Via Transportation, Inc.VIANASDAQ
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Operator: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Via Third Quarter 2025 Earnings Call. [Operator Instructions] Thank you. It is now my pleasure to turn the call over to Via. The floor is yours. [Presentation]
Gabrielle McCaig: Good morning, everyone, and welcome to Via's Third Quarter 2025 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 third quarter 2025 business update before handing it off to Clara 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 on this call, additional information can be found on our investor presentation, press release and SEC filings on our Investor Relations website at investors.ridewithvia.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 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 S-1 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 13, 2025. 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. 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. And without further ado, I'll now hand it over to Daniel.
Daniel Ramot: Thanks, Gabby, and thank you, everyone, for joining us today. We're delighted to host our first public company earnings call, and 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 4, 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. Via provides the world's most advanced platform of software and services, transforming antiquated public transportation systems into efficient digital networks. We've 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 a distinct silos. Via's vertical stack is deployed globally. It can be configured to support the broad and diverse local requirements of our customers without the need for software 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 to jobs, educational opportunities and health care. We believe that after decades of underinvestment in technology, cities across the globe are poised to upgrade their -- and 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 from a major consulting firm. Today, we capture less than 1% of this market. We also estimate that there are approximately 63,000 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 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 this very large opportunity. More than 90% of our revenue is derived from selling our solutions to cities, transit agencies and 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 and 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 transit. 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 addition, several major pieces of legislation in support of public transit have 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 on Via services. At the Federal Transit Administration, it is our understanding that no employees were furloughed during the shutdown. Let's take a couple of minutes to deep dive into the Via platform. Over the past 13.5 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, from rural to 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 routes and dynamically routed transit networks. Transit planners can leverage models trained on billions of data points to rapidly quantify the impact as they make changes to their network. Once a city, or transit agency, has planned its transit network, it can, with a click of a button, begin operating that network using our operating software. Via's operating software supports multiple transit verticals, including microtransit, paratransit, school transport and nonemergency 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 transit 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 expands. This improved access to data can be transformational. Our analytics tools include prebuilt dashboards that allow customers to track their essential KPIs. Our customers can also easily build their own reports directly within our products to create bespoke analysis, or to meet specific funding and compliance obligations. These tools are intuitive and easy to use, even for those who may not be as data or tech savvy. In addition to software, our platform includes a suite of technology-enabled services which facilitate and accelerated adoption of our software. 100% of our customers buy our software. Approximately 20% elect to 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 leverage its full capabilities. Our services also increased the stickiness of our products and accelerate growth. And by broadening our platform and reach, they represent a strong point of differentiation in the marketplace. Via's platform is the product of an investment of hundreds of millions of dollars and 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 have 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 leveraged this data to create the world's first LLM for cities, an 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, a transit planning co-pilot, if you will. A recent and incredibly exciting example of Via's platform in action comes from Springfield, Ohio. I love this case study, as it illustrates the power of our end-to-end platform. First, using our transit planning software, the city was able to rapidly analyze their existing transit 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 a sufficient population density to support buses. You can see the bus network on the left, with the circuitous routes typical of a transit system, trying to use buses to provide transportation in low-density areas, where buses don't really work. The small black icon you see on the map surrounded by a small blue area is Jane. We've dropped Jane in East Springfield and asked how far can she travel using public transit? With the original bus system, it's clear that she can't go very far at all. When the buses are replaced by Via's microtransit system, the picture is very different. Now on the right, Jane 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 impact for Jane and more importantly, since Jane is fictional, for the residents of Springfield. Based on this analysis, Springfield decided to fundamentally redesign their transit network, replacing all of their buses with the Microtransit system powered by Via's platform. Now for the same annual operating budget, the city is able to provide transit access to 40% more of the city and has dramatically improved the passenger headways, reducing them by a factor of 4. For those of you who aren't transit nerds, passenger headway is the average time a 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 increase the number of modules included in their solutions. In Q3 2025, we continue to land multiple new and strategic customers. The launch of our microtransit 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 residents. 