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What changed in TrueCar, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TrueCar, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+496 added−456 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-24)

Top changes in TrueCar, Inc.'s 2023 10-K

496 paragraphs added · 456 removed · 355 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

239 edited+96 added−55 removed396 unchanged
Biggest changeThe reduced inventory and increased prices have had, and may continue to have, several negative effects on us, including: a reduction in dealers’ willingness to participate in our network, at our standard rates or at all, and corresponding pressure on our dealer count and revenue; an increase in competition for dealers’ marketing spending and a limitation on the effectiveness of our advertising, as detailed in the risk factor “ The success of our business relies heavily on our marketing and branding efforts, especially with respect to the TrueCar website and our branded mobile applications, as well as those efforts of the affinity group marketing partners whose websites we power, and these efforts may not be successful ”; a reduction in automobile manufacturers’ incentive spending and willingness to partner with us on incentives, as detailed in the risk factor “ The failure to attract manufacturers to participate in our car manufacturer incentive programs, or to induce manufacturers to remain participants in those programs, could reduce our growth or have an adverse effect on our operating results ”; an adverse effect on consumer satisfaction with the experience we provide due to unusually high vehicle sale prices; and an adverse impact on the amount of inventory available on our sites, which could contribute to a decline in the number of consumer visits to our sites and the number of connections between consumers and dealers through our platform and, as detailed in the risk factor “ The loss of a critical mass of dealers, either nationally or in any given geographic area, could deprive us of the data we need to provide certain of our key features, our inventory supply and certain key elements of our TrueCar Deal Builder’s functionality, any of which would negatively affect our business ,” disrupt our search-engine optimization efforts.
Biggest changeThe reduced inventory and increased prices have had, and may continue to have, several negative effects on our business, including, but not limited to: a reduction in dealers’ willingness to participate in our network, at our standard rates or at all, and corresponding pressure on our dealer count and revenue; an increase in competition for dealers’ marketing spending and a limitation on the effectiveness of our advertising; a reduction in automobile manufacturers’ incentive spending and willingness to partner with us on incentives; an adverse effect on consumer satisfaction with the experience we provide due to unusually high vehicle sale prices; and an adverse impact on the amount of inventory available on our sites, which could contribute to a decline in the number of consumer visits to our sites and the number of connections between consumers and dealers through our platform and disrupt our search-engine optimization efforts.
Further, the automotive regulatory laws were generally developed decades before the emergence of the Internet, they are subject to significant revision or modification and the manner in which they should be applied to our business model is frequently open to question.
Further, automotive regulatory laws were generally developed decades before the emergence of the Internet, they are subject to significant revision or modification and the manner in which they should be applied to our business model is frequently open to question.
Any of these and other similar subscription-related eventualities could have a material adverse effect on our business, growth, financial condition, results of operations and cash flows. In addition, during the coronavirus pandemic, our monetization rates have exhibited substantially greater volatility than historical levels.
Any of these and other similar subscription-related eventualities could have a material adverse effect on our business, growth, financial condition, results of operations and cash flows. In addition, during the coronavirus pandemic, our monetization rates exhibited substantially greater volatility than historical levels.
Further, we enter into arrangements with certain such partners from time to time pursuant to which we receive fees based in whole or in part on the volume of our users who choose to interact with those partners.
Further, we enter into arrangements with certain such partners from time to time pursuant to which we receive fees based in whole or in part on the volume of our users who choose to interact with those partners.
As a result, the application, interpretation and enforcement of these laws and regulations are often uncertain, and may be interpreted and applied inconsistently from jurisdiction to jurisdiction and inconsistently with our current practices and policies.
As a result, the application, interpretation and enforcement of these laws and regulations are often uncertain, and may be interpreted and applied inconsistently from jurisdiction to jurisdiction and inconsistently with our current practices and policies.
For example, legislative or regulatory actions affecting the manner in which we display content to our users, use or share information or obtain consent to use or share information could adversely affect the manner in which we provide our services or adversely affect our financial results.
For example, legislative or regulatory actions affecting the manner in which we display content to our users, use or share information or obtain consent to use or share information could adversely affect the manner in which we provide our services or adversely affect our financial results.
For more information on potential risks related our acquisitions and similar transactions, refer to the risk factor “ We have in the past undertaken and may in the future pursue acquisitions, divestitures, investments and other similar transactions, which could divert our management ’ s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results, and if we do not manage them successfully or if acquired entities or investments fail to perform as expected, our financial results, business and prospects could be harmed. ” Our TrueCar+ offering was structured as a pilot program in the initial stages of its rollout and dealers were able to access the offering for free during that period.
For more information on potential risks related our acquisitions and similar transactions, refer to the risk factor entitled “ We have in the past undertaken and may in the future pursue acquisitions, divestitures, investments and other similar transactions, which could divert our management ’ s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results, and if we do not manage them successfully or if acquired entities or investments fail to perform as expected, our financial results, business and prospects could be harmed. ” Our TrueCar+ offering was structured as a pilot program in the initial stages of its rollout and dealers were able to access the offering for free during that period.
The risks we face in connection with transactions such as these include: • diversion of management time and focus from operating our business; • additional operating losses and expenses of other businesses; • integration of acquisitions, including coordination of technology, research and development and sales and marketing functions; • transition of the other business’s users to our website and mobile applications; • retention of employees from an acquired business, or separation of employees from a divested business; • cultural and other challenges associated with integrating employees from an acquired business into our organization; • integration of an acquired business’s accounting, management information, human resources, legal and other administrative systems, or extrication of such systems from a divested business; • the need to implement or improve controls, procedures and policies at a business that prior to the transaction may have lacked effective controls, procedures and policies; • potential write-offs of intangibles or other assets acquired in acquisitions or similar transactions, or write-downs of investments, that may have an adverse effect our operating results in a given period; • the risks associated with the businesses, products or technologies in question, which may differ from or be more significant than the risks our business faces; • the risks associated with obtaining necessary regulatory approval for a transaction; • liability for the activities, products or services of the business, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; • risk related to the payment of contingent consideration; and 35 Table of Contents • litigation or other claims in connection with the business, product or technology in question, including claims from terminated employees, consumers, former stockholders or other third parties.
The risks we face in connection with transactions such as these include: • diversion of management time and focus from operating our business; • additional operating losses and expenses of other businesses; • integration of acquisitions, including coordination of technology, research and development and sales and marketing functions; • transition of the other business’s users to our website and mobile applications; • retention of employees from an acquired business, or separation of employees from a divested business; • cultural and other challenges associated with integrating employees from an acquired business into our organization; • integration of an acquired business’s accounting, management information, human resources, legal and other administrative systems, or extrication of such systems from a divested business; • the need to implement or improve controls, procedures and policies at a business that prior to the transaction may have lacked effective controls, procedures and policies; 37 Table of Contents • potential write-offs of intangibles or other assets acquired in acquisitions or similar transactions, or write-downs of investments, that may have an adverse effect our operating results in a given period; • the risks associated with the businesses, products or technologies in question, which may differ from or be more significant than the risks our business faces; • the risks associated with obtaining necessary regulatory approval for a transaction; • liability for the activities, products or services of the business, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; • risk related to the payment of contingent consideration; and • litigation or other claims in connection with the business, product or technology in question, including claims from terminated employees, consumers, former stockholders or other third parties.
For more information on this type of risk, refer to the risk factor “ We collect, process, store, share, disclose and use personal information and other data, and our actual or perceived failure to protect this information and data could damage our reputation and brand and harm our business and operating results. ” The success of our business relies heavily on our marketing and branding efforts, especially with respect to the TrueCar website and our branded mobile applications, as well as those efforts of the affinity group marketing partners whose websites we power, and these efforts may not be successful.
For more information on this type of risk, refer to the risk factor entitled “ We collect, process, store, share, disclose and use personal information and other data, and our actual or perceived failure to protect this information and data could damage our reputation and brand and harm our business and operating results. ” The success of our business relies heavily on our marketing and branding efforts, especially with respect to the TrueCar website and our branded mobile applications, as well as those efforts of the affinity group marketing partners whose websites we power, and these efforts may not be successful.
For more information on potential risks to our reputation with dealers arising from these new products, refer to the risk factor “ If key industry participants, including car dealers, affinity partners and automobile manufacturers, perceive us in a negative light or our relationships with them suffer harm, our ability to grow and our financial performance may be damaged. ” Further, we completed the acquisition of Digital Motors Corporation in the second quarter of 2022.
For more information on potential risks to our reputation with dealers arising from these new products, refer to the risk factor entitled “ If key industry participants, including car dealers, affinity partners and automobile manufacturers, perceive us in a negative light or our relationships with them suffer harm, our ability to grow and our financial performance may be damaged. ” Further, we completed the acquisition of Digital Motors Corporation in the second quarter of 2022.
Further, the ongoing industry-wide vehicle inventory shortages that began in 2021 resulted in increased vehicle prices that required us to discontinue long-running, high-performing advertising messages about the amount of savings that our users typically save off of the manufacturers’ suggested retail price, which we believe reduces the effectiveness of our advertising.
Further, the industry-wide vehicle inventory shortages that began in 2021 resulted in increased vehicle prices that required us to discontinue long-running, high-performing advertising messages about the amount of savings that our users typically save off of the manufacturers’ suggested retail price, which we believe reduces the effectiveness of our advertising.
Our primary forms of stock-based incentive awards are time-based restricted stock units, performance-based restricted stock units and stock options. Our stock price has long experienced substantial volatility, which may negatively impact the extent to which our stock-based compensation is viewed as a valuable benefit.
Our primary forms of stock-based incentive awards are time-based restricted stock units and performance-based restricted stock units. Our stock price has long experienced substantial volatility, which may negatively impact the extent to which our stock-based compensation is viewed as a valuable benefit.
If we do so, we will prepare and file with the SEC a prospectus supplement containing specific information about the terms of the offering. 44 Future sales of shares by existing stockholders could cause our stock price to decline.
If we do so, we will prepare and file with the SEC a prospectus supplement containing specific information about the terms of the offering. Future sales of shares by existing stockholders could cause our stock price to decline.
Also, since 2020, we have introduced a number of other products to help streamline consumers’ car-buying experience. The first of these products allows consumers to connect with one of our insurance partners, from whom they may obtain car insurance.
Since 2020, we have introduced a number of other products to help streamline consumers’ car-buying experience. The first of these products allows consumers to connect with one of our insurance partners, from whom they may obtain car insurance.
Although these measures were temporary, executives’ and other employees’ bonuses have also been negatively affected by the disruptions we have faced in recent years, including the termination of the USAA partnership, the coronavirus pandemic and the automobile inventory shortage.
Although these measures were temporary, executives’ and other employees’ bonuses have also been negatively affected by the disruptions we have faced in recent years, including the termination of the USAA partnership in 2020, the coronavirus pandemic and the automobile inventory shortage.
Consumers are provided the option to connect with one or more local dealers in order to get the right deal on the car they want and proceed with purchase. 6 Table of Contents Used Car Inventory Search.
Consumers are provided the option to connect with one or more local dealers in order to get the right deal on the car they want and proceed with purchase. 6 Table of Contents New and Used Car Inventory Search.
In March 2015, we were named as a defendant in a lawsuit purportedly filed on behalf of numerous automotive dealers who are not on the TrueCar platform in the U.S. District Court for the Southern District of New York.
In March 2015, we were named as a defendant in a lawsuit purportedly filed on behalf of numerous automotive dealers who were not on the TrueCar platform in the U.S. District Court for the Southern District of New York.
We cannot predict when, if ever, these automobile inventory-related issues will be resolved, and until they are, they are likely to continue to adversely impact our business, results of operations and prospects.
We cannot predict when, if ever, these automobile inventory-related issues will be fully resolved, and until they are, they are likely to continue to adversely impact our business, results of operations and prospects.
Across the automotive industry, consumers tend to purchase a higher volume of cars in the second and third quarters of each year, due in part to the introduction of new vehicle models from manufacturers.
Seasonality Across the automotive industry, consumers tend to purchase a higher volume of cars in the second and third quarters of each year, due in part to the introduction of new vehicle models from manufacturers.
If any such matter is not ultimately resolved in our favor, losses arising from the results of litigation or settlements, as well as ongoing defense costs or adverse changes in our dealer network, could have a material adverse effect on our business, financial condition, results of operations and cash flows. *** In the past, following periods of volatility in the overall market and the market prices of a particular company’s securities, securities class action lawsuits have often been instituted against affected companies, and as noted above, this type of lawsuit has been instituted against us in the form of the Milbeck Federal Securities Litigation and the Derivative Litigation, among others.
If any such matter is not ultimately resolved in our favor, losses 36 Table of Contents arising from the results of litigation or settlements, as well as ongoing defense costs or adverse changes in our dealer network, could have a material adverse effect on our business, financial condition, results of operations and cash flows. *** In the past, following periods of volatility in the overall market and the market prices of a particular company’s securities, securities class action lawsuits have often been instituted against affected companies, and as noted above, this type of lawsuit has been instituted against us in the form of the Milbeck Federal Securities Litigation and the Derivative Litigation, among others.
We had federal net operating loss carryforwards that begin to expire in the year ending December 31, 2034 and state net operating losses that began to expire in the year ending December 31, 2022.
We had federal net operating loss carryforwards that begin to expire in the year ending December 31, 2034 and state net operating losses that began to expire in the year ended December 31, 2022.
