Verra Mobility Corporation (VRRM) Earnings Call Transcript & Summary

Thank you, everybody, for joining us this afternoon here at the Morgan Stanley TMT Conference. Very excited to have Verra Mobility. David Roberts, President and CEO; and Craig Conti, CFO, are joining me here on stage. Before I get started with David and Craig, I do have to read the disclosure. Please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to us here at Morgan Stanley.

So maybe we'll start with a little bit of a preamble, and I'll open it up to both of you, David and Craig. Great -- first of all, let me say, great to have you here at our TMT conference again. But maybe can you give us and those that may be listening in, et cetera, an overview of the business segments of Verra and in particular, what that mix and growth drivers look like and maybe how that mix is evolving in 2026?

Yes, happy to do so, and thank you for having us again. So Verra Mobility is a leader in smart transportation, and we effectively compete in 2 specific markets, one which we call urban mobility, which is working with cities around the globe to manage transportation, safety and congestion. And then we also work with commercial fleets, providing access to -- giving them fleet management plus access to tolls, handling violations and titles and registrations. And we also work with universities where we're helping them around their parking challenges. So that makes up the sort of the width of the business. So if you were to look right now at our business, you would say that our Government Solutions business is where we are the #1 provider of automated enforcement in North America is having a real renaissance. If you look -- that business operates through the opening of legislation in specific states and in those states, then cities have the option to choose to use an enforcement product or not. And there's been a real sea change in that sentiment, especially around what we call purpose-built enforcement, which are things like school zone speed, work zone speed, school bus stop on. And so we've seen a real tailwind, and that has shown up as how we're talking about the business. And then if we look at the backlog of ARR revenue from last year, it was $63...

$64 million.

$64 million from last year -- excuse me. So that's -- when you talk about growth, I think the recognition that there's a lot of fatalities related to driving, and this is a tool that is in the city's arsenal that they can use to help save lives. So we're super excited about that. But others -- our commercial services is where we're the #1 provider of toll management solutions for rental car companies as well alongside fleet management companies. The real drivers there really are connected to travel. So the more travel, the more people are renting cars, the more the tolling happens to occur. There's also a couple of other, what we call secular tailwinds, but one of which is the conversion to cashless lanes, which is where there used to be -- people may remember, we used to be able to throw a quarter in a basket and the arm comes down, that doesn't really happen anymore. When those lanes are cashless, that's a benefit to both our customers as well as to us. So -- right now, we have a slightly more conservative view on travel. TSA numbers are going to be moderate this year, we think just with all the -- a lot going on in the world, obviously, and we think that's going to be slightly more moderate. We have talked more about a mid-single-digit growth for that business. So businesses are in great place. We're really excited for what we're doing this year and feel like we're going to exit the year really strong, accelerating into '27.

So let's delve in a little bit to the commercial segment that you just touched on. So when you think about the key drivers of growth there, you mentioned increased shift to cashless tolls, new toll roads, international expansion, growth in travel generally. How should we generally rank order each of those or any other factors as growth drivers for the commercial segment?

Yes, James. Let's go through the growth rubric. So we've talked about -- Commercial Services being a mid-single-digit grower over the next couple of years. And the way I like to decouple that growth and talk about the pieces are 1/3, 1/3, 1/3. So the first 1/3 is travel demand, right? So Verra Mobility is a net taker of that. People come to the airport, go through TSA and they rent a car. The second 1/3 of that or what we call the secular tailwinds, which David just touched on a little bit, this is the increasing penetration of cashless rows in the United States. So to give you kind of an idea of that, just less than 3/4 of the roads in the United States that are toll roads are fully cashless. The minute that road goes from a cash pay option to a cashless option, the uptake on our product goes up. So that's a tailwind to us. Also, every year, we add new toll roads in the United States, right? So that's the second 1/3 of 1/3, 1/3, 1/3. And then the final piece are what I say are standard growth initiatives. This is continuing to penetrate the fleet market, continuing with new commercial offerings with our RAC customers and growth in title and registration violations in Europe. So again, really high level, that mid-single-digit growth that we've talked about, 1/3, 1/3, 1/3; 1/3 of it in travel, 1/3 of it secular tailwinds and 1/3 of it in growth initiatives.

So let's talk a couple -- about a couple of things there. First, fleets. My impression is you guys already have very good representation among the car rental companies as it is. Just kind of where do you have footprint there? And then what kind of incremental fleets should we be thinking about, if any, beyond car rental?

