Verra Mobility Conference Call Summary Company Overview - **Company**: Verra Mobility (NasdaqCM: VRRM) - **Industry**: Smart Transportation - **Segments**: - Government Solutions (45% of total business) - Commercial Services - Parking Solutions Key Points Government Solutions Segment - Verra Mobility is the leading provider of automated enforcement technology in North America with approximately 70% market share in the U.S. [4][5] - A significant contract with New York City worth $963 million was announced, which includes a 1,000-camera expansion [8][9] - Projected revenue growth for government solutions is expected to be 10%-12% CAGR from 2024-2027, with high single-digit growth in service revenue beyond 2028 [7][10] - The company has expanded its automated enforcement legislation from 21 to 36 states since going public [11] Commercial Services Segment - Expected revenue growth in commercial services is projected to be mid-single digits for 2025, driven by GDP travel growth, classic growth initiatives, and the addition of toll roads [12][13] - The transition to cashless toll roads is a significant growth driver, with 70%-75% penetration currently [13] - The impact of the recent government shutdown on rental volumes was minimal, with a constant rental volume observed [17] Parking Solutions Segment - The parking segment is expected to see low to mid-single-digit growth [19] Financial Outlook - Adjusted EBITDA margin is expected to decline by approximately 250-300 basis points due to various factors, including a significant investment in minority and women-owned businesses as part of the NYC contract [22][27] - Government solutions margins are projected to grow by 1-1.5 percentage points per year through 2028, aiming for a high 20%-30% margin [28] New Opportunities and Legislative Changes - A pilot program for automated photo enforcement in California is underway, focusing on school zone speed enforcement [29][30] - Legislative changes in California are expected to positively impact the business, while a program in Ontario was canceled due to legislative disinterest [63] Capital Allocation Strategy - The company has increased its buyback authorization to $250 million, indicating a strong cash flow generation capability [38][39] - Prioritization for the next 12-18 months includes investing in existing businesses, pursuing M&A opportunities, and considering share repurchases [40][41] M&A Activity - The company has not made an acquisition since T2 in December 2021, citing high valuations in the market as a reason for not closing recent deals [49][51] - Areas of interest for potential M&A include technology and camera technology innovations [52] Long-term Considerations - The impact of autonomous vehicles on the business is currently minimal, with a long-term view suggesting potential changes in vehicle ownership and operation [31][34] Additional Insights - The company is actively monitoring the market for M&A opportunities but remains patient due to high valuations [51] - The unique requirements of the NYC contract may not be replicated in other municipalities, limiting similar future investments [57][59]

Core Insights - Verra Mobility Corporation specializes in smart transportation solutions, including toll and violations management, and commercial fleet services, operating in a competitive landscape with peers like International Money Express, Inc., Option Care Health, Inc., and R1 RCM Inc. [1] Financial Performance - Verra Mobility's Return on Invested Capital (ROIC) is 4.72%, which is lower than its Weighted Average Cost of Capital (WACC) of 5.78%, resulting in a ROIC to WACC ratio of 0.82, indicating insufficient returns to cover its cost of capital [2] - International Money Express, Inc. demonstrates strong capital efficiency with a ROIC of 14.18% and a WACC of 6.93%, leading to a ROIC to WACC ratio of 2.05, highlighting effective capital utilization compared to Verra Mobility [3] - Option Care Health, Inc. shows efficient capital use with a ROIC of 9.20% and a WACC of 6.85%, resulting in a favorable ROIC to WACC ratio of 1.34, indicating effective returns on invested capital [4] - R1 RCM Inc. faces similar challenges as Verra Mobility, with a ROIC of 0.96% and a WACC of 7.69%, leading to a low ROIC to WACC ratio of 0.12, indicating significant inefficiencies in capital utilization [5]