We continue to monitor and evaluate the impact of potential and enacted changes in applicable federal and state tax law. 42 Table of Contents Risks Related to Ownership of Our Common Stock We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which could cause our stock price to decline.
We continue to monitor and evaluate the impact of potential and enacted changes in applicable federal and state tax law. 45 Table of Contents Risks Related to Ownership of Our Common Stock We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which could cause our stock price to decline.
Also, in most instances, we present consumers with a graphical distribution of what others in the local market paid for a similar vehicle make, model and trim. Within this distribution, we include MSRP and the Market Average, a proprietary calculation based on recent transactions, that provides an understanding of what others have paid for similarly configured vehicles.
Also, in most instances, we provide consumers with a graphical distribution of what others in the local market paid for a similar vehicle make, model and trim. Within this distribution, we include MSRP and the Market Average, a proprietary calculation based on recent transactions, that provides an understanding of what others have paid for similarly configured vehicles.
The limited supply of inventory has also led to an increase in wholesale auction prices and the prices that dealers charge consumers for automobiles.
The limited supply of inventory also led to an increase in wholesale auction prices and the prices that dealers charge consumers for automobiles.
Certain manufacturers who currently participate in these programs have suspended their participation indefinitely 19 Table of Contents due to the low inventory levels, and certain manufacturers who formerly participated in programs of this type have informed us that they will not consider partnering with us again until inventory returns to more typical levels.
Certain 21 Table of Contents manufacturers who currently participate in these programs have suspended their participation indefinitely due to the low inventory levels, and certain manufacturers who formerly participated in programs of this type have informed us that they will not consider partnering with us again until inventory returns to more typical levels.
Our business could also be impacted by cyclical trends affecting the overall economy, specifically the retail automobile industry, as well as by actual or threatened severe weather or other significant events outside of our control. Failure to adequately protect our intellectual property could harm our business and operating results.
Our business could also be impacted by cyclical trends affecting the overall economy, specifically the retail automobile industry, as well as by actual or threatened inflation, recession, severe weather or other significant events outside of our control. Failure to adequately protect our intellectual property could harm our business and operating results.
We benefit consumers by providing information related to what others have paid for a make, model and trim of car in their area and price offers on actual vehicle inventory, which we refer to as VIN-based offers, from our network of TrueCar Certified Dealers.
We benefit consumers by providing information related to what others have paid for a vehicle’s make, model and trim in their area and price offers on actual vehicle inventory, which we refer to as VIN-based offers, from our network of TrueCar Certified Dealers.
The SEC maintains an Internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding our company that we file electronically with the SEC. 12 Table of Contents Item 1A . Risk Factors Investing in our common stock involves a high degree of risk.
The SEC maintains an Internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding our company that we file electronically with the SEC. 13 Table of Contents Item 1A . Risk Factors Investing in our common stock involves a high degree of risk.
Broad market and industry factors, including those relating to the coronavirus pandemic, may seriously affect the market price of our common stock, regardless of our actual operating performance. Additionally, as a public company, we face the risk of shareholder lawsuits, particularly if we experience declines in the price of our common stock.
Broad market and industry factors, including those relating to events such as the coronavirus pandemic, may seriously affect the market price of our common stock, regardless of our actual operating performance. Additionally, as a public company, we face the risk of shareholder lawsuits, particularly if we experience declines in the price of our common stock.
The market price of our common stock could decline as a result of the sale of substantial amounts of our common stock, particularly sales by our directors, executive officers and significant stockholders, a large number of shares of our common stock becoming available for sale or the perception in the market that holders of a large number of shares intend to sell their shares.
The market price of our common stock could decline as a result of the sale of substantial amounts of our common stock, particularly sales directly by us or by our directors, executive officers and significant stockholders, a large number of shares of our common stock becoming available for sale or the perception in the market that holders of a large number of shares intend to sell their shares.
If we are unable to successfully respond to changes in the market, our business could be harmed. Our business has grown when users and automobile dealers have increasingly used our products and services. However, we cannot guarantee that we will be able to maintain or grow our business.
If we are unable to successfully respond to changes in the market, our business could be harmed. Our business has grown when consumers and automobile dealers have increasingly used our products and services. However, we cannot guarantee that we will be able to maintain or grow our business.
Additional factors that could cause fluctuations in the trading price of our common stock include the following: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market prices and trading volumes of technology stocks; • changes in operating performance and stock market valuations of other technology companies generally, or those in the automotive industry in particular; • sales of shares of our common stock by us or our stockholders; • the failure of securities analysts to maintain coverage of us, changes in financial estimates or recommendations by any securities analysts who follow our company; • our failure to meet our publicly-announced guidance of future operating results or otherwise to meet the expectations of securities analysts or investors in this regard; • announcements by us or our competitors of new products or innovations to existing products; • the public’s reaction to our press releases, other public announcements and filings with the SEC, including the guidance regarding our future operating results or the absence of such guidance; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our operating results or fluctuations in our operating results; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • our ability to control costs, including our operating expenses; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; 43 • announced or completed acquisitions, divestitures, investments or other similar transactions involving us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • any significant change in our management; • conditions in the automobile industry; and • general macroeconomic conditions and the growth rate of our markets and the impact of the coronavirus pandemic on these conditions and markets.
Additional factors that could cause fluctuations in the trading price of our common stock include the following: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market prices and trading volumes of technology stocks; • changes in operating performance and stock market valuations of other technology companies generally, or those in the automotive industry in particular; • sales of shares of our common stock by us or our stockholders; • the failure of securities analysts to maintain coverage of us, changes in financial estimates or recommendations by any securities analysts who follow our company; • our failure to meet our publicly-announced guidance of future operating results or otherwise to meet the expectations of securities analysts or investors in this regard; • announcements by us or our competitors of new products or innovations to existing products; • the public’s reaction to our press releases, other public announcements and filings with the SEC, including the guidance regarding our future operating results or the absence of such guidance; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our operating results or fluctuations in our operating results; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • our ability to control costs, including our operating expenses; 46 Table of Contents • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions, divestitures, investments or other similar transactions involving us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • any significant change in our management; • conditions in the automobile industry and broader macroeconomic trends; and • general macroeconomic conditions and the growth rate of our markets and the impact of the ongoing effects of the coronavirus pandemic on these conditions and markets.
Revenue growth may be dependent on a number of factors, including the success of our TrueCar+ offering or our ability to focus on increasing the number of transactions, subscriptions and other sources from which we derive revenue by growing our network of TrueCar Certified Dealers, including dealers representing high-volume brands, both on an overall basis and in important geographies, as well as growth in the revenue we derive from car manufacturer incentive programs.
Revenue growth may be dependent on a number of factors, including the success of our TrueCar+ offering or our ability to focus on increasing the number of transactions, subscriptions and other sources from which we derive revenue by growing our network of TrueCar Certified Dealers, including dealers representing high-volume brands, both on an overall basis and in important geographies, as well as growth in the revenue we derive from car manufacturer incentive 26 Table of Contents programs.
Further, following a decline in our stock price in the third quarter of 2022 and continued macroeconomic disruptions impacting our business, we performed an interim quantitative impairment test as of September 30, 2022, which concluded 40 Table of Contents that the carrying value of our single reporting unit exceeded the fair value and, accordingly, we recognized a non-cash impairment charge of $59.8 million for the year ended December 31, 2022.
Further, following a decline in our stock price in the third quarter of 2022 and continued macroeconomic disruptions impacting our business, we performed an interim quantitative impairment test as of September 30, 2022, which concluded that the carrying value of our single reporting unit exceeded the fair value and, accordingly, we recognized a non-cash impairment charge of $59.8 million for the year ended December 31, 2022.
We are subject to a variety of federal and state laws and regulations that relate to privacy, data protection and personal information, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change.
Privacy Laws We are subject to a variety of laws and regulations that relate to privacy, data protection and personal information, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change.
Similarly, inflation, both with respect to new and used cars prices and the broader macroeconomic environment, may negatively affect consumer behavior and purchasing power, reducing the number of cars purchased by consumers during periods of heightened inflation, such as the twelve months ending June 30, 2022, during which consumer prices increased 9.1% according to the Department of Labor, and while increases in inflation have slowed in intensity since summer 2022, we cannot predict the extent prices will continue to rise, or the long-term effects these conditions may have on consumer behavior.
Similarly, inflation, both with respect to new and used cars prices and the broader macroeconomic environment, may negatively affect consumer behavior and purchasing power, reducing the number of cars purchased by consumers during periods of heightened inflation, such as the twelve months ended June 30, 2022, during which consumer prices increased 9.1% according to the Department of Labor, and while increases in the rate of inflation have slowed since summer 2022, we cannot predict the extent prices will continue to rise, or the long-term effects these conditions may have on consumer behavior.
We also allow automobile manufactures, known in the industry as OEMs, to connect with TrueCar users during their purchase process and efficiently deliver targeted incentives to consumers, based on their affiliation with our affinity group partners.
We also allow automobile manufacturers, known in the industry as OEMs, to connect with TrueCar users during their purchase process and efficiently deliver targeted incentives to consumers, based on their affiliation with our affinity group partners.
To the extent that our consumer base, the number of TrueCar Certified Dealers and the number of parties with which we maintain commercial relationships grow, we would need an increasing amount of technical infrastructure, including network capacity and computing power, to satisfy consumers’ and dealers’ needs and maintain and grow business operations with commercial partners, and we may not effectively scale and grow 37 Table of Contents our technical infrastructure to accommodate any increased demands.
To the extent that our consumer base, the number of TrueCar Certified Dealers and the number of parties with which we maintain commercial relationships grow, we would need an increasing amount of technical infrastructure, including network capacity and computing power, to satisfy consumers’ and dealers’ needs and maintain and grow business operations with commercial partners, and we may not effectively scale and grow our technical infrastructure to accommodate any increased demands.
By facilitating and tracking these incentive codes in their own reporting systems, manufacturers can account directly for this method of reaching consumers. These manufacturers pay a subscription or per-vehicle fee to us for this service.
By facilitating and tracking these incentive codes in their own reporting systems, manufacturers can account directly for this method of reaching consumers. These manufacturers pay a per-vehicle fee to us for this service.
Ensuring that our products adhere to these requirements could divert our attention from key initiatives and require the investment of a significant amount of resources and, if we are unsuccessful in implementing the standards, could negatively affect our reputation and contractual relationships, which could adversely affect our growth rate, revenue and financial and operating performance.
Ensuring that our products adhere to these requirements could divert our attention from key initiatives and require the investment of a significant 25 Table of Contents amount of resources and, if we are unsuccessful in implementing the standards, could negatively affect our reputation and contractual relationships, which could adversely affect our growth rate, revenue and financial and operating performance.
Additionally, as a public company, we face the risk of stockholder lawsuits, 33 Table of Contents particularly if we experience declines in the price of our common stock. Adverse outcomes in any claim or lawsuit against us could result in significant monetary damages or injunctive relief that could adversely affect our ability to conduct our business.
Additionally, as a public company, we face the risk of stockholder lawsuits, particularly if we experience declines in the price of our common stock. Adverse outcomes in any claim or lawsuit against us could result in significant monetary damages or injunctive relief that could adversely affect our ability to conduct our business.
Although we do not sell insurance or automobiles or provide automobile financing products or render credit decisions, certain of our partners sell insurance or provide automobile financing products to the public in general, and may sell insurance or provide automobile financing products to our users in particular.
Although we do not sell insurance or automobiles or provide automobile financing, extend credit to consumers or render credit decisions, certain of our partners sell insurance, extend credit to consumers, render credit decisions or provide automobile financing products to the public in general, and may sell insurance, extend credit, render credit decisions or provide automobile financing products to our users in particular.
After the trial and appellate courts rejected the plaintiff’s motion for class certification, he voluntarily dismissed the remainder of his case, meaning that the California Consumer Class Action is currently resolved. In 2017, we were named as a defendant in a putative class action filed by Kip Haas in the U.S. District Court for the Central District of California.
After the trial and appellate courts rejected the plaintiff’s motion for class certification, he voluntarily dismissed the remainder of his case, meaning that the California Consumer Class Action is currently resolved. • Haas Class Action : In 2017, we were named as a defendant in a putative class action filed by Kip Haas in the U.S.
Our certificate of incorporation provides that, unless we otherwise agree, the Court of Chancery of the State of Delaware will be the exclusive forum for: • any derivative action or proceeding brought on our behalf; • any action asserting a breach of fiduciary duty; • any action asserting a claim against us under the Delaware General Corporation Law, our certificate of incorporation or our bylaws; • any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws; and 45 • any action asserting a claim against us that is governed by the internal-affairs doctrine.
Our certificate of incorporation provides that, unless we otherwise agree, the Court of Chancery of the State of Delaware will be the exclusive forum for: • any derivative action or proceeding brought on our behalf; 48 Table of Contents • any action asserting a breach of fiduciary duty; • any action asserting a claim against us under the Delaware General Corporation Law, our certificate of incorporation or our bylaws; • any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws; and • any action asserting a claim against us that is governed by the internal-affairs doctrine.
Historically, this has involved, among other things, collecting, tracking, using and sharing certain personal data of consumers who interact with our webpages or 26 Table of Contents application. The protection of the privacy of consumers’ data is a topic of heightened national political and commercial attention in a rapidly-changing landscape.
Historically, this has involved, among other things, collecting, tracking, using and sharing certain personal data of consumers who interact with our webpages or application. The protection of the privacy of consumers’ data is a topic of heightened national political and commercial attention in a rapidly-changing landscape.
