- Buys
- 0 of 4
- Three are needed, so it stays out of the basket. Three seats voted.
- Free cash flow yield on market cap
- 22.3%
- 6.9% once the $979.9M of net debt is counted.
- Parking Solutions write-down, June quarter
- $104.4M
- It turned the quarter into a $32.78M operating loss.
- Revenue from three rental car customers
- 34.3%
- One renewal is still open. NYCDOT adds 21.8%.
Quality, long holding periodsOwner earnings cannot be estimated while the rental car contracts are unsettled.
Deep value, margin of safetyCheap on normalised earnings, but short of the discount it demands.
Macro and reflexivityThe engine is intact, credit is tightening, and it waits for October 30.
GrowthTimed out before answering. No vote.
Session of October 17, 2026. Investor D timed out, so three seats voted. The sheet's news block was built by hand from the company's 8-K and 10-Q filings. This is the committee's first review of Verra Mobility.
Bottom line
Against the equity alone, Verra Mobility looks like a bargain. Trailing free cash flow of $96.91M is 22.3% of a $434.67M market cap. Put the debt back in and the same cash is 6.9% of the whole company. Shareholders own less than a third of the enterprise. Lenders own the rest.
Our arithmetic says the market cap holds even if free cash flow shrinks 13% to 16% a year for a decade. All three seats that voted expect more cash than that by year three, and none voted Buy. Investor A calls owner earnings unknowable until the rental contracts settle. Investor B wants a wider discount. Investor C wants the next results first.
Those results are the first test. They are due before the open on October 30, 2026, with no conference call.
The business in 60 seconds
Commercial Services handles tolls and violations for rental car fleets. In the June quarter it brought in 44% of segment revenue and 70% of segment operating income, at a 67.1% margin (10-Q, filed August 5, 2026). Government Solutions runs enforcement cameras for cities, including New York's bus lane and speed programs, at a 24.3% margin on 49% of revenue. Parking Solutions is the remaining 8%, and the write-down landed there.
Three rental car companies supplied 34.3% of quarterly revenue, two of them Avis Budget Group and Hertz. NYCDOT supplied 21.8%, up from 14.7% a year earlier (10-Q). There is one class of common stock. The proxy's ownership table could not be read in this run, so a holder above 10% is neither confirmed nor ruled out (DEF 14A, filed April 6, 2026).
| Fiscal year | Revenue | Operating margin | Free cash flow | Diluted shares |
|---|---|---|---|---|
| 2021 | $550.6M | 20.3% | $168.2M | 163.8M |
| 2022 | $741.6M | 22.2% | $170.2M | 159.0M |
| 2023 | $817.3M | 23.1% | $149.1M | 160.0M |
| 2024 | $879.2M | 15.5% | $152.8M | 167.7M |
| 2025 | $979.1M | 24.4% | $136.7M | 161.3M |
Annual 10-K figures, SEC EDGAR. Margin and free cash flow computed by us. The cause of the 2024 dip was not in the filings we read.
What changed
- Two rental contracts extended, one open. Extensions with Avis and Hertz came with second-quarter results (8-K Exhibit 99.1, August 5, 2026). The 10-Q says one large rental customer had earlier sent a termination notice, and the October 15 release flags talks with the third as a risk. Terms are undisclosed, but the company links part of a $30M working capital outflow this year to "our recent RAC contract renewals".
- A write-down in Parking. $64.0M of goodwill and $40.4M of intangibles (10-Q). Before them, trailing operating income was about $241.3M on our arithmetic, against $136.86M reported.
- Both top jobs change hands. The chief executive left on June 1. A successor starts November 1 (8-K, October 2, 2026). The finance chief leaves November 4, and the 2026 outlook was reaffirmed (8-K, October 15, 2026).
- A shareholder class action. Filed June 4, 2026, in Arizona, it alleges investors were misled about a rental renewal and 2026 guidance. No contingency is recorded (10-Q).
- The customers run smaller fleets. Avis cut its Americas average rental fleet 5%, to 489,192 vehicles (release, July 28, 2026). Hertz's Americas fleet fell 2%, to 429,465 (release, August 6, 2026).
The bull case on Verra Mobility
- The engine still runs. Commercial Services operating income rose 7.1% in the June quarter while both public customers shrank their fleets.
- Cities keep buying cameras. Government Solutions revenue grew 20.0% on New York installations, and Los Angeles picked Verra for California's largest speed safety program (results release, August 5, 2026).
- The damage is in the smallest unit. Parking made 2% of segment operating income.
- No near maturity. $6.89M of principal is due within a year, the $150.0M revolver is undrawn, and the first large maturity is $350.0M of notes in April 2029 (10-Q).
