Q2 2024 Verra Mobility Corp Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the Verra mobility second quarter 2024 earnings calls.
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Speaker Change: Thank you good afternoon, and welcome to Verra mobility second quarter of 2024 earnings call today, we'll be discussing the results announced in our press release issued after the market closed along with our earnings presentation, which is available on the Investor Relations section of our website at IR.
Mark Zindler: Thanks. You. Good afternoon, and welcome to Verra Mobility's second quarter 2024 earnings call. Today we'll be discussing the results announced in our press release issued after the market closed along with our earnings presentation, which is available on the investor relations section of our website at IRMobility.com, with me on the caller David Roberts, Sarah Mobility's Chief Executive Officer, and Craig Conti, our Chief Financial Officer. David once again will make prepared remarks, followed by Craig, and then we'll open up the call for Q&A.
Speaker Change: <unk> got their mobility dot com.
Speaker Change: With me on the call are David Roberts, Verra mobility, as Chief Executive Officer, Craig Conti, Our Chief Financial Officer.
Speaker Change: David will begin with prepared remarks, followed by Craig and then we'll open up the call for Q&A.
Mark Zindler: Management may make forward-looking statements during the call regarding future events, anticipated future trends, and the anticipated future performance of the company. We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. actual results may differ materially from these projected in the forward-looking state and from those projected by a variety of respects.
Speaker Change: Management may make forward looking statements during the call regarding future events anticipated future trends and the anticipated future performance of the company.
Speaker Change: We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.
Speaker Change: Actual results may differ materially from those projected in the forward looking statements due to a variety of risk factors. These factors are described in our SEC filings. Please refer to our to our earnings press release and Investor presentation for Bear mobility is complete forward looking statement disclosure.
Mark Zindler: These factors are described in our SEC file. Please refer to our earnings press release and investor presentation for bare mobility's complete forward-looking statement disclosure. Any forward-looking statements that we make on this call are based on our beliefs and assumptions today, and we do not undertake any obligation to update forward-looking statements. Finally, during today's call, we'll refer to certain non-gap financial measures. A reconciliation of these non-gap measures to the most directly comparable gap measure is included in our earnings release, quarterly earnings presentation, and investor presentation, all of which can be found on our website at ir.verramobility.com. With that, I'll turn the call over to David.
Speaker Change: Any forward looking statements that we make on this call are based on our beliefs and assumptions today and we do not undertake any obligation to update forward looking statements.
Speaker Change: Finally during todays call well refer to certain non-GAAP financial measures a reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in our earnings release.
Speaker Change: Orderly earnings presentation, and Investor presentation, all of which can be found on our website at IR Dot verra mobility dot com with that I'll turn the call over to David.
David Roberts: Thank you. Thank you Mark and thanks, everyone for joining US we had a strong second quarter with revenue adjusted EBITDA and earnings directly in line with our internal expectations.
David Roberts: Thank you. Thank you, Mark, and thanks, everyone, for joining us. We had a strong second quarter with revenue, adjusted EBITDA, and earnings directly in line with our internal expectations. The businesses are performing as expected, and we're pleased to have a strong second half of the year. Travel demand remains robust, and we anticipate continued strength through the balance of the year.
Speaker Change: This is are performing as expected and we're poised to have a strong second half of the year.
Speaker Change: Travel demand remains robust and we anticipate continued strength through the balance of the year year to date TSA passenger volumes as of June 30th stands at 106% of 2023 volume for the same period, driven by strong consumer and business demand with the ladder demonstrated.
Speaker Change: Potential for more growth.
Speaker Change: And our government solutions business the bid pipeline for automated enforcement is strong and growing.
Speaker Change: Second quarter contract awards represented approximately $12 million in incremental <unk>.
Speaker Change: At full run rate.
Speaker Change: The year to date incremental AUR are up to $22 million.
Speaker Change: I'll explain on our awards and bids opportunities later in my prepared remarks.
Speaker Change: Transitioning back to our second quarter financial highlights consolidated revenue growth was 9% adjusted EBIT increased 8% and adjusted EPS increased 7% over the prior year periods, demonstrating that predictable strength of our portfolio of businesses.
David Roberts: Transitioning back to our second quarter financial highlights, consolidated revenue growth was 9% adjusted even to increase 8%, and adjusted EPS increased 7% over the prior year period, demonstrating the predictable strength of our portfolio of business. Based on our year-to-date financial performance and our outlook for the remainder of the year, we are reaffirming full-year 2024 guidance, which Craig will elaborate on in his remarks.
Speaker Change: Based on our year to date financial performance and our outlook for the remainder of the year. We are reaffirming full year 2024 guidance, which Craig will elaborate on in his remarks.
Craig Conti: Now moving onto our business unit operations. The commercial services team delivered outstanding results driven by strong and durable domestic travel trends and our continued strong performance in the fleet management business.
David Roberts: Now moving on to our business unit operation, the Commercial Services team delivered outstanding results driven by strong and durable domestic travel trends and our continued strong performance in the fleet management business. Second Quarter revenue of $104 million dollars, for a 10% increase over the prior year quarter, and adjusted EVA to margins of 67%, we're up about 210 basis points over last year due primarily to the strength of rental car tolling. Second Quarter TSA throughput volume was about 106% of 2023, driving strong growth in adopted rental agreements and tolls incurred, all of which resulted in an 8% increase in rack-toil
Craig Conti: Second quarter revenue of $104 million grew 10% over the prior year quarter.
Craig Conti: And adjusted EBITDA margins of 67% were up about 210 basis points over last year due primarily to the strength of rental car tolling.
Craig Conti: Second quarter TSA throughput volume was about 106% of 2023, driving strong growth and adopted rental agreements and in tolls incurred all of which resulted in an 8% increase in rack tolling revenue.
David Roberts: Additionally, our FMC business generated revenue of $18 million for the quarter, representing 18% growth over the prior year period, primarily driven by enrollment of new vehicles and increased tolling from FMC customers. Moving on to government solutions, recurring service revenue, which reflects 94% of total revenue for the quarter, grew 8% over the same period last year. The recurring service revenue growth was driven by program expansion from existing customers and new cities implementing photo enforcement efforts to improve road safety. To this point, outside of New York City, we drove 14% service revenue growth due to these factors. Total revenue, including international product sales, was up about 11% over the prior year quarter.
Craig Conti: Additionally, our FMC business generated revenue of $18 million for the quarter, representing 18% growth over the prior year period, primarily driven by enrollment of new vehicles and increased tolling from FMC customers.
Craig Conti: Moving onto government solutions recurring service revenue, which reflects 94% of total revenue for the quarter grew 8% over the same period last year.
Craig Conti: The recurring service revenue growth was driven by program expansion from existing customers and new cities implementing photo enforcement efforts to improve road safety.
Craig Conti: To this point outside of New York City, we drove 14% service revenue growth due to these factors.
Craig Conti: Total revenue, including international product sales were up about 11% over the prior year quarter.
Craig Conti: Next I'll elaborate on our second quarter award activity I highlighted earlier and provide an update on a strong quarter for legislative action supporting automated enforcement.
David Roberts: Next, I'll elaborate on the second quarter award activity I highlighted earlier and provide an update on a strong quarter for legislative action supporting automated enforcement. As I mentioned, we won contract rewards representing about $12 million of ARR in the second quarter, bringing the year to date and commensal AR total to $22 million. Of note, we were awarded contracts in California for red light enforcement, representing about $3 million in ARR. We are highly engaged in California and are excited to compete for impending speed program pilots.
