Amendment: SEC Form 10-K/A filed by TrueCar Inc.
$TRUE
Computer Software: Programming Data Processing
Technology
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended December 31 , 2024
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
Commission File Number: 001-36449
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||
(Address of principal executive offices and Zip Code)
(800 ) 200‑2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☐ | ☒ | Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||||||||
| Emerging growth company | |||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2024, the last business day of the registrant’s most recently completed second fiscal quarter, was $282,455,081 based upon the closing price reported for such date on the Nasdaq Global Select Market.
As of February 14, 2025, the registrant had 87,256,034 shares of common stock outstanding.
Documents Incorporated by Reference
TRUECAR, INC.
FORM 10-K/A
EXPLANATORY NOTE
Pursuant to the rules of the SEC, Part IV, Item 15 has also been amended to contain the currently dated certifications from the Company’s principal executive officer and principal financial officer pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1, 31.2 and 32.1, as well as the currently dated consent of the Company’s independent registered public accountant firm as Exhibit 23.1.
Except as described above or as otherwise expressly provided by the terms of this Amendment No. 1, no other changes have been made to the Original Filing. This Amendment No. 1 continues to speak as of the date of the Original Filing, and the Company has not updated the disclosures contained therein to reflect any events that occurred subsequent to the date of the Original Filing. This Amendment No. 1 should be read in conjunction with the Original Filing and with our filings with the SEC subsequent to the Original Filing. Capitalized terms used herein and not otherwise defined are defined as set forth in the Original Filing.
2
PART II
Item 8. Financial Statements and Supplementary Data
The information required by this Item 8 appears in a separate section of this annual report on Form 10-K/A beginning on page F-1 and is incorporated herein by reference.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The phrase “disclosure controls and procedures” refers to controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our chief executive officer, or CEO, and chief financial officer, or CFO, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of December 31, 2024, the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our CEO and CFO have concluded that as of December 31, 2024, our disclosure controls and procedures were designed at a reasonable assurance level and were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria described in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that, as of December 31, 2024, our internal control over financial reporting was effective.
The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report that is included herein.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) under the Exchange Act during the fourth quarter of 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Disclosure Controls and Procedures and Internal Controls over Financial Reporting
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
PART IV
Item 15. Exhibits and Financial Statement Schedules
3
(a)The following documents are filed as part of this Amendment No. 1:
1.Financial Statements:
2.Financial Statements Schedule
All schedules have been omitted because they are not required, not applicable, not present in amounts sufficient to require submission of the schedule, or the required information is otherwise included in our consolidated financial statements and related notes.
3.Exhibits
The following exhibits are filed as part of, or are incorporated by reference in, this Amendment No. 1:
| Exhibit | Exhibit Title | Filed Herewith | Incorporated by Reference | Form | Exhibit No. | Date Filed | ||||||||||||||||||||||||||||||||
| 10-Q | 3.1 | August 7, 2020 | ||||||||||||||||||||||||||||||||||||
| S-1 | 3.4 | May 5, 2014 | ||||||||||||||||||||||||||||||||||||
| S-1 | 4.2 | May 5, 2014 | ||||||||||||||||||||||||||||||||||||
| 10-K | 4.3 | February 28, 2020 | ||||||||||||||||||||||||||||||||||||
| S-1 | 10.1 | April 4, 2014 | ||||||||||||||||||||||||||||||||||||
| S-1 | 10.4 | May 15, 2014 | ||||||||||||||||||||||||||||||||||||
8-K | 10.1 | June 23, 2023 | ||||||||||||||||||||||||||||||||||||
| S-1 | 10.14 | April 4, 2014 | ||||||||||||||||||||||||||||||||||||
| 10-K | 10.5 | February 19, 2025 | ||||||||||||||||||||||||||||||||||||
10-Q | 10.1 | August 6, 2024 | ||||||||||||||||||||||||||||||||||||
| S-1 | 10.15 | April 4, 2014 | ||||||||||||||||||||||||||||||||||||
4
| Exhibit | Exhibit Title | Filed Herewith | Incorporated by Reference | Form | Exhibit No. | Date Filed | ||||||||||||||||||||||||||||||||
| 10-K | 10.18 | March 12, 2015 | ||||||||||||||||||||||||||||||||||||
| 10-Q | 10.2 | August 6, 2021 | ||||||||||||||||||||||||||||||||||||
10-K | 10.8 | February 22, 2024 | ||||||||||||||||||||||||||||||||||||
| 10-Q | 10.1 | August 9, 2016 | ||||||||||||||||||||||||||||||||||||
| S-1 | 10.23 | May 5, 2014 | ||||||||||||||||||||||||||||||||||||
| 10-Q | 10.1 | May 10, 2022 | ||||||||||||||||||||||||||||||||||||
10-K | 10.15 | February 22, 2024 | ||||||||||||||||||||||||||||||||||||
10-Q | 10.1 | May 6, 2024 | ||||||||||||||||||||||||||||||||||||
8-K/A | 10.1 | August 1, 2023 | ||||||||||||||||||||||||||||||||||||
10-Q | 10.1 | November 7, 2023 | ||||||||||||||||||||||||||||||||||||
| 10-K | 10.36 | March 1, 2017 | ||||||||||||||||||||||||||||||||||||
10-Q | 10.3 | November 7, 2023 | ||||||||||||||||||||||||||||||||||||
10-Q | 10.1 | November 7, 2024 | ||||||||||||||||||||||||||||||||||||
| 10-K | 10.21 | February 19, 2025 | ||||||||||||||||||||||||||||||||||||
| 10-K | 19 | February 19, 2025 | ||||||||||||||||||||||||||||||||||||
| 10-K | 21.1 | February 19, 2025 | ||||||||||||||||||||||||||||||||||||
10-K | 97 | February 22, 2024 | ||||||||||||||||||||||||||||||||||||
5
| Exhibit | Exhibit Title | Filed Herewith | Incorporated by Reference | Form | Exhibit No. | Date Filed | ||||||||||||||||||||||||||||||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||||||||||||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibit 101) | |||||||||||||||||||||||||||||||||||||
* Certain identified information has been excluded from the exhibit because it is both not material and is the type that the registrant treats as private or confidential. The registrant agrees to furnish an unredacted copy of this exhibit on a supplemental basis to the SEC or its staff upon request.
# Indicates a management contract or compensatory plan.
6
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TRUECAR, INC. | |||||||||||
| By: | /s/ Jantoon E. Reigersman | ||||||||||
Jantoon E. Reigersman | |||||||||||
| President and Chief Executive Officer | |||||||||||
| Date: | February 21, 2025 | ||||||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||||||||||||
/s/ Jantoon E. Reigersman | President, Chief Executive Officer and Director | February 21, 2025 | ||||||||||||
Jantoon E. Reigersman | (Principal Executive Officer and Director) | |||||||||||||
* | Chief Financial Officer | February 21, 2025 | ||||||||||||
Oliver M. Foley | (Principal Financial Officer and Principal Accounting Officer) | |||||||||||||
* | Director | February 21, 2025 | ||||||||||||
| Robert E. Buce | ||||||||||||||
* | Director | February 21, 2025 | ||||||||||||
| Barbara A. Carbone | ||||||||||||||
* | Director | February 21, 2025 | ||||||||||||
| Faye M. Iosotaluno | ||||||||||||||
* | Director | February 21, 2025 | ||||||||||||
Brendan L. Harrington | ||||||||||||||
* | Director | February 21, 2025 | ||||||||||||
| Diego A. Rodriguez | ||||||||||||||
*By: /s/ Jantoon E. Reigersman | ||||||||||||||
Jantoon E. Reigersman, as attorney-in fact | ||||||||||||||
7
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of TrueCar, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of TrueCar, Inc. and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
F-2
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition – TrueCar Auto Buying Program
As described in Notes 2 and 5 to the consolidated financial statements, the Company recognizes revenue when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. Auto Buying Program revenues include fees paid by customers participating in the Company’s dealer network with which the Company has an agreement. TrueCar Certified Dealers pay the Company fees in one of three ways: on a per-vehicle basis for sales to Auto Buying Program users, on a per-introduction basis for introductions to Auto Buying Program users, or under a subscription arrangement. The Company’s performance obligation to TrueCar Certified Dealers is to provide them with introductions to in-market consumers through the use of the TrueCar platform, so that they have the opportunity to sell vehicles to those consumers. The Company’s Dealer revenue was $158 million for the year ended December 31, 2024, of which a significant portion relates to the Auto Buying Program.
The principal considerations for our determination that performing procedures relating to revenue recognition for the TrueCar Auto Buying Program is a critical audit matter are a high degree of auditor effort in performing procedures and evaluating audit evidence related to the Company’s revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to revenue recognition, including controls over revenue transactions recognized for the TrueCar Auto Buying Program. These procedures also included, among others, evaluating the revenue recognized for a sample of revenue transactions by obtaining and inspecting source documents which included sales contracts, customer rate cards, evidence of delivery, invoices, and cash receipts from customers, where applicable.
/s/ PricewaterhouseCoopers LLP
February 19, 2025
We have served as the Company’s auditor since 2009.
F-3
TrueCar, Inc.
Consolidated Balance Sheets
(in thousands, except par value and share data)
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
Cash and cash equivalents (includes restricted cash of $ | $ | $ | |||||||||
Accounts receivable, net of allowances of $ | |||||||||||
| Prepaid expenses | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities | |||||||||||
Accounts payable | $ | $ | |||||||||
| Accrued employee expenses | |||||||||||
| Operating lease liabilities, current | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Operating lease liabilities, net of current portion | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 9) | |||||||||||
| Stockholders’ Equity | |||||||||||
Preferred stock — $ | |||||||||||
Common stock — $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
TrueCar, Inc.
