Verra Mobility (VRRM) with an unusual trade on 1/3 as 2400 July $20/$30 call spreads bought for $5.25, looking for a move over $30 to make $1.14M on the trade. VRRM has no other notable open interest. VRRM shares are +16% over the past year but have sold off from above the $30 level in July and the last few weeks basing on AVWAP off the August 2023 low and a retest of the early 2024 flag breakout.

VRRM is a leading provider of smart mobility technology solutions and services which include toll and violations management, title and registration, automated safety solutions, and other data driven solutions to rental car companies, fleet management companies, other large fleet owners, municipalities, school districts and violation issuing authorities. VRRM operates in two segments, Commercial Services and Government Solutions. Commercial Services is a market leading provider of automated toll and violations management and title and registration solutions; Government Solutions is a market leading provider of automated safety solutions to municipalities, counties, school districts and law enforcement agencies including services and technology that enable photo enforcement via road safety camera programs related to red-light, speed, school bus, and city bus lanes.

VRRM has a market cap of $4.08B and trades 19X Earnings, 12X EBITDA and 27.3X FCF, the middle of its 10-year range and FY25 seen with revenues rising 6% and EPS growth of 8%. The company has seen strong tailwinds in its Government Solutions business as legislators embrace its “purpose-built enforcement” approach, and it is poised for growth in California and other markets. While the Parking Solutions business has faced some challenges, the company has taken steps to improve its performance. VRRM announced a $100M buyback in November and earlier in 2024 was subject of a strategic review. Scopia Capital, an activist, was formerly pushing for the sale of VRRM. Verra Mobility has pivoted from fixed red light cameras to “purpose-built enforcement”, which means putting cameras in areas where people should be driving more cautiously, such as school zones, around school buses, and work zones. This has been a real tailwind for the business as state legislatures have embraced this approach. VRRM  expects its Commercial Services business to grow at a high-single digit rate, with one-third of that growth coming from GDP growth for travel, one-third from the secular tailwinds of new and converted toll roads, and one-third from growth initiatives like the fleet and title/registration businesses in Europe. VRRM is starting the speed safety program in San Francisco in early 2025, a key driver that could be adopted in other places. Commercial Services continues to benefit from strong domestic travel trends and enrollment of new vehicles / increased tolling with FMC customers. A meaningful expansion into Europe is the biggest needle-mover for Commercial going forward given that it represents a sizable untapped TAM. The NY Governor recently signed legislation to increase its red-light program to 450 intersections, though it likely won’t be rolled out until post-RFP completion.

Verra has a dominant market position across its Commercial Services toll business, its Government Solutions traffic photo enforcement business, and its newly acquired Parking Solutions business. Long term catalysts for accelerated and compounding top line growth at VRRM include new state legislation, Europe, connected fleet, and curb management.

Analysts have an average target of $29 and short interest recently jumped to 3.3% of the float.