Good day, and thank you for standing by. Welcome to Verra Mobility's Fourth Quarter 2024 Earnings Conference Call. My name is Liz, and I will be your conference operator today. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mark Zindler, Vice President, Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to Verra Mobility's Fourth Quarter 2024 Earnings Call. Today, we'll be discussing the results announced in our press release issued after the market close, 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, 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 our investor presentation for Verra Mobility's complete forward-looking statement disclosure. 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 to everyone for joining us. We delivered a solid fourth quarter with consolidated revenue growth of 5%, adjusted EBITDA increased 12% and adjusted EPS increased 38% over the prior year period. Fourth quarter free cash flow of $22 million was slightly ahead of our expectations, and we ended the year with net leverage of 2.4x, while investing nearly $150 million to repurchase about 5 million shares in the fourth quarter. Moving on to the segment level financials. Commercial Services fourth quarter revenue and segment profit increased about 4% over the prior year period. Both revenue and segment profit in Commercial Services were negatively impacted by a prior year period adjustment of approximately $3 million related to tolling activity. RAC tolling, which includes this $3 million prior period adjustment, increased 3% over the prior year period, and FMC revenue grew 5% over the fourth quarter of 2023. Government Solutions service revenue increased 5% over the fourth quarter of 2023. Revenue from New York City, our largest Government Solutions customer, was essentially flat year-over-year, as we await the outcome of the competitive request for proposal for automated enforcement. Service revenue increased 9% outside of New York City, driven by expansion from existing customers and new cities implementing photo enforcement programs. Total revenue, including international product sales, was up about 10% over the prior year quarter, fueled by a $5 million increase in product sales compared to the fourth quarter of 2023. Government Solutions segment profit increased 44% or 790 basis points over last year, driven by a $4 million non-cash charge in the fourth quarter of 2023 and a reduction in credit loss expense in the current year quarter. Moving on to T2, our Parking Solutions business, total revenue declined about 13% for the quarter driven by lower professional services and one-time hardware sales. Segment profit declined to $3 million for the fourth quarter. I'll provide more commentary about what operational improvements we had planned for Parking Solutions later in my remarks. Next, I'm going to focus on the key trends shaping our portfolio of businesses and what makes me so excited about the future growth trajectory. Starting with travel demand, which directly impacts our Commercial Services business. Full year 2024 TSA passenger volume increased about 5% over 2023 volume driven by strong leisure and business travel demand. While that sets up a challenging comparable for 2025, we continue to anticipate resilient travel volume consistent with forecasted GDP growth over the prior year. The travel trends to start the year have been volatile due to winter storms and the California wildfires. However, based on the positive sentiment from the major airlines and our customers coupled with other industry data we've evaluated, we remain comfortable with our expectations for 2025 TSA volume. Additionally, the number of toll roads and the penetration of electronic tolling infrastructure, two secular tailwinds that positively impact the long-term growth profile of Commercial Services, continue to demonstrate ongoing strength. Over the course of 2024, 14 new cashless toll roadways were converted or opened, covering nearly 600 miles of roadways across the United States. Moreover, cashless toll penetration increased from 67% to about 70% in full year 2024, demonstrating that the secular trend to all electronic infrastructure is steady with room for further expansion. Next, I'll move on to the demand for automated photo enforcement, the key driver for our Government Solutions business. In 2024, 30 bills were enacted at the state and local levels to authorize, expand or positively reform automated photo enforcement programs, including recent legislation in Massachusetts authorizing school bus stop arm and fixed and mobile bus lane enforcement. We anticipate these new authorizations in Massachusetts to result in over $30 million of addressable market opportunity. In total, the enabling legislation passed over the prior two years across the United States adds approximately $185 million of total addressable market or TAM, with the potential to expand to over $300 million as further legislation allows in California. Our execution against the TAM has been strong. In the fourth quarter, we won contract awards representing about $11 million of incremental annual recurring revenue at full run rate, bringing the full year incremental ARR total to $56 million. Notably, as we have previously announced, the San Francisco Speed Safety Program will be the first speed program in the state of California, and it is expected to start issuing warnings by the end of the first quarter of 2025. Additional fourth quarter awards, including a new school bus stop arm award in Upstate New York and an expansion of our existing