Verra Mobility Corp

NASDAQ:VRRM

Earnings Call Transcript 2020-Q2

[Operator]

Good day, everyone, and welcome to the Verra Mobility Second Quarter 2020 Financial Results Conference Call. Today's conference is being recorded.

I'd like to now turn the conference to Marc Griffin. Please go ahead, sir.

[Marc Griffin]

Thank you. Good afternoon, and welcome to Verra Mobility's Second Quarter 2020 Earnings Call. Today, we'll be discussing the results announced in our press release issued after the market close. With me on the call this afternoon is David Roberts, Verra Mobility's Chief Executive Officer; and Tricia Chiodo, Chief Financial Officer. We'll begin with some prepared remarks, 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 plans to execute on our growth strategy, our ability to maintain existing and acquiring new customers, and other statements regarding our plans and prospects. Forward-looking statements may often be identified with words such as we expect, we anticipate, or upcoming. These statements reflect our view only as of today and should not be considered our view 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 form on Form 10-K, quarterly report on Form 10-Q, 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 refer to certain non-GAAP financial measures. Reconciliation of GAAP to non-GAAP measures is included in our press release issued after the close 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. As you are all aware, the situation with the COVID-19 pandemic remains fluid, and we will continue to do our best to remain thoughtful and transparent in sharing as much as we can about what we are seeing in our business. The challenges presented by the COVID-19 pandemic during the quarter were unprecedented in terms of overall effect on the economy and to our portfolio of businesses specifically. While we were most certainly impacted by the pandemic, our business and employees remain healthy, and the strength of our core business and our longer-term growth initiatives give us confidence about our future as a global leader in smart transportation.

We are pleased with our execution in the second quarter as results came in above our internal expectations based on slightly higher tolling activity and better-than-expected execution on the New York City school zone speed camera installations. Second quarter revenue came in at $79.8 million, a decline of 27% year-over-year, and our adjusted EBITDA came in at $27.6 million, a decline of 54% year-over-year.

As a reminder, when widespread closures, travel bans and shelter-in-place orders first started, we acted quickly and decisively to prepare our business for the ensuing challenges these orders would have on our business. Those measures that we took included the elimination of discretionary spending and nonessential corporate travel and a hiring freeze on all nonessential positions; the elimination of all discretionary capital expenditures. For Q2, we instituted pay cuts for many of our executives, as well as cash compensation for our Board. Finally, we furloughed approximately 30% of our employees for 90 days. After the 90-day period, the majority of the furloughed employees were formally laid off. These employees' workflows were highly correlated to volumes from our customers, which we believe will take time to recover as domestic and international travel continues to ramp back up.

On the positive side, while our business is facing extreme challenges, like most of the global economy, we continue to believe we've built a highly resilient business that has incredible upside. Additionally, I would like to highlight that we ended the quarter with $113.2 million of cash on the balance sheet, and we have not had to tap our lines of credit. Our current model, which includes the implementation of the cost-saving initiatives that I previously outlined, shows us remaining cash flow-positive for the remainder of the year.

Now I will move on to our Q2 results by segment. The Commercial Services segment revenue declined 60% year-over-year to $27.3 million; and reported adjusted EBITDA was $7.3 million, down 84% year-over-year. This decline is consistent with the preliminary results we highlighted for April on our last earnings call for Q2. We saw month-over-month revenues increases from April through June, and this momentum continued into July. That said, June was still down approximately 50% on a year-over-year basis.

In Europe, we launched a first-ever rental car toll management program with Rent A Car in France. Our initial rollout began in Paris and Nice, but we are expanding to additional regions and expect to have over 50% of their fleet installed by the end of Q3. We are very excited to get this program up and running, but we have tempered our near-term expectations due to COVID-19. That said, we continue to believe the geographical expansion of our [ Raxelin ] products to Europe will be a meaningful growth driver of our Commercial Services segment into the future.

Moreover, as COVID-19 has subsided in Europe, we have been able to move forward with other proof-of-concept pilots and back-office integrations. We are close to getting other fleet pilots launched in the U.K. and Ireland.

