VRRM - NASDAQ

Good afternoon, ladies and gentlemen, and welcome to the Verra Mobility First Quarter 2024 Earnings Call. [Operator Instructions] This call is being recorded on Thursday, 2nd of May 2024. I would now like to turn the conference over to Mark

Thank you. Good afternoon, and welcome to Verra Mobility's First Quarter 2024 Earnings Call. Today, we'll be discussing the results announced in our press release issued after the market closed, along with our earnings presentation, which is available on the Investor Relations section of our website at ir.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. Management may make forward-looking statements during the call regarding future events, anticipated future trends and the anticipated future performance of the company. We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ materially from those projected in the forward-looking statements due to a variety of factors. These factors are described in our SEC filings. Please refer to our earnings press release for Verra Mobility's complete forward-looking statement disclosure. We do not undertake any obligation to update forward-looking statements. Finally, during today's call, we'll refer to certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in our earnings release, which can be found on our website at ir.verramobility.com and on the SEC's website at sec.gov. With that, I'll turn the call over to David.

Thank you, Mark, and thanks, everyone, for joining us. We had a strong start to the year, with revenue, adjusted EBITDA and earnings exceeding our internal expectations for the first quarter. Moreover, all 3 business units met or exceeded our internal expectations for adjusted EBITDA for the quarter. Through our customer-oriented solutions and execution strength guided by the Verra Mobility Operating System, or VMOS, we are consistently delivering strong financial performance. Consolidated revenue growth was 9%, adjusted EBITDA increased 6%, and adjusted free cash flow increased 57% over the prior year period, demonstrating the predictable strength of our portfolio of businesses. Based on the first quarter financial performance and our outlook for the remainder of the year, we are increasing our full year 2024 guidance, which Craig will elaborate on in his remarks. Now moving on to our business unit operations. The commercial services team delivered outstanding results driven by strong and durable domestic travel trends and our continued strong performance in the fleet management business. First quarter revenue of $96 million grew 12% over the prior year quarter, and adjusted EBITDA margins of 63% were up about 90 basis points over last year due primarily to the strength of RAC tolling. First quarter TSA throughput volume was about 106% of 2023, driving strong growth in adopted rental agreements and tolls incurred, all of which resulted in a 10% increase in RAC tolling revenue. Additionally, our FMC business generated revenue of $17 million for the quarter, representing 25% growth over the prior year period, primarily driven by enrollment of new vehicles and increased tolling from FMC customers. Looking ahead, over the course of 2024, we expect continued strength in RAC tolling revenue due to strong travel bookings based on commentary from the major airlines and hotel chains. In our FMC business, we are anticipating a modest pullback and relative growth rates over the balance of the year due primarily to tougher comps this year. The underlying strength of commercial services and particularly the strong travel outlook were the key factors influencing the decision to raise full year guidance. Moving on to Government Solutions. Recurring service revenue, which reflects 96% of total revenue for the quarter, grew 8% over the same period last year. The recurring service revenue growth was driven by program expansion from existing customers and new cities implementing further enforcement efforts to improve road safety. To this point, outside of New York City, we drove 15% revenue growth due to our existing customers' efforts to expand their safety programs. Total revenue, including international product sales, were up about 10% over the prior year quarter. As we discussed in our last earnings call, we are seeing RFPs and award activity continue to ramp up in Florida. I am pleased to report that year-to-date, we have executed contracts for school zone speed, school bus stop-arm and red light programs that, in the aggregate, represent potential recurring revenue of up to $7 million per year. Additionally, on the international side of the GS business, we were awarded an extension of our national highways maintenance contract in the United Kingdom for our variable speed and lane closure systems. This contract award will drive an approximately $2 million of ARR increase in the current revenue run rate. We're also very pleased to report that in the state of Washington, legislation was passed for the expansion of speed programs, bus lane automated enforcement and other beneficial reforms. Overall, we had a strong first quarter from an awards perspective. We're highly competitive in the market and winning our fair share of deals, which, for the quarter, represented up to $10 million of incremental full run rate ARR potential. Moving on to the New York City automated enforcement renewal contract. The city recently published a notification indicating its intention to release the RFP in fiscal year 2024, potentially late in the second quarter of this year. We expect this to be a competitive procurement and believe we have a strong combination of best-in-class technical solutions and market experience to compete effectively for this program. Next, a brief update on T2 Systems. We generated total revenue of approximately $20 million for the first quarter as we anticipated onetime product revenue decline by about $1 million compared to the prior year quarter due to a structural transition away from hardware and towards software and mobile solutions. As product revenue decelerates, we also experienced a decline in onetime ancillary installation and maintenance services revenue. Recurring SaaS revenue was up 5% over the prior year quarter. Adjusted EBITDA of $3 million for the quarter was primarily driven by the year-over-year SaaS revenue growth. For the full year, we continue to expect T2 System to deliver mid-single-digit revenue growth and return to high single-digit revenue growth over the long term, driven by the strength and focus on SaaS and the introduction of transactional revenue pricing opportunities. Turning to capital allocation. We further reduced net leverage to 2.4x, providing optionality for future capital deployment. With respect to M&A, the pipeline is growing. We've been disciplined around valuation but remain active in our evaluation of opportunities. Additionally, we have an open authorization for a $100 million stock buyback. Through the first quarter, we have sought to increase cash on the balance sheet, but the open buyback continues to be a viable option for capital deployment. Lastly, I'll provide a brief update on the company-wide implementation of a Verra Mobility Operating System, or VMOS. Two years ago, we set out to build the future of Verra Mobility. We knew that to deliver unparalleled value to our customers and power our employees and maximize returns for shareholders, we needed a unified and standardized approach to continuously improve the critical areas of our business. We established the Verra Mobility Operating System, a dynamic set of mechanisms and tools designed to drive operational excellence and spark continuous improvement across all parts of Verra Mobility. Since then, we have deployed VMOS mechanisms in core focus areas, including operating reviews, strategic planning and deployment, problem solving and sales funnel management. As an organization, we are building the muscle memory around leveraging VMOS to drive operational excellence across these areas. Finally, as we announced in our press release last month, I'd like to formally welcome and congratulate Cate Prescott on her appointment as Executive Vice President and Chief People Officer. Cate's HR experience and leadership expertise will be instrumental in shaping our organization and HR strategy. Welcome to the team, Cate. Craig, I'll turn it over to you to guide us through our financial results and the 2024 guidance update.

