Verra Mobility - Earnings Call - Q1 2019
May 6, 2019
Transcript
Speaker 0
Greetings, and welcome to the Verra Mobility First Quarter twenty nineteen Financial Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mark Griffin, Investor Relations.
Please go ahead.
Speaker 1
Thank you. Good afternoon, and welcome to Verra Mobility's first quarter twenty nineteen earnings call. Today, we'll be discussing the results announced in our press release issued after the market closed. With me on the call this afternoon is David Roberts, Verra Mobility's Chief Executive Officer and Teresa Chito, Chief Financial Officer of Verra Mobility. They will begin with prepared remarks and then we will open up the call for Q and A.
During the call, we will make statements related to our business that may be considered forward looking, including statements concerning our financial guidance for the full year of 2019, our plans to execute on our growth strategy, our ability to maintain existing and acquire new customers and other statements regarding our prospects and plans. Forward looking statements may often be identified with words such as we expect, we anticipate or upcoming. These statements reflect our views only as of today and should not be considered our views as any subsequent date. We undertake no obligation to update or revise these 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 annual report filed on 10 ks with the SEC and all of our other available filings in the Investor Relations section of our website at irveramobility.com and on the SEC's website at sec.gov. Finally, during the course of today's call, we refer to certain non GAAP financial measures. A reconciliation of GAAP to non GAAP measures is included in our press release issued after the close of the market today, which is located again on our website at ir.verramobility.com and the SEC's website at sec.com. With that, let me turn the call over to David.
Speaker 2
Thank you, Mark, and thank you to everyone joining us on
Speaker 3
the call
Speaker 2
today. 2019 is off to a strong start across all of VeriMobility's lines of business. With our vision of being a global leader in smart transportation, We continue to make strides in both our core business as well as some of our longer term initiatives, which includes the expansion of speed enforcement in New York City and expanding into Europe. As Tricia will discuss in detail later during this call, on a pro form a adjusted basis, our first quarter revenue grew 12% year over year to $98,500,000 and our pro form a adjusted EBITDA came in at $51,300,000 up 12% year over year. As a reminder, in the Commercial Services segment, we focus on products that make processing tolling and title and registration smarter and easier for our customers, which comprises 64% of revenue for the company.
We are the largest provider of toll management to rental car companies and fleet management companies in North America. During the first quarter, the Commercial Services segment on a pro form a adjusted basis grew revenues 22% year over year to $62,600,000 and reported pro form a adjusted EBITDA of $38,000,000 up 28% year over year. During the quarter, we collaborated with our customers on increasing penetration and adoption of tolling programs through various pricing In addition, we continue to see expanded opportunities in our title and registration offering as more customers are looking to outsource providers around this complex yet critical activity. Finally, a tremendous effort was spent setting up our European operations, negotiating with European toll authorities and working with potential customers on piloting toll management solutions. We don't have any specific updates at this time, but would expect to have more detail as the year progresses.
We are very excited about the opportunities for our Commercial segment with an increase in both the number of toll roads in North America and the ongoing conversion to cashless lanes, we expect 2019 to be a strong year. The remaining 36% of our business comes from our Government Solutions segment. We are a leader in photo enforcement in North America, including red light, speed and school bus cameras. We have become a trusted vendor for local municipalities and school districts who are serious about increasing road safety in their communities. During the first quarter, on a pro form a adjusted basis, the Government Solutions segment declined 3% year over year to $35,900,000 and reported pro form a adjusted EBITDA of $13,200,000 down 17% year over year.
The decline in service revenue was primarily driven by the elimination of the red light camera program in Miami, which occurred in Q1 of twenty eighteen. And because this segment has a higher fixed cost component, meaning that a small decline in revenues has a more pronounced effect on the EBITDA line. As the first quarter came to a close, New York State passed legislation that will increase the number of schools on speed cameras in New York City. We are very excited for the opportunity to expand an important safety program, which we have been an integral part of for over ten years. The program currently permits speed speed further enforcement at 140 plus school zones and will soon expand to cover 700 plus school zones in the New York City area.
