Title

Presentation

Verra Mobility Corporation reports earnings inline with expectations. Reported EPS is $0.25 EPS, expectations were $0.25.

Operator: Good afternoon, ladies and gentlemen, and welcome to Verra Mobility’s First Quarter 2026 Earnings Conference Call. My name is Liz, and I will be your conference operator today. This call is being recorded. I would like to turn the presentation over now to your host for today’s call, Mark Zindler, Vice President of Investor Relations for Verra Mobility. Please go ahead, Mr. Zindler.

Mark Zindler: Thank you. Good afternoon, and welcome to Verra Mobility’s First Quarter 2026 Earnings Call. Today, we’ll be discussing the results announced in our press release issued after the market closed along with our earnings presentation, which is available on the Investor Relations section of our website at ir.verramobility.com. 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. Management may make forward-looking statements during the call regarding future events and expectations, anticipated future trends and the anticipated future performance of the company.

We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ materially from those projected in the forward-looking statements due to a variety of risk factors. These factors are described in our SEC filings. Please refer to our earnings press release and investor presentation for our cautionary note on forward-looking statements. Any forward-looking statements that we make on this call are based on our beliefs and assumptions today, and we do not undertake any obligation to update forward-looking statements. 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, quarterly earnings presentation and investor presentation, all of which can be found on our website at ir.verramobility.com.

With that, I’ll turn the call over to David.

David Roberts: Good afternoon, everyone, and thank you for joining us today. I’ll begin with a brief overview of our performance for the first quarter, followed by a commentary on our business segments, operational progress and outlook for the remainder of the year. Overall, we are pleased with our performance in the first quarter, which represents a solid start to 2026. We delivered top line results in line with our internal expectations with upside and profitability while building on our momentum in several of our key growth areas. At Verra Mobility, we remain steadfast in our mission, delivering technology solutions to make transportation safer, smarter and more connected. This mission guides our strategy and execution across the organization.

Before I share the details of those results, let me take a moment to reiterate our strategy, which is centered on the theme of safe, smart and connected. This is actually the framework outlining our competitive advantage and where we see growth opportunities for the company. Safe should be obvious that it’s been the cornerstone since our — it’s been the cornerstone since our company was founded. Last year, we saw a positive road safety momentum, but there’s still a long way to go to dramatically decreasing traffic fatalities and crashes. Smart is all about bringing operational intelligence to transportation systems to make them more efficient and reliable for our customers and connected, which I’ll expand on later when discussing Commercial Services is about unifying fragmented transportation systems and disconnected networks.

We are confident that we are well positioned to help customers solve safe, smart, connected challenges and improve the overall mobility experience for everyone. Turning to our financial results. Total revenue of $224 million for the quarter was aligned with our internal expectations, reflecting steady demand across our core business segments. Adjusted EBITDA and margins came in ahead of our internal expectations, driven primarily by better-than-expected New York City camera installations despite weather delays in January and February, as well as reduced bad debt expense for the quarter. This performance underscores our continued focus on disciplined execution and operational efficiency. Let me now turn to our segment performance, starting with Government Solutions, which was the standout contributor in the quarter.

We saw strong momentum in bookings with up to $13 million in new awards during Q1. Key wins came in across the portfolio, including enforcement programs at Red-Light, speed, work zone, mobile bus lane, and school bus product offerings. Over the trailing 12 months, new bookings totaled approximately $71 million, reflecting sustained demand and strong conversion across our pipeline. We continue to see healthy activity levels driven by increasing adoption of automated traffic enforcement solutions by municipalities. These programs are attractive due to their ability to change driver behavior and improve road safety. Moreover, these programs are long-term recurring contracts that provide strong visibility into future revenue streams and support durable growth over time.

In fact, we are energized by the latest reporting for the National Highway Safety Administration, which indicates that traffic fatalities decreased significantly in 2025 by more than 6%. This is a great indication that safety measures are working. And in the vein of safe, smart and connected, we believe continued deployment of automated enforcement will make significant impact on safety and ultimately saving lives. From an operational standpoint, we continue to make progress against our key strategic priorities. We are expanding our customer base within the government sector while maintaining a strong focus on execution and delivery. At the same time, we are investing in technology and innovation to enhance our platform capabilities. This includes the implementation of MOSAIC, our secure cloud-based back-end automated enforcement platform solution and Government Solutions.