Thank you, David. Good afternoon, and thanks to everyone for joining us on the call. I'll start out today by providing an overview of our first quarter results, followed by an updated overview of how we're thinking about full year 2024. Let's turn to Slide 4, which outlines the key financial measures for the consolidated business for the first quarter. Total revenue increased approximately 9% year-over-year to $210 million for the quarter, driven by strong recurring service revenue growth across the company. Recurring service revenue grew 10% over the prior year quarter, driven by strong travel demand in the CS business and recurring service revenue growth outside of New York City in GS business. At the segment level, Commercial Services grew 12% year-over-year. Government Solutions service revenue increased by 8% over the prior year. And T2 Systems' SaaS and services revenue grew 5% over the first quarter of 2023. Product revenue was $7 million for the quarter. About $3 million of this total was from T2 Systems, while $4 million was from Government Solutions, the majority of which were international products. From a total profit standpoint, consolidated adjusted EBITDA of $93 million increased by approximately 6% over last year. We reported net income of $29 million for the quarter, including a tax provision of about $10 million, representing an effective tax rate of 25%. The tax rate includes certain discrete items, which favorably impacted the rate for the quarter. For the full year, we are anticipating an approximate 30% effective tax rate. Adjusted EPS, which excludes amortization, stock-based compensation and other nonrecurring items, was $0.27 per share for the current quarter compared to $0.26 per share in the first quarter of 2023. Adjusted EPS grew 4% over the prior year quarter despite nearly 16 million additional shares in the share count due to the completion of our de-SPAC process over the second and third quarters of 2023. We delivered $42 million of adjusted free cash flow for the quarter, which includes a $22 million adjustment for the resolution of the PlusPass matter on an after-tax cost basis. The 45% conversion of adjusted EBITDA was driven by strong operating performance and over $10 million of collections that were received in early January in lieu of December of last year. Turning to Slide 5. We generated $376 million of adjusted EBITDA on approximately $835 million of revenue for the trailing 12 months, representing a 45% adjusted EBITDA margin. Additionally, we generated $164 million of adjusted free cash flow or a 44% conversion of adjusted EBITDA, representing $1 of adjusted free cash flow per share on a trailing 12-month basis. Moving to Commercial Services on Slide 6. We delivered revenue of about $96 million in the first quarter, increasing $10 million or 12% year-over-year. RAC tolling revenue increased 10% or about $6 million over the same period last year, driven by robust travel volume and increased rental volume. Additionally, our FMC business grew 25% or about $3 million year-over-year, driven by the enrollment of new vehicles and tolling growth from existing FMC customers. First quarter adjusted EBITDA in Commercial Services was $61 million, representing 14% year-over-year growth. Adjusted EBITDA margins of about 63%, a 90 basis point increase over the first quarter of last year, were largely driven by the continued strength in RAC tolling and execution of our growth initiatives. Let's turn to Slide 7, and we'll take a look at the results of the Government Solutions business. Driven primarily by growth outside of our largest customer, New York City, service revenue increased by $7 million or 8% over the same period last year to $90 million for the quarter. Product revenue was about $4 million for the quarter and was driven primarily by international programs. Adjusted EBITDA was $29 million for the quarter, representing margins of 31%. The reduction in margins versus the prior year is primarily due to slightly increased spending on business development efforts as well as a $2 million onetime benefit for a contract amendment in the first quarter of 2023. Let's turn to Slide 8 for the results of T2 Systems, which is our Parking Solutions business segment. We generated revenue of $20 million and adjusted EBITDA of approximately $3 million for the quarter. Software and services sales increased 5% over the prior year quarter, slightly offset by a $1 million year-over-year reduction in product revenue for the quarter. This decrease was expected based on the transition we're seeing from hardware to software in mobile solutions. Before I close out the financial review of the quarter, I'd like to give you an update on where we stand on the material