We are working with our counterparts at the New York City Department of Transportation on an initial rollout schedule and will update the investment community as information becomes available. We maintained our consistently high renewal rates again in Q1. During the quarter, we renewed key customer programs in Tampa and Seattle. And additionally, we won a key new contract in Philadelphia. We are also currently conducting multiple school zone speed pilots in Georgia as a follow on to the enabling legislation that passed last year.
Overall, we continue to execute on our strategic initiatives for 2019 and are very pleased with our traction during the first quarter. As you know, late in 2018, we launched TZ. TZ is a nationwide pay as you go consumer mobility platform that currently can be used for tolling and can expand to include other applications such as parking and registration renewal. We are driving adoption of our platform mostly through marketing partnerships and integration with other mobility applications. One of our first platform extensions is through a partnership with Arrive, the leading provider of branded and white label last mile mobility solutions.
This partnership will extend the PZ platform to include parking capabilities from Arrive. As this is a new product, adoption has been slower than we had anticipated, and we have reduced the expectation of subscribers in 2019 accordingly. In terms of financial impact, we are not expecting any material contribution this year. PV aside, we are still anticipating a very strong year and as Tricia will mention shortly, are bullish about the company's 2019 financial performance. Our European initiatives are progressing well as we are finalizing the agreement with our first tolling authority located in France, which will allow us to process tolls for our rental car customers throughout France and positions us for a smooth launch for toll processing in Spain and Portugal as well.
Additionally, we are working with certain existing U. S. Rental car customers that have European operations to finalize terms of the toll processing pilot program to launch this summer. Finally, we hired Mike MacFillan as VP of Corporate Development and Strategy to help build out the acquisition parameters through which we can accelerate our leadership in the smart mobility solution space. We are focused on adjacent areas, which allow us to better serve our customers while expanding and solidifying our global scale.
Companies that fit best will support our competitive moats while adding smart technologies, which prepares for the future of connected vehicles and autonomous driving. With Mike on board, we will be better equipped to evaluate strategic acquisition propositions for Ferro Mobility. Welcome aboard, Mike. In summary, we reported a solid first quarter and continued to execute on our initiatives, which will drive a strong 2019. With that, let me hand it over to Tricia to walk through the financials in more detail.
Speaker 4
Thanks, David, and good afternoon, everyone. I'll provide a more detailed overview of our first quarter twenty nineteen financial performance, and then we'll open the call up for questions. As a reminder, most of our commentary today will reflect the company's results for Q1 twenty eighteen on a pro form a adjusted basis, meaning that we've adjusted the financial results to include the impact of two acquisitions in 2018 as well as carving out transaction costs and other one time costs from our operating results. Q1 twenty eighteen is the final quarter in which we will be presenting pro form a results as the true strategic acquisitions were fully included in our reported results starting in the second quarter of that year. We've provided a short investor deck on our website that has a reconciliation from GAAP results to the pro form a adjusted information we'll be discussing today.
And if you're looking at our investor deck, on slide two, we have our consolidated results for the quarter. Total revenue was $98,500,000 for the first quarter and grew $10,500,000 or 12% from $88,000,000 for the same period in the prior year. We're very pleased with this solid result as it reflects the strong demand we're seeing for our tolling products. Adjusted EBITDA of $51,300,000 increased by $5,600,000 or 12% from the pro form a adjusted EBITDA of $45,600,000 in the prior year. First quarter adjusted EBITDA margins remained strong at 52%.
The company reported net income of $2,800,000 in the quarter compared to a net loss of $22,500,000 in the same period of the prior year. The net loss in the first quarter of twenty eighteen was largely attributable to transaction expenses and loss on extinguishment of debt that did not recur in 2019. Net income, adjusted to exclude acquisition amortization and non cash stock compensation for the quarter was $28,100,000 compared to the net loss of $9,100,000 in the year ago period. The company generated $37,400,000 in cash flow from operating activities during the first quarter of twenty nineteen compared to using $3,200,000 in cash flow from operating activities in the first quarter of twenty eighteen. The improvement is directly correlated to the improved net income.
