Verra Mobility Corp

NASDAQ:VRRM

Earnings Call Transcript 2019-Q2

[Operator]

Greetings and welcome to the Verra Mobility Second Quarter 2019 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Marc Griffin, Investor Relations. Please go ahead.

[Marc Griffin]

Thank you. Good afternoon and welcome to Verra Mobility's Second Quarter 2019 Earnings Call. Today, we'll be discussing the results announced in our press release issued after the market closed. With me on the call this afternoon is David Roberts, Verra Mobility's Chief Executive Officer; and Tricia Chiodo, Chief Financial Officer of Verra Mobility. They will begin with prepared remarks, and then we'll open up the call for Q&A.

During the call, we will make statements related to our business that may be considered forward-looking, including statements concerning our financial guidance for the full year of 2019, our plans to execute on our growth strategy, our ability to maintain existing and acquire new customers and other statements regarding our plans and prospects. Forward-looking statements may be identified with words such as we expect, we believe, we anticipate or upcoming. These statements reflect our views only as of today and should not be considered our views as of any subsequent date. We undertake no obligation to update or revise these forward-looking statements.

Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our annual report on Form 10-KA as filed with the SEC, all of which are available on the Investor Relations section of our website at ir.verramobility.com and on the SEC's website at sec.gov.

Finally, during the course of today's call, we'll refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release issued after the close of market today, which is located again on our website at ir.verramobility.com and on the SEC's website at sec.gov.

With that, let me turn the call over to David.

[David Roberts, executive]

Thank you, Marc, and thank you to everyone for joining us on the call today. Verra Mobility reported another strong quarter with Q2 exceeding expectations across all key operating metrics. The macro drivers of our business such as the increase in toll roads and the transition to cashless tolling continue to provide a powerful tailwind that supports the momentum of our business. Ongoing increases in rental car billable days alongside increases in tolling usage are driving our Commercial Services segment, while the expansion of speed enforcement in New York City is driving our Government Solutions segment. The strength of our core business as well as some of our longer-term smart city innovation initiatives give us confidence in our ability to maintain momentum for the remainder of fiscal 2019 and support our vision as a global leader in smart transportation.

As Tricia will discuss in detail later during this call, our second quarter revenue grew 12% year-over-year to $109.6 million, and our adjusted EBITDA came in at $59.7 million, up 9% year-over-year.

Our Commercial Services segment comprises our toll management to rental car companies and fleet management companies in North America, which generated 62% of revenue in the quarter. During the second quarter, the Commercial Services segment grew revenues 14% year-over-year to $68.1 million and reported adjusted EBITDA of $44.1 million, up 11% year-over-year. The momentum in the quarter was driven by our continued collaboration with our customers to enhance penetration and adoption of tolling programs through both product and operational innovations. Additionally, there has been a positive increase in overall toll activity and usage, which is providing a nice tailwind to our commercial business.

Over the past few quarters, we have made tremendous headway in creating the operationalization of our European product. After creating a subsidiary in the Netherlands, we continue to expand our operations with a new country manager for France. We have signed a contract with a major French tolling authority, APRR, which will allow us to process tolls for our rental car customers with additional processing eventually in Spain and Portugal. Furthermore, we are actively engaged with several rental car companies and large fleets on creating programs. As a part of the development process, we redesigned our shield box to better fit with the design of European vehicles. While we have not started any full-fledged pilot programs yet, we expect those to begin during Q4. We are very pleased with the progress we have made to this point and expect to have more traction in the back half of the year.

We remain very excited about the opportunities for our Commercial segment. With strong macro drivers of increases in both the number of toll roads in North America and the ongoing conversion to cashless lanes, we remain confident in our ability to maintain the momentum for the balance of the year.

Our Government Solutions segment constitutes photo enforcement in North America, including red light speed and school bus cameras, and comprised 38% of revenue for the quarter. During the quarter, the Government Solutions segment grew revenues 8% year-over-year to $41.5 million and reported adjusted EBITDA of $15.6 million, up 6% year-over-year. Growth in the Government Solutions segment this quarter was primarily driven by hardware sales offsetting a small decline in service revenue due to the elimination of the red light camera programs in the state of Texas.

