Q4 2019 Earnings Call
Greetings and welcome to the Vera Mobility Corporation fourth quarter and full year 2019 financial results Conference call. At this time, all participants are any listen only mode. A question answer session will follow the formal presentation. If anyone should require operators. This in turn the conference. Please press star there on your telephone keypad. Please note. This conference is being recorded.
I'll now turn the conference over to your host Mark Griffin Investor Relations Mr. Gryphon, you may begin.
Thank you [noise].
Good afternoon, and welcome to very mobility fourth quarter and year end 2019 earnings call.
Today, we'll be discussing the results and that's not press release issued after the market closed with me on the call. It's David Roberts from abilities, Chief Executive Officer, and Tricia Chito Chief Financial Officer. They will begin with prepared remarks, and then we'll open up the call for queuing <unk>.
During the call, we'll make statements related to our business then maybe considered forward looking including statements concerning our financial guidance for the full year of 2020 airplanes to execute on our growth strategy, our ability to maintain existing in acquiring new customers and other statements regarding our plans and prospects.
Forward looking statements they ought to be identified with words, such as we expect we anticipate or coming these statements reflect our views only as of today and should not be considered our views as of any subsequent date, we undertake no obligation to update or revise these forward looking statements.
Forward looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from our expectation.
For a discussion material risks and other important factors that could affect our actual results. Please refer to those contained in <unk> annual report on form 10-K, which is available on the Investor Relations section of our website at <unk> drummed mobility dotcom on the Fccs website that FCC dotcom.
Finally during the course of today's call will refer to certain non-GAAP financial measures reconciliation of GAAP to non-GAAP measures is included in our press release issued after the market today, which is located on our website again at IR Dot Vera mobility, and the Fccs website at <unk> Dot Gov with that let me turn the call over to David.
Thank you Mark and thank you to everyone joining us on the call today.
We're pleased with our execution throughout the year ended 2019 on a strong no with a solid quarter.
We transformed the business in 2018 through two highly strategic acquisitions and 2019 showed investors that are diversified product portfolio.
Support an attractive combination of growth and profitability at scale.
That's tricia will discuss in detail later during the call our fourth quarter revenue grew 18% year over year to $112.5 million and our adjusted EBITDA came in at $59.6 million up 26% year over year.
2019 revenue grew 15% year over year to $448.7 million and our adjusted EBITDA came in at 241 point Fourmillion up 15% year over year.
We were able to exceed expectations across our key metrics and deliver consistent quarter over quarter performance. Despite the headwind created from the state of Texas, passing legislation that eliminated most readily camera programs on a state.
The drivers of our core business remains strong and the commercial services segment cashless tolling continues to drive demand for our product an increasing tolling activity.
And then the government solutions segment, our growth is primarily driven by the expansion of schools on speed in New York City.
The strength of our core business and our longer term smart city innovation initiatives give us confidence in our ability to maintain momentum throughout 2020 and support our vision to be the global leader and smart transportation.
For the fourth quarter. The commercial services segment grew revenues, 17% year over year to 68.2 million and reported adjusted EBITDA of $42.2 million up 23% year over year for 29 seen revenue increased 15% to 276.5 million and reported adjusted EBITDA of 175 point.
4 million up 14%.
[laughter] the momentum in the quarter was driven by our continued collaboration with our customers to increase adoption of tolling programs for both product and operational innovations. A strong example of the collaboration with our customers is the amended agreement with Avis budget group that enhances their ability to price optimize their totaling product well also.
Extending the contract by one year to 2025.
The terms of the contractor materially the same and we're excited to serve serve avis budget for many years to come. Additionally, there has been a positive increase an overall total activity and usage, which is providing a nice tailwind to our commercial business.
As we have highlighted in the past geographical expansion of our rack tolling product to Europe is a meaningful growth driver of our commercial services segment in the future.
During 2019, we continued our investment in the foundation of the European Tolling business. This culminated with the acquisition of Pega, telling him and our partnership with rental car in October we acquired Spanish based I can tell you, which provides electronic toll management services to consumers financial institution and Oems I could tell ya.
<unk> piece for our European expansion strategy because of its interoperable solution and strong network autoliv already relationships across southern Europe.
Finally in December we announced our tolling agreement a French rental car company called rent a car. The agreement has been executed and technology integration is underway as we speak.
