AI-driven Dynamic Pricing And Otonomo Integration Will Improve Future Operational Efficiencies

Key Takeaways

• Strategic expansion in B2B incidents and operational efficiencies are expected to boost revenue and margins, progressing towards financial stability and growth.
  
• Financial enhancements and technological innovation aim to secure stability, with plans for market expansion potentially increasing revenue and supporting business growth.
  
• Dependence on new contracts to offset revenue losses and exiting unprofitable contracts could create revenue and earnings volatility, impacting stability and investor confidence.

Catalysts

Offers mobility assistance software platform for roadside assistance in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.

• Urgent.ly's strategic focus on expanding its B2B incident business through renewals and new customer acquisitions is expected to drive future revenue growth by securing stable and increased revenue streams.
  
• Efforts to improve operational efficiencies, including the integration of Otonomo and technological enhancements like AI-driven dynamic pricing, are designed to expand margins and progress towards non-GAAP operating breakeven, positively impacting net margins.
  
• The enhancement of Urgent.ly's capital structure through a new facility with MidCap Financial and support from investors like Highbridge Capital Management aims to provide financial stability, supporting continued operations and growth, which could enhance future earnings.
  
• Technological innovations, such as the improvements in customer support and service efficiency, are expected to lead to better customer satisfaction and retention, ultimately contributing to revenue stability and potentially lowering operational costs.
  
• The planned launch of new customer partners and expansion into new markets in 2025 suggests potential for significant revenue increases, supporting overall business growth and improved financial performance.

Urgent.ly Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Urgent.ly's revenue will grow by 10.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from -30.8% today to 2.1% in 3 years time.
• Analysts expect earnings to reach $4.0 million (and earnings per share of $3.12) by about May 2028, up from $-44.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 4.1x on those 2028 earnings, up from -0.3x today. This future PE is lower than the current PE for the US Software industry at 31.6x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.41%, as per the Simply Wall St company report.

Urgent.ly Future Earnings Per Share Growth

Risks

• The company experienced a significant year-over-year revenue decline of 23% for 2024, primarily driven by the loss of a major auto manufacturer customer partner, which could continue to impact revenue stability.
  
• Despite technological improvements, the gross profit and margins decreased according to the year-over-year comparison, which could hinder earning potential and margin expansion efforts.
  
• The strategic decision to exit unprofitable contracts could lead to short-term revenue and earnings volatility, even though it aims to improve long-term profitability.
  
• The potential impact of reverse stock split to regain compliance with NASDAQ listing requirements might reflect concerns over stock price performance, impacting investor confidence and market perception.
  
• Dependence on new customer contracts to offset previous revenue losses could lead to uncertainties and risks regarding the consistent achievement of projected revenue and earnings targets.

Valuation

• The analysts have a consensus price target of $12.0 for Urgent.ly based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $191.2 million, earnings will come to $4.0 million, and it would be trading on a PE ratio of 4.1x, assuming you use a discount rate of 11.4%.
• Given the current share price of $11.41, the analyst price target of $12.0 is 4.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.