TrueCar Inc at Needham Technology and Media Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Chris Pierce - Needham & Company, LLC - Analyst : Why don't we start, we kind of hit on the history. It's a lead gen company, new cars and used cars. Why don't we start on new cars, move over to used cars, where you guys have been doing a little bit more with the lack of new car supply and that's where we can start. Just walk us through -- true you had franchise dealer attrition during the COVID period. I know the main reason was lack of new car inventory, kind of macro headwinds you guys felt the brunt of it, depressing the need for online lead generation from those dealers selling new cars. But can you just give us more detail, go a little deeper on that, some nuance as far as what happened and you guys were in the crosshairs of it and what's happening now as inventories come back to normal and transactions go back to normal in new car side of the world?

Question: Chris Pierce - Needham & Company, LLC - Analyst : And you can see it in your two most recent earnings reports, it looked like franchise dealer account kind of bottom and saw some momentum in the last two quarters. And it simply goes back to inventory climbing. Like, I don't want to overthink it. We're seeing more transactions in new cars trading below MSRP. Dealers are just kind of things are moving back to normal and inventories are going higher. Is there anything to certain brands not having inventory and other brands having inventory? And when those brands get inventory, that'll be the final catalyst to get things back to normal?

Question: Chris Pierce - Needham & Company, LLC - Analyst : And how is TrueCar weighted to those dealers that are still struggling to bring back, like those OEMs that are still struggling to bring back inventory?

Question: Chris Pierce - Needham & Company, LLC - Analyst : Can we just go deeper on that because that's I hadn't -- that's the first time I kind of thought of it through that perspective, but just so I have it right, a consumer would go through the process on the TrueCar site and have -- be reasonably comfortable that was the car they wanted at that price, but the dealer had so much leverage at that point in time that they had other people that would pay a higher price than stick there at then listed price for that vehicle. And that would lead to TrueCar not being able to close the transaction. Is that that was another headwind? Just want to make sure I understand that.

Question: Chris Pierce - Needham & Company, LLC - Analyst : Thanks for going deeper on that. I appreciate it. And then can we talk about -- you sort of touched on the attribution model. Can you talk about TrueCar has a [pay-per-sale] model or they had a pay-per-sale model from part of the revenue, which is different than some of the other lead gen providers in this space that are more subscription model where you kind of get paid on a quantity of leads basis versus a closed transaction basis. Can you talk about why you are shifting towards a more subscription model and what might that do -- how that might have hurt dealer attribution and how might that help dealers come back onto the platform?

Question: Chris Pierce - Needham & Company, LLC - Analyst : So can we talk about that then? Why don't we talk about franchise dealer account? How franchise dealer accounts can be coming back? What you're doing to drive franchise deal account back sooner? And then loop in TrueCar Plus and these other services, products that you're offering the dealers and how that might help, A, help them come back, but B, might help pricing down the road as well.

Question: Chris Pierce - Needham & Company, LLC - Analyst : And you talked about rising NPS scores among the dealers on your platform who are TrueCar and the dealers on your platform's relationship improving over time versus in the past. Does the AutoNation transaction sort of play into that? Is that something that would have happened seven, eight years ago or with them taking a stake in TrueCar? And does that validate that TrueCar is moving in the right direction and doing right by dealers on the platform? Is that the right way to think about that?

Question: Chris Pierce - Needham & Company, LLC - Analyst : We're talking about in new cars.

Question: Chris Pierce - Needham & Company, LLC - Analyst : So it is to an extent it's validating on TrueCar's position in the marketplace on the lead gen side, but it's really validating in your view towards what you're moving towards with TrueCar Plus being able to transact digitally versus -- AutoNation will have their own digital storefront, but TrueCar has a much bigger funnel of consumers coming through their storefront and AutoNation wants access to that funnel.

Question: Chris Pierce - Needham & Company, LLC - Analyst : So I talked about maybe shifting away from rooftop focus to more other KPIs. What are some KPIs that you guys are tracking internally on TrueCar Plus? What are some KPIs that you're going to share with the street eventually? And what -- how should we think about pricing? We've heard other players in this space that have moved digital talk about -- their digital deals close at a much higher rate and they're thinking about, they're in their head, they're thinking through what they should do as far as pricing power on those leads that have a more digital deal jacket where the consumer's REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 18, 2023 / 12:45PM, TRUE.OQ - TrueCar Inc at Needham Technology and Media Conference got financing, the consumer's made an appointment, that sort of thing. Like what kind of -- what does TrueCar Plus give you as far as an advantage or versus prior as far as pricing?