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 paratransit service, leveraging Via's platform in Q4. We have also seen an exciting acceleration of our business in the U.K., where government initiative 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 city of Mobile, Alabama launched Via's microtransit solution in March 2024, building on that successful launch the city adopted Via's planning solution, which allowed 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 paratransit solutions, and committed to implementing a full network redesign with a focus on streamlining bus service, expanding microtransit and hugely increasing access to jobs. In 1.5 years, we've grown revenue with this account by 17x. Looking ahead, we believe Via wins through innovation and more specifically, by continuing to innovate across three key areas: one, broadening our platform; two, deepening our vertical stack; and three, being nimble and creative on our go-to-market strategy. Broadening 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 evaluate opportunities and initiatives through this lens. One area where we have been investing in broadening our platform is our newest vertical, student transportation. Q3 was a very strong quarter for this vertical, which saw more than 2x growth in the number of customers subscribing to our solutions. 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 products, even those that provide well-established functionality to our customers. Last quarter, we rolled out major upgrades to our core dispatching interface, allowing dispatchers to more intuitively visualize vehicle routes, handle passenger queries and cope with delays and disruptions in real time. Whether they're a parent, case manager, or front desk staffer at an adult day care center, our Caregiver App allows caregivers to manage trips and receive real-time trip updates for the individual in their care. In our agent AI suite, new features help our customers streamline PDS 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 our customers handle passenger calls. We continue to roll out advanced self-service capabilities for our customers, shortening the loop between planning a new transit systems and deploying it. We're also very pleased to announce the launch of our European Advisory Council. The goal of the council is 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. The 3-member board is chaired by Dr. Rolf Erfurt, CEO of Toll Collect, who previously served as a Chief Operating Officer and Board member for the BVG, the Public Transit Authority of Berlin. Additional founding members include Professor Andreas Hermann, Director of the Institute for Mobility at the University of St. Gallen, and Professor Barbara Lenz, Senior Advisor 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 Waymo 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 Waymo is a step in that direction. Through this partnership, government agencies using Via software can now incorporate Waymo's AVs directly into their public transit networks. Chandler, Arizona is the first city to benefit from this framework, integrating Waymo's service into the city's Chandler Flex microtransit service. 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 Waymo paves the path for AVs 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 Clara to review the financial highlights for the quarter.
Clara Fain: Thank you, Daniel. 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, our platform annual run rate revenue, which we defined as our quarterly platform revenue multiplied by 4, was $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 customers subscribe to one or more solutions, which consist of the combination of software and tech-enabled services tailored to each customer's needs. All of our customers subscribe to our software and approximately 20% of our customers bundle tech-enabled services. Contracts with our customers are typically multiyear and structured with a committed budget and a volume-based component. Pricing is generally based on a number of factors, such as fleet size, minimum number of vehicles or 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 happen when their existing contracts terminate, which is not always consistent throughout the year. Our revenue is highly predictable. The unique nature of our market, customers, combined with our leadership platform position, the contracting 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 testament to the high quality and durability of our business model. Our rapid revenue growth is driven by landing new customers and expanding with existing customers. We delivered strong results on both fronts this quarter. In Q3 2025, the number of customers leveraging our platform was 713, representing 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 continue 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 we continue 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. The breadth of our platform and our position as a category leader provides Via with a strong competitive advantage and drives meaningful expansion opportunities. The mission criticality of our platform and ability to generate meaningful ROI for our customers, combined with our ongoing investment in innovation, drive that stickiness of the platform. And last but not least, the particular nature of our customer