VRRM - NASDAQ

Good afternoon, ladies and gentlemen, and welcome to Verra Mobility's Third Quarter 2025 Earnings Conference Call. My name is Towanda, and I will be your conference operator today. This call is being recorded. [Operator Instructions] I would like to turn the presentation over now to your host for today's call, Mark

Thank you. Good afternoon, and welcome to Verra Mobility's Third Quarter 2025 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.

Thank you, Mark, and thanks, everyone, for joining us. Before I dive into our consolidated financial results, I'll start with an update on our automated photo enforcement contract with the New York City Department of Transportation, which will help contextualize our third quarter financial performance and our revised guidance for the year. We are actively working with the New York City Department of Transportation to finalize the new automated enforcement contract, which was announced at the end of March 2025. As we work to finalize the new contract, we are now in a position to share the key financial expectations. We expect that the new contract will have a 5-year term, with an option for a 5-year renewal and an estimated total contract value of $963 million. We expect annual service revenue to grow from about $135 million in 2024, to a range of $165 million to $185 million by 2027. Furthermore, the New York City Department of Transportation has elected to purchase its own equipment, which is expected to add $20 million to $30 million in product revenue in both 2026 and 2027. Craig will cover additional financial details in his prepared remarks. In parallel with working to finalize the new contract, the New York City Department of Transportation has instructed Verra Mobility through a change order process to install up to 250 red-light cameras by year-end 2025, as a part of the legislatively authorized expansion. The new red-light cameras are expected to generate approximately $30 million of revenue in 2025, of which about $10 million is expected to be product revenue and $20 million is expected to be installation services revenue. The red-light camera expansion program started in the third quarter, and consequently, we generated $17 million of revenue in conjunction with the red-light camera installations in the third quarter, of which approximately $6 million was product revenue and about $11 million with installation services revenue. We look forward to continuing to serve the New York City Department of Transportation and the citizen safety priorities of Vision