We spent $9,200,000 on CapEx in Q1 of twenty nineteen compared to $5,900,000 in the prior year. Free cash flow, which is cash flows from operations less CapEx, was $28,000,000 for the quarter. As of March 31, we had total debt of $901,200,000 and cash on hand of $91,500,000 for net debt of $809,700,000 which was 3.8 times trailing twelve months adjusted pro form a EBITDA of $215,100,000 On the next slide, we have revenue and adjusted EBITDA by segment. Our Commercial Services segment delivers tolling, violation processing, and title and registration services to rental car companies and fleet management companies in The U. S.
And processes violations in Europe. Total revenue for this segment grew 22% to $62,600,000 in the first quarter of twenty nineteen, up from $51,200,000 in the same quarter in the prior year. In the current quarter, we saw increasing number of billable days across our combined rental portfolio and higher level of tolling activities across our entire product portfolio. We expect the demand for our tolling of products to continue to be strong into the next quarter, but would expect the year over year growth rate to be lower as we cross over some more difficult comparable periods. Pro form a adjusted EBITDA for the segment of $38,000,000 in the first quarter of twenty nineteen grew $8,200,000 or 28% year over year from $29,800,000 in Q1 of twenty eighteen.
Adjusted EBITDA margins for Commercial Services was 61%. Our strong EBITDA performance is driven by our continued revenue growth with the impact of well executed integration synergies. Government Solutions segment operates red light, speed, school bus stop arm, and bus lane photo enforcement programs for municipalities and school districts, offering an end to end solution from providing and installing equipment to printing and mailing citations. Total revenue for the segment was $35,900,000 in the first quarter and declined approximately $900,000 or 3% from $36,800,000 in the first quarter of twenty eighteen. Red light programs declined $1,800,000 from the comparable period.
The decline was primarily attributable to the loss of Miami program and to a lesser extent, lower volumes on some of our variable rate contracts. These declines were offset by growth in speed and bus lane revenue. Revenue from Crossing Guard, our school bus stop arm program, was flat year over year despite the installation of nearly 400 new systems because of a statutory issue in Georgia. As you recall on our year end earnings call, there was a change in a Georgia statute which limited the volume of citations in our Crossing Guard program and impacted revenue for Q4 twenty eighteen and Q1 twenty nineteen. In total, there were 4,604 camera systems installed in March of twenty nineteen compared to 4,252 at March thirty first of twenty eighteen.
Q1 twenty nineteen EBITDA of $13,200,000 declined $2,600,000 from $15,800,000 in the same period of the prior year. The decline was primarily the result of reduced revenue. Adjusted EBITDA margins for this business segment were 36.9%. Tax expense for the quarter was $1,300,000 representing an effective tax rate of 31.9%. The effective tax rate increase was primarily due to higher nondeductible executive compensation and our requirements to reflect certain deductions when they occur, including the deduction for equity compensation and the reversal of uncertain tax positions, which will benefit future periods.
We expect our normalized tax rate to be 26 for the full year. In summary, we continue to execute well, delivering strong top and bottom line results and believe that Vero Mobility remains well positioned to maintain this momentum and operating discipline throughout 2019. As David mentioned, New York City will be expanding their Schools on Speed program and we anticipate this will positively impact product revenue in the second half of twenty nineteen. We're working with our counterparts in the New York City Department of Transportation on an initial rollout, but don't feel that it's the appropriate time to update our guidance. Our guidance for 2019 remains with revenue in the range of $428,000,000 to $436,000,000 and adjusted EBITDA in the range of $235,000,000 to $240,000,000 Thank you for taking the time to join us on the call today.
And with that, we'd be happy to take questions now.
Speaker 0
Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Our first question comes from the line of Daniel Moore with CJS Securities.
Please proceed with your question.
Speaker 5
David and Trish, good afternoon.
Speaker 3
Thanks for taking the question.
