Via Transportation, Inc. Q1 FY2026 Earnings Call

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Via Q1 2026 Earnings Call. Operator provided instructions. Thank you. We will now start the presentation.

Good morning, and welcome everyone to Via's First Quarter 2026 Earnings Call. I'm Gaby McCaig, Via's Chief Corporate Communications Officer and Head of Investor Relations. With me today are Daniel Ramot, Via's Co-Founder and CEO; and Clara Fain, Via's Chief Financial Officer. During today's call, Daniel will review our first quarter 2026 business update before handing it off to Clara to discuss financial results and our guidance for the rest of the year. We will then open the call to Q&A. In addition to prepared remarks on this call, additional information can be found in our investor presentation, press release and SEC filings on our Investor Relations website at investors.ridewithvia.com. Before we get started today, we want to draw your attention to the safe harbor statement included in our press release and investor presentation. Items we discuss today will include forward-looking statements about topics, including, but not limited to, our future financial performance, projections and management's plans and objectives for future operations. Actual results may differ materially from those presented in the forward-looking statements and are subject to risks and uncertainties described more fully in our SEC filings, including our quarterly report on Form 10-Q. Any forward-looking statements that we make on this call are based on our assumptions as of today, May 12, 2026. Unless required by law, we undertake no obligation to update or revise these statements as a result of new information or future events. We would also like to point out that our discussion today will include certain non-GAAP financial measures in addition to, not as a substitute for, financial measures calculated in accordance with generally accepted accounting principles. Definitions of these non-GAAP financial measures, along with reconciliations of non-GAAP to GAAP financial measures are provided in our press release and our investor presentation. And without further ado, I'll now hand it over to Daniel.

