TrueCar (TRUE) Q2 2021 Earnings Call Transcript

TrueCar (TRUE 1.35%)
Q2 2021 Earnings Call
Aug 05, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the TrueCar second-quarter 2021 financial results conference call. All participants will be in listen-only mode. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Scott Watkinson.

Please go ahead.

Scott Watkinson -- Senior Vice President, Deputy General Counsel

Thank you, operator. Hello, and welcome to TrueCar's second-quarter 2021 earnings conference call. Joining me today are Mike Darrow, our president and chief executive officer; and Jantoon Reigersman, our chief financial officer. As a reminder, we will be making forward-looking statements on this call.

These forward-looking statements can be identified by the use of words such as believe, expect, plan, anticipate, become, seek, will, intend, confident and similar expressions and are not and should not be relied on 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. The 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 -- President and Chief Executive Officer

Thank you, Scott, and good afternoon, everyone. This quarter is going to be a bit of a departure from our previous calls. I'll start my remarks today with a brief review of our impressive Q2 results. I'll then discuss our view of the current market conditions and the opportunities and challenges we see coming out of Q2.

Lastly, I'll remind everyone of where we're headed as an organization, with a specific emphasis on where we plan to play in the ongoing digital transformation of the automotive vertical. I'm pleased to report that Q2 was another strong quarter for TrueCar. Overall, we ended Q2 above both guidance and consensus forecast with revenue of $65.8 million and adjusted EBITDA of positive $4.7 million. Year-over-year revenue increased by 12%, and quarter-over-quarter revenue increased by 1% while being constrained by retailer inventory availability throughout June.

Additionally, Q2 was a record traffic quarter. Consumer traffic hit historic high of 9.6 million monthly unique visitors. This was partially driven by sourcing TrueCar's unique research content covering nearly 100 new vehicles since the beginning of the year. Prospect conversion was 7% for the quarter, up from 6.2% and 6.3% in the previous quarter in Q2 2020, excluding USAA, respectively.

Unit growth driven by truecar.com and affinity partner growth increased 39% year over year. Furthermore, we added three OEM programs to our newest affinity partner platform, Navy Federal Credit Union. Overall, our affinity partner channel showed 39% year-over-year unit growth and 26% year-over-year visitor growth, while over 22 partners set new monthly unit records throughout the quarter. Strong retail demand for new and used vehicles was a key driver for Q2 retail automotive sales performance.

Early in the quarter, the overall recovery in economy was strong and consumer demand reached near record highs with April SAAR being the highest since 2005. This is despite a 45% year-over-year increase in gas prices from $2.17 in June of 2020 to $3.16 in June of 2021, coupled with a six-year low in OEM incentives. Additionally, new vehicle stock was 1.3 million units less in June of 2021 than in June 2020 and 2.6 million less than in June of 2019. This combination of high demand and low supply caused OEMs to reduce their marketing and incentive spend dramatically while they search for creative ways to adapt to the shortages.

OEMs are continuing to make strategic decisions on chip allocation to high-margin or popular vehicles and are experimenting with creative ways to build vehicles that can be completed when more chips are available. Even with these solutions, new vehicle inventory decreased significantly during Q2, and we believe it's unlikely inventory will rebound to pre-pandemic levels before the end of the year. Regarding the preowned market, vehicle acquisition was a key focus for many retailers. The scarcity of used vehicles led to extreme competition between retailers and acquiring cars directly from consumers.

The new and used vehicle inventory scarcity and pent-up demand allowed dealers to increase prices and decrease their SG&A expense to further strengthen their net returns. In the face of uncertainty regarding new vehicle production, we believe retailers will continue to focus their efforts on pre-owned vehicles, and Jantoon will address our plans to support our retailers in that area in his comments. Digital retailing initiatives grew as dealers continue to build or partner for an end-to-end offering. This demand led to major consolidation in the digital retailing space between industry vendors, especially the large all-in-one providers that offer both DMS and CRM integration capabilities.