As stated during our last earnings call, New York State passed legislation that will increase the number of school zone speed enforcement areas to 750 from 150 in New York City, which Governor Cuomo signed into law on May 12. We are very excited for the opportunity to expand an important safety program, which we have been an integral part of for over 10 years.

Additionally, Mayor Bill de Blasio has asked for a rollout of about 40 cameras per month through the end of the year, and we are aggressively executing on that plan. We have an order on hand for 300 cameras and continue to work with our counterparts at the New York City Department of Transportation on the rollout schedule.

We maintained our consistently high renewal rates again in Q2. During the quarter, we renewed key customer programs in Arlington, Virginia; Decatur, Georgia; Lake Forest, Washington; and Green Cove Springs and New Port Richey, Florida, to name a few. Additionally, we were awarded new contracts in Issaquah, Washington; Renton, Washington; Clayton County, Georgia; and the Philadelphia Parking Authority. We're also currently negotiating contracts for multiple school zone speed programs in Georgia as a follow-on to the enabling legislation that was signed into law last year. Overall, we continue to execute on our strategic initiatives for 2019 and are very pleased with our traction during the second quarter.

Peasy, our nationwide pay-as-you-go consumer mobility platform, continues to gain subscribers as we work through pricing optimization strategies and expand our relationships. Given the slower-than-anticipated adoption, we have pursued complementary go-to-market strategies, which we believe our platform could play a strategic role behind the scenes by extracting value from all of our unique tolling data. As an example, we signed an agreement with a leading rideshare company during the quarter for a toll data service relationship.

We continue to remain diligent in our M&A process and have included a slide in our investor presentation. This slide highlights our acquisition parameters. We believe we have a solid pipeline of quality companies that can accelerate our leadership in the smart mobility solution space, and we are focused on adjacent areas which allow us to better serve our customers while expanding and solidifying our global scale.

Finally, I wanted to touch briefly on congestion pricing. As many of you know, the Metropolitan Transit Authority has issued a request for proposal and expect to launch a congestion pricing program in New York City in January 2021. After a thorough review of the RFP requirements, we have decided not to bid, allowing us to focus our attention and resources exclusively on implementing the expansion of the city school speed safety camera program. While we were certainly excited about the opportunity that the congestion pricing RFP offered, especially since it was aligned with our unique product portfolio and understanding of the customer, that said, we ultimately decided that the challenges associated with the timing of the opportunity outweigh the benefits of submitting a proposal. Our main priority in New York City must remain executing the school speed expansion and continuing to manage the city's red light and bus lane camera programs. We continue to be optimistic about the role we could play in the future congestion pricing bids in other regions of the country, and we'll monitor New York City's congestion pricing program and consider opportunities to partner with the program's vendor once selected.

In summary, we are very pleased with our second quarter results and continue to execute on our initiatives, which will drive a strong 2019.

With that, let me hand it over to Tricia to walk through our financials in more detail.

[Patricia Chiodo, executive]

Thanks, David, and good afternoon, everyone. I'll provide a more detailed overview of the second quarter 2019 financial performance, and then we'll open up the call for your questions. We've provided a short earnings deck on our website that has reconciliation from GAAP to the non-GAAP results we'll be discussing today. If you're following along on that earnings deck, I'm on Slide 3, which outlines revenue and adjusted EBITDA performance by business segment.

Let's start with our Commercial Services segment, which delivers tolling violation processing, title and registration services to rental car companies and fleet management companies in the U.S. and processes violations in Europe. Their total revenue grew 14% to $61.8 million (sic) [ $68.1 million ] in the second quarter of 2019, up from $59.8 million in the same quarter of the prior year. In the current quarter, we saw increasing numbers of billable days across our 3 largest rental car companies and higher levels of tolling activity across our entire product portfolio. We expect demand for tolling products to continue to be strong in the back half of the year. As you look forward for this business segment, keep in mind that Q3 of last year is a difficult comp, and the year-over-year growth rate for that quarter may be lower.

Adjusted EBITDA of $44.1 million in the second quarter of 2019 grew $4.4 million or 11% year-over-year from $39.7 million in Q2 of 2018. Our strong EBITDA performance is driven by continued revenue growth combined with the impact of well-executed integrated -- integration synergies.