We have successfully migrated several customers onto the platform and are actively working to complete other migrations. We continue to expect that the MOSAIC platform will deliver productivity improvements and enable long-term margin expansion by streamlining the end-to-end process of traffic incident events. Moving on to Commercial Services revenue declined 4% compared to the first quarter of 2025 due primarily to prior period churn in our fleet management business. Looking at the remainder of the year, while the price of fuel and events in the Middle East could weigh on travel, household budgets and consumer assessment, we are cautiously optimistic about travel trends. Consumers and business traveler demand for domestic travel continues to be resilient so far, and we remain hopeful that airfare pricing remains affordable and travel volumes remain consistent with the performance year-to-date.

As a reminder, significant customer relationship which represents over 10% of our revenue is currently operating under a short-term contract extension. This contract extension enables us to continue to serve the customer without interruption while we continue to negotiate a long-term renewal. These discussions are ongoing and constructive. As I mentioned earlier, we continue to believe the future of transportation will be defined by solutions that are safe, smart and connected. I’ve already touched on the safe dimension through Government Solutions. So let me expand on what we mean by connected. Today, mobility in the U.S. remains highly fragmented with many systems operating in isolation. We see a meaningful opportunity to help bridge those gaps by connecting platforms, processes and payment methods.

We believe we are well positioned to support our customers and partners, including cities and fleets, tolling authorities and delivering more seamless integrated experiences for the people-based search. One example of delivering a more connected and seamless mobility experience is the AutoKinex Virtual Agent, a solution we announced in April. It is a digital solution for rental car companies to allow drivers to finish the checkout process and activate add-on services like tolling and fueling directly from the vehicle, streamline the experience for renters. This technology can help our rental car customers notify drivers of available services as counter bypass becomes more popular and improves the customer experience and enables new revenue streams through the service selection.

This is just one example where we believe we can deliver on connected solutions. Lastly, top line revenue for Parking Solutions was in line with our internal expectations and with a slight beat on segment profit margins on revenue mix and operating activities. Looking at the broader market environment, we continue to see favorable tailwinds supporting our business. There’s an increasing global focus on road safety alongside growing demand from government customers and automated enforcement solutions. At the same time, domestic travel demand remains resilient, supporting continued growth in our Commercial Services segment. But even against this backdrop of tailwinds, we operate with a pervasive continuous improvement mindset and we launched a company-wide transformation initiative to better position the business for long-term growth.

This effort is focused on controlling what we can control, optimizing our cost structure, improving operational efficiency and aligning resources to unlock new growth opportunities while creating capacity to invest in the future. As a part of this transformation, we made the difficult decision to reduce our workforce by approximately 5% in the first quarter, which we expect will generate approximately $10 million in annualized cost savings. Importantly, these savings are being actively redeployed into the business to drive top line growth and reinforce our technology leadership. We are investing in strategic areas where we have clear competitive advantages, including large-scale fleet management and deep interoperability with cities, courts and law enforcement.

Our priority investments include areas include AI-driven capabilities across both hardware and software, autonomous vehicle ecosystems, rideshare solutions and emerging technologies such as drone applications. A key pillar of this reinvestment is the expanded use of AI across our business directly supporting our smart mobility strategy. In the near term, we are focused on using AI to improve internal workflows and automate processes to drive efficiency and scalability. In parallel, we are embedding AI capability into our products through targeted R&D investments to enhance customer value and differentiate our offerings. While these initiatives are still in the early stages, initial pilot programs have delivered encouraging results. Over time, we expect this disciplined reallocation of resources to enhance our growth profile and improve operating leverage, and we will continue to provide updates as we make progress.

