Q1 2021 Verra Mobility Corp Earnings Call
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It is now my pleasure to introduce your highest budget Dowdy Vice President Investor Relations. Thank you Sir you may begin.
Thank you and good afternoon, and welcome to Verra mobility is first quarter 2021 earnings call.
And we'll be discussing results announced in our press release issued after the market close.
With me on the call are David Roberts, Verra mobility, as Chief Executive Officer, and Tricia <unk>, Our Chief Financial Officer, David will begin with prepared remarks, followed by Tricia and then we'll open up the call for Q&A.
During the call we will make statements related to our business that may be considered forward looking including statements concerning our plans to execute on our growth strategy, our ability to maintain existing and acquire new customers and other statements regarding our plans and prospects forward looking statements may often be identified with words such as.
We expect we anticipate or upcoming these statements reflect our view only as of today May 17, 2021, and should not be considered our views as of any subsequent date, we undertake no obligation to update or revise any forward looking statements forward looking statements are not promises.
Our guarantees of future performance and are subject to a variety of the risks and uncertainties that could cause the actual results to differ materially from our expectations for a discussion of material risks and the other important factors that could affect our annual actual results. Please refer to those contained in our annual.
Port on form 10-K slashed.
And quarterly report form 10-Q, which are available on the Investor relations sections of our website at IR at Verra mobility Dot com and on and on the SEC's website at SEC Dot Gov. Finally during today's call, we'll refer to certain non-GAAP financial measures a reconciliation.
Of GAAP to non-GAAP measures is included in our press release issued after the close today located again on our website at IR at Verra mobility of Dot com and on the SEC's website at SEC Gov.
And with that let me turn the call over to David.
Thanks, Rajiv and thank you to everyone for joining us on the call today we.
We delivered solid first quarter results that exceeded our expectations as we continue to navigate through a challenging economic environment.
With more than one and for Americans vaccinated, and improving March and April TSA traveler throughput data the trends are promising.
As the U S economy, reopens, we see improving metrics across both our business segments.
Our government solutions business saw solid service revenue contribution driven by the expansion of the New York City School Zone speed program, and 2020, and our commercial services segment showed improved demand at the big three rental car companies adjust.
Adjusted EBITDA came in at approximately $40 million or 45% of revenue exceeding our internal expectations.
During the quarter, we optimized our debt capital structure to address our short term capital needs and strengthen our balance sheet to invest for future growth, including funding the purchase of Redflex Holdings, which now which has now received shareholder and court approval and we ended the quarter with approximately $250 million and cash and have additional.
<unk> through our revolver, which remains undrawn with clarity on our outstanding New York City of receivable, which I will detail. Shortly we expect to maintain a healthy cash balance throughout the calendar year.
Now I will move into our Q1 results by segment.
Our government solutions segment delivered revenue of approximately $44 million and generated approximately $18 million and adjusted EBITDA.
With the healthy margin of roughly 40% service revenue grew approximately 15% during the first quarter driven by solid contribution from our fixed speed portfolio, partially offset by our variable programs, which remain impacted by the pandemic. Our speed portfolio is now our largest product line, representing approximately 49% of <unk>.
Government solutions service revenue.
The most significant contributor to our speed portfolio was the ongoing expansion of the New York City School Zone speed program. This program is one of the largest programs globally and the city has become nationally and internationally recognized as a leading innovator and street safety initiatives.
As a reminder, we have two current contracts with the city of New York Department of Transportation of 2014 legacy contract for Red light bustling mobile speed and fixed speed photo enforcement cameras and of 2020 emergency contract for the purchase installation maintenance and operation of and expanded school zone speed program.
And that began in 2020 and.
And our last earnings call. We addressed that we were in the process of Remediated and certain installation deficiencies that we had discovered which had occurred under our 2014 legacy contract and also that we were cooperating with an investigation by the city of New York for matters related to those installations.
I am pleased to report that all addressable sites that we have access to have been fully remediated. Approximately 15 sites are remaining due to conditions that exist at those locations that are preventing remediation. Additionally, the city of New York concluded its investigation into the related matters reported and our 10-K a.
And as Tricia will address we have agreed with the city on the settlement to resolve those matters.
I am very proud of our team's efforts and managing these issues and believe we have emerged as a stronger partner for our long standing customer of the New York City Department of transportation.
We've also made progress on the outstanding receivables related to our New York City contracts, which combined amounts to approximately $121 million through the end of March.
