Deutsche Bank 2019 Technology Conference

Sep 10, 2019

Thanks everyone for coming. Hi. I'm Ashish Sabadra. I cover business and info services companies, and we are excited here to have David and Mike here with us. David is the CEO of Veramobility, and Mike recently joined as the head of m and a. Maybe David, do you want to start off just giving a brief introduction of Vero Mobility and then we'll jump into the questions, talk about the New York City opportunity, Europe and everything, but Yes, maybe absolutely. Yes, happy to do so. Thanks for being here today. So my name is David Roberts. I'm the CEO of the company. We are a leader in smart transportation. We principally serve two customer segments. About 60% of our business comes from what we call commercial services, where we serve commercial fleets, and that is principally serving rental car companies like Hertz, Avis and Enterprise related to their tolling and toll management programs. So we are the number one provider of outsourced toll management programs for rental car companies in The United States. In addition to that, we work with fleet management companies to help them with toll management, violations and title and registration services. On the other side of the business, what we call government solutions, we're the number one provider of photo enforcement in North America. So that includes red light cameras, speed cameras and school bus stop arm cameras. Now that's a great introduction. And maybe we'll jump into the question. I want to talk about the New York City opportunity. So you recently won a big mandate. Maybe you can talk about the opportunity, how big it is, the implementation timeline, any details, color on Sure. That So several months ago now, New York City legislators voted to expand significantly the school zone speed program in New York City. We've been the operator we've been the partner for New York City for well over a decade now for photo enforcement, and they had been operating in about 150 school zones, and they're expanding that to seven fifty school zones. They have what's called a vision zero mandate, which is they want zero fatalities related to traffic deaths inside of New York City, and thus they they think of photo enforcement as a key plank in that opportunity. So over the course of the next several years, we'll be installing cameras in all of the school zones that are on in Manhattan, basically, which will be a total camera count. Again, we have about 300 today, a total camera count of about 1,500. That's great. And then how should we think about the revenue model here? Is it the installation? And can you talk about the monthly recurring fees going forward? Yes. So the way that the model works for New York City is in and about half of our portfolio, we get a fixed fee per camera per month. In addition to that, we also we sell the actual hardware to New York City. And so for both of those, think relative to what we charge in terms of the per month, it's, call it, approximately $3,800 per month. And then we also charge for the installation and the camera and the installation and all the work that goes into set up a camera, call it, in between the 60,000 and $80,000 per camera approximate. That's good. And then as you mentioned, you already had 300 cameras. You installed around 59 cameras in the second quarter. How should we think about the pace of installation going forward? Yes. We've been operating at a very high clip. The way that the city has asked us to do it is to think about 40 cameras per month through the end of the year, including December, and then that rate would change to 60 per month starting next year, which effectively turns out to be about a two point five year time line to get the rest of the cameras installed. And then it obviously includes there's work that Citi has to do to make that happen. There's work that we have to do. There's weather. There's all these kind of things that can impact the timing of that, but that's a good rough estimate of what it would be. That's great. And then, obviously, these cameras are getting installed in New York City, but the the law, the legislation was passed by New York State. Is there opportunity for you to do it for other cities within the New York State? Yeah. We so we already work today with, Yonkers, White Plains, where we operate other programs today. So the state has enabling legislation to allow red light cameras as well as, they just passed legislation for school bus stop arms. So that's a brand new opportunity where we put cameras on the side of school buses so that when the arm is extended and the lights are on, if someone tries to drive the other way if you've ever seen those videos on the local news, they're quite scary, and we see them all the time. We'll give a buy we will give a a fine or ticket to someone that does that. So that's new to New York City or to the New York State as well. Okay. And that program would be applicable across the state? It is. That's gonna be anywhere in the state. Okay. Good. Maybe just sticking on to the photo enforcement part of the business, the government services, you also highlighted a big TAM addressable market in Georgia. Can you help us understand what happened in Georgia and why the addressable market is? Yeah. So one of the, you know, the challenges as well as the opportunities in photo enforcement is that you do have to have state legislation that enables it to occur. Cities on their own can't decide that they're gonna start issuing fines. They have to have a law that backs it. So we, we are a participant in working with state, state legislatures related to passing laws that promote phone enforcement. We were involved in the state of Georgia for the last couple of years helping them think through the best way to roll out what they wanted, which was school zone speed, which is solving one of the biggest problems, which is speeding in school zones. That law passed in, I