TrueCar, Inc.

Good day, and welcome to the TrueCar Second Quarter 2021 Financial Result Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask a question. To ask a question, you may press star then one on your touchtone phone. To withdraw a question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Scott Watkinson.

Please go ahead.

Thank you, Operator. Hello, and welcome to TrueCar's second quarter 2021 earnings conference call. Joining me today are Mike Darrow, our President and Chief Executive Officer, and Jantun Riegersman, our Chief Financial Officer. As a reminder, we will be making forward-looking statements on this call. These forward-looking statements can be identified by the use of words such as believe, expect, plan, anticipate, become, seek, will, intend, confident, and similar expressions, and are not and should not be relied on as a guarantee of future performance or results. Actual results could differ materially from those contemplated by our forward-looking statements. We caution you to review the risk factors section of our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our other reports and filings with the Securities and Exchange Commission for a discussion of the factors that could cause our results to differ materially. The forward-looking statements we make on this call are based on information available to us as of today's date, and we disclaim any obligation to update any forward-looking statements except as required by law. In addition, we will also discuss certain GAAP and non-GAAP financial measures. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are set forth in the investor relations section of our website at true.com. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Now, I'll turn the call over to Mike.

Thank you, Scott, and good afternoon, everyone. This quarter is going to be a bit of a departure from our previous calls. I'll start my remarks today with a brief review of our impressive Q2 results. I'll then discuss our view of the current market conditions and the opportunities and challenges we see coming out of Q2. Lastly, I'll remind everyone of where we're headed as an organization with a specific emphasis on where we plan to play in the ongoing digital transformation of the automotive vertical. I'm pleased to report that Q2 was another strong quarter for Trucar. Overall, we ended Q2 above both guidance and consensus forecasts with revenue of $65.8 million and adjusted EBITDA of positive $4.7 million. Year-over-year revenue increased by 12 percent, and quarter-over-quarter revenue increased by 1 percent, while being constrained by retailer inventory availability throughout June. Additionally, Q2 was a record traffic quarter. Consumer traffic hit a historic high of 9.6 million monthly unique visitors. This was partially driven by sourcing Trucar unique research content covering nearly 100 new vehicles since the beginning of the year. Prospect conversion was 7% for the quarter, up from 6.2% and 6.3% in the previous quarter and Q2 2020, excluding USAA, respectively. Unit growth driven by TrueCar.com and Affinity partner growth increased 39% year over year. Furthermore, we added three OEM programs to our newest Affinity partner platform, Navy Federal Credit Union. Overall, our affinity partner channel showed 39% year-over-year unit growth and 26% year-over-year visitor growth, while over 22 partners set new monthly unit records throughout the quarter. Strong retail demand for new and used vehicles was a key driver for Q2 retail automotive sales performance. Early in the quarter, the overall recovering economy was strong and consumer demand reached near record highs with April SAR being the highest since 2005. This is despite a 45% year-over-year increase in gas prices from $2.17 in June of 2020 to $3.16 in June of 2021, coupled with a six-year low in OEM incentives. Additionally, new vehicle stock was 1.3 million units less in June of 2021 than in June 2020 and 2.6 million less than in June of 2019. This combination of high demand and low supply caused OEMs to reduce their marketing and incentive spend dramatically while they search for creative ways to adapt to the shortages. OEMs are continuing to make strategic decisions on chip allocation to high margin or popular vehicles and are experimenting with creative ways to build vehicles that can be completed when more chips are available. Even with these solutions, new vehicle inventory decreased significantly during Q2, and we believe it's unlikely inventory will rebound to pre-pandemic levels before the end of the year. Regarding the pre-owned market, vehicle acquisition was a key focus for many retailers. The scarcity of used vehicles led to extreme competition between retailers in acquiring cars directly from consumers. The new and used vehicle inventory scarcity and pent-up demand allowed dealers to increase prices and decrease their SG&A expense to further strengthen their net returns. In the face of uncertainty regarding new vehicle production, we believe retailers will continue to focus their efforts on pre-owned vehicles, and Jan Toon will address our plans to support our retailers in that area in his comments. Digital retailing initiatives grew as dealers continued to build or partner for an end-to-end offering. This demand led to major consolidation in the digital retailing space between industry vendors, especially the large all-in-one providers that offer both DMS and CRM integration capabilities. We believe this consolidation underlies the importance of a more broadly applicable solution for dealers and consumers alike to have the best digital retailing experience, one we at Trucar can uniquely provide given our consumer trust and our strong dealer network for both new and used vehicles. This is a good moment to provide an update on our current products as well as our end-to-end solutions. As I mentioned in our last call, in the first half of the year, one initiative we focused our efforts on was expanding our deal-building capabilities across our new and