Q1 2024 TrueCar Inc Earnings Call
Operator: Good day, and welcome to the TrueCar First Quarter 2024 Financial Results Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Jantoon Reigersman, President and Chief Executive Officer of TrueCar. Please go ahead.
Good day and welcome to the Truecar first quarter 'twenty to 'twenty four financial results Conference call. Please note. This event is being recorded I would now like to turn the conference over to John tune Alright Guzman.
John Guzman: Resident and Chief Executive Officer of Truecar. Please go ahead.
Jantoon Reigersman: Thank you, operator. Hello, everyone, and welcome to TrueCar's first quarter 2024 earnings conference call. Joining me today is the awesome Oliver Foley, our Chief Financial Officer. I hope you have all had the opportunity to read our most recent stockholder letter, which was released yesterday after market close and is available on our investor relations website at ir.truecar.com. Before we get started, I need to read our safe harbor.
John Guzman: Thank you operator, Hello, everyone and welcome to Truecar first quarter 2024 earnings Conference call. Joining me today is the awesome Oliver Foley, our Chief Financial Officer I Hope you have all had the opportunity to read our most recent Stoke stockholder letter, which was released yesterday after market close and is available.
John Guzman: On our Investor Relations website at IR adult Truecar adult golf.
John Guzman: Before we get started I need to read our safe Harbor I want to remind you that we will be making forward looking statements on this call including statements regarding our revenue grow as expected adjusted EBITDA as well as our aspirational goals regarding our three year plan forward looking statements can be identified by the use of words, such as believe expect plan.
Jantoon Reigersman: I want to remind you that we will be making forward-looking statements regarding this goal, including statements regarding revenue growth, expected adjusted EBITDA, as well as our aspirational goals regarding our three-year plan. Forward-looking statements can be identified by the use of words such as believe, expect, plan, target, anticipate, become, seek, will, intend, confident, and similar expressions, and should not be relied on as guarantees of future performance or results.
John Guzman: Target anticipate become chic will intend confident and similar expressions and are known and should not be relied on as guarantees of future performance or results.
Jantoon Reigersman: Actual results could differ materially from those contemplated by our forward-looking statements. We caution you to review the risk factors section of our annual report on Form 10-K, our quarterly reports on Form 10-Q, and other reports and filings with the Securities and Exchange Commission for a discussion of the factors that could cause our results to differ materially.
John Guzman: Actual results could differ materially from those contemplated by our forward looking statements. We caution you to review the risk factors section of our annual report on Form 10-K, our quarterly reports on Form 10-Q, and other reports and filings with the security and Exchange Commission for a discussion of the factors that could cause our results to differ materially.
Jantoon Reigersman: The forward-looking statements we make on this call are based on information available to us as of today's date, and we disclaim any obligation to update any further forward-looking statements except as required by law. In addition, we will also discuss certain GAAP and non-GAAP financial measures. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are set forth in the Investor Relations section of our website at ir.truecar.com. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.
John Guzman: The forward looking statements we make on this call are based on information available to US as of today's date and we disclaim any obligation to update any further forward looking statements except as required by law. In addition, we will also discuss certain GAAP and non-GAAP financial net financial measures reconciliations of all non.
John Guzman: non-GAAP measures to the most directly comparable GAAP measures are set forth in the Investor Relations section of our website at IR <unk> com.
John Guzman: non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.
Jantoon Reigersman: With that, we get to the exciting part. I will provide a summary of the quarter as highlighted in our shareholder letter. In Q1, we continued to deliver. We delivered double-digit revenue growth year-over-year and achieved positive adjusted EBITDA. Q1 revenue grew 11% year-over-year, driven by growth in our core dealer business and the continued strength of OEM incentive revenue. We achieved adjusted EBITDA profitability of $0.9 million, a $12.3 million improvement year-over-year.
John Guzman: With that we get to the exciting part.
Speaker Change: I will provide a summary of the quarter as highlighted in our shareholder letter.
Speaker Change: In Q1, we continued to deliver we delivered double digit revenue growth year over year and achieved positive adjusted EBITDA Q1 revenue grew 11% year over year driven by growth in our core dealer business and the continued strength of OEM incentive revenue, we achieved adjusted EBITDA profitability of zero point $9 million.
Speaker Change: A $12 3 million improvement year over year.
Speaker Change: Moreover, the supportive macro trends that we highlighted in the previous quarter, namely the normalization of new vehicle inventory and average day supply have continued their upward trajectory in Q1, reinforcing that the franchise dealers increasingly need access to truecar robust audience of new cars.
Speaker Change: Albert.
Speaker Change: In Q1, though shall burst drove strong new car sales across Truecar franchise dealers, who collectively saw a 7% year over year increase in new vehicle units outperforming the interest industry is four 9% year over year growth in new vehicles.
Jantoon Reigersman: Moreover, the supportive macro trends that we highlighted in the previous quarter, namely the normalization of new vehicle inventory and average day supply, have continued their upward trajectory in Q1, reinforcing that franchise dealers increasingly need access to TrueCar's robust audience of new car shoppers. In Q1, those shoppers drove strong new car sales across TrueCar franchise dealers who collectively saw a 7.3% year-over-year increase in new vehicle units, outperforming the industry's 4.9% year-over-year growth in new vehicle sales.
Speaker Change: During Q1, we announced the expansion of our dealer product offering with the launch of Truecar market solutions Dcms Dcms as a suite of eight distinct products that leverage <unk> extensive appropriate dairy data and hyper targeted audience to help dealers more effectively reach and win in market shoppers.
Speaker Change: During the two months since launching to CMS, we have been encouraged by the over 350 dealers would have added one or more <unk> products to their existing subscriptions and even more encouraged by the early indicators of the incremental value of those products are delivering to them. We are actively working to bundle. Many of these <unk> products into our <unk>.
Speaker Change: Description offerings to accelerate adoption and drive additional value to our dealers, while growing average revenue per dealer.
Speaker Change: As we expressed in our last letter we remain steadfast in our pursuit to become the first digital marketplace, where consumers can buy a new certified pre owned or used car with or without a trade in from the comfort of their couch through an entirely digital online transaction.
Jantoon Reigersman: During Q1, we announced the expansion of our dealer product offering with the launch of TrueCar Market Solutions, DCMS. TCMS is a suite of eight distinct products that leverage TrueCar's extensive proprietary data and hyper-targeted audience to help dealers more effectively reach and win in-market shoppers.
Speaker Change: Moreover, we stated our goal of completing the first end to end digital transaction for the purchase of a new car in the first half of this year and have been hard at working at work solving the myriad of complexities that historically could only be sold through human intervention at one or more steps of the transaction.
Speaker Change: Thankfully through productive collaboration with forward thinking dealer group rich engagement with key stakeholders, including Oems.
Speaker Change: The EMS providers and the learnings drained gained over the last two years, we plan to launch a D. C. Plus pilot later this quarter and it's finally ofer truecar sell burst the ability to transact entirely online we expect that the Baidu will launch with hundreds of used vehicles available to be purchased online by consumers nationwide and thousands of them.
Jantoon Reigersman: During the two months since launching TCMS, we have been encouraged by the over 350 dealers that have added one or more TCMS products to their existing subscriptions, and even more encouraged by the early indicators of the incremental value those products are delivering to them. We are actively working to bundle many of these TCMS products into our subscription offerings to accelerate adoption and drive additional value to our dealers while growing average revenue per dealer.
Speaker Change: New vehicles across various brands available to be purchased online by consumers residing in California.
Speaker Change: In addition, only vehicle trade ins will be Oh, sorry online vehicle trade ins will be supported at launch and consumers will have the option to secure financing for most lenders inclusive inclusive most Oems captive financing arms, we anticipate running the pilot through the end of Q3 in order to incur.
Jantoon Reigersman: As we expressed in our last letter, we remain steadfast in our pursuit to become the first digital marketplace where consumers can buy a new certified pre-owned or used car with or without a trade-in from the comfort of their couch through an entirely digital online transaction. Moreover, we stated our goal of completing the first end-to-end digital transaction for the purchase of a new car in the first half of this year and have been hard at work solving the myriad of complexities that historically could only be solved through human intervention at one or more steps of the transaction.
Speaker Change: Corporate and desk key learnings while in parallel we complete the development of certain key components that would enable us to quickly expand the scope of dealers in geographies throughout Q4.
Speaker Change: The objective of the pilot is to validate and refine one the technical solutions, we have developed to eliminate the need for human interaction of course to consumer purchasing process from selecting the right vehicle to executing the binding retail installment contract to the extent to which a true digital transaction effectively integrates into a dealer.