Thank you, David, and hello, everyone. We appreciate you joining us on the call today. We'll turn to Slide 4, which outlines the key financial measures from the consolidated business for the third quarter. Our Q3 performance, which included 12% service revenue growth and 16% total revenue growth year-over-year exceeded our internal expectations. Service revenue growth, which consists primarily of recurring revenue, was driven by the change order for New York City red-light expansion program and service revenue growth outside of New York City in the Government Solutions business as well as increased revenue from RAC tolling and European operations in the Commercial Services business. At the segment level, Government Solutions service revenue grew 19% year-over-year. Commercial Services revenue increased by 7% over the prior year. In T2 Systems SaaS and services revenue increased 3% compared to the third quarter of 2024. Total product revenue was about $19 million for the quarter, Government Solutions contributed roughly $14 million with $6 million coming from the New York City red-light expansion and $8 million from international product sales. T2 delivered about $4 million in product sales overall for the quarter. On the profitability side, our consolidated adjusted EBITDA for the quarter was $113 million, an increase of approximately 8% versus the same period last year. We reported net income of $47 million for the quarter, including a tax provision of about $18 million, representing an effective tax rate of approximately 28%. GAAP diluted EPS was $0.29 per share for the third quarter of 2025, compared to $0.21 per share for the prior year period. Adjusted EPS, which excludes amortization, stock-based compensation and other nonrecurring items was $0.37 per share for the third quarter of this year compared to $0.32 per share in the third quarter of 2024, representing 16% year-over-year growth. The adjusted EPS growth was driven by the increase in adjusted EBITDA, a sustained reduction in interest expense driven by our prior year debt repricing efforts and our share repurchases in 2024. Cash flows provided by operating activity totaled $78 million, and we delivered $49 million of free cash flow for the quarter, in line with our internal expectations. Turning to Slide 5, we generated $416 million of adjusted EBITDA on approximately $943 million of revenue for the trailing 12 months, representing a 44% adjusted EBITDA margin. Additionally, we generated $153 million of free cash flow or a 37% conversion of adjusted EBITDA over the trailing 12 months. Next, I'll walk through the third quarter performance in each of our three business segments, beginning with Commercial Services on Slide 6. CS year-over-year revenue growth was 7% in the third quarter. RAC tolling revenue increased 7% or about $5 million over the same period last year, driven by increased product adoption and tolling activity, which benefited from a 1% increase in U.S. travel volume over the prior year quarter. Our FMC business declined 3% or about $500,000 year-over-year, driven by prior period customer churn. Additionally, our European operations contributed $2 million of growth compared to the third quarter of 2024. Commercial Services segment profit increased 7% over the prior year, representing a 67% segment profit margin. The margin improvement was largely driven by operating leverage created by improved travel volume and increased product adoption. Turning to Slide 7, Government Solutions saw strong service revenue growth in the quarter, driven by $11 million of installation service for the new red-light camera expansion in New York City as well as 11% service growth outside of New York City. The growth was broad-based across all customer use cases with particular strength in speed, bus lane and school bus stop-arm enforcement programs. Total revenue grew 28% over the prior year quarter, benefiting from about $14 million in product sales, of which $6 million were generated from New York City red-light camera sales and $8 million from international product sales. In total, product sales increased by $9 million over the same period last year. Government Solutions segment profit was $31 million for the quarter, representing margins of approximately 26% compared to 29% in the prior year period. The reduction in margins versus prior year was primarily due to readiness investments made to prepare the company for execution on the pending New York City contract. Let's turn to Slide 8 for a view of the results of T2 Systems. We generated revenue of $22 million and segment profit of approximately $4 million for the quarter. SaaS and Services sales increased 3% compared to the prior year, while product revenue increased 30% or $1 million, compared to the third quarter of 2024. Included within SaaS and services, recurring SaaS revenue increased low single digits compared to the third quarter of 2024. Let's turn to Slide 9 for a view of the balance sheet and take a look at net leverage. We ended the quarter with a net debt balance of $843 million, which reflects the strong free cash flow we generated over the first 9 months of the year. Net leverage landed at 2x, and we've maintained significant liquidity with our newly expanded $150 million undrawn credit revolver. Our gross debt balance at year-end stands at about $1 billion, of which approximately $690 million is floating rate debt. Subsequent to the end of the quarter, we executed a successful refinancing of both our ABL revolver and our term loan. The market for institutional debt is strong relative to recent historical levels, so we took action well in advance of our term loan going current. We increased the revolver limit from $125 million to $150 million and also added an accordion feature to provide an additional $75 million of liquidity if ever needed in the future, resulting in a potential limit of $225 million. Additionally, the maturity of the revolver was extended 5 years to October of 2030. Given the current favorable institutional debt market conditions, we proactively refinanced our term loan on extending the maturity 7 years to October of 2032, and lowered the interest spread by 25 basis points to 2% flat. Now let's turn to Slide 10, and have a look at full year 2025 guidance. Based on our year-to-date results and our outlook for the fourth quarter, we are increasing full year 2025 revenue guidance and affirming all other guidance measures. As David discussed, New York City has authorized the installation of up to 250 additional red-light cameras in 2025 under our existing contract, which is expected to deliver about $30 million of revenue, of which about $10 million is expected to be product revenue and $20 million is expected to be installation service. The adjusted EBITDA generated from these camera sales is expected to be offset by onetime readiness investments to support the new contract requirements in New York City. The readiness investments include the development of a world-class real-time camera health dashboard, cloud migration activities for certain legacy data, and minority and women-owned business enterprise subcontractor ramp-up costs. As a result of these investments, we are not increasing adjusted EPS or free cash flow guidance for the balance of 2025. Excluding the New