Via Transportation Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
May 12, 2026

Key Takeaways

  • Positive Sentiment: Via reported a strong Q1, with revenue up 29% year over year to $127 million and annualized run-rate revenue reaching $510 million for the first time. Customers on the platform rose to a record 838.
  • Positive Sentiment: The company said it is making clear progress toward profitability, with adjusted EBITDA margin improving to -4.6% from -8.4% a year ago. Management reiterated its goal to achieve positive adjusted EBITDA in Q4 2026.
  • Positive Sentiment: Via highlighted accelerating demand for larger full-network transit deals, ending Q1 with a record $650 million pipeline and winning 4 network deals already in 2026 worth more than $40 million in annual contract value. Management described these wins as a potential inflection point.
  • Neutral Sentiment: Guidance was raised for the full year, with 2026 revenue now expected at $547 million to $550 million. Q2 guidance was set below Street expectations, which management attributed to deal timing, later launches in the second half, and continued headwinds in Germany.
  • Neutral Sentiment: Germany remains a key drag, as Via said the market is facing lower growth and some elevated churn amid budget pressure and a slower shift to integrated platform adoption. By contrast, the U.K. was called out as a strong growth market, with revenue up 68% year over year.
AI Generated. May Contain Errors.
Earnings Conference Call
Via Transportation Q1 2026
00:00 / 00:00

There are 15 speakers on the call.

Speaker 12

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Via Q1 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. We will now start the presentation.

Speaker 14

Journeys for everybody, homes for everybody, jobs for everybody. Transport is clearly a key factor in bringing all of those things together.

Speaker 14

Before coming to Remix, planning bus services was very challenging and time-consuming. Using Remix has enabled us to do that in a much more efficient way.

Speaker 14

We're now giving access to residents 7 till 7, Monday to Saturday, which they wouldn't have had previously.

Speaker 14

Via gave us confidence in terms of the specialist service that we run, here at West Midlands Bus On Demand. It's great to have the same system to be able to do the phone booking and the app, we know that our residents are really benefiting from the partnership that we have with Via.

Speaker 14

We were serving about 100,000 residents or so then, and now we're serving over 300,000, and we've seen the ridership increase in a similar factor as well.

Speaker 14

Relationship with Citymapper is growing. We are looking forward to utilizing the data that it will provide for our network planning exercises.

Speaker 14

When the first sort of commingling service went live, the overall patronage collectively was 30% higher. I'm excited about sort of going faster.

Speaker 7

Good morning, and welcome everyone to Via's first quarter 2026 earnings call. I'm Gabby McCaig, Via's Chief Corporate Communications Officer and Head of Investor Relations. With me today are Daniel Ramot, Via's Co-founder and CEO, and Clara Fain, Via's Chief Financial Officer. During today's call, Daniel will review our first quarter 2026 business update before handing it off to Clara to discuss financial results and our guidance for the rest of the year. We will then open the call to Q&A. In addition to prepared remarks on this call, additional information can be found in our investor presentation, press release, and SEC filings on our investor relations website at investors.ridewithvia.com. Before we get started today, we wanna draw your attention to the safe harbor statement included in our press release and investor presentation.

Speaker 7

Items we discuss today will include forward-looking statements about topics including, but not limited to, our future financial performance, projections, 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 quarterly report on Form 10-Q. Any forward-looking statements that we make on this call are based on our assumptions as of today, May twelfth, 2026. Unless 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.

Speaker 7

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 presentation. Without further ado, I'll now hand it over to Daniel.

Speaker 6

Thanks, Gabby, and thank you everyone for joining us today. We're delighted to report another outstanding quarter for Via, with results that exceeded both top and bottom-line expectations. In Q1, our revenue grew 29% year-over-year to $127 million. This was our first quarter with over half a billion dollars in run rate revenue, an important milestone for the company. The number of customers on our platform grew in Q1 to 838, up 23% year-over-year. We continue to make significant strides towards our profitability target with adjusted EBITDA margin of -4.6% in Q1. The basis for our rapid and durable growth is twofold. We are in the early stages of transforming an enormous market, and we offer a unique and differentiated solution that customers increasingly recognize as superior.

Speaker 6

In our core geographies of North America and Western Europe, our serviceable addressable market is estimated at $82 billion based on a report we commissioned from a major consulting firm. Both by customer count and by revenue, our penetration of our SAM is less than 2%. This presents a tremendous opportunity for continued growth for Via. The key to our ability to rapidly transform this enormous market is our unique product and go-to-market strategy. Via is the only company that offers an end-to-end unified platform for optimizing and operating entire transit systems. At the core of our platform is our purpose-built AI-powered software, which leverages proprietary data and expertise we amassed over more than a decade. When customers adopt our software, they can leapfrog decades of technology neglect and rapidly break down technological and operational silos, driving immediate ROI. Crucially, our platform extends well beyond software.

Speaker 6

We are a full-stack transit provider with a broad suite of technology-enabled services that allow us to directly participate in the delivery of transit services to end customers. When customers select Via to provide these services, we become the real-time orchestrator and optimizer of their transit network, assuming control and accountability for service levels, cost, and passenger outcomes. Our software and services are deeply integrated, creating a virtuous cycle. Our software is embedded in every aspect of our services, driving significant efficiency over legacy transit providers who make limited use of technology in their operations. Our services create a powerful feedback loop that supports continuous improvement of our software and provides proprietary data for our AI models. Consistent with the unique nature of our platform, our revenue model is predominantly based on usage and outcomes.

Speaker 6

When customers select Via to orchestrate the delivery of transit services to their passengers, the increased control and accountability can drive operating leverage and enhance our ability to scale with these customers. Our revenue model minimizes friction for expansion and allows us to seamlessly capture this upside. We believe our platform to be the most extensive integrated solution available on the market, enabling customers to seamlessly plan, schedule, operate, and optimize their system across transit modes. Within our platform, microtransit remains Via's founding innovation. It is a new paradigm for mass transit, utilizing dynamically routed flexible shuttles in place of rigid fixed-route and fixed-schedule buses. Our analysis of large U.S. transit systems, for which we have data by bus route, indicates that between 15%-65% of bus routes for those systems operate at lower efficiency than microtransit.

