Q1 2024 TrueCar Inc Earnings Call

Participants

Jantoon Reigersman; President, Chief Executive Officer, Director; TrueCar Inc

Oliver Foley; Chief Financial Officer; TrueCar Inc

Rajat Gupta; Analyst; JPMorgan

David Kang; Analyst; B. Riley Securities

Chris Pierce; Analyst; Needham & Company

Marvin Fong; Analyst; BTIG

Presentation

Operator

Good day, and welcome to the TrueCar first-quarter 2024 financial results conference call. Please note, this event is being recorded.
I would now like to turn the conference over to Jantoon Reigersman, President and Chief Executive Officer of TrueCar. Please go ahead.

Jantoon Reigersman

Thank you, operator. Hello, everyone, and welcome to TrueCar's first-quarter 2024 earnings conference call. Joining me today is the Olson Oliver Foley, our Chief Financial Officer. I hope you have all had the opportunity to read our most recent Total stockholder letter, which was released yesterday after market close and is available on our Investor Relations website at ir.truecar.com.
Before we get started, I need to read our Safe Harbor. I want to remind you that we will be making forward-looking statements on this call, including statements regarding our revenue growth, expected adjusted EBITDA, as well as our aspirational goals regarding our three-year plan.
Forward-looking statements can be identified by the use of words such as believe, expect, plan, target, anticipate, become, seek, will, intend, confident, and similar expressions and are not and should not be relied on as guarantees of future performance or results. Actual results could differ materially from those contemplated by our forward-looking statements.
We caution you to review the risk factors section of our annual report on Form 10-K, our quarterly reports on Form 10-Q, and other reports and filings with the Securities and Exchange Commission for a discussion of the factors that could cause our results to differ materially. Forward-looking statements we make on this call are based on information available to us as of today's date, and we disclaim any obligation to update any further forward-looking statements except as required by law.
In addition, we will also discuss certain GAAP and non-GAAP financial financial measures. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are set forth in the Investor Relations section of our website at ir.truecar.com. The non GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.
But with that, we get to the exciting part, I will provide a summary of the quarter as highlighted in our shareholder letter in Q1. We continued to deliver -- we delivered double-digit revenue growth year over year and achieved positive adjusted EBITDA.
Q1 revenue grew 11% year over year, driven by growth in our core dealer business and the continued strength of our OEM incentive revenue. We achieved adjusted EBITDA profitability of $0.9 million, a $12.3 million improvement year over year
Moreover, the supportive macro trends that we highlighted in the previous quarter, namely the normalization of new vehicle inventory and average day supply have continued their upward trajectory in Q1, reinforcing that franchise dealers increasingly need access to TrueCar's robust audience of new car shoppers in Q1 does show first drove strong new car sales across TrueCar franchise dealers who collectively saw a 7.3% year-over-year increase in new vehicle units, outperforming the interest industry's 4.9% year over year growth in new vehicle sales.
During Q1, we announced the expansion of our dealer product offering with the launch of TrueCar market solutions. DCMSTCMS. has a suite of a distinct products that leverage through projects, extensive proprietary data and hyper targeted audience to help dealers more effectively reach and win in market shoppers.
During the two months since launching TCMS., we have been encouraged by the over 350 dealers that have added one or more TCMS. products to their existing subscriptions and even more encouraged by the early indicators of the incremental value those products are delivering to them. We are actively working to bundle many of these GCMS products into our subscription offerings to accelerate adoption and drive additional value to our dealers.
While growing average revenue per dealer. As we expressed in our last letter, we remain steadfast in our pursuit to become the first digital marketplace where consumers can buy a new certified pre-owned or used car with or without a trade-in from the comfort of their couch through an entirely digital online transaction.
Moreover, we stated our goal of completing the first end to end digital transaction for the purchase of a new car in the first half of this year and have been hard at working at work solving the myriad of complexities that historically could only be solved through human intervention at one or more steps of the transaction, thankfully, through productive collaboration with forward thinking dealer group rich engagement with key stakeholders, including OEMs and the EMS providers and the learnings crane gained over the last two years, and we plan to launch a DC plus pilot later this quarter to finally, all first TrueCar shoppers, the ability to transact entirely online.
