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TrueCar Earnings: Loss Narrows Again as Improvements Take Hold

Online car-shopping service TrueCar (NASDAQ: TRUE) reported on Aug. 8 that it lost $8.1 million in the second quarter of 2017, or $0.09 per share, an improvement over the $14.7 million loss that it posted in the second quarter of 2016.

Adjusted for stock option expenses and one-time items, TrueCar's net income in the second quarter was $1.1 million, or $0.01 per share. That compares with a loss on the same basis of $4.1 million, or $0.05 per share, in the second quarter of 2016.

Image source: TrueCar.

TrueCar earnings: The raw numbers

Metric Q2 2017 Q2 2016 Change
Revenue $81.8 million $66.4 million  23% 
Vehicles purchased ("units") 242,130 192,531  26% 
Adjusted EBITDA $7.4 million $2.4 million  208%
Franchise dealers 12,204  11,734  4% 
Net income (loss) ($8.1 million) ($14.7 million)  $6.6 million improvement
Net income (loss) per share ($0.09)  ($0.17)  $0.08 improvement 
Adjusted net income (loss) per share $0.01 ($0.05)  $0.06 improvement 

Data source: TrueCar. EBITDA = earnings before interest, tax, depreciation, and amortization. Non-GAAP "adjusted" figures exclude employee stock option expenses and non-recurring costs. "Franchise dealers" = auto dealers that hold a "franchise" from an automaker, meaning that they sell new vehicles.

Another quarter of year-over-year improvements

The story of TrueCar's second-quarter performance is a lot like the story we saw in the first quarter of 2017: Once again, nearly all of TrueCar's key business metrics improved year over year, some significantly. 

In addition to the significant year-over-year gains in units, revenue, and dealer count (the metrics that TrueCar's management considers most important), other measures of its business also showed year-over-year improvements:

  • TrueCar's site had an average 7.2 million unique visitors per month in the second quarter, up 8% from a year ago.
  • "Acquisition cost" per sale was $157 in the second quarter, down 13% from a year ago (but up $4 from the first quarter of 2017).
  • "Monetization", or its average fee per vehicle sold via its service, was $319 in the second quarter, essentially flat from $321 a year ago.
  • Average transaction revenue per franchise dealer was $6,450, up 1% from a year ago -- and its total number of franchise dealer partners rose 20%. 

TrueCar's CEO: Primed for growth as the new-car market slows

CEO Chip Perry, who joined TrueCar late in 2015 after a management shakeup, spent last year overhauling TrueCar's business and improving its often-stormy relationships with new-car dealers, including giant AutoNation (NYSE: AN) and other major dealer groups. He said the company's second-quarter result showed that it's on the right path, even as the U.S. new-car market shows signs of slowing down: 

Over the past 6 quarters, since we launched our Dealer Pledge in Q1 of 2016, we have added approximately 3,000 net new franchise dealers to the TrueCar platform, the most prolific period of dealer growth in the history of the company. Given the recent contraction in the auto industry SAAR, the growth we delivered this quarter highlights the efficiency we bring to dealers and OEMs as well as our ability to take share from our competitors. We believe we have a better value proposition, and we expect to continue taking share of both dealer marketing dollars and OEM marketing dollars from other online marketing providers and from the traditional media world.

Perry said that efforts to expand the TrueCar site's content and functionality are well underway. Verified new-car owners will be able to post reviews starting in the third quarter, and an expanded feature set that will allow much more of the vehicle-purchasing process to happen online is in development now. 

Looking ahead: TrueCar boosted its full-year guidance 

TrueCar also released guidance for the third quarter and raised its full-year expectations. (Note that TrueCar beat its own previous guidance, provided with its first-quarter earnings report, for second-quarter units, revenue, and adjusted EBITDA). 

For the third quarter of 2017:

  • Total units are expected to be in the range of 265,000 to 270,000, versus 220,633 in the third quarter of 2016.
  • Revenue between $85 million and $87 million, versus $75.1 million in the third quarter of 2016.
  • Adjusted EBITDA between $7 million and $8 million, versus $5.8 million in the third quarter of 2016.

For the full year:

  • Total units between 975,000 and 985,000, versus 806,953 in 2016. (Prior guidance: between 950,000 and 960,000.)
  • Revenue between $325 million and $329 million, versus $277.5 million in 2016. (Prior guidance: between $322 million and $327 million.)
  • Adjusted EBITDA between $26 million and $28 million, versus $15 million in 2016. (Prior guidance: between $23 million and $26 million.)

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John Rosevear has no position in any stocks mentioned. The Motley Fool recommends TrueCar. The Motley Fool has a disclosure policy.