Verra Mobility Corporation (NASDAQ:VRRM) Q2 2023 Earnings Call Transcript

Verra Mobility Corporation (NASDAQ:VRRM) Q2 2023 Earnings Call Transcript August 9, 2023

Verra Mobility Corporation beats earnings expectations. Reported EPS is $0.29, expectations were $0.27.

Operator: Good afternoon, ladies and gentlemen, and welcome to the Verra Mobility Second Quarter 2023 Earnings Conference Call. At this time, all lines are in listen-only mode. And following the presentation, we will conduct the question-and-answer session. [Operator Instructions] This call is being recorded on Thursday, August 9, 2023. I would now like to turn the conference call over to Mr. Mark Zindler, Vice President, Investor Relations. Please go ahead.

Mark Zindler: Thank you. Good afternoon, and welcome to Verra Mobility’s Second Quarter 2023 Earnings Call. Today, we’ll be discussing the results announced in our press release issued after the market close along with our earnings presentation, which is available on the Investor Relations section of our website at ir.verramobility.com. With me on the call are David Roberts, Verra Mobility’s Chief Executive Officer; and Craig Conti, our Chief Financial Officer. David will begin with prepared remarks, followed by Craig, and then we’ll open up the call for Q&A. During the call, we’ll make statements related to our business that may be considered forward-looking, including, but not limited to, statements concerning our expected future business and financial performance, our plans to execute on our growth strategy, the benefits of our strategic acquisitions, our ability to maintain existing and acquire new customers, expectations regarding key operational metrics and other statements regarding our plans and prospects.

Forward-looking statements may often be identified with words such as we expect, we anticipate or upcoming. These statements reflect our view only as of today, August 9, 2023, and should not be considered our views as of any subsequent date. We undertake no obligation to update or revise any forward-looking statements. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our 2022 annual report on Form 10-K and our 2023 quarterly reports on Form 10-Q, which are available on the Investor Relations section of our website at ir.verramobility.com and on the SEC’s website at sec.gov.

Finally, during 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.verramobility.com and on the SEC’s website at sec.gov. With that, I’ll turn the call over to David.

David Roberts: Thank you, Mark, and thanks, everyone, for joining us. We delivered an outstanding second quarter, highlighted by 9% year-over-year revenue growth, of which 96% was recurring service revenue. Moreover, we delivered adjusted EBITDA growth of 7% over last year and converted 54% of adjusted EBITDA to free cash flow for the quarter. Starting with Commercial Services. We delivered 11% revenue growth driven, in large part, by an exceptionally strong start to the spring and summer travel season. Additionally, FMC revenue grew 17% over the same period last year, aided by the growth initiatives that we have been executing in the businesses. Underpinning these strong results are several key macro drivers. First, travel demand remains robust, with year-to-date TSA volume at approximately 100% of 2019 and about 115% of 2022 volume.

From a qualitative standpoint, the sentiment regarding the strength of travel from the major airlines, hotel chains and rental car companies remain strong through the remainder of this year, aided by the continued pickup in business travel. We are also seeing continued growth in cashless U.S. toll roads, which is an important secular tailwind for our Commercial Services business. Through the first half of 2023, 4 new cashless toll roads or bridges were constructed, including the I-70 Express Lanes in Denver, Colorado. In addition, the Virginia Dulles Toll Road outside of Washington, D.C. converted fully to cashless tolling. As you know, our Enterprise agreement is up for renewal and well underway. The contract initially expired at the end of May, and we are operating on one-month extensions while the parties work on the contract renewal.

I anticipate the agreement being completed this month. In addition, as I mentioned earlier, we have further strengthened our FMC and direct fleet business driven by the investments we’ve made in expanding customer relationships with fleet management companies and the addition of a direct sales function. The team has done an outstanding job of offering a suite of our tolling, title and registration and violations management solutions to provide a customizable and value-added proposition to our customers. Over the first half of this year, our focus on FMC relationships and the build-out of a direct sales team has resulted in significant growth in combined vehicle solutions we deliver to our customers. Moreover, the FMC and direct fleet business will exit the year on a $60 million run rate, a low double-digit growth rate over last year, and going forward, we would expect the business to deliver growth consistent with the overall Commercial Services’ long-term growth rate.

