TrueCar Supercharges Buyback With $100 Million – Buyback Wednesdays

 

Share repurchase programs have regained momentum this year, marking a significant revival from a relatively subdued 2023. The ODP Corporation (ODP) revealed a $1 billion plan, constituting nearly half of its market capitalization at announcement. It is the largest buyback in terms of percentage and tops our list. The involvement of David Einhorn and Greenlight Capital (check out the full Greenlight portfolio here) might explain the large buyback at ODP (the old Office Depot). We would have preferred to see the company pay down debt instead of committing such a large amount of capital to a buyback at a time when markets are hitting all-time highs.

Read More Info @ https://www.insidearbitrage.com/2024/03/truecar-supercharges-buyback-with-100-million-buyback-wednesdays/

The current earnings season has been characterized by numerous high-profile buyback announcements, starting with Meta Platforms, Inc. (META) announcing a $50 billion share repurchase plan. This move was closely followed by an impressive $7 billion repurchase announcement from Uber Technologies (UBER), marking its inaugural foray into share buybacks.

Airbnb, Inc. (ABNB) also made headlines by sanctioning a $6 billion share repurchase initiative, which accounts for approximately 6% of its market capitalization at the time of the announcement. Salesforce, Inc. contributed to the trend with a substantial $10 billion buyback program.

Companies like eBay Inc. (EBAY) with an additional $2 billion allocated for share repurchases and Domino’s Pizza (DPZ) announcing a $1 billion buyback rounded out our list. Notably, February witnessed 140 companies announcing buybacks, with 38 of these companies declaring plans valued at $1 billion or more—a record-setting figure for any month in recent memory. The total authorized buyback volume for February reached $184.5 billion.

Among these large announcements, a smaller  buyback by a small-cap company stood out, drawing attention due to its promising strategic and management overhauls. TrueCar (TRUE) demonstrated noteworthy progress, attributed to significant changes within its C-suite, including the appointment of a new CEO and CFO. This strategic shift appears to be a pivotal moment for TrueCar, signaling a potential turnaround and improved performance.

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Key Insights

·         TrueCar, an automotive marketplace, has a new management with a new CEO and CFO appointed during the last year.

·         The company recently boosted its share repurchase program to $100 million that represented 16% of the market cap at announcement.

·         TrueCar supports over 1 million new and used car transactions between dealers and its users each year.

·         In Q4 2023, the company achieved 13% year-over-year revenue growth and adjusted EBITDA profitability of $2.1 million, a $12.1 million improvement from the previous year.

·         Management is confident the company will achieve positive free cash flow in the second half of the year.

·         TrueCar has set ambitious goals, aiming for annual revenue of over $300 million and more than 10% free cash flow by the end of 2026. The stock is already up more than 45% over the last year.

Financials

Under new CEO Jantoon Reigersman’s guidance, the company has made considerable strides in financial performance, notably reducing its net loss from $20 million in Q2 2023 to a mere $1 million by Q4. Additionally, revenue saw a year-over-year increase of 2% in the third quarter, with a more significant uplift of nearly 13% in the fourth quarter. Operating income has improved markedly over the last six months but still remains materially negative. The improvement is driven by reduced operating expenses in the second half of 2023. Earnings per share (diluted) have improved recently, just on the verge of becoming positive.

Balance Sheet

TrueCar stands out for having a debt-free balance sheet. As of December 2023, the company had a net cash position of $122.56 million. The cash and cash equivalents at the end of the year account for approximately 43% of its market capitalization, underscoring the company’s strong liquidity position.

Capital Allocation

TrueCar has historically not engaged in the distribution of cash dividends and does not foresee initiating such distributions in the near term. Instead, the company prefers to utilize share repurchase programs as a method to return capital to its shareholders. On February 20, 2024, TrueCar elevated its share repurchase initiative to $100 million from the prior authorization of $45.8 million. Over the past four years, TrueCar has successfully reduced its outstanding share count by roughly 15%.

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