☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). YES ☐ NO ☒

As of ~~November 1, 2021,~~May 5, 2022, there were ~~156,061,922~~156,225,265 shares of the Company’s Class A Common Stock, par value $0.0001 per share, issued and outstanding.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of federal securities laws. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, products, services, and technology offerings, market conditions, growth and trends, expansion plans and opportunities, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “preliminary,” “likely” and similar expressions, and the negative of these expressions, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in Part ~~II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q and in Part~~ I, Item 1A. “Risk Factors” of our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2020, filed on May 17,~~ 2021. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include, among other things:

You should not rely on forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances

reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations.

Unless the context indicates otherwise, the terms “Verra Mobility,” the “Company,” “we,” “us,” and “our” as used in this Quarterly Report on Form 10-Q refer to Verra Mobility Corporation, a Delaware corporation, and its subsidiaries taken as a whole.


	September 30, 2021			December 31, 2020
($ in thousands except per share data)				(As restated)
($ in thousands, except per share data)							March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	128,247		$	120,259		$	93,377		$	101,283
Restricted cash		2,945			633			4,016			3,149
Accounts receivable (net of allowance for credit loss of $14.7 million and $11.5 million at September 30, 2021 and December 31, 2020, respectively)		174,463			168,783
Accounts receivable (net of allowance for credit losses of $14.3 million and $12.1 million at March 31, 2022 and December 31, 2021, respectively)								171,906			160,979
Unbilled receivables		27,422			14,045			39,484			29,109
Inventory, net								15,451			12,093
Prepaid expenses and other current assets		39,054			24,317			38,745			41,456
Total current assets		372,131			328,037			362,979			348,069
Installation and service parts, net		10,596			7,944			15,491			13,332
Property and equipment, net		95,786			70,284			99,351			96,066
Operating lease assets		32,960			29,787			39,944			38,862
Intangible assets, net		317,031			342,139			460,083			487,299
Goodwill		637,739			586,435			837,910			838,867
Other non-current assets		15,673			2,699			8,727			14,561
Total assets	$	1,481,916		$	1,367,325		$	1,824,485		$	1,837,056
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	48,632		$	34,509		$	63,049		$	67,556
Deferred revenue								27,369			27,141
Accrued liabilities		53,663			15,636			46,668			38,435
Payable to related party pursuant to tax receivable agreement, current portion		5,202			4,791			5,107			5,107
Current portion of long-term debt		9,433			9,104			11,952			36,952
Total current liabilities		116,930			64,040			154,145			175,191
Long-term debt, net of current portion		965,362			832,941			1,206,276			1,206,802
Operating lease liabilities, net of current portion		31,570			27,986			35,850			34,984
Payable to related party pursuant to tax receivable agreement, net of current portion		64,329			67,869			56,615			56,615
Private placement warrant liabilities		35,933			30,866			42,200			38,466
Asset retirement obligation		10,708			6,409			12,032			11,824
Deferred tax liabilities, net		12,378			21,148			28,286			47,524
Other long-term liabilities		1,040			494			13,266			5,686
Total liabilities		1,238,250			1,051,753			1,548,670			1,577,092
Commitments and contingencies (Note 13)
Stockholders' equity
Preferred stock, $0.0001 par value		—			—			0			0
Common stock, $0.0001 par value		16			16			16			16
Common stock contingent consideration		36,575			36,575			36,575			36,575
Additional paid-in capital		311,003			373,620			312,986			309,883
Accumulated deficit		(100,482	)		(94,850	)		(71,376	)		(81,416	)
Accumulated other comprehensive (loss) income		(3,446	)		211
Accumulated other comprehensive loss								(2,386	)		(5,094	)
Total stockholders' equity		243,666			315,572			275,815			259,964
Total liabilities and stockholders' equity	$	1,481,916		$	1,367,325		$	1,824,485		$	1,837,056


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			Three Months Ended March 31,
($ in thousands, except per share data)				(As restated)						(As restated)			2022			2021
Service revenue	$	141,811		$	82,980		$	348,000		$	245,292		$	161,134		$	89,763
Product sales		20,284			13,928			32,610			48,138			9,251			95
Total revenue		162,095			96,908			380,610			293,430			170,385			89,858
Cost of service revenue		1,412			907			3,624			3,139			3,779			880
Cost of product sales		9,391			7,088			15,562			24,838			5,995			27
Operating expenses		48,309			26,544			115,235			85,502			51,063			30,492
Selling, general and administrative expenses		31,580			17,511			86,252			64,218			41,635			28,443
Depreciation, amortization and (gain) loss on disposal of assets, net		29,529			29,590			84,806			88,002			35,907			28,265
Total costs and expenses		120,221			81,640			305,479			265,699			138,379			88,107
Income from operations		41,874			15,268			75,131			27,731			32,006			1,751
Interest expense, net		11,637			9,578			32,481			31,568			14,279			9,164
Change in fair value of private placement warrants		(5,067	)		(4,400	)		5,067			(11,533	)		3,734			2,067
Tax receivable agreement liability adjustment		—			—			1,661			4,446
Loss on extinguishment of debt		—			—			5,334			—			0			5,334
Other income, net		(3,494	)		(4,982	)		(9,305	)		(9,430	)		(2,866	)		(3,013	)
Total other expenses		3,076			196			35,238			15,051			15,147			13,552
Income before income taxes		38,798			15,072			39,893	��		12,680
Income tax provision		11,492			3,986			17,510			3,176
Net income	$	27,306		$	11,086		$	22,383		$	9,504
Other comprehensive (loss) income:
Income (loss) before income taxes														16,859			(11,801	)
Income tax provision (benefit)														6,819			(2,886	)
Net income (loss)													$	10,040		$	(8,915	)
Other comprehensive income (loss):
Change in foreign currency translation adjustment		(3,818	)		2,467			(3,657	)		(1,408	)		2,708			(190	)
Total comprehensive income	$	23,488		$	13,553		$	18,726		$	8,096
Net income per share:
Total comprehensive income (loss)													$	12,748		$	(9,105	)
Net income (loss) per share:
Basic	$	0.17		$	0.07		$	0.14		$	0.06		$	0.06		$	(0.05	)
Diluted	$	0.14		$	0.07		$	0.14		$	0.06		$	0.06		$	(0.05	)
Weighted average shares outstanding:
Basic		159,358			161,744			161,334			161,460			156,130			162,297
Diluted		165,431			162,568			164,808			161,995			160,749			162,297


For the Three and Nine Months Ended September 30, 2021
For the Three Months Ended March 31, 2022																					For the Three Months Ended March 31, 2022
	Common Stock					Common Stock Contingent			Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Stockholders'				Common Stock				Common Stock Contingent		Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
(In thousands)	Shares			Amount		Consideration			Capital			Deficit			Income (Loss)			Equity				Shares		Amount		Consideration		Capital			Deficit			(Loss) Income			Equity
Balance as of December 31, 2020 (as restated)		162,269		$	16	$	36,575		$	373,620		$	(94,850	)	$	211		$	315,572
Balance as of December 31, 2021																							156,079	$	16	$	36,575	$	309,883		$	(81,416	)	$	(5,094	)	$	259,964
Net income																							—		—		—		—			10,040			—			10,040
Vesting of restricted stock units ("RSUs")																							154		—		—		—			—			—			—
Exercise of stock options																							7		—		—		93			—			—			93
Payment of employee tax withholding related to RSUs vesting																							—		—		—		(1,436	)		—			—			(1,436	)
Stock-based compensation																							—		—		—		4,446			—			—			4,446
Other comprehensive income, net of tax																							—		—		—		—			—			2,708			2,708
Balance as of March 31, 2022																							156,240	$	16	$	36,575	$	312,986		$	(71,376	)	$	(2,386	)	$	275,815

For the Three Months Ended March 31, 2021																					For the Three Months Ended March 31, 2021

Balance as of December 31, 2020																							162,269	$	16	$	36,575	$	373,620		$	(94,850	)	$	211		$	315,572
Net loss		—			—		—			—			(8,915	)		—			(8,915	)			—		—		—		—			(8,915	)		—			(8,915	)
Vesting of restricted stock units ("RSUs")		91			—		—			—			—			—			—
Vesting of RSUs																							91		—		—		—			—			—			—
Payment of employee tax withholding related to RSUs vesting		—			—		—			(857	)		—			—			(857	)			—		—		—		(857	)		—			—			(857	)
Stock-based compensation		—			—		—			2,908			—			—			2,908				—		—		—		2,908			—			—			2,908
Other comprehensive loss, net of tax		—			—		—			—			—			(190	)		(190	)			—		—		—		—			—			(190	)		(190	)
Balance as of March 31, 2021		162,360			16		36,575			375,671			(103,765	)		21			308,518				162,360	$	16	$	36,575	$	375,671		$	(103,765	)	$	21		$	308,518
Net income		—			—		—			—			3,992			—			3,992
Vesting of RSUs		41			—		—			—			—			—			—
Exercise of stock options		7			—		—			87			—			—			87
Payment of employee tax withholding related to RSUs vesting		—			—		—			(96	)		—			—			(96	)
Stock-based compensation		—			—		—			3,573			—			—			3,573
Other comprehensive gain, net of tax		—			—		—			—			—			351			351
Balance as of June 30, 2021		162,408			16		36,575			379,235			(99,773	)		372			316,425
Net income		—			—		—			—			27,306			—			27,306
Share repurchase and retirement		(6,849	)		—		—			(71,985	)		(28,015	)		—			(100,000	)
Vesting of RSUs		3			—		—			—			—			—			—
Exercise of stock options		2			—		—			21			—			—			21
Adjustment to employee tax withholding related to RSUs vesting		—			—		—			29			—			—			29
Stock-based compensation		—			—		—			3,703			—			—			3,703
Other comprehensive loss, net of tax		—			—		—			—			—			(3,818	)		(3,818	)
Balance as of September 30, 2021		155,564		$	16	$	36,575		$	311,003		$	(100,482	)	$	(3,446	)	$	243,666

For the Three and Nine Months Ended September 30, 2020

Balance as of December 31, 2019 (as restated)		159,150		$	16	$	54,862		$	346,891		$	(89,578	)	$	(2,577	)	$	309,614
Net income (as restated)		—			—		—			—			22,140			—			22,140
Cumulative effect of adoption of the credit loss accounting standard, net of tax		—			—		—			—			(694	)		—			(694	)
Earn-out shares issued to Platinum Stockholder		2,500			—		(18,287	)		18,287			—			—			—
Vesting of RSUs		42			—		—			—			—			—			—
Payment of employee tax withholding related to RSUs vesting		—			—		—			(327	)		—			—			(327	)
Stock-based compensation		—			—		—			2,768			—			—			2,768
Other comprehensive loss, net of tax		—			—		—			—			—			(3,367	)		(3,367	)
Balance as of March 31, 2020 (as restated)		161,692			16		36,575			367,619			(68,132	)		(5,944	)		330,134
Net loss (as restated)		—			—		—			—			(23,722	)		—			(23,722	)
Vesting of RSUs		45			—		—			—			—			—			—
Payment of employee tax withholding related to RSUs vesting		—			—		—			(25	)		—			—			(25	)
Stock-based compensation		—			—		—			3,271			—			—			3,271
Other comprehensive loss, net of tax		—			—		—			—			—			(508	)		(508	)
Balance as of June 30, 2020 (as restated)		161,737			16		36,575			370,865			(91,854	)		(6,452	)		309,150
Net income (as restated)		—			—		—			—			11,086			—			11,086
Vesting of RSUs		33			—		—			—			—			—			—
Payment of employee tax withholding related to RSUs vesting		—			—		—			(134	)		—			—			(134	)
Stock-based compensation		—			—		—			3,153			—			—			3,153
Other comprehensive income, net of tax		—			—		—			—			—			2,467			2,467
Balance as of September 30, 2020 (as restated)		161,770		$	16	$	36,575		$	373,884		$	(80,768	)	$	(3,985	)	$	325,722


	Nine Months Ended September 30,
	2021			2020			Three Months Ended March 31,
($ in thousands)				(As restated)			2022			2021
Cash Flows from Operating Activities:
Net income	$	22,383		$	9,504
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)							$	10,040		$	(8,915	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		84,756			87,828			35,675			28,214
Amortization of deferred financing costs and discounts		3,854			3,725			1,306			1,593
Change in fair value of private placement warrants		5,067			(11,533	)		3,734			2,067
Tax receivable agreement liability adjustment		1,661			4,446
Loss on extinguishment of debt		5,334			—			0			5,334
Credit loss expense		6,716			10,628			3,505			2,402
Deferred income taxes		(8,677	)		(3,920	)		(18,771	)		281
Stock-based compensation		10,184			9,192			4,446			2,908
Gain from third-party insurance proceeds		—			(1,400	)
Other		238			1,075			354			133
Changes in operating assets and liabilities:
Accounts receivable, net		(5,442	)		(58,913	)		(14,300	)		(26,672	)
Unbilled receivables		(5,655	)		3,866			(10,265	)		(859	)
Inventory, net								(5,722	)		(691	)
Prepaid expenses and other assets		(5,014	)		8,655			8,235			429
Accounts payable and accrued liabilities		15,596			(15,134	)
Deferred revenue								46			(44	)
Accounts payable and other current liabilities								(477	)		2,374
Other liabilities		(1,717	)		(3,669	)		13,441			459
Net cash provided by operating activities		129,284			44,350			31,247			9,013
Cash Flows from Investing Activities:
Acquisition of business, net of cash and restricted cash acquired		(107,004	)		—
Payment of contingent consideration								(412	)		0
Purchases of installation and service parts and property and equipment		(15,633	)		(18,317	)		(11,478	)		(3,704	)
Cash proceeds from the sale of assets		225			67			25			56
Net cash used in investing activities		(122,412	)		(18,250	)		(11,865	)		(3,648	)
Cash Flows from Financing Activities:
Repayment on the revolver								(25,000	)		0
Borrowings of long-term debt		996,750			—			0			996,750
Repayment of long-term debt		(882,905	)		(26,503	)		(2,255	)		(865,642	)
Payment of debt issuance costs		(6,628	)		(960	)		(54	)		(5,732	)
Payment of debt extinguishment costs		(1,066	)		—			0			(604	)
Share repurchase and retirement		(100,000	)		—
Proceeds from exercise of stock options		108			—
Proceeds from the exercise of stock options								93			0
Payment of employee tax withholding related to RSUs vesting		(924	)		(486	)		(1,436	)		(857	)
Net cash provided by (used in) financing activities		5,335			(27,949	)
Net cash (used in) provided by financing activities								(28,652	)		123,915
Effect of exchange rate changes on cash and cash equivalents		(1,907	)		(874	)		2,231			252
Net increase (decrease) in cash, cash equivalents and restricted cash		10,300			(2,723	)
Net (decrease) increase in cash, cash equivalents and restricted cash								(7,039	)		129,532
Cash, cash equivalents and restricted cash - beginning of period		120,892			132,430			104,432			120,892
Cash, cash equivalents and restricted cash - end of period	$	131,192		$	129,707		$	97,393		$	250,424

Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents							$	93,377		$	249,605
Restricted cash								4,016			819
Total cash, cash equivalents, and restricted cash							$	97,393		$	250,424

1. Description of Business

Verra Mobility Corporation (collectively with its subsidiaries, the “Company” or “Verra Mobility”), formerly known as Gores Holdings II, Inc. (“Gores”), was originally incorporated in Delaware on August 15, 2016, as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses. On January 19, 2017, the Company consummated its initial public offering (the “IPO”), following which its shares began trading on the Nasdaq Capital Market (“Nasdaq”). On June 21, 2018, Gores entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with Greenlight Holding II Corporation, PE Greenlight Holdings, LLC, AM Merger Sub I, Inc., a direct, ~~wholly-owned~~wholly owned subsidiary of Gores and AM Merger Sub II, LLC, a direct, ~~wholly-owned~~wholly owned subsidiary of Gores. On October 17, 2018, the transactions contemplated by the Merger Agreement (the “Business Combination”) were consummated. In connection with the closing of the Business Combination, Gores changed its name to Verra Mobility Corporation. As a result of the Business Combination, Verra Mobility Corporation became the owner, directly or indirectly, of all of the equity interests of Verra Mobility Holdings, LLC and its subsidiaries.

Verra Mobility offers integrated technology solutions and services to ~~commercial fleets, rental car companies, state and local governments domestically, and government agencies internationally. The Company has~~its customers who are located throughout the world, primarily within the United States, Australia, ~~Europe~~Canada and ~~Canada.~~Europe. The Company is organized into 23 operating segments: Commercial Services, Government Solutions and ~~Government~~Parking Solutions (see Note ~~14.~~14, Segment Reporting).

The Commercial Services segment offers toll and violation management solutions for the commercial fleet and rental car industries by partnering with the leading fleet management and rental car companies in North America. Electronic toll payment services enable fleet drivers and rental car customers to use high-speed cashless toll lanes or all-electronic cashless toll roads. The service helps commercial fleets reduce toll management costs, while it provides rental car companies with a revenue-generating, value-added service for their customers. Electronic violation processing services reduce the cost and risk associated with vehicle-issued violations, such as toll, parking or camera-enforced tickets. Title and registration services offer title and registration processing for individuals, rental car companies and fleet management companies. In Europe, the Company provides violations processing through Euro Parking Collection plc (“EPC”) and consumer tolling services through Pagatelia S.L (“Pagatelia”).

The Government Solutions segment offers photo enforcement solutions and services to its customers. Through its acquisition of Redflex Holdings Limited (“Redflex”) on June 17, 2021, the Company expanded its current footprint in the United States and gained access to international markets (see Note 3.3, ~~Aquisition~~Acquisitions). The Government Solutions segment provides complete, end-to-end speed, red-light, school bus stop arm and bus lane enforcement solutions within the United States and Canada. These programs are designed to reduce traffic violations and resulting collisions, injuries, and fatalities. The Company implements and administers traffic safety programs for municipalities, counties, school districts and law enforcement agencies of all sizes. The ~~newly acquired~~ international operations acquired through Redflex primarily involve the sale of traffic enforcement products and related maintenance services.

The Parking Solutions segment offers an integrated suite of parking software and hardware solutions to its customers, which include universities, municipalities, parking operators, healthcare facilities and transportation hubs. The Company added this new operating segment as a result of the acquisition of T2 Systems Parent Corporation (“T2 Systems”) on December 7, 2021, which allows the Company to diversify its operations into the parking solutions space (see Note 3. Acquisitions). The Parking Solutions segment develops specialized hardware and parking management software that provides a platform for the issuance of parking permits, enforcement, gateless vehicle counting, event parking and citation services. T2 Systems also produces and markets its proprietary software as a service to its customers throughout the United States and Canada.