Adjusted EBITDA margin for Commercial Services continues to be strong at 65%, topping the 61% in the first quarter of this year. Our strong margin performance is net of the investments we're making to accelerate our expansion in direct tolling in Europe and to serve the consumer market in the U.S.

Moving to our Government Solutions segment, which operates photo enforcement programs for municipalities and school districts with an end-to-end solution. Their total revenue was $41.5 million in the second quarter and grew 8% year-over-year from $38.4 million in the second quarter of 2018. Now total revenue was comprised of service revenue, that's the monthly fee we generate from the operation of photo enforcement programs; and product revenue, which results from selling and installing camera systems. Service revenue for the quarter was $35 million, declining $2.3 million from $37.3 million for the same period of the prior year. Now $1.1 million of the decline resulted from a decision we made to exit our Street Light Maintenance business in April of this year. This business was noncore and not profitable.

Our red light programs declined $2.2 million from the same quarter in 2018. This was driven by the loss of cameras in Texas, lower prices upon renewals and reduced transaction volume on variable contracts. If you recall, Texas banned the red light photo enforcement earlier in the quarter resulting in the expected reduction of revenue of $11 million annually. The ban went into effect on June 1 of this year and will impact year-over-year growth rates for the next 4 quarters. These declines were offset by growth in speed and bus lane revenue, which have long runways of growth opportunities with the expansion of the New York City programs and new TAM in Georgia.

Product revenue of $6.5 million for the quarter was up from $1.2 million from the same period last year. This increase was primarily driven by installing 59 school zone speed cameras for the New York -- for New York City. As David mentioned, we currently have an order to install 300 camera systems, so you can expect continued growth and product revenue in future quarters.

In Q2 2019, adjusted EBITDA of $15.6 million increased approximately $900,000 or 6% from $14.7 million in the same period in the prior year. Adjusted EBITDA margins for this business segment were 38%. The large increase in product revenue sales is benefiting both the top and the bottom line of this business segment.

Turning to the next slide. We have our consolidated results for the quarter. The combined results for the business segment we just discussed generated total revenue of $109.6 million for the second quarter and grew $11.4 million or 12% from $98.2 million for the same period of 2018.

Adjusted EBITDA of $59.7 million increased by $5.1 million or 9% from the $54.6 million in the prior year. Second quarter adjusted EBITDA margins remained strong at 54.5%, improved from 52% margin reported in the first quarter of this year.

The company reported net income of $3.6 million in the quarter compared to a net loss of $4.8 million in the same period in the prior year. The net loss in the second quarter of 2018 was largely attributable to transaction expenses that did not recur in 2019.

In the current quarter, the company took a $5.9 million impairment charge associated with the loss of Texas red light program. The impairment relates to assets that were operating in Texas and cannot be repurposed to other clients.

EPS for the current quarter was $0.02 per share compared to a net loss of $0.07 per share in the same quarter of 2018.

Tax expense for the quarter was $1.7 million, representing an effective tax rate of 32.6%. The effective tax rate increase was primarily due to higher nondeductible executive compensation and our requirement to reflect certain deductions when they incur, including deductions for equity compensation and the reversal of uncertain tax positions, which will benefit future periods. We expect our normalized tax rate to be 26% to 28% for the full year.

The company generated $45.8 million in cash flow from operations during the 6 months ended June 2019 compared to generating $12.5 million for the same period in the prior year. The improvement is directly correlated to improved net income.

We spent $14.2 million on CapEx in 2019 year-to-date period compared to $11.1 million in the prior year.

Free cash flow, which we define as cash flow from operations less CapEx, was $31.6 million for the first half of 2019. Cash flow for the second quarter was impacted by higher estimated tax payments and increased accounts receivable balances, which we anticipate will improve in the back half of the year.

As of June 30, we had total debt of $899 million and cash on hand of $92 million for a net debt position of $807 million, bringing our leverage ratio to 3.7x trailing 12-month adjusted EBITDA of $220 million.

