Earnings call transcript Q1 2023

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Operator

Good afternoon, ladies and gentlemen, and welcome to Verra Mobility's First Quarter 2023 Earnings Conference Call. At this time all lines are on listen-only mode. [Operator Instructions] This call is being recorded on Thursday May 4, 2023.

I would like to turn the conference over to Mark Zindler, Vice President, Investor Relations. Please go ahead.

Mark Zindler

you. Thank welcome first and call. XXXX Verra to afternoon, quarter Mobility's earnings Good we'll announced market after results discussing closed. our Today, the issued in be press release the With Officer. Verra David and me Conti, call Executive Craig Financial Chief Officer; Roberts, Chief our on the Mobility's are with followed by begin open then Craig, remarks, for call the Q&A. prepared will and we'll David up

performance, execute the we'll key statements regarding make other expected that our forward-looking, considered and be concerning the call, our statements our business plans benefits to existing expectations and During our strategic ability including business acquire future our growth strategy, financial acquisitions, regarding and may customers, metrics new on to related to plans and statements of operational our maintain our prospects.

identified we no We we be our be reflect any forward-looking such statements views March statements. of statements These not of may anticipate date. update upcoming. view XXXX, any with expect, undertake only our as considered obligation revise as X, to today, often as or words should or and Forward-looking subsequent

Forward-looking from guarantees actual performance to to materially are subject cause expectations. risks of variety that results or statements of not and a the and differ future uncertainties are our promises could

at affect results, on the and Investor risks important a of and XX-K available is XXXX Form the ir.verramobility.com discussion website which on at in For sec.gov. material annual Relations please those our of factors our that contained other SEC's to could actual refer report our website on section

GAAP included our can on and financial measures SEC's at the of our non-GAAP on which today's call, to is be at measures. certain we'll in comparable A directly website during sec.gov. refer reconciliation release, website found ir.verramobility.com non-GAAP Finally, to the earnings most these measure

turn I'll With David. over the to that, call

David Roberts

Today's Thank that of of the trends discussion move business segments results and our I'll joining update progress. are excellent future views of overview everyone, to each provide a our you, industry and a strategic today. of and on summary I'll share key drivers. and first recap call of our I'll business results quarter thanks, tracking with our call across And influencing business. start with the an an priorities for Mark, on driving a our close our

We increased driven results revenue free quarter, first XX% and million delivered cash highlighted delivered services over and in quarter quarter. the the first exceptional service services adjusted leverage in by solutions. $XXX and quarter the growth both first EBITDA tolling commercial volume strong prior year, was based generation. solutions. and of for and recurring year strong by was trends the flow primarily revenue XX% revenue in of operating solid and government This government prior EBITDA increased million by We over representing $XX commercial Adjusted driven

benefited a catch will we that Craig solutions note, details As entry had and a in the provide remarks. adjusted about up revenue EBITDA by his government million. $X in

represented offering. this team adopted a revenue quarter in commercial rates performance over Starting performance performance $XX provide quarter an driving experienced renters strong rental TSA product agreements. primary also XXXX pre-pandemic The adoption was all driving of year. volume, volume. for last XXX% reach increase tolling inclusive factor We're throughput increased from period XX% each overview first same the increase delivered of of with I'll strong for million approximately our TSA segments. of an services, again for the the

solutions in partnership entered other existing telepath authorities in with in in Italy I'm tolling rental to and Italy toll integrations partners Verra interoperability car across management the the rental offer markets. Portugal Mobility and France Italy, announce our has car effectively allows This integrations with for partnership Spain, by that telepath and into for utilizing we to tolling our a for pleased recently Italy. allows

important milestone our another year current anticipate European While business. not tolling we do in this from building is revenue partnership, the

to up about over XXX increased product $XX revenue of transition directly first about with were growth our in annual with revenue. $X that quarter over million Moving business. recurring all solutions service recurring quarter Service basis $XX prior the being prior expectations. government adjusted sales total of solutions XX% to Government service EBITDA million the increase quarter, driven deliver the generated which in XX% mentioned. from were recurring due line primarily points to by quarter $XX revenue million, over representing margins revenue. and the We I of the of of about systems TX revenue our first and last year of year year, million, revenue XX%

in SaaS were services the sales latter and with all hardware line expectations, with