We also have partnered with financial institutions to, among other things, allow consumers to pre-qualify for a car loan, and review their credit score to facilitate financing quotations. We have introduced, and intend to continue to introduce, additional other products to facilitate the implementation of our TrueCar+ offering.
We also have partnered with financial institutions to, among other things, allow consumers to pre-qualify for a car loan, review their credit score to facilitate financing quotations and apply for credit from lenders. We have introduced, and intend to continue to introduce, additional other products to facilitate the implementation of our TrueCar+ offering.
These interruptions sometimes negatively affect our business, for example, by impacting our 24 Table of Contents ability to timely invoice the dealers in our network. These interruptions may occur for a number of reasons, including changes to the software used by these data feed providers and difficulties in renewing our agreements with third-party data feed providers.
These interruptions sometimes negatively affect our business, for example, by impacting our ability to timely invoice the dealers in our network. These interruptions may occur for a number of reasons, including changes to the software used by these data feed providers and difficulties in renewing our agreements with third-party data feed providers.
Any reduction in the number of users directed to our website through Internet search engines could harm our business and operating results. 25 Table of Contents Our users may in some cases require dealers who wish to communicate with them other than by email to communicate by text message rather than by calling.
Any reduction in the number of users directed to our website through Internet search engines could harm our business and operating results. Our users may in some cases require dealers who wish to communicate with them other than by email to communicate by text message rather than by calling.
Additionally, if regulators conclude that our 28 Table of Contents products or services fall within the scope of those laws and regulations, we or our TrueCar Certified Dealers could be subject to significant civil or criminal penalties, including fines, or the award of significant damages in class action or other civil litigation.
Additionally, if regulators conclude that our products or services fall within the scope of those laws and regulations, we or our TrueCar Certified Dealers could be subject to significant civil or criminal penalties, including fines, or the award of significant damages in class action or other civil litigation.
Similarly, as discussed elsewhere in this “Risk Factors” section, we believe that the rollout 23 Table of Contents of our TrueCar+ offering is critical to the long-term success of our business. However, we cannot assure you that we will do so successfully, or, if we do, that it will improve our business.
Similarly, as discussed elsewhere in this “Risk Factors” section, we believe that the rollout of our TrueCar+ offering is critical to the long-term success of our business. However, we cannot assure you that we will do so successfully, or, if we do, that it will improve our business.
Our primary forms of stock-based incentive awards are stock options and restricted stock units. We view our people as our most important capital asset, in which we strive to invest to develop talent and growth to build their capabilities. We leverage both extrinsic and intrinsic motivators.
Our primary forms of stock-based incentive awards are time-based restricted stock units and performance-based restricted stock units. We view our people as our most important capital asset, in which we strive to invest to develop talent and growth to build their capabilities. We leverage both extrinsic and intrinsic motivators.
Additionally, we are not currently able to monetize transactions in which manufacturers sell new automobile directly to a consumer without the involvement of a TrueCar Certified Dealer, as Tesla and some other electric car manufacturers do in certain states, for example.
Additionally, we are not currently able to monetize transactions in which a manufacturer sells a new automobile directly to a consumer without the involvement of a TrueCar Certified Dealer, as Tesla and some other electric car manufacturers do in certain states, for example.
In addition, to the extent that repurchases are made, implementation of this program will diminish our cash reserves. 46 General Risk Factors We have incurred and will continue to incur substantial costs as a result of operating as a public company, and our management has been and will be required to continue to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
In addition, to the extent that repurchases are made, implementation of this program will diminish our cash reserves. 49 Table of Contents General Risk Factors We have incurred and will continue to incur substantial costs as a result of operating as a public company, and our management has been and will be required to continue to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
Our principal competitors for consumer awareness include: • Internet search engines and online automotive sites such as Google, Amazon Vehicles, Autotrader.com, eBay Motors, AutoWeb.com (formerly Autobytel.com), KBB.com, CarSaver.com, CarGurus.com and Cars.com; • sites operated by automobile manufacturers such as General Motors and Ford; • online automobile retailers such as Carvana, Vroom, CarMax (and its subsidiary Edmunds) and Shift Technologies; • providers of offline, membership-based car-buying services, such as the Costco Auto Program; and • offline automotive classified listings, such as trade periodicals and local newspapers.
Our principal competitors for consumer awareness include: • Internet search engines and online automotive sites such as Google, Amazon, Autotrader.com, eBay Motors, AutoWeb.com (formerly Autobytel.com), KBB.com, CarSaver.com, CarGurus.com and Cars.com; • sites operated by automobile manufacturers such as General Motors and Ford; • online automobile retailers such as Carvana, CarMax (and its subsidiary Edmunds) and DriveTime; • providers of offline, membership-based car-buying services, such as the Costco Auto Program; and • offline automotive classified listings, such as trade periodicals and local newspapers.
For more information on these matters, refer to the risk factor “ We collect, process, store, share, disclose and use personal information and other data, and our actual or perceived failure to protect this information and data could damage our reputation and brand and harm our business and operating results. ” Our relationships with our affinity group marketing partners could also be harmed by any number of macroeconomic, social, political, legal or regulatory changes or other factors and our and our partners’ respective responses to them.
For more information on these matters, refer to the risk factor entitled “ We collect, process, store, share, disclose and use personal information and other data, and our actual or perceived failure to protect this information and data could damage our reputation and brand and harm our business and operating results. ” Our relationships with our affinity group marketing partners could also be harmed by any number of macroeconomic, social, political, legal or regulatory changes or other factors and our and our partners’ respective responses to them or changes in our partners’ interpretations or existing regulations and other legal requirements.
The complaint asserted claims for violation of the California Business and Professions Code, based principally on allegations of false and misleading advertising and unfair business practices. The complaint sought an award of unspecified damages, interest, injunctive relief and attorney’s fees.
District Court for the Central District of California. The complaint asserted claims for violation of the California Business and Professions Code, based principally on allegations of false and misleading advertising and unfair business practices. The complaint sought an award of unspecified damages, interest, injunctive relief and attorney’s fees.
As of December 31, 2022, our executive officers, directors and holders of 5% or more of our outstanding common stock (based upon the most recent filings on Schedule 13G with the SEC with respect to each such holder) beneficially owned, in the aggregate , approximately 66% of our outstanding shares of common stock (assuming exercise of all beneficially owned shares).
As of December 31, 2023, our executive officers, directors and holders of 5% or more of our outstanding common stock (based upon the most recent filings on Schedule 13G with the SEC with respect to each such holder) beneficially owned, in the aggregate , approximately 54% of our outstanding shares of common stock (assuming exercise of all beneficially owned shares).
If we are not successful in rolling out the TrueCar+ offering, providing a compelling value proposition to consumers and dealers using it, integrating our current and future offerings into that experience or appropriately monetizing it, our business, revenue, operating results and prospects would be adversely affected.
If we are unsuccessful in rolling out the paid TrueCar+ offering, providing a compelling value proposition to consumers and dealers using it, integrating our current and future offerings into that experience or appropriately monetizing it, our business, revenue, operating results and prospects would be adversely affected.
In 2022 and 2021, respectively, we derived approximately 2.7% and 3.7% of our revenue from our arrangements with car manufacturers to promote the sale of their vehicles through additional consumer incentives, and, while more volatile than other of our revenue sources, we believe that this revenue stream represents a potential growth opportunity for our business following the resolution of current automobile inventory shortages.
In 2023 and 2022, respectively, we derived approximately 9.4% and 2.7% of our revenue from our arrangements with car manufacturers to promote the sale of their vehicles through additional consumer incentives, and, while more volatile than other of our revenue sources, we believe that this revenue stream represents a potential growth opportunity for our business following the resolution of current automobile inventory shortages.
Any or all of these adverse effects could result in substantial negative publicity, decreased revenues, increased expenses and decreased profitability. Laws Relating to Financial Products The provision of financial products, including related to the purchase or lease of automobiles, is highly regulated by the jurisdictions in which we do business.
Any or all of these adverse effects could result in substantial negative publicity, decreased revenues, increased expenses and decreased profitability. 33 Table of Contents Laws Relating to Financial Products The provision of financial products, including related to the purchase, financing or lease of automobiles, is highly regulated by the jurisdictions in which we do business.
After consumers have identified a vehicle in which they are interested and received a price offer from a dealer subscribed to one of our Access packages discussed further below, we allow them to further customize their “deal” through our TrueCar Deal Builder, including their vehicle trade-in and payment.
After consumers have identified a vehicle in which they are interested and received a price offer from a dealer subscribed to one of our Access packages discussed further below, we allow them to further customize their “deal” through our TrueCar Unified VDP, including their vehicle trade-in and payment.
If our total compensation packages are not considered competitive, our ability to attract, retain and 22 Table of Contents motivate executives and key employees could be weakened. If we do not succeed in attracting well-qualified employees, retaining and motivating existing employees or integrating new employees, our business could be materially and adversely affected.
If our total compensation packages are not considered competitive, our ability to attract, retain and motivate executives and key employees could be weakened. If we do not succeed in attracting well-qualified employees, retaining and motivating existing employees or integrating new employees, our business could be materially and adversely affected.
The executive cash bonus program is based on company financial performance and the attainment of key strategic objectives under the annual plan approved by the Compensation and Workforce Committee of our Board of Directors. After the end of the fiscal year, the Committee reviews performance against plan objectives and 11 Table of Contents determines the actual payout of the bonus.
The executive cash bonus program is based on company financial performance and the attainment of key strategic objectives under the annual plan approved by the Compensation and Workforce Committee of our Board of Directors. After the end of the fiscal year, that committee reviews performance against plan objectives and determines the actual payout of the bonus.
Members of our dealer organization are eligible for incentive compensation in lieu of the corporate bonus program, which is based on attainment of key activities or the completion of key objectives deemed important by department and company leadership for the growth and maintenance of our dealer network.
Members of our sales organization are eligible for incentive compensation in lieu of the corporate bonus program, which is based on attainment of key activities or the completion of key objectives deemed important by department and company leadership for the growth and maintenance of our dealer network and other revenue streams.
In addition, we attempt to protect our intellectual property, technology and confidential information by requiring our employees and consultants to 39 Table of Contents enter into confidentiality and assignment of inventions agreements and third parties to enter into nondisclosure agreements.
In addition, we attempt to protect our intellectual property, technology and confidential information by requiring our employees and consultants to enter into confidentiality and assignment of inventions agreements and third parties to enter into nondisclosure agreements.
Our dynamic workforce policy allows us to sublet most of our leased office spaces. We engage a number of temporary employees and consultants to support our operations. None of our employees is represented by a labor union or subject to a collective bargaining agreement.
Our dynamic workforce policy allows us to sublet or negotiate early terminations for most of our leased office spaces. We engage a number of temporary employees and consultants to support our operations. None of our employees is represented by a labor union or subject to a collective bargaining agreement.
Further, the equity incentive plans under which we grant our employees stock-based compensation as well as the number of shares issuable thereunder are subject to periodic stockholder approval, which may restrict our ability to authorize the number of stock-based incentive awards to the extent we believe necessary to compensate our employees .
Further, the equity incentive plan under which we grant our employees stock-based compensation as well as the number of shares issuable thereunder is subject to periodic stockholder approval, which may restrict our ability to authorize the number of stock-based incentive awards to the extent we believe necessary to compensate our employees .
This decline is attributable to a number of factors, including supply chain disruptions and shortages of critical parts, such as automotive semiconductor chips, fewer trade-ins from diminished vehicle sales, lease extensions on vehicles that would otherwise have been returned to dealerships, the closure of or restrictions on the operations of wholesale auctions limiting dealers’ ability to source stock and replenish inventory and increases in the costs that dealers incur when purchasing inventory as a result of macroeconomic factors such as rising interest rates and inflation.
These recent low inventory levels are attributable to a number of factors, including supply chain disruptions and shortages of critical parts, such as automotive semiconductor chips, fewer trade-ins from diminished vehicle sales, lease extensions on vehicles that would otherwise have been returned to dealerships, the closure of or restrictions on the operations of wholesale auctions limiting dealers’ ability to source stock and replenish inventory and increases in the costs that dealers incur when purchasing inventory as a result of macroeconomic factors such as rising interest rates and inflation.
If we are not able to adjust our business model in response to these and other developments in the industry, including in response to changing consumer demands during and after the coronavirus pandemic, our business, growth, operating results, financial condition and prospects could be adversely affected.
If we are not able to adjust our business model in response to these and other developments in the industry, including in response to changing consumer demands, our business, growth, operating results, financial condition and prospects could be adversely affected.
Competition for qualified employees in our industry, particularly for software engineers, data scientists and other technical staff, is intense, and we face significant competition in hiring and retaining them. To attract and retain executives and other key employees in this competitive marketplace, we must provide competitive compensation packages, including cash and stock-based compensation.
Competition for qualified employees in our industry, particularly for software engineers, data scientists and other technical staff, is often intense, and we have historically faced significant competition in hiring and retaining them. To attract and retain executives and other key employees in this competitive marketplace, we must provide competitive compensation packages, including cash and stock-based compensation.
In 2015, 279 franchise dealers became inactive as the result of a contractual dispute with a large dealer group, and our franchise dealer count decreased from 9,300 at June 30, 2015 to 8,702 at September 30, 2015. At December 31, 2022, our franchise dealer cou nt was 7,924.
