Q4 2021 Verra Mobility Corp Earnings Call
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Good day and welcome to the Verra Mobility Corporation fourth quarter 2021 earnings call. My name is Jenny and I will be your conference operator today.
Today's conference is being recorded.
This time I would like to turn the conference over to Marc Eisenberg, Vice President of Investor Relations. Please go ahead Sir.
Thank you good afternoon and welcome to their mobility is fourth quarter 2021 earnings call today, we'll be discussing the 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.
Tricia <unk>, our Chief Financial Officer, and Craig Conti, our newly appointed incoming 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'll make statements related to our business that may be considered forward looking including statements concerning our expected future business and financial performance, our plans to execute on our growth strategy.
<unk> as far as strategic acquisitions.
Our ability to maintain existing and acquire new customers expectations regarding key operational metrics and other statements regarding our plans and prospects.
We're looking statements may often be identified with words, such as we expect we anticipate or upcoming these.
These statements reflect our view only as of today April 21, 2022, 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 or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations.
For a discussion of material risks and other important factors that could affect our actual results. Please refer to those contained in our annual report on Form 10-K , which we are targeting to file tomorrow and will thereafter be made available on the Investor Relations section of our website at IR dot their mobility dot com.
And on the SEC's website at SEC Gov.
Finally during today's call, we will refer to certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures included in our earnings release, which can be found on our website at IR Dot verra mobility dot com and on the SEC's website at SEC Gov.
That I will turn the call over to David.
Thank you Mark and thanks, everyone for joining us today as Mark mentioned attrition will lead today's discussion on our financial results, but I'll take a moment to introduce everyone to Craig <unk>, new newly appointed Executive Vice President and incoming Chief Financial Officer.
Greg brings over 20 years of corporate financial management and leadership experience in global publicly traded companies. He previously served as the executive Vice President and CFO of century aluminum company, a global producer of primary aluminum and prior to century aluminum Craig served in senior financial leadership positions with ITW and GE.
Sure. Many of you will be getting to know Craig over the coming weeks and months. So please join me in welcoming well welcoming him to verra mobility.
For the agenda for today's call I'll start with the key highlights and trends that are driving our results I'll also provide a status update on the integration efforts with Red flags and <unk> systems, and then I'll conclude my remarks with a discussion on recent wins and our business development pipeline.
We closed out 2021 with a very strong fourth quarter as our combined businesses continued to perform well.
We're pleased with the consistent execution from our teams globally and we believe this momentum will serve as a platform for acceleration in 2022.
Our results in the fourth quarter were primarily driven by the ongoing schools on speed expansion and New York City and a strong recovery in travel in the U S, which has had a positive impact on our rental portfolio business.
As Tricia will discuss in more detail later, we exceeded the high end of our full year guidance range for total revenue and adjusted EBITDA, delivering 40% top line growth of which 28% is organic growth.
Moving to our recent strategic initiatives the fourth quarter was a strong affirmation of our strategy to drive core business results diversify the business and redeploy capital to strategic and expansive M&A opportunities.
On December 7th we closed our acquisition of <unk> systems, a leading provider of end to end parking management solutions in North America to universities and a growing presence among many among municipalities and health care providers.
As we highlighted last quarter <unk> also provides us with a strong position in the rapidly growing curbside management market.
She is an existing market segments, North American municipalities universities, and health care providers represent up to $4 billion market. According to the 2020 market estimates.
Ladies are faced with unprecedented competition it occurred with rideshare services delivery vehicles and future competing for the same valuable real estate for parking.
And effective care management solution combined Department program with an enforcement solution <unk>.
<unk> SaaS offering for parking management, coupled with our existing photo enforcement solutions should enable us to help customers solve curbside challenges such as defining parking areas and dynamic rates enforcing parking rules and handling payments in the future.
While this market is still in its early stages, we expect that <unk> government solutions segment in combination with TG system will be well positioned to provide a holistic solution to a city or municipality customers, enabling us to expand our solutions portfolio.
We're thrilled to have <unk> as a part of the verra mobility family and their team has been hard at work delivering strong results in the fourth quarter a.
