go to questions.

Questions and Answers:

Operator

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Kyle Evans with Stephens. Please proceed with your question.

Kyle Evans -- Stephens -- Analyst

Hey, Mike. I know you said you were going to share more details around the new consumer launch at the next call, but of course you knew we were going to ask, I wonder if you could put some date brackets around Phase 1 and kind of tell us exactly what we should be looking for and where? And then I've got some follow-up questions as well.

Mike Darrow -- Interim President and Chief Executive Officer

Hey, Kyle. Thanks for the question. Yeah, we have put some date brackets around Phase 1 of our new consumer launch. It will be early in Q1 and it will coincide with our refreshed and all new brand launch that we'll be launching at about the same time. So we're still heavy into testing will be a testing aggressively for probably the next 45 days or so. We'll come up with a final product winner that will be the kind of stitching together an accumulation of all the good testing we've done. We'll start ramping up the traffic on that after the first of the year and we're shooting for a launch very early in Q1.

Kyle Evans -- Stephens -- Analyst

Can you talk a little bit...

Mike Darrow -- Interim President and Chief Executive Officer

What I would say on this is, oftentimes when you talk about these type of projects, when it's going to be completed. And for us this is really just the beginning. This is Phase 1. We're excited about the changes you'll will see early in 2020 but will continue to be iterating through a process.

We've found the comfort level with about 10% of our TCDC traffic that we're able to pull off and aggressively test different things that we'd like to try through the system. So we're going to continue to do that on an ongoing basis and we think it will allow us to continually evolve our product in a positive way.

Kyle Evans -- Stephens -- Analyst

I believe you referenced conversion improvements in your prepared remarks. Could you talk a little bit about what you're seeing in that 10% testing ground in terms of prospect conversion improvements?

Mike Darrow -- Interim President and Chief Executive Officer

Yeah. So, we've seen and the testing we're doing kind of follows the full gamut of the funnel. We've done some work around the configurator that you can actually see on the site right now. We believe it's the state of the art configurator out there for consumers. It helps us get the consumer on the right vehicle, we're excited about that part of the testing. That's actually been launched and will be a a big piece of our new product offering.

Even after we turn the first of the year. Conversion efforts have been many and what we've done is we've try to look for ways to engage consumers in a self-directed way. We've got some different products that we're testing. One of them -- and I think this will be the first time we'll talk about it is a product called lock -- unlock where we get the consumer more involved in the actual selection of the dealers they want to engage with.

There is a number of things we're working on from our DSA algorithm. They kind of sit behind the scenes, but we're beginning to put all the the key attributes of what tends to create a good connection between our dealers and our consumers and we're feeling that into a machine learning data base and testing backwards against previous results to find out what really creates the best alignment between our dealer network and consumers.

So those are just a few of the things we're working on, there is many of them that are in the queue still to be tested, but we're really excited by what we're seeing.

Kyle Evans -- Stephens -- Analyst

And then, lastly, sales and marketing is up as a percent of Rev, Noel, I believe referred to some work that's going on for the rebranding. Could you help quantify that in the current quarter and then help us think about what rebranding looks like from a margin perspective and kind of absolute dollar perspective next year. Thank you.

Noel Watson -- Chief Financial Officer

Thanks, Kyle. Appreciate the question. So, marketing as a percentage of revenue is down sequentially from Q2, it is up year-over-year, but we are -- we're seeing some efficiencies sequentially in our spend. We spend time, particularly on the search engine marketing side, doing some pick and shovel work around our campaigns, doing a better job of matching keyword searches to landing pages and keyword searches to the associated copy, and so we are seeing some efficiencies there. But we also are engaged in testing that we'll be doing throughout Q4. So we've allocated some funds in Q4 for that. We'll be testing across Facebook, YouTube, Connected TV, Programmatic Display, and we also have a consulting engagement. We're looking at our overall marketing mix and trying to optimize across all of those channels. All this being done as we move into the new year to be able to leverage that work as we launch our new brand and have overall improved efficiency in our marketing spend.

