Verra Mobility Corporation

Q1 2024 Earnings Conference Call

5/2/2024

spk05: Ladies and gentlemen, and welcome to the Vero Mobility first quarter 2024 earnings call. At this time, all lines are in a listen only mode. Following the presentation, you will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, 2nd of May 2024. I would now like to turn the conference over to Mark Zindler, Vice President of Investor Relations. Please go ahead.
spk00: Thank you. Good afternoon and welcome to VeriMobility's first quarter 2024 earnings call. Today we'll be discussing the results announced in our press release issued after the market closed, along with our earnings presentation, which is available on the Investor Relations section of our website at ir.verimobility.com. With me on the call are David Roberts, Vero Mobility's Chief Executive Officer, and Craig Conte, our Chief Financial Officer. David will begin with prepared remarks, followed by Craig, and then we'll open up the call for Q&A. Management may make forward-looking statements during the call regarding future events, anticipated future trends, and the anticipated future performance of the company. We caution you that such statements are not guarantees of future performance, and involve risks and uncertainties that are difficult to predict. Actual results may differ materially from those projected in the forward-looking statements due to a variety of factors. These factors are described in our SEC filings. Please refer to our earnings press release for VeriMobility's complete forward-looking statement disclosure. We do not undertake any obligation to update forward-looking statements. 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.veramobility.com and on the SEC's website at sec.gov. With that, I'll turn the call over to David.
spk09: Thank you, Mark, and thanks, everyone, for joining us. We had a strong start to the year with revenue, adjusted EBITDA, and earnings exceeding our internal expectations for the first quarter. Moreover, all three business units met or exceeded our internal expectations for adjusted EBITDA for the quarter. Through our customer-oriented solutions and execution strength guided by the VeriMobility Operating System, or VMOS, we are consistently delivering strong financial performance. Consolidated revenue growth was 9%, adjusted EBITDA increased 6%, and adjusted free cash flow increased 57% over the prior year period, demonstrating the predictable strength of our portfolio businesses. Based on the first quarter financial performance and our outlook for the remainder of the year, we're increasing our full year 2024 guidance, which Craig will elaborate on in his remarks. Now moving on to our business unit operations. The commercial services team delivered outstanding results driven by strong and durable domestic travel trends and our continued strong performance in the fleet management business. First quarter revenue of $96 million grew 12% over the prior year quarter and adjusted EBITDA margins of 63% were up about 90 basis points over last year due primarily to the strength of RAC tolling. First quarter TSA throughput volume was about 106% of 2023, driving strong growth in adopted rental agreements and tolls incurred, all of which resulted in a 10% increase in RAC tolling revenue. Additionally, our FMC business generated revenue of 17 million for the quarter, representing 25% growth over the prior year period, primarily driven by enrollment of new vehicles and increased tolling from FMC customers. Looking ahead over the course of 2024, we expect continued strength in rack tolling revenue due to strong travel bookings based on commentary from the major airlines and hotel chains. In our FMC business, we are anticipating a modest pullback in relative growth rates over the balance of the year due primarily to tougher comps this year. The underlying strength of commercial services, and particularly the strong travel outlook, were the key factors influencing the decision to raise full-year guidance. Moving on to government solutions, recurring service revenue, which reflects 96% of total revenue for the quarter, grew 8% over the same period last year. The recurring service revenue growth was driven by program expansion from existing customers and new cities implementing photo enforcement efforts to improve road safety. To this point, outside of New York City, we drove 15% revenue growth due to our existing customers' efforts to expand their safety programs. Total revenue, including international product sales, were up about 10% over the prior year quarter. As we discussed in our last earnings call, we are seeing RFPs and award activity continue to ramp up in Florida. I am pleased to report that year to date, we've executed contracts for schools on speed, school bus stop arm, and red light programs that in the aggregate represent potential recurring revenue of up to $7 million per year. Additionally, on the international side of the GS business, we were awarded an extension of our national highways maintenance contract in the United Kingdom for our variable speed and lane closure systems. This contract award will drive an approximately $2 million of ARR increase in the current revenue run rate. We're also very pleased to report that in the state of Washington, legislation was passed for the expansion of speed programs, bus lane automated enforcement, and other beneficial reforms. Overall, we had a strong first quarter from an awards perspective. We're highly competitive in the market and winning our fair share of deals, which for the quarter represented up to $10 million of incremental full run rate ARR potential. Moving on to the New York City automated enforcement renewal contract, The city recently published a notification indicating its intention to release the RFP in fiscal year 2024, potentially late in the second quarter of this year. We expect this to be a competitive