Q2 2024 TrueCar Inc Earnings Call

I would now like to turn the conference over to Jantoon Reigersman, President and Chief Executive Officer of TrueCar. Please go ahead.

Speaker Change: Thank you, operator. Hello, everyone, and welcome to the TrueCar second quarter 2024 earnings conference call. Joining me today is 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 Investors Relations website at ir.truecar.com.

Jantoon Reigersman: Before we get started, I need to read our usual safe harbor. I want to remind you that we will be making forward-looking statements about this goal, including statements regarding our revenue growth, expected free cash flow margin, as well as aspirational goals for the year 2026. 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 forward-looking statements except as required by law.

Before we get started, I need to read our usual safe harbor. I want to remind you that we will be making forward-looking statements on this goal, including statements regarding our revenue growth, expected free cash flow margin, as well as aspirational goals for the year 2026.

Forward-looking statements can be identified by the use of words such as believe, expect, plan, target, anticipate, become, seek, will, intent,

confident, and similar expressions and are not and should not be relied on as guarantees of future performance or results. Actual results could

differ materially from those contemplated by our forward-looking statements.

We caution you to review the risk factor section of our annual report on Form 10-K , our quarterly reports on Form 10-Q , and our other reports and filings with the Securities and Exchange Commission for a discussion of the factors that could cause our results to differ materially.

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 forward-looking statements except as required by law.

Speaker Change: In addition, we will also discuss certain GAAP and non-GAAP financial measures. Reconciliation 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.

Speaker Change: The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Speaker Change: So now, to the fun part.

Speaker Change: With that, I'll provide a summary of the quarter as highlighted in our shareholder letter.

Speaker Change: Given the broader market developments, I'm assuming not everybody has read the letter yet, so I will repeat some paragraphs below, as well as add some more color and exciting statistics on our TC Plus initiatives before opening for questions.

Jantoon Reigersman: As we review the results of our second quarter performance, we have taken the opportunity to reflect on our exciting long-term goals for TrueCar and the progress we are making toward our targets. We have established ambitious goals for our organization, and we remain steadfast in our commitment to achieving them. However, this does not happen overnight, and we will encounter inevitable operational challenges on our journey.

Speaker Change: As we review the results of our second quarter performance, we have taken the opportunity to reflect on our exciting long-term goals for TrueCar and the progress we are making towards our targets.

Speaker Change: We have established ambitious goals for our organization.

Speaker Change: and we remain steadfast in our commitment to achieving them.

Speaker Change: This does not happen overnight, and we will encounter inevitable operational challenges on our journey, but we believe we are making the right progress and forming the right habits while pursuing the right priorities to achieve our strategic and financial goals. This is a super exciting time for the company.

Jantoon Reigersman: But we believe we are making the right progress and forming the right habits while pursuing the right priorities to achieve our strategic and financial goals. This is a super exciting time for the company. We estimate that the CDK global malware attack contributed to approximately $750,000 of lost revenue during the quarter, details of which can be found in the shareholder letter.

Speaker Change: In Q2, total revenue was $41.8 million, which represents growth of 6.4% year-over-year and 1.8% quarter-over-corner. We achieved adjusted EBITDA profitability of $0.1 million.

Speaker Change: A 5.4 million improvement year over year.

Speaker Change: We estimate that the CDK global malware attack contributed to approximately 750,000 of lost revenue during the quarter, details of which can be found in the shareholder letter.

Speaker Change: First, we want to acknowledge some super important progress that was made during the quarter and to date in Q3. On July 17th, we proudly announced the launch of our TrueCar Plus pilot, which now empowers consumers for the first time.

Speaker Change: to purchase from over 3,000 new, used, and certified pre-owned vehicles from start to finish, completely online.

Speaker Change: Launching TC Plus is a big deal and a huge accomplishment by the team.

Speaker Change: Furthermore, we're not only strengthening our core business by regaining important dealers on our platform,

Speaker Change: but by working to commercialize new value drivers, including but not limited to our unique data sets and predictive AI capabilities, our newly designed marketing tech stack, and of course, TC+.

Speaker Change: In doing so, we're becoming a better version of TrueCar that more effectively addresses the evolving needs of consumers, dealers, and OEMs alike, positioning the business for what we believe will be a sustained period of growth and market share gains.

Speaker Change: There were a number of factors that temporarily limited growth in Q2, one of which was the broad impact of the CDK global malware attack. We are laser-focused on our execution in order to grow the business at our long-term revenue growth targets of 20% plus.

Speaker Change: As discussed in the past, there are four key building blocks we must successfully execute against in order to achieve our desired long-term growth.

Speaker Change: 1. Activate new dealers, with a focus on regaining many of the franchise dealers that churned while new vehicle supply was constrained. 2. Reduce dealer churn by doubling down on our commitment to help them drive incremental sales and by providing them with unmatched support and service.

Speaker Change: Three, continue to grow average revenue per dealer through our TrueCar Marketing Solutions product offering and eventually through TC+.

Speaker Change: And four, grow revenue from our OEM business by expanding our OEM partnerships and continuing to invest in highly effective incentive programs across our network of affinity partners.

Speaker Change: The building blocks we set forth to meet our targets remain unchanged, as do our long-term goals, and we're not wavering on our goal to return to $300 million in revenue by 2026.

Speaker Change: During Q2, we expanded our franchise and independent dealer network thanks to strong growth in our new dealer activations.

Speaker Change: Moreover, we're now entering a market environment that is much different versus recent years. Our business model has been constrained by the lack of new vehicle supply, but that is now changing. Vehicle supply is returning at a time when demand is patchy.

Speaker Change: This is a very positive backdrop for TrueCar.

Speaker Change: To be clear, there may still be some choppiness in the short term as some dealers look for cost-saving measures. However, it is imperative for every dealer that they continue to drive sales.

Speaker Change: In a more challenging sales environment, TrueCar becomes much more valuable as a superior demand generation partner that can drive incremental sales.

Jantoon Reigersman: TrueCar's counter cycle in this way, and therefore, it is time for us to lean in. We believe we have a unique ability to power targeted OEM incentive programs across our affinity network, and we are poised to capitalize on this ability. The rise in new vehicle inventory levels combined with the growing price sensitivity of consumers has created a challenge for many OEMs that TrueCar is uniquely positioned to solve through the delivery of private targeted offers across our network of 300 plus affinity partners. We see this as a timing issue only.

Speaker Change: TrueCar's counter cycle in this way and therefore it is time for us to lean in.

Speaker Change: We started to do this in Q2, growing marketing spend by 3.2 million or 24% quarter-over-quarter, which contributed to 19.5% quarter-over-quarter growth in new vehicle sales versus 8.9% industry-wide.