Craig Conti: As I mentioned, we won contract awards, representing about $12 million of eight or are in the second quarter, bringing the year to date incremental a our total to $22 million.
Craig Conti: Of note, we were awarded contracts in California for Red light enforcement, representing about $3 million.
Craig Conti: We are highly engaged in California and are excited to compete for and pending speed prop program pilots.
David Roberts: Other notable awards include Speed Enforcement in Doral, Florida; Tempe, Arizona; and several locations across New Zealand, all of which represent about $5 million in total incremental ARR. I am also pleased to report several authorizations and expansions of legislation to advance automated enforcement across the U.S. In Hawaii, the existing Red Light Program was expanded, and speed enforcement was newly authorized. Minnesota Authorized Red Light, Work Zone Speed, and School Zone Speed Pilot Program Additionally, in Vermont, a Work Zone Speed pilot program was authorized, and finally, in Oregon, the state passed authorization for school bus stop arm enforcement.
Craig Conti: Other notable awards include speed enforcement in Doral, Florida, Tempe, Arizona, and several locations across New Zealand, all of which represent about $5 million in total incremental.
Craig Conti: I'm also pleased to report several authorizations and expansions of legislation to advanced automated enforcement that advanced automated enforcement across the U S. In Hawaii the existing Red Light program was expanded in speed enforcement was newly authorized.
Craig Conti: Minnesota authorized Red light work, some speed and school zone speed pilot programs. Additionally, in Vermont. It works on speed pilot program was authorized and finally in Oregon State as authorization for school bus stop arm enforcement.
David Roberts: This is truly an exciting time for our industry as state and local governments embrace technology to solve our most important traffic safety challenges. Over the past 18 months, we have seen the total addressable market for automated enforcement in the U.S. grow by about $125 million with the potential to further expand to greater than $250 million as further legislation passes. Moving on to New York City, in July, the City's Department of Transportation released its RFP for operating and maintaining its automated traffic enforcement program. The RFP outlines the agency's requirements and expectations for a qualified single vendor that will run the current programs with the ability to support back-office services for all existing use cases and any potential future expansion.
Craig Conti: This is truly an exciting time for our industry as state and local governments embrace technology to solve our most important traffic safety challenges.
Speaker Change: Over the past 18 months, we have seen the total adjustable market for automated enforcement in the U S grow by about 200 about $125 million with the potential to further expand to greater than $250 million as further legislation allows.
Speaker Change: Moving on to New York City in July the city's Department of Transportation released its RFP for operating and maintaining its automated traffic enforcement programs.
Speaker Change: RFP outlines the agency's requirements and expectations for qualified single vendor that will run the current programs with the ability to support back office services for all existing use cases and any potential future expansions.
David Roberts: With New York City being among our most important clients, we look forward to submitting our proposal on or before the deadline. Next, a brief update on the T2 system. We generated total revenue of approximately $21 million for the second quarter. As we anticipated, one-time product revenue declined about $1 million compared to the prior year quarter due to a structural transition away from hardware and towards software and mobile solutions. As product revenue decelerates, we also experience a decline in one-time professional services revenue. Recurring SaaS revenue group, mid-single digits over the pride of your court. Adjusted EBITDA was $3 million for the quarter.
Speaker Change: With New York City being among our most important clients, we look forward to submitting our proposal on or before the deadline.
Speaker Change: Next a brief update on tier two systems, we generated total revenue of approximately $21 million for the second quarter as we anticipated onetime product revenue declined about $1 million compared to the prior year quarter due to a structural transition away from hardware and towards software and mobile solutions.
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Speaker Change: As product revenue Decelerates, we also experienced a decline in one time professional services revenue.
Speaker Change: Recurring SaaS revenue grew mid single digits over the prior year quarter, adjusted EBITDA was $3 million for the quarter. We anticipate this quarter to be the low point for adjusted EBITDA dollars and margins and to increase sequentially over the balance of the year.
David Roberts: We anticipate this quarter to be the low point for adjusted EBITDA dollars and margins and to increase sequentially over the balance of the year. As we look to the future of the urban mobility market, we're confident that cities will continue to seek out technological solutions to help address their transportation challenges. We recently partnered with survey company Wakefield Research to learn what municipal technology leaders are focused on with their technology investments. More than half of these leaders have reducing road safety incidents as a top three priority for tech-based solutions. When asked which AI-driven options for traffic monitoring and enforcement would you most want for your jurisdiction, more than half of the responses identified safety needs and high fatality corridors as their top priorities.
Speaker Change: As we look to the future of the urban mobility market. We're confident that cities will continue to seek out technological solutions to help address their transportation challenges. We recently partnered with survey company Wakefield research to learn what municipal technology leaders were focused on with their technology investments.
Speaker Change: More than half of these leaders have reducing road safety incidents as a top three priority protect based solution.
Speaker Change: When asked which AI driven options for traffic monitoring and enforcement would you most want for your jurisdiction more than half of their responses identified safety needs and high fatality corridors and their top three.
Speaker Change: We remain steadfast in our optimism that technology solutions are going to be a top of mind investment for our urban mobility customers.
David Roberts: We remain steadfast in our optimism that technology solutions are going to be a top of mind investment for our urban mobility customers. Next, turning to capital allocation, we maintain net leverage at 2.4 times, providing optionality for future capital deployment. In the second quarter, we repurchased 2 million shares from a selling stockholder, leaving slightly less than $50 million under our stock buyback open authorization.
Speaker Change: Next turning to capital allocation, we maintain net leverage at two four times, providing optionality for future capital deployment in the second quarter, we repurchased 2 million shares from a selling stockholder, leaving slightly less than $50 million under our stock buyback open authorization.
David Roberts: We also remain active in our evaluation of M&A opportunities. The M&A market, and specifically within smart mobility, continues to present opportunities for investment. As we look to adjacent market expansion to broaden our portfolio companies, we continually scan the landscape for markets where our technology and experience can be leveraged into new vectors for growth. Adjacencies within urban mobility, government software, and public safety are examples of markets that we have begun to look more deeply into.
Speaker Change: We also remain active in our evaluation of M&A opportunities the M&A market and specifically within smart mobility continues to present opportunities for investments as we look to adjacent market expansion to broaden our portfolio of companies. We continually scan the landscape for markets, where our technology and experience can be leveraged into new vectors for.
Speaker Change: Growth.
Speaker Change: Adjacencies within urban mobility government software and public safety are examples of markets, where we have begun to that we have begun to look more deeply into.
David Roberts: In summary, we've had a great first half of the year. We're doing exactly what we said we'd do in terms of financial performance. Additionally, travel demand remains robust, and the bid pipeline is strong and growing. This is a great business with a bright future, and I look forward to sharing additional updates as we continue to execute against our growth strategy. Craig, I'll turn it over to you to guide us through our financial results in the 2024 guidance.
Speaker Change: In summary, we've had a great first half of the year, we're doing exactly what we said we'd do in terms of financial performance. Additionally, travel demand remains robust in our bid pipeline is strong and growing this is a great business with a bright future and I look forward to sharing additional updates as we continue to execute against our growth strategy.
Speaker Change: Craig I'll turn it over you to guide us through our financial results in the 2024 guidance discussion.
Craig Conti: Thank you David and Hello, everyone. Appreciate you joining us on the call today, let's turn to slide four which outlines the key financial measures for the consolidated business for the second quarter. We're pleased with our Q2 performance, which included 8% recurring services revenue growth and 9% total revenue.