procurement and believe we have a strong combination of best-in-class technical solutions and market experience to compete effectively for this program. Next, a brief update on T2 Systems. We generated total revenue of approximately $20 million for the first quarter As we anticipated, one-time product revenue declined by about $1 million compared to the prior year quarter due to a structural transition away from hardware and towards software and mobile solutions. As product revenue decelerates, we also experienced a decline in one-time ancillary installation and maintenance services revenues. growth. For the full year, we continue to expect T2 Systems to deliver mid-single-digit revenue growth and return to high single-digit revenue growth over the long term, driven by the strength and focus on SaaS and the introduction of transactional revenue pricing opportunities. Turning to capital allocation, we further reduced net leverage to 2.4 times, providing optionality for future capital deployments. With respect to M&A, the pipeline is growing. We've been disciplined around valuation, but remain active in our evaluation of opportunities. Additionally, we have an open authorization for a $100 million stock buyback. Through the first quarter, we have sought to increase cash on the balance sheet, but the open buyback continues to be a viable option for capital deployment. Lastly, I'll provide a brief update on the company-wide implementation of a bare mobility operating system, or VMOS. Two years ago, we set out to build the future of air mobility. We knew that to deliver unparalleled value to our customers, empower our employees, and maximize returns for shareholders, we needed a unified and standardized approach to continuously improve the critical areas of our business. We established the air mobility operating system, a dynamic set of mechanisms and tools designed to drive operational excellence and spark continuous improvement across all parts of air mobility. Since then, we have deployed VMOS mechanisms in core focus areas, including operating reviews, strategic planning and deployment, problem solving, and sales funnel management. As an organization, we are building the muscle memory around leveraging VMOS to drive operational excellence across these areas. Finally, as we announced in our press release last month, I'd like to formally welcome and congratulate Kate Prescott on her appointment as Executive Vice President and Chief People Officer. Kate's HR experience and HR strategy. Welcome to the team, Kate. Craig, I'll turn it over to you to guide us through our financial results and the 2024 guidance update. Thank you, David.
spk07: Good afternoon, and thanks to everyone for joining us on the call. I'll start out today by providing an overview of our first quarter results, followed by an updated overview of how we're thinking about full year 2024. Let's turn to slide four, which outlines the key financial measures for the consolidated business for the first quarter. Total revenue increased approximately 9% year-over-year to $210 million for the quarter, driven by strong recurring service revenue growth across the company. Recurring service revenue grew 10% over the prior year quarter, driven by strong travel demand in the CS business and recurring service revenue growth outside of New York City in the GS business. At the segment level, commercial services grew 12% year-over-year government solution service revenue increased by 8% over the prior year, and T2 systems SaaS and services revenue grew 5% over the first quarter of 2023. Product revenue was $7 million for the quarter. About $3 million of this total was from T2 systems, while $4 million was from government solutions, the majority of which were international products. From a total profit standpoint, Consolidated adjusted EBITDA of $93 million increased by approximately 6% over last year. We reported net income of $29 million for the quarter, including a tax provision of about $10 million, representing an effective tax rate of 25%. The tax rate includes certain discrete items which favorably impacted the rate for the quarter. For the full year, we are anticipating an approximate 30% effective tax rate. Adjusted EPS which excludes amortization, stock-based compensation, and other non-recurring items, was $0.27 per share for the current quarter, compared to $0.26 per share in the first quarter of 2023. Adjusted EPS grew 4% over the prior year quarter, despite nearly 16 million additional shares in the share count due to the completion of a de-SPAC process over the second and third quarters of 2023. We delivered $42 million of adjusted free cash flow for the quarter, which includes a $22 million adjustment for the resolution of the plus pass matter on an after-tax cost basis. The 45% conversion of adjusted EBITDA was driven by strong operating performance and over $10 million of collections that were received in early January in lieu of December last year. Turning to slide five. we generated $376 million of adjusted EBITDA on approximately $835 million of revenue for the trailing 12 months, representing a 45% adjusted EBITDA margin. Additionally, we generated $164 million of adjusted free cash flow, or a 44% conversion of adjusted EBITDA, representing $1 of adjusted free cash flow per share on a trailing 12 months. Moving to commercial services in slide six, we delivered revenue of about $96 million in the first quarter, increasing $10 million, or 12%, year-over-year. Rack tolling revenue increased 10%, or about $6 million, over the same period last year, driven by robust travel volume and increased rental volume. Additionally, our FMC business grew 25%, or about $3 million, year-over-year, driven by the enrollment of new vehicles and tolling growth from existing FMC customers. First quarter adjusted EBITDA in commercial services was $61 million, representing 14% year-over-year growth. Adjusted EBITDA