In 2015, 279 franchise dealers became inactive as the result of a contractual dispute with a large dealer group, and our franchise dealer count decreased from 9,300 at June 30, 2015 to 8,702 at September 30, 2015. At December 31, 2023, our franchise dealer cou nt was 8,232.
In addition, if we were to issue securities in connection with our acquisition of complementary businesses, products or technologies, our stockholders would also experience dilution. 48 Item 1B. Unresolved Staff Comments None.
In addition, if we were to issue securities in connection with our acquisition of complementary businesses, products or technologies, our stockholders would also experience dilution. 51 Table of Contents Item 1B. Unresolved Staff Comments None.
Cumulatively, these factors resulted in a drastic reduction in the number of cars bought by our users from our dealers. In the second and third quarters of 2020, for example, our units declined by approximately 22% over the same two-quarter period in 2019, with the effect most pronounced in April 2020.
Cumulatively, these factors resulted in a drastic reduction in the number of cars bought by our users from our dealers. In the second and third quarters of 2020, for example, our units declined by approximately 22% over the same two-quarter period in 2019.
Federal Reserve, such as those implemented in 2022, implemented to date in 2023 and those additional increases currently forecast to occur in 2023, could negatively affect the number of vehicles purchased by consumers, and any reduction in purchases could adversely affect automobile dealers and car manufacturers and lead to a reduction in other spending by these constituents, including targeted incentive programs.
Federal Reserve, such as those implemented in 2022 and 2023 as well as any additional increases that could occur in the future, could negatively affect the number of vehicles purchased by consumers, and any reduction in purchases could adversely affect automobile dealers and car manufacturers and lead to a reduction in other spending by these constituents, including targeted incentive programs.
Through our Payments solution, participating dealers can show consumers accurate estimates of their monthly lease or loan payments with digital retailing tools that span the buying and selling lifecycle. We have historically offered the Trade and Payments products separately, and continue to do so for certain dealers.
Through our Payments solution, participating dealers can show consumers accurate estimates of their monthly lease or loan payments with digital retailing tools that span the buying and selling lifecycle. We have historically offered the Trade and Payments products separately, and continue to do so for certain dealers. Dealers can access these tools through the Dealer Portal referred to above.
Consumers may also change their behavior as a result of concerns over climate change, including by seeking to reduce their reliance on automobiles generally or increasing demand for electric vehicles, some of which, as described elsewhere in these risk factors, are sold directly to consumers by manufacturers without the involvement of franchised dealers such as the TrueCar Certified Dealers on our network.
Consumers may also change their behavior as a result of concerns over climate change, including by seeking to reduce their reliance on automobiles generally or increasing demand for electric vehicles, some of which, as described elsewhere in this “Risk Factors” section, are sold directly to consumers by manufacturers without the involvement of franchised dealers such as the TrueCar Certified Dealers on our network.
All of our outstanding shares are eligible for sale in the public market, other than approximately 4.1 million shares (including vested options) as of December 31, 2022 held by directors, executive officers and other affiliates that are subject to volume limitations under Rule 144 of the Securities Act.
All of our outstanding shares are eligible for sale in the public market, other than approximately 2.7 million shares (including vested options) as of December 31, 2023 held by directors, executive officers and other affiliates that are subject to volume limitations under Rule 144 of the Securities Act.
In addition, our ability to grow our revenue is dependent on our ability to: • successfully develop and roll out our TrueCar+ offering; • expand our dealer network in a geographically optimized manner, including increasing dealers in our network representing high-volume brands; • increase the number of transactions between our users and TrueCar Certified Dealers; • increase dealer subscription rates, and manage dealer churn; • grow the revenue we derive from car manufacturer incentive programs; • increase the number of dealers subscribing to our other products, including our Reach and Sponsored Listings products; • maintain and grow our affinity group marketing partner relationships and increase the productivity of our current affinity group marketing partners, and to replace the units generated by our former partnership with USAA; 38 Table of Contents • increase the number of users of our products and services, and in particular the number of unique visitors to the TrueCar website and our TrueCar-branded mobile applications, including by improving our search-engine optimization; • enhance our consumer experience and increase the rate at which site visitors prospect with a TrueCar Certified Dealer and purchase from the prospected dealer; • improve the quality of our existing products and services, and introduce high-quality new products and services; and • introduce third-party ancillary products and services, including by integrating acquired products and services into our business.
In addition, our ability to grow our revenue is dependent on our ability to: • successfully develop and roll out our TrueCar+ offering and other new product offerings; • expand our dealer network in a geographically optimized manner, including increasing dealers in our network representing high-volume brands; • increase the number of transactions between our users and TrueCar Certified Dealers; • increase dealer subscription rates, and manage dealer churn; • grow the revenue we derive from car manufacturer incentive programs; • increase the number of dealers subscribing to our other products; • maintain and grow our affinity group marketing partner relationships and increase the productivity of our current affinity group marketing partners, and to replace the units generated by our former partnership with USAA; • increase the number of users of our products and services, and in particular the number of unique visitors to the TrueCar website and our TrueCar-branded mobile applications, including by improving our search-engine optimization; • enhance our consumer experience and increase the rate at which site visitors prospect with a TrueCar Certified Dealer and purchase from the prospected dealer; • improve the quality of our existing products and services, and introduce high-quality new products and services; • maintain our existing product offerings, including our Trade and Sell Your Car offerings following the termination of our commercial relationship with Accu-Trade; and • introduce third-party ancillary products and services, including by integrating acquired products and services into our business.
Although we do not sell motor vehicles, regulatory authorities or third parties could take the position that some of the regulations applicable to dealers or to the manner in which motor vehicles are advertised and sold generally are directly applicable to our business.
Although we do not sell motor vehicles to consumers, regulatory authorities or third parties could take the position that certain regulations applicable to dealers who sell motor vehicles to consumers or the manner in which motor vehicles are advertised and sold generally are directly applicable to our business.
We believe that our ability to provide a compelling car-buying experience is subject to a number of factors, including: • the actions taken by other participants in the car-buying process, including dealers and automobile manufacturers; • our ability to provide our TrueCar+ offering in a manner that is user-friendly, accepted by dealers and differentiated from the offerings of our competitors; • our ability to launch other new products that are effective and have a high degree of consumer engagement; • our ability to constantly innovate and improve our existing products, including in response to changes in consumer and dealer behavior and preferences, whether in response to the coronavirus pandemic, the macroeconomic environment or otherwise; • the compliance of the dealers within our network of TrueCar Certified Dealers with applicable laws, regulations and the rules of our platform, including the requirement that they honor the prices they quote to our users; 18 Table of Contents • our access to a sufficient amount of data to enable us to provide relevant vehicle and pricing information to consumers, including data provided by TrueCar Certified Dealers through our systems; and • our ability to constantly innovate and improve our mobile application and platform to enable us to provide products and services that users want to use on the devices they prefer.
We believe that our ability to provide a compelling car-buying experience is subject to a number of factors, including: • the actions taken by other participants in the car-buying process, including dealers and automobile manufacturers; • our ability to provide our TrueCar+ offering in a manner that is user-friendly, accepted by dealers and differentiated from the offerings of our competitors; • our ability to provide users personalized experiences tailored to differing consumer and dealer profiles; • our ability to launch other new products that are effective and have a high degree of consumer engagement; • our ability to constantly innovate and improve our existing products, including in response to changes in consumer and dealer behavior and preferences, whether in response to the macroeconomic environment, such as inflation or increased interest rates or otherwise; • the compliance of the dealers within our network of TrueCar Certified Dealers with applicable laws, regulations and the rules of our platform, including the requirement that they honor the prices they quote to our users; • our access to a sufficient amount of data to enable us to provide relevant vehicle and pricing information to consumers, including data provided by TrueCar Certified Dealers through our systems; and • our ability to constantly innovate and improve our mobile application and platform to enable us to provide products and services that users want to use on the devices they prefer.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures Not applicable. 49 Table of Contents PART II
Biggest changeMine Safety Disclosures Not applicable. 53 Table of Content s PART II
Item 3. Legal Proceedings Please refer to the disclosure under the heading “Legal Proceedings” in Note 11 “Commitments and Contingencies” to our annual consolidated financial statements included in Part II, Item 8 of this report for a description of our material pending legal proceedings, which disclosure is incorporated by reference into this Item 3 of Part I. Item 4.
Item 3. Legal Proceedings Please refer to the disclosure under the heading “Legal Proceedings” in Note 10 “Commitments and Contingencies” to our annual consolidated financial statements included in Part II, Item 8 of this report for a description of our material pending legal proceedings, which disclosure is incorporated by reference into this Item 3 of Part I. Item 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers Share repurchase activity during the three months ended December 31, 2022 was as follows: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2022 - October 31, 2022 3,000,000 $1.56 3,000,000 $45,774,521 November 1, 2022 - November 30, 2022 — N/A — $45,774,521 December 1, 2022 - December 31, 2022 — N/A — $45,774,521 On August 6, 2020, the Company issued a press release announcing that its Board of Directors (the “Board”) had authorized a share repurchase program of up to $75 million to allow for the repurchase of the Company’s common stock through September 30, 2022.
Biggest changeOn August 6, 2020, we issued a press release announcing that our Board of Directors (the “Board”) had authorized a share repurchase program of up to $75 million to allow for the repurchase of the our common stock through September 30, 2022.
In May 2021, the Company’s Board increased the authorization of the share repurchase program by an additional $75 million, bringing the total authorization to $150 million. In July 2022, the Company’s board of directors extended the term of the share repurchase program until September 30, 2024.
In May 2021, the Board increased the authorization of the share repurchase program by an additional $75 million, bringing the total authorization to $150 million. In July 2022, the Board extended the term of the share repurchase program until September 30, 2024.
Sales of Unregistered Securities None. 50 Table of Contents Stock Performance Graph The following shall not be deemed “soliciting material” or to be “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any of our other filings under the Exchange Act or the Securities Act of 1933, as amended, except to the extent we specifically incorporate it by reference into such filing.
Sales of Unregistered Securities None. 54 Table of Content s Stock Performance Graph The following shall not be deemed “soliciting material” or to be “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any of our other filings under the Exchange Act or the Securities Act of 1933, as amended, except to the extent we specifically incorporate it by reference into such filing.
The graph assumes that $100 was invested at the market close on December 31, 2017 in our common stock, the Nasdaq Composite and the RDG Internet Composite, and the data for the Nasdaq Composite and the RDG Internet Composite assumes reinvestments of dividends.
The graph assumes that $100 was invested at the market close on December 31, 2018 in our common stock, the Nasdaq Composite and the RDG Internet Composite, and the data for the Nasdaq Composite and the RDG Internet Composite assumes reinvestment of dividends.
The following graph shows a comparison from December 31, 2017 through December 31, 2022 of the cumulative total return for our common stock, the Nasdaq Composite Index (Nasdaq Composite) and the RDG Internet Composite.
The following graph shows a comparison from December 31, 2018 through December 31, 2023 of the cumulative total return for our common stock, the Nasdaq Composite Index (Nasdaq Composite) and the RDG Internet Composite.
As discussed above, we have never declared or paid a cash dividend on our common stock and do not anticipate declaring or paying a cash dividend in the foreseeable future. The stock price performance of the following graph is not necessarily indicative of future stock price performance. 51 Table of Contents Item 6. Reserved 52 Table of Contents
As discussed above, we have never declared or paid a cash dividend on our common stock and do not anticipate declaring or paying a cash dividend in the foreseeable future. The stock price performance of the following graph is not necessarily indicative of future stock price performance. 55 Table of Content s Item 6. Reserved 56 Table of Content s
Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions, any restrictions on paying dividends, including the current restriction on our ability to pay dividends under our credit facility, and other factors that our board of directors may deem relevant.
Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions, any restrictions on paying dividends, and other factors that our board of directors may deem relevant.
Before that date, there was no public trading market for our common stock. Holders of Record As of February 17, 2023, there were 126 holders of record of our common stock.
Before that date, there was no public trading market for our common stock. Holders of Record As of February 14, 2024, there were 117 holders of record of our common stock.
Added
Purchases of Equity Securities by the Issuer and Affiliated Purchasers There was no share repurchase activity during the three months ended December 31, 2023.
Added
In February 2024, the Board further extended the term of the repurchase program until December 31, 2026 and increased the amount authorized to repurchase shares by approximately $54.2 million. Following this increase and expenditures under the program to date, $100 million of authorization currently remains for future share repurchases.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe decrease in sales and marketing expenses of $15.4 million, or 10.2%, for 2021 as compared to 2020 primarily reflected a $11.9 million decrease in employee-related expenses of which $5.3 million is associated with severance-related costs incurred as part of the restructuring undertaken in the second quarter of 2020 and $6.6 million related to reduced headcount, a $2.5 million decrease in creative production costs, a $1.5 million decrease in travel-related and industry conference expenses due to the COVID-19 pandemic, a $1.3 million decrease in stock-based compensation, and a $0.7 million decrease in outsourced services, offset by a $2.3 million increase in revenue share paid to affinity marketing partners and a $1.0 million increase in branded media spend. 63 Table of Contents Technology and Development Expenses Years Ended December 31, % Change 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 (dollars in thousands) Technology and development expenses $ 46,090 $ 41,432 $ 44,930 11.2 % (7.8) % Technology and development expenses as a percentage of revenues 28.5 % 17.9 % 16.1 % Capitalized software costs $ 12,216 $ 11,781 $ 10,664 3.7 % 10.5 % Year ended December 31, 2022 compared to year ended December 31, 2021 .