used car inventory, and thus providing the ability to our consumers to configure monthly loan payments, including all taxes and fees for pre-owned vehicles. This obviously is a fundamental part of building an end-to-end solution. Throughout Q2, we've been rolling out our deal-building experience across the used car marketplace. And thus far, we are happy to report that we enabled more than 60% of pre-owned vehicles or approximately 500,000 vehicles with accurate payments, helping our consumers purchase vehicles with complete price transparency and precise payments based on actual data from lenders. In addition, In the last quarter, we continued expanding our deal-building capabilities across our partner network, reaching approximately 50% of partner traffic, and we intend to continue rolling out this experience across the rest of the partner network by the end of the year. Overall, the number of consumers building deals on our platform continues to gain momentum, with 25% of TrueCar.com new car prospects and 6% of TrueCar.com used car prospects actively engaging and are building deals. In addition to increased consumer engagement with the tool, we also see a very healthy increase in customer satisfaction with this experience and a 2x increase in the net promoter score on Truecar.com, which further underscores our shopper's desire for price transparency, convenience, and a stress-free buying experience. We also observed 26% and 31% increases in close rate for prospects that build deals for new and used cars, respectively. Additionally, in April, we launched our first pilot program of a digital retailing integration partnership with Roadster. Our two companies have more than 500 mutual dealer partners configured to support consumers with a desire to complete various purchase steps digitally. Initial data from the pilot indicates that approximately 20% of consumers who build deals want to finalize their deal online and are handed over to Roadster's checkout process. This is a very encouraging metric as we progress further in our vision to bring more of the purchase process online natively to Truecar.com. We are also seeing that 33% of those consumers transferred from Truecar.com to Roadster checkout experience complete and submit a credit application. As a reminder, we have designed an open API spec for API-based integrations to standardize the transfer of data from our auto buying platform to dealers' digital retailing tools. That way, we can extend the digital buying experience for our consumers from deal building to deal finalization at the dealer, while at the same time, we ensure active dealer participation in our marketplace by integrating their digital retailing tools. While providing extensive consumer flexibility, this approach still remains a hybrid digital solution with opportunity for improvement from a fully contained solution. In parallel, we are actively working on a true car native solution, an end-to-end car buying experience entirely online, including all aspects of purchase finalization, such as credit application, aftermarket products, e-contracting, and nationwide vehicle delivery. In fact, as it relates to the credit application and aftermarket product component, I am very excited to announce that we have partnered with Autofi, the leading commerce platform for end-to-end digital automotive sales and financing to provide consumers with an easy and seamless process to explore auto financing directly from the Trucar marketplace. Trucar consumers will be able to see the offers from a variety of lenders, compare them, and decide what's right for their needs. In addition, once they've selected their financing options, they'll be able to choose protection products and thus complete the essential steps of purchase finalization digitally on our platform. I have alluded to this in the past, but want to take the opportunity here to provide some additional clarifying details. Our goal is to build an auto buying platform in the form of a two-sided online marketplace that gives consumers the ability and the convenience of purchasing a car new or used, from the comfort of their couch, while at the same time providing our participating dealer partners the ability to efficiently market and sell units at scale. In order for this to succeed, we intend to combine the strength and trust of the consumer-facing Trucar brand with the strength of our extensive dealer network to create a true two-sided marketplace that enables dealers to transact their sales online within the comfort and convenience of the trusted Trucar platform. This ultimately will provide consumers with a streamlined and enjoyable purchasing experience and allow our dealers to facilitate a complete online car buying experience, thus enabling them to scale while being more efficient and highly profitable. During the second half of the year, as we seek to finalize the build out of our native end-to-end car buying platform, We plan to launch multiple milestone-based tests of our end-to-end experience with a targeted set of dealers. Here, we can test, learn, and iteratively improve our platform by working closely with our dealer partners to reshape the future of the online car buying experience. Our goal is to have full end-to-end transactions flowing through our platform with our initial set of dealers in Q1 of 2022, and to scale up from there with additional dealers who share the vision of making this experience available to consumers who want it. Before turning the call over to Jan Toon, I'd like to thank all the amazing Trucar members who, through their unwavering focus and commitment, have enabled us to deliver impressive quarterly results in our core traditional business, while in parallel, continuing our integration work with dealer digital retailing efforts And most importantly, put us in a position to become the first automotive marketplace with a true end-to-end digital retail experience for both new and used cars within the first quarter of 2022. And with that, I'll hand the call over to Jan Toon.

