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    VRRM
    Earnings call· Jun 2026(Q2 FY26)

    VERRA MOBILITY Q2 FY26 earnings call VRRM

    Aug 5, 2026 Source

    Executive summary

    Verra Mobility Q2 FY26 — Key Contract Renewals and Updated Outlook

    Verra Mobility's Q2 FY26 results were marked by significant contract renewals with Avis Budget Group and Hertz, providing long-term visibility despite less favorable terms. The company also secured a major new speed enforcement contract with the City of Los Angeles. While operational performance exceeded internal expectations, particularly in Government Solutions, the revised contract economics led to an updated full-year outlook. Management is focused on cost structure realignment, customer centricity, and leveraging AI to drive future growth and efficiency.

    Highlights

    6

    • New 7-year tolling and violation services contract with Avis Budget Group (ABG) reached.

    • New 5-year agreement with Hertz provides long-term visibility for both companies.

    • Selected as automated speed safety vendor for the City of Los Angeles, expected to generate $10 million in ARR.

    • Q2 total revenue, adjusted EBITDA, margin, and adjusted EPS landed stronger than internal expectations.

    • Government Solutions service revenue increased 17% year-over-year, driven by NYC camera installations and 8% growth outside NYC.

    • Commercial Services revenue returned to growth, increasing 6% year-over-year.

    Concerns

    5

    • GAAP net loss of $48 million for the quarter, reflecting a noncash goodwill and intangible asset impairment charge of $104 million for T2 Systems.

    • Avis Budget and Hertz renewals include revised commercial terms that are materially less favorable, leading to an updated full-year guidance.

    • Full-year Commercial Services revenue growth is expected to be in the negative high single-digit range.

    • Commercial Services segment profit margins are expected to contract to the low 60% range for the full year.

    • Government Solutions segment profit margins declined approximately 450 to 500 basis points compared to 2025, primarily due to New York City renewal contract pricing changes.

    Guidance & targets

    17
    CategoryTargetConfidence
    Total Revenue
    $945 million to $965 million
    high materiality
    High
    Adjusted EBITDA
    $360 million to $370 million
    high materiality
    High
    Adjusted EBITDA Margin
    about 38%
    high materiality
    High
    Non-GAAP Adjusted EPS
    $1.11 to $1.17 per share
    high materiality
    High
    Free Cash Flow
    $105 million to $115 million
    high materiality
    High
    Government Solutions Total Revenue Growth
    high end of mid-single-digit
    medium materiality
    Medium
    Government Solutions Service Revenue Growth (outside NYC)
    low double-digit
    medium materiality
    Medium
    Government Solutions Total Revenue Growth (within NYC)
    high single-digit
    medium materiality
    Medium
    Government Solutions Product Revenue
    roughly flat
    medium materiality
    Medium
    Government Solutions Segment Profit Margins
    low 20s
    medium materiality
    High
    Government Solutions Segment Profit Margins
    contract to comparable levels as Q1
    medium materiality
    High
    Government Solutions Segment Profit Margins
    ramp up to the mid-20s
    medium materiality
    High
    Commercial Services Revenue Growth
    negative high single-digit range
    high materiality
    High
    Commercial Services Segment Profit Margins
    low 60% range
    high materiality
    High
    Parking Solutions Revenue Growth
    low to mid-single digits
    medium materiality
    Medium
    Parking Solutions Margins
    slightly accretive to 2025
    medium materiality
    Medium
    Annualized Cost Reductions
    $20 million
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Commercial Services
    Revenue growth driven by increased product adoption and tolling activity, despite a 1% decrease in U.S. travel volume. Segment profit margins increased due to operating leverage and continued success in lowering bad debt expense on improved cash collections.
    RAC tolling revenue growth: 5% YoYFMC business growth: 3% YoY ($1 million)
    		—6%—increased 100 bps
    Government Solutions
    Service revenue growth driven by New York City camera installations and 8% growth outside NYC. Total revenue grew 20% due to a $4 million increase in product revenue. Segment profit margins declined primarily due to the New York City pricing change, but performance was better than expected due to pacing of camera installations.
    Service revenue growth outside New York City: 8%Service revenue growth within New York City: 36%Product revenue: $14 million
    		—17% (service revenue), 20% (total revenue)—$31 million (profit), ~24% (margins)
    Parking Solutions
    SaaS and services sales increased about 1%. Product revenue was effectively flat. Segment profit margins declined primarily due to product sales mix and the timing of operating expenses.
    Product sales: $3 million
    		$20 million~1% (SaaS and services sales)—~$2 million (profit), declined 465 bps (margins)

    Operational metrics

    21
    Adjusted EBITDA
    $111 millionstronger than internal expectations
    Q2 FY26

    Bolstered by New York City camera installation timing, operational improvements, and strong advancements in commercial services collection performance.

