Good day, and welcome to the TrueCar second quarter 2022 financial results conference call. Please note this event is being recorded. I would now like to turn the conference over to Ms. Zaineb Bokhari, Vice President in Investor Relations. Please go ahead, ma'am. Thank you, operator. Hello, and welcome to TrueCar's second quarter 2022 earnings conference call. Joining me today are Mike Darrow, our President and Chief Executive Officer, and Jantoon Reigersman, our Chief Financial Officer and Chief Operating Officer. By now, I hope you've all had the opportunity to read our second quarter stockholder letter, which was released on Tuesday, August 2nd, after market close, and is available on our investor relations website at ir.truecar.com. Before we get started, I want to remind you that we will be making forward-looking statements on this call. These 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 upon as a guarantee 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 Factors 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. 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, I will turn the call over to TrueCar's President and Chief Executive Officer, Mike Darrow, for some opening comments. Mike? Thanks, Zaineb. Good morning, everyone, and thanks for joining us. We issued our Q2 stockholder letter yesterday and highlighted some of the strong progress we've made with the rollout of TrueCar+ in Florida and on the product front for both TrueCar+ and our core used vehicle offering. During Q2, we continued to sign and curate dealers for TrueCar+ and grow the available inventory of new, used, and certified pre-owned vehicles available and continued to see positive momentum in subsequent weeks. While only a small portion of our Florida visitors have been exposed to TrueCar+ to date, early insight from the mid-funnel engagement metrics shows promising trends in June. We'll continue the transactional product build-out for TrueCar+ and increase the exposure for TrueCar+ across more and more of our Florida consumers. The next step in our near-term road. The next steps in our near-term roadmap are clear as we plan to enable the delivery of required documents and other capabilities that are necessary to enable dealers and consumers to complete a vehicle transaction through our marketplace. With the recently completed acquisition of Digital Motors, we gain new capabilities and deep expertise in fintech and automotive e-commerce that we believe will help accelerate our roadmap for TrueCar+. Acceleration and completion of key product features will be laying the foundation for the expansion of TrueCar+ beyond Florida, which remains on track. In addition to these developments, we continue to enhance our core used vehicle offering with the expansion of distance retailing to TrueCar certified dealers across the continental United States. Giving dealers who enroll the ability to expand their market reach for their used inventory and offer the convenience of a reliable and professional home delivery to consumers. We also launched the Sell Your Car experience from partners with strong upper funnel and intent metrics better than our legacy trade experience. Dealer inventories, particularly for new cars, remained near historic lows during Q2 while pricing remained elevated. A recovery in the global supply chain is likely still multiple quarters away in our view, and uncertainty remains high due to geopolitical events and headwinds like a slowing U.S. economy and rising interest rates. Our recent analysis of industry trends led us to estimate July SAR of approximately 13 million, near levels seen in June, with industry sales in units estimated to decline both on a year-over-year and sequential basis. Industry-wide headwinds continue to put pressure on our close rates, reported units, and other key metrics in Q2, and we continue to expect some volatility in our key metrics throughout 2022. In this environment, we're continuing to manage our business and our resources efficiently. I am very encouraged by our progress during Q2, which was made possible through the hard work and dedication of the entire TrueCar crew. I want to thank them for their commitment to our vision. We are striving to bring something new and unique to the market and doing it at a time of rapid change and enormous macro headwinds. As a company, we remain focused on positioning ourselves for the long term and what we expect will be an increasingly digital future for automotive retail. Before we open up the call for live questions, we're going to address some questions around key topics. Zaineb, what's the first question? Thanks, Mike. I'll start with a question that has a couple of parts. Can you provide an update on TrueCar+? What are our plans to expand TrueCar+ beyond the Florida market? Finally, how is what we're planning to deliver with TrueCar+ different from peers who say that consumers can already buy a car online through their marketplaces? Thanks, Zaineb. I'll provide an update on TrueCar+, and then Jantoon can add some context around our expansion plans. During the second quarter, we focused on growing inventory across the