TrueCar, Inc. (NASDAQ:TRUE) Q1 2024 Earnings Call Transcript

TrueCar, Inc. (NASDAQ:TRUE) Q1 2024 Earnings Call Transcript April 30, 2024

TrueCar, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

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.

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. I want to remind you that we will be making forward-looking statements on this call, including statements regarding our 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 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 other reports and filings with the Security 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 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. 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. Moreover, the supportive macro trends that we highlighted in the previous quarter, namely the normalization of new vehicle inventory and average days 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. During Q1, we announced the expansion of our dealer product offering with the launch of TrueCar Market Solutions, TCMS. 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. 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. 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.

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 TC+ 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. In addition, only vehicle trade-ins will be — 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. 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 dealers 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 F&I products.

And four, the process we have developed to digitally establish a competitive and accurate binding value for consumers trade-in that gets incorporated into the deal while mitigating the dealer’s risk through a backstop to the value. Achievement of these objectives will mark a critical milestone on our path to product market fit for TC+ and allow us to initiate the steps required to begin scaling TC+ more broadly in Q4 2024. To that end, as we’ve articulated before, our objective is not only to directly monetize TC+ in 2024, but to instead demonstrate the value it can drive for the ecosystem broadly. For dealers, we intend to demonstrate how TC+ expands their addressable market, allowing them to win consumers they would otherwise never reach, while driving sales efficiencies that grows 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. 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 a 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+ in 2025 and beyond and unlock new and powerful monetization opportunities for TrueCar. 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 TC+ and as such we’re intently continuing to focus on the following four building blocks to drive near-term growth.

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 offering. 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. Execution against these four building blocks provide 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. The primary reason for the lower revenue flowthrough, quarter-over-quarter is our belief that the continued rise in new vehicle inventory, days supply and OEM incentives represents an opportunity to profitably 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. Finally, I would like to acknowledge that 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. I also would like to thank TrueCar Board member Erin Lantz for seven-plus years of dedicated service to the organization. We wish Erin the best and are excited that the Board has nominated Diego Rodriguez to fill her seat. 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 Intuit’s Chief Product and Design Officer and prior to that, as a senior partner at IDEO, Diego will be a tremendous asset 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.

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Q&A Session

Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Rajat Gupta of JPMorgan. Please go ahead.

Rajat Gupta: Great. Thanks for taking the question. Firstly, just on the second quarter comments, you highlighted the lower incremental drop through from some of the planned marketing investments and to accelerate 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 teen 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 should we think about the incremental EBITDA on that incremental revenue in the second half as well? And I have a follow-up. Thanks.

Oliver Foley: Hey, Rajat, it’s Oliver here.

Jantoon Reigersman: Go ahead, Oliver.

Oliver Foley: Do you wanna take a stab at it?

Jantoon Reigersman: 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, the 13% that we’re projecting in Q2 with an incremental investment in marketing spend will hopefully get us towards the high teens in the back half of the year. Now, in terms of flow-through 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, 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, continue to see growth in RpD through the expansion of our expanded product offering.

And I like to believe that the ideal range of marketing spend as a percent of revenue is sort of between the 34% and 36%, whereas in Q1 we were closer to 31%. So if we can get closer to that 35%, I think in the second half of the year, we should see a pretty strong flow-through, through the expanded RpD.

Rajat Gupta: Got it. Got it. That’s helpful. And then as a follow-up, just in the franchise dealer account, that was down slightly sequentially. What drove that decline? Was it, like, some dealer churn because of, like, the newer pricing and some of the new bundles? So what drove that and how should we think about that dealer count going forward? Maybe any quarter-to-date trends in April that we can provide us to help inform that? Thanks.

Jantoon Reigersman: Yeah, absolutely. So the answer is, and I think we already mentioned it in the past, where it’s like we feel — like it’s a little bit of give and take, right? And the vast number of — the number of dealers 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. I think if we do a little bit of self reflection, I think we probably have not been serving good enough some areas of the country and provide sufficient effectively 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 churn 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.

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 form of service effectively when you think about, it’s one of the four building blocks. So that’s number one. And then number two is I think there is for the franchise dealers and obviously the new growth rate and the new car sales and inventory buildup, I think there’s a huge opportunity for them to — for us to prove ourselves effectively to them. So overarching, I don’t look at the rooftop numbers very often in the sense that they will always go 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’ve lost over the last couple of years.

The one that obviously is much harder to control the indie side and the indie side that will stay fluctuating because obviously a lot of players on the indie side that churn off either go out of business or are part of consolidation, et cetera. 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 the growing back our franchise revenue side. I wanted to add one more thing on the previous question, which was remember that in the flow throughs, there’s marketing people and effectively back of this G&A as the three buckets of costs that we have in the business. And so we have been relatively constrained in terms of marketing deployment over the last couple of years because really what would — it didn’t really make a lot of sense to push on the top of funnel too much in a world where there was not a lot of inventory to go against.

