TRUECAR, INC. The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes to those statements included herein. 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 those discussed under "Risk Factors" and elsewhere herein. 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 ourTrueCar 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 , andAAA ; 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 withTrueCar 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 ofTrueCar 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 theDistrict of Columbia . Our subsidiary, TCDS, provides our Trade and Payments solutions. TCDS also supports our Sell Your Car product. Our Sell Your Car and Trade solutions give consumers information on the value of the vehicle they wish to sell or trade-in and enables them to obtain a guaranteed 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 from our DealerScience acquisition to help consumers calculate accurate monthly payments. Finally, our former ALG subsidiary provided forecasts and consulting services regarding determination of the residual value of an automobile at given future points in time. These residual values are used to underwrite automotive loans and leases to determine payments by consumers. In addition, financial institutions use this information to measure exposure and risk across loan, lease, and fleet portfolios. OnNovember 30, 2020 , we divested ALG toJ.D. Power . See Note 5 to our consolidated financial statements included herein for further details.
During the year ended
Market Environment
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. OEMs have been forced to cut production 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. At the same time, wider economic inflation has led to theFederal Reserve raising interest rates, which along with the expectation for future rate hikes are starting to have their intended impact on theU.S. economy. Domestically, consumers are concerned about inflation and while employment remains strong, a possible recession stemming from tighter monetary policy is also weighing on consumer sentiment. Higher interest rates could also reduce consumer demand by making vehicle financing more expensive and reducing the amount of 53 -------------------------------------------------------------------------------- Table of Contents inventory purchased by dealers due to higher financing costs. The inventory shortage along with pressure on consumer demand may impact the decision of our current network of Certified Dealers and OEMs to cancel or pause our services and product offerings and could discourage new dealers and OEMs from joining our network. Refer to Part I, Item 1A, Risk Factors, for additional disclosures of risks related to COVID-19, the global automotive semiconductor chip shortage, and rising interest rates.
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.
Year Ended
December 31,
2022 2021 2020
Average Monthly Unique Visitors 7,371,898 8,636,501 8,354,082
Units (1) 340,940 607,667 766,413
Monetization $ 472 $ 380 $ 352
Franchise Dealer Count 7,924 8,482 10,589
Independent Dealer Count 4,148 4,013 3,794
(1)We issued full credits of the amount originally invoiced with respect to
7,736, 14,912, and 17,655 units during the years ended
Average Monthly Unique Visitors
We define a monthly unique visitor as an individual who has visited our website, our landing page on our affinity group marketing partner sites, or our mobile applications within a calendar month. We identify unique visitors through cookies for browser-based visits on either a desktop computer or mobile device and through device IDs for mobile application visits. In addition, if a TrueCar.com user logs in, we supplement their identification with their log-in credentials to attempt to avoid double counting on TrueCar.com across devices, browsers and mobile applications. If an individual accesses our service using different devices or different browsers on the same device within a given month, the first access through each such device or browser is counted as a separate monthly unique visitor, except where adjusted based upon TrueCar.com log-in information. We calculate average monthly unique visitors as the sum of the monthly unique visitors in a given period, divided by the number of months in that period. We view our average monthly unique visitors as a key indicator of the growth in our business and audience reach, the strength of our brand, and the visibility of car-buying services to the member base of our affinity group marketing partners. The number of average monthly unique visitors decreased 14.6% to approximately 7.4 million for the year endedDecember 31, 2022 from approximately 8.6 million for the year endedDecember 31, 2021 . The decrease was due to our lower marketing spend deployed as a result of constrained dealer inventory during the year endedDecember 31, 2022 .
Units
We define units as the number of automobiles purchased from TrueCar Certified Dealers that are matched to users of TrueCar.com, ourTrueCar -branded mobile applications or the car-buying sites and mobile applications we maintain for our affinity group marketing partners. A unit is counted after we have matched the sale to aTrueCar user with a TrueCar Certified Dealer. We view units as a key indicator of the health of our business, the effectiveness of our product and the size and geographic coverage of our network of TrueCar Certified Dealers. On occasion, we issue credits to our TrueCar Certified Dealers with respect to units sold. However, we do not adjust our unit metric for these credits as we believe that in most cases a vehicle has in fact been purchased through our platform given the high degree of accuracy of our sales matching process. Credits are most frequently issued to a dealer that claims that it had a pre-existing relationship with a purchaser of a vehicle, and we determine whether we will issue a credit based on a number of factors, including the facts and circumstances related to the dealer claim and the level of claim activity at the dealership. In most cases, we issue credits in order to maintain strong business relations with the dealer and not because we have made an erroneous sales match or billing error. The number of units decreased 43.9% to 340,940 for the year endedDecember 31, 2022 from 607,667 for the year endedDecember 31, 2021 . The unit decrease was primarily due to lower automobile inventory levels resulting from the global semiconductor chip shortage. 54 -------------------------------------------------------------------------------- Table of Contents Monetization We define monetization as the average transaction revenue per unit, which we calculate by dividing all of our transaction revenue (dealer revenue and OEM incentives revenue) in a given period by the number of units in that period. Our monetization increased by 24.2% to$472 during the year endedDecember 31, 2022 from$380 during the year endedDecember 31, 2021 , and was primarily due to a higher unit mix shift to used cars that provide higher monetization than new cars, a higher monetization associated with franchise and independent dealer subscription arrangements, and the additions of our Sell Your Car and Distance Retailing offerings in 2022. Franchise Dealer Count We define franchise dealer count as the number of franchise dealers in the network of TrueCar Certified Dealers at the end of a given period. This number is calculated by counting the number of brands of new cars sold at each individual location, or rooftop, regardless of the size of the dealership that owns the rooftop. The network is comprised of dealers with a range of unit sales volume per dealer, with dealers representing certain brands consistently achieving higher than average unit sales volume. We view our ability to increase our franchise dealer count, particularly dealers representing high volume brands, as an indicator of our market penetration and the likelihood of converting users of our platform into unit sales. Our TrueCar Certified Dealer network includes independent non-franchised dealers that primarily sell used cars and are not included in franchise dealer count. Our franchise dealer count decreased to 7,924 atDecember 31, 2022 from 8,482 atDecember 31, 2021 and from 10,589 atDecember 31, 2020 . The decline in franchise dealer count was primarily due to certain franchise dealers scaling back their spending on marketing as a result of automobile inventory shortages.
