Painter: TrueCar’s Newest Acquisition & Funding to Help Dealers Sell Cars
As much as TrueCar’s Scott Painter wanted to discuss Wednesday’s newest acquisition and capitalization, the company’s founder and chief executive officer insisted to Auto Remarketing that the “bigger story” is about dealers.
Painter believes the retail side of the auto industry “has had its toughest four-year stretch in the last 110 years.
“I think the changing behavior of consumers, the volatility of gasoline prices combined with the uncertainty of the economy and the lack the available consumer credit — and even dealer credit in many cases — has really forced the modern retailer to reevaluate how they go to market, how they operate their dealership and how they can thrive and succeed going forward,” Painter shared Wednesday in a phone interview.
“At the end of the day, our partners a national network of 5,500 dealers around the country, we are focused on making them more profitable and helping them to retain margin and sell more cars,” Painter went on to say. “It really is the combination of appealing to the consumer in tough times but also providing a genuine solution to a dealer population that is absolutely foraging for anything that can help them thrive and succeed in the tough market.”
With that description as a backdrop, TrueCar made two more major announcements.
Coming on the heels of a recent transaction with DealerTrack Holdings, TrueCar wrapped up an acquisition of Carperks, a provider of vehicle purchasing and leasing programs, on the same day it secured up to $200 million in debt and equity financing.
“We are a bit of a contrarian business in that we are surging even in tough times,” Painter told Auto Remarketing. “It’s predominantly because when times are tough, people want to save money. That’s what we’re all about.”
The company has made numerous moves in just the past few weeks.
“The company has been growing at triple-digit rates since our inception. We’re a hyper growth company in that regard,” Painter insisted.
“We’re also transactional in nature. Today we represent about 1.3 percent of the new-car market and about 0.2 percent of the used car market flowing through our platform, which means in the month of August alone we did over 20,000 car sales on the platform,” Painter calculated.
“In terms of retail, if we were a dealer — which we’re not — that would make larger than AutoNation on the new-car side,” he went on to declare. “It’s a very scalable business. We anticipate that over the 12 to 18 months that our business can more than double and can do so for the foreseeable future, which is exciting.”
What Does Carperks Bring to the Table?
TrueCar’s acquisition of Carperks took about six months and came together without any significant obstacles, Painte pointed out. The TrueCar boss did not divulge specific numbers, but said it’s a predominantly cash deal and does involve some equity over time.
“The principals at Carperks will become part of the TrueCar team going forward,” Painter indicated.
“It was a very opportunistic thing for us in that because we monetize so much better than Carperks does and we were able to give them a premium to what the value of their business really was to them because the value to us was much, much higher. Sort of the definition of a great deal,” Painter explained.
Carperks leverages group buying power for the corporate employees and members of more than 1,000 highly regarded U.S. businesses and membership organizations.
Through its marketing programs, TrueCar highlighted that Carperks offers preferred new- and used-vehicle buying programs to employees of companies that include Coca Cola, Wells Fargo, Verizon, American Airlines, Macy’s, Home Depot and Sysco Corp. to name a few.
Employees of these companies are able to research and configure vehicles and obtain “Employee Pricing" discounts and special offers through the Carperks website and iPhone app.
“The Carperks audience is a perfect fit for our affinity auto buying solution — and TrueCar upfront pricing adds tremendous value to its customers,” Painter stated.
“With a real innovator like Carperks part of the TrueCar family we are able to further expand our intelligent automotive marketplace, benefiting millions more consumers and thousands of additional dealers in the process,” he continued.
On the heels of its purchase of ALG from DealerTrack, Painter said Carperks will provide TrueCar and its upfront pricing platform a new audience of more than 25 million employees throughout the United States as well as a strong cobranded association with some of the most venerable institutional employers in the U.S. Carperks is joining TrueCar’s already significant customer base and partnerships with well-respected affinity auto buying programs, including USAA, American Express, AAA, Consumer Reports and many others.