Thanks, Gaby, and thank you, everyone, for joining us today. We're delighted to report another outstanding quarter for Via with results that exceeded both top and bottom line expectations. In Q1, our revenue grew 29% year-over-year to $127 million. This was our first quarter with over $0.5 billion in run rate revenue, an important milestone for the company. The number of customers on our platform grew in Q1 to 838, up 23% year-over-year. We continue to make significant strides towards our profitability target with adjusted EBITDA margin of negative 4.6% in Q1. The basis for our rapid and durable growth is twofold. We are in the early stages of transforming an enormous market, and we offer a unique and differentiated solution that customers increasingly recognize as superior. In our core geographies of North America and Western Europe, our serviceable addressable market is estimated at $82 billion based on a report we commissioned from a major consulting firm. Both by customer count and by revenue, our penetration of our SAM is less than 2%. This presents a tremendous opportunity for continued growth for Via. The key to our ability to rapidly transform this enormous market is our unique product and go-to-market strategy. Via is the only company that offers an end-to-end unified platform for optimizing and operating entire transit systems. At the core of our platform is our purpose-built AI-powered software, which leverages proprietary data and expertise we amassed over more than a decade. When customers adopt our software, they can leapfrog decades of technology neglect and rapidly break down technological and operational silos, driving immediate ROI. But crucially, our platform extends well beyond software. We are a full stack transit provider with a broad suite of technology-enabled services that allow us to directly participate in the delivery of transit services to end customers. When customers select Via to provide these services, we become the real-time orchestrator and optimizer of their transit network, assuming control and accountability for service levels, cost and passenger outcomes. Our software and services are deeply integrated, creating a virtuous cycle. Our software is embedded in every aspect of our services, driving significant efficiency over legacy transit providers who make limited use of technology in their operations. And our services create a powerful feedback loop that supports continuous improvement of our software and provide proprietary data for our AI models. Consistent with the unique nature of our platform, our revenue model is predominantly based on usage and outcomes. When customers select Via to orchestrate the delivery of transit services to their passengers, the increased control and accountability can drive operating leverage and enhance our ability to scale with these customers. Our revenue model minimizes friction for expansion and allows us to seamlessly capture this upside. We believe our platform to be the most extensive integrated solution available in the market, enabling customers to seamlessly plan, schedule, operate and optimize their system across transit modes. Within our platform, microtransit remains Via's founding innovation. It is a new paradigm for mass transit, utilizing dynamically routed, flexible shuttles in place of rigid fixed route and fixed schedule buses. Our analysis of large U.S. transit systems for which we have data by bus route indicates that between 15% and 65% of bus routes for those systems operate at lower efficiency than microtransit. These routes are prime candidates for replacement by microtransit and represent strong expansion opportunities for Via. And while microtransit remains a major catalyst for adoption, our focus today has expanded to managing entire transit networks on behalf of our customers, including paratransit and buses. The focus on providing the orchestration layer for entire transit networks is a major contributor to recent acceleration in the growth of our pipeline. Last quarter, we reported that our pipeline grew more than 50% year-over-year. This trend has continued in Q1, and we ended the quarter with a record $650 million in pipeline opportunity. We first took on management of an entire transit network in Sioux Falls, South Dakota. Winning the contract in late 2023 and launching in January 2024, this highly successful partnership with Sioux Falls is the foundation of our expertise and credibility as an orchestrator of full transit networks. After assuming responsibility for the transit network in Sioux Falls, we launched microtransit citywide, modernized and integrated the previously siloed air transit system and redesigned the bus network in close collaboration with the city and the community. This transformation produced outstanding results, reversing a multiyear trend of rising operating costs and declining ridership, driving ridership growth close to 40%. Building on our outstanding results in Sioux Falls, we were able to secure 2 additional network wins in the second half of last year. And so far in 2026, we have already been awarded 4 network deals, representing over $40 million in total annual contract value. We are very encouraged by these recent network wins and believe they may represent an inflection point in our ability to win these opportunities. In our view, there are 3 key factors behind our recent success with network opportunities. First, while some customers have historically procured transit operations and software separately, in some cases even independently procuring services for each transit mode, we are increasingly seeing integrated opportunities that combine transit services and software across multiple modes. Now that we have set the precedent, customers recognize the value of an integrated transit system. When they choose to procure such a system, we are well positioned to capture the opportunity. Second, having established Via as a successful provider of integrated network solutions with strong results and references, we are now able to credibly pursue and win these opportunities. The third important factor is AI. Thanks to AI, we're able to build solutions at a faster pace than ever before. This allows us to enter new verticals such as buses more rapidly. It also means the gap between our offering and those of existing competitors is expanding, allowing us to deliver superior ROI to our customers. Looking ahead to the rest of 2026 and beyond, we are excited by the number of network opportunities in our pipeline and the potential to further accelerate and drive growth in our business. We are in the very early phases of realizing the potential of AI to drive increased automation and efficiency across every aspect of our operations, from routing efficiency to dispatch productivity, lower customer service costs and improved fleet uptime. As the network orchestrator, we are in a position to translate these service cost reductions into expanded margins, especially as volume scales. As their economics continue to improve, autonomous vehicles represent one clear such avenue for cost reductions in the delivery of public transit services. We've seen strong interest from our customers who seek to integrate AVs into their public transit fleets. And we've seen strong interest from AV developers who are seeking to partner with us to provide the deep vertical stack required to serve public transit customers. Building on our partnership with Waymo, we recently partnered with Beep to provide a fleet of autonomous shuttle buses for the city of West Palm Beach, and we're actively discussing opportunities with other AV developers. We view these partnerships as further proof that Via is rapidly becoming the operating system for future cities. We are also continuing to explore the opportunity to extend our platform beyond transit by leveraging our strong local government relationships and AI. Our new Via AI Labs division will leverage forward deployed engineers using AI to rapidly explore and productize solutions to cities' most pressing civic challenges, including waste management, road maintenance and data optimization. While still early days, we're seeing strong initial interest from cities, indicating that Via AI Labs has the potential to be a meaningful catalyst to expand our platform and grow our TAM beyond transit. Lastly, before I hand it over to Clara, I would be remiss not to mention our podcast, ModeShift. ModeShift is a thought-provoking, fast-paced conversation led by Andrei Greenawalt, our Chief Policy Officer, about mobility history, policy and technology. If you are already listening to ModeShift, it's a go-to for anyone interested in transportation, recently reaching as high as #2 in the government category on Apple's podcast chart. Season 2 is now out, and I would encourage you to subscribe. And with that, I'll pass it over to Clara to review the financial highlights for the quarter and our guidance for the year.