believe it was April or May of last year. And so now that's a for our business, that's about a $50,000,000 TAM. If you look at all of the school zones in the state of Georgia, right now, we'll be more focused, obviously, in the Atlanta area, which is where the mass of the opportunity would probably be. That's great. And then on the last earnings call, you also talked about a couple of lens in the Washington state. Can you just talk about what's going on in that state? Yes. So in Washington, we have there's a few states that have all three photo enforcement for school bus, red light and speed, and and Washington state is one of them. We've been working in Seattle and King County for many, many years, and there's been some expansion of their school zone program there as well. Right. How many states currently have this program? And what's the which are the states which are on your radar as being the next big opportunity similar to Georgia or New York State? Yeah. So right now, there's 20 states that have allowance for photo enforcement of some kind. I think twenty twenty one. I think in addition to that, we would say that right now, other states like California, which has it, would be a state that we'd like to fix in some way. Excuse me just one second. Mike, maybe if you can ask you about the we'll jump here a bit and talk about maybe you want to give a quick background. You joined the company recently, so you want to provide a quick background? Sure, sure. So I joined in April 1. I was running M and A for a company called Here Technologies, which is a global location technology provider. So I joined Veramobility on April 1 to really launch the corporate development strategy function at Verra Mobility and build a comprehensive global M and A function at Verra Mobility. Okay. Maybe we can talk about the M and A opportunities. What's the what are the priorities from a capital allocation Sure. Yes. Mean one of the first things I wanted to do when I joined was create a comprehensive M and A program, which to me started with the first principles. And when we think about it, we think about it as strategic fit, financial discipline and integration focus. With strategic fit, I'll get into because that relates to the deal thesis of why Verra Mobility may be a unique buyer for any companies of would be interesting to us. Financial discipline is just being about relentless about our cost of capital and making sure that from the cash flow of the business returns, the capital associated with the risk of the deal that it takes to get the deal done. With integration focus being making sure that as a corporate buyer, we have long term plans in place to realize whatever is the deal thesis for doing the deal in the first place for Vero Mobility. But when I think about strategic fit at Verra Mobility, I think about three things, three areas that are interesting to us. The first one is accelerating our current bet. So as we look at things that we're already investing in organically, things like European expansion, if there are ways for us to accelerate some of that and get there faster, cheaper, whatever that might be, those are obviously very interesting to us. The second piece would be any companies that are in similar spaces that we are, where cost synergies would be meaningful to us to look to take a look at those. And then the third piece would be looking at the areas where VeriMobility brings unique assets to the space, and those are really about our customer relationships, where our customer relationships on the government side, municipality side are super strong. Our customer relationships on the commercial side with our RACs are very strong. So looking at opportunities where we can push new products and expand our existing products through our existing customer channels would be areas that are very interesting to us from a revenue synergy side. So those when I look at strategic fit, those are the three things I think about to fill that pillar for us. That's great. And maybe just a quick follow-up question on those three opportunities. But maybe if you take a step back, can you just talk about the commercial services? That part of the business has been growing consistently in the teens. What's driving the growth? And how do you think about the growth drivers going forward? See if I can finish this The one or good news on the Commercial Services business is that we have an automatic tailwind with the advent of new toll roads, the advent of cashless toll roads and an ongoing effort of our customers that are trying to increase adoption through pricing. And so all those kind of come together, which have generated really outstanding growth. If you look at the first quarter and second quarter this year, they were being sort of the teen, 12% sort of level for the first part of the year. So we were super excited about that. That's great. And then as you think about the penetration, right, you work with all the three rental car companies. What is the penetration? And how do you think about penetration going forward? Some of these secular trends, how do they influence penetration going forward? The penetration is unique because it's very location specific, meaning, we live in Arizona. There are no toll roads. So the adoption level for tolling in Arizona is zero. If you are in Miami and you drive out of the airport, you hit a toll. The adoption level in Miami is 85%. So it's very specific. So when you look on average, you're going to be looking at approximately around the 20% mark, And that has slowly gone up really due to the three things that I listed earlier, which are more toll roads, more cashless toll roads and changing in pricing philosophy and pricing products that allow them to incent people to use the program that may have been avoiding it elsewhere. Sure, sure. On the call, you also mentioned the product and operational innovation, and that's driving increased adoption. Maybe if