Speaker Change: and 9% growth versus the same quarter last year compared to flat industry-wide.

Speaker Change: We believe we have a unique ability to power targeted OEM incentive programs across our affinity network and we are poised to capitalize on this ability.

Speaker Change: The rise in new vehicle inventory levels combined with the growing price sensitivity of consumers has created a challenge for many OEMs that TrueCar is uniquely positioned to solve through the delivery of private targeted offers across our network of 300 plus affinity partners.

Speaker Change: Nevertheless, our Q2 OEM incentive revenue declined 14% year-over-year and 37% sequentially due to the timing of activation of new OEM programs and the slowdown in new vehicle sales volumes among dealers impacted by the CDK global outage.

Jantoon Reigersman: We have a strong pipeline of opportunities, and the revenue trajectory will predominantly be driven by the timing of activation. For most of Q2, these products were available for dealers as add-ons to their existing subscriptions. And during that time, we have quickly grown revenue from these products from zero to a 1 million quarterly run rate with a tremendous amount of opportunity to grow further. Looking beyond Q2 and turning now to TC+. Despite being delayed by the disruption caused by the CDK cyber attacks, we proudly announced TC plus by the launch on July 17.

Speaker Change: We see this as a timing issue only. We have a strong pipeline of opportunities and the revenue trajectory will predominantly be driven by the timing of activations.

Speaker Change: We remain confident in the growth profile of this part of our business, particularly given the fact that although incentives have grown substantially versus last year as a percentage of manufacturers suggested retail price,

Speaker Change: The average incentive amount per vehicle remains more than 30% below pre-pandemic levels and we are uniquely positioned with a proven product market fit.

Speaker Change: During Q2, we also achieved some of our highest levels of revenue activation and upgrades, largely driven by strong growth in the onboarding of new franchise dealers and reactivation of dealers that have previously left our network.

Speaker Change: Despite this growth being partially offset by dealer cancellations, we saw strong improvements across our sales effectiveness metrics during Q2, which we attribute to the sales team reorganization.

Speaker Change: slash realignment that began in the second half of 2023, as well as our commitments to the focused repetition of daily sales activities that we expect will allow us to grow our dealer counts over the next few years.

Speaker Change: Another bright spot in our Q2 performance was the rate of adoption we saw of our suite of TCMS products. Recall that during Q1, we introduced eight unique products that leveraged TrueCar's proprietary data and hyper-targeted audiences to help dealers more effectively reach and win in-market car salvers.

Speaker Change: For most of Q2, these products were available for dealers as add-ons to their existing subscriptions. And during that time, we have quickly grown revenue from these products from zero to a 1 million quarterly run rate, with a tremendous amount of opportunity to grow further.

Speaker Change: Moreover, during June , we incorporated certain TCMS products into our enhanced subscription offering and over the subsequent weeks, we have observed a significant lift in the adoption rate of the enhanced bundle among new dealers, as well as the number of existing dealers choosing to upgrade.

Speaker Change: Their subscription.

Speaker Change: Looking beyond Q2 and turning now to DC+, despite being delayed by the disruption caused by the CDK cyber attacks, we proudly announced DC+, by the launch on July 17th.

Speaker Change: The launch represents a key milestone 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 from the comfort of their couch through an entirely digital online transaction.

Speaker Change: By partnering with the Right Dealer Group, whose vision for the future of automotive retail is closely aligned with our own, we developed an online car buying experience that is integrated with the dealer's back-end systems to overcome the historical obstacles to an entirely online transaction.

Speaker Change: Initially spanning 10 new car brands with over 3,000 new certified grown and used vehicles in stock, consumers seeking the convenience and flexibility of shopping from home can search for the right car that is competitively priced, secure and loan from a range of lenders.

Speaker Change: receive a binding value for their trade-in that gets applied to their new purchase, choose from an extensive selection of compatible accessories, warranties, maintenance packages, and protection products, and schedule the delivery of their new vehicle all on TrueCar's websites.

Speaker Change: While used vehicles are currently available for delivery anywhere throughout the contiguous United States excluding Massachusetts and New York, delivery of new vehicles will initially only be available to consumers in California for the foreseeable future.

Jantoon Reigersman: Over the next several months, the pilot will enable us to validate and refine the technical solutions we have developed to address each stage of the consumer purchasing process, test, and develop additional ways to eliminate friction from the consumer experience, and identify and solve any dealer pain points that might emerge. Moreover, we aim to demonstrate strong consumer adoption of the online capabilities on TC Plus eligible vehicles and the value we can deliver to dealers through sales efficiencies and expanding their addressable market.

Speaker Change: Over the next several months, the pilot will enable us to validate and refine the technical solutions we have developed to address each stage of the consumer purchasing process, test and develop additional ways to eliminate friction from the consumer experience and identify and solve any dealer pain points that might emerge.

Speaker Change: Moreover, we aim to demonstrate strong consumer adoption of the online capabilities on TC Plus-eligible vehicles and the value we can deliver to dealers through sales efficiencies and expanding their addressable market.

Speaker Change: Even though we've gradually turned the service on since July 17th, the new car service has only been available since last Thursday, August 1, in the entirety of California. Within this brief period, we have already seen some cool statistics, including the first new car order placed within 48 hours of launching the product.

Speaker Change: Conversion from vehicle detail page, adding to cart, to credit application submission of over 40%.

Speaker Change: 12 orders placed, with orders placed in this pilot of DC+, being defined as a consumer selecting a vehicle and a price, accepting a 350 credit card hold or lender offer, and uploading all the necessary documents.

Jantoon Reigersman: This is a big deal, and we have yet to open the proper Topol funnel aperture for marketing, which we plan to do over the next several weeks. And yes, the cover page of the shareholder letter is an actual picture of a billboard between Silicon Valley and San Francisco. While the path to 300 million will not be linear and will be subject to risks outside of our control, we are confident that the ultimate outcome will be achieved.

Speaker Change: This is a big deal, and we have yet to open the proper Topol funnel aperture for marketing, which we plan to do over the next several weeks. And yes, the cover page of the shareholder letter is an actual picture of a billboard between Silicon Valley and San Francisco.

Speaker Change: I put here a smiley face which you guys cannot see but it has like big white teeth. It's really cool.

Speaker Change: Finally, we remain committed to the three-year target that we previously set to grow revenue back to $300 million with a 10% free cash flow margin by the end of 2026.

Speaker Change: Achieving that goal requires strong execution against the four key building blocks we have articulated and for us to continue pushing to build a better version of TrueCar that deserves to play a key role in the automotive retail ecosystem.

Speaker Change: While the path to $300 million will not be linear and will be subject to risks outside of our control, we are confident that the ultimate outcome will be achieved.