We secured 11, new logo municipal customers for their citation and enforcement software offering and they continue to expand the University and health care customer base.
Moving onto government solutions in the fourth quarter revenue for government solutions grew 77% year over year to $92 million and adjusted EBITDA was $34 million representing.
Representing 63% year over year growth.
Our success in the quarter was driven by the continued expansion of the New York City School Zone speed program for which we installed 312 six speed cameras.
Our total for the full year to 695.
The remaining 25 were installed in January which fulfilled at 720 camera commitments.
I'd like to also acknowledge our announcement in early February that we officially received a second three year renewal option of our 2014 legacy photo enforcement contract with New York City.
As we stated in the press release and renewal includes an additional <unk>.
100, Red light cameras, and 150 bustling cameras and it covers the maintenance of the speed cameras installed under the 2019 emergency contracts.
In February we also received a notice to proceed from New York City on the remaining 240 schools on speed cameras under the emergency contract, which we anticipate will be installed in 2022 and will generate approximately $11 million in annual recurring revenue once installed.
We continue our integration efforts with <unk> have adopted cohesive ways of working to pursue the synergy targets, we identified as a part of the acquisition.
We've achieved about $5 million in synergies to date and believe there are $3 million to $7 million yet to be realized however, the timeline to achieve those will be longer than we had originally anticipated.
Furthermore, from a revenue perspective, we are beginning to see the strategic impact in the market with recent wins like Denver, Our first major city that we bid on as a collective organization and one in the first quarter of 2022.
This win shows the collective power and experience of the combined organization to win key customers like Denver from incumbent competitors.
As we announced on March 23rd with the addition of John Baldwin, our newly appointed EVP of government solutions, we will continue to pursue additional revenue and cost synergies to deliver the full benefit of the acquisition to our stockholders.
Overall, I'm very pleased with the health of the business development pipeline, along the along with the quantity and the quality of the business submitted our pipeline combined with other positive trends in the industry creates a promising competitive landscape.
One prominent examples the transportation Bill that was recently enacted in Washington State and Washington State to be effective this July which expands the use of automated speed enforcement and extend the sunset period for other photo enforcement through 2025.
Well positioned to capitalize on this expansion given our market position in the state with 21 existing customers.
This is exciting news and a Prime example of the momentum focus on traffic safety that we're poised to execute on.
And lastly, I am pleased to report a new government solutions contract win in the Netherlands, and which verra mobility through Red Flex International as a part of a consortium with DXP technology is one of three vendors selected to supply operate and support fixed systems for speed and Red light enforcement.
Contract has an initial term of up to six years for the supply and installation of cameras, followed by an additional term of up to eight years for the camera maintenance, we expect to start getting revenue in the first quarter 2023.
In the fourth quarter commercial services revenue grew 48% year over year to $71 million and our adjusted EBITDA was $44 million, which was up 74% year over year.
For this segment was driven by the continued strong travel recovery in the U S, which has led to increased total usage.
While fleet levels.
Our rack customers haven't been haven't fully returned to pre pandemic levels. We are seeing increased adoption of our products consumers shopping for longer rental agreements, resulting in more billable days and increased whole rates all of which are driving our strong revenue performance.
Next I'll provide a brief update on our European expansion efforts. The tolling program, we launched in Ireland with enterprise continues to provide beneficial information about the tolling market in Europe , we've exceeded the saturation rate in our service level agreement and we had more than 2000 vehicles equipped with transponders.
Overall, 2000, 22021 was a great year for verra mobility and more than three months in 2022 is already shaping up to be another exciting year growths.
As previously announced Tricia is retiring and therefore this will be her last earnings call as the CFO of air mobility, we are deeply grateful for her leadership and services over the past six years and wish her all the best in your New Adventures.
With our Form 10-K expected to be filed tomorrow, Craig <unk> will take over immediately and Tricia will provide advisory services over a 90 day period 90 day transition period.
As we noted in the press release announcing Craig's appointment, we've scheduled our inaugural Investor Day for July 19th which will allow Greg and John the time needed to get up to speed and fully participate in this exciting event the.