Speaker 6

These routes are prime candidates for replacement by microtransit and represent strong expansion opportunities for Via. While microtransit remains a major catalyst for adoption, our focus today has expanded to managing entire transit networks on behalf of our customers, including paratransit and buses. The focus on providing the orchestration layer for entire transit networks is a major contributor to recent acceleration in the growth of our pipeline. Last quarter, we reported that our pipeline grew more than 50% year-over-year. This trend has continued in Q1, and we ended the quarter with a record $650 million in pipeline opportunity. We first took on management of an entire transit network in Sioux Falls, South Dakota.

Speaker 6

Winning the contract in late 2023 and launching in January 2024, this highly successful partnership with Sioux Falls is the foundation of our expertise and credibility as an orchestrator of full transit networks. After assuming responsibility for the transit network in Sioux Falls, we launched microtransit citywide, modernized and integrated the previously siloed paratransit system, and redesigned the bus network in close collaboration with the city and the community. This transformation produced outstanding results, reversing a multi-year trend of rising operating costs and declining ridership, driving ridership growth of close to 40%. So far in 2026, we have already been awarded 4 network deals, representing over $40 million in total annual contract value.

Speaker 6

We are very encouraged by these recent network wins and believe they may represent an inflection point in our ability to win these opportunities. In our view, there are three key factors behind our recent success with network opportunities. First, while some customers have historically procured transit operations and software separately, in some cases even independently procuring services for each transit mode, we are increasingly seeing integrated opportunities that combine transit services and software across multiple modes. Now that we have set the precedent, customers recognize the value of an integrated transit system. When they choose to procure such a system, we are well-positioned to capture the opportunity. Second, having established Via as a successful provider of integrated network solutions with strong results and references, we are now able to credibly pursue and win these opportunities. The third important factor is AI.

Speaker 6

Thanks to AI, we're able to build solutions at a faster pace than ever before. This allows us to enter new verticals, such as buses, more rapidly. It also means the gap between our offering and those of existing competitors is expanding, allowing us to deliver superior ROI to our customers. Looking ahead to the rest of 2026 and beyond, we are excited by the number of network opportunities in our pipeline and the potential to further accelerate and drive growth in our business. We are in the very early phases of realizing the potential of AI to drive increased automation and efficiency across every aspect of our operations, from routing efficiency to dispatch productivity, lower customer service costs, and improved fleet uptime. As the network orchestrator, we are in a position to translate these service cost reductions into expanded margins, especially as volume scales.

Speaker 6

As their economics continue to improve, autonomous vehicles represent one clear such avenue for cost reductions in the delivery of public transit services. We've seen strong interest from our customers who seek to integrate AVs into their public transit fleets, and we've seen strong interest from AV developers who are seeking to partner with us to provide the deep vertical stack required to serve public transit customers. Building on our partnership with Waymo, we recently partnered with Beep to provide a fleet of autonomous shuttle buses for the city of West Palm Beach, and we're actively discussing opportunities with other AV developers. We view these partnerships as further proof that Via is rapidly becoming the operating system for future cities. We are also continuing to explore the opportunity to extend our platform beyond transit by leveraging our strong local government relationships and AI.

Speaker 6

Our new Via AI Labs division will leverage forward-deployed engineers using AI to rapidly explore and productize solutions to cities' most pressing civic challenges, including waste management, road maintenance, and data optimization. While still early days, we're seeing strong initial interest from cities, indicating that Via AI Labs has the potential to be a meaningful catalyst to expand our platform and grow our TAM beyond transit. Lastly, before I hand it over to Clara, I would be remiss not to mention our podcast, ModeShift. ModeShift is a thought-provoking, fast-paced conversation led by Andrei Greenawalt, our Chief Policy Officer, about mobility history, policy, and technology. If you aren't already listening to ModeShift, it's a go-to for anyone interested in transportation, recently reaching as high as number two in the government category on Apple's podcast chart. Season two is now out, and I would encourage you to subscribe.

Speaker 6

With that, I'll pass it over to Clara to review the financial highlights for the quarter and our guidance for the year.

Speaker 5

Thank you, Daniel. I'm happy to report that Q1 was another very strong quarter for revenue and profitability, with demand for Via's platform reaching a record high. We exceeded half a billion in annual run rate revenue for the first time in the company's history, nearly doubled our pipeline of opportunities compared to the same period last year, accelerated on several fronts thanks to AI, Last but not least, leaped closer to profitability. As we have in all our prior quarters as a public company, we also exceeded our revenue and adjusted EBITDA guidance. Let's start with top line. In Q1 2026, our annual run rate revenue, which is defined as our quarterly revenue multiplied by four, was $510 million, representing a year-over-year increase of 29%.

Speaker 5

Our growth was fueled by the U.S., which represented 74% of our revenue and where we grew 36% year-over-year. Internationally, we saw strong momentum in the U.K., where revenue was up 68% year-over-year. At the same time, we continued to face headwinds in Germany as our customers continue to navigate a sustained constrained budgetary environment. These results reinforce the benefits of our geographical diversification strategy. We closed the quarter with 838 customers at a record high. We're continuing to benefit from flywheel effects in multiple states where the success of existing customers drives referenceability and allows us to rapidly grow revenue without a corresponding increase in sales and marketing investment.

