Q3 2025 Via Transportation Inc Earnings Call
He went to the via third quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session to ask a question simply press star on your telephone keypad.
To withdraw your question Press Star one again, we respectfully request that you limit questions to one and one follow up.
It is now my pleasure to turn the call over to via the floor is yours.
[noise], it's so important for a strong city to have an innovative transportation system a lot of companies and individuals are looking at what public transit options are available before they make that decision on whether theyre going to choose Fort worth and so it is so important that we stay on top of that to remain.
Competitive as an economy.
We're one of the fastest growing cities in the country and so as we've grown to now almost five square miles as a city transit is extremely important and that's what we book.
Cheap maps on some of our on demand hotspots of Mann Foundation parks has been one of them because we have thousands of jobs out there without this Sam re imagined system and program also employers specifically would not be able to be reaching this workforce. So that's one of the first question. Some of these large employers.
We're asking us when we look at coming to Sioux Falls Whats Your transit system look like one of the things we wanted to accomplish was connecting people to work opportunities.
The newest plan Johnson, and Johnson and Thats been built.
Go to a community college, which is going to have a biotechnology training facility. You go through that program and you can get into that plant that has an average salary over $100000.
Being able to do that use ride to get up there and get US 100000, our job really is going to be life changing for families and are converting.
[music].
Good morning, everyone and welcome to <unk> third quarter 2025 earnings call I'm getting the cake V as Chief Corporate Communications Officer, and head of Investor Relations with me today are Daniel remote B as co founder and CEO and clarifying these chief financial Officer.
During today's call Daniel will review, our third quarter 'twenty 'twenty five business update before handing it off to claret to discuss financial results and our guidance for the full year 2025.
Daniel will end with some additional comments before opening it up to Q&A.
In addition to prepared remarks from this call additional information can be found on our Investor presentation press release, and SEC filings on our Investor Relations website at investors that ride with Ya Dot com.
Before we get started today, we want to draw your attention to the Safe Harbor statement included in our press release and Investor presentation items.
Items, we discussed today will include forward looking statements about topics, including but not limited to our future financial performance predictions and management's plans and objectives for future operations.
Actual results may differ materially from those presented in the forward looking statements and are subject to risks and uncertainties described more fully in our SEC filings, including our S. One and quarterly report on Form 10-Q.
Any forward looking statements that we make on this call are based on our assumptions as of today November 13th 2025.
As required by law, we undertake no obligation to update or revise these statements as a result of new information or future events.
We would also like to point out that our discussion today will include certain non-GAAP financial measures. In addition to not as a substitute for financial measures calculated in accordance with generally accepted accounting principles definitions of these non-GAAP financial measures along with reconciliations of non-GAAP to GAAP financial measures are provided in our press release and our investor piece.
Patients.
And without further Ado I'll now hand, it over to Daniel.
Thanks, Debbie and thank you everyone for joining us today, we are delighted to host our first public company earnings call. We're very pleased to report that via delivered another strong quarter exceeding expectations on both top and bottom line performance.
In Q3 2025, our revenue grew 32% year over year platform annual revenue run rate, which is our quarterly platform revenue multiplied by four was $439 million.
The number of customers on our platform grew to 713, a year over year increase of 11%.
Our results demonstrate the durability of our growth as we transform a vital and underpenetrated market and customers increasingly embrace our cutting edge platform.
To provide additional insight into our performance the increase in revenue in Q3 was driven by strong growth in our government business revenue from government customers increased by $26 $5 million or 34% year over year.
We also saw outstanding results in the United States revenue from our U S customers increased by $23 $1 million or 42% year over year.
Taking a step back.
<unk> provides the world's most advanced platform of software and services transforming antiquated public transportation systems into efficient digital networks. We have built a single unified platform that replaces fragmented legacy systems across multiple transit verticals.
Our platform automates key workflows consolidates operations across verticals that have historically operated as distinct silos <unk>.
He is vertical stack is deployed globally it could be configured to support the broad and diverse local requirements of our customers without the need for sulfur customization.
We are fundamentally transforming the way governments and cities operate through automation advanced algorithms data and AI.
Transit is a critical public service in the United States alone Public Transit systems provide 8 billion trips each year and yet 45% of Americans do not have access to transit.
For anyone who cannot afford a car this gap severely limits their ability to get the jobs educational opportunities and health care.
We believe that after decades of Underinvestment in technology cities across the globe poised to upgrade their digitize their transit infrastructure.
This transformation is already in progress and will only accelerate in the coming years.
In our core geographies of North America, and Western Europe, our serviceable addressable market is estimated at $82 billion based on a report commissioned by us for a major consulting firm today, we capture less than 1% of this market.
We also estimate that there are approximately 63000 potential via customers in North America and Europe as of Q3 2025, we had 713 customers on our platform representing approximately 1% of these potential customers as.
As the established category leader, we're extremely well positioned to capitalize on the digital transformation, taking place within our core markets and we are still in the early innings of capturing a very large opportunity.
More than 90% of our revenue is derived from selling our solutions. The city's transit agencies in similar government organizations public transit generally and via services in particular are in the unique position of enjoying broad bipartisan political support one way to visualize this in the U S. 55% of via services are in Red congressional districts.
45% are in Blue congressional districts.
This bipartisan support has helped ensure that as reported by the American Public Transportation Association funding for public transit has grown an average of 4% per year since 2012.
This trend appears to be continuing with the Trump administration's latest 2026 budget proposal, including a $310 million increase in federal funding for public transport.
Bipartisan support for transit extends well beyond the federal government. This is critical since more than 80% of government funding for via services is provided at the state and local levels.
We have consistently seen a broad consensus by voters in support of public transit in local elections.
Earlier. This month 16 of 19 public transit ballot measures successfully passed approving a total of $11.8 billion in transit funding in.
In addition, several major pieces of legislation in support of public Transit has recently been passed by state and local legislatures, including in Illinois, and Oregon, where billions of dollars in transit funding were approved.
Importantly, we have not seen any impact from the federal government shutdown Onvia services at the Federal Transit administration. It is our understanding that new employees were furloughed during the shutdown.
Let's take a couple of minutes a deep dive into the via platform.
Over the past 13, and a half years, we have in a very deliberate way through organic investments and strategic acquisitions built a comprehensive end to end category defining platform of software and services for public transit.
