TrueCar Inc., in a move it described as “unexpected,” said Thursday that its partnership with USAA Federal Savings Bank will end at the close of the third quarter.
TrueCar’s online car-buying service has been driven by a revenue-sharing partnership with USAA for 13 years and TrueCar expected to sign another long-term agreement with the lender, a company spokeswoman said in an email. USAA represents about 29 percent of the vehicles sold by dealers to buyers who connect through the TrueCar marketplace, TrueCar’s spokeswoman said.
In an earnings call Thursday, TrueCar interim CEO Mike Darrow said the company was given “very little notice” of USAA’s decision.
“To be clear, this announcement does not reflect on the service TrueCar has provided to USAA members over the course of a long and successful 13-year partnership,” Darrow said. He added that USAA has decided to stop providing the car-buying service on Oct. 1 in an effort to simplify its business model.
TrueCar will continue revenue sharing with USAA through Sept. 30. As part of the agreement, effective Feb. 14, USAA will pay a $20 million transition services fee to TrueCar.
TrueCar has factored in the loss of revenue in its 2020 full-year guidance. TrueCar now expects full-year revenue of $335 million to $355 million. It had previously forecast revenue of $351 million to $353 million.
The low end of its earnings before interest, taxes, depreciation and amortization guidance for 2020 remains unchanged at $15 million.
Darrow said the company is still assessing the impact of the USAA partnership’s end, adding it allows strategic opportunities with other partners.
He said the relationship with USAA limited its ability to target active military members and their families.
“For context, our research suggests there are over 40 million individuals within this segment,” he said. “Compare this figure to a relatively small number of USAA members who bought a cars through our dealer network in 2019 and you’ll quickly recognize the potential opportunity in front of us.”
Darrow also pointed to new products and consumer-focused efforts TrueCar has rolled out.
In the fourth quarter, the company’s net loss grew to $8.8 million from $6.4 million in the year-ago quarter. Revenue dipped 2 percent to $89.7 million.
For the full year, TrueCar’s net loss rose to $54.9 million, compared to a net loss of $28.3 million in 2018. Revenues were flat at $353.9 million.
The company said it plans to fill the CEO post, vacated in June by Chip Perry, on or before the end of the first quarter.