In summary, we continue to execute well, delivering a strong top and bottom line results and believe that Verra Mobility remains well positioned to maintain the momentum and operating discipline throughout 2019. Based on our performance in the first half of the year and our outlook for the remainder of 2019, we're raising our revenue guidance to the range of $433 million to $441 million. This is a $5 million improvement over our original guidance. Our guidance for adjusted EBITDA is unchanged in the range of $235 million to $240 million. We anticipate stronger product revenue as we continue school zone speed expansion but more muted service revenue with the loss of Texas red light programs and minimal contributions from Peasy and European RAC tolling program.

You can derive from our guidance that our margins will be slightly lower than expected, moving from 55% to 54.3% at the midpoint of our guidance range. And there's a couple of reasons why. We made the decision not to cut costs for Government Solutions segment with immediate loss of Texas revenue, understanding that the school zone speed revenue will be ramping up over the back half of the year. This decision will put short-term pressure on margin but ensures quality of product delivery and service to our clients. We'll also continue to invest in Peasy and Europe RAC tolling, although we don't anticipate meaningful revenue from either product in 2019.

Thank you for taking the time to join us on the call today, and with that, we would be happy to take your questions now.

[Operator]

[Operator Instructions] The first question is from Jim Schneider of Goldman Sachs.

[James Schneider, analyst]

Congratulations on those strong results. I was wondering if you can maybe give us a little bit of a sense, after you get the 300 cameras installed in New York City, what you kind of expect the run rate or annualized recurring revenue to be from that program.

[Patricia Chiodo, executive]

Sure. So if you think about just that 300 camera base, our average across our speed portfolio of service revenue is right about $3,800 per month. So if you take that times 12 and then multiply it by the 300 cameras, your go-forward run rate revenue from that first installation should be about $13.7 million.

[James Schneider, analyst]

Revenue run rate for -- on an annualized basis, right? Okay. That's helpful. And then maybe one for David. On the M&A front, I was wondering if you can maybe give us a little bit of color as we go forward, your updated thoughts on where you might see kind of attractive opportunities for M&A and kind of at what point you might see the earliest opportunity to actually take advantage of that and how -- kind of how you feel about the capital structure and where you'd like to get down to before you initiate something like that.

[David Roberts, executive]

So the final question being, I think, a leverage question, so I'll land on leverage. So I think that per our call, I said we hired a new head of M&A, Mike McMillin, he's been doing a great job. We put into the investor deck just some framing perspective of how we're going to think about M&A so that investors and analysts can get a view as to how we're thinking about deploying capital.

What I would say is that relative to timing, we are looking for things that help us accelerate our growth strategy. That would include what can we do in Europe to make it go faster in Europe because we're very committed to Europe and know that over the long haul, that's a really great opportunity for us. So businesses that have unique capabilities in Europe like EPC would be things that are interesting to us. In addition, we would look at things that are diversifying. So if you look inside of the United States, in our Government Solutions business, we have 200 customers that we principally sell 1 product to because we have only provided previously photo enforcement. That being said, we have great relationships with a lot of these major cities. And as they look to smart city initiatives, we could -- we are a de facto partner that could be working with them. So things that might diversify our products to those customers would be another category.

What I would say in a sense of timing is that the pipeline is very full. But at the same time, valuations are also quite full so we continue to look broadly. But I would think that once -- I think that within the next 6 months, you'll definitely hear some things from us related to M&A.

And then finally, if you think about capital, we generate a fair amount of cash, as you can see, even in the quarter. I would say that we are very comfortable we're going to be at a -- our leverage is estimated at the end of the year to be -- what?

[Patricia Chiodo, executive]

Well, we anticipate that we delever very quickly. You can see the step function and how we're delevering as we progress about each quarter. Our cash flow generation and conversion could take us to leverage ratios that are right about 3.2x by the end of the year.

[David Roberts, executive]

Yes. And so I think that we're comfortable up in the 4 range. So we're pretty comfortable with that for the time being. At least for now, the opportunity to grow through M&A is more attractive than sort of restructuring the capital structure of the business.

[Operator]

The next question is from Ashish Sabadra of Deutsche Bank.