The conference will be held at the NASDAQ market site building in times square, starting at one PM Eastern and we look forward to sharing more details as the July 19 date approaches now I'll turn it over to Tricia to guide us through our financial results.
Thanks, David Good afternoon, and thanks to everyone for joining us on the call and I'll start on slide <unk>.
<unk>, an overview of our fourth quarter and full year 2021 results followed by a discussion of 2020 guidance.
Looking at the Big picture there are three important takeaways.
First we are benefiting from several macro trends that are driving growth such as the recovery in leisure travel along with increased cashless tolling and the growing demand for photo enforcement programs and counties municipalities and school districts.
Our business development team across our business.
I have been very busy and very successful as evidenced by the new business and contract renewal, where it's David described in his remarks.
Third we put ourselves in a position of strength for the future acquisition and integration efforts of Redflex Atg system.
Further expand our capabilities market segments and geographic footprint.
Today I'm going to briefly summarize the financial performance of the three segments discuss our consolidated results for 2021 and spend more time as it relates to the 2022 guidance and the key trends shaping our plan.
The detailed results by segment are provided in our press release and earnings presentation, both of which can be found in the investors section of our website.
I'll start with fourth quarter revenue total revenue consisted of approximately $145 million in service revenue and about $25 million in product revenue.
Excluding about $14 million of <unk> $4 million of TTS with some acquisitions, we delivered approximately $127 million at consolidated organic service revenue, representing nearly 40% year over year organic growth and 21% growth over 2019.
Government solutions delivered $92 million.
Growth.
For the quarter totaled alright.
Fourth quarter total revenue along with $34 million of adjusted EBITDA commercial services generated $71 million of total revenue and $44 million of adjusted EBITDA for the fourth quarter and lastly, two systems delivered $6 five 5 million.
And $2 $6 million of revenue and adjusted EBITDA, respectively for the.
Post closing period in the fourth quarter, our adjusted EBITDA of $80 million increased $34 1 million for the same quarter in the prior year and adjusted EBITDA margins were 47% in the quarter.
The company reported net income of approximately $19 1 million in the quarter compared to a net loss of $14 $1 million in.
In the same period of the prior year, adjusted EPS, which excludes amortization stock based compensation and other noncash items was <unk> 25 per share in the current quarter compared to 13 per share in the fourth quarter of 2020.
The tax provision for the quarter was $8 9 million, representing an effective tax rate of 32%. The effective tax rate is impacted by permanent differences related to market to market adjustments for both private placement warrants and the tax receivable agreement.
Moving to cash generation and working capital, we generated $193 million in cash from operating activities for the year and large part due to changes in networking capital.
We continue to make strong progress collecting outstanding receivables with New York City in the fourth quarter at the start of 2021, we had an outstanding receivable from New York City of approximately $98 million.
Throughout 2021, we Invoiced in New York City, a $146 million for products and services and collected $182 million on aged receivables. The New York City balance was $63 million at the end at year end and $40 million at March 31, and we expect to further reduce our unborn capable balance over the course of 2020.
Yes.
As previously noted we closed two acquisitions in.
In December as David mentioned in his remarks, the integration of Red flags in PT systems are on track.
We ended the fourth quarter was $101 million cash balance and a total debt balance of $1 3 billion, resulting in net leverage of four three times at the end of 2021 net leverage reflects the company's use of the accordion feature on our term loan b and the amount of $250 million used to close the <unk> system.
Acquisition.
Before I discuss our 2020 to guidance I want to provide some color around the delay in the delayed Form 10-K filing as we previously disclosed we determined that revenues from the company's recently acquired Australia subsidiary Redflex may not have been recorded in accordance with GAAP.
Consequently, our audit Committee began an investigation of the circumstances surrounding these issues to determine among other things whether any related adjustment was necessary for previously issued financial statements.
Based on the results of the investigation. The audit Committee determined there is no reason to believe that there was any material are in the company's financial statements. The audit Committee also found no basis to question the integrity of management and no reason to believe that anyone in the company engaged an intentional wrongdoing. The company has already instituted new processes.
Sure.
Stroll environment identified identified new financial practices and <unk>.
Acquisitions and integrated the accounting for rest ex North America into the legacy Verra mobility control environment.
