Truecar 2019 Annual Report

TrueCar Annual Report TrueCar Annual 2019 Report 2019 21MAR202019083747 Dear Fellow Stockholders, I am pleased to be writing this letter on the other side of my formal confirmation as TrueCar’s President and CEO, coming nearly three years to the day from when I first joined this organization. After spending 30 years in the automotive industry, I decided to join TrueCar because I believed in three fundamental truths: 1. The car buying process remained broken; 2. Whoever fixed it would reap significant economic reward; and 3. TrueCar was best positioned to do it. In 2019, we built the foundation. The velocity of product innovation here at TrueCar was truly unprecedented in the company’s history. We took huge steps towards modernizing our site experience, fueled by the technology replatforming investments from prior years, and supplemented by a refreshed brand identity. TrueCar’s employees demonstrated unwavering focus, accelerating us towards fulfilling our goal of dramatically improving the car buying experience. Now, I recognize the road ahead in 2020 will not be without its obstacles. First and foremost, at the time of this writing in mid-March, the full impact of the novel coronavirus remains unknown. Federal and local governments across the globe are taking extraordinary measures to contain the spread of the virus, protect their citizens, and stimulate their economies. During this time, TrueCar will act decisively to support our employees, partners and dealer customers, as we adjust to this changing economic environment. Second, later this year we will navigate the transition of our 13-year partnership with the United Services Automobile Association (USAA). While we remain laser focused on executing against near-term opportunities to replace a meaningful portion of the lost USAA unit volumes, we are prepared to make hard decisions, should they be required to preserve the business’s profitability. In any event, as we look toward the next 12 months, TrueCar’s Board of Directors and management team remain committed to responsibly stewarding stockholder capital. It may be hard to recognize at this moment in time, but to me it is clear: when we emerge on the other side of the coronavirus pandemic, and USAA’s departure later this year, the new TrueCar will in many ways be a much stronger business. Why do I believe that? For one, we will have reduced our reliance on a concentrated source of unit volumes that we did not control. Instead, roughly half of our unit volume will come from our TrueCar branded channel, with the other half spread across nearly 250 affinity partners. This diversification will help strengthen our company. And second, I am confident that our relentless pursuit of a best-in-class consumer experience will drive growth across our non-USAA channels. In 2020, we will build on last year’s momentum as we look to empower consumers with more control over their car buying experience. Moreover, we will accelerate our digital retailing efforts to meet the growing demands of consumers wanting to complete more of the transaction online, before entering the dealership, or in some cases, not entering the dealership at all. Our efforts will reinforce TrueCar’s position of providing the industry’s highest quality, most accountable, new and used car connections. In closing, we know that the challenges ahead of us are serious; but our employees stand prepared and resolved to face them head-on. As President and CEO of TrueCar, I would like to thank you, our stockholders—the owners of our company—for your continued support and trust, for investing in us, and for giving us the opportunity to run this great business. Warmest Regards, 23MAR202014312107 Michael Darrow 20MAR202022563583 President and Chief Executive Officer 21MAR202012295319 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 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 (I.R.S. Employer incorporation or organization) Identification Number) 120 Broadway, Suite 200 Santa Monica, California 90401 (Address of principal executive offices and Zip Code) (800) 200 2000 (Registrant’s telephone number, including area code) 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 Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No 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 an 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 Act). Yes No The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 28, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, was $528,887,252 based upon the closing price reported for such date on the Nasdaq Global Select Market. As of February 21, 2020, the registrant had 107,082,458 shares of common stock outstanding. Documents Incorporated by Reference Portions of the registrant’s Proxy Statement on Schedule 14A for the 2020 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. That Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2019. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part of this Form 10-K. TRUECAR, INC. FORM 10-K PART I 5 Item 1. Business 5 Item 1A. Risk Factors 12 Item 1B. Unresolved Staff Comments 41 Item 2. Properties 41 Item 3. Legal Proceedings 41 Item 4. Mine Safety Disclosures 41 PART II 42 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Item 5. Purchases of Equity Securities 42 Item 6. Selected Financial Data 44 Management’s Discussion and Analysis of Financial Condition and Results of Item 7. Operations 50 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 71 Item 8. Financial Statements and Supplementary Data 71 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 71 Item 9A. Controls and Procedures 71 Item 9B. Other Information 72 PART III 73 Item 10. Directors, Executive Officers and Corporate Governance 73 Item 11. Executive Compensation 73 Security Ownership of Certain Beneficial Owners and Management and Related Item 12. Stockholder Matters 73 Item 13. Certain Relationships and Related Transactions, and Director Independence 73 Item 14. Principal Accounting Fees and Services 73 PART IV 74 Item 15. Exhibits and Financial Statement Schedules 74 Item 16. Form 10-K Summary 78 Signatures 79 2 As used in this Annual Report on Form 10-K, the terms “TrueCar,” “the Company,” “we,” “us” and “our” refer to TrueCar, Inc., and its wholly owned subsidiaries, TrueCar Dealer Solutions, Inc., ALG, Inc. and DealerScience, LLC, unless the context indicates otherwise. TrueCar Dealer Solutions, Inc. is referred to as “TCDS,” ALG, Inc. is referred to as “ALG” and DealerScience, LLC is referred to as “DealerScience.” Special Note Regarding Forward Looking Statements This Annual Report on Form 10-K 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 like “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.

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