We expect that the BiDil launch with hundreds of used vehicles available to be purchased online by consumers nationwide and thousands of new vehicles across various brands available to be purchased online by consumers residing in California. In addition, only vehicle trade-ins will be also online vehicle trade-ins will be supported at launch, and consumers will have the option to secure financing from most lenders, including inclusive of most OEMs captive financing arms.
We anticipate running the pilot through the end of Q3 in order to incorporate and test key learnings while in parallel, we complete the development of certain key components that would enable us to quickly expand the scope of dealers and geographies throughout Q4. The objective of the pilot is to validate and refine one, the technical solutions we have developed to eliminate the need for human interaction across the consumer purchasing process from selecting the right vehicle to executing the binding retail installment contract to the extent to which a true digital transaction effectively integrates into a dealer's back-end system can unlock significant sales efficiencies for the dealer three, the Macan and the mechanism we have developed in the consumer flow to maximize the attachment rate on the dealer's F&I products.
And for the process, we have developed to digitally establish a competitive and accurate binding value for consumers trading that gets incorporated into the deal while mitigating the dealer's risks through backstop to the value achievement of these objectives will market critical milestone on our path to product market fit for T C plus and allow us to initiate the steps required to begin scaling to C plus more broadly in Q4 2024 To that end, as we've articulated before, our objective is not only to do to directly monetize DC plus in 2024, but to instead demonstrate the value it can drive for the ecosystem broadly for dealers, we intend to demonstrate how PC Plus expands their addressable market, allowing them to end consumers.
They would otherwise never reach while driving sales efficiencies. It grows their bottom line for consumers, we seek to demonstrated car-buying can in fact be done from their couch, whether new certified pre-owned or used for OEM.s. We aim to demonstrate that brand loyalty grows and consumers are no longer constrained by shopping inventory in their backyard, but convinced that shop for the best deals on the car they want, regardless of where it is in sum.
We believe that by demonstrating these core value propositions, we can create a powerful flywheel that will fuel the growth of PC Plus in 2025 and beyond and unlock new and powerful monetization opportunities for TrueCar back to our core business and our outlook for the near term. We believe that's the that the strength of our core business will help to maximize the success of TC. plus. And as such, we're in temporary and continue to focus on the following four building blocks to drive near term growth.
One continued to activate new dealers with a focus on regaining many of the franchise dealers that left the platform when new vehicle inventory was constrained to reduce dealer churn by doubling down on our commitment to help them drive incremental sales and providing them with unmatched support and service three continue to grow average revenue per dealer through TCMS. product offering and for grow OEM revenue by expanding our OEM partnerships and continuing to invest in highly effective incentive programs across our network of affinity partners.
Execution against these four building blocks provides us with a path to achieving our goal of returning the business to $300 million in revenue and a 10% free cash flow margin by the end of 2026 to that end, we aim to grow Q2 revenue by 13% year over year, while maintaining adjusted EBITDA target of breakeven. The primary reason for the lower lower revenue flow through quarter over quarter is our belief that the continued rise in new vehicle inventory day supply and OEM incentives represents an opportunity to profitably increase increase increase marketing spend in the quarter and capture a greater share of new vehicle shoppers for our franchise dealer network.
Given our operating leverage, we believe that by spending a greater share of revenue and paid marketing in Q2 while conditions are favorable, we can further accelerate our growth our revenue growth in the second half of the year and put us on the path to achieving positive free cash flow in Q4.
Finally, I would like to acknowledge the TrueCar team in team and our commitment to the future Truecar. We're building in pursuit of the best online experience for dealers and consumers. The team is making huge strides, overcoming structural roadblocks that in the past have impeded innovation in the automotive retail.
I also would like to thank TrueCar Board member, Erin Lantz for seven plus years of dedicated service to the organizations. We wish her the best and are excited that the Board has nominated Diego Rodriguez to fill her seat if elected Diego's decades of experience integrating business design and technology at the very highest levels of industry will be invaluable to the next phase of TrueCar's lifecycle, having most recently served as its Chief Product and Design Officer. And prior to that as a senior partner at IDEO, Diego will be tremendous assets for TrueCar and our mission to deliver the first ever car-buying digital marketplace now.
Operator, let's open the call for questions from our analysts.