With respect to the 2020 emergency contract, which represents approximately 66% of that receivable I'm happy to report that it has now been submitted to the city Comptroller's office for registration once registered we expect to begin receiving payments on those invoices. We are also making progress on clearing administrative hurdles for the unpaid invoices on the <unk>.
14 contract and hope to see payments begin this quarter.
We are proud to continue to play a meaningful role and bringing in New York City's vision Zero initiative to fruition, we recently announced that we received authorization under the emergency contract to order and install 720 additional schools on speed cameras throughout the city, we began installation and April and through last Friday, we have installed of.
Approximately 63 of those cameras and the remainder is expected to be completed and the current calendar year Tricia will provide additional color on the impact of our accounts receivable status and the new camera order on our balance sheet and cash flows.
Overall, we see further momentum for our government solutions business as states reopen and COVID-19 restrictions subside, we're making good progress and Virginia, and Georgia States with newer speed enforcement legislation. We recently initiated a pilot for our speed program, and Bedford County, and Virginia and in Georgia. We have received notice to proceed with the installation.
And of 51 speed cameras, and Spalding County, and are awaiting regulatory approval for potentially another 24 cameras and.
In addition, our healthy pipeline of opportunities include New awards and contracts for approximately 50 speed and Red light cameras and year to date, we expect those opportunities to translate into revenue during the second half of this year or early 'twenty two.
We also maintained consistently high renewal rates during the first quarter, including key customer contracts, and Washington, Florida, Maryland, North Carolina, and Georgia with.
With school is expected to be entirely open for in person and learning. This fall we expect to see recent awards for our crossing guard programs translate into deployments for the coming school year and.
In fact, we have already begun work on our recently announced crossing guard contract for approximately 200 buses for Broome County in New York with more expected over the near term as a reminder, we have received awards from six counties in New York State for a crossing guard program and we expect new wins with the potential to cover approximately 6500 school buses.
Lastly, I would like to address the status of our acquisition of Red Flex Holdings as we announced in late April we agreed to increase the purchase price from 90 to Australia and per share to <unk> 96, Australia and per share I am pleased to report the just last week Red flags shareholders approved the transaction, which we hope will close in this quarter, but may slip into <unk>.
Q3, the delay in closing is related to receiving regulatory approval from Saudi Arabia for which we don't anticipate problems, but which is taking longer than anticipated due to the regulatory regime and the associated timeline.
On May 13, and the Australian Court overseeing the scheme issued orders of approving the transaction based on the shareholder vote, which makes the Saudi regulatory approval. The final contractual condition for the scheme to take effect.
We are incredibly excited about the opportunities of this transaction will have for our customers and our business. We believe the combination will expand our global presence and growth and the smart mobility and safety of enforcement market <unk>.
Increase our resources and scale and enhance our technology capabilities. Our teams are already engaged and identifying cost and revenue synergies to create a worldwide leader and safety enforcement.
Moving onto our commercial services segment, we delivered revenue of approximately $46 million and adjusted EBITDA came in at approximately $23 million or 49% of revenue.
And as a reminder of the largest proportion of the revenue and commercial services is highly correlated to rental car volume at the big three racks, we saw volume pick up by 33% and March which is the highest month over month volume improvement they have experienced since June of 2020.
We're seeing solid and demand and the current quarter, which correlates with the pent up demand for car rentals as recently reported by various trade publications.
Our internal dashboards and the Kpis, we follow also support continuous improvement and the underlying markets recent reports from Hertz and avis points of higher utilization rates, indicating efficient fleet management and the healthy demand environment at the customer level. In addition, the consistent sequential improvements, we see and billable days reaffirmed solid business trends.
While we are optimistic and the trend line remains favorable rack still need to overcome some challenges.
As rental volumes remain well below pre pandemic levels, our outlook remains cautious on the industry, especially given the supply constraints at the OEM level, which potentially could limit volume growth.
We are happy to report that we have made great strides with enterprise and have an agreement in principle to renew our contract for tolling services and the U S. Through may of 2023 on terms that are materially similar to our current contract. Although we are still finalizing those terms.
Our international expansion for <unk> continues to make progress all of the impacts of COVID-19 on the European rock market are limiting the progress of those discussions that said we are continuing active dialogues with many large rental car companies throughout Europe. We are close to finalizing terms with one large global rack and Ireland and in January of this year. We also.
Inverted the pilot with rent a car and France to an 18 month countrywide contract. Additionally.