We believe this consolidation underlines the importance of a more broadly applicable solution for dealers and consumers alike to have the best digital retailing experience. One, we, at TrueCar can uniquely provide given our consumer trust and our strong dealer network for both new and used vehicles. This is a good moment to provide an update on our current products, as well as our end-to-end solutions. As I mentioned in our last call, in the first half of the year, one initiative we focused our efforts on was expanding our deal building capabilities across our new and used car inventory, and thus providing the ability to our consumers to configure monthly loan payments, including all taxes and fees for pre-owned vehicles.

This obviously is a fundamental part of building an end-to-end solution. Throughout Q2, we've been rolling out our deal-building experience across the used car marketplace. And thus far, we are happy to report that we enabled more than 60% of preowned vehicles or approximately 500,000 vehicles with accurate payments, helping our consumers purchase vehicles with complete price transparency and precise payments based on actual data from lenders. In addition, in the last quarter, we continued expanding our deal-building capabilities across our partner network, reaching approximately 50% of partner traffic, and we intend to continue rolling out this experience across the rest of the partner network by the end of the year.

Overall, the number of consumers building deals on our platform continues to gain momentum, with 25% of TrueCar.com new car prospects and 6% of TrueCar.com used car prospects actively engaging and are building deals. In addition to increased consumer engagement with the tool, we also see a very healthy increase in customer satisfaction with this experience and a two times increase in the Net Promoter Score on TrueCar.com, which further underscores our shoppers' desire for price transparency, convenience, and a stress-free buying experience. We also observed 26% and 31% increases in close rate for prospects that build deals for new and used cars, respectively. Additionally, in April, we launched our first pilot program of a digital retailing integration partnership with Roadster.

Our two companies have more than 500 mutual dealer partners configured to support consumers with a desire to complete various purchase steps digitally. Initial data from the pilot indicates that approximately 20% of consumers who build deals want to finalize their deal online and are handed over to Roadster's checkout process. This is a very encouraging metric as we progress further in our vision to bring more of the purchase process online natively to TrueCar.com. We are also seeing that 33% of those consumers transferred from TrueCar.com to Roadster checkout experience, complete and submit a credit application.

As a reminder, we have designed an open API spec for API-based integrations to standardize the transfer of data from our auto buying platform to dealers' digital retailing tools. That way, we can extend the digital buying experience for our consumers from deal building to deal finalization at the dealer, while at the same time, we ensure active dealer participation in our marketplace by integrating their digital retailing tools. While providing extensive consumer flexibility, this approach still remains a hybrid digital solution with opportunity for improvement from a fully contained solution. In parallel, we are actively working on a TrueCar native solution, an end-to-end car buying experience entirely online, including all aspects of purchase finalization, such as credit application, aftermarket products, e-contracting, and nationwide vehicle delivery.

In fact, as it relates to the credit application and aftermarket product component, I am very excited to announce that we have partnered with AutoFi, the leading commerce platform for end-to-end digital automotive sales and financing to provide consumers with an easy and seamless process to explore auto financing directly from the TrueCar marketplace. TrueCar consumers will be able to see the offers from a variety of lenders, compare them and decide what's right for their needs. In addition, once they've selected their financing options, they'll be able to choose protection products and thus, complete the essential steps of purchase finalization digitally on our platform. I have alluded to this in the past, but I want to take the opportunity here to provide some additional clarifying details.

Our goal is to build an auto buying platform in the form of a two-sided online marketplace that gives consumers the ability and the convenience of purchasing a car, new or used, from the comfort of their couch, while at the same time, providing our participating dealer partners the ability to efficiently market and sell units at scale. In order for this to succeed, we intend to combine the strength and trust of the consumer-facing TrueCar brand with the strength of our extensive dealer network to create a true two-sided marketplace that enables dealers to transact their sales online within the comfort and convenience of the trusted TrueCar platform. This ultimately will provide consumers with a streamlined and enjoyable purchasing experience and allow our dealers to facilitate a complete online car-buying experience, thus enabling them to scale while being more efficient and highly profitable. During the second half of the year, as we seek to finalize the build-out of our native end-to-end car-buying platform, we plan to launch multiple milestone-based tests of our end-to-end experience with a targeted set of dealers.