[Alexis-Marion Phili, analyst]

This is Alexis on for Ashish. Congrats on the quarter. So I just wanted to talk about the update on the progress for the European opportunity. And can you just clarify the timing of the program and when you expect to plan to roll out to Spain and Portugal? And also if you've announced any partnerships with European RACs or if there has been any discussion with the ones in the States.

[David Roberts, executive]

Yes. So the timing is -- for the note that we just shared is that we're anticipating a pilot to launch sometime in Q4. We're -- I think from our last call, we've been pretty slightly behind our plan but recognizing that building something from scratch that we do so in the U.S. is going to take some time and operating in Europe is clearly more complex. That being said, we did sign an agreement with APRR, which gives us the ability to do tolling in France. We have gotten our shield box approved, which sounds like a small deal but it's actually a really big deal, which is where the transponder goes inside of a rental car vehicle. And we are in active discussions with multiple RAC customers that would include the customers that we serve here but also additional rental car companies and large fleets, remembering that there's fleet management companies in Europe just as well that are interested in our program. So we anticipate a more robust update in Q3 or certainly Q4 related to who those are and clearly when we are actually moving forward. I suspect we would announce that separately.

[Alexis-Marion Phili, analyst]

Great. And then one more on the -- so the demand for the school zone safety cameras, and any color on opportunities in other cities that may follow? Basically, just what the addressable market looks like. And if you can just comment on your moat around the business that you have in the government space.

[David Roberts, executive]

Yes. So right now, the moat, I would think, is a couple of things. One is market share. We have greater than 50% market share in North America for photo enforcement. Number two is if you look at large cities, so the larger cities in the country, we are sort of the gold standard if you look at the New Yorks and Chicagos and Seattles and San Franciscos of the world, that we have a great reputation with our customers, and I think that's one of our moats alongside the efficacy of our -- both the programs that we implement and the technology that we deploy.

In terms of TAM, we did -- as we mentioned earlier in the call that we did open up the state of Georgia 1.5 years ago now for school zone speed, and that was approximately a $50 million TAM. We are turning our sights now to other states, which have yet to be identified in terms of that opportunity. I would say that school zone speed is a very -- you can't see the air quotes but I'm putting air quotes -- popular program because it's -- while certainly people have disagreements about the use of photo enforcement, it's hard to argue that people should be speeding in school zones, and photo enforcement is a very, very proven method by which to change that behavior. So we anticipate continued growth in speed for several years to come.

[Patricia Chiodo, executive]

And I would add to that, David. We talk about our New York expansion opportunity and the 300 camera order that we have in hand. But that program in and of itself has a long runway just on its own. They -- the legislation allows them to move into an additional 600 school zones, of which we put 2 cameras in every zone. So there's a long runway just in New York itself.

[Operator]

The next question is from Daniel Moore of CJS Securities.

[Dan Moore, analyst]

Sorry to review, but I just want to make sure I get the numbers right. 59 cameras in Q2, 40 a month for the rest of the year is what we're thinking about for New York?

[Patricia Chiodo, executive]

Yes, except don't think about installation in December. So December -- yes, New York City generally won't let us to be on the street in December. So if you sort of do that quick math, you're talking about an additional 200 cameras in the back half of the year.

[Dan Moore, analyst]

Very helpful. And maybe talk about -- is that expansion driving or leading to accelerated conversations in other metros on that side of the business?

[David Roberts, executive]

Yes. I think there's always a trickle effect. So when New York was the first to -- and Dan, make sure I'm answering question, but when New York adopted Vision Zero 5 or 6 years ago, I think now, that was -- they were the first, and then other cities like Seattle and San Francisco took that on. So I think that as you think about companies -- or rather cities transitioning to smart cities and looking for ways to improve safety as well as finding self-funding mechanisms that photo enforcement, and especially purpose-built inside of schools, is going to be something that you will start to see it. And I think we saw the first sort of echo of that when the state of Georgia opened up legislation enabling the state there.

[Dan Moore, analyst]

Helpful. And Trish, any directional at least ability to sort of break out EBITDA margins within Government Solutions between product sales and services?

[Patricia Chiodo, executive]

You can actually derive it from our financial statements because we do provide a product sales line and a cost of product sales line. And you figure that the majority of our OpEx and SG&A is related to the service side of the business. So that's the easiest way to get to it. I can just tell you they are healthy.