Moving on to Government Solutions. Our revenue grew 6% over the same period last year, of which 96% was recurring service revenue. GS sales growth is benefiting from the prior year completion of the New York City build-out and the city’s decision to transition to 24/7 monitoring as well as program expansion with existing customers and new camera installations with new customers. Looking at the big picture in Government Solutions, we are operating amidst the most favorable legislative environment I had experienced in my nine years with Verra Mobility, and states are increasingly turning toward enhanced automated enforcement to increase traffic safety for their citizens. In the second quarter alone, significant positive legislative actions were taken in Florida, Colorado and Connecticut.

Starting with Florida, legislation authorizing automated speed enforcement in school zones and school bus enforcement was signed by the Governor. Based on prior experience in other states, it typically takes about six to 12 months before RFPs are issued for bidding. In Colorado, legislation expanding and creating added efficiencies for automated speed enforcement was signed into law. Connecticut also passed legislation authorizing automated speed and red light enforcement. We expect that potential revenue opportunities across the three states will be an approximate $50 million to $60 million run rate once fully implemented. It’s too early to estimate the specific revenue cadence, but in our experience, these programs typically ramp up across the municipalities that choose to launch enforcement programs over a period of one to three years.

In addition, although it is still early in the process, we’re seeing continued positive momentum in California and Pennsylvania, and we’re excited about helping governments meet their constituents’ demand to help keep children, drivers, pedestrian, cyclists and workers safer on the road. With respect to contract signings, during the second quarter, we renewed a top 5 Verra Mobility safety enforcement customer contract. Our customer renewed their base business relationship with us for a two-year contract term with three, one-year option periods. In addition to this base business renewal, our customers selected us for additional expansion opportunities among red light, speed and school bus stop-arm enforcement, which has the potential to more than double our existing run rate with the customer.

Additionally, we successfully rolled out the Connecticut work zone speed program, supporting their pilot program. The execution by the implementation team was fantastic and the program is driving the intended driver behavior changes Connecticut is seeking. We believe that we have hit an inflection point in automated photo enforcement where citizens are demanding safer roads and governments are responding with enhanced automated solutions. Through our technology, we are helping governments quickly and efficiently deliver tangible results for their communities. Finally speaking, these automated safety programs are highly effective. We and our customers see demonstrated lower speeds, fewer red light run-in collisions and a general adherence to road safety and traffic laws, the end result being a measurable and sharp reduction in crash-related fatalities and injuries.

Across the board, this is a truly exciting time for our company and for all those who are passionate about public safety. Now let’s discuss T2 Systems. We delivered revenue growth of 14% year-over-year, with 76% being recurring subscription and service revenue. Importantly, the continued growth in T2 SaaS and services was a key influencing factor in our decision to acquire this business in the fourth quarter of 2021. And notably, T2 SaaS and service revenue grew 11% over last year, a key performance metric driving future margin expansion in the business. Moreover, we expect to see a higher rate of growth in SaaS and services during the second half of this year. T2 Systems also closed a large new customer in the university space that included our flex enterprise software solution as well as our gated facility solution.

On the municipal front, T2 closed 15 new municipal accounts in the Tier 2 and Tier 3 municipality space, and we continue to gain traction, adding new logos in that segment. In summary, I’m incredibly pleased with our operating performance and am optimistic about the future industry trends. As I said previously, we have a great business with a bright future. The underlying KPIs driving our commercial services business are strong and durable, and we have an incredibly favorable legislative environment, with more and more cities and states gaining conviction around keeping roadways safe, which will drive the future of our Government Solutions business. And the complexity surrounding university and municipality parking represent prime opportunities for the future growth and profitability of the T2 business.

Craig, I’ll turn it over to you to guide us through our financial results and current year outlook.

Craig Conti: Thanks, David. Good afternoon, and thanks to everyone for joining us on the call. I’ll start out today by providing an overview of our second quarter results, followed by our 2023 financial guidance, and I’ll conclude with a brief discussion on capital allocation. Let’s turn to Slide 4, which outlines revenue and adjusted EBITDA performance for the consolidated business. Total revenue increased approximately 9% year-over-year to $204 million for the quarter driven by strong operating performance across the company. Excluding domestic Government Solutions product sales in the second quarter of last year, total revenue grew 13% year-over-year. Recurring service revenue grew 12% over the prior year quarter driven by strong travel demand and the expansion of the New York City school zone speed program.