Our platform is highly modular and can support the transit needs of any size city or community for rural suburban to major metropolitan centers.
We provide software that allows transportation planners to design more livable cities, a one stop shop for planning and scheduling both fixed route and dynamically routed transit networks transit planners can leverage models trained on billions of data points to rapidly quantified the impact as they make changes to their network.
Once the city or transit agency as planned its transit network. It can with a click of a button begin operating that network using our operating software.
<unk> operating software supports multiple transit verticals, including micro transit peer Transit school transport and non emergency medical transportation.
Our software is powered by advanced algorithms and AI.
Which are used by customers to digitize and automate work streams across passenger reservations dispatch customer support program eligibility government reporting and compliance.
We also provide consumer grade mobile apps and web based interfaces for passengers to seamlessly plan book and pay for their trains at journeys across multiple modes of transit.
When customers adopt our platform their ability to visualize their data and derive actionable insights from that data greatly explains this improved access to data can be transformational.
Our analytics tools include prebuilt dashboards that allow customers to track their central Kpis.
Our customers can also easily build their own reports directly within our product to create bespoke analyses.
To meet specific funding in compliance obligations. These.
These tools are intuitive and easy to use even for those who may not be as data or tech savvy.
In addition to software or platform includes a suite of technology enabled services, which facilitate and accelerate adoption of our software.
100% of our customers buy our software approximates 20% electro also procure services. These services are delivered to our customers by a curated ecosystem of third party providers or in some cases directly by via.
Our ability to provide services alongside our software is a critical element of our customer centric go to market strategy, our services enable adoption of our software, allowing us to win customers, who lack the staffing or expertise to use the software or leverages full capabilities. Our services also increase the stickiness of our products and accelerate growth and by broad.
Our platform and reach they represent a strong point of differentiation in the marketplace.
This platform is the product of an investment of hundreds of millions of dollars in over a decade of intensive efforts in research and development.
Our data is derived from multiple sources publicly available data sets such as demographic information from the U S census, and proprietary data produced by our hundreds of services across the globe.
Over the years, we've collected billions of data points from over 150 million trips.
As we expand our customer base. We also continue to scale our data advantage.
We have leverages data to create the world's first LLM for cities and AI model trained on our proprietary data, which provides multiple capabilities that can meaningfully improve the way transit planners design their networks from ridership modeling to bus speed prediction to proactive and conversational transit planning recommendations transit planning co pilot.
If you will.
A recent and incredibly exciting example of this platform and action comes from Springfield, Ohio, I Love. This case study as it illustrates the power of our end to end platform.
Using our transit planning software the city was able to rapidly analyze their existing trains system and model the impact of potential changes to their network.
What became very clear very quickly was that in Springfield, there simply isn't the sufficient population density to support buses you can see the bus network on the left with a circuitous routes typical of a train system trying to use buses to provide transportation and low density areas, where buses don't really book the.
The small black icon you see on the map surrounded by small blue area is gene, we've dropped Jane and East Springfield and asked how far can she travel using public transit.
With the original bus system, it's clear that you can't go very far at all.
When the buses are replaced by V. S. Micro train system. The picture is very different now on the right gene can access a much larger area of Springfield, using transit and a car is no longer a prerequisite to having a job or getting to school.
Needless to say this has real impacts for gene.
And more importantly, since gene is fictional for the residents of Springfield.
Based on this analysis Springfield decided to fundamentally redesigned their transit network, replacing all of their buses with a micro chain system powered by <unk> platform.
Now for the same annual operating budget. The city is able to provide trains with access to 40% more of the city and has dramatically improved the passenger headwinds reducing them by a factor of four.
For those of you who aren't transit nerds passenger headway as the average time of passenger has to wait for a trip.
This is a remarkable transformation for Springfield and its residents.
Even more importantly, we know it is applicable to so many more cities in America.
Our business is characterized by consistent and durable revenue growth. This growth is driven by landing new customers and by expanding within our existing customers.
Expansion within existing customers is driven by both volume expansion as customers add more vehicles or vehicle hours to the platform and upsell as customers increased the number of modules included in their solution.
In Q3, 2025, we continue to land multiple new and strategic customers.
The launch of our micro chains service in Omaha is a great example of a partnership that goes well beyond the transit authority and extends into the local community.
In this case the services received key support from a local nonprofit that is keen to expand access to jobs and other opportunities for Omaha residence.
The early success of our Omaha service rapidly led to another opportunity in neighboring Council bluffs, Iowa, demonstrating the potential for strong regional network effects for our platform.
Council Bluffs will launch a new and modern powertrains and service leveraging <unk> platform in Q4.
We have also seen an exciting acceleration of our business in the U K, where government initiatives to bring transit networks under control of regional authorities is meaningfully expanding the pool of potential customers seeking via solutions with Birmingham, representing a key customer.
In Q3, we also continued to grow rapidly within our existing customer base through both volume expansion and upsell the.
The city of mobile, Alabama launched these micro chains solution in March 2024 building on that successful launch the city adopted via is planning solution, which allows it to critically analyze the performance of its transit network unearthing that only 45% of residents and 55% of the city's jobs were accessible by bus in Q3 2025.
The city added via fixed route scheduling and powertrain solutions and committed to implementing a full network redesign with a focus on streamlining bus service expanding micro transit and hugely increasing access to jobs.
In a year and a half we've grown revenue with this account by 17 times.
Looking ahead, we believe via wins through innovation and more specifically by continuing to innovate across three key areas.
One broadening our platform to deepening our vertical stack and three being nimble and creative in our go to market strategy.
<unk> our platform both through organic product development and strategic acquisitions allows us to increase our competitive advantage grow our share of existing customers' wallets and drive margin expansion through new higher margin software products.
As we develop new product capabilities and features for our customers. This deepening of our vertical stack drives customer satisfaction and increases the stickiness of our platform.
Investing in go to market innovation allows us to reach new government customers and reduce our customer acquisition costs.
We believe this growth framework is key to our continued success and we consistently valued opportunities and initiatives through this lens.
One area, where we have been investing in broadening our platform is our newest vertical student transportation Q.
Q3 was a very strong quarter for this vertical which saw more than two times growth in the number of customers subscribing to our solutions are.
