UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20222023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________.
Commission File Number: 001-37979
VERRA MOBILITY CORPORATION
(Exact name of registrant as specified in its charter)charter)
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) |
(480) 443-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(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 |
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:
Large accelerated filer | ☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |
Emerging growth company | ☐ |
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 ☐☒ NO ☒
As of August 1, 2022,4, 2023, there were 153,184,099169,670,795 shares of the Company’s Class A Common Stock, par value $0.0001 per share, issued and outstanding.
VERRA MOBILITY CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 20222023
TABLE OF CONTENTS
2
Cautionary Note Regarding Forward-Looking Statements
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 for the year ended December 31, 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.2022. 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
3
statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achievedoccur. Moreover, we operate in a very competitive and rapidly changing environment and 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 occur.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. 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.
3
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, are available free of charge on our website, verramobility.com, under the heading “Investors” immediately after they are filed with, or furnished to, the SEC. We use our Investor Relations website, ir.verramobility.com, as a means of disclosing information, which may be of interest or material to our investors and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, public conference calls, webcasts, and social media. Information contained on or accessible through, including any reports available on, our website is not a part of, and is not incorporated by reference into, this Quarterly Report on Form 10-Q or any other report or document we file with the SEC. Any reference to our website in this Form 10-Q is intended to be an inactive textual reference only.
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.
4
Part I—Financial Information
Item 1. Financial Statements
VERRA MOBILITY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ in thousands, except per share data) |
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current assets: |
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents |
| $ | 86,392 |
|
| $ | 101,283 |
|
| $ | 210,083 |
|
| $ | 105,204 |
|
Restricted cash |
|
| 4,169 |
|
|
| 3,149 |
|
|
| 3,416 |
|
|
| 3,911 |
|
Accounts receivable (net of allowance for credit losses of $17.1 million and |
|
| 172,816 |
|
|
| 160,979 |
| ||||||||
Accounts receivable (net of allowance for credit losses of $20.1 million and |
|
| 179,944 |
|
|
| 163,786 |
| ||||||||
Unbilled receivables |
|
| 33,830 |
|
|
| 29,109 |
|
|
| 36,843 |
|
|
| 30,782 |
|
Inventory, net |
|
| 16,549 |
|
|
| 12,093 |
| ||||||||
Inventory |
|
| 19,791 |
|
|
| 19,307 |
| ||||||||
Prepaid expenses and other current assets |
|
| 34,615 |
|
|
| 41,456 |
|
|
| 92,509 |
|
|
| 39,604 |
|
Total current assets |
|
| 348,371 |
|
|
| 348,069 |
|
|
| 542,586 |
|
|
| 362,594 |
|
Installation and service parts, net |
|
| 15,381 |
|
|
| 13,332 |
|
|
| 25,393 |
|
|
| 22,923 |
|
Property and equipment, net |
|
| 102,755 |
|
|
| 96,066 |
|
|
| 114,467 |
|
|
| 109,775 |
|
Operating lease assets |
|
| 38,146 |
|
|
| 38,862 |
|
|
| 37,170 |
|
|
| 37,593 |
|
Intangible assets, net |
|
| 429,813 |
|
|
| 487,299 |
|
|
| 335,781 |
|
|
| 377,420 |
|
Goodwill |
|
| 832,811 |
|
|
| 838,867 |
|
|
| 835,323 |
|
|
| 833,480 |
|
Other non-current assets |
|
| 12,583 |
|
|
| 14,561 |
|
|
| 15,440 |
|
|
| 12,484 |
|
Total assets |
| $ | 1,779,860 |
|
| $ | 1,837,056 |
|
| $ | 1,906,160 |
|
| $ | 1,756,269 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts payable |
| $ | 69,107 |
|
| $ | 67,556 |
|
| $ | 78,410 |
|
| $ | 79,869 |
|
Deferred revenue |
|
| 29,743 |
|
|
| 27,141 |
|
|
| 36,744 |
|
|
| 31,164 |
|
Accrued liabilities |
|
| 49,596 |
|
|
| 38,435 |
|
|
| 51,642 |
|
|
| 48,847 |
|
Tax receivable agreement liability, current portion |
|
| 5,107 |
|
|
| 5,107 |
|
|
| 4,994 |
|
|
| 4,994 |
|
Current portion of long-term debt |
|
| 11,952 |
|
|
| 36,952 |
|
|
| 9,019 |
|
|
| 21,935 |
|
Total current liabilities |
|
| 165,505 |
|
|
| 175,191 |
|
|
| 180,809 |
|
|
| 186,809 |
|
Long-term debt, net of current portion |
|
| 1,205,169 |
|
|
| 1,206,802 |
|
|
| 1,129,692 |
|
|
| 1,190,045 |
|
Operating lease liabilities, net of current portion |
|
| 34,347 |
|
|
| 34,984 |
|
|
| 32,331 |
|
|
| 33,362 |
|
Tax receivable agreement liability, net of current portion |
|
| 55,650 |
|
|
| 56,615 |
|
|
| 50,900 |
|
|
| 50,900 |
|
Private placement warrant liabilities |
|
| 35,600 |
|
|
| 38,466 |
|
|
| 5,430 |
|
|
| 24,066 |
|
Asset retirement obligation |
|
| 12,045 |
|
|
| 11,824 |
| ||||||||
Asset retirement obligations |
|
| 13,729 |
|
|
| 12,993 |
| ||||||||
Deferred tax liabilities, net |
|
| 21,829 |
|
|
| 47,524 |
|
|
| 20,583 |
|
|
| 21,149 |
|
Other long-term liabilities |
|
| 5,492 |
|
|
| 5,686 |
|
|
| 7,386 |
|
|
| 5,875 |
|
Total liabilities |
|
| 1,535,637 |
|
|
| 1,577,092 |
|
|
| 1,440,860 |
|
|
| 1,525,199 |
|
Commitments and contingencies (Note 14) |
|
|
|
|
|
| ||||||||||
Commitments and contingencies (Note 13) |
|
|
|
|
|
| ||||||||||
Stockholders' equity |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Preferred stock, $0.0001 par value |
|
| 0 |
|
|
| 0 |
|
|
| — |
|
|
| — |
|
Common stock, $0.0001 par value |
|
| 15 |
|
|
| 16 |
|
|
| 17 |
|
|
| 15 |
|
Common stock contingent consideration |
|
| 36,575 |
|
|
| 36,575 |
|
|
| 18,287 |
|
|
| 36,575 |
|
Additional paid-in capital |
|
| 311,252 |
|
|
| 309,883 |
|
|
| 533,626 |
|
|
| 305,423 |
|
Accumulated deficit |
|
| (90,852 | ) |
|
| (81,416 | ) |
|
| (74,393 | ) |
|
| (98,078 | ) |
Accumulated other comprehensive loss |
|
| (12,767 | ) |
|
| (5,094 | ) |
|
| (12,237 | ) |
|
| (12,865 | ) |
Total stockholders' equity |
|
| 244,223 |
|
|
| 259,964 |
|
|
| 465,300 |
|
|
| 231,070 |
|
Total liabilities and stockholders' equity |
| $ | 1,779,860 |
|
| $ | 1,837,056 |
|
| $ | 1,906,160 |
|
| $ | 1,756,269 |
|
See accompanying Notes to the Condensed Consolidated Financial Statements.
5
VERRA MOBILITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||
($ in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||||||||
Service revenue |
| $ | 174,502 |
|
| $ | 116,426 |
|
| $ | 335,636 |
|
| $ | 206,189 |
|
| $ | 196,050 |
|
| $ | 174,502 |
|
| $ | 380,748 |
|
| $ | 335,636 |
|
Product sales |
|
| 12,985 |
|
|
| 12,231 |
|
|
| 22,236 |
|
|
| 12,326 |
|
|
| 8,411 |
|
|
| 12,985 |
|
|
| 15,616 |
|
|
| 22,236 |
|
Total revenue |
|
| 187,487 |
|
|
| 128,657 |
|
|
| 357,872 |
|
|
| 218,515 |
|
|
| 204,461 |
|
|
| 187,487 |
|
|
| 396,364 |
|
|
| 357,872 |
|
Cost of service revenue |
|
| 3,713 |
|
|
| 1,332 |
|
|
| 7,492 |
|
|
| 2,212 |
|
|
| 4,338 |
|
|
| 3,713 |
|
|
| 8,568 |
|
|
| 7,492 |
|
Cost of product sales |
|
| 8,326 |
|
|
| 6,144 |
|
|
| 14,321 |
|
|
| 6,171 |
|
|
| 5,962 |
|
|
| 8,326 |
|
|
| 11,345 |
|
|
| 14,321 |
|
Operating expenses |
|
| 55,196 |
|
|
| 36,434 |
|
|
| 106,259 |
|
|
| 66,926 |
|
|
| 65,657 |
|
|
| 55,196 |
|
|
| 127,500 |
|
|
| 106,259 |
|
Selling, general and administrative expenses |
|
| 40,152 |
|
|
| 26,229 |
|
|
| 81,787 |
|
|
| 54,672 |
|
|
| 43,205 |
|
|
| 40,152 |
|
|
| 83,218 |
|
|
| 81,787 |
|
Depreciation, amortization and (gain) loss on |
|
| 34,939 |
|
|
| 27,012 |
|
|
| 70,846 |
|
|
| 55,277 |
|
|
| 29,088 |
|
|
| 34,939 |
|
|
| 59,421 |
|
|
| 70,846 |
|
Total costs and expenses |
|
| 142,326 |
|
|
| 97,151 |
|
|
| 280,705 |
|
|
| 185,258 |
|
|
| 148,250 |
|
|
| 142,326 |
|
|
| 290,052 |
|
|
| 280,705 |
|
Income from operations |
|
| 45,161 |
|
|
| 31,506 |
|
|
| 77,167 |
|
|
| 33,257 |
|
|
| 56,211 |
|
|
| 45,161 |
|
|
| 106,312 |
|
|
| 77,167 |
|
Interest expense, net |
|
| 14,485 |
|
|
| 11,680 |
|
|
| 28,764 |
|
|
| 20,844 |
|
|
| 22,771 |
|
|
| 14,485 |
|
|
| 45,458 |
|
|
| 28,764 |
|
Change in fair value of private placement warrants |
|
| (6,600 | ) |
|
| 8,067 |
|
|
| (2,866 | ) |
|
| 10,134 |
|
|
| 10,918 |
|
|
| (6,600 | ) |
|
| 25,519 |
|
|
| (2,866 | ) |
Tax receivable agreement liability adjustment |
|
| (965 | ) |
|
| 1,661 |
|
|
| (965 | ) |
|
| 1,661 |
|
|
| — |
|
|
| (965 | ) |
|
| — |
|
|
| (965 | ) |
Gain on interest rate swap |
|
| (4,805 | ) |
|
| — |
|
|
| (2,007 | ) |
|
| — |
| ||||||||||||||||
Loss on extinguishment of debt |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 5,334 |
|
|
| 209 |
|
|
| — |
|
|
| 1,558 |
|
|
| — |
|
Other income, net |
|
| (4,039 | ) |
|
| (2,798 | ) |
|
| (6,905 | ) |
|
| (5,811 | ) |
|
| (4,512 | ) |
|
| (4,039 | ) |
|
| (8,268 | ) |
|
| (6,905 | ) |
Total other expenses |
|
| 2,881 |
|
|
| 18,610 |
|
|
| 18,028 |
|
|
| 32,162 |
|
|
| 24,581 |
|
|
| 2,881 |
|
|
| 62,260 |
|
|
| 18,028 |
|
Income before income taxes |
|
| 42,280 |
|
|
| 12,896 |
|
|
| 59,139 |
|
|
| 1,095 |
|
|
| 31,630 |
|
|
| 42,280 |
|
|
| 44,052 |
|
|
| 59,139 |
|
Income tax provision |
|
| 12,639 |
|
|
| 8,904 |
|
|
| 19,458 |
|
|
| 6,018 |
|
|
| 12,522 |
|
|
| 12,639 |
|
|
| 20,367 |
|
|
| 19,458 |
|
Net income (loss) |
| $ | 29,641 |
|
| $ | 3,992 |
|
| $ | 39,681 |
|
| $ | (4,923 | ) | ||||||||||||||||
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Net income |
| $ | 19,108 |
|
| $ | 29,641 |
|
| $ | 23,685 |
|
| $ | 39,681 |
| ||||||||||||||||
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Change in foreign currency translation adjustment |
|
| (10,381 | ) |
|
| 351 |
|
|
| (7,673 | ) |
|
| 161 |
|
|
| 718 |
|
|
| (10,381 | ) |
|
| 628 |
|
|
| (7,673 | ) |
Total comprehensive income (loss) |
| $ | 19,260 |
|
| $ | 4,343 |
|
| $ | 32,008 |
|
| $ | (4,762 | ) | ||||||||||||||||
Net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Total comprehensive income |
| $ | 19,826 |
|
| $ | 19,260 |
|
| $ | 24,313 |
|
| $ | 32,008 |
| ||||||||||||||||
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Basic |
| $ | 0.19 |
|
| $ | 0.02 |
|
| $ | 0.26 |
|
| $ | (0.03 | ) |
| $ | 0.13 |
|
| $ | 0.19 |
|
| $ | 0.16 |
|
| $ | 0.26 |
|
Diluted |
| $ | 0.15 |
|
| $ | 0.02 |
|
| $ | 0.23 |
|
| $ | (0.03 | ) |
| $ | 0.13 |
|
| $ | 0.15 |
|
| $ | 0.16 |
|
| $ | 0.23 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Basic |
|
| 154,694 |
|
|
| 162,378 |
|
|
| 155,408 |
|
|
| 162,338 |
|
|
| 151,132 |
|
|
| 154,694 |
|
|
| 150,151 |
|
|
| 155,408 |
|
Diluted |
|
| 160,344 |
|
|
| 166,028 |
|
|
| 161,507 |
|
|
| 162,338 |
|
|
| 152,590 |
|
|
| 160,344 |
|
|
| 151,586 |
|
|
| 161,507 |
|
See accompanying Notes to the Condensed Consolidated Financial Statements.
6
VERRA MOBILITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
For the Three and Six Months Ended June 30, 2023 | For the Three and Six Months Ended June 30, 2023 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Common |
|
| Common |
|
| Additional |
|
| Accumulated |
|
| Accumulated |
|
| Total |
| ||||||||||||||||||||||||||||||||||||||
(In thousands) |
| Shares |
|
| Amount |
|
| Consideration |
|
| Capital |
|
| Deficit |
|
| Loss |
|
| Equity |
| |||||||||||||||||||||||||||||||||||
Balance as of December 31, 2022 |
|
| 148,962 |
|
| $ | 15 |
|
| $ | 36,575 |
|
| $ | 305,423 |
|
| $ | (98,078 | ) |
| $ | (12,865 | ) |
| $ | 231,070 |
| ||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,577 |
|
|
| — |
|
|
| 4,577 |
| ||||||||||||||||||||||||||||
Vesting of restricted stock units ("RSUs") and performance share units ("PSUs") |
|
| 313 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||
Exercise of stock options |
|
| 53 |
|
|
| — |
|
|
| — |
|
|
| 699 |
|
|
| — |
|
|
| — |
|
|
| 699 |
| ||||||||||||||||||||||||||||
Payment of employee tax withholding related to RSUs and PSUs vesting |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,526 | ) |
|
| — |
|
|
| — |
|
|
| (2,526 | ) | ||||||||||||||||||||||||||||
Exercise of warrants |
|
| 633 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,378 |
|
|
| — |
|
|
| — |
|
|
| 3,378 |
| ||||||||||||||||||||||||||||
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (90 | ) |
|
| (90 | ) | ||||||||||||||||||||||||||||
Balance as of March 31, 2023 |
|
| 149,961 |
|
|
| 15 |
|
|
| 36,575 |
|
|
| 306,974 |
|
|
| (93,501 | ) |
|
| (12,955 | ) |
|
| 237,108 |
| ||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19,108 |
|
|
| — |
|
|
| 19,108 |
| ||||||||||||||||||||||||||||
Earn-out shares issued to Platinum Stockholder |
|
| 2,500 |
|
|
| — |
|
|
| (18,288 | ) |
|
| 18,288 |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||
Vesting of RSUs and PSUs |
|
| 121 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||
Exercise of stock options |
|
| 127 |
|
|
| — |
|
|
| — |
|
|
| 1,689 |
|
|
| — |
|
|
| — |
|
|
| 1,689 |
| ||||||||||||||||||||||||||||
Payment of employee tax withholding related to RSUs and PSUs vesting |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (502 | ) |
|
| — |
|
|
| — |
|
|
| (502 | ) | ||||||||||||||||||||||||||||
Exercise of warrants |
|
| 14,208 |
|
|
| 2 |
|
|
| — |
|
|
| 202,652 |
|
|
| — |
|
|
| — |
|
|
| 202,654 |
| ||||||||||||||||||||||||||||
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,525 |
|
|
| — |
|
|
| — |
|
|
| 4,525 |
| ||||||||||||||||||||||||||||
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 718 |
|
|
| 718 |
| ||||||||||||||||||||||||||||
Balance as of June 30, 2023 |
|
| 166,917 |
|
| $ | 17 |
|
| $ | 18,287 |
|
| $ | 533,626 |
|
| $ | (74,393 | ) |
| $ | (12,237 | ) |
| $ | 465,300 |
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
For the Three and Six Months Ended June 30, 2022 | For the Three and Six Months Ended June 30, 2022 |
| For the Three and Six Months Ended June 30, 2022 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Common |
|
| Common |
|
| Additional |
|
| Accumulated |
|
| Accumulated |
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
(In thousands) |
| Shares |
|
| Amount |
|
| Consideration |
|
| Capital |
|
| Deficit |
|
| (Loss) Income |
|
| Equity |
| |||||||||||||||||||||||||||||||||||
Balance as of December 31, 2021 |
|
| 156,079 |
|
| $ | 16 |
|
| $ | 36,575 |
|
| $ | 309,883 |
|
| $ | (81,416 | ) |
| $ | (5,094 | ) |
| $ | 259,964 |
|
|
| 156,079 |
|
| $ | 16 |
|
| $ | 36,575 |
|
| $ | 309,883 |
|
| $ | (81,416 | ) |
| $ | (5,094 | ) |
| $ | 259,964 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,040 |
|
|
| — |
|
|
| 10,040 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,040 |
|
|
| — |
|
|
| 10,040 |
|
Vesting of restricted stock units ("RSUs") |
|
| 154 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||
Vesting of RSUs |
|
| 154 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||
Exercise of stock options |
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| 93 |
|
|
| — |
|
|
| — |
|
|
| 93 |
|
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| 93 |
|
|
| — |
|
|
| — |
|
|
| 93 |
|
Payment of employee tax withholding related to RSUs vesting |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,436 | ) |
|
| — |
|
|
| — |
|
|
| (1,436 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,436 | ) |
|
| — |
|
|
| — |
|
|
| (1,436 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,446 |
|
|
| — |
|
|
| — |
|
|
| 4,446 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,446 |
|
|
| — |
|
|
| — |
|
|
| 4,446 |
|
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,708 |
|
|
| 2,708 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,708 |
|
|
| 2,708 |
|
Balance as of March 31, 2022 |
|
| 156,240 |
|
|
| 16 |
|
|
| 36,575 |
|
|
| 312,986 |
|
|
| (71,376 | ) |
|
| (2,386 | ) |
|
| 275,815 |
|
|
| 156,240 |
|
|
| 16 |
|
|
| 36,575 |
|
|
| 312,986 |
|
|
| (71,376 | ) |
|
| (2,386 | ) |
|
| 275,815 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 29,641 |
|
|
| — |
|
|
| 29,641 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 29,641 |
|
|
| — |
|
|
| 29,641 |
|
Share repurchases and retirement |
|
| (3,076 | ) |
|
| (1 | ) |
|
| 0 |
|
|
| (6,163 | ) |
|
| (49,117 | ) |
|
| — |
|
|
| (55,281 | ) |
|
| (3,076 | ) |
|
| (1 | ) |
|
| — |
|
|
| (6,163 | ) |
|
| (49,117 | ) |
|
| — |
|
|
| (55,281 | ) |
Vesting of RSUs |
|
| 51 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 51 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Exercise of stock options |
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| 66 |
|
|
| — |
|
|
| — |
|
|
| 66 |
|
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| 66 |
|
|
| — |
|
|
| — |
|
|
| 66 |
|
Payment of employee tax withholding related to RSUs vesting |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (203 | ) |
|
| — |
|
|
| — |
|
|
| (203 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (203 | ) |
|
| — |
|
|
| — |
|
|
| (203 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,566 |
|
|
| — |
|
|
| — |
|
|
| 4,566 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,566 |
|
|
| — |
|
|
| — |
|
|
| 4,566 |
|
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10,381 | ) |
|
| (10,381 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10,381 | ) |
|
| (10,381 | ) |
Balance as of June 30, 2022 |
|
| 153,220 |
|
| $ | 15 |
|
| $ | 36,575 |
|
| $ | 311,252 |
|
| $ | (90,852 | ) |
| $ | (12,767 | ) |
| $ | 244,223 |
|
|
| 153,220 |
|
| $ | 15 |
|
| $ | 36,575 |
|
| $ | 311,252 |
|
| $ | (90,852 | ) |
| $ | (12,767 | ) |
| $ | 244,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
For the Three and Six Months Ended June 30, 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 | ) | ||||||||||||||||||||||||||||
Vesting of RSUs |
|
| 91 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||
Payment of employee tax withholding related to RSUs vesting |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (857 | ) |
|
| — |
|
|
| — |
|
|
| (857 | ) | ||||||||||||||||||||||||||||
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,908 |
|
|
| — |
|
|
| — |
|
|
| 2,908 |
| ||||||||||||||||||||||||||||
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (190 | ) |
|
| (190 | ) | ||||||||||||||||||||||||||||
Balance as of March 31, 2021 |
|
| 162,360 |
|
|
| 16 |
|
|
| 36,575 |
|
|
| 375,671 |
|
|
| (103,765 | ) |
|
| 21 |
|
|
| 308,518 |
| ||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,992 |
|
|
| 0 |
|
|
| 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 income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 351 |
|
|
| 351 |
| ||||||||||||||||||||||||||||
Balance as of June 30, 2021 |
|
| 162,408 |
|
| $ | 16 |
|
| $ | 36,575 |
|
| $ | 379,235 |
|
| $ | (99,773 | ) |
| $ | 372 |
|
| $ | 316,425 |
|
See accompanying Notes to the Condensed Consolidated Financial Statements.