Here, we can test, learn, and iteratively improve our platform by working closely with our dealer partners to reshape the future of the online car buying experience. Our goal is to have full end-to-end transactions flowing through our platform with our initial set of dealers in Q1 of 2022 and to scale up from there with additional dealers who share the vision of making this experience available to consumers who want it. Before turning the call over to Jantoon, I'd like to thank all the amazing TrueCar members, who, through their unwavering focus and commitment, have enabled us to deliver impressive quarterly results in our core traditional business, while, in parallel, continuing our integration work with dealer digital retailing efforts and most importantly, put us in a position to become the first automotive marketplace with a true end-to-end digital retail experience for both new and used cars within the first quarter of 2022. And with that, I'll hand the call over to Jantoon.

Jantoon Reigersman -- Chief Financial Officer

Thank you, Mike. These are super exciting times at the company, and I'm proud to see the strides the team is making in our transformation. Before I touch on our second-quarter performance, I would like to reiterate the message Mike just underlined. Despite the macro challenges, we delivered another strong quarter with units up 39% year over year, excluding USAA, the closest proxy for our performance.

Looking ahead to the second half of the year, we do expect continued inventory constraints, while experts predict the SAAR will continue to decline from original 2021 projections. The volume brands, such as Toyota, Honda, Kia, and the American OEMs, will continue to lag behind the average dealer day supply for the balance of the year. Even though temporary in nature, we do anticipate continued pressure on our dealer count throughout the remainder of the year. In the near term, we will seek to partially mitigate this by fast-tracking additional product offerings, especially used vehicle acquisitions.

We also plan to expand our singles in multi-market offering or distance retailing as some may call it, for pre-owned cars. So traditional dealers can compete equally with the online retailers. In the longer term, we are confident that the combination of our current business model with the beforementioned end-to-end solution will make us a winning platform in the industry for dealers and consumers alike. In other words, we have a fundamentally strong business with ample room for further growth in its current form, in addition to tremendous value-creation opportunities in our new product road map.

So despite the macro challenges, these are very exciting times at the company. I'll now review the strong financial and operating results for the second quarter of 2021. Revenue in the second quarter came in at $65.8 million, up 12% year over year. The year-over-year increase was driven by a strong 39% growth in units year over year, excluding USAA and bolstered by COVID-19 concessions we provided to certain subscription arrangements in Q2 2020.

Franchise revenue ended the quarter at $48 million, up 14% year over year and flat quarter over quarter. Independent revenue ended the period at $11 million, up 87% year over year and up 6% quarter over quarter. New dealer product revenue came in at $3.7 million, up 80% year over year but down 2% quarter over quarter. OEM revenue and other revenue ended the period at $2.8 million and $0.3 million, respectively, with OEM revenue down 42% year over year yet flat quarter over quarter.

We ended Q2 with 13,159 dealers, down 7% from the end of Q1. The primary cause was limited new dealer activations, a consequence of the constrained macro environment as dealers fill out their inventory. Total units for the second quarter ended well above 194,000. Year over year, TrueCar.com and extended affinity units were both up 39%.

Monetization for Q2 came in at $336, up 16% compared to the same period last year. The year-over-year increase was driven by a combination of strong growth in units year over year, excluding USAA, and bolstered by COVID-19 concessions we provided to certain subscription arrangements in Q2 of last year. Now turning to expenses and margins for the second quarter of 2021, where all of the following metrics are for continuing operations and reported on a non-GAAP basis unless otherwise stated. The business generated $60.1 million of gross profit in Q2, a gross margin of 91% and in line with prior quarters.

Technology and development spend of $9.6 million was down from the first quarter due to seasonally expected lower headcount cost and down year over year, driven by a lower headcount, in general. General and administrative spend was $9.8 million in the second quarter, in line year over year and down from Q1 due to lower headcount costs and professional fees incurred. Sales and marketing spend, our largest expense category, ended at $36.0 million, up 42% year over year. As a percentage of revenue, sales and marketing improved 200 basis points to 55% as compared to Q1 but is up 11% from Q2 2020 due to our decision to dial back on marketing during pandemic-related lockdowns in the prior year.