base, government and government agencies create a virtuous cycle of growth through word of mouth and referrals. In Michigan, you can see on the slide, we have begun to experience a flywheel effect. While the success of existing customers in the state is driving new customer opportunities without the need to invest further in sales and marketing. As you can see, we have witnessed a 200% increase in revenue per head in that state, and a 20% decrease in S&M as a percentage of revenue, highlighting the incredible efficiency of our team in this market. Let's dive into our operating expenses, which we're presenting on an adjusted basis. As of Q3 2025, we spent 14.1% of our revenue on sales and marketing, compared to 15% in Q3 2024. Over time, we expect to continue to invest efficiently in S&M to capture our market opportunity. As of Q3 2025, we spent 14.4% of revenue on G&A, compared to 16.7% in Q3 2024. Our research and development efforts have been our #1 area of investment since the foundation of Via 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 harvesting a decade-long investment in R&D. And as we continue to adopt AI, 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 landing 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 50%, driven by 3 levers: one, transitioning lower-margin services to third parties; two, continuing to expand our platform with higher-margin products, notably our software offering through internal development; and three, continuing to explore strategic and accretive M&A. As a reminder, we have established a playbook to execute on M&A with the Remix and Citymapper 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 as stand-alone 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 over time. In this example, from a customer in the Western U.S., the customer started with a software and services microtransit solution in 2019. In 2022, the customer had reached a maturity, whereby they were able to contract for certain services directly, rather than through Via. We were also able to add additional product upsell to the partner for several higher-margin SKUs. In the past 3 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 we can successfully replicate with other customers as their accounts reach maturity. While 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 and Q3 2025, our adjusted EBITDA margin improved from negative 17% to negative 8%. We are pleased about our continued ability to deliver operating leverage, 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 expect adjusted EBITDA to be between negative $7.5 million and $8.5 million, and adjusted EBITDA margin to be between negative 6.5% and negative 7.4%. For the full year 2025, we expect platform revenue to be between $430 million and $430.5 million, representing 30% to 30.2% year-over-year growth. We expect adjusted EBITDA margin to be between negative 8% and negative 7.8%, compared to negative 16.1% in 2024. Now I'll pass it to Daniel for some concluding remarks.
Daniel Ramot: Thank you, Clara. I just 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 continue to transform our massive and hugely important market. Our team remains incredibly passionate about building best-in-class technology for those that 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 deliver. 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 reasons, the government agency is responsible for providing public transportation, operating complex and demanding environments, where risk is rarely rewarded. The use of machine learning and AI has always been core to Via. 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 transit. As the category leader, we believe we are 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 want to thank you all again and turn it back to the operator so we can take some questions.
Operator: [Operator Instructions] Our first question comes from the line of Adam Hotchkiss with Goldman Sachs.
Adam Hotchkiss: Great. It's great to speak with you all in a public forum. Daniel, you mentioned the 63,000 customer opportunity. How would you characterize both the catalysts, but also maybe the barriers you've experienced as you think about the next steps in converting more of that opportunity? And then Clara, just briefly, how do you balance growth and investment within that context?
Daniel Ramot: Adam, thanks so much. Great to speak with you 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 an aversion to risk fundamentally and reluctance 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 technologies And certainly, when we look at regions in which we have established any presence, and even more so when 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, 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, that's always very helpful. And that, I think, will help us continue to accelerate the progress.
Clara Fain: Yes, Adam, great to reconnect, and thanks for the question. When it comes to the investments, we are very focused on putting the dollars where the growth is, and we have a very detailed framework of investment behind the new products that we're launching, focused on our core geography of North America and Europe, and some of the products that we went through together, including our -- obviously our microtransit product, our paratransit product, but also some fixed-route products, but also some new products notably around the school business and some other interesting opportunities that we've identified. So definitely putting the dollars behind the customer opportunity.
Adam Hotchkiss: Great. That's really helpful. And then just on the quarter itself, how would you frame the makeup of the 24 net new customer addition sequentially you had? It was the largest number, I think we've had in recent company history. So was there anything notable about these customers, either from a product or geography perspective? Did student play more of a role? Or is it just where RFPs happen to fall in the calendar year? Any more detail on that makeup would be helpful.