state of Florida for new certified pre-owned and used vehicles and started to drive traffic and shoppers through the flow in TrueCar+. We had 80 dealers and more than 7,000 new used and certified pre-owned units in inventory in TrueCar+ at the end of Q2, and we continue to add to this. Consumers exposed to TrueCar+ still account for less than 10% of our total Florida traffic, so we will continue to increase that exposure in Florida. While it's still early, we shared some insights into the mid-funnel part of the consumer journey to give an indication of the level of participation from consumers and dealers in our TrueCar+ marketplace. During June, consumers placed an average of 260 orders per week and nearly 3,300 orders on a cumulative basis through the end of June. Each of these orders represents a consumer using the TrueCar+ experience that has selected a vehicle and completed the deal-building process. This process includes a trade valuation, if they have one, and a monthly payment calculation when considering a loan or a lease. The consumer then either starts a credit application in conjunction with a credit purchase or enters their credit card information in connection with a cash purchase. In light of the work that remains to be done in completing the TrueCar+ product roadmap to become fully functional, we are still defining the appropriate methodology to better understand which orders placed by TrueCar+ users have converted into sales at our participating dealers. However, we find these early mid-funnel trends to be very encouraging and believe that TrueCar+ is resonating with consumers. As we highlighted in our letter, during the second half, we will focus on delivering required paperwork through TrueCar+. This will be a key step as we prepare to make TrueCar+ a truly transactional marketplace and start to expand beyond Florida. As we work to complete the transactional aspects of TrueCar+, we'll continue to measure performance down the funnel and expect to share those insights in the future. Jantoon, why don't you elaborate on our plans for expansion? Thanks, Mike. I'll build on what Mike has said before. After we enable paperwork on TrueCar+, which is a key step, we're seeking expansion out of Florida, really across two different paths or tracks, one for new and one for used cars. As you can imagine, new cars are harder to transact cross state lines, and so we focus new very much through geotagging and through eventual delivery address to ensure that people are within the state to acquire new vehicles. For the new vehicles, our expansion will be state by state, and we plan to roll out an additional 3-5 states by the end of this year, on the new side. The used inventory we will make available nationwide. We'll continue to push that nationwide rollout for used with TC+ by the end of 2022. We also recently began making business retailing available for TrueCar+ or TrueCar certified dealers across the U.S., and that's really a forefront or at least the start of enabling TrueCar+ to happen afterwards. As we enroll dealers in the program, we're laying the groundwork for vetting and enrolling dealers for the broader expansion, and most importantly, to really see and make sure that they're able to do distance retailing in the back-end flow of their dealerships. I just want to add that the rooftop count will not be a primary metric for TrueCar+. Instead, we will grow and curate a network of dealers that we have, a depth of inventory, and who are committed to delivering a world-class marketplace experience to consumers will be prioritized as dealers. We also know that obviously inventory is, to a certain level, important, or at least rooftops are, to a certain level, important. Scarcity is much more important. The curation will be something we'll be very focused on. Mike, back to you. Thanks, Jantoon. I'll address how TrueCar+ compares to what our peers are doing. Our focus with TrueCar+ is to deliver a transactional marketplace through which a consumer will be able to find a new certified pre-owned or used vehicle that suits their needs in the inventory of one of our dealer partners. Through the product roadmap we shared for TrueCar+, we plan to deliver a marketplace through which consumers will be able to arrange for financing, sell or trade their existing vehicle, get an accurate price, purchase protection products, sign required documents, and arrange for delivery with the dealer. The third-party marketplace peers that we're most often compared to do not offer a transactional marketplace that makes these steps possible. Given what we're planning to deliver with TrueCar+, we just don't see these peers on the same journey. Vertically integrated players are focused on used cars, and other market participants that have added a transactional digital channel to their brick-and-mortar presence are limited to their own inventory and brands. Once we enable paperwork within TrueCar+ and continue to add scale, we will have a unique opportunity to offer a true asset-light marketplace for new, used, and certified pre-owned vehicles across multiple brands. Let's have the next question, Zaineb. Thank