And we recently announced that we won a new contract for transport for London to enforce its direct vision standard scheme that went into effect on March one and 2021. This public safety initiative requires heavy goods vehicles to obtain of safety permanent before entering and operating and most of the greater London. This initiative is part of the mayor of London's Vision zero plan to eliminate all debt.
And serious injuries from London streets by 2041.
On the title and registration side, which continues to do well, we renewed our contract with the element of global leader and the fleet management industry.
In summary, and the foundation for of thoughtfully constructed and the accurate forecast is still challenging and therefore, we will refrain from offering guidance and the near term, but we can provide some qualitative thoughts on our business going forward.
So we see lots of signs of optimism, we continue to anticipate the slow recovery and our commercial services segment, given the ongoing challenges faced by the car rental industry. We expect to return to 2019 service revenue levels by late 'twenty, one or possibly early 2022 as we have commented in the past, we anticipate leisure travel to return earlier than business travel.
<unk>.
Additionally, the new substantial order from the New York City of School Zone speed program will help drive product revenue for our government solutions business. During the current year citation and volumes are still well below pre pandemic levels and we expect positive contributions from our fixed portfolio to offset our variable cameras entering a seasonally slow period through the fall. Additionally, we see of potential of secular chain.
And traffic enforcement in the coming years, which could serve as a catalyst for our government solutions offerings.
Overall, we are happy with the progress that we're making toward our strategic imperatives and remained focus on executing against our plan to create shareholder value. We continue to believe that the balanced product portfolio provides stability and these uncertain times and growth for the future with that let me hand, it over to Tricia to walk through the financials in more detail.
David and good afternoon, everyone I will provide a more detailed overview of our first quarter financial performance and then we'll open up the call for questions.
And we've provided a short earnings deck on our website that provides some insight into the quarter and some reconciliations from our GAAP to any non-GAAP results.
Before I get into the quarterly results I wanted to provide a quick update on the status of the restatement that we announced on May seven and filed with the SEC aftermarket on Friday.
On April 12, the SEC issued a statement regarding the accounting treatment of warrants highlighting the potential accounting implications of certain features of the warrants constantly issued and transactions involving specs.
As a result of the SEC statement, we reevaluated, our accounting treatment of our warrants and concluded that our $13 3 million public warrants were properly classified as a component of equity. However, our $6 $6 7 million private placement warrants should be and should have been previously classified as the liability.
Measured at fair market value with the noncash fair value adjustments recorded in earnings at each reporting period.
We filed the restatement and form 10-K, and reflecting the private placement warrants as of liability from the inception of our business combination and 2018 and reported the market to market adjustments to the fair market value of that liability as a gain or loss on the P&L for all subsequent reporting periods and general to ask.
The stock price increases the fair value of the warrant liability.
Yes.
And the company.
As the stock price increases so does the fair value of the warrant liability and the company recognized as additional noncash loss and the statement of operations with the opposite of the fact happening when the stock price declines.
This can create a lot of volatility and our net income that has no impact on revenue adjusted EBITDA, our total cash flow.
Now, let's turn to the quarterly results.
The following along in the earnings deck I'm on slide two which outlines the revenue and adjusted EBITDA performance for the commercial services segment. Our commercial services segment delivered revenue of $45 $7 million declining $15 6 million or 25% year over year.
This business segment deliveries of the majority of its revenue derives the majority of its revenue from tolling services provided to rental car companies and <unk>.
Continue to fill of the effects of reduced travel due to COVID-19 as.
As David mentioned, the big three racks are significant pickup and demand during March which resulted in the largest month over month increase and we've.
And the last nine months this momentum carried over into April which gives US reason for optimism. However of rental car volumes are still approximately 40% below pre pandemic levels adjusted EBIT.
EBITDA for the quarter of $22 $6 million declined 33, 3% year over year with adjusted EBITDA margins at 49%. If you recall, we stated on our last call that margins would be pressured in Q1, and as we reinstated bonuses for 2021 and ramped up to meet demand.
Turning to the next slide you can see the results of the government solutions business. This segment operates photo enforcement programs from municipalities and school districts offering and end to end solution. Our government solutions business delivered revenue of $44 2 million and the first quarter and declining of 11 3 million or approximate.
<unk> 20 per cent year over year as a reminder of the revenue for the segment is comprised of service revenue. That's the monthly fees, we generate from the operation of photo enforcement programs and product revenue from selling and installing camera systems. I think it's important that we talk about these two sources of revenue separately. The service revenue for the first quarter was 44 million.