NaN Commercial Services customer exceeded 10% of total accounts receivable, net as of any period presented.

There were 0 significant customer concentrations that exceeded 10% of total revenue or accounts receivables, net for the Parking Solutions segment.

Allowance for Credit ~~Loss~~Losses

The Company reviews historical credit losses and customer payment trends on receivables and develops loss rate estimates as of the balance sheet date, which includes adjustments for current and future expectations using probability-weighted

assumptions about potential outcomes. Receivables are written off against the allowance for credit ~~loss~~losses when it is probable that amounts will not be collected based on the terms of the customer contracts, and subsequent recoveries reverse the previous write-off and apply to the receivable in the period recovered. NaN interest or late fees are charged on delinquent accounts. The Company evaluates the adequacy of its allowance for expected credit losses by comparing its actual write-offs to its previously recorded estimates and adjusts appropriately.

The Company identified portfolio segments based on the type of business, industry in which the customer operates and historical credit loss patterns. The following presents the activity in the allowance for credit ~~loss~~losses for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively:


($ in thousands)	Commercial Services (Driver-billed) (1)			Commercial Services (All other)			Government Solutions			Total			Commercial Services (Driver-billed) (1)			Commercial Services (All other)			Government Solutions		Parking Solutions			Total
Balance at January 1, 2021	$	3,210		$	4,277		$	3,984		$	11,471
Balance at January 1, 2022													$	5,397		$	3,092		$	3,649	$	0		$	12,138
Credit loss expense		7,944			(820	)		(408	)		6,716			2,868			246			232		159			3,505
Write-offs, net of recoveries		(3,446	)		(45	)		(21	)		(3,512	)		(1,221	)		(15	)		0		(108	)		(1,344	)
Balance at September 30, 2021	$	7,708		$	3,412		$	3,555		$	14,675

($ in thousands)	Commercial Services (Driver-billed) (1)			Commercial Services (All other)			Government Solutions			Total
Balance at January 1, 2020 (2)	$	5,272		$	1,406		$	1,778		$	8,456
Credit loss expense		4,063			4,180			2,385			10,628
Write-offs, net of recoveries		(7,967	)		(344	)		(627	)		(8,938	)
Balance at September 30, 2020	$	1,368		$	5,242		$	3,536		$	10,146
Balance at March 31, 2022													$	7,044		$	3,323		$	3,881	$	51		$	14,299


($ in thousands)	Commercial Services (Driver-billed) (1)			Commercial Services (All other)		Government Solutions			Total
Balance at January 1, 2021	$	3,210		$	4,277	$	3,984		$	11,471
Credit loss expense		2,252			143		7			2,402
Write-offs, net of recoveries		(1,722	)		2		(21	)		(1,741	)
Balance at March 31, 2021	$	3,740		$	4,422	$	3,970		$	12,132

(1)

Driver-billed consists of receivables from drivers of rental cars and fleet management companies for which the Company bills on behalf of its customers. Receivables not collected from drivers within a defined number of days are transferred to customers subject to applicable bad debt sharing agreements.

~~(2)~~

~~This includes a $0.8~~ ~~million increase to the allowance for credit loss as a result of adopting the credit loss standard.~~

The ~~Company adjusted down its estimate for credit loss as of September 30, 2021 for the~~ Commercial Services ~~(All other) segment to reflect improved economic conditions based on customer payment trends in the last 12 months. The~~(Driver-billed) portfolio segment’s credit loss estimate as of September 30, 2020 was based on higher probabilities of loss given the uncertainty caused by COVID-19 on the travel industry. The Commercial Services (Driver-billed) portfolio segment's credit loss estimate as of September 30, 2021March 31, 2022 increased compared to the prior year due to increased revenue that impacted the volume of transactions as a result of recovery from COVID-19. The Commercial Services ~~(Driver-billed) write-offs, net~~(All other) segment’s credit loss estimate as of ~~recoveries~~March 31, 2022 decreased $~~4.5~~ ~~million during the nine months ended September 30, 2021~~ compared to ~~same period~~the prior year which reflects improved economic conditions based on customer payment trends in ~~2020. Write-offs during~~ the ~~2021 period correlate~~last 12 months.

Deferred Revenue

Deferred revenue represents amounts that have been invoiced in advance and are expected to the lower volume of administrative fees on tolls and violations recognized as revenue during 2020 while the write-offs during the 2020 period correlate to the higher volume of administrative fees on tolls and violationsbe recognized as revenue in ~~2019.~~

future periods, and it primarily relates to the Government Solutions and Parking Solutions customers. The Company ~~evaluates~~had approximately $10.0 million and $8.9 million of deferred revenue in the ~~adequacy of its allowance for expected credit losses by comparing its actual historical write-offs to its previously recorded estimates and adjusts appropriately.~~

Recent Accounting Pronouncements

Accounting Standards Adopted

In ~~August 2018,~~May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2018-13,~~2021-04, ~~(Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The amendments on changes in unrealized gains~~Earnings Per Share (Topic 260), Debt—Modifications and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted this standard during the first quarter of 2021 and provided relevant disclosures for the private placement warrant liabilities which are a Level 3 measurement, that fall within the scope of the standard. See Note 8. ~~Fair Value of Financial Instruments.~~

~~In December 2019, the FASB issued ASU 2019-12,~~ ~~Income Taxes~~Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic ~~740): Simplifying the Accounting for Income Taxes.~~ The ASU removes specific exceptions to the general principles in Topic 740 in GAAP including the exception to the incremental approach for intra-period tax allocation, exceptions to accounting for basis differences when there are ownership changes in foreign investments, and the exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The ASU also simplifies current guidance in relation to franchise taxes that are partially based on income,

transactions with a government that result in a step-up in tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. The Company adopted the ASU as of January 1, 2021 which did not have a material impact on the Company’s financial statements or related disclosures.

~~In August 2020, the FASB issued ASU 2020-06,~~ ~~Debt—Debt with Conversion and Other Options (Subtopic 470-20)~~718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for ~~Convertible Instruments and Contracts in an Entity’s Own Equity~~Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.. This ASU ~~simplifies accounting~~provides guidance for ~~convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as~~ a ~~single liability instrument~~modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another topic. It specifically addresses the measurement and ~~more convertible preferred stock as~~recognition of the effect of a ~~single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement~~modification of the terms or conditions ~~that are required for equity contracts to qualify for~~or an exchange of a freestanding equity-classified written call option if it remains equity-classified after the ~~derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share calculation in certain areas.~~modification or exchange. The Company ~~early~~ adopted this standard as of January 1, ~~2021~~2022, which did not have an impact on ~~the Company’s~~its financial statements and related disclosures, as the Company had no ~~instruments~~transactions subject to the standard. If the Company were to ~~issue instruments subject to the standard~~have modifications or exchanges in the future, such guidance ~~as early adopted by the Company~~ would apply.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, to increase transparency in financial reporting by requiring business entities to disclose information about certain types of government assistance they receive. The amendments require annual disclosures regarding the nature of any transactions with a government accounted for by applying a grant or contribution accounting model by analogy

and the related accounting policy used, the effect of the assistance on the entity’s financial statements, and the significant terms and conditions of the transactions. The Company adopted the ASU as of January 1, 2022, which did not have a material impact on its financial statements or related disclosures.

Accounting Standards Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.The ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. It provides optional expedients and exceptions for applying GAAP to contract modifications, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The amendments are effective as of March 12, 2020 through December 31, 2022, to help stakeholders during the global market-wide reference rate transition period. ~~The impact~~

Under the terms of the ~~implementation of this guidance~~2021 Term Loan discussed in Note 7 below, in the event there is ~~still being determined by~~a benchmark transition away from LIBOR, a benchmark replacement rate has been defined in the ~~Company.~~

~~In May~~ 2021 Term Loan along with the ~~FASB issued ASU 2021-04,~~ Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accountingmechanism for ~~Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.~~ ~~This ASU provides guidance for~~such a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. It specifically addresses the treatment, measurement and recognition of the effect of a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option if it remains equity-classified after the modification or exchange. The amendments are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectivelytransition to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted. The impact of the implementation of this guidance is still being determined by the Company.

~~In October 2021, the FASB issued ASU 2021-08,~~ ~~Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers~~, which requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. The amendments are effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted.take place. The Company ~~is currently evaluating the~~does not anticipate this transition will have a material impact ~~of the implementation of this guidance including the possibility of early adopting the standard in the fourth quarter of 2021.~~on its financial statements.

3. ~~Acquisition~~Acquisitions

Redflex Acquisition

On June 17, 2021, the Company completed the acquisition of Redflex, aan Australian public company limited by shares ~~incorporated in Australia~~ and formerly listed on the Australian Securities Exchange. At the closing of the Redflex is a provider of intelligent traffic management products and services that are sold and managed in the Asia Pacific, North America, Europe, and Middle East regions. Redflex develops, manufactures, and operates a wide range of platform-based solutions, utilizing advanced sensor and image capture technologies that enable active management of state and local motorways. The Company has included the financial results of Redflex in the condensed consolidated financial statements from the date of acquisition.

~~Pursuant to the Scheme Implementation Agreement (the “Agreement”) entered into by the Company and Redflex on January 21, 2021, as amended by the Deed of Amendment and Consent, dated April 30, 2021,~~acquisition, VM Consolidated, Inc., an indirect wholly owned subsidiary of the Company, purchased 100 percent of the outstanding equity of Redflex at A$0.96 per share at consideration of A$152.5 million, or approximately US$117.9 million. Transaction costs for Redflex were $~~9.0~~9.7 million which primarily related to professional fees and other expenses related to the ~~acquisition,~~acquisition. Redflex is a provider of intelligent traffic management products and ~~were included within the selling, general~~services that are sold and ~~administrative expenses~~managed in the ~~condensed consolidated~~Asia Pacific, North America, Europe, and Middle East regions. Redflex designs, manufactures, and operates a wide range of platform-based solutions, utilizing advanced sensor and image capture technologies that enable active management of state and local motorways. The Company has included the financial results of Redflex in the financial statements from the date of ~~operations.~~acquisition.

The final allocation of the ~~preliminary~~ purchase consideration is summarized as follows:


($ in thousands)
Assets acquired
Cash and cash equivalents	$	8,760	$	8,760
Restricted cash		2,163		2,163
Accounts receivable		6,870		6,870
Unbilled receivables		7,744		5,283
Property and equipment ~~(a)~~		28,859		29,809
Deferred tax assets		9,192		10,315
Other assets		13,729		19,247
Trademark		900		900
Customer relationships		23,500		25,900
Developed technology		18,200		18,200
Total assets acquired		119,917		127,447

Liabilities assumed
Accounts payable and accrued liabilities		30,137		31,936
Deferred revenue		1,772		8,048
Long-term debt		14,014		14,014
Other long-term liabilities ~~(a)~~		9,237		11,736
Total liabilities assumed		55,160		65,734
Goodwill ~~(a)~~		53,170		56,214
Total purchase consideration	$	117,927	$	117,927

(a) The Company adjusted the fair values from the initial valuation included in its financial results as of June 30, 2021 to reflect new information obtained about facts and circumstances that existed as of the Redflex acquisition date. The measurement period adjustments include a $13~~1.3~~

~~million increase to the property and equipment line item, $0.7~~ ~~million decrease to the asset retirement obligations included in the other long-term liabilities, and the offsetting decrease of $2.0~~ ~~million to the goodwill line item. There was no impact to the statement of operations as a result of these adjustments.~~

The ~~primary areas that remain preliminary relate~~Company finalized the evaluation of historical Redflex tax positions and the impact on assumed uncertain tax positions and other tax attributes during the three months ended March 31, 2022 which did not result in any changes to the fair values of intangible assets acquired, certain tangible assets and liabilities acquired, legal and other contingencies as of the acquisition date, income and non-income based taxes and residual goodwill. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.previously disclosed amounts at December 31, 2021.

Goodwill consists largely of the expected cash flows and future growth anticipated for the Company and was assigned to the Company’s Government Solutions segment. Management has determined that the Redflex international operations represent a new reporting unit for the purposes of assessing potential impairment of goodwill, and as a result of the acquisition, the Government Solutions segment has 2 reporting units. The ~~total operating~~goodwill is not expected to be deductible for tax purposes. The customer relationships value was based on the multi-period excess earnings methodology utilizing projected cash flows. The significant assumptions used to value customer relationships included, among others, customer churn rates, forecasted revenue growth rates attributable to existing customers, forecasted EBITDA margins and ~~reportable segments~~the discount rate. The values for the trademark and the developed technology related assets were based on a relief-from-royalty method. The significant assumptions used to value these intangible assets included, among others, forecasted revenue growth rates, royalty rates and the expected obsolescence curve. The trademark, customer relationships and the developed technology related assets were assigned useful lives of 5.0 years, 10.0 years, and 8.7 years, respectively.

On December 7, 2021, the Company acquired all of the outstanding shares of T2 Systems Parent Corporation (“T2 Systems”), which offers an integrated suite of parking software and hardware solutions to its customers. This acquisition supports the Company's strategy to expand and diversify into new markets within the mobility sector. The Company has included the financial results of T2 Systems in the financial statements from the date of acquisition, and reported within the newly created Parking Solutions segment.

The Company paid a purchase price of $353.2million. Transaction costs for T2 Systems were $2.9 million which primarily related to professional fees and other expenses related to the acquisition.

The allocation of the preliminary purchase consideration is summarized as follows:


($ in thousands)
Assets acquired
Cash and cash equivalents	$	13,866
Restricted cash		228
Accounts receivable		9,673
Unbilled receivables		2,153
Inventory		7,467
Property and equipment		3,336
Prepaid and other assets		7,477
Trademark		3,200
Customer relationships		164,300
Developed technology		19,300
Total assets acquired		231,000

Liabilities assumed
Accounts payable and accrued liabilities		10,379
Deferred revenue		21,253
Deferred tax liability		37,129
Other liabilities		4,228
Total liabilities assumed		72,989
Goodwill		195,226
Total assets acquired and liabilities assumed	$	353,237

Goodwill consists largely of the expected cash flows and future growth anticipated for the Company ~~has not changed as~~and was assigned to the ~~manner in which the Company allocates resources and monitors operating performance has not changed.~~Company’s Parking Solutions segment. The goodwill is not expected to be deductible for tax purposes. The preliminary customer relationships value was based on the multi-period excess earnings methodology utilizing projected cash flows. The significant assumptions used to value customer relationships included, among others, customer upsell and churn rates,

forecasted revenue growth rates attributable to existing customers, forecasted EBITDA margins and the discount rate. The preliminary values for the trademark and the developed technology related assets were based on a relief-from-royalty method. The significant assumptions used to value these intangible assets included, among others, forecasted revenue growth rates, royalty rates and the expected obsolescence curve. The trademark, customer relationships and the developed technology related assets were assigned preliminary useful lives of ~~5.0~~10.0 years, 10.0 years, and ~~9.2~~6.1 years, respectively.

As of March 31, 2022, the valuation of assets acquired and liabilities assumed is preliminary. The ~~pro forma information below gives effect~~primary areas that remain preliminary relate to the ~~Redflex acquisition~~fair values of unbilled receivables, intangible assets acquired, deferred revenue, legal and other contingencies as ~~if it had been completed on the first day of each period presented. The pro forma results of operations are presented for information purposes only. As such, they are not necessarily indicative~~ of the ~~Company’s results had~~acquisition date, income and non-income based taxes and residual goodwill. The Company expects to finalize the ~~Redflex acquisition been completed on the first day of each period presented, nor do they intend to represent the Company’s future results. The pro forma information does~~valuation as soon as practicable, but not ~~reflect any cost savings from operating efficiencies or synergies that could result~~later than one year from the acquisition ~~and does not reflect additional revenue opportunities following~~date.

On December 13, 2021, the Company completed the acquisition of ~~Redflex.~~NuPark (“NuPark”), a provider of parking services and permit management product platform from Passport Labs, Inc., which expanded the Company's presence in the United States in the Parking Solutions segment. The acquisition date fair value of the consideration transferred to Passport Labs, Inc. was approximately $7.0 million, which consisted primarily of $5.0 million of cash paid at closing and $1.5 million of contingent consideration payable. The Company recorded $0.3 million of tangible assets, $4.9 million of customer relationships intangible assets valued using a multi-period excess earnings methodology, with a preliminary estimated useful life of 10.0 years, and $1.3 million of assumed liabilities which was primarily deferred revenue. Goodwill recorded was $3.2 million for future growth anticipated for the Company and is expected to be deductible for tax purposes. The ~~pro forma information includes adjustments~~fair values assigned to ~~record the~~tangible and intangible assets acquired and liabilities ~~associated with~~assumed were preliminary estimates and the ~~Redflex acquisition at their respective preliminary fair values.~~

~~The pro forma results primarily include adjustments related~~Company expects to ~~amortization of intangibles, depreciation expense, interest expense and related debt extinguishment costs~~finalize the valuation as soon as practicable, but not later than one year from the ~~debt refinancing transactions and exclusion~~acquisition date. The Company has included the financial results of ~~acquisition-related~~NuPark in the financial statements from the date of acquisition, which were not material. The transaction costs ~~and certain capitalized costs related to operating leases and developed technology.~~for the acquisition were not material.

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following at:


($ in thousands)	September 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
Prepaid services					$	9,317	$	8,643
Prepaid tolls	$	8,624	$	9,237		9,139		7,539
Prepaid services		6,288		2,989
Deposits		6,268		3,474		6,878		6,742
Photo enforcement equipment inventory		5,702		113
Prepaid income taxes		5,278		2,354
Prepaid computer maintenance		3,596		2,732		3,545		3,742
Prepaid insurance		1,977		2,641		2,707		4,293
Prepaid income taxes						3,383		5,324
Costs to fulfill a customer contract						2,450		3,364
Other		1,321		777		1,326		1,809
Total prepaid expenses and other current assets	$	39,054	$	24,317	$	38,745	$	41,456

5. Goodwill and Intangible Assets

The following table presents the changes in the carrying amount of goodwill by reportable segment:

Commercial

Government

($ in thousands)

Services

Solutions

Total

Balance at December 31, 2020

$
426,689

$
159,746

$
586,435

Goodwill from Redflex acquisition (a)

—

53,170

53,170

Foreign currency translation adjustment

(1,412
)

(454
)

(1,866
)
Balance at September 30, 2021

$
425,277

$
212,462

$
637,739


	Commercial			Government		Parking
($ in thousands)	Services			Solutions		Solutions		Total
Balance at December 31, 2021	$	425,081		$	215,400	$	198,386	$	838,867
Foreign currency translation adjustment		(1,519	)		562		0		(957	)
Balance at March 31, 2022	$	423,562		$	215,962	$	198,386	$	837,910

~~(a) The Company adjusted down the initial value for goodwill of $55.2~~ ~~million related to the Redflex acquisition as part of measurement period adjustments, as discussed in Note 3.~~ ~~Acquisition~~.