Biggest changeThe decrease was partially offset by a $1.9 million increase related to travel and entertainment costs. 67 Table of Content s Technology and Development Expenses Years Ended December 31, % Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (dollars in thousands) Technology and development expenses $ 42,247 $ 46,090 $ 41,432 (8.3) % 11.2 % Technology and development expenses as a percentage of revenues 26.6 % 28.5 % 17.9 % Capitalized software costs $ 11,767 $ 12,216 $ 11,781 (3.7) % 3.7 % Year ended December 31, 2023 compared to year ended December 31, 2022 .
Independent Dealer Count We define independent dealer count as the number of independent dealers in the network of TrueCar Certified Dealers at the end of a given period that exclusively sell used vehicles. This number is calculated by counting each location, or rooftop, individually, regardless of the size of the dealership that owns the rooftop.
Independent Dealer Count We define independent dealer count as the number of dealers in the network of TrueCar Certified Dealers at the end of a given period that exclusively sell used vehicles. This number is calculated by counting each location, or rooftop, individually, regardless of the size of the dealership that owns the rooftop.
Sections 382 and 383 of the Internal Revenue Code impose substantial restrictions on the use of net operating losses and other tax attributes in the event of a cumulative “ownership change” of a corporation of more than 50% over a three-year period.
Sections 382 and 383 of the Internal Revenue Code impose substantial restrictions on the use of net operating losses and other tax attributes in the event of a cumulative “ownership change” of a corporation of more than 50% over a three-year period.
We experienced a cumulative ownership change as of December 31, 2019 within the meanings of Sections 382 and 383. We estimate that up to $15.2 million and $0.5 million of federal and state net operating loss carryforwards, respectively, may expire unused.
We experienced a cumulative ownership change as of December 31, 2019 within the meanings of Sections 382 and 383. We estimate that up to $15.2 million and $0.5 million of federal and state net operating loss carryforwards, respectively, may expire unused.
Accordingly, we recorded a reduction of deferred tax assets as of December 31, 2020 for the Section 382 limitation of $3.2 million which was fully offset by a corresponding decrease in our valuation allowance, with no net tax provision impact.
Accordingly, we recorded a reduction of deferred tax assets as of December 31, 2020 for the Section 382 limitation of $3.2 million which was fully offset by a corresponding decrease in our valuation allowance, with no net tax provision impact.
Additionally, with the finalization of our 2011 - 2020 research and development tax credit study in 2021, we estimate that certain federal research and development credit carryforwards may expire unused.
Additionally, with the finalization of our 2011 - 2020 research and development tax credit study in 2021, we estimate that certain federal research and development credit carryforwards may expire unused.
Accordingly, we recorded a reduction of deferred tax assets as of December 31, 2021 for the Section 383 limitation of $12.3 million which was fully offset by a corresponding decrease in our valuation allowance, with no net tax provision impact .
Accordingly, we recorded a reduction of deferred tax assets as of December 31, 2021 for the Section 383 limitation of $12.3 million which was fully offset by a corresponding decrease in our valuation allowance, with no net tax provision impact.
This was primarily due to a loss from continuing operations of $118.7 million, adjusted for non-cash items, including goodwill impairment charge of $59.8 million, stock-based compensation expense of $17.7 million, depreciation and amortization expense of $16.5 million, gain from equity method investment of $1.8 million , amortization of lease right-of-use assets of $3.9 million, and bad debt expense of $0.7 million.
This was primarily due to a loss from continuing operations of $118.7 million, adjusted for non-cash items, including a goodwill impairment charge of $59.8 million, stock-based compensation expense of $17.7 million, depreciation and amortization expense of $16.5 million, gain from equity method investment of $1.8 million , amortization of lease right-of-use assets of $3.9 million, and bad debt expense of $0.7 million.
In addition, we customize and operate our platform on a co-branded basis for our many affinity group marketing partners, including financial institutions like Navy Federal, PenFed and American Express; membership-based organizations like Consumer Reports, AARP, Sam’s Club, and AAA; and employee buying programs for large enterprises such as IBM and Walmart.
In addition, we customize and operate our platform on a co-branded basis for our many affinity group marketing partners, including financial institutions such as Navy Federal, PenFed and American Express; membership-based organizations such as Consumer Reports, AARP, Sam’s Club, and AAA; and employee buying programs for large enterprises such as IBM and Walmart.
We have provided below a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure. Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other measure of financial performance calculated and presented in accordance with GAAP.
We have provided below a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure. Adjusted EBITDA should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP.
To the extent that existing cash and cash equivalents and cash from operations are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing.
To the extent that existing cash, cash equivalents and restricted cash, and cash from operations are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing.
See Note 11 “Commitments and Contingencies” to our consolidated financial statements for more information. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures.
See Note 10 “Commitments and Contingencies” to our consolidated financial statements for more information. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures.
Sales and marketing expenses consist primarily of television, digital, and radio advertising; media production costs; affinity group partner marketing fees, which also include loan subvention costs where we pay certain affinity group marketing partners a portion of consumers’ borrowing costs for car loan products offered by these affinity group marketing partners; marketing sponsorship programs; and digital customer acquisition.
Sales and marketing expenses consist primarily of digital customer acquisition and digital advertising; media production costs; affinity group partner marketing fees, which also include loan subvention costs where we pay certain affinity group marketing partners a portion of consumers’ borrowing costs for car loan products offered by these affinity group marketing partners; and marketing sponsorship programs.
Investing Activities of Continuing Operations Cash used in investing activities of $8.0 million during 2022 consisted primarily of $12.1 million paid for our acquisition of Digital Motors and $11.7 million investments in software and computer hardware, offset by $15.7 million received from the sale of our equity method investment in Accu-Trade.
Cash used in investing activities of $8.0 million during 2022 consisted primarily of $12.1 million paid for our acquisition of Digital Motors and $11.7 million investments in software and computer hardware, offset by $15.7 million received from the sale of our equity method investment in Accu-Trade.
This was primarily due to a loss from continuing operations of $38.4 million, adjusted for non-cash items, including stock-based compensation expense of $20.4 million, depreciation and 67 Table of Contents amortization expense of $16.3 million, loss from equity method investment of $5.4 million of which $4.1 million was related to an impairment charge, amortization of lease right-of-use assets of $4.3 million, an impairment charge associated with certain of our existing office locations of $1.7 million, and bad debt expense of $0.5 million.
This was primarily due to a loss from continuing operations of $38.4 million, adjusted for non-cash items, including stock-based compensation expense of $20.4 million, depreciation and amortization expense of $16.3 million, loss from equity method investment of $5.4 million of which $4.1 million was related to an impairment charge, amortization of lease right-of-use assets of $4.3 million, an impairment charge associated with certain of our existing office locations of $1.7 million, and bad debt expense of $0.5 million.
Net cash used in operating activities also reflected a decrease of $5.5 million from changes in operating assets and liabilities, which primarily reflected a decrease in operating lease liabilities of $5.2 million, a decrease in accounts payable of $2.8 million, a decrease in accrued expenses and other current liabilities of $1.4 million, which was primarily due to a decrease in marketing fees payable to our affinity group partners and advertisers, an increase in prepaid expenses and other assets of $0.2 million, and offset by a decrease in accounts receivable of $2.2 million, which was primarily due to a reduction in revenue and an increase in accrued employee expenses of $1.9 million.
Net cash used in operating activities also reflected a decrease of $5.5 million from changes in operating assets and liabilities, which primarily reflected a decrease in operating lease liabilities of $5.2 million, a decrease in accounts payable of $2.8 million, a decrease in accrued expenses and other current liabilities of $1.4 million, which was primarily due to a decrease in marketing fees payable to our affinity group partners and advertisers, an increase in prepaid expenses and other assets of $0.2 million, and offset by a decrease in accounts receivable of $2.2 million, which was primarily due to a reduction in revenue and an increase in accrued employee expenses of $1.9 million Cash provided by operating activities in 2021 was $14.4 million.
Cost of revenue excludes depreciation and amortization of software costs and other hosting and data infrastructure equipment used to operate our platforms, which are included in the depreciation and amortization line item on our statements of comprehensive income (loss). Sales and Marketing .
Cost of revenue excludes depreciation and amortization of software costs and other hosting and data infrastructure equipment used to operate our platforms, which are included in the depreciation and amortization line item on our consolidated statements of comprehensive loss. Sales and Marketing .
The inventory shortage along with pressure on consumer demand may impact the decision of our current network of Certified Dealers and OEMs to cancel or pause our services and product offerings and could discourage new dealers and OEMs from joining our network.
Inventory shortages along with pressure on consumer demand may impact the decision of our current network of Certified Dealers and OEMs to cancel or pause our services and product offerings and could discourage new dealers and OEMs from joining our network.
Financing Activities of Continuing Operations Cash used in financing activities of $32.5 million during 2022 primarily represents payments of $29.8 million for the repurchase of our common stock and taxes paid of $2.9 million for the net share settlement of certain equity awards. These decreases were offset by proceeds received of $0.2 million from the exercise of employee stock options.
These decreases were offset by proceeds received of $0.7 million from the exercise of employee stock options. Cash used in financing activities of $32.5 million during 2022 primarily represents payments of $29.8 million for the repurchase of our common stock and taxes paid of $2.9 million for the net share settlement of certain equity awards.
We generate cash inflows from operations primarily from selling services to dealers participating in our network of TrueCar Certified Dealers, and cash outflows to enable our business operations, develop new services and core technologies that further enhance our online automotive marketplace, and fund share repurchases based on our evaluation of market conditions and other factors.
We generate cash inflows from operations primarily from selling services to dealers participating in our network of TrueCar Certified Dealers, and cash outflows to enable our business operations, develop new services and core technologies that further enhance our online automotive marketplace, and fund repurchases of our common stock based on our evaluation of market conditions and other factors.
Our provision for income taxes for the year ended December 31, 2021 primarily reflects tax expense associated with state income taxes and the amortization of tax-deductible goodwill that is not an available source of income to realize deferred tax assets.
For the year ended December 31, 2021, our provision for income taxes of $0.2 million primarily reflects tax expense associated with state income taxes and the amortization of tax-deductible goodwill that is not an available source of income to realize deferred tax assets.
For guaranteed-sales and guaranteed-introductions subscription arrangements, fees are charged based on the lesser of (i) the actual number of sales generated or introductions delivered through our platform during the subscription period multiplied by the contracted price per sale/introduction or (ii) the guaranteed number of sales or introductions multiplied by the contracted price per sale/introduction. 58 Table of Contents We offer additional add-on products to eligible dealers as part of the Auto Buying Program to increase traffic and retarget in-market consumers.
For guaranteed-sales and guaranteed-introductions subscription arrangements, fees are charged based on the lesser of (i) the actual number of sales generated or introductions delivered through our platform during the subscription period multiplied by the contracted price per sale/introduction or (ii) the guaranteed number of sales or introductions multiplied by the contracted price per sale/introduction. 62 Table of Content s We offer additional add-on products to eligible dealers as part of the Auto Buying Program to increase traffic and retarget in-market consumers.
Cost of revenue includes expenses related to the fulfillment of our services, consisting primarily of data costs and licensing fees paid to third-party service providers and expenses related to operating our website and mobile applications, including data center costs; hosting fees; data processing costs required to deliver introductions to our network of TrueCar Certified Dealers; employee costs related to certain dealer operations; and facilities costs.
Cost of revenue includes expenses related to the fulfillment of our services, consisting primarily of data costs and licensing fees paid to third-party service providers and expenses related to operating our website and mobile applications, including those associated with hosting fees; data processing costs required to deliver introductions to our network of TrueCar Certified Dealers; employee costs related to certain dealer operations; and facilities costs.
We define Adjusted EBITDA as net income (loss) adjusted to exclude interest income, depreciation and amortization, stock-based compensation, (gain) loss from equity method investment including impairment charges, certain litigation costs, certain restructuring costs, certain transaction costs, changes in the fair value of contingent consideration liability, goodwill impairment, other income, lease exit costs, impairment of right-of-use assets, and income taxes.
We define Adjusted EBITDA as net loss adjusted to exclude interest income, depreciation and amortization, stock-based compensation, gain or loss from equity method investment, changes in the fair value of contingent consideration liability, lease exit gain or loss, impairment of right-of-use (“ROU”) assets, transaction costs, restructuring charges, goodwill impairment, other income, and income taxes.
The Program may be suspended or discontinued at any time and does not obligate us to purchase any minimum number of shares. For the year ended December 31, 2022, 2021, and 2020 the Company repurchased and retired a total of 9.8 million, 6.1 million, and 9.3 million shares under the program for $29.7 million, $32.3 million, and $42.2 million respectively.
The Program may be suspended or discontinued at any time and does not obligate us to purchase any minimum number of shares. For the year ended December 31, 2023, 2022, and 2021 the Company repurchased and retired a total of zero, 9.8 million, and 6.1 million shares under the program for zero, $29.7 million, and $32.3 million respectively.
Our benefit from income taxes for 2022 of $2.6 million primarily reflects the release of valuation allowance resulting from net deferred tax liabilities recorded in Digital Motors acquisition accounting providing a source of income in assessing realization of consolidated net deferred tax assets.
For the year ended December 31, 2022, our benefit from income taxes of $2.6 million primarily reflects the release of valuation allowance resulting from net deferred tax liabilities recorded in Digital Motors acquisition accounting providing a source of income in assessing realization of consolidated net deferred tax assets.
