UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the quarterly period ended June 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-36449

TRUECAR, INC.

(Exact name of registrant as specified in its charter)

Delaware	04-3807511
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

120 Broadway, Suite 200

Santa Monica, California 90401

(800) 200-2000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	TRUE	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒     No  ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐ No ☒

As of August 3, 2021, 95,714,763 shares of the registrant’s common stock were outstanding.

TRUECAR, INC.

INDEX

		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	5
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37
	PART II -  OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
Item 6.	Exhibits	73
	Signatures	74

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties.  Forward-looking statements generally relate to future events or our future financial or operating performance.  In some cases, you can identify forward-looking statements because they contain words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “likely,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “target,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our future financial performance and our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses and ability to maintain or grow revenue, scale our business, generate cash flow, fulfill our mission and achieve and maintain future profitability; 

•our ability to forecast our financial and operational performance;

•our relationship with key industry participants, including car dealers and automobile manufacturers;

•anticipated trends, demand rates and challenges in our business and in the markets in which we operate;

•our ability to anticipate market needs and develop new and enhanced products and services to meet those needs and to successfully monetize those products and services;

•maintaining and expanding our customer base in key geographies, including our ability to maintain or increase the number of high-volume brand dealers in our network generally and in key geographies;

•the short- and long-term effects of the coronavirus pandemic on our business;

•our ability to mitigate the financial effect of the termination of our partnership with USAA Federal Savings Bank;

•our ability to maintain and grow our existing additional affinity partner relationships, and to attract new affinity partners to offer our services to their members;

•our reliance on our third-party service providers; 

•the impact of competition in our industry and innovation by our competitors; 

•our anticipated growth and growth strategies, including our ability to maintain or increase close rates and the rate at which site visitors prospect with a TrueCar certified dealer; 

•our ability to successfully maintain or increase dealer subscription rates and manage dealer churn;

•our ability to attract significant automobile manufacturers to participate, and remain participants, in our incentive programs;

•our ability to increase the number of consumers using, and dealers subscribing to, our newer suite of products, including our Access package, which combines our Trade and Payments solutions, and our Finance & Insurance products;

•our ability to anticipate or adapt to future changes in our industry;  

•the impact on our business of seasonality, cyclical trends affecting the overall economy and actual or threatened severe weather events; 

•our ability to hire and retain necessary qualified employees; 

•our continuing ability to provide customers access to our products; 

•our ability to maintain and scale our technical infrastructure and leverage our technology platform to enhance our customer experience and launch new product offerings;

•the evolution of technology affecting our products, services and markets; 

•our ability to adequately protect our intellectual property; 

•the outcome, and effect on our business, of litigation to which we are a party, including our ability to settle any such litigation; 

•our ability to navigate changes in domestic or international economic, political or business conditions, including supply shortages, such as of automotive semiconductors, changes in interest rates, consumer demand and import tariffs and governmental responses to the coronavirus pandemic;

•our ability to stay abreast of, and in compliance with, new or modified laws and regulations that currently apply or become applicable to our business, including newly-enacted and rapidly-changing privacy, data protection and net neutrality laws and regulations and changes in applicable tax laws and regulations; 

•the continued expense and administrative workload associated with being a public company; 

•our ability to maintain an effective system of internal controls necessary to accurately report our financial results and prevent fraud; 

•our liquidity and working capital requirements;

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•the estimates and estimate methodologies used in preparing our consolidated financial statements;

•the future trading prices of our common stock and the impact of securities analysts’ reports on these prices;

•our plans to pursue acquisitions, divestitures, investments and other similar transactions;

•our ability to use the proceeds of the ALG divestiture in a manner that maximizes shareholder value;

•the extent to which we repurchase our common stock under our share repurchase plan and the effect of these repurchases on long-term stockholder value, the volatility and trading price of our common stock and our cash reserves;

•our ability to effectively and timely integrate our operations with those of any business we acquire, including DealerScience, and related factors, including the difficulties associated with such integration (such as the difficulties, challenges and costs associated with managing and integrating new facilities, assets and employees) and the achievement of the anticipated benefits of such integration;

•the preceding and other factors discussed in Part II, Item 1A, “Risk Factors,” and in other reports we may file with the Securities and Exchange Commission from time to time; and

•the factors set forth in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.  Given these uncertainties, you should not place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date the statements are made. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

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SUMMARY OF RISKS AFFECTING OUR BUSINESS

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” later in this Quarterly Report on Form 10-Q. These risks include, but are not limited to, the following:

•The ongoing disruptions and uncertainties caused by the coronavirus pandemic have meaningfully disrupted our business and may continue to do so, including in new and unforeseen ways.

•The termination of our partnership with USAA has adversely affected our business and we may not be able to mitigate its negative financial effects.

•We may not be able to grow and optimize the geographic coverage of dealers in our network, and maintain or increase the representation of high-volume brands in that network or manage dealer churn and increase dealer subscription rates, which would limit our growth.

•The failure to attract manufacturers to participate in our incentive programs, or to induce them to remain participants in those programs, could reduce our growth or adversely affect our operating results.

•The loss of a significant affinity partner or a significant reduction in units attributable to our affinity partners would reduce our revenue and harm our operating results.

•If car dealers or 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.

•Low automobile inventory supply levels adversely impact our business, results of operations and prospects by increasing competition for dealers’ advertising expenditures and reducing automobile manufacturers’ incentive spending.

•We have experienced significant management turnover. An inability to navigate this turnover and attract, retain and integrate new management and other personnel could harm our business.

•Our business is subject to risks related to the larger automotive ecosystem, including interest rates, consumer demand, global supply chain challenges (including relating to automotive semiconductors) and other macroeconomic issues.

•We may not be able to provide a compelling car-buying experience to our users, which could cause the number of transactions between our users and dealers, and therefore our revenues, to decline.

•Our ability to enhance our current product offerings, or grow complementary product offerings, may be limited, and we may not be able to successfully demonstrate the value of any expanded or complementary products that we introduce, which could negatively impact our growth rate, revenues and financial performance.

•If our lead quality or quantity declines, our unit volume could as well, and dealers could leave our network or insist on lower subscription rates, which could reduce our revenue and harm our business.

•We may be unable to maintain or grow relationships with data providers or may experience interruptions in the data feeds they provide, which could limit the information that we are able to provide to our users and dealers as well as the timeliness of the information, and which may impair our ability to attract or retain consumers and dealers and to timely invoice dealers.