Speaker Change: Backend system can unlock significant sales efficiencies for the dealer three the mechanic and the mechanism. We have developed in the consumer flow to maximize the attachment rate on the dealer's F&I products and for the process. We have developed a digitally establish a competitive and accurate at binding value for consumers trade in.
Speaker Change: That gets incorporated into the deal while mitigating the dealers risk through a backstop to the value.
Jantoon Reigersman: Thankfully, through productive collaboration with a forward-thinking dealer group, rich engagement with key stakeholders, including OEMs, DMS providers, and the learnings gained over the last two years, we plan to launch a DC-plus pilot later this quarter that finally offers TrueCar shoppers the ability to transact entirely online. We expect that the pilot will launch with hundreds of used vehicles available to be purchased online by consumers nationwide and thousands of new vehicles across various brands available to be purchased online by consumers residing in California.
Speaker Change: Achievement of these objectives will mark a critical milestone on our path to product market fit for T C plus and allow us to initiate the steps required to begin scaling tissue plus more broadly in Q4 2024.
Speaker Change: To that end as we've articulated before our objective is not only to do it two to directly monetize D C plus in 2024, but to instead demonstrate the values can drive for the ecosystem broadly for dealers, we intend to demonstrate housekeep loss expand their addressable market, allowing them to win consumers they would otherwise never.
Speaker Change: Reach while driving sales efficiencies it grows their bottom line for.
Speaker Change: For consumers, we seek to demonstrated car buying can in fact be done from their couch, whether new certified Preowned argues for Oems. We aim to demonstrate that brand loyalty grows and consumers are no longer constrained by shopping inventory in their backyard, but connects that shop for the best deals on the car they want regardless of where it is.
Jantoon Reigersman: In addition, only vehicle trade-ins will be, oh sorry, online vehicle trade-ins will be supported at launch, and consumers will have the option to secure financing from most lenders, inclusive of most OEMs' captive financing arms. We anticipate running the pilot through the end of Q3 in order to incorporate and test key learnings while, in parallel, we complete the development of certain key components that would enable us to quickly expand the scope of dealers and geographies throughout Q4.
Speaker Change: In sum, we believe that by demonstrating the score value propositions, we can create a powerful flywheel that will fuel the growth of Tc Blas in 2025, and beyond and unlock new and powerful monetization opportunities for Truecar.
Speaker Change: Back to our core business.
Speaker Change: And our outlook for the near term, we believe that the that the strength of our core business will help to maximize the success of D C plus and as such we're in Bentley.
Speaker Change: Continue to focus on the following four building blocks to drive near term growth. One continued to activate new dealers with a focus on we're gaining many of the franchise dealers that left the platform when new vehicle inventory was constrained to reduce dealer churn by doubling down on our commitment to help them drive incremental sales.
Speaker Change: And providing them with unmatched support and service.
Speaker Change: Three continue to grow average revenue per dealer or through dcms product offering and four grow OEM revenue by expanding our OEM partnerships and continuing to invest in highly effective incentive programs across our network of affinity partners.
Jantoon Reigersman: The objective of the pilot is to validate and refine, one, the technical solutions we have developed to eliminate the need for human interaction across the consumer purchasing process, from selecting the right vehicle to executing the binding retail installment contract, two, the extent to which a true digital transaction effectively integrates into a dealer's backend system can unlock significant sales efficiencies for the dealer, three, the mechanism we have developed in the consumer flow to maximize the attachment rate on the dealer's Achievement of these objectives will mark a critical milestone on our path to product-market fit for TC Plus and allow us to initiate the steps required to begin scaling TC Plus more broadly in Q4 2024.
Speaker Change: Execution against these four building blocks provides us with the path to achieving our goal of returning the business to 300 billion in revenue and a 10% free cash flow margin by the end of 2026.
Speaker Change: To that end, we aim to grow Q2 revenue by 13% year over year, while maintaining an adjusted EBITDA target of breakeven.
Speaker Change: The primary reason for the lower the lower revenue flow through quarter over quarter as our belief that the continued rise of new vehicle inventory day supply in OEM incentives represents an opportunity to profitably increase.
Speaker Change: Increased marketing spend in the quarter and capture a greater share of new vehicle show burst for our franchise dealer network given our operating leverage we believe that by spending a greater share of revenue on paid marketing in Q2, while conditions are favorable we can further accelerate our growth our revenue growth in the second half of the year and put us on a path to achieving both of this.
Speaker Change: Free cash flow in Q4.
Speaker Change: Finally, I would like to acknowledge that the truecar team.
Speaker Change: [noise] team and their commitment to the future Truecar were building in pursuit of the best online experience for dealers and consumers. The team is making huge strides overcoming structural roadblocks that in the past have impeded innovation in the automotive retail.
Speaker Change: I also would like to thank Truecar Board member Erin Lantz for seven plus years of dedicated service to the organization. We wish are in the best and are excited that the board has nominated Diego Rodriguez to Silversea, if elected diego's decades of experience integrating business design and technology at the very highest levels of industry will be.
Speaker Change: Invaluable to the next phase of Truecar lifecycle, having most recently served as <unk> chief product and design officer and prior to that as a senior partner at ideal Diego will be tremendous assets for Truecar and our mission to deliver the first ever car buying digital marketplace now operator, let's open the call for questions from our analysts.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question.
Jantoon Reigersman: To that end, as we've articulated before, our objective is not only to directly monetize TC Plus in 2024 but instead to demonstrate the value it can drive for the ecosystem broadly. For dealers, we intend to demonstrate how TC Plus expands their addressable market, allowing them to win consumers they would otherwise never reach, while driving sales efficiencies that grow their bottom line. For consumers, we seek to demonstrate that car buying can, in fact, be done from their couch, whether new, certified, pre-owned, or used.
Speaker Change: Please press Star then two.
Speaker Change: This time, we would pause momentarily to assemble our roster.
Speaker Change: The first question comes from Rajat Gupta of Jpmorgan. Please go ahead.
Rajat Gupta: Oh, great. Thanks for taking the questions.
Rajat Gupta: Firstly, just on you know the second quarter comments.
Rajat Gupta: You highlighted the lower.
Rajat Gupta: Incremental drop through you know you know from some of the.
Rajat Gupta: Planned marketing investments and Jack's Lloyd.
Rajat Gupta: Forward quarters.
Rajat Gupta: If you look at typical seasonality on the top line it seems like.
Jantoon Reigersman: For OEMs, we aim to demonstrate that brand loyalty grows when consumers are no longer constrained by shopping inventory in their backyard but can instead shop for the best deals on the car they want, regardless of where it is. In sum, we believe that by demonstrating these core value propositions, we can create a powerful flywheel that will fuel the growth of TC Plus in 2025 and beyond and unlock new and powerful monetization opportunities for TrueCar.
Rajat Gupta: You would be on track for mid to high teens year over year revenue growth in the second half.
Rajat Gupta: Given where the basis for revenue in the first quarter and wondering if you could share how these incremental investments.
Rajat Gupta: Could change that cadence going forward and how should we think about you know the incremental EBITDA no on that incremental revenue in the second half as well and I have a follow up.
Oliver Foley: Hey, John Oliver here.
Oliver Foley: Go ahead al on your other two seven yes.
al: Yeah go ahead go ahead.
Oliver Foley: I would say as we articulated in the first quarter, we do anticipate to see an acceleration in our revenue growth over the course of the year and so.
Oliver Foley: The 13% that were projecting.
Oliver Foley: In Q2.
al: And incremental investments in marketing spend look we get us towards the high teens in the back half of the year.
Oliver Foley: Now in terms of flow through.
Jantoon Reigersman: Back to our core business and our outlook for the near term. We believe that the strength of our core business will help to maximize the success of DC+, and as such, we're intently continuing to focus on the following four building blocks to drive near-term growth.
Oliver Foley: And sort of what the EBITDA looks like in the back half of the year I think what we've demonstrated over the past two quarters is.
Oliver Foley: The operating leverage that we have.
al: And so you know.
al: What we love to see in Q2 is the extent to which we can grow marketing spend to drive more incremental units to our dealer partners.
