Verra Mobility Corp

NASDAQ:VRRM

Earnings Call Transcript 2023-Q1

[Operator]

Good afternoon, ladies and gentlemen, and welcome to Verra Mobility's First Quarter 2023 Earnings Conference Call. At this time all lines are on listen-only mode. [Operator Instructions] This call is being recorded on Thursday May 4, 2023.

I would like to turn the conference over to Mark Zindler, Vice President, Investor Relations. Please go ahead.

[Mark Zindler, Vice President, Investor Relations]

Thank you. Good afternoon, and welcome to Verra Mobility's first quarter 2023 earnings call. Today, we'll be discussing the results announced in our press release issued after the market closed. With me on the call are David Roberts, Verra Mobility's Chief Executive Officer; and Craig Conti, our Chief Financial Officer. David will begin with prepared remarks, followed by Craig, 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, the benefits of our strategic acquisitions, our ability to maintain existing and acquire new customers, expectations regarding key operational metrics and other statements regarding our plans and prospects.

Forward-looking statements may often be identified with words such as we expect, we anticipate or upcoming. These statements reflect our view only as of today, March 4, 2023, 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 2022 annual report on Form 10-K which is available on the Investor Relations section of our website at ir.verramobility.com and on the SEC's website at sec.gov.

Finally, during today's call, we'll 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, which can be found on our website at ir.verramobility.com and on the SEC's website at sec.gov.

With that, I'll turn the call over to David.

[David Roberts, Chief Executive Officer]

Thank you, Mark, and thanks, everyone, for joining call today. Today's call I'll start with an overview of our excellent first quarter results and provide an update on key business drivers. I'll move on to a discussion of the industry trends that are driving our results and influencing our future views of the business. And I'll close with a recap of our strategic priorities across each of our business segments and share a summary tracking our progress.

We delivered exceptional first quarter results highlighted by strong revenue and adjusted EBITDA and solid free cash flow generation. We delivered $192 million of revenue in the first quarter, representing 13% growth over the prior year quarter. This was primarily driven by strong tolling trends and commercial services and increased recurring service revenue in government solutions. Adjusted EBITDA of $88 million for the first quarter increased 17% over the prior year, and was driven by volume based operating leverage in both commercial services and government solutions. As a note, we had a catch up entry in government solutions that benefited revenue and adjusted EBITDA by about $2 million. Craig will provide the details in his remarks.

Starting with commercial services, I'll provide an overview of the first quarter performance for each of our segments. TSA team again delivered strong performance revenue of approximately $86 million for the quarter represented a 17% increase over the same period last year. The primary factor driving this performance was increased volume. TSA throughput reach 100% of pre-pandemic 2019 volume, driving an increase in adopted rental agreements. We're also experienced strong adoption rates from renters for all inclusive tolling product offering.

I'm pleased to announce that we recently entered into a partnership with telepath for rental car tolling in Italy. This partnership effectively allows Verra Mobility to offer our toll management solutions in Italy for our rental car partners and allows for interoperability across Italy, Spain, France and Portugal by utilizing telepath has integrations with the tolling authorities in Italy and existing integrations in the other markets. While we do not anticipate current year revenue from the partnership, this is another important milestone in building our European tolling business.

Moving to our government solutions business. We generated total revenue of $86 million with $83 million being recurring service revenue. Service revenue increased 14% over the first quarter of last year, driven by the transition from product sales to recurring service revenue. Government solutions margins were about 37% in the first quarter and up about 430 basis points over the prior year quarter primarily due to increase annual recurring revenue that I mentioned. T2 systems deliver revenue of $20 million, representing growth of about 12% over the prior year quarter, and adjusted EBITDA of $3 million, all of which were directly in line with our expectations.

SaaS services and hardware sales were all in line with expectations, with the latter

benefiting from push of several sales from the fourth quarter due to customer request in installation timing. With regard to first quarter sales activity in T2 we had a strong booking for a large tier one university in the mid Atlantic region to extend their T2 solutions to include our parking access and control systems. On the municipal side, Ashland, Kentucky was a great example of a multiple solution sale that included our permits and enforcement software to T2 stations, mobile paying, license plate recognition technology and citation and collection services.

