Welcome to the CIDOTI Virtual Microcap Conference, and thank you for joining us today. I'm Anja Soderstrom, Senior Equity Analyst here at CIDOTI, and as I mentioned, next up we have Urgently Inc. We have the management team with us. We have Matt Booth, the CEO. We have Tim Huffmyer, the CFO, and we also have Jenny Mitchell. She's the VP of Finance, Strategy, and Investor Relations. This will be conducted as a fireside chat, and feel free to submit your questions, and we'll incorporate them as we go. With that, I'll hand it over to Jenny for some disclosures before we get it started.
Thank you. Good morning, and thank you for taking the time to learn a little bit more about Urgently. Before we get started, I'd like to remind you that our remarks today may include forward-looking statements. Actual results may differ from those projected in any forward-looking statements we make. I'd like to refer you to our Safe Harbor statement included in our investor presentation and to the risk factors section of our most recent 10-K filed with the SEC, both of which are available on our investor relations website. With that, I'd like to turn the call over to Matt Booth, Urgently CEO.
Thanks, Jenny, and thanks, Anja. I think what I'll do, Anja, if it's okay, is I'll just go through two or three slides just as some background for some folks that might be new to the Urgently story, and then we can take questions from you and from the folks on the call. Thanks, everyone, for joining us today. Urgently was founded in 2013, so about a little over 10 years ago, and the concept was pretty simple. AAA had 61 million members paying between $50 and $100 a month, so the founding team said, "You know what? We should build a technology-forward business focused around going after and building a better subscription mousetrap than AAA." The team was making good progress on it, had a lot of digitization, and we'll show you some slides in a second about kind of what that looks like.
As the business started to scale up, a large German OEM was looking at the business and said, "You know what? We're unhappy with the service that we have today. We really want a technology digital footprint or digital forward technology business to improve the customer experience." It was off, got the first partner, and then pretty quickly after signed up 50 more, and it was kind of off to the races. As we will talk about a little bit later and Tim can mention on the finance section, the business strangely has never really had a problem with growth. A lot of demand for what it is that we do. We have over time gotten some fantastic investors in the business: Porsche, Jaguar Land Rover, InMotion Ventures, BMW, American Tire Distributors, and of course, Enterprise Rent-A-Car. We have about 150-ish employees.
Most of our contracts are three-year contracts or multi-year contracts directly with the OEM or the fleet company. Did about just under $150 million in revenue. And we do that through a network in North America of independent drivers, about 75,000 or 12,000 or so companies. We cover all of North America 24 by 7. The piece that's really important to us and critical is exceptional quality. On a five-star scale, we score about 30% of the jobs, get feedback on about 30%. We land about a 4.6 out of five stars, which is pretty great because no one aspires in the day in the morning to have their car break down and not start. We're pretty pleased with where that's going, and we're always trying to use technology to make it better. Can you go to the next slide, Jenny?
Just a pretty simple look at what you see as a customer, very similar to Uber or DoorDash or some of the other kind of digitally connected experiences that are out there. Now, there's different versions of this that all the stakeholders see. The tow truck driver will see one version, the customer will see another version, the parent, the OEM or the fleet company will see another one that we can show you in a second. All stakeholders are connected digitally in real time. It's great for expectation setting. Underneath this, there are a lot of analytics and machine learning that we run kind of in real time to produce what we call our triggers that look at the job and say, "Hey, this job is going great.
Leave it alone," or, "This job needs some kind of intervention because there's a snowstorm or a traffic jam." We can talk more about that in a minute. It is really this transparency that has allowed us to grow as quickly as we have. Before we started this out, it was pretty much a black box, which is no one really knew what was going on. You could not see the driver. You did not know when they were coming. As Uber and others started to build these technology experiences, other industries like roadside assistance looked at this and said, "We want that too." That is really our primary technological moat. We will go through some items on the network in a second. Let's go to the next slide, Jenny. Here is a snapshot of what you see in Urgently on a typical Monday morning.
All of the blue dots are disablements. If you look down the right with the legend, battery, flat tire, fuel delivery, lockout, motorcycle tow, wrench, typical roadside assistance that you get with AAA or others. Each of these different icons represents a different kind of disablement reason. Some of our partners actually have a version of this in their headquarters on a large screen TV, and you can press on any of these little dots, and you'll expand the area, and you can see exactly what's wrong, who the customer is, the driver that's coming to help the customer. It is really this kind of real-time visibility that's been driving the business on a go-forward basis, and one of the reasons that we've been as successful as we are. Let's go to the next slide, Jenny.