Jantoon Reigersman: One, continue to activate new dealers with a focus on regaining many of the franchise dealers that left the platform when new vehicle inventory was constrained. Two, reduce dealer churn by doubling down on our commitment to help them drive incremental sales and providing them with unmatched support and service. Three, continue to grow average revenue per dealer through TCMS product offerings. And four, grow OEM revenue by expanding our OEM partnerships and continue to invest in highly effective incentive programs across our network of affinity partners.
al: Continue to see growth in our PD through the expansion of our expanded product offering.
al: <unk>.
al:
al: I like to believe that.
al: Deal.
al: Range of marketing spend as a percent of revenue is sort of between the 34 and 36%, whereas in Q1 grew closer to 31%. So if we can.
al: Get closer to that three 5% I think.
al: In the second half of the year, we should see.
al: Pretty strong flow through.
al:
al: Through the expanded <unk>.
al: RPT.
Speaker Change: Got it got it that's helpful and then as a follow up you know just in the franchise dealer count that was down slightly.
Speaker Change: Sequentially you know what.
Speaker Change: What drove that decline.
Speaker Change: What was it like you know.
RPT: You know some some dealer churn because if like the newer pricing and you know some of the new bundles.
Speaker Change: So what drove that and how should we think about.
Speaker Change: You know that dealer count going forward, you know maybe any quarter to date quarter to date trends in April that you can provide us now what you have thought you have been pulling back.
Speaker Change: Yeah, absolutely so so.
Jantoon Reigersman: Execution against these four building blocks provides us with the path to achieving our goal of returning the business to 300 million in revenue and a 10% free cash flow margin by the end of 2026. To that end, we aim to grow Q2 revenue by 13% year over year while maintaining an adjusted EBITDA target of breakeven.
al: The answer is and I think we already mentioned that in the past, where it's like we feel like it's a little bit of give and take right in a vast number or the number of dealers talking about these are fairly small and dealt us but long story short.
al: I think with resetting the markets as they are it's still somewhat unequal throughout the country.
al: And I think if we if we do a little bit of self reflection I think we probably have.
al: <unk> not been serving good enough some areas of the country and provide sufficient effectively leads to those dealers and some of the certain areas and probably over providing in all the areas and so you'll see that there are certain places where some of the dealers have German into bass because they.
Jantoon Reigersman: The primary reason for the lower revenue flow-through, quarter over quarter, is our belief that the continued rise in new vehicle inventory, day supply, and OEM incentives represents an opportunity to profitably increase... increase marketing spend in the quarter and capture a greater share of new vehicle shoppers for our franchise dealer network. Given our operating leverage, we believe that by spending a greater share of revenue on paid marketing in Q2 while conditions are favorable, we can further accelerate our revenue growth in the second half of the year and put us on the path to achieving positive free cash flow in Q4.
al: Feel like even though they're there they're kind of in need of the service. They have not been served as well as we could have and so I think there are some areas where that has occurred and I think we know exactly what we need to do to help that which is also one of the reasons why we're focusing in one of the building blocks that I argued which is a much better foremost service effect.
al: Lee when you think about it as one of the four building blocks.
al: So that's number one.
al: And then number two is I think theres a for the franchise dealers and obviously the new growth rate that we're doing and the new new car sales and inventory buildup I think theres, a huge opportunity for them to two.
al: For us to prove ourselves effectively to them.
al: So overarching.
al: Don't look at the rooftop numbers very often in the sense that.
al: They will always go fluctuates a little bit what I do know is we're now effectively through the worst of all of that and we're ready to to really recapture a lot of the market share that we've lost over the last couple of years and the one that obviously is much harder to control the indie side and the <unk> side that will stay.
Jantoon Reigersman: Finally, I would like to acknowledge the TrueCar team and their commitment to the future TrueCar we're building. In pursuit of the best online experience for dealers and consumers, the team is making huge strides overcoming structural roadblocks that in the past have impeded innovation in the automotive retail industry. I also would like to thank TrueCar board member Aaron Lance for seven plus years of dedicated service to the organization. We wish Aaron the best and are excited that the board has nominated Diego Rodriguez to fill her seat.
al: Fluctuating because obviously a lot of.
al: Players on the <unk> side. The journal will go either go out of business or a part of consolidation et cetera. So obviously in a fast moving macro environment.
al: That is a little bit harder to predict but overarching I think we have a we have a really good shot that are at the growing back our franchise at the revenue side.
al: By the way.
Speaker Change: I wanted to add one more thing on the previous question, we just remember that's and the flow throughs.
al: There's marketing people and effectively back office G&A is the three buckets of costs.
al: Of course that we have in the business and so we have been relatively constrained in terms of marketing deployments over the last couple of years, because really what would read it didn't really make a lot of sense to push on the top of funnel too much in a world where there was normal level of inventory to go against that now that inventory is coming back I think we're seeing.
Operator: If elected, Diego's decades of experience integrating business design and technology at the very highest levels of industry will be invaluable to the next phase of TrueCar's lifecycle. Having most recently served as Inuit's chief product and design officer, and prior to that, as a senior partner at IDEO, Diego will be a tremendous asset for TrueCar in its mission to deliver the first ever car buying digital marketplace. Now, operator, let's open the poll to questions from our analysts.
al: Being a much better.
al: Our ability to deploy marketing dollars really efficiently and so as a result, I think if you think about those buckets, yeah utilizing that now also sets us back up for the future, especially in a world, where obviously unaided brand awareness for US has decreased over time, and we want to start recapturing that somewhat as well so across the board.
Speaker Change: I think starting to redeploy along the marketing lines is going to be an important piece for us and we've always wanted to do that very efficiently sorry, Oliver I cut you off.
Oliver Foley: Oh, great. Thanks for the color.
Oliver Foley: Yeah.
al: The next question comes from Tom White of D. A Davidson. Please go ahead.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the key.
Thomas Cauthorn White: Hey, this is why on for Tom Thanks for taking our questions I just have a quick one on Truecar marketing solutions. I think you mentioned that over 350 dealers have added a TNF product to their existing subscription could you just give us some color on your expectations for adoption over the course of 2024 and <unk>.
Rajat Gupta: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Rajat Gupta of J.P. Morgan. Please go ahead.
Speaker Change: The impact financials as more dealers adopt the product. Thanks.
Speaker Change: Sure Yeah. So we have had roughly.
Speaker Change: 50 dealers.
Speaker Change: Adopt one or more of our TCE EMS products and I think we're certainly encouraged by that.
Speaker Change: Uhm.
Speaker Change: The.
Speaker Change: In the letter we Havent yet incorporated these into our bundles. They are available as add ons to subscription, but ultimately we want these products to be part of our our our bundled offerings because at that point you have greater adoption.
Oliver Foley: Great Thanks for taking the time to answer the question. You know, firstly, just on the second quarter comments, you highlighted the lower, you know, incremental drop-through from some of the planned marketing investments and, you know, the accelerated growth in the forward quarters. If you look at typical seasonality on the top line, it seems like you would be on track for mid- to high-teens year-over-year revenue growth in the second half, given where the base is for revenue in the first quarter. And wondering if you could share how these incremental investments could change that cadence going forward, and how we should think about, you know, the incremental EBITDA, you know, on that incremental revenue in the second half as Hey Rajat, it's Oliver here.
Speaker Change: I think our outlook for the rest of the year or is that.
Speaker Change: Okay.
Speaker Change: We would love to see.
Speaker Change: A majority of our dealers leveraging these products because we frankly, we think that they do truly help them either gain additional visibility on the platform or strengthen the quality of the leads that they get from the platform.
Speaker Change: And so we truly believe that these will help dealers.
Speaker Change: Get a stronger rois and ultimately that will lead to a.
Speaker Change: Stickier products better retention, but I think the way that we monetize it through higher RPT and so.
Speaker Change: My expectation over the course of the year is that each quarter, we'll see sequential gains in RPE.
Speaker Change: Primarily driven by adoption of the GC Ms product.
Speaker Change: Okay got it thank you.
Speaker Change: The next question is from <unk> Khan of B Riley Securities. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Yeah.
Khan: A couple of questions from me, maybe just on the on the increase in marketing spend in the second quarter.
Khan: Can you talk about if this is going to be more performance based.
Khan: Base market English as Brandon and then potentially payback.
Oliver Foley: Go ahead, Oliver. Do you want to take a stab at it? Yeah, go ahead. I would say, as we articulated in the first quarter, we do anticipate to see an acceleration in our revenue growth over the course of the year. And so, you know, the 13% that we're projecting in Q2 with an incremental investment in marketing spend will hopefully get us, you know, towards the high teens in the back half of the year.
Khan: On that.
Khan:
Khan: And then maybe just on the on the incentive revenue.
Khan: So you're kind of approaching the.