On the fleet management side, we renewed our agreement with one of the largest FMCs in the country for another 3 years. This is a longstanding relationship that we perform multiple services for, including toll management and violation services. As you would expect, the main driver of success of the Commercial Services revenue is highly correlated to rental car volume. While Q2 was slightly better than our internal forecast, we still anticipate ongoing pressure on the business until late 2021. We share this view with other companies in travel-related industries impacted by COVID-19. We will continue to monitor progress and provide more specific updates as information becomes available.

Our Government Solutions segment grew 27% year-over-year to $52.5 million and reported adjusted EBITDA of $20.3 million, up 31% year-over-year. Growth in the Government Solutions segment this quarter was primarily driven by the expansion of the school zone speed program in New York City, which included additional product revenue and subsequent service revenue associated with newly-installed cameras. Our work with the New York City Department of Transportation to expand the number of school zone speed enforcement areas continued ahead apace, and we are excited to be able to bring this important public safety initiative to fruition even during these challenging times.

The expansion of the school zone speed program in New York City continues to track slightly ahead of schedule, with camera installations running ahead of 2019's pace. We installed 195 cameras in the second quarter, an average of 65 per month. Additionally, we installed 20 new bus lane camera systems.

During the quarter, we successfully renewed 100% of our contracts that were up for renewal, but RFPs and activity related to new opportunities were mostly shut down because of COVID-19. On the legislative front, 2 states passed legislation that expands photo enforcement in their respective state. The Commonwealth of Virginia passed legislation in April that authorizes work zone and school zone speed cameras throughout the state. We are excited about the opportunities in Virginia and believe the obtainable TAM is approximately $50 million. Like Georgia, it will take some time for local municipalities to pass their own respective legislation and create RFPs, but momentum for this important safety initiative continues.

Additionally, the state of Washington enacted legislation that authorizes bus lane and Block the Box enforcement cameras in Seattle on a trial basis. Even though it's a fairly small opportunity, it's another example of a state expanding their photo enforcement programs.

As we mentioned earlier in the year, we have pulled our guidance given the uncertainty of the ongoing impacts to our overall business. In Q2, we did engage a third party to help us better assess and align our internal forecast to critical macroeconomic drivers. As we see the impact and efficacy of this more data-driven view, we hope to be in a better position to reinstate guidance at some point in the future.

In summary, we continue to hit our marks in a challenging environment and believe our balanced product portfolio provides stability in these uncertain times and for growth in the future. While it remains uncertain how long COVID-19 or its impact on our customers and our business will persist, we are confident in the resilience of our employees, customers and are built to manage through these turbulent times. We look forward to updating all of our stakeholders, from our employees and customers to our shareholders, on our continued progress.

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

[Patricia Chiodo, executive]

Thanks, David, and good afternoon, everyone. I'll provide a more detailed overview of our second quarter financial performance, and then we'll open up the call for questions. We've provided a short earnings deck on our website that provides some insight into the quarter and has reconciliations from the GAAP to non-GAAP results we'll be discussing today. If you're following along in that earnings deck, I'm on Slide 2, which outlines revenue and adjusted EBITDA performance for our Commercial Services segment.

Total revenue for this segment declined 60% to $27.3 million in the second quarter of 2020 from $68.1 million in the same quarter of the prior year. The business segment derives the majority of its revenue from tolling services provided to rental car companies, which has been greatly impacted by stay-at-home orders and reduced travel due to COVID-19.

As David mentioned, in response to the revenue decline, we took decisive action, reduced costs, decreasing operating expenses by $6 million in Q2 of 2020 compared to the same quarter of the prior year. Similarly, we reduced SG&A by $2.3 million from the same quarter of the prior year. The SG&A savings were offset by a $2.9 million increase in charges associated with credit losses.

Even with these cost-saving measures, adjusted EBITDA for the quarter of $7.3 million declined $36.9 million, or 84% year-over-year from $44.1 million in Q2 of 2019. Adjusted EBITDA margin for the Commercial Services came in at 27%. These are margins that would be strong for most companies in the best of times. It seems small in comparison to the historically high margins produced by this business segment.

Given the uncertainty surrounding the global outbreak of COVID-19 virus, its duration and overall impact on economic conditions, it's difficult for us to predict demand for our product, but we can show you some of the outcomes of the last few months. Some of our largest customers have indicated that their business volumes had fallen nearly 80% in April and 60% in June. We fared a bit better than our underlying customers in April with 64% declines, and in June with 50% declines year-over-year.