Independent Dealer Count
We define independent dealer count as the number of independent dealers in the network of TrueCar Certified Dealers at the end of a given period that exclusively sell used vehicles. This number is calculated by counting each location, or rooftop, individually, regardless of the size of the dealership that owns the rooftop. Our independent dealer count increased to 4,148 atDecember 31, 2022 from 4,013 atDecember 31, 2021 and from 3,794 atDecember 31, 2020 . 55
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Non-GAAP Financial Measures
Adjusted EBITDA is a financial measure that is not calculated in accordance with generally accepted accounting principles inthe United States , or GAAP. We define Adjusted EBITDA as net income (loss) adjusted to exclude interest income, depreciation and amortization, stock-based compensation, (gain) loss from equity method investment including impairment charges, certain litigation costs, certain restructuring costs, certain transaction costs, changes in the fair value of contingent consideration liability, goodwill impairment, other income, lease exit costs, impairment of right-of-use assets, and income taxes. We have provided below a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure. Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other measure of financial performance calculated and presented in accordance with GAAP. In addition, our Adjusted EBITDA measure may not be comparable to similarly titled measures of other organizations as they may not calculate Adjusted EBITDA in the same manner as we calculate this measure. We use Adjusted EBITDA as an operating performance measure as it is (i) an integral part of our reporting and planning processes; (ii) used by our management and board of directors to assess our operational performance, and together with operational objectives, as a measure in evaluating employee compensation and bonuses; and (iii) used by our management to make financial and strategic planning decisions regarding future operating investments. We believe that using Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis because it excludes variations primarily caused by changes in the excluded items noted above. In addition, we believe that Adjusted EBITDA and similar measures are widely used by investors, securities analysts, rating agencies and other parties in evaluating companies as measures of financial performance and debt service capabilities. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
• Adjusted EBITDA does not reflect the receipt of interest or the payment of income taxes;
• Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditures or any other contractual commitments; • Adjusted EBITDA does not reflect the costs to advance our claims in certain litigation or the costs to defend ourselves in various complaints filed against us, which we expect to continue to be significant;
• Adjusted EBITDA does not reflect the severance charges associated with restructuring plans;
• Adjusted EBITDA does not reflect the impairment charges on our right of use ("ROU") assets associated with subleasing;
• Adjusted EBITDA does not reflect the legal, accounting, consulting and other third-party fees and costs incurred by us in connection with the evaluation and negotiation of potential merger and acquisition transactions;
• Adjusted EBITDA does not consider the potentially dilutive impact of shares issued or to be issued in connection with stock-based compensation; and
• other companies, including companies in our own industry, may calculate
Adjusted EBITDA differently than we do, limiting its usefulness as a comparative
measure.
Because of these limitations, you should consider Adjusted EBITDA alongside
other financial performance measures, including our net loss, our other GAAP
results, and various cash flow metrics. In addition, in evaluating Adjusted
EBITDA you should be aware that in the future we will incur expenses such as
those that are the subject of adjustments in deriving Adjusted EBITDA, and you
should not infer from our presentation of Adjusted EBITDA that our future
results will not be affected by these expenses or any unusual or non-recurring
items.
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The following table presents a reconciliation of net (loss) income to Adjusted EBITDA for each of the periods presented:
Year Ended
December 31,
2022 2021 2020
(in thousands) Reconciliation of Net (Loss) Income to Adjusted EBITDA: Net (loss) income
$ (118,685) $ (38,329) $ 76,544 Income from discontinued operations, net of taxes - (40) (96,383) Loss from continuing operations (118,685) (38,369) (19,839) Non-GAAP adjustments: Interest income (2,565) (52) (462) Depreciation and amortization 16,520 16,279 20,547 Stock-based compensation 17,681 20,395 23,077 (Gain) loss from equity method investment (1) (1,845) 5,404 1,989 Certain litigation costs (2) - - (1,939) Restructuring charges (3) - - 8,346 Transaction costs (4) 1,200 - - Change in fair value of contingent consideration liability 359 41 182 Goodwill impairment (5) 59,775 - 8,264 Other income (40) (667) (198) Lease exit costs (6) 214 - - Impairment of right-of-use ("ROU") assets (7) - 1,652 2,136 Provision for (benefit from) income taxes (2,560) 206 (6) Adjusted EBITDA$ (29,946) $ 4,889 $ 42,097 (1)The excluded amounts include a$1.8 million gain from changes in fair value of a derivative asset recognized from the sale of our equity method investment in Accu-Trade during the first quarter of 2022, and a$4.1 million impairment charge on our equity method investment in Accu-Trade in the fourth quarter of 2021. (2)For the year endedDecember 31, 2020 , the excluded amount represents a$2.0 million payment received from one of our insurance carriers in settlement of a lawsuit we brought in the fourth quarter of 2017 to recover insured legal fees. We believe the exclusion of the legal fees recovery is appropriate to facilitate comparisons of our core operating performance on a period-to-period basis. (3)The excluded amount represents charges associated with the restructuring plans undertaken in the second quarter of 2020 to improve efficiency and reduce expenses. We believe excluding the impact of these charges is consistent with our use of these non-GAAP measures as we do not believe they are a useful indicator of our ongoing operating results. (4)The excluded amount represents external legal, accounting, consulting and other third-party fees and costs we incurred in connection with theDigital Motors acquisition. The excluded amounts also included a$0.25 million associated with acceleration of unvested options to purchase shares ofDigital Motors stock held byDigital Motors employees at the time of the acquisition that are accounted for as post-combination compensation expense. These expenses are included in general and administrative expenses in our consolidated statements of comprehensive income (loss). We consider these fees and costs, which are associated with merger and acquisition transactions outside the normal course of our operations, to be unrelated to our underlying results of operations and believe that their exclusion provides investors with a more complete understanding of the factors and trends affecting our business operations.
(5)The excluded amounts represent non-cash impairment charges we recognized on our goodwill during the third quarter of 2022 and the first quarter of 2020.
(6)The excluded amount represents lease exit costs and early termination gains
associated with one of our existing office locations. We consider these charges
to be unrelated to our underlying results of operations and believe that their
exclusion is appropriate to facilitate period-to-period operating performance
comparisons.
