true-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-36449

TRUECAR, INC.

(Exact name of registrant as specified in its charter)


Delaware						04-3807511
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

1401 Ocean Ave, Suite 200

Santa Monica, California 90401

(800) 200-2000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	TRUE	The Nasdaq Global Select Market

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 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	☐	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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 2, 2023, 90,060,682 shares of the registrant’s common stock were outstanding.

TRUECAR, INC.

INDEX


		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	5
	Condensed Consolidated Statements of Comprehensive Loss for the Six Months Ended June 30, 2023 and 2022	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2023 and 2022	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71

Item 6.	Exhibits	72
	Signatures	73

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “likely,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “target,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our future financial performance and our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses and ability to maintain or grow revenue, scale our business, generate cash flow, fulfill our mission and achieve and maintain future profitability;

•the success and long-term effects of our strategic restructuring;

•our ability to forecast our financial and operational performance;

•our relationship with key industry participants, including car dealers and automobile manufacturers;

•anticipated trends, demand rates and challenges in our business and in the markets in which we operate;

•our ability to successfully roll out our TrueCar+ offering, provide a compelling value proposition to consumers using that offering and integrate our current and future offerings into that experience;

•our ability to anticipate market needs and develop new and enhanced products and services to meet those needs and to successfully monetize those products and services;

•maintaining and expanding our customer base in key geographies, including our ability to maintain or increase the number of high-volume brand dealers in our network generally and in key geographies;

•the short- and long-term effects of the coronavirus pandemic on our business;

•our ability to mitigate the financial effect of the termination of our partnership with USAA Federal Savings Bank in 2020;

•our ability to maintain and grow our existing additional affinity partner relationships, and to attract new affinity partners to offer our services to their members;

•our reliance on our third-party service providers;

•the impact of competition in our industry and innovation by our competitors;

•our anticipated growth and growth strategies, including our ability to maintain or increase close rates and the rate at which site visitors prospect with a TrueCar certified dealer;

•our ability to successfully maintain or increase dealer subscription rates and manage dealer churn;

•our ability to attract significant automobile manufacturers to participate, and remain participants, in our incentive programs;

•our ability to anticipate or adapt to future changes in our industry;

•the impact on our business of seasonality, cyclical trends affecting the overall economy and actual or threatened severe weather events;

•our ability to hire and retain necessary qualified employees;

•our continuing ability to provide customers access to our products;

•our ability to maintain and scale our technical infrastructure and leverage our technology platform to enhance our customer experience and launch new product offerings;

•the evolution of technology affecting our products, services and markets;

•our ability to adequately protect our intellectual property;

•the outcome, and effect on our business, of litigation to which we are a party, including our ability to settle any such litigation;

•our ability to navigate changes in domestic or international economic, political or business conditions, including supply shortages, such as of automotive semiconductors, changes in interest rates, consumer demand and import tariffs and governmental responses to the coronavirus pandemic;

•our ability to stay abreast of, and in compliance with, new or modified laws and regulations that currently apply or become applicable to our business, including newly-enacted and rapidly-changing privacy, data protection and net neutrality laws and regulations and changes in applicable tax laws and regulations;

•the continued expense and administrative workload associated with being a public company;

•our ability to maintain an effective system of internal controls necessary to accurately report our financial results and prevent fraud;

•our liquidity and working capital requirements;

•the estimates and estimate methodologies used in preparing our consolidated financial statements;

•the future trading prices of our common stock and the impact of securities analysts’ reports on these prices;

•our plans to pursue acquisitions, divestitures, investments and other similar transactions;

•our ability to use the proceeds of the ALG divestiture in a manner that maximizes shareholder value;

•the extent to which we repurchase our common stock under our share repurchase plan and the effect of these repurchases on long-term stockholder value, the volatility and trading price of our common stock and our cash reserves;

•our ability to effectively and timely integrate our operations with those of any business we acquire, including Digital Motors, and related factors, including the difficulties associated with such integration (such as the difficulties, challenges and costs associated with managing and integrating new facilities, assets and employees) and the achievement of the anticipated benefits of such integration;

•the preceding and other factors discussed in Part II, Item 1A, “Risk Factors,” and in other reports we may file with the Securities and Exchange Commission from time to time; and

•the factors set forth in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date the statements are made. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

SUMMARY OF RISKS AFFECTING OUR BUSINESS

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” later in this Quarterly Report on Form 10-Q. These risks include, but are not limited to, the following:

•Actions that we are taking to restructure our business in alignment with our strategic priorities may not be as effective as anticipated.