    GAAP Net Loss
    $48 million
    Q2 FY26

    Reflects a noncash goodwill and intangible asset impairment charge of $104 million for T2 Systems.

    Goodwill and Intangible Asset Impairment Charge
    $104 million
    Q2 FY26

    Noncash charge for the carrying value of T2 Systems.

    Normalized Effective Tax Rate
    about 28%
    Q2 FY26

    After adjusting for impairment and other nonrecurring expenses.

    GAAP Diluted EPS Loss
    $0.32compared to $0.24 of income per share for Q2 FY25
    Q2 FY26

    Reflects the GAAP net loss.

    Adjusted EPS
    $0.38compared to $0.34 per share in Q2 FY25
    Q2 FY26

    Excludes amortization, stock-based compensation, and other nonrecurring items. Favorability driven by increased adjusted EBITDA and reduction in shares outstanding, partially offset by increased depreciation expense.

    Cash Flows Provided by Operating Activities
    $56 million
    Q2 FY26

    Reflects strong cash generation.

    Net Debt Balance
    about $1 billiondeclined sequentially
    Q2 FY26

    Declined sequentially due to Q2 free cash flow.

    Net Leverage
    2.4x
    Q2 FY26

    Reflects full in-quarter repayment of credit revolver.

    Credit Revolver Status
    100% undrawn
    Q2 FY26

    Full in-quarter repayment.

    Share Repurchase Authorization Available
    $66 millionout of $250 million total authorization
    Q2 FY26

    Priority remains strengthening the balance sheet and building cash reserves.

    Annualized Cost Reductions
    $20 million
    Annualized

    From cost reduction initiatives, including labor and non-labor cost takeout efforts.

    New York City Camera Installation Growth
    exceeded updated contract pricing change
    Q2 FY26

    Team fully caught up with expected installation volumes after Q1 delays.

    US Travel Volume
    1%decrease over prior year quarter
    Q2 FY26

    Despite this decrease, RAC tolling revenue increased.

    Working Capital Use
    $30 million
    FY26

    Primarily related to recent RAC contract renewals and timing of expenditures and collections of ongoing installation work in New York City.

    Intelligent Edge Sensors
    more than 28,000
    current

    Capture real-world transportation activity across the network.

    Toll Transactions Processed
    over 230 million
    annually

    Part of the connected transportation technology platform.

    Traffic Events Processed
    56 million
    annually

    Part of the connected transportation technology platform.

    Parking Permits Issued
    approximately 50 million
    annually

    Supports operations with connected devices.

    Connected Devices
    more than 16,000
    current

    Supports operations across the network.

    Transportation Data Volume
    over 10 petabytes
    rolling basis

    Unique foundation for AI, generated through real-world customer workflows.

    Industry KPIs

    1
    MetricValueDetails
    New business bookings growth$25 million (Q2), ~$74 million (TTM)ARR

    Deals & partnerships

    3
    Avis Budget Group (ABG)New tolling and violation services contract7-year

    Reached agreement on key contractual terms, extending a relationship that had already spanned nearly 2 decades. Includes an option for the customer to modulate their fleet volume.

    HertzNew tolling and violation services agreement5-year

    Provides long-term visibility for both companies and establishes a strong foundation for the next phase of the relationship. Includes an option for the customer to modulate their fleet volume.

    City of Los Angeles, CaliforniaAutomated speed safety vendor selectionexpected $10 million ARR

    Selected as the automated speed safety vendor following the passage of Assembly Bill 645, which authorized speed enforcement in the state. Verra Mobility will have been selected as a technology partner for 6 out of the 6 cities authorized by that legislation.

    Risks & headwinds

    6
    Revised Commercial Terms for RAC Contractsongoing, impacting full-year 2026 and beyond

    materially less favorable

    Mitigation: Cost structure realignment, operational improvements, focus on customer centricity, leveraging technology and AI.

    Fleet Volume Modulation Option in New RAC Contractsongoing

    1% to 1.5% reduction from prior TSA assumption (full-year volume expected around flat with 2025)

    Mitigation: Daily contact with customers to forecast volumes, focus on operational efficiency and technology value.

    Goodwill and Intangible Asset Impairment ChargeQ2 FY26

    $104 million noncash charge

    Mitigation: Focus on improving the Parking Solutions business, which is growing and generating cash.