Turning to the macro perspective. I'm very pleased with the demand outlook across all of our segments. Despite market sentiment that a U.S. recession remains quite possible we have not seen any evidence and travel demand is waning. The major U.S. airlines are all reporting strong bookings through the second quarter and the outlook from our rental car partners remains strong as well. In fact, while leisure travel appears to have returned to pre-COVID levels, there is still more opportunity for business travel. According to a recent survey by Deloitte corporate travel spend in the U.S. and Europe is projected to be about 60% of 2019 levels in the first half of 2023 and rise to about 70% by the end of the year. The report projects full recovery of business travel by late 2024 or early 2025.

A second macro trend is the continued push for safer roads and communities which drives the need for investments in automated safety enforcement. The latest National Highway Traffic Safety data from earlier this year estimated just 2.2% Decrease in U.S. traffic fatalities in 2022. So there's still much work to do to address this trend. In addition, U.S. traffic volumes are increasing. According to the Federal Highway Administration U.S. travel on all roads and streets increased by 2%, which equates to 4.5 billion additional vehicle miles for February 2023 as compared with the same month last year. The need for road safety technology remains strong as evidenced by recent legislative activity in the states of Florida, Colorado and Washington, which I'll address later in my remarks.

Lastly, we provided our top three strategic priorities for each business during the our fourth quarter call. On slide 5 of our earnings overview presentation, you'll see a summary on each of these priorities. While several are ongoing and difficult to quantify on a quarterly basis, we're tracking well against each of our priorities and I'll hit a few highlights here. In commercial services, we are earnestly working toward renewing our agreement with enterprise. Regarding adjacent expansion opportunities we continue to execute well in the fleet management space with FMC revenue growing 13% over the same period last year.

We ultimately see FMC growing to a comparable growth rate with the overall commercial services business. In government solutions we're seeing positive momentum on photo enforcement legislation in several states including Florida, Colorado and Washington with the state of Washington recently signed into law. Florida is evaluating school zone speed and Colorado is looking at both expanding current programs and authorizing new photo enforcement use cases.

All of these states represent attractive opportunities for future growth and will keep the market apprised as new details emerge. In addition, the investments we're making in our software platform and related projects are tracking toward our plan about the timing and budget perspective, we expect to complete these initiatives in the second quarter of 2024 no change from our initial expectations. And finally, in T2 systems, all priorities remain on track. Our bookings in our core business are in line with our annual plan. And we expect continued growth in the municipal market in the second half of the year.

In summary, our operating results and trends are all positive, business fundamentals are durable, and our outlook has not changed and remains very positive. Craig I'll turn it over to you to guide us through the financial results in the current year outlook.

[Craig Conti, Chief Financial Officer]

Thanks, David. Good afternoon, and thanks to everyone for joining us on the call. I'll start out today by providing an overview over first quarter results followed by our 2023 financial guidance and I'll conclude with a brief discussion on capital allocation. Let's turn the slide 7 which outlines revenue and adjusted EBITDA performance for the consolidated business.

Total revenue increased approximately 13% year-over-year to about 192 million for the quarter driven by strong operating performance across the company. Excluding domestic government solutions product sales in the first quarter of last year, we grew 15% year-over-year. Reoccurring service revenue grew 15% over the prior year quarter driven by strong travel demand in the expansion of the New York City School Zone Speed program. At a segment level, commercial services revenue grew 17% year-over-year. Government solutions service revenue increased by about 14% over the prior year and T2 systems service revenue grew 10% over the first quarter of last year. Product revenue was 7 million for the quarter. About 4 million of this total was from T2 systems, while 3 million was from international product sales within government solutions.

From a total profit standpoint, consolidated adjusted EBITDA of 88 million increased by approximately 17% over last year. The core business defined as excluding onetime domestic government solutions product sales generated adjusted EBITDA of approximately 18% versus first quarter of 2022. As David mentioned in his remarks, we had a catch up entry that benefited revenue and adjusted EBITDA in the first quarter. The underlying activity was operational in nature and hence was not adjusted out of our reported revenue or adjusted EBITDA. We recognized approximately $2 million in government solutions revenue for photo enforcement contract activity for a prior period resulting from a contract amendment in the first quarter of 2023. Since the expenses associated with this program had already been accrued, the approximate $2 million of revenue flowed through in its entirety to adjusted EBITDA and income before taxes.

