Verra Mobility Corporation (VRRM) on Q1 2021 Results - Earnings Call Transcript
Operator: Greetings, and welcome to the Verra Mobility Corporation First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Sajid Daudi Vice President, Investor Relations. Thank you, Sajid. You may begin.
Sajid Daudi: Thank you, and good afternoon, and welcome to Verra Mobility's First Quarter and 2021 Earnings Call. Today, we'll be discussing results announced in our press release issued after the market close. With me on the call are David Roberts, Verra Mobility's Chief Executive Officer; and Tricia Chiodo our Chief Financial Officer. David will begin with prepared remarks, followed by Tricia and then we'll open up the call for Q&A.
David Roberts: Thanks, Sajid, and thank you to everyone for joining us on the call today. We delivered solid first quarter results that exceeded our expectations as we continued to navigate through a challenging economic environment. However, with more than one in four American vaccinated and improving March and April TSA Traveler Throughput Data, the trends are promising. As the U.S. economy reopens, we see improving metrics across both our business segments. Our Government Solutions business saw solid service revenue contribution driven by the expansion of the New York City school zone speed program in 2020 and our Commercial Services segment showed improved demand at the big three rental car companies. Adjusted EBITDA came in at approximately $40 million or 45% of revenue exceeding our internal expectations. During the quarter, we optimized our debt capital structure to address our short-term capital needs and strengthened our balance sheet to address for future growth including funding the purchase of Redflex Holdings, which has now received shareholder and court approval.
Patricia Chiodo: Thanks, David, and good afternoon, everyone. I'll provide a more detailed overview of our first 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 to the quarter and some reconciliations from our GAAP to any non-GAAP results. Before I get into the quarterly results, I wanted to provide a quick update on the status of restatement that we announced on May 7 and filed with the SEC after market on Friday. On April 12th, the SEC issued a statement regarding the accounting treatment of warrants highlighting the potential accounting implications of certain features of the warrants commonly issued in transactions involving SPACs. As a result of the SEC’s statement, we reevaluated our accounting treatment of our warrants and concluded that our 13.3 million public warrants were properly classified as a component of equity. However, our 6.67 million private placement warrants should be and should have been previously classified as a liability measured at fair market value with the non-cash fair value adjustments recorded in earnings at each reporting period. We filed the restatement on Form 10-K/A reflecting the private placement warrants as a liability from the inception of our business combination in 2018 and reported the market-to-market adjustments to the fair market value of that liability as a gain or loss on the P&L for all subsequent reporting periods. In general, as the stock price increases, the fair value of the warrant liability and the company – as the stock price increases, so does the fair dot value of the warrant liability and the company recognizes additional non-cash loss in its statement operations with the opposite of effect happening when the stock price declines. This can create a lot of volatility in our net income that has no impact on revenue, adjusted EBITDA or total cash flows. Now, let’s turn to the quarterly results. If you are following along on the earnings deck, I am on Slide 2, which outlines revenue and adjusted EBITDA performance for the Commercial Services segment. Our Commercial Services segment delivered revenue of $45.7 million, declining $15.6 million or 25% year-over-year. This business – this segment delivers the majority of its revenue – derives the majority of its revenue from tolling services provided to rental car companies that continue to feel the effects of reduced travel due to COVID-19. As David mentioned, the big three RACs saw significant pickup in demand during March, which resulted in largest month-over-month increase that we’ve seen in the last nine months. This momentum carried over into April, which gives us reason for optimism. However, rental car volumes are still approximately 40% below pre-pandemic levels. Adjusted EBITDA for the quarter of $22.6 million declined 33.3% year-over-year with adjusted EBITDA margins at 49%. If you recall, we stated on our last call that margins would be pressured in Q1 as we reinstated bonuses for 2021 and ramped up to meet demand. Turning to the next slide, you can see the results of the Government Solutions business. This segment operates photo enforcement programs for municipalities, school districts offering an end-to-end solution. Our Government Solutions business delivered revenue of $44.2 million in the first quarter, declining $11.3 million or approximately 20% year-over-year. As a reminder, revenue for this segment is comprised of service revenue, that’s the monthly fees we generate from the operation of photo enforcement program and product revenue from selling and installing camera systems. I think it’s important that we talk about these two sources of