This year, we're excited to enter the next phase of expansion, which is to create proof of concept pilots with multiple rock customers across Europe, we've spoken with many customers and they are ready to get started him, but there remain many challenges in organizational readiness in a negotiating in executing agreements some of those obstacles or back office technology requirements such as GDP.
PR and customer billing well, there's a more physical like transponder manager, but all are vital steps that will take some time to work through <unk>.
For 2020, we're not expecting any material revenues as our objective is to launch multiple pilots in multiple countries that will build revenue momentum for 21.
While the pace of execution has been slower than we originally anticipated we remain confident and the opportunity will continue and continue to invest to bring to solution to fruition.
Additionally, we are pleased to announce that we have hired a new European leader for our commercial business.
Sure well Semih joined Us in January and will lead our commercial operations from Amsterdam Chair joins us after a distinguished career at Tom Tom where he led global business in Europe and in China.
Our government solutions segment grew revenues, 21% in year over year to $44.3 million and reported adjusted EBITDA of $17.5 million up 34% year over year.
Growth in the government solutions segment. This quarter was primarily driven by the expansion of the school speed. The schools on speed program in New York City, which included additional hardware revenue and the subsequent service revenue associated with newly installed cameras.
As we've discussed through 29 team we've been working with the New York City Department of transportation to expand the number of schools on speed enforcement areas. Our initial order was for 300 cameras as of December 31st we have installed all of them in October we received a notice to proceed for 720 additional schools on speed cameras.
We are excited about the opportunity to continue executing on this important public safety initiatives and have appropriately scaled our operations to meet this demand. We believe our implementation schedule. During 20, Tony will be approximately 50 to 60 cameras per month, but recognize we may not meet that level every month due to factors that are out of our control such as weather.
We also maintained our consistently high renewal rates again in Q4 during the quarter, we renewed key customer programs in Yonkers, New York, Howard County, Maryland, Marietta, Georgia, and Fulton County to name a few. Additionally, we have signed contracts with Spalding County, and Carroll County in Georgia for schools on speed programs. We believe these are two of many opportunities.
We have in Georgia and are preparing to respond to other outstanding RFP overall, we continue to execute on the opportunities in front of US and are very pleased with our traction during the fourth quarter.
Over the years, we have voiced that M&A would be an important strategic part of our growth strategy and we plan to use our strong balance sheet and cash flow position as the LIBOR, we remain diligent than our M&A process and have developed a strong pipeline of opportunities, which we are hopeful will yield one to two deals in 2020 that said, we remain steadfast in our diligence process and are focused on three.
The types of transactions, one those that solidify our position in the core markets. We serve today to diversify our product portfolio through adjacent markets. As an example, things like parking traffic management congestion pricing fleet management et cetera.
And strategic tuck ins work that we can accelerate growth areas that we have already invested like European tolling.
We anticipate 2020 to be a banner year for us fueled by ongoing penetration with our right customers on the U.S. and the implementation of schools on speed programs in New York City in Georgia.
Additionally, we are planning to invest heavily in our core platforms to remain on the leading edge of technology. These investments will enhance the platforms that serve our customers our financial systems and other processes, which will optimize our ability to deliver consistent growth to our shareholders. We're expecting the bulk of the investments and take place in 2020, that's some of the systems may not before.
The updated until 21.
For the full year 2020, we are expecting total revenue in the range of $495 million to $513 million or temporary tend to 14% year over year growth and expect adjusted EBITDA to be in the range of 253 million to $261 million or an EBITDA margin of 51% and so.
Summary, our strong fourth quarter capped off another great year for virile mobility looking to 2020, we believe that very mobility is well positioned to execute on our initiatives and further leverage our platforms with that let me hand, it over to Tricia to walk through some the financials in more detail.
Thanks, David and good afternoon, everyone I'll provide a more detailed overview of rock full year and fourth quarter 2019 financial performance and then we'll open up the call for questions. We've provided a short earnings deck on our website. It has reconciliations from GAAP to non-GAAP results that will be discussing today.
If you're following along on the Investor deck, we're on slide two.
We're happy to report that we exceeded our the high end of our guidance range for both revenue and adjusted EBITDA with total total revenue grew nearly $60 million or 15.4% to $448.7 million for the full year 2019.
Product revenue generated nearly half of the total revenue growth with sales and installation of the 300 schools on speed cameras that David previously mentioned.
For the year, adjusted EBITDA was $241.4 million up $31.9 million or 15.2% from the $209.5 million in 2018.