As presented in the graph on Slide 2, we've seen increasing month-over-month revenue from April through June, and this momentum continued into July. Our preliminary revenue numbers for July have rebounded more than 75% from the April trough.

Turning to the next Slide, we see the net results of Government Solutions business segment. This segment operates further enforcement programs for municipalities and school districts with end-to-end solutions. Total revenue for the segment was $52.5 million in the second quarter and grew 27% year-over-year from $41.5 million in the second quarter of 2019. As a reminder, the total revenue is comprised of service revenue; that's the monthly fee that we generate from operation of photo enforcement programs; and product revenue, which is the result of selling and installing camera system.

I think it's important that we talk about these 2 sources of revenue separately. Service revenue for the quarter was $35.5 million and grew 2% year-over-year from $35.0 million in the second quarter of 2019. The Government Solutions business was impacted by COVID-19, with some school zone speed programs paused and virtually all of our school bus stop arm programs halted while schools are not in session.

We also continued to see year-over-year declines in red light services, which reduced revenue by $2.8 million, primarily resulting from the loss of certain programs in Texas in June 2019. These headwinds were more than offset by the $4.9 million year-over-year growth in our speed portfolio. Expanding our speed portfolio continues to be the focus in the back half of 2020, and we anticipate it will be our largest product by the end of this year.

Product revenue was $17 million for the quarter and was up $6.5 million from the same period last year. These increases were primarily driven by the 195 school zone speed cameras installed in New York City for the quarter. Adjusted EBITDA of $20.3 million increased by $4.8 million, or 31%, from $15.6 million in the same period in the prior year. The large increase in product sales is benefiting both the top and the bottom line of this business segment. Adjusted EBITDA margins for the business segment increased to 39% from 38% in the prior year.

We're very proud of the performance of the Government Solutions business during these difficult times. New work installing cameras in the back half of 2019 and the first half of 2020 will provide service revenue growth to the mid-single digits for the full year 2020.

We continue to execute against an existing order of 720-camera system. COVID-19 has not impacted our supply chain or our installation cycle. And as of today, we've installed an additional 60 systems in Q3, bringing the full-year total installations to 473.

You should see that the pace of installations and revenue will continue in the back half of the year, but the year-over-year growth rates for the product sales will decline as we cross over more difficult comps for the remainder of the year.

Turning to the next Slide, we show our consolidated results for the quarter. The combined results of the business segments we just discussed generated total revenue of $79.8 million for the second quarter, a decline of $29.8 million, or 27%; and $109.6 million for the same period in the prior year. Adjusted EBITDA of $27.6 million decreased by $32.1 million, or 54%, from adjusted EBITDA of $59.7 million in the prior year. Second quarter adjusted EBITDA margins were 34.6%.

During the second quarter, we initiated cost-cutting measures, halting investments, cutting discretionary spending, reduced executive pay and reduced our staffing levels to align with our demand. With these cost control measures, we should see combined OpEx and SG&A decrease by nearly $6 million in the back half of 2020 compared to the current year-to-date numbers.

The company recorded a net loss of $15.4 million in the quarter compared to a net income of $3.6 million in the same period in the prior year, contributing to this loss was the $4 million noncash charge associated with the revaluation of our tax receivable agreement. This TRA will need to be revalued from time to time to reflect updated expected tax rates.

Adjusted EPS, and which excludes amortization, stock-based compensation and TRA revaluation, was $0.06 per share for the current quarter compared to $0.16 per share for Q2 of 2019. Tax benefit to the quarter was $4 million, representing an effective tax rate of 20.7%.

I want to spend a little bit of time discussing our liquidity position. The company generated $22.5 million in cash flows from operating activities during the 6 months ended June 30, 2020, compared to generating $45.8 million for the same period in the prior year. The change resulted from the reduction in net income and was further impacted by increased AR due to high volumes of camera installations and slower payment processing from Government Solution customers. There was also a reduction in liabilities as we made payments in the first quarter toward certain expenses that had been accrued throughout 2019.

We also spent $14.3 million in CapEx compared to $13.2 million in the prior year. Free cash flow, defined as cash flow provided by operating activities less CapEx, was $8.3 million in the year-to-date period. Importantly, we anticipate [ the ] remaining free cash flow positive for the year.

