• Revenue Growth: 11% year-over-year increase in Q1.

• Adjusted EBITDA: Achieved $0.9 million, improved by $12.3 million year-over-year.

• New Vehicle Units: 7.3% year-over-year increase across TrueCar franchise dealers.

• TCMS Product Adoption: Over 350 dealers added TCMS products within two months of launch.

• Q2 Revenue Growth Target: Aim to grow by 13% year-over-year.

• Adjusted EBITDA Target for Q2: Breakeven.

• Free Cash Flow Margin Goal: Targeting a 10% margin by end of 2026.

• Marketing Spend: Plan to increase in Q2 to capture more new vehicle shoppers.

• Warning! GuruFocus has detected 4 Warning Signs with TRUE.

Release Date: April 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: Can you discuss the impact of the planned marketing investments on second-quarter revenue growth and EBITDA? A: (Oliver Foley, CFO) We anticipate an acceleration in revenue growth over the year, aiming for 13% in Q2 due to increased marketing spend, potentially reaching high teens in the latter half of the year. The operating leverage demonstrated in past quarters suggests a strong EBITDA in the second half, with marketing spend as a percentage of revenue ideally between 34% and 36%.

Q: What factors contributed to the slight decline in franchise dealer count? A: (Jantoon Reigersman, CEO) The decline is minor and reflects regional disparities in service quality and lead distribution. We are addressing these issues by improving our service model and focusing on dealer engagement and support.

Q: How do you expect the adoption of TrueCar Marketing Solutions (TCMS) to evolve in 2024, and what impact will it have on financials? A: (Oliver Foley, CFO) With 350 dealers already adopting TCMS products, we aim for widespread adoption through integration into our subscription bundles, enhancing dealer ROI and retention. This should sequentially increase average revenue per dealer (RPD) each quarter.

Q: Could you elaborate on the strategy for increased marketing spend in Q2, particularly regarding performance-based versus branding marketing? A: (Oliver Foley, CFO) The focus will be on balancing efficient performance marketing with broader dealer network support, ensuring strong performance across various dealers and regions. This approach should enhance dealer churn and overall network health.

Q: What are your expectations for OEM incentive revenue growth, given its strong performance? A: (Jantoon Reigersman, CEO) While OEM incentive revenue is subject to fluctuations due to the nature of program-based revenues, we are optimistic about long-term growth. We maintain a strong pipeline and expect OEM revenue to eventually exceed pre-pandemic levels.

Q: Can you provide insights into the partnerships and dealer engagement for the TrueCar+ pilot? A: (Jantoon Reigersman, CEO) The pilot will initially focus on California with a progressive dealer group, aiming to refine the technical and operational aspects of online car transactions. The focus will then expand to midsize to large dealer groups as we scale the program.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.