Verra Mobility Corporation

Good afternoon, ladies and gentlemen, and welcome to Vera Mobility's first quarter 2026 earnings conference call. My name is Liz, and I'll be your conference operator today. This call 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 Vera Mobility's first quarter 2026 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.veramobility.com. With me on the call are David Roberts, Veramobility'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 statements 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.veramobility.com. With that, I'll turn the call over to David.

Good afternoon, everyone, and thank you for joining us today. I'll begin with a brief overview of our performance for the first quarter, followed by a commentary on our business segments, operational progress, and outlook for the remainder of the year. Overall, we are pleased with our performance in the first quarter, which represents a solid start to 2026. We delivered top-line results in line with our internal expectations with upside and profitability, while building on our momentum in several of our key growth areas. At VeriMobility, we remain steadfast in our mission, delivering technology solutions to make transportation safer, smarter, and more connected. This mission guides our strategy and execution across the organization. Before I share the details of those results, let me take a moment to reiterate our strategy, which is centered on the theme of safe, smart, and connected. This is actually the framework outlining our competitive advantage and where we see growth opportunities for the company. Safe should be obvious as it's been the cornerstone since our company was founded. Last year, we saw positive road safety momentum, but there's still a long way to go to dramatically decreasing traffic fatalities and crashes. Smart is all about bringing operational intelligence to transportation systems to make them more efficient and reliable for our customers. And connected, which I'll expand on later when discussing commercial services, is about unifying fragmented transportation systems and disconnected networks. We are confident that we are well positioned to help customers solve safe, smart, connected challenges and improve the overall mobility experience for everyone. Turning to our financial results, Total revenue of $224 million for the quarter was aligned with our internal expectations, reflecting steady demand across our core business segments. Adjusted EBITDA and margins came in ahead of our internal expectations, driven primarily by better-than-expected New York City camera installations despite weather delays in January and February, as well as reduced bad debt expense for the quarter. This performance underscores our continued focus on discipline execution and operational efficiency. Let me now turn to our second performance, starting with government solutions, which was the standout contributor in the quarter. We saw strong momentum in bookings with up to $13 million in new awards during Q1. Key wins came in across the portfolio, including enforcement programs at Red Light, Speed, Work Zone, Mobile Bus Lane, and School Bus product offerings. Over the trailing 12 months, new bookings totaled approximately $71 million, reflecting sustained demand and strong conversion across our pipeline. We continue to see healthy activity levels driven by increasing adoption of automated traffic enforcement solutions by municipalities. These programs are attractive due to their ability to change driver behavior and improve road safety. Moreover, these programs are long-term recurring contracts, that provides strong visibility into future revenue streams and support durable growth over time. In fact, we were energized by the latest reporting from the National Highway Safety Administration, which indicates that traffic fatalities decreased significantly in 2025 by more than 6%. This is a great indication that safety measures are working, and in the vein of Safe, Smart, and Connected, we believe continued deployment of automated enforcement will make significant impact on safety and ultimately saving lives. From an operational standpoint, we continue to make progress against our key strategic priorities. We are expanding our customer base within the government sector while maintaining a strong focus on execution and delivery. At the same time, we are investing in technology and innovation to enhance our platform capabilities. This includes the implementation of Mosaic, our secure, cloud-based, back-end automated enforcement platform solution in government solutions. We have successfully migrated several customers onto the platform and are actively working to complete other migrations. We continue to expect that the Mosaic platform will deliver productivity improvements and enable long-term margin expansion by streamlining the end-to-end process of traffic incident events. Moving on to commercial services, revenue declined 4% compared to the first quarter of 2025 due primarily to prior period churn in our fleet management business. Looking out the remainder of the year, while the price of fuel and events in the Middle East couldn't weigh on travel, household budgets, and consumer sentiment, we are cautiously optimistic about travel trends. Consumers and business travelers' demand for domestic travel continues to be resilient so far, and we remain hopeful that airfare pricing remains affordable and travel volumes remain consistent with the performance year to date. As a reminder, a significant customer relationship, which represents over 10% of our revenue is currently operating under a short-term contract extension. This contract extension enables us to continue to serve the customer without interruption while we continue to negotiate a long-term renewal. These discussions are ongoing and constructive. As I mentioned earlier, we continue to believe the future of transportation will be defined by solutions that are safe, smart, and connected. I've already touched on the safe dimension through government solutions, so let me expand on what we mean by connected. Today, mobility in the U.S. remains highly fragmented with many systems operating in isolation. We see a meaningful opportunity to help bridge those gaps by connecting platforms, processes, and payment methods. We believe we are well-positioned to support our customers and partners, including cities and fleets, tolling authorities, and delivering more seamless, integrated experiences for the people they serve. One example of delivering a more connected and seamless mobility experience is the AutoConnect Virtual Agent, a solution we announced in April. It is a digital solution for rental car companies to allow drivers to finish the checkout process and activate add-on services like tolling and fueling directly from the vehicle, streamlining the experience for renters. This technology can help our rental car customers notify drivers of available services as counter bypass becomes more popular and improves their customer experience and enables new revenue streams through the service selection. This is just one example where we believe we can deliver auto-connected solutions. Lastly, top-line revenue for parking solutions was in line with our internal expectations and with a slight beat on segment profit margins on revenue mix and operating activities. Looking at the broader market environment, we continue to see favorable tailwinds supporting our business. There's an increasing global focus on road safety alongside growing demand from government customers and automated enforcement solutions. At the same time, domestic travel demand remains resilient, supporting continued growth in our commercial services segment. But even against this backdrop of tailwinds, we operate with a pervasive continuous improvement mindset, and we launched a company-wide transformation initiative to better position the business for long-term growth. This effort is focused on controlling what we can control, optimizing our cost structure, improving operational efficiency, and aligning resources to unlock new growth opportunities while creating capacity to invest in the future. As a part of this transformation, we made the difficult decision to reduce our workforce by approximately 5% in the first quarter, which we expect will generate approximately $10 million in annualized cost savings. Importantly, these savings are being actively redeployed into the business to drive top-line growth and reinforce our technology leadership. We are investing in strategic areas where we have clear competitive advantages, including large-scale fleet management, and deep interoperability with cities, courts, and law enforcement. Our priority investments include areas including AI-driven capabilities across both hardware and software, autonomous vehicle ecosystems, rideshare solutions, and emerging technologies such as drone applications. A key pillar of this reinvestment is the expanded use of AI across our business, directly supporting our smart mobility strategies. In the near term, we are focused on using AI to improve internal workflows and automate processes to drive efficiency and scalability. In parallel, we are embedding AI capabilities into our products through targeted R&D investments to enhance customer value and differentiate our offerings. While these initiatives are still in the early stages, initial pilot programs have delivered encouraging results. Over time, we expect this disciplined reallocation of resources to enhance our growth profiles. and improve operating leverage, and we will continue to provide updates as we make progress. Turning to our outlook, we are entering the remainder of 2026 with solid momentum and confidence in our strategy. We believe our strong bookings performance provides a solid foundation for future revenue growth in government solutions, and our pipeline remains robust. As we look ahead, our priorities for the year remain clear, converting government solutions bookings into revenue, executing against our Mosaic platform implementation plan, which we expect to lead to margin expansion in 2027 and beyond, and maintaining discipline around capital allocation. In closing, we delivered a solid first quarter with revenues in line with expectations and upside in profitability. We saw strong booking momentum in government solutions, reinforcing the long-term value of that segment, and we are well-positioned for continued growth as we move through 2026. Craig, I'll turn it over to you to guide us through our financial results and our outlook for the remainder of the year.