Thank you, Daniel. I'm happy to report that Q1 was another very strong quarter for revenue and profitability, with demand for Via's platform reaching a record high. We exceeded $0.5 billion in annual run rate revenue for the first time in the company's history, nearly doubled our pipeline of opportunities compared to the same period last year, accelerated on several fronts, thanks to AI and last but not least, lapsed closer to profitability. As we have in all our prior quarters as a public company, we also exceeded our revenue and adjusted EBITDA guidance. Let's start with top line. In Q1 2026, our annual run rate revenue, which is defined as our quarterly revenue multiplied by 4, was $510 million, representing a year-over-year increase of 29%. Our growth was fueled by the United States, which represented 74% of our revenue and where we grew 36% year-over-year. Internationally, we saw strong momentum in the U.K., where revenue was up 68% year-over-year. At the same time, we continue to face headwinds in Germany as our customers continue to navigate a sustained constrained budgetary environment. These results reinforce the benefits of our geographical diversification strategy. We closed the quarter with 838 customers at a record high. We're continuing to benefit from flywheel effects in multiple states where the success of existing customers drives referenceability and allows us to rapidly grow revenue without a corresponding increase in sales and marketing investment. For example, in California, we saw an 85% increase in revenue year-over-year in Q1 2026 and are pursuing close to $100 million in active pipeline in the state. Now let's dive into our margins and expenses presented on an adjusted basis. In Q1 2026, we spent 13% of our revenue on sales and marketing compared to 14% in Q1 2025. We see very attractive ROI from our investment in sales and marketing and are taking advantage of several internal AI initiatives, including automation of sales outreach and design. We believe these initiatives will yield measurable upside. We also spent 15% of revenue on G&A, which was consistent year-over-year. Our G&A expenses were driven by public company costs and increased insurance costs from higher premium and claims expenses in the quarter as we continue to scale the business. Finally, R&D expenses represented 16% of revenue compared to 20% in Q1 2025, demonstrating very effective leverage. Our engineering team continued to gain efficiency by extensively leveraging the most advanced AI coding tools. Over 75% of our code is now written by and with AI, allowing us to effectively reduce costs year-over-year. Efficiency savings were offset by the unprecedented strength of the Israeli shekel, which is the currency of our largest R&D center and currently stands at a 30-year high versus the U.S. dollar. The strength of the shekel had about $2 million of negative impact to adjusted R&D expenses when compared to Q1 2025. We wrapped up Q1 2026 with negative 4.6% adjusted EBITDA margin compared to negative 8.4% in Q1 2025, continuing to make significant progress on our path to profitability. Finally, our balance sheet remains strong with $348 million of cash and no outstanding debt as of March 31. Over the past few years, we have been able to drive significant operating leverage while generating rapid revenue growth with adjusted operating expenses going up by only $10 million since Q1 2023, while quarterly revenue grew by $74 million in the same period. We believe that we can continue to execute with the same level of discipline in 2026. Now let's turn to guidance. Based on our Q1 results and early traction with full network opportunities with several deals that we have won and will begin to recognize revenue from in the second half of the year, we are raising our guidance for the year. For the second quarter of 2026, we expect revenue to be between $132.5 million and $134 million, representing 22.7% to 25.1% year-over-year growth. We also expect adjusted EBITDA margin to be between negative 3% and negative 2.2%, with adjusted EBITDA between negative $3 million and negative $4 million. There are several factors driving our Q2 guidance. First, we're experiencing continued headwinds in Germany with slower growth and higher churn than normal. Second, consistent with historical revenue patterns, our market has a certain cadence to it with new deals launching when existing contracts expire. This year, we are seeing many large deals that are already contracted or won launch later in the year, which informs our Q2 guidance and our full year revenue guidance. For the full year 2026, we are raising our revenue guidance to $547 million and $550 million, representing 26% to 26.6% year-over-year growth. We are reiterating our adjusted EBITDA guidance, a negative $12.5 million to negative $7.5 million despite about $2 million of annualized impact from the strength of the Israeli shekel as of end of Q1. Finally, we reiterate our goal to deliver our first quarter of profitability in Q4 2026 with positive adjusted EBITDA, which we believe will be a major milestone for Via and an important step on our path to delivering great returns to our shareholders. With that, I wanted to thank you all again and turn it back to the operator so we can take some questions.