Moving on to slide 8, we've generated about $351 million of adjusted EBITDA on approximately $763 million of revenue on a trailing 12 month basis, representing a 46% adjusted EBITDA margin. Over the same period we've generated about 177 billion of free cash flow for a 50% conversion rate of adjusted EBITDA representing $1.13 of free cash flow per share.

Next, I'll turn the commercial services on page 9 where we delivered revenue of about 86 million in the first quarter, increasing 17% year-over-year. Rental car tolling revenue increased 18% over the same period last year driven by robust travel volume and increased product options. Additionally, our FMC business grew 13% versus Q1 of 2022 as our growth initiatives are beginning to take hold. First quarter adjusted EBITDA and commercial services was $54 million representing 15% year-over-year growth. Adjusted EBITDA margins of about 63% reflecting normal seasonality, and were down slightly compared to the first quarter of last year, due primarily to growth investments.

Let's turn to slide 10. And we'll discuss the results of the government solutions business. Driven primarily by New York City's photo enforcement expansion efforts, service revenue increased by $10 million, or 14% over the same period last year to $83 million for the quarter. With New York City schools own now fully implemented, product revenue of nearly $3 million was driven by international programs. Adjusted EBITDA was 31 million for the quarter, representing margins of 37% an increase of about 430 basis points compared to the prior year driven by the catch up entry I previously discussed the transition from product sales to annual recurring revenue, and a reduction in bad debt expense due to improvements in cash collections.

Let's start in slide 11. And we'll take a look at the results of T2 systems, which is our parking solutions business segment. Revenue of $20 million and adjusted EBITDA of approximately 3 million were in line with expectations for the quarter which included the push out of product sales in the fourth quarter due to customer requested installation timing. Software, service and hardware sales were all consistent with expectations. As we discussed last quarter, we made a number of process improvements around building and strengthening the quality of the pipeline and improving the forecasting process. And we're very pleased with the progress the business has made.

Okay, let's turn to slide 12 and take a look at reported income and leverage. We've reported net income of approximately $5 million for the quarter, including a tax provision of 8 million, representing an effective tax rate of 63%. As a reminder, our tax rate is heavily impacted by permanent differences related to mark to market adjustments for our private placement warrants. Adjusted EPS, which excludes amortization, stock based compensation and other nonrecurring items was $0.26 per share for the current quarter compared to $0.22 per share in the first quarter of 2022.

On the right hand side of the page, you can see that we ended the first quarter with a net debt balance of about 1.1 billion resulting in net leverage of 3.2 times for the first quarter. This is down from 3.8 times net leverage in Q1 of 2022. During the first quarter, we paid down approximately 65 million of term loan debt, bringing the gross debt balance at quarter and down to about 1.2 billion, of which approximately 820 million is floating rate debt. In addition, we have also paid down in incremental $10 million over floating debt during the second quarter of 2023.

In total, on a year-to-date basis, we have paid down approximately $75 million of our floating rate term loan debt as of today's call. As we discussed in our fourth quarter earnings call, we entered into an interest rate swap agreement to hedge approximately 675 million notional over a floating rate debt with a float for fixed rate swap, representing about 82% of the floating rate debt. As a reminder, the floating rate portion of our SOFR plus 325 basis point term loan B is fixed at a rate of 5.2% for three years with a monthly option to cancel beginning in December 2023 that we can execute in the event that interest rates move in our favor.

Moving on to cash. We generated approximately $45 million in cash flow from operating activities, resulting in 27 million free cash flow for the quarter.

Finally, let's turn to slide 13 and have a look at total year 2023 guidance which will remain unchanged from our discussion last quarter with our slightly elevated 1Q performance being offset by moderate investment cost increases and the back half of the year. Based on our first quarter results and our outlook for the remainder in the year we're reaffirming all of the following guidance ranges. 6% to 8% revenue growth in constant currency, margin expansion of about 50 basis points, adjusted EPS of $1 to $1.10 per share and free cash flow of $135 million to $155 million. In terms of cadence for the rest of the year, we continue to anticipate revenue and adjusted EBITDA to increase sequentially in the second and third quarters.