you can elaborate on that? Yes. So we did the large acquisition of HTA a couple of years ago. The result of that is a tremendous amount of synergy that we're seeing flow through because the business scales very, very well because effectively, you're talking about three major customers on a we have different platforms, but the core of that now can be shared. And so we were able to get a fair amount of synergies as a result, and therefore, the operating leverage of the business is quite high for every incremental transaction that comes in. It's very, very profitable. And then going back to the point that you made, like, for example, if there's a cashless tolling, the penetration is definitely much higher. So can you give an example, anecdotal example, let's say, Boston Airport Boston So Toll Boston converted to cashless about well, gosh, it's probably been two years now right outside of Logan Airport. Prior to that, the adoption of the program was in the low teen, maybe 10%, 12%. Immediately post that going up, it spiked up to 35%. Again, it's when it reduces optionality. And if you're going to use it and it's cashless, you opt in whether you pull the box down or not. We get the license plate, and we charge it regardless. So it just creates the incentive to use the program. That's good. And then just quickly on the New York City congestion pricing. So New York City is implementing the congestion pricing. Maybe a two part question there. We'll first talk about just on how once that program is enabled, how will that help you on the commercial side? Is there opportunity there? Yes. So congestion pricing is effectively a tolling program. It's a tolling program that charges people to be in a certain area of a certain city at a certain time, and the rates kind of change. So that benefits the way that will impact our business is through when rental cars go into the congestion zone, they'll be charged that fee, presumably. They haven't actually figured out the value, but presumably. And our program would then account for that. So it would be just like they have a tolling program. So there would be a fee associated with that that we would charge. That's how it'll that's going to not start for some time. The program doesn't kick off until 2021, and then there'll be some rollout after that. Okay. And that's helpful. And maybe the second part there was, if New York City is successfully with its congestion pricing, do you see other cities adopting it? Is there an opportunity for you not just to benefit on the commercial side, on the other hand, like you manage the photo enforcement infrastructure? Is there opportunity on the government side as well? Yes, we think so. And we were very active in looking at the bid of doing the congestion pricing scheme for New York. We just arrived at the conclusion that it was so big and very complex that we really wanted to focus our energies on really sort of in hand opportunities that are fantastic that we have already with the city of New York. And we really wanted to wait and see. This is the first congestion scheme in The United States, so it's a little bit different. But we see over time that there'll be other cities that are gonna do it. Seattle Seattle, Philadelphia, DC have all proclaimed that they're gonna be looking at it. So we don't think we're out of the game in any stretch, but we didn't wanna risk it all on this one big bet in the beginning. Yes. That's helpful. A question on TV as well. So you have a mobile app, TV. You also have signed up a couple of partners, including YazBuddy. Can you just talk about your strategy with Peezy and the partnership opportunity there? Yes. So Peezy is a mobile app that you can download. You can go to the App Store right now and download it. It's called Peezy, P E A S Y. It allows you to register your vehicle with us, and you no longer need a transponder. You can go through any toll road in the country and not have to pay a fine that we would charge you for that. We would pay it on your behalf. So it sort of gives you the potential for an interoperable solution today. The way that we've been distributing that is through channel partners. We've aligned ourselves with companies like GasBuddy, where you can get a discount on the PZP by going through GasBuddy as well as with Arrive. We have a partnership with Arrive that allows you to do parking. That has not launched yet. That will launch this quarter or maybe next quarter, where you can actually use the Arrive inventory and register parking on the Peezy app. So it's all relatively new and small, but we plan on using more channel partners like that and continue to grow that base. That's good. That's good. And then on the last call, you also mentioned that there was a tool data service with a leading ridesharing company. Was wondering if you can elaborate on that. Yes. So one of the things you always want to do is you have all these assets in your business and how do you leverage them for the betterment of the company. And we may have more tolling data than any company in The United States as it relates to the where what the charge of tolls is at what time of day and a challenge that if you're a rideshare company and you're using independent drivers is they're charging you back for the tolls, are you sure that that was the actual price of the toll or are they charging you a price that may not be the price of the toll? So we're able to give them data that tells them the charge of every toll of every gantry in The United States so that they can reconcile that discrepancy to make sure that they're only reimbursing for the tolls that they should. Okay. No. That's good. And are there more opportunities like this where you have this data assets? And how do you help migrate Yes, mean we look at OEMs. We look at other sort of nontraditional fleets like rideshare, carshare as opportunities that could use our data. And whether or not they're using PZ or whether