Thank you, Mike. These are super exciting times at the company, and I'm proud to see the strides the team is making in our transformations. Before I touch on our second quarter performance, I would like to reiterate the message Mike just underlined. Despite the macro challenges, we delivered another strong quarter with units up 39% year over year, excluding USAA, the closest proxy for our performance. Looking ahead to the second half of the year, we do expect continued inventory constraints, while experts predict the SAR will continue to decline from original 2021 projections. Volume brands such as Toyota, Honda, Kia, and the American OEMs will continue to lag behind the average dealer day supply for the balance of the year. Even though temporary in nature, we do anticipate continued pressure on our dealer count throughout the remainder of the year. In the near term, we will seek to partially mitigate this by fast-tracking additional product offerings, especially used vehicle acquisitions. We also plan to expand our single VIN multi-market offering or distance retailing, as some may call it, for pre-owned cars so traditional dealers can compete equally with the online retailers. In the longer term, we are confident that the combination of our current business model with the before-mentioned end-to-end solution will make us a winning platform in the industry for dealers and consumers alike. In other words, we have a fundamentally strong business with ample room for further growth in its current form in addition to tremendous value creation opportunities in our new product roadmap. So despite the macro challenges, these are very exciting times at the company. I'll now review the strong financial operating results for the second quarter of 2021. Revenue in the second quarter came in at $65.8 million, up 12% year over year. The year-over-year increase was driven by a strong 39% growth in units year-over-year excluding USAA and bolstered by COVID-19 concessions we provided to certain subscription arrangements in Q2 2020. Franchise revenue ended the quarter at $48 million, up 14% year-over-year and flat quarter-over-quarter. Independent revenue ended the period at $11 million, up 87% year-over-year and up 6% quarter-over-quarter. New dealer product revenue came in at 3.7 million, up 80% year-over-year, but down 2% quarter-over-quarter. OEM revenue and other revenue ended the period at 2.8 million and 0.3 million respectively, with OEM revenue down 42% year-over-year, yet flat quarter-over-quarter. We ended Q2 with 13,159 dealers, down 7% from the end of Q1. The primary cause was limited new dealer activations, a consequence of the constrained macro environment as dealers sell out their inventory. Total units for the second quarter ended well above 194,000. Year-over-year, Truecar.com and extended affinity units were both up 39%. Monetization for Q2 came in at $336, up 16% compared to the same period last year. The year-over-year increase was driven by a combination of strong growth in units year-over-year, excluding USAA, and bolstered by COVID-19 concessions we provided to certain subscription arrangements in Q2 of last year. Now, turning to expenses and margins for the second quarter of 2021, where all of the following metrics are for continuing operations and reported on a non-GAAP basis, unless otherwise stated. The business generated $60.1 million of gross profits in Q2, a gross margin of 91% and in line with prior quarters. Technology and development spend of $9.6 million was down from the first quarter due to seasonally expected lower headcount costs and down year-over-year driven by a lower headcount in general. General and administrative spend was $9.8 million in the second quarter, in line year-over-year, and down from Q1 due to lower headcount costs and professional fees incurred. Sales and marketing spend, our largest expense category, ended at $36.0 million, up 42% year-over-year. As a percentage of revenue, sales and marketing improved 200 basis points to 55% as compared to Q1, but is up 11% from Q2 2020 due to our decision to dial back on marketing during pandemic-related lockdowns in the prior year. Within sales and marketing, Truecar.com acquisition spend was up 145% year-over-year and down 4% quarter-over-quarter, ending the quarter at $13.5 million. Truecar.com units were up year-over-year 39%, resulting in a cost per sale of $130, 16% below the prior quarter and 76% above the prior year. The difference in year-over-year CPS performance reflects the macro environment we faced last year in which we pulled back on acquisition spend and therefore had a deflated cost per sale. Partner marketing spend was $11.6 million in the second quarter, up 14% and 68% quarter-over-quarter and year-over-year respectively. Sales have gone another. The final category within sales and marketing ended the second quarter at $10.8 million, down 70% year-over-year, primarily driven by the reduction in headcount that went into effect in Q2 of 2020. In summary, significant efficiencies across all categories of our sales and marketing spend drove a 3% reduction in non-GAAP expenses quarter-over-quarter, resulting in an adjusted EBITDA of 4.7 million, up 126% quarter-over-quarter. GAAP net loss from continuing operations for the second quarter of 2021 was 7.1 million, or 7 cents per share, compared to a loss of 11.4 million, or 11 cents per share, in Q2 of 2020. I'd now like to provide commentary on our expectations for the rest of 2021. Despite an improving retail environment in the first half of 2021, there remains a heightened level of uncertainty, especially around the industry implications due to the inventory shortages. While our core business fundamentals remain strong, increased pricing, and further constrained availability of new car vehicles, as we began to experience in June, will create an uncertain environment for new unit retail volume until inventory approves. As such, we will not be providing formal Q3 or full-year guidance at this time. We will continue to manage the business responsibly and expect above break-even adjusted EBITDA for Q3. And with that, let's go to questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speaker phone, please pick up your headset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Steve Dyer with Greg Cowell. Please go ahead.