1615

Intangible assets consist of the following as of the respective period-ends:


	September 30, 2021						December 31, 2020						March 31, 2022						December 31, 2021
	Weighted						Weighted						Weighted						Weighted
	Average	Gross					Average	Gross					Average	Gross					Average	Gross
	Remaining	Carrying			Accumulated		Remaining	Carrying			Accumulated		Remaining	Carrying			Accumulated		Remaining	Carrying			Accumulated
($ in thousands)	Useful Life	Amount			Amortization		Useful Life	Amount			Amortization		Useful Life	Amount			Amortization		Useful Life	Amount			Amortization
Trademarks	0.2 years	$	33,043		$	31,262	0.3 years	$	32,223		$	29,358	0.5 years	$	36,203		$	31,617	0.5 years	$	36,225		$	31,429
Non-compete agreements	1.3 years		62,563			46,841	2.0 years		62,589			37,412	0.8 years		62,544			53,121	1.0 years		62,555			49,982
Customer relationships	5.4 years		389,910			155,090	5.9 years		367,512			123,784	6.3 years		561,227			182,326	6.5 years		561,767			167,255
Developed technology	2.1 years		183,716			119,008	2.3 years		166,217			95,848	1.9 years		203,102			135,929	2.2 years		202,768			127,350
Gross carrying value of intangible assets			669,232		$	352,201			628,541		$	286,402			863,076		$	402,993			863,315		$	376,016
Less: accumulated amortization			(352,201	)					(286,402	)					(402,993	)					(376,016	)
Intangible assets, net		$	317,031					$	342,139					$	460,083					$	487,299

Amortization expense was $~~22.9~~27.3 million and $~~23.6~~22.7 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and was $66.9~~ ~~million and $70.6~~ ~~million for the nine months ended September 30, 2021 and 2020,~~ respectively.

Estimated amortization expense in future years is expected to be:


($ in thousands)
Remainder of 2021	$	22,129
2022		85,404
Remainder of 2022			$	79,107
2023		56,701		77,781
2024		46,210		67,295
2025		43,512		64,597
2026				57,525
Thereafter		63,075		113,778
Total	$	317,031	$	460,083

6. Accrued Liabilities

Accrued liabilities consist of the following at:


($ in thousands)	September 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
Accrued salaries and wages					$	12,101	$	15,744
Income taxes payable	$	16,213	$	419		9,436		1,517
Accrued salaries and wages		14,119		4,432
Accrued interest payable		10,041		170		8,995		4,209
Current portion of operating lease liabilities		3,468		3,179		5,989		5,760
Restricted cash due to customers		2,945		633		3,654		3,062
Advanced deposits payable		2,832		2,922
Deferred revenue		2,010		749
Payroll liabilities						1,985		1,876
Other		2,035		3,132		4,508		6,267
Total accrued liabilities	$	53,663	$	15,636	$	46,668	$	38,435

1716

8. Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement, includes a single definition of fair value to be used for financial reporting purposes, provides a framework for applying this definition and for measuring fair value under GAAP, and establishes a fair value hierarchy that categorizes into three levels the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are summarized as follows:

Level 1 – Fair value is based on observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2 – Fair value is determined using quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or inputs other than quoted prices that are directly or indirectly observable.

Level 3 – Fair value is determined using one or more significant inputs that are unobservable in active markets at the measurement date, such as a pricing model, discounted cash flow, or similar technique.

The carrying amounts reported in the Company’s condensed consolidated balance sheets for cash, accounts receivable, accounts payable, accrued expenses and the PPP Loan approximate fair value due to the immediate to short-term maturity of these financial instruments. The estimated fair value of the Company’s long-term debt was calculated based upon available market information. The carrying value and the estimated fair value are as follows:


	Level in	September 30, 2021				December 31, 2020				Level in	March 31, 2022				December 31, 2021
	Fair Value	Carrying		Estimated		Carrying		Estimated		Fair Value	Carrying		Estimated		Carrying		Estimated
($ in thousands)	Hierarchy	Amount		Fair Value		Amount		Fair Value		Hierarchy	Amount		Fair Value		Amount		Fair Value
2021 Term Loan	2	$	627,118	$	628,686	$	—	$	—	2	$	870,209	$	889,522	$	871,467	$	895,125
Senior Notes	2		344,744		352,069		—		—	2		345,086		330,313		344,918		355,250
2018 Term Loan	2		—		—		842,045		861,314
Revolver										2		0		0		24,435		25,000

The fair value of the private placement warrant liabilities is measured on a recurring basis and is estimated using the Black-Scholes option pricing model using significant unobservable inputs, primarily related to estimated volatility, and is therefore classified within level 3 of the fair value hierarchy. The key assumptions used were as follows:


	September 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
Stock price	$	15.07		$	13.42		$	16.28		$	15.43
Strike price	$	11.50		$	11.50		$	11.50		$	11.50
Volatility		44.0	%		44.0	%		47.0	%		48.0	%
Remaining life (in years)		2.1			2.8			1.5			1.8
Risk-free interest rate		0.29	%		0.16	%		1.99	%		0.66	%
Expected dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
Estimated fair value	$	5.39		$	4.63		$	6.33		$	5.77

The Company is exposed to valuation risk on ~~its~~these Level 3 financial instruments. The risk of exposure is estimated using a sensitivity analysis of potential changes in the significant unobservable inputs, primarily the volatility input that is the most susceptible to valuation risk. A 5% increase or decrease to the volatility input at ~~September 30, 2021~~March 31, 2022 would increase or

decrease the estimated fair value by $~~0.33~~ ~~per unit. A 5% decrease to the volatility input at September 30, 2021 would decrease the estimate fair value by $0.32~~0.26 per unit. The following summarizes the changes in ~~the~~fair value of private placement warrant liabilities included in net income (loss) for the respective periods:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

($ in thousands)

(As restated)

(As restated)

Beginning balance

$
41,000

$
22,600

$
30,866

$
29,733

Change in fair value of private placement warrants

(5,067
)

(4,400
)

5,067

(11,533
)
Ending balance

$
35,933

$
18,200

$
35,933

$
18,200


	Three Months Ended March 31,
($ in thousands)	2022		2021
Beginning balance	$	38,466	$	30,866
Change in fair value of private placement warrants		3,734		2,067
Ending balance	$	42,200	$	32,933

The Company has an equity investment measured at cost of $3.7 million and is only adjusted to fair value if there are identified events that would indicate a need for an upward or downward adjustment or changes in circumstances that may indicate impairment. The estimation of fair value requires the use of significant unobservable inputs, such as voting rights and obligations in the securities held, and is therefore classified within level 3 of the fair value hierarchy. There were no identified events that required a fair value adjustment as of March 31, 2022.

The fair value of the contingent consideration payable in connection with the NuPark acquisition was $1.5 million at December 13, 2021 acquisition date and was classified within level 3 of the fair value hierarchy. The valuation of the contingent consideration was measured using a discounted cash flow model and the significant unobservable inputs used in the measurement relate to forecasts of annualized revenue developed by the Company. During the three months ended March 31, 2022, the Company made a payment of approximately $0.4 million and as a result the contingent consideration payable was $1.1 million as of March 31, 2022.

9. Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average shares outstanding during the period, without consideration of common stock equivalents. Diluted net income (loss) per share is calculated by adjusting the weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method.

The components of basic and diluted net income (loss) per share are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

(In thousands, except per share data)

(As restated)

(As restated)

Numerator:

Net income

$
27,306

$
11,086

$
22,383

$
9,504

Denominator:

Weighted average shares - basic

159,358

161,744

161,334

161,460

Common stock equivalents

6,073

824

3,474

535

Weighted average shares - diluted

165,431

162,568

164,808

161,995

Net income per share - basic

$
0.17

$
0.07

$
0.14

$
0.06

Net income per share - diluted

$
0.14

$
0.07

$
0.14

$
0.06

Antidilutive shares excluded from diluted net income per share (1):

Contingently issuable shares (2)

5,000

5,000

5,000

5,000

Public warrants

—

13,333

—

13,333

Private placement warrants

—

6,667

6,667

6,667

Non-qualified stock options

929

668

1,075

668

Performance share units

12

115

142

115

Restricted stock units

82

431

531

347

Total antidilutive shares excluded

6,023

26,214

13,415

26,130

~~(1)~~

~~These amounts represent the outstanding shares as of the three and nine months ended September 30, 2021 and 2020.~~


	Three Months Ended March 31,
(In thousands, except per share data)	2022		2021
Numerator:
Net income (loss)	$	10,040	$	(8,915	)
Denominator:
Weighted average shares - basic		156,130		162,297
Common stock equivalents		4,619		0
Weighted average shares - diluted		160,749		162,297
Net income (loss) per share - basic	$	0.06	$	(0.05	)
Net income (loss) per share - diluted	$	0.06	$	(0.05	)
Antidilutive shares excluded from diluted net income (loss) per share:
Contingently issuable shares (1)		5,000		5,000
Public warrants		0		13,333
Private placement warrants		6,667		6,667
Non-qualified stock options		710		1,205
Performance share units		0		229
Restricted stock units		32		2,582
Total antidilutive shares excluded		12,409		29,016

~~(2)~~(1) Contingently issuable shares relate to the earn-out agreement as discussed in Note 12, Related Party Transactions.

10. Income Taxes

The Company’s interim income tax provision (benefit) is determined using an estimated annual effective tax rate, adjusted for discrete items arising in that period. The estimated annual effective tax rate requires judgment and is dependent upon several factors. The Company provides for income taxes under the liability method. This approach requires the recognition

of deferred tax assets and liabilities for the expected future tax consequences of differences between the tax basis of assets or liabilities and their carrying amounts in the financial statements.

The Company provides a valuation allowance for deferred tax assets if it is more likely than not that these items will expire before the Company is able to realize their benefit. The Company calculates the valuation allowance in accordance with the authoritative guidance relating to income taxes, which requires an assessment of both positive and negative evidence regarding the realizability of these deferred tax assets, when measuring the need for a valuation allowance. Significant judgment is required in determining any valuation allowance against deferred tax assets.

~~In December 2019, COVID-19 emerged and spread throughout the world causing severe disruption to the global economy. In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act~~”) was signed into law after COVID-19 was declared a pandemic. There were several income tax provisions and other non-tax matters incorporated into law as a result of the enactment of the CARES Act. The Company elected to delay the employer-side of the FICA payments for the second, third and fourth quarters of 2020, which were paid on September 15, 2021.

The Company’s effective income tax rate was ~~29.6% and~~ ~~26.4~~40.4% for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020, respectively, and~~the effective income tax benefit rate was ~~43.9% and~~ ~~25.0~~24.5% for the ~~nine~~three months ended ~~September 30, 2021 and 2020, respectively. For~~March 31, 2021. The primary driver for the ~~nine months ended September 30, 2020, the impact of discrete items was favorable and had a larger impact on the~~effective tax rate ~~due~~variance was the increase in pre-tax income for the first quarter of 2022 compared to the ~~pretax income being lower. For the nine months ended September 30, 2021, the pretax income was higher and the discrete items unfavorably affected the tax rate, in addition to the impact~~first quarter of ~~the Company’s permanent differences related to the mark-to-market adjustment on the private placement warrants.~~2021.

The total amount of unrecognized tax benefits increased by $~~0.3~~8.1 million during ~~fiscal year 2021~~the three months ended March 31, 2022 primarily due to prior year tax ~~positions.~~positions related to certain tax elections for Redflex U.S. legal entities. As of ~~September 30, 2021,~~March 31, 2022, the total amount of unrecognized tax benefits was $~~1.3~~11.0 million, of which $~~0.5~~2.2 million would affect ~~our~~the Company's effective tax rate if recognized. The Company recognizes interest and penalties related to unrecognized tax benefits through income tax expense. As of ~~September 30, 2021,~~March 31, 2022, the Company had ~~less than~~ $0.1 million accrued for the payment of interest and penalties. The Company believes that it is reasonably possible that a decrease of up to $8.0 million in unrecognized tax benefits may be necessary within the coming year related to the resolution and effectiveness of the tax elections for the Redflex U.S. legal entities.

The Tax Cuts and Jobs Act of 2017 requires taxpayers to capitalize, and subsequently amortize R&D expenses over five years for research activities conducted in the U.S. and over fifteen years for research activities conducted outside of the U.S. This will result in an increase to our U.S. income tax liability and net deferred tax assets. The actual impact will depend on multiple factors, including the amount of R&D expenses incurred and whether the research activities are performed within or outside of the U.S.

The Company is subject to examination by the Internal Revenue Service and taxing authorities in various ~~states.~~jurisdictions. The ~~Company’s~~Company files U.S. federal and various foreign income tax returns ~~remain~~which are subject to examination by ~~tax~~the taxing authorities in the respective jurisdictions, generally for ~~the~~three or four years ~~2017~~ to ~~2019~~.after they are filed. The Company’s state income tax returns are generally no longer subject to income tax examination by tax authorities prior to ~~2016;~~2018; however, the Company’s net operating loss carryforwards and research credit carryforwards arising prior to that year are subject to adjustment. The Company is currently under audit by ~~the State of Florida and Georgia~~various state tax jurisdictions for the years 2018 and 2019, however, no material adjustments are anticipated. The Company regularly assesses the likelihood of tax deficiencies in each of the tax jurisdictions and, accordingly, makes appropriate adjustments to the tax provision as deemed necessary.

11. Stock-Based Compensation

The following details the components of stock-based compensation for the ~~periods presented:~~respective periods:

Three Months Ended September 30,

Nine Months Ended September 30,

($ in thousands)

2021

2020

2021

2020

Operating expenses

$
179

$
183

$
621

$
697

Selling, general and administrative expenses

3,524

2,970

9,563

8,495

Total stock-based compensation expense

$
3,703

$
3,153

$
10,184

$
9,192

22The increase in stock-based compensation expense of $1.5 million during the three months ended March 31, 2022 is primarily due to the accelerated vesting of RSUs granted to an executive officer as part of a separation agreement.

12. Related Party Transactions

Tax Receivable Agreement

At the closing of the Business Combination, the Company entered into the Tax Receivable Agreement (“TRA”) with PE Greenlight Holdings, LLC (the “Platinum Stockholder”) ~~and Greenlight Holding II Corporation as the stockholder representative.~~. The TRA generally provides for the payment ~~by the post-closing company~~ to the Platinum Stockholder of 50% of the net cash savings, if any, in U.S. federal, state and local income tax that the ~~post-closing company~~Company actually realizes (or is deemed to realize in certain circumstances) in periods after the closing of the Business Combination as a result of the ~~increase in the~~increased tax basis of ~~the intangible assets which resulted from an acquisition by the Company~~certain acquired intangibles prior to the Business Combination. The ~~post-closing company~~Company generally ~~will retain~~retains the benefit of the remaining 50% of these cash savings. The Company estimated the potential maximum benefit to be paid ~~would~~will be approximately $70.0 million, and recorded an initial liability and corresponding charge to equity at the closing of the Business Combination. Subsequently, the Company ~~adjusted~~made adjustments to this amount.

At ~~September 30, 2021,~~March 31, 2022, the TRA liability was approximately $~~69.5~~61.7 million of which $~~5.2~~5.1 million was the current portion and $~~64.3~~56.6 million was the non-current portion, both of which are included in the respective payable to related party pursuant to tax receivable agreement line items on the condensed consolidated balance sheet. ~~The Company made a $4.8~~ ~~million payment during the first quarter of 2021 related to the current portion payable as of December 31, 2020.~~

~~The Company recorded $1.7~~ ~~million and $4.4~~ million of charges for the nine months ended September 30, 2021 and 2020, respectively. The TRA liability adjustment in 2021 is arising from higher estimated state tax rates due to changes in statutory rates, whereas in 2020 it is arising from higher estimated state tax rates due to a change in apportionment.

Earn-Out Agreement

Under the Merger Agreement, the Platinum Stockholder is entitled to receive additional shares of Class A Common Stock (the “Earn-Out Shares”) if the volume weighted average closing sale price of one share of Class A Common Stock on the Nasdaq exceeds certain thresholds for a period of at least 10 days out of 20 consecutive trading days at any time during the five-year period following the closing of the Business Combination (the “Common Stock Price”).

The Earn-Out Shares are issued by the Company to the Platinum Stockholder as follows:


Common Stock Price ~~thresholds~~Thresholds		One-time ~~issuance~~Issuance of ~~shares~~Shares
> $13.00 (a)		2,500,000
> $15.50 (a)		2,500,000
> $18.00		2,500,000
> $20.50		2,500,000

(a)

The first and second tranches of Earn-Out Shares have been issued, as discussed below.

If any of the Common Stock Price thresholds above (each, a “Triggering Event”) are not achieved within the five-year period following the closing of the Business Combination, the Company will 0t be required to issue the Earn-Out Shares in respect of such Common Stock Price threshold. In no event shall the Platinum Stockholder be entitled to receive more than an aggregate of 10,000,000 Earn-Out Shares.

If, during the earn-out period, there is a change of control (as defined in the Merger Agreement) that will result in the holders of the Company’s Class A Common Stock receiving a per share price equal to or in excess of the applicable Common Stock Price required in connection with any Triggering Event (an “Acceleration Event”), then immediately prior to the consummation of such change of control: (a) any such Triggering Event that has not previously occurred shall be deemed to have occurred; and (b) the Company shall issue the applicable Earn-Out Shares to the cash consideration stockholders (as defined in the Merger Agreement) (in accordance with their respective pro rata cash share), and the recipients of the issued Earn-Out Shares shall be eligible to participate in such change of control.