As far as next year, we're still in the 2020 planning process. So I'm not going to put a finer point on the total absolute spend a percentage of revenue next year. We're still working through that. I will say, given the fact that we're planning to launch a new brand in Q1, you could expect from a mix shift standpoint, we're going to spend up in support of that in the first half of the year, but will provide some additional context on the full year on our next call.

Kyle Evans -- Stephens -- Analyst

Great. Thank you.

Operator

Our next question comes from Ron Josey with JMP Securities. Please proceed with your question.

Andrew Boone -- JMP Securities -- Analyst

Hi. Thanks for taking the question. This is Andrew Boone on for Ron. I think in the prepared remarks, you talked about double-digit sessions growth, and that compares to, I think you highlighted flat kind of UV [Phonetic] growth. That implies that more people are coming back to the platform. Can you just talk about kind of repeat visits and key visitors and what you guys are doing to drive that?

And then secondarily, franchise and independent revenue per dealer came in a little bit lower than us. Can you talk about your process with renewals with dealers right now? Thank you.

Mike Darrow -- Interim President and Chief Executive Officer

Yeah. Let me speak first to the reengagement piece of our business, we've got a team actively focusing on reengagement for our consumers. We have a light registration process that's actually pre-prospect before consumers are actually ready to be in connected with the dealer. And we're spending time reengaging those folks through emails, through targeted campaigns, through retargeting on Facebook and other sites. So, we are working hard to take the people who spend time on our site shopping, but don't complete the process of prospecting and making sure we get them back to the site when they're ready to move forward.

Noel Watson -- Chief Financial Officer

Hi. This is Noel, Andrew. I'll take the second question. So, on the revenue per franchise dealer, so right now, we're in an environment where unit growth is flat, and it was flat in Q3. It was flat in Q2. And so, we've consciously made the decision to prioritize maintaining our current dealer network and coverage to fully benefit the new consumer experience and rebrand launch in Q1 and make sure we have a full network. And in the short term, that's led to a modest decline in revenue per dealer. We think it represents an opportunity for us once we return to unit growth. We will say, on the independent side, we do on -- a rate renewal standpoint, we feel like we have some monetization to grow in to there, but we are adding smaller dealers. So when you look at it on a dealer standpoint, as we add smaller dealers. It's going to put pressure on revenue per dealer there. It is worth noting that our new products such as Sponsored Listings and Reach give us an opportunity to offer more value to our dealer customers, and as a result, an opportunity to capture greater wallet share from them as well.

Andrew Boone -- JMP Securities -- Analyst

Thank you.

Operator

Our next question comes from Lee Krowl with B. Riley. Please proceed with your question.

Lee Krowl -- B Riley -- Analyst

Great. Thanks for taking my questions. It seems like kind of behind the scenes, trade-in is kind of tracking in line or, if not, ahead of expectations. So kind of maybe your thoughts on the trade-in drivers during the quarter and perhaps as it ties into both new and used.

Mike Darrow -- Interim President and Chief Executive Officer

Yeah, we -- thanks for the question, Lee. We focused recently on expanding our footprint on True Trade. We know it's going to be an important element of our consumer experience as we go forward and we wanted to make sure that we were getting coverage out into the marketplace. We're approaching 2,000 dealers on True Trade currently, and you will see us begin to integrate the trade-in product in our core buying program post prospect before the end of the year. So we're excited about that. All of our data tells us that consumers -- about 50% of consumers who purchase a new vehicle or used vehicle have a trade-in. And with the number of prospects we have coming through our system, we know that's going a generate a lot of trade-in valuations. We think it's going to create a good opportunity for our current prospects to get an idea what their trade-ins worth before they go into the dealerships. So we're excited about that, and we think we'll see that product begin to grow rapidly as we get it integrated into the core buying product.

Noel Watson -- Chief Financial Officer

Yeah. And just to add to that, once we have it integrated into our flow of the higher lead volume will create engagement with the dealer and our tool and it provides us with an upsell opportunity to our dealers on the software on the full extent of the software, so that they can use it for acquisition across all of their channels.

