If a picture or graph is worth a thousand words, then one of the most fulfilling earnings presentations you can look through is that of TrueCar, Inc. (NASDAQ:TRUE), a leading digital automotive marketplace offering consumers pricing transparency and dealerships more cost-efficient sales leads; its presentations are filled with valuable graphs. This year through mid-July, TrueCar's stock price had jumped roughly 90% before dropping over the past month, but if these three graphs from the second quarter are any indication, the company's investing story is rolling again.
In case you missed the headline financial figures, TrueCar's second quarter was solid; adjusted earnings per share checked in at $0.01 on revenue of $81.8 million, both just slightly topping analysts' consensus estimates. If you're wondering why TrueCar's stock slid roughly 10% right after announcing the top- and bottom-line beats, it's mostly due to the company's forward guidance. Management expects third-quarter revenue to check in between $85 million to $87 million, and while that's a solid year-over-year gain, it was slightly below analysts' estimates calling for $87.68 million.
Beyond the small discrepancy between the company's forward guidance and Wall Street estimates, these four graphs show just how well TrueCar's business has rebounded.
Show me the growth!
One of the many issues TrueCar faced in 2015, as its stock price and earnings spiraled lower, was that its year-over-year unit growth had all but stalled. Of course, young growth companies can't continue to turn in quarter after quarter of double-digit gains forever, but as TrueCar had only gone public a few years prior, investors expected higher growth in units sold. Fortunately, that growth has returned in a big way recently. Starting with the third quarter of 2016, TrueCar's year-over-year unit growth has checked in at 6%, 19%, 24%, and 26% during the most recent second quarter -- but the graph below emphasizes just how significant the rebound is.
Dealership network expands
TrueCar's dealership network is obviously one of the most critical, if not the most important, aspects of the company's business. Dealerships pay TrueCar for each completed sales lead, but enlisting more dealerships isn't necessarily the right move for TrueCar. TrueCar has a growing user base, but those consumers are distributed among a given number of dealerships, and if the latter grows too quickly, the number of sales and value given to each dealership declines. And if dealerships see less value in TrueCar, its investing thesis weakens.
The perfect scenario is when dealerships grow in tandem with the revenue TrueCar generates per dealership; this means its user base is growing quickly enough to still offer more value per dealership despite more dealerships in the network. It's a fine line to walk because TrueCar wants its dealers to generate more revenue and strengthen their partnerships with TrueCar, and TrueCar also wants to expand the reach of its dealership network to be closer and more convenient to potential sales leads. Fortunately, as you can see in the graph below, TrueCar's revenue per dealership increased during the second quarter even with more dealerships in the mix!
Show me the money!
"Despite the bigger picture trends in automotive, we set records in nearly every major financial and operating metric in the second quarter," said Mike Guthrie, Chief Financial Officer, in a press release. Chip Perry, TrueCar's president and CEO, added: "We're growing well; we're delivering value to consumers, dealers, and manufacturers; we're expanding our business, and we're producing operating leverage all while making key investments for the long term."
Expanding on those thoughts, TrueCar's adjusted-EBITDA margin jumped from 3.7% during the prior year's quarter up to 9% during the second quarter, and that helped push its total adjusted EBITDA to record highs, as you can see in the graph below.
Sure, investors were quick to sell shares of TrueCar when guidance didn't live up to Wall Street's expectations, and that's partly understandable as new light-vehicle sales in the U.S. are plateauing and pessimism is growing. But the graphs above highlight that TrueCar can continue to improve growth rates by reaching more consumers, and it can return value to shareholders by improving operations and margins despite an industry slowdown. TrueCar has shown there is still growth to be had, and that's a far better story for investors than it was almost exactly two years ago.