The Company estimated the original fair value of the contingently issuable shares to be $73.15 million, of which $36.6 million remains contingently issuable as of ~~September 30, 2021.~~March 31, 2022. The estimated value is not subject to future revisions during the five-year period discussed above. The Company used a Monte Carlo simulation option-pricing model to arrive at its original estimate. Each tranche was valued separately giving specific consideration to the tranche’s price target. The simulation considered volatility and risk-free rates utilizing a peer group based on a 5-year term. This was initially recorded as a distribution to shareholders and was presented as common stock contingent consideration. Upon the occurrence of a Triggering

Event, any issuable shares would be transferred from common stock contingent consideration to common stock and additional paid-in capital accounts. Any contingently issuable shares not issued as a result of a Triggering Event not being attained by the end of the earn-out period will be canceled.

On April 26, 2019 and on January 27, 2020, the Triggering Events for the issuance of the first and second tranches of Earn-Out Shares occurred, as the volume weighted average closing sale price per share of the Company’s Class A Common

Stock as of that date had been greater than $13.00 and $15.50, respectively, for 10 out of 20 consecutive trading days. These Triggering Events resulted in the issuance of an aggregate 5,000,000 shares of the Company’s Class A Common Stock to the Platinum Stockholder and an increase in the Company’s common stock and additional paid-in capital accounts of $36.6 million, with a corresponding decrease to the common stock contingent consideration account. At ~~September 30, 2021,~~March 31, 2022, the potential future Earn-Out Shares issuable are between 0 and 5.0 million.

~~Platinum Stockholder Secondary Offering~~Go Safe Investment

~~On August 20, 2021, the Platinum Stockholder sold~~ ~~8,000,000~~ ~~shares~~Redflex Irish Investments Pty Ltd, a wholly owned indirect subsidiary of the ~~Company’s Class~~ Company, owns a 16% non-voting equity interest in Road Safety Operations Holdings Unlimited, which has a subsidiary, Road Safety Operations Holdings T/A ~~Common Stock~~Go Safe Ireland ("Go Safe"), who provides speed and traffic enforcement services and related equipment to its customers in ~~a secondary offering. On August 25, 2021, the underwriters of the secondary offering fully exercised the overallotment option granted at the time of the secondary offering to purchase an additional~~ ~~1,200,000~~ ~~shares of the Company’s Class A Common Stock at the secondary offering price of~~Ireland. This investment was approximately $~~14.75~~ per share, less underwriting discounts and commissions, from the Platinum Stockholder. The Company received no proceeds from the secondary offering or the exercise of the overallotment option. The Company incurred $~~0.4~~3.7 million ~~in expenses related to the secondary offering consisting~~as of ~~professional services fees which were included in the selling, general~~March 31, 2022 and ~~administrative expenses in~~December 31, 2021, and is presented within other non-current assets on the condensed consolidated ~~statements of operations. Specifically, pursuant~~balance sheets. The Company is engaged as a vendor to ~~the Amended~~supply equipment and ~~Restated Registration Rights Agreement dated as of October 17, 2018, the Company was required~~services to ~~pay, among other things, all registration~~Go Safe and ~~filing fees, reasonable fees and expenses of legal counsel~~related revenues earned were approximately $0.3 million for the Platinum Stockholder, and road show and marketing expenses. After giving effect to the secondary offering, the exercise of the overallotment option and the sale of additional shares in connection with the Company's repurchase program (discussed below), the Platinum Stockholder held approximately ~~5.1% of the Company’s outstanding Class A Common Stock.~~

~~Share Repurchase and Retirement~~

~~On August 9, 2021, the Company announced that its Board of Directors authorized a share repurchase program for up to an aggregate amount of $100~~ ~~million of its outstanding shares of Class A Common Stock. On August 20, 2021, the Company repurchased and retired~~ ~~6,849,315~~ ~~shares of its Class A Common Stock from the Platinum Stockholder at a price per share of $14.60, which was equal to the price at which the underwriter exercised the overallotment option for the secondary offering discussed above. The Company paid $100~~ million to fund the share repurchase using existing cash on hand. The Company accounted for the share repurchase and retirement under the cost method by deducting its par value from the common stock account, reducing $~~72.0~~ ~~million in the additional paid-in-capital account using the share price when the stock was originally issued, and the remaining excess cost of $28.0~~ ~~million by increasing the accumulated deficit account.~~three months ended March 31, 2022.

13. Commitments and Contingencies

The Company has issued various letters of credit under contractual arrangements with certain of its domestic vendors and customers. Outstanding letters of credit under these arrangements totaled $6.2 million at ~~September 30,~~both March 31, 2022 and December 31, 2021. In addition, the Company has $~~1.8~~2.0 million of bank guarantees at ~~September 30, 2021~~March 31, 2022 required to support bids and contracts with certain international customers.

The Company has non-cancelable purchase commitments to certain vendors. The aggregate non-cancelable purchase commitments outstanding at ~~September 30, 2021~~March 31, 2022 were $~~39.8~~41.3 million. The majority of these outstanding commitments are expected to be incurred in the next twelve months and approximately $2.1 million is expected to be incurred during 2023 through 2024.

The Company is subject to tax audits in the normal course of business and does not have material contingencies recorded related to such audits.

The Company accrues for claims and contingencies when losses become probable and reasonably estimable. As of the end of each applicable reporting period, the Company reviews each of its matters and, where it is probable that a liability has been or will be incurred, the Company accrues for all probable and reasonably estimable losses. Where the Company can reasonably estimate a range of loss it may incur regarding such a matter, the Company records an accrual for the amount within the range that constitutes its best estimate. If the Company can reasonably estimate a range but no amount within the range appears to be a better estimate than any other, the Company uses the amount that is the low end of such range.

~~NYC Investigation~~

In January 2021, the New York City Law Department advised the Company that the City of New York was investigating certain matters related to the Company’s installation work for its largest customer, NYCDOT. The Company was informed in March 2021 by the NYC Law Department that it had concluded its investigation, and an agreement was reached in principle to resolve the matter for approximately $~~1.3~~ ~~million, which was accrued during the three months ended March 31, 2021, subject to final administrative approvals.~~

Legal Proceedings

The Company is subject to legal and regulatory actions that arise from time to time in the ordinary course of business. The Company records a liability when it believes it is probable a loss will be incurred and the amount of loss or range of loss can be reasonably estimated. The assessment as to whether a loss is probable, reasonably possible or remote, and as to whether a loss or a range of such loss is estimable, often involves significant judgment about future events. The Company has determined that resolution of pending matters is not probable to have a material adverse impact on its results of operations, cash flows, or financial position, and accordingly, no material contingency accruals are recorded. However, the outcome of litigation is inherently uncertain. As additional information becomes available, the Company reassesses the potential liability.

Brantley v. City of Gretna is a class action lawsuit filed in the 24th Judicial District Court of Jefferson Parish, Louisiana against the City of Gretna (“City”) and its safety camera vendor, Redflex Traffic Systems, Inc. in April 2016. The plaintiff class, which was certified on March 30, 2021, alleges that the City’s safety camera program was implemented and operated in violation of local ordinances and the state constitution, including that the City’s hearing process violated the plaintiffs’ due process rights for lack of a “neutral” arbiter of liability for traffic infractions. Plaintiffs seek recovery of traffic infraction fines paid. The City and Redflex Traffic Systems, Inc. have ~~initiated an appeal of~~appealed the trial court’s ruling granting class certification, which remains pending. Based on the information available to the Company at present, it cannot reasonably estimate a range of loss for this action and, accordingly, it has not accrued any liability associated with this action.

14. Segment Reporting

The Company has 23 operating and reportable segments, Commercial Services, Government Solutions and ~~Government Solutions.~~Parking Solutions. Commercial Services offers toll and violation management solutions and title and registration services to commercial fleet vehicle owners, rental car companies and violation-issuing authorities. Government Solutions implements and administers traffic safety programs and products for municipalities and ~~local and foreign~~ government agencies of all sizes. As a result of the acquisition of T2 Systems completed in December 2021, the Company added a new reportable segment determined based on the type of products and services offered. T2 Systems provides an integrated suite of parking software and hardware solutions to its customers. The Company’s Chief Operating Decision Maker function (“CODM”) is comprised of the Company’s CEO and certain defined representatives of the Company’s executive management team. The Company’s CODM monitors operating performance, allocates resources and deploys capital based on these ~~two~~three segments.

Segment performance is based on revenues and income from operations before depreciation, amortization, ~~gain (loss)~~(gain) loss on disposal of assets, net, and stock-based compensation. The measure also excludes interest expense, net, income taxes and certain other transactions and is inclusive of other income, net. The tables below refer to this measure as segment profit (loss). The aforementioned items are not indicative of operating performance, and, as a result are not included in the measures that

are reviewed by the CODM for the segments. Other income, net consists primarily of credit card rebates earned on the prepayment of tolling transactions and is therefore included in segment profit (loss).

The following tables set forth financial information by segment for the respective periods:

For the Three Months Ended September 30, 2021

Commercial

Government

Corporate

($ in thousands)

Services

Solutions

and Other

Total

Service revenue

$
77,257

$
64,554

$
—

$
141,811

Product sales

—

20,284

—

20,284

Total revenue

77,257

84,838

—

162,095

Cost of service revenue

996

416

—

1,412

Cost of product sales

—

9,391

—

9,391

Operating expenses

17,471

30,659

—

48,130

Selling, general and administrative expenses

10,615

14,763

2,678

28,056

Other income, net

(3,138
)

(356
)

—

(3,494
)
Segment profit (loss)

$
51,313

$
29,965

$
(2,678
)

$
78,600

Segment profit (loss)

$
51,313

$
29,965

$
(2,678
)

$
78,600

Depreciation and amortization

—

—

29,529

29,529

Change in fair value of private placement warrants

—

—

(5,067
)

(5,067
)
Stock-based compensation

—

—

3,703

3,703

Interest expense, net

—

—

11,637

11,637

Income (loss) before income taxes

$
51,313

$
29,965

$
(42,480
)

$
38,798

For the Three Months Ended September 30, 2020

Commercial

Government

Corporate

Services

Solutions

and Other

Total

($ in thousands)

(As restated)

(As restated)

Service revenue

$
44,153

$
38,827

$
—

$
82,980

Product sales

—

13,928

—

13,928

Total revenue

44,153

52,755

—

96,908

Cost of service revenue

554

353

—

907

Cost of product sales

—

7,088

—

7,088

Operating expenses

11,796

14,565

—

26,361

Selling, general and administrative expenses

5,920

8,107

514

14,541

Other income, net

(4,949
)

(33
)

—

(4,982
)
Segment profit (loss)

$
30,832

$
22,675

$
(514
)

$
52,993

Segment profit (loss)

$
30,832

$
22,675

$
(514
)

$
52,993

Depreciation and amortization

—

—

29,419

29,419

Loss on disposal of assets, net

11

160

—

171

Change in fair value of private placement warrants

—

—

(4,400
)

(4,400
)
Stock-based compensation

—

—

3,153

3,153

Interest expense, net

—

—

9,578

9,578

Income (loss) before income taxes

$
30,821

$
22,515

$
(38,264
)

$
15,072


	For the Three Months Ended March 31, 2022
	Commercial			Government		Parking			Corporate
($ in thousands)	Services			Solutions		Solutions			and Other			Total
Service revenue	$	73,465		$	73,224	$	14,445		$	—		$	161,134
Product sales		—			5,604		3,647			—			9,251
Total revenue		73,465			78,828		18,092			—			170,385
Cost of service revenue		602			473		2,704			—			3,779
Cost of product sales		—			3,727		2,268			—			5,995
Operating expenses		15,947			32,391		2,511			—			50,849
Selling, general and administrative expenses		13,276			16,455		7,672			—			37,403
Other (income) expense, net		(2,955	)		72		17			—			(2,866	)
Segment profit (loss)	$	46,595		$	25,710	$	2,920		$	—		$	75,225
Segment profit (loss)	$	46,595		$	25,710	$	2,920		$	—		$	75,225
Depreciation and amortization		—			—		—			35,675			35,675
Loss (gain) on disposal of assets, net		—			241		(9	)		—			232
Change in fair value of private placement warrants		—			—		—			3,734			3,734
Stock-based compensation		—			—		—			4,446			4,446
Interest expense, net		—			—		—			14,279			14,279
Income (loss) before income taxes	$	46,595		$	25,469	$	2,929		$	(58,134	)	$	16,859


	For the Nine Months Ended September 30, 2021												For the Three Months Ended March 31, 2021
	Commercial			Government			Corporate						Commercial			Government			Corporate
($ in thousands)	Services			Solutions			and Other			Total			Services			Solutions			and Other			Total
Service revenue	$	189,426		$	158,574		$	—		$	348,000		$	45,689		$	44,074		$	—		$	89,763
Product sales		—			32,610			—			32,610			—			95			—			95
Total revenue		189,426			191,184			—			380,610			45,689			44,169			—			89,858
Cost of service revenue		2,432			1,192			—			3,624			531			349			—			880
Cost of product sales		—			15,562			—			15,562			—			27			—			27
Operating expenses		47,667			66,947			—			114,614			14,206			16,092			—			30,298
Selling, general and administrative expenses		30,886			35,693			10,110			76,689			10,792			10,811			4,126			25,729
Other income, net		(7,802	)		(1,503	)		—			(9,305	)		(2,070	)		(943	)		—			(3,013	)
Segment profit (loss)	$	116,243		$	73,293		$	(10,110	)	$	179,426		$	22,230		$	17,833		$	(4,126	)	$	35,937
Segment profit (loss)	$	116,243		$	73,293		$	(10,110	)	$	179,426		$	22,230		$	17,833		$	(4,126	)	$	35,937
Depreciation and amortization		—			—			84,756			84,756			—			—			28,214			28,214
Loss on disposal of assets, net		—			50			—			50			—			51			—			51
Change in fair value of private placement warrants		—			—			5,067			5,067			—			—			2,067			2,067
Tax receivable agreement liability adjustment		—			—			1,661			1,661
Stock-based compensation		—			—			10,184			10,184			—			—			2,908			2,908
Interest expense, net		—			—			32,481			32,481			—			—			9,164			9,164
Loss on extinguishment of debt		—			—			5,334			5,334			—			—			5,334			5,334
Income (loss) before income taxes	$	116,243		$	73,243		$	(149,593	)	$	39,893		$	22,230		$	17,782		$	(51,813	)	$	(11,801	)

For the Nine Months Ended September 30, 2020

Commercial

Government

Corporate

Services

Solutions

and Other

Total

($ in thousands)

(As restated)

(As restated)

Service revenue

$
132,667

$
112,625

$
—

$
245,292

Product sales

—

48,138

—

48,138

Total revenue

132,667

160,763

—

293,430

Cost of service revenue

2,007

1,132

—

3,139

Cost of product sales

—

24,838

—

24,838

Operating expenses

39,076

45,729

—

84,805

Selling, general and administrative expenses

29,495

24,926

1,302

55,723

Other income, net

(9,345
)

(85
)

—

(9,430
)
Segment profit (loss)

$
71,434

$
64,223

$
(1,302
)

$
134,355

Segment profit (loss)

$
71,434

$
64,223

$
(1,302
)

$
134,355

Depreciation and amortization

—

—

87,828

87,828

Loss on disposal of assets, net

16

158

—

174

Change in fair value of private placement warrants

—

—

(11,533
)

(11,533
)
Tax receivable agreement liability adjustment

—

—

4,446

4,446

Stock-based compensation

—

—

9,192

9,192

Interest expense, net

—

—

31,568

31,568

Income (loss) before income taxes

$
71,418

$
64,065

$
(122,803
)

$
12,680

The Company primarily operates within the United States, Australia, ~~Europe~~Canada, United Kingdom and ~~Canada. Revenues are attributable to~~in various other countries ~~based upon the location of the customer.~~in Europe. Revenues from international customers were $~~13.8~~23.3 million and $~~3.6~~2.8 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, respectively. Revenues from Australia, United Kingdom and ~~2020, respectively, and were~~Canada represented $~~21.6~~7.8 million, $6.2 million and $~~10.4~~8.6 million, respectively for the three months ended March 31, 2022. Revenues earned from goods transferred to customers at a point in time were approximately $9.3 million and less than $0.1 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. ~~The Company does not disaggregate assets by segment other than certain customer equipment and vehicles related to the Government Solutions segment. Refer to Note 5,~~ ~~Goodwill and Intangible Assets~~ ~~for goodwill balances by segment.~~

15. Guarantor/Non-Guarantor Financial Information

VM Consolidated, Inc., a wholly owned subsidiary of the Company, is the lead borrower of the 2021 Term Loan, Senior Notes and the Revolver. VM Consolidated, Inc. is owned by the Company through a series of holding companies that ultimately end with the Company. VM Consolidated, Inc. is wholly owned by Greenlight Acquisition Corporation, which is

wholly owned by Greenlight Intermediate Holding Corporation, which is wholly owned by Greenlight Holding Corporation, which is wholly owned by Verra Mobility Holdings, LLC, which is wholly owned by Verra Mobility Corporation or the Company. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, including transactions with the Company’s wholly owned ~~subsidiary~~ guarantor subsidiaries and non-guarantor subsidiaries.

The following financial information presents the condensed consolidated balance sheets as of ~~September 30, 2021~~March 31, 2022 and the related condensed consolidated statements of operations and comprehensive income ~~for the three~~ and ~~nine months ended September 30, 2021 and the~~ condensed consolidated ~~statements~~statement of cash flows for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 for the Company, the combined guarantor ~~subsidiary~~subsidiaries and the combined non-guarantor subsidiaries.

