Good day, and welcome to the Verra Mobility second quarter 2022 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Mark Zindler, Vice President, Investor Relations. Please go ahead, sir. Thank you. Good afternoon, and welcome to Verra Mobility's second quarter 2022 earnings call. Today, we'll be discussing the results announced in our press release issued after the market closed. With me on the call are David Roberts, Verra Mobility's Chief Executive Officer, and Craig Conti, our Chief Financial Officer. David will begin with prepared remarks, followed by Craig, and then we'll open up the call for Q&A. During the call, we'll make statements related to our business that may be considered forward-looking, including statements concerning our expected future business and financial performance, our plans to execute on our growth strategy, the benefits of our strategic acquisitions, our ability to maintain existing and acquire new customers, expectations regarding key operational metrics, and other statements regarding our plans and prospects. Forward-looking statements may often be identified with words such as we expect, we anticipate, or upcoming. These statements reflect our view only as of today, August 3, 2022, and should not be considered our views as of any subsequent date. We undertake no obligation to update or revise any forward-looking statements. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our annual report on Form 10-K and our Form 10-Q for the first quarter 2022, which are available on the investor relations section of our website at ir.verramobility.com and on the SEC's website at sec.gov. Finally, during today's call, we'll refer to certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in our earnings release, which can be found on our website at ir.verramobility.com and on the SEC's website at sec.gov. With that, I'll turn the call over to David. Thank you, Mark, and thanks everyone for joining us today. We've had a very busy and productive second quarter, as well as the first few weeks of the third quarter, including our recent Investor Day. I'll spend a few minutes recapping these events and then turn to the trends that are influencing our strong results in each of our business segments. I'll begin with a brief recap of our Investor Day on July 19th. First, we announced an increase to our guidance for total revenue and adjusted EBITDA based upon our performance to date and outlook for the remainder of the year. Following that announcement, we had what we believe was a successful, well-attended Investor Day, in which we articulated our long-term growth strategies, provided a deep dive into each of our business segments, discussed our M&A criteria, and concluded with our long-term financial outlook and capital allocation priorities. The event also provided the opportunity to communicate our long-term vision of operating in the broader connected fleet solutions and urban mobility markets and how these emerging opportunities provide upside to the long-term outlook provided by Craig in his presentation. My goal was to leave investors and analysts with one key message: Verra Mobility is a great business with a bright future, and our results and outlook validate that message. If you weren't able to attend Investor Day in person or virtually, I encourage you to review the presentation materials and webcast replay available on our investor relations website. Prior to Investor Day, we announced several key developments in Commercial Services. As you'll recall, when we announced first quarter earnings, we signed a five-year contract extension with Hertz for our U.S. operations and also signed a contract with Hertz Spain for a new European tolling pilot. Moreover, immediately leading up to Investor Day, we announced several new partnerships we expect will contribute to core business growth, European expansion, and long-term emerging opportunities. While these partnerships will not lead to significant revenue generation in the near-term, they are the building blocks to drive the future of our connected fleet solutions portfolio over the long-term. Now moving on to our results. We had an outstanding second quarter, highlighted by strong revenue growth and free cash flow generation. Commercial Services delivered exceptional top-line and bottom-line results, driven by continued strong demand for travel in the U.S. In addition, Government Solutions continued to drive strong year-over-year growth, fueled by the New York City school zone speed camera implementation, and T2 Systems delivered results in line with our deal thesis. Going into a little more detail, beginning with Commercial Services, the team again delivered a strong quarter. Taking full advantage of the surge in travel demand across the U.S., revenue of approximately $85 million for the quarter represented a 28% increase over the same period last year and compared to pre-pandemic levels. We achieved 25% growth over the second quarter of 2019. As we noted during our Investor Day presentation, we achieved these results despite the fact that rental car fleet volumes and TSA traveler throughput is below 2019 levels. This is predominantly