Core Viewpoint - Verra Mobility Corporation is exiting Ontario due to new provincial legislation banning automated speed enforcement cameras, which the company did not choose but is mandated by law [1][5]. Legislative Context - The provincial government expedited the legislative process, limiting public debate and hearings, despite strong local support for automated speed enforcement programs [2]. Effectiveness of Speed Cameras - Verra Mobility emphasizes the proven effectiveness of speed cameras in enhancing road safety, citing significant reductions in speeding and crashes, particularly in vulnerable areas like school zones [3][4]. Community Support - A significant majority (73%) of Ontario drivers supported the use of automated speed enforcement, indicating strong community backing for these safety measures [5]. Financial Impact - The exit from Ontario is projected to result in approximately $7 million in lost annual revenue, which has already been incorporated into the company's preliminary consolidated outlook for 2026 [5].

Core Insights - Verra Mobility Corporation has launched AutoKinex, an OEM-ready in-vehicle commerce platform that integrates payment technology for various mobility services [1][2][4] Group 1: Product Overview - AutoKinex allows drivers to pay for services such as tolling, road usage charging, parking, fueling, and EV charging directly from their vehicles [2][4] - The platform is designed to work with 2021 model year and newer Chrysler, Dodge, Jeep, and Ram vehicles in the U.S. through a partnership with Stellantis [2][7] - AutoKinex processes payments instantly and securely, providing real-time charges displayed in the vehicle's infotainment system if enabled [4][6] Group 2: User Experience - Drivers can pass through most toll plazas without stopping, and if a transponder is needed for gated tolling locations, Verra Mobility will provide one at no charge [5][6] - The service simplifies the payment process by verifying the vehicle's location in relation to toll sites and automatically paying the toll on behalf of the driver [6][8] - Enrollment for the service is free, and new users receive their first 30 days at no cost [7] Group 3: Strategic Importance - AutoKinex provides automakers with a scalable revenue channel by embedding essential services and payments in vehicles, enhancing the connected mobility experience [7][8] - The platform consolidates multiple mobility services into a single, intuitive solution, reducing complexity for drivers and manufacturers alike [8]

Core Insights - A recent survey by Verra Mobility indicates that over 75% of Americans have a positive or neutral view towards road usage charging, suggesting a shift in funding preferences for infrastructure projects [1][2] Survey Findings - 51% of respondents support toll roads for funding transportation projects, with 30% neutral and 20% against [5] - 93% of participants believe that infrastructure in their state requires improvement [5] - 73% of Americans think that electric vehicle (EV) owners should pay an 'energy tax' to recoup funds for infrastructure [5] Perceptions of Toll Roads - 67% of respondents find toll roads fairer than taxes [6] - 76% accept paying tolls if the revenue is used for improving road and bridge quality [6] - 72% believe everyone should pay the same toll rate [6] - 75% think tolls should remain constant regardless of the time of day [6] - 65% would be more willing to pay tolls if they knew the revenue was dedicated to infrastructure projects that benefit them directly [6] - 67% believe tolls should be eliminated once a project is fully funded [6] Industry Context - The U.S. tolling market was valued at approximately $12.5 billion in 2022 and is projected to grow to $18.6 billion by 2030 [4] - The federal gas tax, a traditional funding source for infrastructure since 1932, is declining due to the rise in EV sales, with Pennsylvania experiencing a $250 million drop in gas tax revenue from 2019 to 2024 [3] Company Overview - Verra Mobility is a leading provider of smart mobility technology solutions, processing over 300 million tolls and violations annually for more than seven million vehicles worldwide [7][9] - The company aims to help fleet owners manage toll payments efficiently, ensuring accurate billing and seamless travel across toll networks [7]

Group 1 - The core viewpoint is that Verra Mobility Corp. (VRRM) has a positive business outlook and has become more attractively valued, leading to a maintained buy rating [1] - The analyst emphasizes a diverse investment approach, incorporating fundamental, technical, and momentum investing strategies to enhance the investment process [1] Group 2 - The article serves as a platform for tracking investment ideas and connecting with like-minded investors [1]

