TrueCar, Inc.

and welcome to the Truecar Second Quarter 2024 Financial Results Conference Goal. Please note this event is being recorded. I would now like to turn the conference over to Juntoon Vegasman, President and Chief Executive Officer. Please go ahead.

Thank you, operator. Hello everyone, and

welcome to the Truecar Second Quarter 2024 earnings conference goal. Joining me today is Oliver Foley, our Chief Financial Officer. I hope you have all had the opportunity to read our most recent stockholder letter, which was released yesterday after market closed and is available on our Investors Relations website at .truecar.com. Before we get started, I need to read our usual 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 free cash flow margin, as well as aspirational goals for the year 2026. Forward-looking statements can be identified by the use of words such as believe, expect, plan, target, anticipate, become, seek, will, intend, confidence, 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 other reports and filings with the Securities and Exchange Commission for discussion of the factors that could cause our results to differ materially. The forward-looking statements we make on this goal 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, such as reconciliation of all non-GAAP measures to the most directly comparable GAAP measures are set forth in the investor relations section of our website at .truegar.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. So now to the fun part. With that, I'll provide a summary of the quarters highlighted in our shareholder letter. Given the broader market developments, I'm assuming not everybody has read the letter yet, so I will repeat some paragraphs below as well as add some more color and exciting statistics on our TC Plus initiatives before opening for questions. As we review the results of our second quarter performance, we have taken the opportunity to reflect on our existing long-term, on our exciting long-term goals for TrueCar and the progress we are making towards our targets. We have established ambitious goals for our organization, and we remain steadfast in our commitment to achieving them. This does not happen overnight, and we will encounter inevitable operational challenges on our journey, but we believe we are making the right progress and forming the right habits while pursuing the right priorities to achieve our strategic and financial goals. This is a super exciting time for the company. In Q2, total revenue was $41.8 million, which represents growth of .4% -over-year and .8% -over-quarter. We achieved adjusted EBITDA profitability of $0.1 million, a $5.4 million improvement -over-year. We estimate that the CDK Global Malware Attack contributed to approximately $750,000 of lost revenue during the quarter, details of which can be found in the shareholder letter. First, we want to acknowledge some super important progress that was made during the quarter and to date in Q3. On July 17th, we proudly announced the launch of our TrueCar Plus Pilot, which now empowers consumers for the first time to purchase from over 3,000 new, used, and certified pre-owned vehicles from start to finish completely online. Launching TC Plus is a big deal and a huge accomplishment by the team. Furthermore, we're not only strengthening our core business by regaining important dealers on our platform, but by working to commercialize new value drivers, including but not limited to our unique data sets and predictive AI capabilities, our newly designed marketing tech stack, and of course, TC Plus. In doing so, we're becoming a better version of TrueCar that more effectively addresses the evolving needs of consumers, dealers, and OEMs alike, positioning the business for what we believe will be a sustained period of growth and market share gains. There were a number of factors that temporarily limited growth in Q2, one of which was the broad impact of the CDK Global Malware Attack. We are laser focused on our execution in order to grow the business at our long-term revenue growth targets of 20% plus. As discussed in the past, there are four key building blocks we must successfully execute against in order to achieve our desired long-term growth. One, activate new dealers with a focus on regaining many of the franchise dealers a turn while new vehicle supply was constrained. Two, reduce dealer churn by doubling down on our commitment to help them drive incremental sales and by providing them with unmatched support and service. Three, continue to grow average revenue per dealer through our TrueCar Marketing Solutions product offering and eventually through TC Plus. And four, grow revenue from our OEM business by expanding our OEM partnerships and continuing to invest in highly effective incentive programs across our network of affinity partners. The building blocks we set forth to meet our targets remain unchanged, as do our long-term goals, and we're not wavering on our goal to return to 300 million in revenue by 2026. During Q2, we expanded our franchise and independent dealer network thanks to strong growth in our new dealer activations. Moreover, we're now entering a market environment that is much different versus recent years. Our business model has been constrained by the lack of new vehicle supply, but that is now changing. Vehicle supply is returning at a time when demand is patchy. This is a very positive backdrop for TrueCar. To be clear, there may still be some choppiness in the short term as some dealers look for cost-saving measures. However, it is imperative for every dealer that they continue to drive sales. In a more challenging sales environment, TrueCar becomes much more valuable as a superior demand generation partner that can drive incremental sales. TrueCar is counter-cycle in this way, and therefore it is time for us to lean in. We started to do this in Q2, growing marketing spend by $3.2 million or 24% -over-quarter, which contributed to .5% -over-quarter growth in new vehicle sales versus .9% industry-wide and 9% growth versus the same quarter last year compared to flat industry-wide. We believe we have a unique ability to power targeted OEM incentive programs across our affinity network, and we are poised to capitalize on this ability. The rise in new vehicle inventory levels combined with the growing price sensitivity of consumers has created a challenge for many OEMs that TrueCar is uniquely positioned to solve