•We rely on Internet search engines to drive traffic to our website, and if we fail to appear prominently in the search results, our traffic would decline and our business would be adversely affected.

•The success of our business relies heavily on our marketing and branding efforts and those of our affinity partners, and these efforts may not be successful.

•We are subject to a complex framework of regulations, many of which are unsettled, still developing and contradictory, which have in the past, and could in the future, subject us to claims, challenge our business model or otherwise harm our business.

•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.

•We face litigation and are party to legal proceedings that could have a material adverse effect on our business, financial condition, results of operations and cash flows.

•We may fail to meet our publicly announced guidance or other expectations about our business and future operating

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results, which could cause our stock price to decline.

4

TRUECAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

(Unaudited)

	June 30, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	267,073	$	273,314
Accounts receivable, net of allowances of $5,789 and $7,147 at June 30, 2021 and December 31, 2020, respectively	22,835		32,923
Prepaid expenses	8,499		5,800
Other current assets	3,991		12,901
Total current assets	302,398		324,938
Property and equipment, net	19,456		21,421
Operating lease right-of-use assets	25,758		29,192
Goodwill	51,205		51,205
Intangible assets, net	5,775		6,600
Equity method investment	19,219		19,905
Other assets	4,723		4,800
Total assets	$	428,534	$	458,061
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable (includes related party payables of $1,072 and $913 at June 30, 2021 and December 31, 2020, respectively)	$	16,397	$	13,198
Accrued employee expenses	5,358		6,506
Operating lease liabilities, current	4,971		4,771
Accrued expenses and other current liabilities	14,243		18,402
Total current liabilities	40,969		42,877
Deferred tax liabilities	90		40
Operating lease liabilities, net of current portion	29,223		31,974
Other liabilities	22		388
Total liabilities	70,304		75,279
Commitments and contingencies (Note 8)
Stockholders’ Equity
Preferred stock — $0.0001 par value; 20,000,000 shares authorized at June 30, 2021 and December 31, 2020; no shares issued and outstanding at June 30, 2021 and December 31, 2020	—		—
Common stock — $0.0001 par value; 1,000,000,000 shares authorized at June 30, 2021 and December 31, 2020; 97,613,457 and 99,690,942 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	10		10
Additional paid-in capital	729,439		738,290
Accumulated deficit	(371,219)		(355,518)
Total stockholders’ equity	358,230		382,782
Total liabilities and stockholders’ equity	$	428,534	$	458,061

See accompanying notes to condensed consolidated financial statements.

5

TRUECAR, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands except per share data)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues	$	65,766	$	58,554	$	130,871	$	137,471
Costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization presented separately below)	5,746		5,564		11,204		11,739
Sales and marketing	37,476		33,032		77,575		79,112
Technology and development	10,780		12,800		21,973		24,699
General and administrative	13,853		12,849		26,531		24,937
Depreciation and amortization	4,591		5,175		8,903		10,204
Goodwill impairment	—		—		—		8,264
Total costs and operating expenses	72,446		69,420		146,186		158,955
Loss from operations	(6,680)		(10,866)		(15,315)		(21,484)
Interest income	13		61		28		439
Other income	42		—		667		—
Loss from equity method investment	(357)		(507)		(686)		(889)
Loss from continuing operations before income taxes	(6,982)		(11,312)		(15,306)		(21,934)
Provision for (benefit from) income taxes	133		62		227		(170)
Loss from continuing operations	(7,115)		(11,374)		(15,533)		(21,764)
(Loss) income from discontinued operations, net of taxes	(168)		132		(168)		(147)
Net loss	$	(7,283)	$	(11,242)	$	(15,701)	$	(21,911)
(Loss) income per share, basic and diluted
Continuing operations	$	(0.07)	$	(0.11)	$	(0.16)	$	(0.20)
Discontinued operations	$	0.00	$	0.00	$	0.00	$	0.00
Weighted average common shares outstanding, basic and diluted	98,810		107,535		98,696		107,279
Other comprehensive loss:
Comprehensive loss	$	(7,283)	$	(11,242)	$	(15,701)	$	(21,911)

See accompanying notes to condensed consolidated financial statements.

6

TRUECAR, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands except share data)

(Unaudited) 

	Six Months Ended June 30, 2021
	Common Stock					Accumulated Deficit		Stockholders’ Equity
	Shares	Amount		APIC
Balance at December 31, 2020	99,690,942	$	10	$	738,290	$	(355,518)	$	382,782
Net loss	—	—		—		(8,418)		(8,418)
Repurchase of common stock	(1,683,692)	—		(7,829)		—		(7,829)
Stock-based compensation	—	—		6,732		—		6,732
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes	660,311	—		(1,075)		—		(1,075)
Balance at March 31, 2021	98,667,561	$	10	$	736,118	$	(363,936)	$	372,192
Net loss	—	—		—		(7,283)		(7,283)
Repurchase of common stock	(2,088,784)	—		(11,556)		—		(11,556)
Stock-based compensation	—	—		5,507		—		5,507
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes	1,034,680	—		(630)		—		(630)
Balance at June 30, 2021	97,613,457	$	10	$	729,439	$	(371,219)	$	358,230

	Six Months Ended June 30, 2020
	Common Stock					Accumulated Deficit		Stockholders’ Equity
	Shares	Amount		APIC
Balance at December 31, 2019	106,865,830	$	11	$	759,322	$	(432,062)	$	327,271
Net loss	—	—		—		(10,669)		(10,669)
Stock-based compensation	—	—		6,559		—		6,559
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes	317,803	—		(724)		—		(724)
Balance at March 31, 2020	107,183,633	$	11	$	765,157	$	(442,731)	$	322,437
Net loss	—	—		—		(11,242)		(11,242)
Stock-based compensation	—	—		6,855		—		6,855
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes	726,367	—		(856)		—		(856)
Balance at June 30, 2020	107,910,000	$	11	$	771,156	$	(453,973)	$	317,194

See accompanying notes to condensed consolidated financial statements.

