Traffic solutions company Verra Mobility (NYSE:VRRM) met Wall Street’s revenue expectations in Q4 CY2024, with sales up 5% year on year to $221.5 million. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $930 million at the midpoint. Its non-GAAP profit of $0.33 per share was 11.2% above analysts’ consensus estimates.
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Verra Mobility (VRRM) Q4 CY2024 Highlights:
- Revenue: $221.5 million vs analyst estimates of $221.1 million (5% year-on-year growth, in line)
- Adjusted EPS: $0.33 vs analyst estimates of $0.30 (11.2% beat)
- Adjusted EBITDA: $102 million vs analyst estimates of $101.8 million (46% margin, in line)
- Management’s revenue guidance for the upcoming financial year 2025 is $930 million at the midpoint, in line with analyst expectations and implying 5.8% growth (vs 7.6% in FY2024)
- Adjusted EPS guidance for the upcoming financial year 2025 is $1.33 at the midpoint, beating analyst estimates by 2.2%
- EBITDA guidance for the upcoming financial year 2025 is $415 million at the midpoint, below analyst estimates of $417.7 million
- Operating Margin: -19.6%, down from 11.1% in the same quarter last year
- Free Cash Flow Margin: 9.8%, similar to the same quarter last year
- Market Capitalization: $4.27 billion
"We delivered a solid fourth quarter, highlighted by strong earnings and cash flow generation," said David Roberts, President and CEO, Verra Mobility.
Company Overview
Managing over 165 million tolling transactions per year, Verra Mobility (NYSE:VRRM) is a leading provider of smart mobility technology that enhances safety, efficiency, and convenience on roadways.
Electrical Systems
Like many equipment and component manufacturers, electrical systems companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include Internet of Things (IoT) connectivity and the 5G telecom upgrade cycle, which can benefit companies whose cables and conduits fit those needs. But like the broader industrials sector, these companies are also at the whim of economic cycles. Interest rates, for example, can greatly impact projects that drive demand for these products.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Verra Mobility’s sales grew at an exceptional 14.4% compounded annual growth rate over the last five years. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Verra Mobility’s annualized revenue growth of 8.9% over the last two years is below its five-year trend, but we still think the results were respectable. We also think Verra Mobility’s is one of the better Electrical Systems businesses as many of its peers faced declining sales because of cyclical headwinds. 
This quarter, Verra Mobility grew its revenue by 5% year on year, and its $221.5 million of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 6.4% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Operating Margin
Verra Mobility has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 18.9%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Analyzing the trend in its profitability, Verra Mobility’s operating margin rose by 5.9 percentage points over the last five years, as its sales growth gave it immense operating leverage.
In Q4, Verra Mobility generated an operating profit margin of negative 19.6%, down 30.6 percentage points year on year. Conversely, its revenue and gross margin actually rose, so we can assume it was recently less efficient because its operating expenses like marketing, R&D, and administrative overhead grew faster than its revenue.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Verra Mobility’s EPS grew at a remarkable 12.6% compounded annual growth rate over the last five years. Despite its operating margin expansion during that time, this performance was lower than its 14.4% annualized revenue growth, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.
We can take a deeper look into Verra Mobility’s earnings quality to better understand the drivers of its performance. A five-year view shows Verra Mobility has diluted its shareholders, growing its share count by 1.2%. This dilution overshadowed its increased operating efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals. 
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Verra Mobility, its two-year annual EPS growth of 9.1% was lower than its five-year trend. This wasn’t great, but at least the company was successful in other measures of financial health.
In Q4, Verra Mobility reported EPS at $0.33, up from $0.24 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Verra Mobility’s full-year EPS of $1.24 to grow 5.7%.
Key Takeaways from Verra Mobility’s Q4 Results
It was encouraging to see Verra Mobility beat analysts’ EPS and full-year EPS guidance expectations this quarter. On the other hand, its full-year EBITDA forecast slightly missed. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The market seemed to focus on the negatives, and the stock traded down 1.4% to $25.55 immediately after reporting.
So do we think Verra Mobility is an attractive buy at the current price? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.