7
VERRA MOBILITY CORPORATION
condensed consolidated Statements of Cash Flows
(Unaudited)
|
| Six Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
($ in thousands) |
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 39,681 |
|
| $ | (4,923 | ) | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
| ||||||||||
Net income |
| $ | 23,685 |
|
| $ | 39,681 |
| ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
| ||||||||||
Depreciation and amortization |
|
| 70,215 |
|
|
| 55,227 |
|
|
| 59,305 |
|
|
| 70,215 |
|
Amortization of deferred financing costs and discounts |
|
| 2,693 |
|
|
| 2,722 |
|
|
| 2,469 |
|
|
| 2,693 |
|
Change in fair value of private placement warrants |
|
| (2,866 | ) |
|
| 10,134 |
|
|
| 25,519 |
|
|
| (2,866 | ) |
Tax receivable agreement liability adjustment |
|
| (965 | ) |
|
| 1,661 |
|
|
| — |
|
|
| (965 | ) |
Gain on interest rate swap |
|
| (3,563 | ) |
|
| — |
| ||||||||
Loss on extinguishment of debt |
|
| 0 |
|
|
| 5,334 |
|
|
| 1,558 |
|
|
| — |
|
Credit loss expense |
|
| 7,036 |
|
|
| 3,863 |
|
|
| 4,956 |
|
|
| 7,036 |
|
Deferred income taxes |
|
| (15,700 | ) |
|
| (825 | ) |
|
| (4,733 | ) |
|
| (15,700 | ) |
Stock-based compensation |
|
| 9,012 |
|
|
| 6,481 |
|
|
| 7,903 |
|
|
| 9,012 |
|
Other |
|
| 760 |
|
|
| 257 |
|
|
| 134 |
|
|
| 760 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts receivable, net |
|
| (19,112 | ) |
|
| (42,970 | ) | ||||||||
Accounts receivable |
|
| (21,071 | ) |
|
| (19,112 | ) | ||||||||
Unbilled receivables |
|
| (4,918 | ) |
|
| (2,098 | ) |
|
| (6,120 | ) |
|
| (4,918 | ) |
Inventory, net |
|
| (7,397 | ) |
|
| 923 |
| ||||||||
Inventory |
|
| (55 | ) |
|
| (7,397 | ) | ||||||||
Prepaid expenses and other assets |
|
| 8,931 |
|
|
| (2,100 | ) |
|
| 3,000 |
|
|
| 8,931 |
|
Deferred revenue |
|
| 2,917 |
|
|
| 2,146 |
|
|
| 5,768 |
|
|
| 2,917 |
|
Accounts payable and other current liabilities |
|
| 1,711 |
|
|
| 2,191 |
|
|
| 8,890 |
|
|
| 1,711 |
|
Other liabilities |
|
| 4,377 |
|
|
| (545 | ) |
|
| 282 |
|
|
| 4,377 |
|
Net cash provided by operating activities |
|
| 96,375 |
|
|
| 37,478 |
|
|
| 107,927 |
|
|
| 96,375 |
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Acquisition of business, net of cash and restricted cash acquired |
|
| 0 |
|
|
| (107,004 | ) | ||||||||
Payment of contingent consideration |
|
| (647 | ) |
|
| 0 |
|
|
| — |
|
|
| (647 | ) |
Payments for interest rate swap |
|
| (1,556 | ) |
|
| — |
| ||||||||
Purchases of installation and service parts and property and equipment |
|
| (22,724 | ) |
|
| (8,257 | ) |
|
| (30,098 | ) |
|
| (22,724 | ) |
Cash proceeds from the sale of assets |
|
| 72 |
|
|
| 159 |
|
|
| 129 |
|
|
| 72 |
|
Net cash used in investing activities |
|
| (23,299 | ) |
|
| (115,102 | ) |
|
| (31,525 | ) |
|
| (23,299 | ) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Repayment on the revolver |
|
| (25,000 | ) |
|
| 0 |
|
|
| — |
|
|
| (25,000 | ) |
Borrowings of long-term debt |
|
| 0 |
|
|
| 996,750 |
| ||||||||
Repayment of long-term debt |
|
| (4,510 | ) |
|
| (881,281 | ) |
|
| (77,009 | ) |
|
| (4,510 | ) |
Payment of debt issuance costs |
|
| (246 | ) |
|
| (6,507 | ) |
|
| (192 | ) |
|
| (246 | ) |
Payment of debt extinguishment costs |
|
| 0 |
|
|
| (1,066 | ) | ||||||||
Proceeds from the exercise of warrants |
|
| 105,750 |
|
|
| — |
| ||||||||
Share repurchases and retirement |
|
| (55,281 | ) |
|
| 0 |
|
|
| — |
|
|
| (55,281 | ) |
Proceeds from exercise of stock options |
|
| 159 |
|
|
| 87 |
| ||||||||
Payment of employee tax withholding related to RSUs vesting |
|
| (1,639 | ) |
|
| (953 | ) | ||||||||
Net cash (used in) provided by financing activities |
|
| (86,517 | ) |
|
| 107,030 |
| ||||||||
Proceeds from the exercise of stock options |
|
| 2,388 |
|
|
| 159 |
| ||||||||
Payment of employee tax withholding related to RSUs and PSUs vesting |
|
| (3,028 | ) |
|
| (1,639 | ) | ||||||||
Net cash provided by (used in) financing activities |
|
| 27,909 |
|
|
| (86,517 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents |
|
| (430 | ) |
|
| 207 |
|
|
| 73 |
|
|
| (430 | ) |
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
| (13,871 | ) |
|
| 29,613 |
| ||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
| 104,384 |
|
|
| (13,871 | ) | ||||||||
Cash, cash equivalents and restricted cash - beginning of period |
|
| 104,432 |
|
|
| 120,892 |
|
|
| 109,115 |
|
|
| 104,432 |
|
Cash, cash equivalents and restricted cash - end of period |
| $ | 90,561 |
|
| $ | 150,505 |
|
| $ | 213,499 |
|
| $ | 90,561 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Reconciliation of cash, cash equivalents, and restricted cash |
|
|
|
|
|
| ||||||||||
Cash and cash equivalents |
| $ | 86,392 |
|
| $ | 147,346 |
| ||||||||
Restricted cash |
|
| 4,169 |
|
|
| 3,159 |
| ||||||||
Total cash, cash equivalents, and restricted cash |
| $ | 90,561 |
|
| $ | 150,505 |
|
See accompanying Notes to the Condensed Consolidated Financial Statements.
8
VERRA MOBILITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
|
| Six Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest paid |
| $ | 26,036 |
|
| $ | 13,054 |
|
| $ | 43,960 |
|
| $ | 26,036 |
|
Income taxes paid, net of refunds |
|
| 26,027 |
|
|
| 4,995 |
|
|
| 22,904 |
|
|
| 26,027 |
|
Supplemental non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Earn-out shares issued to Platinum Stockholder |
|
| 18,288 |
|
|
| — |
| ||||||||
Purchases of installation and service parts and property and equipment in accounts payable and accrued liabilities at period-end |
|
| 4,617 |
|
|
| 3,358 |
|
|
| 4,374 |
|
|
| 4,617 |
|
Proceeds receivable from the exercise of warrants at period-end |
|
| 52,747 |
|
|
| — |
| ||||||||
Reclassification of private placement warrant liabilities to additional paid-in capital upon exercise |
|
| 44,155 |
|
|
| — |
|
See accompanying Notes to the Condensed Consolidated Financial Statements.
9
VERRA MOBILITY CORPORATION
Notes to the CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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, 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 (the “Platinum Stockholder”), AM Merger Sub I, Inc., a direct, wholly owned subsidiary of Gores and AM Merger Sub II, LLC, a direct, 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 its customers who are located throughout the world, primarily within the United States, Australia, Canada and Europe. The Company is organized into 3three operating segments: Commercial Services, Government Solutions and Parking Solutions (see Note 15.14. Segment Reporting).
The Company’s 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 and consumer tolling services through Pagatelia S.L.
The Company’s Government Solutions segment offers photo enforcement solutions and services to its customers. Through its acquisition of Redflex Holdings Limited (“Redflex”) in June 2021, the Company expanded its current footprint in the United States and gained access to international markets. 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 international operations acquired through Redflexfor this segment primarily involve the sale of traffic enforcement products and related maintenance services.
The Company’s 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 allowed the Company to diversify its operations into thecommercial parking solutions space (see Note 3. Acquisitions). The Parking Solutionsoperators. This 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 SystemsIt also produces and markets its proprietary software as a service to its customers throughout the United States and Canada.
The Company was originally incorporated in Delaware on August 15, 2016, under the name “Gores Holdings II, Inc.” (“Gores”) as a special purpose acquisition company. On January 19, 2017, Gores consummated its initial public offering (the “IPO”), following which its shares began trading on 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 (the “Platinum Stockholder”), AM Merger Sub I, Inc., a direct, wholly owned subsidiary of Gores, and AM Merger Sub II, LLC, a direct, wholly owned subsidiary of Gores. On October 17, 2018, the Company consummated the transactions contemplated by the Merger Agreement (the “Business Combination”) and 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.
2. Significant Accounting Policies
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.
10
Use of Estimates
The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions include those related to allocating the fair values assigned to net assets acquired (including identifiable intangibles) in business combinations,transaction price for revenue recognition, inventory valuation, allowance for credit losses, fair value of the private placement warrant liabilities, fair value of the interest rate swap, self-insurance liability, valuation allowance on deferred tax assets, uncertain tax positions, apportionment for state income taxes, the tax receivable agreement liability, fair value of privately-held securities, 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.
Concentration of Credit Risk
Significant customers are those which represent more than 10% of the Company’s total revenue or accounts receivable, net. Revenue from the single Government Solutions customer exceeding 10% of total revenue is presented below:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
City of New York Department of Transportation |
|
| 18.6 | % |
|
| 26.7 | % |
|
| 18.9 | % |
|
| 25.7 | % |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
City of New York Department of Transportation |
|
| 16.9 | % |
|
| 18.6 | % |
|
| 17.4 | % |
|
| 18.9 | % |
The City of New York Department of Transportation (“NYCDOT”) represented 2517% and 3922% of total accounts receivable, net as of June 30, 20222023 and December 31, 2021,2022, respectively. There is no material reserve related to NYCDOT open receivables as amounts are deemed collectible based on current conditions and expectations. No other Government Solutions customer exceeded 10% of total accounts receivable, net as of any period presented.
Significant customer revenue concentrationsrevenues generated through the Company’s Commercial Services partners as a percent of total revenue are presented below:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Hertz Corporation |
|
| 11.7 | % |
|
| 13.3 | % |
|
| 11.4 | % |
|
| 13.5 | % |
|
| 12.3 | % |
|
| 11.7 | % |
|
| 11.8 | % |
|
| 11.4 | % |
Avis Budget Group, Inc. |
|
| 13.2 | % |
|
| 13.0 | % |
|
| 12.4 | % |
|
| 12.2 | % |
|
| 13.6 | % |
|
| 13.2 | % |
|
| 13.1 | % |
|
| 12.4 | % |
Enterprise Holdings, Inc. |
|
| 9.7 | % |
|
| 12.8 | % |
|
| 9.3 | % |
|
| 13.5 | % |
|
| 9.7 | % |
|
| 9.7 | % |
|
| 9.9 | % |
|
| 9.3 | % |
NaNNo Commercial Services customer exceeded 10% of total accounts receivable, net as of any period presented.
There were 0no significant customer concentrations that exceeded 10% of total revenue or accounts receivables, net for the Parking Solutions segment.segment as of or for any period presented.
Allowance for Credit 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 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. No 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 losses for the six months ended June 30, 20222023 and 2021,2022, respectively:
11
($ in thousands) |
| Commercial Services |
|
| Commercial |
|
| Government Solutions |
|
| Parking Solutions |
|
| Total |
| |||||||||||||||||||||||||
Balance at January 1, 2023 |
| $ | 9,600 |
|
| $ | 1,577 |
|
| $ | 4,573 |
|
| $ | 157 |
|
| $ | 15,907 |
| ||||||||||||||||||||
Credit loss expense |
|
| 5,639 |
|
|
| (94 | ) |
|
| (760 | ) |
|
| 171 |
|
|
| 4,956 |
| ||||||||||||||||||||
Write-offs, net of recoveries |
|
| (359 | ) |
|
| 5 |
|
|
| (147 | ) |
|
| (225 | ) |
|
| (726 | ) | ||||||||||||||||||||
Balance at June 30, 2023 |
| $ | 14,880 |
|
| $ | 1,488 |
|
| $ | 3,666 |
|
| $ | 103 |
|
| $ | 20,137 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
($ in thousands) |
| Commercial Services |
|
| Commercial |
|
| Government Solutions |
|
| Parking Solutions |
|
| Total |
|
| Commercial Services |
|
| Commercial |
|
| Government Solutions |
|
| Parking Solutions |
|
| Total |
| ||||||||||
Balance at January 1, 2022 |
| $ | 5,397 |
|
| $ | 3,092 |
|
| $ | 3,649 |
|
| $ | 0 |
|
| $ | 12,138 |
|
| $ | 5,397 |
|
| $ | 3,092 |
|
| $ | 3,649 |
|
| $ | — |
|
| $ | 12,138 |
|
Credit loss expense |
|
| 5,879 |
|
|
| 428 |
|
|
| 397 |
|
|
| 332 |
|
|
| 7,036 |
|
|
| 5,879 |
|
|
| 428 |
|
|
| 397 |
|
|
| 332 |
|
|
| 7,036 |
|
Write-offs, net of recoveries |
|
| (1,902 | ) |
|
| (100 | ) |
|
| (12 | ) |
|
| (68 | ) |
|
| (2,082 | ) |
|
| (1,902 | ) |
|
| (100 | ) |
|
| (12 | ) |
|
| (68 | ) |
|
| (2,082 | ) |
Balance at June 30, 2022 |
| $ | 9,374 |
|
| $ | 3,420 |
|
| $ | 4,034 |
|
| $ | 264 |
|
| $ | 17,092 |
|
| $ | 9,374 |
|
| $ | 3,420 |
|
| $ | 4,034 |
|
| $ | 264 |
|
| $ | 17,092 |
|
($ in thousands) |
| Commercial Services |
|
| Commercial |
|
| Government Solutions |
|
| Total |
| ||||
Balance at January 1, 2021 |
| $ | 3,210 |
|
| $ | 4,277 |
|
| $ | 3,984 |
|
| $ | 11,471 |
|
Credit loss expense |
|
| 4,877 |
|
|
| (989 | ) |
|
| (25 | ) |
|
| 3,863 |
|
Write-offs, net of recoveries |
|
| (2,613 | ) |
|
| (24 | ) |
|
| (21 | ) |
|
| (2,658 | ) |
Balance at June 30, 2021 |
| $ | 5,474 |
|
| $ | 3,264 |
|
| $ | 3,938 |
|
| $ | 12,676 |
|
The Commercial Services (Driver-billed) portfolio segment’s credit loss estimate as of June 30, 20222023 increased compared to the prior year due to increased revenue that impacted the volume of transactions as a result of recovery from COVID-19.year over year.
Deferred Revenue
Deferred revenue represents amounts that have been invoiced in advance and are expected to be recognized as revenue in future periods, and it primarily relates to Government Solutions and Parking Solutions customers. The Company had approximately $11.017.2 million and $8.912.2 million of deferred revenue in the Government Solutions segment as of June 30, 20222023 and December 31, 2021,2022, respectively. The majority of the remaining performance obligations as of June 30, 20222023 are expected to be completed and recognized as revenue in the next 12 months and $3.74.2 million is expected to be recognized between 2023from 2024 through 2027.2027. The Company had approximately $21.722.4 million and $20.921.2 million of deferred revenue in the Parking Solutions segment as of June 30, 20222023 and December 31, 2021,2022, respectively. The majority of the remaining performance obligations as of June 30, 20222023 are expected to be completed and recognized as revenue in the next 12 months and $0.91.0 million is expected to be recognized after June 30, 2024.
Interest Rate Swap
In December 2022, the Company entered into a cancellable interest rate swap agreement to hedge its exposure to interest rate fluctuations associated with the LIBOR (now transitioned to Term Secured Overnight Financing Rate “SOFR,” as discussed below) portion of the variable interest rate on its 2021 Term Loan. Under the interest rate swap agreement, the Company pays a fixed rate of 5.17% and the counterparty pays a variable interest rate. The Company entered into an International Swaps and Derivatives Association, Inc. Master Agreement with the counterparty which provides for the net settlement of all, or a specified group, of derivative transactions through a single payment. The notional amount on the interest rate swap is $675.0 million. The Company has the option to effectively terminate the interest rate swap agreement starting in 2023.December 2023, and monthly thereafter until December 2025. The Company is treating the interest rate swap as an economic hedge for accounting purposes and any changes in the fair value of the derivative instrument (including accrued interest) and related cash payments are recorded in the condensed consolidated statements of operations within the gain on interest rate swap line item.
The Company recorded a $4.8 million gain during the three months ended June 30, 2023, of which $5.1 million is associated with the derivative instrument re-measured to fair value at the end of the reporting period, netted by $0.3 million related to the monthly cash payments. The Company recorded a $2.0 million gain during the six months ended June 30, 2023, of which approximately $3.6 million is associated with the derivative instrument re-measured to fair value at the end of the reporting period, netted by $1.6 million related to the monthly cash payments. The effect of remeasurement to fair value is recorded within the operating activities section and the monthly cash payments are recorded within the investing activities section in the condensed consolidated statements of cash flows. See below for further discussion on the fair value measurement of the interest rate swap, and Note 6, Long-term Debt, for additional information on the Company's mix of fixed and variable debt.