you, Mike. Jantoon, the next one's for you. Last quarter, you provided a framework for thinking about revenue and expenses for 2022. Can you provide an update to that framework? Most definitely. Thanks. I think the main caveats to the framework we provided on our last call was that the macro environment and close rates remained stable. That did not really hold in Q2 or throughout Q2. The supply side did not improve, and in some cases, maybe even became more constrained. Across the industry, dealer inventories remained low while prices remained above normal. Beyond this, there's also a variation across the different brands, with the Asian brands that our consumers prefer still experiencing above average constraints in available inventory at 14 days versus 26 for the industry overall. For us, this means that vehicle scarcity remained a significant issue during Q2. In addition to this, the Fed has been raising rates aggressively and the economy has started to slow rapidly as a result. Vehicle pricing continues to be a factor, and as measured by the CPI, both new and used vehicles hit new peaks in June. Affordability remains a concern for consumers due to both high prices and rising interest rates. The combination of these factors continues to put pressure on our second quarter close rates. During the second quarter, vehicle SAR peaked in April and then dipped in May and June to about $13 million, where it still remains by our analysis in July. Additionally, we estimate that unit sales across the industry will decline 10% year-over-year and 2% sequentially in July, which signals to us that the industry sales during the second half will remain muted. In this environment, we plan to continue to manage our fixed expenses tightly. However, we plan to invest in brand awareness and marketing to support TrueCar+ and on adding new capabilities as we lay the groundwork to expand TrueCar+ beyond Florida. Due to these factors, we expect non-GAAP expenses to be above the base of $50 million per quarter run rate. We therefore still expect adjusted EBITDA to be negative for 2022, but the second half of the year will show a greater impact from these planned investments. We're managing our business and deploying our cash very, very carefully, and we've proven to do so in the second quarter as well. Our balance sheet with nearly $200 million in cash and 0 in debt, that can support this stepped up investment very well. Let's have the next question, Zaineb. Thank you, Jantoon. Mike, back to you for the next question. Can you speak to the rationale for the acquisition of Digital Motors and maybe share the terms of the purchase? Thanks, Zaineb. Absolutely. We're really excited about the acquisition of Digital Motors and to welcome the DM team to TrueCar. Through this acquisition, we've gained a great team of technology talent with deep transactional experience focused on the automotive space. This includes Andreas Heinrich, who leads the Digital Motors team and is an expert on automotive fintech solutions. This expertise will be critical as we continue to shift to an e-commerce focus with TrueCar+. Our combined product and technology teams are working closely together to accelerate our product roadmap and have already delivered products to the TrueCar+ flow, including the protection products capabilities and the loan payoff integration that we mentioned in our Q1 letter. The initial cash outlay for the acquisition was $12 million, and there's about $8 million of earn-outs that will be paid out over the next three years as certain milestones are hit. Zaineb, back to you. Thanks, Mike. Before we open it up for Q&A, we have a question from our retail investors. What are your plans to increase sales when the economy is taking an overall hit? Mike, do you wanna take that one? Sure, Zaineb. This is an interesting question. We shared for a few quarters now the macro and market trends that continue to have an impact on close rates, particularly for new vehicles given low production levels and dealer inventory. We've introduced capabilities to increase our presence on the used car side and identify new ways to create value for our retail partners and consumers through offerings like Sell Your Car and distance retailing that have allowed us to become a strong resource to our dealers for used cars. We're also investing for the digital future with our TrueCar+ marketplace since we think auto retailing will continue to shift to the digital channel. We expect TrueCar+ to open up increasing monetization and growth opportunities for us once it's fully transactional and we expand its footprint over time. We think TrueCar+ also represents an opportunity for us to add value for our dealers if the economy weakens since dealers will be looking for solutions and ways to increase demand for their vehicle inventories. Zaineb. Thank you, Mike and Jantoon. Now, operator, let's open up the call for questions from the audience. Thank you. Our first question will come from Rajiv Gupta with JP Morgan. Please go ahead. Great. Thanks for taking the questions. Just have a few quick ones here. So just to clarify on, you know, the EBITDA path for the rest