As of December 31, 2022, the Company had a remaining authorization of $45.8 million for future share repurchases.
As of December 31, 2023, the Company had a remaining authorization of $45.8 million for future share repurchases.
Depreciation and amortization expenses increased $0.2 million, or 1.5%, for 2022 as compared to 2021. We expect our depreciation and amortization expenses to continue to be affected by the amount of capitalized internally developed software costs and the timing of placing projects in service. Year ended December 31, 2021 compared to year ended December 31, 2020.
Depreciation and amortization expenses increased $1.2 million, or 7.1%, for 2023 as compared to 2022. We expect our depreciation and amortization expenses to continue to be affected by the amount of capitalized internally developed software costs and the timing of placing projects in service. Year ended December 31, 2022 compared to year ended December 31, 2021.
General and administrative expenses decreased $4.7 million, or 9.6%, for 2022 as compared to 2021. The decrease primarily reflects a $1.4 million decrease in professional services fees and a $2.8 million decrease in facilities costs.
Year ended December 31, 2022 compared to year ended December 31, 2021. General and administrative expenses decreased $4.7 million, or 9.6%, for 2022 as compared to 2021. The decrease primarily reflects a $1.4 million decrease in professional services fees and a $2.8 million decrease in facilities costs.
Cash used in investing activities of $10.7 million during 2021 was for purchases of property and equipment, consisting primarily of $9.8 million of investments in software. Cash used in investing activities of $10.3 million during 2020 was for purchases of property and equipment, consisting primarily of $9.1 million of investments in software.
Cash used in investing activities of $10.7 million during 2021 was for purchases of property and equipment, consisting primarily of $9.8 million of investments in software.
We consider these charges to be unrelated to our underlying results of operations and believe that their exclusion is appropriate to facilitate period-to-period operating performance comparisons. 57 Table of Contents (7) The excluded amount represents impairment charges on our ROU assets associated with certain of our existing office locations.
(3) The excluded amount represents impairment charges on our ROU assets associated with certain of our existing office locations. We consider these charges to be unrelated to our underlying results of operations and believe that their exclusion is appropriate to facilitate period-to-period operating performance comparisons.
Dealer revenue is comprised of Auto Buying Program revenue as well as revenue from TrueCar Trade and DealerScience. Auto Buying Program revenue consists of fees paid by dealers participating in our network of TrueCar Certified Dealers.
Dealer revenue is comprised of Auto Buying Program revenue as well as revenue from TrueCar Trade and, prior to its dissolution, DealerScience. Auto Buying Program revenue consists of fees paid by dealers participating in our network of TrueCar Certified Dealers.
Other Income For the year ended December 31, 2022, other income consists of the gain from sale of a domain name. For the years ended December 31, 2021 and December 31, 2020, other income consists primarily of fees earned from the transition services agreement we entered into with J.D. Power in connection with our ALG divestiture.
Other Income For the years ended December 31, 2022 and December 31, 2021, other income consisted of a gain from the sale of a domain name and of fees earned from the transition services agreement we entered into with J.D. Power in connection with our ALG divestiture, respectively.
(Gain) loss from Equity Method Investment Years Ended December 31, % Change 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 (dollars in thousands) (Gain) loss from equity method investment $ (1,845) $ 5,404 $ 1,989 (134.1) % 171.7 % For the year ended December 31, 2022 we recognized a gain of $1.8 million from changes in fair value of a derivative asset recognized from the sale of our equity method investment in Accu-Trade.
(Gain) loss from Equity Method Investment Years Ended December 31, % Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (dollars in thousands) (Gain) loss from equity method investment $ — $ (1,845) $ 5,404 (100.0) % (134.1) % For the year ended December 31, 2022 we recognized a gain of $1.8 million from changes in fair value of a derivative asset recognized from the sale of our equity method investment in Accu-Trade.
General and administrative expenses consist primarily of employee-related expenses, including salaries, bonuses, benefits, severance, and stock-based compensation expenses for executive, finance, accounting, legal, and human resources functions. General and administrative expenses also include legal, accounting, and other third-party professional service fees, bad debt, lease exit costs, and facilities costs. Depreciation and Amortization .
General and administrative expenses consist primarily of employee-related expenses, including salaries, bonuses, benefits, severance, and stock-based compensation expenses for executive, finance, accounting, legal, and human resources functions. General and administrative expenses also include legal, accounting, and other third-party professional service fees, bad debt, gain or loss from lease exit, impairment of right-of-use assets and facilities costs. Depreciation and Amortization .
Beginning in 2021 and continuing through 2022, we phased out selling substantially all of DealerScience’s products and services. OEM Incentives Revenue . OEM incentives revenue consists of fees paid by automobile manufacturers, or OEMs, to promote the sale of their vehicles through the offering of additional consumer incentives to members of our affinity group marketing partners.
Beginning in 2021 and continuing until the first quarter of 2023, we phased out and ceased selling DealerScience’s products and services. OEM Incentives Revenue . OEM incentives revenue consists of fees paid by automobile manufacturers, or OEMs, to promote the sale of their vehicles through the offering of additional consumer incentives to members of our affinity group marketing partners.
Costs and Operating Expenses Cost of Revenue (exclusive of depreciation and amortization) Years Ended December 31, % Change 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 (dollars in thousands) Cost of revenue (exclusive of depreciation and amortization) $ 16,213 $ 22,239 $ 21,549 (27.1) % 3.2 % Cost of revenue (exclusive of depreciation and amortization) as a percentage of revenues 10.0 % 9.6 % 7.7 % Year ended December 31, 2022 compared to year ended December 31, 2021 .
Costs and Operating Expenses Cost of Revenue (exclusive of depreciation and amortization) Years Ended December 31, % Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (dollars in thousands) Cost of revenue (exclusive of depreciation and amortization) $ 15,856 $ 16,213 $ 22,239 (2.2) % (27.1) % Cost of revenue (exclusive of depreciation and amortization) as a percentage of revenues 10.0 % 10.0 % 9.6 % Year ended December 31, 2023 compared to year ended December 31, 2022 .
As of December 31, 2022, the Company had fixed lease payment obligations of $26.6 million, with $5.6 million payable within 12 months that have not been reduced by minimum non-cancellable sublease rentals aggregating $11.9 million. See Note 4 “Leases” to our consolidated financial statements for more information.
As of December 31, 2023, the Company had fixed lease payment obligations of $16.6 million, with $4.0 million payable within 12 months that have not been reduced by minimum non-cancellable sublease rentals aggregating $4.7 million. See Note 4 “Leases” to our consolidated financial statements for more information.
Contractual Obligations and Known Future Cash Requirements The Company’s material cash requirements include the following contractual and other obligations. 68 Table of Contents Leases The Company has various leases for office space.
Contractual Obligations and Known Future Cash Requirements The Company’s material cash requirements include the following contractual and other obligations. 72 Table of Content s Leases The Company has various leases for office space.
Depreciation consists primarily of depreciation expense recorded on property and equipment. Amortization expense consists primarily of amortization recorded on intangible assets, capitalized software costs, and leasehold improvements. 59 Table of Contents Interest Income . Interest income consists of interest earned on our cash and cash equivalents. Other Income .
Depreciation consists primarily of depreciation expense recorded on property and equipment. Amortization expense consists primarily of amortization recorded on intangible assets, capitalized software costs, and leasehold improvements. Interest Income . Interest income consists of interest earned on our cash, cash equivalents and restricted cash. 63 Table of Content s Other Income .
Purchase obligations The Company has long-term agreements to purchase data information, software related licenses and support services, and other obligations that are enforceable and legally binding. As of December 31, 2022, the Company had purchase obligations of $22.3 million, with $10.0 million payable within 12 months. Purchase obligations exclude agreements that are cancellable without penalty.
Purchase obligations The Company has long-term agreements to purchase data information, software related licenses and support services, and other obligations that are enforceable and legally binding. As of December 31, 2023, the Company had purchase obligations of $13.6 million, with $7.7 million payable within 12 months. Purchase obligations exclude agreements that are cancellable without penalty.
OEMs have been forced to cut production as supply-chain disruption due to the pandemic resulted in a global automotive semiconductor chip shortage. The ensuing automobile inventory shortage has resulted in significant unmet demand, with automotive dealers seeing some incoming new car shipments presold.
OEMs have been forced to cut production because of supply-chain disruption and the global automotive semiconductor chip shortage. The ensuing automobile inventory shortage resulted in significant unmet demand, with automotive dealers seeing some incoming new car shipments presold.
See Note 14 of our consolidated financial statements included herein for more information about our provision for income taxes. 60 Table of Contents Results of Operations The following table sets forth our selected consolidated statements of operations data for each of the periods indicated.
See Note 13 of our consolidated financial statements included herein for more information about our provision for income taxes. 64 Table of Content s Results of Operations The following table sets forth our selected consolidated statements of operations data for each of the periods indicated.
Year Ended December 31, 2022 2021 2020 Revenues 100 % 100 % 100 % Costs and operating expenses: Cost of revenue (exclusive of depreciation and amortization presented separately below) 10 10 8 Sales and marketing 65 59 55 Technology and development 29 18 16 General and administrative 27 21 18 Depreciation and amortization 10 7 7 Goodwill impairment 37 — 3 Loss from operations (78) (14) (7) Interest income 2 * * Other income * * * Gain (loss) from equity method investment 1 (2) (1) Loss from continuing operations before income taxes (75) (16) (7) Provision for (benefit from) income taxes (2) * * Loss from continuing operations (73) (17) (7) Income from discontinued operations, net of taxes — * 35 Net (loss) income (73) % (17) % 27 % * Less than 0.5% of revenues Comparison of Years Ended December 31, 2022, 2021 and 2020 Revenues Years Ended December 31, % Change 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 (dollars in thousands) Revenues Dealer revenue $ 156,485 $ 222,000 $ 252,928 (29.5) % (12.2) % OEM incentives revenue 4,390 8,676 16,833 (49.4) % (48.5) % Other revenue 649 1,022 8,917 (36.5) % (88.5) % Total revenues $ 161,524 $ 231,698 $ 278,678 (30.3) % (16.9) % Year ended December 31, 2022 c ompared to year ended December 31, 2021 .
Year Ended December 31, 2023 2022 2021 Revenues 100 % 100 % 100 % Costs and operating expenses: Cost of revenue (exclusive of depreciation and amortization presented separately below) 10 10 10 Sales and marketing 62 65 59 Technology and development 27 29 18 General and administrative 25 27 21 Depreciation and amortization 11 10 7 Goodwill impairment — 37 — Loss from operations (36) (78) (14) Interest income 4 2 * Other income — * * Gain (loss) from equity method investment — 1 (2) Loss from continuing operations before income taxes (31) (75) (16) Provision for (benefit from) income taxes * (2) * Loss from continuing operations (31) (73) (17) Income from discontinued operations, net of taxes — — * Net loss (31) % (73) % (17) % * Less than 0.5% of revenues Comparison of Years Ended December 31, 2023, 2022 and 2021 Revenues Years Ended December 31, % Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (dollars in thousands) Revenues Dealer revenue $ 143,239 $ 156,485 $ 222,000 (8.5) % (29.5) % OEM incentives revenue 14,958 4,390 8,676 240.7 % (49.4) % Other revenue 509 649 1,022 (21.6) % (36.5) % Total revenues $ 158,706 $ 161,524 $ 231,698 (1.7) % (30.3) % Year ended December 31, 2023 c ompared to year ended December 31, 2022 .
These decreases were offset by proceeds received of $1.4 million from the exercise of employee stock options.
These decreases were offset by proceeds received of $0.2 million from the exercise of employee stock options.
We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions on an ongoing basis and that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions on an ongoing basis and that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. Changes in estimates are recognized in the period in which they become known.
In addition, in evaluating Adjusted EBITDA you should be aware that in the future we will incur expenses such as those that are the subject of adjustments in deriving Adjusted EBITDA, and you should not infer from our presentation of Adjusted EBITDA that our future results will not be affected by these expenses or any unusual or non-recurring items. 56 Table of Contents The following table presents a reconciliation of net (loss) income to Adjusted EBITDA for each of the periods presented: Year Ended December 31, 2022 2021 2020 (in thousands) Reconciliation of Net (Loss) Income to Adjusted EBITDA: Net (loss) income $ (118,685) $ (38,329) $ 76,544 Income from discontinued operations, net of taxes — (40) (96,383) Loss from continuing operations (118,685) (38,369) (19,839) Non-GAAP adjustments: Interest income (2,565) (52) (462) Depreciation and amortization 16,520 16,279 20,547 Stock-based compensation 17,681 20,395 23,077 (Gain) loss from equity method investment (1) (1,845) 5,404 1,989 Certain litigation costs (2) — — (1,939) Restructuring charges (3) — — 8,346 Transaction costs (4) 1,200 — — Change in fair value of contingent consideration liability 359 41 182 Goodwill impairment (5) 59,775 — 8,264 Other income (40) (667) (198) Lease exit costs (6) 214 — — Impairment of right-of-use (“ROU”) assets (7) — 1,652 2,136 Provision for (benefit from) income taxes (2,560) 206 (6) Adjusted EBITDA $ (29,946) $ 4,889 $ 42,097 (1) The excluded amounts include a $1.8 million gain from changes in fair value of a derivative asset recognized from the sale of our equity method investment in Accu-Trade during the first quarter of 2022, and a $4.1 million impairment charge on our equity method investment in Accu-Trade in the fourth quarter of 2021.
