Executive Summary

Q2 2025 revenue was $0.754B, slightly up sequentially and modestly above consensus; adjusted EBITDA rose to $37M with a 4.9% margin, exceeding guidance due to a positive catch‑up on a large transit contract and cost efficiencies .
EPS beat: adjusted diluted EPS was −$0.13 versus S&P Global consensus of −$0.185; revenue of $754M came in ~+$2M above consensus; EBITDA also exceeded consensus, supported by segment improvements, especially Transportation .
FY25 guidance updated: adjusted revenue narrowed to $3.10–$3.20B (from $3.10–$3.25B) while adjusted EBITDA margin midpoint was raised to 5.0–5.5%; Q3 margin targeted at 5.0–5.5% with sequential revenue growth versus Q2 .
Strategic catalysts: Transportation momentum (transit contract amendment, EMV deployments), AI-driven fraud reduction in Government, and ongoing portfolio rationalization plus buybacks (2.7M shares repurchased in Q2) underpin margin expansion and potential multiple re-rating .

What Went Well and What Went Wrong

What Went Well

Transportation segment growth: Adjusted revenue +7.1% YoY to $151M; margin up 320 bps to 5.3% on a contract amendment and JV ownership change enabling a positive catch‑up and execution efficiencies .
Government margin improvement: Adjusted EBITDA $60M (+22% YoY); margin up 520 bps to 25.2% as AI initiatives lowered fraud, labor and telecom expenses—“drivers here resulted from our AI initiatives and efficiency programs” (CFO) .
New business momentum: ACV $150M (+6% YoY, +38% QoQ) and TCV $331M (+21% YoY); qualified ACV pipeline $3.3B (+5% YoY) sets stage for H2 ACV growth and 2026 revenue uplift .

What Went Wrong

Commercial revenue pressure: Adjusted revenue fell 5.9% YoY to $365M; margin down 190 bps to 7.4% on lower volumes at the largest client and higher talent/central tech costs .
Top-line decline YoY: Total revenue down 8.9% YoY, adjusted revenue down 2.6% YoY, reflecting Commercial and Government headwinds offset partly by Transportation .
GAAP results impacted by prior‑year divestiture gains: GAAP net loss of −$40M vs +$216M prior year; pre‑tax −$38M vs +$300M prior year, primarily due to CY25 lacking large divestiture gains recognized in Q2 2024 .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$828	$751	$754
GAAP Diluted EPS ($)	$1.07	$(0.33)	$(0.26)
Adjusted Diluted EPS ($)	$(0.14)	$(0.13)	$(0.13)
Adjusted EBITDA ($USD Millions)	$24	$37	$37
Adjusted EBITDA Margin (%)	3.1%	4.9%	4.9%

Versus consensus (Q2 2025):

Metric	Consensus	Actual
Revenue ($USD Millions)	$752*	$754
Primary EPS ($)	$(0.185)*	$(0.13)
EBITDA ($USD Millions)	$27.5*	$34.0*

Values with asterisk (*) retrieved from S&P Global.

Segment breakdown (Q2 2025):

Segment	Adjusted Revenue ($M)	YoY %	Adjusted EBITDA ($M)	Margin (%)
Commercial	$365	(5.9)%	$27	7.4% (−190 bps YoY)
Government	$238	(2.9)%	$60	25.2% (+520 bps YoY)
Transportation	$151	+7.1%	$8	5.3% (+320 bps YoY)
Unallocated Costs	—	—	$(58)	—

KPIs and cash metrics:

Metric	Q1 2025	Q2 2025
New Business ACV ($M)	$109	$150
New Business TCV ($M)	$280	$331
Net ARR Activity (TTM) ($M)	$116	$63
Operating Cash Flow ($M)	$(58)	$(15)
Shares Repurchased (M)	—	~2.7
Cash at Period End ($M)	$293	~$294

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Revenue ($B)	FY 2025	$3.10–$3.25	$3.10–$3.20	Lowered midpoint/upper bound
Adjusted EBITDA Margin (%)	FY 2025	4.5–5.5	5.0–5.5	Raised midpoint
Adjusted Free Cash Flow ($M)	FY 2025	$0–$40	$0–$40	Maintained
Interest Expense ($M)	FY 2025	~$75	~$75	Maintained
Restructuring ($M)	FY 2025	~25	~25	Maintained
Capex ($M)	FY 2025	~80	~80	Maintained
Q3 Adjusted Revenue	Q3 2025	—	Sequentially higher vs Q2; slightly below Q3’24	New quantitative color
Q3 Adjusted EBITDA Margin (%)	Q3 2025	—	5.0–5.5	New range

