Fading U.S. autos site TrueCar announced a major shake-up Wednesday, laying off 102 people — 24% of its staff — and replacing its CEO.
Jantoon Reigersman
Mike Darrow, who was at TrueCar for six years, including the last four as CEO, vacated both his post and his seat on the board of directors. COO Jantoon Reigersman, who has been with TrueCar for two years, initially as CFO, became president and CEO.
The layoffs will cost the company $7 million U.S. in severance payments — mostly during the second and third quarters of this year — but will net annualized cost savings, not including stock-based compensation, of more than $20 million, according to a company statement.
At the end of last month, TrueCar had a positive balance sheet of $147 million, but this may dip below $125 million in the near term, the company said. Nonetheless, the company is sticking to the forecast it made at the start of this year that it would turn adjusted EBITDA positive and achieve double-digit year-on-year revenue growth in Q4 of this year.
TrueCar shares were worth $2.47 as the Nasdaq closed Wednesday, but in the wake of the company’s announcement, the price surged 12% in after-hours trading.
Mike Darrow
“The restructuring announced today better aligns our cost structure with our revenue base and is designed to make TrueCar a nimbler, more efficient company,” incoming board chairwoman Barbara Carbone wrote in the announcement. “We made this difficult decision after an extensive review and believe that it is necessary to enable TrueCar to achieve its strategic priorities and create long-term shareholder value.”
“Jantoon … has worked tirelessly to ensure TrueCar’s success and improve its financial condition. The Board is confident that he is well suited to successfully navigate a challenging macroeconomic environment while positioning the Company for profitable growth,” Carbone added. “He has a clear vision for TrueCar’s future, and I and the rest of the Board look forward to working together with him to execute on it.”
The change comes after a string of disappointing earnings statements. Although TrueCar posted flat quarter-on-quarter revenue in Q1 of this year — $37 million — sales were in freefall during the previous seven quarters, and the company hadn’t posted a positive bottom line since Q2 2021. In fact, TrueCar’s revenue has been on a downward trend since Q2 2018, when it peaked at $940 million.
Darrow’s tenure has been marked by a number of challenges, including the shutdown of dealerships during the pandemic, but more critically, the loss of its car-buying program with the veterans organization The United Services Automobile Association or USAA — a 13-year relationship that accounted for more than a quarter of TrueCar’s revenue at its peak.
When USAA cut ties with TrueCar in 2020 — a surprise move, TrueCar told investors — the web company was forced to terminate 220 workers or 30% of its headcount.
The company had hoped to fill the hole through affiliations with other groups, but these haven’t materialized.
TrueCar has lately pinned hopes of a turnaround on its online sales platform TrueCar+. First piloted in Florida in Q3 2021 and rolled out to other states in the Southeast late last year, the program appears similar to ones rolled out by Cars.com and Cox Automotive years earlier. And while digital retail was the talk of the industry during pandemic lockdowns, it is now viewed as just another tool to augment traditional sales.
“On behalf of the Board of Directors, I thank Mike Darrow for his steadfast leadership and many contributions to TrueCar, including leading us since 2019 through unprecedented challenges for our company and industry,” Carbone wrote. “We are grateful to him for his passion and dedication to TrueCar over more than six years of service and wish him all the best.”