•Low automobile inventory supply levels adversely impact our business, results of operations and prospects by increasing competition for dealers’ marketing expenditures and reducing automobile manufacturers’ incentive spending.

•If our lead quality or quantity declines, our unit volume could as well, and dealers could leave our network or insist on lower subscription rates, which could reduce our revenue and harm our business.

•If we are not successful in rolling out our TrueCar+ offering, providing a compelling value proposition to consumers using that offering, integrating our current and future offerings into that experience or monetizing it, our business and prospects could be adversely affected.

•Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail.

•The growth of our business relies significantly on our ability to maintain and increase the revenues that we derive from dealers in our network of TrueCar Certified Dealers. Failure to do so would harm our financial performance.

•The loss of a critical mass of dealers, either nationally or in any given geographic area, could deprive us of the data we need to provide certain of our key features, our inventory supply and certain key elements of our TrueCar Deal Builder’s functionality, any of which would negatively affect our business.

•We may not be able to provide a compelling car-buying experience to our users, which could cause the number of transactions between our users and dealers, and therefore our revenues, to decline.

•Our business is subject to risks related to the larger automotive ecosystem, including interest rates, inflation, consumer demand, global supply chain challenges (including relating to automotive semiconductors) and other macroeconomic issues.

•The failure to attract manufacturers to participate in our incentive programs, or to induce them to remain participants in those programs, could reduce our growth or adversely affect our operating results.

•The loss of a significant affinity partner, such as the termination of our partnership with USAA Federal Savings Bank in 2020, or a significant reduction in units attributable to our affinity partners would reduce our revenue and harm our operating results.

•If key industry participants, including car dealers or automobile manufacturers perceive us in a negative light or our relationships with them suffer harm, our ability to grow and our financial performance may be damaged.

•Our business could be adversely affected by executive turnover and other transitions in our senior management team. An inability to navigate these transitions and attract, retain and integrate new management and other personnel could harm our business.

•We rely on relationships with data providers and may experience interruptions in the data feeds they provide, which could adversely affect our current and future product offerings, including TrueCar+, to users and dealers as well as the timeliness of the information we provide, and which may impair our ability to attract or retain consumers and dealers and to timely invoice dealers and otherwise negatively affect our business.

•We rely on Internet search engines to drive traffic to our website, and if we fail to appear prominently in the search results, our traffic would decline and our business would be adversely affected.

•The success of our business relies heavily on our marketing and branding efforts, especially with respect to the TrueCar website and our branded mobile applications, as well as those efforts of the affinity group marketing partners whose websites we power, and these efforts may not be successful.

•If consumers and dealers do not respond positively to our branding, our financial performance and our ability to grow unique visitor traffic and expand our dealer network could be negatively affected.

•We are subject to a complex framework of regulations, many of which are unsettled, still developing and

contradictory, which have in the past, and could in the future, subject us to claims, challenge our business model or otherwise harm our business.

•We collect, process, store, share, disclose and use personal information and other data, and our actual or perceived failure to protect this information and data could damage our reputation and brand and harm our business and operating results.

•We face litigation and are party to legal proceedings that could have a material adverse effect on our business, financial condition, results of operations and cash flows.

•Our number of unique visitors, revenue and operating results fluctuate due to seasonality.

•We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which could cause our stock price to decline.

TRUECAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

(Unaudited)


	June 30, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents (includes restricted cash of $2,205 and $0 at June 30, 2023 and December 31, 2022, respectively)	$	142,405	$	175,518
Accounts receivable, net of allowances of $1,172 and $1,073 at June 30, 2023 and December 31, 2022, respectively	16,236		13,786
Prepaid expenses	6,797		5,969
Other current assets	1,976		2,562
Total current assets	167,414		197,835
Property and equipment, net	20,308		18,902
Operating lease right-of-use assets	13,331		16,940
Intangible assets, net	11,580		13,969
Other assets	4,071		3,881

Total assets	$	216,704	$	251,527
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	9,537	$	8,655
Accrued employee expenses	7,466		7,378
Operating lease liabilities, current	4,788		4,514
Accrued expenses and other current liabilities	10,914		10,232