and from of to regard With in control customer for strong to we activity from sales timing. request large in had fourth the sales to installation region extend tier several a push booking university parking TX benefiting Atlantic our access quarter the quarter to a TX systems. in include one mid solutions first due their

example technology Ashland, great a that and collection On to included a enforcement citation permits paying, mobile and of sale plate side, municipal license solution services. was recognition the stations, our Kentucky software and multiple TX

seen to through pleased demand our well. the waning. bookings quarter outlook Turning outlook The across evidence we of strong major as are with strong remains car the macro segments. the the all and airlines possible recession and a Despite travel reporting have quite that from our second partners market all very perspective. remains any demand rental U.S. is not U.S. sentiment I'm

in and while about levels early recovery by XXXX the to The fact, pre-COVID opportunity report to the to half be of Deloitte levels, to have year. rise appears recent first According in more XXXX returned of projects XX% is business travel. is the there U.S. the XX% by and travel by travel full Europe of XXXX. to for late leisure still end survey a projected travel In XXXX of corporate spend business about or

automated from this investments enforcement. estimated latest macro U.S. second traffic just Traffic data in for roads for fatalities in safer Decrease National A is The the X.X% in the safety trend drives year which XXXX. earlier Highway communities need push continued and Safety

So to trend. this much do work there's to still address

Administration Federal for with travel X.X roads remains safety X%, increasing. additional Highway In streets and compared by I'll which traffic the XXXX to remarks. strong as billion for vehicle same to road in need Washington, According all February by Colorado last miles U.S. addition, as U.S. technology later legislative evidenced equates which increased my states volumes in on month Florida, the are and year. activity recent The the of address

these top during Lastly, on summary our our each strategic you'll presentation, for On our overview of quarter priorities a earnings call. we the provided of fourth slide see X three business priorities. each

quantify working against each basis, we're quarterly difficult and enterprise. few well renewing our agreement with I'll services, priorities In ongoing a tracking are and here. on we several to our earnestly toward highlights a are commercial of While hit

opportunities same expansion XX% continue year. period growing last execute over revenue adjacent Regarding well to in we FMC the fleet with the space management

authorizing school with of to growing comparable photo FMC states is with the law. see both we're overall In Washington at into cases. ultimately and including speed programs evaluating positive the current use state business. expanding looking in Washington We Florida, momentum a enforcement rate Colorado several photo zone on enforcement commercial services new solutions and legislation signed Florida Colorado and growth seeing recently government is

will opportunities for apprised represent All market of the and future details states as growth these attractive emerge. keep new

perspective, toward our platform track. from priorities plan TX of all our And complete on these expect budget the in remain change in making and second quarter finally, no we're tracking investments projects timing are the XXXX initial systems, software expectations. related and about the to we initiatives addition, our in In

municipal business core our in in half the with annual are expect of bookings Our we plan. second our in the in year. market the And continued growth line

In positive. operating summary, to Craig our changed has you I'll fundamentals and very guide the year through our current financial positive, and and outlook results remains turn it are are trends to results us not business in the all durable, over outlook.

Craig Conti

call. everyone to today thanks start conclude brief and a quarter joining out and overview for XXXX an discussion I'll allocation. our the on afternoon, I'll by Good with guidance David. results first us providing over followed capital by financial on Thanks,

the consolidated business. outlines EBITDA the turn revenue adjusted and slide X performance Let's which for

about XX% driven strong for increased year-over-year the million revenue approximately performance operating XXX company. Total to across the by quarter

systems of last X million increased government revenue revenue service revenue of by XX% international systems, was Product the quarter. for and TX we sales revenue from X solutions. first strong year. service solutions At within last by quarter this expansion X the XX% quarter demand grew about the million product a million Excluding total grew the revenue program. from commercial New year segment prior the Government year-over-year. in level, Zone domestic driven Reoccurring year, travel year-over-year. XX% in over solutions product XX% first the of was while government the Speed prior year York was services About over School sales grew over grew TX of quarter City XX% service

EBITDA XX% core adjusted by total solutions EBITDA XX consolidated over a From as product versus domestic onetime business defined of first XX% government excluding of million profit quarter adjusted increased sales last generated XXXX. of approximately The standpoint, year. approximately