Speaker Change: Meanwhile, our balance sheet remains strong with no debt and approximately 180 million of cash in equivalence at the end of Q2. We repurchased 425,000 shares for 1.2 million during Q2.

Speaker Change: and have subsequently repurchased an additional 1.26 million shares for $4.5 million between July 1 and last Friday.

Speaker Change: Despite the broader market turbulence, this is an exciting time at the company and we are pressing full steam ahead. Now, operator, let's open the call for questions from our analysts.

Operator: Our first question comes from the line of Rajat Gupta, JP Morgan. Please go ahead.

Speaker Change: Our first question comes from the line of Rajat Gupta.

Rajat Gupta: Great, thanks for taking the question. You mentioned, you know, you had the highest level of revenue activations and upgrades in the second quarter. Could you elaborate a little bit more on the drivers here? Is it more company-specific, you know, adoption that you saw, or is it just more industry trends that you're seeing in the broader marketplace industry? And then if you could, like, quantify in terms of what this means for the monthly revenue for the dealer going forward. And I have a couple quick follow-ups. Thanks.

Speaker Change: and Tracy Morgan. Please go ahead.

Rajat Gupta: Great, thanks for taking the question. You mentioned, you know, you had the highest level of revenue activations and upgrades in the second quarter.

Rajat Gupta: Could you elaborate a little bit more on the drivers here? Is it more company specific, you know, adoption that you saw, or is it just more industry trends?

Speaker Change: that you're seeing in the broader marketplace industry. And then if you could like quantify in terms of what this means for the monthly revenue for dealer going forward. And I have a couple of quick follow-ups, thanks.

Speaker Change: Yeah, I'll start and then Oliver can talk about the monthly dealer, monthly revenue per dealer. So the short version is, I think, as we tried to highlight also in both the letter and the script, is the idea that macro is generally changing.

Jantoon Reigersman: And so it's changing because inventory is building up. It's changing because there is a lot of pent-up demand, but affordability is a real issue.

Oliver: And so it's changing because inventory is building up, it's changing because there is a lot of pent-up demand, but affordability is a real issue. And so therefore, really focusing on unit sales is really important.

Jantoon Reigersman: And so, therefore, really focusing on unit sales is really important. And you focus on unit sales and help your dealers not only by actually helping them sell cars but also the ancillary products that effectively enable them to sell even more cars, whether those are in-market shoppers or conquesting customers, et cetera. So it's really about the package that I think is working in a world where our dealers are getting more and more under pressure.

Oliver: And you focus on unit sales and help your dealers, not only by actually helping them sell cars, but also the ancillary products that effectively enable them to sell even more cars, whether those are in-market shoppers or conquesting customers, et cetera. So it's really about the package that I think is working in a world where our dealers are getting more and more under pressure.

Jantoon Reigersman: And number one, so there's a macro component. And then, number two is also, I think our sales team and our field team are doing a tremendous job after our restructuring to present themselves slightly differently and articulate the value of TrueCar also slightly differently. So it's a combination of those two factors that, under the leadership of Lisa, are doing a tremendous job. And then Oliver, I don't know, do you want to say something about the revenue?

Speaker Change: And number one, so there's a macro component. And then number two is also, I think our sales team and our field team are doing a tremendous job after our restructuring to

Oliver: also present themselves slightly different and articulate the value of TrueCar also slightly different. So it's a combination of those two factors that under the leadership of Lisa are doing a tremendous job. And then Oliver, I don't know, do you want to say something about the revenue?

Oliver: I would just add that it's amazing to see, since we launched the TrueCar Marketing Solutions product suite, that's given us and the field sales team the opportunity to get in front of dealers, you know, who've known TrueCar for a long time, but they knew

Oliver Foley: the older version of TrueCar that was purely a lead generation provider, right? And so now that we have a much more expansive product offering and we can address today's dealer challenges, not just the ones of the past, we've been able to get in front of even more large enterprise and strategic accounts and really present to them this new product offering that we have. So I think it's a combination of the sales team really sort of hitting their stride and being much more effective in developing a strong pipeline and closing those opportunities. But I also wanna sort of say that the TrueCar Marketing Solutions products have really opened the door for us to get in front of more dealers and get them excited about what we're doing.

Oliver: We call it the older version of TrueCar that was purely a lead gen provider, right? So now that we have a much more expansive product offering and we can address

Speaker Change: Today's dealer challenges, not just the ones of the past, we've been able to get in front of even more large enterprise and strategic accounts.

Oliver: and really present to them this new product offering that we have. And so I think it's a combination of the sales team really sort of hitting their stride and being much more effective in developing a strong pipeline and closing those opportunities. But I also want to sort of...

Oliver: say that the the TrueCar Marketing Solutions products have really sort of opened the door for us to get in front of more dealers and get them excited about what we're doing.

Rajat Gupta: And then maybe, you know, like more near-term. Obviously, the OEM incentives revenue is going to be lumpy. You mentioned some optimism that it's going to pick up in the second half. I was curious, like, you know, we are like a few weeks into the third quarter. Could you update us on what you've seen so far in the third quarter? And then, you know, coming out of the CDK hack. You know, are there any boundaries that you can give us around revenue or EBITDA as well, you know, for the third quarter overall?

Speaker Change: Understood, understood, that's helpful. And then just maybe, you know, like more near-term, you know, obviously the OEM incentives revenue, you know, it's gonna be lumpy.

Speaker Change: You mentioned some optimism that it's going to pick up in the second half. I was curious, we are a few weeks into the third quarter. Could you update us on what you've seen so far in the third quarter? And then, coming out of the CDK hack,

Speaker Change: You know, is there any boundaries that you can give us around revenue or EBITDA as well, you know, for the third quarter overall? Thanks.

Jantoon Reigersman: No, yeah, so I think the first on the OEM side. I think the OEMs, if you look, the pressure on the OEMs is increasing every quarter, and the dealers are asking them for help.

Speaker Change: No, yeah, so I think the first on the OEM side...

Speaker Change: I think the OEMs, if you look, the pressure on the OEMs is increasing every quarter.

Jantoon Reigersman: Obviously, incentives need to come in. And as you guys know, there are really two components to this program. So one, those are lumpy programs, and also the way you design programs.

Speaker Change: And the dealers are asking them for help. Obviously, incentives need to come in. And so, and as you guys know, there are really two components to this program. So one is those are lumpy programs and also the way you design programs. And so

Jantoon Reigersman: And so the OEMs will initially start in a little bit more cautious. They might not make the incentives stackable, or they might provide certain limitations and realize that actually they should take away these restrictions. And so there's both a combination of activations as well as the design and the type of programs.

Speaker Change: The LEMs will initially start in a little bit more cautious.