Yes. So we work with all the 3 major providers here in the U.S. plus a few of the others. When you think about additional fleets, think of what we call the FMC business. FMC business is large corporations that have many vehicles under their purview and they use a third party to both procure and manage many of the services associated with that. So we redistribute our products, which includes toll management, includes violation management. So when the owner of the vehicle and the driver of the vehicle are not the same, that creates some friction that we solve through our technology. And so for FMCs, we sell tolling, we sell violations. We also do title and registration. So -- just think of license plate stickers and the registration of the glove box. When those cars are moving around, that actually becomes a relatively complicated thing, and we provide solutions for our customers there.

Got it. Got it. And then international, can we give an update on Europe? What has to happen from your perspective for cashless tolling to scale meaningfully across the continent or additional countries there? And how do you think about the time horizon for that opportunity?

Well, to be really clear, our initial estimate and time horizon when we bought the business over there, we were off. We thought it was going to happen a little sooner than it did, to be very clear and to be transparent. Look, it really comes down to 2 countries that provide the vast majority of tolling, which would be Italy as well as France. Both of them are predominantly barrier based. And what that really means to us is that as a driver of a vehicle, in particular, rental car vehicle, you can still pull over and put your credit card in and pay or your debit card and the barrier is going to go up. It's not as efficient, it's not as quick. But as they convert to cashless tolls where there is no more option, then you would automatically opt into the program. We have started to see both in Italy in and around Milan and then in and around Paris, more conversion to cashless. So it's not one -- the question is not will they go cashless? Of course, they will because it's significantly more cost effective for them. It's a better experience for the people on the toll roads. It's just at what pace. It's very difficult to say. We have continued to expand in other countries. Our rental car partners are really happy that we're helping them in the countries that we are. So we still really like the business, but we would say that there should be an acceleration here probably in the next 2 to 4 years.

Got it. And then Yes. And I mean to that point is like I've started to see some of the cashless tolling mechanisms we put in place like near the Paris Airport, et cetera. So how are you positioned because with the rental car fleet in Europe because that's the other part of it. It tends -- my impression is a bit more fragmented in that market versus here, so...

They are more independent -- so there's not like a -- for most of the fleets there, it's not like a central office in London says everybody do this. Really, it's the country manager. I'm not even sure that's the appropriate title, but that's how we think about it -- is they're making a decision based upon what's happening. So we've had to go and call on them and reference our relationships here in the United States. But -- so we've got pilots going with all of the major brands just in different countries -- not all in the same country. But they all have shown an interest, and we're still solving a meaningful problem for them, and they realize the problem only gets bigger.

So back on the U.S. and commercial services, one of the key questions we often get from investors is customer concentration risk within the segment. How should investors think about the cadence of RAC renewals and competitive dynamics for those programs?

Yes. I mean, look, I think historically, our business has been the #1 provider of solutions to rental car companies around tolling really since the inception of the industry. And so we've got long-dated relationships with these customers. They -- relative to the cadence, they do -- we're in a discussion now with Avis Budget Group, and we have both Hertz and Enterprise would renew next year. And that's very common. There tend to be 3 to 5 years, just depending on the moment of time that we renew the contract. And we've got, I think, what you would say is a pretty impeccable track record of continuing to serve these customers, and we would imagine doing that. As it relates to customer concentration, we recognize that, that's a thing. When you look at the 3 rental car companies plus New York City, we have customer concentration. We have -- the best way to solve that is through really thoughtful M&A, but we haven't found one that have met our price threshold over the last several years. So we're just going to continue to grow outside. We continue to diversify with other customer types, and we'll settle that over time.

And then back on some of these renewals, -- how do you think about like the risk of in-sourcing from those customers and managing that? Or what are the things that you typically need to do either from a product or capability or even pricing standpoint to make sure you keep that business?

Yes. I don't think of in-sourcing as much of an issue as I would -- and we have competitors. We have competitors in the fleet management companies that we go up against. So I would say that's probably a more likely to manage against from our standpoint because it's a very -- what we do is very complex. It sounds quite easy on the face of it, but tolling is highly -- there's 54 different toll authorities that all have different types of standards and they're not one place to plug in. You have to set up accounts with all them. So there's a lot of complexity there. So we rely on our commitment to our customers and the ability to do what we do. But we also need to -- I think your last point is continue to invest in the platform, how do we make it faster and easier? How do we make this a more seamless experience for the renter, how do we optimize the experience for both our customer and their customer.