weakness we described in our 2023 10-K. In our 10-K, we described several deficiencies regarding IT general control gaps, which aggregated to a material weakness last year. While our remediation work is materially complete, the new controls are required to operate for a sufficient length of time and will undergo additional testing to ensure that they are operating as intended. We will continue to keep you updated on our progress, and we remain confident in our corrective measures. Okay. Let's turn to Slide 9 and discuss the balance sheet and take a little bit closer look at the leverage. As you can see, we ended the quarter with a net debt balance of $903 million, resulting in net leverage of 2.4x at quarter end. We have maintained significant liquidity with our undrawn credit revolvers. Our gross debt balance at year-end stands at about $1.1 billion, of which approximately $700 million is floating rate debt. As we've discussed in the past, our notional hedge of approximately $675 million covers about 95% of our current floating debt total, with a float for fixed rate swap that's cancelable at our option. Before I move on to 2024 guidance, I wanted to provide a brief update on our thinking around long-term leverage targets. We have revised our long-term net leverage target from the prior 3.5x to an updated target of 3x net leverage, recognizing that in periods of M&A activity, we may temporarily and modestly exceed that level. This updated view is consistent with our commitment to deliver value to our shareholders through a disciplined and flexible capital allocation strategy, and we believe this new lower leverage target level is more contemporary with current market trends. Okay. Let's turn to Slide 10 and have a look at full year 2024 guidance. Based on our first quarter results and our outlook for the remainder of the year, we are increasing our revenue guidance from the prior range of $865 million to $880 million to the upper end of that range. We're increasing our adjusted EBITDA guidance from the prior range of $395 million to $405 million to the upper end of that range. We are increasing our adjusted EPS guidance from the prior range of $1.15 to $1.20 per share to the upper end of that range. And lastly, there is no change to our prior adjusted free cash flow guidance of $155 million to $165 million or our expected net leverage at year-end of 2x. The primary influencing factor to raise guidance after the first quarter was a strong travel outlook from the major airlines. Year-to-date TSA volume has been about 106% of 2023, and we are anticipating a strong spring and summer travel season. In terms of cadence for the rest of the year, we continue to anticipate revenue and adjusted EBITDA to increase sequentially in the second and third quarters. However, as we experienced in both 2022 and 2023, we expect a strong sequential growth in the second quarter, with slower sequential growth in the third quarter due to travel demand shifting forward in the year. Consistent with historical trends, we would then expect a modest reduction to revenue and adjusted EBITDA in the fourth quarter. Adjusted EBITDA margins are expected to follow sequential revenue trends. Commercial Services, having the largest influence on the sequential growth rates, will follow the same trends as the consolidated company. And Government Solutions, we expect modest sequential revenue growth over the balance of the year. Lastly, Parking Solutions revenue is expected to deliver mid-single-digit total revenue growth, as we discussed on our fourth quarter earnings call. The temporary reduction in revenue growth is driven by strong demand in SaaS and services, offset by a reduction in onetime product sales as the industry transitions to a focus on software and mobile solutions. We expect comparable adjusted EBITDA margins in the second quarter as compared to first quarter performance, followed by an increase in second half margin performance. Over the long term, we expect Parking Solutions to return to high single-digit growth as we execute our SaaS and transactional revenue growth strategies. Other key assumptions supporting our adjusted EPS and adjusted free cash flow outlook can be found on Slide 11. In summary, we had a strong start to the year, and I'm confident in our ability to deliver on our increased 2024 outlook. We have strong operating momentum in the business, enabled by secular growth drivers and favorable business trends. We're focused on execution and operational excellence to deliver continued solid performance. This concludes our prepared remarks. Thank you for your time and attention. At this time, I'd like to invite Constantine to open the line for any questions. Over to you, Constantine.