Speaker Change: They might not make the incentive stackable or they might provide certain limitations and then realize that actually they should take away these restrictions. And so there's both a combination of activations as well as the design and the type of programs.

Jantoon Reigersman: And the short answer to your question is yes, from what we've already seen in Q3. We've seen that obviously there is activation, there's engagement, etc. So we're positive and bullish on that segment overall. And then, sorry, I know your question on CDK was, but I think that the risk of CDK for us has really been limited to the last part of Q2. At the end of the day, we don't think everything is back online.

Speaker Change: And the short answer to your question is yes, we're positive from what we've already seen in Q3. We've seen that obviously there is activation, there's engagement, etc. So we're positive and bullish on that segment overall.

Jantoon Reigersman: And so the reality is like, like sales matching happens accordingly again. And so there's really no risk that deals have been done on pen and paper without any form of sales matching. Going forward, there's always like, never, never be surprised about some of the unexpected, but overarching, I think the risk is fairly limited in Q3. And it's really limited to the boundary of Q2, as we've outlined in the letter. So I think there's no need for, we should not expect any further.

Jantoon Reigersman: any kind of like guidance framework for the financials for the company for the third quarter? Yeah, I mean, absolutely. I mean, like, thank you for the question.

Jantoon Reigersman: And you know, the question comes in some shape or form. I mean, like that, like, I, as you can imagine, like, I'm always a little bit reluctant to guide because of the way the business runs. And we write like, great examples, a little bit of this lumpiness of, oh, yeah, we're super excited about the opportunity, we're doing all the right things, activations will happen, you'll start seeing that, and in the long term, you'll see tremendous growth there.

Jantoon Reigersman: In terms of guidance, I would say we've indicated in the past that we're aiming to achieve free cash flow break even by the end of the year, right? There might be some give and take there, but it's still an aim we have. Okay, so just wanna now, if we miss a little by a hair, it's the end of the world, but it's really the focus of. I want to make sure that everybody knows that this company is really self-sustainable. And I feel that free cash flow is the right measure vis-a-vis adjusted dividend.

Jantoon Reigersman: And then obviously, for us to hit our three-year plan, we need to start accelerating our revenue growth. And this really starts with consistently achieving double-digit year-over-year growth and then obviously accelerating to beyond our long-term target of 20 plus. And so if you work backwards from 2026, we feel we can actually make that happen. It obviously does mean that we need to start accelerating double digit is a focus, then obviously go beyond that.

Speaker Change: And then obviously for us to hit our three-year plan, we need to start accelerating our revenue growth. Okay, and this really starts with consistently achieving double-digit year-over-year growth, and then obviously accelerating to beyond our long-term target of 20 plus.

Jantoon Reigersman: We're confident in the building blocks; we see the fruit of the labor coming through. And there's still plenty of room for improvement in the various areas that we have. But overall market conditions for both consumer demand and dealer sentiment are in our favor and turning more and more in our favor every day. So we're, we're very bullish. Got it. Great. No, thank you. I'll get back.

Speaker Change: We're confident in the building blocks. We see the fruit of the labor come through.

Speaker Change: And there's still plenty of room of improvement in the various areas that we have. But overall market conditions for both consumer demand and dealer sentiment are in our favor and turning more and more in our favor every day. So we're very bullish.

Operator: Our next question comes from the line of Naved Khan, from B Riley Securities. Please go ahead. Yeah.

Naved Khan: Yeah, hi. Thanks a lot.

Naved Khan: Just a couple of questions from me, so maybe just on the... On the direct channel, you did increase advertising spend, but we didn't see that reflected in terms of unit growth on the direct channel. And I assume there's a lag effect, right, because you spend on marketing, it doesn't maybe – unless it's performance, it might take time to kind of show up. So maybe just talk about how we should think about the direct channel in the back half, at least how are you thinking about it, and also maybe advertising spend in the back half, if that should go up year-on-year or sequentially, how should we think about that. And then I have a follow-up.

Speaker Change: And I assume there's a lag effect, right? Because you spend on marketing, doesn't maybe, unless it's performance, it might take time to kind of show up. So maybe just talk about.

Oliver Foley: Yeah, go ahead, go ahead, Oliver, go first.

Oliver Foley: Okay. Yeah, so I would say that, you know, as we've articulated, we think probably the number one lever for us to drive down dealer cancellations and really sort of strengthen the health of our dealer network is by driving incremental sales. And so what we're focused on doing is sort of capturing share of consumer demand each quarter. And I think we achieved that in Q2. You know, we did spend more money on both sort of branded media spend to the TrueCar.com channel, but also we spent more marketing dollars across the partner network where, you know, we've historically we've had greater efficiency on that spend. But it is important that we are focused on both the direct channel, TrueCar.com, and the partner network. And.

Oliver Foley: I would argue that we saw some pretty encouraging signs, even with the spend that we put towards TrueCar.com. However, I would say that the CDK impact in the last 12 days of the quarter certainly didn't help our unit count. And I think absent that, you likely would have seen a higher TCDC unit count and a lower cost per sale. But there's also some of that spend that's more longer term, right? Isn't necessarily the bottom of the funnel going to convert into unit sales immediately.

Speaker Change: I would argue that, you know, we saw some pretty encouraging signs, even with the spend that we put towards TrueCar.com. I would say that the CDK impact in the last 12 days of the quarter, you know, certainly

Speaker Change: a higher TCBC unit count and a lower cost per sale.

Speaker Change: There's also some of that spend that, you know, that's...

Speaker Change: more longer term, right, isn't necessarily bottom of funnel going to convert into unit sales immediately. But if you look at the big picture, you know, we increased marketing spend and we accomplished our objective, which was to grow unit sales.

Oliver Foley: But if you look at the big picture, we increased marketing spend, and we accomplished our objective, which was to grow unit sales. And so we managed to grow new unit sales well above, sort of the average year-over-year volume growth across public franchise dealers. And so that's what we set out to do, and I think we'll continue to spend, you know, fairly aggressively on consumer acquisition because, ultimately, that's gonna be what helps us keep dealers on the platform, what attracts new dealers to our platform. But we'll always look to do that as efficiently as possible.

Speaker Change: And so we managed to grow new unit sales sort of well above

Speaker Change: The average year-over-year volume growth across public franchise dealers.

Speaker Change: That's what we set out to do and I think what we'll continue to spend

Speaker Change: you know, fairly aggressively on consumer acquisition, because ultimately that's gonna be what helps us keep dealers on the platform, what attracts new dealers to our platform. But we'll always look to do that as efficiently as possible.

Naved Khan: OK. You know, and I'm just trying to sort of... Thank you. If I just kind of look at the numbers, maybe that had like a 200 basis point effect on your top line, versus maybe like a 13%, I think. On the incentive side or something else to help us understand that.

Speaker Change: Okay.