Speaker 5

For example, in California, we saw an 85% increase in revenue year-over-year in Q1 2026 and are pursuing close to $100 million in active pipeline in the state. Let's dive into our margins and expenses presented on an adjusted basis. In Q1 2026, we spent 13% of our revenue on sales and marketing, compared to 14% in Q1 2025. We see very attractive ROI from our investment in sales and marketing and are taking advantage of several internal AI initiatives, including automation of sales outreach, and design. We believe these initiatives will yield measurable upside. We also spent 15% of revenue on G&A, which was consistent year-over-year. Our G&A expenses were driven by public company costs and increased insurance costs from higher premium and claims expenses in the quarter as we continue to scale the business.

Speaker 5

Finally, R&D expenses represented 16% of revenue compared to 20% in Q1 2025, demonstrating very effective leverage. Our engineering team continued to gain efficiency by extensively leveraging the most advanced AI coding tools. Over 75% of our code is now written by and with AI, allowing us to effectively reduce costs year over year. Efficiency savings were offset by the unprecedented strength of the Israeli shekel, which is the currency of our largest R&D center and currently stands at a 30-year high versus the US dollar. The strength of the shekel had about $2 million of negative impact to adjusted R&D expenses when compared to Q1 2025. We wrapped up Q1 2026 with negative 4.6% adjusted EBITDA margin compared to negative 8.4% in Q1 2025, continuing to make significant progress on our path to profitability.

Speaker 5

Finally, our balance sheet remains strong with $348 million of cash and no outstanding debt as of March 31. Over the past few years, we have been able to drive significant operating leverage while generating rapid revenue growth, with adjusted operating expenses going up by only $10 million since Q1 2023, while quarterly revenue grew by $74 million in the same period. We believe that we can continue to execute with the same level of discipline in 2026. Now let's turn to guidance. Based on our Q1 results and early traction with full network opportunities, with several deals that we have won and will begin to recognize revenue from in the second half of the year, we are raising our guidance for the year.

Speaker 5

For the second quarter of 2026, we expect revenue to be between $132.5 million and $134 million, representing 23.7%-25.1% year-over-year growth. We also expect adjusted EBITDA margin to be between -3% and -2.2% with adjusted EBITDA between negative $3 million and negative $4 million. There are several factors driving our Q2 guidance. First, we're experiencing continued headwinds in Germany with slower growth and higher trend than normal. Second, consistent with historical revenue patterns, our market has a certain cadence to it, with new deals launching when existing contracts expire. This year, we are seeing many large deals that are already contracted or won launch later in the year, which informs our Q2 guidance and our full year revenue guidance.

Speaker 5

For the full year 2026, we are raising our revenue guidance to $547 million-$550 million, representing 26%-26.6% year-over-year growth. We are reiterating our adjusted EBITDA guidance at -$12.5 million to -$7.5 million, despite about $2 million of annualized impact from the strength of the Israeli shekel as of end of Q1. We reiterate our goal to deliver our first quarter of profitability in Q4 2026 with positive adjusted EBITDA, which we believe will be a major milestone for Via and an important step on our path to delivering great returns to our shareholders. With that, I wanted to thank you all again and turn it back to the operator so we can take some questions.

Speaker 12

Your first question comes from the line of Adam Hotchkiss with Goldman Sachs.

Operator

Great. Thanks so much for taking the question. Daniel, appreciate all the detail around flywheel states, and I know these brand network effects are something we've talked a lot about in the past. Wondering if you're seeing your referenceability starting to actually catalyze incremental RFP activity? I'm thinking as you launch some of these AV partnerships and build out some of these adjacent offerings like student transit, and I think you even mentioned waste management on the call. Do we at some point go from an RFP environment where customers are proactively looking to replace an existing process to one where Via's brand in the market is actually pulling forward some of these decisions by governments? Thanks so much.

Speaker 6

Thanks so much. It's a great question regarding the effects of the flywheel states and how they're impacting RFPs we're seeing in the market. Overall, I think we're seeing a very positive trend in these flywheel states across a number of factors. One, we're seeing generally win rates higher in these flywheel states, you know, somewhat higher, which is very encouraging. We are seeing increased activity for Via in those states. If we look across our pipeline, we are seeing that, you know, a large percentage of the pipeline is coming from these flywheel states and starting to see a dynamic.

Speaker 6

I think I mentioned this in the prepared remarks that we are, we're really transitioning more and more into opportunities that are well suited to Via, these integrated opportunities that combine the services and the software where we think we believe we have a strong advantage in winning those opportunities. Across a number of dimensions, win rates, the contribution to our pipeline, and then the types of opportunities we're seeing in those flywheel states where we're getting the referenceability, where our offerings quite familiar to our customers, you're starting to see them shift towards creating opportunities and seeking opportunities that are better suited for Via. For us, that's a very encouraging direction.

Operator

Okay, great. Thanks for taking the question, Daniel.

Speaker 6

Thank you.

Speaker 12

Your next question comes from the line of Josh Baer with Morgan Stanley. Your line is open.

Operator

Great. Thanks for the question. Wanted to ask one on the Via AI Labs and the commercialization of those efforts. Maybe for Daniel, if you could talk a little bit about specific products or use cases that are being developed, and, you know, any update on how that opportunity is developing here. Then for Clara, a follow-up would be on the economic side, how you think about how much to invest in AI Labs and, you know, what we should expect from a monetization perspective over time.

Speaker 6

Hey, Josh. Thanks for the question. For AI Labs, we're seeing some really interesting dynamics. Just as far as maybe just to try to get to your question directly as far as the specific products, you know, I just wanna remind everybody that our customers, there's a whole range. There's some that are incredibly sophisticated with AI and are really trying to deploy it internally across their city hall, but that is very rare. For the most part, our customers, you know, they're not your typical Silicon Valley company that's sort of knee-deep in AI and that's all they think about.