of the year, is it safe to assume that, you know, just given the expenses are going up and, you know, inventory still remains tight that the EBITDA loss run rate in the second half should be higher than what you had in the second quarter? If you could clarify that. The short answer is yes, given the additional investment we're planning to make for TC+ going forward. Yeah. That's also what I mentioned earlier in the Q&A. Yeah, absolutely. Got it. Great. Thanks. Maybe, you know, just on the new vehicle side, you know, you highlighted your differentiation there. You know, there are a lot of domestic brands, you know, who are moving to online booking, you know, for their newer electric vehicle models. Curious to know what conversations you're having with them, on how they are perceiving TrueCar+, and how do you integrate that solution, with those kind of purchases? Thanks. Thanks, Rajiv. I'll take that one. You know, we're in our very initial conversations with our OEM partners around TrueCar+. You know, what we're trying to explain to them is regardless of how they go to market from their platforms, we have a steady flow of 7-9 million consumers who like to do a portion of their shopping in an open marketplace like ours. What we'll continue to encourage them is to do what development work they're gonna do around how they're gonna go to market with their vehicles. Some of them have asked us if we can play a role in that, and we're exploring some of those conversations. What we try to continue to tell them is, you know, we wanna take our dealers' inventory, their dealers' inventory as well, and make it fully transactional on our marketplace. That message is resonating with them. They're beginning to understand and, you know, various ones are looking for ways to support how we wanna bring that to market. Got it. Just one last one. You know, following up on some of your initial comments on, you know, the TrueCar+ progress. You know, can you give us some insights into the expanded distance retailing features as well? You know, what kind of traffic or conversion rates are you seeing? Curious, like if you're having to make any incremental investments via, you know, incentives or discounts to ramp up that offering. You know, how competitive would the rates be in comparison to Carvana, for example, that has a similar model to be delivered from Florida to another region in the country? You know, how do you make sure, like, your offering is competitive enough in terms of those rates? Thanks. Yeah. It's a great question. I think I would actually think about this in two ways. One is, we're actually providing very interesting opportunities for dealers to expand outside of their home markets, and we do this very efficiently together with our partner, ACERTUS. This is, for many of them, a first time that they're actually able to go out in a much more expanded geographical area. We have not disclosed any specific information around this, but the pilots that we were doing were very beneficial and to such an extent that we're now rolling it out nationwide. There is a real appetite for this and it is working really well. However, having said that, this is really a prelude to obviously the adoption of TrueCar+ in the long term. The idea here is not necessarily that this is a standalone business model. This is a very interesting opportunity for us to have really good conversations with our dealers and really start working with them on how to conduct sales in a remote flow environment. In other words, remote sales do not happen in a usual flow of our usual CRM flow, as it were, at a dealership that are more used to have people walk into the door. It's a great opportunity for us to engage with them. It's a great opportunity for us to also work and train them on how to work through remote flows, et cetera. The distance retailing element, besides the fact that in standalone is an interesting program that works, it's really a prelude to who is interested in TC+ and how can we then also already train them prior to rolling out TC+ and are actually adopting to these, like, retail, remote retail flows effectively. That's really where the crux is. This is really to build further on the overarching TrueCar+ experience in the future. Got it. Super helpful color. Thank you. The next question will come from Naved Khan with SunTrust. Please go ahead. Thanks. This is Robert Zeller on for Naved, from Truist now. It's good to see the company planning to continue investing in brand, given you know you guys still have a relatively good cash position versus peers. But I'm curious on which OpEx line items you think you can achieve the most leverage in and why. Then your comment on taking fixed costs out of the model. Just curious or out of the business. I'm just curious on where we would see that in the model. Thanks. On the taking out the cost, we have been doing that. I think it's a statement to the last couple of quarters. I think you're effectively looking at a call it a run rate on the cost side of things, except for additional investments as we push in TrueCar+. Right? One of the things you've seen is obviously we've been pulling