3/22/2019Verra Mobility Loses $58 Million
The red light camera and tolling firm Verra Mobility (formerly ATS) struggles with profitability, faces $1 billion in liabilities.
Verra Mobility reported to Nasdaq investors on Monday that it lost $58 million in 2018. Last year, a private equity firm created Verra Mobility by merging Highway Toll Administration with red light camera operator American Traffic Solutions, but the costs of the combination have yet to pay off with the new entity facing total liabilities of $1 billion.
"To service our indebtedness, we will require a significant amount of cash," Verra Mobility noted in its annual report.
The toll collection side of the business pulled in $223 million in revenue for what would have been $121 million in profit in 2018. A substantial portion of this revenue came from collection of the controversial PlatePass fees from motorists who rent cars from Hertz, Avis and Enterprise. The company also issued 2.2 million photo tickets to motorists accused of not paying a toll.
The red light camera and photo radar side of the enterprise brought in $148 million in revenue and what would have been $56 million in profit. The firm boasted of 200 cities in 17 states running Verra Mobility ticketing cameras, which generated 8.5 million tickets last year. The firm claimed the leading position in the industry with 55 percent of the market in speed cameras, 46 percent in red light cameras and 48 percent of school bus cameras.
After considering operational expenses, both the tolling and ticketing sides would have broken even, if not for the $70 million in annual debt payments. The company's sales pitch to investors is that the long-term picture is good. More roads are going to be tolled, and Verra Mobility is positioned to take advantage of it. The firm even has new products on the horizon, including radio frequency identification (RFID) tracking chips for kids who take the bus to school. Long-term risks for Verra Mobility remain significant, however, since public sentiment toward automated ticketing continues to be negative.
"Usage may also be affected if there is an unfavorable shift in political support for or public sentiment towards automated enforcement, or as a result of one or more scandals related to its use," the annual report explained.
The firm has invested millions in cultivating relationships with key public officials and politicians, including inviting them to regular all-expense paid events in Arizona.
"To successfully navigate this regulatory landscape, we have a dedicated government relations team that works with state legislators and local authorities, often with the help of lobbyists and consultants, to track and help support favorable camera-enforcement safety and toll-related legislation," the annual report explained. "Through this network, we have a presence in every state in which our government solutions segment does business."
Verra Mobility also disclosed that it outsources some "image review and violations processing work" to third parties. A report by the California judiciary in 2007 revealed automated ticketing companies had outsourced key elements of the ticketing process to Mexico (view report).
"Our visibility and role as a processor of transactions containing personally identifiable information may also put us at a greater risk of being targeted by hackers," the company noted. "In the normal course of our business, we have been the target of malicious cyber-attack attempts."