A big piece that underpins this that you do not see, but that is really important, is this really is a pretty big geospatial and contextual database that underlies all of these things. It is similar to if you go to Google and you do a search for a local restaurant, except we are tracking the restaurant and the restaurant is moving, and we are tracking inventory from both ends at the same time to match the restaurant and the customer with the right kind of service. In this case, the car is moving, the tow truck is moving, the parts are all different. We have to manage all this in real time and take into account algorithmically what is the traffic like, what is the weather like, are there safety issues, is it a restricted roadway, what is the vehicle, who is the partner, what is the time of day, is it rural.
All these things feed into the geospatial engine at the same time. Then we produce out of that the ideal service provider that needs to come and service the vehicle, and we match that almost in real time with a network, as I mentioned before, of about 74,000 drivers or 12,000 companies. It is pretty sophisticated. We have gotten better and better and added more data to it to refine it over time. If you look at your financials, really we have taken the margin from 2% up to 25%, so pretty good over time. A lot of analytics around this produce a better customer experience. That is really what it is about. It is about making sure that the customer has an exceptional experience. Next slide, Jenny. Cool.
I'll leave it here for a second, and then why don't we, Anja, why don't we go to any questions that you may have?
Yeah. I just wanted to first start with how, if you can talk about how your technology is setting you apart from competitors and who are your competitors.
Yeah. There are two primary competitors in this business. One is a family business that was started outside of Boston in 1974. They focus primarily on insurance companies. They have about $1.2 billion-$1.3 billion, give or take, of sole-sourced insurance contracts. On the other side is AAA on the subscription side. AAA was started in 1902 when there were more horses than cars. It has kind of grown over time, and it is an amalgamation of different clubs, I think 40 or something different clubs in the U.S., kind of a quasi-franchise model that has a unified governance structure over the top of it. Interestingly enough, AAA sells insurance in most of the U.S. states. If you are a big insurance company like Progressive or USAA or State Farm, you are not going to work. You are not going to send your customers to them.
That has allowed the company in Boston to grow pretty big because they were the only ones that had any scale until we came along. They ended up with all the insurance contracts. The market's split between two pieces. One is the subscription side with AAA, and the other side is on the insurance side of the business. It's a good opportunity. Recently, we have achieved enough scale where we can start to go after some of these large contracts. Our view on the market is that there is definitely an opportunity in the subscription business. Maybe, Jenny, you can go to the Tam slide just for a second just to give folks a sense for what that looks like because it's a really big subscription business in the U.S. On the roadside assistance business, primarily it's these large insurance contracts.
We believe over time that they will be dual source. If you remember a time, say, before Amazon AWS, when most of the infrastructure and technology was in the cloud, when you actually had to have a physical data center, you wanted failover data centers, one in Los Angeles and one on the East Coast, just in case something happened to one or the other. You could move volume around. That is typically what we believe we are going to see. What we see in some of our larger contracts is there are multiple vendors that support these large contracts. We believe that is going to continue over time. We believe that these large contracts will open up to more than one person. We believe that we will be the beneficiary of that.
We're pretty excited about our prospects going forward now that we've achieved the scale that we've needed to achieve.
Okay. Thank you. We have a question here from the audience that kind of ties into the previous slide you had open. Can you discuss how you get paid and what the pricing dynamic has been historically?
That's a great question. Typically, we deal with a couple of different kinds of customer partners, OEMs. In the case, as an example, BMW or fleet companies in the case of Enterprise Rent-A-Car. Our contracts are directly with the fleet companies or with the OEMs. We have a deal with the OEM corporate brand. Typically, when you buy a new car, it comes with a warranty, and one piece of the warranty is roadside assistance. If you get a flat tire or you get in an accident and you need to tow or you need a tire change, those jobs come to us. We are paid by the OEM, and we pay the service provider, and we negotiate with the service providers, and we make money in between. Over time, our pricing algorithms and job algorithms have become more sophisticated.
It used to be most companies started out with rate cards. They said, "Hey, in this part of the country, we're going to pay you $40." Over time, what we've noticed is it costs more at night or more during rush hour, and we can change the price up or down using real-time dynamic pricing to optimize experience and optimize margin.
Okay. How much of your revenue is recurring on the long-term contracts versus transactional?