revenue separately. The service revenue for the first quarter was $44 million, which grew $5.8 million or 15.2% year-over-year. The service revenue growth is driven by our expansion of the school zone speed program, which increased by 43.2% over the same quarter and the prior year. The growth in our speed portfolio is primarily related to the New York City school zone speed programs where we installed 720 cameras throughout 2020 for which we are now booking service revenues. This growth was offset by a decline in the school bus stop arm cameras that were - impacted school closures related to COVID-19. As schools return to in-person learning, revenue should return to these programs late in 2021. Product revenue was almost negligible for the quarter as we didn’t install any cameras. As David mentioned, we received the new authorization for installation service and maintenance for New York City Department of Transportation for an additional 720 school zone speed cameras, which we began installing in April. As such, we expect our product revenue to be $50 million to $55 million for the current year, compared to the previous expectation of $3 million to $5 million. We’d anticipate installing all cameras by the end of the year. Adjusted EBITDA of $17.8 million decreased $3.5 million from the prior year quarter. Adjusted EBITDA margins for this business were strong at 40%. David referenced we reached an agreement in principal with the City of New York to resolve matters related to previously disclosed installation issues and while the non-financial terms of the settlement are still being finalized we accrued $1.3 million for the settlement amount. Separately, with the higher product revenue expected from the balance of this year, we anticipate our margins to remain strong for the remainder of the year. Turning to the next slide, we show our consolidated results for the quarter. The combined results of the businesses that we discussed generated total revenue of $89.9 million for the quarter, a decline of $26.9 million or 23% from the same period in the prior year. Adjusted EBITDA of $40.3 million decreased by $14.5 million or 26% from the prior year quarter. First quarter adjusted EBITDA margins were 45%. The company reported a net loss of $8.9 million in the quarter, compared to net income of $22.1 million as restated for the impact of the warrant accounting in the same period in the prior year. Adjusted EPS which excludes amortization, stock-based compensation and other non-cash items was $0.12 per share for the current quarter, compared to $0.19 per share for the same quarter of 2020. The tax benefit for the quarter was $2.9 million representing an effective tax rate of 24.5%. In the quarter, we optimized our capital structure amending and extending our existing term loan with a new $615 million first lien term loan maturing in 2028, which includes an accordion feature providing an additional $250 million of borrowing capacity. We also issued $350 million of new senior unsecured notes at a fixed rate of 5.5% maturing in 2029. This strengthens our balance sheet and provides us with ample liquidity to execute on our strategic priorities for the current calendar year and beyond, while providing liquidity for the pending Redflex acquisition. The company generated $9 million in cash flow from operating activities during the quarter, compared to $14.8 million in the same period of the prior year. The change resulted in the reduction of – the change resulted from the reduction of net income and was further impacted by increased AR. As of March 31, our City of New York Department of Transportation contracts represented approximately 63% of our net accounts receivable. As of the end of the quarter, they owed us $120.7 million under the legacy and emergency contracts combined. Under the emergency contract, we are owed $52.6 million in product revenue and $26.8 million in service revenue. The emergency contract has been submitted for registration to the New York City Controller and we’d expect to receive our first payment during the quarter. We also believe that we will begin receiving payments towards the $41.3 million balance under the 2014 legacy contract. Provided these payments began as anticipated and we should significantly enhance our cash flow performance for the balance of the year. Free cash flow, defined as cash flow provided by operating activities less CapEx, was $5.3 million in the quarter. And as of March 31, we had debt of $1 billion, net of $250 million of cash on hand. Our net debt was $750 million, which was 4.5x trailing 12-months adjusted EBITDA of $167.3 million. We anticipate this to be the trough of our trailing 12-months adjusted EBITDA and therefore the peak of our leverage and we’d expect to delever quickly for the remainder of the year. As we turn to the future, uncertainties surrounding the recovery cycle following the COVID-19 virus, makes it difficult to provide guidance. Our ability to predict travel and rental car demand are limited. We are seeing strong sequential growth in March and April and we’d expect greater service revenue in Q2 and the back half of the year. We anticipate product revenue in the range of $50 million to $55 million. We are pleased with our profitability during these difficult times and believe that we are well positioned to capture revenue as the cycle returns. And with that, I’ll open up the line for questions.