Within sales and marketing, TrueCar.com acquisition spend was up 145% year over year and down 4% quarter over quarter, ending the quarter at $13.5 million. TrueCar.com units were up year over year 39%, resulting in a cost per sale of $130, 16% below the prior quarter and 76% above the prior year. The difference in the year-over-year PPS performance reflects the macro environment we faced last year in which we pulled back on acquisition spend and therefore had a deflated cost per sale. Partner marketing spend was $11.6 million in the second quarter, up 14% and 68% quarter over quarter and year over year, respectively.

Sales, headcount, and other, the final category within sales and marketing, ended the second quarter at $10.8 million, down 17% year over year, primarily driven by the reduction in headcount that went into effect in Q2 of 2020. In summary, significant efficiencies across all categories of our sales and marketing spend drove a 3% reduction in non-GAAP expenses quarter over quarter, resulting in an adjusted EBITDA of $4.7 million up 126% quarter over quarter. GAAP net loss from continuing operations for the second quarter of 2021 was $7.1 million or $0.07 per share, compared to a loss of $11.4 million or $0.11 per share in Q2 of 2020. I'd now like to provide commentary on our expectations for the rest of 2021.

Despite an improving retail environment in the first half of 2021, there remains a heightened level of uncertainty, especially around the industry implications due to the inventory shortages. While our core business fundamentals remain strong, increased pricing and further constrained availability of new car vehicles as we began to experience in June, we'll create an uncertain environment for new unit retail volume until inventory improves. As such, we will not be providing formal Q3 or full-year guidance at this time. We will continue to manage the business responsibly and expect above breakeven adjusted EBITDA for Q3.

And with that, let's go to questions.

Questions & Answers:

Operator

We will now begin the question-and-answer session. [Operator instructions] Our first question comes from Steve Dyer with Craig-Hallum. Please go ahead.

Steve Dyer -- Craig-Hallum Capital Group -- Analyst

Well, thanks. Good afternoon, guys. I may have missed this. I know you sort of touched on the dealer comp quarter-over-quarter down fairly significantly, but I don't know that I heard a reason or sort of what you're seeing real time as to why that was and why you expect that pressure to continue?

Mike Darrow -- President and Chief Executive Officer

Hey, Steve, this is Mike. Thanks for the question. We did see some downward pressure in Q2, particularly the second half of Q2, with dealer count. A very, very high percentage of that was based on the limited inventory availability that was out there in the marketplace.

And we've begun to take some efforts, as you saw in some of Jantoon's comments around shifting some focus to the used car side of the business. But we feel we've got the dealer count under control. Even with the decline we had in Q2, we were able to hit above the top-line revenue number. The big impact that we're seeing around the decreased inventory and then the resulting retail pricing that's going on in the new car space is that it's creating some uncertainty around new car close rate.

And about 30% of our business, as you know, is pay-per-sale. And with the inability to really get our arms around a close rate based on data that came in, and Q2 was a quarter of two different stories, April was a great month, record SAAR looking back to like 2005. And then we saw inventory begin to change the story through May and then into June. So we feel confident we've got the dealer count issue under control.

Our core dealer network remains very strong and intact. And our biggest gap, I guess, in what we're looking at is what will happen to new car close rate as we go into Q3.

Steve Dyer -- Craig-Hallum Capital Group -- Analyst

Got it. OK. And I guess looking ahead, I know you're not giving specific guidance, but just given the fluctuation of dealers and things like that, Q3 has typically been up modestly from Q2. Would you expect that relationship to hold this year? Or is the lower dealer number going to weigh on that?

Mike Darrow -- President and Chief Executive Officer

Yeah. I think what we'll see coming out of Q2 is we will face some pressure on that sequential quarter growth in Q3, not necessarily like I said, because of the dealer count. But on the uncertainty around pay-per-sale units, that will flow through the system in Q3. And listen, we're very proud of the business coming out of a very strong first half and what we were able to accomplish.