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(7)The excluded amount represents impairment charges on our ROU assets
associated with certain of our existing office locations. We consider these
charges to be unrelated to our underlying results of operations and believe that
their exclusion is appropriate to facilitate period-to-period operating
performance comparisons.
Presentation of Financial Statements
Our consolidated financial statements include the accounts of our wholly owned subsidiaries in accordance with FASB ASC 810 - Consolidation. Business acquisitions are included in our consolidated financial statements from the date of the acquisition. Our purchase accounting resulted in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates. All intercompany balances and transactions have been eliminated in consolidation. We report our financial results as one operating segment, with three distinct service offerings: Dealer products and services, OEM incentives, and other. Our operating results are regularly reviewed by our chief operating decision maker on a consolidated basis, principally to make decisions about how we allocate our resources and measure our consolidated operating performance. Our chief operating decision maker regularly reviews revenue for each of our dealer, OEM incentives and other offerings in order to gain more depth and understanding of the factors driving our business.
We are reporting the historical results of our divested ALG subsidiary, including the results of operations and cash flows as discontinued operations for all periods presented herein.
Components of Operating Results
Revenues
Our revenues are comprised primarily of dealer revenue and OEM incentives revenue. We recognize transaction revenue for certain of our Auto Buying Program and OEM incentives arrangements at the time introductions and incentives are delivered based upon expected subsequent vehicle sales between the Auto Buying Program user and the dealer.
Dealer Revenue. Dealer revenue is comprised of Auto Buying Program revenue as well as revenue from TrueCar Trade and DealerScience.
Auto Buying Program revenue consists of fees paid by dealers participating in
our network of TrueCar Certified Dealers. Dealers pay us these fees on a
per-vehicle basis for sales to our users, on a per-introduction basis for sales
to our users or in the form of a subscription arrangement. Subscription
arrangements fall into several types: flat-rate subscriptions, subscriptions
subject to downward adjustment based on a minimum number of vehicle sales, which
we refer to as guaranteed-sales subscriptions, and subscriptions based on
introduction or impression volume, including those subject to downward
adjustment based on a minimum number of introductions, which we refer to as
guaranteed-introductions subscriptions. Additionally, certain dealers pay an
incremental subscription fee for add-on products within our Auto Buying Program.
Under flat-rate subscription arrangements, fees are charged at a monthly flat
rate regardless of the number of introductions made to users of our platform by
the dealer.
Under guaranteed-sales subscription arrangements, fees are charged based on the
number of guaranteed sales multiplied by a fixed amount per vehicle. To the
extent that the actual number of vehicles sold by the dealers to users of our
platform is less than the number of guaranteed sales, we provide a credit to the
dealer. If the actual number of vehicles sold exceeds the number of guaranteed
sales, we are not entitled to any additional fees.
Certain of our subscription arrangements are charged based on volume of
introductions or impressions provided while other introduction-based
subscription arrangements operate under a guaranteed-introductions model. Under
guaranteed-introductions subscription arrangements, fees are charged based on a
periodically-updated formula that considers, among other things, the
introductions anticipated to be provided to the dealer. To the extent that the
number of actual introductions is less than the number of guaranteed
introductions, we provide a credit to the dealer. If the actual number of
introductions provided exceeds the number guaranteed, we are not entitled to any
additional fees.
For guaranteed-sales and guaranteed-introductions subscription arrangements,
fees are charged based on the lesser of (i) the actual number of sales generated
or introductions delivered through our platform during the subscription period
multiplied by the contracted price per sale/introduction or (ii) the guaranteed
number of sales or introductions multiplied by the contracted price per
sale/introduction.
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We offer additional add-on products to eligible dealers as part of the Auto
Buying Program to increase traffic and retarget in-market consumers. These
products include TrueCar Sponsored Listings and TrueCar Reach. TrueCar Sponsor
Listings enables a dealer to place qualifying vehicles at more prominent
positions within the used car search results page. TrueCar Reach is a service
offered to retarget in-market consumers on the dealer's behalf with co-branded
emails. Fees are charged based on a monthly subscription rate for the right to
sponsor up to a set number of vehicles at any time throughout the month under
Sponsored Listings. Fees for our Reach product are also charged on a flat
monthly rate regardless of the number of emails delivered.
TrueCar Trade revenue consists of dealers who pay monthly subscription fees that
vary depending on the level of trade service selected and fees paid for our Sell
Your Car product. Depending on their subscription terms, some dealers pay
additional transaction fees for each vehicle purchased from a consumer that was
introduced via TrueCar Trade. In 2022 we phased out the selling of TrueCar Trade
subscription packages and transitioned dealers to Sell Your Car, for which we
charge fees under a per-introduction or guaranteed-introductions model.
DealerScience revenue consists of monthly subscription fees paid by dealers for
access to DealerScience's products and services. DealerScience provided dealers
with advanced digital retailing software tools that allowed them to calculate
accurate monthly payments, expedite vehicle desking, which is the process of
presenting and agreeing upon financial terms and financing options, and
streamline the consumers' experience from shopping to showroom. Beginning in
2021 and continuing through 2022, we phased out selling substantially all of
DealerScience's products and services.
OEM Incentives Revenue. OEM incentives revenue consists of fees paid by
automobile manufacturers, or OEMs, to promote the sale of their vehicles through
the offering of additional consumer incentives to members of our affinity group
marketing partners. These OEMs pay us a per-vehicle fee for promotion of the
incentive.
Other Revenue. Other revenue consists primarily of fees earned associated with
the
For a description of our revenue accounting policies, see Note 2 "Summary of Significant Accounting Policies" to the consolidated financial statements.
Costs and Operating Expenses
Cost of Revenue (exclusive of depreciation and amortization). Cost of revenue
includes expenses related to the fulfillment of our services, consisting
primarily of data costs and licensing fees paid to third-party service providers
and expenses related to operating our website and mobile applications, including
data center costs; hosting fees; data processing costs required to deliver
introductions to our network of TrueCar Certified Dealers; employee costs
related to certain dealer operations; and facilities costs. Cost of revenue
excludes depreciation and amortization of software costs and other hosting and
data infrastructure equipment used to operate our platforms, which are included
in the depreciation and amortization line item on our statements of
comprehensive income (loss).