Total current liabilities	32,705		30,779
Operating lease liabilities, net of current portion	15,910		18,500
Other liabilities	3,780		4,981
Total liabilities	52,395		54,260
Commitments and contingencies (Note 5)
Stockholders’ Equity
Preferred stock — $0.0001 par value; 20,000,000 shares authorized at June 30, 2023 and December 31, 2022, respectively; no shares issued and outstanding at June 30, 2023 and December 31, 2022	—		—
Common stock — $0.0001 par value; 1,000,000,000 shares authorized at June 30, 2023 and December 31, 2022, respectively; 89,965,342 and 88,439,088 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	9		9
Additional paid-in capital	716,821		709,790
Accumulated deficit	(552,521)		(512,532)
Total stockholders’ equity	164,309		$	197,267
Total liabilities and stockholders’ equity	$	216,704	$	251,527

See accompanying notes to condensed consolidated financial statements.

TRUECAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands except per share data)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues	$	39,293	$	42,275	$	76,273	$	85,808
Costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization presented separately below)	3,931		3,817		7,777		8,763
Sales and marketing	27,180		26,324		53,946		53,405
Technology and development	13,510		11,380		26,008		21,635
General and administrative	12,728		10,937		23,574		22,661
Depreciation and amortization	4,091		3,785		8,282		7,445
Total costs and operating expenses	61,440		56,243		119,587		113,909
Loss from operations	(22,147)		(13,968)		(43,314)		(28,101)
Interest income	1,730		279		3,338		306
Gain from equity method investment	—		96		—		1,845
Loss before income taxes	(20,417)		(13,593)		(39,976)		(25,950)
Provision for (benefit from) income taxes	7		(2,574)		13		(2,517)
Net loss	$	(20,424)	$	(11,019)	(39,989)		(23,433)

Net loss per share, basic and diluted	$	(0.23)	$	(0.12)	(0.45)		$	(0.25)
Weighted average common shares outstanding, basic and diluted	89,383		91,016		89,017		93,457
Other comprehensive loss:
Comprehensive loss	$	(20,424)	$	(11,019)	$	(39,989)	$	(23,433)

See accompanying notes to condensed consolidated financial statements.

TRUECAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands except share data)

(Unaudited)


	Six Months Ended June 30, 2023
	Common Stock					Accumulated Deficit		Stockholders’ Equity
	Shares	Amount		APIC
Balance at December 31, 2022	88,439,088	$	9	$	709,790	$	(512,532)	$	197,267
Net loss	—	—		—		(19,565)		(19,565)
Stock-based compensation	—	—		4,930		—		4,930
Shares issued in connection with employee stock plan, net of shares withheld for employee taxes	622,680	—		(1,006)		—		(1,006)
Balance at March 31, 2023	89,061,768	$	9	$	713,714	$	(532,097)	$	181,626
Net loss	—	—		—		(20,424)		(20,424)

Stock-based compensation	—	—		4,116		—		4,116
Shares issued in connection with employee stock plan, net of shares withheld for employee taxes	903,574	—		(1,009)		—		(1,009)
Balance at June 30, 2023	89,965,342	$	9	$	716,821	$	(552,521)	$	164,309


	Six Months Ended June 30, 2022
	Common Stock					Accumulated Deficit		Stockholders’ Equity
	Shares	Amount		APIC
Balance at December 31, 2021	96,213,243	$	10	$	723,623	$	(393,847)	$	329,786
Net loss	—	—		—		(12,414)		(12,414)
Repurchase of common stock	(3,107,370)	—		(11,028)		—		(11,028)
Stock-based compensation	—	—		3,744		—		3,744
Shares issued in connection with employee stock plan, net of shares withheld for employee taxes	481,122	—		(861)		—		(861)
Balance at March 31, 2022	93,586,995	$	10	$	715,478	$	(406,261)	$	309,227
Net loss	—	—		—		(11,019)		(11,019)
Repurchase of common stock	(3,731,415)	—		(14,075)		—		(14,075)
Stock-based compensation	—	—		4,777		—		4,777
Shares issued in connection with employee stock plan, net of shares withheld for employee taxes	654,005	—		(849)		—		(849)
Balance at June 30, 2022	90,509,585	$	10	$	705,331	$	(417,280)	$	288,061

See accompanying notes to condensed consolidated financial statements.

TRUECAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities
Net loss	$	(39,989)	$	(23,433)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	8,282		7,445
Deferred income taxes	—		(2,524)
Bad debt expense and other reserves	340

SEC Form 10-Q filed by TrueCar Inc.