We're bullish on where the business is going to go, both for our core business and the things that we've been able to put in place to advance our end-to-end digital retailing platform that we provided some details on, and we're excited about the impact that's going to have on our business. So this inventory situation is a very temporary situation. We know we'll quickly work our way out of it, and we're confident that as inventory starts to build, we will see close rates come back up. Pricing will normalize again on the new car side.

And it will give us a better line of sight on our top-line number for Q3 as that happens.

Steve Dyer -- Craig-Hallum Capital Group -- Analyst

And I guess I'm not entirely sure. Maybe could you explain the close rate, the pay-per-sale close rate piece of it? I mean, I generally understand that's about 30% of your business. But how is that right now being impacted?

Mike Darrow -- President and Chief Executive Officer

Yeah. So as we talked about on the call, the key metrics, the fundamental metrics to our business are extremely strong. So in Q2, we set all-time traffic records and prospect records for what the traffic coming through our platform. So those are two of the three fundamental metrics we look at to calculate and to forecast our business, and those are at record levels.

What's happening is as we send people into the marketplace at retail, they're finding a very, very limited selection. And on what vehicles they can find, they're seeing pricing that's kind of unprecedented to the time. So that's impacting the close rate, which, as you know, on our pay-per-sale units, drives that business. So hopefully, that explains it.

Like I said, the core fundamentals are strong. Top-of-funnel is very good. Conversion rate is good. It's just without inventory in the marketplace and with the pricing on the vehicles that are available, our shoppers aren't finding a solution to their buying needs at the rate we normally see.

Steve Dyer -- Craig-Hallum Capital Group -- Analyst

And so then maybe the deviation, I guess it sounds like between your results and outlook versus a competitor who reported this morning is largely you're much more tied to new, which is a hard place to be and probably will be for a little bit yet?

Mike Darrow -- President and Chief Executive Officer

Well, we're not only more tied to new, but we're also more tied to the transaction, right? We've always talked about being very accountable and running a system of attribution that ties us to the success at the dealership with sales. The other reports you're going to hear about marketing numbers and software sales products and things like that, we're running more of a pure marketplace. And we're affected more in times like this when inventory gets so low, and dealers react by raising prices the way they have. So that's a big piece of the puzzle.

Now what that allows us to do, and you and I've had this conversation, it sets us up to be successful in moving this end-to-end process truly into place. So we're excited about the progress we're making there. We've seen good results with the products we've launched around moving consumers further along the process digitally. And we'll be ready in Q1 to start -- Q1 of 2022 to start flowing end-to-end car-buying solutions for both new and used through the system.

So yes, our report is different in that we actually tie our success to the dealer sales.

Steve Dyer -- Craig-Hallum Capital Group -- Analyst

Got it. Helpful. Thanks, Mike.

Operator

Our next question comes from Marvin Fong with BTIG. Please go ahead.

Marvin Fong -- BTIG -- Analyst

Great. Thank you for taking my questions. Yeah, just to revisit dealer count, actually, perhaps more of a forward-looking question. But when inventories do return to normal, how would you expect the dealer count to behave? Should we expect a pretty sharp snapback? I appreciate the difference between dealer count and the unit sales that you just spoke about, Mike, but just in terms of the actual dealer count, how would you expect that to come back once the inventory is normalized?

Mike Darrow -- President and Chief Executive Officer

Yeah. I think we'll see it come back, Marvin. How quickly it comes back, will probably vary by franchise. Will vary by how quickly the brands get caught up on their inventory and how that happens.

We track reason codes very, very closely through our system when a dealer leaves our platform. And like I mentioned, a very, very, very high percentage of the folks leaving our platform are stating that the reason is limited inventory to no inventory to sell. So we expect that to respond very, very quickly. Once the units start to build back up, we feel strongly that we're viewed as a very efficient investment for dealers when they're selling cars and bringing consumers in on those units.