Question and Answer Session

Operator

We will now begin the question and answer session. (Operator Instructions) Rajat Gupta, JPMorgan.

Rajat Gupta

Great. Thanks for taking the questions. Firstly, just on the second quarter comments, you highlighted the lower incremental drop-through. You know, you know, from from some of the U.S. planned marketing investments and accelerated growth in the forward quarters.
If you look at typical seasonality on the top line, it seems like you would be on track for mid to high-teens year-over-year revenue growth in the second half given where the basis for revenue in the first quarter and wondering if you could share how these are incremental investments, it could change that cadence going forward? And how should we think about, you know, the incremental EBITDA on the incremental revenue in the second half as well. And I have a follow-up.

Jantoon Reigersman

You're right, John, that Oliver here go at all or would you want to take the seven?

Oliver Foley

Yes, good, good to kind of and I would say as we articulated in the first quarter, we do anticipate to see an acceleration in our revenue growth over the course of the year. And so the 13% that we're projecting in that in Q2 with an incremental investment in marketing spend will hopefully get us towards the high 10s in the back half of the year.
Now in terms of flow through that and sort of what the EBITDA looks like in the back half of the year. I think what we've demonstrated over the past two quarters is sort of the operating leverage that that may have. And so I think what we'd love to see in Q2 is the extent to which we can grow marketing spend and drive more incremental units to our dealer partners continue to see growth in our PT through the expansion of our expanded product offering. And Tom, I like to believe that the ideal range of marketing spend as a percent of revenue is sort of between the 34% and 36%, whereas in Q1, you were closer to 31%. So if we can, we'll get closer to that 35%. I think in the second half of the year, we should see pretty strong flow through them through the expanded RPT.

Rajat Gupta

Got it. Got it. That's helpful on trend. And as a follow-up, just on the franchise dealer count, that was down slightly sequentially on what drove that decline, you know, was it like, you know, in some deals with some dealer churn because of the newer pricing and, you know, some of the new bundles of what drove that and how should we think about, you know, that dealer count going forward or maybe any quarter to date or quarter to date trends in April that you can provide us to, you know, to help us to open format. Thanks.

Jantoon Reigersman

Yes, absolutely. So so and the answer is, and I think we already mentioned it in the past where it's like. We feel like it's a little bit of give-and-take, right in the vast number of the number of dealers talking about. These are fairly small deltas, but long story short, I think with resetting the markets as they are, it's still somewhat unequal throughout the country.
And I think if we if we do a little bit of self reflection, I think we probably have not been serving good enough some areas of the country and provide the sufficient effectively leads to those dealers in some certain areas and probably over providing in other areas. And so you'll see that there are certain places where some of the dealers have churn in the past because they feel like even though they're there, they're kind of in need of the service.
They've not been served as well as we could have. And so I think there are some areas where that has occurred and I think we know exactly what we need to do to help that. That is also one of the reasons why we're focusing in one of the building blocks of that argued, which is a much better form of service effectively when you think about this one of the four building blocks. So that's number one.
And number two is I think there is a for the franchise dealers. And obviously, the new growth rate that we're doing and the new new-car sales and inventory buildup, I think there's a huge opportunity for them to to for us to prove ourselves effectively to them.
And so overarching, I don't look at the rooftop numbers very often in the sense that and there will always go fluctuate a little bit. What I do know is that we're now effectively through the worst of all of that and we're ready to to really recapture a lot of the market share that we've lost over the last couple of years.
And the one that obviously is much harder to control the indie side and the indie side, it will stay fluctuating because obviously a lot of players on the energy side, the churn off will go either go out of business or a part of consolidation, et cetera. So obviously in a fast moving macro environments, and that is a little bit harder to predict. But overarching, I think we have a we have a really good shot at the it growing back our franchise and at the revenue side.
And can you reiterate, Mike, I wanted to add one more thing on the previous question, which was remember that's in the flow throughs and there's marketing people and effectively back-office G&A is the three buckets of cost that we have in the business.
And so we have been relatively constrained in terms of marketing deployment over the last couple of years because really what would read it didn't really make a lot of sense to push on the top of funnel too much in a world where there was not a lot of inventory to go against and now that inventory is coming back, I think we're seeing a much better and ability to deploy marketing dollars really efficiently. And so as a result, I think if you think about those buckets.
Yes, utilizing that now also sets us back up for the future, especially in a world where obviously unaided brand awareness for us has decreased over time, and we want to start recapturing that somewhat as well. So across the board, I think starting to redeploy or along the marketing lines is going to be an important piece for us. And we will obviously want to do that very efficiently, so in all of our countries.

