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TrueCar Loss Widens as Sales Miss Guidance

By John Rosevear - Updated May 9, 2018 at 8:11PM

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Revenue rose 7%, but the bottom line was down from a year ago.

Online car-shopping service TrueCar (TRUE -1.15%) reported on May 8 that its loss in the first quarter of 2018 widened to $9.1 million from a $6.8 million loss in the year-ago period.

TrueCar's first-quarter revenue rose 7%, to $81.1 million, just above the midpoint of the company's guidance range. But while the number of vehicles purchased via TrueCar's service rose 6% from a year ago, the total fell short of guidance. 

The raw numbers

Metric Q1 2018 Change vs. Q1 2017
Revenue $81.1 million 7%
Vehicles purchased ("units") 229,717 6%
Adjusted EBITDA $6.0 million  (1.6)%
Franchise dealers as of March 31 12,205 0.5%
Net income (loss) $(9.1) million $2.3 million worse
Net income (loss) per share $(0.09) $0.01 worse
Adjusted net income (loss) per share $0.01  $0.02 better

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 that they sell new vehicles.

The front entrance to TrueCar's main office in Santa Monica, California.

Image source: TrueCar.

What happened last quarter

TrueCar had a solid 2017, though not without a speed bump along the way. Though it posted solidly improved results in the first and second quarters of last year, it hit that speed bump in the third quarter when a key partner's website redesign abruptly reduced referrals. That situation was largely remedied during the fourth quarter, and TrueCar ended the year on a strong note.

Investors were looking for another strong note in the first quarter, but TrueCar's results were, frankly, mixed. While most key metrics improved year over year, the total number of vehicles purchased via TrueCar's service fell just shy of guidance (230,000 to 235,000), and adjusted EBITDA fell at the very low end of its guidance range ($6 million to $7 million). Revenue came in at just over the midpoint of the guidance range ($80 million to $82 million).

Here are the other key metrics from TrueCar's first quarter:

  • TrueCar's website had an average 7.8 million unique visitors per month, up from 7.3 million a year ago.
  • A total of 229,717 vehicles were purchased via TrueCar's service in the first quarter, up 6% from the year-ago period.
  • Monetization, or the average fee collected by TrueCar for a vehicle sold via its service, was $334 in the first quarter, up from $324 a year ago.
  • Average monthly transaction revenue per franchise dealer was $1,740, up from $1,683 a year ago.
  • TrueCar's total number of franchise dealer partners rose 4% from the first quarter of 2017, to 12,205.

What TrueCar's CEO said about the quarter

CEO Chip Perry said that adding new dealers and increasing the fees TrueCar collects from those dealers for each sale will be among his key priorities over the next few quarters.

As we move forward, we believe that we're now in a position to better balance network growth while maintaining proper monetization and rate integrity across our dealer network. This foundation is critically important as our core dealer customer base is the vital supply side to our marketplace. And as we know, based on our historical results, having a larger dealer network with proper monetization is a key driver of our revenue growth because better coverage enables our dealers to close more unit sales as our marketplace generates higher lead volume.

Our dealer penetration now stands at 38%, and our backyard coverage is at 55%. We still believe we can add at least 3,000 new, productive franchise dealers to our network, and we have the right strategies and resources to do this over the next 12 to 24 months.

Looking ahead: TrueCar's guidance

TrueCar also released guidance for the second quarter and reiterated its prior guidance for the full year.

For Q2 2018:

  • Total units are expected to be in the range of 243,000 to 248,000 (Q2 2017: 242,130).
  • Revenue in the range of $87 million and $89 million (Q2 2017: $81.8 million).
  • Adjusted EBITDA between $8 million and $9 million (Q2 2017: $7.4 million).

TrueCar's full-year guidance was unchanged. It still expects:

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