Got it. So let's turn to government. This is where -- there have certainly been a bunch of headlines in terms of creating incremental opportunity as well as business that Verra has won over the last 1 to 2 years. To that point, you recently finalized a new 5-year contract with New York City's Department of Transportation, and that began on January 1, 2026. And as part of that contract, you're going to be managing and expanding the city's automated enforcement camera programs. Can you talk about that rollout time line, the phasing of revenue, in particular, equipment versus services? And what success should look like over the first 12 to 18 months?

Yes. So great question. I mean the way I think about this is the majority of the expansion will be installed in 2026 with the remainder in 2027. So as we start talking about that and we're on the quarterly cadence with investors, we're going to let you know how we're going on that. So if you look back to our last earnings call, going a little slower at the beginning of the year because of weather in New York, we can't say concrete. But we expect to be on size with our 2026 expectation. We know how to do this. We've done this for a long time. A little bit on the New York City contract, I want to make sure that we talk about here. The first thing is how does the new contract stack up against the old contract. And I think that's really important. There's a couple of things I want to make sure are clear. When we think about this from a margin dollars or an EBITDA dollars perspective, a couple of things I want to think about moving between the 2. The first is we add EBITDA dollars into the contract because, obviously, we're expanding, right? There's 1,000-plus cameras that we're putting in. That's number one. So that's EBITDA dollars in versus the old contract. The second thing is there's some scope in the contract that we used to do at cost and now we do at margin. So that's more dollars into the contract. And then the third thing is there's new use cases such as speed on green that we're going to do in the new contract that we hadn't done in the old contract, more margin dollars into the contract. And then the next piece is the price rationalization. So that's EBITDA dollars out of the contract. Now I've got one more item to cover on this bridge. But if I snap the bridge right there, old contract versus the new contract, roughly flat to slightly accretive. The next piece that comes in that takes the EBITDA margin dollars down is the investment in the minority and women-owned businesses. That's about $22 million to $24 million a year, right? So that's how to think about the old contract versus the new contract. The other piece of this that I want to make sure is really clear though, if you think about this from a margin percentage standpoint, the new contract is still materially accretive to the rest of the GS business. So as we get a lot of questions on these, sometimes they come from different angles. I want to make sure to lay that all out upfront.

So let's talk about that part of that initiative around minority and women-owned businesses. And just -- you made it clear just now, Craig, that, that brings down EBITDA dollars a bit, et cetera. A little background on those programs, what does that entail? And maybe most importantly for most investors, how long or how recurring is that investment?

Yes. So the way to think about it is this was actually one of the #1 scoring criteria for the RFP for the contract was the use of -- as a percent of the total contract value, the use of minority women-owned businesses. The city looks at this as an opportunity to create local jobs because it's a big and important program. And so it was -- it's a -- think of it, it's a -- you do this or you don't even get a bid or you're definitely not going to -- and so what we look at is, hey, this is a part of doing business in a city like New York. It's the largest automated enforcement program in the world. It won't go down. It will probably just be at the same percentage for the rest of it. So as we think about performance for the rest of the business, we can look for other areas of continuous improvement. We are required to use kind of a -- think of it as almost a fixed percentage of the total contract against minority women-owned businesses.

Got it. Got it. Got it. So that's New York. And I mean, maybe, Craig, I'd go back as -- and David, if you have something to add here, it would be great. But I think for a lot of people, they took notice of this program and the RFP and then the contract, et cetera, but maybe got a little bit offside on the profitability of it. Is that just because like this component wasn't taken into account? Or are there some other things around just the accounting and the way that the program will operate that you've heard from other investors may have been confusing.

Yes. I think the one thing that I heard was the bifurcation between -- is it an accretive margin percent contract versus what does that mean for margin dollars contract. That was the piece that I think may have gotten lost in the mix a little bit. So -- we clarified that on the earnings call, and I think we're clear now. The other thing I would add about New York to what David said, and he's 100% right, obviously, but is the minority and women-owned business isn't 100% of the cost of the contract, right? But when we think about -- and we've talked about this at length, how we take our Government Solutions margin from the low 20s where we expected this year up to the mid- to high 20s by 2028 with potential to grow from there. How do we do that? The majority of that is the MOSAIC project, which I think we'll probably talk about here today. Maybe David can tell you a little bit about it. But it's -- when we think about that and you think about that increase in margin over time for Government Solutions, that's the primary driver.

So let's take advantage of this moment to talk about MOSAIC. Like why does that matter? And how does that -- how should we expect that to drive profitability and margins?