Operator provided instructions. Your first question comes from the line of Adam Hotchkiss with Goldman Sachs.

Daniel, I appreciate all the detail around flywheel states, and I know these brand network effects are something we've talked a lot about in the past. Wondering if you're seeing your referenceability starting to actually catalyze incremental RFP activity. I'm thinking as you launch some of these AV partnerships and build out some of these adjacent offerings like student transit, and I think you even mentioned waste management on the call, do we, at some point, go from an RFP environment where customers are proactively looking to replace an existing process to one where Via's brand in the market is actually pulling forward some of these decisions by governments?

Thanks so much. I'd say it's a great question regarding the effect of the flywheel states and how they're impacting RFPs we're seeing in the market. Overall, I think we're seeing a very positive trend in these flywheel states across a number of factors. One, we're seeing generally higher win rates in these flywheel states, which is very encouraging. And we are seeing increased activity for Via in those states. So if we look across our pipeline, we are seeing that a large percentage of the pipeline is coming from these flywheel states and starting to see a dynamic. And I think I mentioned this in the prepared remarks that we're really transitioning more and more into opportunities that are well suited to Via — these integrated opportunities that combine the services and the software where we believe we have a strong advantage in winning those opportunities. So across a number of dimensions — win rates, the contribution to our pipeline and then the types of opportunities we're seeing in those flywheel states where we're getting the referenceability, where our offering is quite familiar to our customers, you're starting to see them shift towards creating opportunities and seeking opportunities that are better suited for Via. So for us, that's a very encouraging direction.

Your next question comes from the line of Josh Baer with Morgan Stanley.

I wanted to ask one on the Via AI Labs and the commercialization of those efforts. Maybe for Daniel, if you could talk a little bit about specific products or use cases that are being developed? And any update on how that opportunity is developing here? And then for Clara, a follow-up would be on the economic side, how you think about how much to invest in AI labs and what we should expect from a monetization perspective over time?

Josh, thanks for the question. For AI Labs, we're seeing some really interesting dynamics. Just as far as specific products, I want to remind everybody that our customers vary in sophistication. There are some that are incredibly sophisticated with AI and are only trying to deploy it internally across their city hall, but that is very rare. For the most part, our customers are not typical Silicon Valley companies that are deep in AI. So even simple things like helping them get all of their disparate, dispersed, often hard-to-access data into one place that they can look at together in a very organized fashion can be incredibly helpful and frankly transformative. Very basic things — just helping them put all their data together into one dashboard in a simple way. Prior to AI, that would actually have been very hard to do because of the way the data is set up. What we're finding is with AI, we can create tools for them that are incredibly helpful and very, very fast. Those tools, once we create them, can then be taken to other cities, which in the past would have been hard because they were very bespoke and difficult to scale. So that's one example that in a company or a bank you might think is trivial, but in a municipality may be transformational. Beyond that, we're seeing early use cases around sanitation — things like scheduling of resources, which is a core Via capability. If you need to go out and fix potholes, the ability to schedule that with limited resources and bring data together from different sources is valuable. In law enforcement and public safety there are advanced tools, but connecting that data to other parts of the organization is relatively limited. So being able to bring data together in that area is useful. We've also seen use cases around social worker caseloads and helping manage and schedule those workloads. It's a diverse set of use cases. We're still at the exploration stage of figuring out the best products to build, and we're partnering with about a dozen municipalities to dig into this and figure out the right way to build out this offering. Early days, but very exciting from our perspective.