back pretty aggressively on the marketing side. That's for two reasons. One is because we look at the efficiency of our marketing spend, and so we're wise around that. We've been holding off on deploying too much of the broader branding marketing side because as we do that, we wanna make sure we also start educating the markets around the TrueCar+ offering. As we start expanding outside of Florida, you can expect that we're gonna push harder on having make people aware that TrueCar is not a lead generator standalone anymore, but actually is a full digital marketplace where people can now effectively transact and buy a new, used or certified pre-owned car. We're finalizing those elements with the paperwork that we've articulated. There's still some work on the product development side to be done before we scale outside of Florida, but as soon as we do, we will deploy further on that branding and marketing side. Also remember that as we've pulled back on the branding side, it's a great testament to the company that, actually, our monthly uniques have not come down that much and have been very stable. However, unaided brand awareness obviously has come down over time, and that's something we obviously need to be mindful of, and so at some point we'll lean further in. Overarching your first question on the operating business model, I think we're pretty much at where we wanna be, and it's really hard for us to find further cost savings. Thanks. The next question will come from Chris Pierce with Needham. Please go ahead. Hey, good morning. I know you guys talked about still kind of working through conversion methodology, but how should investors think about, you know, monetization methodology on these TrueCar+ units? You did, you know, I think $467 per car in, you know, the current method of, you know, pay per sale and, you know, lead-based. I'm kind of thinking about how should we think about monetization as TrueCar+ moves forward on a per unit basis? Yeah. Chris, very good question. I know that it's a question that many of you have been asking for quite some time. At some point we'll obviously go into more detail on future monetization opportunities for TrueCar+. We have a lot of thoughts around that, and we've already been doing a lot of tests and market tests around that. For the purpose of currently, any lead effectively or whether it's through TrueCar+ or through our original platform is effectively charged at $299, $399. We're not anticipating effectively any revenue assigned to TrueCar+ for this year, for the calendar year of 2022. However, we obviously assume for 2023 we will start monetizing, and we will articulate this in more detail to you guys in one of our later calls. For now, it's really focused on finalizing the product flow. The dealers that are currently on our platform, we effectively are working with them on their working processes on the back end of the dealerships, et cetera. We wanna avoid this concept of always a TrueCar+ lead or is it a core lead or how does that work? It's really about making sure we get consumers on that rails, and we need to finalize that rails all the way to paperwork, which we haven't done yet. Whoever we bring to those dealers, we're charging. We continue to charge at the $299, $399 rates. For this specific year, there's no assumption made on additional revenues effectively. We will elaborate on this in much more detail in the future as we articulate how we're actually gonna monetize TrueCar+, for which there are various opportunities for us. Okay. Just Yeah. Chris, I would just. Okay. I would just add to that, you know, I think we're still optimistic that, you know, by the time we get to 2023, we'll have identified additional monetization opportunities around these units. We just haven't seen enough flow yet in order to get our hands around that. We're very optimistic, and, you know, wanna look at more of these units coming through. We've really taken the pressure off of the product for 2022. We wanna get the product right for consumers, for our retail partners, and then we'll put together a plan that we're still very bullish on around how we'll monetize these units before we get into 2023. Okay. Just lastly, on the 3,300 orders you spoke about in the investor letter, is there any way to kinda how should we think about? Is some of this new versus used? Is some of it buy versus lease? You know, just kind of 'cause there are some things though that are gaps that I think, you know, digitally, you know, if you're helping dealers lease new cars, that's something that's kind of would be unique to you guys versus used. You know, there's a few other players out there, so I'm just curious how to think about the breakdown of those units. Yeah. We didn't provide any of that breakdown in this call, Chris. As we get more and more volume through there, we'll start to look at that. You know, just off the top of my head, I would say it's a combination of new and used, probably predominantly a little heavier used right now because of the inventory situation around new. It is cash. There's some cash deals going through that we're getting a chance to look at, so there's