Verra Mobility Corporation

Good day and welcome to the VERA Mobility Third Quarter 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Rob Abraham. Please go ahead, sir.

Thank you. Good afternoon and welcome to VERA Mobility's Third 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, Veramobility's Chief Executive Officer, and Tricia Chito, our Chief Financial Officer. David will begin with prepared remarks, followed by Tricia, and then we'll open up the call for Q&A. During the call, we will 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, November 4th, 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 material 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 section of our website at ir.veromobility.com and on the SEC's website at sec.gov. Finally, during today's 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.veramobility.com and on the SEC's website at sec.gov. With that, let me turn the call over to David.

Thank you, Rath, and thank you to everyone for joining us on the call today. Q3 was yet another strong quarter for Veramobility this year. We are proud of the great results our team delivered with their consistent execution and both of our business segments have continued to perform well. As Tricia will discuss in more detail later, our third quarter revenue grew 67% year-over-year to $162 million, and our adjusted EBITDA was $82 million, which is up 53% year-over-year. The primary drivers for these results include the ongoing expansion of the Schools on Speed program in New York City and a continued strong recover recovery and travel in the U.S., which has had a positive impact on our rental car tolling business. We've also made excellent progress this quarter in collecting $87.5 million in receivables from our automated enforcement contract with the New York City Department of Transportation. Q3 was a strong affirmation of our capital allocation strategy and our approach to deploying our cash on behalf of our shareholders. The RedFlex acquisition, which closed at the end of Q2, is fully aligned with our strategy to use M&A to both expand our portfolio and solidify our position in core markets. As we highlighted previously, the RedFlex acquisition strengthens our leadership position in photo enforcement in North America by providing an enhanced technology portfolio to our customers and creating cost synergies and new revenue opportunities for the business. In addition, we gained access to new markets such as Australia and Europe, which is consistent with our vision of becoming the leader the leader in smart transportation globally. I'll discuss more about the integration efforts later in my remarks. We also completed a $100 million stock repurchase this quarter. As we explained at the time, we believe that our stock is trading at a discount to its full potential and redeploying our excess capital by investing in the company enhances long-term shareholder value. This again underscores our strong free cash flow capacity and our strategy of returning capital to shareholders at appropriate times. We are confident in our ability to maintain momentum throughout 2021, given the strength of our core business and our long-term strategy. Now let's move on to discuss the highlights from our two business segments. In Q3, our government solutions business delivered 61% revenue growth year-over-year to $85 million, with an adjusted EBITDA of $31 million, which is up 37% year-over-year. These Q3 numbers include $22.8 million of RedFlex revenue. Success in the third quarter was primarily driven by the ongoing expansion of the School Speed Program in New York City, for which we installed 236 speed cameras in the quarter, bringing the total number through the year to 394. We have made strong progress with the program, and we are confident that we will complete the installations of the full 720 camera order early in the first quarter of 2022. In addition, we are proud of our continued customer service excellence by renewing or extending 100 of all of our contracts that were up for renewal in the quarter we also added new business by winning two new school zone speed camera customers in virginia and for the city of atlanta while the government solution segment is still encountering some coven related impacts particularly for school bus solutions we are beginning to see increased opportunities and potential rfps that bode well for 2022. We also achieved key wins outside of the U.S. this quarter, which furthers our global strategy underpinning the acquisition of RedFlex. These wins included deployable speed enforcement solutions for additional cities in Ontario, Canada, where RedFlex has a strong footprint. These cities include Oakville, Pickering, and London. We continue to pursue regulatory approvals for our technology solutions around the globe. In the third quarter, we obtained approval in the Netherlands, which expands our ability to solve more client use cases and our addressable market opportunities in Europe. With regard to the RedFlex integration, our government solutions teams have been focused on executing a successful integration effort. They are working diligently and have made steady progress in achieving the anticipated $8 to $12 million in synergies that