Craig Conti: Thank you, David. And hello, everyone.
Craig Conti: Appreciate you joining us on the call. Let's turn to slide four, which outlines the key financial measures for the consolidated business for the second quarter. We were pleased with our Q2 performance, which included 8% recurring services revenue growth in 9% total revenue. The recurring service revenue growth was driven by strong travel demand in the commercial services business and recurring revenue growth outside of New York City in the government solution. At the segment level, commercial services revenue grew 10% year over year, government solutions services revenue increased by 8% over the prior year, while the key two systems, SAS, and services revenue was flat over the second quarter of last year. Product revenue increased to $10 million for the quarter, driven primarily by an increase in international product sales and government solutions. GS contributed $6 million, and T2 delivered about $4 million in product sales overall.
Speaker Change: The recurring service revenue growth was driven by strong travel demand in the commercial services business and recurring revenue growth outside of New York City in the government solutions business.
Speaker Change: At the segment level commercial services revenue grew 10% year over year government solutions services revenue increased by 8% over the prior year, while <unk> Systems' SaaS and services revenue was flat over the second quarter of last year.
Speaker Change: Product revenue increased to $10 billion for the quarter, driven primarily by an increase in international product sales in government solutions G. S contributed $6 million and key to deliberate about $4 million in product sales overall for the quarter.
Craig Conti: Our consolidated adjusted EBITDA for the quarter was $102 million, an increase of approximately 8% versus last year. We've reported net income of $34 million for the quarter, including a tax provision of about $13 million, representing an effective tax rate of 28%. This rate includes certain discrete items which favorably impacted the tax rate for the quarter. For the full year, we are anticipating an approximate 30% tax rate.
Speaker Change: Our consolidated adjusted EBITDA for the quarter was $102 million, an increase of approximately 8% versus last year.
Speaker Change: We reported net income of $34 million for the quarter, including a tax provision of about $13 million, representing an effective tax rate of 28%.
Speaker Change: This rate includes certain discrete items, which favorably impacted the tax rate for the quarter for the full year, we are anticipating an approximate 30% effective tax rate.
Craig Conti: Gap EPS was $0.20 per share for the second quarter as compared to $0.13 per share for the prior year period. Adjusted EPS, which excludes immunization, stock-based compensation, and other non-recurring items, was $0.31 per share for the second quarter this year compared to $0.29 per share in the second quarter of 2023. Adjusted EPS grew 7% over the prior year quarter, despite nearly 16 million additional shares in the share count due to the completion of our DSPAC process during the second and third quarters of 2020.
Speaker Change: GAAP EPS was <unk> 20 per share for the second quarter as compared to 13 cents per share for the prior year period.
Speaker Change: Adjusted EPS, which excludes amortization stock based compensation and other nonrecurring items.
Speaker Change: <unk> 31 per share for the second quarter this year compared to 29 per share in the second quarter of 2023.
Speaker Change: Adjusted EPS grew 7% over the prior year quarter, Despite nearly 16 million additional shares and the share count due to the completion of our dis back process during the second and third quarters of 2023.
Speaker Change: Cash flows provided by operating activities totaled $40 million and we delivered $26 million of free cash flow for the quarter, which was below our quarterly run rate due to the normal seasonal timing of cash tax payments as well as collections timing amongst several large customers regarding later approximately 60.
Craig Conti: Cash flows provided by operating activities totaled $40 million, and we delivered $26 million of free cash flow for the quarter, which was below our quarterly run rate due to the normal seasonal timing of cash tax payments, as well as collections timing among several large customers. Regarding the latter, approximately $16 million in collections were received in the first three days of July and will benefit third quarter free cash flow as a result.
Speaker Change: Million in collections were received in the first three days of July and will benefit third quarter free cash flow as a result.
Speaker Change: Turning to slide five we generated $384 million of adjusted EBITDA on approximately $853 million of revenue for the trailing 12 months, representing a 45% adjusted EBITDA margin.
Craig Conti: Turning this slide five, we've generated 384 million of adjusted EBITDA on approximately 853 million of revenue from the Trailing 12 months, representing a 45% adjusted EBITDA mark. Additionally, over the Trailing 12 months, we generated 139 million of adjusted free cash flow for a 36% diversion of adjusted EBITDA, on a weighted average base of approximately 169 million. We expect a large sequential increase in free cash flow for the third quarter, followed by a modest decline in the fourth quarter, all of which is expected to drive a 40% free cash flow conversion of adjusted EBITDA for 2024 in line with our full year guidance. Next, I'll walk through the second quarter performance in each of our three business segments, beginning with commercial services on slide 16. C.S.
Speaker Change: Additionally over the trailing 12 months, we generated $139 million of adjusted free cash flow or 36% conversion of adjusted EBITDA on a weighted average base of approximately 169 million shares.
Speaker Change: We expect the largest sequential increase in free cash flow for the third quarter, followed by a modest decline in the fourth quarter.
Speaker Change: All of which is expected to drive a 40% free cash flow conversion of adjusted EBITDA for 2024 in line with our full year guidance.
Speaker Change: Next I will walk through the second quarter performance in each of our three business segments, beginning with commercial services on slide six.
Craig Conti: Your overyear revenue growth was 10% in the second quarter; RAC tolling revenue increased 8% or about $6 million over the same period last year, driven by robust travel volume and increased rental volume. Additionally, our FMC business grew 18%, or about $3 million year over year, driven by the enrollment of new vehicles and tolling growth from existing and newly enrolled FMCs. Commercial services adjusted EBITDA margins expanded about 210 basis points to nearly 67% driven by volume leverage as the summer driving season began ramping up.
Speaker Change: See us year over year revenue growth was 10% in the second quarter.
Speaker Change: <unk> tolling revenue increased 8% or about $6 million over the same period last year, driven by robust travel volume and increased rental volumes. Additionally.
Speaker Change: Additionally, our FMC business grew 18% or about $3 million year over year, driven by the enrollment of new vehicles, and tolling growth from existing and newly enrolled FMC customers.
Speaker Change: Commercial services adjusted EBITDA margins expanded about 210 basis points to nearly 67% driven by volume leverage as the summer driving season began ramping up.
Speaker Change: Turning to slide seven government solutions had strong recurring revenue growth in the quarter driven by 14% service revenue growth outside of New York City.
Craig Conti: Turning to slide 7, government solutions had strong recurring revenue growth in the quarter, driven by 14% service revenue growth outside of New York City. Total revenue growth through 11% over the prior year quarter, bolstered by strong international product sales in addition to the solid non-New York City service revenue. Adjusted even, it was $30 million for the quarter, representing margins of 31%. The reduction in margins versus the prior year is primarily due to increased spending on business development efforts, the non-capitalized portion of our platform investments, and revenue next as a result of an increase in our national product. Let's turn to slide eight for a view of the T2 system, which is our parking solution.
Speaker Change: Total revenue growth grew 11% over the prior year quarter bolstered by strong international product sales. In addition to the solid non New York City service revenue growth.
Speaker Change: Adjusted EBITDA was $30 million for the quarter representing margins of 31%.
Speaker Change: Reduction in margins versus the prior year is primarily due to increased spending and business development efforts. The non capitalized portion of our platform investments and revenue mix as a result of increased international product sales.
Speaker Change: Let's turn to slide eight for a review of T. Two systems, which is our parking solution side.
Speaker Change: We generated revenue of $21 million and adjusted EBITDA of approximately $3 million for the quarter.