Rajat Gupta

Great. Thanks for the color.

Operator

Tom White, D.A. Davidson.

As this is why on for Tom, thanks for taking our questions. I just have a quick one on TrueCar marketing solutions. I think you mentioned that over 350 dealers have added a TTMS. product to their existing subscription. Can you just give us some color on your expectations for adoption over the course of 2024 and maybe the impact to financials as more dealers adopt the product? Thanks.

Oliver Foley

Sure. Yes. So we have had roughly 350 dealers adopt one or more of our TMS products and I mean, we're certainly encouraged by that. Like we articulated in the letter. We haven't yet incorporated these into our bundles, so they are available as add-ons to subscriptions.
But ultimately, we want these products to be part of our are our bundled offering because at that point you have greater adoption. I think our outlook for the rest of the year is that we would love to see a majority of our dealers leveraging these products because we frankly, we think that they they do truly help them either gain additional visibility on the platform or strengthen the quality of the leads that they get from the platform. And so we truly believe that these will help dealers get a stronger ROI and ultimately that will lead to a stickier product, better retention. But I think the way that we monetize it is through higher RPD and so on.
My expectation over the course of the year is that each quarter, we'll see sort of sequential gains in RPD, primarily driven by adoption of the GCMS. product.

Okay. Got it. Thank you.

Operator

David Kang, B. Riley Securities.

David Kang

And Claude, a couple of questions from maybe just on the on the increase in marketing spend in the second quarter and talk about if this is going to be more performance based marketing versus brand and potential payback period on that? And then maybe just on the on the incentive revenue, if you're kind of approaching the range that you are have you had full incentive revenue pre pandemic on. How should we think about growth from these levels? What kind of visibility do you have in terms of driving this further from here term.

Oliver Foley

But why don't I take the first one, some of it? And just as it relates to marketing in terms of sort of the specific payback period or the channels through which we'll be deploying these dollars. I think what we need to do in sort of strike a balance between them sort of fee and the lower funnel performance marketing that drives an efficient cost per sale and really strong ROI for TrueCar and what's best for our dealer partners.
And what I mean by that is if we're constantly optimizing our performance, marketing spend on a cost per basis, right, trying to get the lowest cost cost per click, driving the lowest cost per sale. I think you'll ultimately see some optimizations that that and part necessarily good for the overall dealer network. An example of that is Google can be driving the lowest cost per sale in a particular DMA and certain subsets of our franchise and the dealers are getting a ton of leads and a ton of sales.
But now by doing that, we're effectively not living up to our promise or not fulfilling our value proposition to other dealers in the network. And so what we need to, I think, do a better job at and what ultimately will really I think improve dealer churn. He's thinking more holistically about how do we ensure performance is strong across the network. And so yes, we're going to continue to invest in those lower funnel campaigns to really drive incremental units through the platform. But we want to make sure that we're also now supporting dealers across the country across different DMAs across brands set and in doing that, we think that will really improved churn.
And then the second question was on OEM., right. Jim, do you want to take that data that they repeat the question, just so I make sure that correctly.

David Kang

Yes. So the OEM incentive revenue has been pretty strong for you guys. I mentioned where the bank where the average incentive used to be pre-pandemic, you're kind of approaching the lower end of that band. Just wondering where do you think it can go from these levels and what kind of visibility do you have at TrueCar in terms of driving is the revenue line up from here?