through the delivery of private targeted offers across our network of 300-plus affinity partners. Nevertheless, our Q2 OEM incentive revenue declined 14% -over-year and 37% sequentially due to the timing of activation of new OEM programs and the slowdown in new vehicle sales volumes among dealers impacted by the CDK global outage. We see this as a timing issue only. We have a strong pipeline of opportunities, and the revenue trajectory will predominantly be driven by the timing of activations. We remain confident in the growth profile of this part of our business, particularly given the fact that although incentives have grown substantially versus last year as a percentage of manufacturer-suggested retail price, the average incentive amount per vehicle remains more than 30% below pre-pandemic levels, and we are uniquely positioned with a proven product-market fit. During Q2, we also achieved some of our highest levels of revenue activation and upgrades, largely driven by strong growth in the onboarding of new franchise dealers and reactivation of dealers that had previously left our network. Despite this growth being partially offset by dealer cancellations, we saw strong improvement across our sales effectiveness metrics during Q2, which we attribute to the sales team reorganization slash realignment that began in the second half of 2023, as well as our commitments to the focused repetition of daily sales activities that we expect will allow us to grow our dealer counts over the next few years. Another bright spot in our Q2 performance was the rate of adoption we saw of our suite of TCMS products. Recall that during Q1, we introduced eight unique products that leveraged TrueCar's proprietary data and hyper-targeted audiences to help dealers more effectively reach and win in-market car shoppers. For most of Q2, these products were available for dealers as add-ons to their existing subscriptions, and during that time, we have quickly grown revenue from these products from zero to a one million quarterly run rate with a tremendous amount of opportunity to grow further. Moreover, during June, we incorporated certain TCMS products into our enhanced subscription offering, and over the subsequent weeks, we have observed a significant lift in the adoption rate of the enhanced bundle among new dealers, as well as the number of existing dealers choosing to upgrade their subscription. Looking beyond Q2 and turning now to TC+, despite being delayed by the disruption caused by the CDK cyber attacks, we proudly announced the TC+, by the launch on July 17th. The launch represents a key milestone in our pursuit to become the first digital marketplace where consumers can buy a new, certified pre-owned or used car with or without a trade from the comfort of their couch through an entirely digital online transaction. By partnering with the right dealer group whose vision for the future of automotive retail is closely aligned with our own, we developed an online car buying experience that is integrated with the dealer's backend systems to overcome the historical obstacles to an entirely online transaction. Initially spanning 10 new car brands with over 3,000 new certified pre-owned and used vehicles in stock, consumers seeking the convenience and flexibility of shopping from home can search for the right car that is competitively priced, secure a loan from a range of lenders, receive a binding value for their trade-in that gets applied to their new purchase, choose from an extensive selection of compatible accessories, warranties, maintenance packages, and production products, and schedule the delivery of their new vehicle all on TrueCar's website. While used vehicles are currently available for delivery anywhere throughout the contiguous United States, excluding Massachusetts and New York, delivery of new vehicles will initially only be available to consumers in California for the foreseeable future. Over the next several months, the pilot will enable us to validate and refine the technical solutions we have developed to address each stage of the consumer purchasing process, test, and develop additional ways to eliminate friction from the consumer experience and identify and solve any dealer pain points that might emerge. Moreover, we aim to demonstrate strong consumer adoption of the online capabilities on TC Plus eligible vehicles and the value we can deliver to dealers through sales efficiencies and expanding their addressable market. Even though we've gradually turned the service on since July 17th, the new car service has only been available since last Thursday, August 1, in the entirety of California. Within this brief period, we have already seen some cool statistics, including first new car order placed within 48 hours of launching the product, conversion from vehicle detail page, adding to cart to credit application submission of over 40%, 12 orders placed, with orders placed in this pilot of TC Plus being defined as a consumer selecting a vehicle and a price, accepting a 350 credit card hold or lender offer, and uploading all the necessary documents. This is a big deal, and we have yet to open the proper top of funnel aperture for marketing, which we plan to do over the next several weeks. And yes, the cover page of the shareholder letter is an actual picture of a billboard between Silicon Valley and San Francisco. I've put here a smiley face, which you guys cannot see, but it has like big white teeth. It's really cool. Finally, we remain committed to the three-year targets that we previously set to grow revenue back to 300 million with a 10% free cash flow margin by the end of 2026. Achieving that goal requires strong execution against the four key building blocks we have articulated, and for us to continue pushing to build a better version of TrueCar that deserves to play a key role in the automotive retail ecosystem. While the path to 300 million will not be linear, and will be subject to risks outside of our control, we are confident that the ultimate outcome will be achieved. Meanwhile, our balance sheet remains strong with no debt and approximately 180 million of cash in equivalence at the end of Q2. We repurchased 425,000 shares for 1.2 million during Q2, and have subsequently repurchased an additional 1.26 million shares for 4.5 million between July 1 and last Friday. Despite the broader market turbulence, this is an exciting time at the company, and we are pressing full steam ahead.