7

TRUECAR, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities
Net loss	$	(15,701)	$	(21,911)
Loss from discontinued operations, net of taxes	(168)		(147)
Net loss from continuing operations	(15,533)		(21,764)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	8,903		10,204
Goodwill impairment	—		8,264
Deferred income taxes	50		(397)
Bad debt expense and other reserves	468		3,485
Stock-based compensation	11,542		12,025
Increase in the fair value of contingent consideration liability	41		121
Amortization of lease right-of-use assets	2,142		3,002
Loss from equity method investment	686		889
Impairment of right-of-use assets and write-off and loss on disposal of finite-lived assets	1,666		41
Other noncash expense	219		—
Changes in operating assets and liabilities:
Accounts receivable	9,620		(1,428)
Prepaid expenses and other assets	(1,416)		(685)
Accounts payable	3,250		(11,300)
Accrued employee expenses	(1,171)		4,410
Operating lease liabilities	(2,551)		(3,705)
Accrued expenses and other liabilities	(2,394)		(8,468)
Other liabilities	(366)		905
Net cash provided by operating activities - continuing operations	15,156		(4,401)
Net cash provided by operating activities - discontinued operations	(168)		6,090
Net cash provided by operating activities	14,988		1,689
Cash flows from investing activities
Purchase of property and equipment	(5,410)		(5,568)
Net cash used in investing activities - continuing operations	(5,410)		(5,568)
Net cash provided by (used in) investing activities - discontinued operations	7,500		(726)
Net cash provided by (used in) investing activities	2,090		(6,294)
Cash flows from financing activities
Payment of contingent consideration liability	(2,214)		(2,263)
Proceeds from exercise of common stock options	1,344		3
Taxes paid related to net share settlement of equity awards	(3,049)		(1,583)
Payments for the repurchase of common stock	(19,400)		—
Net cash used in financing activities	(23,319)		(3,843)
Net increase in cash and cash equivalents	(6,241)		(8,448)
Cash and cash equivalents at beginning of period	273,314		181,534
Cash and cash equivalents at end of period	$	267,073	$	173,086

See accompanying notes to condensed consolidated financial statements.

8

TRUECAR, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

(Continued)

	Six Months Ended June 30,
	2021		2020
Supplemental disclosures of non-cash activities
Stock-based compensation capitalized for software development	$	697	$	700
Capitalized assets included in accounts payable, accrued employee expenses and other accrued expenses	850		410
Capitalized asset retirement costs included in property and equipment	—		498

See accompanying notes to condensed consolidated financial statements.

9

TRUECAR, INC. 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    Organization and Nature of Business

TrueCar, Inc. is an Internet-based information, technology, and communication services company. Hereinafter, TrueCar, Inc. and its wholly owned subsidiaries TrueCar Dealer Solutions, Inc., DealerScience, LLC and ALG, Inc. (up to the disposition date of November 30, 2020) are collectively referred to as “TrueCar” or the “Company”; ALG, Inc. is referred to as “ALG,” TrueCar Dealer Solutions, Inc. is referred to as “TCDS” and DealerScience, LLC is referred to as “DealerScience.” TrueCar was incorporated in the state of Delaware in February 2005 and began business operations in April 2005. Its principal corporate offices are located in Santa Monica, California.

TrueCar is a digital automotive marketplace that (i) provides pricing transparency about what other people paid for their cars and enables consumers to engage with TrueCar Certified Dealers who are committed to providing a superior purchase experience; (ii) empowers Certified Dealers to attract these informed, in-market consumers in a cost-effective, accountable manner; and (iii) allows automobile manufacturers (“OEMs”) to more effectively target their incentive spending at deep-in-market consumers during their purchase process. TrueCar has established a diverse software ecosystem on a common technology infrastructure, powered by proprietary data and analytics. Consumers access TrueCar’s platform through the TrueCar.com website and TrueCar mobile applications or through the car buying websites and mobile applications that TrueCar operates for its affinity group marketing partners (“Auto Buying Programs”). An affinity group is comprised of a network of members or employees that provides discounts to its members.

Through its subsidiary TCDS, the Company provides its TrueCar Trade and Payments products. Our Trade solution gives consumers information on the value of their trade-in vehicles and enables them to obtain a guaranteed trade-in price before setting foot in the dealership. This valuation is, in turn, backed by a third-party guarantee to dealers that the vehicles will be repurchased at the indicated price if the dealer does not want to keep them. The Company’s Payments solution leverages the digital retailing technology of its DealerScience subsidiary, acquired in December 2018, to help consumers calculate accurate monthly payments.

2.    Summary of Significant Accounting Policies

Basis of Presentation

The Company’s unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and Article 10-1 of Regulation S-X. Accordingly, some information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements and notes have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2020, and include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the interim periods presented. As a result of the ALG divestiture as discussed in Note 3, the ALG business met the criteria to be reported as discontinued operations. Therefore, the Company is reporting the historical results of ALG, including the results of operations, cash flows, and related assets and liabilities, as discontinued operations for all periods presented herein through the date of disposition. Unless otherwise noted, the accompanying Notes to the Condensed Consolidated Financial Statements have all been revised to reflect continuing operations only.

The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited financial statements at that date, but does not include all of the disclosures required by GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Form 10-K filed with the SEC on March 5, 2021. 

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Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of TrueCar and its wholly owned subsidiaries. Business acquisitions are included in the Company’s condensed consolidated financial statements from the date of the acquisition. The Company’s purchase accounting resulted in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates. Equity investments through which the Company is able to exercise significant influence over but does not control the investee and is not the primary beneficiary of the investee’s activities are accounted for using the equity method. The Company’s share of the income or loss from equity method investments is recognized on a one-quarter lag due to the timing and availability of financial information. Divestitures are included in the Company’s consolidated statements through the date of disposition. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Assets and liabilities that are subject to judgment and use of estimates include sales allowances and allowances for doubtful accounts, contract assets, the fair value of assets and liabilities assumed in business combinations, the fair value of equity method investments, the recoverability and related impairment of goodwill and long-lived assets, valuation allowances with respect to deferred tax assets, useful lives associated with property and equipment and intangible assets, right-of-use assets and operating lease liabilities, contingencies, and the valuation and assumptions underlying stock-based compensation and other equity instruments. On an ongoing basis, the Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. In addition, the Company engaged valuation specialists to assist with management’s determination of the fair values of its single reporting unit related to goodwill impairment, right-of-use assets and lease liabilities, assets and liabilities assumed in business combinations, assets and liabilities of its equity method investment and performance-based stock units.

Segments

The Company has one operating segment. From January 1, 2021 through January 26, 2021, the Company’s chief operating decision maker (“CODM”) was solely comprised of the President and Chief Executive Officer who managed the Company’s operations based on consolidated financial information for purposes of evaluating financial performance and allocating resources. Upon the hiring of the Company’s Chief Financial Officer on January 27, 2021 and through June 30, 2021, the CODM was comprised of both the President and Chief Executive Officer and the Chief Financial Officer, who jointly managed the Company’s operations based on consolidated financial information for purposes of evaluating financial performance and allocating resources.

