Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Verra Mobility Corp (VRRM, Financial) reaffirmed its full-year 2024 revenue, adjusted EBITDA, and adjusted EPS guidance while increasing the adjusted free cash flow guidance to the upper end of the range.
- The company reported strong third-quarter results with a revenue increase of 11% year-over-year in the Commercial Services segment, driven by robust RAC tolling and fleet management performance.
- Government Solutions service revenue, which is primarily recurring, grew by 7% over the same period last year, supported by program expansion and new city implementations.
- Verra Mobility Corp (VRRM) won significant contract awards in the third quarter, representing about $22 million of incremental annual recurring revenue, including a major partnership with Hayden AI.
- The company generated a record $85 million in free cash flow for the third quarter, providing significant optionality for capital deployment, including potential M&A opportunities and share buybacks.
Negative Points
- Travel demand decelerated in September and October due to hurricanes, impacting short-term revenue growth, although it has since reaccelerated.
- The T2 Parking business underperformed, with third-quarter revenue slightly below internal expectations and a decline in SaaS and services revenue by 4% year-over-year.
- The parking industry is transitioning away from hardware and related services, which historically represented about 45% of revenue, impacting short-term revenue growth.
- Verra Mobility Corp (VRRM) anticipates revenue growth at the low end of its 6% to 8% long-term guide in 2025, with adjusted EBITDA growth expected to be in the low to mid-single digits.
- The company faces competitive procurement processes, particularly in New York City, which could impact future revenue and growth opportunities.
Q & A Highlights
Q: Can you discuss Verra Mobility's competitive advantages in the New York City RFP and when we might hear back about the renewal?
A: David Roberts, CEO: We feel confident about our technology and support, which are best-in-class. The RFP is due next week, but we don't expect responses immediately. Clarity on the outcome might come around Q2 of next year.
Q: Regarding the preliminary 2025 outlook, how should we expect growth to progress throughout the year, especially with the ARR coming online?
A: Craig Conti, CFO: We expect New York City to remain flat year-over-year. Growth in Government Solutions should accelerate in the back half of 2025 as new TAMs start contributing, with significant revenue expected in 2026.
Q: How should we rank the growth expectations for 2025 across your business segments?
A: Craig Conti, CFO: Commercial Services is expected to grow at the low end of our long-term guide, with Government Solutions on the high side due to strong demand. T2 will see episodic growth, but its impact on consolidated results will be minimal.
Q: With leverage approaching 2 times by year-end, what are your priorities for reinvesting cash flow?
A: David Roberts, CEO: Our priority is growth, both through business investments and M&A. We are open to share repurchases and have a $50 million authorization outstanding. Our cash flow allows us to make these decisions quarterly.
Q: Can you provide more details on the incremental costs expected in 2025?
A: Craig Conti, CFO: Costs will include TAM execution costs in Government Solutions, financial infrastructure investments, and portfolio mix impacts. We expect $5 million in non-capitalized costs for ERP implementation in the first half of 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