Operator: Your first question comes from Justin Forsythe from Crédit Suisse. Please go ahead.
Justin Forsythe : Hi, David, Trish, Sajid, how are you?
David Roberts: Good.
Patricia Chiodo: Good. Hi, Justin.
Justin Forsythe : Great. Well, I wanted to dig into the NYC opportunity a little bit and congratulations on that win. So, I know, we had talked previously about a ceiling of roughly 1500 cameras in NYC meaning coverage of two cameras per school. And just wanted to dig into that. By my math, it seems like, you’ve actually exceeded that number. So was there more coverage per school zone? And is there incremental upside to numbers in that perhaps expansion of the contracting further?
David Roberts: Well, the second half of that, this is the limit of what the legislation allows for. So there won’t be more cameras past the new 720. But the number is higher than what we thought.
Justin Forsythe : Okay.
Patricia Chiodo: Yes, actually – I think there actually can be, originally, what they had said was they were going to expand it to certain number of school zones that that number was 750 which were already in a 150.
David Roberts: Sure.
Patricia Chiodo: So, then you’d say 600 schools zone from two cameras should get us to about 1200. That being said, sometimes the school zones can expand around the corner or something like that. So, we installed 300 cameras under the legacy contract in 2019. The emergency order that we are currently operating under now actually has 1687 cameras available for installation on it, of which, this order gives us the second – that 1440. So, there is little bit more run.
Justin Forsythe : I see, I see. Got it. But you’ll be – like you said, you’ll be bumping up against the high end of that. So, there is not to be expected any incremental additions on top of this?
Patricia Chiodo: Yes. And I think we’ll keep that exactly like we’ve always done it. When we get the order to proceed, we’ll let you guys know.
Justin Forsythe : Sure. Sure. And regarding the economics there, is there anything different on the service revenue side? It sounded like from your guide for product revenue, you are about in line with perhaps that last order was on the product revenue side, but is there anything different on the service revenue side?
Patricia Chiodo: Not at all. So, it would be about the same as we’ve been talking about for the total monthly fee, which I think we said that the portfolio in general averages about $3800.
Justin Forsythe : Got it. Got it. Super helpful. And I guess, one brief follow-up, wanted to dig into the London opportunity a little bit. And you mentioned this recent win there where you are providing the overweight shipping program there. And I think you had some operations there and contracts with EPC historically. Just curious if you could provide some color around how that will benefit you perhaps selling other solutions into London, which seems to be one of the kind of leading photo enforcement type of cities probably after New York?
David Roberts: Yes. This is less around photo enforcements. All they do have that in the UK, this is more around sort of like road user charging and some of those types of events. So, to me it’s a great adjacency. We worked with TSL for some time on other initiatives. This was an opportunity to expand, the platform that they had already been using into another area. So, it’s not a huge opportunity, but it is something that just shows kind of the efficacy of both the platform and the relationship that we have with TSL.
Justin Forsythe : Got it. Alright. Thank you both. Appreciated.
David Roberts: Thank you.
Patricia Chiodo: Thank you.
Operator: Thank you. Your next question comes from Daniel Moore from CJS Securities. Please go ahead.
Daniel Moore : Yes. Good afternoon, David and Trish. Thanks for taking the question.
Patricia Chiodo: Hey, Dan.
Daniel Moore : Maybe just talk a little bit about, if travel and therefore rental demand continue to recover and based on bookings, certainly things were looking up as we look into the summer and fall. What’s your visibility or confidence that they are actual hub sufficient fleet sizes to get back to 2019 levels, that maybe early 2022 as you described in terms of your outlook.