York City camera installations, our perspective on guidance remains unchanged. The updated full year 2025 guidance ranges are as follows: we now expect total revenue in the range of $955 million to $965 million, representing approximately 9% growth at the midpoint of guidance over 2024. The remainder of the financial guidance remains unchanged and is as follows: we expect adjusted EBITDA in the range of $410 million to $420 million, representing approximately 3% growth at the midpoint over 2024. We anticipate an adjusted EPS range of $1.30 to $1.35 per share. Free cash flow is expected to be in the range of $175 million to $185 million, representing a conversion rate in the mid- to low -- low to mid-40th percentile of adjusted EBITDA. Moving on to the segment level. Government Solutions is expected to generate low to mid-teens total revenue growth for 2025, driven by the new camera installations for New York City, along with the expansion of camera installations with existing customers and new customers awarded in prior quarters. We continue to anticipate that Parking Solutions revenue will be about flat with 2024 levels. We expect SaaS revenue to grow low single digits, offset by a decline in installation of professional service revenue on roughly flat product sales. Based on assumption that travel volume will be only slightly elevated in 2025 compared with 2024, we anticipate Commercial Services growing at the high end of mid-single digits. We anticipate CS revenue, adjusted EBITDA and margins to decline sequentially in the fourth quarter, consistent with historical norms based on travel trends. Our key assumptions supporting our adjusted EPS and free cash flow outlook can be found on Slide 11. Turning now to Slide 12. I wanted to share the key financial assumptions for the New York City contract, we're in the process of finalizing, along with some updated perspective on the overall Government Solutions business. On March 31 of this year, New York City announced that Verra Mobility was selected as the vendor for their automated enforcement program with an initial term of 5 years with a 5-year extension option. The estimated total contract value for the first 5 years is $963 million, and we are currently in final contract negotiations with New York. We anticipate that New York City will again purchase its own equipment from Verra Mobility with all installation and relocation services included in service revenue and additive to the scope of the contract relative to our existing contract. We expect to sell and install about 1,000 incremental new red-light and fixed bus lane cameras over the next 2-plus years. New York City service revenue is expected to grow high single to low double digits through 2027, then to level off in 2028 and beyond. New York City product sales post-2027 are expected to be less than $5 million per year. Total Government Solutions service revenue is expected to grow high single to low double digits over the next several years, leveling at the low end of high single digits, following the completion of the New York City installations. And lastly, Government Solutions segment profit margins are expected to dip in 2026, to the low to mid-20% range on repricing and primarily due to the contract requirement that at least 30% of the total contract value was invested in minority and women-owned subcontractors. We anticipate that beginning in 2027, productivity improvements and platform consolidation will drive margin expansion and approach 30% in 2028 and beyond. Now let's move on to a brief review of how we expect 2026 will play out, incorporating preliminary estimates for commercial services in T2 on Slide 13. I'll remind you that our annual operating plan is not yet complete, so these estimates may change. At the consolidated level, due to the New York City red-light camera installations shifting forward into 2025, we're anticipating mid-single-digit revenue growth overall in 2026. Additionally, we're anticipating a 250 to 300 basis point reduction in adjusted EBITDA margins due to a combination of portfolio mix in the New York City renewal contract, partially offset by a year-over-year reduction in ERP implementation costs. Let me drill down a layer on both of these items. First, on the portfolio mix. This is simply the impact of Government Solutions outpacing Commercial Services growth, which has an approximate 25 basis point impact on consolidated adjusted EBITDA margins. More importantly, the New York City renewal contract is expected to result in an approximate 250 to 300 basis point decline in margins, driven by service pricing changes established through the competitive procurement process in the minority and women-owned subcontractor requirements. Adjusted EPS is expected to increase low to mid-single digits year-over-year despite the investment in ramp-up costs in Government Solutions, largely due to the expanded stock repurchase plan announced today. Rounding out the business segments. We expect Commercial Services to grow mid-single digits due to our expectation that TSA volume will grow approximately 1% to 2% over 2025, just as it has year-to-date, so far this year. Additionally, we expect the fleet business growth to moderate to low single digits due to the prior period churn in our FMC business, which will anniversary in the second quarter of 2026. Segment profit margins for Commercial Services are expected to be up about 25 to 50 basis points due to volume leverage and the reduction of the ERP spend in 2026. Finally, we anticipate that T2 Systems will grow low to mid-single digits with segment profit margins up 50 to 100 basis points over 2025. Looking out beyond 2026, we expect that the Government Solutions platform consolidation that we've discussed over the past several quarters will be a catalyst for margin expansion and general productivity enhancements in 2027 and beyond. This platform, which is highlighted on Slide 14, is an IT initiative to deploy our latest smart mobility platform, termed MOSAIC, internally. MOSAIC is a cloud-based, fully secured application intended to streamline the end-to-end processing of traffic incident events. The platform is expected to provide numerous benefits such as flexible architecture that improves project deployment pipelines, enhanced automation processing, and other productivity improvements and operating efficiencies, and as such, is expected to be a key driver of Government Solutions margin expansion in 2027 and beyond. As David discussed, our Board authorized the expansion of our existing stock buyback plan by an incremental $150 million, bringing the total authorization up to $250 million. We expect to commence the stock repurchases in the near term, subject to market conditions and other factors. We are incredibly excited about the future trajectory of the business. As David noted, finalizing the updated New York City contract provides financial predictability and a source of value creation. Additionally, we are poised for growth and profitability across our businesses as the benefits of investing in our platform yields the intended scale and margin benefits. This concludes our prepared remarks. Thank you for your time and attention. At this time, I'd like to invite Towanda to open the line for any questions. Towanda, over to you.