Craig Conti: We generated revenue of $21 million and adjusted EBITDA of approximately $3 million for the quarter. Fast and services sales were flat with a prior year quarter, offset by a $1,000,000,000 annual reduction in product. Breaking the SaaS and services revenue down a bit further, pure SaaS revenue grew mid-single digit over the prior year quarter. However, offsetting this increase was a decline in installation and other professional services due to the reduction in product sales over the past two quarters. Okay, let's start this slide.
Speaker Change: SaaS and services sales were flat with the prior year quarter offset by a $1 billion year over year reduction in product revenue.
Speaker Change: Breaking the SaaS and services revenue down a bit FERC.
Speaker Change: SaaS revenue grew mid single digit over the prior year quarter. However, offsetting this increase was a decline in installation and other professional services due to the reduction in product sales over the past few quarters.
Speaker Change: Okay, let's turn to slide nine and discuss the balance sheet and we'll take a closer look at leverage.
Craig Conti: Nine in and discuss the balance sheet. We'll take a closer look at that. As you can see, we ended the quarter with a net net balance of $928 million, up modestly on a sequential basis due to the repurchase of 2 million shares during the second quarter. We ended the quarter with net leverage of 2.4 times, and we maintained significant liquidity with our undrawn credit revolvers. Our gross debt balance at year end stands at $1.1 billion, of which approximately $700 million is floating rate debt.
Speaker Change: As you can see we ended the quarter with a net debt balance of $928 million up modestly on a sequential basis due to the repurchase of 2 million shares during the second quarter.
Speaker Change: We ended the quarter with net leverage of two four times and we've maintained significant liquidity with our Undrawn credit revolver.
Speaker Change: Our gross debt balance at year end stands at $1 1 billion of which approximately $700 million is floating rate debt.
Craig Conti: As we've discussed in the past, our notional hedge of approximately $675 million covers over 95% of our current floating debt total, with a float-for-fixed-rate swap that is cancelable at our option. Okay, let's turn to slide 10 and have a look at full year 2024 guidance, which remains unchanged from our discussion last quarter. For purposes of review, I'll give you a quick refresher on our guidance by major categories.
Speaker Change: As we've discussed in the past our notional hedge of approximately $675 million covers over 95% of our current floating debt total with a float for fixed rate swap that is cancelled and our options.
Speaker Change: Okay, Let's now, let's turn to slide 10, and have a look at full year 2024 guidance, which remains unchanged from our discussion last quarter for purposes of review I'll give you a quick refresher on our guidance by major category.
Speaker Change: We expect total revenue growth of approximately 8% and adjusted EBIT margin expansion of about 50 basis points compared to last year.
Craig Conti: We expect total revenue growth of approximately 8% and an adjusted EBITDA margin expansion of about 50 basis points compared to last year. Adjusted EPS is expected at the upper end of the $1.15 to $1.20 per share range. Adjusted free cash flow is anticipated in the range of $155 to $165 million, and finally, net leverage will land at approximately two times, assuming no additional capital allocation investments beyond the investments we've made through the second quarter.
Speaker Change: Adjusted EPS is expected at the upper end of the $1 15 to $1 20 per share range.
Speaker Change: Adjusted free cash flow is anticipated in the range of $155 million to $165 million and finally net leverage will land at approximately two times, assuming no additional capital allocation investments beyond the investments we've made through the second quarter.
Craig Conti: We anticipate revenue and adjusted EBITDA to increase sequentially in the third quarter. However, as we experienced in both 2022 and 2023, we expect sequential growth to slow to low single digits in the third quarter due to travel demand shifting forward in the year.
Craig Conti: We anticipate revenue and adjusted EBITDA to increase sequentially in the third quarter. However, as we experienced in both 2022 and 2023, we expect sequential growth to slow to low single digits in the third quarter due to travel demand shifting forward in the year. Consistent with historical trends, we would then expect a low single-digit reduction in revenue in adjusted EBITDA in the fourth quarter. Adjusted EBITDA margins are expected to follow the same sequential revenue trend.
Speaker Change: Consistent with historical trends, we would then expect a low single digit reduction to revenue and adjusted EBITDA in the fourth quarter adjusted.
Speaker Change: Adjusted EBITDA margins are expected to follow the same sequential revenue trends.
Speaker Change: We expect commercial services to grow mid single digits sequentially in the third quarter and to decline mid single digits in the fourth quarter consistent with historical performance.
Craig Conti: We expect commercial services to grow mid-single digits sequentially in the third quarter and to decline mid-single digits in the fourth quarter, consistent with historical performance. In government solutions, we expect flat to low single-digit sequential revenue growth over the balance. Lastly, Parking Solutions revenue is now expected to deliver flat total revenue compared to prior years.
Speaker Change: And government solutions, we expect flat to low single digit sequential revenue growth over the balance of year.
Speaker Change: Lastly, parking solutions revenue is now expected to deliver flat total revenue compared to prior year.
Operator: As we've discussed, the temporary reduction in revenue growth is comprised of strong demand for SaaS, offset by a reduction in one-time product sales and related installation services as the industry transitions to a focus on software and mobile solutions. We expect T2 adjusted EBITDA margins to grow sequentially in the third and fourth quarters with a full year of about 10 to 25 basis points over last year. Over the long term, we expect parking to return to strong organic growth as we execute our SAS and transactional revenue growth strategies.
Speaker Change: As we've discussed the temporary reduction in revenue growth is comprised of strong demand in SaaS offset by a reduction in one time product sales and related installation services as the industry transitions to a focus on software and mobile solutions we.
We expect Q2, adjusted EBITDA margins to grow sequentially in the third and fourth quarters with the full year up about 10% to 25 basis points over last year.
Speaker Change: Over the long term, we expect parking to return to strong organic growth as we execute our SaaS and transactional revenue growth strategies.
Craig: Other key other key assumptions supporting our adjusted EPS and adjusted free cash flow can be found on slide 11.
Operator: Other key assumptions supporting our adjusted EPS and adjusted free cash flow can be found on slide 11. In summary, we have a strong first half to the year, and I'm confident in our ability to deliver our 2024 out. We are benefiting from a number of secular tailwinds, including strong travel, the continued transition to cashless tolling, as well as a robust and growing landscape for automated enforcement and other urban mobility technologies. The strength of our end markets and our continued focus on execution have set us up well to execute on our long-term goals. This concludes our prepared remarks. Thank you for your time and attention. At this time, I'd like to invite Jenny to open the line for any questions. Over to you, Jenny.
In summary, we had a strong first half of the year and I'm confident in our ability to deliver on our 2024 hour work.
We are benefiting from a number of secular tailwind strong travel continued transition to cashless tolling as well as a robust and growing landscape for automated enforcement and other urban mobility technology solutions.
Speaker Change: Strength of our end markets and our continued focus on execution has set us up well to execute on our long term growth commitments.
This concludes our prepared remarks. Thank you for your time and attention at this time I'd like to invite Jenny to open the line for any questions over to you Jay.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by the tip. If you are using a speakerphone, please lift the handset before pressing any key.
Ladies and gentlemen, we will now begin the question and answer session.
Have a question. Please press the star followed by the one understood you will hear it from the Feraheme has been raised.
<unk> will be taken in the order received should you wish to cancel your request. Please press the star followed by the tail here.
You're using a speaker phone please read the answered that question Amit.