Yes. So Mosaic is really our investment in an updated architecture and platform. The current platform that we've used is one that's been around in the business before I joined and I've been at the company 12 years. So -- it's an older technology architecture, a technology stack. So the cost of ownership of that is significantly higher than modern technology. Our MOSAIC, which is not a brand name, that's just our project name for the product is effectively cloud-based service-oriented architecture that's much more modular and flexible. So we would imagine 3 things effectively happening. One is the software licensing cost of supporting the older program will go down because we won't need it anymore. Two, the number of people required to support the new platform and/or onboard new customers goes down because it's much easier and more standard. And then three, just the total cost of ownership of OpEx to host and support that is significantly lower. So those are the 3 things that will -- as we deploy that over the next 6 to 8 months, that's where the majority of the cost savings will come over time.

Got it. So -- you've also consistently highlighted significant TAM expansion potential from legislation. And so just recap for us, which states or programs do you expect are most likely to convert to meaningful revenue in the next 12 to 24 months? And how are you expecting that those economics will compare to your legacy programs?

Well, I would say the one that we're most excited is here in California. So California, while it had had legislation for red light cameras for years, it was actually a pretty poor legislation, was not effective at deterring anything. We've recently been able to support movements to rectify that legislation for red light, but also open up pilot programs for school zone speed. And there were 6 cities identified, 5 have been RFP, and we won all 5. And so when you look at the opportunity here in California, it's just -- it's the biggest one by far, just given that the state is pretty nascent in its adoption of speed enforcement and that would -- and if that goes statewide, that increases the TAM by another $100 million, $150 million. So we've got a great track record here. We're excited to win. I would say that the economics of that would be very, very similar to other programs in aggregate across the rest of the country.

So -- and what's the composition and timing for these programs? You mentioned maybe expanding the TAM by up to $150 million here in Canada.

That would -- there's some things that have to happen there. So TAM for us is an output of legislation. So that means you've got to get legislators on board to -- and I know you people would be surprised that not only -- you can't always get legislators to agree on things. I know that's shocking to people. But it's a combination of getting them to agree on the problem and the opportunity. It's given that these pilots only started this year -- or in the last year rather, I would say it's another 2 or 3 years. But the fact that we won all 5 that the programs are going to be launched successfully, we feel really, really good about California and spent a lot of time here, a lot of time here.

Got it. So what about Florida? Florida seemed to be moving pretty quickly, especially on school zone. I know there are pilots there. Where are we at from a legislation perspective in that?

Yes. Outside of New York, Florida is the largest red light customer for us, and they have launched school zone speed. They have been sort of a little bit of one foot on the gas and one on the brake. They've opened up some, they pulled some back. That is an area where we've had significantly higher levels of competition. Our competitors are not generally nationwide. They tend to exist in pockets of the country. So we all have a competitor in the Southeast that doesn't compete in the Northeast, and we sort of don't really have much competition out here in the West. So we won a few. they've won a few. So that one has been a little bit slower. But I think one of the nice things is as we rolled out school zone speed in Florida a couple of years ago, we probably made some missteps along the way, just like anybody would, and we really learned from that. And we turned that into continuous improvement. And so far in California, where we're doing the exact same thing we did in Florida, we're 5 for 5. So I feel like we really have put ourselves in a real pole position to be winning here going forward.

And those issues in Florida, were those product or offering related? Or was the engagement with decision-making bodies related?

I would say probably not recognizing that smaller -- that ultimately, this comes down to some level of influence with your customers or the sort of constituents around the customers. And our competitors were very fast and they probably offer things at prices that we weren't quite used to at that time. And so we had to sort of pivot and adjust accordingly.

And then what about other states that should be on the radar even if we don't quite have at least pilot programs funded, et cetera?

I mean we've got work zone that's rolling out in New York. I think that's an area to watch. We've got other work zone programs. School bus is one of our fastest-growing products. That's continued to open up. A couple of years ago, it was only 5 states. It's now in 13. I would say that's another one that we're really excited about as well.

Got it. Got it. Got it. So you mentioned competition. And obviously, we tend to think about you as the leading provider in the markets where you compete. But maybe give an update on the competitive environment. Any changes in your business line that we should be aware of, whether it's new entrants or some of these regional incumbents trying to expand footprint or making incremental investment to improve product, et cetera?