Our efforts in the schools vertical are still nascent, but we're very encouraged by the initial results and believe this can be an engine for growth in the future as well as a template for expansion into other new verticals.
In Q3, we added multiple new product capabilities and features to our platform.
These new capabilities have been extremely well received by customers.
We are relentless about innovation and continue to invest in all parts of our product even those that provide well established functionality to our customers.
Last quarter, we rolled out a major upgrades to our core dispatching interface, allowing dispatches to more intuitively visualized vehicle routes handled passenger queries and cope with delays and disruptions in real time.
Whether they are apparent case manager or front desk staffer at an adult day care center or caregiver App allows caregivers to manage trips and receive real time trip updates for the individual and their care.
And our agent AI suite, new features help our customers streamline tedious manual processes.
Tools like the eligibility application scanner automate the processing of paper applications into digital files for assessment.
Our agent Chatbot is helping to automate how are customers handled passenger calls.
We continue to rollout advanced self service capabilities for our customers shortening the loop between planning a new training system and deployment.
We're also very pleased to announce the launch of our European Advisory Council. The goal of the council as to bring together prominent leaders from the transit technology and academic worlds to generate thought leadership on how integrated digital networks will transform the modern European public transport landscape.
Three member Board is chaired by Dr. Ralf referred CEO of toll collect who previously served as Chief operating Officer and board member for the Bvd, The public Transit authority of Berlin additional.
Additional founding members include Professor Andreas Herman Director of the Institute for mobility, the universities and gallon and professor Barbara lengths Senior adviser and former director of the Institute of Transport Research at the German Aerospace Center.
We believe this high profile board can play a key role in advancing transit innovation and Digitization in Europe, and ensure public budgets continue to be directed towards this important area.
Last but certainly not least we were pleased to announce a new strategic partnership with Weibo to advance the use of autonomous vehicles in public transit.
There is no question via has a key role to play in the introduction of autonomous vehicles into public transit and our partnership with Weibo is a step in that direction through this partnership government agencies using via software can now corporate way most avs directly into their public transit networks.
<unk>, Arizona as the first city to benefit from this framework integrating way most service into the city's Chandler flex microgenesys surface.
Public transit riders and the government agencies, who serve them are too often the last to have access to cutting edge technology.
We're delighted that this partnership with way more paves the path for <unk> to become accessible to millions of global public transit riders enhancing mobility, lowering operating costs and improving safety outcomes.
And with that I'll pass it over to Clark to review the financial highlights for the quarter.
Thank you Danielle.
We are very pleased with our performance in Q3, where we exceeded expectations across top and bottom line metrics now, let's dive into our results.
In Q3, 2025, Oh platform annual run rate revenue, which is defined as our quarterly and platform revenue multiply by four plus $439 million.
Representing a year over year increase of 32%.
As a reminder, we generate revenue primarily through recurring subscription fees for access to our platform our.
Our customers subscribed to one or more solutions, which consists of a combination of software and tech enabled services tailored to each customer's need.
All of our customers subscribe to our software and approximately 20% of our customers bundled tech enabled services.
Contracts with our customers are typically multi year and structure with a committed budget in a volume based component.
Pricing is generally based on a number of factors such as fleet size minimal number of vehicles, our total vehicle hours.
Each contract comprises one bundled price for the combination of software and any tech enabled services selected by the customer.
We are very pleased with our revenue growth of 32% this quarter.
As you can see on our historical performance, our quarterly revenue growth can fluctuate quarter to quarter.
Our business is mostly driven by public procurements, which have a certain cadence and happened when their existing contracts, Germany, which is not always consistent throughout the year.
Revenue is highly predictable.
The unique nature of our market customers combined with our leadership platform position the contracted nature of our revenue and mission criticality of our products provide us with significant visibility into future revenue at any given time over 90% of our projected revenue for the next 12 months is contracted this is a test them.
And to the high quality and durability of our business model.
Rapid revenue growth is driven by lending new customers and expanding with existing customers.
We delivered strong results on both fronts this quarter in.
In Q3 2025, the number of customers leveraging our platform was 713.
Presenting a year over year increase of 11%.
As you can see our year over year growth in new customers has historically ranged between 8% and 12%, which aligns to the cadence of our unique market.
We also continued to experience rapid growth with our existing customers driven by a combination of volume and product growth.
As well as continued stickiness of our platform.
In Q3 2025, the majority of our 32% revenue growth was driven by growth with our existing customers in line with our historical performance as a private company.
In particular I want to highlight our strong momentum in the United States and with our core government customers.
In the long term, we expect that our business will generate consistent and durable revenue growth as it continued to digitize one of the last pen and paper industries and penetrate our 82 billion serviceable addressable market.
Our sales and marketing efforts are highly efficient for a number of reasons.
We're addressing a very large market, which provides many opportunities for growth with both new and existing customers.
<unk> of our platform and our position as the category leader provide via was a strong competitive advantage and drive meaningful expansion opportunities.
The criticality of our platform and ability to generate meaningful ROI for our customers combined with ongoing investment and innovation drive that stickiness of the platform and last but not least the particular nature of our customer base governments and government agencies creative virtuous cycle of growth to avoid a mess and referrals.
In Michigan, you can see on the slide we have begun to experience a flywheel effect, where the success of existing customers in the states is driving new customer opportunities without the need to invest further in sales and marketing.
As you can see we have witnessed 200% increase in revenue per head in that state and a 20% decrease in <unk> as a percentage of revenue highlighting the incredible efficiency of our team in this market.
Let's dive into our operating expenses, which representing on an adjusted basis as of Q3 2025, We spent 14, 1% of our revenue on sales and marketing compared to 15% in Q3 and 24.
Overtime, we expect to continue to invest efficiently in SMN to capture our market opportunity.
As of Q3, 2025, we spent $14 4% of revenue and G&A.
Third to 16, 7% in Q3 2024.
Our research and development efforts has been our number one area of investment is the foundation of VR 13 years ago, we have invested over 500 million in R&D and as of Q3 2025, R&D expenses represented 19, 1% of revenue compared to 24, 7% in Q3 2024.
We are now investing a decade long investment in R&D and as we continue to add up the I automate our processes and expand our product suite, there's a significant opportunity to increasingly drive efficiency in our R&D spend.
As of Q3 2025, our adjusted gross margin was 39, 6%.