Speaker 6

Even simple things like just trying to help them get all of their disparate, dispersed, you know, often not very easy to access data into 1 place that they can look at together in a very organized fashion can be incredibly helpful and frankly transformative. You know, a very basic just trying to help them put all their data together into 1 dashboard in a very simple way, I think prior to AI would be actually very hard to do, just the way that the data is set up. What we're finding is with AI, we can create tools for them that are incredibly helpful very fast. Those tools, once we create them, can then be taken to other cities, you know, which in the past would have been hard.

Speaker 6

They've been very bespoke and difficult to translate and scale. That's one just to, just to give a sense of, you know, something that I think in a, in a company or in a bank you would think is trivial, in a municipality may not be and may actually be quite transformational. Beyond that, I think we're seeing some really interesting early use cases around sanitation, things like just scheduling. You know, this is a sort of core Via capability, scheduling of resources. If you need to go out and fix potholes, just the ability to schedule that in a, you know, limited resource, schedule that in a more useful way.

Speaker 6

Just bringing data together from different sources, whether, you know, they have in law enforcement and public safety, there are a lot of very advanced tools that other companies are providing. Co-connecting that data to other parts of the organization is relatively limited, and so being able to bring, again, data together in that area. We've seen some interesting, you know, an interesting use case around social worker caseloads and being able to help them manage that and being able to schedule. A pretty diverse set of use cases.

Speaker 6

We're still at the exploration stage of trying to figure out, you know, what are the best products for us to build. We're in the process of partnering with, you know, order of 12 municipalities to really dig into this and figure out the right way to build out this offering. Early days, very exciting from our perspective.

Speaker 5

Thanks, Josh. From a gross margin perspective, we expect these initiatives to be accretive to our overall gross margin. We're adopting the forward-deployed engineer model, there are lots of comps there. You can get a sense for the gross margin profile. In terms of balancing the investment, you can see that we've implemented AI internally and truly transformed how the organization works. That has generated, helped us generate operating leverage and quite a lot of savings. In a way, we're reinvesting some of that into our AI capabilities and AI Labs. We expect to continue to balance that investment with our profitability targets.

Speaker 11

Excellent. Thank you both.

Speaker 6

Thank you.

Speaker 12

Your next question comes from the line of Michael Turrin with Wells Fargo. Your line is open.

Speaker 11

Hey, great. Thanks very much. Appreciate you taking the questions. Just a two-parter upfront for me. Daniel, the network win commentary stood out throughout your remarks. I think you mentioned four wins and inflection point. Can you just frame more broadly what those mean for Via and how you'd expect some of the successes there to scale more broadly? For Clara, it looks like you were guiding for it, but gross margin down a touch year-on-year. Just remind us if there's anything seasonal or near time impacting that line and if you're still confident in the path towards longer term expansion there. Thank you.

Speaker 6

Thanks, Michael. Yeah, it'd be great to talk a little bit about the network opportunities and wins. I think maybe to tie this back to some of what we've been saying in the previous calls, we've seen a, you know, this is, we believe, also tied to Via going public and the higher profile that we have, you know, more credibility in the market and just the general growth, the flywheel states, has put us in a position over the last couple of quarters where we've been able to really expand our pipeline in a very meaningful way by adding to the pipeline effectively these much larger network opportunities. This also ties into a maturity of our product.

Speaker 6

We've been investing across multiple verticals around transit, of course, for quite a number of years, and are now in a position where we have a solution that we believe can really address the entire network very effectively, both with software and services. It positions us very well, to go after these larger, full network opportunities. Tied into that with, you know, tied to my response to one of the previous questions, the market itself is also, sort of adopting these solutions, where before they were procuring these in a silo, software potentially separate from operations, you know, different, operational kind of verticals separately in a silo. These were less suitable for us. All of these are coming together and driving this pipeline increase.

Speaker 6

I think we mentioned this last time, one of our key questions for us was, well, these are larger opportunities. They're a different category. They're relatively new for us. We are trying to be very focused in going after ones we think, you know, we have a good chance of winning that are well suited to our offering, that are in flywheel states. As I mentioned before, you know, we're trying to really be focused on where we can win. We don't know what the win rates are gonna look like. Are they gonna be similar to our historical win rate? That's really, I think, this is probably the most important point for us as a company that we're very focused on.

Speaker 6

You know, the last few months have been very encouraging, so I don't, you know, it's still early days. I don't wanna overstate, but we're very encouraged by the trend. We think there's a potential to see this inflection point with these recent wins there. You know, our government customers tend to like to pick companies that have been picked by others already. They don't love to take a ton of risk, understandably. We believe that these wins are a good, sort of, you know, initial step to start to turn that flywheel in this area as well. Very encouraging. You know, it is a core focus area for us as a company. It's what, you know, I'm very focused on. We're all very focused on.

Speaker 6

Very large opportunity if we can convert it. Still early, but we're encouraged.

Speaker 5

Michael, thanks for the question on gross margin. The good question on the year-over-year. Last year in Q1, we had about 5% of one-time revenue, which drove slightly higher gross margin for the quarter. This year in Q1, one-time revenue is about 1% of revenue, which gets us to where we are. That's gonna be the larger driver of the change year-over-year. Nothing different, just slightly different mix on this front. Going forward, as we said last quarter, we expect gross margin to be consistent in the near term as we continue to execute on our very large, you know, $650 million pipeline opportunity at the moment. We are committed to achieving 50% long-term gross margin.

Speaker 5

We believe we can get there by continuing to optimize the cost of our services, now leveraging AI Labs, and new technologies like AI and AVs, and making accretive acquisitions.

Speaker 11

Thanks very much.

Speaker 12

Your next question comes from the line of Patrick Walravens with Citizens. Your line is open.

Speaker 13

Oh, great. Thank you. Clara, I guess a couple for you. How much did Downtowner contribute this quarter?

Speaker 5

Hey, Pat. Thanks for the question. You know, we're very pleased with the Downtowner acquisition, and how it's turning out and the level of integration that we've been able to reach. A perspective is that the material contribution from Downtowner is the number of customers. That's what we believe in, and we're very pleased with that. We've added 94 customers from Downtowner and already starting to see some cross sells there.