Growth in product sales and well executed integration synergies contributed to our adjusted EBITDA expansion adjusted EBITDA margins remained strong at 54% for both 2018 and 2019.
Slide three has results for our commercial services business segment, which delivers tolling violation processing and title and registration services to rental car companies and fleet management companies in the U.S. and processes violations in Europe commercial services had a great year with a full year 2019 service revenue growing.
$35.1 million or 14.5% to $276.5 million much of this growth was driven by higher tolling activity across the entire product portfolio and a shift in product mix that positively impacted revenue and much of the revenue increased drop to the bottom line with adjusted EBITDA growing 22.
Point $2 million.
<unk> hundred $75.4 million for the full year 2019. This business segment produced adjusted EBITDA margins of 63% for the full years ended 2018 and 2019.
For the quarter total revenue grew 17% to $68.2 million up from $58.4 million in the same quarter of the prior year you might recall that in Q4 2018, we had an out of period adjustment that impacted both revenue and adjusted EBITDA to put downward pressure on the quarter, which.
Created improved year over year growth for the 2019 corridor.
Adjusted EBITDA of $42.2 million in the fourth quarter of 2019 grew $8 million or 23.4% year over year from $33.2 million for Q4 2018.
Our adjusted EBITDA performance benefited from from strong revenue growth.
Moving to our government solutions segment, which operates photo enforcement programs from municipalities in school districts with an end to end solution government solutions generated full year revenue of $172.3 million.
Up to $24.8 million or 16.8% over the full year 2019 total revenue was comprised of service revenue. That's the monthly fees that we generate from operating photo enforcement program and product revenue, which results from selling and installing camera systems.
Revenue for the full year, 2019, with $140.2 million down $2.2 million or 1.6% from $142.5 million for the full year ended 2018, although the service revenue was relatively flat flat on a combined basis, our various product line are experiencing divergent trends.
For the full year <unk>, our Red lights photo enforcement program declined approximately $10 million year over year, If you recall, Texas band Red light photo enforcement earlier this year, resulting in a 5.4 million dollar reduction of service revenue in 2019, and this will continue to impact us for the next two quarters.
The remainder of the decline in Red light relates to program losses in Florida and price declines upon renewal.
We also exited our streetlight maintenance program program earlier this year, resulting in a 2.5 million dollar reduction in service revenue. This business was non core and non profitable.
These declines were offset by higher speed program revenue, which grew approximately $10 million.
We installed over 400, new speed cameras in 2019 and believe it the growth in speed programs will outpace the declines in Red light you can see that this is happening in the fourth in our fourth quarter results, where Q4 2019 service revenue was up 3.6% over the same period in the prior year.
Product revenue for the full year 2019 was $32 million up from $5.1 million for the full year 2018. The increase was driven by the 300 unit order from New York City to install schools on speed cameras. We currently have another order for an additional 720 cameras that we've been getting began installing in 2020.
For the quarter total revenue of $44.3 million.
Grew 21% year over year from $36.7 million in the fourth quarter 2018. This was driven by product revenue of $7.6 million for the quarter up from $1.3 million for the same quarter in the prior year service revenue for the quarter was $36.7 million up 3.6% or 1.3, new.
$1 a year over year basis.
Q4, 2019, adjusted EBITDA of $17.4 million increased by approximately $4.4 million or 38% from $13.1 million for the same period in the prior year and adjusted EBITDA margins for this business for 39% up from 36% in the prior year. The large creek increase in a product sales.
Benefiting both the top in the bottom line of the government solutions segment.
Turning to the next slide we show our consolidated results for the quarter. The combined results of the business segments. We just discussed generated total revenue of $112.5 million for the fourth quarter increased $17.4 million or 18% from $95.1 million in fourth quarter of 2018.
Q4, 2019, adjusted EBITDA of $59.6 million increased by $12.3 million or 26% from the adjusted EBITDA of $47.3 million in the prior year.
Fourth quarter adjusted EBITDA margins remained strong at 53%.
The company reported net income of $9.2 million in the quarter compared to a loss of $38 million and the same period in the prior year EPS for the <unk> current quarter was six cents per share compared to a loss of 20 cents 27 cents per share for the same quarter of 2018 tax expense for the quarter and the full year was 3.8 million.
And $13.6 million, respectively. The full your effective tax rate of 28.9% was in line with our expectation.