due to increase in cashless tolling and customer adoption across the U.S. Moving to our Government Solutions business, we generated total revenue of $84 million, representing growth of 34% over last year. In addition, the 265 camera install commitment for New York City remains on track. Through the first half of the year, we've installed 121 cameras and plan to complete the remainder of the installations by the end of the third quarter, barring any supply chain risks, which we do not currently anticipate. Finally, T2 Systems delivered $19 million of revenue for the quarter, directly in line with the deal model, and they remain on track to deliver full year results in line with our internal expectations. Q2 was another strong quarter of growth in free cash flow generation. We are excited to build on the momentum of our Investor Day and continue to drive extraordinary results across the portfolio. Now I'll turn it over to Craig to guide us through our financial results. Thanks, David. Good afternoon, and thanks to everyone for joining us on the call. First, I'll start out by providing an overview of our second quarter 2022 results, then provide commentary on our current financial guidance, followed by a recap of our Investor Day. Let's turn to slide six, which outlines revenue and adjusted EBITDA performance for the consolidated business. Total revenue increased approximately 46% year-over-year to about $187 million for the quarter, driven by strong operating performance across the company and the inclusion of Redflex and T2 Systems in our financial results. As a reminder, we closed the Redflex and T2 Systems acquisitions in June and December of 2021 respectively, so Q2 2021 is not a full quarter for Redflex comparators. Q2 service revenue grew about 50% over the same period last year, of which 26% was organic growth. This growth was attributable to several factors. First, Commercial Services revenue grew 28% year-over-year. Second, Government Solutions service revenue increased by about 50% over the prior year, of which 23% was organic growth. Finally, Redflex and T2 Systems contributed $17 million and $15 million of service revenue respectively. Product revenue was $13 million for the quarter, of which $6 million was from Redflex and T2 Systems. Finally, from a profit standpoint, consolidated adjusted EBITDA of $89 million increased by approximately 29% over last year. Moving to Commercial Services on slide seven, we delivered revenue of about $85 million, increasing $18 million or 28% year-over-year. The improvement was driven by continued strong demand for travel, particularly in the U.S., and the resulting increase in demand for rental cars. As David mentioned, while rental car volumes remained below pre-pandemic levels, the percentage of cashless tolls, toll rates and billable days are all increasing. In addition to continued strength of the rental car market, our ongoing growth initiatives within the commercial fleet management space drove a $3 million increase in tolling-related revenue versus prior year levels. Adjusted EBITDA in Commercial Services was $57 million, representing a 32% year-over-year growth. Let's turn to slide eight and we'll take a look at the results of the Government Solutions business. Driven primarily by our New York City photo enforcement expansion efforts, total revenue increased by $21 million or 34% over the same period last year to $84 million for the second quarter. Service revenue for the second quarter was $75 million, which grew $25 million or about 50% year-over-year. Organic service revenue growth, excluding Redflex, was approximately $11 million or 23%, which was primarily driven by the aforementioned expansion of the New York City school zone speed program. In addition, adjusted EBITDA grew 13% year-over-year to approximately $29 million for the quarter. Let's turn to slide nine, and we'll review the results of T2 Systems, which is our Parking Solutions business segment. Revenue of $19 million and adjusted EBITDA of about $3 million was in line with our expectations for the quarter. As I discussed last quarter, we expect T2 to drive sequential revenue and adjusted EBITDA growth through the balance of the year and anticipate low double-digit growth for their top line and bottom line results this year. In addition, we expect T2 to generate margins in the low 20% range, which are modestly lower than their pre-acquisition levels, due solely to allocations for costs including audit and SOX fees, D&O insurance, and other corporate public company costs that the business would not have incurred prior to our acquisition. The company reported net income of approximately $30 million in the quarter compared to net income of $4 million in the same period in the prior year. Adjusted EPS, which excludes amortization and stock-based compensation and other non-cash and non-recurring items, was $0.29 per share for the current quarter, compared to $0.10 per share in the second quarter of 2021. The tax provision for the quarter was about $13 million, representing an effective tax rate of approximately 30%. As a reminder, our tax rate is impacted by permanent differences related