The market appears to be pricing permanence into problems that are largely finite and observable within weeks.
Investor C, Watch
Commercial Services shows real economic quality where it holds.
Investor A, Avoid, on the one segment it would want to own
The bear case on Verra Mobility
- Cash went backwards as revenue grew. Revenue compounded 15.5% a year over four years while free cash flow shrank 5.0% a year. Capex rose from $25.0M to $119.1M and is guided to about $135M for 2026.
- The buybacks bought little. $558.5M over four years cut diluted shares by 1.5%.
- No tangible cushion. Tangible book is negative $551.89M, and substantially all assets are pledged (10-Q).
- The biggest customer already repriced. New York growth came "net of pricing changes under the new contract" (10-Q). First-half Government Solutions operating income fell 12.6% on revenue up 11.9%.
When three customers hold the volume, they hold the pricing power.
Investor A, Avoid
They may be one structural force: concentrated buyers, public and corporate, discovering this is a commodity service and squeezing it.
Investor C, Watch, on how it could be wrong
Where the committee splits
Three seats voted and none voted Buy. They agree the equity is cheap. They split on what makes it unsafe.
Is the 67% margin a franchise, or a price the rental companies have not taken back yet?
| Position | Seats | The figure it rests on |
|---|---|---|
| The engine is fine | C | Segment operating income up 7.1% at a 67.1% margin (10-Q) |
| The buyers hold the pricing power | A, B | One termination notice, one renewal open, first-half segment revenue up 1.2% |
What settles it. The Commercial Services margin in the September-quarter 10-Q, which SEC rules require by November 9, 2026. Investor A would move to Watch on a signed third renewal with that margin at 63% or more, and calls a margin below 60% permanent Avoid.
From the chair, to Investor C. Commercial Services revenue grew 1.2% in the first half while Avis and Hertz shrank their fleets. What in the October 30 release would show the 67.1% margin is durable before the third renewal is disclosed? It turns on the first-half segment row and the rental read-across.
Is a 22.3% cash yield a margin of safety, or leverage in disguise?
| Position | Seats | The figure it rests on |
|---|---|---|
| The thin equity is the opportunity | C | Equity is 31% of enterprise value (the seat's arithmetic) |
| No measurable cushion | A, B | 6.9% yield on enterprise value; Investor B's 24.3% discount against the 35% it requires |
What settles it. Net leverage on the company's measure, 2.4x at June 30, 2026, in the fourth-quarter release. Investor A wants 2.0x or less. A and C both treat above 3.0x as breaking.
From the chair, to Investor B. Your normalised earnings include fiscal 2024's $31.4M, a year whose cause the sheet could not explain. Which filed line would let you treat it as a one-off, and would that move your discount enough to matter? It turns on the five-year net income row.
| Investor | Verdict | What breaks its thesis |
|---|---|---|
| A | Avoid 6 | Commercial Services revenue down over 10% in any 10-Q through 2027, or net leverage above 3.0x. Critical: rental bargaining power |
| B | Watch 7 | Segment operating income down 20% or more on October 30, trailing free cash flow under $60M, net debt above $1.10B. Critical: renewal economics, toward Avoid |
| C | Watch 6 | A cut to the outlook on October 30, segment revenue turning negative, net leverage above 3.0x. Critical: funding costs, high-yield spread toward 5% |
| D | No response | No vote was cast |
Valuation
What the price requires. The figures in this paragraph are the desk's own, kept away from the seats. At a 9.6% discount rate, the 10-year yield plus 4.5 points, with 3% growth after year ten, the market cap needs trailing free cash flow to fall 14.7% a year for a decade, putting year three at $60.06M. At 8.6% the allowed fall is 16.3% a year and year three is $56.91M. At 10.6% it is 13.3% and $63.06M.
Trailing free cash flow ignores $25.18M of stock compensation. Deduct it and the allowed fall narrows to 8.6% to 11.8% a year, with year three between $49.14M and $54.74M. The seats worked on the unadjusted base, so we use it below. The 10-year yield is 5.10%, against the 6.9% enterprise yield.
Hatched bars are what the market cap needs at each discount rate. Solid bars are each seat's probability-weighted figure from its own scenarios.
| Investor | Bear | Base | Bull | Weighted, year 3 | Against the price |
|---|---|---|---|---|---|
| A | 35%, $40M to $60M | 45%, $120M to $150M | 20%, $180M to $200M | $116.3M | above the band |
| B | 35%, $25.2M | 45%, $96.3M | 20%, $172.7M | $86.7M | above the band |
| C | 25%, $80M to $100M | 50%, $150M to $170M | 25%, above $200M | $152.5M or more | above the band |
Ranges weighted at the midpoint, Investor C's bull case at its $200M floor. Investor A's year three is fiscal 2029, Investor B's fiscal 2028.