2826

Verra Mobility Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

at ~~September 30, 2021~~March 31, 2022

(Unaudited)


($ in thousands)	Verra Mobility Corporation (Ultimate Parent)		VM Consolidated Inc. (Guarantor Subsidiary)		Non- guarantor Subsidiaries		Eliminations			Consolidated		Verra Mobility Corporation (Ultimate Parent)		Guarantor Subsidiaries		Non- guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	102,912	$	25,335	$	—		$	128,247	$	—	$	60,209	$	33,168	$	—		$	93,377
Restricted cash		—		931		2,014		—			2,945		—		3,915		101		—			4,016
Accounts receivable (net of allowance for credit loss of $14.7 million)		—		165,166		9,297		—			174,463
Accounts receivable (net of allowance for credit loss of $14.3 million )													—		158,861		13,045		—			171,906
Unbilled receivables		—		17,958		9,464		—			27,422		—		35,524		3,960		—			39,484
Investment in subsidiary		74,407		203,856		—		(278,263	)		—		106,556		156,179		—		(262,735	)		—
Inventory, net													—		1,124		14,327		—			15,451
Prepaid expenses and other current assets		—		25,884		13,170		—			39,054		—		28,386		10,359		—			38,745
Total current assets		74,407		516,707		59,280		(278,263	)		372,131		106,556		444,198		74,960		(262,735	)		362,979
Installation and service parts, net		—		8,198		2,398		—			10,596		—		15,491		—		—			15,491
Property and equipment, net		—		66,396		29,390		—			95,786		—		82,450		16,901		—			99,351
Operating lease assets		—		28,859		4,101		—			32,960		—		32,075		7,869		—			39,944
Intangible assets, net		—		254,216		62,815		—			317,031		—		344,457		115,626		—			460,083
Goodwill		—		524,766		112,973		—			637,739		—		689,501		148,409		—			837,910
Due from affiliates		169,259		—		—		(169,259	)		—		169,259		—		—		(169,259	)		—
Other non-current assets		—		2,389		13,284		—			15,673		—		4,566		4,161		—			8,727
Total assets	$	243,666	$	1,401,531	$	284,241	$	(447,522	)	$	1,481,916	$	275,815	$	1,612,738	$	367,926	$	(431,994	)	$	1,824,485
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	—	$	31,286	$	17,346	$	—		$	48,632	$	—	$	47,124	$	15,925	$	—		$	63,049
Deferred revenue													—		15,699		11,670		—			27,369
Accrued liabilities		—		40,806		12,857		—			53,663		—		35,592		11,076		—			46,668
Payable to related party pursuant to tax receivable agreement, current portion		—		5,202		—		—			5,202		—		5,107		—		—			5,107
Current portion of long-term debt		—		6,500		2,933		—			9,433		—		11,952		—		—			11,952
Total current liabilities		—		83,794		33,136		—			116,930		—		115,474		38,671		—			154,145
Long-term debt, net of current portion		—		965,362		—		—			965,362		—		1,206,276		—		—			1,206,276
Operating lease liabilities, net of current portion		—		27,700		3,870		—			31,570		—		29,961		5,889		—			35,850
Payable to related party pursuant to tax receivable agreement, net of current portion		—		64,329		—		—			64,329		—		56,615		—		—			56,615
Private placement warrant liabilities		—		35,933		—		—			35,933		—		42,200		—		—			42,200
Due to affiliates		—		134,566		34,693		(169,259	)		—		—		27,173		142,086		(169,259	)		—
Asset retirement obligation		—		7,799		2,909		—			10,708		—		12,006		26		—			12,032
Deferred tax liabilities, net		—		7,091		5,287		—			12,378		—		3,222		25,064		—			28,286
Other long-term liabilities		—		550		490		—			1,040		—		13,255		11		—			13,266
Total liabilities		—		1,327,124		80,385		(169,259	)		1,238,250		—		1,506,182		211,747		(169,259	)		1,548,670
Total stockholders' equity		243,666		74,407		203,856		(278,263	)		243,666		275,815		106,556		156,179		(262,735	)		275,815
Total liabilities and stockholders' equity	$	243,666	$	1,401,531	$	284,241	$	(447,522	)	$	1,481,916	$	275,815	$	1,612,738	$	367,926	$	(431,994	)	$	1,824,485

Verra Mobility Corporation and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income

Three Months Ended ~~September 30, 2021~~March 31, 2022

(Unaudited)



($ in thousands)	Verra Mobility Corporation (Ultimate Parent)			VM Consolidated Inc. (Guarantor Subsidiary)			Non- guarantor Subsidiaries			Eliminations			Consolidated			Verra Mobility Corporation (Ultimate Parent)			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Consolidated
Service revenue	$	—		$	122,285		$	19,526		$	—		$	141,811		$	—		$	143,164		$	17,970		$	—		$	161,134
Product sales		—			16,689			3,595			—			20,284			—			4,875			4,376			—			9,251
Total revenue		—			138,974			23,121			—			162,095			—			148,039			22,346			—			170,385
Cost of service revenue		—			435			977			—			1,412			—			2,475			1,304			—			3,779
Cost of product sales		—			8,613			778			—			9,391			—			2,825			3,170			—			5,995
Operating expenses		—			33,437			14,872			—			48,309			—			41,965			9,098			—			51,063
Selling, general and administrative expenses		—			25,046			6,534			—			31,580			—			35,603			6,032			—			41,635
Depreciation, amortization and (gain) loss on disposal of assets, net		—			25,078			4,451			—			29,529			—			30,739			5,168			—			35,907
Total costs and expenses		—			92,609			27,612			—			120,221			—			113,607			24,772			—			138,379
Income (loss) from operations		—			46,365			(4,491	)		—			41,874			—			34,432			(2,426	)		—			32,006
(Income) loss from equity investment		(27,306	)		3,937			—			23,369			—
Income from equity investment																	(10,040	)		1,312			—			8,728			—
Interest expense, net		—			11,634			3			—			11,637			—			14,279			—			—			14,279
Change in fair value of private placement warrants		—			(5,067	)		—			—			(5,067	)		—			3,734			—			—			3,734
Other income, net		—			(3,421	)		(73	)		—			(3,494	)		—			(2,688	)		(178	)		—			(2,866	)
Total other (income) expenses		(27,306	)		7,083			(70	)		23,369			3,076			(10,040	)		16,637			(178	)		8,728			15,147
Income (loss) before income taxes		27,306			39,282			(4,421	)		(23,369	)		38,798			10,040			17,795			(2,248	)		(8,728	)		16,859
Income tax provision (benefit)		0			11,976			(484	)		0			11,492			—			7,755			(936	)		—			6,819
Net income (loss)	$	27,306		$	27,306		$	(3,937	)	$	(23,369	)	$	27,306		$	10,040		$	10,040		$	(1,312	)	$	(8,728	)	$	10,040
Other comprehensive loss:
Other comprehensive income:
Change in foreign currency translation adjustment		—			—			(3,818	)		—			(3,818	)		—			—			2,708			—			2,708
Total comprehensive income (loss)	$	27,306		$	27,306		$	(7,755	)	$	(23,369	)	$	23,488
Total comprehensive income																$	10,040		$	10,040		$	1,396		$	(8,728	)	$	12,748

~~Condensed Consolidated Statements of Operations and Comprehensive Income~~

~~Nine Months Ended September 30, 2021~~

~~(Unaudited)~~

($ in thousands)

Verra Mobility
Corporation
(Ultimate Parent)

VM
Consolidated
Inc.
(Guarantor
Subsidiary)

Non-
guarantor
Subsidiaries

Eliminations

Consolidated

Service revenue

$
—

$
319,489

$
28,511

$
—

$
348,000

Product sales

—

28,770

3,840

—

32,610

Total revenue

—

348,259

32,351

—

380,610

Cost of service revenue

—

1,351

2,273

—

3,624

Cost of product sales

—

14,677

885

—

15,562

Operating expenses

—

93,889

21,346

—

115,235

Selling, general and administrative expenses

—

76,730

9,522

—

86,252

Depreciation, amortization and (gain) loss on disposal of assets, net

—

77,319

7,487

—

84,806

Total costs and expenses

—

263,966

41,513

—

305,479

Income (loss) from operations

—

84,293

(9,162
)

—

75,131

(Income) loss from equity investment

(22,383
)

8,416

—

13,967

—

Interest expense, net

—

32,478

3

—

32,481

Change in fair value of private placement warrants

—

5,067

—

—

5,067

Tax receivable agreement liability adjustment

—

1,661

—

—

1,661

Loss on extinguishment of debt

—

5,334

—

—

5,334

Other income, net

—

(9,244
)

(61
)

—

(9,305
)
Total other (income) expenses

(22,383
)

43,712

(58
)

13,967

35,238

Income (loss) before income taxes

22,383

40,581

(9,104
)

(13,967
)

39,893

Income tax provision (benefit)

—

18,198

(688
)

—

17,510

Net income (loss)

$
22,383

$
22,383

$
(8,416
)

$
(13,967
)

$
22,383

Other comprehensive loss:

Change in foreign currency translation adjustment

—

—

(3,657
)

—

(3,657
)
Total comprehensive income (loss)

$
22,383

$
22,383

$
(12,073
)

$
(13,967
)

$
18,726

Verra Mobility Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022

(Unaudited)


($ in thousands)	Verra Mobility Corporation (Ultimate Parent)			VM Consolidated Inc. (Guarantor Subsidiary)			Non- guarantor Subsidiaries			Eliminations			Consolidated			Verra Mobility Corporation (Ultimate Parent)			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities:
Net income (loss)	$	22,383		$	22,383		$	(8,416	)	$	(13,967	)	$	22,383		$	10,040		$	10,040		$	(1,312	)	$	(8,728	)	$	10,040
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		—			77,269			7,487			—			84,756			—			30,507			5,168			—			35,675
Amortization of deferred financing costs and discounts		—			3,854			—			—			3,854			—			1,306			—			—			1,306
Change in fair value of private placement warrants		—			5,067			—			—			5,067			—			3,734			—			—			3,734
Tax receivable agreement liability adjustment		—			1,661			—			—			1,661
Loss on extinguishment of debt		—			5,334			—			—			5,334
Credit loss expense		—			6,596			120			—			6,716			—			3,372			133			—			3,505
Deferred income taxes		—			(8,884	)		207			—			(8,677	)		—			(19,247	)		476			—			(18,771	)
Stock-based compensation		—			10,184			—			—			10,184			—			4,446			—			—			4,446
Other		—			238			—			—			238			—			354			—			—			354
(Income) loss from equity investment		(22,383	)		8,416			—			13,967			—
Income from equity investment																	(10,040	)		1,312			—			8,728			—
Changes in operating assets and liabilities:
Accounts receivable, net		—			(5,013	)		(429	)		—			(5,442	)		—			(12,054	)		(2,246	)		—			(14,300	)
Unbilled receivables		—			(4,506	)		(1,149	)		—			(5,655	)		—			(11,305	)		1,040			—			(10,265	)
Inventory, net																	—			(2,559	)		(3,163	)		—			(5,722	)
Prepaid expenses and other assets		—			(345	)		(4,669	)		—			(5,014	)		—			9,173			(938	)		—			8,235
Accounts payable and accrued liabilities		—			30,106			(14,510	)		—			15,596
Deferred revenue																	—			(1,470	)		1,516			—			46
Accounts payable and other current liabilities																	—			2,670			(3,147	)		—			(477	)
Due to affiliates		—			(28,997	)		28,997			—			—			—			(1,148	)		1,148			—			—
Other liabilities		—			(195	)		(1,522	)		—			(1,717	)		—			13,329			112			—			13,441
Net cash provided by operating activities		—			123,168			6,116			—			129,284
Net cash provided by (used in) operating activities																	—			32,460			(1,213	)		—			31,247
Cash Flows from Investing Activities:
Acquisition of business, net of cash and restricted cash acquired		—			(107,004	)		—			—			(107,004	)
Payment of contingent consideration																	—			(412	)		—			—			(412	)
Purchases of installation and service parts and property and equipment		—			(13,277	)		(2,356	)		—			(15,633	)		—			(8,286	)		(3,192	)		—			(11,478	)
Cash proceeds from the sale of assets		—			225			—			—			225			—			25			—			—			25
Cash contribution to subsidiary		—			(23,219	)		—			23,219			—
Net cash used in investing activities		—			(143,275	)		(2,356	)		23,219			(122,412	)		—			(8,673	)		(3,192	)		—			(11,865	)
Cash Flows from Financing Activities:
Borrowings of long-term debt		—			996,750			—			—			996,750
Repayment on the revolver																	—			(25,000	)		—			—			(25,000	)
Repayment of long-term debt		—			(868,892	)		(14,013	)		—			(882,905	)		—			(2,255	)		—			—			(2,255	)
Payment of debt issuance costs		—			(6,628	)		—			—			(6,628	)		—			(54	)		—			—			(54	)
Payment of debt extinguishment costs		—			(1,066	)		—			—			(1,066	)
Share repurchase and retirement		—			(100,000	)		—			—			(100,000	)
Proceeds from exercise of stock options		—			108			—			—			108
Capital contribution from VM Consolidated Inc.		—			—			23,219			(23,219	)		—
Proceeds from the exercise of stock options																	—			93			—			—			93
Payment of employee tax withholding related to RSUs vesting		—			(924	)		—			—			(924	)		—			(1,436	)		—			—			(1,436	)
Net cash provided by financing activities		—			19,348			9,206			(23,219	)		5,335
Net cash used in financing activities																	—			(28,652	)		—			—			(28,652	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(1,907	)		—			(1,907	)		—			—			2,231			—			2,231
Net (decrease) increase in cash, cash equivalents and restricted cash		—			(759	)		11,059			—			10,300
Net decrease in cash, cash equivalents and restricted cash																	—			(4,865	)		(2,174	)		—			(7,039	)
Cash, cash equivalents and restricted cash - beginning of period		—			104,602			16,290			—			120,892			—			68,989			35,443			—			104,432
Cash, cash equivalents and restricted cash - end of period	$	—		$	103,843		$	27,349		$	—		$	131,192		$	—		$	64,124		$	33,269		$	—		$	97,393

3229

Verra Mobility Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022

(Unaudited)


	Verra Mobility Corporation (Ultimate Parent)		VM Consolidated Inc. (Guarantor Subsidiary)		Non- guarantor Subsidiaries		Eliminations		Consolidated		Verra Mobility Corporation (Ultimate Parent)		Guarantor Subsidiaries		Non- guarantor Subsidiaries		Eliminations		Consolidated
Supplemental cash flow information:
Interest paid	$	—	$	18,803	$	—	$	—	$	18,803	$	—	$	8,188	$	—	$	—	$	8,188
Income taxes paid, net of refunds		—		14,429		74		—		14,503		—		1,124		23		—		1,147
Supplemental non-cash investing and financing activities:
Purchases of installation and service parts and property and equipment in accounts payable and accrued liabilities at period-end		—		1,910		—		—		1,910		—		4,057		—		—		4,057
Additions related to asset retirement obligations, property and equipment, and other		—		1,314		—		—		1,314

16. Subsequent Event

~~T2 Systems Acquisition~~

On ~~November 1, 2021, VM Consolidated, Inc.,~~May 7, 2022, the ~~Company's indirect wholly owned subsidiary (“VM Consolidated”), Project Titan Merger Sub, Inc. (“Merger Sub”),~~Company’s Board of Directors authorized a ~~wholly owned subsidiary of VM Consolidated, T2 Systems Parent Corporation, a Delaware corporation (“T2 Systems”), and Thoma Bravo Discover Fund, L.P., a Delaware limited partnership, solely in its capacity as representative, entered into~~share repurchase program for up to an ~~Agreement and Plan of Merger (the “T2 Merger Agreement”). Upon the terms and subject to the conditions set forth in the T2 Merger Agreement, Merger Sub will merge with and into T2 Systems (the “Merger”), with T2 Systems surviving the Merger as an indirect wholly owned subsidiary of the Company. At the closing of the Merger (the “Closing”), VM Consolidated will pay a purchase price~~aggregate amount of $~~347.0~~125 million of its outstanding shares of Class A common stock over the next twelve months. The level at which the Company repurchases depends on a ~~cash-free, debt-free basis,~~number of factors, including its financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors its management may deem relevant. The timing, volume and nature of repurchases are subject to ~~certain customary purchase price adjustments. The purchase price paid by VM Consolidated in the Merger could~~market conditions, applicable securities laws and other factors and may be ~~increased by the costs of an impending asset acquisition by T2 Systems, Inc., an indirect wholly owned subsidiary of T2 Systems, which costs include a $9.0~~ ~~million purchase price and the assumption of liabilities in the form of obligations assumed under contracts assigned to T2 Systems, Inc.~~

~~The obligation of the parties to consummate the Merger is subject to the satisfaction~~amended, suspended or waiver of customary closing conditions set forth in the T2 Merger Agreement, including the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, required stockholder approval and the accuracy of the other party’s representations and warranties and the performance, in all material respects, by the other party of its obligations under the T2 Merger Agreement. The T2 Merger Agreement includes certain termination rights of both VM Consolidated and T2 Systems, including providing that either party, subject to certain exceptions and limitations, may terminate the T2 Merger Agreement if the Merger is not consummated by January 14, 2022. The Closing is expected to take place in the fourth quarter of 2021.discontinued at any time.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read together with our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2020 filed on May 17,~~ 2021, and our financial statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part ~~II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q and those set forth in Part~~ I, Item 1A. “Risk Factors” in our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2020 filed on May 17,~~ 2021. Please also refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

We believe we are a leading provider of smart mobility technology solutions and services ~~to customers located~~ throughout ~~the world, primarily within~~ the United States, Australia, Europe and Canada. These solutions and services include toll and violations management, title and registration, automated safety solutions, ~~title~~parking enforcement and ~~registration,~~citation, and other data-driven solutions, to our customers, which include rental car companies (“RACs”), fleet management companies (“FMCs”), other large fleet owners, ~~state and local government agencies (both domestic and international),~~municipalities, school districts, universities, parking operators, healthcare facilities and transportation hubs and other violation-issuing authorities. Our solutions simplify the smart mobility ecosystem by utilizing what we believe are industry-leading capabilities, information and technology expertise, and integrated hardware and software to efficiently facilitate the automated processing of tolls and violations, automated safety and ~~safety~~parking solutions for hundreds of agencies and millions of end users annually, while also making cities and roadways safer for everyone.

~~On November 1, 2021, VM Consolidated, Inc., our indirect wholly owned subsidiary (“VM Consolidated”), Project Titan Merger Sub, Inc. (“Merger Sub”), a wholly owned subsidiary of VM Consolidated, T2 Systems Parent Corporation, a Delaware corporation (“T2 Systems”), and Thoma Bravo Discover Fund, L.P., a Delaware limited partnership, solely in its capacity as representative, entered into an Agreement and Plan of Merger (the “T2 Merger Agreement”). Upon the terms and subject to the conditions set forth in the T2 Merger Agreement, Merger Sub will merge with and into T2 Systems (the “Merger”), with T2 Systems surviving the Merger as an indirect wholly owned subsidiary of the Company. At the closing of the Merger (the “Closing~~”), VM Consolidated will pay a purchase price of $347.0 million on a cash-free, debt-free basis, subject to certain customary purchase price adjustments. The purchase price paid by VM Consolidated in the Merger could be increased by the costs of an impending asset acquisition by T2 Systems, Inc., an indirect wholly owned subsidiary of T2 Systems, which costs include a $9.0 million purchase price and the assumption of liabilities in the form of obligations assumed under contracts assigned to T2 Systems, Inc.