12
Recent Accounting Pronouncements
Accounting Standards Adopted
In May 2021,March 2020, the Financial Accounting Standards Board ((““FASB”FASB”) issued Accounting Standards Update ((““ASU”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 Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This ASU provides guidance for 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 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 Company adopted this standard as of January 1, 2022, which did not have an impact on its financial statements and related disclosures, as the Company had no transactions subject to the standard. If the Company were to have modifications or exchanges in the future, such guidance 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 tothat will 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.
UnderIn March 2023, the terms of theCompany amended its 2021 Term Loan (as defined below) discussed in Note 7 below, in the event there is a benchmarkagreement to transition away from LIBOR to Term SOFR with the cessation of LIBOR in June 2023. As a benchmark replacement rate has been definedresult, the Company adopted the standard and elected to apply the optional expedients which enable it to consider the change in the 2021 Term Loan along withbenchmark interest rate as a continuation of the mechanismexisting loan agreement and account for such a transition to take place.it prospectively. The Company doesadoption of this standard did not anticipate this transition will have a material impact on itsto the condensed consolidated financial statements.
Accounting Standards Not Yet Adopted
On June 30, 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The ASU clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities. The guidance is effective for fiscal years, including interim periods beginning after December 15, 2023. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its financial statements.
3. Acquisitions
T2 Systems Acquisition
On December 7, 2021, the Company acquired all of the outstanding shares of 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 Parking Solutions segment.
The Company paid a purchase price of $353.2 million. Transaction costs for T2 Systems were $3.3 million, which primarily related to professional fees and other expenses related to the acquisition.
13
The allocation of the preliminary purchase consideration is summarized as follows:
($ 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 and was assigned to the Company’s Parking Solutions segment. The goodwill is not 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 10.0 years, 10.0 years, and 6.1 years, respectively.
As of June 30, 2022, the valuation of assets acquired and liabilities assumed is preliminary. The primary areas that remain preliminary relate to the fair values of unbilled receivables, intangible assets acquired, deferred revenue, 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.
NuPark Acquisition
On December 13, 2021, the Company completed the acquisition of 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 $3.2 million for future growth anticipated for the Company and is expected to be deductible for tax purposes. The fair values assigned to tangible and intangible assets acquired and liabilities assumed were preliminary estimates and the Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. The Company has included the financial results of NuPark in the financial statements from the date of acquisition, which were not material. The transaction costs for the acquisition were not material.
14
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following at:
($ in thousands) |
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
Proceeds receivable from the exercise of warrants |
| $ | 52,747 |
|
| $ | — |
| ||||||||
Prepaid services |
| $ | 9,313 |
|
| $ | 8,643 |
|
|
| 10,138 |
|
|
| 9,171 |
|
Prepaid tolls |
|
| 8,774 |
|
|
| 7,539 |
|
|
| 8,435 |
|
|
| 9,978 |
|
Costs to fulfill a customer contract |
|
| 6,378 |
|
|
| 3,193 |
| ||||||||
Prepaid computer maintenance |
|
| 5,071 |
|
|
| 5,492 |
| ||||||||
Prepaid income taxes |
|
| 4,483 |
|
|
| 4,629 |
| ||||||||
Interest rate swap asset |
|
| 2,263 |
|
|
| — |
| ||||||||
Deposits |
|
| 6,380 |
|
|
| 6,742 |
|
|
| 1,604 |
|
|
| 2,057 |
|
Prepaid computer maintenance |
|
| 3,097 |
|
|
| 3,742 |
| ||||||||
Prepaid insurance |
|
| 1,340 |
|
|
| 4,293 |
| ||||||||
Prepaid income taxes |
|
| 1,043 |
|
|
| 5,324 |
| ||||||||
Costs to fulfill a customer contract |
|
| 2,935 |
|
|
| 3,364 |
| ||||||||
Other |
|
| 1,733 |
|
|
| 1,809 |
|
|
| 1,390 |
|
|
| 5,084 |
|
Total prepaid expenses and other current assets |
| $ | 34,615 |
|
| $ | 41,456 |
|
| $ | 92,509 |
|
| $ | 39,604 |
|
5.4. Goodwill and Intangible Assets
The following table presents the changes in the carrying amount of goodwill by reportable segment:
|
| Commercial |
| Government |
| Parking |
|
|
|
| Commercial |
| Government |
| Parking |
|
|
| ||||||||||||||
($ in thousands) |
| Services |
|
| Solutions |
|
| Solutions |
|
| Total |
|
| Services |
|
| Solutions |
|
| Solutions |
|
| Total |
| ||||||||
Balance at December 31, 2021 |
| $ | 425,081 |
|
| $ | 215,400 |
|
| $ | 198,386 |
|
| $ | 838,867 |
| ||||||||||||||||
Balance at December 31, 2022 |
| $ | 419,720 |
|
| $ | 214,618 |
|
| $ | 199,142 |
|
| $ | 833,480 |
| ||||||||||||||||
Foreign currency translation adjustment |
|
| (5,456 | ) |
|
| (600 | ) |
|
| 0 |
|
|
| (6,056 | ) |
|
| 2,141 |
|
|
| (298 | ) |
|
| — |
|
|
| 1,843 |
|
Balance at June 30, 2022 |
| $ | 419,625 |
|
| $ | 214,800 |
|
| $ | 198,386 |
|
| $ | 832,811 |
| ||||||||||||||||
Balance at June 30, 2023 |
| $ | 421,861 |
|
| $ | 214,320 |
|
| $ | 199,142 |
|
| $ | 835,323 |
|
13
Intangible assets consist of the following as of the respective period-ends:
|
| June 30, 2022 |
|
| December 31, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||||
|
| 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 |
| 0.5 years |
| $ | 36,011 |
|
| $ | 31,751 |
|
| 0.5 years |
| $ | 36,225 |
|
| $ | 31,429 |
|
| 0.4 years |
| $ | 36,164 |
|
| $ | 32,595 |
|
| 0.4 years |
| $ | 36,151 |
|
| $ | 32,233 |
|
Non-compete agreements |
| 0.5 years |
|
| 62,519 |
|
|
| 56,026 |
|
| 1.0 years |
|
| 62,555 |
|
|
| 49,982 |
|
| zero |
|
| 62,541 |
|
|
| 62,541 |
|
| 0.1 years |
|
| 62,529 |
|
|
| 60,926 |
|
Customer relationships |
| 6.0 years |
|
| 558,889 |
|
|
| 196,813 |
|
| 6.5 years |
|
| 561,767 |
|
|
| 167,255 |
|
| 5.0 years |
|
| 558,538 |
|
|
| 258,458 |
|
| 5.5 years |
|
| 557,570 |
|
|
| 227,102 |
|
Developed technology |
| 1.7 years |
|
| 201,122 |
|
|
| 144,138 |
|
| 2.2 years |
|
| 202,768 |
|
|
| 127,350 |
|
| 1.0 years |
|
| 201,256 |
|
|
| 169,124 |
|
| 1.2 years |
|
| 201,548 |
|
|
| 160,117 |
|
Gross carrying value of intangible assets |
|
| 858,541 |
|
| $ | 428,728 |
|
|
|
| 863,315 |
|
| $ | 376,016 |
|
|
| 858,499 |
|
| $ | 522,718 |
|
|
|
| 857,798 |
|
| $ | 480,378 |
| ||||||
Less: accumulated amortization |
|
| (428,728 | ) |
|
|
|
|
| (376,016 | ) |
|
|
|
|
| (522,718 | ) |
|
|
|
|
| (480,378 | ) |
|
|
| ||||||||||||
Intangible assets, net |
| $ | 429,813 |
|
|
|
|
| $ | 487,299 |
|
|
|
|
| $ | 335,781 |
|
|
|
|
| $ | 377,420 |
|
|
|
|
Amortization expense was $27.120.0 million and $21.227.1 million for the three months ended June 30, 20222023 and 2021,2022, respectively, and was $54.442.0 million and $44.054.4 million for the six months ended June 30, 20222023 and 2021,2022, respectively.
Estimated amortization expense in future years is expected to be:
($ in thousands) |
|
|
| |
Remainder of 2022 |
| $ | 51,632 |
|
2023 |
|
| 77,410 |
|
2024 |
|
| 66,938 |
|
2025 |
|
| 64,240 |
|
2026 |
|
| 57,183 |
|
Thereafter |
|
| 112,410 |
|
Total |
| $ | 429,813 |
|
15
($ in thousands) |
|
|
| |
Remainder of 2023 |
| $ | 35,715 |
|
2024 |
|
| 67,017 |
|
2025 |
|
| 64,319 |
|
2026 |
|
| 57,332 |
|
2027 |
|
| 28,325 |
|
Thereafter |
|
| 83,073 |
|
Total |
| $ | 335,781 |
|
6.5. Accrued Liabilities
Accrued liabilities consist of the following at:
($ in thousands) |
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
Accrued salaries and wages |
| $ | 15,981 |
|
| $ | 15,744 |
|
| $ | 19,110 |
|
| $ | 19,109 |
|
Current deferred tax liabilities |
|
| 7,987 |
|
|
| 0 |
|
|
| 7,562 |
|
|
| 7,559 |
|
Current portion of operating lease liabilities |
|
| 5,788 |
|
|
| 5,760 |
|
|
| 7,117 |
|
|
| 6,355 |
|
Accrued interest payable |
|
| 4,249 |
|
|
| 4,209 |
|
|
| 4,271 |
|
|
| 4,459 |
|
Income taxes payable |
|
| 3,931 |
|
|
| 1,517 |
| ||||||||
Restricted cash due to customers |
|
| 3,841 |
|
|
| 3,062 |
|
|
| 3,045 |
|
|
| 3,541 |
|
Advance deposits |
|
| 2,721 |
|
|
| 1,029 |
| ||||||||
Payroll liabilities |
|
| 2,614 |
|
|
| 1,876 |
|
|
| 2,526 |
|
|
| 2,136 |
|
Accrued self-insurance |
|
| 1,283 |
|
|
| 858 |
| ||||||||
Income tax payable |
|
| 1,273 |
|
|
| 269 |
| ||||||||
Other |
|
| 5,205 |
|
|
| 6,267 |
|
|
| 2,734 |
|
|
| 3,532 |
|
Total accrued liabilities |
| $ | 49,596 |
|
| $ | 38,435 |
|
| $ | 51,642 |
|
| $ | 48,847 |
|
14
7.6. Long-term Debt
The following table provides a summary of the Company’s long-term debt at:
($ in thousands) |
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
2021 Term Loan, due 2028 |
| $ | 890,616 |
|
| $ | 895,125 |
|
| $ | 809,097 |
|
| $ | 886,106 |
|
Senior Notes, due 2029 |
|
| 350,000 |
|
|
| 350,000 |
|
|
| 350,000 |
|
|
| 350,000 |
|
PPP Loan |
|
| 2,933 |
|
|
| 2,933 |
| ||||||||
Revolver |
|
| 0 |
|
|
| 25,000 |
| ||||||||
Less: original issue discounts |
|
| (6,197 | ) |
|
| (6,753 | ) |
|
| (4,670 | ) |
|
| (5,637 | ) |
Less: unamortized deferred financing costs |
|
| (20,231 | ) |
|
| (22,551 | ) |
|
| (15,716 | ) |
|
| (18,489 | ) |
Total long-term debt |
|
| 1,217,121 |
|
|
| 1,243,754 |
|
|
| 1,138,711 |
|
|
| 1,211,980 |
|
Less: current portion of long-term debt |
|
| (11,952 | ) |
|
| (36,952 | ) |
|
| (9,019 | ) |
|
| (21,935 | ) |
Total long-term debt, net of current portion |
| $ | 1,205,169 |
|
| $ | 1,206,802 |
|
| $ | 1,129,692 |
|
| $ | 1,190,045 |
|
2021 Term Loan and Senior Notes
In March 2021, VM Consolidated, Inc. (“VM Consolidated”), the Company’s 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 $650.0900.0 million, maturing on March 26, 2028, and an accordion feature providing for an additionalwhich includes the incremental borrowing of $250.0 million in December 2021 as a result of term loans, subject to satisfaction of certain requirements.exercising the accordion feature available under the agreement. In connection with the 2021 Term Loan borrowings, the Company had an offering discount cost of $3.3 million and $0.74.6 million of offering discount costs and $4.5 million in deferred financing costs, both of which were capitalized and are being amortized over the remaining life of the 2021 Term Loan.
During the six months ended June 30, 2023, the Company made early repayments of $72.5 million on the 2021 Term Loan and as a result, the total principal outstanding was $809.1 million as of June 30, 2023. The Company recognized a loss on extinguishment of debt of $0.2 million and $1.6 million for the three and six months ended June 30, 2023, respectively, related to the write-off of pre-existing deferred financing costs and discounts.
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 the Company’s 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. In March 2023, the Company amended its 2021 Term Loan agreement to transition away from LIBOR to Term SOFR with the cessation of LIBOR in June 2023. To compensate for the differences in reference rates utilized, the amended agreement also includes a credit spread adjustment of 0.11448% for an interest period of one-month duration, 0.26161% for a three-month duration, 0.42826% for a six-month duration, and 0.71513% for twelve-months duration in addition to Term SOFR and the applicable margin. The Company has applied the optional expedients in ASC 848, Reference Rate Reform, and elected to treat the change in the benchmark interest rate to Term SOFR as a continuation of the existing loan agreement and account for it prospectively. As of June 30, 2023, the new all-in interest rate on the 2021 Term Loan was 8.5%.
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), as set forth in the following table:
Consolidated First Lien Net Leverage Ratio (As Defined by the 2021 Term Loan Agreement) | Applicable | |
> 3.70:1.00 | 50% | |
< 3.70:1.00 and > 3.20:1.00 | 25% | |
< 3.20:1.00 | 0% |
Senior Notes
In March 2021, VM Consolidated issued an aggregate principal amount of $350350.0 million in Senior Unsecured Notes (the “Senior Notes”), due on April 15, 2029. In connection with the issuance of the Senior Notes, the Company 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 were used in March 2021 to repay in full all outstanding debt which was represented by the First Lien Term Loan Credit Agreement (as amended, the “2018Term Loan”) with a balance of $865.6 million.
On December 7, 2021, VM Consolidated entered into an agreement to exercise the accordion feature under the 2021 Term Loan, borrowing $250.0 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 repayment in full all outstanding debt for T2 Systems. In connection with the Incremental Term Loan, the Company 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
1615
principal outstanding under the 2021 Term Loan, which includes the Incremental Term Loan, was $890.6 million at June 30, 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 the Company’s 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 June 30, 2022, the interest rate on the 2021 Term Loan was 6.1%.
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 ispayable on April 15 and October 15 of each year. On or after April 15, 2024, the Company 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:
Year |
| Percentage |
2024 |
| 102.750% |
2025 |
| 101.375% |
2026 and thereafter |
| 100.000% |
In addition, the Company may redeem up to 40% of the Senior Notes before April 15, 2024, with the net cash proceeds from certain equity offerings.
The Company evaluated the March 2021 refinancing transactions on a 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, the Company recognized a loss on extinguishment of debt of $5.3 million on the 2018 Term Loan during the six months ended June 30, 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 2021 Term Loan.
PPP 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 June 30, 2022, the loan amount outstanding was $2.9 million and was included in the current portion of long-term debt. In early 2021, Redflex applied for forgiveness of this loan and, as of June 30, 2022, was still awaiting approval from the SBA for loan forgiveness. In April 2022, the original maturity as of April 2022 was extended to September 2022 by the lender.
The Revolver
The Company has a Revolving Credit Agreement (the “Revolver”) with a commitment of up to $75.0 million available for loans and letters of credit. The Revolver matures on 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) LIBORTerm SOFR plus an applicable margin, or (2) an alternate base rate, plus an applicable margin. The margin percentage applied to (1) LIBORTerm SOFR 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 the Company’s average availability to borrow under the commitment. At December 31, 2021,There is a credit spread adjustment of 0.10% for a one-month duration, 0.15% for a three-month duration, and 0.25% for a six-month duration, in addition to Term SOFR and the Company had $applicable margin percentages. There are 25.0no million in outstanding borrowings on the Revolver which was repaid in full in January 2022. Atas of June 30, 2022, the2023 or December 31, 2022. The availability to borrow was $68.874.8 million, net of $6.20.2 million of outstanding letters of credit.credit at June 30, 2023.
Interest on the unused portion of the Revolver is payable quarterly at 0.375% and the Company is also required to pay participation and fronting fees at 1.38% on $6.20.2 million of outstanding letters of credit as of June 30, 2022.2023.
17
All borrowings and other extensions of credits under the 2021 Term Loan, 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. Substantially all of the Company’s assets are pledged as collateral to secure the Company’s indebtedness under the 2021 Term Loan. At June 30, 2022,2023, the Company was compliant with all debt covenants.
Interest Expense
The Company recorded interest expense, including amortization of deferred financing costs and discounts, of $14.522.8 million and $11.714.5 million for the three months ended June 30, 20222023 and 2021,2022, respectively, and $28.845.5 million and $20.828.8 million for the six months ended June 30, 20222023 and 2021,2022, respectively.
The weighted average effective interest rates on the Company’s outstanding borrowings were 5.97.6% and 4.17.0% at June 30, 20222023 and December 31, 2021,2022, respectively.
See Note 2, Significant Accounting Policies, for additional information on the interest rate swap entered into in December 2022 to hedge the Company's exposure against rising interest rates.
8.7. 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.
16
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 and 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 of long-term debt are as follows:
|
| Level in |
| June 30, 2022 |
|
| December 31, 2021 |
| Level in | June 30, 2023 |
| December 31, 2022 |
| |||||||||||||||||||||||||||||||
|
| 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 |
| $ |
| 868,926 |
|
| $ |
| 852,764 |
|
| $ |
| 871,467 |
|
| $ |
| 895,125 |
| 2 | $ |
| 792,752 |
| $ |
| 812,131 |
| $ |
| 866,365 |
| $ |
| 883,891 |
| |||||
Senior Notes |
| 2 |
|
| 345,262 |
|
|
| 287,000 |
|
|
| 344,918 |
|
|
| 355,250 |
|
| 2 |
|
| 345,959 |
|
|
| 329,875 |
|
|
| 345,615 |
|
|
| 313,250 |
| ||||||||
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:
|
| June 30, 2022 |
|
| December 31, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
Stock price |
| $ | 15.71 |
|
| $ | 15.43 |
|
| $ | 19.72 |
|
| $ | 13.83 |
|
Strike price |
| $ | 11.50 |
|
| $ | 11.50 |
|
| $ | 11.50 |
|
| $ | 11.50 |
|
Volatility |
|
| 39.0 | % |
|
| 48.0 | % |
|
| 43.0 | % |
|
| 44.0 | % |
Remaining life (in years) |
|
| 1.3 |
|
|
| 1.8 |
|
|
| 0.3 |
|
|
| 0.8 |
|
Risk-free interest rate |
|
| 2.84 | % |
|
| 0.66 | % |
|
| 5.43 | % |
|
| 4.74 | % |
Expected dividend yield |
|
| 0.0 | % |
|
| 0.0 | % |
|
| 0.0 | % |
|
| 0.0 | % |
Estimated fair value |
| $ | 5.34 |
|
| $ | 5.77 |
| ||||||||
Estimated fair value (per warrant) |
| $ | 8.41 |
|
| $ | 3.61 |
|
The Company is exposed to valuation risk on 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 5.0% increase to the volatility input at June 30, 2022 would increase the estimated fair value
18
by $0.22 per unit. A 5.0% decrease to the volatility input at June 30, 2022 would decrease the estimated fair value by $0.21 per unit. The following summarizes the changes in fair value of private placement warrant liabilities included in net income (loss)and the impact of exercises for the respective periods:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
($ in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Beginning balance |
| $ | 42,200 |
|
| $ | 32,933 |
|
| $ | 38,466 |
|
| $ | 30,866 |
|
| $ | 38,667 |
|
| $ | 42,200 |
|
| $ | 24,066 |
|
| $ | 38,466 |
|
Change in fair value of private placement warrants |
|
| (6,600 | ) |
|
| 8,067 |
|
|
| (2,866 | ) |
|
| 10,134 |
|
|
| 10,918 |
|
|
| (6,600 | ) |
|
| 25,519 |
|
|
| (2,866 | ) |
Exercise of warrants |
|
| (44,155 | ) |
|
| — |
|
|
| (44,155 | ) |
|
| — |
| ||||||||||||||||
Ending balance |
| $ | 35,600 |
|
| $ | 41,000 |
|
| $ | 35,600 |
|
| $ | 41,000 |
|
| $ | 5,430 |
|
| $ | 35,600 |
|
| $ | 5,430 |
|
| $ | 35,600 |
|
Change in fair value of private placement warrants consists of adjustments related to the unexercised Private Placement Warrants re-measured to fair value at the end of each reporting period and the final mark-to-market adjustments for exercised warrants. During the six months ended June 30, 2023, there were approximately 6.0 million exercises of Private Placement Warrants which reduced our private placement warrant liabilities by $44.2 million with an offset to common stock at par value and the remaining to additional paid in capital.
