TrueCar held a preliminary second quarter results conference call last week for investors in light of expected losses. During the call, management made a point to explain it’s important to discuss what is contributing to these predicted losses, but also “what did not happen.”

Scott Painter, TrueCar’s chief executive officer and founder, shared with listeners that the end of the company’s relationship with AutoNation, in particular, did not contribute to difficulties seen in Q2.  

“AutoNation stores came off in the third quarter, which did not contribute to the shortfall in the second quarter. The losses against us have not disrupted our dealer relationships,” said Painter.

Earlier this month, AutoNation and TrueCar announced their relationship would be ending as of July 31 due to a dispute about the sharing of customer information.

That said, TrueCar management did provide guidance to investors on the factors that did, in fact, impact Q2 performance, naming lower revenue growth, as well as an increase in spending as the main culprits.

On Thursday evening, Painter said, “Today, we announce our second quarter and full-year results will fall short of our prior guidance, and we are announcing the expected results today because we wanted to get the information out as soon as we had clarity on it, and we also wanted to provide insight and perspective on the quarter.”

Painter provided specific guidance on the following metrics for TrueCar’s Q2 performance before officially announcing the results during a future conference call, scheduled for Aug. 6:

• The company anticipated it will miss prior guidance on unit volume, revenue and adjusted EBITDA
• TrueCar expects Q2 revenue to come be in the range of $65 million to $65.3 million.
• The net loss is expected to be between $15 million and $15.5 million.
• Adjusted EBITDA for the second quarter is expected to be in the range of $200,000 loss to a positive $300,000.
• And units should come in at around 189,000 for Q2.

Mike Guthrie, chief financial officer at TrueCar, explained in more detail the reasons behind the losses, focusing on expected losses in EBITDA, specifically.

“One is revenue growth came in lower than expected, which resulted in lower growth in units during the quarter, and on the expense side, increased marketing spend associated with a number of initiatives within the company also contributed as well as headcount costs, which were related to hiring that we pulled forward to accelerate our mobile and the development of other new products,” Guthrie reported.

He also noted that the company was light on units across all three of its marketing channels by about 9 percent, which caused approximately a $9 million impact on revenue.

“We need to continue to add more partners that can help drive unit growth,” he added.

That said, it wasn’t all bad news for the company.

“Ironically, in despite of the miss in expectations, it’s shaping up to be our best quarter in corporate history in terms of unique visitors, unit volume, total revenue, closing dealer count and other key metrics,” said Painter.

The company expects to grow units by approximately 27 percent year-over-year, and branded channel units are predicted to increase by approximately 46 percent, which Painter pointed out is substantially higher than overall industry sales industry growth in new automobile sales, which grew at about 4 percent.

Painter also assured investors that the second-quarter results will be a “wake-up call” for the company.

“Despite the challenges in the quarter, I think we are all as excited about the company as we have ever been. I think this quarter is an important wake-up call to us, however, as an organization. We clearly need to focus, prioritize better and show a bit more discipline on the cost side of the business,” Painter said.

“What’s important is that we don’t feel like we have a consumer problem, as we are still able to draw customers as attractive rates to effectively grow our business," he continued. "And despite the legal challenges on the dealer front, we do not have a dealer problem as we are at all-time highs in terms of dealer count and in terms of revenue per dealer.”

During the Q&A portion of the call, not surprisingly, the topic of the loss of the biggest dealer group in the country, AutoNation, and the potential future impact on the company came up.

First, investors wanted to know why they were not warned of potential losses in Q2 during the announcement that TrueCar was parting ways with AutoNation earlier this month.

“When AutoNation announced, we felt like we had to address the AutoNation situation. We were not prepared to talk about the guidance in the business in the back half. We were still in the process of getting our arms around that,” Guthrie said.

TrueCar management pointed out that AutoNation constituted just three percent of the company’s revenue in Q2, noting it was a bit more than that last year and has been on the way down quarter-by-quarter.

The AutoNation break represents a loss of 279 stores in the TrueCar network, which Guthrie said it expects to replace by Dec. 31.

“The amount of impact AutoNation has on our guidance is small, if anything. At the absolute extreme end it has a 3 percent impact on Q3 and Q4. And we obviously don’t think it will be that large," Guthrie said.