Thanks. Good afternoon, guys. I may have missed this. I know you sort of touched on the dealer count quarter over quarter down fairly significantly, but I don't know that I heard a reason or sort of what you're seeing real time as to why that was and why you expect that pressure to continue.

Hey, Steve. This is Mike. Thanks for the question. We did see some downward pressure in Q2, particularly the second half of Q2 with dealer count. A very, very high percentage of that was based on the limited inventory availability that was out there in the marketplace. And, you know, we've begun to take some efforts, as you saw in some of Jan Toon's comments, around shifting some focus to the used car side of the business. But we feel we've got the dealer count under control. Even with the decline we had in Q2, we were able to hit above the top line revenue number. The big impact that we're seeing around the decreased inventory and then the resulting retail pricing that's going on in the new car space is that it's creating some uncertainty around new car close rates. And about 30% of our business, as you know, is pay-per-sale and with an inability to really get our arms around a close rate based on data that came in. And Q2 was a quarter of two different stories. April was a great month. Records saw looking back to like 2005. And then we saw inventory begin to change the story through May and then into June. We feel confident we've got the dealer count issue under control. Our core dealer network remains very strong and intact. And our biggest gap, I guess, in what we're looking at is, you know, what will happen to new car close rate as we go into Q3.

Got it. Okay. And I guess looking ahead, I know you're not giving specific guidance, but just given the fluctuation in dealers and things like that, Q3 has typically been up, you know, modestly from Q2. Would you expect that relationship to hold this year, or is the lower dealer number going to weigh on that?

Yeah, I think what we'll see coming out of Q2 is we will face some pressure from on that sequential quarter growth in Q3. Not necessarily, like I said, because of the dealer count, but on the uncertainty around paper sale units that will flow through the system in Q3. And listen, we're very proud of the business coming out of a very strong first half and what we were able to accomplish. We're bullish on where the business is going to go, both for our core business and the things that we've been able to put in place to advance our end-to-end digital retailing platform that we provided some details on, and we're excited about the impact that's going to have on our business. So this inventory situation is a very temporary situation. We know we'll quickly work our way out of it, and we're confident that as inventory starts to build, we will see close rates come back up. Pricing will normalize again on the new car side. And it'll give us a better line of sight on our top line number for Q3 as that happens.

And I guess I'm not entirely sure. Maybe could you explain the close rate, you know, the paper sale close rate piece of it? I mean, I generally understand that's about 30% of your business. But how is that right now being impacted?

Yeah, so as we talked about on the call, the key metrics, the fundamental metrics to our business are extremely strong. So in Q2, we set all-time traffic records and prospect records for the traffic coming through our platform. So those are two of the three fundamental metrics we look at to calculate and to forecast our business, and those are at record levels. What's happening is as we send people into the marketplace at retail, they're finding a very, very limited selection, and on what vehicles they can't find, they're seeing pricing that's kind of unprecedented to the time. So that's impacting the close rate, which, as you know, on our pay-for-sale units drives that business. So hopefully that explains it. Like I said, the core fundamentals are strong. Top of funnel is very good. Conversion rate is good. It's just without inventory in the marketplace and with the pricing on the vehicles that are available, our shoppers aren't finding a solution. to their buying needs at the rate we normally see.