As of June 30, we had total debt of $870.2 million. Net of cash on hand, our net debt was $757 million, which was 3.6x trailing 12-month adjusted EBITDA of $213 million. Our first lien doesn't mature until 2025, and we currently have $75 million revolver that's undrawn. And as of today, the date of this call, we have just over $130 million of cash in the bank. This, combined with our expectation to be free cash flow positive for the year, provides us with confidence in Verra Mobility's liquidity position.

As we look to the future, the uncertainty surrounding the global outbreak of COVID-19 virus, its duration and overall business impact, makes it difficult for us to provide guidance for the back half of the year. But hopefully you’ll find the insights provided within the discussions of each business segment to be helpful.

In summary, we continue to believe that Verra Mobility remains well-positioned in the long-term and has the operating discipline to manage through the current volatility in our business.

And with that, we will open up the call for questions.

[Operator]

[Operator Instructions] We'll go first to Steve Wald with Morgan Stanley.

[Steven Wald, analyst]

Maybe a good place to start would be the upcoming travel season. And I know you guys kind of laid out the trend is improving on the commercial side, down 50% in June. As we're coming into the summer months, it seems like some places are adding activity restrictions, whereas a lot of people have started getting out, looking to travel. I'm curious what your thoughts are having so far outperformed the rental car industry in terms of how you guys expect the travel season to go, even if you can't give formal guidance.

[David Roberts, executive]

Yes. I can take that. I think, in general, what we're seeing is some -- I think if you were just following the news and watched how there was sort of the initial shutdown, and a lot of states start to open up and travel started to increase, which is what we've seen, but you can also see a trend of that sort of coming down.

What has been consistent is business travel remains down, and we would anticipate that to continue. We do believe that, as many others do as well, that when an appropriate treatment is available, that we'll start to see that come back. And we still believe that that's going to take probably through the end of next year.

So we have seen -- it's obviously super hard to guess. And Tricia and I, as you know, have always said we don't play economists, but to the extent that we would anticipate a very slow, muted response on travel up and until the virus is well out of the way or that there is some sort of vaccine in place.

[Steven Wald, analyst]

Completely understood. And maybe just following up on that comment, I thought I heard you say, David, sort of getting back to 2019 levels would be something that maybe -- not to play Armchair Economist, but just in terms of getting to the 2021 numbers, like you talked about, would be closer to the end of that year rather than the earlier part of the year. I just want to make sure I had that right, and if you're seeing any behavior shifts among the customers in terms of uptake of the rental car tolling product relative to the rental car base, I guess, of clientele. Has that penetration picked up?

[David Roberts, executive]

Yes. I think it's hard to tell right now. I think our belief is that, as we head into '21, we'll be starting to see those 2019 levels again. That does obviously have some underpinning assumptions that are related to a vaccine in place, business travel starting to restore itself. Clearly, if you follow airlines and some of the other travel-related industries, they would tell you that they don't ever anticipate business travel to be at the level it was, given the sort of shock to the system and how people have adapted to using technology.

So at this point, what I would say is we're seeing -- I would say that, as I said on the call, that what we are seeing is ahead of our internal models, which, obviously, we're trying to be as conservative as possible. But I don't think we have enough trend yet to say that we're going to be outperforming or heading back specifically. I think the macro environment is still pretty inconclusive on that.

[Steven Wald, analyst]

If I could just squeeze in one last one on M&A. I noticed the slide continues to be prominent in your investor slide, [ not ] the earnings ones you guys referred to during the call. Just curious to give any update in terms of how you guys are thinking about Europe as a priority relative to M&A and if you're seeing any shift there because of increasingly attractively-priced assets in any adjacent categories you might be interested in.

[David Roberts, executive]

Yes. We continue to maintain. We have a good pipeline. Clearly, at the beginning of the quarter, you would have seen conversations slow because financing was quite questionable, just in general, not for Verra Mobility necessarily. And we've certainly reengaged on several of those conversations. We're still bullish about getting deals done. Whether or not things are attractively priced, it's sort of an eye-of-the-beholder perspective, so it all depends. But we still remain active. And while we would want to continue to expand our capabilities in Europe, we're not solely looking, therefore also looking and having conversations with businesses in the U.S., as well.

