Verra Mobility Corporation

Good afternoon, ladies and gentlemen, and welcome to VR Mobility's fourth quarter and year-end 2025 earnings conference call. My name is Michelle, and I will be your conference operator today. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like to turn the presentation over now to your host for today's call, Mark Zindler, Vice President of Investor Relations for Vera Mobility. Please go ahead, Mr. Zindler.

Thank you. Good afternoon and welcome to VeriMobility's fourth quarter and full year 2025 earnings call. Today we'll be discussing the results announced in our press release issued after the market closed, along with our earnings presentation, which is available on the investor relations section of our website at ir.verimobility.com. With me on the call are David Roberts, VeriMobility's Chief Executive Officer, and Craig Conte, our Chief Financial Officer. David will begin with prepared remarks, followed by Craig, and then we'll open up the call for Q&A. Management may make forward-looking statements during the call regarding future events and expectations, anticipated future trends, and the anticipated future performance of the company. We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ materially from those projected in the forward-looking statement. due to a variety of risk factors. These factors are described in our SEC filings. Please refer to our earnings press release and investor presentation for our cautionary note on forward-looking statements. Any forward-looking statements that we make on this call are based on our beliefs and assumptions today and we do not undertake any obligation to update forward-looking statements. Finally, during today's call, we'll refer to certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in our earnings release, quarterly earnings presentation, and investor presentation, all of which can be found on our website at ir.barrelmobility.com. With that, I'll turn the call over to David.