The company generated $133.8 million in cash from operating activities injury in 2019 compared to generating $46 million for the full year 2018. This improvement is directly correlated to the improved net income we spent $29.7 million on capex in 2019 compared to 26.6 million.
$1 in the prior year most of this capex is used for photo enforcement equipment for our customers across the country free cash flow, which is cash flow from operation operations less capex with $104.1 million in 2019.
As of December 31st we had $894 million at cash on hand, I'm, sorry that and $131 million of cash on hand for net debt of $763 million, bringing our leverage ratio to 3.2 times.
Our credit facility contains provisions that require mandatory prepayments on excess cash flow based on a leverage ratio are required prepayment is $19.7 million, which will be made in Q1 of 2020.
In February of 2020, we repriced our credit facility lowering the interest rate from LIBOR, plus 375 to LIBOR plus 325.
This change will save the company approximately $4.5 million an annual interest expense.
In summary, we continued to execute well delivering strong top and bottom line results and believe that they're in mobility remains well positioned to maintain this momentum throughout 2020 for the full year 2020, we are expecting total revenue in the range of $495 million to $512 million or 10% to 14% year over year growth.
Included in that growth, we expect product sales in the range of $45 million to $52 million, we have in order to install an additional 720 schools on speed cameras. The majority of this order will be fulfilled in 2020.
But at a lower price than we had on our last order in 2019.
We should expect price reduction of approximately 25% from the previous year.
We expect to service revenue to grow 8% to 10% year over year generating between 450 and $460 million for the full year 2020.
We expect adjusted EBITDA to be in the range of $253 million to $261 million or an adjusted EBITDA margin of 51% 2020 will be a year of growth and investment, we're making a meaningful investment in our systems, primarily around invoicing and billing and we'll continue to invest in European tolling. These investments along.
The impact of the price of lower price on product sales accounted for slightly lower margins in 2020.
Thank you for taking the time to join US on this call today and with that we'd be happy to take your questions now.
At this time, we will be conducting a question answer session. If you'd like to ask your question. Please press star one on your telephone keypad confirmation tone wouldn't get your line is in the question Q you May Press Star too if you would like to remove your question from the Q.
For participants using speaker equipment, maybe necessary to pick up your handset before passing the Starkey one moment. Please let me pull for questions.
Our first question is from Steven Wall Morgan Stanley. Please proceed with your question.
On.
Revenue.
The 14% Tricia could you maybe take even can you.
Are you looking David can you broke up on the beginning of your statement could you start from the beginning please yes sure. It may come to better now you are.
Okay great.
Maybe we just look at the pieces driving the revenue growth guidance in 2020, I was hoping Trisha maybe you could just walk us through some of the moving parts. There if I'm thinking about the math right just given the tailwind youre going to get from installing the cameras, what does that mean for the tolling business and sort of what are the drivers there given it looks like it's a bit of a departure from the mid teens growth you saw in that segment. This year.
Yeah, and I think we've said so and so the kids installation is for the government solutions segment, but what we're going to what you're going to seize you're gonna see these sort of two things happening well in government solutions, we're going to continue to see a decline in red light, although not as meaningful as it was in the current year, but you're going to see the rise of speed as we continue to install camera is not only in new.
New York City, but also in Georgia.
So we believe that by the end of Twentytwenty that the speed will be the largest product revenue that will have within the government solutions business segment. So you combine those those service trends will get you double digit growth on the service side and then you've got growth coming out of the product revenue is we're going to stall basically double the.
Amount of cameras or sell double the amount of cameras and 2020 as we did in 2019 on the commercial services side, we said that on the outer years, we thought it commercial services would be it like a 6% to 8% grower and that's where it's trending to now so that's not surprising for us with our growth in the future coming from European told.
In which as David mentioned, probably will materialize more significantly as we move into 2021.
Got it okay. That's helpful. Thanks, and then.
Just maybe on the rental car agreement I think or David you said you extended the this contract out by year to 2025 give any updated thoughts on your approach towards I guess leader in the you're coming to the table at the other two major partners.
Nothing that we haven't said before but obviously, a we'll just approach them at the appropriate time are.
I think the approach that we took with JBG is a good one which is we served them well, we continued to partner and find ways to help them.
And that led to an extension. So we're hoping that that same strategy will work at the appropriate timing that works for both us and for our customers with the other two.
Got it Okay, and then maybe just one quick one that could squeeze it in.