Compared to 39, 2% in Q3 2024.
In the near term, we are focused on lending our market opportunity and penetrating our customer base further.
In the medium to long term, we reiterate our commitment to an adjusted gross margin of 60%.
And then let three levers one transitioning lower margin services to third parties.
Two continuing to expand our platform with higher margin products, notably our software offering to internal development and three continuing to explore strategic and accretive M&A. As a reminder, we have establish a playbook to execute on M&A with the remix density map of acquisitions, which were both highly successful on all counts.
Our industry is highly fragmented and there are many point solutions, which will not make it a standalone companies in the long term and might be excellent additions to our platform.
Our IPO was a powerful moment for brand awareness and has generated significant inbound interest for potential M&A targets.
With mature customers, we have a proven track record of successfully being able to increase gross margins overtime.
In this example from a customer in the Western U S. The customer started with a software and services micro transit solution in 2019 and 2022, the customer had reached maturity whereby they were able to contract for certain services directly rather than through via web.
We're also able to add additional product upsell to the partner for several higher margin Skus.
In the past three years, we have been able to double run rate revenue on this account, while expanding gross margin from 40% to 50%. We believe that this is a formula that we can successfully replicated with other customers as their accounts reach maturity.
Generating rapid and durable revenue growth, we have benefited from significant operating leverage in the business. This operating leverage supported a continuous improvement in net loss margin and adjusted EBITDA margin in the last year alone between Q3 2024 in Q3 2025, our adjusted EBITDA margin improved from negative, 17% and negative 8%.
We are pleased about our continuing ability to deliver operating leverage as.
As the business scales.
Now turning to guidance.
For the fourth quarter, we expect platform revenue to be between $114 6 million and $115 1 million, representing 25% to 25, 5% year over year growth we.
We expect adjusted EBITDA to be between negative $7 5 million and $8 5 million and.
And adjusted EBITDA margin to be between negative six 5% and negative seven 4% for the full year 2025, we expect platform revenue to be between 430 and $435 million.
Renting 30% to 32% year over year growth.
We expect adjusted EBITDA margin to be between negative, 8% and negative seven 8% compared to negative $16, 1% in 2024.
Now I'll pass it to Daniel for some concluding remarks.
Thank you flora.
Want to reiterate again, how pleased we are with this quarter's performance and to express my confidence in our ability to maintain strong performance as we continued to transform our massive and hugely important market.
Our team remains incredibly passionate about building best in class technology for those with the tech industry has long neglected local governments and some of their most vulnerable citizens.
We believe that our financial success is directly correlated to the meaningful impact that our solutions.
In the course of our IPO I had the opportunity to discuss with some of you our views on the importance of making sure that governments are not left behind in the AI Revolution.
Our customers not by nature, an early adopter of new technology.
And for good reason.
The government agencies responsible for providing public transportation operating complex and demanding environments, where risk is rarely are rewarded.
The use of machine learning and AI has always been core to view, but given the complex environment in which our customers operate we believe it is our responsibility to help them gain access to this new technology.
As we continue to broaden our platform AI will enable our customers to generate a virtuous cycle of planning operating and optimizing their entire networks, leading to smarter and more efficient trains.
As the category leader, we believe were very well positioned to capitalize on the AI and autonomous vehicle opportunities in our space.
We're excited to continue to work hard to help our government customers adopt new technologies and meaningfully increase the value they deliver to their constituents.
And with that I wanted to thank you all again and turn it back to the operator, so we can take some questions.
As a reminder to ask a question simply press star one on your telephone keypad.
We respectfully request that you do and my questions to one and one follow up our first question comes from the line of Adam Hotchkiss with Goldman Sachs. Your line is open.
Great. Thanks, so much for taking the question. So that's great to speak with you all in a public Forum Daniel you mentioned, the 63000 customer opportunity how would you characterize both the catalyst, but also maybe the barriers you've experienced as you think about the next steps in converting more of that opportunity and then Carl just briefly how do you balance growth.
And investment within that context, thanks, so much.
Thanks, so much.
You could see here.
I think when we focus on the opportunity ahead of us the barriers are similar to what we've experienced historically primarily.
The customer that we're dealing with has.
On the Virgin to risk fundamentally.
Reluctant to change and that is usually the highest barrier for us to overcome I will say that over the years and certainly in this last quarter, we have seen that barrier start to come down and we're able to accelerate.
Our ability to convince our customers to adopt new technology and certainly when we look at regions in which we have established any presence and even more so we've established a meaningful presence that barrier can come down meaningfully and really help us accelerate through these regional network effects that we talk about so.
Fundamentally are the same we need to keep doing a really good job explaining the value of the ROI to our customer and showing them how it works.
In nearby cities Thats always very helpful and that I.
I think will help us continue to accelerate the progress.
Sure.
Yes.
<unk>, great to reconnect and thanks for the question.
When it comes to the investment.
We are very focused on putting the dollars where the growth is and we have very detailed framework of investment behind the new products that we're launching focused on our core geographies North America, and Europe and some of the products that we went through.
Together, including our obviously, our micro <unk> product on powertrain did part of the also some upticks with products, but also some new products.
Notably around the schools business and some other <unk>.
Interesting opportunities that we've identified so it's definitely putting the dollars behind the behind the customer opportunity.
Great. That's really helpful. And then just on the quarter itself. How would you frame. The makeup of the 24 net new customer additions sequentially. You had it was the largest number I think we have had in recent company history. So was there anything notable about these customers either from a product or geography perspective.
Student play more of a role or.
Or is it just where rfps happened to fall in the calendar year any more detail on that makeup would be helpful.
Yeah, how did you how did you break it down further for you as you saw we're very pleased with the performance in North America as continuing to see very strong demand and that is reflected in the customer growth and we're also seeing some good traction around new products, including this gross product, which has driven some of that growth as well so.
So I would say both both of these are definitely drivers of customer growth.
Great. Thank you very much thanks, Adam Thanks, Adam.
The next question comes from the line of Josh Baer with Morgan Stanley. Your line is open.
Great Daniel Clara Gabby the whole team congrats on a strong quarter and welcome to the public markets.
You have great visibility on the pipeline I was hoping you could share some of what you're seeing with us from an RFP perspective or customer decision and implementation timing perspective, ultimately what do we need to look out for from the customer adds over the next several quarters and then my follow up Clara mentioned the.