$X first our that was with income David had As out entry in adjusted been underlying and contract or the period contract in a in already XXXX. EBITDA. and EBITDA program government its million revenue of in up reported operational we $X before the adjusted had Since approximate adjusted benefited was first a adjusted accrued, photo a revenue for quarter The revenue million prior hence recognized enforcement taxes. remarks, in amendment catch revenue not flowed entirety quarter. EBITDA mentioned nature from resulting activity in through associated his of the the activity We approximately of for and solutions expenses this to

margin. we've of adjusted a slide month on million approximately million revenue X, about Moving EBITDA EBITDA representing to $XXX XX% XX basis, a on of on generated $XXX trailing adjusted

XXX $X.XX about per XX% rate Over share. the free billion we've EBITDA of of cash period free a adjusted conversion representing same for of cash generated flow flow

revenue robust driven increased services we on turn same where million X year-over-year. Rental page revenue increased quarter, travel XX% and commercial first increasing I'll volume XX in year options. product tolling Next, the over the about period car the by of last XX% delivered

Additionally, take growth grew XXXX beginning our QX as FMC are to of business hold. our XX% versus initiatives

to First was to last $XX of and EBITDA year, EBITDA XX% slightly due of margins Adjusted quarter reflecting primarily compared adjusted XX% million year-over-year about services first the investments. representing seasonality, commercial were quarter growth normal down and growth.

business. implemented, for discussed solutions quarter, basis points XXX $X XX. million due the increased about the revenue the City's period increase With collections. now by by government $XX photo to was transition programs. representing of million by and product annual million, schools Driven year turn year discuss enforcement of expense results efforts, nearly recurring of XX% primarily New margins same of a And revenue Adjusted City to improvements fully to slide sales was the previously the product service compared or quarter. own expansion reduction York Let's $XX international million last the entry New in driven driven by the revenue, over we'll XX debt to from in for EBITDA cash catch XX% up to I an the prior bad York

the customer slide in at line approximately with is quarter segment. requested of systems, X $XX parking Let's million of look we'll And for expectations the adjusted push out of and results a XX. the the included of product timing. Revenue start quarter in EBITDA TX business in installation sales take to solutions which due million fourth which our were

were all hardware expectations. and with sales service Software, consistent

And and discussed improving around the has building strengthening the we a made very the made. of number process improvements the process. pipeline of we quality last and pleased forecasting with progress business quarter, the we're As

of to the turn for million and XX a representing leverage. reported quarter, income XX%. including reported million, look at an and provision effective approximately X of income a take let's tax net of rate slide tax $X Okay, We've

permanent stock quarter to amortization, reminder, first which nonrecurring our share our compared As a and XXXX. based $X.XX EPS, by market impacted is in differences adjustments private for current warrants. heavily other placement compensation the tax to the to items mark was Adjusted of rate for quarter related share per per excludes $X.XX

XXXX. billion X.X debt balance the of we from of the the times quarter side about with times can you in X.X a in leverage for hand right of quarter. leverage net X.X net resulting This of the net first that see first page, is QX On down ended

During million to XXX X.X and at approximately down million the approximately term first which down balance of loan we the rate debt. bringing floating debt XX of quarter, gross about is quarter paid billion, debt,

debt floating addition, quarter incremental have In paid during over also in we million down of second the $XX XXXX.

basis, a rate we In total, approximately debt on have of $XX our today's paid million term down year-to-date floating call. loan as of

XX% hedge approximately into debt. rate with about entered swap, fixed our rate rate swap agreement the call, floating we million floating notional As we debt float discussed a XXX representing in quarter rate an earnings fourth to of interest for a over

rate our X.X% term move loan cancel years SOFR reminder, the a portion the December fixed a point to that event favor. at basis rate of option a rates execute B floating in plus As can of XXX monthly XXXX beginning our three in in is with for that interest we

Moving on cash for operating cash. resulting We in free flow generated million activities, to cash $XX million the XX from flow approximately in quarter.