Lee Krowl -- B Riley -- Analyst

Got it. And then, just on the OEM and incentive business, it seems like it's a combo OEM specific and also just kind of a general trend and lower OEM and incentive spending. Maybe talk on -- just a little bit on kind of the strategy as you sit today and maybe the potential changes to the pipeline to get that vertical business growing again next year.

Noel Watson -- Chief Financial Officer

Yeah, we've had two years consecutively to tell two pretty different stories around that piece of the business. In '18, bringing on some new partners generated quite a bit of growth in our OEM business, and was much of the growth that we delivered in 2018. Two of those partners did not come back to the platform in '19, and it created the dip in revenue. So it's going to be a little choppy even going forward as we get out there and talk to the OEMs. We are in discussions with all of our OEM partners on a regular basis, and we feel good about being a solution to them going forward and we expect the OEM business to turn back to growth in 2020, although a lot of that business is still being developed now. So, the OEMs are planning; they're going through their planning cycles for incentives as we speak. They want to see a big closed in Q4 of this year and then they will begin working on next year and we're in the middle of those discussions. One of the products, new products, we are looking at for the future is a better understanding of, of what they have in their current garage. Our trade-in product will help us understand that a bit. And as you can imagine the OEMs are interested in a prospect to potentially is trading a competitive product and the opportunity to win a conversion and steal someone from another brand. So, we think integration of trade into the flow will help us understand that and will get even -- will have the opportunity to be even more fine-tuned with our OEM partners.

Lee Krowl -- B Riley -- Analyst

Got it. Thank you for taking my questions.

Operator

Our next question comes from Daniel Powell with Goldman Sachs. Please proceed with your question.

Daniel Powell -- Goldman Sachs -- Analyst

Great. Thank you. Two questions, if I may. First, just wanted to ask around monetization, realize the OEM incentives were softer this quarter, but we kind of back those figures out and on the dealer product revenue side as well. It looked like monetization was generally a bit softer versus Q2 than it has been historically. Just curious if there is anything going on there from a mix perspective? Can you help us explain that?

Mike Darrow -- Interim President and Chief Executive Officer

Yeah. Thanks for the question, Daniel. I think that ties back to our earlier commentary on the revenue per franchise dealer. We're seeing some softer monetization and given that we're at flat overall unit volumes and we're consciously doing so in protection of the network.

And to put a finer point on that, Daniel, we're excited about our coverage right now on the franchise side of the business. We want to carry this group of dealers with us into Q1. When we introduced our new product in our new brand campaign and get back to growth. So we're being sensitive to that and we want to make sure that this group sticks with us as we turn the corner on 2020.

Daniel Powell -- Goldman Sachs -- Analyst

Understood, thanks. And then, on the -- the traffic look like it improved versus 2Q. Your units at TrueCar and USAA both look like they approved relative the trends in the second quarter, but it looks like the market share that you're reporting the declines there accelerated. Just curious if that's telling us anything about your market exposures or if there is any nuance there that would be helpful, appreciate it.

Mike Darrow -- Interim President and Chief Executive Officer

Yeah. We -- we've seen the upticks in traffic and we felt good about traffic across all three channels in Q3. And we've continued to focus on effectively bringing that traffic to the site and doing the right things to create conversion on that.

So we haven't seen any significant competitive impact influences on that business, we have seen a shift to use versus our new car percent of the unit. So that's a bit of the shift, but I think we're in a good position. We feel we're in a strong position as the number one new car provider, and we're growing on the used car side. And I think you'll see those shares -- the share numbers begin to move again once we get into 2020.

Daniel Powell -- Goldman Sachs -- Analyst

Great. Appreciate it.

Operator

Our next question comes from Nick Jones with Citi. Please proceed with your question.

Nick Jones -- Citi -- Analyst

Hi. Thanks for taking the questions. I guess, first, can you talk a little bit about what the rebranding of TrueCar is going to be as you launch in new side and then maybe expand a little bit on the focus on millenials and women as you think on [Phonetic] interesting shift?