Speaker Change: And I'm just trying to sort of...

Speaker Change: kind of

Speaker Change: I understand they don't do it at all.

Speaker Change: the growth that we had kind of expected versus where you, you know reported and obviously this CDK hack is kind of

Speaker Change: Maybe that had like a 200 basis point effect on your top line.

Speaker Change: versus maybe like a 13%, I think.

Speaker Change: Thank you very much.

Jantoon Reigersman: Yeah, I think the biggest impact is just the delay in activations on the OEM side, right? So it's a little bit hard to really predict the timeline, and these are obviously, number one, often high impact dollars. So these are high amounts as well as high flow-through dollars. And so it's really just a timing issue more than anything else.

Speaker Change: Number one, often high impact dollars, so these are high amounts, as well as high flow-through dollars. And so it's really just a timing issue more than anything else.

Naved Khan: Okay, um, maybe last question, um, just for the Foley-er, um, you said that you expect to have free cash flow. Break-even. Is that exiting the years for the full year as a whole? How should we understand that?

Speaker Change: Okay, maybe last question. Just for the Foley-er, you said that you expect to be free cash flow.

Jantoon Reigersman: No, yeah, the exiting year, yeah, the exiting year, Q4. OK.

Naved Khan: Thank you, guys.

Speaker Change: Okay, thank you guys.

Operator: The next question comes from the line of Chris Pierce, Natham, please go ahead.

Speaker Change: The next question comes from the line of Chris Pierce, Natham, please go ahead.

Christopher Pierce: Hey, good morning guys. How are you doing? Can you just talk about the sequential decline in gross margins a little bit? Kind of, and how to think about that gross margin path for the rest of the year?

Chris Pearce: Hey, good morning guys. How are you doing?

Chris Pearce: Can you just talk about the sequential decline in gross margins a little bit? Kind of, and how to think about that gross margin path the rest of the year.

Jantoon Reigersman: Yeah, the sequentially planning gross margins are really attributed to the expanded TrueCar Wholesale Solutions product offering. Historically, we've always had this sell your car lead model where we would connect our dealer partners with consumers looking to sell their car. That is a much higher flow-through versus the sort of profile offer model that we launched earlier this year, whereby we are sort of, you know, acquiring vehicles directly from consumers on behalf of our dealers and ultimately selling those vehicles to our dealers. So Lower Margin Profile. And what we saw in Q2 is that the expenses associated with acquiring those vehicles from consumers were what pulled down the gross margin sequentially.

Speaker Change: Yeah, the sequentially planning gross margins is really attributed to...

Speaker Change: acquiring vehicles directly from consumers on behalf of our dealers and ultimately selling those vehicles to our dealers.

Speaker Change: Lower margin profile and what we saw in Q2 is that the expenses associated with acquiring those vehicles from consumers is what pulled down the gross margin sequentially.

Jantoon Reigersman: I want to add one thing that I think is really important, and you'll hear me reiterate this probably multiple times over the next couple of quarters, which is that the wholesale side is an enabler to TrueCarPlus. And I think that should not be overlooked.

Speaker Change: I want to add one thing that I think is really important, and you'll hear me reiterate this probably multiple times over the next couple of quarters, which is

Speaker Change: Really, the wholesale side is an enabler to TrueCar Plus, and I think that that should not be overlooked. So, in a world where the TrueCar Plus flow is an online flow, where you obviously want to provide a committed, like,

Jantoon Reigersman: So in a world where the TrueCarPlus flow is an online flow, where you obviously want to provide a committed value on the trade as well, and you want to enable the trade to flow fluidly through not only the consumer experience but also through the dealer experience. Because not every dealer would want to have that trade, right? So you want to be able to offset that trade immediately back into the market.

Speaker Change: value on the trade as well. And you want to enable the trade to flow fluidly through not only the consumer experience, but also through the dealer experience.

Jantoon Reigersman: It's really about enabling TrueCarPlus scalability. And so the wholesale side is really driving, the major driver of that is that. And obviously, that's already proving its worth. So I just want to make sure that people are fully aware that that's an important part.

Speaker Change: and obviously that's already proving it's worth so I just want to make sure that people are fully aware that that's an important part of component on that.

Christopher Pierce: Can you kind of just go into the specifics of like, is it holding inventory or certain dealers not wanting certain cars? Is it the value that they're trying to find? Or like, how should we think about that going forward? Yeah, so if you think about it, like, there are two pieces, right?

Speaker Change: Can you kind of just go into the specifics of it, like is it holding inventory or a certain dealer is not wanting certain cars or the values of certain cars to find, or like how should we think about that going forward?

Speaker Change: Yeah, so if you think about it, like, so there are two pieces, right, and one will just take more time, and the other one is more near term. So you want to have, so the near term is you want to have a solution that if somebody trades their car as part of TrueCarPlus, you can actually give a real value.

Jantoon Reigersman: And one will just take more time, and the other one is more near term. So you want to have, so the near term is you want to have a solution that if somebody trades their car as part of TrueCarPlus, you can actually give a real value, it gets baked into the deal, and the dealer who sells the car grounds the car, but then has the option to keep the car or not, right?

Speaker Change: It gets baked into the deal. The dealer who sells the car grounds the car but then has the option to keep the car or not, right? It's not up to the dealer. They shouldn't have to take the car, especially not if the trade happens across the country or it's not within their

Jantoon Reigersman: It's not up to the dealer; they shouldn't have to take the car, especially not if the trade happens across the country or, right, it's not within their desired vehicles, etc. So we want to, we want to decouple the trade from the actual sale of the initial car. And so by decoupling that, you want to effectively then create a marketplace. Now, there's an added component to that, which, obviously, as we were working through that flow, is that it turns out that a lot of our dealers would love to have access to our inventory. So now you have a win-win situation.

Speaker Change: their desired vehicles, et cetera. So we wanna decouple the trade from the actual selling of the initial car.

Speaker Change: And so, by decoupling that, you want to effectively then create a marketplace. Now, there's an added component to that, which obviously, as we were working through that flow, is that it turns out that a lot of our dealers would love to have access to used inventory.

Jantoon Reigersman: So, which is obviously great, we can solve the flow on TrueCarPlus. And then, over time, as these volumes start increasing, also start having dealers effectively participate in the ability to get access to those inventories if the grounding dealer doesn't want to have the car. And so, which is, which is awesome because if you can do that over time, then obviously, you effectively enable a very attractive wholesale side of the business.

Speaker Change: So, now you have a win-win, which is obviously great. We can solve the flow on TrueCar Plus, and then over time, as these volumes start increasing,

Speaker Change: also start having dealers effectively participate in the ability to to get access to those inventories if the grounding dealer doesn't want to have the car.