or not they're just using the back end systems, understanding the price and the payment of tolls, where the toll roads are, how much they're charging, that's all data that is useful to these fleets because that's a very, very expensive cost for them. So we can help them manage that more effectively. Then you talked about the Arrive partnership that you plan to launch in quarter or two. Are there opportunities to work with other parking providers? How do you think about like cities parking in cities can be a challenge? You want talk about that? Yes. So in general, yes, if we think about our current customers and problems they're trying to solve and what we currently solve for local governments, municipalities is a photo enforcement problem. But parking is a problem they're trying to solve. We have parking incorporated in PDO, we will. So thinking about how we can provide similar services, whether it's on the enforcement side or which is what we do today in photo enforcement or looking at larger opportunities in parking. It's certainly a market that's interesting to us as we think about expanding our product portfolio for cities because it's a problem that we're trying to solve today. So it's on our radar and it's an area we're looking at if we find the right entry point for wear mobility. But it's a problem all our customers are thinking about and trying to solve today. That's correct. Let's shift to Europe. So Europe, congrats on the partnership with or signing the contract with the French tolling authority, APRR. And I was just wondering if you can provide some color on how big the opportunity is in Europe and what does this contract mean for the pilot? I think it's important to note that the the one of the major sort of planks of the business that we have here in The United States is the integration with toll authorities, that we have the ability to make a payment on behalf of a vehicle that's registered to our accounts. That is part of our secret sauce. Well, I guess it's not a secret, but I just told you. So if you guys will just keep it in this room, that'd be great. So that is how I mean, that is the way that you create interoperability and the ability from a vehicle that moves from one state to another or one country to another. It exists within the context of those integrations. Therefore, we needed that to exist inside of Europe, and we picked France as our first location. There's more toll roads in France than in all of The United States. So it's a target rich environment, if you will, as it relates for rental car companies because that's where their challenge is. There is no rental car program today that they use across Europe to manage tolling. So that was the opportunity. We look at Europe as a total, as a $300,000,000 total opportunity when you look at fleets, rental cars, tolling violations and everything else. Okay. And so what would be the next steps in terms of you've talked about a potential pilot launch in the fourth quarter. What are the steps involved? Where are you in terms of managing the relationship with the rental car companies to launch the product? Yes. So David mentioned, I mean, there's two pieces to it. You need the relationship with the tolling authorities and then you need the relationship with the customers. The good news is our current customers in The U. S. Are the same customers that operate in Europe. There are a few others, but they are asking us to solve the problem in Europe. So now that we have the relationship with APRR in France, it will be working on getting pilots rolled out in France. And then in parallel, we'll be working on creating the relationships with the other countries in Europe, focusing on U. K, Ireland, focusing on other companies in Southern Europe to expand where we can provide the services to the rental car companies. So the next step will be pilots with our current customers and then looking at expanding that through relationships with tolling authorities in other countries in Europe. That's great. As we think about the market itself, I think it's like $300,000,000 opportunity. How should we think about the ramp? Is this a multiyear revenue opportunity? Yes. We've always said that Europe is a ten year opportunity for us, that we got to prove it. We want to work with our partners to do so, but it's going to be I think what you'll see is a lot of proof of concept and a lot of adoption going into next year as we not only pull out our rollout in France but also Southern Europe. And then from there, you'll start to get a trajectory up. So like you could see the end of next year sort of being this trajectory up of we've got line of sight, we've proven it, and now it's just going to be how fast do we roll it out in the rest of Okay. No, that's good. That's good. And then when you think about working with the rental car companies, how are you able to leverage your existing relationship? And then you also made a tuck in acquisition, EPC. Can you also help us explain how that acquisition has helped you managing that relationship with the total authorities? So I guess the first maybe you answer the second part. I'll answer the first part, which is we definitely leverage relationships here. Our rental car part of the reason we're doing this is our customers asked us to. They wanted us to come to Europe because there was no solution, and they realized that it was an opportunity not only for them to generate income, but also to solve a problem for their customers given the proliferation of toll roads. So That was a big genesis of why we're going there to begin with. And then maybe talk a little bit about Yes. I mean, so EPC does cross border violations in Europe. So EPC is really the foundation with which we can use to expand our presence in in Europe rather than building it from scratch. They have relationships with many of the key countries in Europe, not necessarily with the tolling authorities, but it gives us