true-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-36449

TRUECAR, INC.

(Exact name of registrant as specified in its charter)


Delaware						04-3807511
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

120 Broadway, Suite 200

Santa Monica, California 90401

(800) 200-2000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	TRUE	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 4, 2021, 98,806,292 shares of the registrant’s common stock were outstanding.

TRUECAR, INC.

INDEX


		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets as of M a rch 3 1 , 202 1 and December 31, 2020	5
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 3 1 , 202 1 and 2020	7
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 3 1 , 2021 and 2020	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72

Item 6.	Exhibits	73
	Signatures	76

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “likely,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “target,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our future financial performance and our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses and ability to maintain or grow revenue, scale our business, generate cash flow, fulfill our mission and achieve and maintain future profitability, including in light of the existing impacts of and continued uncertainty occasioned by the coronavirus pandemic;

•our ability to forecast our financial and operational performance;

•our relationship with key industry participants, including car dealers and automobile manufacturers;

•anticipated trends, demand rates and challenges in our business and in the markets in which we operate;

•our ability to anticipate market needs and develop new and enhanced products and services to meet those needs and to successfully monetize those products and services;

•maintaining and expanding our customer base in key geographies, including our ability to maintain or increase the number of high-volume brand dealers in our network generally and in key geographies;

•the effect of the coronavirus pandemic, and governments’, organizations’ and consumers’ responses to it, on the wider economy, the automotive industry, the demand for cars, dealers’ ability to sell cars, dealers’ and automobile manufacturers’ third-party marketing budgets and our business;

•our ability to mitigate the short- and long-term effects of the coronavirus pandemic on our business and employees, and the success of initiatives that we take to do so, including our efforts to improve or retool our existing products and services, innovate new products and services, cut costs and preserve our dealer network;

•our ability to mitigate the financial effect of the termination of our partnership with USAA Federal Savings Bank;

•our ability to maintain and grow our existing additional affinity partner relationships, and to attract new affinity partners to offer our services to their members;

•our reliance on our third-party service providers;

•the impact of competition in our industry and innovation by our competitors;

•our anticipated growth and growth strategies, including our ability to maintain or increase close rates and the rate at which site visitors prospect with a TrueCar certified dealer;

•our ability to successfully maintain or increase dealer subscription rates, manage dealer churn and return to active status dealers who suspended their participation in our auto-buying program as a result of the coronavirus pandemic;

•our ability to attract significant automobile manufacturers to participate, and remain participants, in our incentive programs;

•our ability to increase the number of consumers using, and dealers subscribing to, our newer suite of products, including our Access package, which combines our Trade and Payments solutions, and our Finance & Insurance products;

•our ability to anticipate or adapt to future changes in our industry;

•the impact on our business of seasonality, cyclical trends affecting the overall economy and actual or threatened severe weather events;

•our ability to hire and retain necessary qualified employees;

•our continuing ability to provide customers access to our products;

•our ability to maintain and scale our technical infrastructure and leverage our technology platform to enhance our customer experience and launch new product offerings;

•the evolution of technology affecting our products, services and markets;

•our ability to adequately protect our intellectual property;

•the outcome, and effect on our business, of litigation to which we are a party, including our ability to settle any such litigation;

•our ability to navigate changes in domestic or international economic, political or business conditions, including changes in interest rates, consumer demand and import tariffs and governmental responses to the coronavirus pandemic;

•our ability to stay abreast of, and in compliance with, new or modified laws and regulations that currently apply or become applicable to our business, including newly-enacted and rapidly-changing privacy, data protection and net neutrality laws and regulations and changes in applicable tax laws and regulations;

•the continued expense and administrative workload associated with being a public company;

•our ability to maintain an effective system of internal controls necessary to accurately report our financial results and prevent fraud;

•our liquidity and working capital requirements;

•the estimates and estimate methodologies used in preparing our consolidated financial statements;

•the future trading prices of our common stock and the impact of securities analysts’ reports on these prices;

•our plans to pursue acquisitions, divestitures, investments and other similar transactions;

•our ability to use the proceeds of the ALG divestiture in a manner that maximizes shareholder value;

•our ability to effectively and timely integrate our operations with those of any business we acquire, including DealerScience, and related factors, including the difficulties associated with such integration (such as the difficulties, challenges and costs associated with managing and integrating new facilities, assets and employees) and the achievement of the anticipated benefits of such integration;

•the preceding and other factors discussed in Part II, Item 1A, “Risk Factors,” and in other reports we may file with the Securities and Exchange Commission from time to time; and

•the factors set forth in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date the statements are made. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

SUMMARY OF RISKS AFFECTING OUR BUSINESS

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” later in this Quarterly Report on Form 10-Q. These risks include, but are not limited to, the following:

•The ongoing disruptions and uncertainties caused by the coronavirus pandemic have meaningfully disrupted our business and may continue to do so, including in new and unforeseen ways.

•The termination of our partnership with USAA has adversely affected our business and we may not be able to mitigate its negative financial effects.

