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TrueCar's Losses Widen on Partner Challenges

Car-shopping website operator TrueCar (NASDAQ: TRUE) reported on Tuesday that it lost $9.5 million in the third quarter, or $0.10 per share, a worse result than it posted in Q3 2016, when it lost $7.4 million.

TrueCar also reduced its full-year 2017 sales and revenue guidance.

TrueCar earnings: The key numbers

What happened last quarter

In the first and second quarters of 2017, TrueCar had a good story to tell: Nearly all of its business metrics improved year-over-year each time.

But the story in the third quarter was a little different: While "units" (TrueCar's term for vehicles purchased via its service), the total number of new-car ("franchise") dealers using its service, and traffic to TrueCar's site all rose from a year ago, its average fee per sale and total revenue per franchise dealer both fell.

  • TrueCar's website had an average 7.7 million unique visitors per month, up 1% from a year ago.
  • Acquisition cost per sale was $151, down from $180 a year ago. 
  • Monetization (the average fee collected by TrueCar for a vehicle sold via its service) was $306, down from $319 in Q2 and $319 in Q3 2016. 
  • Average transaction revenue per franchise dealer was $5,319, down 5% from $5,600 in Q3 2016. 
  • The number of franchise dealer partners rose 14% year over year to 12,286. 

What TrueCar's CEO had to say

CEO Chip Perry, who joined TrueCar late in 2015 after a management shakeup, spent last year revamping TrueCar's business and improving its often-difficult relationships with new-car dealers, including giant AutoNation (NYSE: AN).

In the earnings presentation, Perry explained that an important partner (USAA) had redesigned its website, introducing several new steps into its car-buying section. The result was a big drop in traffic, prospects, and units for TrueCar from that source in the quarter. But, Perry expects that situation will improve:

Looking ahead: TrueCar's guidance

TrueCar also released guidance for the fourth quarter and adjusted its full-year expectations -- and not all favorably.

For Q4 2017:

  • Total units are expected to be in the range of 240,000 to 245,000, up 11% from the fourth quarter of 2016.
  • Revenue in the range of $81 million to $83 million.
  • Adjusted EBITDA between $6 million and $7 million.

For the full year:

  • Total units between 953,000 and 958,000, versus 806,953 in 2016. (Prior guidance: between 975,000 and 985,000.)
  • Revenue between $321 million and $323 million, versus $277.5 million in 2016. (Prior guidance: between $325 million and $329 million.)
  • Adjusted EBITDA between $27.4 million and $28.4 million, versus $15 million in 2016. (Prior guidance: between $26 million and $28 million.)

Long story short: TrueCar scaled back its full-year guidance around units and revenue, but raised its adjusted-EBITDA expectations slightly.

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John Rosevear has no position in any of the stocks mentioned. The Motley Fool recommends TrueCar. The Motley Fool has a disclosure policy.