IPO as a branding moment more from an M&A perspective, I think I'm wondering if you've noticed the change in inbound conversations from customers as well how's the IPO changed awareness and interest in the platform.
Hey, Josh Thanks, so much.
To be a public company.
We're looking at the cusp.
Customers.
Looking forward I think we'll continue to see very positive trends across all of our markets.
We are seeing and I think.
It ties to your follow up question too.
Our feeling that the IPO was a moment for us it's hard to quantify but the reception on the customer side definitely feeling a sort of a different timber to it if you will and I think that's helping US also develop a pipeline and.
Continuing to push in that direction as Claire mentioned the U S. In particular, we've seen really strong dynamics and that's been true for the quarterly results and looking ahead at pipeline. So we're very pleased with that and we're seeing some good dynamics in Europe, too as well, especially in the U K.
So looking ahead I think that that's a market, we're very very interested in focusing on.
Oh, great. Thank you Brian Thank you Joseph.
Thanks, Jeff.
Our next question comes from the line of Michael Carroll with Wells Fargo. Your line is open.
Hey, great. Thanks, very much good morning, thanks for taking the questions and my congrats as well on the first quarter as a public company for via <unk>.
But when I go back to the customer metric.
I think given you have some commentary we've been fielding questions around central government shutdown impacts it doesn't sound like there was any real impact there, but I'm just curious how much of the bigger sequential adds youre seeing is tied back to some of the commentary of Daniel's, making around just increasing reference ability in your view.
You on.
Something that is a good leading indicator for the durability of future revenue growth or maybe other indicators you would point investors towards as Theyre getting to know the company.
Hey, Michael.
Thanks for the question.
I think I do think the reference ability is key and I know we've been we've been talking about that quite a lot, but the way that we are approaching this market those proof points that we can point to for customers, whether it's the new conversations and also when we're talking to existing customers about expanding the second they can see what's happening nearby.
Is extremely important and I think we talked a lot about the mobile example.
But earlier.
I think the fact that in mobile they were able to see what we did in Sioux Falls, just as an example, and we're able to visit.
That is incredibly impactful when they're making what is frankly, a huge decision from their perspective.
These are pass onto us.
Basically management and the design of their entire transit system.
I think the influence that these types of conversations that they can have with peers.
Incredibly important so that reference ability is really key.
Our hope is that we can continue to build on that over the coming years to really drive the rapid adoption.
Yeah.
And just on the <unk> partnership.
None of us in general I think that sounds exciting and maybe a bit more advanced than we tend to think about.
Within public transit agencies could you just expand on how youre thinking about the evolution of that opportunity and what that does for b as Tam overall overtime. Thanks very much.
Yeah.
I think autonomous is a huge opportunity for us I also think it's incumbent on us to play this role on behalf of our customers and help them adopt this new technology. So we're working very hard to build obviously the purchasing with way most exciting keenly, Arizona as a first step, but I think with weibo expanding around the country and now into Europe.
Lots of opportunity there to continue to expand that partnership and we're looking to broaden our partnership base. So that we can be that that partner to our customers who enables them to adopt autonomous vehicles, we're seeing interestingly quite different dynamics in the U S versus Europe U S very focused on robo tax season, we can brew.
The public sector in Europe, we're seeing much more of a top down sort of drive from the governments to push autonomous vehicles in the public transit sector. So that may actually be an early adopter of autonomous vehicles and lots of funding going into that so I think a lot of opportunity in Europe from the autonomous vehicle space and overall, what we've seen is when we help our.
Customers reduce their costs.
They are willing to invest more and.
They see the ROI. So if the times vehicles can bring down costs certainly improve safety.
A lot of opportunity there from our perspective.
Yeah.
Also it's pretty encouraging thanks very much.
Thanks.
Your next question comes from the line of Brad Zelnick with Deutsche Bank. Your line is open.
I will echo my congrats to you all as well exciting.
To finally be out and a great quarter to start.
I've got two questions and ironically, they piggyback on Michael's last question. So first on customer count just given the very strong customer additions this quarter, how should we think about the cadence of customer count going forward and please remind us of any seasonality here or anything else that we should keep in mind and then.
Got a follow up.
Hey, Brad Thanks, Thanks for the <unk>. So we're very pleased with the results this quarter I'm out of the gate. So thank you for the support.
On the customer account you know you've seen the chart and we've discussed this.
Quite a lot.
There was some cadence to the market and we have certain quarters that are very strong in customer addition, in some quarters that are.
Strong, but maybe lower the general range for customer additions in 8% to 12% and when you look back at the last 10 quarters Thats been fairly consistent.
I would expect that we continue to remain in that range. This quarter was very strong.
Some of our new products could be seasonal but we are very early in the penetration of those markets. There is still a lot of white space overall across the platform.
Feel very good about that range.
Okay, that's very helpful and actually I'm going to pivot I was going to ask a whammo question, but I'll save that for another time, but.
But maybe bigger picture for you Daniel.
Not that you don't already have an enormous opportunity to pursue but when you talk about leveraging billions of proprietary data points to bring AI to government and delivering llm's for cities, what's the even broader potential over time, perhaps even in addressing needs that are that are adjacent to transit. Thanks very much.
Yes, thanks, very much but I think that's a great question.
We are very focused on our current market, which is as you've mentioned that you've talked about a lot is huge and we're not seeing that.
Kind of opportunity for durable growth diminish anytime soon in our view I think the.
With AI and the ability to become much more efficient and developing products, which I feel like in the last quarter. We're starting to see we're starting to see an acceleration of our product roadmap and in part I.
But that to our ability to develop code more quickly using these tools you could imagine that given the customer relationships, we have and the opportunity ahead of us we could more quickly expand into other areas in the government technology space. So.
I don't think thats necessarily an immediate.
Thing that we would work on but definitely something on our minds as far as the broader opportunity and how quickly we can move into it.
Excellent. Thanks again.
Thanks, so much.
Your next question comes from John Gucci, and the future with Guggenheim. Your line is open.
Thank you.
I'd like to offer my congrats to the team to this are really impressive results across all metrics.
And Clara Thanks for that customer example, going from 40% to 50% it really helps with that bridge.