Turning to our outlook. We are entering the remainder of 2026 with solid momentum and confidence in our strategy. We believe our strong bookings performance provides a solid foundation for future revenue growth in Government Solutions and our pipeline remains robust. As we look ahead, our priorities for the year remain clear, converting Government Solutions bookings into revenue, executing against our MOSAIC platform implementation plan, which we expect to lead to margin expansion in 2027 and beyond and maintaining discipline around capital allocation. In closing, we delivered a solid first quarter, with revenue in line with expectations and upside in profitability. We saw strong booking momentum in Government Solutions, reinforcing the long-term value of that segment and we are well positioned for continued growth as we move through 2026.

Craig, I’ll turn it over to you to guidance to our financial results and our outlook for the remainder of the year.

Craig Conti: Thank you, David, and hello, everyone. I appreciate you joining us on the call today. Let’s turn to Slide 4, which outlines the key financial measures for the consolidated business for the first quarter. Our Q1 performance was generally in line to slightly ahead of internal expectations with total revenue directly in line with internal expectations and adjusted unit dollars and margins slightly ahead due to revenue mix and timing considerations. Starting with service revenue. Government Solutions increased 4% in the quarter, driven by 12% growth outside of New York City. Within New York City, incremental new camera installation growth was more than offset by the updated contract pricing change. Commercial Services revenue declined about 4% year-over-year due to the impact of prior period churn and a small nonrecurring accounting true up.

Parking Solutions service revenue increased 6% on SaaS and subscription revenue performance. Total product revenue was $10 million for the quarter, Government Solutions contributed roughly $7 million and T2 delivered about $3 million in product sales overall for the quarter. Consolidated adjusted EBITDA for the quarter was $86 million, modestly stronger than our internal expectations as New York City camera installations were better than expected once the weather improved in March. We reported net income of $27 million for the quarter, including a tax provision of about $14 million, representing an effective tax rate of 34%. The effective tax rate is temporarily higher this quarter due to the year-over-year impact of stock-based compensation and reserve timing.

We expect the full year effective tax rate to be 28% to 29% based on the second half 2026 planned activities, which is unchanged from our guidance. GAAP diluted EPS was $0.17 per share for the first quarter of 2026 compared to $0.20 per share for the prior year period. Adjusted EPS, which excludes amortization, stock-based compensation and other nonrecurring items was $0.25 per share for the first quarter this year compared to $0.30 per share in the first quarter of 2025. The adjusted EPS decline was driven by the reduction in adjusted EBITDA, along with increased depreciation expense, partially offset by the effect of our share repurchases in the fourth quarter of 2025 and the first quarter of 2026. Moving on to cash flows. Cash flows provided by operating activities totaled $41 million, and we delivered about $10 million of free cash flow for the quarter, which was below our internal expectations of about $20 million.

The $10 million shortfall is comprised of $7 million of temporarily increased inventory balances in GS due to the weather delays in New York City. Additionally, CS unbilled receivables increased about $5 million, driven by nonrecurring timing items related to the settlement of total incurred and associated invoicing to end users. Lastly, and partially offsetting these amounts, we benefited from about $2 million of bad debt improvement in the CS business year-over-year. These New York City and Commercial Services items are solely timing related and thus, we are reaffirming our free cash flow outlook for the full year, which I’ll cover in a bit more detail in a few minutes. Next, I’ll walk through the first quarter performance in each of our 3 business segments, beginning with Commercial Services on Slide 5.

CS year-over-year revenue declined 4% in the first quarter. RAC tolling revenue increased 1% over the same period last year, driven by increased product adoption and tolling activity, which benefited from a 1.5% increase in U.S. travel volume over the prior year quarter. The core rent tolling growth was offset by about $2 million related to the nonrecurring true-up that I discussed earlier. Our FMC business declined 19% or about $3.6 million year-over-year, primarily driven by the prior period customer churn we have discussed historically. Adjusting for both the prior period FMC churn and the nonrecurring true-up, revenue growth would have been mid-single digits for the quarter. Commercial Services segment profit margin increased 100 basis points over the prior year.