Youll see youll see in our 10-K, which we expect to file tomorrow.
A material weakness associated with a third party application called Zenna.
Financially. This is a financial reporting tool utilized in performing certain control activities. In summary, it was determined that Dennis stock one tied to report.
Deemed unreliable and because we utilized center for several sox controls dose controls using these reports were determined to be an effective. Please note. However that the material weakness had no impact on our financial statement outcome.
We are committed to the cycle of continuous improvement in our financial process and control environment.
Now turning to the discussion for 2022 were reiterating our guidance provided in the press release dated March 30 in total we expect total revenue in the range of 16 to $694 million to $715 million with a midpoint of $704 million representing <unk>.
<unk>, 28% growth over 2021 include.
Included in that growth, we expect sales to be in the range with product sales to be in the range of 59 million to $63 million.
We expect adjusted EBITDA in the range of $312 million to $322 million, representing 17% growth at the midpoint over 2021, we expect an adjusted EBITDA margin of 45%, which reflects the impact of the full year of Red flags in tier two systems as well as expected increases in R&D and SG&A.
<unk> expenses to fund continued growth.
In commercial services, we expect the trends that have been building over the past 18 months to continue with higher total fees increased take rates of our services and more billable days per rental agreement, we are expecting revenue to surpass 2019 levels with growth rates in the low double digits.
Should see higher growth rates in the first half of the year and tightening as we crossover more difficult comps in Q3 and Q4 remember that all of the revenue in this segment is service revenue.
Government solutions have both service and product revenue.
Service revenue should grow greater than 25% year over year, driven primarily by the year over year impact of New York City schools on speed cameras installed in 2021, and the full year impact of Red Flex product revenue, which is more episodic is expected to be in line with 2021 level, we're expecting a reduction in New York.
Speed camera installation from 720 cameras in 2021 to 240 in 2022, creating a nearly $35 million headwind.
The decline will be offset by the full year impact of Red flags.
Lastly, parking solutions revenue is expected to deliver low double digit revenue growth driven primarily by strong recurring subscription based revenue.
We anticipate revenue and adjusted EBITDA to decline in the first quarter relative to the fourth quarter of 2000, <unk> fourth quarter of 2021 performance followed by sequential increases in the second and third quarter and then a modest reduction in the fourth quarter levels, all of which is consistent with our historical seasonal trends.
Lastly, based on the adjusted EBITDA guidance and the expected free cash flow conversion rate of approximately 50%, we expect to reduce net leverage to the range of about 3.3 times to three two times by the end of 2022 and with that I'll open the call for questions.
Okay.
Thank you.
If you would like to ask a question. Please press star one on your telephone keypad and if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question.
And we will go first to Daniel Moore of CJS Securities.
Thank you good afternoon.
Just quickly welcome Craig and Chris. Thank you for all your help you've been tremendous and a pleasure to work with.
Maybe start David high level question, but you started to touch on this in the prepared remarks can you give us a little bit of a preview of the analyst day, just as it relates to <unk> and the strategy for integrating that business and how you plan to leverage it over the longer term.
Yes. Good question, Dan Good talk to you what I would say is we've actually spent some time, serving our investors and the investment landscape to really hone in on the messages that we think matter most and I think the clarification of long term strategy.
As to the top of the list and so I think what Youll see and I'll just sort of say this structurally is.
One clear definition of the markets that we plan.
So what are the dynamics of those markets and how we feel like we compete today and into the future and then more specifically how <unk> looks to create value in the market. It competes with them on how we can accelerate that growth through sort of being a part of the variable build the operating system and so I think thats going to be the principal way youll see that as I think clarify.
<unk> the broader world of what we would call urban mobility and.
How parking is a really important part of that globally and that's why we're excited to have Q2 and the family.
Excellent. That's helpful. Maybe just the expected cadence of the 240 school zone speed camera installs.
And then talk about how much interest youre seeing you talked about the split.
Growing interest from other municipalities across the country for similar capabilities.
So I think the cases that will be done there starting in the third quarter should be completed by the end of <unk>.
The third quarter.