Now that inventory is coming back, I think we’re seeing a much better ability to deploy marketing dollars really efficiently. As so 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.

Rajat Gupta: Great. Thanks for the color.

Operator: The next question comes from Tom White of DA Davidson. Please go ahead.

Unidentified Analyst: Hey, this is [indiscernible] 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 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 to financials as more dealers adopt the product? Thanks.

Oliver Foley: Sure. Yeah, so 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 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 truly help them either gain additional visibility on the platform or strengthen the quality of the leads that they get from the platform. And so we truly believe that these will help dealers get a stronger ROI and ultimately that will lead to a stickier product, better retention.

But I think the way that we monetize it is through higher RpD. And so, my expectation over the course of the year is that each quarter we’ll see sort of sequential gains in RpD, primarily driven by, adoption of the GCMS product.

Unidentified Analyst: Okay, got it. Thank you.

Operator: The next question is from Naved Khan of B. Riley Securities. Please go ahead.

Naved Khan: Yeah, thanks a lot. A couple of questions from me. Maybe just on the increase in marketing spend in the second quarter, can you talk about if this is going to be more performance-based marketing versus branding and then potential payback period on that? And then maybe just on the incentive revenue, so you’re kind of approaching the range that 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 this further up from here?

Oliver Foley: 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, I think what we need to 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. And what I mean by that is if we’re constantly optimizing our performance marketing spend on a cost per basis, right, trying to get the lowest cost per click, driving the lowest cost per sale, I think you ultimately see some optimizations that aren’t necessarily good for the overall dealer network. And an example of that is Google can be driving the lowest cost per sale in a particular DMA, and certain subsets of our franchise and indie dealers are getting a ton of leads and a ton of sales.

But by doing that, we’re effectively not living up to our promise or not fulfilling our value proposition to other dealers in the network. And so what we need to do a better job at and what ultimately will really, I think, improve dealer churn is thinking more holistically about how do 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 supporting dealers across the country, across different DMAs, across brands. And in doing that, we think that will really improve churn. And then the second question was on OEM, right? Jantoon, do you want to take that?

Jantoon Reigersman: Yeah, Naved, can you repeat the question just so that I make sure that’s asked correctly.

Naved Khan: Yeah, so the OEM incentive revenue has been pretty strong for you guys. You kind of mentioned where the average incentive used to be pre-pandemic. You’re kind of approaching the lower end of that band. 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 this revenue line-up from here?

Jantoon Reigersman: Yeah. So, very good question. So we’re obviously very bullish on the OEM line in general in the long term. We feel that there’s a lot of opportunity obviously for OEMs to help support their dealer networks, especially obviously with high interest rate environment consumers need all the help they can get, vis-a-vis buying cars. What’s hard to predict is like all of the near to midterm. We have a running, we always have a really running strong pipeline in general. But OEM revenue comes in, 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 build up in building blocks 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. You know what you have in the pipeline and the pipeline is strong. The question then is just when do they kick in? When do OEMs decide to actually participate in certain programs? Some programs are more effective than others. Some we try certain things and it might not actually work and some over-achieve. And so it’s a little bit more bulky in nature. And so we do less of an effort to really try to predict this shorter but we’re very confident in this in the long term. So don’t be surprised, right, like historically, where 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.

Naved Khan: Okay, got it, that’s helpful. And then maybe just a clarification on the marketing spend. And I’m assuming that the increase in — most of the increase in the marketing would be going towards the direct channel versus partner, but correct me if I’m wrong. And then maybe just talk about the conversions on the website. How are they versus where they’ve been historically? Have they improved or are they below those levels?

Oliver Foley: Yeah, so conversion — sorry, go ahead.

Jantoon Reigersman: Yeah, so I’ll take it, Oliver. 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 engaging on the direct side. Overarching [frost] (ph) conversions have been improving and continue to improve. And it’s obviously something we’re also very, very focused on. And we feel that now that the market is, market in general, the micro is more normalizing, it also allows us to start utilizing more of the tools we have at our disposal around consumer experience, like in 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 a little bit of the performance marketing landscapes.

And so the marketing that worked two, three years ago is not per se working the same way now. 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 also the way we capture consumers, the way the consumers behave on the site and our level of intelligence we have and data we have around us, we think we can do a better job marketing than we have done historically.

Naved Khan: Great. Thank you guys.

Operator: The next question comes from Chris Pierce of — with Needham & Co. Please go ahead.

Chris Pierce: Hey, good morning. Going back to the first question in franchise dealers, can you kind of talk about what you’re doing in those geographies where maybe the franchise dealer kind of [keep] (ph) higher churn? Like what are some things that you can do to kind of reintroduce the new product to those dealers? And is TrueCar+ sort of part of that playbook or is that sort of not related?

