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VERRA MOBILITY Corp (VRRM)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 revenue was $236.0M (+6% YoY) and beat S&P Global consensus ($232.8M); Adjusted EPS was $0.34, above normalized EPS consensus ($0.329) as operating performance and lower interest expense supported upside . Revenue Consensus Mean: $232.8M*; EPS Normalized Consensus Mean: $0.329*.
  • Guidance reaffirmed for FY 2025: Revenue $925–$935M, Adjusted EBITDA $410–$420M, Adjusted EPS $1.30–$1.35, FCF $175–$185M, with management cautioning results may skew to the low end if travel softens .
  • Government Solutions strength (total revenue +10% YoY) and bookings momentum (approximately $21M incremental ARR in Q2, ~$60M TTM) signal durable demand from legislation and program expansions; NYC renewal remains pending but service revenue was flat YoY .
  • Commercial Services grew +5% YoY, aided by European RAC rollouts; FMC declined 2% and is expected to decline again in Q3 before stabilizing, while travel assumptions were reduced modestly vs Q1 outlook .
  • Liquidity improved: Net cash from operations $75.1M; net leverage 2.2x; revolver upsized to $125M; new $100M repurchase authorization in May 2025 (no repurchases yet) .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue beat and Adjusted EPS beat vs consensus; Q2 Adjusted EBITDA reached $105.3M (45% margin), and operating cash flow rose to $75.1M on working capital improvements .
    • Government Solutions delivered +10% total revenue and ~11% service growth ex-NYC; product revenue up ~$2.9M YoY; bookings conversion pipeline is robust with ~$21M incremental ARR in Q2 and ~$60M on TTM basis .
    • Management tone confident on secular tailwinds: “We delivered a strong second quarter with all key financial measures ahead of our internal expectations.” and reiterated strong TAM expansion from enabling legislation (e.g., Colorado/Nevada stop-arm adding ~$40M TAM) .

  • What Went Wrong

    • FMC declined ~2% YoY (about $0.3M) on churn and macro softness; management expects a further decline in Q3 before stabilizing at a lower run-rate .
    • Government Solutions margins compressed to ~28% (~100 bps mix impact from international camera sales; ~100 bps ERP costs; ~50 bps setup costs) despite revenue growth, reflecting program ramp costs ahead of revenue recognition .
    • Parking Solutions revenue down ~4% on product sales and professional services declines; recurring SaaS was flat YoY for the quarter, with turnaround efforts still early-stage .

Financial Results

MetricQ2 2024Q1 2025Q2 2025Q2 2025 Consensus
Revenue ($M)$222.4 $223.3 $236.0 $232.8*
GAAP Diluted EPS ($)$0.20 $0.20 $0.24 —
Adjusted EPS ($)$0.31 $0.30 $0.34 $0.329 (EPS Normalized)*
Adjusted EBITDA ($M)$102.2 $95.4 $105.3 $103.1 (EBITDA)*
Adjusted EBITDA Margin (%)46% 43% 45% —

*Values retrieved from S&P Global.

Segment performance:

SegmentRevenue ($M)Q2 2024Q1 2025Q2 2025
Commercial ServicesRevenue$104.0 $101.4 $109.1
Commercial ServicesSegment Profit ($M)$69.5 $63.1 $72.0
Commercial ServicesSegment Margin (%)67% 62% 66%
Government SolutionsRevenue$97.7 $101.8 $107.1
Government SolutionsSegment Profit ($M)$29.9 $29.4 $30.1
Government SolutionsSegment Margin (%)31% 29% 28%
Parking Solutions (T2)Revenue$20.7 $20.0 $19.9
Parking Solutions (T2)Segment Profit ($M)$2.8 $2.9 $3.2
Parking Solutions (T2)Segment Margin (%)14% 15% 16%

KPIs:

KPIQ2 2024Q1 2025Q2 2025
Net Income ($M)$34.2 $32.3 $38.6
Cash from Operations ($M)$40.0 $63.0 $75.1
Free Cash Flow ($M)$26.0 $41.7 $40.3
Diluted Weighted Avg Shares (M)168.6 162.1 161.5

Guidance Changes

MetricPeriodPrevious Guidance (Q4’24/Q1’25)Current Guidance (Q2’25)Change
Total Revenue ($M)FY 2025$925–$935 $925–$935 Maintained
Adjusted EBITDA ($M)FY 2025$410–$420 $410–$420 Maintained
Adjusted EPS ($)FY 2025$1.30–$1.35 $1.30–$1.35 Maintained
Free Cash Flow ($M)FY 2025$175–$185 $175–$185 Maintained

Underlying assumptions:

AssumptionPeriodPreviousCurrentChange
Weighted avg diluted shares (M)FY 2025~163 ~163 Maintained
Effective tax rate (%)FY 202528.5–29.5; cash taxes ~$65M 28.5–29.5; cash taxes ~$45M Lower cash taxes
D&A ($M)FY 2025~110 ~110 Maintained
Net interest expense ($M)FY 2025~70; net cash interest ~$65 ~70; net cash interest ~$65 Maintained
Change in working capital (cash use, $M)FY 2025~15 ~15 Maintained
Capital expenditures ($M)FY 2025~90 ~110 Raised