The CODM reviews financial information on a consolidated basis, accompanied by information about dealer revenue, OEM incentive revenue, and other revenue (Note 13). All of the Company’s principal operations, decision-making functions and assets are located in the United States.

Allowance for Doubtful Accounts

The Company determines its allowance for doubtful accounts based on historical write-off experience and specific circumstances that make it likely that recovery will not occur. The Company reviews the allowance for doubtful accounts periodically and assesses the aging of account balances, with an emphasis on those that are past due over ninety days. Account balances are charged off against the allowance when the Company determines that it is probable the receivable will not be recovered.

The Company considers the need to adjust historical information to reflect the extent to which the Company expects current conditions and reasonable and supportable forecasts to differ from the conditions that existed for the period over which historical information was evaluated. The primary current and future economic indicators that the Company uses to develop its current estimate of expected credit losses include the current and forecast U.S. Gross Domestic Product (GDP).

The Company calculates the expected credit losses on a pool basis for those trade receivables that have similar risk characteristics. For those trade receivables that do not share similar risk characteristics, the allowance for doubtful accounts is calculated on an individual basis. Risk characteristics relevant to the Company’s accounts receivable include revenue billing model and aging status.

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The following table summarizes the changes in the allowance for doubtful accounts and sales allowances (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Allowances, at beginning of period	$	6,149	$	7,887	$	7,147	$	6,591
Charged as a reduction of revenue	1,287		2,959		2,566		5,357
Charged to bad debt expense in general and administrative expenses	236		1,260		468		3,485
Write-offs, net of recoveries	(1,883)		(1,802)		(4,392)		(5,129)
Allowances, at end of period	$	5,789	$	10,304	$	5,789	$	10,304

The Company’s assessment considered business and market disruptions caused by COVID-19 and estimates of expected emerging credit and collectability trends. The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict causing variability and volatility that may have a material impact on our allowance for credit losses in future periods.

3.    Discontinued Operations

On November 30, 2020, the Company completed the sale of its 100% interest (the “Divestiture”) in ALG to J.D. Power for $112.5 million in cash (subject to customary working capital and other adjustments) pursuant to the Membership Interest Purchase Agreement, dated as of July 31, 2020 (the “Purchase Agreement”). The Purchase Agreement provides for J.D. Power to pay the Company (i) a potential cash earnout of up to $7.5 million based upon ALG’s achievement of certain revenue metrics in 2020 and (ii) a potential cash earnout of up to $15 million based upon ALG’s achievement of certain revenue metrics in 2022. The Company received cash proceeds of $111.5 million, net of working capital adjustments, and incurred transaction costs of approximately $1.9 million. As part of the Divestiture, the Company also received a five-year data license from J.D. Power for use of certain ALG data in the Company’s products and services. The Company recorded the fair value of the data license in the amount of $1.9 million. The carrying value of the data license is included in other current assets and other assets in the accompanying condensed consolidated balance sheets. The data license is being treated as additional consideration received and is being amortized on a straight-line basis over five years. The Company accounts for the future earnouts as gain contingencies and recognizes the contingent consideration associated with the Divestiture when the consideration is determined to be realizable. At December 31, 2020, the Company recorded a receivable of $7.5 million associated with the achievement of the first earnout based on certain 2020 revenue metrics. The Divestiture resulted in a pre-tax gain of $92.5 million for the year ended December 31, 2020. During the first quarter of 2021, the Company received cash payment of $7.5 million related to the first earnout and is reflected within investing activities of discontinued operations on the accompanying condensed consolidated statements of cash flows.

The Divestiture represents a strategic shift in the Company’s business and meets the criteria of discontinued operations. As a result, the operating results and cash flows from ALG have been reflected as discontinued operations in the condensed consolidated statements of comprehensive loss and consolidated statements of cash flows for all periods presented.

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The following table presents the detail of “(Loss) income from discontinued operations, net of taxes” within the condensed consolidated statements of comprehensive loss (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues	$	—	$	4,131	$	—	$	8,740
Costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization presented separately below)	—		1,295		—		2,341
Sales and marketing	—		444		—		939
Technology and development	—		303		—		620
General and administrative	168		671		168		895
Depreciation and amortization	—		1,250		—		2,492
Goodwill impairment	—		—		—		1,923
Total costs and operating expenses	168		3,963		168		9,210
(Loss) income from operations	(168)		168		(168)		(470)
Interest income	—		11		—		166
(Loss) income from discontinued operations before income taxes	(168)		179		(168)		(304)
Provision (benefit) from income taxes	—		47		—		(157)
(Loss) income from discontinued operations, net of taxes	$	(168)	$	132	$	(168)	$	(147)

4.    Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Accounting standards describe a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

•Level 1 — Quoted prices in active markets for identical assets, liabilities, or funds.

•Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of cash equivalents, accounts receivable, prepaid and other current assets, accounts payable, and accrued expenses and other current liabilities approximate fair value because of the short maturity of these items.

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The following table summarizes the Company’s financial assets measured at fair value on a recurring basis at June 30, 2021 and December 31, 2020 by level within the fair value hierarchy. Financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):

	At June 30, 2021								At December 31, 2020
							Total Fair								Total Fair
	Level 1		Level 2		Level 3		Value		Level 1		Level 2		Level 3		Value
Assets:
Cash equivalents	$	256,715	$	—	$	—	$	256,715	$	262,309	$	—	$	—	$	262,309
Total assets	$	256,715	$	—	$	—	$	256,715	$	262,309	$	—	$	—	$	262,309
Liabilities:
Contingent consideration, current	$	—	$	—	$	—	$	—	$	—	$	—	$	2,459	$	2,459
Total liabilities	$	—	$	—	$	—	$	—	$	—	$	—	$	2,459	$	2,459

Contingent Consideration Obligations

The following table summarizes the changes in the fair value of the contingent consideration obligation (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Fair value, beginning of period	$	2,490	$	4,852	$	2,459	$	4,777
Cash payments	(2,500)		(2,500)		(2,500)		(2,500)
Additions and changes in fair value	10		46		41		121
Fair value, end of period	$	—	$	2,398	$	—	$	2,398

