Online car-shopping service TrueCar (TRUE 1.72%) reported on Aug. 8 that it lost $24.1 million in the second quarter of 2019, down from a loss of $6.6 million in the second quarter of 2018, as new revenue from automakers fell short of its expectations.
The company also cut its full-year guidance for the second time in two quarters. TrueCar's second-quarter revenue and adjusted earnings before interest, tax, depreciation, and amortization both fell short of the guidance it had given in May.
Image source: TrueCar.
The raw numbers
| Metric | Q2 2019 | Change vs. Q2 2018 |
|---|---|---|
| Revenue | $88.1 million | 0.2% |
| Vehicles purchased (units) | 249,856 | (0.2%) |
| Adjusted EBITDA | $3.7 million | (57.4%) |
| Net income (loss) | ($24.1 million) | $17.5 million worse |
| Adjusted net income (loss) | ($2.2 million) | $5.4 million worse |
| Net income (loss) per share | ($0.23) | $0.16 worse |
| Adjusted net income (loss) per share | ($0.02) | $0.05 worse |
Data source: TrueCar. EBITDA = earnings before interest, tax, depreciation, and amortization. Non-GAAP "adjusted" figures exclude employee stock-option expenses and nonrecurring costs.
What happened at TrueCar in the second quarter?
- In a move that surprised investors, CEO Chip Perry retired on June 3. He was replaced on an interim basis by Mike Darrow, the company's partnership chief.
- Non-GAAP expenses, or expenses other than employee stock-option costs, totaled $84.4 million in the second quarter, up from $79.1 million in the year-ago period, driven primarily by increased sales and marketing spending.
- TrueCar's website had an average of 7.2 million unique visitors per month, down 7.7% from 7.8 million per month in the second quarter of 2018.
- A total of 249,856 vehicles were purchased via TrueCar's service in the second quarter, down slightly from a year ago.
- Monetization, or the average fee collected by TrueCar for each vehicle sold via its services, was $333 in the second quarter, up slightly from $332 a year ago.
- Average monthly transaction revenue per franchise dealer was $1,744, down 2.9% from $1,796 in the second quarter of 2018.
- TrueCar's total number of franchise dealer partners rose 3% to 12,861 as of the end of the second quarter, up from 12,368 a year ago.
What TrueCar's management had to say
Back in May, now-retired CEO Chip Perry had said that early second-quarter results were trailing his expectations because a major automaker had decided not to offer incentives via TrueCar's platform. As it turned out, that was a key reason the company's second-quarter revenue and adjusted EBITDA fell short of its guidance.
During TrueCar's earnings call, Perry's interim successor, Mike Darrow, said that TrueCar is taking a couple of approaches to revamping its strategy in light of the softening U.S. new-car market and lower spending by automakers ("OEMs," for original equipment manufacturers) on incentives.
What this means is, first, being proactive versus reactive as part of the OEMs' marketing strategy. And second, looking to get more embedded in the OEMs' annual planning process. In addition, we are actively managing our pipeline and working to expand existing relationships.
Ultimately, as a result of our planning discussions with OEMs, we will evolve our product set in a way that we believe addresses their needs and drives adoption.
Looking ahead
For the second time this year, TrueCar cut its full-year guidance for 2019. It now expects its full-year results to decline from 2018 levels:
- Revenue between $345 million and $350 million. (Prior guidance: between $361 million and $375 million. 2018 result: $353.6 million.)
- Adjusted EBITDA between $10 million and $14 million. (Prior guidance: between $27 million and $36 million. 2018 result: $32.9 million.)
For the third quarter of 2019, TrueCar now expects both revenue and adjusted EBITDA to fall well short of its results in the third quarter of 2018.
- Revenue between $87 million and $89 million. (Q3 2018: $93.6 million.)
- Adjusted EBITDA between $1 million and $3 million. (Q3 2018: $10 million.)