Most of how the business works is we get paid when there is a job. If there's a breakdown, we get paid. It is not really ARR, but it's about as close to ARR as you can possibly get, given that these are long-term contracts and we know how big the vehicle car park is and we know how many breakdowns there are typically by branded vehicle. We pretty much know within a point or so about what the revenue will actually end up looking like over time. It is pretty straightforward to forecast. The one exception is COVID. When people stopped driving, people did not break down as much. You could see that kind of in some of our historical financials. That had a propensity to reduce revenue because there were just fewer jobs out there.
Other than that, hopefully, knock on wood, we won't see another pandemic in my lifetime. The revenue is about as close to ARR as you could possibly get.
Okay. Hopefully, we won't see another pandemic, but we have a lot of noise in the macroeconomic environment today with the tariffs and other things, uncertainties going on. How does that affect your business?
A couple of different ways to look at it. One, when we first heard about tariffs, look, we were obviously concerned because vehicles come from all over the world, and vehicles and parts are moved in and out of different geographies with real-time, just-in-time inventory. Interestingly, the dealers that we've talked to and the OEMs that we've talked to have had some of their best sales weeks and months since the tariffs were announced. As soon as they were announced, everyone rushed out to go buy new cars. The dealers and others are pretty excited about it. I think it's unclear what the long-term tariff policy is going to be and which countries specifically are going to be targeted by it and what the long run looks like. I would venture to guess that it will affect the aftermarket more.
As an example, if an insurance company, if you get in an accident and have to have your car fixed, those aftermarket parts that come from all over the place that are not OEM parts are probably going to be more expensive and harder to get over time. I do not think anyone really has an idea yet on, "Are tariffs here to stay? Are they going to be here today, gone later today?" We do not really know, and we do not know what countries are going to be affected by it yet. I think everyone in this business is long-term planning with plants and equipment. Everyone is kind of taking a wait-and-see approach to see how it all falls out.
Okay. Thank you. We have a question here from Darius. Are there certain types of vehicles which tend to be more profitable?
It's not generally the vehicles that tend to be more profitable, but it's definitely the service type. As you can imagine, rolling a tow truck is pretty expensive in terms of fuel and just heavy equipment. While the revenue is higher on those particular jobs, the margin contribution is less. The jobs that are the most profitable are the ones that are soft-served on a purely percentage basis. Tire changes, battery changes, jump starts. Interestingly, one of the questions that we get quite often from folks is, "What happens with EVs? Do they break down? Is that good or bad for your business?" EVs tend to have a lot of tire problems because of the torque in the tires.
We tend to see a lot of tire issues with EVs, which from a business perspective, we like because those are more profitable jobs.
Okay. What levers do you have to drive margin improvement?
Quite a few. I mean, a lot of the business is really built around two things, like one, network efficiency and network density. This is probably one of our favorite slides. You can see back in Q1 2022, we started at 6%, climbed up now to 26%. Really, this is just the hard blocking and tackling of what needs to happen over time to kind of scale the business. Lots of AI, lots of machine learning, lots of automation. We have done some price increases over time, and we have added a handful of new higher-margin products, like VIP programs and other things that are super high-touch.
It's a combination of better product, better operational controls, better unit economics, looking at the right customer, the ideal customer profile, and then just doing the hard work to make sure that we're really paying attention to how the money's flowing in and out of the business. I think, as this chart shows, we've been pretty successful at improving the margins since the beginning. We're super focused on that.
Have you set up a revenue and margin goal for publicly?
Yeah. We have set publicly our revenue and margin goal back before when the business was at 6%. Our goal in the long run was 25-30%. We said, "That's going to be the sweet spot that we can get this business to." Everyone was like, "You guys are crazy. If you guys get this to 15%, we'll be doing handstands." Now we are right in that goal that we said we would be in, which is between 25-30%. I think we see a path to get it up a couple more points in this segment of the business. Over time, as we expand to other new markets, like subscription as an example, subscription has a much higher gross margin profile. It will be about adding those new products and then changing the mix of the business over time.
This business might be 28-29% over time, and then subscription may be at 60% or higher over time. It is just a matter of changing the overall revenue mix over time to drive the economics higher.
Thank you. You work with some rather large car OEMs. If you can just mention some of those and how penetrated you are with them and your sort of land and expand approach too.
Yeah. Typically, we've started off with European brands that were very focused on and English brands that were very focused on high quality, and then rental brands that are very focused on super high quality. We've started to expand into more kind of mass market OEMs over time as people have realized, "Geez, we really need a technology kind of solution." Most of the contracts that we have today are probably 80% penetrated, give or take. There is a lot of just new opportunity, both in terms of new programs that we can add and then to push the penetration up higher within the accounts.