Speaker 4
Yes. Thank So
Speaker 5
starting with Commercial Services revenue growth obviously reaccelerated nicely in the quarter. Can you give us a sense for contribution from Europe? And then more generally, you provided some nice color, but additional breakdown on volume of transactions versus pricing, any other factors which may have impacted the year over year compares, be it weather or others? Just a general a little bit more color on the acceleration of the business. And Trish, I think you said, obviously, tough to sustain that type of growth in Q2, but maybe any more detail around what you're seeing there would be great.
Speaker 2
I I guess I think broadly, so maybe the we won't get into the transaction ones. But think what you can see, if you look at North American tolling is that our customers have had a good quarter as well. There's an increased volume from them in terms of the number of rental agreements that they're seeing. They report each of those in their own financial statements. In addition to that, we are seeing a nice adoption of the tolling program as a percentage of those RAs.
So we're seeing overall, if their growth is if we remain constant, but they grow, we grow as well. In addition, continuing growth of toll roads as well as the conversion of cashless continues to be a bit of a tailwind in the overall volume story for the commercial or there may be more specifically lentil car tolling.
Speaker 4
And in relation to your question on Europe, the European expansion that we're undertaking has not started to produce revenue yet, we don't expect it to produce revenue until the back half of the year. So that's not that's not a portion of this growth. So this growth is, you know, is on those sort of that new expansion that we have in Europe. To your question earlier about whether this is really price or volume, the majority of this is really around volume. It's the number of billable days and it's also the number of tolling activities that we have.
Indication of the more difficult comparable quarter as we cross over to Q2 of twenty eighteen is really to do with a change in margin share of one single contract that we had. So that would be the only component of this that would be price.
Speaker 5
Perfect. Helpful. And then switching gears, maybe this is looking out a little bit, but certainly New York City looks like congestion pricing is likely to move forward over the next couple of years. You mentioned some other new opportunities. Just maybe talk about the level of dialogue you're seeing with different cities and maybe frame that relative to twelve months ago.
Speaker 2
Yeah, I think there's obviously look, think the reality is that if you look at New York, they are a trendsetter. So I mean, really won't speak directly to the level of conversation that we're having with New York. But I would just say, and I think I've said previously, that we see congestion pricing as opportunity for us, that we are well situated for given our knowledge of all of the components that make a successful congestion pricing program work. Those are all contained within variability. So we think that we have an opportunity there.
I would then say if you look and sort of follow the news related to that dam, which I know that you do, over the weekend Washington DC had an article where they're going to consider congestion pricing. Philadelphia is going to consider there's other cities that are going to be quickly following suit related to congestion pricing, which broadly is a tolling program that has some unique enforcement and customer interactions that go with it, but it's effectively a tolling program. So we think that we're well situated, we'll clearly be thinking strategically on how we can best perform related to those types of opportunities, not only in The United States, but around the world.
Speaker 5
Perfect. Last one, and I'll jump back in queue. But in terms of it sounds like you're going to start to see some revenue at least certainly on the product side in the second half of the year with the expansion of New York City opportunity for safety zone enforcement. And yet, obviously, I guess, feel like you should leave the guide untouched for now, least from a top line perspective. Maybe just frame, if you could, the magnitude of the opportunity to some and what that might imply for the higher end of the range of your guidance from a revenue perspective?
Speaker 4
Yes. In our so just for clarity, we did already guide in 2019 that we were going to have more product sales. And that's because we did anticipate some expansion within school zone speed for New York City. We did not anticipate this magnitude of expansion for New
Speaker 3
York
Speaker 4
City. So if you want to think about comparabilities, last year we had about $5,000,000 worth of revenue in product sales. Our guidance includes double that this year, so about $10,000,000 And we were thinking that was right around this 75 to 100 cameras that might be installed in that year. And right now the city is looking to expand to close to 300 in their first expansion tranche that they would do. The reason that we have reluctance in order to update guidance is that we don't have a timing of when that's going to impact.
And obviously, the longer that the timing delays before we actually get the go ahead to start installing can really impact the total revenue for the year. But when we get that information, we'll certainly let you guys know.