Faiza Alwy: Once again, that is stage one should you wish to ask a question. Your first question is from Faiza Alwy from Goethe Bank. Please ask your question.
Once again that is star one should you wish to ask a question.
Your first question is from Oliver <unk> from Deutsche Bank. Please ask your question.
Yes, hi, thank you so much.
David Roberts: Yes. Hi David, thanks for all the color around the incremental ARR and government solutions. I wanted to ask about, you know, competitive activity there, sort of what type of
Thanks for all the color around the incremental <unk> government solutions.
Wanted to ask about competitive activity, there and what type of contracts are you winning them. How would you characterize sort of your win rate is it in line with.
Historical level, just give us a bit more color around the competitive landscape there.
David Roberts: Yeah, of course. One, the competitive landscape really depends on where in the country, or really, I guess, where in the world, but mostly where in the country where we are. It seems that some of our other competitors have focused more on certain areas. There are a couple of competitors that have really focused on what I would just call the southeast of the United States. Others are a little bit more in the northeast and then less so in the west, but a little bit here. In general, what you would say is our win rate, both in terms of the total number of contracts, as well as the dollars that we're making.
Yeah of course, one the competitive landscape really depends on what what where in the country that really are I guess, where in the world, but mostly we're in the country, where we are it seems that some of our other competitors have focused more on in certain areas.
There's a couple of competitors that have really focusing on what I would just call. The generally the southeast of the United States, others are a little bit more in the northeast and Enzo less so on the west, but a little bit there in general what you would say is that our win rate. Both in terms of the total number of contracts as well as the dollars that we're going after which is obviously a more important.
That number is in line with our expectations.
And similar to historic numbers overall.
What I would say is that our competitors are definitely feisty they've been doing.
Good job, but because of all the work we've done to open up the market, but in the major accounts that we feel like we've done a really good job there.
Great. Thank you and then in commercial services right you had strong growth in the quarter. It sounds like you are.
David Roberts: Great, thank you. And then in commercial services, right? You've had strong growth in the quarter. It sounds like you are saying that you expect sort of strong travel demand to continue. Just talk a little bit more about your confidence there because it seems like some travel companies are calling out a little bit of
Saying that you expect sort of strong traveler demand to continue.
Just talk a little bit more about your confidence there because it seems like theres. Some some travel companies are calling out a little bit of slowing in demand.
And I Wonder if there are other factors that are making up for any slowing just you know there's a little bit more concerned around the consumer environment, So talk a bit more about your confidence there.
David Roberts: Yeah, thanks, Faiza. I think I know what you're referring to, but in general, if you look at the demand commentary coming from the airlines and, quite frankly, some of our largest customers, that continues to remain right. And I think the Let's take a look at the TSA throughput. I mean, the TSA throughput is 106% year-to-date. It was 106% in this versus 2023. It was 106% in the first quarter. It was 106% in the second quarter.
Yeah. Thanks Faiza.
I think.
I know, what you're referring to but in general if you look at the demand commentary coming from the airlines and quite frankly, some of our largest customers that continues to remains.
And I think that the.
Let's take a look at the TSA throughput I mean, the TSA throughput of 106% year to date. It was 106% that's versus 2023 was 106% first quarter was 106% second quarter. It was 106% in July and a delay in and around that range in August so we have not yet seen that.
So we still think that that's level of travel that we've seen.
David Roberts: It was 106% in July, and it's in and around that range in August. So we have not yet seen that. So we still think that the level of travel that we've seen year-to-date is what we're gonna experience going forward, and I haven't heard anything different. I think the only other thing I would add to that...
Year to date is what we're going to experience go forward and I haven't heard anything different I think the only other thing I would add to that.
It's qualitative, but we have seen a return to the business traveler right. So to the degree that that the consumer would have slowed down a bit there is an offsetting increase in business travel that we've continued to see come through 2024, and I think that's why we've seen TSA hold really really flat through the first seven months and change it.
The year.
Great. Thank you.
Thank you.
Daniel Moore: Thank you. Your next question is from Daniel Moore from CJS Securities. Please ask your question.
Next question is from Daniel Moore from CJS Securities. Please ask your question.
Thanks, David Thanks, Greg Thanks for all the color.
David Roberts: Thanks, David. Thanks, Craig. Thanks for all the color.
I wanted to maybe just dig in on margins a little bit by segment.
Not necessarily this year, but.
David Roberts: I wanted to maybe just dig in on margins a little bit by segment, not necessarily this year, but for commercial services, 67% margin, clearly exceptional, and benefiting from seasonal strengths. But just talk about sustainability of those levels as we look beyond 24. And then conversely, in government solutions, margins, you know, come in a bit with some of the investments you make. Talk about the opportunity for operating leverage as we, you know, look out, and some of those new enforcement programs come online.
The commercial services, 67% margin clearly exceptional in benefiting from seasonal strength.
But just talk about the sustainability of those levels as we look beyond 24, and then Conversely in government solutions margins come in a bit with some of the investments you've made could talk about the opportunity for operating leverage.
As we look out and some of those new enforcement programs come online.
Yeah, great. So.
David Roberts: Lots to unpack in that question, so I'll do my best. I'll start with what I think is going to happen for the year, and then I'll give you some directional indications on how we're thinking about 2025. Overall for the company for the year, I think we're going to create 50 basis points, which is consistent with what we said at the beginning of the year. I think CS will probably be about 100 basis points. GS is going to end the year flat, slightly down, and T2 will be up a shekel or two. So again, if you cost that out, you get up to 50 basis points.
A lot to unpack in that question. So I'll do my best I'll start with what I think is going to happen for the year and then I'll give you some directional indication and how we're thinking about 2025.
Overall for the company for the year I think we're going to accrete 50, 50 basis points, which is consistent with what we said at the beginning of the year I think CES will probably be about 100 basis points GFS is going to end the year flat to slightly down and <unk> will be will be upper shekel. There too. So again, if you cost out you get up to 50 basis points.
Now the one thing that 67% for CES remember, we're in the summer driving season. So we could see that even maybe potentially tick a bit higher in the third quarter, but that will come back in the fourth quarter. Okay for the CFS of sorry for the GFS business Youre right. If you compare where we're at today year over year, you will see the reduction in GFS.
David Roberts: Now the one thing on 67% for CS, remember we're in the summer driving season, so we could see that even maybe potentially take a bit higher in the third quarter, but that will come back. For the CS of sorry for the GS business, you're right, if you compare where we're at today, you're over a year ahead. You will see the reduction in GS that's roughly 50-50 between us doing more product sales internationally, which have follow-on service agreements, which are higher margins, but they're lower margin sales upfront. That's what you're seeing, journalists.
That's roughly split 50 50 between us doing more product sales internationally, which have follow on service agreements, which are higher margin, but lower margin sales upfront.
And Thats, what Youre seeing journal is and then the other side is are the investments that we're making to win some of some of these new teams, but I think if you look at GFS sequentially, one thing I'd like to point out we're down 50 basis points sequentially in the second quarter. That's all mixed driven so as we see those investments ramp up year over year, we're consistent within the year.
And I'm going to use that as a jumping off point I think for the second part of your question is what is 2025 look like.
As if travel remains where it is today like we said it will be a GDP grower right if nothing else changes.
David Roberts: If travel remains where it is today, like we've said, it will be a GDP grower, right? If nothing else changes, the business will continue to scale. So we should see margin accretion again year over year in CS just based on what we're seeing for travel. For GS, that one's a tougher basket.