So it will look it'll look a little bit off from where we were last year. Because remember we started installing those 720 cameras last year in the back half of the year, So youre going to Houston, probably positive comps in Q1, but negative comps in Q4 so.
Once again, you'll see product revenue being a little lumpy throughout that timeframe.
And then maybe on the back half of that question, Dan I think we've we've continued to see positive momentum in particular in things like speed or speed enforcement globally.
I referenced the one opportunity that we won in the Netherlands, there's going to be some others that will be able announce later as well. So I think the trend right now is our friend and I think globally, we're going to start to see bigger and broader programs in major metropolitan areas in the years ahead.
Perfect and then maybe just last for me I think you've mentioned the synergies from Red Flex may be getting pushed out a little bit.
Just clarifying the overall synergies you still expect to achieve and maybe what's causing that.
Yeah, I think I think there's a couple of things in play I think we needed to just cause regroup we thought.
John who is a great addition to the organization is going to run the organization and create those synergies, but also as we integrate we lose the ability to separate out what used to be red flag from what used to be verra mobility and it just becomes one entity over time.
So I think what you need to look for is just that the north American entity returns to the margin with the legacy Verra mobility company had and that sort of the real sign that synergies are being obtained over time.
Very helpful. Thanks again.
Mhm.
And we'll go next to Dave Koning of Baird.
Oh, Yeah, Hey, guys. Thanks nice job.
And I guess, yeah, I guess first of all we don't have great Q1 seasonal David going back just because of the last couple of years or so comp complicated with COVID-19 , but maybe Q1 19 is the best we have in revenue was up very nicely sequentially was up 7%.
Are we back to normalized trends I mean, I would think that was even better actually right. We're getting we see TSA data everyday is even better than that.
So should we be up sequentially in Q1 based on some of that data.
In this segment or the company has a hall.
Just commercial yes, Im sorry, just commercial it was up 7% in Q1 19 in the TSA data is like kind of really accelerating. This Q1. So I'm just wondering can it be even better than kind of normal trends, which seem like they would be up sequentially.
Yes.
We could I think youre going to see a really I think youre going to see a really strong.
Q1 of 2022.
Okay.
I don't know that theyre going to be up sequentially from Q4.
Normally that you drop a little bit we would expect more likely that this would be.
If they were flat that would be a really good result for us.
So I don't know that were going to see that go up from Q Q4 to Q1, that's not the normal trend.
Okay, Okay gotcha.
That's good to know and then secondly.
On a red flex I guess two parts. So red Flex question. One is whats just kind of the organic growth within wet redflex itself like relative to what it was in Q4 'twenty.
And then it was down a little sequentially is that the normal trend for Redflex in Q4.
I think what youre seeing in Red Flex is that their product revenue is is really really lumpy.
And especially as we converted them into the GAAP accounting requirement, whereas previously they used to be able to take product revenue over a percentage of completion.
But in the U S. GAAP rules it really doesn't meet the criteria for most of those contracts. So you're really seeing that youre only recognizing the revenue at the end of the project periods as the cameras are actually installed and accepted by the customer.
So I think thats, just making the overall revenue for red flags appear to be more lumpy than it normally would I think the only piece of the red flex revenue youre going to be able to see going forward is anything that's on the international segment and youll be able to see both the service and product project revenue within that segment that everything.
Thats in the U S. As David mentioned with Denver, We're building, we're building as a collective and you won't be able to distinguish between a red Sox and a.
Verra mobility customer.
Gotcha Thats helpful well, thanks, and yes, great job.
Thank you.
And we'll move to our next question from James Fawcett with Morgan Stanley .
Thank you very much.
Wondering as you look at your forecast for this year. How are you building in recovery and travel assumptions are you looking for a linear improvement through the course of the year versus what we've seen thus far in the first quarter or acceleration just trying to get a little bit of understanding how you formulated them.
Yes, so we don't we don't necessarily formulate a deep assumption on like is it leisure travel corporate travel we've got it's more like you said, it's a linear growth that we're seeing and we're looking at trends as they related to 2019, meaning that as we move through the 2019 timeframe.
What were the seasonal trends how did they play out because even though travel might be recovering in certain areas. It only concerns us if it's recovering in tolling regions.