5.    Goodwill

The Company assesses recoverability of goodwill on an annual basis or when events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable, such as a decline in stock price and market capitalization. Throughout the second half of 2019 and through the first quarter of 2020, the Company’s stock price experienced high volatility, causing a decline in its enterprise market capitalization. During the first quarter of 2020, as a result of the global economic disruption and uncertainty due to the COVID-19 pandemic, along with the Company’s announcement that it had entered into a short-term agreement to extend its partnership with USAA Federal Savings Bank to continue to power the USAA Car Buying Service through September 30, 2020, the Company concluded a triggering event had occurred. In light of these two factors, the Company performed an interim quantitative impairment test as of March 31, 2020, in which the Company estimated the fair value of its single reporting unit by utilizing an income approach which uses a discounted cash flow (“DCF”) analysis. The Company has previously used an implied market value approach. Given the high degree of market volatility and lack of reliable market data as of March 31, 2020, the Company determined that a discounted cash flow model (income approach) provided the best approximation of fair value. Determining fair value requires the exercise of significant assumptions and judgments, which are considered Level 3 inputs under the fair value hierarchy, including the amount and timing of expected future cash flows, long-term growth rates and the discount rate. Based on the results of the interim impairment test, the Company concluded that the carrying value of its reporting unit was greater than the fair value and, accordingly, recognized a non-cash impairment charge of $10.2 million during the three months ended March 31, 2020, of which $1.9 million was included in discontinued operations. If the pandemic’s economic impact is more severe, or if the economic recovery takes longer to materialize or does not materialize as strongly as anticipated, this could result in further goodwill impairment charges.

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6.    Property and Equipment, net

Property and equipment consisted of the following at June 30, 2021 and December 31, 2020 (in thousands):

	June 30, 2021		December 31, 2020
Computer equipment, software, and internally developed software	$	71,771	$	66,198
Furniture and fixtures	3,803		4,610
Leasehold improvements	15,632		15,727
	91,206		86,535
Less: Accumulated depreciation	(71,750)		(65,114)
Total property and equipment, net	$	19,456	$	21,421

Included in the table above are property and equipment of $1.1 million and $0.9 million at June 30, 2021 and December 31, 2020, respectively, which are capitalizable but had not yet been placed in service. These balances were comprised primarily of capitalized software not ready for its intended use.

Total depreciation and amortization expense of property and equipment was $4.2 million and $4.6 million for the three months ended June 30, 2021 and 2020, respectively. Total depreciation and amortization expense of property and equipment was $8.1 million and $9.0 million for the six months ended June 30, 2021 and 2020, respectively.

Amortization of internal use capitalized software development costs was $3.1 million and $3.3 million for the three months ended June 30, 2021 and 2020, respectively. Amortization of internal use capitalized software development costs was $6.3 million and $6.4 million for the six months ended June 30, 2021 and 2020, respectively.

During the six months ended June 30, 2021, the Company disposed of or retired certain fully depreciated computer equipment, software, and internally developed software with an original cost basis of $0.9 million.

7.    Credit Facility

February 2018 Amended Credit Facility

The Company is party to a third amended and restated loan and security agreement (as amended from time to time, the “Third Amended Credit Facility”) with a financial institution that provides for advances under a $35.0 million revolving line of credit. In February 2018, the Company entered into a first amendment to the Third Amended Credit Facility that, among other things, extended the expiration from February 18, 2018 to February 18, 2021. In December 2018, the Company entered into a second amendment to the Third Amended Credit Facility to make certain other revisions that did not alter the borrowing amounts, interest rates, or required ratios. In February 2021, the Company entered into a third amendment to the Third Amended Credit Facility to extend the expiration date to April 19, 2021 that did not alter the borrowing amounts, interest rates, or required ratios. The Third Amended Credit Facility provided a $10.0 million subfacility for the issuance of letters of credit and contained an increase option permitting the Company, subject to the lender’s consent, to increase the revolving credit facility by up to $15.0 million, to an aggregate maximum of $50.0 million.

April 2021 Amendment to Credit Facility

In April 2021, the Company entered into a fourth amendment to the Third Amended Credit Facility (the “Credit Facility”). The Credit Facility extends the maturity date to April 12, 2024. Similar to the third amended and restated loan and security agreement, the Credit Facility provides for advances under a $35.0 million revolving line of credit. The Credit Facility also provides for a $10.0 million subfacility for the issuance of letters of credit and contains an increase option permitting the Company, subject to the lender’s consent, to increase the revolving credit facility by up to $15.0 million to an aggregate maximum of $50.0 million.

The Credit Facility bears interest, at the Company’s option, at either (i) the prime rate published by The Wall Street Journal, plus a spread of -0.25% to 0.25%, or (ii) a LIBOR rate determined in accordance with the terms of the Credit Facility, plus a spread of 1.75% to 2.25%. In each case, the spread is based on the Company’s adjusted quick ratio, which is a ratio of the Company’s cash and cash equivalents plus net billed accounts receivable to current liabilities, excluding operating lease obligations, plus all obligations and liabilities to the financial institution including issued and outstanding letters of credit.

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Interest is due and payable quarterly in arrears for prime rate loans and on the earlier of the last day of each quarter or the end of an interest period for LIBOR rate loans. The Company is also obligated to pay an unused revolving line facility fee of 0.00% to 0.15% per annum based on the Company’s adjusted quick ratio.

The Credit Facility requires the Company to maintain an adjusted quick ratio of at least 1.25 to 1.00 on the last day of each quarter. The Credit Facility also limits the Company’s ability to pay dividends.

The Company’s future material domestic subsidiaries are required, upon the lender’s request, to become co-borrowers under the Credit Facility. Additionally, the Credit Facility contains acceleration clauses that accelerate any borrowings in the event of default. The Company’s obligations and those of its future material domestic subsidiaries are collateralized by substantially all of their respective assets, subject to certain exceptions and limitations.

At June 30, 2021, the Company had no outstanding amounts under the Credit Facility and the amount available was $32.2 million, reduced for the letters of credit issued and outstanding under the subfacility of $2.8 million.

8.    Commitments and Contingencies

Reorganization

In May 2020, the Company committed to a restructuring plan (the “Restructuring Plan”) in furtherance of its efforts to enhance productivity and efficiency, preserve profitability and streamline its organizational structure to better align operations with its long-term commitment to providing an enhanced consumer experience. The majority of the restructuring costs liability was paid during the year ended December 31, 2020 with the remainder expected to be paid in 2021. The Company does not expect to incur significant additional charges in future periods related to the Restructuring Plan.