Speaker 13

Okay. Do you wanna share what people are just asking what the organic growth rate was. That's what I'm trying to get at.

Speaker 5

No, Pat, I really appreciate your question. I'm trying to answer it. You know, as you can see in our numbers, I'll take a step back. We increased guidance for the year. Our growth opportunity for the year, we feel very good about the general opportunity we're seeing. When, you know, I understood your question about organic growth and what I'm seeing, more so when I look forward to 2026 and 2027, I feel very positively. Demand for the platform is at a, we just shared this quarter that we have about $650 million of pipeline opportunities, which is, you know, a very strong increase year-over-year and at the highest we've ever seen our pipeline.

Speaker 5

I believe that our potential for organic growth is very strong and has not slowed down at all.

Speaker 13

Okay. Then, Daniel, can you talk a little bit more about what's going on in Germany and, maybe compare that to, like, California or something? What's the dynamic in Germany?

Speaker 6

Yeah, Pat, I can take this one. Thanks. Germany is, for us, obviously presenting some real headwinds as you guys are seeing. Despite the headwinds, you know, I think we've had really nice results this quarter and are, you know, continue to be very positive about the year overall. Germany, we, you know, we're facing some headwinds that are unusual, so it is an unusual market for our perspective. It is an area where we have not yet been able to move past microtransit being adopted in a silo. I think we talked a lot on this call and in the past about the importance for us of deploying the entire platform. You know, in the U.S. we started obviously microtransit, then added paratransit, now we're adding sort of these full network opportunities.

Speaker 6

That is really key both to our growth and, frankly, to the stickiness of the platform. As we add more and more of these services, it, you know, becomes very challenging to make any changes that don't involve working together with us. Oftentimes these changes actually present an opportunity. In Germany, we have not yet been able to crack it beyond the microtransit vertical. You know, we do sell planning and scheduling and other software, but the majority of our revenue still comes from microtransit. Unfortunately, the agencies there are still treating microtransit as a, you know, in a silo as a separate service. You know, we believe pretty strongly that Germany in that sense is very much behind other parts of the world, and we're not seeing that in the U.K.

Speaker 6

Obviously, the U.S. we've talked about. Canada, you know, the dynamics are much more moving towards integration and for us an opportunity to deploy our whole platform. That coupled with the just the headwinds or macro headwinds, if you will, around funding that exist in Germany across the entire country, combine to create some real pressure on our services and limit our growth there. You know, we're pretty confident that this is a temporary situation, that we will be able that the strength of our product and our solution will allow us to move beyond that and, you know, embed our other products in the market as well, and the dynamic will change. It is taking longer than the than it has been in other markets.

Speaker 6

That's sort of this unusual dynamic in Germany, the funding coupled with the fact that our services are focused in a silo.

Speaker 13

Okay, great. Thank you for all that perspective.

Speaker 6

Thanks, Pat.

Speaker 12

Your next question comes from the line of Brad Zelnick with Deutsche Bank. Your line is open.

Speaker 2

Great. Thank you so much for taking the question and great start to the year. I actually want to follow up on Patrick's question about the difficulties in Germany. You specifically called out both lower growth and higher churn. Is one of those particularly worse than the other? How would you characterize the health of existing customers and appetite for new programs in other areas within the EU? I mean, I guess, is there any risk that what you're seeing in Germany spreads elsewhere?

Speaker 6

Yeah, Brad, thanks. I, you know, I don't know that churn or lower growth one or the other in Germany is where it's probably the lower growth, frankly, is, you know, that's just my sense is the real challenge there. It's, you know, by the way, just to be clear, it's not that the market in Germany is collapsing. Germany today represents 16% of our revenue. It's, you know, we see that market's probably staying fairly stable as far as revenue for a while. That's about where it's been. I believe we had 3% growth. It's just, you know, for us, relative to our 29% growth overall, 36% in the U.S. and so forth, it's just a headwind.

Speaker 6

I think, you know, we have a real opportunity to turn it around in the coming couple of years, but for the moment, I would say the lower growth is probably a challenge. There's some churn. There's some elevated churn as well that we're contending with for all the reasons that I mentioned earlier. I want to be very clear about that. We really don't see that as a, you know, as a model for the rest of the EU or anything that we're seeing anywhere else. It is very particular to Germany. It has to do with our roots there. Actually, Germany was a major growth driver for us earlier this decade, funny to say. We saw it really drive a lot of growth, very fast adoption.

Speaker 6

It's now reached a relatively high level of contribution to our business relative to other EU countries, and then it's in this position that we just discussed. In the U.K., we're seeing very different dynamics as we mentioned, really fast growth, adoption of our entire platform. There's a move there towards what's called franchising, which is moving responsibility for transit to local authorities, which is really driving growth for us and is, you know, has the potential to drive a ton of growth down the road. Has been driving some of the growth we're seeing today, although a lot of the growth has actually been pre-franchising. So we're seeing some really nice results there, and other markets don't really look anything like Germany from our perspective. You know, France, we have very different dynamics.

Speaker 6

Italy and Spain, just getting started. Nordics and the Benelux countries, we're seeing very positive dynamics. It really is Germany is sort of a unique case, and has to do with just the way that we got into the country and then the current dynamics, and then of course this very challenging funding, with government instability and so forth that you've seen in Germany over the last couple of years, certainly not helping.

Speaker 2

Thank you for that, Daniel. Very, very helpful to hear. Just a quick follow-up. A lot of volatility in fuel prices of late. What if if any impact does that have on your financials, and how are contracts structured as it relates to fuel price exposure? Thanks.