to mark-to-market adjustments for our private placement warrants. Before I close out the financial review for the quarter, I'd like to give you an update on where we stand on the material weaknesses we addressed in our most recent 10-K. Specifically, these weaknesses were associated with monitoring controls and accounting activities over the acquisition of Redflex and in the design and maintenance of reporting controls related to a third-party application utilized to perform certain control activities and in the preparation of our consolidated financial statements. In response to the Redflex related item, we have implemented new controls over the monitoring and recognition of revenues by acquired companies and have hired additional qualified personnel to perform month-end oversight activities, including the selection and application of Generally Accepted Accounting Principles. In response to the third- party financial reporting application item, we have instituted a series of compensating controls designed to independently confirm the accuracy and reliability of the data utilized in our control activities and in the preparation of our consolidated financial statements. At this time, we expect the remediation of these material weaknesses to be complete by December 31, 2022. While our remediation work is materially complete, the new controls are required to operate for a sufficient length of time and will undergo additional rigorous testing to ensure they are operating as intended. Now back to our financial results. Moving on to cash generation for the second quarter. We generated approximately $65 million in cash flow from operating activities, resulting in $54 million of free cash flow for the quarter, or a 61% conversion of adjusted EBITDA. In addition, on a trailing 12-month basis, free cash flow per share was $1.31. Free cash flow benefited from higher than average cash collections attributable to the growth in Commercial Services in the back end of the first quarter that was subsequently collected in the second quarter. Additionally, New York City accounts receivable has declined to $43 million at the end of the second quarter, compared to $63 million at December 31, 2021. Our expectation for the business is to drive roughly comparable levels of free cash flow in the third quarter and to slightly level off in the fourth quarter. As you can see on slide 10, we ended the second quarter with a net debt balance of less than $1.2 billion, resulting in net leverage declining to 3.5x for the quarter. This is down from 4.3x net leverage at the close of 2021. Next, I'd like to give you a brief update on the share repurchase program the company's Board of Directors authorized on May 7 for up to an aggregate amount of $125 million over the next 12 months. During the quarter, the company paid $50 million, which represented the aggregate amount authorized for an accelerated share repurchase or ASR, and received an initial delivery of 2.7 million shares. The final settlement is expected to occur during the third quarter of 2022, at which time a volume weighted average price calculation over the term of the ASR agreement will be used to determine the final number and average price of shares repurchased and retired. In addition, the company paid about $5 million to repurchase over 336,000 shares through open market transactions during the second quarter, which we subsequently retired. Of the $125 million approved repurchase program, the company authorized an aggregate purchase amount of $75 million related to the open market repurchases, of which about $70 million is available for future repurchases as of June 30, 2022. Next, let's take a look at our current guidance on page 11. In conjunction with our Investor Day on July 19, we increased guidance as follows. Total revenue in the range of $720 million-$740 million, and adjusted EBITDA in the range of $325 million-$335 million. Our guidance implies modest sequential growth in comparing the second half of the year to the first six months. This is consistent with historical trends, as we typically experience strong tolling revenue in the third quarter, driven by summer travel demand and a sequential reduction in the fourth quarter. You'll also note we experienced strong adjusted EBITDA margin expansion in the second quarter of this year compared to the first quarter of 2022. In Commercial Services, we benefited from volume leverage as the business continues to scale. We expect Commercial Services margins to remain at comparable levels in the third quarter and then to level off in the fourth quarter in line with normal seasonality. In Government Solutions, we also experienced strong margin expansion in Q2 compared to Q1 of 2022. This was primarily attributable to the revenue mix impacted by New York City camera sales. We expect margins to remain at elevated levels in the third quarter for the same reason and then to level off in the fourth quarter. The macro trends that help drive the outperformance in Commercial Services over the first half of the year continue to exceed our expectations. If the current trends continue in the third quarter, we will likely revisit our