The following table presents a roll forward of the restructuring costs liability for the six months ended June 30, 2021 (in thousands):

	Restructuring Costs Liability
Accrual at December 31, 2020	$	381
Cash Payments	—
Accrual at June 30, 2021	$	381

Legal Proceedings

From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. In accordance with authoritative guidance, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved is material. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available. The Company is not currently a party to any material legal proceedings, other than as described below.

Stockholder Litigation

Milbeck Federal Securities Litigation

In March 2018, Leon Milbeck filed a putative securities class action complaint against the Company in the U.S. District Court for the Central District of California (the “Milbeck Federal Securities Litigation”). On June 27, 2018, the court appointed the Oklahoma Police Pension and Retirement Fund as lead plaintiff, who filed an amended complaint on August 24, 2018. The amended complaint sought an award of unspecified damages, interest, attorney’s fees and equitable relief based on allegations that the defendants made false or misleading statements about our business, operations, prospects and performance during a purported class period of February 16, 2017 through November 6, 2017 in violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, and that the defendants made actionable misstatements in violation of

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Section 11 of the Securities Act in connection with the Company’s secondary offering that occurred during the class period. The amended complaint named the Company, certain of its then-current and former officers and directors and the underwriters for its secondary offering as defendants. On October 31, 2018, the lead plaintiff dismissed the underwriters from the litigation “without prejudice,” meaning that they could be reinstated as defendants at a later time. On August 2, 2019, the parties entered into an agreement to settle the Milbeck Federal Securities Litigation on a class-wide basis for $28.25 million, all of which was paid by the Company’s directors’ and officers’ liability insurance, pursuant to which the court dismissed the case on May 26, 2020. As a result, the Milbeck Federal Securities Litigation is currently resolved.

Delaware Consolidated Derivative Litigation

In August 2019, three purported stockholder derivative actions were filed in Delaware alleging a variety of claims nominally on the Company’s behalf arising out of alleged breaches of fiduciary duty under Delaware law based upon substantially the same factual allegations as the Milbeck Federal Securities Litigation. The complaints named the Company, certain of its then-current and former directors and officers, USAA and, in one of the actions, certain entities affiliated with USAA and certain of our current and former directors as defendants. On October 7, 2019, the Delaware Court of Chancery consolidated the cases into a single action in that court bearing the caption In re TrueCar, Inc. Stockholder Derivative Litigation (the “Delaware Consolidated Derivative Litigation”). On November 6, 2019, the plaintiffs filed a consolidated complaint against all of the defendants named in the prior actions, asserting claims for breach of fiduciary duty, unjust enrichment, contribution and indemnification against the Company’s current and former officers and directors, and claims for aiding and abetting breaches of fiduciary duty against the entities affiliated with USAA and with certain of the Company’s current and former directors. The plaintiffs sought an award of damages against the defendants on behalf of the Company and various alleged corporate governance reforms. On December 19, 2019, the defendants filed motions to dismiss for failure to make a pre-suit demand. On September 30, 2020, the court dismissed the Delaware Consolidated Derivative Litigation with prejudice for failure to make a pre-suit demand and failure to state a claim and the plaintiffs did not appeal the ruling. As a result, the Delaware Consolidated Derivative Litigation is resolved. Following the court’s decision, the plaintiffs sent a letter to the Company demanding that it pursue claims against certain current and former officers for various alleged breaches of their fiduciary duties, based substantially on the same factual allegations as the Milbeck Federal Securities Litigation. On November 18, 2020, the Company’s Board of Directors (the “Board”) established a special committee of the Board (the “Special Committee”) to investigate the claims contained in the Delaware Consolidated Derivative Litigation, the Lee Derivative Litigation and other related stockholder demands. The Company has not recorded an accrual related to this matter as of June 30, 2021 as the Company does not believe a loss is probable or reasonably estimable.

Lee Derivative Litigation

In December 2019, Sulgi Lee, a purported stockholder, filed a derivative action in the Delaware Court of Chancery (the “Lee Derivative Litigation”) alleging a variety of claims nominally on the Company’s behalf arising out of alleged breaches of fiduciary duty under Delaware law based upon substantially the same factual allegations as the Milbeck Federal Securities Litigation. The complaint named the Company, certain of its then-current and former directors and officers and USAA as defendants. The plaintiff seeks an award of damages against the defendants on the Company’s behalf and various alleged corporate governance reforms. On May 5, 2020, the court entered the parties’ stipulation to stay this litigation pending the outcome of the motions to dismiss in the Delaware Consolidated Derivative Litigation. Following the dismissal of the Delaware Consolidated Derivative Litigation, on December 22, 2020, the court entered the parties’ further stipulation to stay the Lee Derivative Litigation pending the outcome of the Special Committee’s investigation. The Company believes that the complaint is without merit, and should the litigation proceed, the Company intends to vigorously defend itself in this matter. The Company has not recorded an accrual related to this matter as of June 30, 2021 as the Company does not believe a loss is probable or reasonably estimable.

Trademark Litigation

On April 9, 2020, the Company was named as a defendant in a lawsuit filed by Six Star, Inc. (“Six Star”) in the U.S. District Court for the Middle District of Florida (the “Trademark Litigation”). The complaint in the Trademark Litigation alleged that the Company’s new “BUY SMARTER DRIVE HAPPIER” tagline infringed and diluted Six Star’s “BUY SMART BE HAPPY” trademark and included claims of false advertising and deceptive and unfair trade practices. The complaint sought injunctive relief in addition to certain monetary awards. On June 25, 2021, the parties entered into a settlement agreement pursuant to which the parties agreed to dismiss the Trademark Litigation in exchange for the Company agreeing not to use Six Star’s “BUY SMART BE HAPPY” trademark and to only use its own trademark in conjunction with the word “TrueCar.” The

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settlement agreement did not provide for either party to pay the other any amounts. On June 28, 2021, the court dismissed the Trademark Litigation pursuant to the settlement agreement. As a result, the Trademark Litigation is currently resolved.

Employment Contracts

The Company has entered into employment contracts with certain executives of the Company. Employment under these contracts is at-will employment. However, under the provisions of the contracts, the Company would incur severance obligations of up to twelve months of the executive’s annual base salary for certain events such as involuntary terminations.

Indemnifications

In the ordinary course of business, the Company may provide indemnities of varying scope and terms to customers, vendors, lessors, investors, directors, officers, employees and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or intellectual property infringement claims made by third parties. While the Company’s future obligations under certain of these agreements may contain limitations on liability for indemnification, other agreements do not contain such limitations and under such agreements it is not possible to predict the maximum potential amount of future payments due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under such indemnities have not had a material effect on the Company’s business, financial condition, results of operations or cash flows. Additionally, the Company does not believe that any amounts that it may be required to pay under these indemnities in the future will be material to the Company’s business, financial position, results of operations, or cash flows. 