speed program in Toronto. Our Government Solutions ARR bookings typically materialize into revenue over a 12 to 18 month period. In conjunction with an approximate 97% contract renewal rate, we believe demonstrates a strong and predictable recurring revenue stream. Moving on to New York City. We are awaiting the outcome of the competitive RFP for the city's automated enforcement program. The New York City Department of Transportation recently published their annual report quantifying the efficacy of their automated photo enforcement programs, and we're incredibly pleased and proud of the findings, which include: daily violations and speed camera locations have decreased 94% since the start of the program in 2014, 74% of drivers received no more than one or two violations per year, locations with cameras installed in 2022 showed 14% fewer injuries and fatalities between 2021 and 2023 compared to control corridors without cameras, violations in the overnight and weekend hours decreased 40% in the two years since 2022 when expanded hours first went into effect. Following the expansion to overnight and weekend enforcement locations with speed cameras saw 9% fewer injuries compared to control locations without cameras during the overnight and weekend hours. We believe that these findings demonstrate the importance of implementing automated enforcement and the positive impact it can have on traffic safety for our communities. Next, I'll discuss T2 Parking Solutions business, which we acquired in December 2021. T2 is the industry leader, delivering parking solutions to universities, municipalities and private parking operators across the United States. We offer an end-to-end suite of software, professional services and hardware to meet our customers' evolving needs to manage parking. As you can see in the fourth quarter results, we recorded a non-cash impairment of goodwill attributed to the T2 business to better align the current environment and the carrying value with the historic environment when we acquired the business. Craig will elaborate on the financial impact of the goodwill impairment in a moment, but I'll take a few moments to comment on the trends shaping the business. We believe the market for SaaS-enabled solutions to manage the complexities of parking and universities, municipalities and private parking operations is strong and growing. And as I noted in our third quarter call, Lin Bo joined our executive leadership team in August and brings tremendous experience in leading organizations, driving sales growth and enhancing operations. Since joining the organization this summer, Lin has brought in new sales leadership, and we are seeing early signs of stabilizing our operations. We have visibility into a strong sales pipeline for our SaaS-enabled permit management solutions, and we are in the very early innings of our sales and marketing of our e-commerce platform, which is designed to create new revenue streams through transactional pricing. Our goals for 2025 were to stabilize the business first by addressing the challenges that led to elevated customer churn and simultaneously rejuvenating the sale funnel and continuing to deliver a broad suite of solutions. We anticipate flat revenue in 2025 relative to 2024, and our focus is on exiting '25 with strong velocity with the goal of getting back to growth in 2026. We expect the demand for parking, permitting and enforcement for cities and universities to continue to increase over the long-term given the unique challenges related to urbanization and curb management, and we believe the market opportunity for T2 is significant or taking steps needed to drive long-term execution and performance. Moving on, we had an active year from a capital allocation perspective. Over the full year in 2024, we deployed $200 million to repurchase over 7 million shares. Additionally, we refinanced our term loan debt twice, lowering our borrowing rate by 100 basis points over the course of the year. Additionally, we were active in evaluating M&A opportunities, but ultimately redirected capital to share repurchases based on valuations and price discipline. Craig will provide a detailed commentary on our 2025 financial outlook, but I'll hit the highlights. As we indicated during our third quarter call, we expect to deliver revenue growth consistent with our long-term 6% to 8% outlook, albeit at the low end of that range in 2025. Moreover, we anticipate adjusted EBITDA to grow at a slower pace than revenue due to investments in sales and product installs and government solutions. One-time costs related to our ERP implementation and lastly, revenue mix as Commercial Services revenue is expected to reflect lower anticipated travel volume. We expect adjusted EPS growth will outpace adjusted EBITDA due primarily to the capital allocation efforts I just discussed, lower borrowing costs and reduced share count driven by the 2024 share repurchases. Our business fundamentals are strong and intact. Travel demand appears resilient and is a source of ongoing strength for Commercial Services. We expect that our strong sales bookings in Government Solutions will drive solid revenue growth over the foreseeable future. And finally, we expect T2 to exit 2025 with a strong velocity. Based on these factors, we anticipate that our long-term outlook remains intact relative to the 2026 revenue and adjusted EBITDA targets that we provided at our 2022 Investor Day. Craig, I'll turn it over to you to guide us through our financial results, capital allocation and 2025 financial outlook.