Speaker Change: And so, which is awesome, because if you can do that over time, then obviously you effectively enable a very attractive...

Jantoon Reigersman: But the reason why you won't see dramatic growth on the wholesale side overnight, and we want to make sure we do this in a very structured manner, is that initially, it is really to support the TrueCarPlus growth trajectory. And then, over time, we can expand that as we have more and more dealers on the wholesale network effectively. Does that make sense? Okay. Uh, yeah. And then just one on TrueCarPlus. When you guys initially rolled out, was it, do I have it correct that it was based in the southeast, but now it's California dealer-based? Or can you talk about the dealer network and kind of how that's been shifting or kind of geographically why you decided to start in California? Yeah, so if you go, if you

Speaker Change: also side of the business.

Speaker Change: But the reason why you won't see like dramatic growth on the wholesale side overnight, and we want to make sure we do this in a very structured manner, is really initially to support the TrueCar Plus growth trajectory. And then over time, we can expand that as we have more and more dealers on the wholesale network effectively.

Speaker Change: Does that make sense?

Speaker Change: Yeah, yeah, and then just one on TrueCarPlus. When you guys initially rolled out, was it, do I have it correct that it was based in the southeast, but now it's California dealer based, or can you talk about the dealer base and kind of how that's been shifting or kind of geographically why you decided to start in California?

Jantoon Reigersman: Yeah, so if you go back, so if you think of TrueCar Plus 1.0, it was never really a full online transaction. It was always a formal super lead. And if you think about the broader market, that's effectively what most solutions are that people are claiming to be an online transaction, but that's really not the case.

Speaker Change: Yeah, so if you go back, so if you think of TrueCar Plus 1.0, it was never really a full online transaction. It was always a formal superlead.

Speaker Change: And if you think about the broader market, that's effectively what most solutions are that people are claiming to be an online transaction.

Jantoon Reigersman: I don't want to be harsh on the industry, but unfortunately, I think there's a lot of snake oil out there. So in order to actually enable a transaction online to take place where everything happens online and you sign a RIC online and you do the fulfillment, et cetera, you want to narrow it effectively to, okay, what's the market you can focus on initially, where you have the in-market consumers that are attracted to online shopping, as well as the dealers that are progressive and willing and able to work with us on creating this flow.

Speaker Change: That's really not the case. I don't want to be harsh on the industry, but unfortunately, I think there's a lot of snake oil.

Speaker Change: In order to actually enable a transaction online to take place where everything happens online, and you sign a RIC online, and you do the fulfillment, etc., you want to narrow it.

Speaker Change: effectively to, okay, what's the market you can focus on initially, where you have the in-market consumers that are attractive to online shopping, as well as the dealers that are progressive and willing and able to work with us on creating this flow. So, although we originally launched the first version in Florida, because there was a high demand there, we learned a lot from that, but that was really effectively a form of a super lead. This is the actual transaction form. We launched it in California, really, because we have a fantastic dealer group we're working with.

Jantoon Reigersman: So although we originally launched the first version in Florida because there was a high demand there, we learned a lot from that, but that was really effectively a form of a super lead. This is the actual transaction form.

Jantoon Reigersman: We launched it in California really because we have a fantastic dealer group we're working with in California, but also because, in the new case, you want to kind of be state-specific initially in order to avoid any conflicts around DMAs and be respectful to other dealers, to the franchise laws, to be respectful to the OEMs, et cetera. And so this is really about proving it out, showing that it is worth it.

Speaker Change: in California, but also because we want to, in the new case...

Speaker Change: You want to kind of be state-specific initially in order to avoid any conflicts around DMAs.

Speaker Change: and be respectful to other dealers, to the franchise laws, to be respectful to the OEMs, etc. And so this is really about proving it out, showing that this is worth. What's fun and exciting is that you have all the different stakeholders looking at this thing, saying, wow.

Jantoon Reigersman: What's fun and exciting is that you have all the different stakeholders looking at this and saying, wow, this is cool, but let's make sure we don't shake up the system too much and really focus on the DMAs, be within the DMA in the state that the dealers are in, for new; we can do this obviously more broadly for use. And then, as we go and scale this, we can obviously start scaling more inventory within the state and then start adding other states as well.

Speaker Change: This is cool, but let's make sure we don't rattle the system too much and really focus on the DMAs.

Speaker Change: Be within.

Speaker Change: within the DMA in the state that the dealers are in for new. We can do this obviously more broadly for use and then as we go and scale this we can obviously start scaling more inventory within the state and then start adding other states as well. This also allows for an easier product development cycle because it allows for a more confined problem set to solve.

Jantoon Reigersman: This also allows for an easier product development cycle because it allows for a more confined problem set to solve. So at the moment, new, you can buy them within California, the whole of California. Used, you can obviously buy them within the United States minus Hawaii, Alaska, Massachusetts, and New York.

Speaker Change: So at the moment, new, you can buy within California, the whole of California. Used, you can obviously buy within the United States minus Hawaii, Alaska, Massachusetts, New York.

Speaker Change: Okay, thank you.

Operator: The next question comes from a man like Tom White, D.A. Davidson. Please go ahead.

Thomas White: Great, thanks. Jantoon, you touched on new car supply kind of ramping up broadly across the industry and how that's an important new kind of industry development that should benefit you guys, I guess, as long as demand, consumer demand, hangs in there. But if I understand you right, you also sort of mentioned that kind of in the face of that, some dealers might... I guess look to like trim operating expenses or overhead first before, you know, maybe leaning into new demand channels to kind of try and move that supply off their lots.

Speaker Change: Our next question comes from a man of Tom White, D.A. Davidson. Please go ahead.

Tom White: Great, thanks. Jantoon, you touched on new car supply kind of ramping up broadly across the industry and

Tom White: how that's an important new kind of industry development that should benefit you guys, I guess, as long as demand, consumer demand, hangs in there. But did I hear you right? You also sort of mentioned that, kind of in the face of that, you know, some dealers might...

Speaker Change: I guess, look to like trim operating expenses or overhead first before, you know, maybe leaning into new demand channels to kind of try and move that supply off their lots. I was hoping you could just kind of...

Thomas White: I was hoping you could just kind of provide a little bit more detail on that. Just curious, like, are you hearing that broadly from dealers, like where are they cutting? And I guess what gives you confidence that, you know, marketing expense isn't something they'll cut and is something they'll lean into eventually.

Speaker Change: provide a little bit more kind of detail on that. Just curious, like, are you hearing that broadly from dealers? Like, where are they cutting?

Speaker Change: And I guess what gives you confidence that, you know, marketing expense isn't something they'll cut and is something eventually they'll lean into. Thank you.

Jantoon Reigersman: Yeah, great question. So the short answer is yes.