At a segment level, Commercial Services revenue grew 11% year-over-year, Government Solutions service revenue increased by 14% over the prior year and T2 Systems Service revenue grew 11% over the second quarter of last year. Product revenue was $8 million for the quarter. About $5 million of this total was from T2 Systems, while $3 million was from international product sales within Government Solutions. From a total profit standpoint, consolidated adjusted EBITDA of $95 million increased by approximately 7% over last year. The core business, defined as excluding onetime domestic Government Solutions product sales, generated adjusted EBITDA growth of approximately 10% versus the second quarter of 2022. Turning to Slide 5. We’ve generated about $357 million of adjusted EBITDA on approximately $780 million of revenue on a trailing 12-month basis, representing a 46% adjusted EBITDA margin.

Over the same term, we’ve generated about $174 million of free cash flow, or 49% conversion of adjusted EBITDA, representing $1.13 of free cash flow per share. Moving to Commercial Services on Slide 6. We delivered revenue of $94 million in the second quarter, which is an 11% year-over-year increase. RAC tolling revenue increased 16% over the same period last year driven by robust travel volume and increased rental volume. Additionally, our FMC business grew 17% year-over-year as our growth initiatives continue to produce the intended results. Second quarter adjusted EBITDA in Commercial Services was $61 million, representing 8% year-over-year growth. Adjusted EBITDA margins of about 65% reflected normal seasonality and were down slightly compared to the second quarter of last year due primarily to growth investments in our FMC business.

Let’s turn to Slide 7, and we’ll take a look at the results of the Government Solutions business. Driven primarily by New York City’s photo enforcement expansion efforts, service revenue increased by $10 million or 14% over the same period last year to $85 million for the quarter. With New York City school zone speed now fully implemented, product revenue of about $3 million was driven by international programs. Adjusted EBITDA was $30 million for the quarter, representing margins of 34%, essentially flat with the prior year despite the platform investments we’re making. Quickly turning to Slide 8. We had a solid quarter in Parking Solutions and remain on plan for the year. Revenue of $22 million and adjusted EBITDA of about $4 million were directly in line with expectations.

In addition, the mix of hardware, service and SaaS revenues were largely as expected. Moving to Slide 9, we’ll take a look at reported income and leverage. We reported net income of $19 million for the quarter, including a tax provision of about $13 million, representing an effective tax rate of 40%. As a reminder, our tax rate is heavily impacted by permanent differences related to mark-to-market adjustments for our private placement warrants. Adjusted EPS, which excludes amortization, stock-based compensation and other nonrecurring items, was $0.29 per share for the current quarter, which is $0.02 per share higher than the second quarter of 2022. On the right-hand side of the page, you can see that we ended the second quarter with a net debt balance of $949 million, resulting in net leverage of 2.7x for the second quarter.

The primary drivers were strong free cash flow, debt repayments and the cash exercise of about 13.8 million warrants, which yielded approximately $106 million in cash proceeds during the second quarter. At the end of the second quarter, we have paid down approximately $80 million of floating rate term loan debt on a year-to-date basis. Our gross debt balance at quarter end stands at about $1.2 billion, of which approximately $809 million was floating rate debt. Moving on to cash. We generated approximately $63 million in cash flow from operating activities, resulting in $51 million of free cash flow for the quarter. Okay. Let’s turn to Slide 10 and have a look at full year 2023 guidance. Based on our year-to-date results and our outlook for the remainder of the year, we are increasing our guidance for revenue to an updated range of between $800 million and $810 million.

We are guiding to the upper end of the previously communicated ranges for both adjusted EBITDA and free cash flow. And finally, we are maintaining the existing adjusted EPS range primarily driven by increased share count, which I will discuss next. As of today’s call, both the third and fourth earn-out share tranches, which were 2.5 million each, were issued to Platinum Equity, the company’s former private equity owner. The third tranche was triggered in the second quarter and the fourth tranche was triggered subsequent to the end of the quarter. Our weighted average fully diluted share count of 162 million shares for total year 2023 contemplates five million newly issued shares as well as the impact of the warrant exercises I discussed earlier.