Thank you, Mark, and thanks, everyone, for joining us. We close 2025 with strong execution and momentum across our three business segments. Total revenue for the fourth quarter increased 16% from the fourth quarter of 2024, exceeding our internal expectations, while adjusted EBITDA and adjusted EPS were generally in line with our internal expectations. Looking ahead to 2026 and beyond, we are executing against a focused value creation strategy designed to strengthen our core, enhance profitability, and position bear mobility for durable long-term growth. In the near term, we are driving operational discipline, sharpening our portfolio focus, and anticipate expanding margins in 2027 and beyond. We are allocating capital and prioritizing resources against the highest return opportunities. Our priorities are clear, deliver predictable, profitable growth, while strengthening margin performance over the long term. At the same time, we are investing with intent to extend our leadership and unlock long-term value We are modernizing our technology platforms, including advancing Mosaic, our secure, cloud-based, end-to-end automated enforcement solution and government solutions, and accelerating development of our connected vehicle platform and commercial services. The future of mobility is safe, smart, and connected. Cities and fleets are moving in that direction, and we are building the capabilities to lead that transition. These investments are disciplined, aligned with customer demand, and designed to drive durable competitive advantage and sustained shareholder value. Before I transition to our operating results, I'll start with an update on our automated photo enforcement contract with New York City Department of Transportation. I'm pleased to report that we signed and registered our contract at the end of December 2025. The total contract value now stands at $998 million over a five-year period and includes an option for a five-year renewal. Under our then-existing contract with In New York City Department of Transportation, we generated $22 million of revenue attributable to the red light camera installations in the fourth quarter of 2025, of which approximately $14 million was installation services revenue and about $8 million was product revenue. Next, I'll move on to a macro view of each of our segments, starting with government solutions, which we consider our primary value creation engine due to the expanding addressable market and our competitive positioning are continuing to deliver strong growth and high win rates moreover we are poised for margin expansion in 2027 and beyond via the deployment of the mosaic platform to support the event processing requirements of our global enforcement programs starting with growth and high win rates in the fourth quarter of 2025 government solutions total revenue increased 25 percent over the fourth quarter of 2024 driven primarily by the new york city red light expansion Additionally, we entered into bookings of about $23 million of incremental annual recurring revenue based on a full run rate, bringing the full year 2025 total to about $64 million in bookings. Notable fourth quarter bookings include a school zone speed program in Orlando, Florida, a red light enforcement program in Pittsburgh, Pennsylvania, and a speed enforcement program across the state of Hawaii. These recent wins reinforce our structural advantage serving cities and public sector partners. Moreover, our adjustable market in the US has expanded by approximately $365 million due to new enabling legislation over the past three years, with the potential to expand to about $500 million if California passes additional enabling legislation for the statewide deployment of speed enforcement. That said, we recognize there continues to be legislative activity and ongoing public debate about automated enforcement programs. including new state and local laws enabling speed and stop-arm camera programs and ongoing discussion over the role of automated tools in traffic safety. But we remain confident in our business given the wide body of evidence showing these systems successfully change driver behavior and improve safety. Speed cameras contribute to significant declines in violations as well as a 14% reduction in crashes in major cities. National safety authorities, including the United States Department of Transportation's Federal Highway Administration and the National Highway Traffic Safety Administration, recognize that automated speed enforcement is a proven safety countermeasure that can reduce fatalities and serious injuries by meaningful margins. Moreover, the vast majority of automated enforcement programs are cost neutral to our customers, as we incur the cost of the cameras and installation costs in most deployments, and remaining cash outlays are paid via self-funding mechanisms. We also prioritize data privacy, compliance, and transparency in every implementation, and we will continue partnering with local authorities to create safer streets and better outcomes for the communities with which we serve. Our school bus stop-arm safety program is a standout example. Clear safety outcomes coupled with strong customer adoption and durable long-term demand, as well as public acceptance. In fact, we recently shared the results of a consumer survey we conducted late last year, which showed 82% of respondents supported safety cameras to monitor and penalized drivers who illegally pass stopped school buses, and 70% of respondents favor automated enforcement in school zones. Automated enforcement reigns a core catalyst for driver safety, which continues to be a top public priority. Next, I will turn to our parking solutions business, or T2 systems. In summary, T2 is stable, improving, and being invested in thoughtfully. Fourth quarter, total revenues increased 5% over the prior year quarter, in line with our internal expectations. In 2025, T2 performed in line with its internal plan, along with an improving outlook. We are seeing early signs of momentum, primarily in the context of decreasing customer churn, while growth is primarily driven by SaaS bookings and investment in the transaction-based business area. Our operational focus is twofold, improving utilization and monetization of our SaaS and transaction-based revenue model, coupled with disciplined self-funded growth. Moving on to commercial services, fourth quarter revenue and segment profit increased about 10% and 7% respectively over the prior year period. Rental car or rack tolling increased 16% over the prior year period driven by increased travel volume and product adoption, as well as higher tolling activity compared to the fourth quarter of last year. The growth in rack tolling was partially offset by a decline in fleet management revenue of about 8% compared to the fourth quarter of 2024, quarter earnings call. Strategically, commercial services remains a durable cash-generated business with clear competitive advantage, while the operating environment is more normalized relative to recent years. We believe that the fundamentals of the business remain solid. For 2026, we expect mid-single-digit revenue growth. We expect TSA volumes to grow modestly compared to 2025 levels, and FMC revenues expected to grow mid-single digits, reflecting the impact of prior year period churn in the first half of 2025. Importantly, the segment continues to generate significant free cash flow to support reinvestment and capital return. While long-term growth expectations are more moderate than prior outlooks, we see a clear and achievable path to sustained mid-single-digit growth. The drivers remain balanced and resilient, roughly one-third from travel volume growth, one-third from structural secular tailwinds, and one-third from focused growth initiatives that expand our value proposition. We're particularly excited with Stellantis, which we believe will improve the driving experience and simplify end-vehicle payment processes. In the near term, especially over the next two years, we are taking a more cautious view due to softer anticipated travel volumes, reduced European travel to the United States, and expected fleet reductions among our rental car customers. Should macro conditions improve and fleet levels recover faster than expected, there remains potential to perform above this baseline. In commercial services, we are sharpening our execution, serving customers at their highest point of need profitability, and cash generation, who are positioned to deliver consistent, high-quality earnings over time. Moving on to capital deployment and portfolio focus, our approach to capital deployment remains disciplined and clearly prioritized. First, we continue to allocate capital toward areas of the business where we see the strongest growth and returns, including programs like school bus stop-arm enforcement, where demand, safety outcomes, and long-term economics are compelling. Second, we are actively evaluating M&A opportunities that can accelerate growth or advance our capabilities in key areas along with safe, smart, and connected themes, with a strong focus on strategic fit and return on invested capital. Third, share repurchases remain an available tool within our capital allocation framework, and we have returned over $650 million to shareholders through buybacks over the past five years. Across all capital deployment decisions, we are sharpening our portfolio to maximize performance in businesses that are already growing and to improve returns on invested capital, allocating capital with greater focus and selectivity. We believe this discipline supports both near-term margin performance and long-term strategic flexibility. As we look ahead, particularly around AI and autonomous vehicles and the evolving fleet landscape, we're focused less on defining specific products today and more about the problem spaces where we believe we are structurally advantaged. As mobility becomes more autonomous, connected, and data-driven, cities and fleets alike will face fundamental changes in how safety, compliance, enforcement, governance, and transactions are managing. And those are areas we're already operating at scale with trusted relationships. We're taking an intentional but very disciplined approach, building capabilities, working closely with cities and fleet operators, and investing in learning before committing significant capital. As mobility transitions from individually driven vehicles to software-directed vehicles, value accrues to the systems that enable safe, efficient, and compliant access to the road. These are exactly the environments in which VAR mobility operates today, which we believe creates a long-term structural tailwind as autonomy continues to advance. In conjunction with these trends, we're expecting to increase R&D spending in these areas and the financial guidance that Craig will discuss incorporates the spending. Craig, I'll turn it over to you to guide us through our financial results, capital deployment, and 2026 guidance. Thank you, David, and hello, everyone.