we targeted as a part of the investment thesis. The integration process is going well, and we are adopting new ways of collaborating with our team members in Australia and Europe. As you can imagine, as with any acquisition, there are some unforeseen challenges. But overall, we are on course and excited about the impact of the Red Flex technology and its global footprint will continue to our future growth. Like most businesses in the current environment, the government solution segment is not immune to the global supply chain challenges. For example, we are beginning to see longer lead times for certain components for our camera systems. However, we have placed a strong focus on supply chain management and made some smart early risk investments to avoid impacts to our revenue this year. Switching now to our commercial services business, we delivered strong third quarter revenue of $77 million, which was a 75% year-over-year increase. Adjusted EBITDA was $51 million, which is about 65% year-over-year. The continued recovery of travel, which leads to increased total road usage, was a primary driver for the business this quarter. We are continuing to monitor the refleeting occurring within our RAC customers as fleet levels are still down from where they were in 2019. However, we are seeing consumers offer longer rental agreements resulting in more billable days. This helps offset the decline in total number of vehicles. Overall, we continue to see some good tailwinds in the market. For our European business, we are excited to announce that in Q3, we signed an agreement with Enterprise to launch a pilot tolling program in Ireland. We are currently enrolling more than 2,200 vehicles at multiple pilot locations across the country. This is an exciting opportunity to position ourselves for a significant size fleet in the country. We will monitor and adjust the program based on the data, and we will collect incoming months. As we have discussed in the past, our goal this year and next is to establish as many pilot tow programs as we can in strategic countries across Europe, such as Ireland, Spain, and Portugal. This helps prove the value proposition for our customers. We are enthusiastic about the Ireland pilot as it is a significant step on this journey, and we hope to announce additional pilot programs soon. Finally, I would like to provide some additional clarity and commentary about the big announcement we issued this week regarding the acquisition of T2 Systems. We are thrilled about this fantastic new addition to the VeriMobility portfolio of smart mobility solutions that make transportation safer and easier. We have been consistent about our desire to enter the parking management business, which is a natural adjacency to many of our existing solutions. T2 Systems is a leader in parking and curbside management for universities and municipalities in North America, and it features best-in-class SaaS solution. By some estimates, the U.S. parking sector is a $13 billion total adjustable market and is expected to grow as cities and municipalities face greater curbside management challenges due to factors like increased e-commerce deliveries and ridesharing. T2 Systems' hardware and software solutions are perfectly suited to address today's market needs as well as evolving challenges. Parking is a new space for us, so we envision that T2 Systems will operate as a third leg of the stool for our company We will manage it as a portfolio company and it will operate as a distinct business unit rather than being fully integrated as we did with Redflex and HTA. However, it will remain strong connections to both of our business units to help shape sales opportunities and product development. This acquisition is yet another example of how we are putting our significant cash flow back to work for our investors, all while growing revenue and diversifying our customer base. We don't anticipate any issues associated with closing the deal, We are targeting a closing before the end of the year. We are excited to welcome T2 Systems' talented team to the VeriMobility family. Overall, 2021 has been a strong year so far for VeriMobility, and our results this quarter demonstrate the success of our strategic initiatives and consistent execution. We remain committed to updating to our updated guidance. And before I turn it over to Tricia to walk us through the financial results in more detail, I wanted to share that Tricia has announced her intention to retire And as a result, we'll be leaving VeriMobility sometime in Q2 of next year. We will immediately begin efforts to identify her successor and are fortunate that Tricia will continue to serve as CFO during the search process and to assist during the subsequent transition. Tricia has served at VeriMobility CFO since 2015 and has played an essential role in the enterprise-wide transformation that has enabled us to deliver outstanding financial performance to our shareholders. I have deeply valued her strong financial acumen and her strategic insights, as well as her friendship. We are thankful for her enormous contributions to our company and are excited for her to take this wonderful and well-deserved next step in her life. With that, I'll turn it over to Trisha.