In terms of cadence for the remainder of the year, we anticipate both revenue and adjusted EBITDA to increase in the third quarter with low single-digit sequential growth. This is due to the dynamic in which a higher percentage of leisure travel is occurring in the second quarter compared to pre-COVID seasonality. Consistent with historical trends, we would then expect a modest reduction to revenue and adjusted EBITDA in the fourth quarter. Our Commercial Services outlook contemplates PSA volumes in the 99% of 2019 volume range for the remainder of the year. As a reminder, in Government Solutions for the second half of 2023, we expect a year-over-year decline in product sales and the service revenue comps will be tougher due to the installation timing of New York City cameras last year and the anniversary of the transition to 24/7 camera monitor.

Our increased guidance also contemplates increased onetime operating and SG&A costs in Commercial Services focused on growing our FMC business as well as product innovation to support new lanes of growth going forward. In addition, we anticipate increased operating cost in Government Solutions for engineering, staffing and technology development in the back half of the year, supporting the platform investments we have discussed previously. Specifically, these investments will support enhanced compliance, data security and tools to enable onboarding new clients more efficiently. All of these investments are focused on driving future revenue growth. Moving now to our capital allocation plans for the remainder of the year. As of today’s call, we have processed the exercise of approximately 17.3 million warrants in exchange for the issuance of approximately 15 million shares.

Warrant holders have redeemed approximately 14 million of the 17.3 million total warrants on a cash basis, which has yielded about $161 million in cash proceeds to date. As a reminder, we issued 20 million warrants in conjunction with our IPO in 2018. As of today, about 87% of those warrants are now retired, and Verra Mobility is rapidly moving towards a fully destacked capital structure. For the remainder of 2023, we plan to pursue a balanced approach to capital allocation through paying down debt and executing share repurchases. To this point, we have paid down an additional $100 million of floating rate debt in early August, bringing our total debt paydown for the year to about $180 million. As we discussed previously, we have hedged approximately $675 million, or about 95% of our current floating debt total, with a float for fixed rate swap.

This hedging instrument fixes the SOFR portion of our SOFR plus 325 basis point Term Loan B at a rate of 5.2% for three years with a monthly option to cancel beginning in December 2023 that we’ll be able to execute in the event interest rates move in our favor. Under this balanced capital allocation approach and combined with our free cash flow estimate for the remainder of the year, we expect net leverage to land around 2.5x by year-end 2023. In summary, we are excited about where the company is currently positioned and are confident we are well set up to execute into the future. This concludes our prepared remarks. Thank you for your time and attention today. At this time, I’d like to invite Kelsey to open the line for any questions. Kelsey?

Q&A Session

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] And your first question comes from Faiza Alwy from Deutsche Bank. Please go ahead.

Faiza Alwy: Yes, thank you so much. Hi everyone. So I wanted to ask about Commercial Services margins. And I’m wondering if there was any impact from the all-inclusive pricing that you’ve talked about, or is it mostly just the investments in fleet management that you mentioned? And maybe if you can disaggregate the impact from those investments and how we should think about that in the back half of this year?

Craig Conti: Yes. Sure, Faiza. Thank you for the question. The way I would think about it, I think the Commercial Services business is going to be flat to slightly up from a margin standpoint year-over-year. So we are certainly seeing the margin uplift both from the strength that we continue to see coming out of TSA, as we’ve talked about in previous quarters, and the strength of the all-inclusive product. When I talk about those investments, I think it will be easier if I talk about it from a total company level. So those investments are approximately $5 million to $7 million in the back half of the year. And I think the easy way to think about that is, if you take the increased guidance that we said for revenue, and you held margin constant, what EBITDA would you get to?

It would be a little higher than the EBITDA range that we have. The delta between those two is that onetime investment. So I think I got the first part of your question. The second part of your question is out of that $5 million, roughly half of that, is in the Commercial Services business. So without that investment, we would see a little margin, of course, year-over-year, but we wouldn’t see that great 17% growth we saw in the FMC business in the second quarter.

Faiza Alwy: Understood, thank you. And then just secondly, on the Government Solutions side, there’s obviously been a lot of legislation that we’ve been following, that you’ve talked about. I’m curious, sort of you’ve talked about $50 million to $60 million of run rate revenue. So talk about just big picture, sort of how you get there, what are some of the — what do you assume in terms of market share? What are the competitive dynamics like? Help us think through the revenue benefit of that as we look out over the next two to three years?