The revenue decline was more than offset by volume leverage and lower bad debt expense on improved cash collections. Turning to Slide 6. Government Solutions service revenue increased 4% in the quarter, driven by a 12% growth outside of New York City. Within New York City, incremental new camera installation growth was more than offset by the updated contract pricing change, which went into effect on January 1 of this year. Total revenue grew 3% over the prior year quarter as product revenue was down about $1 million year-over-year due primarily to a reduction in product revenue in our international business. Government Solutions segment profit was $21 million for the quarter, representing margins of approximately 20%. The decline in segment profit dollars and margins is primarily attributable to the New York City pricing change.

While this represents a reduction in segment profit dollars and margins over the prior year, this performance was better than expected due to both the revenue growth outside of New York and New York City camera installations expanded faster than we contemplated as we establish the pacing on our full year 2026 guidance. Let’s turn to Slide 7 for a review of the results of Parking Solutions. We generated revenue of $20 million and segment profit of approximately $3 million for the quarter. SaaS and services sales increased about 6% compared to the prior year, while product revenue declined about $600,000 compared to 2025. Parking Solutions segment profit margins expanded 210 basis points driven by revenue mix and other onetime items. Okay. I’ll turn to Slide 8 and discuss the balance sheet and take a closer look at leverage.

We ended the quarter with a net debt balance of approximately $1 billion, which was elevated sequentially due primarily to first quarter share repurchases. Net leverage landed at 2.5x, which also reflects partial usage of our credit revolver to help fund the share repurchases. Let me give you some detail on our share repurchase activity. In the first quarter, we purchased approximately 2.2 million shares for about $50 million through open market transactions. This brings the cumulative share repurchases up to $184 million under the $250 million authorization, which is the largest program in the company’s history. We slowed our share repurchases in the first quarter out to conservatism. Q1 is routinely our lowest cash generation quarter due to the seasonality of our core business.

This was compounded by one-off transitory items such as the weather-related increase in New York City project inventory. Share buybacks remain an important element of our capital allocation strategy, and we are pleased to have significant additional capacity of $66 million under our current authorization to repurchase shares through the remainder of the year. Looking ahead, based on our view that free cash flow will grow over the remainder of the year and in line with our guidance levels, we’ll continue to actively consider opportunities to repurchase shares and otherwise allocate capital to drive shareholder returns. Okay. Let’s now turn to Slide 9 and I have a look at full year 2026 guidance. Based on our first quarter results and our outlook for the remainder of the year, we are reaffirming all guidance measures.

As a reminder, the full year 2026 guidance ranges provided on our fourth quarter 2021 earnings call were as follows: we expect total revenue in the range of $1.02 billion to $1.03 billion, representing approximately 5% growth at the midpoint of guidance over 2025. We expect adjusted EBITDA in the range of $405 million to $415 million or adjusted EBITDA margin of about 40%, representing a 250 basis point decline compared to 2025. As we previously discussed, the combination of portfolio mix in the New York City renewal contract, partially offset by a year-over-year reduction in ERP implementation costs are expected to drive the temporary reduction in margins. We expect 2026 non-GAAP adjusted EPS to be in the range of $1.32 to $1.38 per share, representing low single-digit growth over 2025.

And lastly, free cash flow is expected to be in the range of $150 million to $160 million for 2026, representing a conversion rate in the high 30th percentile adjusted EBITDA. We expect to spend approximately $125 million of CapEx in 2026, roughly flat with 2025. The vast majority will be spent on Government Solutions to implement newly awarded photo enforcement programs. Moving on to the segment level. Government Solutions is expected to generate the high end of mid-single-digit total revenue growth which reflects the blended growth rates across the segment, including low double-digit revenue growth outside of New York City. This also comes from flat product revenue compared to the prior year as New York City product sales will be offset by a decline in international product revenue.

The outlook for GS margins is unchanged. We expect segment profit margins to contract by approximately 450 to 500 basis points compared to 2025, primarily due to the New York City renewal contract including service pricing adjustments from the competitive procurement process and the inclusion of minority and women-owned subcontract requirements by the city of New York. Winter weather in New York City during January and February delayed our camera installation time lines and informed our Q1 guidance, but a quicker-than-expected recovery in March enabled us to accelerate installations and ultimately overdrive Q1 margins, which led to the outperformance in the first quarter. We expect second and third quarter margins to be around the same levels as Q1 and then a ramp up to the mid-20s by Q4 2026, fueled by volume leverage, MOSAIC cost savings and school bus stop arm seasonality.