[Operator Instructions] Our first question comes from the line of Faiza Alwy with Deutsche Bank.

Thank you so much for giving us all that detail around the New York City contract, really helpful, and just giving us a longer-term view there. I guess I wanted to double click on the margins, as you can imagine. So Craig, you pointed to a few different things. It sounded like there were some start-up costs that you're incurring this year. And then it sounds like there are some continuing costs next year and beyond and you mentioned the subcontracting with the minority and women-owned businesses. So I guess, just parse that out to the extent you can further quantify how much of this might be onetime versus continuing. That would be really helpful.

Yes, you bet. So let me start first with 2025. So when we talk about those onetime readiness costs, that truly is one time. And the scope of that is approximately $5 million to $10 million depending on where it shakes out. And that's all baked into the guidance. But I think the crux of your question is let's move into 2026. So at the total Verra Mobility level, I expect margins to come down about 250 to 300 basis points, okay? And there's three buckets I want you to think about there. The first bucket is the portfolio mix, which simply means that the GS business, which is a lower-margin business than CS, as you well know, is growing faster than CS in 2026 as compared to '25. That's about 25 basis points at the consolidated level. That's negative. Then we pick up about 25 to 50 basis points on the positive between two things. Number one is our CS business. We'll still have volume leverage and accrete margins as we've talked about. I don't see any change there. And also, the ERP spending, as we've discussed in the past, the thrust of that spend will be behind us. So we'll get some benefit there. So I get 25 to 50 basis points back. And then the New York City renewal in totality, I expect to be a 250 to 300 basis point reduction in 2026, and that's really two pieces. The first is the price normalization. This was a competitive contract, as everyone well knows. And then the second piece is the cut in of the minority and women-owned business requirements. Now those minority and women-owned business requirements is a recurring cost and that will be to the tune of $20 million to $25 million per year that we did not have previously as we look out for the life of contract.

Understood. And just a clarification, are you going to see -- is there an incremental CapEx spend that's maybe coming from purchase of these cameras? Or does that go through the income statement?

Let me be really clear on this one, Faiza, it's a great question. Absolutely not. Absolutely not. So the expectation here is that New York is once again going to purchase their own capital as they have in the past.

Okay. Got it. And then just a follow-up on this point right around the competitive process and the margin dilution that you're seeing from this contract. I know you have previously talked about, as the TAM has increased, you've made some investments in the business. Like are you seeing a similar outcome with some of these other contracts that you're signing with other municipalities or district -- or jurisdictions? And like how should we think about margins overall beyond just the New York City impact in the Government Solutions business?

Yes. I would say -- this is David. I would say that New York City, obviously, given its size and scale makes it -- the impact there is significantly higher. Two, I would say that in general, we are competing at very similar levels across the board that we had in the past. And then what I would say is outside of New York, only a few other major metropolitan areas at this time have the same level of requirements around the use of, for example, for minority and women-owned businesses. So we're not seeing that pop up all across the country and things like that. So I would look at New York City as a bit of a -- as it always has been a bit of a unique one.

And I would add on to the end of that, as you asked about go-forward margins, I think we said on this call a couple of times that the GS business is a high 20s, 30% margin business. Clearly, it's not going to be that in 2026, and we know that. But that has not changed. That has not changed. So the investments that we've made in previous years and a little bit this year to consolidate our platform and I wanted to give some updated perspective on what that is today called MOSAIC will get us back to that level of profitability. So we feel very good about that.

Our next question comes from the line of Keith Housum with Northcoast Research.

Appreciate the color on New York City here. Any color you can provide on '26 for the cadence of the cameras? Will they be pretty even throughout the quarter -- through the year or you guys need to build off throughout the year?

It's -- we don't know yet. I mean, we'll get to the end of the year and do the planning with it, but it will probably be relatively smooth throughout the year, but there's always fits and starts depending on weather and other things that may go along within the city.

And I think the only thing I would say is that is if we look across all of the years, the thrust of the installs will be done by 2027, is our current -- is where we are currently with a few trickling into 2028. But yes, as David said, we're not at that level of detail where I could kind of give you a view by quarter.