Speaker 5
Understood. Congrats on a great start to the year. Look forward to seeing you next week.
Speaker 2
Yes. Thanks, Dan.
Speaker 0
Our next question comes from the line of Ashish Sabadra with Deutsche Bank. Please proceed with your question.
Speaker 6
Congrats on the solid quarter. My question on the New York City, the safety school safety enforcement as well. As we think about the opportunity, not just for this year, but just as we think about expansion in 600 schools, can you help us frame how many cameras? And is there any way you can think about how big that opportunity is? And then as we think about the rest of The U.
S. As you started gaining more traction, a follow-up would be the addressable market? Thanks.
Speaker 2
Sure. I guess the best way to think about New York City would almost be like a TAM, if you were to say, as they think about school zones, they want to get to around 700 total. And most of those, if not all of those, would require two cameras per school zone is the best way to think about the total size of the opportunity. Again, the sequencing and the timing and the role of that is where the real TBD is. And we're just really trying to be a good partner to the city as to how they think about it.
They have to do a lot of work on these programs as well. So they have to build out an organization to support a, in effect, a fourfold, fivefold increase in the total size of the program. So that's why we're not as we don't have so much data to share at current time. What I would say is that, as I mentioned in my opening comments, Ashish, that we are now starting to see some traction in the state of Georgia, which was opened up for schools on speed legislation earlier last year in the March timeframe. And the fact that it's now been a year is very not atypical to a brand new program for local government.
So we're anticipating to start to see the fruits of our labor there in the back half of the year. And I would say that and we've calculated the total TAM there, meaning every school zone in the major metropolitan area of Georgia was around $50,000,000 Clearly, that's the most aggressive view of that, but still it's a great opportunity for us to get into a state that's really embraced photo enforcement as a part of their overall road safety programs. And then I think what you'll see is other states and other cities start to ask questions about how they can think about it. You saw that Philadelphia has an expansion in their program, so there'll be more. Right now, the primary ones clearly are New York City and Georgia are the most clear and present to us.
Speaker 6
No, that's great. And then just for our clarification purposes, can you just talk about how you make the revenue stream on these cameras? Are there upfront installation fees or installation revenue as well as ongoing processing revenues? Any color that you can provide on those fronts?
Speaker 4
Yes. And that's exactly the way that it works, Ashish. So there would be New York City is unique in that they buy their product. So they would buy the camera and the related installation. So that's where you would see that product revenue jumping up from, you know, from where it was last year going forward.
And then you can think about those cameras that once they're installed is we have a service contract in order to maintain the cameras, process those citations and, you know, do the image cross and the transaction processing associated with it. And we get so if you wanted to think about I don't want to talk about a customer specific revenue, but I can tell you that that feed portfolio across all of our customers generates per camera at about $3,800 per month is what they're generating right now. So that's you know, so you would say that once the cameras are up and installed, you know, it wouldn't be that specific revenue, but that's what the product portfolio is producing right now per camera per month.
Speaker 6
That's great. And then just on the commercial, obviously, pretty good acceleration there. But as you think about the increased tool and the shift to cashless tooling as well as increased penetration at your customer, how should we think about the opportunity over the near term, like not just 2019, but over the next three years?
Speaker 2
We've always said that eventually there'll be an effective tapering of the growth over time. And we think that the tolling in North America would be somewhere in the 6% to 8% longer term view. Clearly, right now, are the rack that we will exceed that for this year as the rack businesses are doing quite well and our business is doing well within them. But I am if you follow the tolling side, there's more tolling being considered right now than I remember. There's three new toll roads that are being considered by the Florida Legislature.
There's some up in Connecticut. There's going to continue to be an increase of that given the infrastructure deficit that we do have. So we feel very positive about that number. But which is also why we did the deal in Europe was to expand that capability into Europe that has an effectively it's a bit more greenfield and should grow at a higher level once it gets going.
Speaker 6
Great, again. And congrats on the solid results.