guidance again, assuming the rest of the business performs consistently with our plan, albeit incorporating the historical leveling off of RAC tolling we typically experience in the fourth quarter. Additionally, based on achieving the midpoint of the adjusted EBITDA guidance range and an expected free cash flow conversion rate of about 50% of adjusted EBITDA for the year, we expect net leverage to be 3.5x or less by year-end 2022. This net leverage result includes the full completion of the stock repurchase program discussed today. Lastly, I'll provide a brief recap of the financial overview discussed during Investor Day and reiterate some of the key takeaways. We provided a long-term financial outlook in which we believe we can generate 6%-8% annual organic revenue growth through 2026. This top line growth will result in 8%-10% annual adjusted EBITDA and free cash flow growth, again on an organic basis. These forecasted results yield about $1.2 billion of cumulative organic free cash flow by 2026, and assuming we maintain net leverage at a target of 3.5x over the forecast period, that provides for up to $500 million in incremental relevering capacity. With this $1.7 billion in deployable capital capacity over the next five years, we provided a range of capital allocation scenarios focused on stock repurchases and M&A. The central message of our Investor Day was that organic free cash flow is our strongest value creation lever. Coupling this with our capital allocation priorities, the company has multiple paths to double free cash flow per share by 2026. This is the end of our prepared remarks. Thank you for your time and attention today. At this time, I'd like to invite Cody to open the line for questions. Cody? Thank you. If you'd like to ask a question, go ahead and please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one if you'd like to ask a question. We'll go ahead and take our first question from James Faucette with Morgan Stanley. Please go ahead. Hey, guys. This is Jeff Goldstein on for James. Just thinking about your revenue growth by segment in the back half, should those growth rates generally line up with your Investor Day guidance around long-term growth? Maybe if we strip out the New York City benefit to the government business. I'm just trying to understand if there's kind of other factors in play right now that would cause you to under or overperform those long-term targets right now. Yeah. There's a couple things. When you look at a year. This is Craig, by the way. Thanks for the question. When you look at Verra Mobility, you can't really look at the back half and compare it to an annual target, for the reason is that each of our quarters are so different. The business grows sequentially with Q1 being the lowest quarter. It'll grow sequentially to Q2. 3Q is the highest quarter, and then fourth quarter is the second lowest quarter. You can't really take the highest quarter, second lowest quarter, compare it to an annual target. What I would say is, as we look at the back half of the year, the rental car business continues to surprise us with how strong that's been. One way to think about that is to kind of take a look at the TSA throughput. If you look at how the TSA throughput has behaved in the first half versus the second half of the year, maybe even better, let's drill in on the first to the second quarter. Back pre-pandemic in 2019, that was a 17% growth from Q1 to Q2 in 2019. As we come into 2022, that same metric is a 27% growth. As I look at the back half of the year, I haven't brought in all that favorability yet because I wanna look for another 60 days and see if it actually comes through the top line. What I would say is we do have growth in the back half of the year. What we have in there from a total revenue standpoint today grows in the third quarter. Again, shrinks in the fourth quarter as it has historically, but we'll probably take another look at guidance if the rental car strength continues to be as strong as it was in the second quarter. Got it. Okay. That was all very helpful. As my follow-up, you talked a lot about at your Investor Day, the bus stop camera opportunity. Maybe you can just remind us of how much revenue you're currently doing there and how you view the pipeline. Is that, you know, a six to 12-month opportunity to move the needle or more like a four to five-year opportunity? You said bus stop. Just to clarify, we're talking about CrossingGuard, which is our school bus stop arm. Is that? Yeah, yeah. We're talking the same thing? Okay, great. Okay. Yeah. That, that's a business that's really been in recovery because as you can imagine, during the pandemic, it effectively went to zero because the schools were out and things like that. It's actually growing right now, and I would anticipate that the business is performing well. We're continuing to see opportunities, especially kind of up in the Northeast category. I think it's not a large business for us. What I would say is it's over the next two to four years is probably where we'll see the optimization of that business. Okay, fair enough. Thanks, guys. Yeah. Yeah, thank you. Thank you. We'll