In the earnings call with investors for the third quarter of 2018, TrueCar chief executive and president Chip Perry outlined several new initiatives of interest to dealers. This article highlights these and provides a brief financial summary.
In his comments, Perry noted new initiatives to improve TrueCar’s value to dealers — including a new trade evaluation tool called Trade.
He also discussed the company’s new technology platform called Capsella and progress made to strengthen OEM and affinity partner programs.
Affinity channel partners like financial services company United Services Automobile Association (USAA), Costco and others serve more than 300 million members in the U.S., a broad audience into which TrueCar hopes to leverage loyalty to its brand.
“Our first key initiative is dealer revenue growth and monetization … designed to balance network growth, while maintaining strong rate integrity, specifically,” Perry said. “First, aligning pricing with the value we've been delivering based on our unique closed-loop attribution model; second, further enhancing our dealer acquisition strategy to strategically fill coverage gaps across the network; and third, rolling out a new plan around independent dealers designed to grow our independent dealer base and increase used car inventory.
“I'm pleased to say that these investments continue to bear fruit, as not only has our dealer network reached record size of 16,031 dealers, with 497 net additions during the quarter, but we've also seen growth in revenue per franchise dealer of 6 percent year-over-year, along with a meaningful reduction in churn. All of this comes as a result of our more surgical approach to renewals and confirms the strength of our value proposition,” Perry said.
As to OEM initiatives, the strategy is to demonstrate TrueCar’s superiority over OEMs’ inclination to prefer impression-based display advertising to reach consumers and market more effectively through the TrueCar platform “to help OEMs avoid brand and residual value dilution… [This] is truly unique in the auto industry,” Perry said.
National roll out of TrueCar Trade in 2019, Perry said, “will introduce a new form of transparency into one of the greatest sources of consumer dissatisfaction with the car-buying process.
“In contrast, our competitors provide static forms that generate a single output or range of values without any clarity or context for the consumer around how the car's value is derived. Our product actually does this, and that's why consumers and dealers like it,” Perry said.
“Trade is a vital element of our upcoming end-to-end shopping-to-showroom consumer experience because it provides an upfront transactional component that is needed to calculate an accurate monthly payment,” he said.
(Later, Perry said in an interview with AuSM in November that “TrueCar Trade is available nationally today through our homepage, everywhere in America.” The company rollled TrueCar Trade out regionally during 2018 and recently turned it on nationally).
TrueCar tested Trade this fall in 45 markets, and 600 dealers signed up for the subscription service. Because of this acceptance, the company began rolling out the product’s national marketing campaign this year rather than early next year as planned.
“In addition to our trade-in product, we are continuing to investigate product improvements and investments required to enable consumers to obtain penny-perfect monthly payment offers from dealers that include lease and loan terms and F&I products, which will unlock further pieces of our full end-to-end vision,” Perry added.
He noted Capsella improvements already include faster site speeds and faster product cycle-times.
“Completing our re-platforming project will enable us to unlock higher consumer conversion and close rates, higher consumer satisfaction, and stronger consumer engagement with viewers. It will also enable us to further build out the major components of our end-to-end experience, including our future research and discovery product and market differentiated digital retailing tools,” Perry said.
John Pierantoni, TrueCar chief accounting officer and interim chief financial officer, reported that 3Q franchise dealer count increased by 181 dealers to 12,549 — dealer churn has been an issue — with revenue up 8 percent over 3Q of 2017. Revenue from independents was $9 million in the quarter, up 9 percent over last year. Independent dealer count was up 19 percent year-over-year to 3,482.
He said monthly revenue per independent dealer declined 5 percent, both year-over-year and sequentially, to $907. He said the decline was due to the shift in TrueCar’s sales strategy towards more small- to mid-sized independent dealers. “Our strategy is designed to diversify our inventory to better meet consumers' shopping needs,” Pierantoni said
“Overall,” Perry said, “our conversion level [6 percent] is going quite nicely. Our used-car conversion rates are up. I'm certainly not discouraged, or I don't see any fundamental or systemic issues concerning our dealer efforts or our dealer team and our ability to grow that part of our business.”
3Q of 2018 Financial Highlights
- Total revenue up 14 percent from a year ago to $93.6 million
- Net loss of $6.3 million, or $0.06 per share, compared to net loss of $9.5 million, or $0.10 per share, in the third quarter of 2017.
- Non-GAAP net income $4.3 million, or $0.04 per share, compared to Non-GAAP net income of $1.9 million, or $0.02 per share, in the third quarter of 2017.
- Adjusted EBITDA of $10.0 million, representing an Adjusted EBITDA margin of 10.7%, compared to Adjusted EBITDA of $8.0 million, representing an Adjusted EBITDA margin of 9.7 percent, in the third quarter of 2017.
- Units sold by TrueCar Certified Dealers through TrueCar.com and mobile were 268,026, up 6 percent from 253,527 in the third quarter of 2017.
- Franchised dealer count was 12,549 as of Sept. 30, compared to 12,368 as of June 30.
- Independent dealer count was 3,482 as of Sept. 30, compared to 3,166 as of June 30.
Stay tuned for a follow-up story on the TrueCar Trade product in a subsequent story.