The business can book continued to scale. So we should see margin accretion again year over year and CFS just based on what we're seeing for travel for GFS that once the tougher part.
David Roberts: If the volume fell exactly as we see it today, we'd probably be flat to slightly accretive. But here's what can happen. As you've listened to the calls for the last couple of quarters, every time one of these new markets opens, we mobilize, and, you know, we get our feet on the ground, and that costs money to do. Obviously, it's the easiest return on investment you can imagine for us to invest, but we will continue to see that.
If if the volume falls exactly as we see it today, we'd probably be flat to slightly accretive, but here's what can happen as you as you've listened to the calls for the last couple of quarters. Every time one of these new markets opened we mobilized and we get our feet on the ground in that that cost money to do obviously, it's not easy.
He is return on investment you can imagine for us to invest but we will continue to see that so if I had the guess on GFS I don't think we'll see margin percent accretion next year I think flat would probably be good down another 50 basis points, probably wouldn't be horrible, but then once we know where we land in California and some of these other camps and we get some build to suit.
David Roberts: So if I had to guess on GS, I don't think we'll see margin percent accretion next year. I think flat would probably be good. Down another 50 basis points probably wouldn't be horrible. But then once we know where we land in California and some of these other camps, and we get some notices to proceed, Then the margin accretion will start as we're able to lean out that cost that you need to put in when you're opening up.
To proceed.
Then the margin accretion will star as we're able to lean out that cost that you need to put in when you are opening up a new market.
Really helpful and then on the tier two side, you're obviously continuing to shift from hardware to SaaS based solutions and I. Appreciate you calling out the maintenance work that goes along with that.
David Roberts: And then on the T2 side, you obviously continue to shift from hardware to SAS-based solutions, and I appreciate you calling out the maintenance work that goes along with that or the implementation work. Maybe just talk about the pipeline of opportunities, one, and then two, as when do you think those two sort of inflect and we might get back to more positive growth or start to drift back toward the kind of longer-term expectations for that business. Thanks.
Implementation work.
Maybe just talk about the pipeline of opportunities one in then too.
When do you think those those two sort of inflect and when we might get back to.
Hmm.
More positive growth or start to drift back toward the kind of longer term expectations for that business. Thanks.
David Roberts: Hey Dan, David. Yeah, a great question. So what I would say is, right now, I think the team is really building some momentum; we're seeing a lot of traction in our permits and enforcement side of that business. As you recall, there's a university segment where we're back in software, and then there's a municipal segment that is more permits and enforcement, and we're seeing tremendous growth well above plan. That's a smaller portion of the business, and so what I would say is we're obviously going to be adjusting ourselves to make sure we're taking an opportunity to capture that demand.
Hey, Dan David Yeah, Great question. So what I would say is right now I think the team is really building. So mentum, we're seeing a lot of traction in our permits and enforcement side of that business as you recall there is a.
Our University segment, where were backend software and then there are municipal segment that is more permits and enforcement and we're seeing tremendous growth well above plan. That's a smaller portion of the business.
And so what I would say is we've obviously, we're going to be adjusting ourselves to make sure we're taking care.
An opportunity to capture that demand I would say that as we exit the year, we should probably be back on toward trajectory of getting to a higher run rate and I would expect next year is still not going to be at the high single digits, but probably starting to get towards that towards the end of next year is probably the best trajectory and the margin to come along with that.
David Roberts: I would say that as we exit the year, we should probably be back on the trajectory of getting to a higher run rating. You know, I would expect next year it is still not going to be in the high single digits, but you know, probably starting to get toward that toward the end of next year is probably the best trajectory and the margin to come along.
All right really helpful. Last one for me is just the balance sheet guidance for us to exit the full year with net leverage of 2.0 times.
David Roberts: All right, really helpful. The last one for me is just the balance sheet. Guidance for, you know, is to exit the full year with net leverage or 2.0 times. Is that a priority for you, or are you still up for Tunis Tech, you know, looking at M&A and door-to-door sales between now and your end. Thanks again.
Is that a priority for you or are you still be up for Tunis deck, looking at M&A and or buybacks between now and year end. Thanks again.
Yes, thanks for asking that.
David Roberts: Yeah, thanks for asking that. And the fact that you asked the question means I should have said it differently in the script. So double thank you.
Fact that you asked the question because I should have set a different script. So double. Thank you no. That's not a target that is not a target that will be the result, right. So the target for the company over term I think we talked about this a quarter or two ago. Dan is three times net leverage so.
David Roberts: No, that is not a target. That is not a phrase That will be the result, right? So the target for the company over the term, I think we talked about this a quarter or two ago, Dan, is three times net leverage. So, you know, we are out there looking to deploy capital, but like we said, if we can't do that in a creative way, it will delever the company, but that would be the result, not necessarily the target.
We are out there looking to deploy capital, but like we said if we can't do that in an accretive way I mean, it will delever the company, but that that would be the result, not necessarily a target.
David Roberts: Thought that was the case; just wanted to confirm. Thanks again.
David Roberts: I thought that was the case.
I thought that was the case just wanted to confirm thanks again.
Thank you.
Thank you. Your next question is from Keith Hoffman Northcoast Research. Please ask your question.
Keith Housum: Thank you. Your next question is from Keith Housum from North Coast Research. Please ask your question.
David Roberts: Great. Thank you. Good morning, guys. Or, more accurately, good afternoon, I should say. It's been a long day. In terms of the T2 parking, are there any KPIs or any kind of metrics you can give us to give some confidence that that business is growing? You know, understanding the shift from license to the SAS model, but just want to give a little more confidence to that story if we can.
Great. Thank you good morning, guys or good afternoon, I should say, it's a long day.
In terms of the tissue Parker is there any kpis or any kind of metrics you can give us some confidence that that business is growing we're understanding the shift from license to the SaaS model, but.
Yes, do I give them more confidence story, if we can.
Yes, I mean, I won't give any specific kpis that we manage internally necessary. What I would say is that the revenue growth from permits and enforcement is well above plan. What I would also say is that our pipeline of new and expansion sales opportunities that our current basis is also starting to expand again, so what I would say is right now after sort of the convert.
David Roberts: Yeah, I mean, I won't give you any specific KDI that we manage internally necessarily. What I would say is that the revenue growth from permits and enforcement is well-planned. What I would also say is that our pipeline of new and expansion sales opportunities in our current basis is also starting to expand again. So, what I would say is, right now, after sort of this conversion and the market for our operator segment, we've really pivoted the business back to the core around universities and small municipalities.
Version in the market of our operators segment, we've really pivoted the business back to the core around University and small municipalities.
So what I would say is that we are probably in the the bottom of the trough right now is the way I would describe.
The business from that and we are moving our way up the other side of that.
And again I think I think about this business is trajectory base. So how do we think about it is it's going to end this year and maybe more importantly, how do we get back to that high single digit growth rate an expanded margin opportunities towards the end of next year as well and let me let me just add to that a bit so David did it from a product standpoint.
David Roberts: Let me just add to that a bit. David did it from a product standpoint, which is good. Let me try to do it from how we go to Mark Zindler.
Which is good but let me try to do it from how we go to market standpoint. So there's three things that we look at and we're not we're not going to do this externally on a on a regular basis, but I think given this quarter and warrants mentioned right.
David Roberts: So there's three things that we look at, and we're not gonna do this externally on a regular basis, but I think given this quarter, Warren mentioned, right, is we've got True Traditional SaaS revenue, we have service revenue, which is hardware-enabled services, so it's not fast, and it's also not hardware. Then, of course, we got hardware. When hardware goes, when hardware demand pulls, which we saw happening year over year, it brings with it some of those services. Okay, but the true value drives it.