The way that this business works, interestingly enough, is the newer accounts that you sell are four or five or six times as big as the accounts you typically operate on because once you get enough scale, you can move up to the next tier of accounts. Like a mass market OEM sells four or five times as many cars as a luxury brand. An insurance company probably has 10x of a large OEM in terms of volume. You can see as you move up in scale, the revenue also increases. It is not like you add 10%. You are adding incrementally more over time.
Okay. Thank you. Can you also talk about your go-to-market strategy and what that looks like?
Yeah. Typically, go-to-market is we offer to do pilots. We’ll say, put us in for a certain percentage of the traffic, 10%, 15%, 20%. Most of the contracts have started off like that, where we do a pilot for a certain amount of time, which is usually fixed duration, maybe six months or something like that, or give or take. We win by having superior quality. We’re very analytically focused. We know exactly how the book should perform. We know exactly what we need to target. We’re pretty good at setting expectations and goals and targets with the customers. It’s kind of a multi-phase sales process on here, which is like there’s a pilot, and the pilot turns into usually a percentage of the business, call it 15%-20%.
On almost all the accounts, we've ramped them up to at least either 100% or 80% over time. It's kind of a land and expand opportunity, if you will.
Okay. Can you also talk about how large that reciprocal market is for you and how you see that evolve over the next couple of years?
Yeah. There's a couple of different pieces. One, there's the roadside assistance business, which is typically, think AAA. It's $25 billion globally, about $12.5 billion in the U.S. There's an interesting market that sits between insurance companies, OEMs, and fleets, which has this kind of connected vehicle data business. We had bought a company a year ago last October called Autonomo, which was focused specifically on this connected vehicle data. The way to think about this is your car is streaming data constantly to you. In the future, there should be a point in time where your car, if it's going to break down, it's going to tell you. You might get notified on your phone or your iWatch that says, "Hey, Anja, your car is going to have a flat tire when you come out of the office today.
Do you want us to send a technician out to fix it ahead of time? It is this kind of what we call proactive business that is coming that we do in some cases now, but it is going to expand pretty quickly. That is a really big business that straddles between a handful of markets. McKinsey and others have pegged it over $100 billion. We love the subscription business. Big market, 60 million people that pay between $50 and $100 a year today. AAA really is the only big subscription player, which is very strange in a market like that, that that is the one. We look at that and we think about how can we do that, but better? How can we make it a better experience? How can we make it more price-effective? How can we make the experience superior?
I think sooner or later, we'll announce that we'll kind of think about how we go in and attack that market with something that's new and innovative that hasn't been seen before.
Okay. Sounds exciting. What are the biggest changes to the market that you're positioned to capitalize on?
I think the biggest changes, interestingly, are as follows. If you started this business in the 1970s or you started this business in the 1900s, there were not fax machines or GPS or computers or anything. Most of the competitor networks are set up around geographics. Let's take Dallas, for instance. You would probably give one area, Richardson, Texas, to one group of providers. You would give Plano to another group of providers. You would give Frisco to another group of providers in North Dallas to somebody else. They would get all the volume in those areas. That is great unless there is an accident on 75 in Plano and that particular group of providers gets backed up. You really did not have a way to move assets around.
Think of Uber, right, with surge pricing, where if Santa Monica is busy and you need to get people to Hollywood, you can offer economic incentives so that there are more vehicles that go to Hollywood. We have built technology to match the demand along the entire continuum of the job spectrum with the network. We do not have exclusive geographic areas. We do not have the problem that if someone, this is like under a quota franchise model, is busy, then the customer waits. We move the jobs around to different people that are open and available. It is actually a pretty big sea change because most of the other competitors have negotiated contracts with specific rates and volumes to people. In the end, if someone is busy, like in Plano, the Plano example, then the customer has to wait.
We pride ourselves on making sure that the customer gets experienced quickly. I think our customer service scores speak for themselves with 4.6 out of 5.
Okay. Got it. Can you share if certain population centers are more profitable than others?
There's certainly more jobs and more revenue in population centers. That's absolutely true. In terms of profitability, you can imagine if someone is in, let's say, Colorado, and they're skiing and they have to get towed a long distance, those tend to be expensive jobs. We service people pretty much everywhere. It is really, as you mentioned, there's more driving in population centers than there are in smaller places. There's typically more revenue in those areas.