Consolidated Statements of Comprehensive Loss
(in thousands except per share data)
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Revenues | $ | $ | $ | ||||||||||||||
| Costs and operating expenses: | |||||||||||||||||
Cost of revenue (exclusive of depreciation and amortization presented separately below) | |||||||||||||||||
| Sales and marketing | |||||||||||||||||
| Technology and development | |||||||||||||||||
| General and administrative | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Goodwill impairment | |||||||||||||||||
| Total costs and operating expenses | |||||||||||||||||
| Loss from operations | ( | ( | ( | ||||||||||||||
| Interest income | |||||||||||||||||
| Other income | |||||||||||||||||
Gain from equity method investment | |||||||||||||||||
Loss before income taxes | ( | ( | ( | ||||||||||||||
| Provision for (benefit from) income taxes | ( | ||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
Net loss per share, basic and diluted | $ | ( | $ | ( | $ | ( | |||||||||||
| Weighted average common shares outstanding, basic and diluted | |||||||||||||||||
Other comprehensive loss: | |||||||||||||||||
Comprehensive loss | $ | ( | $ | ( | $ | ( | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
TrueCar, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands except share data)
| Common Stock | APIC | Accumulated Deficit | Stockholders’ Equity | |||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
Net loss | — | — | — | ( | ( | |||||||||||||||||||||||||||
| Repurchase of common stock | ( | ( | ( | — | ( | |||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||||||||||||||
| Shares issued in connection with employee stock plans, net of shares withheld for employee taxes | — | ( | — | ( | ||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ( | |||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||||||||||||||
| Shares issued in connection with employee stock plans, net of shares withheld for employee taxes | — | ( | — | ( | ||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ( | |||||||||||||||||||||||||||
Repurchase of common stock, including excise tax | ( | — | ( | — | ( | |||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||||||||||||||
| Shares issued in connection with employee stock plans, net of shares withheld for employee taxes | — | ( | — | ( | ||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
TrueCar, Inc.
Consolidated Statements of Cash Flows
(in thousands)
| For the Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Cash flows from operating activities | |||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Goodwill impairment | |||||||||||||||||
| Deferred income taxes | ( | ||||||||||||||||
| Bad debt expense and other reserves | |||||||||||||||||
| Stock-based compensation | |||||||||||||||||
| Increase in the fair value of contingent consideration liability | |||||||||||||||||
| Amortization of lease right-of-use assets | |||||||||||||||||
Gain from equity method investment | ( | ||||||||||||||||
Impairment of right-of-use assets | |||||||||||||||||
Gain on lease exit | ( | ||||||||||||||||
| Other noncash expenses | |||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| Accounts receivable | ( | ||||||||||||||||
| Prepaid expenses and other assets | ( | ( | |||||||||||||||
| Accounts payable | ( | ( | |||||||||||||||
| Accrued employee expenses | ( | ( | |||||||||||||||
| Operating lease liabilities | ( | ( | ( | ||||||||||||||
| Accrued expenses and other current liabilities | ( | ||||||||||||||||
| Other liabilities | |||||||||||||||||
Net cash provided by (used in) operating activities | ( | ( | |||||||||||||||
| Cash flows from investing activities | |||||||||||||||||
| Purchase of property and equipment | ( | ( | ( | ||||||||||||||
| Cash from sale of equity method investment | |||||||||||||||||
| Cash paid for acquisition, net of cash acquired | ( | ||||||||||||||||
Net cash used in investing activities | ( | ( | ( | ||||||||||||||
| Cash flows from financing activities | |||||||||||||||||
| Payment of contingent consideration liability | ( | ( | |||||||||||||||
| Proceeds from exercise of common stock options | |||||||||||||||||
| Taxes paid related to net share settlement of equity awards | ( | ( | ( | ||||||||||||||
| Payments for the repurchase of common stock | ( | ( | |||||||||||||||
| Net cash used in financing activities | ( | ( | ( | ||||||||||||||
Net decrease in cash, cash equivalents, and restricted cash | ( | ( | ( | ||||||||||||||
Cash, cash equivalents, and restricted cash at beginning of year | |||||||||||||||||
Cash, cash equivalents, and restricted cash at end of year | $ | $ | $ | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
TrueCar, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Continued)
| For the Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Supplemental disclosure of cash flow information | |||||||||||||||||
Cash paid (received) during the year for: | |||||||||||||||||
| Income taxes | $ | ( | $ | $ | ( | ||||||||||||
| Supplemental disclosures of non-cash activities | |||||||||||||||||
| Stock-based compensation capitalized for software development | $ | $ | $ | ||||||||||||||
| Capitalized assets included in accounts payable, accrued employee expenses and other accrued expenses | |||||||||||||||||
| Changes in right-of-use assets for operating lease obligations | |||||||||||||||||
| Changes in lease liabilities for operating lease obligations | |||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-8
1. Organization and Nature of Business
TrueCar, Inc. is an internet-based information, technology, and communication services company. TrueCar, Inc. and its wholly owned subsidiaries, TrueCar Dealer Solutions, Inc., Digital Motors Corporation, and TrueCar Wholesale Solutions, Inc. are collectively referred to as “TrueCar” or the “Company”; TrueCar Dealer Solutions, Inc. is referred to as “TCDS,” Digital Motors Corporation is referred to as “Digital Motors,” and TrueCar Wholesale Solutions, Inc. is referred to as “TCWS.” TrueCar was incorporated in the state of Delaware in February 2005 and began business operations in April 2005. Its principal corporate offices are located in Santa Monica, California.
TrueCar is a digital automotive marketplace that (i) provides pricing transparency about what other people paid for their cars and enables consumers to engage with TrueCar Certified Dealers who are committed to providing a superior purchase experience; (ii) empowers TrueCar Certified Dealers to attract these informed, in-market consumers in a cost-effective, accountable manner; and (iii) allows automobile manufacturers (“OEMs”) to more effectively target their incentive spending at deep-in-market consumers during their purchase process. TrueCar has established a diverse software ecosystem on a common technology infrastructure, powered by proprietary data and analytics. Consumers access TrueCar’s platform through the TrueCar.com website and TrueCar mobile applications or through the car buying websites and mobile applications that TrueCar operates for its affinity group marketing partners (“Auto Buying Programs”). An affinity group is comprised of a network of members or employees that provides discounts to its members.
Through its subsidiary, TCDS, the Company provides its Trade and Payments solutions. TCDS also supports the Company’s Sell Your Car product. The Sell Your Car and Trade solutions give consumers information on the value of the vehicle they wish to sell or trade-in and enables them to obtain a guaranteed trade-in price before setting foot in the dealership. This valuation is, in turn, backed by a guarantee to dealers that the vehicles will be repurchased at the indicated price if the dealer does not want to keep them. The Company’s Payments solution helps consumers calculate accurate monthly payments.
2. Summary of Significant Accounting Policies
Basis of Presentation
The Company’s accounting and financial reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”).
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of TrueCar and its wholly owned subsidiaries. Business acquisitions are included in the Company’s consolidated financial statements from the date of the acquisition. The Company’s purchase accounting results in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates. Divestitures are included in the Company’s consolidated financial statements through the date of disposition. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Assets and liabilities that are subject to judgment and use of estimates include sales allowances and allowances for doubtful accounts, contract assets, the fair value of assets and liabilities assumed in business combinations, the recoverability and related impairment of goodwill and long-lived assets, valuation allowances with respect to deferred tax assets, useful lives associated with property and equipment and intangible assets, measurement of right-of-use assets and operating lease liabilities, contingencies, and the valuation and assumptions underlying stock-based compensation awards and other equity instruments. On an ongoing basis, the Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. In addition, the Company engaged valuation specialists to assist with management’s determination of the fair values of its single reporting unit related to goodwill impairment, right-of-use
F-9
assets and lease liabilities, assets and liabilities assumed in business combinations, assets and liabilities of its equity method investment and performance-based stock units.
Segments
The Company has one operating segment. From January 1, 2024 through December 31, 2024, the Company’s chief operating decision maker (the “CODM”) was comprised of the President and Chief Executive Officer (“CEO”).
Equity Method Investment
On February 8, 2019, the Company acquired 20 % of the outstanding equity interests of Accu-Trade, LLC, a Delaware limited liability company (“Accu-Trade”), from R.M. Hollenshead Auto Sales & Leasing, Inc., a Florida corporation (“RHAS”), Robert M. Hollenshead (“Hollenshead”) and Jeffrey J. Zamora (“Zamora” and, together with RHAS and Hollenshead, the “Sellers”), pursuant to a Membership Interest Purchase Agreement, dated as of February 8, 2019 (the “Purchase Agreement”), by and among Accu-Trade, RHAS, Hollenshead, Zamora and the Company. Pursuant to the Purchase Agreement, and upon the terms and subject to the conditions thereof, the Company paid the Sellers $17.9 million in cash consideration and made a $5 million capital contribution to Accu-Trade. The Compa ny recognized its proportional share of the income or loss from the equity method investment on a one-quarter lag due to the timing and availability of financial information from Accu-Trade.
The Company assessed the carrying value of its investment in Accu-Trade for impairment whenever changes in the facts and circumstances indicated a loss in value had occurred. When indicators existed, the fair value was estimated and compared to the investment carrying value. If any impairment was judgmentally determined to be other than temporary, the carrying value of the investment was written down to fair value. On February 2, 2022, the Company entered into a redemption agreement with Accu-Trade to redeem the Company’s 20 % ownership interest in Accu-Trade. As a result of the events and circumstances leading up to the Company’s entry into the redemption agreement with Accu-Trade, the Company concluded that the investment in Accu-Trade was impaired and recorded a $4.1 million impairment charge in its equity method investment for the year ended December 31, 2021.
On March 1, 2022, the Company sold its 20 % ownership interests in Accu-Trade at the investment’s carrying value and recorded a derivative asset for the right to receive escrow payments. For the year ended December 31, 2022, we recognized a gain of $1.8 million from changes in fair value of the derivative asset from inception till its settlement in Q2 2022. The gain is included within Gain (loss) from equity method investment on the accompanying consolidated statements of comprehensive loss.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Accounting standards describe a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
•Level 1 — Quoted prices in active markets for identical assets, liabilities or funds.
F-10
•Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Fair Value Methods
Fair value is based on quoted market prices, if available. If listed prices or quotes are not available, fair value is based on internally-developed models that primarily use market-based or independently sourced market parameters as inputs.
For assets and liabilities measured at fair value, the following section describes the valuation methodologies, key inputs, and significant assumptions.
Cash equivalents, consisting primarily of money market instruments and debt securities, represent highly liquid investments with maturities of three months or less at purchase. Generally, market prices are used to determine the fair value of money market instruments and debt securities.
The carrying amounts of cash equivalents, restricted cash, accounts receivable, prepaid and other current assets, accounts payable, and accrued expenses and other current liabilities approximate fair value because of the short maturity of these items.
