Sign in
VM

VERRA MOBILITY Corp (VRRM)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered 16% YoY revenue growth to $261.9M, Adjusted EPS of $0.37, and Adjusted EBITDA of $113.3M; strength was driven by the NYC red‑light camera expansion and broad-based growth in Government Solutions and Commercial Services .
  • Results exceeded Wall Street consensus: revenue $261.9M vs $237.7M*, and Primary EPS $0.37 vs $0.24*; GAAP diluted EPS was $0.29 . Guidance was raised for FY25 revenue to $955–$965M while Adjusted EBITDA, Adjusted EPS, and FCF were reaffirmed .
  • NYC contract update and long‑term view: management expects mid‑single digit consolidated revenue growth in 2026 and a 250–300 bps EBITDA margin decline due to portfolio mix and NYC renewal economics (including M/WBE subcontracting) before margin expansion resumes from 2027 with Mosaic platform efficiencies .
  • Capital allocation: Board expanded the buyback authorization by $150M to $250M total; net leverage improved to 2.0x with $196M cash on hand as of quarter‑end .
  • Stock reaction catalysts: revenue guidance hike, detailed NYC economics/timing disclosures, and buyback commencement plan (subject to market conditions) .

What Went Well and What Went Wrong

What Went Well

  • Government Solutions revenue +28% YoY to $122.6M on NYC red‑light expansion and broader program growth; Q3 included $17M from 130 NYC cameras (≈$6M product, ≈$11M installation services) .
  • Commercial Services revenue +7% YoY to $117.3M; tolling activity and product adoption offset FMC churn; segment margin remained 67% .
  • Bookings and legislative tailwinds: ~$14M incremental ARR in Q3 (TTM ~$51M) and California reforms add ~$140M to TAM; management emphasized program safety impacts and pipeline momentum .
  • “We delivered a strong third quarter with all key financial measures ahead of our internal expectations.” – David Roberts, CEO .

What Went Wrong

  • Profitability mix: Adjusted EBITDA margin declined to 43% (from 46% in Q3’24) on higher project implementation and NYC readiness costs .
  • Government Solutions margin fell to 26% (from 29% YoY) due to implementation and readiness costs .
  • Cash generation decelerated YoY: operating cash flow $77.7M (vs $108.8M in Q3’24) and Free Cash Flow $49.0M (vs $85.1M), largely from higher accounts receivable .

Financial Results

Consolidated performance (USD)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($M)$223.3 $236.0 $261.9
Adjusted EBITDA ($M)$95.4 $105.3 $113.3
Adjusted EBITDA Margin (%)43% 45% 43%
Net Income ($M)$32.3 $38.6 $46.8
GAAP Diluted EPS ($)$0.20 $0.24 $0.29
Adjusted EPS ($)$0.30 $0.34 $0.37

Segment breakdown – Q3 2025 (USD)

SegmentRevenue ($M)YoY %Segment Profit ($M)Margin
Commercial Services$117.3 +7% $78.3 67%
Government Solutions$122.6 +28% $31.3 26%
Parking Solutions (T2)$22.1 +7% $3.8 17%

KPIs and balance sheet highlights

KPIQ3 2025
Operating Cash Flow ($M)$77.7
Free Cash Flow ($M)$49.0
Cash & Equivalents ($M)$196.1
Total Long-Term Debt, net ($M)$1,029.9
Net Debt ($M)$842.7
Net Leverage (TTM)2.0x
NYC cameras installed (Q3)130 units
NYC expansion revenue contribution (Q3)~$17M (≈$6M product, ≈$11M installation)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueFY 2025$925–$935M $955–$965M Raised
Adjusted EBITDAFY 2025$410–$420M $410–$420M Maintained
Adjusted EPSFY 2025$1.30–$1.35 $1.30–$1.35 Maintained
Free Cash FlowFY 2025$175–$185M $175–$185M Maintained
Underlying Assumptions (select)FY 2025Shares ~163M; D&A ~$110M; Net interest ~$70M; Working capital use ~$15M; Capex ~$110M Shares ~162M; D&A ~$110M; Net interest ~$70M; Working capital use ~$15M; Capex ~$110M Minor updates