Speaker 5

Thanks, Brad. Yeah, we're facing, you know, some large volatility in some of the elements here with the challenging macro. Fuel, we have some exposure to fuel. Fuel is about $3 million a quarter of spend in our COGS. That's kind of 2%-3% of revenue. We saw a spike in fuel costs towards the end of Q1, there's a little bit of impact there. Not material, but some impact to gross margins. We continue to see higher costs coming through Q2 and are expecting some impact there, which we factored into our guidance.

Speaker 5

We do have contractual mechanism to pass through some of these increases to our customers and we are working on this pass-through as we speak, so we don't have to bear the cost of the higher cost of fuel. I feel optimistic that we'll be able to pass through the bulk of it and not have to incur those costs ourselves. That's kind of the general structure of the contract.

Speaker 2

Thanks, Clara, and thanks again for taking the questions.

Speaker 5

Thanks.

Speaker 12

Your next question comes from the line of John DiFucci with Guggenheim Securities. Your line is open.

Speaker 9

Thank you. I have a question for Clara, and then a follow-up for Daniel. Clara, it's good to see the strong results this quarter and the annual guide raised by just a little bit more than the beat. The second quarter revenue guidance was just below the Street's numbers, and given typical seasonality for three Q being, you know, about two Q a little bit higher. I think this implies a little more back-end loaded than the Street had for the year. We know you have great visibility into future revenue, not only for the existing contracts, but for new ones coming online too. Can you give us a little more color on why this looks a little more back-end loaded than I guess the Street had modeled, and how your business should progress through the year, especially the fourth quarter?

Speaker 5

Thanks, John. You know, we did our best to give a sense for where we are and really appreciate your understanding of the results. You have a good understanding of what we're seeing. In Q2, we are seeing 2 factors drive the Q2 results. One is, I think we've discussed about the cadence of the market. There's some implicit interesting seasonality to our market where deals launch when other deals expire. We're seeing a lot of launches in H2 that are already won and contracted, which, you know, could have launched in Q2, but they're launching later in the year. That's driving some of our, you know, Q2 results.

Speaker 5

One is, you know, the cadence of the market, which we have every year. This year, I think Q2 is like lower, then we'll see H2. We are seeing a strong H2 that you can derive from our guidance. Second, the headwinds that we just discussed in Germany are having a more pronounced effect on Q2, and that's also factored into the guide. Onto your comment around last year, the Q2 to Q3 seasonality, because of that, we're not expecting to see a similar pattern. We do expect H2, as you can derive from the numbers, to be quite strong. Not quite a similar dynamic to last year where we had kind of Q2 to Q3.

Speaker 5

There'll be some seasonality in Q3, but it'll be more than offset by the launches.

Speaker 9

Great. That's really helpful. Thank you, Clara. Daniel, Clara talked about R&D leverage in her prepared remarks, it would have come down even more. You would have gotten even more leverage if not for the strength of the shekel. Can you talk about from the R&D perspective, talk about that benefit which we're seeing there, which I guess is AI related, to the innovation you're doing in R&D, especially as it, I guess, pertains to new things like AVs and Via AI Labs.

Speaker 6

Yeah. John, thanks. I think you're seeing it exactly right. We are seeing some really promising and frankly exciting leverage on R&D. Certainly AI is a major contributor. I wanna say I think some of it is driven by AI. Some of it, frankly, I think is driven by just very, very good work that the team has been doing over the last few years to build, you know, build an infrastructure that's highly scalable. Not so easy with government customers, as we've discussed before, because they do like to kind of spec out your product and create, you know, a ton of diversity that's actually quite hard to manage at scale. You know, we have well over 800 customers, of course.

Speaker 6

To provide to each of them you support all of their requirements with all the little details and sort of the vertical nature of that across everything we do around the platform at scale and still be able to move very fast is a really hard challenge. That's something that we, over the last few years, have invested a ton in trying to enable, so creating that infrastructure internally. When you layer AI on top of that, I think we're seeing some really, really nice progress there, and that's allowing us to run very fast. We, you know, we're seeing the leverage obviously in the financials. We talked about this last quarter, this has really continued our delivery on product is only accelerating.

Speaker 6

I think if you talk to our customers, you'll hear the same from them. To me, we're really cranking on that part, and I'm very excited about it. Let's see how we can continue to accelerate.

Speaker 9

That's great. Great to hear. Nice job, guys. Thank you.

Speaker 6

Thanks so much.

Speaker 12

Your next question comes from the line of Scott Berg with Needham & Company. Your line is open.

Speaker 5

Hi, this is Ian Black down for Scott Berg. With the elevated oil prices, are you seeing any impact on end customer demand? Yeah, that's a, you know, that's a really good question. Actually, I, and you're right to point it out. You know, there's several layers of the, you know, commodity price impact. The first one is obviously what we just discussed, you know, in our construction. The second one is that we are starting to see signs that actually not our customers, but their end customers, the riders or the folks that are actually using public transit are trying to use public transit more because of rising oil prices.

Speaker 5

To that effect, we are seeing, you know, increasing demand for the services that we provide and for our customers and the customers.

Speaker 6

Yeah. If I, if I may jump in too, Clara, I, I would also add that that is layered on top of I think this is, you know, well-known, you guys probably follow this, just how expensive it has become, especially in the U.S., to own a car, and it's been quite a lot written about it recently. Certainly to buy a new car and, you know, the cost of repairs for, you know, for used cars. If you layer on top of that the challenge that car ownership creates financially for folks now with the higher gas prices, I think that all folds into what Clara was just saying.

Speaker 8

Great. A lot of your microtransit customers kind of start out with trials and expand over time. As you land more system-wide deals, should we expect kind of a change in how your customers ramp?

Speaker 6

That's a good question. I think there's probably, you know, you may end up seeing less of customers going, you know, from, call it $1 million to $10 million, you know, as you might when we start with a microtransit, a smaller microtransit service, and then are able to take over the entire transit system. You know, my feeling is that, and tied in part to what we're saying, and then a lot of other products that we're able to sell, including entering the schools vertical. We're starting to see, for the first time in the last quarter, some nice cross-sell from our transit to our schools product, which previously, you know, these are related, but different departments oftentimes, the cross-sell is not as straightforward.