The obligation of the parties to consummate the Merger is subject to the satisfaction or waiver of customary closing conditions set forth in the T2 Merger Agreement, including the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, required stockholder approval and the accuracy of the other party’s representations and warranties and the performance, in all material respects, by the other party of its obligations under the T2 Merger Agreement. The T2 Merger Agreement includes certain termination rights of both VM Consolidated and T2 Systems, including providing that either party, subject to certain exceptions and limitations, may terminate the T2 Merger Agreement if the Merger is not consummated by January 14, 2022. The Closing is expected to take place in the fourth quarter of 2021.

On August 9, 2021, we announced that our Board of Directors authorized a share repurchase program for up to an aggregate amount of $100 million of our outstanding shares of Class A Common Stock. On August 20, 2021, we repurchased and retired 6,849,315 shares of our Class A Common Stock from the Platinum Stockholder at a price per share of $14.60, which was equal to the price at which the underwriter exercised the overallotment option for the secondary offering. We paid $100 million to fund the share repurchase using existing cash on hand. See Note 12. ~~Related Party Transactions, for additional details on the secondary offering by the Platinum Stockholder.~~

~~On June 17, 2021, we completed the acquisition of Redflex Holdings Limited (“Redflex~~”), a public company limited by shares, incorporated in Australia and listed on the Australian Securities Exchange. Redflex is a provider of intelligent traffic management products and services that are sold and managed in the Asia Pacific, North America, Europe, and Middle East regions. Redflex develops, manufactures, and operates a wide range of platform-based solutions, utilizing advanced sensor and image capture technologies that enable active management of state and local motorways. We included the financial results of Redflex in the condensed consolidated financial statements from the date of acquisition.

~~Pursuant to the Scheme Implementation Agreement (the “Agreement~~”) entered into by us and Redflex on January 21, 2021, as amended by the Deed of Amendment and Consent, dated April 30, 2021, VM Consolidated, Inc., our indirect wholly owned subsidiary, purchased one hundred percent of the outstanding equity of Redflex at A$0.96 per share resulting in consideration of A$152.5 million, or approximately US$117.9 million. See Note 3~~. Acquisition,~~ ~~for additional details on the Redflex acquisition.~~

~~We have two operating and reportable segments, Commercial Services and Government Solutions:~~

Segment performance is based on revenues and income from operations before depreciation, amortization, gain (loss) on disposal of assets, net, and stock-based compensation. The measure also excludes interest expense, net, income taxes and certain other transactions and is inclusive of other income, net.

We operate under long-term contracts and have a highly reoccurring service revenue model. We continue to execute on our strategy of growing revenues with existing customers, expanding offerings into adjacent markets through innovation or acquisition and reducing operating costs. During the periods presented, we:

Redflex – During the second quarter of 2021, we acquired Redflex Holdings Limited (“Redflex”), which provides intelligent traffic management products and services to its customers. Through our acquisition of Redflex, we expanded our current footprint in the United States and gained access to international markets.

T2 Systems – During the fourth quarter of 2021, we acquired T2 Systems Parent Corporation (“T2 Systems”), which provides an integrated suite of parking software and hardware solutions and supports our strategy to diversify into new markets and increase opportunities to cross sell to customers within our overall portfolio.

We have three operating and reportable segments, Commercial Services, Government Solutions and Parking Solutions:

Segment performance is based on revenues and income from operations before depreciation, amortization, (gain) loss on disposal of assets, net, and stock-based compensation. The measure also excludes interest expense, net, income taxes and certain other transactions and is inclusive of other income, net.

~~Total revenue consists of service revenue generated by our Commercial Services and Government Solutions segments and product sales generated by the Government Solutions segment.~~Revenues

Service Revenue. Our Commercial Services segment generates service revenue primarily through the ~~management~~operation and ~~operation~~management of tolling programs and processing violations for RACs, FMCs and other large fleet customers. These solutions

are ~~full service~~full-service offerings by which we enroll the license plates of our customers’ vehicles and transponders with tolling authority accounts, pay tolls and violations on the customers’ behalf and, through proprietary technology, integrate with customer data to match the toll or violation to the driver and then bill the driver (or our customer, as applicable) for use of the service. The cost of certain tolls, violations and our customers’ share of administration fees are netted against revenue. We also generate service revenue in our Commercial Services segment through processing titles and registrations for our customers.

Our Government Solutions segment generates service revenue through the operation and maintenance of photo enforcement systems. This revenue is generally tied to long-term contracts, and revenue is recognized either when services are performed or when citations are issued or paid, depending on the terms of the customer contract. Revenue drivers in this segment include the number of systems installed and the monthly revenue per system. Ancillary service revenue is generated in our Government Solutions segment from payment processing, pass-through fees for collection expense, and other fees.

Our Parking Solutions segment generates service revenue mainly from offering software as a service, subscription fees, professional services and citation processing services related to parking management solutions to its customers.

Product Sales. Product sales are generated by the sale of photo enforcement equipment ~~to certain customers~~ in the Government Solutions segment ~~whose~~and specialized hardware in the Parking Solutions segment. Customer buying patterns vary greatly from period to ~~period. We recognize~~period related to product ~~sales revenue when the equipment is accepted or installed.~~sales.

Cost of Service Revenue. Cost of service revenue consists of collection and other professional services provided by third parties associated with the delivery of certain ancillary services performed by ~~both~~ our ~~Government Solutions and Commercial Services~~ segments.

Cost of Product Sales. Cost of product sales consists of the cost to acquire and install photo enforcement equipment purchased by ~~our~~ Government Solutions customers and costs to develop and install hardware sold to Parking Solutions customers.

Operating Expenses. Operating expenses include payroll and payroll-related costs (including stock-based compensation), costs related to the operation of our call centers and other operational costs, including transaction processing, print, postage and communication costs.

Selling, General and Administrative Expenses. Selling, general and administrative expenses include payroll and payroll-related costs (including stock-based compensation), real estate lease expense, insurance costs, professional services fees, acquisition costs and general corporate expenses.

Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net includes depreciation on property, plant and equipment, and amortization of definite-lived intangible assets. This line item also includes any one-time gains or losses incurred in connection with the disposal of certain assets.

Interest Expense, Net. This includes interest expense and amortization of deferred financing costs and discounts and is net of interest income.

Change in Fair Value of Private Placement Warrants. Change in fair value of private placement warrants consists of liability adjustments ~~to the liability~~ related to the 6,666,666 ~~warrants~~Private Placement Warrants originally issued to Gores Sponsor II, LLC ~~in a private placement in connection with our initial public offering (the “Private Placement Warrants”) from the re-measurement~~re-measured to fair value at the end of each reporting period.

~~Tax Receivable Agreement Liability Adjustment. Tax receivable agreement liability adjustment consists of adjustments made to our Tax Receivable Agreement (the “TRA”) with PE Greenlight Holdings, LLC and Greenlight Holding II Corporation due to changes in estimates.~~

Loss on Extinguishment of Debt. Loss on extinguishment of debt generally consists of early payment penalties, the write-off of original issue discounts and deferred financing costs associated with debt extinguishment.

Other Income, Net. Other income, net primarily consists of volume rebates earned from total spend on purchasing cards and ~~gains~~gain or ~~losses~~loss on foreign currency transactions.

Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to Three Months Ended ~~September 30, 2020~~March 31, 2021

The following table sets forth our statements of operations data and expresses each item as a percentage of total revenue for the periods presented as well as the changes between periods. The tables and information provided in this section were derived from exact numbers and may have immaterial rounding differences.


	Three Months Ended September 30,
							Percentage of Revenue						Increase (Decrease) 2021 vs 2020						Three Months Ended March 31,
	2021			2020			2021			2020			$			%									Percentage of Revenue						Increase (Decrease) 2022 vs 2021
($ in thousands)				(As restated)															2022			2021			2022			2021			$			%
Service revenue	$	141,811		$	82,980			87.5	%		85.6	%	$	58,831			70.9	%	$	161,134		$	89,763			94.6	%		99.9	%	$	71,371			79.5	%
Product sales		20,284			13,928			12.5	%		14.4	%		6,356			45.6	%		9,251			95			5.4	%		0.1	%		9,156			9637.9	%
Total revenue		162,095			96,908			100.0	%		100.0	%		65,187			67.3	%		170,385			89,858			100.0	%		100.0	%		80,527			89.6	%
Cost of service revenue		1,412			907			0.9	%		0.9	%		505			55.7	%		3,779			880			2.2	%		1.0	%		2,899			329.4	%
Cost of product sales		9,391			7,088			5.8	%		7.3	%		2,303			32.5	%		5,995			27			3.5	%		0.0	%		5,968			22103.7	%
Operating expenses		48,309			26,544			29.8	%		27.4	%		21,765			82.0	%		51,063			30,492			30.0	%		33.9	%		20,571			67.5	%
Selling, general and administrative expenses		31,580			17,511			19.5	%		18.1	%		14,069			80.3	%		41,635			28,443			24.4	%		31.7	%		13,192			46.4	%
Depreciation, amortization and (gain) loss on disposal of assets, net		29,529			29,590			18.2	%		30.5	%		(61	)		(0.2	)%		35,907			28,265			21.1	%		31.5	%		7,642			27.0	%
Total costs and expenses		120,221			81,640			74.2	%		84.2	%		38,581			47.3	%		138,379			88,107			81.2	%		98.1	%		50,272			57.1	%
Income from operations		41,874			15,268			25.8	%		15.8	%		26,606			174.3	%		32,006			1,751			18.8	%		1.9	%		30,255			1727.9	%
Interest expense, net		11,637			9,578			7.2	%		9.9	%		2,059			21.5	%		14,279			9,164			8.4	%		10.2	%		5,115			55.8	%
Change in fair value of private placement warrants		(5,067	)		(4,400	)		(3.1	)%		(4.5	)%		(667	)		15.2	%		3,734			2,067			2.2	%		2.3	%		1,667			80.6	%
Loss on extinguishment of debt																				—			5,334			—			5.9	%		(5,334	)		(100.0	)%
Other income, net		(3,494	)		(4,982	)		(2.2	)%		(5.1	)%		1,488			(29.9	)%		(2,866	)		(3,013	)		(1.7	)%		(3.4	)%		147			(4.9	)%
Total other expenses		3,076			196			1.9	%		0.3	%		2,880			1469.4	%		15,147			13,552			8.9	%		15.0	%		1,595			11.8	%
Income before income taxes		38,798			15,072			23.9	%		15.5	%		23,726			157.4	%
Income tax provision		11,492			3,986			7.1	%		4.1	%		7,506			188.3	%
Net income	$	27,306		$	11,086			16.8	%		11.4	%	$	16,220			146.3	%
Income (loss) before income taxes																				16,859			(11,801	)		9.9	%		(13.1	)%		28,660			242.9	%
Income tax provision (benefit)																				6,819			(2,886	)		4.0	%		(3.2	)%		9,705			336.3	%
Net income (loss)																			$	10,040		$	(8,915	)		5.9	%		(9.9	)%	$	18,955			212.6	%

Service Revenue. Service revenue increased by ~~$58.8~~$71.4 million, or ~~70.9%~~79.5%, to ~~$141.8~~$161.1 million for the three months ended ~~September 30, 2021~~March 31, 2022 from ~~$83.0~~$89.8 million for the three months ended ~~September 30, 2020,~~March 31, 2021, representing ~~87.5%~~94.6% and ~~85.6%~~99.9% of total revenue, respectively. The following table depicts service revenue by segment:

Commercial Services service revenue increased by ~~$33.1~~$27.8 million, or ~~75.0%~~60.8%, from ~~$44.2~~$45.7 million for the three months ended ~~September 30, 2020~~March 31, 2021 to ~~$77.3~~$73.5 million for the three months ended ~~September 30, 2021.~~March 31, 2022. This increase was primarily due to the increased travel demand in the RAC industry that impacted volume in the three months ended ~~September 30, 2021~~March 31, 2022 compared to the prior year which was negatively impacted by the COVID-19 pandemic.

Government Solutions service revenue includes revenue from speed, red-light, school bus stop arm and bus lane photo enforcement systems. Service revenue was ~~$64.6~~$73.2 million and ~~$38.8~~$44.1 million for the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ respectively, and it increased by ~~$25.7~~$29.1 million. The Redflex acquisition contributed approximately $17 million ~~with~~to our growth. Organic growth excluding Redflex ~~contributing $15.9~~was approximately $12 million, ~~during~~which was primarily driven by the ~~three months ended September 30, 2021. Our~~expansion of school zone speed ~~program revenue grew approximately $13.6 million during~~programs, and speed is the ~~three months ended September 30,~~largest product in this segment. We added 779 speed cameras in 2021, ~~compared to the same period~~excluding Redflex, which provided year-over-year growth in ~~2020 due to the inclusion of Redflex operations~~2022 and 111 speed cameras for the three months ended ~~September 30,~~March 31, 2022 which provided growth in the current period and will continue to provide growth for the remainder of 2022. The remaining growth can be attributable to other expansions and improvement in variable rate programs that returned to more normalized volume as COVID-19 restrictions lifted throughout 2021.

Parking Solutions service revenue of $14.4 million resulted from our acquisition of T2 systems in December 2021 with no ~~comparable amounts~~revenue in the prior year and an increase in the total number of camera systems installed. This trend is expected to continue into future quarters. In addition, revenue from red-light programs increased by $6.3 million which was mainly attributable to the inclusion of Redflex operations for the three months ended September 30, 2021comparable period.

~~with no comparable amounts in the prior year, and a general increase in travel and related vehicle traffic in 2021 compared to prior year which was negatively impacted by the COVID-19 pandemic.~~

We maintained an average of 8,946 active camera systems during the three months ended September 30, 2021 compared to an average of 3,730 for the three months ended September 30, 2020. The increase in active camera systems was primarily due to the inclusion of Redflex camera systems with no comparable amounts in the prior year, the expansion of speed enforcement systems with existing customers, and the restart of cameras that were temporarily inactive due to COVID-19.

Product Sales. Product sales were ~~$20.3~~$9.3 million and ~~$13.9~~$0.1 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Product sales increased ~~$6.4~~by $9.2 million which was mainly due to $6.0 million of product revenue generated from the ~~inclusion of~~ Redflex ~~camera systems with~~and T2 Systems acquisitions for which there was no ~~comparable amounts~~revenue in the ~~prior year and installations for~~comparable 2021 period. Prior to these acquisitions, product revenue was limited to a ~~single customer that is expanding its school zone speed program.~~few large customers whose buying patterns varied greatly from period to period. Product sales ~~revenue is generated from international~~for these customers ~~and certain domestic customers in~~contributed to the ~~Government Solutions segment who purchase their equipment and their buying patterns vary greatly from year~~remaining increase due to ~~year.~~an additional 46 units sold.

Cost of Service Revenue. Cost of service revenue increased from $0.9 million for the three months ended ~~September 30, 2020~~March 31, 2021 to ~~$1.4~~$3.8 million for the three months ended ~~September 30, 2021.~~March 31, 2022. The ~~$0.5~~$2.9 million increase ~~resulted from increased~~was mainly attributable to the inclusion of costs ~~from third-party professional services associated~~in the Parking Solutions segment with no comparable amounts in the ~~delivery of certain ancillary services.~~prior year.

Cost of Product Sales. Cost of product sales increased by ~~$2.3~~$5.9 million from ~~$7.1~~less than $0.1 million in the three months ended ~~September 30, 2020~~March 31, 2021 to ~~$9.4~~$6.0 million in the three months ended ~~September 30, 2021,~~March 31, 2022, which was consistent with the increase in product ~~sales.~~sales discussed above.

Operating Expenses. Operating expenses increased by ~~$21.8~~$20.6 million, or ~~82%~~67.5%, from ~~$26.5~~$30.5 million for the three months ended ~~September 30, 2020~~March 31, 2021 to ~~$48.3~~$51.1 million for the three months ended ~~September 30, 2021.~~March 31, 2022. The increase was primarily attributable to increase in wages expense, subcontractor expenses, and recurring services ~~and subcontractor expenses~~ resulting from ~~increased operations in 2021, which were lower in the 2020 period due to the impact from the COVID-19 pandemic. The increase was also driven by~~ the inclusion of Redflex and T2 Systems operations ~~for the three months ended September 30, 2021~~ with no comparable amounts in the prior year. Operating expenses as a percentage of total revenue ~~increased~~decreased from ~~27.4%~~33.9% to ~~29.8%~~30.0% for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021, respectively.~~2022, respectively which was contributed by the Commercial Services segment's improved operating leverage from its corresponding revenue improvement. The following table presents operating expenses by segment:

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to ~~$31.6~~$41.6 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$17.5~~$28.4 million for the same period in ~~2020.~~2021. The increase is primarily due to increased wages ~~expense,~~and information technology ~~and communications expense~~expenses due to the inclusion of Redflex and T2 Systems operations ~~for~~in the three months ended ~~September 30, 2021~~March 31, 2022 with no comparable amounts in the prior year. In addition, we had increases of ~~$2.9~~$2.2 million for professional services and $1.5 million related to ~~the credit loss~~stock-based compensation expense compared to the prior year, ~~$2.7 million of~~which were partially offset by a decrease in transaction costs ~~incurred during the quarter and an increase due~~of $3.9 million compared to ~~the reinstatement of employee bonus accrual in~~ 2021. Selling, general and administrative expenses as a percentage of total revenue ~~increased~~decreased from ~~18.1%~~31.7% to ~~19.5%~~24.4% for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021,~~2022, respectively. The following table presents selling, general and administrative expenses by segment:

Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net, ~~remained consistent year over year at $29.5~~increased by $7.6 million ~~and $29.6~~to $35.9 million for the three months ended ~~September 30, 2021 and 2020, respectively.~~March 31, 2022 from $28.3 million for the same period in 2021. This was mainly due to increased ~~depreciation~~amortization and ~~amortization~~depreciation expense resulting from the Redflex ~~acquisition~~and T2 Systems acquisitions included in the three months ended ~~September 30, 2021~~March 31, 2022 with no comparable ~~amount~~amounts in the prior year, partially offset by a decrease due to certain trademark intangibles being fully amortized for the three months ended ~~September 30, 2021.~~March 31, 2022.