credibility with which to launch a business in Europe that it would be hard to build organically. So it serves us as a foundation from which to launch our RAC tolling operations in Europe. That's good. And then just maybe you talked about on the M and A side, Europe was definitely one of the opportunities. Maybe you can elaborate further how you might be able to use M and A to speed up your deployment in Europe? Yes. Just in general, we would be interested in companies that we'd be interested in areas that gave us the contractual relationships that are needed because they take time to create and build. So we'd be looking at as we just think about the things that we need, which is customer relationships with the racks. We have those through our business in The U. S. Establishing the relationships with tolling authorities across Europe is the next step. So anything that can accelerate those would be interesting to us. But M and A is an option, right? I mean we're we it is just that. It's an option as we think about the faster and cheapest way to do things. So we are pushing forward organically on those efforts. And if we find the right targets that help us accelerate those at the right price with the right strategic fit, right right cultural fit, we'll look to move quickly on those. Otherwise, we'll continue building it organically because we think we have the the ability to do that as well. That's good. Sure. Yes. So I think if I remember correctly, that really comes down to I forget the total number, but it's billions of vehicles that go by our cameras daily across The United States. And so there's data and information that come from those as a result. So as you think about the intersection and and what's happening there in the future, the way that autonomy and connected vehicles go is they need to know what's happening at the intersection, and they need to know what the cars are and which way they're going and how fast they're going. And so we we sort of sit at where the the opportunity is for where autonomy and and connected vehicles are gonna exist, it's at those intersections. So for us, that data that we're capturing is just part of the equation that we can expand into as we think about other areas associated with intersections that will be relevant to the future of where autonomy is going. They all they are is they're just getting data and signals from all the intersections to tell them what's happening so they know how to respond when they get we we have multiple thousands of intersections that we're already monitoring, and we can use that data to help that. So we just have to just have to really craft our path of what are the moves that we want to make so that we can turn that into something special. Could you just share a little bit more about the financial model? It looks like your consensus revenue number is like $440,000,000 for 2019. What's the mix between hardware, recurring services, etcetera? And what would the margin profile look like long term? So I don't have the numbers in front of me, so I'd have to so we do generate some product revenue. It's very specific to one customer, which is New York City. So that's sort of a idiosyncratic view of the way to think about our revenue. So we always think about the service revenue. It's going to have in front of me here. Where's the product? Oh, product sales is $26,000,000 And then you would anticipate that's going be going up given the expansion in New York City going forward. The margin profile on that is very consistent with the margin profile that exists within the Government Solutions business, so call it 38% to 40%. If that answers your second part of your question. I mean I think that we've the way we don't get too detailed into the way we break out margin, but the business operates effectively at a total variability margin of, call it, 55% for the business. And we're trying to get that better. Any other questions in the audience? Maybe I'll ask a few more questions about enforcement. So we talked about red light sorry, red light, school speed as well as school bus arm. Can you help us understand how's your revenue right now? What are really the growth drivers? Where's the big growth engine? Is a is a flat it's the most mature photo enforcement. It's gonna be flat. You won't see many states that are gonna well, any I don't think you'll see any states that are gonna promote legislation related to new red light. What you're gonna see is this sort of purpose built photo enforcement like school zone or work zone, and that's where they brought this. Okay. And then just in terms of Texas, can you just help us understand what happened in Texas? And is that pretty unique in that sense? Or there are other states that we need to monitor? Vote enforcement is a political you know, it has a political aspect of it. Texas was an example where state legislators thought it would be better to not have safety inside of intersections, and so they took it away. It does happen from time to time. It's pretty rare. And, really, the shift has been the other way with promoting a new legislation versus takeaway legislation. So New York, Georgia are examples where there's been expansion. Texas is really the only state legislation where there's been a takeaway in the last several years from where they were actually banned. And then just maybe going back to the margin question that was asked earlier, how should we think about the incremental contribution margins in the business? Like what's the incremental contribution margins on incremental revenues? And how do you decide or how does management focus on margin expansion versus reinvesting back in the business? Yes. I mean I think the way we've always looked at it is both of the businesses scale very well, so incremental margin is very, very high for both of our businesses. That being said, we sort of identified early on that margins would eventually sort of drift down. We took