Thanks, Josh. From a gross margin perspective, we expect these initiatives to be accretive to overall gross margin. We're adopting a front-end engineer model, and there are lots of comps there so you can get a sense for the gross margin profile. In terms of balancing the investment, you can see that we've implemented AI internally and truly transformed how the organization works. That has helped us generate operating leverage and a lot of savings. In a way, we're reinvesting some of that into our AI capabilities and AI Labs. So we expect to continue to balance that investment with our profitability target.

Your next question comes from the line of Michael Turrin with Wells Fargo.

Just a two-parter upfront for me. Daniel, the network win commentary stood out throughout your remarks. I think you mentioned 4 wins and an inflection point. Can you just frame more broadly what those mean for Via and how you'd expect some of the successes there to scale more broadly? And for Clara, it looks like you were guiding for it, but gross margin down a touch year-on-year. Just remind us if there's anything seasonal or near-term impacting that line and if you're still confident in the path towards longer-term expansion there.

Thanks, Michael. It'd be great to talk a little about the network opportunities and wins. This ties back to what we've been saying in previous calls: Via's higher profile and the growth of flywheel states have put us in a position over the last couple of quarters to expand our pipeline meaningfully by adding larger network opportunities. This also ties into the maturity of our product. We've invested across multiple verticals around transit for years and are now in a position where we have a solution that can address the entire network very effectively, both with software and services. So it positions us well to go after these larger full network opportunities. The market itself is increasingly open to adopting integrated solutions where before they procured services and software in silos. All of these factors are driving pipeline increase. One key question for us was whether these larger opportunities would have similar win rates to our historical ones. We are focused on pursuing opportunities we believe we can win and are being disciplined. The last few months have been very encouraging. It's still early days, and I don't want to overstate, but we believe there is potential to see an inflection point with these recent wins. Government customers tend to prefer suppliers that others have already chosen, so these wins are an initial step to start turning that flywheel. Very encouraging and a core focus area for our company.

Michael, thanks for the question on gross margin. Good question on the year-over-year. Last year in Q1, we had about 5% of one-time revenue, which drove slightly higher gross margin for the quarter. This year in Q1, one-time revenue is about 1% of revenue, which accounts for the change year-over-year. So it's largely a mix difference. Going forward, as we said last quarter, we expect gross margin to be consistent in the near term as we continue to execute on our very large $650 million pipeline opportunity at the moment, but we are committed to achieving 50% long-term gross margin. We believe we can get there by continuing to optimize the cost of our services, leveraging AI Labs and new technologies like AI and AVs, and making accretive acquisitions.

Your next question comes from the line of Patrick Walravens with Citizens.

Clara, I guess a couple for you. So how much did Downtowner contribute this quarter?

Thanks for the question. We're very pleased with the Downtowner acquisition and how it's turning out and the level of integration that we've been able to reach. Our perspective is that the material contribution from Downtowner is the number of customers. That's what we believe, and we're very pleased with that. So we've added 94 customers from Downtowner and are already starting to see some cross-sells there.

Okay. Do you want to share what the organic growth rate was? That's what I'm trying to get at.

No. Pat, I really appreciate your question, and I'm trying to answer it. As you can see in our numbers, I'll take a step back. We increased guidance for the year and our growth opportunity for the year, and we feel very good about the general opportunity we're seeing. When I look forward to 2026 and 2027, I feel very positively. Demand for the platform is strong — we shared this quarter that we have about $650 million of pipeline opportunity, which is a very strong increase year-over-year and the highest we've ever seen our pipeline. So I believe that our potential for organic growth is very strong and has not slowed down at all.

Okay. And then Daniel, can you talk a little bit more about what's going on in Germany? And maybe compare that to like California or something? What's the dynamic in Germany?

