Verra Mobility Corporation Q1 FY2026 earnings call

Strategy

• Centered on safe, smart, and connected theme. Safe is cornerstone, smart brings operational intelligence, connected unifies fragmented transportation systems.

Business Segments

• Government solutions: Strong booking momentum, key wins across portfolio, sustained demand, long-term recurring contracts, Mosaic platform implementation for productivity improvements and margin expansion.
• Commercial services: Revenue decline due to prior period churn and non-recurring true-up, RAC tolling revenue growth driven by increased product adoption and tolling activity, FMC business decline due to prior period churn.
• Parking solutions: Service revenue growth, segment profit margins expansion driven by revenue mix and other one-time items.

Transformation

• Company-wide transformation initiative focused on controlling costs, optimizing cost structure, improving operational efficiency, and reallocating resources to drive top-line growth and reinforce technology leadership, including 5% workforce reduction generating ~$10 million annualized cost savings, investing in strategic areas like AI-driven capabilities, autonomous vehicle ecosystems, rideshare solutions, and emerging technologies.

Platform Implementation

• Mosaic platform implementation in government solutions, several customers migrated, expected to deliver productivity improvements and long-term margin expansion.

Total revenue for the quarter was $224 million. Government solutions saw strong booking momentum with up to $13 million in new awards in Q1, trailing 12-month new bookings totaled ~$71 million. Service revenue in government solutions increased 4% in the quarter, driven by 12% growth outside NYC; within NYC, incremental new camera installation growth was offset by updated contract pricing change. Commercial services revenue declined 4% year-over-year due to prior period churn and non-recurring accounting turnaround; RAC tolling revenue increased 1% driven by increased product adoption and tolling activity, FMC business declined 19% primarily due to prior period customer churn. Parking solutions service revenue increased 6%, revenue was in line with internal expectations with a slight beat on segment profit margins on revenue mix and operating activities.

Full Year 2026 Guidance

• Total revenue expected in range of $1.02 to $1.03 billion, ~5% growth at midpoint over 2025.
• Adjusted EBITDA expected in range of $405 to $415 million, adjusted EBITDA margin ~40%, temporary reduction in margins due to portfolio mix and NYC renewal contract partially offset by year-over-year reduction in ERP implementation costs.
• Non-GAAP adjusted EPS expected in range of $1.32 to $1.38 per share, low single-digit growth over 2025.
• Free cash flow expected in range of $150 to $160 million, reaffirmed free cash flow outlook despite Q1 shortfall due to timing-related items.
• Government solutions expected to generate high-end mid-single-digit total revenue growth, segment profit margins to contract ~450 to 500 basis points compared to 2025 but ramp up to mid-20s by Q4 2026.
• Commercial services revenue growth expected to accelerate as spring-summer travel season ramps up and FMC churn sunsets, segment profit margins expected to expand over prior year.
• Parking solutions revenue expected up mid-single digits versus 2025 levels, margins slightly accretive to 2025.

Q: Daniel Moore with CJS Securities asked about government solutions new bookings in Q1, RFQs and opportunity in pipeline, timing of commercial services contract renewal, and Mosaic integration progress.

A: David and Craig responded that government solutions had $13 million new bookings in Q1, activity and opportunities in pipeline look good, timing of commercial services contract renewal not specified, Mosaic integration is going well with some customers live on the platform and 10 to 15 million cost savings target still good.

Q: Tomo Sano with JP Morgan asked about CS business revenue impact from FMC customer turn, drivers for revenue recovery, key factors behind margin improvement and sustainability.

A: Craig responded that CS business revenue down 3.5% in Q1 with FMC churn being a material impact, FMC business grew excluding churn, travel had positive impact, mid-single-digit growth expected for rest of the year due to FMC churn sunsetting and travel hanging in there, margin improvement driven by volume leverage, prior year ERP spending, and improved bank debt expense.

Q: Faiza Alwi with Deutsche Bank asked about government solutions revenue realization, incremental cost savings.

A: David responded that government solutions overall service expected to be high single-digit grower, product roughly flat, non-New York City service expected to be low double digit grower, incremental cost savings already in the guide, generated by actions announced in March, may show up in R&D, SG&A, or OPEX outside of R&D.

Q: David Koning with Baird asked about commercial business sequential growth, government EBITDA transition.

A: David responded that commercial business sequential growth expected to be stronger with FMC churn impact less, government EBITDA in 2027 expected to be bigger than 2025, margins of GS business expected to be in mid-20s by 2027 with good growth on non-New York City side and service growth in New York City.

Q: Louie DePalma with William Blair asked about 2027 EBITDA outlook for GS business and European rental car tolling products developments.

A: David responded that 2027 EBITDA outlook for GS business unchanged, European rental car tolling products continuing to operate in many countries with some growth on a relative basis, including in Italy, Ireland, France, Spain.