Yes. Where I would say is leadership -- when you're in the leadership position, you attract competitors because people want to be where you are, right? In the automated enforcement side, what I would just say is, again, we compete with smaller local companies that have some resources deployed in a certain area of country. They tend to focus in and around that area. I would not say that they have launched products that were materially different or a new offering per se, although some of them have had some really good products. I don't want to -- I don't want to be dismissive. But it's probably just more -- hey, they put -- they said we're going to focus right here. We're rolling out the largest program in the world in New York City. We're opening up TAM. So we may have been less focused on certain pockets. But as we have pivoted, we've really redeployed our resources into these regions to stay kind of just, hey, you're going to own that area of the country and compete against XYZ. And we started to see our win rate continue to go up. Our win rate last year was like 70% on that -- so I think we've really pivoted the business against some of the competitive responses that we've seen in the market over the last couple of years.

Got it. And then let's talk about -- I can't believe we've made it whatever, almost 25 minutes without speaking directly about AI. But how are you thinking about that key risks and opportunities in AI-enabled government tech and urban mobility, especially given you have a partnership with Hayden AI. What are you seeing in terms of adoption? How is that changing the competitive environment? Where is the market headed?

Yes. I would say so on the -- I'll call it on the outside the company. And so on our products, we use AI today in the cameras, the camera use machine learning technology. We use that to process out false positives so that we're not running all that video across the network. It's very expensive to run that video across the network. We're able to eliminate that at the roadside. So the camera does that on its own and gets...

And false positive would be something that normally would have triggered the camera...

The violation wasn't...

Right. Exactly.

Exactly. So we're trying to limit those as much as we can. Otherwise, the person that gets more expensive, you're pulling video. So we've been doing that for a couple of years now. Look, I think the -- what's happening is the cameras are getting significantly smarter at the road side, but the back-end system, i.e., Mosaic is really going to be using AI to be predictive. And then how do you allow for our cities to make better decisions around safety based upon the data that you're gathering, not just from an enforcement camera, but from other data points that are sitting in and around the intersections that they operate. Inside the company, we've had some successful, what I would call sort of small pilots. We ran 30 pilots of AI in the company. So this is anything from how do we do RFP responses to how we think about HR services, like everything. We were just trying to find some grit under the tire of the promise of AI. And obviously, I think AI clearly has a fair amount of press right now. In practicality, in reality, we're just trying to find use cases that actually result in dollars to the business versus technology. So -- we've got several that we've deployed. This year, we've got a couple more. I would say that over time that you would -- in a more -- I don't -- obviously, there was a story of a company laying off, I think, half of its workforce at one time related to AI. That's not going to be happening at Verra Mobility. But what I think we can do is how do we thoughtfully and considerately deploy AI in the pockets that are -- that it has the high side so we can redeploy resources to growth is something that we're very keen on doing, and we've got a lot of resources tied up against that right now.

Got it. So let's shift to parking, small nascent part of the business for Verra, but one where there's probably a lot of opportunity. Talk about -- and you mentioned universities as one of the areas.

Yes.

What are the complexities of university and maybe municipal parking generally that the T2 part of the business addresses? And how would you describe demand versus the biggest opportunities?

Yes. So the thing about a university is it's -- you don't think about when we bought the business, you're like, how hard can it be? Well, I have 2 kids at school right now. And every semester, they got to get a new permit for a new lot. The rules are different. Those lots don't ever stay the same. You can park there on Tuesday, but you can't park there on Wednesday, then you get a ticket for it. Then you've got visitors coming in for football games and then you've got faculty and advisers and all these things. So there's a fair amount of real-time complexity generally in constrained spaces that universities have to deal with. One of the large universities that we deal with is the Texas A&M University. And you would be shocked at the number of challenges that they have. They have like a 20-person parking department just in the university. And what our software does is, it acts as a partner to them in an ERP to help them manage that. We now are able to deploy most of the sort of parker-facing technology via mobile and very quick payment apps. We're helping them make decisions on where to place access controls for security purposes as well as for revenue generation. So that's the -- that business has, I think, those are going to be real -- those are very real and durable challenges that will be there for many years to come.

So how should we think about growth of the Parking segment and how big can it be?

Look, I think right now, we've had a year or 2 where churn was a real problem in the business. We lost some customers, and I think the company has done a really nice job to settle that. So the growth rate is going to be more muted. So it's going to be low mid-single digits for this year and probably next. What I think is important in that business is the continued move to transaction-based revenue versus just the hardware that we sell, either the Pay station or the access controls and/or just the software, but moving more to that recurring revenue is the real goal because that's going to lift the margins up as well. And they're doing a really good job, I think, of both updating the product and also updating their sort of go-to-market commercial motion to do that as well.