Jantoon Reigersman

Yes, the very So very good question. So the so look, we're very we're obviously very bullish on the OEM line in general in the long term, we feel that there's a lot of opportunity, obviously for OEMs to help support their dealer networks and especially obviously with high interest rate environment, consumers need all the help they can get vis a vis acquire if we feel to be buying cars. And what's hard to predict is like all of the near to midterm you we have running we always have a really running strong pipeline in general.
And but OEM revenue comes in or call it like a little bit of bulky programs and programs are often finite in time. And so they come they go. They fluctuate a little bit. It's less around regular sales that you effectively build up and building blocks and further build up on your MRR effectively. And so there's always a fluctuation in terms of the revenue lines. It's hard to predict those. You know what you have in the pipeline and the pipeline is strong.
The question then is when do they kick in? When do OEMs decide to actually participate in certain programs, some programs are more effective than others. Some we tried certain things and it might not actually work and some overachieve. And so it's a little bit more bulky in nature.
And so we do less of an effort to really tried to predict is shorter, but we're very confident in the long-term. So don't be surprised, right, like historically where sometimes quarter over quarter are some fluctuations in terms of volume and revenue, but it doesn't take away that we feel that in the long run, OEM revenue should should supersede effectively what we used to be doing pre pandemic.

David Kang

Got it. That's helpful. And then maybe just a clarification on the on the marketing spend. I'm assuming that the increase in most of the increase in the marketing would be going towards the direct channel versus part number? Correct me if I'm wrong. And then maybe just talk about the conversions on the website. How hard how are they versus where they've been historically have improved are they below was level?

Jantoon Reigersman

Yes. So our conversion cycle, as on I'll take another city. The short answer is and it will mostly be direct. And I think there are certain programs we're running with the partners, but they those are fairly steady going. So this is really about more engaging on the direct side and overarching And for us, conversions have been improving and continue to improve.
And it's obviously something we're also very, very focused on. And we feel that now that the market is and the market in general and the macros more normalizing. It also allows us to start utilizing more of the tools we have at our disposal around consumer experience that again driving really end to end funnel efficiencies.
And so this is something we're now really going to deploy a little bit more towards, especially in a world where obviously the Googles of this world have been changing a little bit of the performance marketing landscapes. And so the marketing the work two, three years ago is not per se, working the same way and now and so and we're also obviously getting much more sophisticated around it, but it's mostly direct and on.
And we think we have a huge opportunity given also the way we capture consumers the way consumers behave on the site and our level and intelligence we have and data we have around that. We think we can do a better job marketing than we have done historically.

Operator

Thank you. Chris Pierce, Needham & Co.

Chris Pierce

Hey, good morning. Going back to the first question and franchise dealers, can you kind of talk about what you're doing in those geographies where maybe they're franchised, you are kind of at higher churn. What are some things that you can do to kind of reintroduce the newer product to those dealers and is TrueCar plus sort of part of that playbook? Or is that sort of not related now to group losses?

Jantoon Reigersman

Not related to TrueCar plus really is, I think think of it as as a Red Lake as I'd like it, they can. They can really separate business line effectively for now. And in some ways, I feel a little bit schizophrenic and I think I've mentioned it to use in the past, which is like a field schizophrenic because there are days where I feel like I'm a Series D venture, PRODUCT CYO. as opposed to a public company, CEO when it comes to to core-plus. And then obviously, we have the core business.
So at TrueCar plus the thing will be applicable. Obviously, to especially initially to some of the larger dealer groups probably initially. And so when we're talking we're talking about the franchise, dealers really am if you think of it as and this is the block we were mentioning, right where we've had. We obviously have a large amount of dealers on our platform. We've been running a series of these dealers a little bit on autopilot, some of these groups, especially the ones that are and not necessarily and in high high-growth markets effectively have probably been somewhat neglected.
And so now that the the the market is coming back and inventory is coming back, et cetera. We effectively have to be more on top of them and really help them and help them in training and help them in insights and all these type of things. And I think we've done I was probably six months ago or so, we've made a big shift internally where we really emphasize both the sales and service side.
And we've had a very strong service leader come in. We have a very strong service team now, and they are constantly thinking about the gate, how often do we touch our dealers, what do we provide and what form do we provided? What does the service we provide, et cetera.
So the whole notion of the way we are servicing our book has dramatically changed over the last six months, and it is obviously having really good fruit in the form of dealers being very excited about what we're doing, but it also means that and you're realizing that there are some dealers we probably have not serviced as well as we could have. And obviously, in some of those areas, we're going to do a much better job.