Now, operator, let's open the call for questions from our analysts.

Great. Thanks for taking the question. You mentioned you had the highest level of revenue activation and upgrades in the second quarter. Could you elaborate a little bit more on the drivers here? Is it more company-specific adoption that you saw, or is it just more industry trends that you see in the broader marketplace industry? And then if you could quantify in terms of what this means for the monthly revenue for dealer going forward, and have a couple quick follow-ups. Thanks.

I'll start, and then Oliver can talk about the

monthly revenue per dealer. The short version is, I think, as we tried to highlight also in both the letter and the script, is the idea that macro is genuinely changing. It's changing because inventory is building up. It's changing because there is a lot of spent up demand, but affordability is a real issue. Therefore, really focusing on unit sales is really important. You focus on unit sales and help your dealers not only by actually helping them sell cars, but also the ancillary products that effectively enable them to sell even more cars, whether those are in-market shoppers or conquesting customers, etc. It's really about the package that I think is working in a world where our dealers are getting more and more under pressure. And then number one, so there's a macro component. And then number two is also, I think our sales team and our field team are doing a tremendous job after restructuring to also present themselves slightly different and articulate the value of true car also slightly different. So it's a combination of those two factors that under the leadership of Lisa are doing a tremendous job. And then Oliver, I don't know whether you want to say something about the revenue.

I would just add that it's amazing to see since we launched the TrueCar Marketing Solutions product suite, that's given us and the field sales team the opportunity to get in front of dealers who've known TrueCar for a long time, but they knew the older version of TrueCar that was purely a lead gen provider. So now that we have a much more expansive product offering and we can address today's dealer challenges, not just the ones of the past, we've been able to get in front of even more large enterprise and strategic accounts and really present to them this new product offering that we have. So I think it's a combination of the sales team really sort of hitting their stride and being much more effective in developing a strong pipeline and closing those opportunities. But I also want to say that the TrueCar Marketing Solutions products have really opened the door for us to get in front of more dealers and get them excited about what we're

doing. Understood. That's helpful. And then just maybe more near term, obviously the OEM incentives revenue, it's going to be lumpy. You mentioned some optimism that it's going to pick up in the second half. I was curious, like, you know, we are like a few weeks into the third quarter, could you update us on what you've seen so far in the third quarter? And then coming out of the CDK hack, is there any boundaries that you can give us around revenue or EBITDA as well for the third quarter overall?

Thanks. No, yeah, so I think the first on the OEM side, I think the OEMs, if you look, the pressure on the OEMs is increasing every quarter. And the dealers are asking them for help, obviously incentives need to come in. And so, and as you guys know, there are really two components to this program. So one is those are lumpy programs and also the way you design programs. And so the OEMs will initially start in a little bit more cautious, they might not make the incentive stackable, or they might provide certain limitations and then realize that actually they should take away these restrictions. And so there's both a combination of activations and as well as the design and the type of programs. And the short answer to your question is yes, we're positive from what we've already seen in Q3. We've seen that obviously there is activation, there's engagement, etc. So we're positive and bullish on that segment overall. Yeah. And then sorry, and then your question on CDK was, I think that the risk of CDK for us has really been limited to the last part of Q2. At the end of the day, we don't think everything is back online. And so the reality is like sales matching happens accordingly again. And so there's really no risk that deals have been done pen and paper without any form of sales matching going forward. There's always like never be surprised about some of the unexpected but overarching, I think the risk is fairly limited to in Q3 and it's really limited to the boundary of Q2 as we've outlined in the letter. So I think there's no, we should not expect any further issues with that.