Thank you, David, and hello, everyone. Appreciate you joining us on this call today. Let's turn to Slide 4, which outlines the key financial measures for the consolidated business for the fourth quarter. Our Q4 performance was on plan, which included 4% service revenue growth and 5% total revenue. The service revenue growth, which consists primarily of recurring revenue, was driven by solid fourth quarter travel demand in the Commercial Services business and service revenue growth outside of New York City and the Government Solutions business. At the segment level, Commercial Services revenue grew 4% year-over-year, Government Solutions service revenue increased by 5% over the prior year, while T2 Systems SaaS and Services revenue declined 4% over the fourth quarter of 2023. Product revenue was $12 million for the quarter. Government Solutions contributed $8 million and T2 delivered about $4 million in product sales overall for the quarter. Additionally, our consolidated adjusted EBITDA for the quarter was $102 million, an increase of approximately 12% versus last year. We reported a net loss of $67 million for the quarter, which reflects the goodwill impairment charge of $97 million for the carrying value of T2 Systems. The tax provision of about $11 million after adjusting for the goodwill impairment expense represents a normalized full year effective tax rate of about 30%. The GAAP EPS loss of $0.41 per share for the fourth quarter of 2024 compares to a profit of $0.02 for the prior year period. The delta between these two results was driven primarily by the $97 million goodwill impairment for T2 Systems. Adjusted EPS, which excludes amortization, stock-based compensation, goodwill impairment and other non-recurring items, was $0.33 per share for the fourth quarter of this year compared to $0.24 per share in the fourth quarter of 2023, representing 38% year-over-year growth. The increase in adjusted EPS was driven by the increase in adjusted EBITDA, a sustained reduction in interest expense driven by our 2024 repricing efforts and our ongoing share repurchase activities. Cash flows provided by operating activities totaled $40 million, and we delivered $22 million of free cash flow for the quarter, slightly ahead of our expectations. Turning to Slide 5. We generated $402 million of adjusted EBITDA on approximately $879 million of revenue for the full year 2024, representing a 46% adjusted EBITDA margin. Additionally, we generated $153 million of free cash flow for the year or a 38% conversion of adjusted EBITDA. Please note that this free cash flow total includes the one-time $22 million tax adjusted plus past legal settlement costs we incurred during the first quarter of 2024. Next, I'll walk through the fourth quarter performance in each of our three business segments, beginning with Commercial Services on Slide 6. Commercial Services year-over-year revenue growth was 4% in the fourth quarter. RAC tolling revenue increased 3% or about $2 million over the same period last year, driven by solid travel demand and increased activity. As David mentioned earlier, we incurred an approximate $3 million charge, impacting both revenue and segment profit due to prior period tolling activity. This $3 million impact was historical in nature and nonrecurring. However, it was not added back to our segment profit. Our FMC business grew 5% or about $1 million year-over-year, driven by the enrollment of new vehicles and tolling growth from existing and newly enrolled FMC customers. Additionally, the combination of title and registration, violation management, Europe and other revenue contributed approximately $2 million of year-over-year revenue growth for the quarter. Commercial Services segment profit margin declined about 40 basis points in the fourth quarter to 65%, driven primarily by the prior period adjustment mentioned earlier. For the full year, Commercial Services generated $408 million of revenue or 9% growth over last year. Segment profit of $268 million resulted in margins of about 66%, a 70 basis point improvement over the prior year, driven by volume-based operating leverage. Turning to Slide 7. Government Solutions had solid service revenue growth in the quarter, driven by 9% growth outside of New York City. Total revenue grew 10% over the prior quarter, benefiting from about $8 million in product sales, a $5 million increase over the same period last year. Government Solutions segment profit was $35 million for the quarter, representing margins of approximately 34%. The increase in margins versus the prior year is primarily due to a prior period $4 million expense adjustment in the fourth quarter of last year as well as lower credit loss expense in the current year quarter. For the full year, Government Solutions generated $391 million of total revenue, a 9% increase over 2023, driven primarily by 12% service revenue growth outside of New York City. Segment profit was $122 million for the year, an increase of 6% over the prior year. Let's turn to Slide 8 for a review of the results of T2 Systems, which is our Parking Solutions business segment. We generated revenue of $20 million and segment profit of approximately $3 million for the quarter. SaaS and service sales were down 4% or $700,000 from the prior year quarter, while product revenue was down 35% or $2 million compared to last year. Breaking down the SaaS and services revenue a bit further, recurring SaaS revenue grew about 4% over the prior year quarter. However, offsetting this increase was a decline in installation and other professional services due to the reduction in product sales over the past four quarters. For the full year, T2 delivered revenue of $81 million, a decline of approximately 6% versus last year and segment profit of $3 million. As David discussed, we recorded a $97 million non-cash impairment of the goodwill to better align the current environment and the carrying value of T2. This does not change our view of the strength of the end markets in which T2 competes. We highly value the recurring nature of the SaaS business where we see strong demand and we anticipate significant potential for our nascent e-commerce platform, which creates new