margins of about 63%, a 90 basis point increase over the first quarter of last year, were largely driven by the continued strength in rack tolling and execution of our growth initiatives. Let's turn to slide seven, and we'll take a look at the results of the government solutions business. Driven primarily by growth outside of our largest customer, New York City, service revenue increased by $7 million or 8% over the same period last year to $90 million for the quarter. Product revenue was about $4 million for the quarter and was driven primarily by international programs. Adjusted EBITDA was $29 million for the quarter, representing margins of 31%. The reduction in margins versus the prior year is primarily due to slightly increased spending on business development efforts as well as a $2 million one-time benefit for a contract amendment in the first quarter of 2023. Let's turn to slide eight for the results of T2 Systems, which is our parking solutions business site. We generated revenue of $20 million and adjusted EBITDA of approximately $3 million for the quarter. Software and services sales increased 5% over the prior year quarter, slightly offset by a $1 million year-over-year reduction in product revenue for the quarter. This decrease was expected based on the transition we're seeing from hardware to software and mobile solutions. Before I close out the financial review of the quarter, I'd like to give you an update on where we stand on the material weakness we described in our 2023 10-K. In our 10-K, we described several deficiencies regarding IT general control gaps which aggregated toward material weakness last year. While our remediation work is materially complete, the new controls are required to operate for a sufficient length of time and will undergo additional testing to ensure that they are operating as intended. We will continue to keep you updated on our progress, and we remain confident in our corrective measures. Okay, let's turn to slide nine and discuss the balance sheet and take a little bit closer of a look at leverage. As you can see, we ended the quarter with net debt balance of $903 million. resulting in net leverage of 2.4 times at quarter end, we have maintained significant liquidity with our undrawn credit revolvers. Our gross debt balance at year end stands at about $1.1 billion, of which approximately $700 million is floating rate debt. As we've discussed in the past, our notional hedge of approximately $675 million covers about 95% of our current floating debt total with a float for fixed rate swap that's cancelable at our option. Before I move on to 2024 guidance, I wanted to provide a brief update on our thinking around long-term leverage targets. We have revised our long-term net leverage target from the prior 3.5 times to an updated target of three times net leverage, recognizing that in periods of M&A activity, we may temporarily and modestly exceed that level. This updated view is consistent with our commitment to deliver value to our shareholders through a disciplined and flexible capital allocation strategy. And we believe this new lower leverage target level is more contemporary with current market trends. Okay, let's turn to slide 10 and have a look at full year 2024 guidance. Based on our first quarter results and our outlook for the remainder of the year, we are increasing our revenue guidance from the prior range of 865 to 880 million to the upper end of that range. We're increasing our adjusted EBITDA guidance from the prior range of 395 to 405 million to the upper end of that range. We are increasing our adjusted EPS guidance from the prior range of $1.15 to $1.20 per share to the upper end of that range. And lastly, there is no change to our prior adjusted free cash flow guidance of $155 to $165 million or our expected net leverage at year-end of two times. The primary influencing factor to raise guidance after the first quarter was strong travel outlook from the major airlines. Year-to-date TSA volume has been about 106% of 2023, and we are anticipating a strong spring and summer travel season. 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 both 2022 and 2023, we expect the strongest sequential growth in the 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 to revenue and adjusted EBITDA in the fourth quarter. Adjusted EBITDA margins are expected to follow sequential revenue trends. Commercial services, having the largest influence on the sequential growth rates, will follow the same trends as the consolidated company. At Government Solutions, we expect modest sequential revenue growth over the balance of the year. Lastly, parking solutions revenue is expected to deliver mid-single-digit total revenue growth, as we discussed on our fourth quarter earnings call. The temporary reduction in revenue growth is driven by strong demand in SaaS and services, offset by a reduction in one-time product sales as the industry transitions to a focus on software and mobile solutions. We expect comparable adjusted EBITDA margins in the second quarter as compared to first quarter performance, followed by an increase in second-half margin performance. Over the long term, We expect parking solutions to return to high single-digit growth as we execute our SaaS and transactional revenue growth strategies. Other key assumptions supporting our adjusted EPS and adjusted free cash flow outlook can be found on slide 11. In summary, we had a strong start to the year, and I'm confident in our ability to deliver on our increased 2024 outlook. We have strong operating momentum in the business enabled by secular growth drivers and favorable business trends. We're focused on execution and operational excellence to deliver continued solid performance. This concludes our prepared remarks. Thank you for your time and attention. At this time, I'd like to invite Konstantin to open the line for any questions. Over to you, Konstantin.