Khan: And the range that are there.
Speaker Change: Yeah Yeah.
Speaker Change: Incentive revenue pre pandemic.
Speaker Change:
Khan: How should we think about the growth from these levels what kind of visibility do you have in terms of driving this further up from here.
Khan: Sure.
Speaker Change: I take the first one.
Khan: Nevada.
Speaker Change: Just as it relates to marketing.
Speaker Change: <unk>.
Speaker Change: In terms of sort of.
Speaker Change: The specific payback period or the channels through which will be deploying these dollars no I think what we need to.
Speaker Change: Do <unk> to strike a balance between sort of be.
Oliver Foley: Now, you know, in terms of flow through, you know, and sort of what EBITDA looks like in the back half of the year, I think what we've demonstrated over the past two quarters is sort of the operating leverage that we have. And so, you know, I think what we'd love to see in Q2 is the extent to which we can grow marketing spend, drive more incremental units to our dealer partners, and continue to see growth in RPD through the expansion of our expanded product offering. And, you know, I like to believe that the ideal range of marketing spend as a percent of revenue is sort of between 34 and 36%, whereas in Q1, we were closer to 31%.
Speaker Change: The lower funnel performance marketing drives.
Speaker Change: Inefficient cost per sale.
Speaker Change: And really strong ROI for Truecar.
Speaker Change: Yes.
Speaker Change: Whats best for our dealer partners and what I mean by that.
Speaker Change: We're constantly optimizing our performance marketing spend on a cost per basis trying to get the lowest cost cost per click driving the lowest cost per sale.
Speaker Change: I think you ultimately see some optimization that Matt.
Speaker Change: Aren't necessarily good for the overall dealer network.
Speaker Change: An example of that is.
Speaker Change: Google can be driving the lowest cost per sale in a particular DMA and certain subsets of our franchise and the dealers are getting a ton of leasing and tenant sales.
Speaker Change: By doing that we're effectively.
Speaker Change: Not living up to our promise are not fulfilling our value proposition to other dealers in the network and so what we need to do a better job at what ultimately will really improve.
Jantoon Reigersman: So, if we can, you know, get closer to that 35%, I think in the second half of the year, we should see, you know, a pretty strong flow through the expanded RPD. Got it, got it, that's helpful. As a follow-up, you know, just in the franchise dealer account, that was down slightly, sequentially. What drove that decline, you know, was it like, you know, some dealer ch So what drove that, and how should we think about, you know, that dealer count going forward? Maybe any quarter to date, quarter to date trends in April that we can provide us with, you know, to help inform that?
Speaker Change: Dealer churn.
Speaker Change: Is thinking more holistically about how do we ensure performance is strong across the network.
Speaker Change: So yes, we're going to continue to invest in those more funnel campaigns.
Speaker Change: To really drive incremental units through the platform, but we want to make sure that we're also.
Speaker Change: No.
Speaker Change: Supporting dealers across the country across different DNA across brands.
Speaker Change: And in doing that we think that will really improve churn.
Speaker Change: And then the second question was on OEM right, Jim do you want to take that.
Jim: Can you repeat the question just wanted to make sure that asset correctly.
Jim: Yeah, so the OEM incentive revenue.
Jim: It's been pretty strong for you guys you've kind of mentioned.
Jim: You mentioned that you.
Jim: You know where the average incentive used to the pre pandemic, you've kind of pushing that lower end of that band.
Jim: I'm just wondering.
Jim: Where you think it can go from these levels and what kind of visibility do you have a truecar in terms of driving this yesterday when you line up from here.
Jim: Yeah.
Speaker Change: So very good question so.
Speaker Change: Look we're very we're obviously very bullish on the OEM line in general in the long term, we feel that there is a lot of opportunity obviously for Oems to help support their dealer networks.
Jantoon Reigersman: Yeah, absolutely. So the answer is, and I think we've already mentioned it in the past, where we feel like it's a little bit of give and take, right, in the vast number of the number of dealers we're talking about. These are fairly small deltas, but long story short, I think with resetting the markets as they are, it's still somewhat unequal throughout the country.
Jim: Especially obviously with high interest rate environment consumers need all the help they can get vis vis acquire if it needs to be buying cars.
Jim: What's hard to predict is like all of the near to midterm. You. We have a running we always have a really running strong pipeline in general.
Jim: OEM revenue comes in or call it like a little bit of bulky programs and programs are often finite in time and so they come they go they fluctuate a little bit it's less around regular sales that you effectively buildup in building blocks and alright. Thank buildup on your MLR are effectively.
Jantoon Reigersman: I think if we do a little bit of self-reflection, I think we probably have not been serving some areas of the country well enough and providing sufficient effective leads to those dealers in certain areas and probably over-providing in other areas. And so you'll see that there are certain places where some of the dealers have churned in the past because they feel like even though they're kind of in need of the service, they've not been served as well as we could have.
Jim: And so there's always a fluctuation in terms of the revenue lines.
Jim: Hard to predict those you know what you have in the pipeline and the pipeline is strong the question Dennis just when do they kick in when do Oems decide to actually participate in certain programs. Some programs are more effective than others.
Jim: Some we try certain things and it might actually work in some overachieve and so it's a little bit more bulky in nature and so we do less of an effort to really try to predict the short term, but we're we're very confident in his own Walter so don't be surprised like historically, where sometimes port over.
Jantoon Reigersman: And so I think there are some areas where that has occurred, and I think we know exactly what we need to do to help that, which is also one of the reasons why we're focusing on one of the building blocks that I argued for, which is a much better form of service. So that's number one. And then number two is, I think there is a huge opportunity for the franchise dealers and, obviously, the new growth rate that we're doing and the new car sales and inventory buildup. I think there's a huge opportunity for us to prove ourselves effectively to them.
Jim: For quarter or there are some fluctuations in terms of volume and revenue, but it doesn't take away that we feel that in the long run OEM revenue should should supersede effectively what we used to be doing pre pandemic.
Speaker Change: Okay got it that's helpful. And then maybe just a clarification on the.
Speaker Change: On the marketing span.
Speaker Change: I'm, assuming that the increase in most of the increase in the marketing would be.
Speaker Change: Towards the direct channel versus partner, but correct me if I'm wrong.
Jim: Then maybe just talk about the conversions sounded upside how hard how out of the bushes.
Jim: It had been historically have been approved or are they below those levels.
Jantoon Reigersman: So, overarching, I don't look at the rooftop numbers very often in the sense that they will always go up and fluctuate a little bit. What I do know is that we're now effectively through the worst of all of that. And we're ready to really recapture a lot of the market share that we lost over the last couple of years. The one that, obviously, is very much harder to control is the Indy side.
Speaker Change: Yeah, so conversion.
Speaker Change: Yes.
Speaker Change: I'll take it out of a study the short answer is it.
Speaker Change: It will mostly be direct.
Speaker Change: I think there are certain programs, we're running with the partners, but they they those are fairly steady going. So this is really about more engaging on the direct side.
Speaker Change: Overarching.
Speaker Change: Frost conversions have been improving and continue to improve.
Speaker Change: And it's obviously something we're also very very focused on and we feel that now that the market is in a market in general in the macros more normalizing. It also allows us to start utilizing more of the tools, we have at our disposal around consumer experience. They can driving really end to end funnel efficiencies.
Jantoon Reigersman: And the Indy side, that will stay fluctuating because obviously, a lot of players on the indie side that turn off or either go out of business or are part of consolidation, etc. So, obviously, in a fast-moving macro environment, that is a little bit harder to predict. But overarching, I think we have a really good shot at growing back our franchise revenue side. By the way, I wanted to add one more thing to the previous question, which was, remember that in the flow-throughs, there are marketing people and effectively back office G&A as the three buckets of costs that we have in the business.
Speaker Change: And so this is something we're now really going to deploy a little bit more towards especially.
Speaker Change: Especially in a world, where obviously the googles of this world has been changing a little bit of the the <unk>.
Speaker Change: Performance marketing landscapes, and so the marketing the work two or three years ago or so per say working the same way and now and so in world. So obviously getting much more should go sophisticated around it but it's mostly direct and.
Speaker Change: And we think we have a huge opportunity given also the way we capture consumers to weight consumers behave on the sites and our level.
Speaker Change: Intelligence, we have and data we have around US we think we can do a better job marketing that we have done historically.
Speaker Change: Okay. Thank you guys.
Christopher Alan Pierce: The next question comes from Kris peers of with Needham <unk> Co. Please go ahead.
