Q4 2023 Earnings Summary
- TrueCar sees a huge opportunity in growing its OEM incentive revenue line, with active dialogues and interesting programs with OEMs, expecting to get back to historical OEM numbers and beyond in the coming years.
- TrueCar+ is expected to help attract new dealers and retain existing ones, providing a differentiated marketplace that expands dealers' addressable market and improves their ability to drive F&I sales. This could lead to regaining market share and increased revenue growth starting in 2025 and beyond.
- TrueCar maintains over $135 million on its balance sheet and expects to be free cash flow positive in the second half of 2024, providing opportunities for strategic acquisitions, share repurchases, or investing in growth initiatives like TrueCar+ to drive future growth.
- TrueCar's OEM incentive revenues are lumpy and difficult to predict, leading to uncertainty in revenue growth projections and making it challenging to forecast future performance.
- TrueCar anticipates a continued decline of smaller independent dealers throughout the year, due to factors like high financing costs and challenging market conditions, which may negatively impact their dealer network and revenue.
- TrueCar+ is not expected to contribute significant revenue in 2024, indicating potential delays in realizing growth from this initiative and uncertainty about its future impact on the company's financials.
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Revenue Growth Expectations
Q: How will incentive revenue grow in 2024?
A: Management aims to reach a $300 million revenue target by end of 2026, implying a 24% compound annual growth rate. In Q3, they saw single-digit growth, and double-digit growth in Q4. They expect growth to continue upward but acknowledge it won't be perfectly linear, confident in the building blocks they've established. -
TrueCar+ Monetization
Q: Will TrueCar+ contribute to revenue in 2024?
A: They don't expect significant financial contributions from TrueCar+ in 2024. The focus is on product development and expanding dealer participation, with meaningful revenue impact anticipated in 2025 and beyond. However, TrueCar+ is expected to help attract new dealers and retain existing ones in 2024. -
Capital Allocation Priorities
Q: What are the capital allocation priorities for 2024?
A: With over $135 million on the balance sheet and expecting to be free cash flow positive in the second half of 2024 , management is considering all options, including strategic acquisitions, share repurchases, and increasing marketing spend for TrueCar+. They plan to actively engage in capital allocation strategies once they reach free cash flow breakeven. -
OEM Incentive Revenues
Q: How should we think about OEM incentive revenue in 2024?
A: OEM incentive revenues are project-based and can be lumpy. There's no clear seasonality, as revenues depend on specific OEM programs and priorities. However, they see a huge opportunity to grow this revenue line and aim to return to historical OEM levels and beyond in the coming years. -
Tech and Development Expenses
Q: Is the current tech expense run rate sustainable?
A: The Q4 tech and development expenses were slightly below normal due to a $1 million accrual reversal , coming in at $6.4 million. Moving forward, they expect expenses to be slightly above $7 million per quarter. -
Independent Dealer Churn
Q: Will independent dealer churn continue in 2024?
A: They anticipate a continued decline in smaller independent dealers due to financing challenges and market consolidation. Nonetheless, they are focusing on larger independents and are seeing good traction with them and with franchise dealers. -
TrueCar+ Rollout Plans
Q: Will TrueCar+ be white-labeled or kept on the marketplace?
A: Initially, they are focusing on rolling out TrueCar+ within their marketplace by onboarding select dealers to ensure a quality experience. They acknowledge the potential for white-label opportunities, especially leveraging their affinity network, and view it as a significant opportunity in the future.