Clara Fain: Yes, happy to break it down further for you. As you saw, we're very pleased with the performance in North America, continuing to see very strong demand there, and that is reflected in the customer growth. And we're also seeing some good traction around new products, including the schools product, which has driven some of that growth as well. So I would say both of these are definitely drivers of the customer growth.
Operator: The next question comes from the line of Josh Baer with Morgan Stanley.
Josh Baer: Great. Daniel, Clara, Gabby, the whole team, congrats on a strong quarter and welcome to the public markets. I know 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 a change in inbound conversations from customers as well? Has the IPO changed awareness and interest in the platform?
Daniel Ramot: Josh, thanks so much. We're happy to be a public company. It's exciting. Looking at the customers and 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. We are feeling that the IPO was a moment for us. It's hard to quantify, but the reception on the customer side, definitely feeling sort of a different timber to it, if you will. And I think that's helping us also develop the pipeline and continue to push in that direction. As Clara 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's a market we're very interested in focusing on.
Operator: Our next question comes from the line of Michael Turrin with Wells Fargo.
Michael Turrin: My congrats as well on the first quarter as a public company for Via. I want to go back to the customer metric. I think given you had 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 you're seeing is tied back to some of the commentary Daniel is making around, just increasing referenceability, and just your view on us assessing that as a good leading indicator for the durability of future revenue growth, or maybe other indicators you would point investors towards as they're getting to know the company.
Daniel Ramot: Michael, thanks for the question. I think -- I do think the referenceability is key. And I know 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 in new conversations and also when we're talking to existing customers about expanding, the fact that they can see what's happening nearby is extremely important. And I think we talked a lot about the Mobile example a bit 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 to pass on to 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 referenceability is really key. And our hope is that we can continue to build on that over the coming years to really drive rapid adoption.
Michael Turrin: And just on the Waymo partnership and autonomous in general, I think that sounds exciting and maybe a bit more advanced than we tend to think about within public transit agencies. Can you just expand on how you're thinking about the evolution of that opportunity and what that does for Via's TAM overall over time?
Daniel Ramot: Yes. Thanks. I think autonomous is a huge opportunity for us. I also think it's incumbent 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 partnership with Waymo is exciting. Chandler, Arizona is a first step, but I think with Waymo 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 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. is very focused on robotaxis and we can bring the public sector in. Europe, we're seeing much more of a top-down sort of drive from the government 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 cost they're willing to invest more and they see the ROI. So if autonomous vehicles can bring down costs, certainly improve safety, there's just a lot of opportunity there from our perspective.
Operator: Your next question comes from the line of Brad Zelnick with Deutsche Bank.
Brad Zelnick: I'll echo my congrats to you all as well, exciting to finally be out and a great quarter to start. Mike -- 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 I've got a follow-up.
Clara Fain: Brad, thanks for the kind words. So we're very pleased with the results this quarter out of the gate. So thank you for the support. On the customer account, you've seen the chart, and we've discussed this quite a lot. There is some cadence to the market. We have certain quarters that are very strong on customer additions and some quarters that are strong but may be lower. The general range for customer additions is 8% to 12%. And when you look back at the last 10 quarters, that's been fairly consistent. So 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. So there's still a lot of white space overall across the platform, and I feel very good about that range.
Brad Zelnick: Okay. That's very helpful. And actually, I'm going to pivot. I was going to ask a Waymo question, but I'll save that for another time. But maybe a 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 for cities, what's the even broader potential over time, perhaps even in addressing needs that are adjacent to transit?
Daniel Ramot: Yes. Thanks very much, Brad. I think that's a great question. We are very focused on our current market, which, as you mentioned, you 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 in developing products, which I feel like in the last quarter, we're starting to see an acceleration our product road map. And in part, I attribute 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 that's 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.
Operator: Next question comes from John DiFucci with Guggenheim.