The Company has an equity investment measured at cost with a carrying value of $3.52.0 million as of June 30, 2023, 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 June 30, 2022.
The fair value of the contingent consideration payable in connection with the NuPark acquisition was $1.5 million at December 13, 2021 acquisition date and was classified within level 3 of the fair value hierarchy. The valuation of the contingent consideration was measured using a discounted cash flow model and the significant unobservable inputs used in the measurement relate to forecasts of annualized revenue developed by the Company. Duringduring the six months ended June 30, 2022,2023.
The recurring fair value measurement of the interest rate swap was valued based on observable inputs for similar assets and liabilities including swaption values and other observable inputs for interest rates and yield curves and is classified within level 2 of the fair value hierarchy. The following presents the changes in the fair value of the interest rate swap in the gross balances within the below line items for the respective periods:
17
($ in thousands) |
| Three Months Ended |
|
| Six Months Ended |
| ||
Prepaid expenses and other current assets |
|
|
|
|
|
| ||
Beginning balance |
| $ | — |
|
| $ | — |
|
Change in fair value of interest rate swap |
|
| 2,263 |
|
|
| 2,263 |
|
Ending balance |
| $ | 2,263 |
|
| $ | 2,263 |
|
|
|
|
|
|
|
| ||
Other non-current assets |
|
|
|
|
|
| ||
Beginning balance |
| $ | 857 |
|
| $ | 1,973 |
|
Change in fair value of interest rate swap |
|
| 1,439 |
|
|
| 323 |
|
Ending balance |
| $ | 2,296 |
|
| $ | 2,296 |
|
|
|
|
|
|
|
| ||
Accrued liabilities |
|
|
|
|
|
| ||
Beginning balance |
| $ | 1,413 |
|
| $ | 977 |
|
Change in fair value of interest rate swap |
|
| (1,413 | ) |
|
| (977 | ) |
Ending balance |
| $ | — |
|
| $ | — |
|
The Company made a paymentseparately classifies the current and non-current components based on the value of approximately $settlements due within 12 months (current) and greater than 12 months (non-current). For additional information on the interest rate swap, refer to Note 2. 0.6Significant Accounting Policies million and as a result, the contingent consideration payable was $0.9 million as of June 30, 2022..
9.8. 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 June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(In thousands, except per share data) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net income (loss) |
| $ | 29,641 |
|
| $ | 3,992 |
|
| $ | 39,681 |
|
| $ | (4,923 | ) | ||||||||||||||||
Net income |
| $ | 19,108 |
|
| $ | 29,641 |
|
| $ | 23,685 |
|
| $ | 39,681 |
| ||||||||||||||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Weighted average shares - basic |
|
| 154,694 |
|
|
| 162,378 |
|
|
| 155,408 |
|
|
| 162,338 |
|
|
| 151,132 |
|
|
| 154,694 |
|
|
| 150,151 |
|
|
| 155,408 |
|
Common stock equivalents |
|
| 5,650 |
|
|
| 3,650 |
|
|
| 6,099 |
|
|
| 0 |
|
|
| 1,458 |
|
|
| 5,650 |
|
|
| 1,435 |
|
|
| 6,099 |
|
Weighted average shares - diluted |
|
| 160,344 |
|
|
| 166,028 |
|
|
| 161,507 |
|
|
| 162,338 |
|
|
| 152,590 |
|
|
| 160,344 |
|
|
| 151,586 |
|
|
| 161,507 |
|
Net income (loss) per share - basic |
| $ | 0.19 |
|
| $ | 0.02 |
|
| $ | 0.26 |
|
| $ | (0.03 | ) | ||||||||||||||||
Net income (loss) per share - diluted |
| $ | 0.15 |
|
| $ | 0.02 |
|
| $ | 0.23 |
|
| $ | (0.03 | ) | ||||||||||||||||
Antidilutive shares excluded from diluted net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Net income per share - basic |
| $ | 0.13 |
|
| $ | 0.19 |
|
| $ | 0.16 |
|
| $ | 0.26 |
| ||||||||||||||||
Net income per share - diluted |
| $ | 0.13 |
|
| $ | 0.15 |
|
| $ | 0.16 |
|
| $ | 0.23 |
| ||||||||||||||||
Antidilutive shares excluded from diluted net income per share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Contingently issuable shares (1) |
|
| 5,000 |
|
|
| 5,000 |
|
|
| 5,000 |
|
|
| 5,000 |
|
|
| 2,500 |
|
|
| 5,000 |
|
|
| 2,500 |
|
|
| 5,000 |
|
Public warrants |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 13,333 |
| ||||||||||||||||
Private placement warrants |
|
| 0 |
|
|
| 6,667 |
|
|
| 0 |
|
|
| 6,667 |
|
|
| 646 |
|
|
| — |
|
|
| 646 |
|
|
| — |
|
Non-qualified stock options |
|
| 1,502 |
|
|
| 1,039 |
|
|
| 1,502 |
|
|
| 1,185 |
|
|
| 750 |
|
|
| 1,502 |
|
|
| 789 |
|
|
| 1,502 |
|
Performance share units |
|
| 179 |
|
|
| 0 |
|
|
| 179 |
|
|
| 229 |
|
|
| 329 |
|
|
| 179 |
|
|
| 329 |
|
|
| 179 |
|
Restricted stock units |
|
| 1,007 |
|
|
| 26 |
|
|
| 1,007 |
|
|
| 2,559 |
|
|
| — |
|
|
| 1,007 |
|
|
| 1,204 |
|
|
| 1,007 |
|
Total antidilutive shares excluded |
|
| 7,688 |
|
|
| 12,732 |
|
|
| 7,688 |
|
|
| 28,973 |
|
|
| 4,225 |
|
|
| 7,688 |
|
|
| 5,468 |
|
|
| 7,688 |
|
(1) Contingently issuable shares relate to the earn-out agreement as discussed in Note 13,12, Other Significant Transactions.
10.9. Income Taxes
The Company’s interim income tax provision 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
19
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.
18
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.
The Company’s effective income tax rate was 29.939.6% and 69.029.9% for the three months ended June 30, 20222023 and 2021,2022, respectively, and 32.946.2% and 549.632.9% for the six months ended June 30, 20222023 and 2021,2022, respectively. The primary driver for the effective tax rate variance is due to the permanent differences related to the mark-to-market adjustment on the private placement warrants and the increase in pre-tax income for 2022 compared to 2021, resulting in the Company’s permanent book and tax differences having a proportionately lesser impact on the effective tax rate for 2022.Private Placement Warrants.
The total amount of unrecognized tax benefits increased by $8.30.9 million during the six months ended June 30, 20222023 primarily due to prior year tax positions associated with the Redflex acquisition.positions. As of June 30, 2022,2023, the total amount of unrecognized tax benefits was $11.112.1 million, of which $2.53.6 million would affect our effective tax rate if recognized. The Company recognizes interest and penalties related to unrecognized tax benefits through income tax expense. As of June 30, 2022,2023, the Company had $0.10.8 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 related to the Redflex acquisition may be necessary within the coming year, which will not have an impact to the statements of operations.
Effective January 1, 2022, 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 currently evaluating the impacts of this change to the financial statements but does not expect them to be material.
The Company is subject to examination by the Internal Revenue Service and taxing authorities in various jurisdictions. The Company files U.S. federal and various foreign income tax returns which are subject to examination by the taxing authorities in the respective jurisdictions, generally for three or four years 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 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 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.
11.10. Stockholders’ Equity
Share Repurchases and RetirementWarrants
As of December 31, 2022, there were 19,999,967 warrants outstanding to acquire shares of the Company’s Class A Common Stock, including (i) 6,666,666 warrants originally issued to Gores Sponsor II, LLC in a private placement in connection with the IPO (the “Private Placement Warrants”) and (ii) the remaining warrants issued in connection with the IPO (the “Public Warrants” and, together with the Private Placement Warrants, the “Warrants”). The Warrants have a five-year term and will expire in October 2023. As of June 30, 2023, 2,959,609 total Warrants remain outstanding, of which 645,711 were determined to be Private Placement Warrants.
OnDuring the six months ended June 30, 2023, the Company processed the exercise of 17.0 million Warrants in exchange for the issuance of 14,840,070 shares of Class A Common Stock. There were 13,782,411 shares issued in exchange for cash-basis warrant exercises resulting in the receipt of $105.8 million in cash proceeds as of June 30, 2023, and $52.7 million of cash proceeds received in July 2023 which was recorded within prepaid expenses and other current assets. The remaining Warrant exercises were completed on a cashless basis. For details on the Private Placement Warrants liabilities as a result of the Warrant exercises and the changes in fair value of the liabilities recorded in the condensed consolidated statement of operations, refer to Note 7. Fair Value of Financial Instruments.
Subsequent to June 30, 2023, there were an additional 254,038 Warrants exercised in exchange for 253,478 shares of Class A Common Stock resulting in $2.9 million in cash proceeds.
Share Repurchase Programs
In November 2022, the Company's Board of Directors authorized a share repurchase program for up to an aggregate amount of $100.0 million of the Company's outstanding shares of Class A Common Stock over an 18-month period in open market, accelerated share repurchase (“ASR”) or privately negotiated transactions, each as permitted under applicable rules and regulations, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Exchange Act. The Company has not yet repurchased shares under this program.
19
In May 7, 2022, the Company’s Board of Directors authorized a share repurchase program for up to an aggregate amount of $125.0 million of its outstanding shares of Class A Common Stock over the next twelve months from time to time in open market transactions, accelerated share repurchases (“ASR”) or in privately negotiated transactions, each as permitted under applicable rules and regulations, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Securities Exchange Act of 1934 (the “Exchange Act”).
a twelve-month period. On May 12, 2022, the Company paid $50.0 million which represented the aggregate amount authorized for an ASR, and received an initial delivery of 2,739,726 shares of its Class A Common Stock in accordance with an ASR agreement with a third-party financial institution. The final settlement is expected to occuroccurred during the third quarter of fiscal year 2022, at which time, a volume-weighted average price calculation over the term of the ASR agreement will be used to determine the final number and the average price of shares repurchased and retired.2022. The Company accounted for the ASR as a common stock repurchase and a forward contract indexed to its own common stock. The Company determined that the equity classification criteria was met for the forward contract, therefore, it did not account for it as a derivative instrument.
20
In addition, the Company paid $5.2 million to repurchase 336,153 shares of its Class A Common Stock through open market transactions during the second quarter of fiscal year 2022, which it subsequently retired. The Company authorized an aggregate purchase amount of $75.0 million related to the open market repurchases, of which $69.8 million is available for future repurchases as of June 30, 2022. The Company incurred $0.1 million of direct costs in connection with both share repurchase transactions during the second quarter of fiscal year 2022, which it included in the cost of the shares acquired.
The Company paid a total of $55.3 million for sharesshare repurchases, including $0.1 million of direct costs, during the second quarter of fiscal year 2022 which was accounted by deducting the par value from the common stock account, reducing $6.2 million from additional paid-in capital calculated using an average share price, and by increasing accumulated deficit for the remaining cost of $49.1 million. The repurchases under the May 2022 share repurchase program were completed prior to the authorization of the November 2022 share repurchase program discussed above.
12.11. Stock-Based Compensation
The following details the components of stock-based compensation for the respective periods:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
($ in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Operating expenses |
| $ | 284 |
|
| $ | 248 |
|
| $ | 498 |
|
| $ | 442 |
|
| $ | 547 |
|
| $ | 284 |
|
| $ | 879 |
|
| $ | 498 |
|
Selling, general and administrative expenses |
|
| 4,282 |
|
|
| 3,325 |
|
|
| 8,514 |
|
|
| 6,039 |
|
|
| 3,978 |
|
|
| 4,282 |
|
|
| 7,024 |
|
|
| 8,514 |
|
Total stock-based compensation expense |
| $ | 4,566 |
|
| $ | 3,573 |
|
| $ | 9,012 |
|
| $ | 6,481 |
|
| $ | 4,525 |
|
| $ | 4,566 |
|
| $ | 7,903 |
|
| $ | 9,012 |
|
The increasedecrease in stock-based compensation expense of $1.0 million and $2.51.1 million during the three and six months ended June 30, 2023 as compared to the 2022 period is primarily due to the accelerated vesting of RSUs granted in 2022 to an executive officer as part of a separation agreement.
2120
13.12. Other Significant Transactions
Tax Receivable Agreement
At the closing of the Business Combination, the Company entered into a Tax Receivable Agreement (“TRA”) with the Platinum Stockholder. On August 3, 2022, the Platinum Stockholder sold and transferred to Lakeside Smart Holdco L.P (“Lakeside”), all of its rights, remaining interests and obligations as of that date under the TRA. The TRA generally provides for the payment to the Platinum StockholderLakeside of 50.0% of the net cash savings, if any, in U.S. federal, state and local income tax that the 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 increased tax basis of certain acquired intangibles prior to the Business Combination. The Company generally retains the benefit of the remaining 50.0% of these cash savings. The Company estimated the potential maximum benefit to be paid 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 made adjustments to this amount.
At June 30, 2022,2023, the TRA liability was approximately $60.855.9 million of which $5.15.0 million was the current portion and $55.750.9 million was the non-current portion, both of which are included in the respective tax receivable agreement liability line items on the condensed consolidated balance sheet.
The Company recorded a $1.0 million benefit for the three and six months ended June 30, 2022 and a $1.7 million charge for the three and six months ended June 30, 2021. The TRA liability adjustment in 2022 is arisingwhich resulted from lower estimated state tax rates due to changes in apportionment, whereas in 2021 it is arising from higher estimated state tax rates due to changes in statutory rates.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:upon meeting the below Common Stock Price Thresholds (each, a “Triggering Event”):
Common Stock Price Thresholds | One-time Issuance of Shares | |
> $13.00 (a) | 2,500,000 | |
> $15.50 (a) | 2,500,000 | |
> $18.00(a) | 2,500,000 | |
> $20.50(a) | 2,500,000 |
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, 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 $36.618.3 million remains contingently issuable as of June 30, 2022.2023. 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 5five-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 beare transferred from common stock contingent consideration to common stock and additional
22
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 and June 14, 2023, the Triggering Events for the issuance of the first, second and secondthird 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, $15.50 and $15.5018.00, respectively, for 10 out of 20 consecutive trading days. These Triggering Events resulted in the issuance of an aggregate 5,000,0007,500,000 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 $36.654.9 million, with a corresponding decrease to the common stock contingent consideration account. At June 30, 2022, the potential future Earn-Out Shares issuable are between 0 and 5.0 million.
Related Party Equity Investment
Redflex Irish Investments Pty Ltd, a wholly owned indirect subsidiaryOn July 26, 2023, the Triggering Event for the issuance of the Company, owns a 16% non-voting equity interest in Road Safety Operations Holdings Unlimited, which has a subsidiary, Road Safety Operations Holdings T/last tranche of Earn-out Shares occurred as the volume weighted average closing sale price per share of the Company’s Class A Go Safe Ireland (“Go Safe”), which provides speed and traffic enforcement services and related equipment to its customers in Ireland. This investment was approximatelyCommon Stock as of that date had been greater than $3.520.50 million and $for 3.710 out of 20 consecutive trading days. This resulted in the issuance of 2,500,000 million as of June 30, 2022 and December 31, 2021, respectively, and is presented within other non-current assets onshares to the condensed consolidated balance sheets. The Company is engaged as a vendor to supply equipment and services to Go Safe and related revenues earned were approximately $0.2 million and $0.5 million for the three and six months ended June 30, 2022.Platinum Stockholder.
2321
14.13. 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 totaledhad $6.2 million at both June 30, 2022 and December 31, 2021. In addition, the Company has $1.92.0 million of bank guarantees at June 30, 20222023 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 June 30, 20222023 were $46.421.6 million. The majority of these outstanding commitments are expected to be incurred during the remainder of 2022in 2023, and approximately $5.91.7 million is expected to be incurred between 20232024 and 2025.
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.
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 Gretnais 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 appealed the trial court’s ruling granting class certification, which remains pending.was denied and their petition for discretionary review of the certification ruling by the Louisiana Supreme Court was declined. Merits discovery in the trial court is underway. No trial date has been set. 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.
PlusPass Inc. (“PlusPass”) v. Verra Mobility Corporation, et al. is a lawsuit filed in the United States District Court, Central District of California, against Verra Mobility, The Gores Group LLC, Platinum Equity LLC, and ATS Processing Services, Inc., in November 2020. PlusPass filed amended complaints on November 20, 2020 and April 27, 2021. PlusPass alleges that Verra Mobility violated Section 7 of the Clayton Act through a 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 PlusPass’ second amended complaint in its entirety, which was denied in August 2021. Discovery is closed. Verra Mobility filed a motion for summary judgment on June 21, 2023, which is pending. Trial has been set for November 2023. Verra Mobility believes that all of PlusPass' claims are without merit and will defend itself vigorously in this litigation. 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.
22
15.14. Segment Reporting
The Company has 3three operating and reportable segments,segments: Commercial Services, Government Solutions and 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 government agencies of all sizes. Parking Solutions 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 three segments.
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. The tables below refer to this measure as segment profit (loss).profit. 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 included in segment profit below consists primarily of credit card rebates earned on the prepayment of tolling transactions and is therefore included in segment profit (loss).gains or losses on foreign currency transactions, and excludes certain non-operating expenses inapplicable to segments.
24During the third quarter of 2022, the Company changed its measure of segment profit to include loss on disposal of assets, net, and to exclude transaction and transformation expenses that were previously included within the selling, general and administrative expenses and other income, net line items below. The comparable prior periods have been recast to conform to the revised presentation although the impact of this revision to previously reported segment profit was not material.