Notes: Management raised revenue on NYC expansion but kept EBITDA/EPS/FCF unchanged due to one‑time NYC readiness costs .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
NYC contract & economicsIdentified as vendor; negotiations ongoing; 2025 NYC service revenue assumed flat; update call planned post‑execution .Preliminary 2026 outlook: mid‑single digit revenue growth; EBITDA margin −250–300 bps from NYC pricing and M/WBE subcontracting; 1,000 incremental cameras expected over ~2+ years; NYC buys its own equipment .Greater clarity; near‑term margin headwind; long‑term growth.
Margin outlook & costsERP spend and implementation costs affected margins; setup year in GS; Mosaic platform discussed for future efficiency .One‑time NYC readiness costs $5–$10M in 2025; recurring M/WBE costs ~$20–$25M per year in NYC contract; Mosaic expected to add 150–200 bps to GS margins by ~2028 .Near‑term compression; medium‑term expansion.
Travel/TSA & Commercial ServicesTSA volume near flat; cautious on H2; CS expected high single‑digit growth (downshift if travel weakens) .Q3 TSA ~+1% YoY; CS +7% revenue; FMC churn impact to be more visible in Q4; mgmt expects stabilization thereafter .Stabilizing volumes; selective pressure in FMC.
Legislative TAM & bookingsTAM +$185M over 2.5 years; TTM ARR bookings ~$52M .California reforms add ~$140M TAM; TTM bookings ~$51M; new awards (e.g., San Jose speed) and pilots progressing .TAM expanding; strong win rate and pipeline.
Platform & technology (Mosaic)Platform consolidation underway; expected to support future margin expansion .Mosaic highlighted as cloud platform driving 2027+ automation and efficiency; key to GS margin rebuild .Execution in progress; benefits from 2027+.
Capital allocation$100M buyback authorized in May; no repurchases yet .Buyback authorization increased to $250M; intent to commence near‑term (subject to conditions) .More aggressive repurchases signaled.

Management Commentary

  • CEO framing: “Driven primarily by the New York City red‑light expansion change order, the Company generated 16 percent revenue growth compared to the third quarter of 2024.” – David Roberts .
  • NYC safety impact: “Daily violations at speed camera locations have decreased 94% since the start of the program in 2014… red light running violations… declined by 73% since… 1994.” – David Roberts .
  • Margin mechanics: “At the total Verra Mobility level, I expect margins to come down about 250 to 300 basis points [in 2026]… recurring… minority and women‑owned business subcontractor requirements… $20–$25 million per year.” – Craig Conti .
  • 2025 cost phasing: “One‑time readiness costs… approximately $5 million to $10 million… baked into guidance.” – Craig Conti .
  • Capital model: “We expect to commence the stock repurchases in the near term, subject to market conditions…” – Craig Conti .

Q&A Highlights

  • NYC cost structure: One‑time readiness spend of $5–$10M in 2025; recurring M/WBE subcontracting $20–$25M per year for the NYC contract term .
  • NYC equipment: City to purchase its own equipment; no incremental capex burden to VRRM for NYC camera hardware .
  • Commercial: FMC churn impact was smaller than expected in Q3 but should be more apparent in Q4; tolling activity remains strong; TSA throughput YTD ~100% of 2024 with October tracking +4% MTD at last look .
  • 2026 cadence: Most NYC installs done by 2027, some into 2028; GS margins expected low‑to‑mid‑20s in 2026 with Mosaic driving recovery toward ~30% by 2028 .
  • Share repurchases: Plan to take an active role on the expanded $250M authorization, subject to market conditions .

Estimates Context

  • Q3 2025 vs S&P Global consensus:
    • Revenue: $261.9M actual vs $237.7M consensus* .
    • Primary EPS: $0.37 actual vs $0.24 consensus*; GAAP diluted EPS was $0.29 .
MetricQ3 2025 Consensus*Q3 2025 Actual
Revenue ($M)237.7*261.9
Primary EPS ($)0.24*0.37

*Values retrieved from S&P Global.

  • Other context: Target Price Consensus Mean $29.83* (6 estimates); no text consensus recommendation provided by S&P in this pull.

Key Takeaways for Investors

  • NYC red‑light expansion is driving upside now (Q3 contribution ~$17M) and sets a multi‑year growth runway; negotiations for the renewal are in late stages with clear financial contours shared on the call .
  • FY25 revenue guidance was raised while EBITDA/EPS/FCF held due to one‑time NYC readiness spend; quarterly mix and setup costs weighed on margins but do not alter the cash or leverage trajectory (net leverage 2.0x) .
  • 2026 is a transition year: mid‑single digit growth and 250–300 bps margin compression expected from NYC pricing/M/WBE mix; Mosaic platform and operating leverage are positioned to expand margins from 2027 onward .
  • Commercial Services remains resilient on tolling and adoption; FMC churn will pressure Q4 but management expects stabilization, with travel volumes broadly steady vs 2024 .
  • Legislative catalysts (notably California reforms) and strong bookings underpin GS growth beyond NYC, reinforcing medium‑term top‑line visibility .
  • Capital returns likely to accelerate with a $250M buyback and improved liquidity, offering a potential support to per‑share earnings amidst transitional margin dynamics .

Additional Q3 2025 Press Releases

  • Repurchase expansion and operational updates were reiterated across the 8‑K and press materials; non‑earnings PRs in October/November covered scheduling and product/brand updates [9, 8, 2, 1 in List]. Key financial disclosures are consolidated above .

(End of recap)