We still expect GS margins to land in the low 20s overall for total year 2026 consistent with what we shared on our last call. Commercial Services revenue growth is expected to accelerate as the spring/summer travel season ramps up and we sunset the FMC churn after the second quarter of this year to get to mid-single-digit revenue growth overall for the full year. CS segment profit margins are expected to expand over the prior year, driven by volume leverage, prior year ERP spending and improved bad debt expense. These expectations are also predicated on a successful outcome of our ongoing negotiations with a significant customer for a pending contract renewal, as David discussed earlier. We continue to anticipate that Parking Solutions revenue will be up mid-single digits versus 2025 levels driven by growth in SaaS and subscription and professional services.

Lastly, we expect Parking Solutions margins to be slightly accretive to 2025. Other key assumptions supporting our adjusted EPS and free cash flow outlook can be found on Slide 10. This concludes our prepared remarks. Thank you for your time and attention today. At this time, I’d like to invite Liz to open the line for any questions. Over to you, Liz.

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Operator: [Operator Instructions] Our first question comes from Daniel Moore with CJS Securities.

Dan Moore: David and Craig, I’ll start with Government Solutions. I think you said $13 million new bookings in Q1. Did I hear that right outside of New York City. And just how would you describe the overall level of RFQs and opportunity in the pipeline today versus a year ago?

David Roberts: I would say it’s very — I mean, probably right on par with it, Dan, is we’ve seen a lot of great activity, continued expansion and opportunities in places like California that we talked about a long time ago. School bus continues to have a lot of RFPs coming out. So we would say that the activity and the go forward of that business looks really good. It looks fantastic right now.

Dan Moore: Very helpful. And then shifting gears. You mentioned, obviously, no change to the full year outlook for Commercial Services. You did say that it was based on a successful outcome of the renegotiation. Is there sort of a timing that you have in mind as it relates to kind of low and high end of the guidance range there?

David Roberts: I would say, obviously, we’re very careful when we talk about those things. We’re continue to work under our contract. So we wouldn’t put a place of timing on that right now, Dan.

Dan Moore: Understood. Maybe one more and I’ll jump back in queue. Just the integration of MOSAIC, how is that progressing relative to expectations? And is $10 million to $15 million cost savings in ’27 still a good target?

David Roberts: Yes, it is. It’s going well. It’s a big project that we’ve been doing for quite some time, and we’ve got some customers stood up on the program — or excuse me, on the platform and we’ve got a line of others that are waiting to get on. So we’re excited about the potential of the product.

Craig Conti: Yes. And Dan, I’ll just jump in on that. That number that we’ve talked about is something that we talk about here a lot. So there’s a lot of visibility to it. So yes, the short answer is, we look at the pacing of MOSAIC, we expect it to be breakeven this year from an investment. This is at the EBIT line, Dan. And so on from an investment savings standpoint, we do expect in that $10 million to $15 million-ish range, $15 million being the way upper end of that. But $10 million to $15 million in 2027, an additional $10 million compounded out beyond that. So looking — we do have customers live on the platform as we speak today.

Operator: Our next question comes from Tomo Sano with JPMorgan.

Tomohiko Sano: Could you talk about the CS business, the revenue impact from FMC customer churn has bottomed in Q1? And if you could talk about the main drivers for the revenue recovery and the key factors behind the margin improvement and then sustainabilities into — throughout the year, please?

Craig Conti: Yes. Okay. So let me — this is Craig. I’ll take a shot at that. So if we think about the CS business, it’s down 3.5%. That’s the actual total quarter year-over-year in the first quarter. And there’s 4 pieces to that bridge. The first piece is the FMC churn, which we’ve been talking about for a year now. This is the last — it will impact us in the second quarter as well, but this is the most material impact that will have. That was just under $5 million. If I forget about the churn, look at the FMC business that actually grew, right? So we grew over $1 million outside of the churn in the quarter. Travel was somewhere between $1.5 million to $2 million positive. And then we had the accounting true-up. And let me explain just quickly what this was.

