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TrueCar's First-Quarter Loss Narrowed on Cost Cuts as Revenue Slid

By John Rosevear - May 8, 2020 at 12:25PM

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The company moved quickly to respond to the COVID-19 outbreak.

Online car-shopping service TrueCar (TRUE -0.40%) said that its first-quarter loss narrowed from the first quarter of 2019 to $10.7 million despite a decline in revenue after the COVID-19 outbreak disrupted businesses in March.

TrueCar's loss of $0.10 per share and revenue of $83.5 million both fell short of Wall Street's consensus estimates as reported by Thomson Reuters. Analysts had expected a loss of $0.02 per share on revenue of $86.44 million.

TrueCar's stock price fell sharply after the news was released.

The raw numbers

Metric Q1 2020 Q1 2019
Revenue $83.5 million $85.8 million
Vehicles purchased (units) 197,002 232,781
Adjusted EBITDA $9.5 million $5.1 million
Net income (loss) ($10.7 million) ($14.4 million)
Adjusted net income (loss) $4.2 million ($428,000)
Net income (loss) per share ($0.10) ($0.14)
Adjusted net income per share $0.04 $0.00

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 first quarter? 

  • Non-GAAP expenses, or expenses other than employee stock-option costs, totaled $74 million in the first quarter, down from $80.5 million a year ago.
  • TrueCar's website had an average of 7.8 million unique visitors a month in the first quarter, up 9.2% from 7.1 per month in the first quarter of 2019.
  • In total, 197,002 vehicles were purchased via TrueCar's service in the quarter, down 15% from a year ago.
  • Monetization, or the average fee collected by TrueCar from dealers for each vehicle sold via its service, was $392 in the first quarter, up from $348 a year ago.
  • Average monthly transaction revenue per "franchise" dealer was $1,634, down from $1,723 a year ago. (Franchise dealers are new-car dealers; they hold franchises from automakers to sell their products.) 
  • TrueCar had 11,356 franchise dealer partners as of the end of the first quarter, down from 12,565 at the end of 2019.

TrueCar ended the first quarter with $182.9 million in cash, up slightly from $182 million at the end of 2019. 

TrueCar's CEO outlined his response to the coronavirus pandemic

During TrueCar's earnings call, CEO Mike Darrow outlined four sets of actions that the company has taken since much of the U.S. was shut down in mid-March in response to the pandemic.

First, TrueCar's entire workforce has been working from home since mid-March -- and that has worked out very well for the company so far. "In fact, the success of this transition has encouraged us to reconsider the way in which we leverage remote work going forward to reduce cost and sustain productivity," he said.

A glass door with TrueCar's logo at the entrance to its offices.

TrueCar's office in Santa Monica, California, has been closed since mid-March. Image source: TrueCar.

Second, TrueCar cut subscription rates for dealers in April and May in an effort to demonstrate its commitment to helping its dealer partners. (TrueCar's relationships with new-car dealers have sometimes been strained, with damaging effects on its business; maintaining good relations is rightly a priority for Darrow now.)

Third, TrueCar launched a new "Buy From Home" service on its site in late March. The idea is to give consumers a way to buy a new vehicle while maintaining strict social distancing. Participating dealers have agreed to provide remote paperwork processing, home delivery, and verified sanitation of vehicles before delivery. 

Darrow said that about 40% of its dealers (roughly 6,000) have opted into the Buy From Home service. Those dealers completed more than 8,000 remote transactions in April, he said.

Finally, Darrow and his team were able to cut costs quickly as the impact of the virus outbreak became clear. Those cost cuts helped keep TrueCar's adjusted EBIDTA in the black and added slightly to its cash balance, despite the business slowdown.

Looking ahead: No financial guidance for now

TrueCar said that it won't update its guidance for auto investors for the full year, or provide guidance for the second quarter, given the uncertainties around consumers' willingness to make discretionary purchases as the U.S. economy reopens. TrueCar withdrew its full-year guidance in March. 

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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