The following tables set forth financial information by segment for the respective periods:
|
| For the Three Months Ended June 30, 2022 |
|
| For the Three Months Ended June 30, 2023 |
| ||||||||||||||||||||||||||||||||||
|
| Commercial |
|
| Government |
|
| Parking |
|
| Corporate |
|
|
|
|
| Commercial |
|
| Government |
|
| Parking |
|
| Corporate |
|
|
|
| ||||||||||
($ in thousands) |
| Services |
|
| Solutions |
|
| Solutions |
|
| and Other |
|
| Total |
|
| Services |
|
| Solutions |
|
| Solutions |
|
| and Other |
|
| Total |
| ||||||||||
Service revenue |
| $ | 84,888 |
|
| $ | 74,672 |
|
| $ | 14,942 |
|
| $ | — |
|
| $ | 174,502 |
|
| $ | 94,455 |
|
| $ | 84,994 |
|
| $ | 16,601 |
|
| $ | — |
|
| $ | 196,050 |
|
Product sales |
|
| — |
|
|
| 8,856 |
|
|
| 4,129 |
|
|
| — |
|
|
| 12,985 |
|
|
| — |
|
|
| 3,260 |
|
|
| 5,151 |
|
|
| — |
|
|
| 8,411 |
|
Total revenue |
|
| 84,888 |
|
|
| 83,528 |
|
|
| 19,071 |
|
|
| — |
|
|
| 187,487 |
|
|
| 94,455 |
|
|
| 88,254 |
|
|
| 21,752 |
|
|
| — |
|
|
| 204,461 |
|
Cost of service revenue |
|
| 496 |
|
|
| 563 |
|
|
| 2,654 |
|
|
| — |
|
|
| 3,713 |
|
|
| 688 |
|
|
| 681 |
|
|
| 2,969 |
|
|
| — |
|
|
| 4,338 |
|
Cost of product sales |
|
| — |
|
|
| 4,893 |
|
|
| 3,433 |
|
|
| — |
|
|
| 8,326 |
|
|
| — |
|
|
| 2,011 |
|
|
| 3,951 |
|
|
| — |
|
|
| 5,962 |
|
Operating expenses |
|
| 18,105 |
|
|
| 34,401 |
|
|
| 2,406 |
|
|
| — |
|
|
| 54,912 |
|
|
| 20,780 |
|
|
| 39,399 |
|
|
| 4,931 |
|
|
| — |
|
|
| 65,110 |
|
Selling, general and administrative expenses |
|
| 13,681 |
|
|
| 14,433 |
|
|
| 7,756 |
|
|
| — |
|
|
| 35,870 |
|
|
| 16,131 |
|
|
| 15,926 |
|
|
| 6,441 |
|
|
| — |
|
|
| 38,498 |
|
Other (income) expense, net |
|
| (3,840 | ) |
|
| (218 | ) |
|
| 19 |
|
|
| — |
|
|
| (4,039 | ) | ||||||||||||||||||||
Loss on disposal of assets, net |
|
| — |
|
|
| 92 |
|
|
| — |
|
|
| — |
|
|
| 92 |
| ||||||||||||||||||||
Other income, net |
|
| (4,237 | ) |
|
| (215 | ) |
|
| (60 | ) |
|
| — |
|
|
| (4,512 | ) | ||||||||||||||||||||
Segment profit |
| $ | 56,446 |
|
| $ | 29,456 |
|
| $ | 2,803 |
|
| $ | — |
|
| $ | 88,705 |
|
| $ | 61,093 |
|
| $ | 30,360 |
|
| $ | 3,520 |
|
| $ | — |
|
| $ | 94,973 |
|
Segment profit |
| $ | 56,446 |
|
| $ | 29,456 |
|
| $ | 2,803 |
|
| $ | — |
|
| $ | 88,705 |
|
| $ | 61,093 |
|
| $ | 30,360 |
|
| $ | 3,520 |
|
| $ | — |
|
| $ | 94,973 |
|
Depreciation and amortization |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 34,540 |
|
|
| 34,540 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 28,996 |
|
|
| 28,996 |
|
Loss on disposal of assets, net |
|
| — |
|
|
| 385 |
|
|
| 14 |
|
|
| — |
|
|
| 399 |
| ||||||||||||||||||||
Transaction and other related expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 64 |
|
|
| 64 |
| ||||||||||||||||||||
Transformation expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 665 |
|
|
| 665 |
| ||||||||||||||||||||
Change in fair value of private placement warrants |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,600 | ) |
|
| (6,600 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,918 |
|
|
| 10,918 |
|
Tax receivable agreement liability adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (965 | ) |
|
| (965 | ) | ||||||||||||||||||||
Gain on interest rate swap |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,805 | ) |
|
| (4,805 | ) | ||||||||||||||||||||
Loss on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 209 |
|
|
| 209 |
| ||||||||||||||||||||
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,566 |
|
|
| 4,566 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,525 |
|
|
| 4,525 |
|
Interest expense, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14,485 |
|
|
| 14,485 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,771 |
|
|
| 22,771 |
|
Income (loss) before income taxes |
| $ | 56,446 |
|
| $ | 29,071 |
|
| $ | 2,789 |
|
| $ | (46,026 | ) |
| $ | 42,280 |
| ||||||||||||||||||||
Income before income taxes |
| $ | 61,093 |
|
| $ | 30,360 |
|
| $ | 3,520 |
|
| $ | (63,343 | ) |
| $ | 31,630 |
|
|
| For the Three Months Ended June 30, 2021 |
| |||||||||||||
|
| Commercial |
|
| Government |
|
| Corporate |
|
|
|
| ||||
($ in thousands) |
| Services |
|
| Solutions |
|
| and Other |
|
| Total |
| ||||
Service revenue |
| $ | 66,480 |
|
| $ | 49,946 |
|
| $ | — |
|
| $ | 116,426 |
|
Product sales |
|
| — |
|
|
| 12,231 |
|
|
| — |
|
|
| 12,231 |
|
Total revenue |
|
| 66,480 |
|
|
| 62,177 |
|
|
| — |
|
|
| 128,657 |
|
Cost of service revenue |
|
| 905 |
|
|
| 427 |
|
|
| — |
|
|
| 1,332 |
|
Cost of product sales |
|
| — |
|
|
| 6,144 |
|
|
| — |
|
|
| 6,144 |
|
Operating expenses |
|
| 15,990 |
|
|
| 20,196 |
|
|
| — |
|
|
| 36,186 |
|
Selling, general and administrative expenses |
|
| 9,479 |
|
|
| 10,119 |
|
|
| 3,306 |
|
|
| 22,904 |
|
Other income, net |
|
| (2,594 | ) |
|
| (204 | ) |
|
| — |
|
|
| (2,798 | ) |
Segment profit (loss) |
| $ | 42,700 |
|
| $ | 25,495 |
|
| $ | (3,306 | ) |
| $ | 64,889 |
|
Segment profit (loss) |
| $ | 42,700 |
|
| $ | 25,495 |
|
| $ | (3,306 | ) |
| $ | 64,889 |
|
Depreciation and amortization |
|
| — |
|
|
| — |
|
|
| 27,013 |
|
|
| 27,013 |
|
Gain on disposal of assets, net |
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
Change in fair value of private placement warrants |
|
| — |
|
|
| — |
|
|
| 8,067 |
|
|
| 8,067 |
|
Tax receivable agreement liability adjustment |
|
| — |
|
|
| — |
|
|
| 1,661 |
|
|
| 1,661 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 3,573 |
|
|
| 3,573 |
|
Interest expense, net |
|
| — |
|
|
| — |
|
|
| 11,680 |
|
|
| 11,680 |
|
Income (loss) before income taxes |
| $ | 42,700 |
|
| $ | 25,496 |
|
| $ | (55,300 | ) |
| $ | 12,896 |
|
2523
|
| For the Six Months Ended June 30, 2022 |
| |||||||||||||||||
|
| Commercial |
|
| Government |
|
| Parking |
|
| Corporate |
|
|
|
| |||||
($ in thousands) |
| Services |
|
| Solutions |
|
| Solutions |
|
| and Other |
|
| Total |
| |||||
Service revenue |
| $ | 158,353 |
|
| $ | 147,896 |
|
| $ | 29,387 |
|
| $ | — |
|
| $ | 335,636 |
|
Product sales |
|
| — |
|
|
| 14,460 |
|
|
| 7,776 |
|
|
| — |
|
|
| 22,236 |
|
Total revenue |
|
| 158,353 |
|
|
| 162,356 |
|
|
| 37,163 |
|
|
| — |
|
|
| 357,872 |
|
Cost of service revenue |
|
| 1,098 |
|
|
| 1,036 |
|
|
| 5,358 |
|
|
| — |
|
|
| 7,492 |
|
Cost of product sales |
|
| — |
|
|
| 8,620 |
|
|
| 5,701 |
|
|
| — |
|
|
| 14,321 |
|
Operating expenses |
|
| 34,052 |
|
|
| 66,792 |
|
|
| 4,917 |
|
|
| — |
|
|
| 105,761 |
|
Selling, general and administrative expenses |
|
| 26,957 |
|
|
| 30,888 |
|
|
| 15,428 |
|
|
| — |
|
|
| 73,273 |
|
Other (income) expense, net |
|
| (6,795 | ) |
|
| (146 | ) |
|
| 36 |
|
|
| — |
|
|
| (6,905 | ) |
Segment profit |
| $ | 103,041 |
|
| $ | 55,166 |
|
| $ | 5,723 |
|
| $ | — |
|
| $ | 163,930 |
|
Segment profit |
| $ | 103,041 |
|
| $ | 55,166 |
|
| $ | 5,723 |
|
| $ | — |
|
| $ | 163,930 |
|
Depreciation and amortization |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 70,215 |
|
|
| 70,215 |
|
Loss on disposal of assets, net |
|
| — |
|
|
| 626 |
|
|
| 5 |
|
|
| — |
|
|
| 631 |
|
Change in fair value of private placement warrants |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,866 | ) |
|
| (2,866 | ) |
Tax receivable agreement liability adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (965 | ) |
|
| (965 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,012 |
|
|
| 9,012 |
|
Interest expense, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 28,764 |
|
|
| 28,764 |
|
Income (loss) before income taxes |
| $ | 103,041 |
|
| $ | 54,540 |
|
| $ | 5,718 |
|
| $ | (104,160 | ) |
| $ | 59,139 |
|
|
| For the Six Months Ended June 30, 2021 |
|
| For the Three Months Ended June 30, 2022 |
| ||||||||||||||||||||||||||||||
|
| Commercial |
|
| Government |
|
| Corporate |
|
|
|
|
| Commercial |
|
| Government |
|
| Parking |
|
| Corporate |
|
|
|
| |||||||||
($ in thousands) |
| Services |
|
| Solutions |
|
| and Other |
|
| Total |
|
| Services |
|
| Solutions |
|
| Solutions |
|
| and Other |
|
| Total |
| |||||||||
Service revenue |
| $ | 112,169 |
|
| $ | 94,020 |
|
| $ | — |
|
| $ | 206,189 |
|
| $ | 84,888 |
|
| $ | 74,672 |
|
| $ | 14,942 |
|
| $ | — |
|
| $ | 174,502 |
|
Product sales |
|
| — |
|
|
| 12,326 |
|
|
| — |
|
|
| 12,326 |
|
|
| — |
|
|
| 8,856 |
|
|
| 4,129 |
|
|
| — |
|
|
| 12,985 |
|
Total revenue |
|
| 112,169 |
|
|
| 106,346 |
|
|
| — |
|
|
| 218,515 |
|
|
| 84,888 |
|
|
| 83,528 |
|
|
| 19,071 |
|
|
| — |
|
|
| 187,487 |
|
Cost of service revenue |
|
| 1,436 |
|
|
| 776 |
|
|
| — |
|
|
| 2,212 |
|
|
| 496 |
|
|
| 563 |
|
|
| 2,654 |
|
|
| — |
|
|
| 3,713 |
|
Cost of product sales |
|
| — |
|
|
| 6,171 |
|
|
| — |
|
|
| 6,171 |
|
|
| — |
|
|
| 4,893 |
|
|
| 3,433 |
|
|
| — |
|
|
| 8,326 |
|
Operating expenses |
|
| 30,196 |
|
|
| 36,288 |
|
|
| — |
|
|
| 66,484 |
|
|
| 18,105 |
|
|
| 34,401 |
|
|
| 2,406 |
|
|
| — |
|
|
| 54,912 |
|
Selling, general and administrative expenses |
|
| 20,271 |
|
|
| 20,930 |
|
|
| 7,432 |
|
|
| 48,633 |
|
|
| 13,591 |
|
|
| 14,255 |
|
|
| 7,571 |
|
|
| — |
|
|
| 35,417 |
|
Other income, net |
|
| (4,664 | ) |
|
| (1,147 | ) |
|
| — |
|
|
| (5,811 | ) | ||||||||||||||||||||
Segment profit (loss) |
| $ | 64,930 |
|
| $ | 43,328 |
|
| $ | (7,432 | ) |
| $ | 100,826 |
| ||||||||||||||||||||
Segment profit (loss) |
| $ | 64,930 |
|
| $ | 43,328 |
|
| $ | (7,432 | ) |
| $ | 100,826 |
| ||||||||||||||||||||
Loss on disposal of assets, net |
|
| — |
|
|
| 385 |
|
|
| 14 |
|
|
| — |
|
|
| 399 |
| ||||||||||||||||
Other (income) expense, net |
|
| (3,840 | ) |
|
| (218 | ) |
| 19 |
|
|
| — |
|
|
| (4,039 | ) | |||||||||||||||||
Segment profit |
| $ | 56,536 |
|
| $ | 29,249 |
|
| $ | 2,974 |
|
| $ | — |
|
| $ | 88,759 |
| ||||||||||||||||
Segment profit |
| $ | 56,536 |
|
| $ | 29,249 |
|
| $ | 2,974 |
|
| $ | — |
|
| $ | 88,759 |
| ||||||||||||||||
Depreciation and amortization |
|
| — |
|
|
| — |
|
|
| 55,227 |
|
|
| 55,227 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 34,540 |
|
|
| 34,540 |
|
Loss on disposal of assets, net |
|
| — |
|
|
| 50 |
|
|
| — |
|
|
| 50 |
| ||||||||||||||||||||
Transaction and other related expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 273 |
|
|
| 273 |
| ||||||||||||||||
Transformation expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 180 |
|
|
| 180 |
| ||||||||||||||||
Change in fair value of private placement warrants |
|
| — |
|
|
| — |
|
|
| 10,134 |
|
|
| 10,134 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,600 | ) |
|
| (6,600 | ) |
Tax receivable agreement liability adjustment |
|
| — |
|
|
| — |
|
|
| 1,661 |
|
|
| 1,661 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (965 | ) |
|
| (965 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 6,481 |
|
|
| 6,481 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,566 |
|
|
| 4,566 |
|
Interest expense, net |
|
| — |
|
|
| — |
|
|
| 20,844 |
|
|
| 20,844 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14,485 |
|
|
| 14,485 |
|
Loss on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| 5,334 |
|
|
| 5,334 |
| ||||||||||||||||||||
Income (loss) before income taxes |
| $ | 64,930 |
|
| $ | 43,278 |
|
| $ | (107,113 | ) |
| $ | 1,095 |
| ||||||||||||||||||||
Income before income taxes |
| $ | 56,536 |
|
| $ | 29,249 |
|
| $ | 2,974 |
|
| $ | (46,479 | ) |
| $ | 42,280 |
|
|
| For the Six Months Ended June 30, 2023 |
| |||||||||||||||||
|
| Commercial |
|
| Government |
|
| Parking |
|
| Corporate |
|
|
|
| |||||
($ in thousands) |
| Services |
|
| Solutions |
|
| Solutions |
|
| and Other |
|
| Total |
| |||||
Service revenue |
| $ | 180,094 |
|
| $ | 168,227 |
|
| $ | 32,427 |
|
| $ | — |
|
| $ | 380,748 |
|
Product sales |
|
| — |
|
|
| 5,950 |
|
|
| 9,666 |
|
|
| — |
|
|
| 15,616 |
|
Total revenue |
|
| 180,094 |
|
|
| 174,177 |
|
|
| 42,093 |
|
|
| — |
|
|
| 396,364 |
|
Cost of service revenue |
|
| 1,171 |
|
|
| 1,192 |
|
|
| 6,205 |
|
|
| — |
|
|
| 8,568 |
|
Cost of product sales |
|
| — |
|
|
| 3,725 |
|
|
| 7,620 |
|
|
| — |
|
|
| 11,345 |
|
Operating expenses |
|
| 40,645 |
|
|
| 77,003 |
|
|
| 8,973 |
|
|
| — |
|
|
| 126,621 |
|
Selling, general and administrative expenses |
|
| 31,583 |
|
|
| 30,566 |
|
|
| 12,989 |
|
|
| — |
|
|
| 75,138 |
|
Loss on disposal of assets, net |
|
| — |
|
|
| 116 |
|
|
| — |
|
|
| — |
|
|
| 116 |
|
Other income, net |
|
| (7,954 | ) |
|
| (250 | ) |
|
| (64 | ) |
|
| — |
|
|
| (8,268 | ) |
Segment profit |
| $ | 114,649 |
|
| $ | 61,825 |
|
| $ | 6,370 |
|
| $ | — |
|
| $ | 182,844 |
|
Segment profit |
| $ | 114,649 |
|
| $ | 61,825 |
|
| $ | 6,370 |
|
| $ | — |
|
| $ | 182,844 |
|
Depreciation and amortization |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 59,305 |
|
|
| 59,305 |
|
Transaction and other related expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 332 |
|
|
| 332 |
|
Transformation expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 724 |
|
|
| 724 |
|
Change in fair value of private placement warrants |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25,519 |
|
|
| 25,519 |
|
Gain on interest rate swap |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,007 | ) |
|
| (2,007 | ) |
Loss on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,558 |
|
|
| 1,558 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,903 |
|
|
| 7,903 |
|
Interest expense, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 45,458 |
|
|
| 45,458 |
|
Income before income taxes |
| $ | 114,649 |
|
| $ | 61,825 |
|
| $ | 6,370 |
|
| $ | (138,792 | ) |
| $ | 44,052 |
|
24
|
| For the Six Months Ended June 30, 2022 |
| |||||||||||||||||
|
| Commercial |
|
| Government |
|
| Parking |
|
| Corporate |
|
|
|
| |||||
($ in thousands) |
| Services |
|
| Solutions |
|
| Solutions |
|
| and Other |
|
| Total |
| |||||
Service revenue |
| $ | 158,353 |
|
| $ | 147,896 |
|
| $ | 29,387 |
|
| $ | — |
|
| $ | 335,636 |
|
Product sales |
|
| — |
|
|
| 14,460 |
|
|
| 7,776 |
|
|
| — |
|
|
| 22,236 |
|
Total revenue |
|
| 158,353 |
|
|
| 162,356 |
|
|
| 37,163 |
|
|
| — |
|
|
| 357,872 |
|
Cost of service revenue |
|
| 1,098 |
|
|
| 1,036 |
|
|
| 5,358 |
|
|
| — |
|
|
| 7,492 |
|
Cost of product sales |
|
| — |
|
|
| 8,620 |
|
|
| 5,701 |
|
|
| — |
|
|
| 14,321 |
|
Operating expenses |
|
| 34,052 |
|
|
| 66,792 |
|
|
| 4,917 |
|
|
| — |
|
|
| 105,761 |
|
Selling, general and administrative expenses |
|
| 26,854 |
|
|
| 30,698 |
|
|
| 14,966 |
|
|
| — |
|
|
| 72,518 |
|
Loss on disposal of assets, net |
|
| — |
|
|
| 626 |
|
|
| 5 |
|
|
| — |
|
|
| 631 |
|
Other (income) expense, net |
|
| (6,795 | ) |
|
| (146 | ) |
|
| 36 |
|
|
| — |
|
|
| (6,905 | ) |
Segment profit |
| $ | 103,144 |
|
| $ | 54,730 |
|
| $ | 6,180 |
|
| $ | — |
|
| $ | 164,054 |
|
Segment profit |
| $ | 103,144 |
|
| $ | 54,730 |
|
| $ | 6,180 |
|
| $ | — |
|
| $ | 164,054 |
|
Depreciation and amortization |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 70,215 |
|
|
| 70,215 |
|
Transaction and other related expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 489 |
|
|
| 489 |
|
Transformation expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 266 |
|
|
| 266 |
|
Change in fair value of private placement warrants |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,866 | ) |
|
| (2,866 | ) |
Tax receivable agreement liability adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (965 | ) |
|
| (965 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,012 |
|
|
| 9,012 |
|
Interest expense, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 28,764 |
|
|
| 28,764 |
|
Income before income taxes |
| $ | 103,144 |
|
| $ | 54,730 |
|
| $ | 6,180 |
|
| $ | (104,915 | ) |
| $ | 59,139 |
|
The Company primarily operates within the United States, Australia, Canada, United Kingdom and in various other countries in Europe and Asia. Revenues earned from goods transferred to customers at a point in time were approximately $13.08.4 million and $12.213.0 million for the three months ended June 30, 20222023 and 2021,2022, respectively and were $22.215.6 million and $12.322.2 million for the six months ended June 30, 2023 and 2022, and 2021, respectively.