[Operator Instructions] Your first question comes from the line of Faiza Alwy from Deutsche Bank.

So first, just wanted to talk about the raised guidance. Craig, I know you mentioned sort of the travel outlook, and that was a factor in the raised guidance. But then you also mentioned sort of additional potential contracts on the government side. So I just wanted a little bit more color in terms of how we should think about the raised guidance and whether any incremental recurring revenue -- we should expect any incremental recurring revenue on the Government Services side as well.

Yes, sure. Thank you, Faiza. So I think I'll give you a little more detail on how we think about that. So if you take -- let's just use revenue for simplicity. If we look at the midpoint of the previous guidance going to the high end of that range, that's an increase of $5 million to $10 million, okay? The vast majority of that increase in the guidance is in Commercial Services due to the increase in travel demand, right? We saw that come through as the TSA came in a couple of points higher than we anticipated in the first quarter. As we take that out for the remainder of the year, I think that raises our full year outlook on TSA throughput by about 1.5 points to 2 points, somewhere in that neighborhood. GS is pretty much on the service side in the same spot that we talked at last time, which I do think we're going to see the low end of high single-digit growth for GS service this year. What we talked about in terms of ARR, we continue to see great progression in the state of Florida and overall. It's all about when that revenue actualize. So we don't have a lot of notice to proceeds on those. That revenue will come into the business either in the late -- very late part of this year or potentially into 2025. That's why it's not necessarily a factor in increasing the revenue guidance for 2024, but I think it's a very good indication of what the business can deliver going forward.

Great. That's very helpful. And then just a question on capital allocation. You did lower your leverage target, and you mentioned sort of opportunity to potentially buy back stock. So I just want to understand, do you need -- do you want to reach that target first before you buy back stock? Or should we expect you to be actively buying back stock at this point and you sort of want to get to that leverage by the end of the year? So just talk about some of your thinking process around capital allocation.

Yes. Thanks again for the question, Faiza. I think the way that we think about -- we're going to remain balanced as we've been in the past. We have that open authorization, which is there for a reason. When we look at -- what I can say on the M&A side, as we look out at the market today, there are certainly more processes and more assets that are actually showing up on the screen than there were, right? So it's really hard to kind of dial in on that on which one would come first. If I'd guess, I get a 50% chance of being wrong, so I won't do that. But what I would say is, as we looked at it in totality, the 3.5x net leverage was a very contemporary view for the company 2 years ago, right? And as we look out today, with what we've seen in rates and how we've seen that perform and also what we're seeing on the screen in terms of M&A, we think that 3x is the right leverage for the company. And remember that, that 3x is a long-term target. So hopefully, it came out in the prepared remarks, right? We still could go over that for a period, right? But as we've talked about in the past with the cash generation of the company, we have the ability to delever over a period of quarters and come back to that level point, now being 3 versus 3.5 that we talked about, maybe 2, 2.5 years ago.

Your next question is from the line of Daniel Moore from CJS Securities.

Maybe just to drill down on Commercial Services a little bit, not necessarily in the quarter, but just the multiple quarters now. Another double-digit quarter -- double-digit growth quarter on top of a difficult comp. Clearly, we cycled past the pandemic-related recovery. So obviously, TSA volumes helped quite a bit. Just when you think about the algo, what continues to outperform expectations? Is it attachment rates, their uptake on your services, on rental contracts, more toll roads, shift to cashless? What sort of maybe trending better than maybe your single-digit algo would indicate?