Yes, Pat, I can take this one. Thanks. Germany is, for us, obviously presenting some real headwinds as you guys are seeing. Despite the headwinds, I think we've had really nice results this quarter and are very positive about the year overall. Germany is an unusual market for us. It is an area where we have not yet been able to move past microtransit being adopted in a silo. We've talked a lot about the importance of deploying the entire platform. In the U.S., we started with microtransit then added paratransit and now we're adding full network opportunities. That is key both to our growth and the stickiness of the platform. As we add more services, it becomes very challenging for customers to change providers without working with us, which also presents opportunities. In Germany, we have not yet been able to crack it beyond the microtransit vertical. We do sell planning and scheduling and other software, but the majority of our revenue there still comes from microtransit and agencies treat microtransit as a silo. We believe Germany is behind other parts of the world in this sense; in the U.K. and U.S. we're seeing moves toward integration that create opportunities for deploying our whole platform. That, coupled with macro headwinds around funding across Germany, has created pressure on our services and limited growth there. We're confident this is temporary and that the strength of our product and solution will allow us to embed more products in the market over time, but it is taking longer than in other markets.

Your next question comes from the line of Brad Zelnick with Deutsche Bank.

Great start to the year. I actually want to follow up on Pat's question about the difficulties in Germany. You specifically called out both lower growth and higher churn. Is one of those particularly worse than the other? And how would you characterize the health of existing customers and appetite for new programs in other areas within the EU? I mean, is there any risk that what you're seeing in Germany spreads elsewhere?

Yes, Brad, thanks. I don't know that churn or lower growth is singularly worse — it's probably lower growth that's the real challenge there. To be clear, the market in Germany is not collapsing; Germany today represents about 16% of our revenue. We see it staying fairly stable; it was roughly flat with about 3% growth. So it's a headwind relative to our overall growth, which is higher elsewhere. We have an opportunity to turn it around in coming years. There's some elevated churn as well, but we don't see this as a model for the rest of the EU. It is particular to Germany. Germany was a major growth driver for us earlier, but it is now in a different phase. The U.K. is showing very different dynamics with fast growth and adoption of our entire platform, a move toward franchising that is driving growth, and positive dynamics in other markets like the Nordics and Benelux. So this is a unique case and tied to funding and the way we initially entered the country.

Very helpful. Just a quick follow-up. A lot of volatility in fuel prices of late. What, if any, impact does that have on your financials? And how are contracts structured as it relates to fuel price exposure?

Thanks, Brad. Yes, there's some volatility in fuel prices. Fuel is about $3 million a quarter of spend in our COGS, so that can be 2% to 3% of revenue. We saw a spike in fuel costs towards the end of Q1, so there's some impact to gross margins. We expect higher costs in Q2 and have factored that into our guidance. We have contractual mechanisms to pass through some of these increases to our customers, and we are working on these pass-throughs so we don't have to bear the full cost of higher fuel ourselves. I feel optimistic that we'll be able to pass through the bulk of it.

Your next question comes from the line of John DiFucci with Guggenheim Securities.

I have a question for Clara and then a follow-up for Daniel. So Clara, it's good to see the strong results this quarter and the annual guide raised by just a little bit more than the beat. But the second quarter revenue guidance was just below the Street's numbers. And given typical seasonality for Q3 being a bit higher than Q2, I think this implies a bit more back-end loaded than the Street had modeled. We know you have great visibility into future revenue, not only for the existing contracts, but for new ones coming online. So can you give us a little more color on why this looks a little more back-end loaded than the Street had modeled and how your business should progress through the year, especially the fourth quarter?

Thanks, John. You have a good understanding. There are two factors driving the Q2 results. One is the cadence of the market — there's an implicit seasonality where deals launch when other deals expire. We're seeing many launches in H2 that are already won and contracted but are launching later in the year, which drives some of the Q2 results. Second, the headwinds in Germany are having a more pronounced effect on Q2, and that's factored into the guide. Regarding last year's Q2-to-Q3 seasonality, we don't expect to see the same pattern this year. We expect H2 to be quite strong, and while there will be some seasonality in Q3, it will be more than offset by these launches.