spk05: Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press R followed by the number one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from the line of Faiza Ali from Deutsche Bank. Please go ahead.
spk03: Yes, hi. Thank you so much. So first, just wanted to talk about the raised guidance. Craig, I know you mentioned sort of the travel outlook, and that was a factor in the raised guidance. Um, you also mentioned sort of additional, you know, potential contracts on the government side. So just want a little bit more color in terms of how we should think about about the race guidance and whether any incremental recurring revenue. Um, we should expect any incremental recurring revenue on the government services side as well.
spk07: Yeah, sure. Thank you. So, I think. I'll give you a little more detail on how we think about that. So if you take, let's just use revenue for simplicity. If we look at the midpoint of the previous guidance going to the high end of that range, that's an increase of, you know, a $5 to $10 million, okay? The vast majority of that increase in the guidance is in commercial services due to the increase in travel demand, right? We saw that come through as the TSA came in a couple points higher than we anticipated in the first quarter as we take that out. the remainder of the year, you know, I think that raises our full year outlook on TSA throughput by about a point and a half to two points, somewhere in that area. GS is pretty much on the service side in the same spot that we talked at last time, which I do think we're going to see the low end of high single-digit growth for GS service this year. What we talked about in terms of ARR, we continue to see great progression in the state of Florida and overall. It's all about when that revenue actually So we don't have a lot of notice to proceeds on those. That revenue will come into the business either in the late, very late part of this year or potentially into 2025. That's why it's not necessarily a factor in increasing the revenue guidance for 2024. But I think it's a very good indication of what the business can deliver going forward.
spk03: Great. That's very helpful. Thank you. And then just a question on capital allocation. You know, you did lower your leverage target. And you mentioned sort of, you know, opportunity to potentially buy back stock. So just want to understand, you know, do you need, do you want to reach that target first before you buy back stock? Or should we expect you to be actively buying back stock, you know, at this point and you sort of want to get to that leverage by the end of the year? So just talk about some of your thinking process around capital allocation.
spk07: Yeah, thanks again for the question, Faiza. The way that we think about it, we're going to remain balanced as we've been in the past. You know, we have that open authorization, which is there for a reason. When we look at what I can say on the M&A side, as we look out at the market today, there's certainly more processes and more assets that are actually showing up on screen than there were, right? So it's really hard to kind of dial in on that. on which one would come first. If I guessed, I got a 50% chance of being wrong, so I won't do that. But what I would say is, as we looked at it in totality, the three and a half times net leverage was a very contemporary view for the company two years ago, right? And as we look out today with what we've seen in rates and how we've seen that perform and also what we're seeing on the screen in terms of M&A, we think that three times is the right leverage for the company. And remember that that three times is a long-term target. So hopefully it came out in the prepared remarks, right? We still could go over that for a period, right? But as we've talked about in the past with the cash generation of the company, we have the ability to delever over a period of quarters and come back to that level point, now being three versus three and a half that we talked about, you know, maybe two, two and a half years ago.
spk03: Got it. Thank you so much.
spk05: Your next question is from the line of Daniel Moore from CJS Securities. Please go ahead.
spk04: Thank you, and thanks for the call, Dave and Craig. Maybe drill down on commercial services a little bit, and not necessarily in the quarter, but just, you know, multiple quarters now. Another double-digit quarter, double-digit growth quarter on top of a pretty tough, difficult comp. Clearly, we've cycled past, you know, the pandemic-related recovery, so Obviously, TSA volumes help quite a bit. Just when you think about the algo, what continues to outperform expectations? Is it attachment rates or uptake on your services, on rental contracts, more toll roads, shift to cashless? What's sort of maybe trending better than maybe a single-digit algo would indicate?