Interest Expense, Net. Interest expense, net increased by ~~$2.0~~$5.1 million from ~~$9.6~~$9.2 million for the three months ended ~~September 30, 2020~~March 31, 2021 to ~~$11.6~~$14.3 million for the same period in ~~2021.~~2022. This increase is primarily ~~due~~attributable to ~~the increased borrowings as part of the~~$1.2 billion in average outstanding debt ~~restructuring in March 2021 in conjunction with the fixed rate on the Senior Notes being approximately 200 basis points higher than the rate paid for the 2021 Term Loan~~ during the three months ended ~~September 30,~~March 31, 2022, compared to $875 million in average outstanding debt for the same period in 2021. See “Liquidity and Capital Resources.”

Change in Fair Value of Private Placement Warrants. We recorded ~~a gain~~losses of ~~$5.1~~$3.7 million and ~~$4.4~~$2.1 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, related to the changes in fair value of our Private Placement Warrants which are accounted for as liabilities on our condensed consolidated balance sheets. The change in fair value is the result of re-measurement of the liability at the end of each reporting period.

Other Income, Net. We pay a high volume of tolls on behalf of our customers with purchasing cards which generate rebates based on volume, payment terms and rebate frequency. Other income, net decreased slightly and was ~~$3.5~~$2.9 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$5.0~~$3.0 million for the same period in 2021.

Income Tax Provision (Benefit). Income tax provision was $6.8 million with an effective tax rate of 40.4% for the three months ended March 31, 2022 compared to an income tax benefit of $(2.9) million with an effective tax benefit rate of 24.5% for the three months ended March 31, 2021. The primary driver for the effective tax rate variance was the increase in pre-tax income for the first quarter of 2022 compared to the first quarter of 2021.

Net Income (Loss). We had net income of $10.0 million for the three months ended September 30, 2020. The decrease of $1.5 million is primarily driven by a total of $2.8 million in gains recorded in the three months ended September 30, 2020 from a settlement agreement and related insurance proceeds, which was offset by an increase in the 2021 period due to increased tolling activityMarch 31, 2022, as ~~a result of COVID-19 recovery in the travel industry.~~

~~Income Tax Provision.~~ ~~Income tax provision was $11.5 million representing an effective tax rate of 29.6% for the three months ended September 30, 2021~~ compared to a ~~tax provision~~net loss of $4.0 million, representing an effective tax rate of 26.4% for the same period in 2020. The primary driver of the effective tax rate variance is from the Company’s permanent differences related to the mark-to-market adjustment on the private placement warrants.

~~Net Income.~~ ~~We had net income of $27.3~~$(8.9) million for the three months ended ~~September 30, 2021, as compared to a net income of $11.1 million for the three months ended September 30, 2020.~~March 31, 2021. The ~~$16.2~~$19.0 million increase in net income was primarily due to increases in both service revenue and product sales, and the other statement of operations activity discussed above.

~~Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020~~

~~Service Revenue.~~ Service revenue increased by $102.7 million, or 41.9%, to $348.0 million for the nine months ended September 30, 2021 from $245.3 million for the nine months ended September 30, 2020, representing 91.4% and 83.6% of total revenue, respectively. The following table depicts service revenue by segment:

Commercial Services service revenue increased by $56.8 million, or 42.8%, from $132.7 million for the nine months ended September 30, 2020 to $189.4 million for the nine months ended September 30, 2021. This increase was primarily due to the increased travel demand in the RAC industry that impacted volume in the nine months ended September 30, 2021 compared to the prior year which was negatively impacted by the COVID-19 pandemic. In addition, the consecutive revenue growth was approximately $10.8 million in the third quarter of 2021 compared to the second quarter of 2021 partially due to seasonality in the RAC industry from leisure travel in the summer months.

Government Solutions service revenue includes revenue from speed, red-light, school bus stop arm and bus lane photo enforcement systems. Service revenue was $158.6 million and $112.6 million for the nine months ended September 30, 2021 and 2020, respectively, and it increased by $45.9 million with Redflex contributing $19.0 million during the nine months ended September 30, 2021. Our speed program revenue grew approximately $29.6 million during the nine months ended September 30, 2021 compared to the same period in 2020 due to the inclusion of Redflex operations for approximately one hundred days in the 2021 period with no comparable amounts in the prior year and an increase in the total number of camera systems installed. This trend is expected to continue into future quarters. In addition, revenue from red-light programs increased by $10.2 million

which was mainly attributable to the inclusion of Redflex operations for approximately one hundred days in the 2021 period with no comparable amounts in the prior year and the general increase in travel and related vehicle traffic in 2021 compared to prior year which was negatively impacted by the COVID-19 pandemic.

We maintained an average of 6,550 active camera systems during the nine months ended September 30, 2021 compared to an average of 4,008 for the nine months ended September 30, 2020. The increase in active camera systems was primarily due to the inclusion of Redflex camera systems with no comparable amounts in the prior year, the expansion of speed enforcement systems with existing customers, and the restart of cameras that were temporarily inactive due to COVID-19.

~~Product Sales.~~ Product sales were $32.6 million and $48.1 million for the nine months ended September 30, 2021 and 2020, respectively. Product sales decreased $15.5 million mainly due to the timing of installations at a single customer that is expanding its school zone speed program, offset by an increase due to the inclusion of Redflex product sales for approximately one hundred days in the 2021 period with no comparable amounts in the prior year. Product sales revenue is generated from international customers and certain domestic customers in the Government Solutions segment who purchase their equipment and their buying patterns vary greatly from year to year.

~~Cost of Service Revenue.~~ Cost of service revenue increased from $3.1 million for the nine months ended September 30, 2020 to $3.6 million for the nine months ended September 30, 2021. The $0.5 million increase resulted from increased costs from third-party professional services associated with the delivery of certain ancillary services.

~~Cost of Product Sales.~~ Cost of product sales decreased by $9.3 million from $24.8 million in the nine months ended September 30, 2020 to $15.6 million in the nine months ended September 30, 2021, which was consistent with the decrease in product sales.

~~Operating Expenses.~~ Operating expenses increased by $29.7 million, or 34.8%, from $85.5 million for the nine months ended September 30, 2020 to $115.2 million for the nine months ended September 30, 2021. The increase was primarily attributable to increase in wages expense, recurring services, and subcontractor expenses resulting from increased operations in 2021, which were lower in the 2020 year due to the impact from the COVID-19 pandemic. The increase was also driven by the inclusion of Redflex operations for approximately one hundred days in 2021 with no comparable amounts in the prior year. Operating expenses as a percentage of total revenue increased from 29.1% to 30.3% for the nine months ended September 30, 2020 and 2021, respectively. The following table presents operating expenses by segment:

~~Selling, General and Administrative Expenses.~~ Selling, general and administrative expenses increased by $22.0 million to $86.3 million for the nine months ended September 30, 2021 compared to $64.2 million for the same period in 2020. The increase is primarily due to $10.1 million in transaction costs incurred related to the Reflex acquisition and other deal costs, increased wages expense due to the reinstatement of employee bonus accrual in 2021, and increased wages, information technology and other related professional expenses from the inclusion of Redflex operations for approximately one hundred days in 2021 with no comparable amounts in prior year. These increases were partially offset by a $3.9 million reduction to the credit loss expense resulting from changes in loss rate estimates based on improved economic conditions. Selling, general and administrative expenses as a percentage of revenue increased from 21.9% to 22.6% for the nine months ended September 30, 2020 and 2021, respectively.~~The following table presents selling, general and administrative expenses by segment:~~

~~Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net.~~ Depreciation, amortization and (gain) loss on disposal of assets, net, decreased from $88.0 million for the nine months ended September 30, 2020 to $84.8 million for the same period in 2021. The decrease was mainly due to certain trademark intangibles being fully amortized for seven months out of the nine months period ended September 30, 2021, offset by increased depreciation and amortization expense resulting from the Redflex acquisition in 2021 with no comparable amounts in the prior year.

~~Interest Expense, Net.~~ Interest expense, net increased by $0.9 million from $31.6 million for the nine months ended September 30, 2020 to $32.5 million for the same period in 2021. This increase is primarily due to increased borrowings as part of the debt restructuring in March 2021, partially offset by lower interest rates in 2021 on our variable-rate debt compared to the same period in 2020. See “~~Liquidity and Capital Resources” below.~~

~~Tax Receivable Agreement Liability Adjustment~~. We recorded $1.7 million and $4.4 million in charges for the nine months ended September 30, 2021 and 2020, respectively. The TRA liability adjustment in 2021 is arising from higher estimated state tax rates due to changes in statutory rates, whereas in 2020 it is arising from higher estimated state tax rates due to a change in apportionment.

~~Loss on Extinguishment of Debt~~. Loss on extinguishment of debt was $5.3 million during the nine months ended September 30, 2021 consisting of a $4.0 million write-off of pre-existing deferred financing costs and $1.3 million of lender and third-party costs associated with the issuance of the new 2021 Term Loan discussed below.

~~Other Income, Net.~~ We pay a high volume of tolls on behalf of our customers with purchasing cards which generate rebates based on volume, payment terms and rebate frequency. Other income, net was $9.3 million for the nine months ended September 30, 2021, compared to $9.4 million for the nine months ended September 30, 2020. The slight decrease is primarily driven by a total of $2.8 million in gains recorded in the nine months ended September 30, 2020 from a settlement agreement and related insurance proceeds, which was offset by an increase in the 2021 period due to increased tolling activity as a result of COVID-19 recovery in the travel industry.

~~Income Tax Provision.~~ Income tax provision was $17.5 million representing an effective tax rate of 43.9% for the nine months ended September 30, 2021 compared to a tax provision of $3.2 million, representing an effective tax rate of 25% for the same period in 2020. For the nine months ended September 30, 2020, the impact of discrete items was favorable and had a larger impact on the tax rate due to the pretax income being lower. For the nine months ended September 30, 2021, the pretax income was higher and the discrete items unfavorably affected the tax rate, in addition to the impact of the Company’s permanent differences related to the mark-to-market adjustment on the private placement warrants.

~~Net Income.~~ We had net income of $22.4 million for the nine months ended September 30, 2021, as compared to a net income of $9.5 million for the nine months ended September 30, 2020. The increase in net income of $12.9 million was

~~mainly due to increase in service revenue in both of our segments, and the other statements of operations activity discussed above.~~

Our principal sources of liquidity are cash flows from operations and available borrowings under our ~~2021 Term Loan and the~~ Revolver ~~(both of which are defined~~(defined below).

We have incurred significant long-term debt as a result of acquisitions completed in the prior ~~years as well as the Redflex acquisition in the current year.~~years.

We believe that our existing cash and cash equivalents, cash flows provided by operating activities and our availability to borrow under our Revolver (as defined below) will be sufficient to meet operating cash requirements and service debt obligations for at least the next 12 months. Our ability to generate sufficient cash from our operating activities depends on our future performance, which is subject to general economic, political, financial, competitive and other factors beyond our control. In addition, our future capital expenditures and other cash requirements could be higher than currently expected due to various factors, including any expansion of our business or strategic acquisitions. Should we pursue strategic acquisitions, we may need to raise additional capital, which may be in the form of additional long-term debt, borrowings on our Revolver, or equity financings, all of which may not be available to us on favorable terms or at all.

We have the ability to borrow under our Revolver to meet obligations as they come due. As of ~~September 30, 2021,~~March 31, 2022, we had ~~$62.2~~$68.8 million available for borrowing, net of letters of credit, under our Revolver.

On May 7, 2022, the Company’s Board of Directors authorized a share repurchase program for up to an aggregate amount of $125 million of its outstanding shares of Class A common stock over the next twelve months. The level at which the Company repurchases depends on a number of factors, including its financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors its management may deem relevant. The timing, volume and nature of repurchases are subject to market conditions, applicable securities laws and other factors and may be amended, suspended or discontinued at any time.

The City of New York Department of Transportation (“NYCDOT”) represented ~~46.3%~~29% and 39% of total accounts receivable, net. The Company provides photo enforcement services to NYCDOT under two primary agreements, (i) a legacy contract relating to photo enforcement cameras that were installed prior to fiscal year 2020 (the “~~Legacy Contract”),~~net as of March 31, 2022 and ~~(ii) an emergency contract for the purchase, installation, maintenance and operation of the expanded speed camera program beginning in 2020 (the “Emergency Contract”). At September 30,~~December 31, 2021, the Legacy Contract had an open receivable balance of $16.1 million, of which $7.6 million had aged beyond NYCDOT’s 45-day payment terms. As of September 30, 2021, the Company has invoiced NYCDOT for $80.9 million in product revenue and $48.8 million in service revenue under the Emergency Contract, and the Emergency Contract had an open receivable balance of $64.8 million, of which $41.6 million had aged beyond NYCDOT’s 45-day payment terms. The total outstanding receivables balance decreased $46.2 million at September 30, 2021 compared to the outstanding balance at June 30, 2021 as the Company collected $87.5 million during the third quarter of 2021 related to both contracts.respectively. There is no material reserve related to NYCDOT open receivables as amounts are deemed collectible based on current conditions and expectations. ~~Please also see section entitled “Risk Factors~~.”

The following table sets forth certain captions indicated on our statements of cash flows for the respective periods:

Cash provided by operating activities increased by ~~$84.9~~$22.2 million, from ~~$44.4~~$9.0 million for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 to ~~$129.3~~$31.2 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Net income year over year increased by ~~$12.9~~$19.0 million, from ~~$9.5~~$8.9 million loss in ~~2020~~2021 to ~~$22.4~~$10.0 million income in ~~2021.~~2022. Adjustments to reconcile net income (loss) to cash provided by operating activities ~~increased $9.1~~were an aggregate decrease of $12.7 million in ~~2021~~2022 compared to ~~the 2020 nine-month period and consisted~~2021. This was primarily ofdue to a ~~$16.6 million~~ change in ~~the fair value of private placement warrants~~deferred income taxes and the $5.3 million loss on extinguishment of debt ~~which~~in 2021 with no comparable amount in the 2022 period. These decreases were offset ~~partially~~mainly by ~~the decreases in~~increased depreciation and amortization ~~tax receivable agreement~~resulting from our recent acquisitions, combined with increases in the fair value of the private placement warrants liability, ~~adjustment and the~~ credit loss ~~expense. The major~~expense and stock-based compensation expenses. We had an aggregate increase of $16 million in 2022 compared to 2021 for the changes in operating assets and liabilities ~~were driven by a significant reduction in the accounts receivable balance from payments received by NYCDOT during the second and third quarters of fiscal year 2021, and~~due to an increase in ~~accrued~~other liabilities ~~resulting from an increase~~and a decrease in ~~accrued interest~~prepaid expenses and ~~income taxes payable as of the period end. Total payments received from NYCDOT during the three and nine months ended September 30, 2021 totaled $115.7 million and~~

~~$87.5 million, respectively. The increase in accrued interest is attributable to the timing of our interest payments on the $350 million of Senior Notes that were issued in March 2021.~~other current assets partially offset by increased inventory.

Cash used in investing activities was ~~$122.4~~$11.9 million and ~~$18.3~~$3.6 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively. The cash used in 2021~~respectively, which was primarily related to the acquisition of Redflex on June 17, 2021 by VM Consolidated, Inc. of one hundred percent of the outstanding equity of Redflex at A$0.96 per share for total consideration of A$152.5 million, or approximately US$117.9 million. The cash used in 2020 wasmainly related to purchases of installation and service parts and property and equipment. The $7.8 million increase in capital purchases year over year is primarily attributable to our recent acquisitions.

Cash (used in) provided by ~~(used in)~~ financing activities was ~~$5.3~~$(28.7) million and ~~$(27.9)~~$123.9 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, respectively. The cash used in 2022 was mainly due to the repayment of the $25.0 million borrowing on the Revolver in January 2022 and ~~2020, respectively.~~the quarterly principal payment on the 2021 Term Loan at the end of the quarter. We had aggregate borrowings of $996.8 million during the first quarter of 2021 consisting of the 2021 Term Loan and Senior Notes (defined below) and ~~repayments of $882.9~~we concurrently repaid $865.6 million on outstanding debt ~~related to~~on the ~~2018 and 2021 Term Loans, and debt assumed as part of the Redflex acquisition that was subsequently paid. The~~ 2018 Term Loan ~~has been fully repaid in March 2021.~~(defined below). The aggregate borrowings net of the repayments, ~~along with existing~~which totaled $131.2 million, were held as cash ~~on hand were~~and cash equivalents at March 31, 2021 and used in part to fund the close of the Redflex ~~acquisition in June~~acquisition. We also had payments related to debt issuance costs and debt extinguishment costs during the 2021 and the share repurchase and retirement for $100 million in August 2021 (discussed above). The cash used in financing activities in 2020 was mainly due to a $19.7 million mandatory prepayment of excess cash flows we made in the quarter ended March 31, 2020 pursuant to the terms of the 2018 Term Loan, and costs associated with refinancing it in February 2020.period.

In March 2021, VM Consolidated, Inc., our wholly owned subsidiary, entered into an Amendment and Restatement Agreement No.1 to the First Lien Term Loan Credit Agreement (the “2021 Term Loan”) with a syndicate of lenders. The 2021 Term Loan has an aggregate borrowing of $650 million, maturing on March 26, 2028, and an accordion feature providing for an additional $250 million of term loans, subject to satisfaction of certain requirements. In connection with the 2021 Term Loan, we had an offering discount cost of $3.3 million and $0.7 million of deferred financing costs, both of which were capitalized and are amortized over the remaining life of the 2021 Term Loan.

In addition, in March 2021, VM Consolidated, Inc. issued an aggregate principal amount of $350 million in Senior Unsecured Notes (the “Senior Notes”), due on April 15, 2029. In connection with the issuance of the Senior Notes, we incurred $5.7 million in lender and third-party costs, which were capitalized as deferred financing costs and are being amortized over the remaining life of the Senior Notes.

The net proceeds from both the 2021 Term Loan and the Senior Notes received in March 2021 were used to repay in full all outstanding debt which was represented by the ~~existing~~ First Lien Term Loan Credit Agreement (as amended, the “2018 Term Loan”) with a balance of $865.6 million.