on we're a public company now, so there was a lot of public company costs. As we look about growth and investment, we're gonna we're we're not gonna not invest in Europe and make things go faster there to protect our margins. We need to grow there, but we believe the long term is gonna be much stronger. And even as we look at M and A, we tease Mike that he needs to find deals that have better margins than we have, and there's not a lot out there. And so we've got to focus on growth and expansion and what are the strategic natures of it, not just protecting the margin. We at our longer view, our margins stay very, very robust. Okay. That's helpful. Maybe going back to the commercial services, can you just help us understand how long are those rental car contracts? And then in addition to providing tag readers, what kind of relationship do you have with those rental car companies and how deep and wide your motives? The contracts are about five years, give or take, and we do a lot. Beyond getting a transponder, which is just one of the things, we have a call center that answers phones from people that that when they go to ask about the toll management program, they talk to our people. And people at the counters, at the airports that are installing the transponders to make sure they have their right loan, we support them in marketing. We we have a software system that reconciles payment to the toll authority to payment to the billing and the renter. Those are all highly integrated into very custom systems that have been built there over the course of a decade. So we're we're we're a big part of their business. We're very much sticky and intertwined, not just the contract. And we do we do a lot of work on their behalf. Okay. That's helpful. And then one of the things that you also mentioned was there was a change in pricing by a few rental car companies. Can you just elaborate on that? And what how you've benefited from that? Yes. I mean, overall, the primary form of pricing was a rental day, which you were charged a fee per day that you have the car. That wasn't really perhaps the most consumer friendly versus having a program that said, we'll charge you every day that you run a toll, and that's called usage day. And that's basically the programs that are out there now, which is everyone's moving to. It's a benefit to us because it's a better program, it's a stickier program, it's a longer term program, and it doesn't impact our business because our our the way that we make money hasn't really changed in in that pricing, so we're we're effectively okay with that. Okay. So it essentially helps drive better adoption because Better adoption, better exposure, less noise. You know, sometimes those programs can have noise with state attorney generals. It's great. It's a it's a very when you say, hey. I'm gonna charge you a fee for when you use this program. In exchange for that, I'm going have a transponder. I'm going to have the marketing. I'm going to take on the like, it's a more reasonable exchange, and I think it's better for everybody. Okay. That's helpful. Can you also talk about the capital intensity in the business? There are times when you do install red light cameras, then many times, basically, the states which take that on. So can you help us understand the capital intensity? Is it very capital intense or very capital light? Yeah. It's almost all of our CapEx is almost exclusively inside of government solutions. You know, we're we run around 20 to maybe 25 to upwards of $27,000,000 a year. But the way that that works is that CapEx is immediately once it's in the ground and producing revenue, we're getting our payback very, very quickly Yeah. Which is sixteen to eighteen months. And so it's a pretty useful it's a good use of our capital in that regard. It works out okay for us. Yes. So when I think about it, right, 25,000,000 versus EBITDA in the range of $240,000,000 it's a very small percentage. So how should we think about the free cash flow conversion in the business? It's very high. It's the best way to describe it. I mean, I think overall, if you look at our approximately to the 50% mark is where our free cash flow conversion is. It sort of correlates less taxes and everything, but it kind of correlates to our margins. Okay. And then Mike talked about the M and A opportunities, but how should we think about capital in general? Other than M and A, how are you thinking about it? Where's the leverage? Think the leverage is likely about 3x right now. How do you think about leverage and the use of cash? So our first use of capital is to accelerate bets that we've already made. So that's whether that's in our core business or things like we're doing in Europe to make that go faster. Second thing would be, I think, in M and A. And maybe you can talk about the rest, sorry. Yes. In terms of just how we think about capital. Yes. I mean, look, we'll think about it when we look at how to deploy capital. We'll put everything next to each other and see what the best use of that is, whether it's M and A, whether it's internal investment or it's paying down debt. Primarily from a leverage perspective, our current hypothesis is that we would delever over time mainly through growth, that we would use the capital we have to find the right growth opportunities because we think they exist using things like our customer relationships and expanding our product portfolio. So we think the opportunities are there to expand through growth and delever through growth rather than through our using our cash flow to do it directly. But we have to find the right opportunities to do it. So and that's partly strategic and partly opportunistic as things come up. So as we go, we will put all the various uses of capital next to each other and be very as we think about it. We we definitely are not a stand and steer type of company despite our cash flow. We look at growth as our mandate for the next