Speaker 2
Thank you. Thanks,
Speaker 0
you. Our next question comes from the line of Louis De Palma with William Blair. Please proceed with your question.
Speaker 3
Good afternoon, David and Tricia. Hi.
Speaker 2
Hi, Louie.
Speaker 3
I was wondering, have you fully already achieved the synergies associated with HTA on the cost and revenue side?
Speaker 4
No, we haven't. So we started integrating HTA. We acquired them in March of twenty eighteen and got a lot of our synergies underway in the back half of twenty eighteen. So we do believe that overall we'll have about $10,000,000 benefited from synergies in 2019. But what you'll see is as we cross over the back half of the year, we'll get into more difficult comps as far as those will smooth out.
And the synergies are really related. We did a complete org structure in June of last year. We did a more refined org structure in December, or I should say fourth quarter of last year. So we'll see those synergies play out across that time period because of the year over year benefit of the run rate.
Speaker 3
Thanks, Tricia. And regarding Europe, is everything proceeding according to your internal timeline in terms of the different country rollouts and the partnerships with the tolling authorities?
Speaker 2
Yes, I think overall it's probably a little bit slower, which wouldn't be surprising given the fact that this is new to the world. I would say that it's definitely not due to the lack of desire or the openness of either working with the toll authorities or the customers. It's just so it's such a new program for them. They have to go through their own hoops to figure out how to support. It's not something that they've done before.
But we clearly have line of sight to both customers as toll authorities that want to be a part of it. So it's probably moving a little bit slower, but nothing that would be something to be overly concerned about.
Speaker 3
Okay. And in the prepared remarks, did you mention that you're working with multiple of the big three U. S. Racks? Or do you just only plan on trialing with one for calendar twenty twenty?
Speaker 2
Yes. I think we're in conversations, but we haven't disclosed either who or how many because we're also speaking to European racks as well.
Speaker 3
Sounds good. Thanks, guys.
Speaker 2
Yeah. Thanks, Louis.
Speaker 0
Our next question comes from the line of Brian Hogan with William Blair. Please proceed with your question.
Speaker 7
Yes. Thanks for taking
Speaker 0
my questions. And also, on
Speaker 7
the New York City speed camera rollout, you have 140 cameras today and up to seven fifty from what I've seen from the law. But I guess my question is, are they going to RFP it? Are you going to have the entire $750,000,000 What is the what can you share from that front from a contract perspective?
Speaker 2
Yes, I mean, whether or not the city determines to do an RFP, that's going to be their decision. What I would say is that there is a change request that was publicly out on the New York City site for an increase to the current year for an expansion of two twenty five cameras for the year relative to our plan. So there was a change request. It's out on their site. It was approved and we're moving forward with it.
So I guess what I would say is we stand ready to serve our customer and continue to run, manage and expand the program that we've solely done by ourselves for the last decade.
Speaker 3
All right.
Speaker 7
Helpful, thank you. Going on to PZ, why do you think the adoption has been slower than anticipated? And two, I think you anticipated the run rate exiting 2020 was somewhere between like 13,000,000 and $15,000,000 of revenues. Are you still expecting that? Or is that not the case and it's going to be offset by something else?
I'm just kind of curious on your piece
Speaker 2
of that. Yes. I mean, so the first part the question is why is it a bit slower? I mean, part of it is, it is a new to the world product, at least in mass. So we've always known that, one, we wanted to go through channel partners, which has been our that's been our strategy since day one is we're more of a behind the scenes and we want to leverage channel partners to redistribute products.
And while we have a very active pipeline of companies we've spoken to from and we've landed a few, as you know, with either GasBuddy and now with Arrive. They just it's a new to world product. It takes some level of time for them to understand the value and how it can benefit their users as well. So that's been a little bit slow. Two is, we needed to build out functionality that would allow us to test different pricing mechanisms.