Great. That's really helpful. And Daniel, Clara talked about R&D leverage in her prepared remarks. It would have come down even more without the strength of the shekel. Can you talk about that R&D benefit, which is AI related to the innovation you're doing in R&D and especially as it pertains to new things like AVs and AI Labs?

Yes, John. You're seeing it right. We're seeing promising leverage in R&D. AI is a major contributor, and the team has built a scalable infrastructure over the last few years, which is not easy with government customers who often create a lot of diversity in requirements. We've invested heavily to enable scale across our more than 800 customers and still move fast. Layer AI on top of that and we're seeing very nice progress. That allows us to run very fast. We're seeing the leverage in the financials and our product delivery is only accelerating. If you talk to our customers, you'll hear the same. We're cranking on that part and I'm very excited about continuing to accelerate it.

Your next question comes from the line of Scott Berg with Needham & Company; Ian Black is on for Scott Berg.

With the elevated oil prices, are you seeing any impact on end customer demand?

Yes, that's a very good question. There are several layers to commodity price impact. Beyond the cost side, we're starting to see signs that riders — end customers — are using public transit more because of rising oil prices. So we are seeing increasing demand for the services we provide and for our customers.

If I may add, that is layered on top of how expensive it has become to own a car in the U.S. — the cost of repairs, buying new cars, and higher fuel prices. Layering those pressures on car ownership increases the need for public transit, reinforcing what Clara just said.

Great. And then a lot of your microtransit customers kind of start out with trials and expand over time. As you land more system-wide deals, should we expect a change in how your customers ramp?

Yes, that's a good question. You may see fewer customers making the jump from a very small microtransit pilot to a massive expansion in a single step. However, when we take over entire systems, there's still a lot we can sell to those customers — additional services such as school transit, paratransit, planning tools, and other modules. For the first time in the last quarter, we've seen cross-sell from our transit product into schools, which previously was more difficult because these are often different departments. When we have a strong presence in a city from a network win, that can create opportunities to translate into other vertical sales. So you may not always see a single large jump from small microtransit to whole transit network, but there's still substantial expansion potential within those customers.

I'd add that the AI Labs opportunity comes from a different budget pocket. Near-term, you're seeing trends like cross-sell to schools, and AI Labs has the potential to truly expand the TAM.

Your next question comes from the line of Brian Schwartz with Oppenheimer.

Daniel, I want to follow up on the comments about the pipeline doubling year-over-year. It's even bigger than the size of the business right now. So my question is about the cadence of the conversion of that pipeline — how it's going to play out. And I wanted to ask you specifically about procurement cycle timing. Are you seeing any meaningful changes from government procurement timelines or approval processes versus what you've seen in the recent past?

Thanks, Brian. We haven't seen a notable change in average sales cycle timelines — it's remained fairly constant. It's something we're monitoring to understand whether larger opportunities take longer and, if so, which parts take longer. We need more data over the coming quarters to determine that. Right now, I would say we haven't seen any noticeable change, but we're keeping a close eye on it. On the government side, especially in the U.S., the dynamics are fairly similar to the last few years. As I mentioned earlier, in our flywheel states, we're starting to shape RFPs and seeing opportunities that are better suited to Via. So nothing majorly different on procurement timelines at this point.

And then my follow-up for Clara. Wanted to ask about the timeline from the benefits that you could see from these AI initiatives, whether internal or AI Labs, specifically with gross margin. I assume over time it's going to reduce operating costs as well as service delivery costs. From a timeline standpoint, when should we expect those efficiencies to start to play off and have a positive impact to gross margin?

Thanks, Brian. There are several layers. Some internal efficiencies from AI are already helping drive operating leverage and we've commented on R&D improvements. You can see some of that in our results even with the strong shekel, which had about $2 million of year-over-year impact. That's a sense of the level of efficiency we're getting. On monetization from AI Labs, it's early, so we'll reserve the precise timeline, but we are seeing momentum with customers and believe that AI Labs will be strongly accretive to gross margin. For the overall business, it will take some time for the full impact — we hope to see some benefits by the end of the year and more next year, but we'll share more as visibility improves.