Certain assets, including the equity method investment, right-of-use assets, property and equipment, goodwill, and intangible assets are also subject to measurement at fair value on a non-recurring basis if they are deemed to be impaired as a result of an impairment review. For the years ended December 31, 2024 and 2023, the Company recorded right-of-use asset impairment charges of $6.9 million and $2.4 million, respectively, related to office operating leases. For the year ended December 31, 2022, the Company recorded goodwill impairment charges of $59.8 million.
For the twelve months ended December 31, 2022, the Company recognized a gain of $1.8 million from changes in fair value of a derivative asset recognized from the sale of its equity method investment in Accu-Trade.
The Company recorded a contingent consideration liability upon the acquisition of Digital Motors in 2022. The contingent consideration is measured at fair value and is based on significant inputs not observable in the market which include the probability of achieving certain future targets. This represents a Level 3 measurement within the fair-value hierarchy. The valuation of contingent consideration uses assumptions the Company believes a market participant would make. The Company assesses these estimates on an ongoing basis as it obtains additional data impacting the assumptions. Changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized within the consolidated statements of comprehensive loss. During the second quarter of 2023 the Company amended the purchase agreement in connection with its Restructuring Plan (Note 9) such that the future targets were considered 100% achieved, and as a result, there were no significant unobservable inputs used to measure the contingent consideration liability as of December 31, 2024.
The following table summarizes the Company’s assets and liabilities at fair value on a recurring basis at December 31, 2024 and 2023 by level within the fair-value hierarchy. The current and non-current portions of contingent consideration reside within “Accrued expenses and other current liabilities” and “Other liabilities”, respectively, within the consolidated balance sheet. These assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):
F-11
| At December 31, 2024 | At December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total Fair | Total Fair | ||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Value | Level 1 | Level 2 | Level 3 | Value | ||||||||||||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash equivalents | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Total Assets | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Contingent consideration, current | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Contingent consideration, non-current | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Liabilities | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Contingent Consideration Obligations
The following table summarizes the changes in the fair value of the contingent consideration obligation (in thousands):
| Year Ended December 31, | |||||
| 2024 | |||||
| Fair value, at beginning of year | $ | ||||
| Additions | |||||
| Payoff | ( | ||||
| Changes in fair value | |||||
| Fair value, at end of year | $ | ||||
Concentrations of Credit and Business Risk
Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents and accounts receivable.
The Company, at times, maintains cash balances at financial institutions in excess of amounts insured by United States government agencies or payable by the United States government directly. The Company places its cash and cash equivalents with high credit quality financial institutions.
Credit is extended to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral or other security to support accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains an allowance for doubtful accounts based on these evaluations. No single customer comprised more than 10 % of the Company’s total revenues for the years ended December 31, 2024, 2023 and 2022. At December 31, 2024 and December 31, 2023, one customer comprised 12.8 % and 32.3 % of the Company’s accounts receivable balance, respectively.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original or remaining maturity at the date of purchase of three months or less to be cash equivalents. At December 31, 2024 and 2023, cash and cash equivalents were comprised primarily of cash held in money market funds and checking accounts. At December 31, 2023, cash and cash equivalents included $1.9 million of restricted cash used to collateralize a letter of credit to secure certain of the Company’s obligations under one of its office leases, which has since been terminated (Note 9).
F-12
Accounts Receivable, Allowance for Doubtful Accounts, and Sales Allowances
The Company extends credit in the normal course of business to its customers and performs credit evaluations on a case-by-case basis. The Company does not obtain collateral or other security related to its accounts receivable.
Accounts receivable are recorded based on the amount due from the customer and do not bear interest. The Company reduces accounts receivable for sales allowances and its allowance for doubtful accounts. For contract assets, the Company records the assets net of sales allowances and an allowance for doubtful accounts, which are estimated in the same manner as for accounts receivable balances.
The Company establishes sales allowances at the time of revenue recognition based on its history of adjustments and credits provided to its network of dealers. Sales allowances relate primarily to credits issued where a dealer claims that an introduction was previously identified by the dealer from a source other than the Company. While the dealer is contractually obligated to pay the invoice, the Company may issue a credit against the invoice to maintain overall dealer relations. In assessing the adequacy of its sales allowances, the Company evaluates its history of adjustments and credits made through the date of the issuance of the financial statements. Estimated sales adjustments and credits and ultimate losses may vary from actual results which could be material to the financial statements; however, to date, actual sales allowances have been materially consistent with the Company’s estimates.
The Company determines its allowance for doubtful accounts based on historical write-off experience and specific circumstances that make it likely that recovery will not occur. The Company reviews the allowance for doubtful accounts periodically and assesses the aging of account balances, with an emphasis on those that are past due over ninety days . Account balances are charged off against the allowance when the Company determines that it is probable the receivable will not be recovered. The Company does not have any off-balance sheet credit exposure related to its customers.
The Company considers the need to adjust historical information to reflect the extent to which the Company expects current conditions and reasonable and supportable forecasts to differ from the conditions that existed for the period over which historical information was evaluated. The primary current and future economic indicators that the Company uses to develop its current estimate of expected credit losses include the current and forecast U.S. Gross Domestic Product (“GDP”).
The Company calculates the expected credit losses on a pool basis for those trade receivables that have similar risk characteristics. For those trade receivables that do not share similar risk characteristics, the allowance for doubtful accounts is calculated on an individual basis. Risk characteristics relevant to the Company’s accounts receivable include revenue billing model and aging status.
The following table summarizes the changes in the allowance for doubtful accounts and sales allowances (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Allowances, at beginning of year | $ | $ | $ | ||||||||||||||
| Charged as a reduction of revenue | |||||||||||||||||
| Charged to bad debt expense in general and administrative expenses | |||||||||||||||||
| Write-offs, net of recoveries | ( | ( | ( | ||||||||||||||
| Allowances, at end of year | $ | $ | $ | ||||||||||||||
Property and Equipment, net
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which is generally three years for computer hardware and software, five years for furniture and equipment, and over the shorter of the lease term or the useful life of the assets for leasehold improvements. Maintenance and repairs are expensed as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the Company’s results of operations.
F-13
Leases
The Company determines if an arrangement is a lease at inception and determines the classification of the lease, as either operating or finance, at commencement. The Company does not have any finance leases.
Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company estimates the incremental borrowing rate to reflect the profile of secured borrowing over the expected term of the leases based on the information available at the later of the initial date of adoption or the lease commencement date.
The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Sublease rental income is recognized as a reduction to the related lease expense on a straight-line basis over the sublease term. See Note 4 for additional information.
Software and Website Development Costs
The Company accounts for the costs of computer software obtained or developed for internal use in accordance with FASB ASC 350, Intangibles — Goodwill and Other. Computer software development costs and website development costs are expensed as incurred, except for internal use software or website development costs that qualify for capitalization as described below, and include certain employee related expenses, including salaries, bonuses, benefits and stock-based compensation expenses; costs of computer hardware and software; and costs incurred in developing features and functionality. These capitalized costs are included in property and equipment on the consolidated balance sheets.
The Company expenses costs incurred in the preliminary project and post-implementation stages of software development and capitalizes costs incurred in the application development stage and costs associated with significant enhancements to existing internal use software applications.
Software costs are amortized using the straight-line method over an estimated useful life of three years commencing when the software project is ready for its intended use.
At December 31, 2024 and 2023, capitalized software costs were $84.3 million and $85.9 million, respectively, before accumulated amortization of $69.6 million and $68.1 million, respectively.
Expected amortization expense with respect to capitalized software costs at December 31, 2024 for each of the years through December 31, 2027 is as follows (in thousands):
| Years ended December 31, | |||||
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| Total amortization expense | $ | ||||
F-14
Intangible Assets Acquired in Business Combinations
The Company values assets acquired and liabilities assumed on each acquisition accounted for as a business combination, and allocates the purchase price to the tangible and intangible assets acquired and liabilities assumed based on its best estimate of fair value. Acquired intangible assets include customer relationships and developed technology. The Company determines the appropriate useful life of intangible assets by performing an analysis of cash flows based on historical experience of the acquired businesses. Intangible assets are amortized over their estimated useful lives based on the pattern in which the economic benefits associated with the asset are expected to be consumed, which to date has approximated the straight-line method of amortization. The estimated useful lives for customer relationships and technology are generally to ten years and to ten years , respectively.
Long-Lived Assets
Goodwill
Goodwill represents the excess of the aggregate purchase price paid over the fair value of the identifiable assets and liabilities acquired in the Company’s business combinations. Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Events or changes in circumstances that could trigger an impairment review include a significant adverse change in business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of use of the acquired assets or the Company’s overall business strategy, significant negative industry or economic trends, significant underperformance relative to expected historical or projected future results of operations, or a decline in the Company’s stock price and market capitalization. Due to the impacts of our analysis described in the following paragraphs, the Company does not have a goodwill balance as of December 31, 2024 and 2023.
During the second quarter of 2022, as a result of the continued economic disruption as well as a decline in the Company’s stock price and market capitalization, the Company concluded a triggering event had occurred as of June 30, 2022. The Company performed an interim quantitative impairment test, in which the Company estimated the fair value of its single reporting unit by utilizing a market approach, which was based on the market capitalization of the Company using its share price in the Nasdaq Global Select Market and an appropriate control premium. Determining the control premium requires the exercise of significant assumptions and judgments, which are considered Level 3 inputs under the fair value hierarchy, including expected future cash flows, which were based on the synergies market participants could realize if they acquire the reporting unit, and the discount rate. Based on the results of the interim impairment test, the Company concluded that the fair value of its reporting unit was greater than the carrying value and that goodwill was not impaired as of June 30, 2022.
During the third quarter of 2022, as a result of additional macroeconomic disruptions, including rising interest rates, and a further decline in market capitalization, the Company concluded a triggering event had occurred. The Company performed an interim
F-15
quantitative impairment test as of September 30, 2022 utilizing an income approach. Under the income approach, the Company used a discounted cash flow analysis. Determining fair value requires the exercise of significant assumptions and judgments, which are considered Level 3 inputs under the fair value hierarchy, including the amount and timing of expected future cash flows, long-term growth rates, and the discount rates. The Company also performed a reconciliation of the fair value of the reporting unit to the Company’s market capitalization as of September 30, 2022. The market capitalization reconciliation included the estimation of a reasonable control premium and other market factors such as control premiums observed in market transactions. Based on the results of the impairment test, the Company concluded that the carrying value of its single reporting unit exceeded the fair value and, accordingly, recorded a non-cash impairment charge of $59.8 million during the three months ended September 30, 2022.
