It was an eventful second-quarter conference call for TrueCar, one which included reporting an almost $15 million loss during the quarter, as well as plans for chief executive officer and chairman Scott Painter to step down later this year.
Though operating results suffered during the last quarter, the company did report an increase to $65.3 million in revenue (a quarterly record), up from $50.5 million during Q2 of 2014, as well strong unit sales — points that Painter touched on during the conference call announcing his impending resignation as the leader of TrueCar.
“While our business performance was solid, and all the fundamentals of the business remains strong, the bottom line is we failed to deliver the operating results that our shareholders deserve,” Painter said.
During the call, Painter explained as CEO, he bears the ultimate responsibility for the company’s performance, “and falling short of expectations, including my own.”
“I feel an intensely personal responsibility to our shareholders, our employees, our dealer and OEM partners, and the 6 million customers who engage with us on a monthly basis to always do what’s best for the business,” Painter said, as he founded and grew the company over the past decade.
That said, Painter said the potential of the business is far greater than its current operating results suggest, while also noting he has had a sometimes “strained” relationship with the dealer community the company exists to serve.
“In addition, I do not believe I have communicated our value proposition to investors as effectively as I could have. Those things are on me,” he said.
Painter said during the call, “It’s time for a change.”
He will continue to serve as chairman of the company’s board of directors and will work with the board to find a replacement by the end of the year.
The board has already formed a search committee, and will begin working on the search for the new executive. Painter noted during the call that if a successor is found before the end of the year, the succession process will begin sooner than expected.
And along with Painter’s move, TrueCar announced that Christopher Claus, former president of USAA Financial Advice & Solutions Group and a current director of TrueCar, has been named lead independent director. The company explained Claus will focus on the board’s search committee to find a new CEO as well as building deeper ties with USAA.
Growing unit sales & future outlook
Speaking of the growing TrueCar/USAA partnership, this topic came up in TrueCar chief financial officer Mike Guthrie’s discussion of unit results for Q2.
Guthrie began by noting, “The numbers that we will report today are all in line with those preannounced results,” that the company shared during a July 29 call.
Starting with unit sales from TrueCar certified dealers, Guthrie reports 190,358 units were sold on the company’s platform in Q2, up 27 percent year-over-year.
Here are a few more break-out unit stats highlighted during the call:
- The units sold by the company’s dealer partners represented 4 percent new-car retail market share for Q2, up 3.4 percent from this time last year.
- The TrueCar branded channel accounted for 82,112 unit sales or 43 percent of the total. This represented 46 percent year-over-year growth.
- About 21 percent of cars sold were used units in Q2, versus 24 percent in Q1.
- The USAA channel accounted for 58,883 unit sales, an all-time high, and up 14 percent from this time last year.
“The co-branded marketing campaign we launched with USAA on May 21 bolstered these results, and we saw a significant acceleration in unit sales growth from Memorial Day to the end of June, versus the first half of the quarter,” said Guthrie.
In fact, due to the success of the program, Guthrie shared the campaign will go through Labor Day.
“The results we achieved in late May and June were strong, and we believe we can take that momentum into Q3 and grow that channel by as much as 15 percent year-over-year,” Guthrie said.
The company also shared it is very focused on adding new partners that can “reignite growth” in the coming months.
“For the rest of 2015, the focus is going to be on continuing to grow the business while managing investments and cost and delivering adjusted EBITDA,” Guthrie said.
And as the company heads into Q3, Guthrie said TrueCar would be putting emphasis on three points, one being growing the partnership with USAA.
Secondly, the company has budgeted as much as $20 million on acquisitions spend for its TrueCar branded channel.
“We plan to adjust that number during the quarter based on our desire to achieve efficient cost-per-sale economics. In any event, we expect to grow units approximately 20 to 25 percent year-over-year in the TrueCar branded channel,” Guthrie added.
Lastly, the CFO shared TrueCar is taking a “conservative approach” to other partner channels, given four quarters of basically flat performance. TrueCar is forecasting sequential declines in Q3 and Q4.
“We will, however, focus diligently on working more efficiently with these partners in order to achieve better results,” Guthrie said.
As for what’s in store for Q3, the company expected revenue to come in between $65 to $67 million dollars, with units coming in within the range of 190,000 to 195,000.
Looking at full-year 2015 predictions, Guthrie expects revenue of $252 to $258 million on units of 730,000 to 740,000.