The tolling — one of the largest tolling authorities in the country changed their back office in the back quarter of 2025. And as we went and reconciled that all the activity from the fourth quarter we did find something that we needed to change. So that was about $2 million. So if you look at that in terms of fee dollars that I just gave you, that would get you down 3.5% year-over-year. Let me get to the second part, though, is how are you comfortable or how do you think about mid-single-digit growth for the rest of the year. Well, if I take out that FMC churn, which I said will not be as impactful in the second quarter and then anniversaries after the second quarter, it’s not even in the back half of the year, and I take out that onetime true-up that relates back to the fourth quarter.

I already had mid-single-digit growth within the quarter. So that’s how I think about how that looks for the rest of the year, Tomo. And I would lay on top of that where travel is maybe more than you wanted, but I’ll just give you the full answer. So it’s — we closed the quarter with 101% or 1.5% growth travel year-over-year. As we sit here as of last night, I think we’re about at 101%, which is exactly what we told you we modeled for the rest of the year. If I listen to the airlines, they sound cautiously optimistic, I think, is how I would characterize it. In terms of domestic demand. So you kind of mix all that up and say, if I take the one-timers out of the first quarter, I — are already seeing that mid-single-digit growth. If I go forward, it feels like travel is hanging in there.

So I feel comfortable with the mid-single-digit growth as we look out to the balance of the year.

Tomohiko Sano: That’s very helpful. And one more on the GS business, could you provide an upgrade on the regulatory developments and new project opportunities in California and how you see the growth potential in that state going forward, please?

David Roberts: Yes. So far, we continue to do very well in California. All of the legislation has been that we help support pass has been a tailwind to us as we’ve — I don’t want to say run the table. We’ve won more than our fair share relative to what’s been happening in California, and we feel like there’s going to be even more opportunities for expansion as we look for other use cases to be applied later. So in all regards, I think California is exactly what we hoped it to be when we started talking about the legislation 3.5 years ago. So we’re really excited about California.

Operator: Our next question comes from Faiza Alwy with Deutsche Bank.

Faiza Alwy: I wanted to follow up on the Government Solutions business. It sounds like you had some timing benefits on the product sales side. So I’m just curious if you could kind of level out with us on how we should think about revenue realization, both product and service revenue within Government Solutions as we go through the rest of the year?

Craig Conti: Yes, Faiza no problem. So as I think about GS, we talked about this with New York and without New York. So let’s forget that for a second, let’s talk about just total GS. Like I said in the prepared remarks, I expect this to be the high end of mid-single-digit growth overall for total GS, okay? Now if we want to split that into just not going to do the New York City split, I’ll do that in a minute. So just between product and service. I expect GS overall service to be a high single-digit grower for the year. And I expect GS product to be roughly flat, maybe down a couple of million dollars. And the reason on the down a couple of million dollars on GS is really the project runoff that we had in international. So meaning that we have a large order last year that’s not recurring this year.

It’s not that the business is shrinking. That’s how we think about overall GS. If I bring that to New York City, okay, I think that New York City for the full year in total is going to grow high single digits, low double digits. That depends on exactly when we get these installs done. Again, we went a little faster in March than we thought. It looks pretty good in April. But then overall, non-New York City, so just to kind of round it out, I expect non-New York City to be a low double-digit grower service-wise for the total year 2026. So those are the kind of 6 points of truth on GS. Faiza, was that helpful?

Faiza Alwy: Yes, very helpful. And then I wanted to ask about the incremental cost savings that you mentioned. I think you said $10 million annualized savings. When do we start to see that? Is that going to help in 2026? And if so, considering that you didn’t raise the EBITDA guide, like are there offsets? Are you incrementally reinvesting somewhere? Just additional color around that would be helpful.