revenue streams through transactional pricing. Okay. Let's turn to Slide 9 and discuss the balance sheet and take a closer look at leverage. As you can see, we ended the quarter with a net debt balance of $968 million, which reflects about $150 million used for share repurchases in the fourth quarter. We ended the quarter with net leverage of 2.4x, and we've maintained significant liquidity with our undrawn credit revolver. Our gross debt balance at year-end stands at about $1 billion, of which approximately $700 million is floating-rate debt. At the end of the third quarter and based on the SOFR forward yield curve, we opted to utilize our early termination option and cancel the entirety of our float for fixed rates as well. Consequently, the term loan is now fully floating. In addition, in the fourth quarter, we completed a successful repricing of our $700 million term loan B. The repricing was over-subscribed, and we achieved a 50 basis point reduction in the coupon rate, lowering it to SOFR plus 2.25%. This repricing will yield about $10 million in cash savings, net of fees over the remaining life of the debt. On our total debt stack, this lowers our weighted average cost of debt to a little over 6% at current SOFR levels. This was our second successful debt repricing this year, the cumulative effect being a reduction in our spread of a full 100 basis points over the course of 2024. Closing out our discussion on 2024, I'm pleased to report that we successfully remediated the IT general controls material weakness identified in our 2023 audit through a combination of the implementation of enhanced IT oversight, system in-force segregation activities and the hiring of new and experienced personnel. Now let's turn to Slide 10 for a discussion on full year 2025. We expect total revenue in the range of $925 million to $935 million, representing approximately 6% growth at the midpoint of guidance over 2024, consistent with the preliminary outlook we provided on our third quarter earnings call. We expect adjusted EBITDA in the range of $410 million to $420 million, representing approximately 3% growth at the midpoint over 2024. Again, consistent with the preliminary outlook on our Q3 call. This represents an adjusted EBITDA margin of about 45%, down about 100 basis points compared to last year. As we previously discussed, the combination of TAM execution costs, financial infrastructure investment and portfolio mix are expected to drive the temporary reduction in margins. Let me provide a refresher on each of these margin drivers. The TAM execution cost is largely driven by our government business as we incur incremental business development and project go-live costs in advance of converting our growing backlog to revenue. The financial infrastructure item relates to the previously discussed in-flight replacement of our aging ERP and HR information systems. We expect to incur about $5 million of non-capitalized costs in the first half of the year to complete this project. These project costs are one-time in nature and will not continue past 2025. The portfolio mix is primarily in our Commercial Business, where we expect travel growth year-over-year. However, that growth will be moderated relative to other growth drivers of the business, limiting margin expansion. Moving on to the segment level. In Commercial Services, we expect high single-digit revenue growth driven by resilient travel demand and product adoption. We are modeling TSA volume at 102.5% for the full year, and breaking that down further, we anticipate the first quarter will be modestly below that estimate followed by a sequential ramp-up in travel volume in the second and third quarters, ending with a reduction in the fourth quarter, very much in line with historical trends. In addition, we're expecting increased FMC revenue at a growth rate generally in line with the overall Commercial Services business. For the combined Commercial Services business, the first quarter is forecast to be our lowest revenue-generating quarter followed by sequential revenue increases in the second and third quarters, followed then by a decline in the fourth quarter as the summer driving season comes to a close. As a reminder, all revenue in this segment is service revenue. Government Solutions is expected to generate the high end of mid-single-digit total revenue growth, driven by the expansion of camera installations with existing customers and new customers awarded in the fiscal year 2024. We expect annual product revenue in the Government Solutions segment to be roughly comparable to 2024 levels. To contextualize this further, we anticipate flat service revenue from New York City while we await the outcome of the competitive RFP, and we expect product revenue to be mostly flat, all of which comprises nearly 40% of total Government Solutions revenue. The remaining 60% of Government Solutions revenue is expected to grow low double digits in 2025. Lastly, Parking Solutions is expected to be about flat with 2024 levels. We expect SaaS revenue to grow low to mid-single digits, offset by a decline in installation and professional service revenue on roughly flat product sales. For the company as a whole, we are guiding to a 2025 non-GAAP 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 low to mid-40 percentile of adjusted EBITDA. We expect to spend approximately $90 million of CapEx in 2025, an increase of about $20 million over 2024. The vast majority will be spent in Government Solutions to implement newly awarded photo enforcement programs. Lastly, based on the adjusted EBITDA and free cash flow guidance and excluding capital allocation investments, we expect to reduce net leverage to about 2x by year-end 2025. Other key assumptions supporting our adjusted EPS and free cash flow outlook can be found on Slide 11. In closing, we are well positioned to deliver a strong 2025 on both the top and bottom line. Our core markets are solid and the secular growth trends are durable. We remain confident in achieving the 2026 revenue and adjusted EBITDA targets we set back at our Investor Day in the summer of 2022. 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. Liz, over to you.