So we think it will come back quickly. The challenge we're having, and I think everybody is probably facing the same thing, is the information seems to be inconsistent about when inventory will come back. It varies by brand. It varies by model.

A lot of different discussions going on as to how that's going to come back. So we're keeping a close eye on it. We're managing our dealer count. We're managing our business through Q3, and we'll look forward to good results.

But we just didn't have enough data around close rates to put a forecast or a guidance out there, but we expect this to be very short-term, and we think it will snap back to your question.

Marvin Fong -- BTIG -- Analyst

Gotcha. And a couple of follow-ups maybe for Jantoon. On monetization, if I back out sort of OEM incentives and new dealer products, it looked like it came down pretty significantly, maybe closer to where it's been in prior quarters. Could you just kind of talk about the puts and takes for monetization in the quarter? And how we should model that going forward the next couple of quarters? And then if you could just touch on marketing spend and your ability to kind of move that to protect your margins, you obviously have in mind that you can take EBITDA breakeven, that would be great.

Thanks.

Jantoon Reigersman -- Chief Financial Officer

Sure. So I think a couple of things. So on the monetization side, remember, as Mike mentioned, so 70% of our business is effectively subscription, 30% pay-per-sale. As a result, your monetization will somewhat fluctuate because obviously, your pay-per-sale, on a relative basis, will have an influence on your average monetization.

Currently, the one uncertainty is very effectively your close rates around the pay-per-sale element. And so as a result, that's the reason really the simple -- only and simple reason why we wouldn't be guiding because it's just a fluctuation that we have that's a fairly finite risk that we're managing, and we've already addressed some of the pieces on how we go about that in the coming quarter. But long story short, I think we've mentioned also in the past, monetization will somewhat like decrease over the remainder of the year because of that mix between subscription and pay-per-sale. Your question on the marketing side.

So there are a couple of elements associated to this. So one is obviously everybody currently in the industry is focusing on the same keywords, right? Everybody is focusing on used. And so there's some element of our cost of marketing overall, though, remember that the event -- one of the advantages that I think we have as a business model is pretty much 50% of our cost structure is flexible and variable. And so a large part of that is marketing.

The marketing team that we have is a very good team, and we're very adequate in moving according to the channels and see the right opportunities, as we've been doing. And as you've seen over the last couple of quarters, we've gotten very, very efficient in our marketing spend and our cost of acquisition. This obviously is a little bit of an interesting time as all the different players are effectively focusing on kind of the same channels. But overall, we feel we have a lot of room, not only on the performance marketing side, but also on like more of the overall brand marketing, etc.

I mean, I think Mike, in his remarks, already alluded to, effectively, we've now written articles on 100 vehicles that have received a lot of unique visits, etc. So there's a lot more room for us to also create more visitors accordingly. The other thing I want to mention is, look, fundamentally, the business is strong. We have unique -- we have good visitors numbers, right? People are going through, we have good conversion rates, etc., it's really the element of the close rate and particular around the PPS element.

That is just hard to predict as we go through this period of inventory constraints. Does that answer your question?

Marvin Fong -- BTIG -- Analyst

Yes, totally. Thank you, Jantoon. Thank you, Mike. Appreciate it.

Operator

Our next question comes from Rajat Gupta with JPMorgan. Please go ahead.

Rajat Gupta -- JPMorgan Chase & Co. -- Analyst

Great. Thanks. Thanks for taking my question. Just had an initial question on just any learnings from the pilot program with Roadster.

How does this relationship change Roadster integrate with CDK? Could this potentially help improve their integration and eventually help serve a larger dealer base? Just trying to see like how you were connected to that acquisition and how that change comes for you. And I have a follow-up.

Mike Darrow -- President and Chief Executive Officer

Yeah. Great question. And I think we've seen some real positive results from our initial pilot and the work we're doing with Roadster. We have over 500 dealers who are mutual dealers to both of our platforms, and we are beginning to flow folks through that system.