Speaker Change: Yeah, great question. So, the short answer is yes. So, obviously, inventory is building up. And so, as you can imagine,

Jantoon Reigersman: So obviously, inventory is building up. And so, as you can imagine, floor financing, right, and expenses for dealers are high. And so sales efficiency is really important for them. And obviously, there is a nervousness that if rates, like if affordability stays where it is, then yes, there is a lot of pent-up demand, but pent-up demand doesn't really help the dealers because they obviously need to be selling cars. And so if you look forward, I think more broadly, the dealers are somewhat nervous, right, because at the end of the day, they're realizing that prices will probably come down, right, like they will effectively start resetting a little bit similar to what it was pre-pandemic. So they're going to get a margin squeeze, right, if and when prices come down. They have issues around demand and affordability. And then, right, they have high floor financing costs, et cetera.

Speaker Change: For financing, right? And expenses for dealers is high. And so sales efficiency is really important for them. And obviously, nervousness that if if rates like if affordability states where it is,

Speaker Change: Then, yes, there's a lot of pent-up demand, but pent-up demand doesn't really help the dealer because they obviously need to be selling cars.

Speaker Change: And so, if you look forward, I think more broadly...

Tom White: The dealers are somewhat nervous, right? Because at the end of the day, they're realizing that prices will probably come down, right? Like it will effectively almost start resetting a little bit similar to what it was pre-pandemic.

Speaker Change: So they're going to get margin squeeze, right, if the prices and when prices come down. They have issues around demand and affordability. And then, right, they have high floor financing costs, etc. So altogether, obviously, they're very mindful of the P&L, especially of the P&L that

Jantoon Reigersman: So all together, obviously, they're very mindful of the P&L, especially the P&L that they've obviously been able to have very efficient P&Ls in recent times, and that now obviously starts to get under pressure. And so there's a lot of consideration around, again, how to be efficient as a dealership. But this is exactly where I actually think we play really well.

Tom White: They've obviously been able to have very efficient P&Ls in the recent times, and that now obviously starts.

Tom White: getting under pressure.

Tom White: And so there's a lot of consideration around, again, how to be efficient as a dealership. But this is exactly where I actually think we play really well.

Jantoon Reigersman: And this is also what I tried to allude to earlier when I made the comment about the field team, is that the engagement we are doing with dealers is very different than in the past. This is not about walking into a dealership and saying, hey, I'm going to send you more leads. This is really about understanding the problems that the different dealers cope with. And so a dealer in Wyoming has a very different problem set than the dealer in LA versus New York.

Speaker Change: And this is also what I tried to allude to earlier when I made the comment about the field team, is that the engagement we are doing with dealers is very different than the past, right? This is not about walking into a dealership saying, hey, I'm going to send you more leads.

Tom White: This is really about understanding the problem sets that different dealers cope with. And a dealer in Wyoming has a very different problem set than the dealer in L.A. versus New York.

Jantoon Reigersman: And so this is really about how we can help the dealers, not only by servicing them well, by providing the right insights and training, et cetera, but also having a much broader product suite that actually allows us to customize those programs much more to these dealers. So, in many ways, a little bit of a harsher environment for our dealers, and I hate to say it because, obviously, they are our customers, is actually to our benefit because it then means that, yes, they're going to have greater scrutiny.

Tom White: This is really about how can we help the dealers, not only by servicing them well, by providing the right insights and training, etc., but also having a much more broader product suite.

Tom White: that actually allows us to custom those programs.

Tom White: much more to these dealers. So, in many ways...

Tom White: a little bit of a harsher environment for our dealers. And I hate to say it because obviously they're our customers. It's actually to our benefit because that means that yes, they're gonna have a greater scrutiny. But I think under scrutiny, we actually perform better because we obviously have good results.

Jantoon Reigersman: But I think under scrutiny, we actually perform better because we obviously have good results. But yeah, overarching, I think if you were to pull the testament of dealers, there is a level of nervousness over the future if affordability doesn't come down relatively quickly or if OEMs are not stepping in and helping to close that gap of affordability.

Speaker Change: But yeah, overarching, I think if you were to pull the testament of dealers, there's a level of nervousness over the future if affordability doesn't come down relatively quickly or if OEMs are not stepping in and helping support close that gap of affordability.

Thomas White: Got it. Thank you. That's very interesting. I appreciate it.

Speaker Change: Got it. Thank you. That's very interesting. Appreciate it.

Operator: The next question comes from the line of Marvin Fong, VTIG. Please go ahead.

Tom White: The next question comes from the line of Marvin Fong, BTAG. Please go ahead.

Marvin Fong: Hi, good morning. Thanks for taking my questions. So, maybe a multi-part one on the launch of TC+, but I know it sounds like it's only been live for less than a week here, but, you know, for the 12 orders you've referenced, did everything kind of go as planned? Did you hit any snags? And also, just as you've talked about starting to scale this in the fourth quarter of the year, is that sort of like a firm timeline, or is that kind of dependent on how the transaction volumes in the pilot phase go? Any color that would be great, and then I have a follow-up.

Marvin Fong: Good morning, thanks for taking my questions. So maybe a multi-part one on the launch of TC+, but...

Speaker Change: I don't know.

Marvin Fong: It sounds like it's only been live for less than a week here, but, you know, for the 12 orders you referenced, you know, did everything kind of go as planned? Did you hit any snags?

Marvin Fong: and also just as you've talked about starting to scale this in the fourth quarter of the year, is that sort of like a firm timeline or that kind of dependent on like how the transaction volumes in the pilot phase go?

Jantoon Reigersman: Yeah, awesome, so... I always need to be careful how I answer that question given, like, if you ask the product folks, nothing goes as planned. If you ask me, everything goes as planned. So I think the answer is no.

Speaker Change: Any color there would be great, and then I have a follow-up.

Speaker Change: I always need to be careful.

Jantoon Reigersman: I think, look, we're learning a ton. I think we're getting a lot of feedback, which is really good. I think the real thing is that, fundamentally, the flow is a really good flow.

Speaker Change: I think we're getting a lot of feedback, which is really good.

Jantoon Reigersman: I think what's really interesting is once you actually open it up and have real consumers go through it who are not like friends and family and people that are somewhat adjacent, which is really what we've been doing, you immediately start seeing the little things where you might have a bias or you might not have thought about it or something is unclear. What we do know is, look, we knew we could have further improved the product, and you can effectively, eternally improve the product, but we knew we wanted to be out there. We know we can shorten the steps dramatically in the flow. And we also know that language is really key in terms of understanding, right? Car buying is not something that most people do every day.

Jantoon Reigersman: So yeah, we're learning a lot. And then you're also learning a lot of nuances, right? Somebody who wants to have a financing and has three jobs.