And so then maybe the deviation, I guess, it sounds like between your results and outlook versus a competitor who reported this morning is largely you're much more tied to new, which is a hard place to be and probably will be for a little bit, yeah.

Well, we're not only more tied to new, but we're also more tied to the transaction, right? We've always talked about being very accountable to, and running a system of attribution that ties us to the success at the dealership with sales. The other reports you're going to hear about marketing numbers and software sales products and things like that, we're running more of a pure marketplace and we're affected more in times like this when inventory gets so low and dealers react by raising prices the way they have. So that's a big piece of the puzzle. What that allows us to do, and, you know, I've had this conversation, is it sets us up to be successful in moving this end-to-end process truly into place. Excuse me. So, you know, we're excited about the progress we're making there. We've seen good results with the products we've launched around moving consumers further along the process digitally. And, you know, we'll be ready in Q1 to start Q1 of 2022 to start flowing end-to-end car buying solutions for both new and used through the system. So, yeah, our report's different in that we actually tie our success to the dealer's sales.

Got it. Helpful. Thanks, Mike. Mm-hmm.

Our next question comes from Marvin Fong with VTIG. Please go ahead.

Great. Thank you for taking my questions. Yeah, just to revisit dealer count, actually, perhaps more of a forward-looking question, but when inventories do return to normal, how would you expect the dealer count to behave? Should we expect a pretty sharp snapback? I appreciate the difference between dealer count and the unit sales that you just spoke about, Mike, but Just in terms of the actual dealer count, how would you expect that to come back once inventory is normalized?

Yeah, I think we'll see it come back. Marvin, how quickly it comes back will probably vary by franchise, will vary by how quickly the brands get caught up on their inventory and how that happens. We track reason codes very, very closely through our system when a dealer leaves our platform. And like I mentioned, A very, very, very high percentage of the folks leaving our platform are stating that the reason is limited inventory to no inventory to sell. So we expect that to respond very, very quickly. Once the units start to build back up, we feel strongly that we're viewed as a very efficient investment for dealers when they're selling cars and bringing consumers in on those units. So we think it'll come back quickly. The challenge we're having, and I think everybody's probably facing the same thing, is the information seems to be inconsistent about when inventory will come back. It varies by brand. It varies by model. A lot of different discussions going on as to how that's going to come back. So we're keeping a close eye on it. We're managing our dealer count. We're managing our business through Q3, and we'll look forward to good results. But we just didn't have enough data around close rate to to put a forecast or a guidance out there, but we expect this to be very short-term, and we think it will snap back to your question.

Thank you. And a couple of follow-ups maybe for John Toon. On monetization, if I back out sort of OEM incentive and new dealer products, it looked like it came down pretty significantly, maybe closer to where it's been in prior quarters. Could you just kind of talk about the puts and takes of monetization in the quarter and how we should model that, you know, going forward the next couple of quarters. And then if you could just touch on marketing spend and your ability to kind of move that to protect your margins, you obviously have in mind that you can even break even. That would be great. Thanks.

Sure. So I think a couple of things. So on the monetization side, remember, as Mike mentioned, so 70% of our business is effectively subscription, 30% paper sale. As a result, your monetization will somewhat fluctuate because obviously your paper sale on a relative basis will have an influence on your average monetization. Currently, the one uncertainty is effectively your close rates around the paper sale element. And so as a result, that's the reason, really the only and simple reason why we wouldn't be guiding because it's just a fluctuation that we have that's a fairly significant finite risks that we're managing. And we've already addressed some of the pieces on how we go about that in the coming quarter. But long story short, I think we've mentioned also in the past, monetization will somewhat like decrease over the remainder of the year because of that mix between subscription and paper sales. Your question on the marketing side, So there are a couple of elements associated to this. So one is, obviously, everybody currently in the industry is focusing on the same keywords, right? Everybody's focusing on used. And so there's some element of your cost of marketing. Overall, though, remember that one of the advantages that I think we have as a business model is that pretty much 50% of our cost structure is flexible and variable. And so a large part of that is marketing. The marketing team that we have is a very good team and we're very adequate in moving according to the channels and see the right opportunities as we've been doing. And as you've seen over the last couple of quarters, we've gotten very, very efficient in our marketing spend and our cost of acquisition. This obviously is a little bit of an interesting time as all the different players are effectively focusing on kind of the same channels. But overall, we feel we have a lot of room, not only on the performance marketing side, but also on like more of the overall brand marketing, et cetera. I mean, I think Mike in his remarks already alluded to effectively, we've now written articles on 100 vehicles that have received a lot of unique visits, et cetera. And so there's a lot more room for us to also create more visitors accordingly. The other thing I want to mention is, look, fundamentally, the business is strong. We have good visitors, numbers, right? People are going through with good conversion rates, et cetera. It's really the element of the close rate in a particular round, the PPS element, that is just hard to predict as we go through this period of inventory constraints. Does that answer the question?