Note: Company did not provide explicit tax rate, OI&E, or dividend guidance beyond preferred dividends; capital allocation updated with buyback program ($50M authorization; ~2.7M shares repurchased in Q2) .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024 and Q1 2025)	Current Period (Q2 2025)	Trend
AI/Technology initiatives	Q1: Launch of GenAI assistant “Conni”; AI fraud tool in Government; commercial AI voice/IVR use cases	CEO: “We continue to roll out AI initiatives… eight key initiatives… fraud reduction, item processing workflow, customer-facing environments”	Broadening and scaling
Tariffs/Macro exposure	Q1: Minimal tariff exposure, mostly in Transportation equipment; insulated from macro	Continued macro caution; focus on controllable margins; reiterates uncertainties but optimistic execution	Steady/managed
Transportation performance	Q1: NYC congestion pricing back office; Lima transit contract; Q1 Transportation margin up 380 bps	Q2 transit contract amendment and JV consolidation drove catch‑up; EMV systems deployed in Italy	Strengthening
Government fraud/Regulatory	Q1: AI-enabled fraud reduction driving lower expenses	Q2 Government margin expansion on AI fraud reductions; “big bill” could unlock opportunities in SNAP/Medicaid operations	Positive tailwind potential
Portfolio rationalization	Q1: Phase 2 targeting up to $350M proceeds; debt reduction and buybacks	Q2: Work “underway” with expectation of actions by year-end; buyback activity executed	Ongoing; potential catalysts
Talent/Attrition	Q1: Cultural recognition; leadership strengthening	Attrition lower; wage pressure muted vs prior year; board chair transition to Harsha V. Agadi	Improving retention; governance refresh
Leverage/Refi	Q1: Net leverage 2.7x; revolver largely undrawn	Net leverage 2.7x; revolver largely undrawn; refinancing in process	Stable; refi near-term

Management Commentary

“Revenue… was slightly up sequentially at $754,000,000 in line with our expectations with another solid quarter of adjusted EBITDA at $37,000,000 and 4.9%… exceeding expectations” — CEO Cliff Skelton .
“Adjusted EBITDA… higher than we guided… driven by excellent progress we have been making in one of our large transit contracts” — CFO Giles Goodburn .
“The drivers [in Government] resulted from our AI initiatives and efficiency programs, resulting in lower fraud, labor and telecom expenses” — CFO Giles Goodburn .
“We expect to hit the high end of EBITDA and margin and expect to meet revenue expectations” — CEO Cliff Skelton .
“We are currently in the process of refinancing our revolving credit facilities, which we expect to have finalized in the very near future” — CFO Giles Goodburn .

Q&A Highlights

Regulatory tailwinds: Management sees potential SNAP/Medicaid operational opportunities from pending legislation (“big beautiful bill”), contingent on state rollout speed—focus on fraud reduction and eligibility operations .
Commercial cadence: Several deals “pushed to Q3,” with expectation of improved Q3 performance; emphasis on land‑and‑expand to grow share of wallet and retain volume .
Portfolio actions: Work underway on Phase 2 rationalization; management “hopes and believes” actions by year‑end but avoided specifics; balanced capital deployment across debt and buybacks .
Talent dynamics: Lower attrition and muted wage pressure vs prior year; continued talent upgrades in commercial and public sector teams .
Governance: Board chair transition to Harsha V. Agadi; strategic continuity and focus on completing Phase 2 and sequential margin improvement .

Estimates Context

Q2 2025 results vs S&P Global consensus: revenue $754M vs $752M*; primary EPS −$0.13 vs −$0.185*; EBITDA $34.0M* vs $27.5M* — all ahead of consensus, with the company reporting adjusted EBITDA of $37M and a 4.9% margin .
Implication: Street models likely raise margin assumptions for H2 given transit contract catch‑up, cost programs, and AI benefits in Government; revenue expectations for FY may edge toward low end of the new range ($3.10–$3.20B) .