[Operator]

Our next question will come from Dan Moore with CJS Securities.

[Stefanos Crist, analyst]

This is Stefanos calling in for Dan. In Europe, is it likely that we'll start to see a more measurable contribution to revenue toward the later part of '21? Or is it more likely to be 2022 and beyond?

[David Roberts, executive]

Yes. Right now, based upon the way we're thinking about things, it's similar to the sort of broader response of, hey, let's get run rate toward the end of next year, which could start to be significant, but it'll probably show up in a more consistent basis in '22. But we're still pretty bullish in second half of next year is starting to get through having all the proof-of-concepts and the pilots and then basically moving from there to fleet expansion.

Again, the challenge has really not been interest and/or desire or access to potential customers, but many of those same customers have been severely impacted by COVID-19, which has subsequently impacted whether they're on furlough or available or having to switch and talk to [ new ] people. So it's more of almost like a communication administrative issue that's been more challenging than necessarily the product working, which has been working great for Rent A Car.

And so we're just going to anticipate that that's probably going to hang around through the end of the year and that we'll start to see more acceleration hopefully in Q4 and certainly into Q1.

[Stefanos Crist, analyst]

I have one more for you. In Government Services, are you seeing an increase in the number of opportunities for the school and safety zone enforcement outside of New York and Georgia?

[David Roberts, executive]

Yes. I mean, yes, there's definitely opportunities out there, but most of them have been slowed down. I mean, in effect, many school zones are not operating, and many of them may not operate in the fall, depending on what part of the country you live in.

And so what I would say is that -- what I mentioned in the call is that the legislative bodies have still seen great value in what these programs can contribute to safety at a local level, and what you saw in Virginia, which kind of piggybacks on top of Georgia and then what we saw in Washington. So we do think there's a pretty good sized demand for them. We'll anticipate building that demand in Virginia as we go through the back half of the year, given that the legislation just passed. Because if you recall, it took us almost a year probably to start getting RFPs and sales and demos and things going in Georgia, so we would anticipate a similar timeline for Virginia and other places as well.

[Operator]

Our next question will come from Tim Chiodi (sic) [ Tim Chiodo ] with Credit Suisse.

[Justin Forsythe, analyst]

This is Justin Forsythe on for Tim Chiodo. So I just wanted to unpack the commercial result a little bit. And obviously, it looked like a better result there than the Street had anticipated. Typically, we'd think of it as maybe a mix between potentially increased leisure or maybe outperformance on rental days, which I think maybe we saw a little bit of both, or maybe even a mix shift to contactless as certain tolling booths are now pushing people through contactless, increasing your spread there. Could you maybe unpack that a little more for me?

[Patricia Chiodo, executive]

Yes. So I think one of the things is that the volumes have dropped off so significantly from the rental car companies, but the normal things that allow us to outperform, meaning that we can improve the take rate on a static number of rental agreements and create increased revenue. It's really hard to do on volumes that are this low.

Really, what you're seeing is you're seeing that we're outperforming in our tolling services because we've got the fleet management companies are out there, and they're continuing to move around. So those are really drivers who are using it for their own work. So fleet management companies are still performing well. And our violations programs also performed fairly well during this quarter. And what we've all seen from the rental car companies is that, when renters are out there with the vehicles, they are using a high number of tools. So it's sort of like the combination of that is keeping us a little more propped up than what we're seeing from just the underlying local companies themselves.

[Justin Forsythe, analyst]

And just one more, if I might. What we've heard now [ roughly ], and I think, called out in a few consecutive earnings calls here, and we know that the opportunity there in New York is probably the most sizable, I would say, of the portfolio. I mean, has there been a strategic kind of flip-over there to potentially exploring more of those? I know you mentioned the Seattle business. But is there other areas where you could potentially expand that program? And obviously, there's a benefit there with the fixed service fees.

[David Roberts, executive]

Yes. So, I mean, we are continuing to have ongoing expansion conversations with New York around the bus program there. And in Seattle, it's a pretty unique program in the city is set up, sort of from a geography standpoint, to make it work better. So we certainly believe that the concept is applicable in other major cities, but it would only be applicable in sort of large metropolitan areas like the Chicagos, the Seattle, San Franciscos of the world. But we are in ongoing discussion with the MTA related to expansion there.