Craig Conti: Yes, sure. So the easy short answer it’s already in the guide, okay? The additional detail on that is why is it already in the guide, what we’re talking about now is because literally, we announced the actions that generated that — those savings in March of our earnings calls at the end of February. So obviously, we had announced it early so we could talk about that. That’s the financial side. And as to where that will show up. It will — may show up in R&D. There are R&D type of activities that may show up in R&D and may show up in SG&A and OpEx outside of R&D. But as David said, the whole reason that we’re doing this, we’re controlling what we can control to invest in the future of the company.

Operator: Our next question comes from David Koning with Baird.

David Koning: I guess, first of all, in the commercial business, just so we think correctly sequentially, it seems like the only 2 things really to think about sequentially, one, you typically grow 8% to 10% sequentially, just seasonality. And then two, the true-up of $2 million. You get that back, right? So those would be your 2 main things to think about sequentially.

Craig Conti: Yes, that’s right. I think — I’ll just give you the number, Dave, for everybody. I think that, that sequential growth from Q1 to Q2 is going to be a little stronger. One, I don’t expect the FMC churn number to quite be as big, but I don’t know if that was the bridge or not. So I expect that number to be in the low to mid-double digits sequentially for CS.

David Koning: Yes. Yes. That makes sense. Okay. And then government EBITDA — when we think about, I guess, even transitioning from this year to next, once next year, we get to kind of more and everything. Should it be bigger than 2025? And really where I’m going with this is you have the 2 components, you have New York. I guess with all the extra revenue, does that EBITDA, is that going to be better EBITDA than it was before you got the extra revenue. And then is the EBITDA from the non-New York business, just given other growth there could also be bigger, and just making sure the expenses aren’t overweighing the revenue? Just to understand that better.

Craig Conti: Yes. I don’t want to split that between New York and non-New York, but I will tell you overall, Dave, is that I think you’re talking about ’27 to ’26, right, not ’26 to ’25?

David Koning: Well, kind of — but I’m kind of just making sure that by ’27, when everything is clean, that it will at least be bigger than kind of the pre-growth in both parts of the business.

Craig Conti: I’m sorry. Okay. I got your question. So in other I want to make sure I’m answering the question you’re asking. So is ’27 bigger than ’25?

David Koning: Right. Yes.

Craig Conti: Yes. The answer to your question yes, it is. And I think — let me give a couple of detail points on how you can triangulate them. So let’s talk about margins of the GS business. We did the — in the prepared remarks, I did the pacing, which is a little bit updated from our last call, but how we get to low 20s pacing for 2026 by quarter. That overall gets us to the low 20s. I expect to be in an EBITDA percentage. I expect to be in the mid-20s by the time we get to 2027. If we think about what we talked about previously and what that growth looks like, the non-New York City growth that we talked about in the third quarter was double digits — double-digit growth. New York City growth, I still expect that to grow on the service side.

Obviously, I’m not going to be growing on the product side, because the majority of the installations will be behind us. But I don’t expect that revenue to step back. So you’ve got good growth on the non-New York City side, you’ve got flattish growth on the New York City side, maybe a little bit positive, and you’ve got a couple of basis points of margin expansion mostly from the [indiscernible] and MOSAIC savings.

Operator: [Operator Instructions] Our next question comes from Louie DiPalma with William Blair.

Louie Dipalma: Following up on the last question, has there been any change for the 2027 EBITDA outlook for the GS business. I think on the third quarter earnings call, you said that EBITDA should be in the range of $135 million to $145 million. So has that been not changed?

Craig Conti: No change, Louie.

Louie Dipalma: Great. And my other question, has there been any developments in terms of the trials and commercialization of the European rental car tolling products? I know that there’s been — I think there was the agreement in Italy last year. Any color there would be great.

David Roberts: Yes. We continue to operate in many of the same countries, although the fleets are getting slightly larger, there was some growth there on a relative basis small, but it is continuing to grow. Yes, we are operating in and around the city of Milan in Italy as well as we continue to operate in Ireland, a little bit in France and Spain.

Operator: That concludes today’s question-and-answer session. Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.

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