All three seats sit above the band, and none voted Buy. The company's free cash flow guidance sits in a table we could not read, so it cannot be set beside them. The bear cases matter more here. Investor A's straddles the hurdle and Investor B's falls below it, so the price sits near what those two call the bad outcome. Investor A: "I cannot form a conservative estimate of owner earnings five years out, so the low multiple is not a margin of safety I can measure." Investor B: "I require at least a 35% discount here." Investor C: "the whole question resolves in the October 30 print, so I watch the catalyst rather than front-run it."
| Investor | Entry discipline |
|---|---|
| A | Enterprise free cash flow yield of 10% or more, net leverage under 2.0x, after the third rental terms are disclosed |
| B | 5.2x normalised net earnings or less |
| C | Equity free cash flow yield above 25% with the renewal resolved, or under 3x EV to implied Adjusted EBITDA if it fails |
Comparables
No table. Of the four US peers we ran, only WEX filled four of the five core figures. Conduent (CNDT) and Rekor (REKR) are loss-making, and Corpay's (CPAY) inputs could not be sourced. Kapsch TrafficCom, the closest tolling peer, is not a US filer.
WEX, the fleet payments network, runs a 36.0% operating margin against Verra's 24.4% and holds net cash. It trades at 17.7x earnings, Verra at 9.8x on earnings already cut by the write-down. The gap is balance sheet and concentration, exactly where the committee split.
Key risks
Ranked by the desk, most severe first. Raised by shows where each was named.
| Risk | Why it matters | Raised by | First signal |
|---|---|---|---|
| High. Rental renewal terms | The 67% segment rests on three customers, one of which sent a termination notice | 10-Q, Analyst, Investors A, B, C | Segment margin below 63% in the 10-Q due November 9, 2026 |
| High. Debt ahead of a thin equity | Net debt is about 2.3x market cap, assets pledged | 10-Q, Analyst, Investors A, B, desk arithmetic | Net leverage above 3.0x |
| High. NYCDOT concentration | 28.5% of receivables plus $33.1M unbilled, on a repriced contract | 10-Q, 10-K, Analyst, Investor C | NYCDOT above 35% of receivables |
| Medium. Capex that does not convert | Free cash flow fell as capex rose almost fivefold | Analyst, Investors A, B, C | Fiscal 2027 capex guidance at or above $100M |
| Medium. Floating rates, 2029 notes | The term loan floats at SOFR plus 2.00% | 10-Q, Analyst, Investor C | High-yield spread above 5.0% |
| Medium. Leadership and litigation | New chief executive, departing finance chief, class action | 8-K, 10-Q, Analyst, Investors B, C | Interim finance chief named, 10-Q on time |
| Low. Fewer violations from autonomous fleets | Could shrink violation volumes | forum (unverified), Investor C | Not dated |
The filings settle one worry: $115.4M of revolver capacity covers near-term liquidity.
What to watch
| Date | Event | What it decides |
|---|---|---|
| October 30, 2026 | Third-quarter results, no call (8-K, October 15, 2026) | Whether the outlook holds and where the segment margin sits |
| November 4, 2026 | Finance chief departs (8-K, October 15, 2026) | Whether an interim finance chief is in place |
| November 9, 2026 | 10-Q deadline, SEC rules | NYCDOT receivables, renewal disclosure |
| Ongoing | Third rental renewal (October 15, 2026 release) | The weakest link for all three seats |
| March 1, 2027 | 10-K deadline, SEC rules | Net leverage, 2027 capex plan |
Owning it onchain
No tokenized version of Verra Mobility is listed by xStocks or Backpack, per the lookup of October 15, 2026.
Data
| Item | Figure | Source |
|---|---|---|
| Share price | $2.86, close October 16, 2026 | Yahoo Finance |
| Shares outstanding | 151,982,804 at August 31, 2026 | SEC EDGAR |
| Market cap | $434.67M | Price times shares, computed |
| Enterprise value | About $1.41B | Market cap plus $979.86M net debt at June 30, 2026 |
A related read on equity yield against enterprise yield: our Charter Communications review.
Method. Four investors with different philosophies, each on a different AI model, read one identical fact sheet and voted independently. A name needs three Buys to enter a basket. How the committee works.
As of October 17, 2026, BagsCapital manages no outside capital and holds no position in Verra Mobility. Nothing here is investment advice.