spk07: Right, right. So I still think I totally understand what you're asking. So let me start by saying that. High single-digit is still the growth target, even with the increased guidance for commercial services. And I think that that rubric looks a lot like it did when we talked last quarter, right? So about half of that, half of that high single-digit growth, let's build it from zero, is coming from the secular tailwind. So this is toll roads. These are additional toll roads transitioned from barrier-based to cashless roads, predominantly in the United States, and then continued rollout of the all-inclusive pricing model. And then the other half of that growth is split between two pieces. That's the growth initiative side, and we've talked about the strength in the FMC business, mostly coming from increased utilization at the fleets, and then some growth in Europe as well. Then the remaining 25% or half of the half is coming from TSA growth. That's what we said three months ago. I think maybe today it's a little bit more towards TSA than on the growth initiatives, just given the outperformance in the first quarter, but that rubric about 50% for the tailwinds, and then the other 50% split between TSA and growth initiatives remains intact from what we discussed last time.
spk04: Makes sense. And then on the government solution side, I think I can back into the math, but just any more color on some of the investments you're making in terms of the, you know, enhancing customer-facing platforms, more generally what it is that you're – you know, looking to accomplish and then, you know, how much, how long will that incremental expense last or is it sort of a one time? Thanks.
spk09: Yeah, Dan, it's David. So, I mean, basically the, we're really excited for the government solutions business. There's a lot of really great things going on that are been buoyed by an ongoing sort of legislative opening across the country. And to the investments is, which is our platform, you know, over the history of the company, we've, done lots of acquisitions, and when you do that, you end up with multiple platforms. And so this is an opportunity to, one, consolidate from several platforms to one or two, and two, to modernize that and reduce our ongoing cost of ownership of the platform so we can be really much more scalable in the future. And that's going to be ongoing. We would anticipate that's going to be pretty much the bulk of this year, as it has been, and probably go into maybe the first part of next year as well.
spk08: Perfect. I'll jump back with any follow-ups. Thank you.
spk05: Your next question comes from the line of Keith Soem from North Coast Research. Please go ahead.
spk02: Great. Thank you. Congratulations, guys, on a good quarter. In terms of the government solutions segment, perhaps talk a little bit about the outperformance in the quarter. I'm assuming these are unrelated to the positive legislation developments that we had last year. But are these a mix of smaller engagements or is there weighted down by just a few different agencies?
spk09: I think it's not as much from the, I think where you're saying, Keith, it's not from the TAM that we just opened. We are starting to win some of those, which is really exciting, especially in Florida. But the tail of that is going to be a couple of quarters away before you start seeing the revenue. This goes back to the team really focusing on the wins that we got last year and the customer expansions that we did last year. alongside some international wins as well.
spk02: Great. And actually, following up on that, on the international front, you know, international is not an area for government solutions. We've talked a lot about in the past. But we're asking, providing a bit of context or color about the size of the international and the opportunities there. You know, is international growing, you know, in line with domestic? Or how do they kind of compare from a growth trajectory?
spk09: Yeah, I mean, if you look globally, it's a decent sized market. In many places, it's a hardware only market. So we've really focused in the areas where there's a service component because that's where kind of our skill set and expertise is, which really lands itself for the most part, not exclusively, but for the most part in North America. So Canada, you've got a little bit in Europe and Australia are the primary places where that exists. So we feel really good about those markets that we're in and we'll continue to look for kind of the same approach, which is where we may have red light or speed in some countries. We may look to expand that, as well as look for opportunities to expand to a service model versus a hardware-only model. But right now, the North American market is growing so fast, we've got plenty to focus on right here at home.
spk08: Great. Thank you. Appreciate it. Your next question is from the line of Louis de Palma from William Blair. Please go ahead.
spk01: David, Craig, Ann, and Mark, good afternoon. Hey, Louis. You announced strong government bookings with the $10 million of ARR incremental awards. And over the past year, it has been well documented that there has been industry momentum for school zone speed cameras across the U.S. But along these lines, have you also witnessed any change in sentiment for red light cameras and has the overall demand for red light cameras improved?
spk09: Well, I would say that the overall demand is mostly unchanged. And what I mean by that is for the most part, Louis, that the transition to what we call purpose-built enforcement is really the trend, which is, hey, instead of just having something at an intersection, Let's go to where the problems are, which are the most important to a community where their precious cargo is, which is around work zones, school zones, school buses. And so what I would say is that the red light demand, we've always thought that would be a flat, flattish type of business long term. I think it's actually up a little bit. And I would anticipate it to stay there because I think the other ones are, one, more meaningful to the communities and also legislatively a bit more palatable.
spk01: That makes sense. And yeah, I was just thinking about how there is proposed legislation to dramatically expand the New York City red light program. And I was wondering if that was part of a nationwide trend or if it's more one-off and granted legislation.