9.    Stock-based Awards

Stock Options

A summary of the Company’s stock option activity for the six months ended June 30, 2021 is as follows:

	Number of Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life
				(in years)
Outstanding at December 31, 2020	10,009,282	$	9.58	5.1
Granted	768,354	5.04
Exercised	(387,052)	3.47
Forfeited/expired	(1,078,734)	8.34
Outstanding at June 30, 2021	9,311,850	$	9.60	4.4

At June 30, 2021, total remaining stock-based compensation expense for unvested stock option awards was $5.2 million, which is expected to be recognized over a weighted-average period of 2.9 years. For the three months ended June 30, 2021 and 2020, the Company recorded stock-based compensation expense for stock option awards of $1.0 million and $1.4 million, respectively. For the six months ended June 30, 2021 and 2020, the Company recorded stock-based compensation expense for stock option awards of $2.6 million and $3.0 million, respectively.

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Restricted Stock Units

Activity in connection with restricted stock units is as follows for the six months ended June 30, 2021:

	Number of Shares	Weighted- Average Grant Date Fair Value
Non-vested — December 31, 2020	6,918,474	$	4.63
Granted	5,007,558	4.81
Vested	(1,911,185)	4.78
Forfeited	(1,441,562)	4.55
Non-vested — June 30, 2021	8,573,285	$	4.71

At June 30, 2021, total remaining stock-based compensation expense for non-vested restricted stock units was $37.0 million, which is expected to be recognized over a weighted-average period of 2.8 years. For the three months ended June 30, 2021 and 2020, the Company recorded $4.2 million and $4.8 million in stock-based compensation expense for restricted stock units, respectively. For the six months ended June 30, 2021 and 2020, the Company recorded stock-based compensation expense for restricted stock units of $8.9 million and $9.1 million, respectively.

Stock-based Compensation Cost

The Company recorded stock-based compensation cost relating to stock options and restricted stock units in the following categories on the accompanying condensed consolidated statements of comprehensive loss (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Cost of revenue	$	66	$	42	$	137	$	355
Sales and marketing	1,512		2,279		4,471		4,440
Technology and development	1,159		1,320		2,347		2,545
General and administrative	2,420		2,470		4,587		4,685
Total stock-based compensation expense	5,157		6,111		11,542		12,025
Amount capitalized to internal software use	350		355		697		700
Total stock-based compensation cost	$	5,507	$	6,466	$	12,239	$	12,725

10.    Income Taxes

In determining quarterly provisions for income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date loss. The Company’s annual estimated effective tax rate differs from the statutory rate primarily as a result of state taxes, tax amortization of goodwill and changes in the Company’s valuation allowance.

The Company recorded income tax expense of $0.1 million for the three months ended June 30, 2021 and 2020. For the six months ended June 30, 2021 and 2020, the Company recorded income tax expense of $0.2 million and an income tax benefit of $0.2 million, respectively. For the three months ended June 30, 2021 and 2020 and six months ended June 30, 2021, the Company’s provision for income taxes 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 six months ended June 30, 2020, the tax benefit primarily arose in connection with the impairment of goodwill during the first quarter of 2020, resulting in the reduction of indefinite-lived deferred tax liabilities.

    There were no material changes to the Company’s unrecognized tax benefits in the six months ended June 30, 2021, and the Company does not expect to have any significant changes to unrecognized tax benefits through the end of the fiscal year. Due to the presence of net operating loss (“NOL”) carryforwards, all income tax years remain open for examination by the IRS and various state taxing authorities.

The Internal Revenue Code of 1986, as amended (the “IRC”), imposes substantial restrictions on the utilization of net operating losses and other tax attributes in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use pre-change net operating loss and research tax credits may be limited as prescribed under IRC Sections 382 and

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383. Events that may cause a limitation in the amount of the net operating loss and credits that the Company uses in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. The Company experienced a cumulative ownership change as of December 31, 2019. The Company estimates that up to $15.2 million and $0.5 million of federal and state net operating loss carryforwards, respectively, may expire unused. Accordingly, the Company 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 its valuation allowance, with no net tax provision impact. Additionally, pending finalization of the 2011-2020 research and development tax credits study, the Company anticipates that certain federal research and development credit carryforwards may expire unused. Any write-off of these tax attributes would be fully offset by a corresponding decrease in the Company’s valuation allowance, with no net tax provision impact.

11.    Net (Loss) Per Share

The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share data): 

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net loss	$	(7,283)	$	(11,242)	$	(15,701)	$	(21,911)
Loss from continuing operations	$	(7,115)	$	(11,374)	$	(15,533)	$	(21,764)
(Loss) income from discontinued operations, net of taxes	$	(168)	$	132	$	(168)	$	(147)
Weighted-average common shares outstanding, basic and diluted	98,810		107,535		98,696		107,279
(Loss) income per share, basic and diluted
Continuing operations	$	(0.07)	$	(0.11)	$	(0.16)	$	(0.20)
Discontinued operations	$	0.00	$	0.00	$	0.00	$	0.00

The following table presents the number of anti-dilutive shares excluded from the calculation of diluted loss per share at June 30, 2021 and 2020 (in thousands):

	June 30,
	2021	2020
Options to purchase common stock	9,312	10,740
Common stock warrants	510	1,459
Non-vested restricted stock unit awards	8,573	8,606
Total shares excluded from net loss per share	18,395	20,805

Share Repurchase Program

In July 2020, the Company’s 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 the Company’s common stock through September 30, 2022. In May 2021, the Company’s board of directors increased the authorization of the Program by an additional $75 million, bringing the total authorization to $150 million. The timing and amount of any repurchases will be determined by Company management based on its evaluation of market conditions and other factors. Repurchases of the Company’s common stock may be made under a Rule 10b5-1 plan, which would permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws, open market purchases, privately-negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws. The Program may be suspended or discontinued at any time and does not obligate the Company to purchase any minimum number of shares. During the six months ended June 30, 2021, the Company repurchased and retired a total of 3.8 million shares under the Program for $19.3 million. As of June 30, 2021, the Company had a remaining authorization of $88.5 million for future share repurchases.