Sales and Marketing. Sales and marketing expenses consist primarily of
television, digital, and radio advertising; media production costs; affinity
group partner marketing fees, which also include loan subvention costs where we
pay certain affinity group marketing partners a portion of consumers' borrowing
costs for car loan products offered by these affinity group marketing partners;
marketing sponsorship programs; and digital customer acquisition. In addition,
sales and marketing expenses include employee-related expenses for sales,
customer support, marketing and public relations employees, including salaries,
bonuses, benefits, severance, and stock-based compensation expenses; third-party
contractor fees; and facilities costs. Marketing and advertising costs promote
our services and are expensed as incurred, except for media production costs,
which are expensed the first time the advertisement is aired.
Technology and Development. Technology and development expenses consist
primarily of employee-related expenses, including salaries, bonuses, benefits,
severance, and stock-based compensation expenses; third-party contractor fees;
facilities costs; software costs; and costs associated with our product
development, product management, research and analytics, and internal IT
functions.
General and Administrative. General and administrative expenses consist
primarily of employee-related expenses, including salaries, bonuses, benefits,
severance, and stock-based compensation expenses for executive, finance,
accounting, legal, and human resources functions. General and administrative
expenses also include legal, accounting, and other third-party professional
service fees, bad debt, lease exit costs, and facilities costs.
Depreciation and Amortization. Depreciation consists primarily of depreciation
expense recorded on property and equipment. Amortization expense consists
primarily of amortization recorded on intangible assets, capitalized software
costs, and leasehold improvements.
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Interest Income. Interest income consists of interest earned on our cash and cash equivalents.
Other Income. Other income primarily consists of fees earned associated with the
transition services agreement with
Provision for (Benefit from) Income Taxes. We are subject to federal and state income taxes inthe United States . We provided a full valuation allowance against our net deferred tax assets atDecember 31, 2022 andDecember 31, 2021 , as it is more likely than not that some or all of our deferred tax assets will not be realized. As a result of the valuation allowance, our income tax expense (benefit) is significantly less than the federal statutory rate of 21%. Our benefit from income taxes for the year endedDecember 31, 2022 primarily reflects the release of valuation allowance resulting from net deferred tax liabilities recorded inDigital Motors acquisition accounting providing a source of income in assessing realization of consolidated net deferred tax assets. Our provision for income taxes for the year endedDecember 31, 2021 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. We had federal net operating loss carryforwards of approximately$309.8 million and state net operating loss carryforwards of approximately$242.0 million atDecember 31, 2022 . AtDecember 31, 2022 , we also had federal and state research and development credit carryforwards of approximately$1.1 million and$11.2 million , respectively. Sections 382 and 383 of the Internal Revenue Code impose substantial restrictions on the use of net operating losses and other tax attributes in the event of a cumulative "ownership change" of a corporation of more than 50% over a three-year period. We experienced a cumulative ownership change as ofDecember 31, 2019 within the meanings of Sections 382 and 383. We estimate that up to$15.2 million and$0.5 million of federal and state net operating loss carryforwards, respectively, may expire unused. Accordingly, we recorded a reduction of deferred tax assets as ofDecember 31, 2020 for the Section 382 limitation of$3.2 million which was fully offset by a corresponding decrease in our valuation allowance, with no net tax provision impact. Additionally, with the finalization of our 2011 - 2020 research and development tax credit study in 2021, we estimate that certain federal research and development credit carryforwards may expire unused. Accordingly, we recorded a reduction of deferred tax assets as ofDecember 31, 2021 for the Section 383 limitation of$12.3 million which was fully offset by a corresponding decrease in our valuation allowance, with no net tax provision impact. OnMarch 27, 2020 , the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 public health emergency. The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. OnMarch 11, 2021 , the American Rescue Plan Act of 2021 (ARP Act) was enacted to further extend economic relief from the impacts of COVID. The ARP Act includes, among other things, provisions relating to the extension of employee retention tax credits and credits for paid sick and family medical leave, repeal of a worldwide interest allocation election, changes to pension funding requirements, and expanded limits on executive compensation deductions. OnAugust 16, 2022 , the Inflation Reduction (IR) Act was enacted, including income tax incentives designed to encourage investment in renewable and alternative energy sources, adoption of electric vehicles and improvement in the energy efficiency of buildings and communities. To finance these incentives the law imposes a 15% corporate alternative minimum tax effective for tax years beginning afterDecember 31, 2022 on certain large corporations that have at least an average of$1 billion adjusted financial statement income over a consecutive three-tax year period. The IR Act also includes an excise tax on net stock repurchases made afterDecember 31, 2022 . We estimate that the CARES, ARP, and IR Acts will not have a material impact on our tax expense (benefit), financial position or cash flows. Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible in the current year and are required to be capitalized and amortized forU.S. tax purposes effectiveJanuary 1, 2022 . Unless postponed or modified through legislative processes, this mandatory capitalization may increase cash tax liabilities. OnJune 2020 ,California suspended the ability for certain companies to deduct net operating losses between 2020 and 2022, which impacted the ability to offset income received from the 2020 divestiture of our ALG subsidiary inCalifornia with net operating losses and resulted in the utilization ofCalifornia research and development credits to offsetCalifornia state taxes. Legislation enacted byCalifornia in the first quarter of 2022 restored the ability to deduct net operating losses for the 2022 taxable year. We continue to monitor and evaluate the impact of potential and enacted changes in applicable federal and state tax law.
See Note 14 of our consolidated financial statements included herein for more information about our provision for income taxes.
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The following table sets forth our selected consolidated statements of operations data for each of the periods indicated.
Year Ended
December 31,
2022 2021 2020
(in thousands)
Consolidated Statements of Operations Data:
Revenues $ 161,524 $ 231,698 $ 278,678
Costs and operating expenses:
Cost of revenue 16,213 22,239 21,549
Sales and marketing 104,534 136,479 151,915
Technology and development 46,090 41,432 44,930
General and administrative 44,087 48,747 49,989
Depreciation and amortization 16,520 16,279 20,547
Goodwill impairment 59,775 - 8,264
Total costs and operating expenses 287,219 265,176 297,194
Loss from operations (125,695) (33,478) (18,516)
Interest income 2,565 52 462
Other income 40 667 198
Gain (loss) from equity method investment 1,845 (5,404) (1,989)
Loss from continuing operations before income taxes (121,245) (38,163) (19,845)
Provision for (benefit from) income taxes (2,560) 206 (6)
Loss from continuing operations (118,685) (38,369) (19,839)
Income from discontinued operations, net of taxes - 40 96,383
Net (loss) income $ (118,685) $
(38,329)
Other Non-GAAP Financial Information Adjusted EBITDA$ (29,946) $ 4,889 $ 42,097 61
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The following table sets forth our selected consolidated statements of
operations data as a percentage of revenues for each of the periods indicated.