John DiFucci: And I'd like to offer my congrats to the team too. These 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 question -- my first question anyway is more on the growth. And it has been brought up several times here. This is the greatest sequential increase in customer count we've seen, and our model goes back almost 3 years. But if I wanted to look for anything that may raise questions from investors, the ARR per customer actually declined a little bit sequentially for the first time in 8 quarters. Is that simply because you added so many customers that didn't have a full quarter's worth of revenue in there since your ARR calc is just simply revenue times 4? Or is there something else affecting 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?
Clara Fain: Absolutely. Thanks, John. It's a great question and happy to give you more color on ARR per customer. First of all, we're very pleased with the customer adds this quarter, very strong demand across the board and the revenue growth as well. But you're right, platform ARR per customer did decline slightly quarter-over-quarter in Q3 versus Q4, some 1%. And that's generally driven by, one, normal seasonality patterns of our existing contracts. In Q3, we tend to have universities, schools, corporate contracts, that have lower volumes during the summer. So that seasonal -- that slight seasonality drives lower ARR per customer in Q3. And then the growth in our schools business, where we saw a significant increase in the number of customers and the schools product is relatively new. These customers launched their services in Q3, coinciding with the start of the academic year and, therefore, contributed to more limited revenue in that quarter. So that drove the slight decline in ARR per customer. Over time, we expect these customers to ramp up.
John DiFucci: Okay. Great. And Daniel, you said there was no impact from the federal government shutdown in this quarter. But we've been just looking closely at all the government funding. And do you see any impact from like COVID era funding that I think, in some cases, is going to start expiring over the next year or so? Perhaps maybe you can share your experience in similar situations, when there are funding pressures, where does mass transit sit as far as priorities among competing alternatives for funding?
Daniel Ramot: John, thanks. It's a great question. When -- maybe I'll try to answer that in 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 that funding for transit works, it's long-term funding typically appropriated at the federal level, appropriated every 5 years. This sort of -- it was a very long shutdown obviously, but we don't believe that it will have any impact on our business even as it ends and looking into this quarter and the next quarter. So that specifically to the shutdown. I think more generally, you're asking a general question of what is happening to -- with transit funding, especially some of those funding bills from previous administration start to expire and longer term. There's sort of, I'd say, some puts and takes there. There's some of this funding that's expiring. There's some other funding that we talked about, whether through ballot measures or other sort of state legislature approvals that is coming in that is growing the overall pot. 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 transit agency by transit agency basis. We need to identify where they are in their budget cycle. At any point that you're going to look to see -- there may be an overall trend. We've talked about it maybe in Germany, there was a period last year or so where the overall trend was downward. There's still some cities that have more budget, some cities 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's still individual cities or transit agency 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 cycle so we can honestly provide them with the right solution, adapt our pitch, if you will, if you think of it from a sales perspective, but in reality, find the right solution for them. If they're in a downward trend, we need to help them save money, we need to help them become more efficient. And I think we're extremely well positioned, sometimes kind of counterintuitively, that's our biggest opportunity because they have to change something. They're under budget pressure and that's where we can come in with our solution and really help them avoid service cuts while they're reducing their budgets. Obviously, in an expansion kind of phase, that's also a great opportunity. We can launch new microtransit services, we can do lots of stuff with them. So it's really about identifying where they are versus being worried about the budget going up or down. Does that makes sense?
John DiFucci: That does make sense, Daniel.
Operator: Your next question is from the line of Patrick Walravens with Citizens.
Patrick Walravens: Let me add my congratulations [indiscernible], the perfect debut. Can you guys comment on -- and I know you'll guide next quarter, so we're not asking for that. But can you just comment on what the durability of the growth looks like in this model? And also what the pace of margin expansion looks like? Just sort of any broad points you can share with us would be super helpful.