In addition, in evaluating Adjusted EBITDA you should be aware that in the future we will incur expenses such as those that are the subject of adjustments in deriving Adjusted EBITDA, and you should not infer from our presentation of Adjusted EBITDA that our future results will not be affected by these expenses or any unusual or non-recurring items. 60 Table of Content s The following table presents a reconciliation of net loss to Adjusted EBITDA for each of the periods presented: Year Ended December 31, 2023 2022 2021 (in thousands) Reconciliation of Net Loss to Adjusted EBITDA: Net loss $ (49,766) $ (118,685) $ (38,329) Income from discontinued operations, net of taxes — — (40) Loss from continuing operations (49,766) (118,685) (38,369) Non-GAAP adjustments: Interest income (6,718) (2,565) (52) Depreciation and amortization 17,699 16,520 16,279 Stock-based compensation 14,299 17,681 20,395 (Gain) loss from equity method investment (1) — (1,845) 5,404 Change in fair value of contingent consideration liability 931 359 41 (Gain) loss from lease exit (2) (1,477) 214 — Impairment of right-of-use assets (3) 2,376 — 1,652 Transaction costs (4) — 1,200 — Restructuring charges (5) 8,947 — — Goodwill impairment (6) — 59,775 — Other income — (40) (667) Provision for (benefit from) income taxes 17 (2,560) 206 Adjusted EBITDA $ (13,692) $ (29,946) $ 4,889 (1) The excluded amounts include a $1.8 million gain from changes in fair value of a derivative asset recognized from the sale of our equity method investment in Accu-Trade during the first quarter of 2022, and a $4.1 million impairment charge on our equity method investment in Accu-Trade in the fourth quarter of 2021.
Sales and Marketing Expenses Years Ended December 31, % Change 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 (dollars in thousands) Sales and marketing expense $ 104,534 $ 136,479 $ 151,915 (23.4) % (10.2) % Sales and marketing expense as a percentage of revenues 64.7 % 58.9 % 54.5 % Year ended December 31, 2022 compared to year ended December 31, 2021 .
Sales and Marketing Expenses Years Ended December 31, % Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (dollars in thousands) Sales and marketing expenses $ 99,050 $ 104,534 $ 136,479 (5.2) % (23.4) % Sales and marketing expenses as a percentage of revenues 62.4 % 64.7 % 58.9 % Year ended December 31, 2023 compared to year ended December 31, 2022 .
Cash Flows The following table summarizes net cash derived from operating, investing, and financing activities from continuing operations, as well as net cash from discontinued operations: Year Ended December 31, 2022 2021 2020 (in thousands) Consolidated Cash Flow Data: Net cash (used in) provided by operating activities $ (29,137) $ 14,374 $ 29,898 Net cash used in investing activities (8,028) (10,689) (10,277) Net cash used in financing activities (32,534) (38,086) (49,238) Net cash used in continuing operations (69,699) (34,401) (29,617) Net cash provided by discontinued operations — 6,304 121,397 Net (decrease) increase in cash and cash equivalents $ (69,699) $ (28,097) $ 91,780 Operating Activities of Continuing Operations Our net loss and cash flows provided by or used in operating activities are significantly influenced by our investments in headcount and infrastructure to support our growth, marketing and advertising expenses.
Cash Flows The following table summarizes net cash derived from operating, investing, and financing activities from continuing operations, as well as net cash from discontinued operations: Year Ended December 31, 2023 2022 2021 (in thousands) Consolidated Cash Flow Data: Net cash (used in) provided by operating activities $ (22,414) $ (29,137) $ 14,374 Net cash used in investing activities (11,809) (8,028) (10,689) Net cash used in financing activities (4,331) (32,534) (38,086) Net cash used in continuing operations $ (38,554) $ (69,699) $ (34,401) Net cash provided by discontinued operations $ — $ — $ 6,304 Net decrease in cash, cash equivalents and restricted cash $ (38,554) $ (69,699) $ (28,097) Operating Activities of Continuing Operations Our net loss and cash flows used in operating activities are significantly influenced by our investments in headcount and infrastructure to support our growth and marketing and advertising expenses.
Technology and development expenses increased $4.7 million, or 11.2%, for 2022 as compared to 2021. The increase primarily reflects a $5.3 million increase in employee-related expenses associated with increased headcount as we continue to invest in TrueCar+, expand our product portfolio, and enhance our existing core offering. The increase was partially offset by a $0.9 million decrease in facilities costs.
Year ended December 31, 2022 compared to year ended December 31, 2021. Technology and development expenses increased $4.7 million, or 11.2%, for 2022 as compared to 2021. The increase primarily reflects a $5.3 million increase in employee-related expenses associated with increased headcount as we continue to invest in TrueCar+, expand our product portfolio, and enhance our existing core offering.
However, we do not adjust our unit metric for these credits as we believe that in most cases a vehicle has in fact been purchased through our platform given the high degree of accuracy of our sales matching process.
On occasion, we issue credits to our TrueCar Certified Dealers with respect to units sold. However, we do not adjust our unit metric for these credits as we believe that in most cases a vehicle has in fact been purchased through our platform given the high degree of accuracy of our sales matching process.
Interest income increased $2.5 million, or 4,832.7%, for 2022 as compared to 2021 primarily due to higher interest rates. Year ended December 31, 2021 compared to year ended December 31, 2020. Interest income decreased $0.4 million, or 88.7%, for 2021 as compared to 2020 primarily due to lower interest rates.
Interest income increased $4.2 million, or 161.9%, for 2023 as compared to 2022 primarily due to higher interest rates. Year ended December 31, 2022 compared to year ended December 31, 2021. Interest income increased $2.5 million, or 4,832.7%, for 2022 as compared to 2021 primarily due to higher interest rates.
Income from Discontinued Operations Years Ended December 31, % Change 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 (dollars in thousands) Income from discontinued operations, net of taxes $ — $ 40 $ 96,383 (100.0) % (100.0) % For the year ended December 31, 2021, income from discontinued operations, net of taxes, was less than $0.1 million and relates to the resolution of net working capital adjustments of our ALG divestiture and professional fees associated with this resolution.
For the year ended December 31, 2021, income from discontinued operations, net of taxes, was less than $0.1 million and relates to the resolution of net working capital adjustments of our ALG divestiture and professional fees associated with this resolution.
General and Administrative Expenses Years Ended December 31, % Change 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 (dollars in thousands) General and administrative expense $ 44,087 $ 48,747 $ 49,989 (9.6) % (2.5) % General and administrative expense as a percentage of revenues 27.3 % 21.0 % 17.9 % Year ended December 31, 2022 compared to year ended December 31, 2021 .
General and Administrative Expenses Years Ended December 31, % Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (dollars in thousands) General and administrative expenses $ 40,321 $ 44,087 $ 48,747 (8.5) % (9.6) % General and administrative expenses as a percentage of revenues 25.4 % 27.3 % 21.0 % Year ended December 31, 2023 compared to year ended December 31, 2022 .
However, our future capital requirements will depend on many factors, including our revenue levels, the timing and extent of our spending to support our technology and development efforts, costs related to potential acquisitions to further expand our business and product offerings, collection of accounts receivable, macroeconomic activity, and the length and severity of business disruptions following the COVID-19 pandemic.
However, our future capital requirements will depend on many factors, including our revenue levels, the timing and extent of our spending to support our technology and development efforts, costs related to potential acquisitions to further expand our business and product offerings, collection of accounts receivable, macroeconomic activity, and the length and severity of business disruptions resulting from inventory constraints caused by the global automobile semiconductor chip shortage.
Year Ended December 31, 2022 2021 2020 Average Monthly Unique Visitors 7,371,898 8,636,501 8,354,082 Units (1) 340,940 607,667 766,413 Monetization $ 472 $ 380 $ 352 Franchise Dealer Count 7,924 8,482 10,589 Independent Dealer Count 4,148 4,013 3,794 (1) We issued full credits of the amount originally invoiced with respect to 7,736, 14,912, and 17,655 units during the years ended December 31, 2022, 2021, and 2020, respectively.
Year Ended December 31, 2023 2022 2021 Average Monthly Unique Visitors 8,014,703 7,371,898 8,636,501 Units (1) 318,578 340,940 607,667 Monetization $ 497 $ 472 $ 380 Franchise Dealer Count 8,232 7,924 8,482 Independent Dealer Count 3,268 4,148 4,013 (1) We issued full credits of the amount originally invoiced with respect to 4,476, 7,736, and 14,912 units during the years ended December 31, 2023, 2022, and 2021, respectively.
Sales and marketing expenses decreased $31.9 million, or 23.4%, for 2022 as compared to 2021. The decrease primarily reflected a $22.0 million decrease in our branded media spend, an $8.6 million decrease in revenue share paid to our affinity marketing partners, and a $2.1 million decrease in stock-based compensation expenses.
The decrease primarily reflected a $22.0 million decrease in our branded media spend, an $8.6 million decrease in revenue share paid to our affinity marketing partners, and a $2.1 million decrease in stock-based compensation expenses.
We provided a full valuation allowance against our net deferred tax assets at December 31, 2022 and December 31, 2021, as it is more likely than not that some or all of our deferred tax assets will not be realized.
We provided a full valuation allowance against our net deferred tax assets at December 31, 2023 and 2022, as it is more likely than not that some or all of our deferred tax assets will not be realized. As a result of the valuation allowance, our income tax expense (benefit) is significantly less than the federal statutory rate of 21%.
We had federal net operating loss carryforwards of approximately $309.8 million and state net operating loss carryforwards of approximately $242.0 million at December 31, 2022. At December 31, 2022, we also had federal and state research and development credit carryforwards of approximately $1.1 million and $11.2 million, respectively.
We had federal net operating loss carryforwards of approximately $338.5 million and state net operating loss carryforwards of approximately $260.9 million at December 31, 2023. At December 31, 2023, we also had federal and state research and development credit carryforwards of approximately $1.1 million and $11.2 million respectively.
Year Ended December 31, 2022 2021 2020 (in thousands) Consolidated Statements of Operations Data: Revenues $ 161,524 $ 231,698 $ 278,678 Costs and operating expenses: Cost of revenue 16,213 22,239 21,549 Sales and marketing 104,534 136,479 151,915 Technology and development 46,090 41,432 44,930 General and administrative 44,087 48,747 49,989 Depreciation and amortization 16,520 16,279 20,547 Goodwill impairment 59,775 — 8,264 Total costs and operating expenses 287,219 265,176 297,194 Loss from operations (125,695) (33,478) (18,516) Interest income 2,565 52 462 Other income 40 667 198 Gain (loss) from equity method investment 1,845 (5,404) (1,989) Loss from continuing operations before income taxes (121,245) (38,163) (19,845) Provision for (benefit from) income taxes (2,560) 206 (6) Loss from continuing operations (118,685) (38,369) (19,839) Income from discontinued operations, net of taxes — 40 96,383 Net (loss) income $ (118,685) $ (38,329) $ 76,544 Other Non-GAAP Financial Information Adjusted EBITDA $ (29,946) $ 4,889 $ 42,097 61 Table of Contents The following table sets forth our selected consolidated statements of operations data as a percentage of revenues for each of the periods indicated.
Year Ended December 31, 2023 2022 2021 (in thousands) Consolidated Statements of Operations Data: Revenues $ 158,706 $ 161,524 $ 231,698 Costs and operating expenses: Cost of revenue (exclusive of depreciation and amortization presented separately below) 15,856 16,213 22,239 Sales and marketing 99,050 104,534 136,479 Technology and development 42,247 46,090 41,432 General and administrative 40,321 44,087 48,747 Depreciation and amortization 17,699 16,520 16,279 Goodwill impairment — 59,775 — Total costs and operating expenses 215,173 287,219 265,176 Loss from operations (56,467) (125,695) (33,478) Interest income 6,718 2,565 52 Other income — 40 667 Gain (loss) from equity method investment — 1,845 (5,404) Loss from continuing operations before income taxes (49,749) (121,245) (38,163) Provision for (benefit from) income taxes 17 (2,560) 206 Loss from continuing operations (49,766) (118,685) (38,369) Income from discontinued operations, net of taxes — — 40 Net loss $ (49,766) $ (118,685) $ (38,329) Other Non-GAAP Financial Information Adjusted EBITDA $ (13,692) $ (29,946) $ 4,889 65 Table of Content s The following table sets forth our selected consolidated statements of operations data as a percentage of revenues for each of the periods indicated.
Capitalized software costs increased $0.4 million for 2022 as compared to 2021 primarily due to an increase in internally-developed software of $0.2 million in addition to an increase in third-party software costs of $0.2 million. We expect technology and development expenses to continue to be affected by variations in headcount in technology and product development .
Capitalized software costs decreased $0.4 million for 2023 as compared to 2022 primarily due to a decrease in third-party software costs of $0.5 million as we reduced our use of consultants, offset by an increase in internally developed software of $0.1 million We expect technology and development expenses to continue to be affected by variations in headcount in technology and product development.