A real life example, there but my questions. My first question anyway is more on the growth and it hasn't been brought up several times here. This is the greatest sequential increase in customer count we have seen in our model goes back almost three years.
But if I wanted to look for anything that may raise questions from investors the IRR per customer actually declined a little bit sequentially for the first time in eight quarters is that simply because you added. So many customers that didn't have a full quarters worth of revenue in there since your <unk>.
Simply revenue times, four or is there something else affecting that that we should be thinking about perhaps.
The new school product and maybe that's a lower ASP or how should we be thinking about that.
Absolutely. Thanks, Thanks, John It's a great question and happy to give you more color on the Arab per customer.
Sure sure.
We estimate this quarter very strong demand across the board.
And the revenue growth as well.
The Red platform Air customer base declined slightly quarter over quarter in Q3 versus Q4.
1%.
And that's generally driven by one normal seasonality patterns of our existing contracts in this in Q3, we tend to have.
Overseas schools corporate contract.
And that has a lower volumes during the summer so that seasonal is that slight seasonality drive slower customer in Q3, and then the growth in AR.
Our scores business.
While we saw a significant increase in number of customers and this goes back to it's relatively new.
As customers launch their services in Q3, coinciding with the startup of the Academy can therefore contributed to more limited revenue in that quarter. So that drove the slight decline per customer overtime. We expect these customers to ramp up.
Okay, great. Thank you thanks for thanks for that clearer.
Daniel You said there was no impact from the federal government shutdown in this quarter, but we've been looking closely at all of the government funding and.
Do you see any impact from like Cobra era funding that I think in some cases this is going to start expiring over the next year or so.
And perhaps maybe you can share your experience in similar situations when there are funding pressures.
Mass transit sit as far as priorities among competing alternatives for funding.
And you can think it's a.
Great question.
Yeah.
Well, maybe I'll try to answer than a few different pieces, so specifically to the government shutdown.
We haven't seen any impact at all so far and we don't expect to see any impact from that the way the funding for transit works. Its long term funding typically appropriately at the federal level appropriate every five years.
This is sort of it was a very long shutdown, obviously, but we don't believe that it will have any impact on our business. Even if it ends in looking into this quarter in the next quarter. So that specifically to the shutdown I think more generally you're asking a general question of what is happening to transit funding, especially some of those funding those pieces.
Administration start to expire and longer term.
There is there is sort of let's say some puts and takes there. There is some of this funding. That's expiring there is some other funding that we talked about whether through ballot measures or other sort of state legislature approvals that is coming in that is that is growing the overall part overall I think what's key for us and what we've seen consistently is that we just need to identify and it's a little bit on a city by city and <unk>.
That agency buy transit agency basis, we need to identify where they are in their budget cycle at any point that youre going to look to see there may be an overall trend. We can talk about it maybe in Germany. There was a period over the last year or so.
The overall trend was downward there is still some cities that have more budget seems to have fewer the U S. I don't think the overall trend is downward I think it actually continues to go up overall and then but within that there is still individuals' cities between leases that may be in their budget cycles sort of up or down and the key for us is to identify where they are in the budget cycles. So we can.
Honestly provide them with the right solution adapt our pitch. If you will if you think of a new sales perspective, but in reality it find the right solution for them. If they are in a downward trend we need to help them save money, we kept them become more efficient and I think we're extremely well positioned sometimes a kind of a counter intuitively that's our biggest opportunity because they have to change something there under budget pressure and that's where we can come in with.
Our solution can really help them avoid service cuts, while they're reducing their budget. Obviously in an expansion expansion kind of phase that is also a great opportunity. We can launch new Microgenesys services, we can do lots of stuff with.
It's really about identifying where they are versus be worried about the budget going up or down.
Okay.
That does makes sense Daniel Thank you got it.
Nice job team.
Thanks, very much John pleasure.
Your next question is from the line of Patrick Walraven scripts citizens. Your line is open.
Oh, great. Thank you and let me add my congratulations.
Terrific. Thank you.
Can you guys comment on them.
I know Youll guide next quarter. So we're not asking for that but can you just comment on what the durability of the growth looks.
It looks like in this model and also what the pace of margin expansion. It looks like just sort of any broad points you can share with us would be super helpful.
Hey, Pat Thanks for the question.
We feel very good about the durability of the growth long term just given the scale of the market.
Very limited penetration and the fact that it's not.
We don't see our current cohort of customers being any different from the next cohort of customers. If you will I think I talked about Springfield, Ohio in that opportunity.
There are so many cities like Springfield, So it's not that there's something unique about our current customer that won't apply to the next 100 200000 2000 customers. We really believe that there is a tremendous opportunity to continue doing what we're doing today just at a much larger scale now if you add on top of that all the product innovation that were driving the new.
Alex other opportunities.
We're very optimistic about what's possible.
That's fantastic.
Clara maybe pace of margin expansion.
I looked at the clock.
Thanks for that.
For the kind words as well.
So in the immediate term me. So we're focused on our organic operational improvements enabled modest gross margin expansion and we achieved that successfully this quarter.
With a one four.
4% margin expansion in the medium to longer term, we are working to improve gross margins for the three levers one positioning our lower margin services to third parties to continue to extend our platform with higher margin products, notably our software offering which were which were investing heavily in two and three continuing to.
As for strategic M&A.
Establishing this playbook with remix MCT, Napa acquisitions, which were both highly successful on all accounts.
And the industry continues to be highly fragmented so theres an opportunity to to to acquire point solutions, which may not make it as a standalone companies that have excellent excellent products and teams and maybe very accretive additions to the platform.
We reiterated and underscore the commitment to the long term target of 50% and our commitment to margin expansion and again, we'll take two phases. The first phase, where we're continuing to land customers and with that with modest gross margin expansion and then the second phase where we start to see the impact on the three levers and have more meaningful.
Function extension of the margin.
Wonderful thank you.
Yeah.
Okay.
Your next question comes from Scott Berg with Needham and company. Your line is open.
Hi, everyone really nice.
Here on the gate pardon me I wanted to probably take brands.
Weibo question here, but.
The partnership with secret testing, but knowing how those contracts are constructed within the micro transit area. How do your contracts change in that type of scenario are these contracts probably my guess is they're more weighted on the software side of what the offering looks like that some of your services side, but just trying to understand how that near it.