However, as we experienced in 2022, we expect a stronger second quarter with slower sequential growth in the third quarter due to travel demand shifting forward in the year. Consistent with historical trends, we would then expect a modest reduction reduction to revenue and adjusted EBITDA in the fourth quarter. Relative to commercial services first quarter performance TSA volume at 100% of 2019 levels and other KPIs and commercial services exceeded our expectations. In our guidance, we assume TSA throughput levels to be in the 97% to 98% range of 2019 volume for the remainder of the year. We'll be monitoring TSA volume and forward travel bookings data from the airlines but we currently continue to anticipate strong travel demand for the remainder of the year.

Our guidance also contemplates increased operating in SG&A costs in commercial services for various growth initiatives, as well as increased operating costs and government solutions for increased staffing to support the platform investments previously discussed.

Finally, based on our free cash flow estimate, which implies a conversion rate of about 40% of adjusted EBITDA we expect to reduce net leverage to approximately three times by year end 2023 which contemplates a balanced approach to debt pay down and share repurchases all in line with what we discussed last quarter.

This concludes our prepared remarks. Thank you for your time and attention today. At this time, I'd like to invite Julie to open the line for any questions. Julie, over to you.

[Operator]

Thank you. [Operator Instructions] Your first question comes from Daniel Moore from CJS Securities. Please go ahead.

[Daniel Moore, CJS Securities]

Thanks, David, Greg, for taking questions and all the color. Good afternoon. Start with the guide. Obviously very strong quarter above our expectations and I believe consensus and sounds like TSA back to pre-pandemic levels. So just maybe talk about your thoughts on holding the guide into the stage of the year versus potentially raising it. And how much of conservatism may be in there? Thanks.

[David Roberts, Chief Executive Officer]

Sure. Yes. Thanks for the question, Dan, thanks for being on the call. So as we think about this one from the revenue side, you're right, the TSA throughput came to 100% for the first quarter of 2019. In as I talked about in the prepared remarks were modeled in the high 90s for the balance of the year. We just want to see this play out for another quarter. We don't have any reason to believe it's going to be any different right now. But I want to get another quarter under our belt, I think at this level to see if we would go ahead and raise that's one piece.

I think the second piece, Dan on the revenue side is the GS business that favorable $2 million catch up that we had in the GS business was one time non-recurring. That's another thing I'd throw out there. And then if I take those revenue comments and slow them down to EBITDA and EPS, the only other thing I'd add is that we're making those investments on the CS and GS side of the house. So in CS, those are product investments about running faster in our core markets, especially in the fleet business, which as you heard was up 13% in the first quarter, and then it's continued cost, we had some delayed hiring, and some of the work that we're going to do in GS on our platform in the future. So as I add all those things up, I still think I'm in the same spot for the year. But if travel continues strong, we'd certainly relook at it and another quarter or so.

[Daniel Moore, CJS Securities]

Makes perfect sense. And then maybe one follow up related, despite the increased investment SG&A continues to tick lower as a percentage of revenue, obviously aided a little bit by that $2 million that you talked about. But is that Q1 level kind of sustainable? And what's kind of a realistic goal, if we look out over the next three to five years embedded in your long term plan? Thanks again.

[David Roberts, Chief Executive Officer]

Yes Dan. Sure. I think it was a little artificially depressed here in the first quarter. So the first thing, if we just take it down to EBITDA percent probably be the easiest way to do it. So we did get a benefit, obviously from that catch up entry. I don't know if you caught it in the prepared remarks, but that was 100% flow through we'd already accrued the cost for that back in 2022. So when you look at the margin, you're going to see a steep jump in GS, and then for the overall business. So if I think about total margins for the company, I still think we're going to accrete about half a point year-over-year. And I still think we're on that trajectory. If you look at just operating in SG&A costs as a percent of revenue, more specifically, to your question those costs, especially in the GS business, what we did see as the delay on some of the hiring on that, just due to other priorities in the business, and of course, repeated headcount, availability, and some of the skills that we're trying to hire. So I do expect that cost to go north in the second quarter and in the back half of the year, and expect it to look a lot like the total year that we discussed with you last time out.

[Daniel Moore, CJS Securities]

Make sense. Okay. We'll jump back with and follow up. Thanks.

[David Roberts, Chief Executive Officer]

Sure. Thanks, Dan.

[Operator]

Your next question comes from Faiza Alwy from Deutsche Bank. Please go ahead.

