As it struggles to emerge from the various setbacks of the Covid-19 pandemic, Santa Monica-based TrueCar Inc. rotated in a new chief executive and trimmed nearly a quarter of its workforce this month.
Onetime chief financial and chief operating officer Jantoon Reigersman is now chief executive of the company, after Michael Darrow resigned from the role and from the board. The changes follow a quarter that held stagnant revenues for the digital vehicle marketplace, as well as plummeting earnings.
“Jantoon has been with us for over two years … during which time he has worked tirelessly to ensure TrueCar’s success and improve its financial condition,” incoming board chairwoman Barbara Carbone said in a statement. “The board is confident that he is well suited to successfully navigate a challenging macroeconomic environment while positioning the company for profitable growth. He has a clear vision for TrueCar’s future and I and the rest of the board look forward to working together with him to execute on it.”
Stock prices briefly spiked after the June 14 announcement, but soon dropped again. They closed at $2.11 on Thursday, its second lowest close price this year.
Not all bad
Still, there remains some optimism internally and by analysts that the changes made this month will yield positive results by next year.
“I now feel a lot more confident that they’re going to break even or positive because they’re going to have a lot less expenses,” said Chris Pierce, a senior analyst with Needham & Co. LLC. “The stock rallied the first day, but I’m surprised people aren’t feeling good about their long-term numbers.”
Although new vehicle inventory continues to slowly climb nationwide, that has not yet translated to sales, in large part because the generally lower supply of new and used vehicles has resulted in higher base prices in an economy with high interest rates.
This is a problem for TrueCar, which depends on auto dealers partnering with the platform and making sales for revenue. First-quarter revenue fell year over year from $43.5 million to $37 million, with earnings falling from a $6.3 million loss to a loss of $11.3 million; meanwhile, vehicles sold have fallen 17%. This despite web traffic being up 19% in terms of average monthly unique visitors and dealer count being marginally lower than it was a year ago.
In terms of dealer participation, franchise dealers have been slowly growing in numbers — and monthly revenue — since the third quarter. This is partially offset, however, by independent dealer numbers and monthly revenue that have been in a general decline since mid-2021.
Layoffs
In eliminating 102 positions — 24% of the company’s workforce — TrueCar said it would generate nonrecurring expenses of up to $7 million for the remainder of 2023 but potentially save up to $20 million in annual recurring expenses. It was not announced when these layoffs will go into effect and how they will be distributed among the company’s departments.
A representative with TrueCar did not respond to an interview request with a company official.
Pierce said the staff reduction appears to align with Reigersman’s more tech-oriented background and observed that Reigersman, as the former chief financial officer and chief operating officer, has been responsible for some of the company’s tech advancements in recent years.
“I think he’s more of a dynamic, tech-forward thinking leader. He’s a little younger, more of a friendly face to the investment community. He’s been one of the faces of the company for the past couple of years, so I don’t think it’s a tremendous negative to have a change in the c-suite,” Pierce said. “The prior CEO was a car person. He’d been in the industry a long time. There’s nothing wrong with that, but the auto industry has been slow to change from a tech perspective.”
Carbone, in announcing the changes, remained confident that TrueCar was on the path to breaking even on earnings and doubling revenue growth by the fourth quarter. New vehicle production, bolstered mostly by domestic companies, is expected to continue as the economy irons out kinks from supply chain issues.
“The restructuring announced today better aligns our cost structure with our revenue base and is designed to make TrueCar a nimbler, more efficient company,” she said. “We made this difficult decision after an extensive review and believe that it is necessary to enable TrueCar to achieve its strategic priorities and create long-term shareholder value.”
Given TrueCar’s operation as a web platform that auto dealers use as a marketplace, Pierce added that he did not expect any particular shortcomings as a result of the layoffs. Though he acknowledged “24% is 24%,” it appeared that the necessary infrastructure was in place and could weather the changes.
“It should be a pretty skinny operation,” he said. “I think the guts of the operation and what they need in the future has been built out. I don’t think they need to spend much more on tech development going forward. I feel like once you get it built, it should in theory be self-sustaining.
“I do think they can run things a lot leaner, like a tech company,” Pierce added. “I think the macros are there, but whether they can capitalize on it is TBD.”