Year Ended
December 31,
2022 2021 2020
Revenues 100 % 100 % 100 %
Costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization
presented separately below) 10 10 8
Sales and marketing 65 59 55
Technology and development 29 18 16
General and administrative 27 21 18
Depreciation and amortization 10 7 7
Goodwill impairment 37 - 3
Loss from operations (78) (14) (7)
Interest income 2 * *
Other income * * *
Gain (loss) from equity method investment 1 (2) (1)
Loss from continuing operations before income taxes (75) (16) (7)
Provision for (benefit from) income taxes (2) * *
Loss from continuing operations (73) (17) (7)
Income from discontinued operations, net of taxes - * 35
Net (loss) income (73) % (17) % 27 %
* Less than 0.5% of revenues
Comparison of Years Ended
Revenues
Years Ended December 31 , % Change
2022 2021 2020 2022 vs. 2021 2021 vs. 2020
(dollars in thousands)
Revenues
Dealer revenue $ 156,485 $ 222,000 $ 252,928 (29.5) % (12.2) %
OEM incentives revenue 4,390 8,676 16,833 (49.4) % (48.5) %
Other revenue 649 1,022 8,917 (36.5) % (88.5) %
Total revenues $ 161,524 $ 231,698 $ 278,678 (30.3) % (16.9) %
Year ended December 31, 2022 compared to year ended December 31, 2021 . The
decrease in our revenues of $70.2 million , or 30.3%, in 2022 as compared to 2021
was mainly due to pressure on our close rates brought on by higher vehicle
prices and limited new vehicle inventories associated with the global automobile
semiconductor chip shortage. Dealer revenue, OEM incentives revenue, and other
revenue comprised 96.9%, 2.7%, and 0.4%, respectively, of revenues for 2022 as
compared to 95.9%, 3.7%, and 0.4%, respectively, for 2021. The decrease of $65.5
million in dealer revenue was primarily a result of lower inventory associated
with the global automobile semiconductor chip shortage. The decrease of $4.3
million in OEM incentives revenue was driven by lower vehicle incentive volumes
and by certain OEMs reducing or ending their programs as a result of lower
inventory associated with the global automobile semiconductor chip shortage.
Other revenue was relatively flat for the year ended December 31, 2022 . The
inventory constraints caused by a global semiconductor chip shortage are easing
and new vehicle inventories are starting to recover, although they remain below
the historical levels. Despite inventory recovery, vehicle affordability remains
an issue due to elevated prices for vehicles, rising interest rates, and low OEM
incentives. Our business will continue to be impacted by these macroeconomic
trends.
Year ended
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incentives revenue, and other revenue comprised 95.9%, 3.7%, and 0.4%,
respectively, of revenues for 2021 as compared to 90.8%, 6.0%, and 3.2%,
respectively, for 2020. The decrease of $30.9 million in dealer revenue was
primarily a result of low inventory associated with the global automobile
semiconductor chip shortage. The decrease of $8.2 million in OEM incentives
revenue was driven by the loss of OEM programs that targeted USAA members only
and certain OEMs pausing their programs also as a result of low inventory
associated with the global automobile semiconductor chip shortage. A decrease of
$7.9 million in other revenue was primarily driven by fees earned related to the
USAA transition services agreement which ended on September 30, 2020 .
Costs and Operating Expenses
Cost of Revenue (exclusive of depreciation and amortization)
Years Ended December 31, % Change
2022 2021 2020 2022 vs. 2021 2021 vs. 2020
(dollars in thousands)
Cost of revenue (exclusive of
depreciation and amortization) $ 16,213 $ 22,239 $ 21,549 (27.1) % 3.2 %
Cost of revenue (exclusive of
depreciation and amortization) as a
percentage of revenues 10.0 % 9.6 % 7.7 %
Year ended December 31, 2022 compared to year ended December 31, 2021 . The
decrease in cost of revenue of $6.0 million , or 27.1%, for 2022 as compared to
2021 was primarily driven by a $5.7 million decrease in data and licensing
expenses due to a lower dealer count, and a decrease in fees paid to Accu-Trade
related to a software and data licensing agreement which was terminated as part
of the sale of our equity method investment in Accu-Trade.
Year ended December 31, 2021 compared to year ended December 31, 2020 . The
increase in cost of revenue of $0.7 million , or 3.2%, for 2021 as compared to
2020 was primarily due to a $3.8 million increase in data and licensing expenses
primarily driven by growth in dealer adoption of our retail solutions products
compared to the prior year. This increase was offset by a $2.5 million decrease
in employee-related expenses, of which $0.6 million is associated with
severance-related costs incurred as part of the restructuring undertaken in the
second quarter of 2020 and $1.9 million related to reduced headcount, a $0.3
million decrease in stock-based compensation, and a $0.3 million decrease in
facilities costs.
Sales and Marketing Expenses
Years Ended December 31, % Change
2022 2021 2020 2022 vs. 2021 2021 vs. 2020
(dollars in thousands)
Sales and marketing expense $ 104,534 $ 136,479 $ 151,915 (23.4) % (10.2) %
Sales and marketing expense as a
percentage of revenues 64.7 % 58.9 % 54.5 %
Year ended December 31, 2022 compared to year ended December 31, 2021 . Sales and
marketing expenses decreased $31.9 million , or 23.4%, for 2022 as compared to
2021. The decrease primarily reflected a $22.0 million decrease in our branded
media spend, an $8.6 million decrease in revenue share paid to our affinity
marketing partners, and a $2.1 million decrease in stock-based compensation
expenses. The decrease was partially offset by a $1.9 million increase related
to travel and entertainment cost. We expect sales and marketing expenses to vary
over the course of the year depending on the state of the automobile inventory
and semiconductor chip shortages. Revenue share that we pay to our affinity
marketing partners is tied to revenue and units and will fluctuate along with
those results. Inventory shortages also impact the deployment of branded media
spend, which was reduced when conversion rates fall and branded media spend
becomes less efficient. However, we expect to incur incremental branded media
expenses to support further rollout of our TrueCar+ initiatives.