[Dan Moore, analyst]

On both sides, absolutely. This is a speculation question, but based on what you know about the New York City RFP for congestion pricing, what's your sense of the likelihood that it gets modified? I know you're not going to participate as it's written today, but any thoughts there?

[David Roberts, executive]

Yes, not really only because it's pure -- I would just say that, look, congestion pricing is not common. It's -- there's only so many cities that actually have it around the globe, and New York is a big, big complex city. I suspect as they -- after this -- I think they're going to be selecting a partner here in the next 2 to 3 weeks, if I'm not mistaken. I'm assuming that they'll have to come to some terms as a part of the RFP process to modify to make some things a little bit easier. But New York City has some very clear demands that they're looking to extract, and I'm assuming these partners are willing to sign up for it. So it will be a little bit of let's see what happens.

[Dan Moore, analyst]

Understood. Lastly for me, a tag-on to the M&A question. Just as you think about both internal and growth via M&A, areas of opportunity, any specific examples as you're -- related to the long-term smart city initiative? What are some of the other types of services that you can envision providing? And are there companies out there that you're actually looking to buy in the next 6 to 12 months?

[David Roberts, executive]

Let the record show that I'm not committing to any of the following, but I'll give you some examples, Dan, to help you out. So there's 2 categories -- or maybe 3 categories that are probably pretty interesting to us. Actually, maybe 4. One is we do have a title and registration business that we really like and we think that in the future could be a unique position, as we've always said. All the -- whether it's autonomous connected or normal or electric or what have you, it still needs a title and a tag, and that's something that we do and we do quite well and there's probably a future there.

As we think about smart cities, though, there's a couple of areas that we are kind of interested in. We like the parking space. We like congestion pricing despite the decision to no bid. That was just a focus and a delivering for our customer decision as much as anything. And congestion pricing entails a lot of other things like sensor technology as well as traffic management. So all of those kind of come together as what I would call very broad categories that we're looking at and looking at them both in the U.S. and abroad.

[Dan Moore, analyst]

Helpful. Congrats on the progress in the quarter. Appreciate it.

[Operator]

The next question is from Dave Koning of Robert W. Baird & Co.

[David Koning, analyst]

I guess, first of all, you made a comment about how Q3 of last year presents a little bit of a tough comp. And I'm just wondering, in the -- that's in the Commercial Services business. And I'm wondering, what's the normal cadence sequentially of the year. Last year, obviously, Q3 was so much stronger. Is there a summer driving season that we should still normally see a pretty nice sequential pickup in Q3?

[Patricia Chiodo, executive]

Yes. You should see a nice sequential pickup in Q3. But I think last year, as we moved from Q2 to Q3, that pickup was $12 million. And there were some reasons for that. There were some delays in tolls from the Florida -- from FDOT, the Florida Tolling Administration, that moved revenue from Q2 to Q3. We can't recognize the revenue unless we receive the toll file, and they just stopped sending toll files. So you're going to see that there's still -- there should still be a sequential bump as we go into Q3, but it's not going to be $12 million, which it was last time. So as you -- you're going to see the same levels, but sort of that muted bell curve is going to run over the top.

[David Koning, analyst]

Okay. Okay. Great. And secondly, margins in Government sequentially were up, which, to me, seemed pretty encouraging given you added all the product revenue that you didn't really have in Q1. You added it sequentially. That should come on at, I would think, a lower margin. So for the rest of the year, can margins stay reasonably high even with all that product revenue?

[Patricia Chiodo, executive]

Yes, they can. So our product revenue is actually for the first -- for this quarter came in at really nice margins and obviously higher than the business segment as a whole. But we also installed the fastest and easiest cameras that we could in that quarter using existing poles where we could. You might -- what you might see is that I think those product margins are going to remain above the average for the business segment throughout the rest of the year. So I think that's probably a good assumption, Dave.

[David Koning, analyst]

And I just -- if I can sneak one quick one in. EPC, we don't get to see the revenue. It's not in your press release just given you anniversaried it. But I think in the year-ago, it was $2.4 million. Is that growing still like 40%, 50% year-over-year in Q2?