take our next question from Dan Moore with CJS Securities. This is Stefanos Crist calling in for Dan. Thanks for taking our questions. Sure. Could you just talk a little bit more about T2, maybe about the integration so far to date and maybe some updates on cross-selling opportunities you expect to achieve? Yeah. As a reminder, the integration for T2 is actually very, very light. We look at it as a, as a portfolio company, not something that's gonna be sort of brought into any of our other businesses at this time. Outside of some of the costs that we burdened onto the business that Craig mentioned in his remarks related to SOX and, sort of public company costs, it's continuing to grow. We're seeing a good recovery of that business coming again out of the. It was a business that was also pretty severely impacted related to the pandemic, and we're seeing strong recovery. What I would say right now is that large parking opportunities are not necessarily super quick in the manifestation of those, so they're building a pipeline now, and there's a lot of collaboration between the businesses to help generate those opportunities. We don't have a marker as of yet that we can point to, that that was the one. We're still in the early phases of that. Got it. Thanks. And just in terms of your RAC customers, what are you hearing about their willingness and just ability to grow their fleets looking out to 2023, 2024, and then beyond? Yeah. I mean, I think the best we try to not comment on those companies in terms of their specific plans because they're the two of them are publicly traded. There's plenty of information available to them. What I would say is that they are being super responsive to the demand, and they are continuing to be very active in refleeting. They are as of yet not back up to 2019 levels. That has not impacted our business at all, but I would say the trajectory is to continue to get to you know align those assets to the demand as quickly as possible. Perfect. Thanks so much. Yeah, thank you. Thank you. We'll take our next question, Faiza Alwy with Deutsche Bank. Yes. Hi, thank you. I just wanted to touch on Government Solutions. Could you just remind us of the puts and takes around service and product revenues, at least for the rest of the CR? And, you know, what the margin implications of that might be, as we look at the back half for Government Solutions? Yeah, sure. So this is Craig. I'll try to take that one piece by piece. We talked about installations. These are fixed fee installations for the business being 265 units for the year. This is the product piece of Government Solutions, the legacy business. I'll go into the international piece in a second. Let me pace that out for you. On that, 265, we've done roughly one half of those in the first half of the year. The remaining half are gonna be done in the third quarter. As you look ahead to the third quarter for Government Solutions, you're gonna see another strong quarter of product sales. When you think about that from a margin standpoint, the core business is at about. It's in the mid to high 30s percent, and I think it'll be there for the third quarter, pretty flat into the fourth quarter as well, maybe a small pullback in the fourth quarter. The product sales that I just talked about are slightly incremental from a margin standpoint, but not materially. Not enough to move the entire segment by more than a point. Does that help, Faiza, w ith some entry into the business? Yes. That does help. Just as it relates to T2 margins, I know you talked about it being mostly allocation. Like, is this sort of I know this quarter is a little bit different because you didn't get the full revenue, but how should we think about, you know, margins for T2 sort of exiting the year? Like, are you able to offset some of these costs? I mean, I imagine it should benefit. If it's just allocation, it should benefit some of the other segments because you're allocating lower costs to those segments then. Maybe just walk us through, like, how we should think about, you know, T2 margins from here. I think I know, Craig. I think I know where you're going with that one. When we think about the T2 business on a fully allocated basis, including the cost that we talk about, we think about something around 20%, especially in the back half of the year. I think that's the number you're looking for for the exit rate of 2022. This business is a sequential grower to the point where our revenue in the fourth quarter is 75% more than it was in the first quarter, and the composition of that revenue starts to favor the higher margin products. This is a trend that's held for two decades. It starts to favor the higher margin things that we sell in the back half of the year. If you look at the revenue trajectory here, the first half of the year, this is still on plan. We expect the back half of the year to be materially higher. It, you know, it may be the high teens, very high teens or around 20%, but we expect to exit the year at 20% for T2. Great. Thank you so much. You bet. Thank you. We'll take our next question from Louie DiPalma with William Blair. David, Craig and Mark, good