“The acquisitions we’re interested in fall into two categories,” Painter told Auto Remarketing. “They have to do directly with data as the ALG transaction did. Or they have to do with speaking with customers in the context of a conversation where we can talk about upfront prices and educate them as to what others are paying.
“We love the Carperks acquisition just because they are in direct dialogue with as many as 25 million employees in organic conversation where we can introduce our upfront pricing and our platform as a way of helping those members get a better car-buying experience and save money,” he continued.
“For us, it was really a perfect acquisition,” Painter added.
Carperks founder Don Wolfson declared, “This is the culmination of our dream here at Carperks — to make the car buying experience better for as many individuals as possible.
“As a part of TrueCar, we can more effectively serve our existing partners and most importantly, help save American families money during these challenging economic times,” Wolfson added.
Bernie Brenner, TrueCar chief strategy officer, insisted, “Today is an exciting time for those who recognize that upfront pricing and total transparency are crucial to the success of the auto retail business.
“A best-in-breed company like Carperks allows us to better reach out to more dealers and buying groups — helping drive new sales to the car industry as a whole,” Brenner stressed.
TrueCar Raises $200 Million
In other company news, TrueCar also announced Wednesday that it has secured up to $200 million in debt and equity financing. The company said a portion of the proceeds from this round of financing will be used to fund the development of new revenue streams, growth and strategic acquisitions.
“The fact we were able to raise money was more of a reflection of the fact that the business has reached an operation inflexion point where these kinds of things tend to happen quickly. Both acquisitions and new capital tend to galvanize around the performance,” Painter shared with Auto Remarketing.
“The company was not in need of cash, believe it or not,” Painter emphasized. “We’ve been profitable since 2009, and we were in a strong operating cash position. This is really about funding some future growth initiatives to increase revenue and expand our service offerings as well as to make additional acquisitions going forward.”
Participants in the financing include current investors USAA, Capricorn Investment Group and GRP Partners. Executives indicated the financing involved the conversion of all shares of TrueCar preferred stock for common stock on a one-for-one basis, and the issuance of common stock to investors in the round.
“Eliminating the liquidation preferences that come with preferred stock results in a clean capital structure and a single currency that makes acquisitions much easier. It’s a rare move for a privately-held company and reflects the confidence and support of all of our shareholders,” Painter noted.
Steven Dietz, of GRP Partners, surmised, “TrueCar has a performance track record of profitable, hyper-growth that is unique — especially in a tough economic climate.”
TrueCar went on to mention its new investors represent both strategic partners and financial firms that traditionally seek public company investments. Some of the high profile strategic investors in the equity financing include GR Match (an affiliate of Guthy-Renker), McCombs Family Partners and DealerTrack Holdings.
Financial investors in TrueCar include GSV Capital Corp., Passport Capital, International Investment House and Allen & Co.
“We believe that TrueCar represents one of the most compelling value propositions for consumers that are in the market to buy a new car. In addition to producing all direct response commercials for TrueCar which are scheduled to start airing in October, we were thrilled to align our interests further by investing in the company,” stated Boris Shimanovsky, president of GR Match.
TrueCar pointed out debt capital is being provided by Silicon Valley Bank.
“Our mission is to help entrepreneurial companies of all sizes succeed by providing creative financing solutions as well as industry knowledge and connections. TrueCar is on the right track with consistent growth, despite a tough economy. We look forward to continuing to work with them as they grow,” noted Mark Turk, managing director for Silicon Valley Bank in southern California.
This financing comes on the heels of two recent acquisitions made by TrueCar: Carperk and ALG.
“TrueCar has reached a point where we have an opportunity to forever change the car buying experience while also helping our certified dealers across the country,” Painter declared.
“The reality that consumers shop differently today than in the past, creating an opportunity to transform the entire system in a way that benefits both buyers and sellers,” he added.
TrueCar’s busy summer has included August sales through its marketplace of more than 20,000 vehicles — bringing the total number of vehicles sold since inception to over 350,000 resulting in total savings to consumers of just below $1.5 billion with an average savings of $4,154 off of MSRP.