of our and turn of growth let's all $X Finally, total offset to adjusted have expansion and investment and guidance XQ the on half last first the the quarter will moderate revenue being elevated XX and results guidance for remain year basis of slide by in to of the from free slightly back the to we're increases constant $X.XX quarter our share look ranges. which following million performance flow XX reaffirming a unchanged XXXX in X% at Based cash with our discussion of margin year. X% to $XXX our about points, million. per $XXX currency, EPS outlook remainder year cost

and rest for anticipate the the we to the in second to revenue increase terms and third sequentially year, EBITDA of adjusted of In quarters. cadence continue

bookings XX% and KPIs travel historical commercial in first experienced reduction TSA be EBITDA monitoring the the volume and stronger However, commercial Relative guidance, growth volume of trends, anticipate and XXXX to our to at and exceeded in the range fourth due the as expect but quarter. a of to then expectations. TSA the continue the quarter for to be levels In second we with demand we quarter for sequential other year. remainder strong expect currently of airlines services the adjusted We'll to XXXX modest throughput to reduction XXXX, performance travel from volume we of services quarter with third in Consistent remainder in forward revenue TSA would the shifting assume our levels a XXX% forward demand year. we XX% travel in the we data year. slower

Our in increased support increased well growth as costs to solutions operating operating contemplates discussed. commercial increased previously government costs for guidance platform SG&A various the as and initiatives, also services for in investments staffing

reduce adjusted debt by year which Finally, based pay share implies discussed XX% our which to last we balanced expect cash net three on estimate, leverage a conversion in free about EBITDA a down approximately XXXX of contemplates flow rate to repurchases and times line to of we approach end all with what quarter.

for this prepared Julie, This line any the concludes time and Thank over today. to to open Julie you like you. for attention our I'd remarks. time, invite your At questions. to

Operator

Securities. first CJS Thank from comes you. question Instructions] Please Your ahead. go Moore [Operator from Daniel

Daniel Moore

sounds expectations the Thanks, Good David, and TSA like strong Greg, levels. questions for consensus color. to all taking with very the Start above back afternoon. guide. quarter our and I Obviously pre-pandemic believe and

the stage in the your it. much how talk Thanks. into be of guide And just conservatism of there? versus holding potentially raising So the may about on maybe thoughts year

David Roberts

the the thanks Sure. question, on call. Dan, for Yes. being for Thanks

about go any we belt, So We it's as at throughput to But for from came have the reason level now. raise were think TSA this one another to if don't We balance any ahead first to going and year. of different would get our you're be the just right to as quarter. another XXX% for that's this of to out XXXX. under right, the want I revenue talked play I this see to see quarter piece. in believe I In want for we XXs in think the high about side, the the one prepared modeled remarks quarter the

making then the side and second GS I'd the is catch Dan is of the that I That's revenue business EPS, time the favorable on comments non-recurring. EBITDA I in on slow add out up the that think And and investments them revenue that if there. we the thing house. I'd to had million GS thing those we're one take was side down the $X business other piece, only and those throw another GS CS

product then in to you hiring, do we're the business, some about in core of running especially the and going heard future. those as markets, in So first XX% quarter, investments it's continued cost, work in are fleet was the faster which and had delayed we in our up CS, the GS on some in that our platform

we'd the So think relook as or spot so. same if things those strong, for I travel the year. in it continues add all another and still up, I at I'm certainly But quarter

Daniel Moore

kind related, aided And tick by up then percentage follow what's to $X about. the look obviously years talked realistic your of term But perfect is of you lower plan? in investment one we kind sustainable? a embedded next little that that of continues sense. as Makes again. QX over if SG&A despite level bit goal, out to three that five And a increased million the long maybe a revenue, Thanks

David Roberts

Dan. Yes Sure.

a quarter. here it first was think the little depressed artificially in I

the to just it. EBITDA way first we do be percent to thing, it easiest So if take down the probably

obviously already So get but if don't was XXX% that the through the up in benefit, flow did that from accrued we in cost you catch entry. caught prepared back a XXXX. that for I it we'd know remarks,

then look steep for the to you're you jump in margin, going see overall at the when GS, So a business. and

to company, on a So think think half if trajectory. about margins point about we're think still I year-over-year. I going still we're total I for accrete the And that

specifically, other to skills a what availability, that to priorities on of and in your see some headcount, costs, delay trying and that, in course, the business, we're at as of the in the did look hire. repeated due on percent business, of just some more hiring the operating as question just those especially SG&A we GS costs If the you of to revenue,

expect do in I year half we go second cost it that that and discussed look expect lot in the a like quarter the year, time last out. the back So and total north the you of to to with

Daniel Moore

Make sense.