Obviously pretty top of mind right now you know rental car activity and travel around the Corona virus anything you guys are seeing according to your watching for that relevant for us to be careful here.
Yes, two things one is we get our information is probably lagging because we get our things after the facts I don't know than we have any real data to support a decline in that at all today.
Part two of that is that international renters as a relatively small portion of the total number of renters that is that's a really small numbers so that being said.
We're going to remain vigilant, we'll watch whats happening as we end. This continues to play out obviously, there's a lot of real time information, but as of yet we haven't seen anything material it will impact our business.
Okay, great. Thanks, yes. Thank you.
Our next question is from Ryan carry Bank of America. Please proceed with your question.
Good afternoon, and thanks for taking my questions understood just hoping you could provide a little more color on the adjusted EBITDA margin Guide I know you called out a few contributor driving the faster expense expense growth in 2020, I was just trying to get a better sense the magnitude of each in explaining the year over year step up.
Yeah, you figure that they're just the overall lower margins would be attributed from the product revenue were product revenue last year was accretive to our overall margins for the company as a whole and with this year with the discounts that were giving too.
You know one of our largest customers in New York City. Those those margins will that will put a little pressure on it you can probably think about that has been about $5 million of pressure on our margins. In addition to that we have decided to make a real meaningful investment in our system. If you think about our company. We are the accumulation of several founder.
Led businesses.
On each creating their own proprietary software, which we have all brought together and and this is the year that we want to make sure that we are creating stability for the future growth and by doing so we're going to make a sizable investment in technology.
Got it should those incremental investment and they invoicing and feeling is that something that's more onetime in nature, meaning we're going to go through in 2020, and then could you kind of rebound in the margins or is this something that you expect will continue kind of for the foreseeable future.
No. It's I think it's just a one time what I'd said is that it's going to be mostly done you should there may be some tail effect that goes into next year, but it would be de Minimis I think it's really focus for this year.
Got it final from me it sounds like you're expecting a pretty meaningful step down in growth in the commercial services business from a say kind of like the mid teens growth range. We saw this year in machine for the last several years to more kind of high single digits range is there anything worth calling out beyond just law of large numbers just 'cause it seems like a pretty material step down kind of from where you were exiting fourq you. Thank you.
Yeah, and I think we've been saying that for about a year that does that's really where we saw the market going and really it's an accumulation that that this business segment has been growing in the mid to high teens for the last four to five years.
And as we sort of we it's just it becomes more and more difficult to two hurdle, though that was high expectation.
You know so we said that this business unit would settle into sort of a 6% to 8% growth and that's really what we'll see and then in 2021 as we sort of get the the steam under our wings are the windows never our wings for the.
European rental car totaling well, we'll see growth there as well.
Thank you for taking my questions sure.
Our next question is from Daniel Moore CJS Securities.
Please proceed with your question.
Thank you and good afternoon, David and Trish.
Maybe just talk a little bit about the.
The price concessions for you know in New York City, or do you see that as a kind of the new norm as far as Asps are concerned and then beyond that you mentioned, Georgia and some other opportunities maybe just talk about the level of dialogue for other a safety zone enforcement area contracts.
New York the the discount that we reference are really just just related to volume. It's just it's a volume discount I mean that was really the gist of it. So that's and we have talked about that previously I believe yeah, yes. So I mean I think we'd previously said that you know with you guys remodeling you could last year, you could probably model a new camera in about $100.
In dollars and revenue in this year I'd eat you're probably better off modeling in in a more like $75000.
And then the opportunities that we have to grow in Georgia are really us just approaching our customer and and I think we have two new contracts there to new contracts and we have a good pipeline is.
So we'll feel complement our plans for Georgia for the year.
Very helpful. And then just maybe a couple of housekeeping Trish you've just as we think about modeling for next year kind of tax rate in DNA and then just generally where we see capex shaking out.
Yeah, I think you should put your tax rate right at that sort of 28% is probably a good tax rate for us it's higher than what you are probably previously modeling, but that's because a shift in our overall a portion met of state revenue was moving from low tax states. The high tax days think out of Texas into New York kind of thing.
So so that's probably a good way to think about it going forward and then far that capex, so not only to the investment that we're making in our systems hitting our PNM, but also it's going to be hitting our capitalization of internal labor as well on where capex. This year was right around the 30 million dollar Mark you probably should think about it next year in the 35 to four.
80 million dollar Mark.