Chris Pierce

Okay, perfect. And then we see volumes trending on marketing would be through your income statement hit due to increased incentive spending and how we see you guys turning on marketing to kind of drive more units to dealers. Is there any sort of magic bullet or why or why have dealers so return on marketing, and I'm just kind of curious the disconnect given what we see in the industry and what we see as far as inventories.

Jantoon Reigersman

And the honest answer to that, I think is just a Big Lake OEM.s are just very thoughtful, long-term footfall and obviously have achieved interesting P & L's over the last couple of years were right like they've they've become very, very efficient because they didn't really have to support.
And it's very hard to start have to start supporting again, right back to what normalized was in a world where the last couple of years, a lot of a lot of these OEMs have been saying that dose was the new normal. And so I think just like redeploying capital for them is just a little bit harder.
And so there's a little bit of a lagging effect, but we clearly are seeing it because once you walk into those stores with the appropriate data. And obviously, we have a lot of data across the different brands. You you start seeing also just which OEMs are a little bit more responsive to the macro environment.
Which ones are eager more eager to really maintain like longevity of relationship with our customers, right? So if you're if you are a three times same car buyer and you're walking in for the fourth time, are you going to be sophisticated about that? Or do you not really care as an OEM and so there it is a balancing act and each OEM has a very different identity in a very different view and a very different strategy around that.
And so and we have these open dialogues and reprice. We tried to accommodate each of those alone will with data, we provide arguments on why we think certain progress makes sense depending on their characters and views.
And then the other thing is also we obviously tried to make them match also potentially with some of our affinity partners as well if there are certain programs there. So but these things take a little bit of time but the main reason is just them lagging of realizing what's happening around a slight unwillingness to over deploy too soon and kind of wait and see mode. And I agree with you that I would have expected that to come a little bit faster in general as a macro thing, although I think we are we are doing a really good job of capturing capturing share.

Chris Pierce

Okay. Thank you.

Operator

Marvin Fong, BTIG.

Marvin Fong

Good morning. Thanks for taking my questions on. I'd like to just start on the independent channel. So I think in the shareholder letter, you wrote that you were seeing signs of that channel bottoming out. And yet in the earlier comments, Jantoon I think you were saying that still a little bit unpredictable with bankruptcies and consolidations. So maybe just kind of along those square those two online that part, I mean, is there actual positive inflection in independent dealer count that you're seeing or just expand on that for a little bit?

Jantoon Reigersman

Yes, it is just that the I think the remark is more towards like the fluctuations. It's never really a perfect line and it depends a little bit on the months. And it's and so it's just harder to predict given the sizing of the type of dealer. So right, a dealer count a if a dealer is a dealer. And even despite the sizing or effectively revenue or monetary value, it brings to us. So the comment was much more around the fluctuation and just the heart, but it's hard to predict that even though more broadly, it seems that the world is stabilizing around. That doesn't mean that like it on a month-by-month basis, it's a it's hard to predict. So it's it's really more about the volatility than it is about the overarching trend.

Marvin Fong

Got it. Okay. Thanks for clarifying that. And a question just on TCMS. and I think, Oliver, you were mentioning that it should be an RPD. driver and I realize it's early and you don't want to be too specific, but could you could you maybe just kind of frame the the RPD lift opportunity, like how much lift would you get from a dealer who only subscribing to like one or two products versus one that might be doing? Or if I just maybe dimensionalize that for us a bit and be helpful. Thanks.