Year ended December 31, 2021 compared to year ended December 31, 2020 . The
decrease in sales and marketing expenses of $15.4 million , or 10.2%, for 2021 as
compared to 2020 primarily reflected a $11.9 million decrease in
employee-related expenses of which $5.3 million is associated with
severance-related costs incurred as part of the restructuring undertaken in the
second quarter of 2020 and $6.6 million related to reduced headcount, a $2.5
million decrease in creative production costs, a $1.5 million decrease in
travel-related and industry conference expenses due to the COVID-19 pandemic, a
$1.3 million decrease in stock-based compensation, and a $0.7 million decrease
in outsourced services, offset by a $2.3 million increase in revenue share paid
to affinity marketing partners and a $1.0 million increase in branded media
spend.
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Technology and Development Expenses
Years Ended December 31, % Change
2022 2021 2020 2022 vs. 2021 2021 vs. 2020
(dollars in thousands)
Technology and development expenses
11.2 % (7.8) %
Technology and development expenses as
a percentage of revenues 28.5 % 17.9 % 16.1 %
Capitalized software costs $ 12,216 $ 11,781 $ 10,664 3.7 % 10.5 %
Year ended December 31, 2022 compared to year ended December 31, 2021 .
Technology and development expenses increased $4.7 million , or 11.2%, for 2022
as compared to 2021. The increase primarily reflects a $5.3 million increase in
employee-related expenses associated with increased headcount as we continue to
invest in TrueCar+, expand our product portfolio, and enhance our existing core
offering. The increase was partially offset by a $0.9 million decrease in
facilities costs.
Capitalized software costs increased $0.4 million for 2022 as compared to 2021
primarily due to an increase in internally-developed software of $0.2 million in
addition to an increase in third-party software costs of $0.2 million .
We expect technology and development expenses to continue to be affected by variations in headcount in technology and product development.
Year endedDecember 31, 2021 compared to year endedDecember 31, 2020 . The decrease in technology and development expenses of$3.5 million , or 7.8%, for 2021 as compared to 2020 primarily reflected a$4.0 million decrease in employee-related expenses, of which$1.6 million is associated with severance-related costs incurred as part of the restructuring undertaken in the second quarter of 2020 and$2.4 million related to reduced headcount, and a$0.5 million decrease in facilities costs, partially offset by a$1.3 million increase in outsourced services.
Capitalized software costs increased
General and Administrative Expenses
Years Ended December 31, % Change
2022 2021 2020 2022 vs. 2021 2021 vs. 2020
(dollars in thousands)
General and administrative expense
$ 49,989 (9.6) % (2.5) % General and administrative expense as a percentage of revenues 27.3 % 21.0 % 17.9 % Year endedDecember 31, 2022 compared to year endedDecember 31, 2021 . General and administrative expenses decreased$4.7 million , or 9.6%, for 2022 as compared to 2021. The decrease primarily reflects a$1.4 million decrease in professional services fees and a$2.8 million decrease in facilities costs. The decrease in facilities costs was largely comprised of a$1.7 million impairment charge on our right-of-use asset recognized in the second quarter of 2021 associated with subleasing an office space and a$0.8 million gain related to an early lease termination and settlement of an asset retirement obligation recognized in the second quarter of 2022. Year endedDecember 31, 2021 compared to year endedDecember 31, 2020 . General and administrative expenses decreased$1.2 million , or 2.5%, for 2021 as compared to 2020. The decrease primarily reflected a$2.4 million decrease in bad debt expense driven by adjustments to our allowance for doubtful accounts resulting from both improved collection efforts and forecast assumptions, a$1.9 million decrease in employee-related expenses, of which$0.8 million is associated with severance-related costs incurred as part of the restructuring undertaken in the second quarter of 2020 and$1.1 million related to reduced headcount, a$0.4 million decrease in impairment charges on our right-of-use assets associated with office leases, and a$0.6 million decrease in stock-based compensation expense. The decrease was offset by a$3.3 million increase in legal expenses as a result of a$2.0 million payment received in the first quarter of 2020 from one of our insurance carriers in settlement of a lawsuit we brought during the fourth quarter of 2017 to recover insured legal fees and a$1.1 million increase in other expenses associated with bank fees and insurance costs. 64
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Depreciation and Amortization Expenses
Years Ended December 31, % Change
2022 2021 2020 2022 vs. 2021 2021 vs. 2020
(dollars in thousands)
Depreciation and amortization expenses
1.5 % (20.8) %
Year ended December 31, 2022 compared to year ended December 31, 2021 .
Depreciation and amortization expenses increased $0.2 million , or 1.5%, for
2022 as compared to 2021. We expect our depreciation and amortization expenses
to continue to be affected by the amount of capitalized internally developed
software costs and the timing of placing projects in service.
Year ended December 31, 2021 compared to year ended December 31, 2020 .
Depreciation and amortization expenses decreased $4.3 million , or 20.8%, for
2021 as compared to 2020 primarily due to certain long-lived assets reaching the
end of their useful lives in 2020.
Goodwill Impairment
For the year endedDecember 31, 2022 , we recognized a non-cash goodwill impairment charge of$59.8 million , which represents the amount that the carrying value of our single reporting unit was in excess of its estimated fair value atSeptember 30, 2022 . For further details, see Note 7 to our consolidated financial statements included herein.
For the year ended
Interest Income
Years Ended December 31, % Change
2022 2021 2020 2022 vs. 2021 2021 vs. 2020
(dollars in thousands)Interest income$ 2,565 $ 52 $ 462 4,832.7 % (88.7) %
Year ended
Year endedDecember 31, 2021 compared to year endedDecember 31, 2020 . Interest income decreased$0.4 million , or 88.7%, for 2021 as compared to 2020 primarily due to lower interest rates. Other Income For the year endedDecember 31, 2022 , other income consists of the gain from sale of a domain name. For the years endedDecember 31, 2021 andDecember 31, 2020 , other income consists primarily of fees earned from the transition services agreement we entered into withJ.D. Power in connection with our ALG divestiture.