Our first question comes from Faiza Alwy with Deutsche Bank.

So I wanted to follow up on the Commercial Services business. You mentioned maybe some volatile trends this quarter starting the year because of the weather and wildfires, et cetera. So I just want to clarify there. And I know, Craig, you gave pretty good seasonality on how you're thinking about trends. But curious if there's sort of anything else you'd like to say about the quarterly cadence around whether it's travel trends or commercial revenues in general?

Thank you, Faiza. I’ll address that in two parts. As we approach 2025, there are no changes to our previous discussions regarding TSA, which remains a solid indicator for the business. To recap TSA's performance, we concluded the fourth quarter of 2024 at approximately 103%, comparing quarter-over-quarter from 2024 to 2023. I anticipate a performance of about 102.5% for 2025, starting slower and ramping up to slightly above 102.5% by year-end, averaging out at that figure. I predict around 101% for the first quarter. Currently, we closed January at just under 102%, with February so far tracking at 100%, bringing our year-to-date figure to 101%. Regarding the impact of wildfires and other weather events, we've seen variability week-to-week, but overall, our volume projections are aligning with expectations. Now, let me outline the revenue expectations for our Commercial Services by quarter compared to 2024. I foresee a low single-digit decline for the first quarter sequentially from the fourth quarter of last year, followed by a low double-digit increase in the second quarter, similar to this year. The third quarter should see a high single-digit increase, and the fourth quarter will revert back to a high single-digit increase as well. This averages out to a high single-digit organic growth for Commercial Services in 2025.

Great. That's very helpful. And then on the Government Services business, it sounds like you're starting to build in some revenues from the new contracts coming from the new legislation. So a two-part question on that. One, maybe update us on some of these win rates as you're bidding for these contracts? And then secondly, a similar question around how do you expect sort of revenue to build through the course of the year as again, some of the ARR converts to revenue?

Yes, I think we don't usually discuss win rates, but we're definitely securing more than our fair share. As we mentioned, the total dollar amount we've closed over the past six months or since the end of last year reflects exciting pent-up demand. Typically, it takes about 12 to 18 months for that revenue to materialize, which I would consider an industry standard. There might be instances where we see it sooner or later, but that timeframe is generally accurate. We anticipate drawing down on that backlog over the next 12 to 18 months.

I expect that service revenue will demonstrate some growth trends. Looking back at the overall growth for Government Solutions, we've discussed a range of high end to mid-single digits for the business as a whole. Notably, 40% of this business comes from New York City, which we are projecting to remain flat this year, and we also anticipate product revenue to remain flat as well. Thus, all the growth in the remaining 60% of the business, specifically the service growth outside of New York City, is expected to be in the low double digits year-over-year. If we analyze this sequentially, we should see service revenue either staying flat or increasing each quarter, though this is subject to timing variations. The situation becomes a bit more complex when we consider the total revenue line for Government Solutions. We still expect product revenue to fall within last year’s range, which could be more sporadic. Therefore, it’s important to view the growth of service revenue in Government Solutions as sequential, with almost all of that growth arising from services outside of New York City.