Jantoon Reigersman: And so suddenly, you need to upload pay stubs, but we only have one opportunity to upload your pay stub, not three, or three simultaneously. Then how do you put that together? Or even the interactions with lenders, et cetera. So net-net is, yeah, we're learning a tremendous amount, and the teams have been picking this up really, really well. We have daily huddles together; we solve immediate problems that evening.

Speaker Change: like wants to have a financing and has three jobs. And so suddenly, you need to upload paystubs, but we only had one one opportunity to upload your paystub, not three, right, or three simultaneously, then how do you, how do you, like, put that together? Or, right, like, even the interactions with lenders, etc. So net net is, yeah, we're learning a tremendous amount.

Marvin Fong: And the teams have been picking this up really, really well. We have daily huddles together, we turn immediate problems that evening. So yeah, so I think this is exactly what we wanted to be. I would love to start scaling this, right? We initially had this open at a limited

Jantoon Reigersman: So yeah, I think this is exactly what we want it to be. I would love to start scaling this, right? We initially had this open at a limited distance from the dealers, but we then gradually opened it further. As of last Thursday, we're opening in California for new customers. And you also start seeing very different behaviors amongst the different credit profiles, right? Remember that historically we were talking, and at some point, you'll start hearing me talk about that again around these cohorts, right? So the convenience cohort and, like the EV cohort, et cetera. So each of those has very different behaviors as they go online.

Marvin Fong: distance from the dealers. We then gradually opened it further. As of last Thursday, we're opening in California for new.

Speaker Change: and the EV cohort, et cetera. So each of those have very different behaviors as they go online. We're observing very similar behaviors to the past as well.

Jantoon Reigersman: We're observing very similar behaviors to the past as well. And so, yeah, so there's just a tremendous amount of learning that will come from it. We're obviously looking to scale this. We're initially focused on the new side, really on California. The first thing we need to do is obviously start adding more inventory to that.

Jantoon Reigersman: We should first need to make sure that the product is fluid. And that's right, like all the tiny hiccups and kinks are worked out so that it's as automated as can be for the dealer, as well as for the consumer. Once we have that more under control, start adding inventory to that because obviously the matching of demand and supply is a key component to that. And then we can start thinking about doing this also in other states.

Marvin Fong: And that's right, like all the tiny hiccups and kinks are worked out so that it's as automated as can be also for the dealer as well as for the consumer. Once we have that more under control, start adding inventory to that because obviously the the matching of demand and supply is a key component around that.

Jantoon Reigersman: And so really, there are these different segments. Remember though, I'll just remind everybody that we don't charge for TC+, so don't expect any revenue from that this year. It's really about proving it, and it's proving it not only to the dealers; it's really proving it to the wider stakeholders. It's proving it to lenders, proving it to OEMs, it's proving it to dealers. A lot of people are looking at what we're doing and how we're doing it. So this is really exciting, and clearly, people are responding well to the product. So yeah, scale it initially product-focused, then California-focused, then outside of California, and other states.

Marvin Fong: And then we can start thinking about doing this also in other states.

Speaker Change: And so, really, there are these different segments. Remember, though, I'll just remind everybody that we don't charge for TC Plus, so don't expect any revenue from that within this year. It's really about proving it, and it's proving it not only to the dealers, it's really proving it to the wider stakeholders.

Marvin Fong: it's proving it to lenders, proving it to OEMs, it's proving it to dealers. A lot of people are looking at what we're doing and how we're doing it.

Speaker Change: So this is really exciting, and clearly people are resonating well with the product. So, yeah, Scaly initially product-focused, then California-focused, then outside of California, other states.

Marvin Fong: And then, just following up on Chris's questions about the new kind of wholesale profile. So, can you just confirm, I mean, is there any holding period risk? I mean, if wholesale prices or vehicle prices were to move very sharply? Yeah.

Speaker Change: Terrific color. And then just following up on Chris's questions about the new kind of wholesale profile. So, can you just confirm, I mean, is there any holding period risk?

Jantoon Reigersman: Yeah, good, very good question. The answer is, I mean, minimal is the short answer.

Jantoon Reigersman: And so really, the idea is, it's not us wanting to become a wholesaler or to arbitrage the market or things like that. That's not what we're good at. This is really focused on initially enabling, right, having the infrastructure in place to enable TC Plus growth from a trade-in perspective. And then, as a, as a positive side effect of that, we have a lot of customers asking for inventory. So great.

Speaker Change: It's not us wanting to become like a wholesaler or it's not us wanting to arbitrage the market or things like that. That's not what we're good at.

Jantoon Reigersman: So then all the inventory that flows out of the TC Plus trade-ins, then obviously, we can obviously offset it to these customers, and then it's a win-win for everybody. But the idea really is, no, we don't want to take any inventory risk. We don't want to hold any inventory. That's not our business. And it's not really enough. We, you have to, in terms of paper holding, because you technically are holding inventory for a very short period of time as you process the paperwork, because there's no other way. But it's really just to enable the TC Plus flow.

Speaker Change: This is really focused on initially enabling

Marvin Fong: And then as a positive side effect of that is we have a lot of customers asking for inventory. So great. So then all the inventory that flows out of the TC Plus trade-ins, then obviously we can obviously offset to these customers and then it's a win-win for everybody. But the idea really is, no, we don't want to take any inventory risk. We don't want to hold any inventory. That's not our business and it's not really enough. You have to in terms of paper holding, because you technically are holding inventory for a very short period of time as you transit the paperwork, because there's no other way.

Marvin Fong: but it's really to just enable a TC plus flow and obviously it helps our dealer network to have access to inventory. But so yeah, so I would not I would not assume any inventory risk from our side and we're not arbitraging any of these prices.

Jantoon Reigersman: And obviously, it helps our dealer network to have access to inventory. But so, yeah, I would not assume any inventory risk from our side, and we're not arbitraging any of these prices. So we're pretty much dealing at one price that we already have pretty much fixed on the other side. Okay, guys.

Marvin Fong: So we're pretty much dealing at one price that we already have pretty much fixed on the other, on the back end.

Marvin Fong: Okay, I got it. Thanks so much, Chanti.

Speaker Change: Okay, got it. Thanks so much, Jantoon.

Operator: This concludes the question and answer session. I would like to turn the call back over to Jantoon for closing remarks.

Speaker Change: This concludes the question and answer session. I would like to turn the call back over to Jantoon for closing remarks.

Jantoon Reigersman: I'm awesome. I would like to thank everybody for taking the time to participate in our call today. I also want to thank the team for all their Herculean effort. We have many exciting initiatives in the works and an evolving team.

Jantoon Reigersman: Awesome. I would like to thank everybody for taking the time to participate in our call today. I also want to thank the team for all their Herculean efforts.