evening. Hey, Louie. Hey, Louie. Rental car providers, and David, you just mentioned how two of them are publicly traded. They have reported record revenue, and this record revenue is partially as a result of the travel rebound, and it's also partially a result of price increases. I was wondering, is there an opportunity for the $5.95, like, daily fee that's charged to use your tolling service? Is there the chance that could be, like, increased in the future? I mean, potentially. What I would say, though, is the pricing of what goes to the end renter is completely 100% set by our customers. We don't provide any influence on that whatsoever. If they believe that that is a better, you know, if the value proposition and sort of match to the cost and everything else, I think they would make those types of decisions. They certainly have made increases in the past. I would just say that we're not necessarily the ones that drive those decisions. Great. When you say it's been increased in the past, has it been increased in the past 12 months, such that has any of your, like, really strong growth over the past year from rental car tolling, has it come from, like, price increases, or has it come from the factors that you referenced at the Analyst Day in terms of the volumes and the shift to electronic tolling? Yeah. The answer, the direct answer is no. Just as a reminder that pricing is very geographically dependent, and it's also product dependent, meaning if it's an all-inclusive in the Northeast, that's significantly different than an all-inclusive in Florida. It really is very dependent upon both the product, the brand, the location. There isn't, as an example, there's not one. You don't just do a $1 increase across all products. That's not how the business works for our customers. Right. That makes sense. Another question, David. Thanks for that. Two days ago, the New York City school zone speed camera program went into effect, 24/7. Does this have any impact on your contract for that program, or should we expect there to be any impact in the future associated with this? Yeah. I mean, we'll be the one that's operating the cameras 24/ 7. It wasn't comprehended in the initial contract, so we're just going through the process to make sure that it gets appropriately favored. Great. Would that have, I guess, a positive impact? Is that positive impact already in your guidance? It would have. We don't have the pricing yet, so I honestly don't know. We haven't, as David said, we haven't finalized the contract. I'm assuming it would have a positive impact. It's not in there today, Louie. Great. That's all I have. Thanks, guys. Thank you. Thanks, Louie. Thank you. Once again, that's star one for questions. We'll hear next from Keith Housum with Northcoast Research. Good afternoon, guys. I appreciate the opportunity. Craig, can you walk us through the ASR? You're kind of like being in terms of the timing of that, the lift in the third quarter. If we understand it right, you know, you've got 2.7 million shares that came out of the total share count in the second quarter. Does the balance of that come out in the third quarter? Yes. The short answer is yes. Let me give you the top of the waves here again, Keith, as I read what I prepared today, maybe I gave a little too much information. It wasn't super clear. The ASR was $50 million, and the way that an ASR works is they're funded up front at 80% of the value, and then the remaining 20% settles later, right? What was captured in the second quarter was the 80% of the value. It was actually a $50 million check that the company wrote, but it was $40 million worth of shares retired. When our Q comes out, you'll see that we did that at $14.60. That's the 2.7 million shares. There is another piece that'll be trued up here for the remaining 20% or another $10 million in the third quarter. That's the ASR. Is that one clear, Keith? Yes. That $10 million, that's the average value of the shares from the date you guys entered it to whenever it concludes. I'm assuming maybe it's 60 or 90 days. Is that a fair assumption? You got it. That's exactly correct. Okay, cool. Thanks. Appreciate it. This is a follow-up. You know, in the Commercial Services segment, you've got obviously the three segments, the toll management, the violations, the title registration business. Can you kinda unpack how each one of those three little verticals did? In terms of the quarter? Yeah. I mean, obviously, I'm assuming toll management was, you know, obviously the biggest driver of the growth here based on the size and success. How did the violations and title registration do? You know, we don't give details at the product segment level within each of our business units. You know, obviously the principal driver of our growth has been the Commercial Services on the RAC tolling, but the other businesses are continuing to perform as well. That's right. Great. Fair enough. Appreciate it. Thank you. Thank you. At this time, there appears to be no additional questions in the queue. That does conclude today's conference. Just wanna thank you all for your participation, and you may now disconnect. Thank you. Thank you.