David and Craig, first, I just wanted to touch on the GS business. It's good to hear that the San Francisco pilot remains on track for Q1. I just wanted to check on the other cities in California that are going to be having RFPs for a similar pilot program. Have those RFPs come out yet? And when could we expect to hear back on those?

Yes. The one that's gone out that we've already responded to is San Jose. We're anticipating the others to be, I would say, any time in the next 3 to 6 months that we'll hear a couple of others in places like Oakland, L.A., Long Beach, places like that. But they're not out yet, but those are the ones we're expecting. But San Jose has already come out and has already been responded to.

Okay. Great. And then for my follow-up. Is the second quarter still the right approximate timing for when we could get some clarity on the outcome of the NYC RFP?

Yes, it's really not in our control. It's up to the city and their decision-making. It seems reasonable to suggest we might have some clarity in Q2, but I can't specify if it'll be early or late in the quarter.

This is Will on for Dan. Given that 2025 is more in investment setup here, particularly in Government Solutions, how should we think about the opportunity for margin expansion looking into 2026 and beyond?

Yes. From my perspective, the answer is that it depends. We are expanding into new geographies in 2024 and again in 2025, which may continue into 2026. I anticipate that margins will reflect similar levels in 2025 and 2026. Specifically, for GS margins in 2024, we finished at about 31%. Looking ahead to next year, I expect to see approximately 150 to 200 basis points of pressure. A significant portion of this pressure is due to the implementation of a new ERP system. Additionally, with anticipated low double-digit growth in service revenue from new geographies, those costs will be incurred before the revenue is realized. Therefore, I would expect margins to be in the high 20s to around 30%. Overall, I think of this as a 30% margin business.

That's super helpful. And then just a follow-up. Where are you seeing the most potential opportunity from an M&A perspective?

For M&A, we've maintained a broad perspective, and the level of asset activity is exceptionally high, as numerous mini assets from private equity owners or financial sponsors are coming up for sale. Our inability to close a deal in the past year or two is not due to a lack of effort on our part. We are focused on maintaining price discipline and ensuring strong visibility moving forward. There are many assets we are excited about, particularly in the connected vehicle and urban mobility sectors.

David, Craig and Mark, does the speed camera pipeline remain as elevated as it was 2 years ago when the legislation for Florida and California came out? And I know you mentioned the new legislation that's pending in Massachusetts. But with the pipeline, should we expect similar bookings in 2025 relative to 2024?

Yes, let me address the first part first. In David's prepared remarks, he mentioned that $185 million of total addressable market is opening in the near term, with about 20% to 40% of that related to school zone speed. So, to answer your first question, is the pipeline as strong as it was 2 years ago? The answer is definitely yes. Regarding your second question about whether bookings will be as strong in 2024 as they were previously, I cannot provide a definitive answer. Looking at our activities year-to-date, we feel very positive about our pipeline. While I can't disclose a specific booking number for obvious reasons, you can infer our thoughts on bookings from our forecast of low double-digit service revenue growth outside of New York City. We would need more bookings going into 2025 to achieve that goal. Therefore, there will be some in-year revenue. Overall, I want to emphasize that our pipeline remains robust, and we are very enthusiastic about our ability to capitalize on it.

Yes. We have a product engineering group within the business that is always both looking at not only working with our current customers but surveying the landscape globally as to what we can do to be more supportive and forward-leaning with our customers. So we have a team that's fully deployed to do that. I don't have a dollar amount to share, but we leverage both our internal teams as well as the several partners that we use across the different camera technologies.

Sounds good. And one last one. A few years ago, David and Craig and Mark, you and your RAC partners have offered all-inclusive pricing, and there seems to be a lot of customer satisfaction. What is the penetration now of all-inclusive pricing within your customer base? Do most customers go for all inclusive? Or do they still use the per-day pricing?

It's very driven by the location, Louie, because all-inclusive works better in some locations than others. So we actually look at that adoption rate basically at an airport-by-airport location. And so we don't really get into any specific disclosure around the customers.

