VERRA MOBILITY Corp Q1 FY2025 earnings call

• Total revenue for the quarter increased 6% over the same period last year to $223 million, with adjusted EPS increasing 11% over the prior year period. - New York City Department of Transportation identified Verra Mobility as the vendor to manage New York City's automated enforcement safety programs for a 5-year period after current contract expires in December 2025, though contract negotiations are ongoing. - Monitors domestic travel demand as it influences commercial services business, with broader pullback in consumer confidence and travel demand impact seen. - Government Solutions business sees positive support of photo enforcement programs, with enabling legislation adding $185 million of TAM and potential to expand over $300 million, and booked about $6 million of incremental annual recurring revenue in first quarter. - Maintains full year 2025 financial guidance, but notes uncertain travel demand may trend towards lower end of guidance range. - ERP implementation project is going well with vast majority of processes live on new platform on schedule and on budget.

Commercial Services: First quarter revenue and segment profit increased about 6% and 4% respectively over the prior year period. RAC tolling increased 6% over the prior year period driven by a modest 1% increase in TSA travel volume, increased product adoption and higher tolling activity. FMC revenue grew 12% compared to the first quarter of 2024, primarily due to increased vehicle enrollment and higher tolling activity. Government Solutions: Service revenue increased 4% over the first quarter of 2024. Revenue from New York City, the largest customer, was essentially flat year-over-year while service revenue increased 7% outside of New York City. Total revenue including international product sales was up about 8% over the prior year quarter, fueled by a $4 million increase to product sales. T2: Total revenue increased about 2% for the quarter driven by increased revenue from SaaS product offerings and a modest increase in product sales, partially offset by lower professional services revenue.

• Maintain full year 2025 financial guidance, but uncertain travel demand may lead to trend towards lower end of guidance range. - Government Solutions expected to generate high end of mid-single-digit total revenue growth, with New York City service flat under legacy contract and product revenue largely flat, remaining 60% expected to grow low double digits. - Parking Solutions revenue expected to be about flat with 2024 levels, SaaS revenue to grow low to mid-single digits offset by decline in installation and professional service revenue. - Historically first quarter is lowest revenue-generating quarter, but current economic uncertainty may change trends in 2025.

• Broader pullback in consumer confidence levels and impact on travel demand as seen by U.S. air carriers cutting forecasts. - Uncertain economic environment may lead to softer travel demand impacting commercial services business. - Indirect impact of potential tariff exposure on consumer and business spending may impact travel demand in commercial services business.

Q: Nik Cremo asked about when the New York City contract will be finalized and when greater clarity on its impact on the business would be available.

A: David Roberts said probably in the next 60 to 90 days is a reasonable bet.

Q: Daniel Moore asked about the attractive pipeline in Q2 and updates on California RFPs.

A: David Roberts said they are well ahead of pipeline plan and California is going well with waiting for final updates from some RFPs.

Q: Daniel Moore asked about RAC tolling revenue growth vs TSA volume growth and if the outperformance trend would continue.

A: Craig Conti said there could be a disconnect as TSA covers the whole country and Verra Mobility's business is in specific areas, so can't anticipate at this time.

Q: Daniel Moore asked about margin expansion opportunity in Government Solutions beyond 2025.

A: David Roberts said the expanding market with new opportunities and use cases sets them up well in the business over the next couple of years.

Q: Louie DiPalma asked about thoughts on autonomous vehicle fleet operators as tolling partners and camera backlog and churn.

A: David Roberts said autonomy impact is longer term and focused on partnering with car manufacturers; Craig Conti said camera backlog translates to revenue over 12-18 months and churn rate is very high at 97%-98%.

Q: David Koning asked about Commercial Services guidance weakening and about bad debt expense.

A: Craig Conti said it would be a little less than high single digit if travel slows; Craig Conti explained the bad debt expense was for aged receivables and not related to current operations.

Q: Rodney McFall asked about initial steps in T2 to improve the business and exposure to international travel.

A: David Roberts said management team reinvigorated commercial leadership and execution; Craig Conti said Verra Mobility looks more domestically as most tolling activity is in certain states.