three to five years, and that's what we're gonna do. You asked about debt. I mean, I think we're down to about three and five times, 3.4 3.47. Yes. 3.7 at the end of second quarter, but expected to be 3.2 by the end of the year. Yes. Exactly. So given that, obviously, we delever very, very quickly. I think we're comfortable at a four times leverage given the way that we delever, especially as we think about using all that excess capital to go to growth. It's a very cost efficient way to do it, and so we'll continue to do it. That's good. Maybe moving back to the commercial services. When we think about we talked about the cashless road, but can you also talk about the new toll roads? Have you seen more toll roads come through? And how can that help also drive increased adoption? Yes. I mean there's a lot of more toll roads that are being built, and probably are seeing them in your local area. There's just, toll roads are, what I would say, a very fair, very effective way to help fund infrastructure deficits. They do provide a benefit in most cases where it's more convenient, it's faster, more reliable journey, and that that those dollars can be used to invest in technology, which is why congestion pricing is coming to New York is that they have a huge deficit in new investments, so it works quite well. And every one of those toll roads is a you know, it's basically a new customer for us almost if you wanna think of it from that standpoint. It's good for our business. That's good. When we talked about photo enforcement, we did talk about the school speed. Maybe you can talk about the school bus stop cameras. Are there new legislation coming on? I think New York State recently passed legislation. How should we think about the opportunity there? Yeah. We that just happened, so I don't know what we haven't I don't have, like, an official statement for TAM yet, but it's a it's a great opportunity. School bus is a very it's one of the few products that we have that's actually popular where I remember when we launched it in Atlanta, we actually had moms calling us and asking if they could get on the bus where their kids were. It's a it's a form of protection for them. It goes with the purpose built school, school safety. So we look we feel very good about that opportunity and that other states will look at New York and say this is something we need to do, and we would anticipate more school bus legislation in the in the day in the years ahead in other states as well. Okay. And then how does the economics for school bus compared to, let's say, other kind of programs that you have? It's a little bit different. The revenue model is a little bit less given the fines and frequency of fines because the buses are moving around. But it does operate at a little bit lower margin than does our school zone speed, as an example, but still very, very positive and attractive margin for all. That's helpful. But the revenue model is the same as it could be for paid citations. Okay. That's helpful. And then maybe just jumping on to Europe once again. You've helped quantify the opportunity, but can you just help us understand why is the opportunity so big? Is it more like can you help us understand, like, people here may not really appreciate the toll roads versus rental cars in Europe versus U. S, so help compare and contrast. Yeah. I guess the way to think about it is it's completely greenfield. So there is no pan European solution today for rental car. They are handling it through violations or they're handling it themselves locally. So given that and the fact that this is a very revenue positive for them, we look at it as effectively greenfield. We're the only company in the world that actually provides this service today, so we should feel pretty good about our opportunity to execute on that inside of Europe, which is why we deployed as much capital as we have to take advantage of that opportunity. Okay. That's helpful. If there are no more questions, I'll stop. One second. One more question. Yes. On the commercial services side? Yes. So just in case people ask, what's the competitive landscape? Right now, in The United States, at least, there is no other provider that does fleet managed commercial vehicles. There are some providers that work in the trucking space, so commercial trucks, the big trucks. That's a space that we've chosen to not be in, at least for the time being. So that's the only relative to the sort of capability, that's the only one. And those operate completely different than a retail consumer facing model, obviously. Inside of Europe, it's a little bit dependent on what country I am. Most of the time, they opt they just let the the driver pay cash or figure it out themselves, or they get the violation and they process the violation. But there are some providers that are doing some things there as well, but very, very small. Nothing of I I don't think there's more than a 100 vehicles that have anything related to it. So, you know, we're very fortunate that we there was only really two providers before when we brought them together and created one, and we have the most experience, the most capability, the most knowledge of how to administer these programs. So again, another reason why we felt really excited about the opportunity in Europe. Maybe if you want to talk about the competitive environment on the photo enforcement side as well and your market share there. So in photo enforcement, we have about 50% market share. Our principal competitors there is a company called Conduent. So Conduent inside of their transportation segment has a photo enforcement piece. And then there is a company out of Australia called Redflex that also has some enforcement. If we're 50%, they're roughly 20% each, and then the rest is divided up into some very, very small players. But when you look at large metropolitan areas, we tend to be the the de facto provider for the larger program.