Right. Right. So Dan, I still think -- I totally understand what you're asking. So let me start by saying that high single digit is still the growth target, even with the increased guidance for Commercial Services. And I think that, that rubric looks a lot like it did when we talked last quarter, right? So about half of that, half of the high single-digit growth, let's build it from 0, is coming from the secular tailwinds. So this is toll roads. These are transitioned from -- I'm sorry, additional toll roads, transition from barrier-based to cashless roads predominantly in the United States, and then continued rollout of the all-inclusive pricing model. And then the other half of that growth is split between 2 pieces. That's the growth initiative side. And we've talked about the strength in the FMC business, mostly coming from increased utilization at the fleets and then some growth in Europe as well. And then the remaining 25% or half of the half, is coming from TSA growth. That's what we said 3 months ago. I think maybe today, it's a little bit more towards TSA than on the growth initiatives, just given the outperformance in the first quarter, but that rubric, about 50% for the tailwinds and then the other 50% split between TSA and growth initiatives, remains intact from what we discussed last time.

Makes sense. And then on the Government Solutions side, I think I'd get back into the math, but just any more color on some of the investments you're making in terms of the enhancing customer-facing platforms. More generally, what it is you're looking to accomplish and then how much -- how long will that incremental expense last. Or was it sort of a onetime?

Yes. Dan, it's David. So I mean, basically, the -- we're really excited for the Government Solutions business. There's a lot of really great things going on that have been buoyed by an ongoing sort of legislative opening across the country. And to the investments, which is our platform, over the history of the company, we've done lots of acquisitions. And when you do that, you end up with multiple platforms. And so this is an opportunity to, one, consolidate from several platforms to 1 or 2; and two, to modernize that and reduce our ongoing cost of ownership of the platform so we can be really much more scalable in the future. And that's going to be ongoing. We would anticipate that's going to be pretty much the bulk of this year, as it has been, and probably go into maybe the first part of next year as well.

Your next question comes from the line of Keith Housum from Northcoast Research.

Congratulations, guys, on a good quarter. In terms of the Government Solutions segment, perhaps talk a little bit about the outperformance in the quarter. I'm assuming these are unrelated to the positive legislation developments that we have last year. But are these a mix of smaller engagements? Or was that weighted down by just a few different agencies?

I think it's not as much from the -- I think what you're saying, Keith, it's not from the TAM that we just opened. We are starting to win some of those, which is really exciting, especially in Florida. But off the tail of that is going to be a couple of quarters away before you start seeing the revenue. This goes back to the theme really, focusing on the wins that we got last year and the customer expansions that we did last year, alongside some international wins as well.

Great. And actually, following up on that on the international front. International is not an area for Government Solutions we've talked about in the past. But we're asking -- provide a little bit of context or color about the size of the international and the opportunities there. Is international growing in line with domestic? Or how do they kind of compare from a growth trajectory?

Yes. I mean if you look globally, it's a decent-sized market. In many places, it's a hardware-only market. So we've really focused in the areas where there's a service component because that's where kind of our skill set and expertise is, which really lands itself, for the most part, not exclusively, but for the most part, in North America, so Canada, you've got a little bit in Europe and Australia are the primary places where that exists. So we feel really good about those markets that we're in, and we'll continue to look for just kind of the same approach, which is where we may have red light or speed in some countries. We may look to expand that as well as look for opportunities to expand to a service model versus in a hardware-only model. But right now, the North American market is growing so fast. We've got plenty to focus on right here now.

Your next question is from the line of Louie DiPalma from William Blair.

You announced strong government bookings with the $10 million of ARR incremental awards. And over the past year, it has been well documented that there has been industry momentum for school zone speed cameras across the U.S. But along these lines, have you also witnessed any change in sentiment for red light cameras? And has the overall demand for red light cameras improved?

I would say that the overall demand is mostly unchanged. And what I mean by that is for the most part, Louie, the transition to what we call purpose-built enforcement is really the trend, which is, hey, instead of just having something at an intersection, let's go to where the problems are, which are the most important to a community where their precious cargo is, which is around work zones, school zones, school buses. And so what I would say is that the red light demand, we've always thought that would be a flat, flattish type of business long term. I think it's actually up a little bit. And I would anticipate it to stay there because I think the other ones are, one, more meaningful to the communities and also legislatively a bit more palatable.

