TrueCar, Inc.

Good day and welcome to the TrueCar 3rd Quarter 2023 Financial Results Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Mr. Jan Toon Rigersman, President and Chief Executive Officer of TrueCar. Please go ahead, sir.

Thank you, Operator. Hello, everyone, and welcome to the TrueCar 3rd Quarter 2023 Earnings Conference Call. Joining me today is Oliver Foley, our new Chief Financial Officer. I hope you all have had the opportunity to read our third quarter stockholder letter, which was released yesterday after market close and is available on our investor relations website at ir.truecar.com. Before we get started, I need to read our safe harbor. I want to remind you that we will be making forward-looking statements on this goal, including statements regarding our revenue growth, expected adjusted EBITDA, as well as aspirational goals regarding our three-year plan. Forward-looking statements can be identified by the use of words such as believe, expect, plan, target, anticipate, become, seek, will, intent, confident, and similar expressions, and are not and should not be relied on as guarantees 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 factor section of our annual report on Form 10K, our quarterly reports on Form 10Q, and our reports and filings with the Security and Exchange Commission for a discussion of 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. Reconciliation of all non-GAAP measures to the most directly comparable GAAP measure are set forth in the investor relations section of our website at ir.trucar.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. With that, I will provide a summary of the quarter as highlighted in our shareholder letter. This is an exciting quarter. We have surpassed our guidance. We're back to year-over-year revenue growth for the first time in nine quarters and achieved positive adjusted EBITDA a quarter earlier than originally indicated in our previous guidance. We have a clear vision, and we are working hard to realize it. The macroeconomic environment is showing signs of improving, and both consumers and dealers are in increasingly greater need of TrueCars offerings. US monthly inventory exceeded 2 million units for the first time since March 2021, a year-over-year increase of 50.3%. The percentage of new car sales over MSRP decreased to 39%, a decline of 37% year-over-year. And in September, average new car incentives climbed 129% year-over-year to $2,367. We still have a ways to go before the macroeconomic environment returns to historical norms, but it appears the tide has started to turn in our favor. We believe our focus on enabling transactions for both consumer and dealers through a more comprehensive journey, rather than selling page views, impressions or ads, will set us apart from our competition in new ways. Enabling the right consumer to find the right car with the right financing at the right dealer is essential to this experience. but actual online transaction enablement that includes the execution of key deal documents requires more than these components. Specifically, it requires an experience that integrates seamlessly with the processes and software relied upon by dealers, lenders, and other third parties. Building out these third party integrations is a complex challenge that requires time, but we're laser focused on meeting this challenge. We continue to make good progress on our product flow, having launched what we call our unified flow. This flow is designed to resemble traditional online commerce checkout flow, whereby consumers are provided with relevant transaction details, landed costs, and next steps to complete the purchase of the product they're buying. We have also successfully launched our economic cohort and our convenience cohort flows, and we're well on the way to launch our EV flow in December. We continue to refine each of these three cohort flows as we reduce friction, eliminate unnecessary steps, and learn from product-focused groups and consumer behaviors. We truly have shifted the organization to a product testing mindset and talent base, and the build-out of these cohort flows is emblematic of that shift. Beyond these three cohort flows, we see revenue opportunities stemming from the possibility of regaining dealers we have lost over the past several years, expanding value-added services to enhance dealer operations and further strengthening our OEM and affinity business. As we look forward, we believe we have tremendous growth opportunities, but we also know such growth cannot come overnight. We're building a company that can endure and sustain, and it can help shape the automotive industry over time. This happens from the ground up while making sure we have the right people in the right seats with the right focus and core values, all aimed towards pursuing both growth and profitability. For the fourth quarter of 2023, we reiterate our expectation of returning to double-digit year-over-year revenue growth and break even our positive adjusted EBITDA. In the longer term, we're focused on the importance of sustained revenue growth and positive free cash flow. We are in pursuit of both. We understand the importance of the rule of 40 as an indicator of healthy growing companies with good profitability metrics. We believe that what we need to do to drive long-term shareholder value for all of you is to simply execute and prove ourselves consistently. In light of this, we have established three-year aspirational goals. By the end of 2026, we're pursuing in excess of 300 million annual revenue, and greater than 10% free cash flow. We realize these are ambitious goals, but if we meet them, we would have combined revenue growth and free cash flow margin of at least 40% by the end of 2026, which we believe would emphasize our financial health under the rule of 40, as well as the value accretion opportunity we believe we have ahead of us. We believe that we have the opportunity, the platform, and the talent to execute our strategy, and now the macro is turning in our favor. Join us in this journey as we reshape the car buying experience. Now, operator, let's open the call for questions from our analysts.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.