That shifted that Sir.
So that's a great question, Scott and and Thats, absolutely right. When we when we put out so we think a win was one of our potential fleet providers.
We can have a human driven vehicle with a fleet.
It could have a wave of vehicle and those would be equivalent solutions for our customers and we offer them both.
And in that in that contract basically outsourcing to weigh more of the fleet and vehicle means.
Outsourcing a large chunk of our cost with third parties that those contracts tend to be higher margin, obviously, we have <unk>.
Small sample today. So there is some room.
Two to explore with Abbott in very high margin and allow us to bring this incredible technology to our customers with our vertical software layer on top so they can actually use it as part of their transit system.
Understood helpful. Thank you and then.
Many comments on strong customer additions in the quarter I guess as you think about the growth algorithm over the near term maybe two to four quarters out does that algorithm kind of shift towards more.
New customer opportunity of more revenues coming from net new customers or.
<unk>.
Predictable cross sell model. This is that still the way we should think about maybe the next several quarters.
Okay great.
Great question from our point of view the growth algorithm states pretty.
Pretty much the same you were very focused on continuing to grow within our existing customers.
And also add new customers in the same way that we talked about them.
If I'm looking forward a few quarters.
The feeling is that it should stay about the same as what you've seen in our historical results as far as the distribution between the two.
Excellent nice quarter. Thanks, Kevin.
Thanks, Thanks, so much.
Yeah.
Your next question comes from Brian Schwartz with Oppenheimer. Your line is open.
Thank you for taking my questions. This morning Echo great results out of the gate.
Two questions first for Danielle.
AI.
I know, it's early but how do you envision discussing pricing for AI functionality with your clients clearly, it's a differentiator of the business, but is it all about the stickiness of the platform.
Can it help you take up price since you're giving clients more value.
Just thinking about as you bring in more AI functionality into the product suite and your core offerings moving forward.
Hey, Brian Thanks, so much and great question.
I think we can do so much with AI to continue to evolve and transform the product and something thats increasingly even more useful to our customers. So there's definitely a lot of value that we're delivering there.
<unk> specifically at least for now we are trying to be extremely customer centric.
<unk> is very sensitive to.
Two feeling that.
In any way being Nickeled and Dimed. So our approach has been for our entire history to say, we deliver a solution and we will continuously update that solution for use a day you are extremely happy with that product that makes it very sticky it builds real trust with our customer we have so much other opportunity to grow with them beyond simple price increases.
Our software that.
That's been our philosophy I think that should apply to additional AI features that were added and adding into the platform.
Despite the fact that I do agree they can contribute the enormous amount of value to the customer now that said in parallel we're able to use AI to launch what I think of as sort of new products.
And those I think we can sell separately as individuals skus increase.
Increasing the revenue that we're able to generate from each one of our customers. These are also very high margin cars point earlier, so I would separate from.
Taking existing functionality upgrading it sometimes very significantly with AI at least in the short to medium term that really isn't our philosophy to try to charge for that.
I think it has had a lot of value.
New products I think are real opportunities.
Thank you Danielle and one question for Clorox following up on Pat's question, but maybe specifically about the gross margin line, we saw a nice lift to gross margin this quarter and over the past four quarters to for the business.
Beyond the scale are there other drivers for greater gross margin efficiency that you can foresee taking hold.
For the business over the next 12 months or maybe over the medium term. Thanks again for taking my questions.
Thanks, Brian.
That's very helpful questions. So happy to happy to address it I think there are several drivers that where we're looking at to continue to drive gross margin and beyond scale and beyond the three levers that we just discussed one is obviously the mix shift towards higher margin contracts. We're seeing and you said. This is a great case study of a customer that went from.
40% to 50% gross margin and is continuously improving in that customer's growth.
Revenue growth will drive further margin expansion are continuing to look at the mix shift, which is which is a really nice driver of near term margin incentives is that it's quite interesting and focusing on those customers, where we can drive.
Uptick in margin to changes in operational metrics and second.
We are continuing to work on cost improvement.
Our cost to serve our customers AI has brought a lot of new opportunities to reduce cost.
And our cost to serve so while on the top line data on justice, because we're just adding more value to our platform and.
Bringing in continuing to penetrate our Tam, which will drive a lot of revenue growth going forward and hopefully durable growth strong durable growth on the cost line, we're actually using AI to reduce our cost and that that is valid for obviously, all cogs and opex and trying to continue to generate examples.
Your support customer success.
Infrastructure cost the ability to better manage and control those costs has increased substantially with AI tools.
So we're definitely focused on that and I think that will drive.
Expansion.
Your next question is from the line of Brian Peterson with Raymond James Your line is open.
Thanks for taking my question and congrats on the really strong results here.
So I wanted to double click on the school's opportunity it's encouraging to hear the momentum there is there any way to help frame that opportunity relative to what you have today in terms of fleet size, our spend and as we think about that go to market is that more of a net new dynamic where you're selling to a new buyer or is there a cross sell potential.
Relative to some of your existing public sector customers could you have some impact out of it.
Yes.
Thanks, Brian happy to happy to give more color on that opportunity I would start anything that's been.
<unk> been investing in and the product and the technology for that end market for us.
A significant amount of time that the go to market motion is still very nascent average close to where the in the early stages of capturing this opportunity.
And then in <unk>.
Answering some of your question and that opportunity is quite meaningful and it's part of our overall Tam.
And definitely very attractive across all fronts.
The way we look at it as you know the buyer is can be different and it depends we're looking at and in general we tend to go to school districts or <unk>.
Please go ahead of schools and there are definitely different than the made her the head of the transit agency in terms of who is actually buying the platform. So that that is definitely a new customer and they can buy it in most cases. However, there is a halo effect.
And the reference ability of our platform within the cities that they're showing in Cds, where these may be living together in various functions and as people may be sitting together and discussing their solutions. There are other scenarios, where they are quite separate so I would say there is there's a bit of a range.
Our buyers, but I would say in most cases, it's decidedly different buyer, although once we have existing presence in that region or that that Citi would definitely benefit from the network effect.
The reference ability of our platform.
More to come on that as well.
For that business.
That's great to hear acquired and maybe just sticking on the reference ability point, Daniel I know you've mentioned the European customer Advisory Board a.