Okay. Another question here from the audience. Any thoughts on technology spending needs going forward and what areas are the key focus on?
If you look at, if you pull apart our financials, you'll see that we've done a pretty good job of pulling down OpEx costs in the business. We've reduced costs quite a bit. We have a lot of technologists in the business today. I think we have enough for this side of the business. If we decide to, say, expand into something new, we might want to increase technology investment over time. For where we are today, we feel great about kind of where we are on the tech spending.
Okay. Another question here is key competitive advantages compared to peers?
It's really the technology and the data analytics. We have spent a lot on data and machine learning and what people call AI, which is just pattern recognition, and then the algorithms that feed the network and feed the pricing and feed the optimization. We are constantly spending more on that and looking at how to improve it. A pretty big competitive moat, we believe, for us, just given where we see our competitors.
Okay. Another question here. When can we hear more concrete announcements on capturing new markets that you just spoke about?
I think we'll have some more announcements that are coming in the next kind of quarter or two. We have a pretty robust roadmap of new products that are coming out that we're excited to announce. We're not going to announce them ahead of time because we like to surprise the competitors when they come out. There are definitely, as Jenny can attest to, a whole bunch of interesting things in the pipeline that we're excited about kind of this year.
You recently closed the financing. Can you talk us through that?
Yeah. Tim, you want to take that one?
Sure. Yes. We closed in February. We extended a large portion of our hybrids debt out to a maturity of July of 2026. We replaced our first secured lender with a working capital line of credit with Mid-Cap Financial. It is a $20 million line with another $5 million upside. That is secured off of our accounts receivable. The good thing about this is as our accounts receivable base grows, we will have access to more capital with that line of credit. That line of credit matures in a few months. It is actually a three-year line of credit, but it does mature in front of the hybrids debt. We are working on it. The board is constantly looking at our strategic options related to that debt, related to the hybrids portion.
It is focused on making sure we have a solution for that as we think about the business over the next couple of quarters.
Okay. Thank you. Can you just touch on just the balance sheet and your cash generation as well?
Yeah. The balance sheet right now, because we have the line of credit, cash is a little bit less important than it used to be. We do have a $5 million liquidity metric that we try to manage to. That is really unrestricted cash along with available borrowings on the line of credit. That is a watermark that we have to stay above right now for both of our credit agreements. From an accounts receivable standpoint, we got good quality AR there, usually over between $20 million-$25 million worth of accounts receivable. We have a really good asset base there. On the debt side, most of our accounts payable and accrued liabilities are all kind of standard run rate. We do have the debt activity that I spoke about a few minutes ago that is out there.
From a cash flow perspective, we're still burning a little bit of cash. We are, and we are happy to have reported in this last quarter our non-GAAP operating break-even. We're just about there. We are looking forward to growing the business and flipping to positive and then ultimately cash generation in the next couple or several quarters. We are excited about that.
Okay. Sounds good. I have one last question here from the audience. We sort of touched on it, but maybe we can elaborate a bit. With your current OEM customers, what is the current penetration on the customer base have you reached?
It's pretty high. Most of our OEM contracts that we have, we're the sole source partner. Some of the fleet programs that we mentioned, it's more like 80%. So it's pretty good. There's always new programs to add to. So we're always adding new programs and new opportunities.
Okay. Thank you.
The question is where the growth is going to come from. It's going to come from signing up new clients.
Okay. We're actually out of time. I'm going to hand it over to you, Matt, for some closing remarks. First, I want to thank everyone who participated and the management team for joining us today. I also want to, I know you have a pretty full one-on-one schedule, but if anyone wants to catch up with the management team, you can reach out directly to us or to the management team directly. I'm sure they will squeeze you in somehow. With that, I'll hand it over to you, Matt.
Thank you, Anja, again for hosting us. It's always great to talk to you. We think we get pretty fantastic questions from this group. If anyone wants to talk to us later today or later in the week, if you're not available today, by all means, please reach out to us at investorrelations.geturgently.com. We're happy to schedule something that's great. I think the one thing I will mention is Tim and the team and myself have been super focused on getting to this first milestone, which is non-GAAP break-even. You can see looking over time how much we've improved margin and how much we've improved the expense profile of the business. We're very bullish on where we can take this business over time. I think we've done what we said we're going to do.
This year, we look to knocking down more wins and reporting more wins out to the folks here. Thanks again.
Sounds good. Thank you. Thank you, everyone.
Thank you.