Oliver Foley

Certain items. So as you can imagine, it is hard to predict, not only because it's it's early on, but because the products are are all very different, right. And so there are some products that are on that are really good candidates for large dealer groups.
Let's just take a TrueCar preferred military partner, right? That's a it's a a much higher ticket product. And it works really well for larger dealer groups where they can sort of gain access to a the military community and the locations that they are, whereas auto intro for instance or time path are much more programmatic. They're good for really any dealer that's looking to enhance the quality of leads that they get from the platform. So they're there really and all priced very differently.
And so it's not only sort of the the total adoption of TCMS. products, but really which ones gain most traction. So it's hard to say what the ERP impact would be on over the course of the year. But I think we should we should expect through a combination of selling some of these fees fees, call it larger ticket GC/MS products like TrueCar Military and then also incorporating some of the other products into our bundled offering. We should see sort of each corner as adoption grows that PD. will go up.

Marvin Fong

How much?

Oliver Foley

No, I'm not quite willing to say say how much that will be.

Marvin Fong

Okay. That's perfectly understandable. Thanks so much, guys.

Operator

Rajat Gupta, JPMorgan.

Rajat Gupta

Thanks for squeezing me back in. I just had like one follow-up on that. Two-part was could we get a little more color around like the partnerships that you're working on, you know, both on like the dealer and taking on relationship and maybe like any more color you can give on like the OEM.s they are engaging with, you know, as you build this product out of the even on the dealer side, you know, are these like larger groups or are there like a part of a larger group? Or are these like really like a small stores? I'm just curious if you could give us any more color around how that's evolving?

Operator

Yes. Absolutely absolutely that. So the for the for the for the pilot itself, and we're working with specific dealer groups who have historically been very, very progressive and mention that obviously on the new side will focus on California initially is really because we want to make sure we we are somewhat constrained from a geography perspective, obviously. And the California consumer is probably also interest more interested and more likely to transact online.
That's obviously close to Silicon Valley and associate divisions. And also it helps us then be with the interest we may receive in OEM.s sort of like everybody is engaged and excited without necessarily making sure that we we intervene with the business of other dealer groups effectively or start getting into their DMA unnecessarily at the start as we prove this out.
So the good thing is that all these stakeholders are really excited. They're curious, I think everybody agrees that this is the way to go. I also think and I think it's really important to emphasize this.
There are still some reluctance in the industry at times whether this comes at the expense of dealer groups. And I'm not sure that I agree with that. I think really this is helping dealer groups expand their footprint and their ability to actually drive margins. And for the consumer.
It's something that the consumer's been asking for and have for a long time and obviously both in our TrueCar plus product, but even in the way people are purchasing online today. So it's really DMS providers, LMS providers, it's obviously logistical companies, captive lenders, et cetera, all coming together, initially launching it with one group really to further refine because what you need to do is you need to merge de-merge documents, make sure that the documents all correct. Rebates are correct, calculated correctly, right. Obviously that the logistical and delivery is done correctly, et cetera.
So there's a lot that comes together, especially on the new side, a new site has a very, very different complexity then on the used side. And so we will be nationwide on the used side. I'll buy that. The inventory will be slightly small on the new side will focus on California.
And to your question on scaling it, I think we will end up doing at the end of the year and obviously into the next year is the scaling will probably happen with like mid-size to larger dealer groups in general and writing 25 stores, 30 stores, 50 stores type groups and most because of the most often because they are just very, very progressive when it comes to their deck but also very progressive when it comes to their adoption to product flows and organizational really workflows for that matter.
And so and being almost too large, it's a little bit of an impediment that you need to really rethink your overarching infrastructure, but does seem to be the sweet spot. And so those that will be the sweet spot where we're going to focus on initially as we start scaling this. But before we do want to just prove this out in terms of just technical deployment and work out the bugs that might occur right where people get stuck in some shape or form of of random scenarios, we might not have sold off in the past. And so we're going to do that over the course of the next quarter and then obviously scale from there. But mid-sized group mid-size to large-size group is what is important.

Rajat Gupta

Got it. Got it. Great. Thanks for all the color and good luck.

Operator

Thank you. This concludes the question and answer session. I would like to turn the call back over to John too for closing remarks.

Jantoon Reigersman

So thank you, everybody, for taking the time to participate in our call. And I in particular, want to thank the team. It's incredible to see the continued effort and hard work without our people. None of these results are and are possible ever. And so with gratitude, thank you for everyone, and thank you for being part of our journey.

Operator

As now concluded. Thank you for attending today's presentation. You may now disconnect.