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TrueCar’s Growing Market Reach

Posted on Friday, Sep 26th 2014

A survey of more than 3,000 consumers conducted in February this year to understand car buyers’ behavior across the United States revealed the presence of a “trust gap” between car buyers and dealers. For instance, car buyers believe that dealers are getting significantly higher margins than what they actually get. According to the National Automobile Dealers Association, profits made by a dealer on a new-car sale have fallen from 5.5% in 2003 to 3.8% in 2013. Online negotiation and car buying and selling platformTrueCar (Nasdaq: TRUE) is hoping to minimize this gap in consumer perception by providing a more transparent solution.

TrueCar’s Financials
TrueCar’s second quarter revenues grew 62% over the year to $50.5 million. But that did not translate into net income as the company reported a net loss of $0.22 per share compared with a loss of $0.07 per share reported a year ago. They did, however, end the quarter with $1.5 million in adjusted earnings. The market was looking for revenues of $45.5 million and adjusted earnings of $1.1 million for the quarter.

By segment, revenues from transaction services grew 68% to $46.1 million and data and other revenues increased 15% to $4.4 million.

Among key operating metrics, the number of average monthly unique visitors grew 72% to 4.2 million and the number of units on their website grew 55% to 149,527. Monetization rates of $308 were in line with their expectations of $305-$310 for the quarter. Franchise dealer count grew 24% over the year to 7,682 at the end of the quarter and transaction revenue per franchise dealer improved 36% to $6,195.

For the current quarter, TrueCar projected revenues of $51 million-$54 million and an adjusted EBITDA of $2 million-$3 million. They expect to end the year with revenues of $197 million-$202 million and an adjusted EBITDA of $6 million-$8 million. The Street was forecasting revenues of $192 million for the year.

TrueCar’s Growing Reach
Earlier this quarter, TrueCar announced the renewal of their partnership with AAA to continue to power their auto buying program. Through the program, AAA’s more than 30 million members will be able to connect with TrueCar Certified Dealers and have access to a simpler and seamless process of purchasing a new car at an average discount of $3,000 off the retail price.

They also launched several enhancements to their auto buying program for the insurance partners. Through the platform, insurance partners will be able to help their customers who have suffered a total loss of their vehicle make an informed purchase of their replacement vehicle. The program will let automakers market targeted incentives to buyers in the market on account of a totaled car. They already have insurer GEICO as one of the early adopters to this program.

TrueCar listed on the Nasdaq earlier this year at $9 a share. The stock is currently trading at $16.95 with a market capitalization of $1.3 billion. It touched a high of $25 earlier this month.

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