And so that's something that we're going to begin to do to really pilot other ways to create incentives for people to adopt the program. So that's underway as we speak. And then thirdly, to your question is, I don't think we would anticipate the 13,000,000 to $15,000,000 run rate. But to your last part of your 3B of your question is, I think that we would find other ways to cover that through other aspects of the business. And we still think that there's a unique opportunity for PZ to be a unique platform.
We're very excited about the Arrive partnership that we will have functionality that it really goes to the vision of a singular mobility platform that allows people to use frequently these driver related services that are frequent. So tolling being one, integrating parking into it, and then over time looking for other services that make sense that we either build, borrow, or partner with or buy. We're really excited to see the results of that as we launch that functionality over the summer.
Speaker 7
Sure. On the commercial business, I guess I'm trying to ask, is it are you seeing increased penetration? Is that the primary driver? I know you've articulated some of the transaction days. And I guess I'm asking is that because like Avis, I think they reported transaction days in The United States being down 1% in the first quarter.
So I'm just seeing, are you seeing increased penetration as driving that or more
Speaker 0
than that?
Speaker 2
Yes, there's definitely a higher usage rate. If you look at even with the shift to usage day, the usage has actually remained actually quite high relative to our initial expectations. And you also look at Hertz that was actually had a really good quarter as well, which was growing. And enterprise, while not public, I think they had a strong quarter as well by what we can tell. So I think generally it's a bit of both.
But the volume certainly is much higher right now to Tricia's point, which is where we're seeing the culmination of slight growth within the RACs as well as a slight increase in adoption plus the increase of cashless tolls and the new toll roads are kind of coming together nicely in the first quarter of the year.
Speaker 0
All right. Thanks for taking the question.
Speaker 2
Yes. Thank you.
Speaker 0
Our next question is a follow-up from Daniel Moore with CJS Securities. Please proceed with your question.
Speaker 5
Thank you again. Just maybe a modeling question or two. SG and A, if we look at Q1,
Speaker 2
is that a reasonable run rate to build off of?
Speaker 5
Do you have incremental public company and or other expenses that we should think about as we build the remainder of the year?
Speaker 4
I think it's a pretty good run rate for us. We've already started processes for SOX integration, other items like that in Q1. So I would think that that's probably a pretty solid run rate.
Speaker 5
Got it. And then cash generation, obviously, was very strong. Just maybe talk a little bit about working capital, in particular timing of payables, expectations over the next couple of quarters. And if you did say it, I apologize, but just CapEx expectations for the year.
Speaker 4
Yes. Our CapEx expectations for the year should be right around 28,000,000 We're ranging between 25,000,000 and $28,000,000 There was a big chunk of CapEx that was spent in the first quarter associated with a lot of times we have to buy equipment customer sites prior to installation. And so that's the reason that CapEx was larger in Q1 as we prep for those installations later in the year. As far as working capital goes, I don't anticipate big swings within working capital coming up. One of the things that we did have in working capital that would not be assured to repeat would be that we had a customer who put down a large deposit for title and registration services.
Some of our large customers, because we do pay the title and registration on their behalf, pay those monies to us in advance. So that was actually creating a working capital fluctuation that we don't anticipate will repeat itself in the next quarter.
Speaker 5
Very helpful. And at least the last one for me that specifically on that title and registration, it sounds like that piece of the business is actually picked back up. Maybe just talk about where you're seeing the growth from, racks versus fleet management companies? Is it expansion of existing customers? Any color there?
Speaker 4
Actually, it's timing. So title and registration was actually up by $1,200,000 roughly, I don't know if that's the exact number, on a quarter over quarter basis between this year and prior year. And the majority of that is associated with the timing of when the registrations are due. So think about it if you've got registrations that are due in the March or the end of a month or, let's say, the December. And in some years, our billing cycle may bleed over into the other time periods.
And it creates volatility in a quarter over quarter situation. We don't anticipate that the growth in title and registration for the quarter will remain for the rest of the year. So you can think of title and reg as being about a 12% grower on the top line, 10% to 12%.
Speaker 5
Perfect. Thank you again for the color.
Speaker 0
Ladies and gentlemen, we have reached the end of the question and answer session. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.