We've got true traditional SaaS revenue, we have service revenue, which a hardware enabled surfaces. So it's not fast and it's also not hardware then well of course, we got hardware when hardware goes when hardware demand pulls back, which we saw happen year over year. It brings with it some of those services okay.
But the true value driver of key too is the recurring SaaS part of the business. That's the part that we want to see continue to grow that's the part as it becomes a larger part of the portfolio over the next handful of years is going to make this.
David Roberts: T2 is the recurring SaaS part of the business. That's the part that we want to see continue to grow. That's the part that will become a larger part of the portfolio over the next handful of years. It's gonna make this more sustainable, and it's gonna make it a higher-margin business. We saw that part grow 5% year over year. So when we talk about being flat in total revenue, what we're seeing happen is the shift away from hardware, which again for us is by resale, right?
More more sustainable and it's got to make it a higher margin business. We saw that that part this quarter grow 5% year over year. So when we talk about being flat and total revenue. What we're seeing happen is the shift away from hardware, which again for US is by resell right. So that we're not too too sad to see you.
David Roberts: So we're not too sad to see it go. And some of the attached services that go along with that, but the stuff that keeps us in front of the customer and drives our 97% retention rate in this business actually grew mid single-digits, even in a pressured quarter.
Don and some of the attach services that go along with that but the stuff that keeps us in front of the customer and drives our 97% retention rate in this business actually grew mid single digits, even in a pressured quarter lengths.
David Roberts: Okay, great to appreciate that call; thank you. In terms of the European storytelling efforts, are there any updates to report there?
Great I appreciate that color. Thank you.
The European tolling efforts is there any update to report there.
Yes, nothing new from the last from last quarter in terms of number of pilots or things like that.
David Roberts: Yeah, nothing new from the last quarter in terms of the number of pilots or things like that. And, off the top of my head, no new toll roads that have opened or gone cashless that would be of any note. So, kind of in the same position that we were, which is we've got a couple of pilots in some key countries. We are beginning to see a bit of a thaw as it relates to barrier-based tolling in places like France and Italy. And, you know, we'll just continue to monitor and execute on the pilots that we do have.
Off the top of my head no no new toll roads that have opened are gone cashless that would be of any note. So kind of in the same position that we were which is we've got a couple of pilots in some key countries. We are beginning to see a bit of a thought as it relates to the.
The barrier base totaling in places like France, and Italy.
And.
We'll just continue to monitor and execute on the on the pilots that we do that.
Great and last question for me in terms of the Florida School Zone cameras. If I remember right. You guys really are thinking that revenue is really going to be more of a.
First half of 2025 versus a second half 2024 and that.
Is that still a line of thought.
David Roberts: Yeah, that's correct. That's exactly right, Keith. Great. Thanks, guys.
Yes, that's correct that's exactly right.
David Roberts: Great. Thanks, guys. I appreciate it.
Great. Thanks, guys appreciate it.
Yes.
Thank you once again.
Louis Dipalma: Thank you. Once again, please press star 1 if you wish to ask a question. Your next question is from Louis DiPalma on behalf of William Blair. Please ask your question.
Mark I wanted to wish to ask a question. Your next question is from early Dipalma William Blair. Please ask your question.
David Roberts: David, Craig, Anne, and Mark, good afternoon. Hello everyone.
David Craig and Mark good afternoon.
Hey, Louie Louie.
David Roberts: Following up on the answer that you just gave, the 22 million dollars in AR Bookings Year-to-day for photo enforcement represents roughly 6% of our forecast for your government services revenue this year. And do you still expect that the A.R.R. growth rate will accelerate in 2025 from these winds? And are you expecting that the acceleration will likely be back-end loaded to the second half of the year as it generally takes time to install these cameras? What are your thoughts in terms of the time of installation for these winds that you've achieved thus far?
Following up on that.
The answer that you just gave the $22 million in <unk>.
Our bookings year to date for.
Photo enforcement represents roughly 6% of our forecast for your government services revenue. This.
This year.
And do you still expect that the E. R. R.
The growth rate will.
Accelerate and 2025 from these wins and are.
Are you expecting that the acceleration will likely be backend loaded to the second half of the year as it generally takes time to install these cameras are like what are your thoughts in terms of the time of installation core for these wins that you've achieved thus far.
Yes.
The short answer to your question Louis is yes.
David Roberts: The short answer to your question, Louis, is yes. OK, but the slightly longer answer is: hyming really matters here. It's really, really matters, right? So when we're looking myopically at a 90 day cycle or a 360 day cycle to show growth for the company. So let me bring it back for a second, and then I'll try to give you a little more detail.
The slightly longer answer is yes.
Timing really matters here, it really really matters right. So when we're looking myopically at a 90 day cycle or a 360 days cycle.
To show growth for the company. So let me let me bring it back for a second and then I'll try to give you a little more detail so bringing it back we expect the government solutions business still to grow mid to the high end of mid single digits. This year I don't see that changing I don't see anything that that and the new <unk>.
Our that we've been able to put under contract here I don't see anything that's going to move that for 2024 as we go out into 2025 and the notice to proceed start coming a couple of things happened the notice to proceed.
David Roberts: I don't see anything that's going to change that for 2024. But as we go out into 2025 and those Notices to Proceed start coming, a couple things happen. The Notice to Proceed gets awarded, then the actual installation happens, then there's a calibration period, then the program actually starts. It really matters if that last thing, the program actually starts, happens in April or it happens in June, because you're going to see a materially different impact in 2025 because of that.
It gets it gets awarded right than the actual install happens and there is a calibration period then the program actually starts and it really matters. If that last thing then the program actually start happens in April or it happens in June is youre going to see a materially different impact in 2025.
Because of that I'll, just I'll have a better view of that six months from today, but bringing it back to the easy answer is I do think this is this is for sure 2025 impact most likely second half is where you'll see the most material impact just given how long it takes the program to actually turn into <unk>.
David Roberts: I'll just have a better view of that six months from today, but bringing it back to the easy answer, I do think this is for sure a 2025 impact, and probably the second half is where you'll see the most material impact, just given how long it takes the program to actually start turning a profit.
Revenue for the company.
Great and does anything stand out with a New York City.
David Roberts: Great. And does anything stand out with the New York City RFP? I think you mentioned that bids are due in October, but do you think that it's a fair RFP?
Pat I think you mentioned that bids are due in October but.
Do you think that it is a fair RFP.
Yes.
David Roberts: Well, what I would say is the best word I can use long, it's 800 pages; it's a pretty comprehensive RFP. They did a really thoughtful job and, you know, we had, as you recall, we had expected it earlier in the year and, clearly, they were busy putting together a very, very comprehensive and so I would say, yeah, that it was originally going to be due in August and I think August, and it's moved back now to the end of October as the current time. That's it, and I think it's been written extremely well, New York as I expected in the, in the RFP reflection.
Well, what I would say, it's the best word I can use long, it's 800 pages, it's a pretty comprehensive RFP. They did a really thoughtful and.
We had as you recall that we had expected earlier in the year and clearly they were busy putting together a very very comprehensive.
So I would say, yes, it was originally going to be.
Due in I think August and it's moved back now to the end of October as the current.
The data and I think it's been written extremely.
New York is I expectations in the RFP reflects that.
Great and one final one on that.