26
The following table details the revenues from international customersoperations for the respective periods:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
($ in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Australia |
| $ | 8,436 |
|
| $ | 1,141 |
|
| $ | 16,218 |
|
| $ | 1,141 |
|
| $ | 10,269 |
|
| $ | 8,436 |
|
| $ | 19,970 |
|
| $ | 16,218 |
|
Canada |
|
| 7,984 |
|
|
| 365 |
|
|
| 15,660 |
|
|
| 400 |
|
|
| 8,580 |
|
|
| 7,984 |
|
|
| 15,801 |
|
|
| 15,660 |
|
United Kingdom |
|
| 4,992 |
|
|
| 3,318 |
|
|
| 11,198 |
|
|
| 5,648 |
|
|
| 5,926 |
|
|
| 4,992 |
|
|
| 12,662 |
|
|
| 11,198 |
|
All other |
|
| 472 |
|
|
| 483 |
|
|
| 1,154 |
|
|
| 878 |
|
|
| 734 |
|
|
| 472 |
|
|
| 1,422 |
|
|
| 1,154 |
|
Total international revenues |
| $ | 21,884 |
|
| $ | 5,307 |
|
| $ | 44,230 |
|
| $ | 8,067 |
|
| $ | 25,509 |
|
| $ | 21,884 |
|
| $ | 49,855 |
|
| $ | 44,230 |
|
16.15. Guarantor/Non-Guarantor Financial Information
VM Consolidated is the lead borrower of the 2021 Term Loan and Senior Notes and the Revolver. VM Consolidated is owned by the Company through a series of holding companies that ultimately end with the Company.Notes. VM Consolidated 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. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, including transactions with the Company’s wholly owned guarantor subsidiaries and non-guarantor subsidiaries.
The following financial information presents the condensed consolidated balance sheets as of June 30, 20222023 and the related condensed consolidated statements of operations and comprehensive income for the three and six months ended June 30, 20222023 and the condensed consolidated statement of cash flows for the six months ended June 30, 20222023 for the Company, the combined guarantor subsidiaries and the combined non-guarantor subsidiaries.
2725
Verra Mobility Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
at June 30, 20222023
(Unaudited)
($ in thousands) |
| Verra Mobility |
|
| Guarantor Subsidiaries |
|
| Non- |
|
| Eliminations |
|
| Consolidated |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | — |
|
| $ | 54,934 |
|
| $ | 31,458 |
|
| $ | — |
|
| $ | 86,392 |
|
Restricted cash |
|
| — |
|
|
| 4,130 |
|
|
| 39 |
|
|
| — |
|
|
| 4,169 |
|
Accounts receivable (net of allowance for credit losses of $17.1 million) |
|
| — |
|
|
| 162,855 |
|
|
| 9,961 |
|
|
| — |
|
|
| 172,816 |
|
Unbilled receivables |
|
| — |
|
|
| 29,222 |
|
|
| 4,608 |
|
|
| — |
|
|
| 33,830 |
|
Investment in subsidiary |
|
| 74,964 |
|
|
| 141,993 |
|
|
| — |
|
|
| (216,957 | ) |
|
| — |
|
Inventory, net |
|
| — |
|
|
| 1,531 |
|
|
| 15,018 |
|
|
| — |
|
|
| 16,549 |
|
Prepaid expenses and other current assets |
|
| — |
|
|
| 26,154 |
|
|
| 8,461 |
|
|
| — |
|
|
| 34,615 |
|
Total current assets |
|
| 74,964 |
|
|
| 420,819 |
|
|
| 69,545 |
|
|
| (216,957 | ) |
|
| 348,371 |
|
Installation and service parts, net |
|
| — |
|
|
| 15,381 |
|
|
| — |
|
|
| — |
|
|
| 15,381 |
|
Property and equipment, net |
|
| — |
|
|
| 85,405 |
|
|
| 17,350 |
|
|
| — |
|
|
| 102,755 |
|
Operating lease assets |
|
| — |
|
|
| 30,854 |
|
|
| 7,292 |
|
|
| — |
|
|
| 38,146 |
|
Intangible assets, net |
|
| — |
|
|
| 321,251 |
|
|
| 108,562 |
|
|
| — |
|
|
| 429,813 |
|
Goodwill |
|
| — |
|
|
| 689,501 |
|
|
| 143,310 |
|
|
| — |
|
|
| 832,811 |
|
Due from affiliates |
|
| 169,259 |
|
|
| — |
|
|
| — |
|
|
| (169,259 | ) |
|
| — |
|
Other non-current assets |
|
| — |
|
|
| 8,306 |
|
|
| 4,277 |
|
|
| — |
|
|
| 12,583 |
|
Total assets |
| $ | 244,223 |
|
| $ | 1,571,517 |
|
| $ | 350,336 |
|
| $ | (386,216 | ) |
| $ | 1,779,860 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable |
| $ | — |
|
| $ | 54,932 |
|
| $ | 14,175 |
|
| $ | — |
|
| $ | 69,107 |
|
Deferred revenue |
|
| — |
|
|
| 18,624 |
|
|
| 11,119 |
|
|
| — |
|
|
| 29,743 |
|
Accrued liabilities |
|
| — |
|
|
| 38,210 |
|
|
| 11,386 |
|
|
| — |
|
|
| 49,596 |
|
Tax receivable agreement liability, current portion |
|
| — |
|
|
| 5,107 |
|
|
| — |
|
|
| — |
|
|
| 5,107 |
|
Current portion of long-term debt |
|
| — |
|
|
| 11,952 |
|
|
| — |
|
|
| — |
|
|
| 11,952 |
|
Total current liabilities |
|
| — |
|
|
| 128,825 |
|
|
| 36,680 |
|
|
| — |
|
|
| 165,505 |
|
Long-term debt, net of current portion |
|
| — |
|
|
| 1,205,169 |
|
|
| — |
|
|
| — |
|
|
| 1,205,169 |
|
Operating lease liabilities, net of current portion |
|
| — |
|
|
| 28,933 |
|
|
| 5,414 |
|
|
| — |
|
|
| 34,347 |
|
Tax receivable agreement liability, net of current portion |
|
| — |
|
|
| 55,650 |
|
|
| — |
|
|
| — |
|
|
| 55,650 |
|
Private placement warrant liabilities |
|
| — |
|
|
| 35,600 |
|
|
| — |
|
|
| — |
|
|
| 35,600 |
|
Due to affiliates |
|
| — |
|
|
| 24,982 |
|
|
| 144,277 |
|
|
| (169,259 | ) |
|
| — |
|
Asset retirement obligation |
|
| — |
|
|
| 12,020 |
|
|
| 25 |
|
|
| — |
|
|
| 12,045 |
|
Deferred tax liabilities, net |
|
| — |
|
|
| — |
|
|
| 21,829 |
|
|
| — |
|
|
| 21,829 |
|
Other long-term liabilities |
|
| — |
|
|
| 5,374 |
|
|
| 118 |
|
|
| — |
|
|
| 5,492 |
|
Total liabilities |
|
| — |
|
|
| 1,496,553 |
|
|
| 208,343 |
|
| �� | (169,259 | ) |
|
| 1,535,637 |
|
Total stockholders' equity |
|
| 244,223 |
|
|
| 74,964 |
|
|
| 141,993 |
|
|
| (216,957 | ) |
|
| 244,223 |
|
Total liabilities and stockholders' equity |
| $ | 244,223 |
|
| $ | 1,571,517 |
|
| $ | 350,336 |
|
| $ | (386,216 | ) |
| $ | 1,779,860 |
|
($ in thousands) |
| Verra Mobility |
|
| Guarantor Subsidiaries |
|
| Non- |
|
| Eliminations |
|
| Consolidated |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | — |
|
| $ | 185,418 |
|
| $ | 24,665 |
|
| $ | — |
|
| $ | 210,083 |
|
Restricted cash |
|
| — |
|
|
| 3,378 |
|
|
| 38 |
|
|
| — |
|
|
| 3,416 |
|
Accounts receivable (net of allowance for credit losses of $20.1 million ) |
|
| — |
|
|
| 164,707 |
|
|
| 15,237 |
|
|
| — |
|
|
| 179,944 |
|
Unbilled receivables |
|
| — |
|
|
| 32,126 |
|
|
| 4,717 |
|
|
| — |
|
|
| 36,843 |
|
Investment in subsidiary |
|
| 296,041 |
|
|
| 130,071 |
|
|
| — |
|
|
| (426,112 | ) |
|
| — |
|
Inventory |
|
| — |
|
|
| 2,408 |
|
|
| 17,383 |
|
|
| — |
|
|
| 19,791 |
|
Prepaid expenses and other current assets |
|
| — |
|
|
| 82,777 |
|
|
| 9,732 |
|
|
| — |
|
|
| 92,509 |
|
Total current assets |
|
| 296,041 |
|
|
| 600,885 |
|
|
| 71,772 |
|
|
| (426,112 | ) |
|
| 542,586 |
|
Installation and service parts, net |
|
| — |
|
|
| 25,393 |
|
|
| — |
|
|
| — |
|
|
| 25,393 |
|
Property and equipment, net |
|
| — |
|
|
| 95,760 |
|
|
| 18,707 |
|
|
| — |
|
|
| 114,467 |
|
Operating lease assets |
|
| — |
|
|
| 31,129 |
|
|
| 6,041 |
|
|
| — |
|
|
| 37,170 |
|
Intangible assets, net |
|
| — |
|
|
| 241,688 |
|
|
| 94,093 |
|
|
| — |
|
|
| 335,781 |
|
Goodwill |
|
| — |
|
|
| 689,697 |
|
|
| 145,626 |
|
|
| — |
|
|
| 835,323 |
|
Due from affiliates |
|
| 169,259 |
|
|
| — |
|
|
| — |
|
|
| (169,259 | ) |
|
| — |
|
Other non-current assets |
|
| — |
|
|
| 12,823 |
|
|
| 2,617 |
|
|
| — |
|
|
| 15,440 |
|
Total assets |
| $ | 465,300 |
|
| $ | 1,697,375 |
|
| $ | 338,856 |
|
| $ | (595,371 | ) |
| $ | 1,906,160 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable |
| $ | — |
|
| $ | 60,250 |
|
| $ | 18,160 |
|
| $ | — |
|
| $ | 78,410 |
|
Deferred revenue |
|
| — |
|
|
| 21,323 |
|
|
| 15,421 |
|
|
| — |
|
|
| 36,744 |
|
Accrued liabilities |
|
| — |
|
|
| 39,347 |
|
|
| 12,295 |
|
|
| — |
|
|
| 51,642 |
|
Tax receivable agreement liability, current portion |
|
| — |
|
|
| 4,994 |
|
|
| — |
|
|
| — |
|
|
| 4,994 |
|
Current portion of long-term debt |
|
| — |
|
|
| 9,019 |
|
|
| — |
|
|
| — |
|
|
| 9,019 |
|
Total current liabilities |
|
| — |
|
|
| 134,933 |
|
|
| 45,876 |
|
|
| — |
|
|
| 180,809 |
|
Long-term debt, net of current portion |
|
| — |
|
|
| 1,129,692 |
|
|
| — |
|
|
| — |
|
|
| 1,129,692 |
|
Operating lease liabilities, net of current portion |
|
| — |
|
|
| 28,655 |
|
|
| 3,676 |
|
|
| — |
|
|
| 32,331 |
|
Tax receivable agreement liability, net of current portion |
|
| — |
|
|
| 50,900 |
|
|
| — |
|
|
| — |
|
|
| 50,900 |
|
Private placement warrant liabilities |
|
| — |
|
|
| 5,430 |
|
|
| — |
|
|
| — |
|
|
| 5,430 |
|
Due to affiliates |
|
| — |
|
|
| 31,083 |
|
|
| 138,176 |
|
|
| (169,259 | ) |
|
| — |
|
Asset retirement obligations |
|
| — |
|
|
| 13,624 |
|
|
| 105 |
|
|
| — |
|
|
| 13,729 |
|
Deferred tax liabilities, net |
|
| — |
|
|
| (1 | ) |
|
| 20,584 |
|
|
| — |
|
|
| 20,583 |
|
Other long-term liabilities |
|
| — |
|
|
| 7,018 |
|
|
| 368 |
|
|
| — |
|
|
| 7,386 |
|
Total liabilities |
|
| — |
|
|
| 1,401,334 |
|
|
| 208,785 |
|
|
| (169,259 | ) |
|
| 1,440,860 |
|
Total stockholders' equity |
|
| 465,300 |
|
|
| 296,041 |
|
|
| 130,071 |
|
|
| (426,112 | ) |
|
| 465,300 |
|
Total liabilities and stockholders' equity |
| $ | 465,300 |
|
| $ | 1,697,375 |
|
| $ | 338,856 |
|
| $ | (595,371 | ) |
| $ | 1,906,160 |
|
2826
Verra Mobility Corporation and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
Three Months Ended June 30, 20222023
(Unaudited)
|
|
|
| |||||||||||||||||||||||||||||||||||||
($ in thousands) |
| Verra Mobility |
|
| Guarantor Subsidiaries |
|
| Non- |
|
| Eliminations |
|
| Consolidated |
|
| Verra Mobility |
|
| Guarantor Subsidiaries |
|
| Non- |
|
| Eliminations |
|
| Consolidated |
| ||||||||||
Service revenue |
| $ | — |
|
| $ | 157,137 |
|
| $ | 17,365 |
|
| $ | — |
|
| $ | 174,502 |
|
| $ | — |
|
| $ | 174,830 |
|
| $ | 21,220 |
|
| $ | — |
|
| $ | 196,050 |
|
Product sales |
|
| — |
|
|
| 8,466 |
|
|
| 4,519 |
|
|
| — |
|
|
| 12,985 |
|
|
| — |
|
|
| 4,122 |
|
|
| 4,289 |
|
|
| — |
|
|
| 8,411 |
|
Sales to affiliates |
|
| — |
|
|
| (348 | ) |
|
| 348 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,668 | ) |
|
| 2,668 |
|
|
| — |
|
|
| — |
|
Total revenue |
|
| — |
|
|
| 165,255 |
|
|
| 22,232 |
|
|
| — |
|
|
| 187,487 |
|
|
| — |
|
|
| 176,284 |
|
|
| 28,177 |
|
|
| — |
|
|
| 204,461 |
|
Cost of service revenue |
|
| — |
|
|
| 2,499 |
|
|
| 1,214 |
|
|
| — |
|
|
| 3,713 |
|
|
| — |
|
|
| 2,972 |
|
|
| 1,366 |
|
|
| — |
|
|
| 4,338 |
|
Cost of product sales |
|
| — |
|
|
| 5,290 |
|
|
| 3,036 |
|
|
| — |
|
|
| 8,326 |
|
|
| — |
|
|
| 1,802 |
|
|
| 4,160 |
|
|
| — |
|
|
| 5,962 |
|
Cost of sales to affiliates |
|
| — |
|
|
| (3 | ) |
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,211 | ) |
|
| 1,211 |
|
|
| — |
|
|
| — |
|
Operating expenses |
|
| — |
|
|
| 45,283 |
|
|
| 9,913 |
|
|
| — |
|
|
| 55,196 |
|
|
| — |
|
|
| 55,088 |
|
|
| 10,569 |
|
|
| — |
|
|
| 65,657 |
|
Selling, general and administrative expenses |
|
| — |
|
|
| 32,465 |
|
|
| 7,687 |
|
|
| — |
|
|
| 40,152 |
|
|
| — |
|
|
| 38,189 |
|
|
| 5,016 |
|
|
| — |
|
|
| 43,205 |
|
Depreciation, amortization and (gain) loss on disposal of assets, net |
|
| — |
|
|
| 29,875 |
|
|
| 5,064 |
|
|
| — |
|
|
| 34,939 |
|
|
| — |
|
|
| 23,979 |
|
|
| 5,109 |
|
|
| — |
|
|
| 29,088 |
|
Total costs and expenses |
|
| — |
|
|
| 115,409 |
|
|
| 26,917 |
|
|
| — |
|
|
| 142,326 |
|
|
| — |
|
|
| 120,819 |
|
|
| 27,431 |
|
|
| — |
|
|
| 148,250 |
|
Income (loss) from operations |
|
| — |
|
|
| 49,846 |
|
|
| (4,685 | ) |
|
| — |
|
|
| 45,161 |
| ||||||||||||||||||||
Income from operations |
|
| — |
|
|
| 55,465 |
|
|
| 746 |
|
|
| — |
|
|
| 56,211 |
| ||||||||||||||||||||
Income from equity investment |
|
| (29,641 | ) |
|
| 3,942 |
|
|
| — |
|
|
| 25,699 |
|
|
| — |
|
|
| (19,108 | ) |
|
| (1,022 | ) |
|
| — |
|
|
| 20,130 |
|
|
| — |
|
Interest expense, net |
|
| — |
|
|
| 14,482 |
|
|
| 3 |
|
|
| — |
|
|
| 14,485 |
|
|
| — |
|
|
| 22,786 |
|
|
| (15 | ) |
|
| — |
|
|
| 22,771 |
|
Change in fair value of private placement warrants |
|
| — |
|
|
| (6,600 | ) |
|
| — |
|
|
| — |
|
|
| (6,600 | ) |
|
| — |
|
|
| 10,918 |
|
|
| — |
|
|
| — |
|
|
| 10,918 |
|
Tax receivable agreement liability adjustment |
|
| — |
|
|
| (965 | ) |
|
| — |
|
|
| — |
|
|
| (965 | ) | ||||||||||||||||||||
Gain on interest rate swap |
|
| — |
|
|
| (4,805 | ) |
|
| — |
|
|
| — |
|
|
| (4,805 | ) | ||||||||||||||||||||
Loss on extinguishment of debt |
|
| — |
|
|
| 209 |
|
|
| — |
|
|
| — |
|
|
| 209 |
| ||||||||||||||||||||
Other income, net |
|
| — |
|
|
| (3,186 | ) |
|
| (853 | ) |
|
| — |
|
|
| (4,039 | ) |
|
| — |
|
|
| (4,207 | ) |
|
| (305 | ) |
|
| — |
|
|
| (4,512 | ) |
Total other (income) expenses |
|
| (29,641 | ) |
|
| 7,673 |
|
|
| (850 | ) |
|
| 25,699 |
|
|
| 2,881 |
|
|
| (19,108 | ) |
|
| 23,879 |
|
|
| (320 | ) |
|
| 20,130 |
|
|
| 24,581 |
|
Income (loss) before income taxes |
|
| 29,641 |
|
|
| 42,173 |
|
|
| (3,835 | ) |
|
| (25,699 | ) |
|
| 42,280 |
| ||||||||||||||||||||
Income before income taxes |
|
| 19,108 |
|
|
| 31,586 |
|
|
| 1,066 |
|
|
| (20,130 | ) |
|
| 31,630 |
| ||||||||||||||||||||
Income tax provision |
|
| — |
|
|
| 12,532 |
|
|
| 107 |
|
|
| — |
|
|
| 12,639 |
|
|
| — |
|
|
| 12,478 |
|
|
| 44 |
|
|
| — |
|
|
| 12,522 |
|
Net income (loss) |
| $ | 29,641 |
|
| $ | 29,641 |
|
| $ | (3,942 | ) |
| $ | (25,699 | ) |
| $ | 29,641 |
| ||||||||||||||||||||
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Net income |
| $ | 19,108 |
|
| $ | 19,108 |
|
| $ | 1,022 |
|
| $ | (20,130 | ) |
| $ | 19,108 |
| ||||||||||||||||||||
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Change in foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| (10,381 | ) |
|
| — |
|
|
| (10,381 | ) |
|
| — |
|
|
| — |
|
|
| 718 |
|
|
| — |
|
|
| 718 |
|
Total comprehensive income (loss) |
| $ | 29,641 |
|
| $ | 29,641 |
|
| $ | (14,323 | ) |
| $ | (25,699 | ) |
| $ | 19,260 |
| ||||||||||||||||||||
Total comprehensive income |
| $ | 19,108 |
|
| $ | 19,108 |
|
| $ | 1,740 |
|
| $ | (20,130 | ) |
| $ | 19,826 |
|
2927
Verra Mobility Corporation and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
Six Months Ended June 30, 20222023
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
($ in thousands) |
| Verra Mobility |
|
| Guarantor Subsidiaries |
|
| Non- |
|
| Eliminations |
|
| Consolidated |
|
| Verra Mobility |
|
| Guarantor Subsidiaries |
|
| Non- |
|
| Eliminations |
|
| Consolidated |
| ||||||||||
Service revenue |