•We may not be able to grow and optimize the geographic coverage of dealers in our network, and maintain or increase the representation of high-volume brands in that network or manage dealer churn and increase dealer subscription rates, which would limit our growth.

•The failure to attract manufacturers to participate in our incentive programs, or to induce them to remain participants in those programs, could reduce our growth or adversely affect our operating results.

•The loss of a significant affinity partner or a significant reduction in units attributable to our affinity partners would reduce our revenue and harm our operating results.

•If car dealers or automobile manufacturers perceive us in a negative light or our relationships with them suffer harm, our ability to grow and our financial performance may be damaged.

•Low automobile inventory supply levels adversely impact our business, results of operations and prospects by increasing competition for dealers’ advertising expenditures and reducing automobile manufacturers’ incentive spending.

•We have experienced significant management turnover. An inability to navigate this turnover and attract, retain and integrate new management and other personnel could harm our business.

•Our business is subject to risks related to the larger automotive ecosystem, including interest rates, consumer demand, global supply chain challenges and other macroeconomic issues.

•We may not be able to provide a compelling car-buying experience to our users, which could cause the number of transactions between our users and dealers, and therefore our revenues, to decline.

•Our ability to enhance our current product offerings, or grow complementary product offerings, may be limited, and we may not be able to successfully demonstrate the value of any expanded or complementary products that we introduce, which could negatively impact our growth rate, revenues and financial performance.

•If our lead quality or quantity declines, our unit volume could as well, and dealers could leave our network or insist on lower subscription rates, which could reduce our revenue and harm our business.

•We may be unable to maintain or grow relationships with data providers or may experience interruptions in the data feeds they provide, which could limit the information that we are able to provide to our users and dealers as well as the timeliness of the information, and which may impair our ability to attract or retain consumers and dealers and to timely invoice dealers.

•We rely on Internet search engines to drive traffic to our website, and if we fail to appear prominently in the search results, our traffic would decline and our business would be adversely affected.

•The success of our business relies heavily on our marketing and branding efforts and those of our affinity partners, and these efforts may not be successful.

•We are subject to a complex framework of regulations, many of which are unsettled, still developing and contradictory, which have in the past, and could in the future, subject us to claims, challenge our business model or otherwise harm our business.

•We collect, process, store, share, disclose and use personal information and other data, and our actual or perceived failure to protect this information and data could damage our reputation and brand and harm our business and operating results.

•We face litigation and are party to legal proceedings that could have a material adverse effect on our business, financial condition, results of operations and cash flows.

•We may fail to meet our publicly announced guidance or other expectations about our business and future operating

results, which could cause our stock price to decline.

TRUECAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

(Unaudited)


	March 31, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	274,573	$	273,314
Accounts receivable, net of allowances of $6,149 and $7,147 at March 31, 2021 and December 31, 2020, respectively	28,308		32,923
Prepaid expenses	4,905		5,800
Other current assets	4,057		12,901
Total current assets	311,843		324,938
Property and equipment, net	20,626		21,421
Operating lease right-of-use assets	28,124		29,192
Goodwill	51,205		51,205
Intangible assets, net	6,188		6,600
Equity method investment	19,576		19,905
Other assets	4,709		4,800

Total assets	$	442,271	$	458,061
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable (includes related party payables of $1,040 and $913 at March 31, 2021 and December 31, 2020, respectively)	$	13,831	$	13,198
Accrued employee expenses	4,549		6,506
Operating lease liabilities, current	4,847		4,771
Accrued expenses and other current liabilities	16,064		18,402

Total current liabilities	39,291		42,877
Deferred tax liabilities	57		40
Operating lease liabilities, net of current portion	30,645		31,974
Other liabilities	86		388

Total liabilities	70,079		75,279
Commitments and contingencies (Note 8)
Stockholders’ Equity
Preferred stock — $0.0001 par value; 20,000,000 shares authorized at March 31, 2021 and December 31, 2020; no shares issued and outstanding at March 31, 2021 and December 31, 2020	—		—
Common stock — $0.0001 par value; 1,000,000,000 shares authorized at March 31, 2021 and December 31, 2020; 98,667,561 and 99,690,942 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	10		10
Additional paid-in capital	736,118		738,290
Accumulated deficit	(363,936)		(355,518)
Total stockholders’ equity	372,192		382,782
Total liabilities and stockholders’ equity	$	442,271	$	458,061

See accompanying notes to condensed consolidated financial statements.

TRUECAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands except per share data)

(Unaudited)


	Three Months Ended March 31,
	2021		2020
Revenues (includes related party contra revenue of $297 and net revenue of $1,247 for the three months ended March 31, 2021 and 2020, respectively)	$	65,105	$	78,917
Costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization presented separately below; includes related party cost of revenue of $1,248 and $285 for the three months ended March 31, 2021 and 2020, respectively)	5,458		6,175
Sales and marketing (includes related party expenses of $0 and $1,959 for the three months ended March 31, 2021 and 2020, respectively)	40,099		46,080
Technology and development	11,193		11,899
General and administrative	12,678		12,088
Depreciation and amortization	4,312

SEC Form 10-Q filed by TrueCar, Inc.