Daniel Ramot: Pat, thanks for the question. We feel very good about the durability of the growth long term. Just given the scale of the market, our very limited penetration. And the fact that it's not -- we don't see our current cohort of customers as being any different from the next cohort of customers, if you will. I think I talked about Springfield, Ohio and 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, 200, 1,000 and 2,000 customers. We really believe that there's 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 we're driving the new products, other opportunities, we're very optimistic about what's possible here.
Patrick Walravens: That's fantastic. And Clara, maybe pace of margin expansion?
Daniel Ramot: Yes. I'll leave that to Clara.
Clara Fain: Thanks for the kind words as well. So in the immediate term, so we're focused on organic operational improvements to enable modest gross margin expansion, and we achieved that successfully this quarter with a 0.4% margin expansion. In the medium to longer term, we are working to improve gross margin to 3 levers. One, transitioning our lower-margin services to third parties; two, continuing to expand our platform with higher-margin products, notably our software offering, which we're investing heavily into; and three, continuing to explore strategic M&A. We've established this playbook with Remix and Citymapper acquisitions, which were both highly successful on all counts. And the industry continues to be highly fragmented. So there's an opportunity to acquire point solutions, which may not make it as a stand-alone companies, but have excellent products and teams and may be very accretive additions to the platform. We reiterated on this call 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 continue to land customers and with modest gross margin expansion, and then the second phase where we start to see the impact of those three levers, and have more meaningful step function expansion of the margin.
Operator: Your next question comes from Scott Berg with Needham & Company.
Scott Berg: Really nice quarter here out of the gate. I wanted to probably take Brad's Waymo question here. But I think the partnership is super interesting, but knowing how those contracts are constructed within the Microtransit 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 that offering looks like than some of the peer services side. But just trying to understand how that may or may not shift in that scenario.
Clara Fain: Well, that's a great question, Scott. And that's absolutely right. When we partner -- so we think of Waymo as one of our potential fleet providers. We can have a human-driven vehicle with a fleet, we can have a Waymo vehicle. And those would be equivalent solutions for our customers, and we offer them both. And in that contract, basically outsourcing to Waymo, the fleet and the vehicle means outsourcing a large chunk of our COGS to a third party. So those contracts tend to be higher margin. Obviously, we have a small sample today, so there's some room to explore there, but they have 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.
Scott Berg: Understood. Helpful. And then many comments on the strong customer additions in the quarter. I guess as you think about the growth algorithm over the near term, maybe 2 to 4 quarters out, does that algorithm kind of shift towards more net new customer opportunity, or more revenues coming from net new customers? Or the really predictable cross-sell model, is that still the way we should think about maybe the next several quarters?
Daniel Ramot: Yes. Great question. From our point of view, the growth algorithm stays pretty much the same. We're very focused on continuing to grow within our existing customers and also add new customers in the same way that we talked about. And 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.
Operator: The next question comes from Brian Schwartz with Oppenheimer.
Brian Schwartz: Echo great results out of the gate. Two questions. First for Daniel on 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 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?
Daniel Ramot: Brian, thanks so much. Great question. I think we can do so much with AI to continue to evolve and transform the product in something that's increasingly even more useful to our customers. So there's definitely a lot of value that we're delivering there. On price specifically, at least for now, we are trying to be extremely customer-centric. Our customer is very sensitive to feeling that they're in any way being nickeled and dimed. And so our approach has been for our entire history to say we deliver a solution, and we will continuously upgrade that solution for you so that you're extremely happy with that product. That makes it very sticky. It builds real trust with our customer. And we have so much other opportunity to grow with them beyond simple price increases to our software, that's been our philosophy. I think that should apply to additional AI features that we're adding into the platform despite the fact that I do agree they can contribute enormous amounts 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 individual SKUs, increasing the revenue that we're able to generate from each one of our customers. These are also very high margin to Clara's 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. And I think it's had -- add a lot of value. Some new products, I think, are real opportunities.