David Roberts: So, the best – I think they went actually quite public about the fact that they have had some concerns related to new vehicles. And so, certainly the ones that we know about publicly are entering into the sort of – we might call the newly used car market to try to round out their fleets. But I think, they have been relatively clear about that there would be an expectation that the demand will outstrip supply at least for some period of time as we head into the back part of the year. And so, the OEMs and the chip – really the chip manufacturing can get back into a place where they can fill up that demand. Hard to guess, like what the lagging effect of that is, but it’s certainly – they are certainly anticipating some slowness on that aspect.
Daniel Moore : Got it. But we are talking likely months or quarters as opposed to materially longer than that, understood. And then, just in terms of the – you mentioned the contracts in Ireland, as far as your discussions with RACs, are they kind of ready to start talking again about expansion services into Europe as they get their own ducks in a row here? Any update in terms of the timing and the opportunity around there would be great. Thanks.
David Roberts: Yes. I think it’s going to be – well, not a tale of two cities, but a tale of two countries which is the sort of significant increase in travel-related opportunities here in the U.S. is outpacing Europe, but it continues to grow, but why, because there is still some restrictions inside of Europe. So, I think what, the rental car companies would say is that, they are hopeful that by the end of the year, that the vaccination efforts inside of Europe are pacing with the U.S. and that would allow them to sort of see that travel demand pickup. I know certain countries are definitely trying to target the ability to have more travel come summer. So, I suspect it will be – it will still be reasonably delayed until the vaccination progress makes some more headway inside of Europe.
Daniel Moore : Very helpful. Last one, and then I’ll leave it. But, I believe you said, Georgia, additional 50 cameras or so. Any product revenue associated with that? Or is it more typical at least agreements?
David Roberts: Yes. I think, they are standard operating procedures that are usual kind of lease agreements to your point.
Daniel Moore : Great. Thank you.
Operator: Thank you. Your next question comes from James Faucette from Morgan Stanley. Please go ahead.
James Faucette: Thank you very much and thanks for the color on at least some of the puts ad takes as you think about the rest of this year and where you can get back to some of the key metrics or at least compared to 2019. I am wondering, if you can help us bracket though where kind of what bottom versus top end would be in – or what would be the drivers in variants going forward? It seems like, I think kind of as you suggested, we should be seeing pretty consistent sequential improvement on as long as the world continues to reopen et cetera. So, just looking for a little incremental clarification there.
David Roberts: So, I mean I fully understand the question. So, if you think about what are the – maybe the - when you say puts and takes, James, you sounded like, what are the things that sort of influence to go up and the influencers to go down like what are things technically.
James Faucette: Yes, exactly.
David Roberts: Yes. So, I think in general, you’ve got a commitment from New York City, which gives us a really strong sort of right down in the middle of the road. It’s going to be very, very consistent with previous practice in terms of the way we think about growth. But we still have variable programs and in particular ones that are in school zones or in particular school zone or crossing guard which is our school bus program. The – right now, we would think that those would be “turn back on” come fall and kids are back in school. But there still could be a – to your easier word a take on that, meaning they can get the way, they could be led, they could maybe hybrid learning situations that could potentially impact. And so, up until we are back to full sort of recovery any invariable program I think will have some level of pressure on it. And so, we are hoping that, by going into next year, that that we are back to a normalized runrate. And it would be the same, obviously, the big driver in Commercial Services is, on the tolling side, which we talked about is hoping to get back to that 2019 levels we believe this year. But the variability of things like the cars available as well as any sort of potential setback in the concept of opening or reclosing your vaccination or anything like that could potentially be a take on that. And then, Europe is one that we are still it’s unclear as to when that’s going to start to hit its critical mass because of the current stance of the countries there is certainly more conservative here in the U.S. and until that gets clarified, I don’t think we’ll have quite the same level of ability to predict what we think it’s going to be.