spk09: Yeah, it's a good point. New York obviously has really embraced the benefits of automated enforcement and And they are often a trendsetter for other areas, but that could go quite slowly. So, I wouldn't say that's a harbinger of immediate transition to red light expansion, but it could be something that means something in the future.
spk01: Great. And for Craig, you may have answered this in one of the prior answers, but when are you targeting for the migration to be finished from the legacy platforms onto the new VERA mobility operating system, should we expect that expenses will be elevated throughout the rest of the year? Or is that something that you expect to finish in the next couple of quarters?
spk07: Yeah, the first part of that, Lou, is we expect to have that work complete in 2025. We will see some incremental expenses if you were to look dollars to dollars year over year. But I still do expect to keep the margins in the GS business at least flat to 25 basis points up year over year, right? So, again, you'll see that increase on a dollar-for-dollar basis. But that increase isn't just the new system spend. As these new TAMs, David walked through some of them in his prepared remarks. As they open, right, we need to put salespeople in some of those areas. We need to train folks. We need to attend conferences we haven't been to before. So there's also some SG&A that just comes along with the market expanding. But I think if you take that and roll it all together and put it into the total GS business, we still do expect to be able to hold margins and even increase them up to 25 basis points year over year with the spending.
spk01: Great. And that makes sense. And you reiterated the $90 million gap. full-year CapEx target. I may have missed this, but what was CapEx in the first quarter, and is there expected to be any seasonality to the CapEx throughout the year?
spk07: It was 15 in the first quarter, Louis, so it is going to ramp up a little bit over – and we anticipated that. That was not a surprise whatsoever. I still think it'll come in somewhere on the rounds, around $90 million for the year, and it does ramp up the back half.
spk01: Excellent. That's it for me. Thanks, everyone.
spk08: Thank you.
spk05: Just a reminder, if you have any questions, please press star, then the number one on your telephone keypad. Your next question is from Dave Koning from Baird. Please go ahead. Yeah. Hey, guys.
spk06: Nice job, and thank you. First of all, the year-over-year growth in commercial was about 10 million, and I think you said about 6 million travel, 3 million FMC. But then as we go through the year, the FMC growth gets a little smaller. But does travel stay, give or take, around that 6 million then, or maybe even a little better if the TSA demand looks good? I mean, is that kind of how to think about it?
spk07: That is how to think about it. I think you're really close there.
spk06: So,
spk07: I expect FMC growth year over year. In the second quarter, I expect it again. In the third quarter, I expect it to level out in the fourth quarter. So there is a little bit more to go on FMC. I think the right way to think about TSA is essentially we took what we saw here in the first four months of the year and applied that to the seasonality that we've seen for the last decade over the balance of the year. And I'll save you the math on that. The way that that kind of worked out When we thought at the beginning of the year, when we talked a few months ago, we said, you know, and before I even say this, let's remember that 2023 isn't a perfect copy either. It did ramp a little bit through 2023. So as we look at the quarters, it looks a little funky. But for the total year, here's how it shook out. We said originally it'd be somewhere between 101 to 102. I think that if I take what we saw in the first four months of the year, apply that to the back eight months of the year, the total year probably goes up to 103, maybe a little bit north of that. That's with taking what we see today and bringing it forward through the right comps to the end of the year.
spk06: Gotcha. Yep, that makes sense. Thank you. And then maybe my follow-up, just an interesting thing in the cash flow statement, the bad debt expense was about $5 million in Q1, and kind of all through last year it was kind of $1.5 to $3 million per quarter, and even before that. So it was a little higher. Was there something to the credit cards used by travelers that were a little harder to collect, or what was that?
spk07: That's a great question and a really good catch. It's not – let me tell you what it's not, and then I'll do my best to tell you what it is. So what it's not is we're not seeing the consumer get weaker. Because when we saw those come through and they actualized, we had the same question. What we're seeing is transactionally, there's been some differences. And it's not necessarily with the health of the consumer. It's how we transact it. So I think that has come back in line. So the way I would think about it is that the incremental bad debt expense that we saw in the first quarter, I'm not seeing in the second quarter. I still need to go do some work and to find out exactly what that was, but I do know that it was not the health of the consumer. So I think it was a one-time thing that I don't expect to see go forward.
spk08: Gotcha. Thanks. Well, nice job, guys. Thank you. Thank you.
spk05: There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Disclaimer

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