Which grew $5 8 million or 15, 2% year over year. The service revenue growth is driven by our expansion of the school zone speed program, which increased by 43, 2% over the same quarter and the prior year the growth and our speed portfolio is primarily related to the New York City schools.
On the speed program, where we installed 720 cameras throughout 2020 for which we which we are now booking service revenue.
This growth was offset by a decline and the school bus stop arm cameras that were impact by school closures related to COVID-19, as schools return to in person and learning revenue should return to these programs late in 2021.
Product revenue was almost negligible for the quarter as we didn't install any cameras and.
As David mentioned, we received and new authorization for installation and service and maintenance for New York City Department of Transportation for an additional 720 schools on speed cameras, which we began installing and April as such we expect our product revenue to be $50 million to $55 million free the current year compared to the previous expectation of <unk>.
Three to 5 million weighted.
We would anticipate installing all cameras by the end of the year.
Adjusted EBITDA of $17 $8 million decreased $3 5 million from the prior year quarter adjusted EBITDA margins for this business was strong and 40%.
David.
And David referenced we reached an agreement in principle with the city of New York to resolve matters related to previously disclosed installation issues and while the non financial terms of the settlement are still being finalized we accrued $1 3 million.
For the settlement amount.
Separately with the higher product revenue expected from the balance of this year, we anticipate our margins to remain strong for the remainder of the year.
Turning to the next slide we show our consolidated results for the quarter the.
Combined results of the businesses that we just discussed generated total revenue of $89 9 million for the quarter of decline of $26 9 million or 23% from the same period and the prior year adjusted EBITDA of $43 million decreased by $14 5 million or 26% from the <unk>.
Prior year quarter.
The first quarter, adjusted EBIT and margins were 45% the.
The company reported a net loss of $8 9 million and the quarter compared to net income of $22 1 million as restated for the impact of the warrant accounting and the same period and the prior year, adjusted EPS, which excludes amortization and stock based compensation and other noncash items was <unk> 12 per share for the current <unk>.
<unk> compared to <unk> 19 per share for the same quarter of 2020.
And the tax benefits of the quarter was $2 9 million, representing an effective tax rate of 24, 5%.
And the quarter, we optimized our customer capital structure, amending and extending our existing term loan with the new $650 million first lien term loan maturing in 2028, which includes an accordion feature providing an additional $250 million of borrowing capacity.
We also issued $350 million of new senior unsecured notes at a fixed rate of five 5% maturing in 2029. This strengthens our balance sheet and provides us with ample liquidity to execute on our and our strategic priorities for the current calendar year and beyond while providing liquidity for the pending Redflex acquisition.
The company and generated $9 million and cash flow from operating activities during the quarter compared to $14 8 million and the same period of the prior year. The change resulted in the reduction of the change resulted from the reduction of net income and was further impacted by increased AAR.
As of March 31.
Our city of New York Department of Transportation contracts represented approximately 63% of our net accounts receivable as of the ended the quarter. They owed the oldest of $127 million under the legacy and emergency contracts combined.
Under the emergency contract, we are out of $52 $6 million and product revenue and $26 8 million and service revenue. The emergency contract has been submitted for registration to the New York City Comptroller and we'd expect to receive our first payment during the quarter.
We also believe that we will begin receiving payments towards the $41 $3 million balance under the 2014 legacy contract.
These payments began as anticipated and we should significantly enhance our cash flow performance for the balance of the year free.
Free cash flow defined as.
Cash flow provided by operating activities less Capex was $5 3 million and the quarter and as of March 31, we had debt of $1 billion.
Net of $250 million of cash on hand, our net debt was $750 million, which was five four.
And four five times trailing 12 months adjusted EBITDA of $167 3 million.
We anticipated we anticipate this to be the trough of our trailing 12 months adjusted EBITDA and therefore, the peak of our leverage and we'd expect to Delever quickly and for the remainder of the year.
And as we turn to the future uncertainties surrounding the recovery cycle. Following the COVID-19 virus makes it difficult to provide guidance or ability to predict to travel and rental car demand are limited.
We're seeing strong sequential growth in March and April and would expect greater service revenue in Q2, and the back half of the year, we anticipate product revenue and the range of $50 million to $55 million. We're pleased with our profitability. During these difficult times and believe that we're well positioned to capture revenue.
As the cycle return and with that I'll open up the line for questions.
Thank you.
Now I'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
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Your first question comes from Justin Post.
From Credit Suisse. Please go ahead.
Alright, David trick.