Revenue Recognition
The Company recognizes revenue when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. The Company determines revenue recognition through the following steps:
•Identification of the contract, or contracts, with a customer;
•Identification of the performance obligations in the contract;
•Determination of the transaction price;
•Allocation of the transaction price to the performance obligations in the contract; and
•Recognition of revenue when, or as, the performance obligation or obligations are satisfied.
Dealer Revenue
Dealer revenue is comprised of Auto Buying Program revenue as well as revenue from TrueCar Trade and Sell Your Car.
Auto Buying Program revenues include fees paid by customers participating in the Company’s dealer network with which the Company has an agreement (“TrueCar Certified Dealers” or “Dealers”). TrueCar Certified Dealers pay the Company fees in one of three ways: on a per-vehicle basis for sales to Auto Buying Program users, on a per-introduction basis for introductions to Auto Buying Program users, or under a subscription arrangement. Additionally, certain Dealers pay an incremental subscription fee for add-on products within our Auto Buying Program. Contracts are cancellable by the Dealer or the Company at any time. The Company does not provide significant Dealer financing terms.
The Company’s performance obligation to TrueCar Certified Dealers is the same for all payment types for our Auto Buying Program revenues: to provide Dealers with introductions to in-market consumers through the use of the TrueCar platform, so that those Dealers have the opportunity to sell vehicles to those consumers. Control transfers to Dealers upon delivery of introductions, which is the point at which the Company recognizes revenue.
When a user decides to proceed with a vehicle purchase through the Company, the user provides his or her name, address, email, and phone number during the process of obtaining price offers on actual vehicle inventory, which gives the Company the identity and source of a TrueCar introduction provided to a specific Dealer before an actual sale occurs. After a sale occurs, the Company receives information regarding the sale, including the identity of the purchaser, through the Dealer Management System used by the Dealer that makes the sale. The Company also receives information regarding vehicle sales from a variety of other data sources, including third-party car sales aggregators, car dealer networks, and other publicly available sources (collectively, “sales data”) and uses this sales data to further verify that a sale has occurred between an Auto Buying Program user and a TrueCar Certified Dealer, as well as to invoice Pay-Per-Sale Dealers shortly after the completion of the sales transaction.
Pay-Per-Sale. Under fee arrangements based on a pay-per-sale billing model, revenue for the Auto Buying Program is recognized when introductions are delivered to the Dealer and for the amount that the Company estimates it will be able to earn. To formulate this estimate, the Company uses the expected value method based primarily on an analysis of the expected number of sales resulting from in-period introductions. This estimate is based on historical introductions to vehicle sale close rate trends as well as actual sales measured in the period. Under the contractual terms and conditions of arrangements with TrueCar Certified Dealers that pay on a per-vehicle-sale basis, the Dealer is not obligated to pay the Company until a vehicle sale has occurred between the Auto
F-16
Buying Program user and the Dealer, for which the introduction was provided to the Dealer by the Company. Contractually, the Dealers’ obligation to pay is not contingent on verification or acceptance of the transaction by the Dealer. As a result, revenue recognition occurs earlier than billing as an estimate of the variable consideration to be received upon control transfer of the delivered introduction, resulting in a contract asset.
Pay-Per-Introduction. Under fee arrangements based on a pay-per-introduction billing model, revenue for the Auto Buying Program is recognized when introductions are delivered.
The Company also recognizes revenue from Dealers under subscription agreements. Subscription fee arrangements are short-term in nature with terms ranging from to six months and are also cancellable by the Dealer or the Company at any time. Subscription arrangements fall into three types: flat-rate subscriptions, subscriptions subject to downward adjustment based on a minimum number of vehicle sales (“guaranteed sales”), and subscriptions based on introduction or impressions volume, including those subject to downward adjustment based on a minimum number of introductions (“guaranteed introductions”). For all subscription arrangements, the Company recognizes the fees as revenue when introductions or impressions are delivered by allocating a portion of the monthly subscription fee to each delivered introduction or impression. For guaranteed sales and guaranteed introduction subscriptions, the amount allocated is adjusted at the end of each month for any credits, as described below.
Flat-Rate Subscription. Under flat-rate subscription arrangements, fees are charged at a monthly flat rate regardless of the number of introductions provided by the Company to the Dealer or sales made to users of the Company’s platform by the Dealer.
Guaranteed-Sales Subscription. Under guaranteed-sales subscription arrangements, monthly fees are charged based on the number of guaranteed sales multiplied by a fixed amount per vehicle. To the extent that the actual number of vehicles sold by the Dealers to users of the Company’s platform is less than the number of guaranteed sales, the Company provides a credit to the Dealer. If the actual number of vehicles sold exceeds the number of guaranteed sales, the Company is not entitled to any additional fees.
Guaranteed-Introductions Subscription. Under guaranteed-introductions subscription arrangements, monthly fees are charged based on a periodically-updated formula that considers, among other things, the introductions anticipated to be provided to the Dealer. To the extent that the number of actual introductions is less than the number of guaranteed introductions, the Company provides a credit to the Dealer. If the actual number of introductions provided exceeds the number guaranteed, the Company is not entitled to any additional fees.
Auto Buying Program Add-On Features. The Company offers additional add-on products to eligible Dealers as part of the Auto Buying Program to increase traffic and retarget in-market consumers. These products include TrueCar Sponsored Listings (“Sponsored Listings”), TrueCar Reach (“Reach”) and TrueCar Marketing Solutions (“TCMS”). Sponsored Listings enables a Dealer to place qualifying vehicles at more prominent positions within the inventory search results page, and fees are charged based on a monthly subscription rate for the right to sponsor up to a set number of vehicles at any time throughout the month. Reach is a service offered to retarget in-market consumers on the Dealer’s behalf with co-branded emails, and fees are charged on a flat monthly rate regardless of the number of emails delivered. TCMS includes a suite of digital marketing solutions enabling dealers to better target in-market car shoppers, and fees are charged on a monthly subscription rate based on the product and marketing channel. Subscription fees are recognized on a monthly basis.
TrueCar Trade and Sell Your Car. TrueCar Trade provides consumers with information on the value of their vehicle, while providing Dealers with introductions to these in-market consumers so that those Dealers have the opportunity to buy vehicles from those consumers. The value of the vehicle is referred to as the True Cash Offer (“TCO”) and is backed by a guarantee from TCWS to repurchase the vehicle at the TCO if the dealer does not wish to keep it. Dealers pay a fee under a per-introduction or guaranteed-introductions model for access to the Company’s Sell Your Car product. Prior to offering Sell Your Car, the Company charged Dealers a monthly subscription fee for access to the Company’s Trade solution, which varied depending on the level of service provided. The Company phased out these subscription packages in 2022. Subscription fees were recognized on a monthly basis. Under the pay-per-introduction billing model, revenue is recognized when introductions are delivered. Under the guaranteed-introductions model, revenue is recognized based on the anticipated number of introductions to be provided to the Dealer. To the extent that the number of actual introductions is less than the number of guaranteed introductions, the Company provides a credit to the Dealer. If the actual number of introductions provided exceeds the number guaranteed, the Company is not entitled to any additional fees.
F-17
OEM Incentives Revenue
The Company enters into arrangements with OEMs to promote the sale of their vehicles primarily through the offering of additional consumer incentives. These manufacturers pay a per-vehicle fee to the Company for promotion of the incentive after the sale of the vehicle has occurred between the Auto Buying Program user and the Dealer. The Company’s performance obligation to OEMs is to deliver incentive offers to consumers. Control transfers upon delivery of incentive offers, which is the point at which the Company recognizes revenue. The Company recognizes revenue for the amount that the Company estimates it will be able to earn. To formulate this estimate, the Company uses the expected value method based primarily on an analysis of the expected number of sales resulting from in-period incentive offers delivered. This estimate is based on historical incentive offers to vehicle sale close rate trends as well as delivered incentive offers resulting in actual sales measured in period. As a result, revenue recognition occurs earlier than billing as an estimate of the variable consideration to be received upon control transfer, resulting in a contract asset.
Incremental Costs to Obtain a Contract
The revenue standard requires capitalization of the incremental costs to obtain a contract, which the Company has identified as certain of its sales commissions paid to internal sales representatives for the sale of TrueCar’s services to Dealers. These costs are deferred and then amortized over the expected customer life. Amortization expense is included within sales and marketing on the accompanying consolidated statements of comprehensive loss.
Cost of Revenue (exclusive of depreciation and amortization)
Cost of revenue includes expenses related to the fulfillment of the Company’s services, consisting primarily of data costs and licensing fees paid to third-party service providers and expenses related to operating the Company’s website and mobile applications, including those associated with its data centers, hosting fees, data processing costs required to deliver introductions to its network of TrueCar Certified Dealers, employee costs related to certain dealer operations, wholesale vehicle acquisition costs, marketing spend on behalf of TrueCar Marketing Solutions (“TCMS”) customers, and facilities costs. Cost of revenue excludes depreciation and amortization of software development costs and other hosting and data infrastructure equipment used to operate the Company’s platforms, which are included in the depreciation and amortization line item on its statements of comprehensive loss.
Sales and Marketing
Technology and Development
Technology and development expenses consist primarily of employee-related expenses for technology and development staff, including salaries, benefits, bonuses, severance, and stock-based compensation; third-party contractor fees; facilities costs; software costs; and costs associated with our product development, product management, research and analytics, and internal IT functions. Technology and development expenses are expensed as incurred.
General and Administrative
General and administrative expenses consist primarily of employee-related expenses for administrative, legal, finance, and human resource staffs, including salaries, benefits, bonuses, severance, and stock-based compensation; professional fees; insurance premiums; other corporate expenses; gain and loss from lease exit; impairment of ROU assets; and facilities costs.