Brian Schwartz: Thank you, Daniel. And one question for Clara. 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 4 quarters, too, for the business. Beyond 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?
Clara Fain: Thanks, Brian. A very thoughtful question. So happy to address it. I think there are several drivers that we're looking at to continue to drive gross margin 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 saw this great case study of a customer that went from 40% to 50% gross margin and is continuously improving. And that customer's growth -- revenue growth will drive further margin expansion. So continuing to look at the mix shift, which is a really nice driver of near-term margin expansion is quite interesting and focusing on those customers where we can drive an uptick in margin through changes in operational metrics. And second, we are continuing to work on cost improvement on our cost to serve our customers. AI has brought a lot of new opportunities to reduce costs in our cost of serve. So while on the top line, Daniel just discussed, we're just adding more value to our platform and bringing and 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 costs, and that is valid for, obviously, our COGS and our OpEx, and trying to continue to generate examples, obviously, customer support, customer success infrastructure costs, the ability to better manage and control all those costs has increased substantially with AI tools. So we're definitely focused on that. And I think that will drive margin expansion.
Operator: Your next question is from the line of Brian Peterson with Raymond James.
Brian Peterson: Congrats on the really strong results here. So I wanted to double-click on the schools opportunity. It's encouraging to hear the momentum there. Is there any way to help frame that opportunity relative to what you have today, either in terms of fleet size or 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 guys unpack that a bit?
Clara Fain: Yes. Thanks, Brian. Happy to give more color on that opportunity. I would start by saying that we've been investing in the product and the technology for that end market for a significant amount of time. But the go-to-market motion is still very nascent for schools. So we're in the early stages of capturing this opportunity. And to answer some of your question and that opportunity is quite meaningful and it is part of our overall TAM, and definitely very attractive across all fronts. The way we look at it is the buyer is -- can be different, it depends. We're looking -- in general, we tend to go to school districts, or DOEs or head of schools. And they are definitely different than the mayor, or the head of the transit agency in terms of who is actually buying the platform. So that is definitely a new customer and a different buyer in most cases. However, there is a halo effect and the referenceability of our platform within a city. So there are certain cities where these may be kind of living together in these various functions and these people may be sitting together and discussing their solutions. There are other scenarios where they're quite separate. So I would say, there's a bit of a range of buyers. But I would say in most cases, it's a slightly different buyer, although once we have existing presence in that region or that city would definitely benefit from the network effect and the referenceability of our platform. More to come on that as we continue to grow that business.
Brian Peterson: No, that's great to hear, Clara. And maybe just sticking on the referenceability point. Daniel, I know you mentioned the European Customer Advisory Board. You're very strong in Germany. The tone 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 groundswell into other geographies? Congrats on the strong results.
Daniel Ramot: Thank you so much, Brian. I think specifically within Europe, maybe I'll just give an example on the school bus. That's a market where school bus operates quite differently. They don't have yellow school bus as well. In the U.S., yellow school bus, there are more buses, if you just count the number of buses than there are transit buses. So it's a huge opportunity. In Europe, typically, school bus is much more integrated. They don't have yellow school bus, much more integrated into their sort of traditional public transit system. With a lot of special education, school transport being provided. So there, there's an opportunity and that gets the referenceability 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 that's still complete there to make that opportunity to accelerate, but I think that's an area that we can see some really good growth. And overall, I do think that while, yes, every place you go, they say, "Oh no, no, here, we're different than we are in this other country." There's no question that when we have success in one region, it influences all the other regions as well.
Operator: Your next question is from Jonathan Ho with William Blair.
Jonathan Ho: 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 want to understand the drivers for that geographic strength.
Clara Fain: Thanks, Jonathan, and good to connect. From our perspective, Q3 was business as usual. We saw very strong demand for the platform across all metrics and across all of our solutions. You can see historically, there's a cadence to the market, certain quarters that can be very strong, certain quarters are a bit slower. And this quarter turned out to be very strong with lots of additions and growth. But the growth algorithm is the same and the opportunity continues to be very large, supporting durable growth, and we'll continue to be very excited and confident in this opportunity. And I think Q3 is no different than the prior quarters and really a strong testament of that market opportunity.