Got you. And then Craig, you might have just mentioned it, what do you anticipate the benefit being from MOSAIC in 2027 and beyond?

I think that we will -- for the...

Say, 2025, not 2026.

Yes, he said '27 and beyond, right? I mean the '27 and beyond you are asking.

2025, sorry.

Yes.

Yes. Here's how I think about that is, I'm actually going to back it up to 2026. I think this is about 1.5 points to 2 points of margin in the GS business alone until we get to, I'll call it, the level altitude here, which is probably out in the end of 2028. So when you look at the New York City slide that I put and you kind of look in the upper right, the major driver of bringing the GS margins from the low to mid-20s back up to those high 20s, approaching 30% by 2028 is MOSAIC. So I would level load it across that time period.

Okay. That's helpful. Appreciate it. In terms of the share repurchases, you guys have had a share repurchase outstanding $100 million out there previously for a while. But it sounds like you guys are ready to act on the combined 250 years shortly, correct? As opposed to previously you guys were more opportunistic and you hold for dry powder.

The short answer is yes. The slightly longer answer is we always have to say, obviously, subject to market conditions. But we feel pretty good about taking an active role on that, Keith.

Our next question comes from the line of Louie DiPalma with William Blair.

Congrats on inching closer to the finalization of the contract. I was wondering what remains in terms of establishing the definitive contract? And do you have a sense of the timing?

At this point, what I would call it is primarily administrative working inside of the process that the city has laid out for contract approval. There's not really any significant terms and conditions that we're working through at this point. I would expect it relatively short order.

And for Craig, you provided great detail on the 3-year Government Systems revenue and EBITDA outlook. I think, it implies a 3-year government systems EBITDA growth CAGR of approximately 7%. I was wondering what does the 3-year outlook assume for CapEx? I don't think you provided any CapEx assumptions, but anything regarding CapEx or the total company free cash flow conversion in 2028 would be helpful.

Yes. I won't go into 2028 free cash flow conversion just yet, Louie. We're still kicking around a potential date for an Investor Day, which will probably be a great time to do that. But as I think of 2026, I think the CapEx spend looks a lot like it did in 2025. And I got to say, I'm really proud of that because we're going to have another year of -- in 2026 for non-New York City high single-digit growth, and I think we'll have a CapEx total that looks a lot like the one that we put in front of investors this year. So as we continue to go out, all I would say is directionally, I expect that our CapEx as a percentage of service revenue, both for the company and for GS, everything I see today, we should have hit the high watermark here in 2025. That's the view I have today. Obviously, when I learn more, I can tell you a little bit more.

Great. And another New York City related question for David or Craig, you both discussed installing 1,000 incremental cameras over the next 2 years. Does that total include all of the upgrades for the existing cameras. And do you still plan on upgrading the entire fleet of existing cameras? Or does that 1,000 include everything?

Well, Louie, I can give you most of that. It does not include the upgrades. That 1,000 does not include the upgrades. However, when I went into the financial, we kind of did the CAGR discussion just a minute ago, that does include the upgrade. So those upgrades will be more. In terms of a number, I really want to see a final contract from New York because that's really at the customer's option. But the 1,000 does not include upgrades. It also doesn't include relocations of cameras from one spot to another.

Okay. And one final one. From a high level, how does the functionality of the new cameras compared to the cameras that you've been -- you were installing 5 years ago. Are there like many new features with the cameras? And is there the potential to add on like new revenue lines. And I'm not talking specifically about the New York market, but even for other markets, like what's the additional functionality with the latest generation of cameras?

I would say primarily two things. One is obviously the resolution and the quality of the image detection gets much higher. So think of your iPhone 17 versus the iPhone 12 or whatever, just the quality of the images and video is significantly better. That's number one. The ability to shoot across other lanes. I would say a lot of the investment we made is into the platform that Craig had mentioned MOSAIC, which is functionality that will deliver a much more seamless, much more efficient capability for our customers, look at data, data dashboards, making decisions. But the third point is, yes, in the world of cameras, that is the direction, which is a single camera that can do 5, 6 or 7 things, not just one thing. And that's what we would anticipate moving with that type of technology going forward.

Our next question comes from the line of David Koning with Baird.