F-18
Stock-Based Compensation
The Company recognizes stock-based compensation expense related to employee stock options, restricted stock units, and performance stock units based on the fair value of the awards on the grant date. Stock-based compensation for employee awards is generally recognized on a straight-line basis over the requisite service period. The Company estimates the grant-date fair value of option grants, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. For issuances of restricted stock units, the Company determines the fair value of the award based on the closing market value of its common stock on the grant date. For issuances of performance stock units, the Company calculates the fair value of the award using a Monte Carlo simulation valuation model on the grant date. The stock-based compensation expense for the performance stock units is recognized over the requisite service period using the proportionate amount of the award’s fair value that has been earned through service to date.
Compensation expense for non-employee stock-based awards is recognized in accordance with Accounting Standards Update ("ASU") No. 2018-07, Stock-based Compensation - Improvements to Nonemployee Share-based Payment Accounting, which the Company adopted on January 1, 2019. This ASU aligns much of the guidance on measuring and classifying nonemployee awards with that of awards to employees. Under this new guidance, the measurement of nonemployee equity awards is fixed on the grant date. Awards for nonemployees are measured and expense is recognized consistent with that for employee awards as outlined above.
Share Repurchase Program
Shares repurchased pursuant to the Company’s share repurchase program are immediately retired upon purchase. Repurchased common stock is reflected as a reduction of stockholders’ equity. The Company’s accounting policy related to its share repurchases is to reduce its common stock based on the par value of the shares and to reduce its capital surplus for the excess of the repurchase price over the par value. Since the inception of its share repurchase program in the third quarter of 2020, the Company has had an accumulated deficit balance; therefore, the excess over the par value has been applied to additional paid-in-capital. Once the Company has retained earnings, the excess will be charged entirely to retained earnings.
Income Taxes
The Company uses the liability method of accounting for income taxes, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when such assets and liabilities are recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the year that includes the enactment date. The Company determines deferred tax assets including net operating losses and liabilities, based on temporary differences between the book and tax bases of assets and liabilities. A valuation allowance is established to reduce net deferred tax assets to amounts that are more likely than not to be realized. The Company considers all available evidence, both positive and negative, in assessing the need for a valuation allowance. The Company has a full valuation allowance, and has concluded, based on the weight of all available evidence, that it is more likely than not that our net deferred tax assets will not be realized, primarily due to historical net operating losses.
The Company uses a two-step approach for evaluating uncertain tax positions. Step one, recognition, requires the Company to determine if the weight of available evidence indicates that a tax position is more likely than not to be sustained upon audit, including resolution of related appeals or litigation processes, if any. If a tax position is not considered “more likely than not” to be sustained, no benefits of the position are recognized. If the Company determines that a position is “more likely than not” to be sustained, then the Company proceeds to step two, measurement, which is based on the largest amount of benefit which is more likely than not to be realized on effective settlement. The Company recognizes interest and penalties accrued related to unrecognized tax benefits, if any, in its income tax provision in the accompanying statements of comprehensive loss.
Comprehensive Loss
F-19
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. The Company has evaluated recently issued pronouncements and does not believe any will have a material impact on the Company’s consolidated financial statements or related financial statement disclosures, except as discussed below. In addition, the Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption, unless otherwise discussed.
Adopted in the current period
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which improves segment disclosure requirements, primarily through enhanced disclosure requirements for significant segment expenses. The improved disclosure requirements apply to all public entities that are required to report segment information, including those with only one reportable segment.
ASU 2023-07 requires all segment profit or loss and assets disclosures to be provided on an annual and interim basis and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 on January 1, 2024, with no material effect on its consolidated financial statements, except for the related disclosures.
Adoption in future periods
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which addresses the requests of investors, lenders, creditors, and other allocators of capital for more transparency regarding income tax information primarily related to the rate reconciliation and income taxes paid information. Further amendments within this update also aim to improve the effectiveness of income tax disclosures. The amendments in this update apply to all entities that are subject to Topic 740, Income Taxes and are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the provisions of the amendments and the impact on its income tax disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires additional disclosures of the nature of expenses included in the income statement. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027 on a prospective basis, with early adoption permitted. The Company is currently evaluating the provisions of the amendments and the impact on its disclosures.
3. Business Combination
On May 31, 2022 (the “Acquisition Date”), the Company acquired all of the outstanding shares of Digital Motors for $15.5 million in cash and up to $8.0 million of contingent cash consideration based on the occurrence of certain events including the achievement of product development milestones and future revenues. The acquisition of Digital Motors is intended to accelerate TrueCar's plan to deliver a robust digital car buying and selling experience with its TrueCar+ marketplace. At the Acquisition Date, the Company assessed the probabilities of Digital Motors meeting product development milestones and future revenue targets and recorded a contingent consideration liability of $6.3 million. At December 31, 2024 and 2023 the contingent consideration liability was remeasured to $4.0 million and $5.6 million, with zero and $3.6 million recorded in “Other liabilities” and $4.0 million and $2.0 million recorded in “Accrued expenses and other current liabilities” within the consolidated balance sheets, respectively.
The Company recorded goodwill of $8.6 million on the Acquisition Date, which represented the excess of the purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed. The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise from the Company’s acquisition of Digital Motors. Goodwill attributed to the acquisition is not deductible for income tax purposes. The purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair value as of the Acquisition Date. As a result of the Company’s impairment assessment in September 2022, goodwill was subsequently written down to zero (refer to Note 6).
F-20
The following table summarizes the allocation of the purchase consideration and the estimated fair value of the assets acquired and the liabilities assumed for the acquisition of Digital Motors as of the Acquisition Date (in thousands).
| Digital Motors | |||||
| Assets acquired | |||||
| Cash | $ | ||||
| Acquired technology | |||||
| Other assets acquired | |||||
| Goodwill | |||||
| Total assets acquired | $ | ||||
| Liabilities assumed | |||||
| Accounts payable | $ | ||||
| Accrued employee expenses | |||||
| Deferred tax liabilities | |||||
| Other liabilities assumed | |||||
| Total liabilities assumed | $ | ||||
| Net assets acquired | |||||
| Consideration paid | |||||
| Cash paid | $ | ||||
| Contingent consideration | |||||
| Total consideration | $ | ||||
The finalized purchase price allocation is reflected in the consolidated balance sheet as of December 31, 2022.
The estimated useful life for acquired technology was 4 years at the time of acquisition, but a change in estimate during the third quarter of 2023 resulted in revision of the useful life to 3 years. Total liabilities assumed include $1.8 million of accrued Digital Motors transaction expenses, which were paid by the Company shortly after the Acquisition Date and included in cash paid for acquisition, net of cash acquired on the accompanying consolidated statements of cash flows.
The Company incurred transaction costs of $1.0 million in connection with the Digital Motors acquisition which were expensed as incurred and included in “General and administrative” expense in the accompanying consolidated statements of comprehensive loss.
The Company’s consolidated financial statements include the operating results of Digital Motors from the Acquisition Date through December 31, 2024. Separate operating results and pro forma results of operations for Digital Motors have not been presented as the effect of the acquisition is not material to the Company’s financial results.
F-21
4. Leases
Lease Costs
For the years ended December 31, 2024, 2023, and 2022, the Company recorded operating lease costs of corporate offices, excluding subleases, in the consolidated statements of comprehensive loss as follows (in thousands):
| Operating lease costs recorded within: | Year Ended December 31, 2024 | Year Ended December 31, 2023 | Year Ended December 31, 2022 | |||||||||||||||||
| Cost of revenue | $ | $ | $ | |||||||||||||||||
| Sales and marketing | ||||||||||||||||||||
| Technology and development | ||||||||||||||||||||
| General and administrative | ||||||||||||||||||||
| Total operating lease costs | $ | $ | $ | |||||||||||||||||
The Company did not include short term or variable lease costs in the table above as these amounts were immaterial. The Company made cash payments of $4.6 million, $7.8 million and $6.7 million for the years ended December 31, 2024, 2023, and 2022, respectively, which were included in “Cash flows from operating activities” within the consolidated statements of cash flows. The Company’s operating leases have a weighted average remaining lease term of 3.9 years and weighted average discount rate of 6.1 %.
The existing operating leases have remaining lease terms ranging from 1.0 to 5.1 years. Certain lease agreements contain options to renew, with renewal terms that generally extend the lease terms by 3 to 5 years for each option.
For its subleases, the Company recorded contra rent expense of $2.2 million, $3.5 million and $3.4 million for the years ended December 31, 2024, 2023, and 2022, respectively.
The Company recognized ROU asset group impairment charges of $6.9 million and $2.4 million for the years ended December 31, 2024 and 2023, respectively, reducing the carrying value of the related lease assets to its estimated fair value. Fair value was estimated using an income approach based on management’s forecast of future cash flows expected to be derived based on current sublease market rent. The impairment charge is included in general and administrative expenses in the consolidated statements of comprehensive loss.
In April 2024, the Company notified its landlord of termination effectively immediately at the leased office space located at 1401 Ocean Avenue, Santa Monica, California due to the landlord’s breach of contract. A letter of credit with a principal amount of $1,750,000 secured the Company’s obligations under the Lease and was drawn down by the landlord upon receiving notice of termination. The Company applied the full drawdown payment of the letter of credit as a reduction to the lease liability. The Company vacated and returned possession of the premises on April 30, 2024. As of December 31, 2024, the Company has fully impaired the ROU asset associated with the lease of $6.8 million, leaving the remaining lease liability of $7.2 million. As the Company has not yet been legally released from the lease agreement (Note 9), the impact of the remaining lease term and discount rate associated with this lease has been included in our disclosures above.
In July 2023, the Company signed a termination agreement with one of its subtenants to early terminate the sublease agreement, which included the receipt of $1.4 million in early termination fees. As a result, the Company also evaluated the ROU asset on the head lease and concluded the asset was impaired, resulting in total impairment charges of $2.0 million. In November 2023, the Company signed a lease amendment to exit the same floor from the head lease and paid $2.1 million for the early exit. To account for the partial termination on the head lease, the Company remeasured the lease liability, using the incremental borrowing rate in place at the date of modification, resulting in a $1.9 million reduction in the lease liability, a $0.5 million reduction of the ROU asset group, and the recognition of a $1.5 million gain.