Speaker 6

I think when we actually, those are coming. You know, the example I'm thinking of is coming from one of those network wins where we've taken over the whole network, and then our presence is so pronounced in the city that we now have an opportunity to translate that into a schools win. You know, our feeling is that there's still a lot more that we can sell to those customers, even when we take over the entire system. You probably won't, will not see that same big jump, you know, for, from a small microtransit deal to an entire transit, if that makes sense.

Speaker 5

I'd add that the AI Labs opportunity is coming from a totally different pocket. In the near term, you're getting from transit to school and then getting through with the AI Labs opportunity, truly, I believe, expands the TAM.

Speaker 8

Awesome. Thank you so much.

Speaker 5

Sure.

Speaker 6

Thanks.

Speaker 12

Your next question comes from the line of Brian Schwartz with Oppenheimer. Your line is open.

Speaker 4

Yeah. Hi. Thank you for taking my questions this morning. Daniel, I wanted to follow up on the comments about the pipeline doubling year-over-year. It's even bigger than the size of the business right now. My question is about the cadence of the conversion of that pipeline, how it's gonna play out. I wanted to ask you specifically about maybe procurement cycle timing. Are you seeing any meaningful changes from the government procurement timelines or the approval processes versus what you've seen in the recent past?

Speaker 6

Thanks, Brian. We, you know, we haven't seen much of a change in our overall sort of sales cycle timeline. That has remained as it has throughout this period on, you know, on average, so it is average, fairly constant. It is something we're watching carefully to try to understand if these larger opportunities, you know, do they take longer? Is the decision, you know, and what If so, which part could take longer? Again, on average, we, you know, we need to get more data on these over the next coming quarters and really get a sense if, you know, hopefully we're able to continue to scale them and as discussed earlier. Right now, I would say we're not seeing any noticeable change, it is something we're definitely keeping an eye on.

Speaker 6

On, on the whole, on the government side, you know, there's, especially in the U.S., there's not much of a change from, you know, the last few years that we're seeing. Dynamics continue to be fairly similar other than what I described earlier, which is, you know, we are really starting to shape the RFPs that are coming out, particularly in our flywheel states. We're seeing greater opportunity for us to, you know, to actually win those deals and so forth. I won't repeat everything I answered earlier, but from a kind of government macro perspective, we haven't seen any major change.

Speaker 4

Thank you. My follow-up question for Clara. Just wanted to ask you about the timeline from the benefits that you could see from these AI initiatives, whether they're internal, whether they're AI labs, specifically with gross margin, 'cause I assume over time, it's gonna reduce your operating costs as well as your service delivery costs. From a timeline standpoint, when should we expect those efficiencies to start to play off and have a positive impact to the gross margin? Thanks.

Speaker 5

Thanks, Brian, and thanks for the question. You know, there are several layers of your question. I think some of the internal efficiencies that we're seeing with AI are, you know, continuing to help drive the operating leverage that we're seeing, and we commented earlier on the R&D line. You can see some of that there already. We expect to continue to deliver, and we've been delivering despite, you know, very strong Israeli shekel, which had about $2 million of year-over-year impact and kind of $2 million for the year at this point. It kind of gives you a sense for the level of

Speaker 6

Of efficiency that we're getting. To the top line, you know, I think it's still early to say for sure, so we'll kind of reserve the timeline for later. We are seeing really nice momentum with customers and interested parties on our AI Labs products. We believe that the gross margin will be, you know, strongly accretive to our base first margin for it to impact the overall business. You know, it will take a bit of time. You know, hopefully we get a little bit, you know, by the end of the year and then some next year. That's kind of the type of timeline we're looking at.

Speaker 6

You know, we'll share more as we have more visibility into this.

Speaker 4

Okay. Thanks for taking my questions.

Speaker 6

Thanks, Brian.

Speaker 12

Your next question comes from the line of Brian Peterson with Raymond James. Your line is open.

Speaker 3

Thanks for taking the question. Daniel, maybe one for you. You've mentioned a couple big AV wins over the last few quarters. I'd love to understand the nature of those wins. Are those more pilots? As we're thinking about, like, the opportunity there, do you envision more kind of network-oriented arrangements with customers that are using AVs and that's a big potential unlock? Would just love to understand that a bit.

Speaker 6

Yeah. Thanks. The AVs are definitely an area of great interest to us, and we're following the developments very closely. Well, you know, just to explain kind of the wins we've talked about so far. The one we mentioned, West Palm Beach, is, you know, that's an opportunity where we are going to deploy the AVs as fixed route shuttles, essentially as sort of small buses, as part of the service that we provide to the city. It is part of what the city was interested in, it's not coming immediately at launch, will come, you know, in the next year or 2 as those vehicles become available. It is very much embedded into the network and into the model. That's 1 kind of opportunity.

Speaker 6

The other kind of opportunity is more in the sort of overflow, if you will, as we discussed in Chandler, what we're doing with Waymo, where we're leveraging the presence of AVs in the market as available sort of supply that we can, that we can take advantage of as part of our municipal service. Our view is that the first example where the AVs are really embedded into the service, we're utilizing them as, you know, a core part of the fleet, is the right model for us and is the one that we are most interested in, and we're trying to create.

Speaker 6

You know, it's unclear yet who of these AV developers and which of them is gonna have the vehicles available and the right form factor, you know, the right price, frankly, because right now, obviously, they're very expensive and how quickly that will develop. Our view is we're trying to partner with as many of them as possible, so that as soon as those vehicles become available, we can plug them into our network in a major way. Again, our preferred model is to really embed them as part of the fleet that we're using.