Any kind of like guidance framework for the financials for the company for third quarter?

Yeah, absolutely. Thank you for the question. And you're the question of common sense here for form. I mean, look, like, as you can imagine, like, I'm always a little bit reluctant to to guide because of the way the business runs. And we write like a great examples a little bit of this lumpiness of OEM, we're super excited about the opportunity. We're doing all the right things, activations will happen. You'll start seeing that and in the long term, you'll see tremendous growth there. In terms of guidance, I would say we've indicated in the past that we're aiming to achieve free cash flow break even by the end of the year. Right. There might be some give and take there, but it's still an aim we have. So just want to now if we miss a little by here, it's on the end of the world, but it's really the focus of I want to make sure that everybody knows that this company is really self sustainable. And I feel that free cash flow is the right measure, -a-vis adjust a diva da. And then obviously for us to hit our three year plan, we need to start accelerating our revenue growth. And this really starts with consistently achieving double digit year of year growth and then obviously accelerating to beyond our long term target of 20 plus. And so if you work backwards from the 2026, we feel we can actually make that happen. It obviously does mean that we need to start accelerating, double digit is a focus, then obviously go beyond that. We're confident in the building blocks. We see the fruit of the labor come through. And there's still plenty of room of improvement in the various areas that we have, but overall market conditions for both consumer demand and dealer sentiment are in our favor and turning more and more in our favor every day. So we're very bullish.

Got it. Great. Thank you. I'll get back to you.

Next question comes from the line of Navid Khan. Be right in security. Please go ahead.

Hi. Thanks a lot. Just a couple of questions from me. So maybe just on the on the direct channel, you did increase advertising spend, but we didn't see that reflected in terms of unit growth in the direct channel. And I assume there's a lag effect because you spend on marketing. Unless it's performance, it might take time to kind of show up. So maybe just talk about how should we think about the direct channel in the back half, at least how are you thinking about it? And also maybe advertising spend in the back half. If that should go up year on year or sequentially, how should we think about that? And then I will follow up.

Thanks.

Go ahead, Oliver. Go first. Okay.

Yeah. So I would say that, you know, as we've articulated, we think probably the number one lever for us to drive down dealer cancellations and really sort of strengthen the health of our our dealer network is by driving incremental sales. And so what we're focused on doing is, is sort of capturing share of consumer demand each quarter. And I think we achieve that in Q2. You know, we did spend more money on both sort of branded media spend to the Truebar.com channel, but also we spent more marketing dollars across the partner network where, you know, we've had greater efficiency on that spend. But it is important that we are focused on both the direct channel Truebar.com and the partner network. And I would argue that, you know, we saw some some pretty encouraging signs, even with the spend that we put towards Truebar.com. I would say that the CDK impact in the last 12 days of the quarter, you know, certainly didn't help our unit count. And I think absent that, you likely would have seen a higher TCBC unit count and a lower cost per sale. There's also some of that spend that, you know, that's more longer term, right, isn't necessarily bottom of funnel going to convert into unit sales immediately. But if you look at the big picture, you know, we increased marketing spend and we accomplished our objective, which was to grow unit sales. And so we managed to grow new unit sales sort of well above sort of the average year over year, you know, volume growth across public franchise dealers. And so that's that's what we set out to do. And I think what we'll continue to spend, you know, fairly aggressively on consumer acquisition, because ultimately that's going to be what what helps us keep dealers on the platform, what attracts new dealers to our platform. But we'll always look to do that as efficiently as possible.

Okay. And I'm just trying to sort of kind of understanding on the growth that we had kind of expected versus where you, you know, reported. And obviously, this CDK hack is kind of part of that. But if I just kind of look at the numbers, right. Maybe that had like a 200 basis point of an effect on on your top line versus maybe like a 13%, I think, kind of alluded to you could achieve. So just trying to sort of unpack what the differential could be. Is it like a delayed spending on the incentive side or something else that helps us understand that?