F-22
In June 2022, the Company signed a lease amendment to exit certain floors of a leased office space effective July 31, 2022 and to settle the asset retirement obligation associated with exiting the leased space for a lower amount than previously recognized. To account for the reduction in lease term, the Company remeasured the lease liability, using the incremental borrowing rate in place at the date of modification, with a corresponding reduction to the right of use asset. A total gain of $0.8 million was recognized which included the $0.6 million difference in reduction of lease liability of $3.7 million and right-of-use asset of $3.1 million and the $0.2 million gain on settlement of the asset retirement obligation.
Lease Commitments
Future undiscounted lease payments for the Company’s operating lease liabilities, a reconciliation of these payments to its operating lease liabilities, and related sublease income at December 31, 2024 are as follows (in thousands):
| Years ended December 31, | ||||||||
| 2025 | $ | |||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| Thereafter | ||||||||
| Total lease payments | $ | |||||||
| Less: imputed interest | ( | |||||||
| Total lease liabilities (discounted) | $ | |||||||
| Year ended December 31, | Sublease Income | |||||||
| 2025 | $ | |||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| Thereafter | ||||||||
| Total sublease income | $ | |||||||
5. Revenue Information and Deferred Sales Commissions
Deferred Sales Commissions
Deferred sales commissions within other assets were $3.5 million and $2.2 million as of December 31, 2024 and 2023, respectively. For the years ended December 31, 2024, 2023 and 2022, amortization expense for deferred sales commissions was $1.5 million, $1.1 million and $1.2 million, respectively. There was no impairment loss in relation to the costs capitalized in any period.
Contract Balances
The Company’s contract asset balance for estimated variable consideration to be received upon the occurrence of subsequent vehicle sales is included within other current assets and is distinguished from accounts receivable in that these amounts are conditional upon subsequent sales and not only upon the passage of time. Substantially all of the contract asset balance of $0.9 million and $0.9 million at January 1, 2024 and 2023, respectively, was transferred to accounts receivable during the years ended December 31, 2024 and 2023 as vehicle sales occurred, with no significant changes in the estimate. A contract asset of $1.0 million and $0.9 million was recorded as of December 31, 2024 and 2023, respectively, for leads delivered where consideration to be received was still conditional upon subsequent vehicle sales.
F-23
Disaggregation of Revenue
The Company disaggregates revenue into three revenue streams: dealer revenue, OEM incentives revenue, and other revenue. The following table presents the Company’s revenue categories during the periods presented (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Dealer revenue | $ | $ | $ | ||||||||||||||
| OEM incentives revenue | |||||||||||||||||
| Other revenue | |||||||||||||||||
| Total revenues | $ | $ | $ | ||||||||||||||
6. Goodwill
The Company assesses recoverability of goodwill on an annual basis as of December 31 or when events or changes in circumstances indicate that the carrying value may not be recoverable, such as a deterioration in macroeconomic conditions and a sustained decrease in stock price. Since 2021, the Company’s business has been negatively impacted by the global automotive semiconductor chip shortage, and since 2022, by rising interest rates. During the third quarter of 2022, the Company’s stock price experienced high volatility, causing a further decline in its market capitalization since the Company last tested the goodwill for impairment at June 30, 2022. As a result of the further decline in market capitalization and the continued macroeconomic disruptions, the Company concluded a triggering event had occurred.
The Company performed an interim quantitative impairment test as of September 30, 2022 utilizing an income approach. Under the income approach, the Company used a discounted cash flow analysis. Determining fair value requires the exercise of significant assumptions and judgments, which are considered Level 3 inputs under the fair value hierarchy, including the amount and timing of expected future cash flows, long-term growth rates, and the discount rates. The Company also performed a reconciliation of the fair value of the reporting unit to the Company’s market capitalization as of September 30, 2022. The market capitalization reconciliation included the estimation of a reasonable control premium and other market factors such as control premiums observed in market transactions. Based on the results of the impairment test, the Company concluded that the carrying value of its single reporting unit exceeded the fair value and, accordingly, recorded an impairment charge of $59.8 million. The Company’s goodwill balance was zero as of December 31, 2022 after the impairment charge. No further changes to goodwill occurred during the twelve months ended December 31, 2024.
7. Property and Equipment, net
Property and equipment consisted of the following at December 31, 2024 and 2023 (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Computer equipment and internally developed software | $ | $ | |||||||||
| Furniture and fixtures | |||||||||||
| Leasehold improvements | |||||||||||
| Less: Accumulated depreciation | ( | ( | |||||||||
| Total property and equipment, net | $ | $ | |||||||||
Included in the table above are property and equipment of $1.0 million and $1.0 million as of December 31, 2024 and 2023, respectively, which are capitalizable but had not yet been placed in service. These balances were comprised primarily of capitalized software not ready for its intended use.
F-24
Total depreciation and amortization expense of property and equipment was $11.6 million, $12.1 million, and $13.0 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Amortization of internal use capitalized software development costs was $11.1 million, $11.3 million, and $12.2 million for the years ended December 31, 2024, 2023, and 2022, respectively.
During the years ended December 31, 2024 and 2023, the Company disposed of or retired certain computer equipment, internally developed software, leasehold improvements, and furniture and fixtures with an original cost basis of $14.4 million and $17.5 million, and accumulated depreciation of $14.2 million and $17.1 million, respectively. The remaining net book value of $0.3 million and $0.4 million was recorded as depreciation and amortization expense during the years ended December 31, 2024 and 2023, respectively.
8. Intangible Assets
Intangible assets consisted of the following at December 31, 2024 and 2023 (in thousands):
| At December 31, 2024 | |||||||||||||||||
| Gross Carrying Value | Accumulated Amortization | Net Carrying Value | |||||||||||||||
| Acquired technology and domain name | $ | $ | ( | $ | |||||||||||||
| Customer relationships | ( | ||||||||||||||||
| Total | $ | $ | ( | $ | |||||||||||||
| At December 31, 2023 | |||||||||||||||||
| Gross Carrying Value | Accumulated Amortization | Net Carrying Value | |||||||||||||||
| Acquired technology and domain name | $ | $ | ( | $ | |||||||||||||
| Customer relationships | ( | ||||||||||||||||
| Total | $ | $ | ( | $ | |||||||||||||
During the year ended December 31, 2022, the Company disposed of certain fully amortized acquired technology with an original cost basis of $1.0 million. There were no disposals during the years ended December 31, 2024 and 2023.
Amortization expense by asset type for the years ended December 31, 2024, 2023, and 2022 is shown below (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Acquired technology and domain name | $ | $ | $ | ||||||||||||||
| Customer relationships | |||||||||||||||||
| Total amortization | $ | $ | $ | ||||||||||||||
Expected amortization expense with respect to intangible assets at December 31, 2024 is as follows (in thousands):
| Years ended December 31, | |||||
| 2025 | $ | ||||
| Thereafter | |||||
| Total amortization expense | $ | ||||
F-25
9. Commitments and Contingencies
Reorganization
In June 2023, the Company committed to a restructuring plan (the “Restructuring Plan”) in furtherance of its efforts to enhance productivity and efficiency, preserve profitability and streamline its organizational structure to better align operations with its long-term commitment to providing an enhanced consumer experience. The Company recorded of approximately $7.2 million during the year ended December 31, 2023 in connection with the Restructuring Plan. The Company did not record any restructuring costs during the twelve months ended December 31, 2024 related to the Restructuring Plan and does not expect to incur significant additional charges in future periods related to the Restructuring Plan.
The following table presents a roll forward of the Restructuring Plan costs liability for the twelve months ended December 31, 2024 (in thousands):
Restructuring Costs Liability | |||||
Accrual at December 31, 2023 | $ | ||||
| Expense | |||||
| Cash Payments | ( | ||||
Accrual at December 31, 2024 | $ | ||||
Legal Proceedings
From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. In accordance with authoritative guidance, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved is material. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available.
On April 10, 2024, the Company notified Mani Brothers Portofino Plaza (DE), LLC, a Delaware limited liability company (the “Landlord”) that the Company was exercising its right to terminate a lease for office space (the "Lease") located at 1401 Ocean Avenue, Santa Monica, California (the “Premises”) effective immediately, following the Landlord's breach of the Lease and related conduct by the Landlord. Also on April 10, 2024, the Company filed a lawsuit in Los Angeles Superior Court, seeking a declaratory judgment that its termination of the Lease was justified under applicable California law, along with certain other relief. A letter of credit with a principal amount of $1,750,000 (the “Letter of Credit”) secured the Company’s obligations under the Lease. As described in Note 2, the full principal amount of the Letter of Credit was collateralized by restricted cash. On April 18, 2024, the Landlord notified both the Company and the bank that issued the Letter of Credit that the Landlord was drawing down the full amount available under the Letter of Credit. The drawdown on the Letter of Credit was completed on April 25, 2024 and the Company has applied the payment as a reduction to the lease liability. The Company vacated and returned possession of the Premises on April 30, 2024. On May 8, 2024, the Landlord filed a cross-complaint against the Company alleging breach of contract as a result of the Company’s termination of the Lease and seeking an unspecified amount of damages.
As of December 31, 2024, the Company has fully impaired the right-of-use asset associated with the lease of $6.8 million in accordance with FASB ASC 360 — Property, Plant, and Equipment. At December 31, 2024, the lease liability of $7.2 million remains on the condensed consolidated balance sheet and will remain until the matter is legally resolved in accordance with FASB ASC 405 — Liabilities. The Company will continue to recognize lease cost for the accretion of interest on the lease liability until the matter is resolved.
The Company intends to vigorously defend its position that the lease was appropriately terminated.
F-26
Employment Contracts
The Company has entered into employment contracts with certain executives of the Company. Employment under these contracts is at-will employment. However, under the provisions of the contracts, the Company would incur severance obligations of up to twelve months of the executive’s annual base salary for certain events, such as involuntary terminations.
Indemnifications
In the ordinary course of business, the Company may provide indemnities of varying scope and terms to customers, vendors, lessors, investors, directors, officers, employees and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or intellectual property infringement claims made by third parties. While the Company’s future obligations under certain of these agreements may contain limitations on liability for indemnification, other agreements do not contain such limitations and under such agreements it is not possible to predict the maximum potential amount of future payments due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under such indemnities have not had a material effect on the Company’s business, financial condition, results of operations or cash flows. Additionally, the Company does not believe that any amounts that it may be required to pay under these indemnities in the future will be material to the Company’s business, financial position, results of operations, or cash flows.