And a lot of us holding regions have already seen some of the recovery that was there. So it's more along the lines of do we expect certain trends in the length of the rental agreement to say do we expect certain things we've seen in the last 18 months to say, Mike higher toll rates those are going to stay I don't see these toll authorities, turning around and reducing third full rates.
Anytime soon and we would expect that may be driving pattern stay very similar to what they were in the last year. What we did see over the last 18 months as the take rate of our products has increased that people are willing to pay for convenience and this is a product of convenience.
We believe that those take rates will stay higher response.
Got it got it and then you mentioned kind of the tests and market evaluation and Ireland. It sounds like you've got a lot of vehicles there.
What are you thinking about in terms of what next steps are and win.
That we could be looking at expansion and further traction in that region.
I think what we're what we've committed to deal with the customers to use once we got fully deployed is to use that information to go back and see.
Assess the value of it for their customers as well as the uptake for them as well and both have been quite positive.
What that allows us to do that is to have that sort of walking case study, where we can go to other potential partners to say Hey, This is we're solving a problem.
It helps your customers. It helps you it makes money for you and so that was really the the opportunity where our pipeline remains strong in other parts of Europe , as well and we're getting much closer to launching a few pilots in other parts of the Europe is while we've mentioned before that we wanted to get into places like Spain.
<unk> and places like that eventually so I think all of those are remaining.
I think we still remain confident it will have some of those to announce shortly.
Got it great. Thank you very much.
Yes. Thanks.
And we'll move to our next question from Faisal Al <unk> of Deutsche Bank.
Yes, hi, thank you.
I was hoping you could give us a little bit more color on commercial services and how we should think about the long term drivers there.
I understand that.
We're talking about 2022 being above 2019, but it was just thinking about what.
What the expectation is going forward and whether there are any macro considerations that we should keep in mind like do you think to the extent that does.
A recession or anything else like does that actually does that benefit you does that hurt you. What are some of the puts and takes that we should keep in mind as it relates to your business.
Thank you.
Yes sure.
Sure. Thank you I think on a longer term, we've always said that we believe that this business is going to grow at 6% to 8% and that has been driven by some of these macro trends Steve the increase in toll roads the movement to cashless tolling all of those things benefit us.
And obviously then there is the rise in the fall of what's actually happening with the rental car company.
But we've proven over time that historically, we've grown at call it 12% to 18% in this in the <unk>.
All business segments, even with the rental car companies were relatively flat now it would be hard to say that if there was a real recession and rental car companies were de fleeting again or where they were in the cycle that it wouldn't impact us I think it would but I think some of these other trends that we're seeing will still sold.
The higher toll rates the longer rental agreements I think a lot of those things will still hold during that if there's a recession happens.
Okay understood. Thank you.
Mhm.
And we'll go to our next question from Trevor Bowers from Northcoast research.
Hi, guys congrats on the quarter.
Just a couple of quick questions about the top management business. So how did the toll management results in the fourth quarter compared to your expectations. Prior to the quarter would you say the recovery in domestic travel is in line with what you thought or maybe faster or slower.
I think it's faster than what we anticipated.
So the fourth quarter came in it came in really strong it came in above where we were in 2019 and the rental car companies haven't returned to full fleet. Yet. So if you say that TSA data, although recovering isn't where it was in fourth quarter of 2019 and rental fleets although recovery.
<unk> are not where they were in 2019, we were really pleased to exceed 2019 revenue for Q1 of 2021.
And in Q4, I'm, sorry, Q4 at 2021.
Okay, great and that kind of leads me into my follow up question. So in terms of revenue per user and the top management business, how does that compare to 2019.
21 versus 2019.
That's not how we look at those stats.
So I mean, because theres all sorts of factors in there that toll rates are faster the length of the rental is the factor whether they are using an all inclusive or usage shape product as a factor. So that's not a specific stat that we do we do keep revenue per rental agreement I don't know that Thats number a number we've ever disclosed.
Okay, great. Thanks, a lot.
Yes.
And as a reminder, this star one if you do have a question at this time, we will go next to appoint dipalma of William Blair.
Good afternoon, David Tricia and Craig.