| $ | — |
|
| $ | 300,301 |
|
| $ | 35,335 |
|
| $ | — |
|
| $ | 335,636 |
|
| $ | — |
|
| $ | 339,199 |
|
| $ | 41,549 |
|
| $ | — |
|
| $ | 380,748 |
|
Product sales |
|
| — |
|
|
| 13,341 |
|
|
| 8,895 |
|
|
| — |
|
|
| 22,236 |
|
|
| — |
|
|
| 7,310 |
|
|
| 8,306 |
|
|
| — |
|
|
| 15,616 |
|
Sales to affiliates |
|
| — |
|
|
| (348 | ) |
|
| 348 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,140 | ) |
|
| 4,140 |
|
|
| — |
|
|
| — |
|
Total revenue |
|
| — |
|
|
| 313,294 |
|
|
| 44,578 |
|
|
| — |
|
|
| 357,872 |
|
|
| — |
|
|
| 342,369 |
|
|
| 53,995 |
|
|
| — |
|
|
| 396,364 |
|
Cost of service revenue |
|
| — |
|
|
| 4,974 |
|
|
| 2,518 |
|
|
| — |
|
|
| 7,492 |
|
|
| — |
|
|
| 6,120 |
|
|
| 2,448 |
|
|
| — |
|
|
| 8,568 |
|
Cost of product sales |
|
| — |
|
|
| 8,115 |
|
|
| 6,206 |
|
|
| — |
|
|
| 14,321 |
|
|
| — |
|
|
| 3,236 |
|
|
| 8,109 |
|
|
| — |
|
|
| 11,345 |
|
Cost of sales to affiliates |
|
| — |
|
|
| (3 | ) |
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,649 | ) |
|
| 1,649 |
|
|
| — |
|
|
| — |
|
Operating expenses |
|
| — |
|
|
| 87,248 |
|
|
| 19,011 |
|
|
| — |
|
|
| 106,259 |
|
|
| — |
|
|
| 106,708 |
|
|
| 20,792 |
|
|
| — |
|
|
| 127,500 |
|
Selling, general and administrative expenses |
|
| — |
|
|
| 68,068 |
|
|
| 13,719 |
|
|
| — |
|
|
| 81,787 |
|
|
| — |
|
|
| 73,235 |
|
|
| 9,983 |
|
|
| — |
|
|
| 83,218 |
|
Depreciation, amortization and (gain) loss on disposal of assets, net |
|
| — |
|
|
| 60,614 |
|
|
| 10,232 |
|
|
| — |
|
|
| 70,846 |
|
|
| — |
|
|
| 49,150 |
|
|
| 10,271 |
|
|
| — |
|
|
| 59,421 |
|
Total costs and expenses |
|
| — |
|
|
| 229,016 |
|
|
| 51,689 |
|
|
| — |
|
|
| 280,705 |
|
|
| — |
|
|
| 236,800 |
|
|
| 53,252 |
|
|
| — |
|
|
| 290,052 |
|
Income (loss) from operations |
|
| — |
|
|
| 84,278 |
|
|
| (7,111 | ) |
|
| — |
|
|
| 77,167 |
| ||||||||||||||||||||
Income from operations |
|
| — |
|
|
| 105,569 |
|
|
| 743 |
|
|
| — |
|
|
| 106,312 |
| ||||||||||||||||||||
Income from equity investment |
|
| (39,681 | ) |
|
| 5,254 |
|
|
| — |
|
|
| 34,427 |
|
|
| — |
|
|
| (23,685 | ) |
|
| (1,439 | ) |
|
| — |
|
|
| 25,124 |
|
|
| — |
|
Interest expense, net |
|
| — |
|
|
| 28,761 |
|
|
| 3 |
|
|
| — |
|
|
| 28,764 |
|
|
| — |
|
| �� | 45,483 |
|
|
| (25 | ) |
|
| — |
|
|
| 45,458 |
|
Change in fair value of private placement warrants |
|
| — |
|
|
| (2,866 | ) |
|
| — |
|
|
| — |
|
|
| (2,866 | ) |
|
| — |
|
|
| 25,519 |
|
|
| — |
|
|
| — |
|
|
| 25,519 |
|
Tax receivable agreement liability adjustment |
|
| — |
|
|
| (965 | ) |
|
| — |
|
|
| — |
|
|
| (965 | ) | ||||||||||||||||||||
Gain on interest rate swap |
|
| — |
|
|
| (2,007 | ) |
|
| — |
|
|
| — |
|
|
| (2,007 | ) | ||||||||||||||||||||
Loss on extinguishment of debt |
|
| — |
|
|
| 1,558 |
|
|
| — |
|
|
| — |
|
|
| 1,558 |
| ||||||||||||||||||||
Other income, net |
|
| — |
|
|
| (5,874 | ) |
|
| (1,031 | ) |
|
| — |
|
|
| (6,905 | ) |
|
| — |
|
|
| (7,673 | ) |
|
| (595 | ) |
|
| — |
|
|
| (8,268 | ) |
Total other (income) expenses |
|
| (39,681 | ) |
|
| 24,310 |
|
|
| (1,028 | ) |
|
| 34,427 |
|
|
| 18,028 |
|
|
| (23,685 | ) |
|
| 61,441 |
|
|
| (620 | ) |
|
| 25,124 |
|
|
| 62,260 |
|
Income (loss) before income taxes |
|
| 39,681 |
|
|
| 59,968 |
|
|
| (6,083 | ) |
|
| (34,427 | ) |
|
| 59,139 |
| ||||||||||||||||||||
Income before income taxes |
|
| 23,685 |
|
|
| 44,128 |
|
|
| 1,363 |
|
|
| (25,124 | ) |
|
| 44,052 |
| ||||||||||||||||||||
Income tax provision (benefit) |
|
| — |
|
|
| 20,287 |
|
|
| (829 | ) |
|
| — |
|
|
| 19,458 |
|
|
| — |
|
|
| 20,443 |
|
|
| (76 | ) |
|
| — |
|
|
| 20,367 |
|
Net income (loss) |
| $ | 39,681 |
|
| $ | 39,681 |
|
| $ | (5,254 | ) |
| $ | (34,427 | ) |
| $ | 39,681 |
| ||||||||||||||||||||
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Net income |
| $ | 23,685 |
|
| $ | 23,685 |
|
| $ | 1,439 |
|
| $ | (25,124 | ) |
| $ | 23,685 |
| ||||||||||||||||||||
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Change in foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| (7,673 | ) |
|
| — |
|
|
| (7,673 | ) |
|
| — |
|
|
| — |
|
|
| 628 |
|
|
| — |
|
|
| 628 |
|
Total comprehensive income (loss) |
| $ | 39,681 |
|
| $ | 39,681 |
|
| $ | (12,927 | ) |
| $ | (34,427 | ) |
| $ | 32,008 |
| ||||||||||||||||||||
Total comprehensive income |
| $ | 23,685 |
|
| $ | 23,685 |
|
| $ | 2,067 |
|
| $ | (25,124 | ) |
| $ | 24,313 |
|
3028
Verra Mobility Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 20222023
(Unaudited)
($ in thousands) |
| Verra Mobility |
|
| Guarantor Subsidiaries |
|
| Non- |
|
| Eliminations |
|
| Consolidated |
|
| Verra Mobility |
|
| Guarantor Subsidiaries |
|
| Non- |
|
| Eliminations |
|
| Consolidated |
| ||||||||||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net income (loss) |
| $ | 39,681 |
|
| $ | 39,681 |
|
| $ | (5,254 | ) |
| $ | (34,427 | ) |
| $ | 39,681 |
| ||||||||||||||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Net income |
| $ | 23,685 |
|
| $ | 23,685 |
|
| $ | 1,439 |
|
| $ | (25,124 | ) |
| $ | 23,685 |
| ||||||||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Depreciation and amortization |
|
| — |
|
|
| 59,983 |
|
|
| 10,232 |
|
|
| — |
|
|
| 70,215 |
|
|
| — |
|
|
| 49,034 |
|
|
| 10,271 |
|
|
| — |
|
|
| 59,305 |
|
Amortization of deferred financing costs and discounts |
|
| — |
|
|
| 2,693 |
|
|
| — |
|
|
| — |
|
|
| 2,693 |
|
|
| — |
|
|
| 2,469 |
|
|
| — |
|
|
| — |
|
|
| 2,469 |
|
Change in fair value of private placement warrants |
|
| — |
|
|
| (2,866 | ) |
|
| — |
|
|
| — |
|
|
| (2,866 | ) |
|
| — |
|
|
| 25,519 |
|
|
| — |
|
|
| — |
|
|
| 25,519 |
|
Tax receivable agreement liability adjustment |
|
| — |
|
|
| (965 | ) |
|
| — |
|
|
| — |
|
|
| (965 | ) | ||||||||||||||||||||
Gain on interest rate swap |
|
| — |
|
|
| (3,563 | ) |
|
| — |
|
|
| — |
|
|
| (3,563 | ) | ||||||||||||||||||||
Loss on extinguishment of debt |
|
| — |
|
|
| 1,558 |
|
|
| — |
|
|
| — |
|
|
| 1,558 |
| ||||||||||||||||||||
Credit loss expense |
|
| — |
|
|
| 6,769 |
|
|
| 267 |
|
|
| — |
|
|
| 7,036 |
|
|
| — |
|
|
| 4,856 |
|
|
| 100 |
|
|
| — |
|
|
| 4,956 |
|
Deferred income taxes |
|
| — |
|
|
| (14,483 | ) |
|
| (1,217 | ) |
|
| — |
|
|
| (15,700 | ) |
|
| — |
|
|
| (3,347 | ) |
|
| (1,386 | ) |
|
| — |
|
|
| (4,733 | ) |
Stock-based compensation |
|
| — |
|
|
| 9,012 |
|
|
| — |
|
|
| — |
|
|
| 9,012 |
|
|
| — |
|
|
| 7,903 |
|
|
| — |
|
|
| — |
|
|
| 7,903 |
|
Other |
|
| — |
|
|
| 760 |
|
|
| — |
|
|
| — |
|
|
| 760 |
|
|
| — |
|
|
| 132 |
|
|
| 2 |
|
|
| — |
|
|
| 134 |
|
Income from equity investment |
|
| (39,681 | ) |
|
| 5,254 |
|
|
| — |
|
|
| 34,427 |
|
|
| — |
|
|
| (23,685 | ) |
|
| (1,439 | ) |
|
| — |
|
|
| 25,124 |
|
|
| — |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Accounts receivable, net |
|
| — |
|
|
| (19,443 | ) |
|
| 331 |
|
|
| — |
|
|
| (19,112 | ) | ||||||||||||||||||||
Accounts receivable |
|
| — |
|
|
| (17,682 | ) |
|
| (3,389 | ) |
|
| — |
|
|
| (21,071 | ) | ||||||||||||||||||||
Unbilled receivables |
|
| — |
|
|
| (5,003 | ) |
|
| 85 |
|
|
| — |
|
|
| (4,918 | ) |
|
| — |
|
|
| (6,784 | ) |
|
| 664 |
|
|
| — |
|
|
| (6,120 | ) |
Inventory, net |
|
| — |
|
|
| (2,918 | ) |
|
| (4,479 | ) |
|
| — |
|
|
| (7,397 | ) | ||||||||||||||||||||
Inventory |
|
| — |
|
|
| 194 |
|
|
| (249 | ) |
|
| — |
|
|
| (55 | ) | ||||||||||||||||||||
Prepaid expenses and other assets |
|
| — |
|
|
| 8,785 |
|
|
| 146 |
|
|
| — |
|
|
| 8,931 |
|
|
| — |
|
|
| 5,530 |
|
|
| (2,530 | ) |
|
| — |
|
|
| 3,000 |
|
Deferred revenue |
|
| — |
|
|
| 1,454 |
|
|
| 1,463 |
|
|
| — |
|
|
| 2,917 |
|
|
| — |
|
|
| 969 |
|
|
| 4,799 |
|
|
| — |
|
|
| 5,768 |
|
Accounts payable and other current liabilities |
|
| — |
|
|
| 4,788 |
|
|
| (3,077 | ) |
|
| — |
|
|
| 1,711 |
|
|
| — |
|
|
| 11,236 |
|
|
| (2,346 | ) |
|
| — |
|
|
| 8,890 |
|
Due to affiliates |
|
| — |
|
|
| (3,497 | ) |
|
| 3,497 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18,154 |
|
|
| (18,154 | ) |
|
| — |
|
|
| — |
|
Other liabilities |
|
| — |
|
|
| 4,342 |
|
|
| 35 |
|
|
| — |
|
|
| 4,377 |
|
|
| — |
|
|
| 715 |
|
|
| (433 | ) |
|
| — |
|
|
| 282 |
|
Net cash provided by operating activities |
|
| — |
|
|
| 94,346 |
|
|
| 2,029 |
|
|
| — |
|
|
| 96,375 |
| ||||||||||||||||||||
Net cash provided by (used in) operating activities |
|
| — |
|
|
| 119,139 |
|
|
| (11,212 | ) |
|
| — |
|
|
| 107,927 |
| ||||||||||||||||||||
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Payment of contingent consideration |
|
| — |
|
|
| (647 | ) |
|
| — |
|
|
| — |
|
|
| (647 | ) | ||||||||||||||||||||
Payments for interest rate swap |
|
| — |
|
|
| (1,556 | ) |
|
| — |
|
|
| — |
|
|
| (1,556 | ) | ||||||||||||||||||||
Purchases of installation and service parts and property and equipment |
|
| — |
|
|
| (17,179 | ) |
|
| (5,545 | ) |
|
| — |
|
|
| (22,724 | ) |
|
| — |
|
|
| (25,667 | ) |
|
| (4,431 | ) |
|
| — |
|
|
| (30,098 | ) |
Cash proceeds from the sale of assets |
|
| — |
|
|
| 72 |
|
|
| — |
|
|
| — |
|
|
| 72 |
|
|
| — |
|
|
| 129 |
|
|
| — |
|
|
| — |
|
|
| 129 |
|
Net cash used in investing activities |
|
| — |
|
|
| (17,754 | ) |
|
| (5,545 | ) |
|
| — |
|
|
| (23,299 | ) |
|
| — |
|
|
| (27,094 | ) |
|
| (4,431 | ) |
|
| — |
|
|
| (31,525 | ) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Repayment on the revolver |
|
| — |
|
|
| (25,000 | ) |
|
| — |
|
|
| — |
|
|
| (25,000 | ) | ||||||||||||||||||||
Repayment of long-term debt |
|
| — |
|
|
| (4,510 | ) |
|
| — |
|
|
| — |
|
|
| (4,510 | ) |
|
| — |
|
|
| (77,009 | ) |
|
| — |
|
|
| — |
|
|
| (77,009 | ) |
Payment of debt issuance costs |
|
| — |
|
|
| (246 | ) |
|
| — |
|
|
| — |
|
|
| (246 | ) |
|
| — |
|
|
| (192 | ) |
|
| — |
|
|
| — |
|
|
| (192 | ) |
Share repurchases and retirement |
|
| — |
|
|
| (55,281 | ) |
|
| — |
|
|
| — |
|
|
| (55,281 | ) | ||||||||||||||||||||
Proceeds from exercise of stock options |
|
| — |
|
|
| 159 |
|
|
| — |
|
|
| — |
|
|
| 159 |
| ||||||||||||||||||||
Payment of employee tax withholding related to RSUs vesting |
|
| — |
|
|
| (1,639 | ) |
|
| — |
|
|
| — |
|
|
| (1,639 | ) | ||||||||||||||||||||
Net cash used in financing activities |
|
| — |
|
|
| (86,517 | ) |
|
| — |
|
|
| — |
|
|
| (86,517 | ) | ||||||||||||||||||||
Proceeds from the exercise of warrants |
|
| — |
|
|
| 105,750 |
|
|
| — |
|
|
| — |
|
|
| 105,750 |
| ||||||||||||||||||||
Proceeds from the exercise of stock options |
|
| — |
|
|
| 2,388 |
|
|
| — |
|
|
| — |
|
|
| 2,388 |
| ||||||||||||||||||||
Payment of employee tax withholding related to RSUs and PSUs vesting |
|
| — |
|
|
| (3,028 | ) |
|
| — |
|
|
| — |
|
|
| (3,028 | ) | ||||||||||||||||||||
Net cash provided by financing activities |
|
| — |
|
|
| 27,909 |
|
|
| — |
|
|
| — |
|
|
| 27,909 |
| ||||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
|
| — |
|
|
| — |
|
|
| (430 | ) |
|
| — |
|
|
| (430 | ) |
|
| — |
|
|
| — |
|
|
| 73 |
|
|
| — |
|
|
| 73 |
|
Net decrease in cash, cash equivalents and restricted cash |
|
| — |
|
|
| (9,925 | ) |
|
| (3,946 | ) |
|
| — |
|
|
| (13,871 | ) | ||||||||||||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
| — |
|
|
| 119,954 |
|
|
| (15,570 | ) |
|
| — |
|
|
| 104,384 |
| ||||||||||||||||||||
Cash, cash equivalents and restricted cash - beginning of period |
|
| — |
|
|
| 68,989 |
|
|
| 35,443 |
|
|
| — |
|
|
| 104,432 |
|
|
| — |
|
|
| 68,842 |
|
|
| 40,273 |
|
|
| — |
|
|
| 109,115 |
|
Cash, cash equivalents and restricted cash - end of period |
| $ | — |
|
| $ | 59,064 |
|
| $ | 31,497 |
|
| $ | — |
|
| $ | 90,561 |
|
| $ | — |
|
| $ | 188,796 |
|
| $ | 24,703 |
|
| $ | — |
|
| $ | 213,499 |
|
3129
Verra Mobility Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
Six Months Ended June 30, 20222023
(Unaudited)
|
| Verra Mobility |
|
| Guarantor Subsidiaries |
|
| Non- |
|
| Eliminations |
|
| Consolidated |
|
| Verra Mobility |
|
| Guarantor Subsidiaries |
|
| Non- |
|
| Eliminations |
|
| Consolidated |
| ||||||||||
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Interest paid |
| $ | — |
|
| $ | 26,036 |
|
| $ | — |
|
| $ | — |
|
| $ | 26,036 |
|
| $ | — |
|
| $ | 43,960 |
|
| $ | — |
|
| $ | — |
|
| $ | 43,960 |
|
Income taxes paid, net of refunds |
|
| — |
|
|
| 25,764 |
|
|
| 263 |
|
|
| — |
|
|
| 26,027 |
|
|
| — |
|
|
| 22,188 |
|
|
| 716 |
|
|
| — |
|
|
| 22,904 |
|
Supplemental non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Earn-out shares issued to Platinum Stockholder |
|
| 18,288 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18,288 |
| ||||||||||||||||||||
Purchases of installation and service parts and property and equipment in accounts payable and accrued liabilities at period-end |
|
| — |
|
|
| 4,617 |
|
|
| — |
|
|
| — |
|
|
| 4,617 |
|
|
| — |
|
|
| 4,374 |
|
|
| — |
|
|
| — |
|
|
| 4,374 |
|
Proceeds receivable from the exercise of warrants at period-end |
|
| 52,747 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 52,747 |
| ||||||||||||||||||||
Reclassification of private placement warrant liabilities to additional paid-in capital upon exercise |
|
| 44,155 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 44,155 |
|
16. Subsequent Events
32Subsequent to June 30, 2023, there were an additional 254,038 Warrants exercised in exchange for 253,478 shares of Class A Common Stock resulting in $2.9 million in cash proceeds.
On July 26, 2023, the Triggering Event for the issuance of the last tranche 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 $20.50 for 10 out of 20 consecutive trading days. This resulted in the issuance of 2,500,000 shares to the Platinum Stockholder. See Note 12, Other Significant Transactions, for additional discussion on Earn-out Shares.
On August 7, 2023, the Company made an early repayment of $100.0 million on its 2021 Term Loan.
30
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 for the year ended December 31, 2021,2022, 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 in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.2022. Please also refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements.”
