Urgent.ly, Inc. Q3 FY2024 earnings call

• Third quarter revenue of $36.2 million was in line with expectations, with fourth consecutive quarter of revenue guidance commitment. - Secured three-year contract renewal extending long-term customer partner relationship to nine years, and two-year contract renewal with a large worldwide vehicle rental company. - Divested Autonomous Business Unit The Flow, returning 51% ownership to management and retaining 49% equity, with perpetual royalty-free license to integrate its software. - Recognized in October by Auto Tech Breakthrough Award for overall transportation tech of the year for yield-based pricing technology. - Location aggregation system rolled out to 15% of network for RSA dispatches, improving digital engagement and reducing cost. - Reduced operating expenses through employee reductions and changes in business processes, with non-GAAP operating expenses and loss improving year-over-year.

For the third quarter ended September 30, 2024, Urgentle reported revenue of $36.2 million, which was within the guidance range of $35 million to $38 million, a decline of 21% or $9.8 million from the same quarter last year. The decline was primarily driven by the reduction in dispatch volume from a customer partner nonrenewal. Gross profit for the quarter was $7.8 million compared to $9.2 million in the prior year period, with gross margin at 21% compared to 20% in the prior year. Operating expense was $13.7 million, an improvement of 9% from $15 million in the prior year period. Non-GAAP operating expense was $10.7 million, an improvement of 16% from $12.7 million in the prior year period. Non-GAAP operating loss for the quarter was $2.9 million, an improvement of 17% from $3.5 million in the prior year period. At the end of the third quarter, total employees were 188, a reduction of 160 employees or 46% from the fourth quarter of last year.

• Expect fourth quarter 2024 revenue in range of $30 million to $33 million and full-year 2024 revenue in range of $141 million to $144 million. - Target non-GAAP operating loss of approximately $2 million in fourth quarter 2024 and non-GAAP operating breakeven in first quarter 2025. - Expected common stock shares outstanding at end of fourth quarter to be 13.5 million.

• Customer partner strategy change leading to revenue reduction, with one customer partner representing less than 5% of first nine months 2024 revenue. - Complexity of secured debt structure requiring negotiation and collaboration among stakeholders, including addressing debt maturities.

Q: Can you just give us a little breakdown? I know you talked about the renewals and then three new partners and then the loss of a partner. Like, what is the right way to think of these three new partners potentially replacing or replacing at a higher level the partner that unfortunately is kind of pulling back on what they are doing?

A: So the renewals, Chris, as we went through this year, we have been pretty successful on the renewals. I think we have renewed on a run rate basis about 50% or so. Tim, keep me honest on that, 50% of the revenue. Which is great. The three new partners, as they are modeled out now, will more than make up for the one that is discontinuing with us in terms of top-line revenue. They are larger in scale and, you know, at equal to or exceeding the margin contribution.

Q: Are they global OEMs or fleet managers? Like, what is the right bucket that they fall into?

A: It is a combination of fleets and it is a combination of insurance and B2B C.

Q: Okay. Okay. And these are competitive processes that you guys won?

A: Yep.

Q: Okay. And then so if I think about the revenue that you guided through the fourth quarter, can you remind me, is the first quarter of 2025 still sort of a messy comp because you had the larger that did not renew as part of revenue in the first quarter? And then the comps get more organic in the second quarter. Is that the right way to think about it?

A: It is, Chris. That is right.

Q: Okay. And then just lastly for me, gross margins. I know there was a sort of a headwind last quarter on lower margin jobs, which is sort of outside of your control. But from our kind of looking at things historically, we actually thought the third quarter was the weakest quarter for gross margins because of summer travel and people traveling further and away from no jobs? Like providers have to travel further to get the jobs. Gross margins were up sequentially. So I just kind of can you just tie those two together for me?

A: Yeah. It does turn into a I think your theory is right, Chris. I mean, that is where all our conversations have been. It does come down to a bit of mix in how all the jobs come in and depending on the margin profile of each of those jobs. So it is mix driving a little bit of that.