Purchase Obligations
At December 31, 2024, the Company had the following purchase obligations (in thousands):
| Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | More Than 5 Years | |||||||||||||||||||||||||
| Purchase obligations | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Purchase obligations include long-term agreements to purchase data information, software-related licenses, and support services, and other obligations that are enforceable and legally binding as of December 31, 2024. Purchase obligations exclude agreements that are cancellable without penalty.
Credit Facility
In March 2023, the Company terminated its third amended and restated loan and security agreement (the “Credit Facility”) with a financial institution that provided for advances under a $35.0 million revolving line of credit. As of the date of the termination, the company had no
F-27
10. Stockholders’ Equity
Share Repurchase Program
In July 2020, the Company’s board of directors authorized an open market stock repurchase program (the “Program”) of up to $75 million to allow for the repurchase of shares of the Company’s common stock through September 30, 2022. In May 2021, the Company’s board of directors increased the authorization of the Program by an additional $75 million, bringing the total authorization to $150 million. In July 2022, the Company’s board of directors extended the expiration of the Program until September 30, 2024. In February 2024, the Program had a remaining authorization of $45.8 million and the Company’s board of directors increased the authorization of the Program by $54.2 million, bringing the total remaining authorization to $100 million, as well as extended the expiration of the program until December 31, 2026. Following this increase, the Company had $100 million of remaining authorization for future repurchases. The timing and amount of any repurchases will be determined by Company management based on its evaluation of market conditions and other factors. Repurchases of the Company’s common stock may be made under a Rule 10b5-1 plan, which would permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws, open market purchases, privately-negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws. The Program may be suspended or discontinued at any time and does not obligate the Company to purchase any minimum number of shares. During the years ended December 31, 2024, 2023 and 2022 the Company repurchased and retired a total of 6.1 million, zero and 9.8 million shares under the Program for $20.0 million, zero and $29.7 million respectively, which excludes excise tax imposed under the Inflation Reduction Act of $0.1 million, zero, and zero respectively. As of December 31, 2024, the Company had a remaining authorization of $80.0 million for future share repurchases.
Reserve for Unissued Shares of Common Stock
The Company is required to reserve and keep available out of its authorized but unissued shares of common stock such number of shares sufficient for the exercise of all outstanding awards, plus shares available for grant under the Company’s equity incentive plan.
The number of shares of the Company’s common stock reserved for these purposes at December 31, 2024 is as follows:
| Number of Shares | |||||
| Outstanding stock options | |||||
| Outstanding restricted stock units | |||||
Outstanding performance stock units | |||||
Additional shares reserved for maximum payout of outstanding performance stock units | |||||
| Additional shares available for grant under the equity plan | |||||
| Total | |||||
11. Stock-based Awards
The Company’s stockholders approved the Company’s 2023 Equity Incentive Plan (the “2023 Plan”) at its June 2023 Annual Meeting of Stockholders. The 2023 Plan serves as the successor to the 2014 Equity Incentive Plan (the “2014 Plan), which was terminated when the 2023 Plan was adopted. Prior awards granted under the 2014 Plan continue to be subject to the terms and provisions of the 2014 Plan. In connection with the Company’s initial public offering in May 2014 (the “IPO”), the Company’s 2005 Equity Incentive Plan and 2008 Equity Incentive Plan were terminated and the Company’s 2015 Inducement Equity Incentive Plan was terminated in February 2022. Upon termination of the 2014 Plan, the shares reserved for issuance under the 2023 Plan included: (i) shares that have been reserved but not issued pursuant to any awards granted under the 2014 Plan and were not subject to any awards granted thereunder, plus (ii) shares subject to awards granted under the 2014 Plan that expire or otherwise terminate without having been exercised or issued in full, are forfeited to or repurchased by the Company due to failure to vest or are acquired by the Company (other than shares repurchased by the Company on the open market) pursuant to awards granted under the 2014 Plan used to pay the exercise price or purchase price of such an award or to satisfy the tax withholding obligations of such an award.
F-28
In accordance with the evergreen provision of the 2014 Plan, the shares available for issuance under the 2014 Plan included an annual increase on January 1 of each year equal to the least of: (x) 10,000,000 shares; (y) 5 % of the total outstanding shares of the Company’s common stock as of the last day of the prior fiscal year; or (z) such lesser amount as determined by the Company’s Board of Directors. On January 1, 2023, the final evergreen increase of the now-terminated 2014 Plan resulted in an additional 4,421,954 shares of common stock being available for issuance under the 2014 Plan.
As of December 31, 2024, the total number of shares available for future issuance under the 2023 Plan was 20,451,887 shares. Under the 2023 Plan, the Company has the ability to issue incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, and performance shares. The exercise price of stock options granted under the 2023 Plan must at least equal the fair market value of the Company’s common stock on the date of grant. Stock options granted generally vest monthly over a four-year period and expire 10 years from the date of grant. Restricted stock units generally vest quarterly over a four-year period. Performance stock units granted generally vest at the end of a three-year period.
Stock Options
A summary of the Company’s stock option activity for the year ended December 31, 2024 is as follows:
| Number of Options | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Life | Aggregate Intrinsic Value (1) | ||||||||||||||||||||
| (in years) | (in millions) | ||||||||||||||||||||||
| Outstanding at December 31, 2023 | $ | ||||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Forfeited/expired | ( | ||||||||||||||||||||||
| Outstanding at December 31, 2024 | $ | $ | |||||||||||||||||||||
| Vested and expected to vest at December 31, 2024 | $ | $ | |||||||||||||||||||||
Exercisable at December 31, 2024 | $ | $ | |||||||||||||||||||||
(1)The aggregate intrinsic value represents the excess of the closing price of the Company’s common stock of $3.73 on December 31, 2024 over the exercise price of in-the-money stock option awards.
At December 31, 2024, total remaining stock-based compensation expense for unvested option awards was $0.1 million, which is expected to be recognized over a weighted-average period of 0.3 years.
There were no option grants in 2024, 2023, or 2022. The Company recorded stock-based compensation expense for stock option awards of $0.2 million, $0.9 million, and $1.5 million, for the years ended December 31, 2024, 2023, and 2022, respectively.
The total intrinsic value of options exercised in 2024, 2023, and 2022 was less than $0.1 million, $0.1 million, and less than $0.1 million, respectively.
F-29
Restricted Stock Units
A summary of the Company’s restricted stock unit (“RSU”) activity for the year ended December 31, 2024 is as follows:
| Number of Shares | Weighted-Average Grant Date Fair Value | ||||||||||
Non-vested — December 31, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
Non-vested — December 31, 2024 | $ | ||||||||||
The total fair market value of RSUs that vested for the years ended December 31, 2024, 2023, and 2022 was $9.1 million, $8.3 million, and $8.4 million, respectively.
The weighted-average grant-date fair value of RSUs granted for the years ended December 31, 2024, 2023, and 2022 was $3.49 , $2.31 , and $3.49 , respectively. For the years ended December 31, 2024, 2023, and 2022, the Company recorded $8.1 million, $10.8 million, and $12.1 million in compensation expense, respectively. At December 31, 2024, total remaining stock-based compensation expense for non-vested RSUs is $15.7 million, which is expected to be recognized over a weighted-average period of 2.6 years.
Performance Stock Units
Performance stock units (“PSU”) vesting is subject to the achievement of certain market conditions over a three-year period. The number of shares of common stock to be issued under a PSU agreement is based upon a comparison of the Company’s total stockholder return (“TSR”) determined by reference to the Company’s compound annual growth in stock price (“CAGR”) relative to the Russell 2000 Total Return Index (the “Index”), over a three-year performance period. If the CAGR is equal to that of the Index, the target number of PSUs will vest. For every percentage point that the CAGR exceeds the Index, the number of PSUs that are eligible to vest in excess of target is increased by a respective amount of percentage points, and for every percentage point that the CAGR is below the Index, the number of PSUs that are eligible to vest is decreased by a respective amount of percentage points as well. If the Company’s absolute CAGR is negative during the performance period of the PSUs, then the executives’ payout will be capped at 100% of target, irrespective of the extent to which the CAGR exceeds the Index. Payouts of the performance share awards range from 0 % to 175 % of the target awards based on the Company’s TSR ranking relative to the Index.
A summary of the Company’s PSU activity for the year ended December 31, 2024 is as follows:
Performance Share Units | Weighted-Average Grant Date Fair Value | ||||||||||
Outstanding — December 31, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
Outstanding — December 31, 2024 | $ | ||||||||||
The total fair market value of PSUs that vested for the years ended December 31, 2024, 2023, 2022 was $1.3 million, $0.7 million and $0.1 million, respectively.
The weighted-average grant-date fair value of PSUs granted for the years ended December 31, 2024, 2023, and 2022 was $4.39 , $2.75 , and $4.90 , respectively. For the years ended December 31, 2024, 2023, and 2022, the Company recorded $3.4 million, $2.6 million, and $4.1 million in compensation expense, respectively. At December 31, 2024, total remaining stock-based compensation expense for non-vested PSUs is $5.2 million, which is expected to be recognized over a weighted-average period of 1.9 years.
F-30
Valuation Assumptions and Stock-based Compensation Cost
The fair value of stock options granted to employees is estimated on the grant date using the Black-Scholes option-pricing model. This valuation model requires the Company to make assumptions and judgments about the variables used in the calculation, including the expected term, the volatility of the Company’s common stock, risk-free interest rate, and expected dividends. The Company uses the simplified method under the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate expected term for plain vanilla share options, as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The computation of expected volatility is based on the historical volatility of the Company’s common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The Company uses an expected dividend of zero , as it does not anticipate paying any dividends in the foreseeable future. Forfeitures on share-based awards are recognized as they occur. No stock option awards were granted during the years ended December 31, 2024, 2023, and 2022.