(Gain) loss from
Years Ended December 31, % Change
2022 2021 2020 2022 vs. 2021 2021 vs. 2020
(dollars in thousands)
(Gain) loss from equity method
investment $ (1,845) $ 5,404 $ 1,989 (134.1) % 171.7 %
For the year ended December 31, 2022 we recognized a gain of $1.8 million from
changes in fair value of a derivative asset recognized from the sale of our
equity method investment in Accu-Trade. No gain or loss was recognized at the
time of the sale as the fair value of the sales proceeds received, including the
initial fair value of the derivative asset, was equal to the then carrying value
of the investment.
For the year ended December 31, 2021 , we recognized an impairment charge in the
amount of $4.1 million on our equity method investment in Accu-Trade, which
represents the amount that our carrying value was in excess of its estimated
fair value at December 31, 2021 .
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Provision for (Benefit from) Income Taxes
Years Ended December 31, % Change
2022 2021 2020 2022 vs. 2021 2021 vs. 2020
(dollars in thousands)
Provision for (benefit from) income
taxes $ (2,560) $ 206 $ (6) 1,342.7 % 3,533.3 %
Years ended December 31, 2022 , December 31, 2021 and December 31, 2020 . Our
benefit from income taxes for 2022 of $2.6 million primarily reflects the
release of valuation allowance resulting from net deferred tax liabilities
recorded in Digital Motors acquisition accounting providing a source of income
in assessing realization of consolidated net deferred tax assets. Our provision
for income taxes for 2021 of $0.2 million 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. Our benefit from income taxes for 2020 of less than $0.1 million
primarily arose in connection with the impairment of goodwill, resulting in
reduction of indefinite-lived deferred tax liabilities.
Sections 382 and 383 of the Internal Revenue Code impose substantial
restrictions on the use of net operating losses and other tax attributes in the
event of a cumulative "ownership change" of a corporation of more than 50% over
a three-year period. We experienced a cumulative ownership change as of December
31, 2019 within the meanings of Sections 382 and 383. We estimate that up to
$15.2 million and $0.5 million of federal and state net operating loss
carryforwards, respectively, may expire unused. Accordingly, we 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
our valuation allowance, with no net tax provision impact. Additionally, with
the finalization of our 2011 - 2020 research and development tax credit study in
2021, we estimate that certain federal research and development credit
carryforwards may expire unused. Accordingly, we recorded a reduction of
deferred tax assets as of December 31, 2021 for the Section 383 limitation of
$12.3 million which was fully offset by a corresponding decrease in our
valuation allowance, with no net tax provision impact.
Income from Discontinued Operations
Years Ended December 31, % Change
2022 2021 2020 2022 vs. 2021 2021 vs. 2020
(dollars in thousands)
Income from discontinued operations,
net of taxes $ - $ 40 $ 96,383 (100.0) % (100.0) %
For the year ended
For the year endedDecember 31, 2020 , income from discontinued operations, net of taxes, was primarily due to a gain on sale of$92.5 million recognized on the ALG divestiture.
Liquidity and Capital Resources
At
We have incurred cumulative losses of$512.5 million from our operations throughDecember 31, 2022 , and expect to incur additional losses in the future. We generate cash inflows from operations primarily from selling services to dealers participating in our network of TrueCar Certified Dealers, and cash outflows to enable our business operations, develop new services and core technologies that further enhance our online automotive marketplace, and fund share repurchases based on our evaluation of market conditions and other factors. We believe that our existing sources of liquidity and cash expected to be generated from operations will be sufficient to fund our operations for at least the next 12 months. However, our future capital requirements will depend on many factors, including our revenue levels, the timing and extent of our spending to support our technology and development efforts, costs related to potential acquisitions to further expand our business and product offerings, collection of accounts receivable, macroeconomic activity, and the length and severity of business disruptions following the COVID-19 pandemic. To the extent that existing cash and cash equivalents and cash from operations are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing. Additional funds may not be available on terms favorable to us or at all. 66 -------------------------------------------------------------------------------- Table of Contents Credit Facility We are party to a credit facility withSilicon Valley Bank that provides for advances of up to$35.0 million . This credit facility provides a$10.0 million subfacility for the issuance of letters of credit and contains an increase option permitting us, 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's previous three-year term matured onApril 19, 2021 . InApril 2021 , we entered into an amendment to extend the maturity date of our credit facility for another three years to expire onApril 12, 2024 . No amounts were outstanding atDecember 31, 2022 . The amount available under the amended credit facility atDecember 31, 2022 was$32.6 million , reduced for the letters of credit issued and outstanding under the subfacility of$2.4 million . See Note 10 of our consolidated financial statements herein for more information about our amended credit facility.
Share Repurchase Program
In the third quarter of 2020, our 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 our common stock throughSeptember 30, 2022 . In the second quarter of 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 is determined by us based on our evaluation of market conditions and other factors. Repurchases of our common stock may be made under a Rule 10b5-1 plan, which would permit common stock to be repurchased when we 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 us to purchase any minimum number of shares. For the year endedDecember 31, 2022 , 2021, and 2020 the Company repurchased and retired a total of 9.8 million, 6.1 million, and 9.3 million shares under the program for$29.7 million ,$32.3 million , and$42.2 million respectively. As ofDecember 31, 2022 , the Company had a remaining authorization of$45.8 million for future share repurchases.
Cash Flows
The following table summarizes net cash derived from operating, investing, and
financing activities from continuing operations, as well as net cash from
discontinued operations:
Year Ended December 31,
2022 2021 2020
(in thousands)
Consolidated Cash Flow Data:
Net cash (used in) provided by operating activities $ (29,137) $ 14,374 $ 29,898
Net cash used in investing activities (8,028) (10,689) (10,277)
Net cash used in financing activities (32,534) (38,086) (49,238)
Net cash used in continuing operations (69,699) (34,401) (29,617)
Net cash provided by discontinued operations -
6,304 121,397
Net (decrease) increase in cash and cash equivalents
Operating Activities of Continuing Operations
Our net loss and cash flows provided by or used in operating activities are significantly influenced by our investments in headcount and infrastructure to support our growth, marketing and advertising expenses.