Got it. Last few minutes, I want to chat capital allocation and some of the financials. What are your capital allocation priorities today? And you guys have always done a lot around organic investment, but also M&A and even buybacks. So talk us through where the priority is and what we should expect the balance sheet to look like in the next 1 to 2 years, et cetera.

I'll do the first, and you can talk about the balance sheet. I think the -- I mean, our philosophy on this has not changed since going public, which is the first thing we want to do is invest in our businesses. This year, we talked recently in earnings where we're going to be increasing our R&D and spend around autonomous vehicles as we think of what are the solutions that we want to be providing in and around that area as we look to cities and fleets and some of the challenges they're facing. So we're upping the ante there a bit. Part 2 is growth. As you mentioned earlier, we do have customer concentration. We'd like to diversify our revenue sources thoughtfully and considerately over time. And you can do that through M&A. We haven't done a deal in a while because we also have a lot of financial discipline. We -- as I've said, we've chased a lot of deals, but we've said no on price and candidly, so did everybody else. So perhaps this new market will reset the expectations of what price would be. And then third, since going public, we bought $650 million worth of shares. We did $130 million in the quarter -- sorry, excuse me, in Q4. So because of the cash flow generation of our company, we're able to sort of recalibrate against those top 3 sort of regularly. It's not something we set and then revisit 2 years later. We can do that almost every 6 months. You can you talk about where we'll be on the balance sheet?

Yes, real quick. I mean, so look, at the end of last year, we did another debt refi, brought down our borrowing cost. The consolidated interest rate for the company is now under 6%, which if I were to think that, that would be the case 2 years ago, would have thought it was crazy, right? So I think it's wonderful. But that also will tell you that maybe it's not as much to -- it's a higher bar to lean into paying down our debt at this point. We ended the quarter at around 2.3x net levered. If you run out my guide to the end of the year, it will get you to 2x -- we've said consistently for quite some time now that we think the level of flight path for leverage for the company is 3x. But we are more than happy to run it lower than that. We will not artificially get to that 3x to see that 3x. But I think that's a good gating item to say would -- for the right acquisition or the right combination of capital allocation, could we pop above that, come back to that and kind of stay at that level, that should be what you're thinking of as that long-term level loaded ceiling. But again, if you run my guide out to the end of the year, you're going to get to a 2x net levered business.

Got it. So let's finish up there on the guide and potential swing factors. Look, we've got the 2026 guidance. We've got renewed NYC programs. So with that in mind, what are the key swing factors, whether it be NYC rollout pace, some costs associated with minority and women-owned businesses, commercial volumes, new program awards. Where should we be anticipating the biggest potential variance in both upside or downside risks?

Yes. I think for Verra Mobility for time and memorial, it does travel -- it does follow travel demand, right? So to the degree -- and we have modeled in to be clear what we have and why, we have 1% growth in for this year, and here's exactly why. That's where we exited the fourth quarter. As of this morning, we're at about 1.5 points. So it's kind of at least for the first...

Slightly better.

Slightly better, but we're well within the rounds of saying 1%. So to the degree that it's higher or lower than that, that's always one piece to look at. And I think on the Government Solutions side, one may be short term, one may be slightly more medium or long term. The short term one are the installs in New York City, like we're confident we can do that in 2026. I don't love having to go out at the end of the fourth quarter and saying, well, I can't put in cameras if it's not above 32%, but that is...

Going or whatever...

I don't love having to go through that complexity. So we'll watch that. And then I think the second thing is we've talked about getting the margins in our GS business. We've not just talked, we've committed to getting those margins back up to a significantly higher level than they are today. And the largest path to do that is continue to execute on MOSAIC, which we're doing in the background, and that's going to start showing up in the prints in '27.

Got it. Got it. Last thing for you, David, priority. Priorities this year as you kind of work through and look beyond just this year from a horizon perspective?

Yes. Look, this is all about resetting the base of the business, but also it comes down to growth. What are our new growth vectors. We're investing in innovation. We're investing in product management. We're investing in autonomous. So really, we want to -- the priority is to leave the year with a clear idea of where we're going to play in those markets and go put some capital behind them.

Love it. David, Craig, thank you very much for joining us today.

Thank for having us.

Appreciate it.

Good to see you. Thank you.

Great. Thank you.