[Faiza Alwy, Deutsche Bank]

Yes. Hi. Thank you. I would love a little bit more color on the telepath partnership that you mentioned in your prepared remarks. And I think I heard you say that there's no current revenue anticipated, but give us a sense sort of dimensionalize the partnership for us a little bit? Any further color on that would be helpful.

[David Roberts, Chief Executive Officer]

Yes. I mean, this really just goes back to the original thesis of going to Europe was, hey, can we replicate the value proposition that we have for commercial fleets here in the U.S. related to access to toll roads for the most part in Europe, you're doing that in a country by country basis. The partnership with telepath, but actually, it's sort of allowing us to accelerate our access to a group of countries that I listed in my prepared remarks. And so we'll anticipate that we can hopefully, to kind of accelerate our value to those countries. Some of that is going to be, you obviously working with our customers in those countries. And then as we've spoken about the conversion to cashless will need to come alongside that to really get the full benefit of it. But telepaths is a major-major player in the toll it's probably the major player in Europe related to tolling. So we're super excited to be on the radar and have a partnership like this.

[Faiza Alwy, Deutsche Bank]

Got it. Thank you, and then you Secondly you were just talking about certain investments across both segments. I'm curious with respect to your approach, or these would you characterize these as really discretionary expenses where maybe to the extent revenue comes in better than what you're forecasting, you may end up investing more. And if it's a bit lower, you can pull back on some of the spending. So give us a sense of how you're thinking of investments this year?

[David Roberts, Chief Executive Officer]

Yes. Sure Faiza I think I know where you're going with that one. The investments that we have in the business right now, we're going to make pretty much regardless of the environment, unless, of course, we saw something extreme. So I don't know that I'm waiting on revenue. To make these investments. I think what we've seen in the GS space is just simply timing. I think, well, we have the same investment that we expected coming into the year with just the pacing of that investment is going to be weighted towards the back three quarters versus the first quarter. When I think about on the CS side, this is after we've seen the efficacy of the early efforts that we've done and this is primarily in the fleet business and rounding out some additional tools that will help us capture the small and mid market players in the space as well as putting in the right commercial talent. As we've seen the early efficacy of those, we're doubling down on those efforts for future growth.

[Faiza Alwy, Deutsche Bank]

Understood, thank you.

[Operator]

Your next question comes from James Faucette from Morgan Stanley. Please go ahead.

[Unidentified Analyst]

Hey, guys, this is Jeff [indiscernible] on for James. I wanted to touch on the legislative opportunities, and maybe just touching on Washington, specifically where you said it was recently signed into law there. So how should we think about the timing of you getting on the ground and potentially seeing a financial impact from that? And then maybe also talk us through the potential timing around recent events in Florida and Colorado as well?

[Speaker]

Yes, I mean, Washington, basically becomes another state that has all three use cases related for speed red light as well, as we've been working Washington for some time, now they have all three. So that would actually be I would anticipate time to revenue, they're shorter mean, we could probably, depending on RFP timing and things like that, that'd be this year type of thing in terms of pipeline. Relative to places like Porto, while there's been really, really positive activity, it hasn't been signed yet. So we'll wait obviously, until that's finalized. Those things typically take a few months relative to making sure that all the Is are dotted, so to speak both legislatively as well, in terms of policy, in terms of how they roll it out. So I would anticipate discussions with customers this year, I would anticipate revenue for those next year.

[Unidentified Analyst]

Got it. Okay. And then can you talk about the shift to the all inclusive fee structure within commercial? What are you doing there? How many customers on that type of fee structure? Or what type of lift do you see to revenue when you get customers on that platform? Maybe just talk us through that.

[David Roberts, Chief Executive Officer]

Yes. First of all, this is our, it's a program that we've developed on behalf of customers and for the market. It's just a really favorable customer experience, because it allows you to predetermine your usage of tolls as well as to have that on your bill when you turn in your vehicle. So from that standpoint, traditionally had always been a product that was mostly at the sort of off airport type brands. But now, many of our customers are bringing that online to their airport brands or the mainline brands. And so overall, it's a much better experience for customers or the renters, and therefore our customers are really pleased with that as well. So we would anticipate further penetration that as more toll roads open and more brands decide to adopt it.

[Unidentified Analyst]

That's helpful. Thank you.

[Operator]

Your next question comes from Keith Housum from Northcoast Research. Please go ahead.