Afternoon.
Yes.
Tricia congrats on helping lead that where it is today and Craig Congrats on joining our team.
Thank you.
Or for David.
In February you indicated that we're still.
Negotiating with her in regards to the tolling contract was there any update.
On that negotiation.
Jim.
That everything is status quo based upon the guidance and the implied growth I was just wondering if there's any update with the negotiation.
Yes, I think you're.
When you surmise is correct, meaning we still feel very good about it.
We have not yet signed the final contract we are I would say we're in the.
I don't know what inning, when we say we are in the Ethernet happening on and we're getting very close.
As you can imagine with the recovery in fleets.
The challenge <unk> had in keeping their fleets up not just hurts, but I'll, let art Hey, Bobby I had other things they've also had a major leadership changed in the last couple of weeks. So given that theres been some other priorities that they have been working on but that also speaks to the fact that we've had a longstanding relationship that is quite reliable that we can continue to work forward under the current contract.
We'll have a renewed agreement here shortly.
Great.
And I was also wondering David.
Are you seeing thus far with <unk>.
Strategic synergies with tier two system and your photo enforcement Division.
Yeah.
Yes, so right now and as you recall that we werent targeting sort of the cost synergies were really leaving us.
As.
More of a portfolio model.
And so what we have started to see is two things one is what I would say across pipeline opportunities meaning.
People within the photo enforcement business are looking for potential parking opportunities for Q2, and vice versa is mostly us looking at our municipalities and bringing those strategic which is by the way that was the strategic concept that we would have that we talked about.
And then two as I mentioned earlier in my opening comments, we definitely see this opportunity as curbside management as a.
Collective significant opportunity and so there'll be what I would call increased collaboration as we think about go to market around curbside.
We've got some time that that market isn't fully activated yet, but I think we've got the right platforms between Q2 and government solutions to be real player in that space.
Great and do you intend to be very acquisitive in that curbside management market and the reason I ask is for rental car, calling you have a 100% market share in the U S.
And for photo enforcement you have.
95% market share, but for for parking it does vary.
<unk> market.
Now you just began with <unk> assistance and so it should investors think of this as.
A roll up opportunity for you or do you have like the foundation with <unk>.
Organically, expanding and growing your own pace.
Yes.
A couple of ways to answer that first is are we going to be acquisitive period, Yes, I think you've seen that we will continue to.
<unk> run our traps as we look across the landscape of smart mobility to deploy capital when it makes the most sense through acquisition that we believe that we can grow and expand diversify and returns.
Our return value to shareholders.
Two is do we see that in parking to your point. It is very very fragmented in particular in the United States one of the reasons and as you know we had some questions.
Questions about the price we paid around Q2, when we acquired the offset is that it's one of the larger most profitable in the industry here in the U S and so that was one of the reasons. We were so excited to get it.
I think what we would say is that with that and the municipal base. We havent different solutions, we have a pretty good foundation, but as we think about curbside management. There are obviously other incremental technologies that are at play in that and we would certainly consider we will always consider M&A when its appropriate I don't know that we have a specific rollout.
Strategy as it relates to parking at this point.
Okay that is helpful.
Thanks, everybody.
Yes. Thanks, Thank you.
Okay.
And we will go to a follow up question from Daniel Morris.
P J S securities.
Yes, Thank you again.
Patricia alluded to this but as travel has come back and come back a little faster.
Have you seen any changes in average terms of the contracts any reversion to the mean in terms of usage miles driven length of contract terms are we all generally still pretty well kind of above pre pandemic levels at least at this stage.
We don't get the miles driven we get we do get length of rental agreement and that has remained longer than 2019 for most of the dependent of time period, including the back half of 2021 and.
And we are seeing that we're getting more billable days per contract.
Which is awesome because they are key to Congress.
They are using tools more often than not and that contract. So that's fairly consistent.
Okay, no change yet at least as of yet that's perfect. Thank you again.
Okay.
Thanks, Dan.
And with no other questions in the queue.
That does conclude the question and answer session and this concludes today's call. Thank.
Thank you everyone for your participation.
You may now disconnect.
Thank you.
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Yes.
Okay.
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