Some of these limitations are: • Adjusted EBITDA does not reflect the receipt of interest or the payment of income taxes; • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditures or any other contractual commitments; • Adjusted EBITDA does not reflect the costs to advance our claims in certain litigation or the costs to defend ourselves in various complaints filed against us, which we expect to continue to be significant; • Adjusted EBITDA does not reflect the severance charges associated with restructuring plans; • Adjusted EBITDA does not reflect the impairment charges on our right of use (“ROU”) assets associated with subleasing; • Adjusted EBITDA does not reflect the legal, accounting, consulting and other third-party fees and costs incurred by us in connection with the evaluation and negotiation of potential merger and acquisition transactions; • Adjusted EBITDA does not consider the potentially dilutive impact of shares issued or to be issued in connection with stock-based compensation; and • other companies, including companies in our own industry, may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Some of these limitations are: • Adjusted EBITDA does not reflect the receipt of interest or the payment of income taxes; • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditures or any other contractual commitments; • Adjusted EBITDA does not reflect lease exit gain or loss or impairment charges on our ROU assets associated with subleasing; • Adjusted EBITDA does not reflect goodwill impairment charges; • Adjusted EBITDA does not reflect changes in the fair value of our contingent consideration liability; • Adjusted EBITDA does not reflect the legal, accounting, consulting and other third-party fees and costs incurred by us in connection with the evaluation and negotiation of potential merger and acquisition transactions; • Adjusted EBITDA does not reflect the charges associated with the Restructuring Plan initiated and completed in the second quarter of 2023 to improve efficiency and reduce expenses or a realignment of the Company’s leadership structure initiated in the third quarter of 2023; • Adjusted EBITDA does not consider the potentially dilutive impact of shares issued or to be issued in connection with stock-based compensation; and • other companies, including companies in our own industry, may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Capitalized software costs increased $1.1 million for 2021 as compared to 2020 primarily due to an increase in third-party software costs of $1.7 million offset by a decrease in internally-developed software of $0.6 million.
The increase was partially offset by a $0.9 million decrease in facilities costs. Capitalized software costs increased $0.4 million for 2022 as compared to 2021 primarily due to an increase in internally-developed software of $0.2 million in addition to an increase in third-party software costs of $0.2 million.
Units We define units as the number of automobiles purchased from TrueCar Certified Dealers that are matched to users of TrueCar.com, our TrueCar-branded mobile applications or the car-buying sites and mobile applications we maintain for our affinity group marketing partners. A unit is counted after we have matched the sale to a TrueCar user with a TrueCar Certified Dealer.
The increase is a result of continuing to optimize the efficiency of our acquisition spend. 58 Table of Content s Units We define units as the number of automobiles purchased from TrueCar Certified Dealers that are matched to users of TrueCar.com, our TrueCar-branded mobile applications or the car-buying sites and mobile applications we maintain for our affinity group marketing partners.
For the year ended December 31, 2021, we recognized an impairment charge in the amount of $4.1 million on our equity method investment in Accu-Trade, which represents the amount that our carrying value was in excess of its estimated fair value at December 31, 2021. 65 Table of Contents Provision for (Benefit from) Income Taxes Years Ended December 31, % Change 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 (dollars in thousands) Provision for (benefit from) income taxes $ (2,560) $ 206 $ (6) 1,342.7 % 3,533.3 % Years ended December 31, 2022, December 31, 2021 and December 31, 2020 .
No gain or loss was recognized at the time of the sale as the fair value of the sales proceeds received, including the initial fair value of the derivative asset, was equal to the then carrying value of the investment For the year ended December 31, 2021, we recognized an impairment charge in the amount of $4.1 million on our equity method investment in Accu-Trade, which represents the amount that our carrying value was in excess of its estimated fair value at December 31, 2021. 69 Table of Content s Provision for (Benefit from) Income Taxes Years Ended December 31, % Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (dollars in thousands) Provision for (benefit from) income taxes $ 17 $ (2,560) $ 206 100.7 % 1,342.7 % Years ended December 31, 2023, December 31, 2022 and December 31, 2021 .
The decrease in facilities costs was largely comprised of a $1.7 million impairment charge on our right-of-use asset recognized in the second quarter of 2021 associated with subleasing an office space and a $0.8 million gain related to an early lease termination and settlement of an asset retirement obligation recognized in the second quarter of 2022.
The decrease in facilities costs was largely comprised of a $1.7 million impairment charge on our right-of-use asset recognized in the second quarter of 2021 associated with subleasing an office space and a $0.8 million gain related to an early lease termination and settlement of an asset retirement obligation recognized in the second quarter of 2022. 68 Table of Content s Depreciation and Amortization Expenses Years Ended December 31, % Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (dollars in thousands) Depreciation and amortization expenses $ 17,699 $ 16,520 $ 16,279 7.1 % 1.5 % Year ended December 31, 2023 compared to year ended December 31, 2022 .
At the same time, wider economic inflation has led to the Federal Reserve raising interest rates, which along with the expectation for future rate hikes are starting to have their intended impact on the U.S. economy.
At the same time, wider economic inflation has led to the Federal Reserve raising interest rates, which along with the expectation that interest rates will remain high for the foreseeable future, will continue to impact the U.S. economy.
Goodwill Impairme nt For the year ended December 31, 2022, we recognized a non-cash goodwill impairment charge of $59.8 million, which represents the amount that the carrying value of our single reporting unit was in excess of its estimated fair value at September 30, 2022. For further details, see Note 7 to our consolidated financial statements included herein.
Depreciation and amortization expenses increased $0.2 million, or 1.5%, for 2022 as compared to 2021. Goodwill Impairme nt For the year ended December 31, 2022, we recognized a non-cash goodwill impairment charge of $59.8 million, which represents the amount that the carrying value of our single reporting unit was in excess of its estimated fair value at September 30, 2022.
Share Repurchase Program In the third quarter of 2020, our board of directors authorized an open market stock repurchase program (the “Program”) of up to $75 million to allow for the repurchase of shares of our common stock through September 30, 2022.
Additional funds may not be available on terms favorable to us or at all. 70 Table of Content s Share Repurchase Program In the third quarter of 2020, our board of directors authorized an open market stock repurchase program (the “Program”) of up to $75 million to allow for the repurchase of shares of our common stock through September 30, 2022.
Net Cash Provided by Discontinued Operations Net cash provided by discontinued operations of $6.3 million in 2021 mainly consisted of the $7.5 million cash earnout received from J.D. Power based upon ALG’s achievement of certain revenue metrics in 2020 net of a cash payment of $1.0 million related to final net working capital adjustments associated with the divestiture.
Power based upon ALG’s achievement of certain revenue metrics in 2020 net of a cash payment of $1.0 million related to final net working capital adjustments associated with the divestiture.
We view units as a key indicator of the health of our business, the effectiveness of our product and the size and geographic coverage of our network of TrueCar Certified Dealers. On occasion, we issue credits to our TrueCar Certified Dealers with respect to units sold.
A unit is counted after we have matched the sale to a TrueCar user with a TrueCar Certified Dealer. We view units as a key indicator of the health of our business, the effectiveness of our product and the size and geographic coverage of our network of TrueCar Certified Dealers.
The unit decrease was primarily due to lower automobile inventory levels resulting from the global semiconductor chip shortage. 54 Table of Contents Monetization We define monetization as the average transaction revenue per unit, which we calculate by dividing all of our transaction revenue (dealer revenue and OEM incentives revenue) in a given period by the number of units in that period.
Monetization We define monetization as the average transaction revenue per unit, which we calculate by dividing all of our transaction revenue (dealer revenue and OEM incentives revenue) in a given period by the number of units in that period.
In most cases, we issue credits in order to maintain strong business relations with the dealer and not because we have made an erroneous sales match or billing error. The number of units decreased 43.9% to 340,940 for the year ended December 31, 2022 from 607,667 for the year ended December 31, 2021.
In most cases, we issue credits in order to maintain strong business relations with the dealer and not because we have made an erroneous sales match or billing error.
We consider these charges to be unrelated to our underlying results of operations and believe that their exclusion is appropriate to facilitate period-to-period operating performance comparisons. Presentation of Financial Statements Our consolidated financial statements include the accounts of our wholly owned subsidiaries in accordance with FASB ASC 810 — Consolidation .
We consider these charges to be unrelated to our underlying results of operations and believe that their exclusion is appropriate to facilitate period-to-period operating performance comparisons.
The excluded amounts also included a $0.25 million associated with acceleration of unvested options to purchase shares of Digital Motors stock held by Digital Motors employees at the time of the acquisition that are accounted for as post-combination compensation expense. These expenses are included in general and administrative expenses in our consolidated statements of comprehensive income (loss).
(4) The excluded amounts represent external legal, accounting, consulting and other third-party fees and costs we incurred in connection with the Digital Motors acquisition, and $0.25 million associated with acceleration of unvested options to purchase shares of Digital Motors stock held by Digital Motors employees at the time of the acquisition that are accounted for as post-combination compensation expense.
Domestically, consumers are concerned about inflation and while employment remains strong, a possible recession stemming from tighter monetary policy is also weighing on consumer sentiment. Higher interest rates could also reduce consumer demand by making vehicle financing more expensive and reducing the amount of 53 Table of Contents inventory purchased by dealers due to higher financing costs.
Domestically, consumers are concerned about inflation and while employment remains strong, a possible recession stemming from tighter monetary policy is also negatively weighing on consumer sentiment and spending. The resumption of student loan payments in the second half of 2023 and higher interest rates could also reduce consumer demand.
On November 30, 2020, we divested ALG to J.D. Power. See Note 5 to our consolidated financial statements included herein for further details. During the year ended December 31, 2022, we generated revenues of $161.5 million and recorded a net loss of $118.7 million.
On November 30, 2020, we divested ALG to J.D. Power. See Note 5 to our consolidated financial statements included herein for further details.
The network is comprised of dealers with a range of unit sales volume per dealer, with dealers representing certain brands consistently achieving higher than average unit sales volume.
This number is calculated by counting the number of brands of new cars sold at each individual location, or rooftop, regardless of the size of the dealership that owns the rooftop. The network is comprised of dealers with a range of unit sales volume per dealer, with dealers representing certain brands consistently achieving higher than average unit sales volume.
Interest Income Years Ended December 31, % Change 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 (dollars in thousands) Interest income $ 2,565 $ 52 $ 462 4,832.7 % (88.7) % Year ended December 31, 2022 compared to year ended December 31, 2021 .
For further details, see Note 7 to our consolidated financial statements included herein. Interest Income Years Ended December 31, % Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (dollars in thousands) Interest income $ 6,718 $ 2,565 $ 52 161.9 % 4,832.7 % Year ended December 31, 2023 compared to year ended December 31, 2022 .
This was primarily due to a loss from continuing operations of $19.8 million, which was adjusted for non-cash items, including stock-based compensation expense of $23.1 million, depreciation and amortization expense of $20.4 million, goodwill impairment of $8.3 million, amortization of lease right-of-use assets of $5.4 million, bad debt expense of $3.0 million, and asset impairment and write-off of $2.4 million primarily due to a ROU asset impairment of $2.1 million.
This was primarily due to a loss from continuing operations of $49.8 million, adjusted for non-cash items, including stock-based compensation expense of $14.3 million, depreciation and amortization expense of $17.7 million, amortization of lease right-of-use assets of $3.0 million, an increase in the fair value of contingent consideration liabilities of $0.9 million, impairments and write offs of assets of $2.4 million, and bad debt expense of $0.7 million, partially offset by a gain on lease exit of $1.6 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeHowever, if inflation leads to a significant decrease in consumer demand for vehicles, or if our costs were to become subject to significant inflationary pressures and we are not able to fully offset such higher costs through price increases, inflation could harm our business, operating results and financial condition. 69 Table of Contents Foreign Currency Exchange Risk Historically, as our operations and sales have been primarily in the United States, we have not faced any significant foreign currency risk.
Biggest changeHowever, if inflation leads to a significant decrease in consumer demand for vehicles, or if our costs were to become subject to significant inflationary pressures and we are not able to fully offset such higher costs through price increases, inflation could harm our business, operating results and financial condition.
Financial Statements and Supplementary Data The information required by this Item 8 appears in a separate section of this annual report on Form 10-K beginning on page F-1 and is incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Financial Statements and Supplementary Data The information required by this Item 8 appears in a separate section of this annual report on Form 10-K beginning on page F-1 and is incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 74 Table of Contents
A hypothetical 25 basis points decrease in interest rates earned on our cash and cash equivalents balance as of December 31, 2022 would result in a decrease in annual interest income of approximately $0.4 million.
A hypothetical 25 basis points decrease in interest rates earned on our cash and cash equivalents balance as of December 31, 2023 would result in a decrease in annual interest income of approximately $0.3 million.
Interest Rate Risk We had cash and cash equivalents of $175.5 million at December 31, 2022, which consist entirely of bank deposits and short-term money market funds. Such interest-earning instruments carry a degree of interest rate risk.
Interest Rate Risk We had cash, cash equivalents, and restricted cash of $137.0 million at December 31, 2023, which consist entirely of bank deposits and short-term money market funds. Such interest-earning instruments carry a degree of interest rate risk.
If we plan for international expansion, our risks associated with fluctuation in currency rates will become greater, and we will continue to reassess our approach to managing this risk. Item 8.
Foreign Currency Exchange Risk Historically, as our operations and sales have been primarily in the United States, we have not faced any significant foreign currency risk. If we plan for international expansion, our risks associated with fluctuation in currency rates will become greater, and we will continue to reassess our approach to managing this risk. Item 8.
We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. To the extent we borrow funds under our credit facility, we would be subject to fluctuations in interest rates.
We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. We believe that we do not have a material exposure to changes in fair value as a result of changes in interest rates.
Removed
See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.” As of December 31, 2022, we had no borrowings under the credit facility. We believe that we do not have a material exposure to changes in fair value as a result of changes in interest rates.

Other TRUE 10-K year-over-year comparisons