[Keith Housum, Northcoast Research Partners]

Good afternoon, guys. Just elaborating further on the prior question. [indiscernible] emember the past discussions regarding the all inclusive pricing that perhaps will have a negative impact on margins. Can you perhaps talk a little bit about the development of that product further and do you still expect to see that upon adoption?

[David Roberts, Chief Executive Officer]

I'm not sure where the negative impact on margin came from Keith.

[Keith Housum, Northcoast Research Partners]

Okay. Okay. Maybe. [indiscernible].

[David Roberts, Chief Executive Officer]

Yes, no, it's a overall, it's a great product for customers as well as for us. The adoption is being increased because our customers are being seeing how it works well in different regions. And so they're rolling it out more. Again it's really at their discretion, not ours.

[Keith Housum, Northcoast Research Partners]

Got you. Okay. Appreciate that. Craig a little bit more on the guidance. I can appreciate the wanting to be a little bit more conservative. But can you give us a little bit idea perhaps if the [indiscernible] would come in at 100% of TSA travel versus the [indiscernible]. What's the incremental difference in terms of revenue for CS?

[Craig Conti, Chief Financial Officer]

I think it's hard to equate those two. I hate to go to 1% gets us this Keith as I think you well know. And it's not quite that prescriptive. But if I took it forward, and I said, let's say I see the tolling and violations performance in the first quarter that I saw on the balance of the year. Now in our original plan original guidance, we assumed a little lower than 97 to 98 for the first quarter. So I don't think you'd quite be able to see what you saw for the first quarter bring it through to the back half. But it would be $5 million, approaching $10 million, potentially, if it were at that 100%. And I think what's important about that assumes that it's at the exact same mix that we saw, and there's kind of nothing else going on in the portfolio that moves the other way. So it's not enough to bring it up, I would say a factor of 10s of millions of dollars, but to the degree that we stay at exactly 100%, which, by the way, Keith that is where we closed the quarter. So from 1 to 331, that TSA throughput was exactly 100%. As I drag that forward to the end of April, it's still at exactly that 100%. So if we were to stay at exactly that level, we could potentially see some sort of upside of commercial service business.

[Keith Housum, Northcoast Research Partners]

Great. Thank you. Appreciate it.

[Craig Conti, Chief Financial Officer]

Sure.

[Operator]

[Operator Instructions] Your next question comes from Louie Dipalma from William Blair. Please go ahead.

[Louie Dipalma, William Blair]

David, Craig and Mark, good afternoon.

[David Roberts, Chief Executive Officer]

Good afternoon.

[Louie Dipalma, William Blair]

Was the impact from the New York City speed camera program shift from 16 hours to 24 hours? Was that in line with the prior expectations that you set?

[Craig Conti, Chief Financial Officer]

It is. So if you go back and think about total New York City revenue, and we said that be down, somewhere around $5 million to $10 million total year-on-year, the way it looks today, that's still when I see today. So and the reason that is down year-over-year Louie was because we have the difference of having product sales in 2022 is that shifted to ARR here in 2023, the timing of those things, which was offset partially by the 24/7 which went into place at the tail end of last year. So that's a slightly longer answer to your simple question. Yes, it is in and yes, it is as expected.

[Louie Dipalma, William Blair]

Great. Thanks, Craig. And, in general, were speed camera net ads during the quarter strong, even though that New York City contract has completed?

[David Roberts, Chief Executive Officer]

I mean are you just requesting outside of New York you mean?

[Louie Dipalma, William Blair]

Yes.

[David Roberts, Chief Executive Officer]

Yes. I mean, I think everything was in line with plan.

[Louie Dipalma, William Blair]

Great. And another one, switching to the commercial division. There's been a lot of initiatives for the different racks to onboard electric vehicles. Has that served as a benefit for your onboarding and title and registration businesses?

[David Roberts, Chief Executive Officer]

It does and as much as the fact that they're electric doesn't matter as much as if they're in board. They're sort of inflating new vehicles which does impact our ability for both from a title violations perspective and from a title and registration perspective. So yes, anytime they're adding vehicles, that's good for us.

[Louie Dipalma, William Blair]

Great. That's it for me. Thanks, everyone.

[David Roberts, Chief Executive Officer]

Thanks, Louie.

[Operator]

There are no further questions at this time. This concludes today's conference call. You may now disconnect. Thank you.