Christopher Alan Pierce: Hey, good morning going back to the first question and franchise dealers can you kind of talk about what you're doing in those geographies, where it may be their franchise dealer count higher churn like what are some things that you can do to kind of reintroduce the newer product to those dealers and at Truecar, plus sort of part of that playbook or or is that sort of not related.
Jantoon Reigersman: And so we have been relatively constrained in terms of marketing deployment over the last couple of years because it didn't really make a lot of sense to push on the top of the funnel too much in a world where there was not a lot of inventory to go against.
Christopher Alan Pierce: No trigger pluses noble related to Truecar, plus really is think of it as as a as really like is it like they can they can really separate business line effectively for now and in some ways I feel a little bit of a schizophrenic and I think I've mentioned it to use in the past, which is I guess youll schizophrenic because their days.
Jantoon Reigersman: And now that inventory is coming back, I think we're seeing a much better ability to deploy marketing dollars really efficiently. And so as a result, I think if you think about those buckets, utilizing that now also sets us back up for the future, especially in a world where, obviously, unaided branded awareness for us has decreased over time. And we want to start recapturing that somewhat as well. So across the board, I think starting to redeploy along the marketing lines is going to be an important piece for us. And we obviously want to do this very efficiently. Sorry, Oliver, I cut you off.
Christopher Alan Pierce: Where I feel like I'm, a series D venture products' CEO as opposed to a public company CEO when it comes to two core plus and then obviously we have the core business. So.
Christopher Alan Pierce: Truecar plus I think it will be applicable, obviously too, especially initially to some of the larger dealer groups probably initially.
Christopher Alan Pierce: So when we're talking with.
Christopher Alan Pierce: Talking about the franchise dealers really.
Christopher Alan Pierce: Think of it as and this is the block we were mentioning right, where we've had we obviously have a large amount of dealers on our platform. We've been running a series of these dealers a little bit on auto pilot. Some of these groups, especially the ones that are.
Christopher Alan Pierce: Not necessarily in in high growth markets effectively have probably been somewhat neglected and so now that the the the the market is coming back and inventory is coming back et cetera, we effectively have to be more on top of them and really.
Operator: [inaudible] The next question comes from Tom White of DA Davidson. Please go ahead. Hey, this is Wyatt speaking for Tom.
Christopher Alan Pierce: Help them and help them in training and help them in our.
Christopher Alan Pierce: Insights and all these type of things and I think we've done it was probably six months ago or so we've made a big shift internally, where we really emphasize both the sales and service side and we've had a very strong service leader come in we have a very strong service team now and they are constantly thinking about the gay.
Wyatt J. Swanson: Thanks for taking our questions. I just have a quick one on TrueCar Marketing Solutions. I think you mentioned that over 350 dealers have added a TCMS product to their existing subscription. Could you just give us some color on your expectations for adoption over the course of 2024 and maybe the impact on financials as more dealers adopt the product? Thanks.
Christopher Alan Pierce: How often do we touch our dealers, while do we provide and what form do we've provided what does the service we provide et cetera. So the whole notion of the way we are servicing our book has dramatically changed over the last six months and it is obviously, having really good fruit in the form of dealer being very excited about what we're doing but it all.
Oliver Foley: Sure. Yeah, so, you know, we have had roughly 350 dealers adopt one or more of our TCMS products, and we're certainly encouraged by that. Like we articulated in the letter, we haven't yet incorporated these into our bundles, so they are available as add-ons to subscriptions, but ultimately, we want these products to be, you know, part of our bundled offering because at that point, you have greater adoption. I think our outlook for the rest of the year is that we would love to see a majority of our dealers leveraging these products because, frankly, we think that they do And so, you know, we truly believe that these will help dealers get a stronger ROI. And ultimately, that will lead to, you know, a stickier product, and better retention.
Christopher Alan Pierce: So means that.
Christopher Alan Pierce: You're you're realizing that there are some dealers, we probably have not serviced as well as we could have and obviously in some of those areas, we're going to do a much better job.
Christopher Alan Pierce: Okay, perfect and then.
Christopher Alan Pierce: Then we see Oems turning on marketing with the you know to your income statement. It can increase the chance to spending and how we see you guys turning on marketing to kind of drive more units to deal with it.
Christopher Alan Pierce: Is there any sort of magic bullet or like why why have dealers been slow to turn on marketing I'm just kind of curious the disconnect given what we see in the industry and what we see as far as inventories.
Christopher Alan Pierce:
Speaker Change: The honest answer to that I think it's just that the Oems are just.
Speaker Change: Very thoughtful long term full full and obviously have achieved interesting P&L over the last couple of years, where Brian like Dave they've become very very efficient because they didn't really has to support and it's very hard to start have to start supporting again, Brian back to.
Speaker Change: Well normalized was in a world where the last couple of years a lot of a lot of these Oems have been saying that dose was the new normal and so I think just like redeploying capital for them, it's just a little bit harder and so theres, a little bit of a lagging effect and but.
Speaker Change: But we clearly are seeing ads because once you walk into those doors with the appropriate data and obviously, we have a lot of data across the different brands. You. You start seeing also just which Oems are a little bit more responsive to the macro environment, which ones are more eager to really maintain and longevity of relay.
Speaker Change: <unk> shipped with our customers right. So if you're if you are a three times same gar buyer and you're walking in for the fourth time or are you going to be sophisticated about that or do you not really garrison OEM and so dirty balancing act in each OEM has a very different identity in a very different view in a very different strategy around that and so.
Naved Ahmad Khan: But I think the way that we monetize it is through higher RPD. And so, you know, my expectation over the course of the year is that each quarter we'll see sort of sequential gains in RPD, primarily driven by, you know, adoption of the GC-MS product. Okay. Thank you. The next question is from Naved Khan of Raleigh Securities. Please go ahead.
Speaker Change: We have visa's open dialogues and reprice, we tried to culminate each of those in one well with data we provide arguments on why we think certain programs make sense, depending on their characters and views and then the other thing is also we obviously tried to make them machel, so potentially with some of our affinity partners as well if there are certain programs there.
Speaker Change: So, but these things take a little bit of time, but the main reason is just.
Oliver Foley: Yeah, thanks a lot. I have a couple of questions for you. Maybe just on the increase in marketing spend in the second quarter, can you talk about if this is gonna be more performance-based marketing versus branding and then the potential payback period on that? And then maybe just on the incentive revenue, so you're kind of approaching the... You know, the range that, uh.., you know, we had for incentive revenue pre-pandemic? How should we think about growth from these levels? What kind of visibility do you have in terms of driving?
Speaker Change: Lagging of realizing what's happening around a slight unwillingness to over deployed too soon.
Speaker Change: And kind of wait and see mode and I agree with you that I would've expected that to come a little bit faster in general as a macro thing. Although I think we are we are doing a really good job capturing.
Speaker Change: Capturing share.
Speaker Change: Okay. Thank you.
Speaker Change: Okay.
Speaker Change: The next question comes from Marvin Fong with B T. I G. Please go ahead.
Marvin Milton Fong: Good morning, Thanks for taking my questions I.
Marvin Milton Fong: I'd like to just start on on the independent channel. So I think in the shareholder letter you wrote that you were seeing signs of that channel bottoming and yet in the earlier comments John too thin.
Marvin Milton Fong: Saying that you know it still.
Speaker Change: Hello, Bill unpredictable with bankruptcies and consolidations. So maybe you can just kind of.
Naved Ahmad Khan: Further up from here, Sure, why don't I take the first one, Naved, and as it relates to marketing, in terms of sort of a specific payback period or the channels through which we'll be deploying these dollars, you know, I think what we need to just do is sort of strike a balance between sort of the lower funnel performance marketing that drives an efficient cost per sale and really strong ROI for TrueCar and what's best for our dealer partners.
Speaker Change: Square those two lines of thought I mean, there's the actual.
Speaker Change: Positive inflection in the independent dealer count that sort of thing.
Speaker Change: Just to expand on that a little bit.
Bill: Yeah. It is it just that the I think the remark is more towards like the fluctuations it's never really a perfect line.
Speaker Change: And it depends a little bit on the months and it's so it's just harder to predict given the sizing of the type of dealer show right, a and the dealer count a.
Speaker Change: A dealers are dealer and even despite the sizing or effectively revenue or monetary value it brings to us.
