Verra Mobility Corporation

Good day and welcome to the VeriMobility Corporation updated call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Sajid Dowdy, Vice President, Investor Relations. Please go ahead, sir.

Thank you. Good afternoon and welcome to VeriMobility's second quarter 2021 earnings call. Today, we'll be discussing the results announced in our press release issued after the market closed. With me on the call are David Roberts, VeriMobility's Chief Executive Officer, and Tricia Chordoff, our Chief Financial Officer. David will begin with prepared remarks, followed by Tricia, and then we'll open the call up for Q&A. During the call, we'll make statements related to our business that may be considered forward-looking, including statements concerning our plans to execute on our growth strategy, our ability to maintain existing and acquire new customers, and other statements regarding our plans and prospects. Forward-looking statements may often be identified with words such as we expect, we anticipate, or upcoming. These statements reflect our view only as of today, August 9th, 2021, and should not be considered our views as of any subsequent date. We undertake no obligation to update or revise any forward-looking statements. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of materials, risks, and other important factors that could affect our actual results, please refer to those contained in our annual report on Form 10-K-A and quarterly report on Form 10-Q, which are available on the investor relations sections of our website at ir.veramobility.com. and on the SEC website at sec.gov. Finally, during the call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release issued after the close today, located again on our website at ir.bearimobility.com and on the SEC's website at sec.gov. And with that, let me turn the call over to David.

Thanks, Sajid, and thank you, everyone, for joining us on the call today. We delivered very strong results during the second quarter as the positive impact of the vaccine rollout and economies reopening resulted in a sharp rebound in leisure travel. Consolidated revenue grew 61% year over year to $129 million with strong flow through as adjusted EBITDA came in at nearly $69 million or 53% of revenue. This exceptional performance essentially mirrors our pre-pandemic peak performance in the third quarter of 2019. With the expected economic recovery occurring faster than we initially anticipated and encouraging business trends at both business segments, we are reintroducing guidance and expect a robust second half of the calendar year 2021 from a growth, profitability, and free cash flow perspective. The last 12 months have been uniquely challenging for many businesses. However, our team has done a great job managing through the challenges and remaining focused on our strategic objectives. As we continue to execute against our plan, our priorities remain. strengthening our core offerings and expanding our footprint internationally as we deliver on our vision to be the global leader in smart transportation. With economies reopening and scale returning, we are seeing the benefits of our strategic actions taken last year. For the first six months of 2021, we have delivered revenue of approximately $219 million, representing growth of just over 11% compared to the first half of 2020 and 5% over the first half of 2019. We are also seeing strong operating leverage with the first half of 2021 EBITDA margins of approximately 50%. The strength of our core business and the continued adoption of data-driven, intelligent, and integrated travel solutions give us a confidence in our ability to maintain this momentum for the second half of this year and beyond. The strength in the quarter was led by our commercial services segment, which benefited from the improved travel demand that is positively impacting the rental car industry. While overall volumes are still below pre-pandemic levels, we delivered segment revenue of roughly $66 million and adjusted EBITDA of nearly $43 million, representing a segment margin of 64%. The strength was broad-based, with all key operating metrics exceeding expectations. In addition, positive macro trends like the transition to cashless tolling continue to provide a powerful tailwind that supports the momentum of our business. During the pandemic, several tolling authorities across the country moved to all cashless, which bodes well for the adoption rates of our tolling solutions. We continue to see demand coming primarily from leisure travelers, which is a trend that we expect to persist through the balance of the year. We anticipate business travel to return as a higher level of our product mix in 2022. Despite the known industry challenges currently faced by the rental car industry, we believe the racks are effectively refleeting and being creative to keep up with the leisure travel demand. In fact, our title and registration business segment, which represents approximately 7% of the commercial service revenue, saw a sequential growth of nearly 133%. This robust activity is primarily related to an increase in RAC-related volume with some contributions from FMCs. We continue to make steady progress in Europe as the pandemic-related shutdowns remain prevalent across the continent. Our strategic objective is to establish ourselves as a first-of-its-kind, fully outsourced, pan-European toll management solution provider. We continue to look for opportunities as we build a foundation and expand our footprint there. Overall, I'm very pleased with our performance this quarter, which demonstrates how quickly we can scale when our customers need us, especially in a fluid demand environment. Our execution this quarter is a testament to the resilience of our business model, strong customer relationships, and disciplined execution. Our government solutions business also delivered exceptional results driven by the benefits of the New York City School Zone Speed Program and increased driving patterns. Revenue for the second quarter came in at $62 million, representing year-over-year growth of 18%. Sequentially, service revenue grew just over 13%, and product revenue grew by approximately $12 million, representing new camera installs for the New York City school zone speed programs. Adjusted EBITDA came in at roughly $26 million, with healthy margins of 41%. I'm glad to report that we've started receiving payments on the outstanding New York City receivable. Based on the current pace of payments, we expect to make good progress toward collecting this receivable during the second half of this year. And Tricia will share additional details about the timing and the impact of our cash flow shortly. As a reminder, our longstanding customer, the New York City Department of Transportation, announced the expansion of its Schools on Speed camera program in 2019. Through 2020, we installed 1,020 cameras, and earlier this year, they further expanded the program by an additional 720 cameras, which we are currently deploying. During the second quarter, we installed 158 cameras and are on target to install a majority of the remaining cameras during the second half of 2021. Thanks in part to the rapid growth of the New York City program, our speed portfolio now represents roughly 39% of the government solutions revenue. During the quarter, we also closed the Red Flex acquisition and the integration efforts are off to a great start. We have established a new leadership team and are in the midst of aligning the business unit priorities and goals. While still in the early stages of the integration process, we believe the combination with RedFlex creates significant cost synergies and new revenue opportunities while providing an enhanced technology portfolio to our customers. From a revenue perspective, RedFlex operates in some unique channels, which will create opportunities for us in the U.S. and internationally. The team recently renewed and expanded a large multi-year vehicle-based mobile speed camera program for Australia's transport for New South Wales. Additionally, in the U.S., we can now offer unique construction zone speed and railroad crossing programs, which complement our pre-existing offerings. We are very excited about the strategic acquisition expected to accelerate our international strategy. As we realign our teams, our focus remains on the greenfield opportunities we are pursuing in Georgia and Virginia, as well as our crossing guard offering. Our pipeline of opportunities remains strong, and our teams remain engaged with various municipalities and school districts in their respective states. With schools expected to be back in session in the fall, we anticipate a pickup in the activity for our Crossing Guard program, specifically in New York, where we have a potential opportunity of 6,500 cameras. We plan to install 650 cameras in New York, Washington, and Georgia during the second half of 2021. Additionally, we maintain consistently high renewal rates during the quarter, including key customers in Arizona, Georgia, Florida, and Washington. Finally, we announced today that our board approved the new $100 million share repurchase program. Our capital allocation strategy has always focused on investing for growth through M&A first and then returning excess cash to shareholders. However, current valuations, we believe the repurchase of our shares represents an attractive investment opportunity to redeploy excess capital and enhance long-term shareholder value creation. Overall, we are happy with the progress we made during the first half of the calendar 2021 with an improving business outlook for both our segments, We are poised for a strong second half of the year. As such, we are reintroducing guidance that reflects growth and profitability well ahead of our expectations from earlier in the year. We remain cognizant of the fact that the new COVID variant could create new uncertainties and are monitoring the situation closely for any anticipated impacts. With that, let me hand it over to Tricia to walk through the financials and the business outlook in more detail.