3/31/2020Red Light Camera Company Profits Crash During Pandemic
Worldwide virus lockdowns threaten the financial viability of red light and speed camera companies.
The global pandemic and resulting restrictions on work and travel has caused a massive reduction in vehicle traffic around the world. This is putting the squeeze on red light camera and speed camera companies that depend on high traffic volume to turn a profit. Moreover, the closing of schools has entirely eliminated school bus camera operations as well as, in many jurisdictions, the use of school zone speed cameras.
Redflex Traffic Systems of Australia, the number two operator of photo enforcement devices in the US, was struggling to stay afloat before the pandemic. The company has yet to report a profit since 2014, when its top US executives were caught and jailed for bribing officials in Illinois and Ohio. Despite declaring its manufacturing and ticketing support services as "essential" operations that must continue, the company expects major losses.
"Approximately fifteen percent of group revenue is dependent on volume-based contracts, and we anticipate our revenues from these contracts will be impacted broadly in line with the reduction in traffic volumes as well as the duration of the disruption," the company told Australian investors on Monday. "Unfortunately, the deployment of the roadwork speed enforcement contract in Pennsylvania, which commenced in March 2020, has been adjourned due to the decision by the state to suspend roadworks."
Redflex announced it was slashing staff salaries and reducing hours for "most staff" while looking for other ways to cut costs until the travel restrictions are relaxed. Redflex stock, which stood at 68 cents per share in February closed Friday at 34 cents.
Verra Mobility, the largest camera operator in the country, saw its stock plunge from a high of $17 in February to $7 on Monday. The company had released its 2019 revenue results at the beginning of March, the week before the World Health Organization declared a pandemic. As a result, Verra Mobility's outlook had been enthusiastic, reflecting a net profit of $33 million for the year based on booming revenue from tolling (up 27 percent) and automated ticketing machines (up 34 percent for the year). The company's debt load, however, increased slightly at just over $1 billion. The firm is now bracing for the worst.
"Due to the uncertainty surrounding the global outbreak of the COVID-19 virus, its duration, and overall business impact, Verra Mobility Corporation is withdrawing its 2020 guidance issued on March 2, 2020," the company announced on March 17. "In addition to the significant steps it has taken to protect the health and safety of its employees, the company is also taking action to mitigate the financial impact to its business by reducing variable costs across the business."