Yes, totally. Thank you, John. Thank you, Mike. Appreciate it.

Our next question comes from Rajat Gupta with JP Morgan. Please go ahead.

Great. Thanks for taking my questions. Just had an initial question on just any learnings from the pilot program with Roadster. How does this relationship change as Roadster integrates with CDK? Could this potentially help improve deal integration and eventually help serve a larger dealer? Just trying to see like how you're connected to that acquisition and how that changes things for you. And I have a follow-up.

Yeah, great question. And I think, you know, we've seen some real positive results from our initial pilot and the work we're doing with Roadster. We have over 500 dealers now. who are mutual dealers to both of our platforms. And we are beginning to flow folks through that system. We launched that program in May, and it takes about 90 days for us to get real data, particularly around the maturation of sales units and that. But we have seen some real interesting things. And the first thing I mentioned in the pre-read was that 20% of people who get to the stage of, do you want to finish the deal online, are clicking. that they do. I think that's a number higher than what you hear from the marketplace. You know, oftentimes when you talk to a retailer, they'll say less than 10% of my volume is, you know, fully digital or people who want to do the deal fully online. You know, we're getting indications that the number is much more significant than that through our Roadster test. We're seeing good MPS, customer satisfaction numbers for the folks flowing through it. So there's a lot of good information data that we'll be able to talk about more as we gather more of it regarding sales and clothes and things like that. As far as the relationship with Roadster is very strong. I talked to Andy after the company was acquired. He was excited about it. They create a bigger footprint for them in the marketplace and their relationship with CDK and a bigger footprint for Roadster therefore provides a bigger opportunity for us to expand that business with them. We've gotten a real positive reaction from particularly our big dealer partners on our approach to leaning into the digital systems that the dealers are investing in. Roadster was the first one of those, and we're real happy with it. We hope to see that one grow, and we all have plans to add more of those digital retailers to the system as we go.

I just want to add one thing that I think is important. The Roadster integration is interesting for us because it really is a further qualification of the leads for the dealers. But at the end of the day, it still is a, in some ways, only a partial digital integration. What's really where we're focused and where I think the emphasis has been also in the preamble has been around us building out a much more native solution of a true end-to-end, which is effectively one step further. So even though the roadster integration is a very interesting part, and it's really our responsiveness to our dealer network to enable a variety of options to integrate with our system in some shape or form, it's really the native piece that will enable a true transaction happening online.

Got it. Got it. That's helpful. And, you know, I don't know if this came up earlier on the call, but, you know, one of your peers rolled out this instant online appraisal tool helping dealers source inventory from retail customers, you know, a trend which has amplified over the last few quarters. Just curious if you could share your thoughts on this dynamic and if, you know, you're looking to, you know, venture into any such avenue going forward as well. Maybe that can tie into the capital allocation as well.

Yeah, we're looking at certainly leaning into our dealer partners acquisition of used vehicles. One of the ways we've done that is through our deal builder product. You know, the best way and still 50% of the people who are transacting on a new vehicle have a used car attached to that. We put a guaranteed value on those trades for our for our retail partners and, you know, they're getting interesting volume through that. We've always got our eyes open as to, you know, things we could be doing to help dealers in the used car acquisition space. We have a sell my car feature, you know, on our site right now that, you know, we get activity on and pass that dealer on to our retailers. So, you know, we're paying attention to that space. There's certainly a lot of focus around it right now as As new car inventory is short and dealers change their focus to used cars, and we'll continue to lean into that and continue to try to help our retailers with that piece of it.

Got it. Got it. Great. Thanks a lot for all the color and good luck.

This concludes the question and answer session. I would like to turn the call back over to Mike Darrow for closing remarks.

Okay, I'd just like to thank everybody for taking the time to participate in our call today, and I'd also like to thank again all the hard workers here at Trucar who are enabling us to publish a strong second quarter and also make progress on our integration work with the digital retail partners and also our journey to be the first two-sided marketplace with making new and used cars available in a digital way. Appreciate your time, and thank you for participating.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.