Perfect I'll sneak one more in if I may just it generally speaking maybe an update on.
The ER progress that we're making both with Pega tell Ya and then more generally in Europe.
Obviously sounds like you know 2020 continues to be an investment your number one number to any just with Corona I know you know, it's hard to tell right now, but as anything that might.
Slow that progress down.
At least based on what you're seeing today.
Yes, I mean, so the first part is we continue to make progress in Europe.
And we've we only closed I could tell you toward the end of the year. So we're still no kind of the phases of integration, but they they've been doing well we have our new leader there that's kind of taken the home of our European operations, who will operate out of Amsterdam, which is where our European headquarters is.
We're in the middle coating and developing right now for the first pilot than we have many.
Sort of contractual discussions happening with others, but as I mentioned in the discussion it's.
Theres just things that are slightly more complicated for people that are starting from scratch that they have to do to consider to launch a program and just it's not.
Not as if they were doing it this is new to the world inside of Europe.
As it relates to the current of IRS I mean, it's still too very very early I don't anticipate given that we would be doing pilots with a relatively low number of vehicles that that would have any impact on our ability to roll out because it's so small.
So I would anticipate that had been a couple of years from now than that might be a different answered just depending on what the travel restrictions and the challenges are in Europe as a result of the virus.
Very helpful. Appreciate the color. Thank you yeah. Thanks.
Our next question is from Ashish Sabadra Deutsche Bank. Please proceed with your question.
Thanks, Thanks for taking my question. So question about the even if it's on their call talked about that unpredictable product and that's gaining some pretty good traction among the commercial customers.
It's all done you're going to states and they are holding back out across the country. So my question was how do you think about this kind of an unlimited product being rolled out by other providers and how do we think about that up opportunity or the victim. Thanks.
Yeah.
I mean, we think it's great because ultimately we are the the inventor of the we're a part of that that model that they're leveraging.
We think that as a rental car companies look for more customer friendly sort of pricing models that thats good for the industry and good for them and the all inclusive of the sort of as they call. The unlimited is a great way to think about it. So we're fully supportive of that which is and we hit we've been helping them along the way.
That's great and then maybe just on Europe, a follow up question there would be how should we think about that revenue. Unfortunately in the middle.
I understand that wouldn't be lucky kids talking more 2021, but as we think over the next year two years, how should we think about what the revenue growth potential by as you would hope comes on and hope that helps accelerate the commercial revenue growth called so how like because having the opportunity or the next taken five years. Thanks.
I think I think what we need to do as she she is really get the first pilot program up and running so that we can get all the right statistics to say, what that's going to look like on the you know I you know I had a lot of people are saying he could this be at 30 million dollar product and I think the answer is yes, but not in that timeframe that you proposed.
I think it's got its got potential to grow its just going to take us a little longer on the customers are more they're not as concentrated as they here are they they're here in the U.S. and and we don't have enough information from the pilot to see what the price points are gonna be that we're going to go to market up.
Okay. That's helpful and maybe if I can sneak in one final one just on congestion pricing have you had any other conversations with other cities and any kind of traction, but you're seeing there again. The Mcdermott question are you on that front. Thanks, Yeah. I mean, we still we still remain very interested in congestion pricing for the future.
You've probably seen several cities are doing studies as we speak.
Outside of New York City program, I think we still want to see what happens what the model is that they settle too which is I think is going to take some level of time.
It's still very early that being said, we still feel like we have.
Products and services, a knowledge and know how that can be valuable and so as we get line of sight to a clear what the market is going to look like that I think we can be slightly more specific and slightly more aggressive in how we're going to be pursuing that go forward. It's still it is just so very very early meaning that there is no.
Program and the United States today, So we've got some waiting to do to really figure out what the best way to support our customers will be.
That's very helpful. Thanks, Steven Intertia, yeah. Thanks, Ashish Thank you.
Our next question is from Timothy She auto Credit Suisse. Please proceed with your question.
Thank you Okay I wanted to follow up a little bit on the New York School bus stop arm opportunity and then a quick follow up on the product pricing. So on the New York School bus stop opportunity just to dig into it a little bit more maybe we can put some granularity around the opportunity. Our understanding is there's roughly 10000 buses in the.
City and that the monthly revenue there can be more in sort of the 500 dollar range and also fully understand that that would not be a full year round opportunity maybe nine months per year, maybe just some added context. Given you obviously have been very strong relationship with the city of New York.