Trish and Sajid how are you.
Hi, Justin.
Great well I wanted to dig into the NYSE opportunity a little bit.
And and congratulations on that win so I know you had talked previously about a ceiling of roughly 500 cameras and NYSE, meaning coverage of two cameras.
For school zone, and just wanted to dig into that by my math. It seems like you've actually exceeded that number so is there.
More coverage per school zone, and is there incremental upside to numbers and that.
Perhaps.
And expansion of the contract even further.
Okay.
The second half of that this is the limit of what the legislation allows force. So there won't be more cameras from us past the new 700000, but the number is higher than what you thought.
Yes, the actually Ken Youre exiting I think they are actually can be originally what they had said they were going to expand it to a certain number of school zones that number was 750 of which we were already and 150. So then you'd say 600 school zone tends to camera should get us to about 1200.
And that being said, sometimes disclosed and can it can expand around the corner or something like that so we installed 300 cameras under the legacy contract and 2019, the emergency order that we're currently operating under now actually has 687 cameras available for installation on.
And of which the order gives us the second the 14th 14 40.
There's a there's a little bit more room.
I see I see got it so but you will be like you said youll be bumping up against the high end of that so there is not to be expected any any incremental additions on top of this.
Yes, and I think we'll keep that exactly like we've always done it and when we get the order to proceed we will let you guys know sure.
Sure sure.
And regarding the economics, there is there anything different on the service revenue side. It sounded like from your guide for product revenue Youre about in line with.
Perhaps that last order was on the product revenue side, but is there anything different on the service revenue side.
And not at all so it would be about the same as we've been talking about for the the total monthly fee, which I think we've said that the debt portfolio and general average is about $3800.
Got it got it Super helpful. I guess, one brief follow up wanted to dig into the London opportunity a little bit and you mentioned this recent win there where you're providing the overweight shipping.
The program there and I think you had some operations, there and and contracts with EPC. Historically, just curious if you could provide some color around how that will benefit you, perhaps selling other solutions into London, which seems to be one of the kind of leading.
Photo enforcement type of cities, probably after New York.
Yes. This is and this is.
Less around photo and force.
And until they do have that and the UK. This is more around sort of like road user charging and some of those types of events. So.
To me it's of Great adjacency, we worked with Tfl for some time.
On other initiatives. This was an opportunity to expand a platform that they had already been using into another area. So it's not a huge opportunity, but it is something that just shows kind of the efficacy of both the platform and the relationship that we have with the CFO.
Got it alright. Thank you both I appreciate it. Thank you. Thank you.
Thank you and your next question comes from Daniel Moore from CJS Securities. Please go ahead.
Yes afternoon, David interest and thanks for taking the questions.
Moving now.
Maybe just talk a little bit about if.
Travel and therefore rental demand and continue to recover.
And based on bookings certainly things were looking up the west we look into the summer and.
Paul.
What's your visibility and confidence at the racks will have sufficient fleet sizes to get back to 19 levels.
The maybe the early 'twenty two as you described in terms of your outlook.
Yes, so the best I think David and actually quite public about the fact that they've had some concerns related to new vehicles and so certainly the ones that we know about publicly are entering into the sort of we might call. The newly used car market to try to round out their fleets.
And I think they have been relatively clear about that there would be and expectation that the demand will outstrip supply at least for some period of time as we head into the back part of the year until the Oems and the chip that really has the chip manufacturing can get back into a place where they can fill out the demand hard to guess like what the lagging effect of that is but it certainly.
They are certainly anticipating some slowness on that aspect.
Got it, but we're talking likely months or quarters and.
And as opposed to materially longer than that understood.
And then just in terms of the.
You mentioned the contract in Ireland.
As far as your discussions with Rex or the kind of ready to start talking again about expansion of services into Europe.
And as they get their own ducks in a row here.
Any update in terms of timing of the opportunity around there would be great. Thanks, Yeah, I think it's going to be well not a tale of two cities by the tale of two countries.
Which is the sort of significant increase and travel related opportunities here and the U S is outpacing Europe.
Continues to grow but wider because there are still some <unk>.
Restrictions inside of Europe, So I think what the rental car companies would say is that they are hopeful that by the end of the year that the vaccination efforts inside of Europe are pacing, then with the U S and that would allow them to sort of see that travel demand pick up I know certain countries are definitely trying to target the ability to have more travel and come summer.
So I suspect it'll be it'll still be.
Reasonably delayed and turn until the vaccination progress makes them more headway inside of Europe.