Yeah, I think the biggest impact is just the delay or inactivations on the OEM side, right. So it's a little bit hard to really predict the timeline. And these are obviously number one, often higher high impact dollar. So these are high amounts as well as high flow through dollars. And so it's really just a timing issue more than anything else.

Okay, maybe last question. Just for the full year, you said that you expect to be free cash flow, break even. Is that exiting the year or for the full year as a whole? How should we understand that?

No, exiting the year.

Yeah,

exiting the year. 2-4.

Okay. Thank you, guys.

Next question comes from the line of Chris Pierce. Nate, please go ahead.

Hey, good morning, guys. How are you doing? Can you talk about the sequential decline in gross margins a little bit and how to think about that gross margin path the rest of the year?

Yeah, the sequential decline in gross margins is really attributed to the expanded TrueCar Wholesale Solutions product offering. So, you know, historically, we've always had this sell your car lead model where we would connect our dealer partners with consumers looking to sell their car. That is a much higher flow through versus the sort of profile offer model that we've launched earlier this year, whereby we are sort of, you know, acquiring vehicles directly from consumers on behalf of our dealers and ultimately selling those vehicles to our dealers. So, lower margin profile and what we saw in Q2 is that the expenses associated with acquiring those vehicles from consumers is what pulled down the gross margin sequentially.

I want to add one thing that I think is really important and you'll hear me reiterate this probably multiple times over the next couple of quarters, which is really the wholesale side is an enabler to TrueCar Plus. And I think that should not be overlooked. So, in a world where the TrueCar Plus flow is an online flow where you obviously want to provide a committed value on the trade as well and you want to enable the trade to flow fluidly through not only the consumer experience, but also through the dealer experience. Because not every dealer would want to have that trade, right? So, you want to be able to offset that trade immediately out back into the market. It's really about enabling TrueCar Plus scalability. And so, the wholesale side is really drive is the major driver of that is that and obviously that's already proving it's worth. So, I just want to make sure that people are fully aware that that's an important part of component on that.

Can you kind of just go into the specifics? Is it holding inventory or a certain dealer is not wanting certain cars and the value of the car to find? Or how should we think about that going forward?

Yeah, so if you think about it like, so there are two pieces, right? And one will just take more time and the other one is more near term. So, do you want to have, so the near term is you want to have a solution that if somebody trades their car as part of TrueCar Plus, you can actually give a real value. It gets baked into the deal. The dealer who sells the car grounds the car, but then has the option to keep the car or not, right? It's not up to the dealer. They shouldn't have to take the car, especially not if the trade happens across the country or right. It's not within their desired vehicles, etc. So, we want to decouple the trade from the actual selling of the initial car. And so, by decoupling that, you want to effectively then create a marketplace. Now, there's an added component to that, which obviously as we were working through that flow is that it turns out that a lot of our dealers would love to have access to use inventory. So, now you have a win-win, which is obviously great. We can solve the flow on TrueCar Plus and then over time as these volumes start increasing, also start having dealers effectively participate in the ability to get access to those inventories if the grounding dealer doesn't want to have the car. Which is awesome because if you can do that over time, then obviously you effectively enable a very attractive wholesale side of the business. But the reason why you won't see dramatic growth on the wholesale side overnight, and we want to make sure we do this in a very structured manner is really initially to support the TrueCar Plus growth trajectory. And then over time we can expand that as we have more and more dealers on the wholesale network effectively. Does that make sense?

Yeah. And then just one on TrueCar Plus. When you guys initially rolled out, do I have it correct that it was based in the southeast, but now it's California dealer based? Or can you talk about the dealer base and kind of how that's been shifting or kind of geographically why you decided to start in California?