    New York City Contract Pricing Changefull-year 2026

    segment profit margins contracted by approximately 450 to 500 basis points compared to 2025

    Mitigation: Volume leverage, Mosaic cost savings, school bus stop bar seasonality expected to ramp margins to mid-20s by Q4 2026.

    Higher Capital Expenditure SpendingFY26

    anticipated higher CapEx spending versus prior guidance

    Mitigation: CapEx is primarily for implementing newly awarded photo enforcement programs in Government Solutions, indicating investment in growth.

    Working Capital UseFY26

    $30 million anticipated use

    Mitigation: Related to recent RAC contract renewals and timing of expenditures and collections of ongoing installation work in New York City; managed through financial flexibility.

    What to watch in Q3 FY26

    5

    Enterprise Mobility contract status

    next quarter
    CurrentIn positive discussions
    TargetNew contract agreement

    Why it matters

    Enterprise is a major customer; securing a renewal would further stabilize the Commercial Services segment and provide long-term visibility.

    Very impressed by the Enterprise Mobility team and what they're doing. I'd also just mention that we're engaged in positive discussions with them.

    Q&A highlights

    7

    What led to the initial termination notice from ABG, and what factors ultimately drove them to renew the contract?

    Jon Keyser explained that after the initial termination notice, Verra Mobility re-engaged with Avis, listened to their concerns and strategic priorities, and developed a path forward. The renewal is a testament to the value of Verra Mobility's technology platform and its ability to adapt to customer needs, building a strong, constructive long-term relationship.

    “We have one mouth and 2 ears. And so we approach that long-held customer with that in mind. We better understood what they were trying to do.”

    asked by Tomohiko Sano · answered by Jonathan Keyser

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Priorities and Leadership Transition

    Interim CEO Jon Keyser outlined three immediate priorities for Verra Mobility: broadening and deepening customer relationships, realigning the cost structure and improving operations, and positioning the company for future growth and long-term value creation. He emphasized leadership principles such as integrity, customer centricity, acting with urgency, and leveraging AI as a force multiplier, drawing on his extensive background. The company has already made tangible progress against these priorities since his appointment in late May.

    02

    Key Customer Relationship Developments

    Verra Mobility successfully renewed critical contracts, securing a new 7-year tolling and violation services agreement with Avis Budget Group (ABG) and a new 5-year agreement with Hertz. These renewals stabilize the commercial services customer base, extending relationships that have spanned nearly two decades. Management highlighted these agreements as a testament to the value of Verra Mobility's technology, operating capabilities, and ability to adapt to customer needs, despite the new terms being less favorable.

    03

    Government Solutions Expansion and Impact

    The company announced its selection as the automated speed safety vendor for the City of Los Angeles, a significant win following California's Assembly Bill 645. This makes Verra Mobility the technology partner for all six cities authorized by the legislation, reinforcing its leadership in roadway safety. Management cited measurable improvements in driver behavior and safety, including a 28% reduction in red light violations in San Jose and a nearly 50% decline in traffic fatalities in other served communities, underscoring the real-world impact of their technology.

    04

    Operational Transformation and Cost Structure Realignment

    Verra Mobility is actively realigning its cost structure and improving operations, having completed principal labor and certain non-labor cost takeout efforts. These initiatives are expected to result in $20 million of annualized cost reductions, with full run rate savings beginning in 2027. The transformation also focuses on non-labor spending, third-party costs, procurement, and organizational complexity to enable faster decision-making, greater operational leverage, and a stronger customer experience.

    05

    Leveraging AI for Future Growth and Efficiency

    The company is pursuing two principal AI initiatives: improving internal operations (e.g., accelerating software development, automating repetitive work, improving forecasting) and incorporating AI more deeply into its products and services. With over 28,000 intelligent edge sensors, 10 petabytes of transportation data, and processing over 230 million toll transactions annually, Verra Mobility believes it has a unique foundation to transform this data into valuable insights, creating new AI-enabled transportation solutions that strengthen customer outcomes and improve roadway safety.

    06

    Q2 Financial Performance and Updated Outlook

    Verra Mobility reported Q2 performance ahead of internal expectations, with total revenue, adjusted EBITDA, and adjusted EPS landing stronger than anticipated. However, due to the materially less favorable commercial terms of the Avis Budget and Hertz renewals, the company updated its full-year 2026 guidance. This includes lower ranges for total revenue and adjusted EBITDA, and a projected negative high single-digit revenue growth for Commercial Services. A non-cash goodwill and intangible asset impairment charge of $104 million was recorded for T2 Systems.

    AI-generated summary of the company’s earnings call. Not investment advice.