James Faucette: Got it. Got it. And then, just back on the cash flow and the receivables from New York, et cetera. Do you hear that there is progress being made on that? Can you, anyway you can help us on anticipate what you think the timeframe is, before they get fully up to date on that. I can appreciate there are some different issues at play there. But just trying to get a general sense as to when you get caught up or when they get caught up there?
Patricia Chiodo: Yes. And I really have no way of predicting what this city is going to do. What I can tell you is what, what we’ve modeled internally. So, internally, we have modeling that they will continue to add to their receivable on the service revenue side by about $7.3 million a month. And then, we have them starting to pay. So whatever is current, plus about $10 million in backlog starting in, call it, like July. So that we would catch up $60 million from the old receivable and remain current like that from what they were going on. That would still mean at the end of the year they’d still owe us close to $60 million if that were the way that that money flowed. But once again, I –that is just what we are modeling which is probably trying to be conservative. But we would hope that especially on the installation of product that they would be able to catch up quickly. Because I believe that those monies are satisfied for those infrastructure products.
James Faucette: Got it. That’s useful. Thanks guys.
Patricia Chiodo: Thank you.
Operator: Thank you. Your next question comes from David Koning from Baird. Please go ahead.
David Koning : Yes. Hey guys. Thanks. I guess, first of all, I was just kind of going through the 10-Q and when we look at the top three RACs, they all got nicely better in terms of growth in Q1 obviously than Q4. But the other revenue, if we take total segment revenue less those top three, that declined I think by more than any quarter of last year was down like 34% year-over-year. So just wondering what happened to the fleet part or other part of that commercial business?
Patricia Chiodo: I would know, you are going to be the one reading through the 10-Q. Yes, so, as I led through there, it is that we are still getting really strong revenue from the RACs tolling side, let me pull up the other ones and I can tell you where we are from their viewpoint. And you are looking at quarter-over-quarter, is that right? Are you looking sequential?
David Koning : I am looking, yes, compared to the first quarter of last year, year-over-year? And I know, enterprise is really good, right? I mean, it actually grew by Q1. I mean, that’s pretty impressive. But the other – of the non-top three was the part that declined by more.
Patricia Chiodo: Yes. And we are seeing – we are seeing a bigger decline, like a 20% decline on a quarter-over-quarter basis from the SMCs or violations business, so, in the U.S. declined by - well, this is actually U.S. and Europe declined by about 28%. So we are seeing declines in those. And then, we had a fairly big drop off also 43% in our title and registration business from those comparative timeframe. So, and that’s really volume-driven of what’s moving through those. So, but we are seeing sort of that that rebound from the RAC. And I think what happened in those other businesses, is they got lagging revenue. So, even though, we started to see the shutdown in March of last year it really didn’t impact those businesses, SMCs and titles and registration until later. So, we should see growth in all of these products as we go through into the next quarter.
David Koning : Gotcha. Okay. So that’s the good news there, if that's just lagging, it just means that we are going to get nice recovery just maybe a quarter or two later than some of the RACs?
Patricia Chiodo : Yes.
David Koning : Yes. Okay.
Patricia Chiodo : That's exactly right.
David Koning : And then, the only other one just in government, obviously, New York is going to progress, both lines will be good nice sequential growth, I would imagine both cameras and service revenue, but then the rest of the business, the non-New York part, the last few quarters has been nicely stable or even growing. I think this quarter maybe was down slightly sequentially, but if - basically, it's been pretty stable. Is that going to start to grow too? I know you talked about Georgia and other things, but you just expect sequential progression?
David Roberts : Yes, you would anticipate one of the major things that, David, drive that as just government decision-making and obviously during the pandemic, there weren't a lot of new awards that were given and not a lot of decisioning around those types of things, as local governments were highly focused on obviously, the pandemic. So, now that you can start to see these counties and cities are starting to kind of pull themselves out, you saw some decisions in Georgia. You would hope to start to see some of those other decisions getting made here. The summer may slow it down a little bit as it would normally would relative to selling, but then you would start to see a pickup in the back part of the year.
David Koning : Yes. Gotcha. Alright. Thanks, guys.
David Roberts : Yes. Thank you.