Question: Chris Pierce - Needham & Company, LLC - Analyst : Just so I have it right, I kind of think of, from talking to dealers at conventions or just kind of cold calling them, you've got a cohort of dealers that didn't love the pay-per-sale model. Now for them, you can try to move them to subscription, but you've also got dealers on the subscription package already. But because you're offering more value, you'll have the pricing power over time with those dealers. And can you just remind us, have you been able to raise prices with any dealers during this time? I'm guessing the answer is no because of supply and demand of vehicles.

Question: Chris Pierce - Needham & Company, LLC - Analyst : Okay, great. Just one on very big picture macro, then Teresa, I want to kind of hit on the financials a little bit. We sort of talked about inventories, inventories coming back, but just broadly, talking internally with some of the folks on the Needham research team, they're seeing auto dealers, OEMs, local dealers really come back in terms of advertising spend in a big way versus a year, two years ago. Is that something that I can think of as a leading indicator for lead gen spend, or it's all sort of the same type of thing because it's all marketing and dealers are increasing their marketing budget and that'll kind of have a halo effect on TrueCar and the industry TrueCar plays in?

Question: Chris Pierce - Needham & Company, LLC - Analyst : Okay, yeah. So sort of a halo effect over time as things normalize. Okay, that's the right way to think about it. Thank you. So TrueCar guided to double-digit -- at least double-digit revenue growth in the fourth quarter of '23, but you also guided to positive or flat or positive adjusted EBITDA margins in the fourth quarter of 2023. Just looking at my model, if I follow the letter of the law on 10% revenue growth, where it looks like you have to see a decent amount of OpEx reduction to get to adjusted EBITDA flat or positive. I just want to -- how do the pieces fit together in a better growth environment or a slower growth environment as far as dealers and transactions? And I'm just wondering how those pieces fit together. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 18, 2023 / 12:45PM, TRUE.OQ - TrueCar Inc at Needham Technology and Media Conference

Question: Chris Pierce - Needham & Company, LLC - Analyst : And was TrueCar Plus, would 2022 qualify as an investment year and that's why expenses come down or it's about the sales and marketing line in the sense that you feel like you have the funnel, it's about converting the funnel better, or it's kind of a little of both, kind of how you frame it?

Question: Chris Pierce - Needham & Company, LLC - Analyst : Okay. And can you talk about the cash balance you guided towards at the end of the year, TrueCar's cash balance in general and thoughts on that cash balance beyond the share buyback? I don't believe you were active in the first quarter of '23, but correct me if I'm wrong, but there's a little bit of discipline there, too. So I just like to hear what how you're thinking about the cash balance as it relates to the cash balance per share and what to do with the cash.

Question: Chris Pierce - Needham & Company, LLC - Analyst : Okay. And then congrats on the recent promotion to CFO. Are there any one or two key priorities that you're highlighting at this point in time or you're thinking through things that you want to get done in the first couple of six months or some low hanging fruit or things you want to action items for you and your team?

Question: Chris Pierce - Needham & Company, LLC - Analyst : Okay, okay. And then we have a couple of minutes left. Why don't we spend a couple of minutes on the used environment? Improving volumes in the first quarter of 2023. And TrueCar used to have leverage to new, moving increasing leverage to used. I guess why move into used. Was it the macro force your hand and you found you've had success there and what happens going forward on the used side of the world?

Question: Chris Pierce - Needham & Company, LLC - Analyst : Okay. But so it's more about, you've got this new funnel and you hadn't been, you've been under-monetizing the used trade-in aspect of the new funnel. And now you're finding a way to kind of monetize that aspect.

Question: Chris Pierce - Needham & Company, LLC - Analyst : Perfect. I appreciate the clarity there. Why don't we leave it there? I appreciate you guys spending some time with us this early in the morning. I know you're in California and we'll talk soon.

Question: Chris Pierce - Needham & Company, LLC - Analyst : Yes.