David Roberts: Yes. Thanks. Good question. The way we think about it is, one, we feel that $50 million to $60 million TAM is probably, as I mentioned earlier, the largest one-year opening that I’ve seen in nine years. And so we think that favorability is going to be with us for a while because more and more people are, A, getting used to enforcement as it continues to be around year-over-year; and two, the benefits are just sort of unquestionable. With that being said, we certainly have competitors. And some of that is depending on the product or the use case, so maybe different for red light versus speed versus bus enforcement. And sometimes that’s geographic. But we continue to compete and win well. If you look at RFPs, our overall win rate, it still remains very high.

And we would anticipate, the way we think about it, is we would like to win over the next probably three to five years because it does take a little bit of time for some of these states to activate somewhere close to our overall market share.

Faiza Alwy: Great, thank you so much.

Operator: Thank you. And your next question comes from Nik Cremo from Credit Suisse. Please go ahead.

Nik Cremo: Congrats on the strong quarter. And thanks for taking my questions. First, I just wanted to get a little more color on what’s driving the high revenue growth in the fleet management business and just why you would expect the revenue growth to slow down next year just kind of given all the growth investments you’re making this year. And then for my follow-up, I just wanted to ask if you think that there’s potential for the Government Solutions business overall to grow above the mid-single digit, like medium-term guidance you provided last year at your Investor Day, kind of maybe like 2025 through 2027, just given the favorable legislative backdrop that you’re seeing today. Thank you.

Craig Conti: Yes, sure, Nik. Let me try to unpack that. So for the first one, on the FMC business, I think the business started growing also in the back half of last year. So there’s a little bit of a comp dynamic in the back half of the year. I can’t continue to grow the business at 16% to 17% year-over-year. I think that growth rate gets into the high single-digits to approaching — let’s call it, high single-digits in the back half of next year. And that’s where I expect it to be going — sorry, the back half of this year, that’s where I expect it going into next year. I think the simple answer of how we got there is we resourced it. So we’ve got some really good commercial talent that we brought in. That was Phase 1. Phase 2 is developing tools that are going to help us onboard clients much more effectively, so effectively arming that commercial talent that we brought in with tools to grow the market.

So that is we’re kind of in Phase 1. We’re spending on Phase 2. I like the return on Phase 1. I’m excited about what we can accomplish in Phase 2. So I think that’s fleet. When we think about Government Solutions, not ready to say that yet. And here’s why, financial, okay? As David went through in really good detail, I love where we are in terms of, call it, the motion and the regulation here. What we haven’t yet seen is how that moves from a statewide law to an actual RFP, and there is a process that goes in between there, and that tells us a couple of things. Number one is how much we’re going to play in that area, and I think the second thing is going to be at what pace that comes in. So if I were sitting here a year ago, I would say I feel more confident about the growth than I did a year ago, for sure, but I’m not ready to kind of go up from the mid-single-digit organic growth just yet.

Nik Cremo: Great, thanks for all the color.

Craig Conti: You bet.

Operator: Thank you. [Operator Instructions] And your next questions comes from Daniel Moore from CJS Securities. Please go ahead.

Daniel Moore: Thank you. Good afternoon. David and Craig, thanks for taking the questions. Maybe you covered a lot, maybe drill in a little more on T2 obviously, really solid growth on the SaaS side. Just talk about the opportunity funnel, what that looks like, both near-term and longer-term, relative to maybe your initial expectations when you acquired it?

David Roberts: Yes. Thanks, Dan, for the question. What I would say is what we’re seeing right now is kind of exactly what we would want to see, which is increasing growth in the SaaS portion of the business, and that’s kind of — that’s the best part of what the T2 business brings to offer. And part two is sort of as we’re starting to see them win more within the municipality space, that was kind of hypothesis number two behind the acquisition, and they’re starting to do that. They have a really, what I would call world-class platform for permits and enforcements, and we’re starting to see that really catch on. When we say Tier 2 or Tier 3, that’s just the size of the municipality. And so if you look at that, what I might just call more broadly the middle market of municipalities. We’ve got a real strong program in hardware to support it as well. So I would say right now, we’re very excited about the trajectory of the business.

Daniel Moore: Very helpful. And maybe one more. I appreciate the color, Craig. And obviously, the progress you made not only from a cash flow perspective, but also on the warrants. Well over 90% of your debt now fixed or hedged and leverage ticking down towards 2.5x. Is it time to go on offense a little bit more? And maybe talk about what the M&A pipeline might look like? Thanks.