Yeah, so

if you go back to, like if you think of TrueCar Plus 1.0, right, it was never really a full online transaction. It was always a formal super lead. And if you think about the broader market, that's effectively what most solutions are that people are claiming to be an online transaction. That's really not the case. I don't want to be harsh on the industry, but unfortunately I think there's a lot of snake oil. So in order to actually enable a transaction online to take place where everything happens online and you sign a RIC online and you do the fulfillment, etc., you want to narrow it effectively to, okay, what's the market you can focus on initially, where you have the in market consumers that are attractive to online shopping, as well as the dealers that are progressive and willing and able to work with us on the market. Creating this flow. So although we originally launched the first version in Florida, because there was a high demand there, we learned a lot from that, but that was really effectively a form of a super lead. This is the actual transaction form. We launched it in California really because we have a fantastic dealer group we're working with in California, but also because we want to in the new case, you want to kind of be state specific initially in order to avoid any conflicts or conflicts that are happening in the market. So we're working with the And so this is really about proving it out, showing that this is worth. What's fun and exciting is that you have all the different stakeholders looking at this thing. Wow, this is cool. But right, like, let's make sure we don't rattle the system too much and really focus on the DMAs, be within, be within the DMAs. Within the DMA and the state that the dealers are in for new, we can do this obviously more broadly for use. And then as we go and scale this, we can obviously start scaling more inventory within the state and then start adding other states as well. This also allows for an easier product development cycle because it allows for a more confined problem set to solve. So at the moment, new, you can buy within California, the whole of California. Used, you can obviously buy within the United States minus Hawaii, Alaska, Massachusetts, New York.

Okay, thank you.

From Tom White, D.A. Davidson, please go ahead.

Great, thanks. Gentune, you touched on new car supply kind of ramping up broadly across the industry and how that's an important new kind of industry development that should benefit you guys. I guess as long as demand, consumer demand hangs in there. But did I hear you also sort of mention that kind of in the face of that, you know, some dealers might, I guess, look to like trim operating expenses or overhead first before, you know, maybe leaning into new demand channels to kind of try and move that supply off their lots. I was hoping you could just kind of provide a little bit more kind of detail on that. Just curious, like, are you hearing that broadly from dealers? Like, where are they cutting? And I guess what gives you confidence that, you know, marketing expense isn't something they'll cut and is something eventually they'll lean into? Thank you.

Yeah, great question. So the short answer is yes. So obviously, inventory is building up. And so as you can imagine, floor financing, right, and expenses for dealers is high. And so sales efficiency is really important for them. And obviously, a nervousness that if rates like if affordability stays where it is, then yes, there's a lot of spend up demand, but spend up demand doesn't really have to be high. And so they have to be able to help the dealer because they obviously need to need to be selling cars. And so if you look forward, I think more broadly, the dealers are somewhat nervous, right, because at the end of the day, they're realizing that prices will probably come down, right, like, it will effectively almost start resetting a little bit similar to what it was pre pandemic. So they're going to get margin squeeze, right, if the prices and when prices come down, they have issues around demand and affordability. And then right, they have high floor financing costs, etc. So all together, obviously, they're very mindful of the P&L, especially of the P&L that they've obviously been able to have very efficient P&Ls in the recent times, and that now will really start getting under pressure. And so there's a lot of consideration around, okay, how, how to be efficient as a dealership. But this is exactly where I actually think we play really well. And this is also what I what I tried to allude to earlier when I made the comment about the field team is that the engagement we are doing with dealers is very different in the past, right? This is not about walking into a dealership saying, hey, I'm going to send you more leads. This is really about understanding the problem sets that different dealers cope with. And so and then dealer in Wyoming has a different very different dealer, the problem set than the dealer in, in LA versus New York. And so this is really about how can we help the dealers not only by servicing them well, but providing the right insights and certain and training, etc. But also having a much more broader product suite that actually allows us to custom those programs, much more to these dealers. So in many ways, a little bit of a harsher environment for our dealers, and I hate to say it, because obviously there are customers is not actually to our benefits, because it then means that yes, they're going to have a greater scrutiny. But I think under scrutiny, we actually perform better because we obviously have good results. And so, but yeah, overarching, I think if you were to pull the testament of dealers, there's a level of nervousness over the future if affordability doesn't come down relatively quickly, or if OEMs are not stepping in and helping support close that gap of affordability.

Got it. Thank you. That's very interesting. Appreciate it.

Next question comes from the line of Marvin Fong, BTAG. Please go ahead.

Hi, good morning. Thanks for taking my questions. So maybe a multi part one on on the launch of PC plus, but I know it sounds like it's only been live for less than a week here. But, you know, for the 12 orders you've referenced, you know, did everything kind of go as planned? Did you did you hit any snags? And also, just as you talked about, during the scale this in the fourth quarter of the year, is that sort of like a firm timeline? Or that kind of dependent on like how the transaction volume in the pilot phase go? Any any color that would be great in the follow up?