Very helpful last one of the metal.
EBIT, but.
I believe you said, Georgia.
<unk>.
Cameras are so any product revenue associated with that or is it more typical.
Lease agreements.
Yes.
Think of the standard standard operating procedures and the usual kind of lease agreement to your point.
Great. Thank you.
Okay.
Thank you.
Your next question comes from James Fawcett from Morgan Stanley. Please go ahead.
Thank you very much and.
And thanks for the color on that.
Some of the puts and takes as you think about the rest of this year and where are you.
You can get back to.
Some of the key metrics.
And we've compared to 2019 I'm wondering if you can help us bracket, though.
And where.
And kind of what bottom versus top and would be and what would be the drivers and very and going forward it seems like and.
And I think kind of as you suggested we should be seeing.
Pretty consistent sequential.
The improvement as long as the world continues to reopen et cetera. So just looking for a little.
Incremental clarification there.
So.
And then fully understand the question.
So if you think about what are the maybe the when you say puts and takes are Jamie and somewhat like what are the things that sort of influence to go up and and Influencers to go down like what are the things exactly exactly yes.
Yes, so I think in general and <unk> got a.
Our commitment from New York City, which gives us a really strong sort of right down the middle of the road is going to be very very consistent with previous practice in terms of the way we think about growth.
But we still have variable programs and in particular ones that are and school zones are in particular school zone or crossing guard, which is our school bus program the.
And the right now we would think that those would be quote unquote turned back on come fall and kids are back and school, but there still could be a to.
Use your word of take on that meeting of could get delayed there could be less of it could.
The hybrid learning situations that could potentially impact and so open until we're back to full sort of recovery any variable program. I think we will have some level of pressure on it and so we're hoping that by the going into next year that we're back to a normalized run rate and.
And to be the same obviously, the big driver and commercial services is on the on the tolling side, which as we talked about is hoping to get back to that 2019 levels. We leave this year, but the variability of things like the amount of cars available as well as any sort of potential setback and the concept of opening or re closings of vaccination and or any.
The thing like that could potentially be a take on that and then Europe is one that we're still.
It's unclear as to when that's going to sort of hit its critical mass because of the the current stance of the countries. There is <unk>.
And certainly more conservative here and the U S and until that gets clarified I don't think we will have quite the same level of.
The ability to predict what we think is going to be.
Got it got it and then just back on on the cash flow and the receivables from New York et cetera reviewed the here that there's progress being made on that.
Can you any way you can help us anticipate what the what you think the timeframe is before they get fully up to date on that I can appreciate the.
And there are some different issues at play there, but just trying to get a general sense and as to when you get caught up or when they get caught up there.
And I really have no way of predicting what the city is going to do.
What I can tell you is what what we've modeled internally and.
And so internally we have modeling that they will continue to add to their receivable on the service revenue side by about $7 $3 million a month.
And then we have them starting to pay so whatever is current plus about $10 million and backlog starting and call. It like July so that we would catch up $60 million from the old receivable and remain current like that from what they were going on debt would still mean at the end of the year of what they'd still low.
It's close to $60 million, if that were the way that that money flowed.
But once again.
And that is just what we're modeling which is probably trying to be conservative, but we would hope that especially on the installation of product that they would be able to catch up quickly because I believe that those monies are set aside for those infrastructure set of products.
Got it thats useful thanks, guys.
Thank you.
Thank you and your next question comes from David Koning from Baird. Please go ahead.
Yes.
Hey, guys. Thanks.
I guess first of all I was just kind of going through the 10-Q and when we look at the top three racks, they all got nicely better.
In terms of growth and Q1, obviously and in Q4, but the other revenue if we take total segment revenue less of those top three.
And that declined I think by more than any quarter of last year was down like 34% year over year. So just wondering what happened to the the fleet part or other parts of the commercial business.
Yes.
No youre going to be the one reading through the 10-Q.
And yes, so as I.
And I look through there.
And it is that we're still getting really strong revenue from the from the rack totaling side, let me pull up the other ones and I can tell you where we are from.
Third viewpoint and Youre looking at quarter over quarter is that right or are you looking sequential.
Im looking at yes, compared to the <unk>.
First quarter of last year year over year, and I know enterprise is really good right I mean, it actually grew by Q1, I mean, thats pretty impressive, but yes, there was the other day.
The non top III was the part the decline.
Yes.
Yes, and we are seeing.
And we're seeing and bigger declines like of 20% decline on a quarter over quarter basis from from the FMC and.