Naved Ahmad Khan: And what I mean by that is if we're constantly optimizing our performance marketing spend on a cost-per-click basis, trying to get the lowest cost per click, driving the lowest cost per sale, you know, I think you'll ultimately see some optimizations that aren't necessarily good for the overall dealer network. And, you know, an example of that is, you know, Google can be driving the lowest cost per sale in a particular VMA, and certain subsets of our franchise and independent dealers are getting a ton of leads and a ton of sales. But, you know, by doing that, we're effectively not living up to our promise or not fulfilling our value proposition to other dealers in the network.
Speaker Change:
Speaker Change: And so the commentary is much more around the fluctuation in just the heart, but it's hard to predict it even though more broadly it seems that the world is stabilizing around that doesn't mean that like on a month per month basis. It's a it's hard to predict so it's really more about the volatility and it is about the overarching trend.
Speaker Change: Got you okay. Thanks for clarifying that and a question just on T. C. M. S and I think all of that you were mentioning that it should be in our P. D driver.
Speaker Change: I realize it's early and you don't want to be too specific but could you could you maybe just kind of frame the.
Speaker Change: The RTD lift opportunity like how much lift would you get from a dealer who only subscribing to like one or two products versus one that might be doing.
Speaker Change: Five I guess, maybe dimensionalize that for us that'd be that'd be helpful. Thanks.
Speaker Change: Sure.
Speaker Change: As you can imagine it is hard to predict not only because it's it's early but because the products are all very different and so there are some products that.
Speaker Change: That are really good candidates for large dealer groups, let's just take truecar preferred military partner.
Speaker Change: Ah.
Speaker Change: Much higher ticket.
Speaker Change: And it works really well for larger dealer groups, where they can gain access to eight.
Speaker Change: The military community and the locations that they are.
Oliver Foley: And so, what we need to, I think, do a better job at, and what ultimately will really, I think, improve dealer churn, is think more holistically about how we ensure performance is strong across the network. And so, yes, we're going to continue to invest in those lower funnel campaigns to really drive incremental units through the platform. But we want to make sure that we're also, you know, supporting dealers across the country, across different VMAs, across brands. And in doing that, we think that'll really improve churn. And then the second question was on OEM, right? Jantoon, do you want to take that?
Speaker Change: Whereas auto insurance for instance, or prime path or are much more programmatic theyre. Good for really any dealer that's looking to enhance the quality of leads that they get from our platform. So they're.
Speaker Change: They're really.
Speaker Change: They're all priced very differently and so it's not only.
Speaker Change: The total adoption of Tcs products, but really which one.
Speaker Change: Gain most traction so it's hard to say, what the RP impact would be.
Speaker Change: Over the course of the year, but.
Speaker Change: I think we should.
Speaker Change:
Speaker Change: We should expect through a combination of selling some of these.
Speaker Change: Call it larger ticket Tcs products like Truecar military and then also incorporating some of the other products into our bundled offering we should see sort of each corner.
Speaker Change: As adoption grows that RPT.
Speaker Change: You would go up how much.
Speaker Change: I'm not quite willing to say.
Speaker Change: And how much that will be.
Jantoon Reigersman: Yeah, Naved, can you repeat the question, just so I'm sure that I answered correctly? Yeah, so the OEM incentive revenue has been pretty strong for you guys. You kind of... You know, mentioned where the band is, you know, where the average incentive used to be pre-pandemic. You're kind of pushing the lower end of that band.
Speaker Change: Okay, that's perfectly understandable. Thanks, so much guys.
Speaker Change: Okay.
Speaker Change: The next question is from Rajat Gupta of Jpmorgan. Please go ahead.
Rajat Gupta: Oh, great. Thanks for squeezing me back in just had one follow up on the Truecar plus it.
Rajat Gupta: Could we get a little more color around like the partnerships that you're working on.
Rajat Gupta: No.
Rajat Gupta: Dealer.
Rajat Gupta: Our relationship and maybe like any more color you can give on like you know the Oems.
Rajat Gupta: They're engaging with you know as you build this product out even on the dealer side, you know I'll be like larger groups are a part.
Naved Ahmad Khan: Just wondering, where you think it can go from these levels and what kind of visibility do you have for TrueCar in terms of driving? How does this revenue line up from here? Yeah, so very good question. So look, we're obviously very bullish on the OEM line in general for the long term. We feel that there's a lot of opportunity, obviously, for OEMs to help support their dealer networks, especially in the obviously high interest rate environment; consumers need all the help they can get vis-a-vis acquiring and buying cars. What's hard to predict is like all of the near to midterm.
Rajat Gupta: Part of larger group or does that usually like a small charge I'm just curious.
Rajat Gupta: Could give us any more color on how that is.
Speaker Change: Yeah, absolutely absolutely was that so the for the for the for the pilot itself.
Speaker Change: We're working with a specific dealer group, who have historically been very very progressive.
Speaker Change: Mentioned that obviously on the news side, who will focus on California. Initially is really because we want to make sure we were somewhat constrained from a geography perspective, obviously.
Speaker Change: The California consumer is probably also interest more interested and more likely to transact online. It's obviously close to silicon valley and associated regions.
Speaker Change: And also it helps US then be within the TMA.
Speaker Change: And so like everybody is engaged and excited without necessarily making sure that we are.
Speaker Change: Intervene with the business of other dealer groups effectively or start getting into their DMA unnecessarily at the start as we prove this out so the good thing is that all these stakeholders are really excited they're curious I think everybody agrees that this is the way to go I also think and I think it's really important to emphasize this there are still some.
Jantoon Reigersman: We always have a really running strong pipeline in general, but OEM revenue comes in, call it, a little bit of bulky programs, and programs are often finite in time. And so they come, they go, they fluctuate a little bit. It's less around regular sales that you effectively build up and build up on your MRR effectively. And so, there's always a fluctuation in terms of the revenue lines. It's hard to predict those things. You know what you have in the pipeline, and the pipeline is strong. The question then is just when do they kick in?
Speaker Change: Reluctance in the industry at times, whether this is comes at the expense of dealer groups and I'm not sure that I agree with that I think really this is helping dealer groups expand their footprint and their ability to actually drive margins and for the consumer it's something that the consumer has been asking for and have for a long time.
Speaker Change: And obviously bolt in our Truecar plus product, but even in the way people are purchasing online today. So.
Speaker Change: It's really dms providers LMS providers, it's obviously logistical companies, it's captives lenders et cetera are all coming together initially launching it with one group really to further refine.
Jantoon Reigersman: When do OEMs decide to actually participate in certain programs? Some programs are more effective than others. Some we try certain things, and they might not actually work, and some overachieve. And so, it's a little bit more bulky in nature.
Jantoon Reigersman: Would you need to do is you need to merge demerger documents to make sure that the documents or correct rebates are correct calculated correctly right, obviously that the logistical.
Speaker Change: Deliveries done correctly et cetera, so there's a lot of guns together, especially on the new side, a new sizes are very very different complexity, then on the used side.
Speaker Change: And so we will be nationwide on the used side I'll buy that the inventory will be slightly small.
Naved Ahmad Khan: So, we make less of an effort to really try to predict this short term, but we're very confident in this long term. So, don't be surprised, right, that sometimes, quarter over quarter, there are some fluctuations in terms of OEM revenue, but it doesn't take away that we feel that, in the long run, OEM revenue should supersede effectively what we used to be doing pre-pandemic. Okay.
Speaker Change: On the new side, we'll focus on California and to your question on scaling. It I think we will end up doing at the end of the year and obviously into the next year as the scaling will probably happen with like mid size to larger dealer groups in general.
Speaker Change: Right thing 25 stores 30 stores 50 stores type groups.
Jantoon Reigersman: Most because often most often because they are just very very progressive when it comes to their debt, but also very progressive when it comes to their adoption to product flows and organizational really workflows for that matter and so being.
Naved Ahmad Khan: Being almost two large it's a little bit of an abatement that you need to really rethink your overarching infrastructure, but does seem to be the sweet spot and so those are that will be the sweet spot, where we're going to focus on initially as we start scaling this but before we do want to just prove this out in terms of just technical deployment of work out the bugs.
Jantoon Reigersman: That's helpful. And then maybe just a clarification on the... on the marketing stand. I'm assuming that most of the increase in marketing would be going towards the direct channel versus the partner channel, but correct me if I'm wrong. And then maybe just talk about the conversions on the website, how they are versus where they've been historically. Have they improved, or are they still below those levels? I'm going to change that. So I'll take it, Oliver.
Oliver Foley: So that might occur right, where people get stock in some shape or form of of random scenarios, we might not have sold off in the past and so we're going to do that over the course of the next quarter and then obviously scale from there, but the midsized group midsize to large size group is what is important.