Patricia Chiodo : Thank you.
Operator: Thank you. Your next question comes from Louie DiPalma from William Blair. Please go ahead.
Louie DiPalma : Good afternoon, David, Tricia and Sajid.
David Roberts : Hi.
Patricia Chiodo : Hi.
Louie DiPalma : What are your high-level thoughts on the proposed infrastructure bill? And how that could benefit Verra Mobility as a transportation infrastructure provider? Do you think that as a result of this bill, there will be more tolling infrastructure, road user charging systems, and in general, speed cameras that could lead to more demand for your systems?
David Roberts : Well, certainly, so, I think any investment in infrastructure is good for our business, clearly. That as they look to modernize and upgrade that's going to be overall that halo effect should be good. I think in addition, there is also been more conversation. We certainly did a press release a couple weeks ago around sort of a broader view of photo enforcements and having that as a standard play in transportation across the country versus today, where it is a state-by-state decision and thinking perhaps there might be an opportunity for more of a Federal playbook, if you will. And again, that's not pending. That's just conversation at this point. So all that with – but tolling is a proven way to both increase the efficacy of travel time, as well as to raise revenue. And so, the – you would anticipate that over time, there should be more toll roads. And so at the infrastructure bill - again, I am not betting on when that's going to get complete, because I suspect it's going to be quite some time. But that that would still be positive for our business as a whole.
Louie DiPalma : Great. And regarding the pilot that you mentioned in Ireland, is that with a new RAC partner?
David Roberts : It would be with a current customer that has operations in Ireland.
Louie DiPalma : So, would it be with your current European partner or one of your current North American partner?
David Roberts : It would be with a customer that's not already in Europe.
Louie DiPalma : Gotcha.
David Roberts : Yes.
Louie DiPalma : That's it for me. Thanks, everybody.
David Roberts : Yes. Thank you.
Patricia Chiodo : Thank you.
Operator: Thank you. Your next question comes from Keith Housum from Northcoast Research. Please go ahead.
Keith Housum : Good afternoon, guys. I appreciate it and congratulations on New York City. In terms of the remediation efforts you guys have had it put in over the past, however long it's been, could you provide a little bit of context in terms of the impact it had on profitability for how longer part of you sell?
Patricia Chiodo : Yes. We had - we had estimated the expenses in relation to remediation to be about $3 million the majority of which had been accrued for by the end of the year. And then, obviously, the settlement of $1.3 million, which was in the current quarter. So, if you think about this is $4.3 million, $4.5 million, that's right around where – what it cost us.
Keith Housum : Gotcha. And was that – you said you already accrued about $3 million. Did you accrue for that last year? Or was that this quarter perhaps?
Patricia Chiodo : No, the majority of it was accrued for last year. And – but we expended the cash this quarter. But we did a lot of the work this quarter, but it was accrued for at the end of the year.
Keith Housum : Got it. Appreciate it. In terms of – and then, the color about the school bus cameras opportunity for 6,500 school bus cameras, I am sorry, I didn't catch all the details there. If you can you perhaps review some of the context there for us?
David Roberts : For the 6,500, so that is multiple counties. So New York State has enabling legislation for school bus cameras. The 6,500 is a collection of multiple counties that have sort of signed on for the ability to go and deploy those cameras. It doesn't mean that they will deploy all 6,500, but they certainly have the – over time they will start to pilot and deploy those over the course of the next several months and probably over the next year or so. We mentioned that in the statement that we are starting to install for Broome County with 200 cameras, and we would hope to anticipate more installs here over the summer as schools start to realign on getting back – kids back in buses and back to school in the fall.
Keith Housum : Got it. Appreciate it. So, it really is a hunt – life is a hunt for you guys to go out and get new guys in?
Patricia Chiodo : Exactly.
David Roberts : Yes, well said.
Keith Housum : Gotcha. Okay. And then, if I can squeeze one more in here. In terms of the commercial business, have you guys noticed an increased penetration rate or adoption rate of the total transponders with movement toward cashless collections?