And our violations business and so in the U S declined by less is actually U S and Europe declined by about 28%. So we are we are seeing declines and those and then we had we had a fairly big drop off also of 43% and our title and registration business from those comparative timeframe. So.
And that's really volume driven and flex.
What's moving through those so so but we are seeing sort of debt that rebound from the rock and I think what happened and those other businesses.
They've got lagging revenue so even though we started to see the shutdown in Q in March of last year, It really didnt impact dose in those businesses, the fmc's and titles and registration until later.
And so we'll see we should see growth and all of these products as we go through into the next quarter.
Gotcha, Okay. So thats the good news there if that's just the lagging it just means that we're going to get a nice recovery, just maybe a quarter or two get later than some of the racks yeah. Okay. That's exactly right.
And then and then the only other one just in government, obviously, New York is going to progress both lines of B.
Good nice sequential growth I would imagine both cameras and service revenue, but then the rest of the business. The non New York part. The last few quarters has been nicely stable or even growing I think this quarter, maybe was down slightly sequentially, but basically it's been pretty stable is that going to start to grow too with I know you talked about George and other things, but you just expect sequential progression.
You weren't anticipated one of the major things that are David that drive that is just the government decision, making and obviously during the pandemic there werent a lot of new awards that were given and.
And not of lot of Decisioning around those types of things as local governments were highly focused on obviously the pandemic. So now that you can start to see these counties and cities are starting to kind of pull themselves out you saw some decisions and Georgia, you would hope to start to see some of those other decisions getting made here the <unk>.
Summer may slow it down a little bit as it would normally would relative to the suiting, but then you would start to see a pickup and the back part of the year.
Gotcha, alright, thanks, guys.
Yes. Thank you.
Thank you and your next question comes from Lewis the Tomo from William Blair. Please go ahead.
Good afternoon, David Tricia and subdued.
Hi.
And what.
Are your high level thoughts on the proposed and infrastructure Bill and how that could benefit verra mobility.
A transportation infrastructure provider do you think that as a result of this.
And bill there will be more tolling infrastructure road user of charging systems, and and general speed cameras that could lead to more demand for your systems.
Well, certainly so I think any investment and infrastructure is good for our business clearly.
But as they look to modernize and upgrade thats going to be overall debt halo effects should be good I think in addition.
There has also been more conversation, we certainly did a press release of couple of weeks ago around sort of a broader view of photo enforcements and having that as the standard play and transportation across the country versus today, where it is the state by state decision and thinking perhaps there might be and opportunity for more of a of federal playbook. If you will and again that's not true.
<unk>, that's just conversation at this point.
So all of that with the.
But tolling is a proven way to both increase the efficacy of travel time as well as to raise revenue and so the you would anticipate that over time, there should be more toll roads and so at the infrastructure Bill.
Again, I'm not betting on when that's going to get complete because I suspect, it's going to be quite some time, but.
That would still be positive for our business as a whole.
Great and regarding the pilot that you mentioned and in Ireland is that with the new rack partner.
It would be with a current customer that has operations in Ireland.
So would it be with your current.
European partner or one of your current North American price.
It would be with the customer that's not already in Europe.
Okay.
Gotcha.
Yes, that's it from me thanks, everybody. Thank you.
Okay.
Your next question comes from Keith <unk> from Northcoast Research. Please go ahead.
Good afternoon, guys I appreciate it.
Congratulations on New York City in terms of the remediation efforts that you guys are kind of put it and over the past hour of August bank provided the context in terms of the impact they had and profitability for how longer and harder to do so.
Yeah, we had.
We had.
Estimated the expenses in relation to remediation to be about $3 million, the majority of which had been accrued for by the end of the year.
And then obviously the settlement of $1 $3 million, which was and the current corridor. So if you.
And think about this as you know for.
<unk>, three and $4 5 million.
That's right around where and what it cost us.
Gotcha and was that each of you already accrued rent of $3 million decrease from that last year of debt this quarter.
Yes.
The majority of it was accrued for last year and but the we expanded the cash this quarter, but we did a lot of the work this quarter, but it was accrued for at the end of the year.
Got it I appreciate it.
In terms of and then the color about the school bus cameras and of the opportunity versus the 500 scope of the cameras.
Sorry, I didn't catch all of the details there perhaps reviews of the contracts there for us.
For the 6500, so that has multiple count So New York State has enabling legislation for school bus cameras.