Right. The one thing on customers on that, that we will say, though, is that this only exists technically today for 2 of our customers. Right? So enterprise does not use this on a wide basis, which is something that we thought about in the past. But this continues to be a popular product. And you're right, but we've got some really good feedback on it, and it's performing well.

Great job. I'd like to focus on the year-over-year growth in Q4 for Commercial. It was $4 million, but there was a $3 million headwind, meaning it should have been $7 million on a core basis. However, your guidance for Q1 suggests only about $1 million or even less in year-over-year growth. Can you explain the reason for the deceleration and the expected normalized year-over-year growth?

I agree with you about the fourth quarter, David. You are correct about the $3 million, which needs to be added back. I don't see the acceleration into Q1 as anything other than seasonal. The same applies on a year-over-year basis. It's important to note that the TSA throughput isn't equivalent in both periods, which will impact your results. There was more TSA growth sequentially last year compared to the current period you’re observing. On a broader scale, we still anticipate high single-digit growth. Reflecting on our discussion from last year, we projected growth to be driven by 50%, 25%, and 25%, leading to that high single-digit figure, supported by the three pillars. Those pillars are still in place today, although it now appears as one-third, one-third, one-third for this year. To break it down: one-third comes from GDP-related travel growth, which aligns with the 102.5% I referenced; another third is driven by secular tailwinds, including the increase in domestic toll roads and the shift to cashless tolls, which we expect to accelerate; and the final third encompasses all other areas, including the fleet, title and registration, and our European operations. While Q1 may show some unusual year-over-year comparisons, the year overall should align well.

I think where we've been really specific is that we're in an RFP time, so we're going to wait and see what the city does. And at whatever time they decide to expand with the program, that would be the time that we would be able to be more specific around that.

Regarding the impairment charge in the Parking segment, it's clear that you have strong confidence in your ability to improve that business. Could you elaborate on what specifically gives you that confidence? Is the market expanding? Are other companies managing to grow while you aren’t? I would like to gain a better understanding of your level of confidence.

Yes. I believe that permits and enforcement issues continue to pose challenges for cities and universities. Observing our competitors and the significant influx of private equity capital into this sector, we’ve noticed considerable M&A activity. This is evident when we analyze the growth of some of our competitors. Our main challenge has been our own execution issues. There is substantial evidence indicating that this sector has the potential to contribute significantly to our company. We are using this data along with our ongoing market research and pipeline development since the introduction of new leadership.

Okay. Appreciate that. And I understand the challenges in the M&A environment now how competitive it is. If 2025, from an M&A perspective, is much like 2024, do you anticipate another round of significant share repurchases to kind of use your free cash flow?

Yes, our strategy for that has not changed at all. Due to the company's impressive cash flow generation, we can make those decisions almost every quarter. We'll assess our M&A pipeline, where we stand in various deal processes, as well as our intrinsic value compared to the stock's trading price, and make decisions accordingly. We will certainly remain opportunistic regarding share repurchases, but that will depend on our M&A pipeline.

This is Shefali Tamaskar asking a question on behalf of James. I just wanted to touch on international markets. I wanted to see if you've seen any change in trends towards more cashless adoption in Europe specifically? And if there's anything to call out in terms of new wins there or visibility into international for 2025?

Yes. There have definitely been several toll roads in France and a couple in Italy that have gone cashless. These are among the smaller toll roads in those countries. Additionally, we have renewed several customers with whom we initiated pilots over the past year, as they recognized the value in our program, particularly in regions with greater automation like Spain or Portugal. Overall, the trend is definitely moving positively, but progress has been slow because the total authorities will need to adapt to facilitate faster acceleration.

Okay. Great. Good to hear on that. And then just in government, I wanted to touch on any recent trends you've been seeing in terms of specific demand? I know you've previously called out more strength and I think what you've called, purpose-built enforcement. And I want to see if that's still the case in terms of where demand is from a legislation perspective and any change in kind of how the economics compare across red light and the bus arm and all the different types of offerings you have?

Yes. I would say the demand is effectively the same that the real shift is still toward specific areas where there is precious cargo, which is in and around schools and school buses. Those are still what I would say, by far and away, the larger demand drivers. And the economics around that implementation and our capabilities to increase certain things through our technology deployment remain, I think, effectively the same.

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