We launched that program in May, and it takes about 90 days for us to get real data, particularly around the maturation of sales units and that. But we have seen some real interesting things. And the first thing I mentioned in the preread was that 20% of people who get to the stage of, do you want to finish the deal online or clicking, that they do. I think that's a number higher than what you hear from the marketplace.

Oftentimes, when you talk to a retailer, they'll say less than 10% of my volume is fully digital or people who want to do the deal fully online. We're getting indications that the number is much more significant in that through our Roadster test. We're seeing good NPS customer satisfaction numbers for the folks flowing through it. So there's a lot of good data that we'll be able to talk about more as we gather more of it regarding sales and close and things like that.

As far as the relationship with Roadster is very strong. I talked to Andy after the company was acquired. He was excited about it. It creates a bigger footprint for them in the marketplace in their relationship with CDK and a bigger footprint for Roadster, therefore, provides a bigger opportunity for us to expand that business with them.

So we've gotten a real positive reaction from particularly our big dealer partners on our approach to leaning into the digital systems that the dealers are investing in. Roadster was the first one of those, and we're real happy with it. We hope to see that one grow, and we have plans to add more of those digital retailers to the system as we go.

Jantoon Reigersman -- Chief Financial Officer

I just want to add one thing. I want to add one thing that I think is important is like the Roadster integration is interesting for us because it really is a further qualification of the leads for the dealers. But at the end of the day, it still is a, in some ways, only a partial digital integration. What's really where we are focused and where I think the emphasis has been also in the preamble has been around us building out a much more native solution of a true end-to-end which is effectively one step further.

So even though the Roadster integration is a very interesting part, and it's really our responsiveness to our dealer network to enable a variety of options to integrate with our system in some shape or form is really the native piece that will enable a true transaction happening online.

Rajat Gupta -- JPMorgan Chase & Co. -- Analyst

Got it. Got it. That's helpful. And you know, I don't know if this came up for you on the call, but one of your peers rolled out this instant online appraisal tool helping dealers source inventory from retail customers, a trend which has amplified over the last few quarters.

I'm just curious if you could share your thoughts on this dynamic and if you're looking to venture into any such avenue going forward as well, maybe that can tie into the capital allocation as well.

Mike Darrow -- President and Chief Executive Officer

Yeah. We're looking at certainly leaning into our dealer partners acquisition of used vehicles. One of the ways we've done that is through our deal builder product. The best way -- and still, 50% of the people who are transacting on a new vehicle have a used car attached to that.

We put a guaranteed value on those trades for our retail partners, and they're getting interesting volume through that. We've always got our eyes open as to things we could be doing to help dealers in the used car acquisition space. We have a sell my car feature on our site right now that we get activity on and pass that dealer on to our retailers. So we're paying attention to that space.

There's certainly a lot of focus around it right now as new car inventory is short and dealers change their focus to used cars, and we'll continue to lean into that. And continue to try to help our retailers with that piece of it.

Rajat Gupta -- JPMorgan Chase & Co. -- Analyst

Got it. Got it. Great. Thanks.

Thanks, Mike, for the color, and good luck.

Mike Darrow -- President and Chief Executive Officer

Thanks, Rajat.

Operator

This concludes the question-and-answer session. I would like to turn the call back over to Mike Darrow for closing remarks.

Mike Darrow -- President and Chief Executive Officer

OK. I'd just like to thank everybody for taking the time to participate in our call today. And I'd also like to thank, again, all the hard workers here at TrueCar who are enabling us to publish a strong second quarter and also make progress on our integration work with the digital retail partners and also our journey to be the first two-sided marketplace, which sells -- making new and used cars available in a digital way. So I appreciate your time, and thank you for participating.

Operator

[Operator signoff]

Duration: 42 minutes

Call participants:

Scott Watkinson -- Senior Vice President, Deputy General Counsel

Mike Darrow -- President and Chief Executive Officer

Jantoon Reigersman -- Chief Financial Officer

Steve Dyer -- Craig-Hallum Capital Group -- Analyst

Marvin Fong -- BTIG -- Analyst

Rajat Gupta -- JPMorgan Chase & Co. -- Analyst

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