Core Insights - Verra Mobility Corporation specializes in smart transportation solutions, including toll and violations management, and title and registration services, operating in a competitive landscape with peers like International Money Express, Inc., Option Care Health, Inc., and R1 RCM Inc. [1] Financial Performance - Verra Mobility's Return on Invested Capital (ROIC) is 4.72%, which is lower than its Weighted Average Cost of Capital (WACC) of 6.47%, indicating inefficiencies in capital utilization [2][6] - International Money Express, Inc. (IMXI) has a strong ROIC of 19.70% against a WACC of 7.08%, demonstrating effective capital efficiency [3][6] - Option Care Health, Inc. (OPCH) shows a ROIC of 9.30% and a WACC of 6.94%, indicating it generates returns above its cost of capital [4][6] - R1 RCM Inc. (RCM) has a ROIC of 1.33% and a WACC of 7.69%, similar to Verra Mobility, indicating challenges in generating sufficient returns on invested capital [5][6]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Core Insights - Verra Mobility Corp (VRRM) reported quarterly earnings of $0.37 per share, exceeding the Zacks Consensus Estimate of $0.34 per share, and showing an increase from $0.32 per share a year ago, resulting in an earnings surprise of +8.82% [1] - The company achieved revenues of $261.94 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 9.39% and up from $225.55 million year-over-year [2] - Verra Mobility has consistently surpassed consensus EPS estimates over the last four quarters, indicating strong performance [2] Earnings Outlook - The sustainability of the stock's price movement will depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.34 on revenues of $233.37 million, and for the current fiscal year, it is $1.32 on revenues of $932.09 million [7] Industry Context - The Internet - Software industry, to which Verra Mobility belongs, is currently ranked in the top 30% of over 250 Zacks industries, suggesting a favorable outlook for stocks within this sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Verra Mobility's stock performance [5][6]

Core Insights - The new automated photo enforcement contract with the New York City Department of Transportation is expected to have a five-year term with a potential five-year renewal, valued at approximately $963 million [35][36][37] - Annual service revenue is projected to grow from about $135 million in 2024 to between $165 million and $185 million by 2027, with additional product revenue from the city’s equipment purchases expected to add $20 million to $30 million in both 2026 and 2027 [1][36] - The red light camera expansion program is anticipated to generate $30 million in revenue in 2025, with $10 million from product revenue and $20 million from installation services [5][30] Financial Performance - Total revenue for Q3 2025 increased by 16% year-over-year to $262 million, with all business segments meeting or exceeding internal plans [8][20] - Adjusted EPS for Q3 2025 rose by 16% compared to the prior year, driven by operating performance and reduced interest expenses [22][30] - Government Solutions revenue grew by 28% year-over-year, with a 46% increase in revenue from New York City, primarily due to new red light camera installations [10][26] Segment Insights - Government Solutions service revenue increased by 19% year-over-year, while Commercial Services revenue rose by 7% [21][26] - T2 Systems, the Parking Solutions business, saw a 7% revenue increase, driven by a 3% rise in SaaS and services revenue and a 30% increase in product revenue [15][27] - The company anticipates Government Solutions to grow in the low to mid-teens for total revenue in 2025, driven by new camera installations [32][36] Legislative Impact - Recent legislation in California is expected to add an incremental $140 million to the total addressable market, increasing the potential market to approximately $365 million, with the possibility of expanding to $500 million with further legislation [11][12] - The company is actively pursuing contracts in California, including a school bus stop arm program and a speed program in various cities [13][76] Future Outlook - The company expects total consolidated revenue growth to moderate to mid-single digits in 2026, with adjusted EBITDA margins anticipated to decline by 250 to 300 basis points due to the New York City renewal contract [16][39] - The company plans to invest in a new smart mobility platform, Mosaic, which is expected to drive margin expansion and productivity improvements starting in 2027 [41][42] - A $150 million increase in the stock repurchase program has been authorized, bringing the total to $250 million, reflecting confidence in long-term growth [19][44]