Jonathan Ho: Got it. And then in terms of the timing for ballot measures that you referenced. Like what is the time frame for that to translate into contracting and potentially RFP opportunities? It would just be helpful to understand what that process typically looks like.
Daniel Ramot: Yes. Thank you, Jonathan. Great to connect. Great question. That's worth clarifying. That is a very long-term process. So it takes months, sometimes years for that funding to sort of really become available, then there's the procurement process and so forth. So we're looking at -- and then the funding is often over many years that it's available depending on the specific ballot 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're increasingly finding ourselves involved in these ballot measures and helping to support them and maybe even initiate them in some cases. So I think that's something that we'll look to do more of and really thinking 1, 2, 5, 10 years ahead in some cases as to when it 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...
Operator: And your final question comes from Aleksandr Zukin with Wolfe Research.
Aleksandr Zukin: Congrats. Maybe, Daniel, first one for you. The Waymo partnership feels like a seminal moment, partially because it 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 and services challenge for your customer base? And maybe just elaborate, if you can, both the potential marketing and pipeline opportunity that, that partnership is driving from awareness in terms of your customer base? And then from both an accretion perspective to the contract, which I think you guys mentioned earlier, how do we think about as more of potentially these autonomous contracts roll out across your customer base, how do we think about the revenue uplift opportunity? And I've got a quick follow-up.
Daniel Ramot: Thanks, Alex. I really appreciate it. 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's a -- there can be a real impact, both in the way that our customers perceive this opportunity. I would say -- 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. And there are even some of our customers that have indicated that -- and sometimes it's not even yet a budget matter. It's just a matter of wanting to be ahead on this technology that they would be willing to launch certain services of autonomous vehicles that they're not -- it may take them a lot longer to agree to launch with human-driven vehicles. So I feel that the opportunity is very large, I totally agree with you, and it really is at the moment, depending on the availability of these autonomous vehicles. So as quickly they can become available in the different geographies, I think we'll see an acceleration.
Aleksandr Zukin: Perfect. And then maybe, Clara, the large upsell that you guys talked about for Mobile, Alabama, it feels like that was also a competitive displacement of a larger -- or a large competitor. Maybe just talk through as you continue to take share, when does that kind of click happen in the mind of a customer to really move and scale from a legacy operator to Via in those situations?
Clara Fain: Alex, thanks for the question. And you're absolutely right. This was a takeover. I mean that some of the expansion was a takeover from a legacy player in the transit space. It's a really interesting market that we're in, where it's 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 that have been established in this market for a very long time. And so it is a process to displace them, and displace them with these very large contracts. I would say demand for these very large contracts is the strongest it's ever been. So we're starting to see a halo effect of some of the takeovers. We've taken over several of those contracts already, and the performance is extremely impressive in terms of both taking transit systems that actually do not work that our ridership are declining -- ridership is declining, cost is increasing, consumers, residents are not aware of it and not happy with it and turning that around within a year or 2. So we're starting to see outstanding results for those very large takeovers. And as we see more -- as we get more data around that, we are seeing the referenceability kick in and the flywheel effect work. And so today, we have probably the strongest pipeline in this type of opportunities we've ever had. And obviously, it's on us to execute on that, and there's a sales cycle, so it will take some time, but we're very confident in our ability to continue to push on that front and get very large contracts for the business over time.
Operator: This concludes the Q&A session for today. I will now hand the call back to Via for closing remarks.
Daniel Ramot: 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, and we're excited for the road ahead. Look forward to doing many more of these calls with you. Thanks, everybody.
Operator: Thank you again for joining us today. This does conclude today's presentation. You may now disconnect.