David Roberts: Dan, I’ll take that question. Yes, we’re not sitting on the sidelines. I can assure you that. We’re definitely on offense. So we continue to manage what we would consider as a very thoughtful approach. As Craig mentioned earlier, we’re also making some investments in the business into some new products and some commercial resources across the portfolio, because we’re seeing traction that we think we can accelerate just in the products and services that we have today, plus some related adjacencies to those core businesses. So that’s part one. And then part two, we continue to maintain a robust M&A pipeline. But at the same time, we also maintain high bars as to how we think about that. So I think you would still anticipate us to be very, very active in the back half of this year, first part of next year.

But in the meantime, we’ll continue to allocate capital in a very systematic way, which is in the best use of shareholders, consistent with our pattern and practice of the past.

Daniel Moore: And the last one, then I’ll jump out. But on the guidance, I think you indicated that it implies about 99% TSA level relative to pre-pandemic for the back half of the year. Do you expect a little bit of a tick lower? Or is that sort of building conservatism? Thanks.

Craig Conti: Yes. I mean, I looked at it this morning. On a year-to-date basis, Dan, I’ll give you the exact total, it’s 100.0%. I think year-to-date through August, it’s 99%. So we’re not going to call it that fine. So I just think the 99% we took where we are through August. I don’t have any indication — I think at a more macro level. I don’t have any indication that we’re going to see any softening in the near-term horizon. So we’re pretty confident with that number, what we see today.

Daniel Moore: Okay. Thank you.

Operator: Thank you. And your last question comes from Louie DiPalma from William Blair. Please go ahead.

Louie DiPalma: David, Craig, and Mark. Good afternoon.

David Roberts: Hey, Louie.

Craig Conti: Hi, Louie.

Louie DiPalma: David, you referenced the legislative momentum for school zone speed cameras. The New York City school zone speed camera Vision Zero program, I believe began in 2020. Do the statistics overwhelmingly show that the cameras have been effective at reducing fatalities and accidents? And in general, across the United States, are cities looking at the New York City program as a blueprint for success at this initiative?

David Roberts: Yes, great question. So I think what we’ve been able to show not only in speed, but also in CrossingGuard as well as in red light that the cameras work. They are designed to change driver behavior, and they do. If you look at the average speed in school zones, pre-camera versus post-camera, they go down precipitously, accident rates go down. All of the markers that you would look for work, and it’s doing so in a force multiplier environment, meaning that you’re not having to use police force to go out and enforce that. We’re doing it automatically. So what we’re seeing is, I think that New York has been a real trailblazer on this. And certainly, other cities look to New York and the results that they’re getting.

While they may deploy in a slightly different way, depending on the legislation or their kind of local environment. We would say that New York has been a trendsetter in that way, and we’ll continue to look at them to the future as they look at other use cases for enforcement.

Louie DiPalma: Along these lines, some cities have shut down red light camera programs for various political reasons. But is it possible that some of these same cities that were opposed to red light camera programs are more willing to adopt the school zone speed camera programs in like Florida or other cities that recently had a positive legislation?

David Roberts: Yes. I totally agree with that. We’ve been using the terminology, Louie, as you know, called purpose built, which is where before red light camera was the first use case of enforcement in the United States, the market has really listened to what our customers were telling us and starting to say, hey, we have these very specific needs. Can you create elegant technology solutions to solve them? And we have. So school zone speed was probably what I might call prime use case number one. And that started with fixed, and then we went to mobile, and then we went portable, and then you start to look at work zones. And I would say that cities that would want to say, hey, we still have this problem. Maybe we don’t like red light, but these are really precious cargo areas in our city. We want to make sure that they are protected. So I would say, yes, you would start to see adoption there.

Louie DiPalma: Great. And last one for Craig. With the expected renewal of Enterprise, is there expected to be any material changes from the prior agreement?

Craig Conti: No, we don’t expect that, Louie. I don’t expect that at all.

Louie DiPalma: Excellent. Thanks. That’s it for me.

David Roberts: Thank you.

Craig Conti: Thanks Louie.

Operator: Thank you. And there are no further questions at this time. Mr. Zindler, you may proceed.

Mark Zindler: Thank you, everyone, for your participation today. Have a great day.

David Roberts: Thank you, everybody.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you very much for participating and ask that you please disconnect your lines. Have a great day.