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12.    Related Party Transactions

Transactions with USAA

USAA is a large stockholder in the Company and was the Company’s most significant affinity marketing partner. At the time that the Company entered into arrangements with USAA to operate its Auto Buying Program, USAA met the definition of a related party. In February 2020, the Company entered into a short-term agreement to extend its partnership with USAA Federal Savings Bank (“USAA FSB”) to continue to power the USAA Car Buying Service through September 30, 2020. USAA FSB paid the Company a $20 million transition services fee that was earned over the term of the agreement. Revenue share from USAA FSB to the Company remained the same as it was under the previous agreement except that amounts earned after March 1, 2020 were settled net of the transaction service fee. For the three and six months ended months ended June 30, 2020, the Company recognized revenue of $3.9 million and $5.6 million, respectively. For the six months ended June 30, 2020, the Company recorded sales and marketing expense of $2.0 million related to service arrangements entered into with USAA. The Company did not record any sales and marketing expense for the three months ended June 30, 2020 as revenue share due USAA FSB was settled net of the transaction service fee earned. At June 30, 2021 and December 31, 2020 the Company had no amounts due to or from USAA.

Transactions with Accu-Trade

During the first quarter of 2019, the Company became a 20% owner of Accu-Trade and accounts for the investment using the equity method, as the Company has significant influence over the investee. The Company had amounts due to Accu-Trade included in accounts payable at June 30, 2021 and December 31, 2020 of $1.1 million and $0.9 million, respectively. The Company recognized contra-revenue of $0.3 million and $0.2 million and cost of revenue of $1.3 million and $0.1 million for the three months ended June 30, 2021 and 2020, respectively, related to a software and data licensing agreement entered into with Accu-Trade. The Company recognized contra-revenue of $0.6 million for the six months ended June 30, 2021 and 2020, and cost of revenue of $2.5 million and $0.4 million for the six months ended June 30, 2021 and 2020, respectively.

13.    Revenue Information

Disaggregation of Revenue

The Company disaggregates revenue into three revenue streams: dealer revenue, OEM incentives revenue, and other revenue. The following table presents the Company’s revenue categories during the periods presented (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Dealer revenue	$	62,670	$	50,049	$	124,727	$	123,847
OEM incentives revenue	2,768		4,771		5,565		8,294
Other revenue	328		3,734		579		5,330
Total revenues	$	65,766	$	58,554	$	130,871	$	137,471

Contract Balances

The Company’s contract asset balance for estimated variable consideration to be received upon the occurrence of subsequent vehicle sales is included within other current assets and is distinguished from accounts receivable in that these amounts are conditional upon subsequent sales and not only upon the passage of time. Substantially all of the contract asset balances of $2.3 million at December 31, 2020 were transferred to accounts receivable during the six months ended June 30, 2021 as vehicle sales occurred, with no significant changes in the estimate. A contract asset of $2.2 million and $2.3 million was recorded as of June 30, 2021 and December 31, 2020, respectively, for leads delivered where consideration to be received was still conditional upon subsequent vehicle sales.

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Item 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto included in Item 1 “Financial Statements” in this Quarterly Report on Form 10-Q. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those discussed in the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.  See “Special Note Regarding Forward-Looking Statements.”

Overview

TrueCar is a leading automotive digital marketplace that enables car buyers to connect to our network of Certified Dealers. We are building the industry’s most personalized and efficient car buying experience as we seek to bring more of the purchasing process online.

We have established a diverse software ecosystem on a common technology infrastructure, powered by proprietary data and analytics. Our company-branded platform is available on our TrueCar website and mobile applications. 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. We enable users to obtain market-based pricing data on new and used cars, and to connect with our network of TrueCar Certified Dealers. We also allow automobile manufacturers, known in the industry as OEMs, to connect with TrueCar users during the purchase process and efficiently deliver targeted incentives to consumers.

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. VIN-based offers provide consumers with price offers for specific vehicles from specific dealers. We benefit our network of TrueCar Certified Dealers by enabling them to attract these informed, in-market consumers in a cost-effective, accountable manner, which we believe helps them to sell more cars profitably. We benefit OEMs by allowing them to more effectively target their incentive spending at deep-in-market consumers during their purchase process.

Our network of TrueCar Certified Dealers consists primarily of new car franchises, representing all major makes of cars, as well as independent dealers selling used vehicles. TrueCar Certified Dealers operate in all 50 states and the District of Columbia.

Our subsidiary, TCDS, provides our TrueCar Trade and Payments products. Our Trade solution gives consumers information on the value of their trade-in vehicles and enables them to obtain a guaranteed trade-in price before setting foot in the dealership. This valuation is, in turn, backed by a third-party guarantee to dealers that the vehicles will be repurchased at the indicated price if the dealer does not want to keep them. Our Payments solution leverages the digital retailing technology of our DealerScience subsidiary, acquired in December 2018, to help consumers calculate accurate monthly payments.

During the three months ended June 30, 2021, we generated revenues of $65.8 million and recorded a loss from continuing operations of $7.1 million. During the three months ended June 30, 2020, we generated revenues of $58.6 million and recorded a loss from continuing operations of $11.4 million. During the six months ended June 30, 2021, we generated revenues of $130.9 million and recorded a loss from continuing operations of $15.5 million. During the six months ended June 30, 2020, we generated revenues of $137.5 million and recorded a loss from continuing operations of $21.8 million.

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COVID-19 Pandemic

Events surrounding the ongoing COVID-19 pandemic have resulted and will continue to result in significant economic disruptions. We continue to experience the negative effects of COVID-19 on our business, operations and financial results as reflected in the year over year decline in revenues, and we may experience further negative effects on our results of operations, financial condition and cash flows due to numerous uncertainties. In addition to vehicle inventory shortages caused by closures in OEM production facilities in the early days of the COVID-19 induced lockdown, OEMs have also been forced to cut production in the current year 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. The inventory shortage along with strong consumer demand may impact the decision of our current network of Certified Dealers to cancel or pause on our services and product offerings and could discourage new dealers from joining our network. Refer to Part II, Item 1A, Risk Factors, for additional disclosures of risks related to COVID-19.

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Key Metrics

We regularly review a number of key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make operating and strategic decisions.

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Average Monthly Unique Visitors	9,617,228		8,280,273		9,396,466		8,015,985
Units (1)	194,791		189,068		360,649		386,070
Monetization	$	336	$	290	$	361	$	342
Franchise Dealer Count	9,614		11,267		9,614		11,267
Independent Dealer Count	3,545		4,131		3,545		4,131