David Roberts: Great, and one final one, on the tolling side, does the rollout of your and your partner's all-inclusive plan continue to do well, and is it continuing to expand with your partners?
Calling side.
Does the rollout of your and your partners all inclusive plans does that <unk>.
To do well and is it.
Continuing to expand.
With your partners.
It's continuing to do well Louie.
David Roberts: Continuing to do well, Louis. It's going to flex quarter to quarter, depending on opt-in and counter incentives, but we're very happy with the performance. But what we're not going to see, so we've anniversary hurt actually flipping the program on. So you're not gonna see that kind of momentum year over year growth now that that's in the run rate. But the opt-in rate there continues to be exactly where we have it.
It's going to flex quarter to quarter, depending on opt in and counter incentives, but we're very happy with the performance, but what we're not going to see so we've anniversaried.
Inclusion of with CPG, Mark the second one.
So we have anniversaried hurts actually flipping the program on so you're not going to see those kind of momentum year over year growth now that that's in the run rate.
But we the often right there continues to be exactly where we have we're very pleased.
David Roberts: We're very excited. Sounds good. Thanks. Thanks, everyone.
Sounds good thanks, thanks, everyone.
Thank you.
Thank you.
Operator: There are no further, oh sorry, we have another one that just came in that's from Dave Konig from Baird. Please ask your question.
There are no further oh, sorry, we have another one that just.
<unk>.
That's comment Dave Koning from Baird. Please ask your question.
David Koning: Oh, yeah, guys, so I am a little late to join in, but a couple questions. One, credit loss expense, year-to-date, a little higher, both you want, and two were up about 50% compared to last year. Now those aren't big numbers, so a 50% move isn't that much, but is that economic related at all, or maybe what is it?
Oh, Yeah, Hey, guys, sorry, I'm, a little late to join but a couple of questions.
One credit loss expense year to date is a little higher both Q1, and Q2 were up about 50% compared to last year now those aren't big numbers, so 50% move isn't that much but is that economic related at all or maybe what what is that.
David Roberts: Yeah, Dave, great question. It is not economically related.
Yes, it's a great great question. It is not economically related let me start with that.
David Roberts: Let me start with that. We did have some two contractual things that we're still, quite frankly, in negotiations with to get recoveries that we booked prudently in the first quarter. As I look at our number, well, I'm doing this off the top of my head, Dave, so I know you'll keep me honest, but I believe the credit loss expense was something around $3.9 million in the second quarter of 2024.
We did have some to contractual things that were still quite frankly in negotiations with to get recoveries that we booked prudently in the first quarter as.
As I look at our number four I'm doing this off the top of my head, Dave. So I know Youll keep me honest, but I believe the credit loss expense was something on the rounds of about $3 $9 million in the second quarter of <unk>.
24, that's pretty much exactly what it was in the third quarter of 2023 right. So.
David Roberts: That's pretty much exactly what it was in the third quarter of 2024, right? So, and if I look at it year over year, it's up about 25%, but my volume's up roughly half that. So what I'm seeing today is literally volume driven. I have not seen the consumer getting any weaker in our stack. And again, I think some of that stuff that we put on the books in the first quarter. Hopefully, I'll be able to come back to you in the back half of the year and tell you that we had a favorable contract.
And if I look at it year over year, it's up about 25%, but my volumes up roughly half of that so what I'm seeing today is literally volume driven I have not seen the consumer getting any weaker in our stack and again I think some of that stuff that we put on the books in the first quarter, hopefully I'll be able to come back to you in the back half of the year and tell you that.
We had a favorable contractual settlement.
David Roberts: Gotcha, no that's helpful. And then I guess the other question, you know Avis and Enterprise are obviously doing really well, Hertz, and maybe you at Ancestry, but Hertz was down year over year in the I guess in the quarter, maybe not surprising at all, but is that kind of expected from Hertz just given kind of where they're at?
Got it that's helpful. And then I guess, the other question Avis and enterprise, obviously doing really well hurts and maybe your ancestry, but hurts was down year over year in the eye.
In the quarter.
Maybe not surprising at all but is that kind of expected from Hertz, just given kind of where they're at.
David Roberts: I was surprised too. I saw that too, Dave.
I was surprised too.
I saw that two days and look I think it just has to do with snap the chalk and.
In 90 days I cant my business is not necessarily a reflection totally of hurts right because hurts does business a lot of places where my product doesn't exist because theres all toll roads right, but as long as those numbers are directionally correct over a longer period of time I think I think we're okay. If I'm not mistaken I think hertz rental days were about.
Flat year over year, so I would chalk up.
I would chalk up.
US being down in her to year over year more to locational mixed then it would anything macroeconomic or anything going on with the customers.
David Roberts: Great, and that's a question for me. In terms of the Florida School Zone cameras, if I remember correctly, you guys really were thinking that your revenue is really going to be more of a, you know, first half of 2025 versus a second half of 2024 event. If that's the line of thought.
Gotcha, that's great. Thanks, guys.
David Roberts: Gotcha. Oh, that's great. Thanks, guys.
Thank you thanks.
Thank you.
Operator: There are no further questions at this time, and that concludes the question and answer session for today. Ladies and gentlemen, we have reached the end of the conference. Thank you all for joining us, and may we ask that you please disconnect your lines?
There are no further questions at this time and that concludes the question and answer session for today.
Ladies and gentlemen, we have reached the end of the conference. Thank you all for joining.
And maybe asking could you. Please disconnect your lines.
Okay.
David Roberts: Gotcha, that's great, thanks guys!
David Roberts: Year-to-day TSA passenger volumes as of June 30 stood at 106% of 2023 volume for the same period, driven by strong consumer and business demand, with the latter demonstrating potential for more growth, and our government solutions business to bid pipeline for automated enforcement is strong and growing. Second quarter contract awards represented approximately $12 million in incremental ARR at full run rate, bringing the year-to-date incremental ARR up to $22 million. I'll explain our awards and bid opportunities later in my prepared remarks.
Operator: Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to get up for a question. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time. I would now like to turn the conference over to Mark Zindler, Investor Relations. Please go ahead.
David Roberts: I think it just has to do with snapping the chalk in 90 days. I can't believe it. My business is not necessarily a total reflection of hurts, right? Because hurts does business in a lot of places where my product doesn't exist because there's no tolerance, right? But as long as those numbers are directionally correct, over a longer period of time, I think we're okay. If I'm not mistaken, what hurts is that rental days are about flat year over year. So I would chalk it up to us being down in her year over year. More to locational mix than it would any same macroeconomic or anything going on with the customer.
David Roberts: So bringing it back, we expect the government solution business, still the growth, the high end of mid-single digital business. I don't see that changing. I don't see anything in the new ARR that we've been able to put under contract here.
David Roberts: And then the other side is the investments that we're making to win some of these new teams. But I think if you look at GS sequentially, one thing that I'd like to point out is that we're down 50 basis points to eventually in the second quarter; that's all mixed groups. So as we see those investments ramp up year over year, we're consistent with Indonesia. And I'm going to use that as a jumping off point, I think, for the second part of your question: what is 2025?
David Roberts: And so, what I would say is that we are probably in the bottom of the trough right now in the way I would describe business from that end. We are moving our way up on the other side of that. And again, I think about this business as trajectory-based. So how should we think about it? Is it going to end this year? And, more importantly, how do we get back to that high single-digit growth rate and expanded margin opportunities toward the end of next year as well?
David Roberts: I want me, let me in.