That makes sense. And yes, I was just thinking about how there is proposed legislation to dramatically expand the New York City red light program, and I was wondering if that was part of a nationwide trend or if it's more one-off and granted legislation.

Yes, it's a good point. New York obviously has really embraced the benefits of automated enforcement, and they are often a trendsetter for other areas, but that could go quite slowly. So I wouldn't say that's a harbinger of immediate transition to red light expansion, but it could be something that means something in the future.

Great. And for Craig, you may have answered this in one of the prior answers, but when are you targeting for the migration to be finished from the legacy platforms onto the new Verra Mobility Operating System? Should we expect that expenses will be elevated throughout the rest of the year? Or is that something that you expect to finish in the next couple of quarters?

Yes. The first part of that, Louie, we expect to have that work completed in 2025. We will see some incremental expenses, if you were to look dollars-to-dollars year-over-year. But I still do expect to keep the margins in the GS business at least flat to 25 basis points up year-over-year, right? So again, you'll see that increase on a dollar-for-dollar basis, but that increase isn't just the new system spend. As these new TAMs -- David walked through some of them in his prepared remarks. As they open, right, we need to put salespeople in some of those areas. We need to train folks. We need to attend conferences we haven't been to before. So there's also some SG&A that just comes along with the market expanding. So -- but I think if you take that and roll it all together and put it into the total GS business, we still do expect to be able to hold margins and even increase them up to 25 basis points year-over-year with the spending.

Great. And that makes sense. And you reiterated the $90 million full year CapEx target. I may have missed this, but what was CapEx in the first quarter? And is there expected to be any seasonality to the CapEx throughout the year?

It was 15 in the first quarter, Louie, so it is going to ramp up a little bit over -- and that -- we anticipated that. That was not a surprise whatsoever. I still think it will come in somewhere on the rounds around $90 million for the year, and it does ramp up in the back half.

[Operator Instructions] Your next question is from Dave Koning from Baird.

Nice job. I guess, first of all, the year-over-year growth in commercial was about $10 million. And I think you said about $6 million travel, $3 million FMC. But then as we go through the year, the FMC growth gets a little smaller. But does travel stay, give or take, around that $6 million that or maybe even a little better if the TSA demand looks good? I mean is that kind of how to think about it?

That is how to think about it. I think you're really close there. So I expect FMC growth year-over-year in the second quarter. I expect it again in the third quarter. I expect it to level up in the fourth quarter. So there is a little bit more to go on FMC. When I think -- I think the right way to think about TSA is essentially, we took what we saw here in the first 4 months of the year and applied that to the seasonality that we've seen for the last decade over the balance of the year, right? And I'll save you the math on that. The way that, that kind of worked out, when we talked at the beginning of the year, when we talked a few months ago, we said -- and before I even say this, let's remember that 2023 isn't a perfect comp either. It did ramp a little bit through 2023. So as we look at the quarters, it looks a little funky. But it -- for the total year, here's how it shook out. We said, originally, it'd be somewhere between [ 1 0 1 to 1 0 2 ], right? I think that if I take what we saw in the first 4 months of the year, apply that to the back 8 months of the year, the total year probably goes up to [ 1 0 3 ], maybe a little bit north of that. That's what taking what we see today and bringing it forward through the right comps to the end of the year.

Got you. Yes, that makes sense. And then maybe my follow-up, just an interesting thing in the cash flow statement. The bad debt expense was about $5 million in Q1, and kind of all through last year, it was kind of $1.5 million to $3 million per quarter and even before that. So it was a little higher. Was there something to the credit cards used by travelers that were a little harder to collect? Or what was that?

Yes, that's a great question and a really good catch. It's not -- let me tell you what it's not. And then I'll do my best to tell you what it is, right? So what it's not is we're not seeing the consumer get [ weaker ], all right? Because when we saw those come through and they actualized, we have the same question. What we're seeing is transactionally, there's been some differences, and it's not necessarily with the health of the consumer, it's how we transacted. So I think that has come back in line. So the way we think about it is the incremental bad debt expense that we saw in the first quarter, I'm not seeing it in the second quarter. I still need to go do some work and to find out exactly what that was, but I do know that it was not the health of the consumer. So I think it was a onetime thing that I don't expect to see go forward.