some cash. There's certainly lease and finance deals going through as well. You know, we'll get more and more info on that and begin to break that out as we have additional numbers there. You know, we're encouraged. It appears like there are all types of buyers who are engaging with TrueCar+ and finding a way to work through the process, find a car, build the deal they want, apply for credit if they're a finance or a lease person, and then continue to move forward. We're excited by these mid-funnel metrics we put out there. They continue to advance from where they were in June, so we're excited about that part. We'll add more dealers, more inventory. We'll expose more consumers to it. I think as the data grows, you know, we'll be able to get more specific as to your question as to, you know, what specific type of buyers are we seeing come through. Right now we're getting a full spectrum. We're getting a chance to see new, used, lease, loan, cash, the whole deal. Good. Thank you. Good luck. Again, if you have a question, please press star then one. Our next question will come from Zachary Schechtman with BTIG. Please go ahead. How's it going, guys? Good morning. Thanks for taking my questions. This is Zack Schechtman from BTIG on for Marvin Fong. Our first question is really just on the franchise dealer count, how it behaved within the quarter. Was the churn pretty linear throughout the quarter? Was it more weighted to either the beginning or the end? If you could provide any insight into how dealer churn behaved in July, that would also be great. Thanks, Zach. We don't provide any of this color usually. I think what is just important to remember is, we're still in a constrained, strange world, and we have very good relationships with a lot of these dealers, including some of the dealers that churn off. It's always a delicate balance on how hard do you wanna hold them tight to their obligations vis-a-vis how do you actually wanna keep the relationship for when the pendulum swings back. We don't necessarily give the colors around how exactly that evolves over the quarter, but the long story short is we feel very confident about the overall rooftop base that we have, and we're also very, very confident about the opportunity and the possibilities of the TrueCar+ adoption as we roll out in a much more curated form amongst our dealer base. Got it. Thank you. I guess my only other question would be on the acquisition of Digital Motors. Could you elaborate a little bit on what part of their technology in particular appealed to you? Additionally, if there are any other elements of TrueCar+ that you might consider accelerating through acquisitions? Yeah. I think, Zach, thanks for the question. You know, the Digital Motors had built out a fully functioning e-commerce platform for a number of dealers they had been working with previous to our acquisition of them. You know, they have expertise across the entire flow. The ones that we were able to bring to bear the quickest were the, you know, the VIN-based insurance products. Through some API work with them, we're gonna be adding VIN-based accessories as another element of that. What we really like, and I mentioned it in my comments, is that Andy Heinrich and that group is very advanced in the fintech side of the business. We know to be really good as a transactional marketplace, you have to offer different paths for consumers as they wanna go on that car-buying journey. Pre-qualification, shop by payments, things like that are things that we have on our roadmap, and they have quite a bit of expertise in, and we will be tapping into that expertise to bring those products to bear. You know, we had a chance because they're an Orange County company to do a lot of due diligence. We had a chance to look at their tech and their capabilities, and they're pretty well-versed across the full spectrum. We've got the teams integrated, we've got them pulling together and finding solutions, and you know, we had a couple of very quick immediate wins. We have a pretty well-defined, you know, three-year plan with these folks as to what we wanna bring to market with them. I think you'll see the next focus will be in that area of financing and how do we make sure we get a consumer on the right car, get them through the system, so when they get to the credit app, they're shopping an appropriate vehicle. We're really excited about that acquisition, and they're gonna help us in a lot of ways. Awesome. Thank you, guys. This concludes our question and answer session. I would like to turn the conference back over to Mr. Mike Darrow for any closing remarks. Please go ahead. Thanks, operator. I'd like to thank everybody for taking the time to participate in our call today. I also wanna thank the entire team at TrueCar for all their hard work as we work to deliver on our near-term roadmap for TrueCar+ and lay the groundwork for expansion beyond Florida. This is an exciting time for our company, and we look forward to sharing more about our progress with you all on our next call. Thanks for spending time with us this morning. The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.