[Patricia Chiodo, executive]

For EPC? No. EPC hasn't been growing at that pace.

[David Roberts, executive]

It was never growing at that pace. Yes, the...

[Patricia Chiodo, executive]

Oh, I think what you're talking about...

[David Koning, analyst]

I'm thinking of Europe. I messed up.

[Patricia Chiodo, executive]

No. I think you're -- if you're looking at what our Q1 financial results were, I think that we had a huge bump in growth in Q1 for title and registration. And it normalized for Q2, which is what we also said there. So title and registration in Q1 was like 48% up quarter-over-quarter. That was really timing. We expect that to be sort of a run rate basis of closer to 10%. So I think that might be what you're thinking about from our Q.

[David Koning, analyst]

Yes, I think that's right. Yes. No, I appreciate it.

[Operator]

The next question is from Louie Dipalma of William Blair.

[Rohan Piska, analyst]

This is Rohan Piska on behalf of Louie. Congrats on the solid quarter. In regards to the HTA acquisition closed last March, we were under the impression that you recently still are operating separate tolling networks for American Traffic Solutions and HTA. At the end of the second quarter, have all of the revenue and cost synergies been fully achieved?

[Patricia Chiodo, executive]

I -- so as far as closing -- as far as the tolling system, we are -- we do have different computer systems serving each of our 3 largest customers that are on there just because they are our 3 largest customers and we want to make sure that we -- that they're stable and it doesn't change their integration. That, we never intended to change, so if you're talking about systems. But the majority of our back-office integration as well as our revenue synergies would have been achieved. We started rolling those out probably this time last year, so we've crossed over the majority of them.

[Operator]

The next question is from Chris Sinnott of Cowen.

[Christopher Sinnott, analyst]

I'd like to go back to the New York City congestion pricing issue, if we could. If you could just help me understand whether this decision was purely about the timing constraints that were imposed or if there were other technological or logistical issues presented that would have still been issues regardless of the time to implement.

[David Roberts, executive]

Yes. It's a fair question. I think the reality is it will be, by all accounts, the largest congestion pricing scheme in the world in one of the most unique cities in North America to be sure. And all of that -- getting that started from scratch with the addition of a short time frame only increases the complexity. So there's definitely complexity with installing cameras in New York City, integrating with Peasy. There's a lot of work to be done, but the time frame certainly made it challenging. And based upon the RFP, the city is very, very serious about that time frame and being ready to go in January 2020.

[Christopher Sinnott, analyst]

Got it. That's helpful. If I could throw one more in there on Peasy. You had mentioned signing up with this rideshare partner. Does this imply that really getting Peasy to scale is going to involve potentially some more similar type of corporate partnerships and things of that nature that they're going to really get this to grow rather than just the app itself on its own? Or should we look to see more of these type of things signed up?

[David Roberts, executive]

That's exactly right. And that was actually always the original thesis was the -- we have the capability to offer direct-to-consumer model and we wanted to build that brand, but at the same time, we knew that we often fit better behind the scenes than we do out in front and then offering our data and our platform to others that might want to leverage their customers. So what we did with GasBuddy earlier in the year as an example, where distributing the technology through others is probably a better way to go and leveraging the platform, the data that we have, and looking for ancillary revenue was exactly what we did with the rideshare company. So whether it's the GasBuddy or whether it was with Arrive, which is the parking company that we did a partnership with, all of those are looking for accelerated ways to distribution versus a direct-to-consumer model.

[Operator]

The next question is a follow-up from Daniel Moore of CJS Securities.

[Dan Moore, analyst]

Just a quick one on cash generation. I'm wondering if the uptick in product revenue had any impact on receivables. Is there any meaningful delta in collection terms between product sales and service revenue?

[Patricia Chiodo, executive]

Yes. There shouldn't be a meaningful difference, but it definitely had an impact. The -- and the invoice that we sent out for, I think, all 59 of the installations for New York went out on June 3. So that's a part of the uptick in our receivables that's there, but it shouldn't slow the collection cycle. We generally get paid within 30 to 45 days, or we should, from New York City, so I'm not expecting that to be a longer cycle.

[Operator]

There are no further questions at this time. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.