Urgent.ly Inc. (NASDAQ:ULY) is a leading connected mobility assistance software platform that matches vehicle owners and operators with service professionals who deliver traditional roadside assistance, proactive maintenance, and repair services. The company has demonstrated impressive financial performance, with annual revenue reaching $184,653,000 and annual net income of $74,729,000 in the most recent fiscal year. However, the company has faced challenges in its operating cash flow and free cash flow, which stood at -$65,145,000 and -$65,294,000, respectively, during the same period.

Business Overview

Urgent.ly's platform leverages location-based services, real-time data, artificial intelligence, and machine-to-machine communication to deliver quick, safe, and innovative roadside assistance services for leading brands across the automotive and insurance industries, as well as other transportation-focused verticals. The company's digitally native software platform enables its partners to deliver exceptional user experiences that drive high customer satisfaction and loyalty.

With 57 Customer Partners and more than 71,000 participating Service Provider vehicle drivers in its network as of March 31, 2024, Urgent.ly delivers innovative, transparent, and exceptional connected mobility assistance experiences at scale. The company generates substantially all of its revenue from its Customer Partners, who contract with Urgent.ly to fulfill roadside assistance service requests for Consumers. Urgent.ly enters into multi-year contracts with its Customer Partners, typically three years in length, and generates revenue on a per-incident basis, including negotiated rates customized for each Customer Partner.

Urgent.ly also generates revenue from Customer Partner membership programs, which are typically offered to Consumers through an out-of-warranty vehicle maintenance program or bundled with other subscription membership offerings, on a fixed fee basis. Additionally, the company offers its platform as a SaaS solution to enable certain of its Customer Partners' roadside assistance services, recognizing revenue ratably over the life of the contract, which is typically one to three years.

Financials

In the first quarter of 2024, Urgent.ly reported revenue of $40,092,000, a decrease of 19% compared to the same period in the prior year. The revenue decline was primarily driven by the reduction in dispatch volume from the loss of one insurance Customer Partner and one auto manufacturer Customer Partner, which resulted in a decrease of $13,700,000 in revenue. This was partially offset by an increase in dispatch volume and rates charged to existing Customer Partners, as well as $1,600,000 in revenue from the Otonomo business acquired in October 2023.

Despite the revenue decline, Urgent.ly's gross profit for the first quarter of 2024 was $9,351,000, compared to $9,259,000 in the same period of the prior year. The slight increase in gross profit was primarily driven by rate increases applied to Customer Partners and a decrease in first call costs, resulting in a gross margin of 23% for the quarter, up from 19% in the same period of the prior year.

Operating expenses for the first quarter of 2024 were $17,699,000, a decrease of 10% from the same period in the prior year. This reduction was primarily due to a 12% decrease in Urgent.ly employees and an 18% decrease in Otonomo employees, as the company continued its efforts to optimize its workforce and streamline operations. The company's GAAP operating loss for the first quarter of 2024 was $8,348,000, an improvement of 19% from the same period in the prior year.

Urgent.ly also reported a non-GAAP operating loss of $5,103,000 for the first quarter of 2024, a 35% improvement from the fourth quarter of 2023. This demonstrates the company's progress towards achieving non-GAAP operating breakeven by the beginning of the third quarter of 2024, as outlined in its guidance.

Liquidity

As of March 31, 2024, Urgent.ly had cash, cash equivalents, and short-term investments of $40,747,000 and a net principal debt balance of $54,257,000 with a maturity in January 2025. In January 2024, the company took steps to enhance its capital structure by using cash on hand to repay $17,500,000 in net principal debt and $6,000,000 of banking fees under the Structural Loan Agreement, while also extending the maturity date to January 2025.

During the first quarter of 2024, Urgent.ly capitalized approximately $1,600,000 of internally developed software activities in support of launching a partnership with a top five global OEM and making enhancements to its platform. The company expects to continue this practice, including an additional $1,400,000 in capitalized software costs in the second quarter of 2024.

Outlook

For the second quarter of 2024, Urgent.ly expects revenue to be between $32,000,000 and $35,000,000. The company remains on track to achieve non-GAAP operating breakeven by the beginning of the third quarter of 2024, as it continues to focus on operational improvements and margin expansion.

Going forward, Urgent.ly is focused on three key priorities: 1) expanding its existing B2B incident business through new partnerships and expanded relationships with existing partners; 2) achieving non-GAAP operating breakeven through operational improvements and margin expansion; and 3) leveraging its assets from the Otonomo acquisition, combined with Urgent.ly's core technologies, to provide innovative and differentiated services to its partners.

Risks and Challenges

Urgent.ly faces several risks and challenges, including its history of operating losses and negative cash flows, its substantial dependence on a limited number of Customer Partners, and the need for additional capital to fund its operations and growth initiatives. The company also faces risks related to its ability to protect its intellectual property, comply with regulatory requirements, and integrate the Otonomo business successfully.

Conclusion

Urgent.ly is a leading player in the rapidly evolving mobility assistance industry, leveraging its innovative software platform and strategic partnerships to deliver exceptional experiences for its Consumers and Customer Partners. While the company has faced some operational and financial challenges, its recent performance and strategic initiatives suggest that it is well-positioned to navigate these obstacles and capitalize on the significant growth opportunities in the market. Investors should closely monitor Urgent.ly's progress as it continues to execute on its strategic priorities and work towards achieving sustainable profitability.