Okay. up. We'll with jump back Thanks. and follow

David Roberts

Dan. Sure. Thanks,

Operator

go Your Deutsche Faiza Bank. next Please from from Alwy question comes ahead.

Faiza Alwy

color bit there's partnership would Yes. say be a little revenue give the dimensionalize Hi. on I color heard current little would in bit? I that that love further the sense prepared a think partnership And us anticipated, a your more Thank but that you. mentioned you of I us remarks. helpful. on Any you sort for no telepath

David Roberts

Yes. goes was, most of we Europe have hey, can the U.S. to I to to back this the fleets replicate mean, original related commercial we proposition access in doing to that accelerate partnership roads for The the thesis for to listed remarks. prepared going just in the really I value my basis. to that country here you're our by toll it's with part Europe, group actually, of a countries telepath, of but access sort in us that in country allowing a

that can kind anticipate hopefully, countries. to accelerate to we'll And our those so we of value

you tolling. to benefit is get the those it's working to countries. spoken to the conversion of toll Some about our that major-major of related a cashless Europe that to really going in major be, with the to probably will And it. player we've alongside full come telepaths in then obviously need in as the is customers player But

the radar like a we're be So super to on and partnership this. excited have

Faiza Alwy

spending. than a in these with you pull you, Thank characterize were these revenue investments or then some respect extent on approach, comes maybe forecasting, can it. your segments. it's about what And of really Secondly across Got where may if discretionary would I'm you lower, expenses you're curious more. just both as you up talking back you and the investing the you bit end to certain better to

of So investments give sense year? this of how a thinking us you're

David Roberts

with have the environment, now, one. I Yes. Sure make going we're of you're we extreme. where we right regardless that business I that think in much The the going to pretty Faiza course, investments know unless, saw something of

know To these don't I So on waiting revenue. that investments. make I'm

GS space just seen simply is timing. what think I we've the in

quarters the the the we out have the of efficacy commercial about this well players and that the this versus tools the in to the business be going done efforts that investment back some same early we is we've well, and towards help with mid rounding the will is seen think pacing the as think, side, the that quarter. after just first on right into additional the talent. When I fleet three that space expected I primarily coming CS investment us market as weighted the of we've capture small putting and is in in year

doubling As for down we've seen efforts future on growth. the early efficacy of we're those those,

Faiza Alwy

Understood, thank you.

Operator

from go comes Stanley. from question Please Faucette next ahead. Your James Morgan

Unidentified Analyst

on signed there. opportunities, Washington, on Hey, and wanted legislative James. the touch to into where guys, I for recently maybe it this specifically Jeff is [indiscernible] you law just said on was touching

that? getting how timing we the then impact of about So and potential events potentially ground recent also through Florida the talk timing a should maybe around you Colorado And think us seeing in as on and the from well? financial

Speaker

Washington, becomes has state as well, for mean, we've that Yes, another have I been for related three. basically they all time, all as cases light now red some speed use working three Washington

it would yet. anticipate really, of that on terms of activity, probably, be positive there's hasn't shorter Porto, could timing things like year be they're RFP been So mean, and really revenue, to while like time signed I this been pipeline. places type that'd that, actually to in Relative thing depending would we

how obviously, that roll the out. making a are Is months legislatively few wait they dotted, to that's sure of in it finalized. typically policy, we'll in So speak until take terms relative things so well, of as Those both terms all to

So for customers I I would revenue this with year. anticipate would anticipate next discussions year, those

Unidentified Analyst

it. Got

what Or that. Okay. can within us on platform? type revenue talk of inclusive the about on Maybe you to you the shift do you talk structure are fee structure? What commercial? see customers doing How get of there? And that just type when lift many through to fee you customers then that all

David Roberts

Yes.

usage on allows your have a behalf experience, it's First turn your you of of well It's of tolls when your to just developed that a market. we've our, vehicle. predetermine in you favorable this on really bill is that customers it and as because program as to the all, customer for

So sort from of airport bringing now, product had many our their been standpoint, at that of brands mostly customers off or the traditionally was the airport But brands. a that that brands. always mainline online to type are

better as a it's overall, that renters, pleased so with for the really well. customers And experience much customers therefore and our or are

anticipate we more as penetration more open that adopt further decide toll roads would So to and brands it.