Patricia Chiodo : No. What we are seeing is more – we are seeing more billable days per rental agreement. So you could say that that could be in relation to sort of the take rate of the product or it could be that those rental agreements are lasting longer. So they are hitting more tolls along the side. But, if you think about the RACs being down 40% year-over-year on their volume, we are not down by that much. So we are sort of buoyed up by the fact that we are seeing more billable days per contract, for which we have our product in it. We are seeing more toll usage per contract, all of which is helpful for us.
Keith Housum : Great. Thank you.
Operator: Thank you. Your next question is a follow-up question from Jason Forsythe from Credit Suisse. Please go ahead. Pardon me.
Justin Forsythe : I apologize, I was on mute. I am sorry. Wanted to jump back in queue. I just had a quick follow-up regarding something you hinted at. But maybe wanted to dive in a little more and it's regarding capacity constraints, potentially at the big three RACs. And it seems like, obviously, there is a lot of pent-up demand in certain RACs, you could even see potentially positive growth. But, how do you see that playing out? And do you think they are prepared to go into this travel season with sufficient capacity? Or do you think that could potentially kind of limit upside going forward this year and then perhaps, kind of catching up in 2022?
David Roberts : Well, certainly, the statements in plenty of articles on major news publications regarding the issue and pictures of people standing in empty lots at airports waiting for a car to get return. So they can get in because there are no vehicles. It's certainly not an issue related to the rental car companies, because they are very quick and consistent orders from OEMs. It's the OEMs and the inability to get their appropriate chips that run the vehicles that they would like to purchase. So, it's a global supply chain issue that is having this downstream effect. My understanding, again from publicly related conversations with people that work for the RACs is that they are looking at going into the used car market that, which they were just in selling, they are now going back to buy. Their buyers in the used car market are probably the more newly used. So, knowing them and given the year that they have before, I suspect they're going to be pretty scrappy in finding way to make sure that they can fill out that demand, which obviously ends up being a good thing for our business, as well.
Justin Forsythe : Got it. Right. And I think you mentioned this, but it sounded like demand and you saw it, and I think they comment on their calls as well that demand have been pretty robust through April. And so, that kind of would be expected to expand into the summer months?
David Roberts : Yes, there is - I think it's coming back ahead of what many of us would have thought.
Patricia Chiodo : Yes.
David Roberts : Depending on where we were in vaccinations. But I think the openings and the new guidances from CDC and things like that are all boding well for a lot of people ready to get out of their house.
Justin Forsythe : Got it. Got it. And just a minor housekeeping one here, the $50 million to $55 million in product revenue, I assume that does not include any potential addition from Redflex.
Patricia Chiodo : No. No, that's just us.
Justin Forsythe : Alright. Awesome. Thank you very much, guys. Appreciated.
Patricia Chiodo : Thank you.
Operator: Thank you. Your next question comes from Sameer Kalucha from Deutsche Bank. Please go ahead.
Sameer Kalucha : Hi. Thanks for taking my question. What I was wondering is, with the remediation measures that you've put in, or you went through for the NY dot or NYC dot contract, I am wondering if that impacts any economics going forward? That's one. And number two, what kind of mitigation strategies you are putting in to make sure that that you don't run into those issues going forward?
Patricia Chiodo : Yes. There have been – so, we don't – there are some operating procedures that we are going to take on going forward. But most of those – we discovered this issue in the end of 2019. So, most of those we already had in play for all of 2020. So really what it is, it's a method by which we install and how we take pictures of the contracts and there are certain sort of procedures that we and the city have agreed to that we’ll go forward – that we'll use on a go-forward basis. But many of those had been in play at the installation site for 2020 or at least we had step function towards them. So I don't think it's going to be a big lift from that perspective.
Sameer Kalucha : Great. Thank you. Seems like things are progressing well on other fronts. Congrats. Thank you.
Patricia Chiodo : Yes. Thank you.
David Roberts : Thank you.
Operator: Thank you. There are no further questions at this time. That does conclude our conference. You may disconnect at any time. Thank you for participating.