Additional liquidity updates: revolver upsized to $125M (undrawn) ; new $100M repurchase program authorized May 17, 2025 (no repurchases to date) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Travel demand and CS outlookTSA +5% in 2024; model 102.5% for 2025; CS high-single-digit growth framework Modest TSA growth; risk to lower-end of guidance; CS seasonality outlined TSA ~99–100% YTD; back half modeled flattish; CS +5% YoY with ERP costs; FMC to decline in Q3 before stabilizing Stable to slightly softer assumptions
FMC trajectoryGrowth in Q4; 12% growth Q1; comps to moderate FMC +12% Q1; growth to moderate FMC -2% YoY; down again in Q3 then stabilize/grow Near-term pressure, stabilization expected
Government Solutions TAM and margins$185M TAM added over 2 years; product episodic; margins ~30% expected in setup year $185M TAM; ~$52M TTM ARR bookings; strong pipeline Legislation adds ~$40M TAM (CO/NV stop-arm); ~$21M ARR bookings Q2; margins ~28% with mix/ERP/setup cost headwinds TAM accelerating; margins pressured near term
NYC contractRFP pending; anticipating clarity around Q2 Identified by NYCDOT; negotiations ongoing; 60–90 day expectation Renewal pending; service revenue flat YoY; update call planned upon execution Awaiting resolution
ERP implementationOn-time; $5M non-cap costs in 1H25 On schedule/budget; majority live On schedule/budget; most complex portion complete; smaller processes to transition Execution progressing
Parking Solutions (T2)Goodwill impairment; flat 2025 revenue planned; exit ‘25 stronger SaaS +5%, product softer; turnaround KPIs Q2 revenue -4%; SaaS flat; margins 16%; early signs of success Stabilizing; slow progress
European RAC expansionFrance/Italy cashless movement; pilot renewals —Italy rollout underway; multiple countries in motion (France, Portugal, Spain, Ireland, Italy) Positive ramp

Management Commentary

  • “Total revenue for the quarter increased 6% over the same period last year to $236,000,000… Adjusted EPS increased 10% over the prior year period, driven by our operating performance, recent share repurchases and the reduction in our interest rate on our term loan debt.”
  • “In the second quarter, we entered into contracted bookings of about $21,000,000 of incremental annual recurring revenue at full run rate, bringing the trailing twelve months total to about $60,000,000.”
  • “We are maintaining our full year 2025 financial guidance… we remain cautious that a further modest decline in travel volume may cause us to trend toward the lower end of the financial ranges as previously provided.”
  • CFO margin color: “About 100 bps of [GS margin decline] is simply mix… Another 100 bps… from ERP costs… 50 bps… incremental setup cost.”
  • Liquidity and leverage: “Net leverage landed at 2.2 times and we’ve maintained significant liquidity with our newly expanded $125,000,000 undrawn credit revolver.”

Q&A Highlights

  • Commercial Services and travel assumptions: Management assumes throughput ~99–100% for the back half; consensus sentiment stronger; CS modeled within guidance range .
  • FMC outlook: FMC declined ~2% ($0.3M) and will decline again in Q3; then stabilize before resuming growth .
  • GS margins: ~250 bps YoY decline decomposed into mix (international product), ERP costs, and setup costs; expect dilution until platform consolidation completes, with NYC outcome to reset longer-term view .
  • NYC timing: Negotiations ongoing; update upon execution; service revenue in NYC flat YoY for 2025 under legacy contract .
  • Capital allocation: M&A pipeline active; opportunistic buybacks within 3x net leverage framework; new $100M authorization with no Q2 repurchases .

Estimates Context

  • Q2 2025 actuals vs S&P Global consensus:
    • Revenue beat: $236.0M vs $232.8M*; +1.4% variance .
    • Adjusted/Normalized EPS beat: $0.34 vs $0.329*; +3.3% variance .
  • FY 2025 consensus: Revenue $962.8M*, Primary EPS $0.955*, Normalized EPS $1.332*; guidance reaffirmed at $925–$935M revenue and $1.30–$1.35 Adjusted EPS, implying potential consensus recalibration if travel trends soften .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue and Adjusted EPS beats highlight resilient demand across CS and GS, with cash generation strong; watch for travel data and FMC stabilization into Q4 for trajectory confirmation .
  • Government Solutions growth is underpinned by accelerating legislation and bookings; near-term margin dilution from product mix/implementation should abate as programs mature and platform consolidation completes .
  • NYC renewal is a binary narrative catalyst; outcome and red-light expansion could influence GS growth/margins and risk profile—management will host an update call post-execution .
  • European RAC rollout (Italy, France, Iberia) provides incremental CS optionality; contribution is early but broadening, offering a medium-term growth lever .
  • Capital structure and liquidity offer flexibility (2.2x net leverage; $125M revolver); with no Q2 buybacks under the new $100M authorization, opportunistic repurchases remain a potential capital deployment catalyst if M&A doesn’t materialize .
  • Guidance reaffirmed; cash taxes lowered and capex raised reflecting program execution—risk skew is to lower end of ranges if travel moderates; traders should monitor TSA and airline commentary .
  • Non-GAAP adjustments are consistent (amortization, stock comp, transformation/transaction items); Adjusted EBITDA margins remain mid-40s, supporting FCF conversion at low-to-mid 40% for 2025 .