The fair value of each PSU award was estimated at the date of grant using a Monte Carlo simulation valuation model. This valuation model requires the Company to make assumptions and judgments about the variables used in the calculation. In calculating the fair value of the award, the risk-free interest rate is based on the yield of a Treasury Note with a term commensurate with the term of the PSU. The expected term is based on the remainder of the performance cycle as of the date of grant. The expected volatility is based on the three-year historical stock price for the Company and the Index. The correlation is calculated based on the stock price of the Company and the Index for the three-year volatility period. The following weighted-average assumptions were used in estimating the fair value of the PSUs at the date of grant:
Year Ended December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
Expected volatility of common stock | % | % | % | |||||||||||||||||
Expected volatility of Index | % | % | % | |||||||||||||||||
Average correlation coefficient of the Company and the Index | ||||||||||||||||||||
Risk-free interest rate | % | % | % | |||||||||||||||||
Expected term (years) | ||||||||||||||||||||
The Company recorded stock-based compensation cost relating to stock options, RSUs, and PSUs in the following categories on the accompanying consolidated statements of comprehensive loss (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Cost of revenue | $ | $ | $ | ||||||||||||||
| Sales and marketing | |||||||||||||||||
| Technology and development | |||||||||||||||||
| General and administrative | |||||||||||||||||
| Total stock-based compensation expense | |||||||||||||||||
| Amount capitalized to internal-use software | |||||||||||||||||
| Total stock-based compensation cost | $ | $ | $ | ||||||||||||||
F-31
12. Income Taxes
The components of the Company’s income tax provision (benefit) are as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | $ | $ | ||||||||||||||
| State | ( | ||||||||||||||||
| Total current provision (benefit) | ( | ||||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | ( | ||||||||||||||||
| State | ( | ||||||||||||||||
Total deferred provision (benefit) | ( | ||||||||||||||||
| Total income tax provision (benefit) | $ | $ | $ | ( | |||||||||||||
The 2024 and 2023 income tax expense of less than $0.1
The 2022 income tax benefit of $2.6 million primarily reflects the release of valuation allowance resulting from net deferred tax liabilities recorded in Digital Motors acquisition accounting providing a source of income in assessing realization of consolidated net deferred tax assets.
The overall effective income tax rate differs from the statutory federal rate as follows:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Income tax benefit based on the federal statutory rate | % | % | % | ||||||||||||||
| State income taxes, net of federal benefit | |||||||||||||||||
| Nondeductible expenses | ( | ( | ( | ||||||||||||||
| Change in valuation allowance | ( | ( | ( | ||||||||||||||
| Stock-based compensation | ( | ( | ( | ||||||||||||||
| Uncertain tax positions | |||||||||||||||||
| Goodwill impairment | ( | ||||||||||||||||
Other | |||||||||||||||||
| Overall effective income tax rate | % | % | % | ||||||||||||||
F-32
The components of deferred tax assets (liabilities) are as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Net operating loss carryforwards | $ | $ | |||||||||
| Stock-based compensation | |||||||||||
| Accrued expenses | |||||||||||
| Research and development tax credits | |||||||||||
Operating lease liabilities | |||||||||||
| Intangible assets and goodwill | |||||||||||
| Property, equipment and software | |||||||||||
| Capitalized research and development costs | |||||||||||
| Other | |||||||||||
| Gross deferred tax assets | |||||||||||
| Valuation allowance | ( | ( | |||||||||
| Net deferred tax assets | |||||||||||
| Deferred tax liabilities: | |||||||||||
| Capitalized commissions | ( | ( | |||||||||
| Operating lease assets | ( | ( | |||||||||
| Gross deferred tax liabilities | ( | ( | |||||||||
| Total net deferred tax assets (liabilities) | $ | $ | |||||||||
At December 31, 2024, the Company had federal and state net operating loss carryforwards of $346.6 million and $276.9 million, respectively. Of the Company’s federal net operating loss carryforwards, $248.2 million will begin to expire in 2034 and $98.4 million does not expire. The Company’s state net operating loss carryforwards began to expire in 2022. At December 31, 2024, the Company had federal and state research and development tax credit carryforwards of approximately $1.1 million and $11.2 million, respectively. The federal tax credit carryforwards begin to expire in the year ending December 31, 2040. The state tax credit carryforwards can be carried forward indefinitely. Utilization of the Company’s net operating loss and tax credit carryforwards may be subject to annual limitations arising from ownership change limitations provided by Sections 382 and 383 of the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the net operating loss and tax credit carryforwards before their utilization.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2024. Such objective evidence limits the ability to consider other subjective evidence such as its projections for future growth. On the basis of this evaluation, at December 31, 2024, a valuation allowance of $126.9 million has been recorded since it is more likely than not that the deferred tax assets will not be realized.
The change in the valuation allowance for the years ended December 31, 2024, 2023, and 2022 is as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Valuation allowance, at beginning of year | $ | $ | $ | ||||||||||||||
| Increase in valuation allowance | |||||||||||||||||
| Valuation allowance, at end of year | $ | $ | $ | ||||||||||||||
The $6.7 million increase in valuation allowance is primarily related to the increase in deferred tax assets for net operating loss carryforwards and capitalized research and development costs and the decrease in deferred tax liabilities for operating lease assets.
F-33
The following is a reconciliation of the total amounts of unrecognized tax benefits (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Unrecognized tax benefit, beginning of year | $ | $ | $ | ||||||||||||||
Decrease based on tax positions in prior period | ( | ||||||||||||||||
| Increase based on tax positions in current period | |||||||||||||||||
| Unrecognized tax benefit, end of year | $ | $ | $ | ||||||||||||||
The December 31, 2024 balance includes $0.3 million, that if recognized, would affect the effective income tax rate. The December 31, 2024, 2023, and 2022 balances each include tax benefits of $3.4 million, which if recognized, would be in the form of net operating loss or tax credit carryforwards and expected to require a full valuation allowance based on present circumstances. These amounts are net of offsetting benefits from other tax jurisdictions.
The Company’s policy is to recognize interest and penalties related to uncertain tax positions, if any, in the income tax provision. At December 31, 2024, no interest and penalties related to uncertain tax positions have been accrued.
The Company is subject to United States federal and state taxation. Due to the presence of net operating loss carryforwards, all income tax years remain open for examination by the Internal Revenue Service and various state taxing authorities. The Company is not currently under Internal Revenue Service or state tax examination.
13. Net Loss Per Share
Basic earnings per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding, net of the weighted average unvested restricted stock subject to repurchase by the Company, if any, during the period. Diluted earnings per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding, adjusted for the effects of potentially dilutive common stock, which are comprised of stock options, restricted stock units and stock warrants, using the treasury-stock method, and convertible preferred stock, using the if-converted method. Because the Company reported losses attributable to common stockholders for all periods presented, all potentially dilutive common stock is antidilutive for those periods.
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders during the years ended December 31, 2024, 2023, and 2022 (in thousands, except per share data):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Weighted-average common shares outstanding, basic and diluted | |||||||||||||||||
Net Loss per share, basic and diluted | $ | ( | $ | ( | $ | ( | |||||||||||
The following table presents the number of anti-dilutive shares excluded from the calculation of diluted net loss per share attributable to common stockholders at December 31, 2024, 2023, and 2022 (in thousands):
| December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Options to purchase common stock | |||||||||||||||||
| Unvested restricted stock units | |||||||||||||||||
Unvested performance stock units | |||||||||||||||||
| Total shares excluded from net loss per share attributable to common stockholders | |||||||||||||||||
F-34
14. Employee Benefit Plan
The Company has a 401(k) Savings Retirement Plan that covers substantially all full-time employees who meet the plan’s eligibility requirements and provides for an employee elective contribution. The Company made matching contributions to the plan of $1.1 million, $1.4 million, and $1.8 million for the years ended December 31, 2024, 2023, and 2022, respectively.
15. Related Party Transactions
Transactions with Accu-Trade
On March 1, 2022, the Company sold its 20 % ownership interests in Accu-Trade and no longer considers Accu-Trade a related party after the sale. See Note 2 to our consolidated financial statements included herein for further details. The Company recognized contra-revenue of $0.1 million and cost of revenue of $1.1 million during the year ended December 31, 2022 related to a software and data licensing agreement entered into with Accu-Trade. There was no related party activity during the years ended December 31, 2023 and 2024.
16. Segment Reporting
TrueCar operates as a single operating segment, which is the business of providing a digital automotive marketplace. This marketplace offers pricing transparency to consumers, empowers TrueCar Certified Dealers to attract in-market consumers, and allows automobile manufacturers to target their incentive spending more effectively.
The Company’s CODM is the President and CEO, who manages the Company’s operations based on consolidated financial information for purposes of evaluating financial performance and allocating resources. The financial information reviewed by the CODM includes revenue by service offering including dealer revenue, OEM incentive revenue, and other revenue (Note 5), in addition to key expense categories that are regularly provided for the consolidated company.
The accounting policies of the Company’s single operating segment are the same as those described in the summary of significant accounting policies. Although there are other measures of operating performance used by the CODM, the Company concluded that consolidated net income is the measure required to be disclosed as the segment measure of profit or loss. Net income is utilized to evaluate the effectiveness of TrueCar's various service offerings and to monitor budget versus actual results in order to gain more depth and understanding of the factors driving the business. The following is a reconciliation of the Company’s net loss. It includes the significant expense categories regularly provided to the CODM, computed under U.S. GAAP, reconciled to the Company’s total net loss as presented in the consolidated statements of comprehensive loss:
F-35
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Revenues | $ | $ | $ | ||||||||||||||
Less: | |||||||||||||||||
Headcount expense | |||||||||||||||||
Branded media | |||||||||||||||||
Partner marketing | |||||||||||||||||
Other marketing | |||||||||||||||||
Outsourced services | |||||||||||||||||
Data licensing, software, and hosting | |||||||||||||||||
Other segment expenses* | |||||||||||||||||
| Interest income | ( | ( | ( | ||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Goodwill impairment | |||||||||||||||||
Restructuring charges** | 1,474 | 8,947 | — | ||||||||||||||
| Stock-based compensation | |||||||||||||||||
Other reconciling items*** | ( | ||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
*Other segment expenses includes wholesale, facilities and other operating costs.
**Restructuring charges represent charges associated with the realignment of the Company’s leadership structure beginning in the third quarter of 2023 as well as charges associated with the Restructuring Plan undertaken in the second quarter of 2023 to improve efficiency and reduce expenses.
***Other reconciling items solely includes changes in fair value of contingent consideration liability, gain on sale of equity method investment, lease impairment, interest accretion for terminated lease, gains and losses on lease exit, transaction costs associated with Digital Motors, other income and income taxes, which are all disclosed elsewhere in the consolidated financial statements and accompanying footnotes.
F-36