Oliver Foley: Got it got it great. Thanks for all the color and good luck.
Speaker Change: Thank you.
Jantoon Reigersman: This concludes the question and answer session I would like to turn the call back over to John tune for closing remarks.
Oliver Foley: So thank you everybody for taking the time to participate in our call.
Oliver Foley: In particular I want to thank the team.
Jantoon Reigersman: So the short answer is it will mostly be direct. I think there are certain programs we're running with the partners, but those are fairly steady going. So this is really about more engagement on the direct side. Overall, for us, conversions have been improving and continue to improve. And it's obviously something we're also very, very focused on.
John Guzman: It's incredible to see the continued effort and hard work without our people. None of these results of our R. R.
Jantoon Reigersman: <unk> possible ever and so with gratitude. Thank you for everyone and thank you for being part of our journey.
Jantoon Reigersman: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
John Guzman: Yeah.
Jantoon Reigersman: And we feel that now that the market, in general, and the macro is more normalizing, it also allows us to start utilizing more of the tools we have at our disposal around the consumer experience, like driving really end-to-end funnel efficiencies. And so this is something we're now really going to deploy a little bit more towards, especially in a world where, obviously, the Googles of this world have been changing the performance marketing landscapes a little bit. And so the marketing that worked two, three years ago is not, per se, working the same way now.
Jantoon Reigersman: Mhm.
Jantoon Reigersman: [music].
Operator: And so, and we're also obviously getting much more sophisticated around that, but it's mostly direct. And we think we have a huge opportunity given the way we capture consumers, the way consumers behave on the site, and our level of intelligence we have and data we have around that. We think we can do a better job marketing than we have done historically. Great. Thank you guys. The next question comes from Chris Pierce of Needham & Co., please go ahead. Hey, good morning.
Operator: Okay.
Operator: Yeah.
Operator: [music].
Christopher Alan Pierce: Going back to the first question and franchise dealers, can you kind of talk about what you're doing in those geographies where maybe the franchise dealer kind of gained higher churn? Like what are some things that you can do to kind of reintroduce the newer product to those dealers? And is TrueCar Plus sort of part of that playbook, or is that sort of not related?
Jantoon Reigersman: No, TrueCar Plus is not related. So TrueCar Plus really is, think of it as like a really separate business line, effectively for now. And in some ways, I feel a little bit schizophrenic, and I think I've mentioned it to you in the past, which is that I feel schizophrenic because there are days where I feel like I'm a Series D venture product CEO as opposed to a public company CEO when it comes to TrueCar Plus, and then, obviously, we have the core business.
Jantoon Reigersman: So TrueCar Plus, I think, will be applicable obviously to, especially initially, to some of the larger dealer groups. So when we're talking about the franchise dealers, really think of it as, and this is the block we were mentioning, right, where we've had, we obviously have a large number of dealers on our platform. We've been running a series of these dealers a little bit on autopilot. Some of these groups, especially the ones that are not necessarily in high-growth markets, have probably been somewhat neglected.
Jantoon Reigersman: And so now that the market is coming back and inventory is coming back, etc., we effectively have to be more on top of them and really help them and help them with training and help them with insights and all these types of things. And I think we've done, it was probably six months ago or so, we made a big shift internally where we really emphasize both the sales and service side. We've had a very strong service leader come in. We have a very strong service team now, and they're constantly thinking about, okay, how often do we touch our dealers? What do we provide, and in what form do we provide it?
Jantoon Reigersman: Yeah.
Jantoon Reigersman: Yeah.
Jantoon Reigersman: [music].
Jantoon Reigersman: What is the service we provide, etc.? So the whole notion of the way we are servicing our book has dramatically changed over the last six months. And that obviously bears really good fruit in the form of dealers being very excited about what we're doing, but it also means that you're realizing that there are some dealers we probably have not serviced as well as we could have. And obviously, in some of those areas, we're going to do a much better job. Okay.
Jantoon Reigersman: Okay.
Jantoon Reigersman: Okay.
Jantoon Reigersman: Yeah.
Jantoon Reigersman: [music].
Jantoon Reigersman: Yes.
Jantoon Reigersman: [music].
Jantoon Reigersman: Yeah.
Jantoon Reigersman: [music].
Jantoon Reigersman: Okay.
Christopher Alan Pierce: And then, you know, we see OEMs turning on marketing with the, you know, through your income statement and through increased, you know, incentive spending. Now we see you guys turning on marketing to kind of drive more units to dealers. Is there any sort of magic bullet or, like, why have dealers been slow to turn on marketing?
Christopher Alan Pierce: Yeah.
Christopher Alan Pierce: [music].
Christopher Alan Pierce: Okay.
Christopher Alan Pierce: Yeah.
Christopher Alan Pierce: Okay.
Christopher Alan Pierce: [music].
Christopher Alan Pierce: Yeah.
Christopher Alan Pierce: Yeah.
Christopher Alan Pierce: Great.
Christopher Alan Pierce: Yeah.
Christopher Alan Pierce: [music].
Christopher Alan Pierce: Yeah.
Christopher Alan Pierce: [music].
Jantoon Reigersman: I'm just kind of curious about the disconnect given what we see in the industry and what we see as far as inventory is concerned. The honest answer to that, I think, is just that OEMs are just very thoughtful, long-term thoughtful, and obviously have achieved interesting P&Ls over the last couple of years, where they've become very, very efficient because they didn't really have to support it. And it's very hard to have to start supporting again, right back to what normal was in a world where, for the last couple of years, a lot of these OEMs have been saying that this was the new normal. And so I think just like redeploying capital for them is just a little bit harder, and so there's a little bit of a lag effect.
Jantoon Reigersman: Yes.
Jantoon Reigersman: Yeah.
Jantoon Reigersman: [music].
Jantoon Reigersman: Yeah.
Jantoon Reigersman: Yes.
Jantoon Reigersman: Okay.
Jantoon Reigersman: Yes.
Jantoon Reigersman: [music].
Jantoon Reigersman: Yes.
Jantoon Reigersman: Yes.
Jantoon Reigersman: But we clearly are seeing it because once you walk into those doors with the appropriate data, and obviously, we have a lot of data across the different brands, you start seeing also just which OEMs are a little bit more responsive to the macro environment, which ones are more eager to really maintain a longevity of relationship with our customers, right? So if you are a three-time same car buyer and you're walking in for the fourth time, are you going to be sophisticated about that, or do you not really care as an OEM?
Jantoon Reigersman: Yeah.
Jantoon Reigersman: Yes.
Jantoon Reigersman: [music].
Jantoon Reigersman: Yeah.
Jantoon Reigersman: [music].
Jantoon Reigersman: Yes.
Jantoon Reigersman: [music].
Jantoon Reigersman: And so there are these balancing acts, and each OEM has a very different identity and a very different view and a very different strategy around that. And so we have these as open dialogues, and we try to accommodate each of those. And then, with data, we provide arguments on why we think certain programs make sense, depending on their characters and views.
Jantoon Reigersman: Right.
Jantoon Reigersman: [music].
Jantoon Reigersman: Okay.
Jantoon Reigersman: And then the other thing is that we obviously try to make them match potentially with some of our affinity partners as well, if there are certain programs there. But these things take a little bit of time, but the main reason is just lag in realizing what's happening around them, a slight unwillingness to over-deploy too soon and kind of a wait and see mode. And I agree with you that I would have expected that to come a little bit faster in general as a macro thing. Although I think we are doing a really good job capturing share. Thank you. The next question comes from Marvin Fong with BTIG. Please go ahead. Good morning.
Jantoon Reigersman: Okay.
Jantoon Reigersman: [music].
Jantoon Reigersman: Yes.
Jantoon Reigersman: [music].
Jantoon Reigersman: Okay.
Jantoon Reigersman: [music].
Jantoon Reigersman: Yes.
Jantoon Reigersman: Okay.
Jantoon Reigersman: Yes.
Jantoon Reigersman: Okay.
Jantoon Reigersman: Yeah.
Jantoon Reigersman: [music].
Marvin Milton Fong: Thanks for taking my questions. I'd like to just start on the independent channel. So, I think in the shareholder letter you wrote that you were seeing signs of that channel bottoming. And yet, in earlier comments, Jantoon, I think you were saying that, you know, still a little bit unpredictable with bankruptcies and consolidations. So, maybe just kind of square those two lines of thought.
Marvin Milton Fong: Okay.
Marvin Milton Fong: Mhm.