Yeah, awesome. So I always need to be careful how I answer that question given like the product like, like if you ask the product folks, nothing goes as planned. If you ask me everything goes as planned. So I think the answer is no, it's, I think, look, we're learning a ton. I think we're getting a lot of feedback, which is really good. I think you the real the real thing is fundamentally the flow is a really good flow. I think what's really interesting is once you actually open it up and have real consumers go through that are not like friends and family and like people that are somewhat adjacent, right, which is really what we've been doing, you immediately start seeing the little things where you might have a bias or you might like not have thought about it or something is unclear. What we do know is, look, we knew we could have further improve the product and you can effectively eternally improve the product. But we knew we wanted to be out there. We know we can shorten the steps dramatically in the flow. And, and we also know that language is really key in terms of understanding, right? Car buying is not something that most people do every day. So yeah, we're learning a lot. And then you're also learning a lot of nuances, right? Somebody who, like wants to have a financing and has three jobs. And so suddenly, you need to upload pay stubs, but we only had one one opportunity to upload your pay stubs, no three, right? Or three simultaneously, then how do you, how do you, like put that together or right, like even the interactions with lenders, etc. So net net is yeah, we're learning a tremendous amount. And the teams have been picking this up really, really well. We have daily huddles together, we turn, we turn like immediate problems that evening. So yeah, so I think this is exactly what we wanted to be. I would love to start scaling this right, we initially had this open at a limited distance from the dealers, we then gradually opened it further. As of last Thursday, we're opening in California for new. You also start seeing very different behaviors amongst the different credit profiles, right? Remember that historically, we were talking and at some point, you'll start hearing me talk about that again, around these cohorts, right? So, so the convenience cohort and, and the EV cohort, etc. So each of those have very different behaviors as they go online, we're observing very similar behaviors to the past as well. And so, yeah, so there's just a tremendous learning that will come from it. We're obviously looking to scale this, we're initially focused on the new side, really on California. The first thing we need to do is obviously start adding more inventory to that. Well, I should rephrase that we should first need to make sure that the product is flow fluid. And that's right, like all the tiny hiccups and kinks are worked out so that it's as automated as can be also for the dealer as well as for the consumer. Once we have that more under control, starting to start adding inventory to that, because obviously the matching of demand and supply is a key component around that. And then we can start thinking about doing this also in other states. And so really, there are these different segments. Remember, though, I'll just remind everybody that we don't charge for TC Plus, I don't expect any like revenue from that within this year. It's really about proving it. And it's proving it not only to the dealers, it's really proving it to the wider stakeholders. It's proving it to lenders, proving it to OEMs, it's proving it to dealers. A lot of people are looking at what we're doing and how we're doing it. So this is really exciting. And clearly people are resonating well with the product. So yeah, scaling initially product focused, then California focused, then outside of California, other states.

Awesome. That's terrific color. And then just following up on Chris's questions about the new kind of wholesale profile. So please confirm, I mean, is there any holding period risk? I mean, if wholesale prices or vehicle prices were to move very sharply? Yeah,

good, very good question. The answer is, I mean, minimal is the short answer. And so really, the idea is, it's not us wanting to become a wholesaler, or it's not us wanting to arbitrage the market or things like that. That's not what we're good at. This is really focused on initially enabling, right, having the infrastructure in place to enable the market to move forward. And then we're able to see plus growth from a trade in perspective. And then as a as a as a positive side effect of that is we have a lot of customers asking for inventory. So great. So then all the inventory that flows out of the TC plus trade ins, then obviously we can obviously offset to these customers. And then it's a win win for everybody. But the idea really is no, we don't want to take any inventory risk, we don't want to hold any inventory. That's not our business. And it's not really not we have to in terms of paper holding because you technically are holding inventory for a very short period of time as you trans it the paperwork because there's no other way. But it's really to just enable enable the TC plus flow. And obviously, it helps our dealer network to have access to inventory. But so yeah, so I would not I would not assume any inventory risk from our side. And we're not arbitraging any of these prices. So we're pretty much dealing at one price that we already have pretty much fixed on the other on the back end.

Okay, got it. Thanks so much, Chanti.

The question and answer session, I would like to turn the call back over to the gentleman for closing remarks.

Awesome. I

would like to thank everybody for taking the time to participate on our call today. I also want to thank the team for all their herculean efforts. We have many exciting initiatives in the works and the evolving team culture is a testament to all the right changes we have made. We are making progress with gratitude to the team. Thank you. And as I like to close off a lot of our letters to infinity and

beyond. Conference has now concluded. Thank you for attending today's presentation.

You

may now disconnect.