Verra Mobility (NasdaqCM:VRRM) FY Conference Transcript

Verra Mobility FY Conference Summary Company Overview - Company: Verra Mobility (NasdaqCM: VRRM) - Industry: Outsourced towing management services, traffic safety enforcement, and parking management - Revenue: Approximately $950 million for the trailing 12 months as of Q3 2025 [3] - EBITDA: Just over $400 million with a 44% adjusted EBITDA margin [3] - Free Cash Flow: $153 million, representing a conversion rate of nearly 40% of adjusted EBITDA [3] - Employee Count: Approximately 2,000 [4] - Customer Base: Over 2,300 customers, primarily in parking services [4] Business Segments 1. Commercial Services - Market Position: Leader in toll and violation management for commercial fleets [6] - Revenue: Approximately $400 million globally, with high single-digit organic growth expected [8] - Recurring Revenue: 90% of revenue is recurring in nature [8] - Growth Drivers: GDP-like travel growth, increasing cashless road penetration, and new toll road additions [8] 2. Government Solutions - Market Position: Industry leader in automated traffic enforcement [9] - Revenue: Approximately $400 million, also a high single-digit organic grower [10] - Recurring Revenue: 90% of revenue is recurring [10] - Key Contracts: Largest customer is New York City, with a renewed contract valued at nearly $1 billion [10] - Market Share: Maintains a 70% market share in the U.S. [11] - Growth Opportunities: Adoption of new photo enforcement technologies and expansion into new municipalities [11] 3. Parking Solutions - Market Position: Leading provider of parking management solutions in North America [12] - Revenue: Approximately $80 million, with mid-single-digit organic growth [13] - Recurring Revenue: 50% from SaaS, 25% from recurring services, and 25% from episodic hardware sales [13] - Growth Drivers: Expansion into universities and municipalities, with significant market potential [13] Financial Performance - Revenue Growth: Total revenue CAGR of about 15% pre-COVID, with service revenue CAGR of about 17% [20] - Adjusted EBITDA Growth: 12% CAGR, with margins in the mid-40s [20] - Leverage: Closed Q3 with a leverage ratio of about two times, targeting three times net leverage [22] - Liquidity: $200 million in cash and an undrawn credit facility, totaling over $400 million in liquidity [22] Strategic Insights - New York City Contract: Expected to be EBITDA accretive despite a temporary margin step back due to contract adjustments [25][31] - Market Trends: High single-digit growth expected in Government Solutions, driven by technology adoption and new city contracts [26] - Cash Flow Expectations: Anticipated cash flow to remain stable, with a conversion rate of around 40% of adjusted EBITDA [34] Future Growth Opportunities - Commercial Services: Expansion into European markets and adjacencies like telematics and vehicle towing [16] - Government Solutions: Growth through new city contracts and technology adoption, including school bus enforcement [17] - Parking Solutions: Potential growth in airport parking management and monetizing curb space in urban areas [18] Market Dynamics - Travel Trends: Overall travel growth of about 0.5% in 2025, with a bullish outlook for 2026 [42][43] - Cashless Tolling: Approximately 70% of U.S. toll roads are cashless, indicating significant growth potential [36] - European Market: Cashless tolling penetration is much lower than in the U.S., presenting future opportunities [39] Capital Allocation Strategy - M&A vs. Debt Reduction: Focus on high-return opportunities, including share buybacks, with a recent authorization of $250 million for buybacks [49][50] - Long-term Outlook: Emphasis on being a world-class capital allocator, balancing debt management and growth investments [49]