Unidentified Analyst

helpful. you. Thank That's

Operator

Your from comes Housum Please from ahead. next question Northcoast Keith go Research.

Keith Housum

Good afternoon, guys.

Just prior Can talk bit pricing on emember elaborating the that about all the the a to [indiscernible] discussions perhaps further question. further regarding will development you past have upon perhaps little that inclusive the margins. still product negative impact and you of on see adoption? do a that expect

David Roberts

impact sure on the where from not I'm Keith. margin came negative

Keith Housum

Okay.

Okay. [indiscernible]. Maybe.

David Roberts

it's overall, works a it's as for are us. The customers well product well in different great because no, increased for regions. seeing being our adoption as being is it customers how Yes, a

they're it's ours. so not rolling And it out really more. their Again discretion, at

Keith Housum

you. Got

can I versus Okay. CS? the the of wanting TSA you little guidance. conservative. XXX% bit the revenue of on a [indiscernible] idea at travel if What's be little give can to perhaps bit Appreciate Craig would the come in terms a little more a incremental difference appreciate in But us [indiscernible]. that. the for more bit

Craig Conti

say saw know. I And that think that it's in the year. tolling us prescriptive. said, on took forward, and to violations the think see if first I well the performance I to those two. let's I quarter not you this go as hard I I the and Keith balance of quite I X% equate it's to But hate gets it

XX Now little we first a our for original original to plan in assumed the XX lower quarter. than guidance,

the XXX%. saw, important other in And that of But that for mix I think million, be see the it's at were at else I it approaching to it first million, about bring $XX if exact So there's $X half. it and we be don't through portfolio that what to saw think same nothing you'd would way. you that the quarter potentially, able going kind that moves quite the what's back assumes the on

we to quarter. Keith enough where the not millions by bring factor it's exactly that would is up, of I degree which, the So but the stay it XXs a closed way, XXX%, of say that at to dollars, we of

to throughput X TSA from XXX, So exactly that was XXX%.

drag at I of forward to XXX%. still that that exactly end As April, it's the

were level, we upside to that we of potentially some business. exactly if could commercial of at sort So stay service see

Keith Housum

Great. Thank it. you. Appreciate

Craig Conti

Sure.

Operator

go question ahead. next comes Your Dipalma from Please Instructions] Louie from Blair. [Operator William

Louie Dipalma

Craig Mark, good and afternoon. David,

David Roberts

Good afternoon.

Louie Dipalma

City impact hours? the speed program that expectations Was shift with XX from set? XX from to New in the Was camera York that you prior hours line the

Craig Conti

is. It

way looks So think about we million go $X total that's million total today. down, somewhere back that if City you $XX revenue, when see to year-on-year, said York and and around be New the it today, still I

difference was went partially place by the year. So that at and down end was because is is the tail the year-over-year into things, last having XX/X ARR the that which of sales offset XXXX product Louie reason shifted here which we the to in have of in XXXX, those timing of

to and So simple is that's yes, answer it expected. as it question. a longer your in Yes, slightly is

Louie Dipalma

even camera And, though were net during City Great. strong, New general, completed? York contract has ads Thanks, speed in Craig. the quarter that

David Roberts

you requesting mean? I of York New mean outside are you just

Louie Dipalma

Yes.

David Roberts

I think was with line plan. mean, I in Yes. everything

Louie Dipalma

There's lot one, for the switching another to a different racks commercial to that and And Great. electric onboard division. been registration title benefit the served initiatives onboarding vehicles. of for and as your Has businesses? a

David Roberts

title a as of inflating does as perspective matter our they're and ability and from does they're both from much impact violations electric They're perspective. and vehicles registration a which the doesn't board. as that title fact new sort for if much It as in

So good yes, anytime that's vehicles, adding us. for they're

Louie Dipalma

for it That's me. Great. Thanks, everyone.

David Roberts

Thanks, Louie.

Operator

There conference are call. no further questions at This this concludes today's time.

you. disconnect. Thank now You may

Verra Mobility (VRRM) 4 May 232023 Q1 Earnings call transcript