Mike Darrow -- Interim President and Chief Executive Officer

Yeah. And Nick, the marketing people will kill me if I gave you too much on this, but we've seen the preliminary work in -- and we're excited about it. It's been a while. If you've been following us as a brand, since we've done much to refresh our brand and even from the product side, we were built at a time when the impact of millennials and the extreme influence of women on the buying process hadn't come to fruition.

So, we know we are in a position to need to freshen all of that. The new brand is modern, it's exciting, what you'll see is is very upbeat. And I think you'll like it once you see it, and we're positive. On the opportunity to grow some segments where maybe we weren't being considered before and certainly the growth segment. So, more work to be done on that and it's certainly going to be important as to how we tie that into our new product experience. We're feeling good about both of those efforts and look forward to both of those having an impact in the market in Q1 -- early Q1 of 2020.

Nick Jones -- Citi -- Analyst

Great. Thank you. I appreciate the color.

Operator

Our next question comes from Marvin Fong with BTIG. Thank you. Please proceed with your question.

Marvin Fong -- BTIG -- Analyst

Okay. Good evening, and thanks for taking my questions. Most of them are asked already. But just on the partner channel, the deceleration in the growth in units, I just -- if you just dig a little deeper into what the trends are that's causing that slowdown, and I realize we'll see from growth once you on-board the new partners you've signed up, but if you just help us on that?

And then, second question, you've mentioned that we should see an uptick in branded traffic growth in the fourth quarter. And I was just curious, is that more of a function of the compares or some of the STO improvement that you've been doing also driving that? Thank you.

Mike Darrow -- Interim President and Chief Executive Officer

Yes. Thank you for the question, Marvin. And on the partner side, we went through a bit of a period where we had some limited resources around our BD function that supports the partner group. And it has been a period of time before we had brought some new partners on. So, part of the slowdown in growth that you saw was the fact that we had lost some partners and we had not brought some new partners into the mix until just recently.

We're really excited about the newest set of partners we brought onboard, Motor1, Kroger, the number one grocery retailer in the nation with a very active digital audience, and we also have a deal with Credit Karma that we've signed and we hope to launch before the end of the year. So, we're excited about reinvigorating the partner network. You'll see that begin to show signs of growth again. When you bring new partners on like that, there is always a phase of optimization and getting to know how the sites work together in that, but we think we've brought some real influential kind of partners on, Motor1 has 10 million monthly uniques that visit their site. So we're excited about returning that channel back to growth as we turn the corner on 2020.

Noel Watson -- Chief Financial Officer

Hi, Marvin, this is Noel. I'll take the second question on SEO. So, a component of the performance is related to lapping compares. If you remember last year at the end of September, there was a algorithm change that had a significant impact on our SEO traffic. So we had -- we are lapping that in Q4, but we're also making a lot of progress on our internal SEO efforts both in creating strong -- stronger upper funnel content, 10 best lists and things that will keep people coming to the site and engaged in the site for longer periods of time. And also things like dynamic splitters on the site. So, we are making good progress with the things that we're working on from a product standpoint as well as lapping the comparison.

Marvin Fong -- BTIG -- Analyst

Great. Thanks guys, and nice quarter.

Noel Watson -- Chief Financial Officer

Thank you.

Operator

We have reached the end of the question-and-answer session. At this time, I'd like to turn the call back to Mike Darrow for closing comments.

Mike Darrow -- Interim President and Chief Executive Officer

Thank you, operator. I'd like to close by again thanking all the hard working TrueCar employees who are making these positive results possible and helping us set the foundation for a really exciting year in 2020. Thank you for your time and questions today, and I look forward to speaking with all of you over the coming weeks. Thanks, again.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Noel Watson -- Chief Financial Officer

Mike Darrow -- Interim President and Chief Executive Officer

Kyle Evans -- Stephens -- Analyst

Andrew Boone -- JMP Securities -- Analyst

Lee Krowl -- B Riley -- Analyst

Daniel Powell -- Goldman Sachs -- Analyst

Nick Jones -- Citi -- Analyst

Marvin Fong -- BTIG -- Analyst

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