Yes, that's exactly right I mean.
I think you guys have gotten to know its wellness, though just because the law has passed and there are the buses there doesn't mean that things move exactly as quickly as we would like.
That being said I think thats, a very fair way to think about the opportunity which is.
The total number of bosses by a slightly.
500, and then thinking of the nine month, eight and a half month sort of total time that they're going to be deployed is I think as the appropriate way to think about the opportunity and I think we'll start to see traction on that probably toward school next year, not I don't suspect it would be anything going on in that in the spring.
Okay.
Sorry school in the fall of 20, not next year as and 21 excuse me.
All 2020 some of that begins.
I would suspect so.
The question is it sort of a school district by School District decision, making process or is it an assumption that all 10000 eventually maybe it takes a few years. All 10000 eventually are equipped with the cameras or is it some subset of that 10000.
It will probably it depends on school districts. So it is there is multiple decision makers involved which is why it takes some level of time to rollout.
In general it you wouldn't necessarily have to put a camera on every single boss, but it just depends again on the school. This because some people do both for a full fleet install others do not depending on the routing.
And it's still a little early to determine how we would be doing that in the city. So right now I looked at the 10000 is the Tam and underneath that is what we won't get into once we get some more information start deploying.
Okay, great. Thanks, a lot and then lastly, I'm very minor I apologize I have you might have touched on this earlier I had to hop off for something else briefly but on the product pricing I know you mentioned think about it I think a 75 K instead of 100 K for the sort of next round makes total sense buying and greater bulk.
Just broadly speaking I think that the overall product margin, including some of the either items that go into that revenue line items had hit as high as high Fiftys what percentage in terms of a gross margin should we be thinking about this year does this put us into sort of the high fortys.
Hi, yes, probably mid fortys not that not as high as you're thinking.
Fortys.
Okay, great. Thanks, a lot for taking my questions. Yes. Thank you.
Our next question is from week to PAMA William Blair. Please proceed with your question.
David Tricia and Mark good afternoon.
Hey, good afternoon.
When you say that you expect Europe to generate material revenue and 2021 are you assuming.
Any contribution from your big three U.S. rental car partners in Europe.
Yeah I think.
Yes, we would assume that we would be working with some of the customers that we serve currently in the U.S.
And I think what we're saying, it's just that we're not going to have any meaningful revenue in 2020 and that will start to escalate as we move into 2021, but on a on a base of revenue of $512 million, you know, meaning material or meaningful is you know and I have the holder.
Indeed, and you know related to that question by the end of 2020 shouldn't most of the upfront European infrastructure investment be complete and I guess in total how much of.
How much capex and Opex is necessary to form the foundation for for Europe.
Yes.
The first party question is yeah, we would anticipate by even later in the year that we would have sort of load balance the infrastructure to meet with what we think the demand will be related to the pilots once the pilots go outside of that meaning more pan European multi country. Those types of things that we may have to higher adjust accordingly to meet that demand yeah.
And I think I think of in 2019 numbers, we had about $3 million of investments and in Europe for the expansion and you know you were probably going to have $3 million to $5 million. This year as we continue to roll out to multiple country.
Okay, Okay, and one final one.
How many cameras for the New York City schools on speed came a contract are currently in backlog relative to the more than 600 that you expect to install this year like in other words at the end of this year. How many cameras are you choose.
Rating will be remaining for 2021.
I think what we've recently said is that we believe that if they were going to expand into 750 schools on from the initial 150 that they started with it it would be about 1200 cameras.
Which we installed 300 in 2019 and you know we've got an order for 720 for this year, but if we said we're all going to install 600 of those than we would still have 300 cameras left to roll into 2021.
Sounds good thanks, everybody.
Our next question from Daniel Moore CJS Securities.
Please proceed with your question.
Thanks again last one for me, but just an update on capital allocation. Obviously is we're getting down ticking down quickly closer to three times.
In addition to M&A and debt repayment.
Is there any other possibilities are considerations in terms of opportunistically, adding shareholder value.
Yeah, I think at this point, we're going to continue to the pipeline as we think about M&A is very strong and so the likely scenario to be deployed through M&A. If for some reason those dried up and we weren't able to do anything then clearly we would reassess and look for ways to increase shareholder value in other means but I think right now M&A is.
The strong strong candidate for that.
Understood. Thank you, yes, thanks, Dan Thank you.
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Thank you.