Cash used in operating activities in 2022 was$29.1 million . This was primarily due to a loss from continuing operations of$118.7 million , adjusted for non-cash items, including goodwill impairment charge of$59.8 million , stock-based compensation expense of$17.7 million , depreciation and amortization expense of$16.5 million , gain from equity method investment of$1.8 million , amortization of lease right-of-use assets of$3.9 million , and bad debt expense of$0.7 million . Net cash used in operating activities also reflected a decrease of$5.5 million from changes in operating assets and liabilities, which primarily reflected a decrease in operating lease liabilities of$5.2 million , a decrease in accounts payable of$2.8 million , a decrease in accrued expenses and other current liabilities of$1.4 million , which was primarily due to a decrease in marketing fees payable to our affinity group partners and advertisers, an increase in prepaid expenses and other assets of$0.2 million , and offset by a decrease in accounts receivable of$2.2 million , which was primarily due to a reduction in revenue and an increase in accrued employee expenses of$1.9 million . Cash provided by operating activities in 2021 was$14.4 million . This was primarily due to a loss from continuing operations of$38.4 million , adjusted for non-cash items, including stock-based compensation expense of$20.4 million , depreciation and 67 -------------------------------------------------------------------------------- Table of Contents amortization expense of$16.3 million , loss from equity method investment of$5.4 million of which$4.1 million was related to an impairment charge, amortization of lease right-of-use assets of$4.3 million , an impairment charge associated with certain of our existing office locations of$1.7 million , and bad debt expense of$0.5 million . Net cash provided by operating activities also reflected an increase of$3.6 million from changes in operating assets and liabilities, which primarily reflected a decrease of$15.7 million in accounts receivable primarily due to a reduction in revenue and a decrease of$2.7 million in prepaid expenses and other assets, offset by a decrease in accrued expenses and other current liabilities of$5.6 million primarily due to a decrease in marketing fees payable to our affinity group partners and advertisers, a decrease in operating lease liabilities of$5.2 million , a decrease in accounts payable of$1.8 million , and a decrease in accrued employee expenses of$1.8 million . Cash provided by operating activities in 2020 was$29.9 million . This was primarily due to a loss from continuing operations of$19.8 million , which was adjusted for non-cash items, including stock-based compensation expense of$23.1 million , depreciation and amortization expense of$20.4 million , goodwill impairment of$8.3 million , amortization of lease right-of-use assets of$5.4 million , bad debt expense of$3.0 million , and asset impairment and write-off of$2.4 million primarily due to a ROU asset impairment of$2.1 million . Net cash provided by operating activities also included a$14.2 million decrease from changes in operating assets and liabilities. The$14.2 million decrease primarily reflected a decrease of$8.2 million in accounts payable primarily due to a decrease in marketing fees payable to our affinity group partners and advertisers, a decrease in operating lease liabilities of$6.3 million , and a decrease in accrued expenses and other current liabilities of$4.1 million driven by reduced accrued legal fees, offset by cash collections of$2.3 million from accounts receivable, a decrease of$1.3 million in prepaid expense and other assets primarily due to a decrease in prepaid marketing costs.
Investing Activities of Continuing Operations
Cash used in investing activities of$8.0 million during 2022 consisted primarily of$12.1 million paid for our acquisition ofDigital Motors and$11.7 million investments in software and computer hardware, offset by$15.7 million received from the sale of our equity method investment in Accu-Trade. Cash used in investing activities of$10.7 million during 2021 was for purchases of property and equipment, consisting primarily of$9.8 million of investments in software. Cash used in investing activities of$10.3 million during 2020 was for purchases of property and equipment, consisting primarily of$9.1 million of investments in software.
Financing Activities of Continuing Operations
Cash used in financing activities of$32.5 million during 2022 primarily represents payments of$29.8 million for the repurchase of our common stock and taxes paid of$2.9 million for the net share settlement of certain equity awards. These decreases were offset by proceeds received of$0.2 million from the exercise of employee stock options. Cash used in financing activities of$38.1 million during 2021 primarily represents payments of$31.9 million for the repurchase of our common stock, taxes paid of$5.3 million for the net share settlement of certain equity awards, and a$2.2 million payment related to the fair value portion of a contingent consideration related to our 2018 acquisition of DealerScience. These decreases were offset by proceeds received of$1.4 million from the exercise of employee stock options.
Cash used in financing activities of
Net Cash Provided by Discontinued Operations
Net cash provided by discontinued operations of$6.3 million in 2021 mainly consisted of the$7.5 million cash earnout received fromJ.D. Power based upon ALG's achievement of certain revenue metrics in 2020 net of a cash payment of$1.0 million related to final net working capital adjustments associated with the divestiture. Net cash provided by discontinued operations of$121.4 million in 2020 includes net cash provided by operating activities of$9.2 million and cash provided by investing activities of$112.2 million , primarily from cash proceeds received from the sale of ALG. See Note 5 to the accompanying consolidated financial statements for additional information.
Contractual Obligations and Known Future Cash Requirements
The Company's material cash requirements include the following contractual and other obligations.
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Leases
The Company has various leases for office space. As ofDecember 31, 2022 , the Company had fixed lease payment obligations of$26.6 million , with$5.6 million payable within 12 months that have not been reduced by minimum non-cancellable sublease rentals aggregating$11.9 million . See Note 4 "Leases" to our consolidated financial statements for more information.
Purchase obligations
The Company has long-term agreements to purchase data information, software
related licenses and support services, and other obligations that are
enforceable and legally binding. As of
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance withU.S. generally accepted accounting principles, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions on an ongoing basis and that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. See Note 2 "Summary of Significant Accounting Policies" to the consolidated financial statements, which describes our significant accounting policies and methods used in the preparation of our consolidated financial statements. The methods, estimates, and judgments that we use in applying our accounting policies require us to make difficult and subjective judgements, often as a result of the need to make estimates regarding matters that are inherently uncertain. Our most critical accounting estimates are those relating to revenue recognition, sales allowances and allowances for doubtful accounts, the fair value of assets and liabilities assumed in business combinations, the recoverability of goodwill, long-lived assets, equity method investment, income taxes, and the expensing and capitalization of software and website development costs.
Recent Accounting Pronouncements
See Note 2 "Summary of Significant Accounting Policies" to our consolidated financial statements included herein.
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