Your next question comes from the line of Brian Peterson with Raymond James.

Daniel, maybe one for you. You've mentioned a couple of big AV wins over the last few quarters. I'd love to understand the nature of those wins. Are those more pilots? And as we're thinking about the opportunity there, do you envision more kind of network-oriented arrangements with customers that are using AVs and that's a big potential unlock? Would love to understand that a bit.

Thanks. AVs are an area of great interest. For example, West Palm Beach is an opportunity where we will deploy AVs as six-route shuttles — small buses — as part of the service we provide to the city. It's part of what the city wanted, and it's expected to come in the next year or two as vehicles become available. So that is embedded into the network and the model. Another opportunity is leveraging AVs as available supply in the market, such as with Waymo, where we can use that supply as part of our municipal service. Our preferred model is to embed AVs as part of the fleet that we operate, using them as a core part of the fleet. It's unclear which AV developers will have vehicles available at the right form factor and price; today they are still expensive. We are trying to partner with many developers so that as vehicles become available, we can plug them into our networks. Cities are interested in integrating AVs either for innovation or because the economics could allow them to deploy more service for the same budget as AV costs decline. So we see two core models: embedded fleet integration and opportunistic use of external AV supply.

Your next question comes from the line of Jonathan Ho with William Blair.

I wanted to understand, first of all, what helped drive some of the strong growth in the U.K.? And do you expect that to persist over time as well?

Thanks, Jonathan. The U.K. dynamics are very favorable. Two main factors: first, we've established ourselves as the category leader there and are not seeing a lot of competition; microtransit adoption has really taken hold and our core products are succeeding. Second, there's a move toward franchising where local authorities take more responsibility for transit, which is driving budgets toward efficiency and integrated services — dynamics that are well suited to our offering. We also have Citymapper as a strong brand there and are getting traction with planning software and other products. Based on what we see today, we believe the trend should continue and we're hopeful about ongoing progress in the U.K.

Excellent. And how are you thinking about federal funding as well as some of the upcoming legislation in support for state government transit? Is there anything in process that you're excited about or that worries you?

Thanks, Jonathan. Funding is very important and diverse. In the U.S., federal funding for the types of services we provide has been pretty consistent, with continued bipartisan support for public transit at the formula fund level. We would like to see federal funding move toward a model that encourages outcomes and efficiency, which would motivate agencies to modernize services. We're having conversations around that and believe it could push agencies toward transformation in positive ways. Local and state-level funding dynamics vary, and given current pressures on households around transportation cost, public transit is increasingly critical. Studies show strong economic returns for investment in public transit, and we see potential positives from growing local and state-level support.

Your next question comes from the line of Alex Zukin with Wolfe Research.

Most of my questions have been answered. But maybe, Clara, can you quantify the actual headwinds to revenue that you're seeing this year and maybe gross profit in the model from the issues in Germany that maybe weren't in the plan initially? And then any headwind, I think you've quantified it, but maybe just remind us the headwind on profitability for the year from the FX moves.

Thanks, Alex. On FX, we're seeing about $0.5 million quarter-over-quarter at the Q1 rate, which annualizes to about $2 million due to the strength of the Israeli shekel at a 30-year high. Year-over-year, that's about $2 million of impact. On Germany, we've reflected those headwinds in our guidance, so there is some impact to revenue and gross profit from those headwinds. That said, we've been able to more than offset the Germany headwind with growth and our pipeline, so I'm pleased with how we've diversified and are executing.

Got it. And maybe just one more, Clara. What drove receivables up sequentially?

Last quarter we had close to breakeven operating cash flow because several customers paid early before the holidays. That was unusual and favorable, and receivables reverted this quarter as those customers resumed normal payment timing. So it's a timing issue in working capital and we expect it to revert next quarter. Nothing fundamental—just timing of government payment cycles.

I'll now turn the call back over to Daniel Ramot for closing remarks.

Well, thanks, everybody, for joining the call. We really appreciate it, and look forward to the next call, next quarter. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.