On December 7, 2021, VM Consolidated Inc., entered into an agreement to exercise the accordion feature under the 2021 Term Loan, borrowing $250 million in incremental term loans (“Incremental Term Loan”). The proceeds from the Incremental Term Loan were used, along with cash on hand, to fund the acquisition of T2 Systems, including repaying in full all outstanding debt for T2 Systems. In connection with the Incremental Term Loan, we had an offering discount cost of $1.3 million and $3.8 million of deferred financing costs, both of which were capitalized and are amortized over the remaining life of the 2021 Term Loan. The Incremental Term Loan accrued interest from the date of borrowing until December 31, 2021, at which time, it was combined with the 2021 Term Loan to be a single tranche of term loan borrowings. The total principal outstanding under the 2021 Term Loan, which includes the Incremental Term Loan, was $892.9 million at March 31, 2022.

The 2021 Term Loan is repayable at 1.0% per annum of the amount initially borrowed, paid in quarterly installments. It bears interest based, at our option, on either (1) LIBOR plus an applicable margin of 3.25% per annum, or (2) an alternate base rate plus an applicable margin of 2.25% per annum. As of ~~September 30, 2021,~~March 31, 2022, the interest rate on the 2021 Term Loan was ~~3.4%~~3.6%.

In addition, the 2021 Term Loan requires mandatory prepayments equal to the product of the excess cash flows of the Company (as defined in the 2021 Term Loan agreement) and the applicable prepayment percentages (calculated as of the last day of the fiscal year, beginning with the year ending December 31, 2022), as set forth in the following table:

Interest on the Senior Notes is fixed at 5.50% per annum and is payable on April 15 and October 15 of each ~~year (beginning on October 15, 2021).~~year. On or after April 15, 2024, we may redeem all or a portion of the Senior Notes at the redemption prices set forth below in percentages by year, plus accrued and unpaid interest:

In addition, we may redeem up to 40% of the Senior Notes before April 15, 2024, with the net cash proceeds from certain equity offerings.

We evaluated the March 2021 refinancing transactions on a ~~lender by lender~~lender-by-lender basis and accounted for the portion of the transaction that did not meet the accounting criteria for debt extinguishment as a debt modification. Accordingly, we recognized a loss on extinguishment of debt of $5.3 million on the 2018 Term Loan during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 consisting of a $4.0 million write-off of pre-existing deferred financing costs and discounts and $1.3 million of lender and third-party costs associated with the issuance of the ~~new~~ 2021 Term Loan.

During fiscal year 2020, Redflex received a loan from the U.S. Small Business Administration (“SBA”) as part of the Paycheck Protection Program (“~~PPP Loan~~”) to offset certain employment and other allowable costs incurred as a result of the COVID-19 pandemic. At ~~September 30, 2021,~~March 31, 2022, the loan amount outstanding was $2.9 million and ~~is payable within a year, and is~~was included in the current portion of long-term debt. In early 2021, Redflex applied for forgiveness of this loan and, ~~awaits~~as of March 31, 2022, was still awaiting approval from the SBA.

We have a Revolving Credit Agreement (the “Revolver”) with a commitment of up to $75 million available for loans and letters of credit. The Revolver matures on ~~February 28, 2023. The terms of the Revolver were not affected by the other debt instruments discussed above.~~December 20, 2026. Borrowing eligibility under the Revolver is subject to a monthly borrowing base calculation based on (i) certain percentages of eligible accounts receivable and inventory, less (ii) certain reserve items, including outstanding letters of credit and other reserves. The Revolver bears interest on either (1) LIBOR plus an applicable margin, or (2) an alternate base rate, plus an applicable margin. The margin percentage applied to (1) LIBOR is either 1.25%, 1.50%, or 1.75%, or (2) the base rate is either 0.25%, 0.50%, or 0.75%, depending on our average availability to borrow under the commitment. At ~~September 30,~~December 31, 2021, we had no$25.0 million in outstanding borrowings on the Revolver, ~~and our~~which was repaid in full in January 2022. At March 31, 2022, the availability to borrow was ~~$62.2~~$68.8 million, net of $6.2 million of outstanding letters of credit.

Interest on the unused portion of the Revolver is payable quarterly at 0.375% and we are also required to pay participation and fronting fees at 1.38% on $6.2 million of outstanding letters of credit as of ~~September 30, 2021.~~March 31, 2022.

All borrowings and other extensions of credits under the 2021 Term Loan, ~~the~~ Senior Notes and the Revolver are subject to the satisfaction of customary conditions and restrictive covenants including absence of defaults and accuracy in material respects of representations and warranties. ~~At September 30, 2021, we were compliant with all debt covenants.~~ Substantially all of our assets are pledged as collateral to secure our indebtedness under the 2021 Term Loan.

On March 31, 2022, we notified our lenders that we were unable to file the Annual Report on Form 10-K within 90 days following the year ended December 31, 2021, as is required under the 2021 Term Loan, Senior Notes, and the Revolver. While we were compliant with all debt covenants at December 31, 2021 and March 31, 2022, the late filing created a technical default when the filing requirement was not met; however, this did not result in an Event of Default under the 2021 Term Loan, Senior Notes, and the Revolver as the Annual Report on Form 10-K was filed within the 30-day cure period allowed by these agreements for late filing of annual financial statements.

We recorded interest expense, including amortization of deferred financing costs and discounts, of ~~$11.6~~$14.3 million and ~~$9.6~~$9.2 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $32.5 million and $31.6 million for the nine months ended September 30, 2021 and 2020,~~ respectively.

We do not have any material off-balance sheet financing arrangements as of ~~September 30, 2021.~~March 31, 2022.

The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the

financial statements and the accompanying notes. Significant ~~items subject to such~~ estimates and assumptions include those related to the fair values assigned to net assets acquired (including identifiable ~~intangible assets)~~intangibles) in business combinations, ~~the carrying amounts of~~revenue recognition, inventory ~~long-lived assets, goodwill, the~~valuation, allowance for credit ~~loss,~~losses, fair value of the private placement warrant liabilities, valuation ~~allowances~~allowance on deferred tax assets, impairment assessments of goodwill, intangible assets and other long-lived assets, asset retirement obligations, contingent consideration and the recognition and measurement of loss contingencies. Management believes that its estimates and assumptions are reasonable in the circumstances; however, actual results could differ materially from those estimates.

Refer to our ~~2020~~2021 Annual Report on Form ~~10-K/A filed on May 17, 2021~~10-K for our critical accounting policies, estimates and judgments.

For a discussion of recent accounting pronouncements, refer to Note 2, Significant Accounting Policies, in Part I, Item 1, Financial Statements.

We are exposed to interest rate market risk due to the variable interest rate on the 2021 Term Loan described in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.

Interest rate risk represents our exposure to fluctuations in interest rates associated with the variable rate debt represented by the 2021 Term Loan, which has an outstanding balance of ~~$646.8~~$892.9 million ~~and~~at March 31, 2022. The 2021 Term Loan bears interest based, at our option, on either (1) LIBOR plus an applicable margin of 3.25% per annum, or (2) an alternate base rate plus an applicable margin of 2.25% per annum. At March 31, 2022, the interest rate ~~of 3.4% at September 30, 2021.~~on the 2021 Term Loan was 3.6%. Based on the ~~September 30, 2021~~March 31, 2022 balance outstanding, each 1% movement in interest rates will result in an approximately ~~$6.5~~ $8.9 million change in annual interest expense.

We have not engaged in any hedging activities during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.

Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange ~~Act)~~Act of 1934 (the “Exchange Act”)) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. Our Chief Executive Officer and Chief Financial Officer, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of ~~September 30, 2021~~March 31, 2022 and, based on their evaluation, have concluded the controls and procedures were ~~effective~~ineffective as athe material ~~weakness~~weaknesses in internal control over financial reporting that ~~was~~were disclosed in our Annual Report on Form ~~10-K/A filed on May 17, 2021~~10-K for the year ended December 31, ~~2020 was~~2021 were not yet remediated during the ~~second~~first quarter of fiscal year ~~2021.~~2022.

As previously described in Part II, Item 9A. “Controls and Procedures” in our Annual Report on Form 10-K for the year ended December 31, 2021, management commenced implementation of remediation plans which are ongoing to address the material weaknesses mentioned above. The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of these material weaknesses will be completed prior to the end of our 2022 fiscal

year. The following steps of the remediation plan are currently in process, and management may determine to enhance existing controls and/or implement additional controls as the implementation progresses:

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the quarter ended ~~September 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

On November 2, 2020, PlusPass, Inc. (“PlusPass”) commenced an action in the United States District Court, Central District of California, against Verra Mobility Corporation (“Verra Mobility”), The Gores Group LLC, Platinum Equity LLC, and ATS Processing Services, Inc., alleging civil violations of federal antitrust statutes: Section 7 of the Clayton Antitrust Act of 1914 (the “Clayton Act”), and Sections 1 and 2 of the Sherman Act. On November 20, 2020, PlusPass filed a First Amended Complaint. On February 9, 2021, the defendants filed motions to dismiss, and PlusPass subsequently abandoned various theories and claims and dismissed The Gores Group LLC, Platinum Equity LLC, and ATS Processing Services, Inc. On April 27, 2021, PlusPass filed a Second Amended Complaint (“SAC”), alleging that Verra Mobility violated Section 7 of the Clayton Act through the merger of Highway Toll Administration, LLC (“HTA”) and American Traffic Solutions, Inc. (“ATS”) in 2018, and that Verra Mobility violated Sections 1 and 2 of the Sherman Antitrust Act of 1890 by using exclusive agreements in restraint of trade and other allegedly anticompetitive means to acquire and maintain monopoly power in the market for the administration of electronic toll payment collection for rental cars. PlusPass seeks injunctive relief, divestiture by Verra Mobility of HTA, damages in an amount to be determined, and attorneys’ fees and costs. On May 28, 2021, Verra Mobility filed a motion to dismiss the SAC in its entirety, which was denied in August 2021. ~~Initial discovery~~Discovery is underway. Verra Mobility believes that all of ~~PlusPass’s~~PlusPass' claims are without merit and will defend itself vigorously in this litigation.

Part I, Item 1A. “Risk Factors” in our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2020, filed on May 17,~~ 2021 includes a discussion of our risk factors. ~~The information presented below supplements, and should be read in conjunction with,~~Other than the risk ~~factors and information disclosed in our Annual Report on Form 10-K/A. Except as presented~~factor discussed below, there have been no material changes from the risk factors described in our Annual Report on Form ~~10-K/A filed on May 17, 2021.~~10-K. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future SEC filings.

Our largest customer, NYCDOT, has outstanding receivables with us totaling $80.8 million resulting from a period of non-payment during fiscal year 2020 and the first quarter of 2021. While NYCDOT resumed payments in the second and third quarters of 2021, we cannot predict when this matter will be resolved, how much it may cost or the timing of their payments to us.

We provide photo enforcement and school zone enforcement services to NYCDOT, which was our largest customer by revenue in 2020 (31.3% of total revenue for the year ended December 31, 2020), under two primary contracts: a legacy contract relating to red light, bus lane, mobile speed and fixed speed photo enforcement cameras that were installed prior to fiscal year 2020 (the “~~Legacy Contract”), and an emergency contract for the purchase, installation, maintenance and operation of an expanded fixed speed camera program beginning in 2020 (the “Emergency Contract~~”). In late 2019, we concluded that some of our system installations under the Legacy Contract did not meet New York City’s requirements related to the depth of buried electrical conduit and the color of grounding wire. We disclosed these issues to NYCDOT and in the fourth quarter of 2020 agreed to remediate the affected sites. As of October 2021, remediation efforts have been completed on all accessible sites, and will be completed on the remaining sites as soon as they become accessible.

~~In January 2021, we were separately informed that the City of New York’s Law Department (the “NYC Law Department~~”) was investigating matters related to our previously disclosed conduit depth issue as well as matters related to whether we unnecessarily installed new poles where existing infrastructure could have been used. We were informed in March 2021 by the NYC Law Department that it had concluded its investigation, and we reached an agreement in principle to resolve the matter for approximately $1.3 million, subject to final administrative approvals. The installation issues described above and investigated by the NYC Law Department did not have any impact on the camera operations or the overall effectiveness of the photo enforcement programs. We continue to perform work for NYCDOT under the Legacy Contract and the Emergency Contract, and in March 2021, we received an Authorization to Proceed (the “~~Authorization to Proceed~~”) with the installation of an additional 720 school zone speed cameras in 2021. We began installing the additional school zone speed cameras in April 2021 and, as of September 30, 2021, we had installed approximately 390 cameras under the Authorization to Proceed.

The Emergency Contract was registered with the NYC Comptroller’s office in May 2021. In June 2021, NYCDOT began making payments under the Emergency Contract and resumed making payments under the Legacy Contract. The total outstanding receivables balance decreased $46.2 million at September 30, 2021 compared to the outstanding balance at June 30, 2021 as the Company collected $87.5 million during the third quarter of 2021 related to both contracts. Because we are

~~continuing to install new cameras pursuant to the Authorization to Proceed and performing services related to all installed cameras, we continue to maintain an open receivable balance with NYCDOT.~~

At September 30, 2021, the Legacy Contract had an open receivable balance of $16.1 million, of which $7.6 million had aged beyond NYCDOT’s 45-day payment terms. As of September 30, 2021, the Company has invoiced NYCDOT for $80.9 million in product revenue and $48.8 million in service revenue under the Emergency Contract, and the Emergency Contract had an open receivable balance of $64.8 million, of which $41.6 million had aged beyond NYCDOT’s 45-day payment terms. We continue to work with NYCDOT to expedite payments for the aged accounts receivables.

We cannot ~~predict when these matters~~guarantee that our stock repurchase program will be ~~finally resolved, how much~~consummated, fully or at all, or that it ~~may cost or~~will enhance long-term shareholder value. Stock repurchases could also increase the ~~timing~~volatility of the ~~payments to us on the outstanding receivables. The failure to resolve these matters with the City~~trading price of ~~New York in a timely~~our stock and ~~effective manner~~ could ~~have a material adverse effect on~~diminish our ~~business, financial condition and results of operations.~~cash reserves.

~~(1) On August 9, 2021, we announced that~~In May 2022, our Board of Directors authorized a share repurchase program for up to an aggregate amount of ~~$100~~$125 million of ~~Class A Common Stock. On August 20, 2021, we repurchased and retired 6,849,315~~our outstanding shares of Class A ~~Common Stock from~~common stock over the ~~Platinum Stockholder~~next twelve months. The timing, price, and quantity of purchases under the program will be at the discretion of our management and will depend upon a variety of factors including share price, ~~per share~~general and business market conditions, compliance with applicable laws and regulations, corporate and regulatory requirements, and alternative uses of ~~$14.60, which was equal~~capital. The program may be amended, suspended or discontinued by our Board of Directors at any time. Although our Board of Directors has authorized this stock repurchase program, there is no guarantee as to the exact number of shares, if any, that will be repurchased by us, and we may discontinue purchases at any time if management determines additional purchases are not warranted. We cannot guarantee that the program will be consummated, fully or at all, or that it will enhance long-term stockholder value. The program could affect the trading price ~~at which~~of our common stock and increase volatility, and any announcement of a termination of this program may result in a decrease in the ~~underwriter exercised the overallotment option for the secondary offering discussed above. We paid $100 million to fund the share repurchase using existing~~trading price of our common stock. In addition, this program could diminish our cash ~~on hand. As~~reserves.

Item 2. Unregistered Sales of ~~September 30, 2021, zero dollars remained available for repurchase under our share repurchase program.~~Equity Securities and Use of Proceeds

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware		81-3563824
(State of		(I.R.S. Employer
Incorporation)		Identification No.)

1150 North Alma School Road		85201
Mesa, Arizona		(Zip Code)
(Address of Principal Executive Offices)


(Title of Each Class)	(Trading Symbol)	(Name of Each Exchange on Which Registered)
Class A Common Stock, par value $0.0001 per share	VRRM	Nasdaq Capital Market
Warrants to purchase Class A Common Stock	VRRMW	OTC Pink Marketplace


PART I—FINANCIAL INFORMATION		5
Item 1. Financial Statements		5
Condensed Consolidated Balance Sheets		5
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)		6
Condensed Consolidated Statements of Stockholders’ Equity		7
Condensed Consolidated Statements of Cash Flows		8
Notes to the Condensed Consolidated Financial Statements		10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		3431
Item 3. Quantitative and Qualitative Disclosures About Market Risk		4639
Item 4. Controls and Procedures		4639
PART II—OTHER INFORMATION		4741
Item 1. Legal Proceedings		4741
Item 1A. Risk Factors		4741
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		4842
Item 3. Defaults Upon Senior Securities		4842
Item 4. Mine Safety Disclosures		4842
Item 5. Other Information		4842
Item 6. Exhibits		4943
SIGNATURES		5145


($ in thousands)	September 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
2021 Term Loan, due 2028	$	646,750		$	—		$	892,870		$	895,125
Senior Notes, due 2029		350,000			—			350,000			350,000
PPP Loan		2,933			—			2,933			2,933
2018 Term Loan		—			865,642
Revolver								0			25,000
Less: original issue discounts		(5,788	)		(3,952	)		(6,478	)		(6,753	)
Less: unamortized deferred financing costs		(19,100	)		(19,645	)		(21,097	)		(22,551	)
Total long-term debt		974,795			842,045			1,218,228			1,243,754
Less: current portion of long-term debt		(9,433	)		(9,104	)		(11,952	)		(36,952	)
Total long-term debt, net of current portion	$	965,362		$	832,941		$	1,206,276		$	1,206,802


Consolidated ~~first lien net leverage ratio (as defined~~First Lien Net Leverage Ratio (As Defined by the 2021 Term Loan ~~agreement)~~Agreement)		Applicable ~~prepayment~~Prepayment ~~percentage~~Percentage
> 3.70:1.00		50%
< 3.70:1.00 and > 3.20:1.00		25%
< 3.20:1.00		0%


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


Year		Percentage
2024		102.750%
2025		101.375%
2026 and thereafter		100.000%


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1)
August 1-31, 2021		6,849,315	$	14.60		6,849,315	$	—
Total		6,849,315	$	14.60		6,849,315	$	—


32.2*	~~Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~	X
101.INS	Inline XBRL Instance Document (the instance does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).	X
101.SCH	Inline XBRL Taxonomy Extension Schema Document.	X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.	X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.	X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.	X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.	X
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)	X
* This certification is deemed not filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.


	VERRA MOBILITY CORPORATION

Date: ~~November 4, 2021~~May 9, 2022	By:	/s/ David Roberts
		David Roberts
		President and Chief Executive Officer
		(Principal Executive Officer)