I guess I was wondering, I was looking at the government revenue, if you take total less the New York, so total service less New York service, and when you do that, next year's growth is good, 7%, 8% when you just kind of take your numbers. The year out is really good. It's like 16% in that acceleration -- okay. I guess what's behind that? I mean, that's an amazing acceleration. And is that part of the EBITDA margin expansion because your higher margin work, assuming -- I assume, is going to be accelerating into '27.

Yes. I mean, so the growth -- that's exactly right. So if you think -- that's why we -- in my remarks, Dave, we talked about there's a little bit of a reset because yes, because of the size and what's happening in New York, which is awesome, awesome stuff, it's just going to have a bit of a drag next year. But past that, when you get past the implementation of our technology upgrades as well as all of the winning that we have been doing in the marketplace, our win rate has been significantly higher over the last 12 months that was previously we basically won all of the opportunities so far in California. We're winning great opportunities in school bus. So what I would say is -- but remember, there is a time to book and then a time to realize revenue, which does take a little bit. So what you're seeing is all of the winning in the backlog turning into revenue as we get into early or mid-part of next year, that translated into real growth in '27.

Got you. Okay. No, that's great to see. And then I guess my follow-up, in commercial, you had the second toughest comp of the year, yet you accelerated growth despite the fleet management headwind, and so I'm wondering how you had the best growth for the year so far in Q3 despite both the tough comp and the fleet management. It seems like something is going really well there.

Yes. David, you get annoy with me here on fleet. I'm going to tell you again, it wasn't as bad as I thought. And basically, what that means is tolling activity outside of the churn that we talked about last quarter was as high as we've seen probably in the last 5 or 6 quarters. So the churn didn't have as large of an impact. Let's put it that way. And I do not expect that will be the case as we go into the fourth quarter. So if you remember, when we were -- all of us, if we remember, 90 days ago, we talked about, I expect that fleet business to have a mid-teens year-over-year negative [ beat ]. I do expect that to come in the fourth quarter. And quite frankly, I expected in the third quarter. However, that tolling activity picked up. But the RACs have been strong. Sitting here today, we are at -- we had a good solid Q3 in TSA throughput at [ $101 million ]. On a year-to-date basis, we're just north of [ $100 million ]. And then the month of October has been really strong. Last I looked on a month-to-date basis, it was plus 4%. So I feel pretty good about how the business is performing. But that fleet -- that fleet thing is going to show up in the fourth quarter, a little bit more than the last quarter.

Our next question comes from the line of Chris

So I wanted to double-click on California a little bit, and I appreciate the legislative update, and the updates across different cities and especially congrats on the San Jose Award. I'm just wondering from the 2026 guidance perspective, is it fair to think that anything from what you've been awarded, including San Jose in the guide, whereas the upcoming pilots or especially -- specifically Los Angeles, Glendale, and Long Beach, those are not in the guidance yet. And can you give us a sense of what's your overall scale in California and what are the potential opportunities you have visibilities to especially those private cities?

Yes, Chris, first of all, welcome. Second of all -- yes. This is Craig. I'll give you the financial piece of that, and then I'll let David talk about the commercial motion that we've seen in California. So the ones that you just spoke of are pilots, right? So those pilots, I think, in totality for the state of California, all the pilots amount to about $10 million of ARR, and roughly half of those have only gone out for RFP. So to the degree that we won 100% of the pilots that have come out to RFP, as David just talked about, yes, that's in our guide, but it's not a significant amount of money. The other thing is, when you're talking about a new modality even in a state that's an existing customer, typically the time from winning of the contract or the award of the contract to revenue is 12 to 18 months. So even if those had been bigger numbers, the answer would be implicitly, it's in the guide, but it's not a really big number. But outside of that, with the red-light, I think, maybe, Dave, do you want to talk about that?

Yes. I mean I think as I mentioned in my remarks, we still have a couple of pending from the school zone speed program, which we will anticipate first part of next year. The red-light is significant. So we're the largest provider of red light in the state of California currently. But historically, it had always had some unique administrative challenges to a way that it would fully -- with multiple different challenges that I mentioned some in my remarks that I won't go back into. But -- so we just look at that as an opportunity to reshape the way that we're serving customers already. And because they've removed some of the administrative barriers, we would anticipate some of those programs to expand. We feel like we're in -- California is really something that we've worked really, really hard on as an organization, an enormous amount of focus, partnering with our government relations as well as our local teams as well to produce what we consider is going to be a great outcome for many, many years to come.