Marvin Milton Fong: Okay.
Marvin Milton Fong: [music].
Marvin Milton Fong: Okay.
Marvin Milton Fong: [music].
Jantoon Reigersman: I mean, is there actual positive inflection in the independent dealer account that you're seeing, or to expand on that a little bit? Thank you. Yeah, it is just that I think the remark is more towards the fluctuations. It's never really a perfect line.
Jantoon Reigersman: And it depends a little bit on the month. And it's, so it's just harder to predict given the sizing of the type of dealer. So, right, a dealer counts, a dealer is a dealer, and even despite the size or effectively revenue or monetary value it brings to us, the comment was much more around the fluctuation and just the heart that it's hard to predict it, even though, more broadly, it seems that the world is stabilizing around that doesn't mean that, like, on a month to month basis, it's hard to predict.
Jantoon Reigersman: Okay.
Jantoon Reigersman: [music].
Marvin Milton Fong: So it's really more about the volatility than it is about the overarching trend. Gotcha. Okay. Thanks for clarifying that. And one question just on TCMS.
Marvin Milton Fong: And I think, Oliver, you were mentioning that it should be an RPD driver. And I realize it's early and you don't want to be too specific, but could you maybe just kind of frame the RPD lift opportunity? Like, how much lift would you get from a dealer who is only subscribing to like one or two products versus one that might be doing four or five? Just maybe dimensionize that for us. That'd be helpful. Thanks.
Marvin Milton Fong: Yes.
Marvin Milton Fong: [music].
Marvin Milton Fong: Yeah.
Oliver Foley: Sure. But, as you can imagine, it is hard to predict, not only because it's early, but because the products are all very different, right? And so there are some products that are really good candidates for large dealer groups. Let's just take TrueCar Preferred Military Partner, right? That's a much higher-ticket product, and it works really well for larger dealer groups, where they can sort of gain access to the military community and the locations that they are in. Whereas Auto Intro, for instance, or Prime Path are much more programmatic, they're good for really any dealer that's looking to enhance the quality of leads that they get from the platform.
Marvin Milton Fong: [music].
Oliver Foley: Yes.
Oliver Foley: [music].
Oliver Foley: So they're, they're really, They're all priced very differently, and so it's not only sort of the total adoption of TCMS products but really which ones gain the most traction. So it's hard to say what the RP impact would be over the course of the year. You know, I think we should.
Oliver Foley: We should expect, you know, through a combination of selling some of these, these, these, um, I call them larger ticket TCMS products like TrueCar Military and then also incorporating some of the other products into our bundled offering. We should see, sort of, each quarter, as adoption grows, that the RPD will go up. How much?
Oliver Foley: You know, I'm not quite willing to say, uh, say how much that'll be. Okay, that's perfectly understandable. Thanks so much, guys. The next question is from Rajat Gupta of JP Morgan. Please go ahead.
Oliver Foley: Uh huh.
Oliver Foley: [music].
Rajat Gupta: Uh huh.
Rajat Gupta: Great, thanks for squeezing me back in. You just had a follow-up on TrueCar Plus. Could we get a little more color around the partnerships that you're working on, both in the dealer and the take-heon relationship, and maybe any more color you can give on the OEMs that you're engaging with as you build this product out? Even on the dealer side, are these larger groups, or are they a part of a larger group, or are these really small stores? I'm just curious if you could give us any more color around that. Yeah, absolutely, Rajat.
Oliver Foley: [music].
Rajat Gupta: Hum.
Rajat Gupta: Hum.
Rajat Gupta: Yeah.
Rajat Gupta: Hum.
Rajat Gupta: Yeah.
Rajat Gupta: Yeah.
Rajat Gupta: [music].
Rajat Gupta: Okay.
Rajat Gupta: [music].
Rajat Gupta: Hum.
Rajat Gupta: Hum.
Rajat Gupta: Hum.
Rajat Gupta: [music].
Jantoon Reigersman: So for the pilot itself, we're working with a specific dealer group who have historically been very, very progressive. I mentioned that, obviously, on the new side, we'll focus on California initially. That's really because we want to make sure we are somewhat constrained from a geography perspective. Obviously, the California consumer is probably also more interested and more likely to transact online. It's obviously close to Silicon Valley and associated regions.
Jantoon Reigersman: Okay.
Jantoon Reigersman: [music].
Jantoon Reigersman: And also, it helps us then be within the DMA OEM so that everybody is engaged and excited without necessarily making sure that we intervene with the business of other dealer groups effectively or start getting into their DMA unnecessarily at the start as we prove this out. So the good thing is that all these stakeholders are really excited. They're curious.
Jantoon Reigersman: I think everybody agrees that this is the way to go. But I also think, and this is really important to emphasize this, there is still some reluctance in the industry at times about whether this comes at the expense of dealer groups. And I'm not sure that I agree with that.
Jantoon Reigersman: I think this is really helping dealer groups expand their footprint and their ability to actually drive margins. And for the consumer, it's something that the consumer has been asking for for a long time. And obviously, both in our Truecar Plus product but even in the way people are purchasing online today. So they're really DMS providers, LMS providers. It's obviously logistical companies. It's captives, lenders, et cetera, all coming together, initially launching it with one group really to further refine it. Because what you need to do is merge and demerge documents, make sure that the documents are all correct, and rebates are calculated correctly, right?
Jantoon Reigersman: Okay.
Jantoon Reigersman: [music].
Jantoon Reigersman:
Jantoon Reigersman: Yeah.
Jantoon Reigersman: Yes.
Jantoon Reigersman: Obviously, that the logistical delivery is done correctly, et cetera. So there's a lot that comes together, especially on the new side. The new side is a very, very different complexity than on the use side.
Jantoon Reigersman:
Jantoon Reigersman: [music].
Jantoon Reigersman: And so we will be nationwide on the youth side, albeit that the inventory will be slightly smaller. On the new side, we'll focus on California. And to your question on scaling it, I think what we'll end up doing at the end of the year and, obviously, into the next year is that the scaling will probably happen with mid-size to larger dealer groups in general. Right, think 25 stores, 30 stores, 50 stores type groups.
Jantoon Reigersman: Most often because they are just very, very progressive when it comes to their tech, but also very progressive when it comes to their adoption of product flows and organizational real workflows for that matter. And so being almost too large is a little bit of an impediment that you need to really rethink your overarching infrastructure. But those seem to be the sweet spot.
Jantoon Reigersman: And so that will be the sweet spot where we're going to focus initially as we start scaling this. But before we do, we want to just prove this out in terms of just technical deployment and work out the bugs that might occur where people get stuck in some shape or form in random scenarios we might not have thought of in the past. And so we're going to do that over the course of the next quarter and then, obviously, scale from there. But the mid-size group, the mid-size to large-size group, is what is important.
Jantoon Reigersman: Okay.
Jantoon Reigersman: [music].
Jantoon Reigersman: Yeah.
Rajat Gupta: Got it. Got it. Great. Thanks for all the color and good luck.
Jantoon Reigersman: Yeah.
Jantoon Reigersman: Yes.
Rajat Gupta: [music].
Operator: Thank you. This concludes the question and answer session. I would like to turn the call back over to Jantoon for closing remarks. So, thank you, everybody, for taking the time to participate in our call. I, in particular, want to thank the team. It's incredible to see the continued effort and hard work. Without our people, none of these results would ever be possible.
Operator:
Operator: Yeah.
Operator: [music].
Operator: Yeah.
Operator: Okay.
Operator: [music].
Jantoon Reigersman: And so with gratitude, thank you for everyone, and thank you for being part of our journey. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. ?? ?? © BF-WATCH TV 2021, © The Ultimate Parody Site! [inaudible] © BF-WATCH TV 2021 ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Thomas White, Jantoon Reigersman, Michael Darrow, Ryan Pfingst, Jantoon Reigersman, ??? ??? ??? ??? ??? ??? ??? ?? ?? ?? ?? ?? ?? ?? ?? © BF-WATCH TV 2021 © The Ultimate Parody Site-Limited, ?? ?? ?? ?? ?? ?? ?? ?? ?? ??
Operator: Uh huh.
Operator: [music].
Jantoon Reigersman: Yes.
Jantoon Reigersman: [music].
Jantoon Reigersman: Okay.
Jantoon Reigersman: Uh huh.
Jantoon Reigersman: Yes.
Jantoon Reigersman: Yes.
Jantoon Reigersman: [music].
Jantoon Reigersman: Sure.
Jantoon Reigersman: [music].