Speaker 6

We're seeing cities very interested in that, whether it's because they're motivated by innovation, appearing innovative, you know, and kind of being part of that cutting edge or because they're thinking about, okay, the economics as the price of these AVs goes down, that could represent savings and therefore allow them to deploy more service, you know, for the same budget that they have. Those are sort of two core reasons.

Speaker 3

Thanks, Daniel.

Speaker 6

Thanks.

Speaker 12

Your next question comes from the line of Jonathan Ho with William Blair. Your line is open.

Speaker 10

Hi. Good morning. I just wanted to understand, first of all, like what helped drive some of the strong growth in the U.K., and do you expect that to sort of persist over time as well?

Speaker 6

Thanks, Jonathan. I can take that one. You know, U.K. dynamics, as we mentioned, are very favorable. I'd say there are probably two factors. One, this is a market where we, you know, I believe we've really established ourselves as, you know, by far the category leader. We're not seeing a ton of competition, and we're seeing really interesting opportunities, you know, the adoption of microtransit. I think you saw the video at the beginning of earnings, all from the U.K. There's just an understanding there of the potential for microtransit, a deeper understanding to really transform the market. We also have Citymapper there, which is a huge brand. You know, we're seeing some initial nice traction with our planning software and so forth.

Speaker 6

That's one factor, just, really nice success of some of our core products. On top of that, we are seeing this move towards franchising and just local authorities taking on more responsibility for their. So there's a whole dynamic in the U.K. that I won't get into that's been around here for a few decades now. This move towards franchising is creating a shift in how the budgets are being utilized towards efficiency, towards services that are integrated, just, you know, an approach that's very well suited to our current offering. That's driving a very positive dynamic. You know, at least based on what we can see today, we believe that this trend should continue. We're very hopeful about the progress in the U.K.

Speaker 10

Excellent. You know, how are you thinking about federal funding as well as some of the upcoming legislation in support for state government transit? Is there anything that's maybe in process that either you're excited about or that worries you? Thank you very much.

Speaker 6

Thanks, Jonathan. You know, funding is a obviously a very important topic and kind of, you know, very diverse. As we talked about funding in Germany, I won't belabor. In the U.S., across the federal government, you know, what we're seeing is that funding is pretty consistent. If anything, the sorts of funds that are going into our services, either typically produce formula funds, a slight increase in that area. Nothing dramatic, but pretty consistent. Continued bipartisan support, you know, for public transit, at least the sort of, again, the sort of public transit we're providing. I know there's some debates about large infrastructure projects that are maybe in a different place.

Speaker 6

When you talk about the sort of nuts and bolts, just providing public transit and the funds that are going into that, nothing very dramatic either direction, you know, on the federal front, as best we can see. You know, we would love to see the federal government move towards a funding model that encourages outcomes and sort of efficiency. We're having conversations around that front. I hope that that would, you know, that's something that the government will consider in some of the new funding bills. I think that would push agencies towards transforming their services in very positive ways, both for the residents and for us.

Speaker 6

The last thing I'd say around it is with, you know, and we talked about the fuel prices, but there are other dynamics that are, I think, putting real pressure on Americans, you know, just people trying to live their everyday lives and trying to get around. Mobility is critical. Cars are becoming increasingly expensive, gas is expensive, and the need for public transit as a core service and the understanding of how much value that has. You know, a recent study from MIT showed for every $1 invested in Chicago public transit, there's an $11 return in economic activity. I think that understanding, you know, our sense is at the local level, the state level is starting to grow.

Speaker 6

You know, of course, we're encouraging that, and we think that that's a potential positive as we look forward.

Speaker 10

Thank you.

Speaker 6

Thanks.

Speaker 12

Your next question comes from the line of Alex Zukin with Wolfe Research. Your line is open.

Speaker 1

Yeah. Hey, guys. Thanks for taking the time to ask the question, or take the question rather. Most of my questions have been answered, maybe Clara, can you quantify the actual headwinds to revenue that you're seeing this year and maybe gross profit in the model from the issues in Germany that maybe weren't in the plan initially? Then any headwind, I think you've quantified it, maybe just remind us the headwind on profitability for the year from the FX moves.

Speaker 5

Thanks, Alex. Last but not least, I really appreciate your question. On the FX, I'll start with that. On the FX, we are seeing, you know, quarter-to-quarter, half a million dollars. If you annualize that, it's about $2 million. That's at the Q1 rate. They've seen continued strength of the Shekel, if you follow, which is at a 30-year high. We're looking at that. Year-over-year, $2 million. These are the same $2 million, but, you know, they accumulate. Overall a pretty significant impact from the Shekel. You know, that's one. You can do the math there.

Speaker 5

On the Germany impact, you know, we've reflected that in our guidance. Overall, there is some impact to revenue and to, you know, to gross profit from what we're seeing from the headwinds in Germany. You know, I'll say that we've been able to more than offset that with the growth and the pipeline that we've created. I mean, kind of very pleased with the work that the team has done there. It supports our strategy of continuing to diversify revenue and get just a diversified, you know, geographical exposure as we continue to grow the business.

Speaker 1

Got it. Maybe just one more, Clara. What drove receivables up sequentially?

Speaker 5

Thanks, Alex. On receivables, last quarter, if you remember, we had, you know, close to breakeven operating cash flow as we saw several customers somehow pay before Christmas. I will say that's very unusual, they ended up, you know, submitting payment before Christmas. We noted last quarter that the receivables and the dynamics of working capital were very favorable. They reverted this quarter. It's just temporary as, you know, some of those customers had paid early, we expect that to revert next quarter. Just some interesting dynamics here as you start to follow some government payment timelines. I mean, nothing fundamental. It's just really a timing issue.

Speaker 1

Perfect. Thank you.

Speaker 12

I'll now turn the call back over to Daniel Ramot for closing remarks.

Speaker 6

Thanks everybody for joining the call. We really appreciate it and look forward to the next call next quarter. Thank you.

Speaker 12

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

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