Jantoon Reigersman: No, TrueCar+ is not related. So TrueCar+ 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 like I feel schizophrenic is there are days where I feel like I’m a Series B venture product CEO as opposed to a public company CEO when it comes to TrueCar+ and then obviously we have the core business. So TrueCar+, I think will be applicable obviously to, especially initially to some of the larger dealer groups, probably initially. So when we’re talking about the franchise dealers, really think of it as, and this is the book we were mentioning, right? 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 autopilot. Some of these groups, especially the ones that are not necessarily in high growth markets effectively have probably been somewhat neglected. And so now that the market is coming back and inventory is coming back, et cetera, we effectively have to be more on top of them and really help them and help them in training and help them in insights and all these type of things. And I think we’ve done a — 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. 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 what form do we provide? What is 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 that is obviously having 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.

Chris Pierce: Okay, perfect. And then we see OEMs turning on marketing through your income statement and through the increased incentive spending. And now we see you guys turning on marketing to kind of drive more units to dealers. Is there any sort of magic bullet or why a dealer has 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 inventory is.

Jantoon Reigersman: 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. And it’s very hard to start — have to start supporting again, right back to what normalized was in a world where 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 lagging effect. 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 their customers.

Right? So if you are a three times 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? 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. And then the other thing is also, we obviously try to make them match also potentially with some of our affinity partners as well if there are certain programs there. So, but these things take a little bit of time, but the main reason is just lagging of realizing what’s happening around, a slight unwillingness to over-deploy too soon and kind of 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.

Chris Pierce: Thank you.

Operator: The next question comes from Martin Fong with BTIG. Please go ahead.

Martin Fong: Good morning. 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 the earlier comments, Jantoon, I think you were saying that, still a little bit unpredictable with bankruptcies and consolidation. So maybe you just kind of square those two lines of thought. I mean, is there actual positive inflection in the independent dealer count that you’re seeing or just to expand on that a little bit, thanks.

Jantoon Reigersman: Yeah, it is — it’s just that the, I think the remark is more towards like the fluctuations. It’s never really a perfect line 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. So, right, a — the dealer count, a dealer is a dealer, and even despite the sizing or effectively revenue or monetary value it brings to us. So the [common goal] (ph) is much more around the fluctuation and just the hard — 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-per-month basis it’s hard to predict. So it’s really more about volatility than it is about the overarching trend.

Martin Fong: Got you. Okay, thanks for clarifying that. And a question just on TCMS 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 only is subscribing to like one or two products versus the one that might be doing four or five, just maybe dimensionalize that for us. That’d be helpful, thanks.

Oliver Foley: Sure. So 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 — it’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. Whereas [Auto Intro, for instance, or Prime Paths] (ph) 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. So 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 RpD impact would be over the course of the year. But I think we should expect through a combination of selling some of these, call it, 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 RpD will go up. How much? I’m not quite willing to say how much that’ll be.

Martin Fong: Okay. That’s perfectly understandable. Thanks so much guys.

Operator: The next question is from a Rajat Gupta of JPMorgan. Please go ahead.

Rajat Gupta: Great. Thanks for squeezing me back in. Just had like a follow-up on TrueCar+. Could we get a little more color around the partnerships that you’re working on, both on the dealer and the [indiscernible] relationship. 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, are they a part of a larger group, or are these really like a small store? I’m just curious if you could give us any more color on how that’s evolving. Thanks.

Jantoon Reigersman: Yeah, absolutely, Rajat. 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 interested — more interested and more likely to transact online. It’s obviously close to Silicon Valley and associated regions. And also it helps us then be within the [Technical Difficulty] OEM. So like 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, 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 reluctance in the industry at times, whether this 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 for a long time and obviously both in our TrueCar+ product but even in the way people are purchasing online today. So it’s 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, because what you need to do is you need to merge, de-merge documents, make sure that the documents are all correct, rebates are calculated correctly, right, 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 different complexity than on the used side. And so we will be nationwide on the used side, albeit that the inventory will be slightly small. 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 the scaling will probably happen with like mid-size to larger dealer groups in general, where I think 25 stores, 30 stores, 50 stores type groups, 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 to product flows and organizational, really workflows for that matter.

And so being almost too large, it’s a little bit of an impediment that you need to really rethink your overarching infrastructure, but those seem to be the sweet spot. And so that will be the sweet spot where we’re going to focus on initially as we start scaling this. But before we do, we want to just prove this out in terms of just technical deployment and workout, the bugs that might occur, right? Where people get stuck in some shape or form of 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 mid-sized group — mid-sized to large-sized group is what is important.

Rajat Gupta: Got it. Great. Thanks for all the color and good luck.

Jantoon Reigersman: Thank you.

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

Jantoon Reigersman: 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. With other people, none of these results are possible ever. And so with gratitude, thank you for everyone and thank you for being part of our journey.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.