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TrueCar Earnings: Revenue Rises 14% as Growth Plan Unfolds

By John Rosevear - Nov 7, 2018 at 10:06AM

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TrueCar missed its own sales guidance but managed solid growth anyway.

Online car-shopping service TrueCar (TRUE 0.36%) reported on Nov. 6 that it lost $6.3 million in the third quarter, or $0.06 per share, an improvement over the $9.5 million loss it posted in the third quarter of 2017.  

Adjusted for stock-option expenses and one-time items, TrueCar had a net profit of $4.3 million, or $0.04 per share. That compares with income on the same basis of $1.9 million, or $0.02 per share, in the year-ago period. 

The company missed its prior guidance for sales in the quarter, and it cut its full-year guidance for sales, revenue, and core profit. 

TrueCar earnings: The raw numbers

Metric Q3 2018 Change vs. Q3 2017
Revenue $93.6 million  14%
Vehicles purchased ("units") 268,026 6%
Adjusted EBITDA $10.0 million 25%
Franchise dealers 12,549 2.1%
Net income (loss) ($6.3 million) $3.2 million improvement
Net income (loss) per share ($0.06) $0.04 improvement
Adjusted net income per share $0.04 $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 headquarters in Santa Monica, CA.

Image source: TrueCar.

What happened to TrueCar in the third quarter of 2018

TrueCar's results have been up and down for a couple of years now. In 2017, a strong first half was followed by a big setback when a key partner, USAA, redesigned its website. TrueCar was featured less prominently on the new site, and its referrals fell sharply. 

TrueCar's bumpy ride has continued into 2018. A mixed-bag first quarter was followed by a solid second quarter in which all of the company's key metrics were up year over year, and changes to USAA's site had largely restored its referral flow. 

All of TrueCar's key metrics were up year over year in the third quarter as well, but TrueCar's expectations for the quarter turned out to be too optimistic: Revenue and adjusted EBITDA came in at the low end of its guidance, and "units," or the number of vehicles purchased via its site, fell short of the range it had predicted (274,000 to 279,000). 

Here are the other key metrics from TrueCar's third-quarter report:

  • TrueCar's website had an average of 8 million unique visitors per month, up 3.9% from 7.7 million in the third quarter of 2017.
  • A total of 268,026 vehicles were purchased via TrueCar's service in the third quarer, up 6% from a year ago.
  • Monetization, or the average fee collected by TrueCar for each vehicle sold via its services, was $331 in the third quarter, up from $306 a year ago.
  • Average monthly transaction revenue per franchise dealer was $1,878, up 5.9% from $1,773 in the third quarter of 2017. 
  • TrueCar's total number of franchise dealer partners rose 2.1% to 12,549 as of the end of the third quarter, up from 12,286 a year ago. 

What TrueCar's CEO said about the third quarter

During TrueCar's earnings call, CEO Chip Perry said that the long-term growth plan he outlined at the beginning of 2018 is on track:

We set ambitious operational goals at the outset of the year that were key drivers to unlock our long-term growth potential, and we are pleased by the progress we have made so far this year. We have 3 quarters of good execution behind us. And we believe that the cumulative effort to date has positioned us well, both to attract more consumers into an improved experience, enabled by a more agile and flexible technology platform and to fulfill demand with our growing and increasingly productive dealer network and an expanding OEM client base.

Based on the progress we made this year, we believe we can significantly accelerate our revenue growth in 2019, and we have created a foundation for building what we believe will be the industry's only true end-to-end online shopping to showroom experience.

Looking ahead: TrueCar's guidance

TrueCar also released guidance for the fourth quarter and revised its full-year guidance downward. 

For the fourth quarter of 2018:

  • Total units are expected to fall between 262,000 and 267,000 (Q4 2017: 239,521).
  • Revenue in the range of $95.5 million to $97.5 million (Q4 2017: $83.1 million).
  • Adjusted EBITDA between $10 million and $11 million (Q4 2017: $7.5 million).

For the full year:

  • Total units in the range of 1,010,000 to 1,015,000 (prior guidance: 1,030,000 to 1,040,000. 2017: 952,834).
  • Revenue between $358 million and $360 million (prior guidance: $360 million to $365 million. 2017: $323.1 million).
  • Adjusted EBITDA between $34.7 million and $35.7 million (prior guidance: $36 million to $40 million. 2017: $28.9 million).

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