[Operator]

We'll go next to Louie DiPalma with William Blair.

[Louie Dipalma, analyst]

I was wondering, over the past 6 months, have you witnessed any changes in the competitive environment for rental car tolling in either Europe or the U.S.? And without naming names, is any emerging competitor gaining momentum, from your perspective?

[David Roberts, executive]

In that category, I think the answer is still no. Just given our size and scale, we have a very unique position in our marketplace. And as we continue to expand and talk to new potential customers in Europe, we have, as of yet, not found kind of an emerging competitor that's solely dedicated and has an entire global business dedicated to the rental car tolling space.

So none of them yet. We certainly don't rest on those laurels, clearly. But as of yet, to our knowledge, at least right now, there has not been a major competitive entre into that market.

[Louie Dipalma, analyst]

Great. And a follow-up on the M&A question that was asked earlier. Has the pandemic at all changed your M&A strategy? And regarding M&A, are you looking to bundle together more services that you would like to sell the rental car companies via M&A? Are you looking to diversify your customer concentration away from the rental car companies?

[David Roberts, executive]

So the answer to the first part of your question, Louie, is no, the same strategy. We're going to use our balance sheet to accelerate our growth, and we do that by looking at adjacencies, categories that we think would be relevant to our future. And we talked about those in the past, things like parking or traffic management or congestion pricing in areas like that, not necessarily specifically, but in those sort of broader categories.

And then, I think, generally speaking, we would like to continue to diversify and add the third or fourth or fifth leg of the stool. And certainly, that's always the hope. It doesn't mean that those are assets that are necessarily available or affordable based upon pricing or owners' expectations, but clearly, that's part of our strategy.

[Louie Dipalma, analyst]

Sounds good. And one last one. The monthly chart of your commercial revenue that was in your slide deck was very helpful. I was wondering, do you have any commentary about July?

[Patricia Chiodo, executive]

Yes. So I don't know if anybody else hears it, but I've got music playing in the background. But the July actually continued to improve, and what we said is that it was 75% better than the trough, which was April. So it [ had a ] marked improvement on where we were from the trough. And obviously, those are preliminary numbers because we're sitting right on [indiscernible].

[Operator]

We'll go next to Ashish Sabadra with Deutsche Bank.

[Alexis-Marion Phili, analyst]

This is Alexis on for Ashish. Just quickly on the New York City school zone speed program, I think cameras installed were ahead of pace at 65 per month. Is that a fair assumption, going forward? Or should we be modeling around 60 per month? Any color on that?

[Patricia Chiodo, executive]

So we did 60 in the month of July, so that's one of the things that I had said on the call. I think if you're sort of in that range to 60 to 65, you're probably right. We've been moving at a very fast pace. And I think that you're going to see in the back half of the year, though, is you may get into more weather-related issues that may slow it down a little bit.

So we normally model at the 60, so that's probably fair enough for you to be around the same timeframe, or the same amount.

[Alexis-Marion Phili, analyst]

And then one more. How are you thinking about Avis and Hertz reducing their fleet size? How do you think that will affect you? Or any color on that?

[Patricia Chiodo, executive]

Yes, I mean, it definitely will impact us. Obviously, the number of vehicles that they have also drives the total number of rental agreements that they have. We would hope that as they sort of strategically reduce those fleets, that they still will be in places that are high tolling volume. So it really has to do with where the fleet is and then how well that fleet is utilized.

Our trigger is not the total amount of fleet that they have, but it's a total amount of rental agreements. So if they have smaller fleets but they've got improved utilization, and they're in areas where they have high traffic and tolling, such as Orlando or over on the East Coast, all of that would still benefit us. That's one of the reasons that we're saying that it's going to take us until sort of exiting 2021 to have a run rate that's going to look like 2019 because it will take a while for them to rebuild those fleets over time as volumes come back.

[Operator]

And we have no other questions at this time. I'd like to turn it back to our presenters for any additional or closing remarks.

[Patricia Chiodo, executive]

Yes, thank you guys all for your time, and I'm looking forward to next quarter.

[David Roberts, executive]

Yes, thank you.

[Operator]

That does conclude today's conference. Thank you all for your participation. You may now disconnect.