We're very strong in Germany, the tone on the on the U K is not lost on us, but I'm just curious as you think about those proof points in those markets. How do we think about a potential ground swell into other geographies. Thanks, guys and congrats on the strong results.
Thanks, so much.
Alright.
I think specifically within Europe.
Maybe I'll just give an example in the school bus.
That's a market where school bus operates quite differently. They don't have yellow school buses, while in the U S. But theyre more buses you just count number of buses has been narrowed transit buses. So it's a huge opportunity in Europe typically school bus is much more integrated view. They don't have the old school bus much more integrated into their.
Traditional public transit system with a lot of special education.
Our school transport being provided so there there is an opportunity that gets it referenced ability to sell the school bus product.
To the same customer to the customer that we already work with so that's a much more direct sale. There's a lot of product work is still complete there to make that.
Opportunity accelerates, but I think that's an area that we could see some really good.
Really good growth and overall.
I do think that while yes every place you go they say Oh no no here were different than we are in this other country. There is no question that when we have success in one region. It influences the all the other regions as well.
Great to hear thank you. Thank.
Thank you.
Your next question is from Jonathan Ho with William Blair. Your line is open.
Hi, Good morning, and let me Echo my congratulations as well, maybe just starting out with the strength you saw in the U S market. This quarter, what maybe stood out or maybe surprised you in terms of win rates or utilization just wanted to understand the drivers for that geographic strength.
Thanks, Jonathan.
Connected because.
From our perspective Q3 was business as usual, we saw very strong demand for the platform.
Across the across all metrics and across all of our solutions.
You can see you know historically there is a cadence to the market as certain quarters that in that can be very strong firm or is there a bit slower in this quarter turned out to be very strong with lots of additions and growth that the growth algorithm is the same and the opportunity continues to be very large.
Supporting durable growth.
We will continue to be very excited and confident in this opportunity and I think Q3's.
No different than prior quarters, and really a strong testament of that market opportunity.
Got it and then in terms of the timing for ballot measures that you referenced like what is the timeframe for that to translate into contracting and potentially RFP opportunities. It would just be helpful to understand what that process typically it looks like thank you.
Thank you Jonathan.
Great question.
Clarifying that as a very long term.
Process so.
It takes months, sometimes years for that funding to sort of really become available. Then there is the procurement process and so forth. So we're looking at.
And then the funding is often over many years that its available depending on the specific dollar measure. So we're looking at a very long term impact generally in our business everything we're doing is fairly long term.
And we're always thinking ahead and in many cases, we are increasingly finding ourselves involved in in these ballot measures and helping to support them and maybe even initiate them. Some cases. So I think that's something that we'll look to do more of and really thinking 125 10 years ahead in some cases as to when we will have a material impact on the business.
But that's just that's sort of the time scale that we need to think of it.
Thank you.
And your final question comes from Alexander Zukin with Wolfe Research. Your line is open.
Yeah, Hey, guys. Thanks.
Thanks for taking the question and congrats.
Maybe.
First one for you.
<unk> partnership feels like a seminal moment, partially because.
Seems like it enables you to kind of even more maybe aggressively fulfill your vision for solving what seems to be an extraordinarily difficult kind of algorithmic in mass and then services challenge for your customer base and maybe just elaborate if you can both the potential marketing in Pi.
<unk> opportunity that that partnership is driving from awareness in terms of your customer base and then from both a accretive accretion perspective to the contract, which I think you guys mentioned earlier.
How do we think about as more of a potentially these autonomous contracts rollout across your customer base. How do we think about the revenue uplift opportunity and I've got a quick follow up.
Thanks, Alex I really appreciate it I.
I agree with you I think there's a real opportunity in autonomous it's just starting.
But I agree with everything you said I think there is a there can be a real impact both in the way that our customers perceive this opportunity I would say is.
What I've seen from talking to customers and that's true here and in Europe.
As these autonomous vehicles become available the demand for them from the public transit sector.
Is very high I think it's really just limited by the availability of these vehicles.
Vehicles and.
There are even some some of our customers that have indicated that it is something that is not even yet our budget matter. It's just a matter of.
Wanting to be ahead on this technology that they would be willing to launch certain services with Thomas vehicles that theyre not it may take them a lot longer to agree to launch with a few hundred vehicles. So I feel that the opportunity is very large totally agree with you and it really is at the moment dependent on the availability of these autonomous vehicles to them as quickly as they can become available in the different geography.
<unk>.
I think we will see an acceleration.
Perfect and then maybe Clara the large upsell that you guys talked about.
So for mobile, Alabama feels that that was also a competitive displacement of a larger.
A large competitor maybe just talk through as you continue to take share.
When does that kind of click happened in the mind of a customer to really.
Move in scale from our legacy operator to via in those situations.
Yeah.
Alex Thanks for the question.
Yeah, absolutely right. This was a takeover that did some of the extension was a takeover from a legacy player in the <unk> space.
It's a really interesting market that we're in we're probably.
Probably the last pen and paper industry in terms of technology and you have a number of very large legacy players that are all obviously very large in scale.
Has been established in this market.
Very long time, and so it is a process to displace them and displays and let these very large contracts.
I would say demand for these very large contracts. This is the strongest it's ever been so we're starting to see a halo effect.
Some of the takeover as we've taken over.
Several of those contracts already and the performance is.
Extremely impressive in terms of taking taking.
Taking transit systems that actually did not work that our ridership are declining.
Declining cost are increasing.
Consumers residents are not aware of that and not happy with that and turning that around within a year or two so we're starting to see outstanding results.
Those very large takeovers and as we see more as we get more data around that.
We are seeing the reference ability kick in and the flywheel effect.
So today, we have probably the strongest pipeline in this type of opportunities that we've ever had and obviously, it's on us to execute on that and then sales cycles. It will take some time, but we're very confident in our ability to continue to push on that fund them and get very large contracts.
For the business.
Overtime excellent. Thank you guys.
Thanks, Chris.
Thank you. Thank you.
This concludes the Q&A session for today I will now hand, the call back to this for closing remarks.
Thanks, very much so thank you all for listening and for the great questions. As we said, we're very pleased with our first quarter results as a public company.
We're excited for the road ahead look forward to doing many more of these calls with you. Thanks everybody.
Okay.
Thank you again for joining US today. This does conclude today's presentation you may now disconnect.