The 6500 is a collection of multiple counties that have sort of signed on for the ability to go and deploy those cameras. It doesn't mean that they will deploy all of 6500, but they certainly have the overtime. They will start the pilot and deploy those over the course of the next several months and probably over the next year or so.
The we mentioned that in the statement that we are starting and install for Broome County, with 200 cameras and we would hope to anticipate more installs here over the summer as school start to realign on getting back and kids back and buses and back to school the ball.
And I appreciate it so it really is.
The license to Hunt for you guys the go out and getting new values and.
Exactly well said.
Okay, and then if I can squeeze one more and here in terms of the the.
Commercial business and you guys noticed the increased penetration rate of adoption rate of your total transponders with the movement towards cashless collections.
No what we're seeing is more and we're seeing more billable days per rental agreements. So you could say that that could be in relation to sort of the take rate of the product or it could be that those rental agreements.
Are lasting longer and so theyre hitting more tolls along the side, but if you think about the <unk> being down 40% year over year on their volume and were not down by that much.
And so we're sort of buoyed up by the fact that we're seeing more billable days per contract for which we have our product and it we're seeing more total usage per contract.
All of all of which is helpful for us.
Great. Thank you.
Yes.
Thank you and your next question is a follow up question from Jason full aside from credit Suisse. Please go ahead.
Pardon me.
Yourself.
The fund me.
I apologize I was on mute.
And sorry, I wanted to jump back in queue and I just had a quick follow up regarding something you hinted at but maybe wanted to dive and a little more and it's regarding capacity constraints at potentially at the big three racks and.
It seems like obviously theres a lot of pent up demand and.
And certain racks, you could even see potentially positive growth but.
How do you see that playing out and do you think they are prepared to go into this travel season with sufficient capacity or do you think that could potentially kind of limit upside.
Going forward this year, and then perhaps kind of catching up and 2022.
Well certainly the statements and the <unk>.
Plenty of articles on major news publications regarding the issue and pictures of people standing and empty lots of airports waiting for a car to get returns. So they can get in one because there are no vehicles at.
It's certainly not an issue related to the rental car companies because they are very quick and consistent orders from Oems with the Oems and the inability to get the appropriate shifts that run the vehicles that they would like to purchase so.
It's a global supply chain issue that is having this downstream effect.
My understanding again from public publicly related.
Conversations with people that work for the <unk> of Theyre looking at going into the used car market debt, which they were just and selling there and now going back to buy.
And there are buyers and the used car market are probably the more newly use so.
Knowing them and given the year that they had before I suspect theyre going to be pretty scrappy, and finding a way to make sure that they can fill out that demand, which obviously ends up being a good thing for our business flow.
Got it right and.
I think you mentioned this but it sounded like demand and.
Solid and and I think they comment on their calls as well that demand has been pretty robust through April and so that kind of would be expected to expand into the summer months.
Yes, there is.
I think it's coming back ahead of what many of US would of thought the.
Depending on where we werent vaccinations, but I think the.
The openings and the new guidance is from CDC and things like that are all boding well for a lot of people ready to get out of the house.
Got it got it and and just the minor housekeeping one here the 50 to 55 and product revenue I assume that does not include any potential addition from red flags.
No no that's just tough.
Alright awesome. Thank you very much guys I appreciate it.
Okay.
Thank you. Your next question comes from Sumit of preacher from Deutsche Bank. Please go ahead.
Hi, Thanks for taking my question what I was wondering is the.
The the remediation measures you.
And put in or you went through for the.
For the <unk> tour and unless you dot contract.
I'm wondering if that impacts any economics going forward, that's one and number two what kind of mitigation strategies, you're putting in to make sure that the.
You don't run into those issues going forward.
Yes, there have been.
And we don't there are some operating procedures that we're going to take ongoing forward, but most of those we discovered this issue and the end of 2019. So most of those we already had and play for all of 2020.
And so really what it is is the it's the method by which we install and how we take pictures of the contracts and there are certain set of procedures debt.
And the city has agreed to that will go forward debt will use on a go forward basis and.
But many of those had been in play.
At the at the installation site for for 2020 or at least we had step function towards them. So I don't I don't think its going to be a big a big lift from that perspective.
Great. Thank you.
Things are progressing well on other fronts and congrats thank you, yes, and thank you.
Thank you.
There are no further questions at this time that does conclude our conference.
You may disconnect at anytime and thank you for participating.
Okay.
Okay.
And.
Okay.
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Yeah.
Okay.
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Okay.