Business Overview
We are a leading provider of smart mobility technology solutions and services throughout the United States, Australia, EuropeCanada and Canada. TheseEurope. We make transportation safer, smarter and more connected through our integrated, data-driven solutions, and services includeincluding toll and violations management, title and registration services, automated safety solutions, parkingand traffic enforcement and citation,commercial parking management. We bring together vehicles, hardware, software, data, and other data-driven solutions,people to oursolve transportation challenges for customers which includearound the world, including fleet owners such as rental car companies (“RACRACss””), and fleet management companies (“FMCs”), other large fleet owners, municipalities, school districts,governments, universities, parking operators, healthcare facilities, and transportation hubscommercial parking operators and other violation-issuing authorities. Our solutions simplify the smart mobility ecosystem by utilizing what we believe are industry-leading capabilities, informationvision is to continue to develop and use technology expertise, and integrated hardwaredata intelligence to make transportation safer, smarter and software to efficiently facilitate the automated processing of tolls and violations, automated safety and parking solutions for hundreds of agencies and millions of end users annually, while also making cities and roadways safer for everyone.more connected.
Executive Summary
We operate under long-term contracts and have a highly reoccurring service revenue model. We continue to execute our strategy to grow revenue organically year over year and expand offerings into adjacent markets through innovation or acquisition.focus on initiatives that support our long-term vision. 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.
Recent Events
Share Repurchases and Retirement
On May 7, 2022, our Board of Directors authorized a share repurchase program for up2023, due in part to an aggregate amount of $125.0$105.8 million of our outstanding shares of Class A Common Stock over the next 12 monthscash proceeds received from time to time in open market transactions, accelerated share repurchases (“ASR”) or in privately negotiated transactions, each as permitted under applicable rules and regulations, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Securities Exchange Act of 1934 (the “Exchange Act”) .
Segment Information 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, 31 During the third quarter of 2022, we changed our measure of segment profit to include loss on disposal of assets, net, and to exclude transaction and transformation expenses that were previously included within the selling, general and administrative expenses and other income, net line items. The comparable prior periods have been recast to conform to the revised presentation, although the impact of this revision to previously reported segment profit was not material. See Note 14, Segment Reporting. Primary Components of Our Operating Results Revenues Service Revenue. Our Commercial Services segment generates service revenue primarily through the operation and management of tolling programs and processing violations for RACs, FMCs and other large fleet customers. These solutions are 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. Our Government Solutions segment generates service revenue through the operation and maintenance of photo enforcement systems. 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 in the Government Solutions segment and specialized hardware in the Parking Solutions segment. Customer buying patterns vary greatly from period to period related to product sales. Costs and Expenses Cost of Service Revenue. Cost of service revenue consists of recurring service costs, collection and other Cost of Product Sales. Cost of product sales consists of the cost to acquire and install photo enforcement equipment purchased by Government Solutions customers and costs to develop and install hardware sold to Parking Solutions customers. Operating Expenses. Operating expenses primarily include payroll and payroll-related costs (including stock-based compensation), subcontractor costs, payment processing and other operational costs, including 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 related to the 32 Tax Receivable Agreement Liability Adjustment. Gain on Interest Rate Swap. Gain on interest rate swap relates to the gain associated with the derivative instrument re-measured to fair value at the end of the reporting period and the related periodic cash payments. Loss on Extinguishment of Debt. Loss on extinguishment of debt Other Income, Net. Other income, net primarily consists of volume rebates earned from total spend on purchasing cards, Results of Operations Three Months Ended June 30, 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 June 30, Three Months Ended June 30, Percentage of Revenue Increase (Decrease) Percentage of Revenue Increase (Decrease) ($ in thousands) 2022 2021 2022 2021 $ % 2023 2022 2023 2022 $ % Service revenue $ 174,502 $ 116,426 93.1 % 90.5 % $ 58,076 49.9 % $ 196,050 $ 174,502 95.9 % 93.1 % $ 21,548 12.3 % Product sales 12,985 12,231 6.9 % 9.5 % 754 6.2 % 8,411 12,985 4.1 % 6.9 % (4,574 ) (35.2 )% Total revenue 187,487 128,657 100.0 % 100.0 % 58,830 45.7 % 204,461 187,487 100.0 % 100.0 % 16,974 9.1 % Cost of service revenue 3,713 1,332 2.0 % 1.0 % 2,381 178.8 % 4,338 3,713 2.1 % 2.0 % 625 16.8 % Cost of product sales 8,326 6,144 4.5 % 4.8 % 2,182 35.5 % 5,962 8,326 2.9 % 4.5 % (2,364 ) (28.4 )% Operating expenses 55,196 36,434 29.4 % 28.3 % 18,762 51.5 % 65,657 55,196 32.1 % 29.4 % 10,461 19.0 % Selling, general and administrative expenses 40,152 26,229 21.4 % 20.4 % 13,923 53.1 % 43,205 40,152 21.1 % 21.4 % 3,053 7.6 % Depreciation, amortization and (gain) loss on disposal of assets, net 34,939 27,012 18.6 % 21.0 % 7,927 29.3 % 29,088 34,939 14.3 % 18.6 % (5,851 ) (16.7 )% Total costs and expenses 142,326 97,151 75.9 % 75.5 % 45,175 46.5 % 148,250 142,326 72.5 % 75.9 % 5,924 4.2 % Income from operations 45,161 31,506 24.1 % 24.5 % 13,655 43.3 % 56,211 45,161 27.5 % 24.1 % 11,050 24.5 % Interest expense, net 14,485 11,680 7.7 % 9.1 % 2,805 24.0 % 22,771 14,485 11.1 % 7.7 % 8,286 57.2 % Change in fair value of private placement warrants (6,600 ) 8,067 (3.5 )% 6.3 % (14,667 ) (181.8 )% 10,918 (6,600 ) 5.3 % (3.5 )% 17,518 (265.4 )% Tax receivable agreement liability adjustment (965 ) 1,661 (0.5 )% 1.3 % (2,626 ) (158.1 )% — (965 ) — (0.5 )% 965 (100.0 )% Gain on interest rate swap (4,805 ) — (2.3 )% — (4,805 ) n/a Loss on extinguishment of debt 209 — 0.1 % — 209 n/a Other income, net (4,039 ) (2,798 ) (2.2 )% (2.2 )% (1,241 ) 44.4 % (4,512 ) (4,039 ) (2.2 )% (2.2 )% (473 ) 11.7 % Total other expenses 2,881 18,610 1.5 % 14.5 % (15,729 ) (84.5 )% 24,581 2,881 12.0 % 1.5 % 21,700 753.2 % Income before income taxes 42,280 12,896 22.6 % 10.0 % 29,384 227.9 % 31,630 42,280 15.5 % 22.6 % (10,650 ) (25.2 )% Income tax provision 12,639 8,904 6.8 % 6.9 % 3,735 41.9 % 12,522 12,639 6.2 % 6.8 % (117 ) (0.9 )% Net income $ 29,641 $ 3,992 15.8 % 3.1 % $ 25,649 642.5 % $ 19,108 $ 29,641 9.3 % 15.8 % $ (10,533 ) (35.5 )% Service Revenue. Service revenue increased by 33 Three Months Ended June 30, Percentage of Revenue Increase (Decrease) ($ in thousands) 2022 2021 2022 2021 $ % Service revenue Commercial Services $ 84,888 $ 66,480 45.3 % 51.7 % $ 18,408 27.7 % Government Solutions 74,672 49,946 39.8 % 38.8 % 24,726 49.5 % Parking Solutions 14,942 — 8.0 % — 14,942 n/a Total service revenue $ 174,502 $ 116,426 93.1 % 90.5 % $ 58,076 49.9 % Three Months Ended June 30, Percentage of Revenue Increase (Decrease) ($ in thousands) 2023 2022 2023 2022 $ % Service revenue Commercial Services $ 94,455 $ 84,888 46.2 % 45.3 % $ 9,567 11.3 % Government Solutions 84,994 74,672 41.6 % 39.8 % 10,322 13.8 % Parking Solutions 16,601 14,942 8.1 % 8.0 % 1,659 11.1 % Total service revenue $ 196,050 $ 174,502 95.9 % 93.1 % $ 21,548 12.3 % Commercial Services service revenue increased by Government Solutions service revenue increased by $10.3 million to $85.0 million for the three months ended June 30, 2023 compared to $74.7 million in the same period in 2022. The increase was primarily driven by the expansion of speed programs, as speed is the largest product in this segment and contributed approximately $8.0 million to the service revenue growth. The remaining increase is attributable to expansions across red-light, bus lane and school bus stop-arm programs. Parking Solutions service revenue grew by $1.7 million to $16.6 million for the three months ended June 30, 2023, from $14.9 million for the three months ended June 30, 2022. The Cost of Service Revenue. Cost of service revenue increased from Cost of Product Sales. Cost of product sales Operating Expenses. Operating expenses increased by Three Months Ended June 30, Percentage of Revenue Increase (Decrease) ($ in thousands) 2022 2021 2022 2021 $ % Operating expenses Commercial Services $ 18,105 $ 15,990 9.7 % 12.4 % $ 2,115 13.2 % Government Solutions 34,401 20,196 18.3 % 15.7 % 14,205 70.3 % Parking Solutions 2,406 — 1.2 % — 2,406 n/a Total operating expenses before stock-based compensation 54,912 36,186 29.2 % 28.1 % 18,726 51.7 % Stock-based compensation 284 248 0.2 % 0.2 % 36 14.5 % Total operating expenses $ 55,196 $ 36,434 29.4 % 28.3 % $ 18,762 51.5 % Three Months Ended June 30, Percentage of Revenue Increase (Decrease) ($ in thousands) 2023 2022 2023 2022 $ % Operating expenses Commercial Services $ 20,780 $ 18,105 10.1 % 9.7 % $ 2,675 14.8 % Government Solutions 39,399 34,401 19.3 % 18.3 % 4,998 14.5 % Parking Solutions 4,931 2,406 2.4 % 1.2 % 2,525 104.9 % Total operating expenses before stock-based compensation 65,110 54,912 31.8 % 29.2 % 10,198 18.6 % Stock-based compensation 547 284 0.3 % 0.2 % 263 92.6 % Total operating expenses $ 65,657 $ 55,196 32.1 % 29.4 % $ 10,461 19.0 % Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to Three Months Ended June 30, Three Months Ended June 30, Percentage of Revenue Increase (Decrease) Percentage of Revenue Increase (Decrease) ($ in thousands) 2022 2021 2022 2021 $ % 2023 2022 2023 2022 $ % Selling, general and administrative expenses Commercial Services $ 13,681 $ 9,479 7.3 % 7.4 % $ 4,202 44.3 % $ 16,131 $ 13,591 7.9 % 7.3 % $ 2,540 18.7 % Government Solutions 14,433 10,119 7.7 % 7.8 % 4,314 42.6 % 15,926 14,255 7.8 % 7.6 % 1,671 11.7 % Parking Solutions 7,756 — 4.1 % — 7,756 n/a 6,441 7,571 3.2 % 4.0 % (1,130 ) (14.9 )% Corporate and other — 3,306 — 2.6 % (3,306 ) (100.0 )% 729 453 0.3 % 0.2 % 276 60.9 % Total selling, general and administrative expenses before stock-based compensation 35,870 22,904 19.1 % 17.8 % 12,966 56.6 % 39,227 35,870 19.2 % 19.1 % 3,357 9.4 % Stock-based compensation 4,282 3,325 2.3 % 2.6 % 957 28.8 % 3,978 4,282 1.9 % 2.3 % (304 ) (7.1 )% Total selling, general and administrative expenses $ 40,152 $ 26,229 21.4 % 20.4 % $ 13,923 53.1 % $ 43,205 $ 40,152 21.1 % 21.4 % $ 3,053 7.6 % Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net, Interest Expense, Net. Interest expense, net increased by Change in Fair Value of Private Placement Warrants. We recorded a Tax Receivable Agreement Liability Adjustment. We recorded a $1.0 million benefit Gain on Interest Rate Swap. We recorded a $4.8 million gain during the three months ended June 30, 2023, of which approximately $5.1 million is associated with the derivative instrument re-measured to fair value at the end of the reporting period, offset by $0.3 million related to the monthly cash payments on the interest rate swap. 35 Loss on extinguishment of debt. We recorded a $0.2 million loss on extinguishment of debt during the three months ended June 30, 2023 related to the write-off of pre-existing deferred financing costs and discounts in connection with the early repayment of $10.0 million on the 2021 Other Income, Net. Income Tax Provision. Income tax provision was $12.5 million representing an effective tax rate of 39.6% for the three months ended June 30, 2023 compared to a tax provision of $12.6 million, representing an effective tax rate of 29.9% for the Net Income. We had net income of $19.1 million for the three months ended June 30, 2023, as compared to a net income of $29.6 million for the three months ended June 30, Six Months Ended June 30, The following table sets forth our statements of operations data and expresses each item as a percentage of total revenue for the periods presented as well as the changes between periods. The tables and information provided in this section were derived from exact numbers and may have immaterial rounding differences. Six Months Ended June 30, Percentage of Revenue Increase (Decrease) ($ in thousands) 2022 2021 2022 2021 $ % Service revenue $ 335,636 $ 206,189 93.8 % 94.4 % $ 129,447 62.8 % Product sales 22,236 12,326 6.2 % 5.6 % 9,910 80.4 % Total revenue 357,872 218,515 100.0 % 100.0 % 139,357 63.8 % Cost of service revenue 7,492 2,212 2.1 % 1.0 % 5,280 238.7 % Cost of product sales 14,321 6,171 4.0 % 2.8 % 8,150 132.1 % Operating expenses 106,259 66,926 29.7 % 30.6 % 39,333 58.8 % Selling, general and administrative expenses 81,787 54,672 22.9 % 25.1 % 27,115 49.6 % Depreciation, amortization and (gain) loss on disposal of assets, net 70,846 55,277 19.8 % 25.3 % 15,569 28.2 % Total costs and expenses 280,705 185,258 78.5 % 84.8 % 95,447 51.5 % Income from operations 77,167 33,257 21.5 % 15.2 % 43,910 132.0 % Interest expense, net 28,764 20,844 8.0 % 9.6 % 7,920 38.0 % Change in fair value of private placement warrants (2,866 ) 10,134 (0.8 )% 4.6 % (13,000 ) (128.3 )% Tax receivable agreement liability adjustment (965 ) 1,661 (0.3 )% 0.8 % (2,626 ) (158.1 )% Loss on extinguishment of debt — 5,334 — 2.4 % (5,334 ) (100.0 )% Other income, net (6,905 ) (5,811 ) (1.9 )% (2.7 )% (1,094 ) 18.8 % Total other expenses 18,028 32,162 5.0 % 14.7 % (14,134 ) (43.9 )% Income before income taxes 59,139 1,095 16.5 % 0.5 % 58,044 5300.8 % Income tax provision 19,458 6,018 5.4 % 2.8 % 13,440 223.3 % Net income (loss) $ 39,681 $ (4,923 ) 11.1 % (2.3 )% $ 44,604 906.0 % Six Months Ended June 30, Percentage of Revenue Increase (Decrease) ($ in thousands) 2023 2022 2023 2022 $ % Service revenue $ 380,748 $ 335,636 96.1 % 93.8 % $ 45,112 13.4 % Product sales 15,616 22,236 3.9 % 6.2 % (6,620 ) (29.8 )% Total revenue 396,364 357,872 100.0 % 100.0 % 38,492 10.8 % Cost of service revenue 8,568 7,492 2.1 % 2.1 % 1,076 14.4 % Cost of product sales 11,345 14,321 2.9 % 4.0 % (2,976 ) (20.8 )% Operating expenses 127,500 106,259 32.2 % 29.7 % 21,241 20.0 % Selling, general and administrative expenses 83,218 81,787 21.0 % 22.9 % 1,431 1.7 % Depreciation, amortization and (gain) loss on disposal of assets, net 59,421 70,846 15.0 % 19.8 % (11,425 ) (16.1 )% Total costs and expenses 290,052 280,705 73.2 % 78.5 % 9,347 3.3 % Income from operations 106,312 77,167 26.8 % 21.5 % 29,145 37.8 % Interest expense, net 45,458 28,764 11.5 % 8.0 % 16,694 58.0 % Change in fair value of private placement warrants 25,519 (2,866 ) 6.4 % (0.8 )% 28,385 (990.4 )% Tax receivable agreement liability adjustment — (965 ) — (0.3 )% 965 (100.0 )% Gain on interest rate swap (2,007 ) — (0.5 )% — (2,007 ) n/a Loss on extinguishment of debt 1,558 — 0.4 % — 1,558 n/a Other income, net (8,268 ) (6,905 ) (2.1 )% (1.9 )% (1,363 ) 19.7 % Total other expenses 62,260 18,028 15.7 % 5.0 % 44,232 245.4 % Income before income taxes 44,052 59,139 11.1 % 16.5 % (15,087 ) (25.5 )% Income tax provision 20,367 19,458 5.1 % 5.4 % 909 4.7 % Net income $ 23,685 $ 39,681 6.0 % 11.1 % $ (15,996 ) (40.3 )% Service Revenue. Service revenue increased by 36 Six Months Ended June 30, Percentage of Revenue Increase (Decrease) ($ in thousands) 2022 2021 2022 2021 $ % Service revenue Commercial Services $ 158,353 $ 112,169 44.3 % 51.4 % $ 46,184 41.2 % Government Solutions 147,896 94,020 41.3 % 43.0 % 53,876 57.3 % Parking Solutions 29,387 — 8.2 % — 29,387 n/a Total service revenue $ 335,636 $ 206,189 93.8 % 94.4 % $ 129,447 62.8 % Six Months Ended June 30, Percentage of Revenue Increase (Decrease) ($ in thousands) 2023 2022 2023 2022 $ % Service revenue Commercial Services $ 180,094 $ 158,353 45.5 % 44.3 % $ 21,741 13.7 % Government Solutions 168,227 147,896 42.4 % 41.3 % 20,331 13.7 % Parking Solutions 32,427 29,387 8.2 % 8.2 % 3,040 10.3 % Total service revenue $ 380,748 $ 335,636 96.1 % 93.8 % $ 45,112 13.4 % Commercial Services service revenue increased by Government Solutions service revenue increased by $20.3 million to $168.2 million for the six months ended June 30, 2023 compared to $147.9 million in the same period in 2022. The increase was primarily driven by the expansion of speed programs, as speed is the largest product in this segment and contributed approximately $17.7 million to the service revenue growth. The remaining increase is attributable to expansions across red-light, bus lane and school bus stop-arm programs. Parking Solutions service revenue grew by $3.0 million to $32.4 million for the six months ended June 30, 2023, from $29.4 million for the six months ended June 30, 2022. The Cost of Service Revenue. Cost of service revenue increased from Cost of Product Sales. Cost of product sales Operating Expenses. Operating expenses increased by Six Months Ended June 30, Percentage of Revenue Increase (Decrease) ($ in thousands) 2022 2021 2022 2021 $ % Operating expenses Commercial Services $ 34,052 $ 30,196 9.5 % 13.8 % $ 3,856 12.8 % Government Solutions 66,792 36,288 18.7 % 16.6 % 30,504 84.1 % Parking Solutions 4,917 — 1.4 % — 4,917 n/a Total operating expenses before stock-based compensation 105,761 66,484 29.6 % 30.4 % 39,277 59.1 % Stock-based compensation 498 442 0.1 % 0.2 % 56 12.7 % Total operating expenses $ 106,259 $ 66,926 29.7 % 30.6 % $ 39,333 58.8 % Six Months Ended June 30, Percentage of Revenue Increase (Decrease) ($ in thousands) 2023 2022 2023 2022 $ % Operating expenses Commercial Services $ 40,645 $ 34,052 10.3 % 9.5 % $ 6,593 19.4 % Government Solutions 77,003 66,792 19.4 % 18.7 % 10,211 15.3 % Parking Solutions 8,973 4,917 2.3 % 1.4 % 4,056 82.5 % Total operating expenses before stock-based compensation 126,621 105,761 32.0 % 29.6 % 20,860 19.7 % Stock-based compensation 879 498 0.2 % 0.1 % 381 76.5 % Total operating expenses $ 127,500 $ 106,259 32.2 % 29.7 % $ 21,241 20.0 % Selling, General and Administrative Expenses. Selling, general and administrative expenses increased Six Months Ended June 30, Six Months Ended June 30, Percentage of Revenue Increase (Decrease) Percentage of Revenue Increase (Decrease) ($ in thousands) 2022 2021 2022 2021 $ % 2023 2022 2023 2022 $ % Selling, general and administrative expenses Commercial Services $ 26,957 $ 20,271 7.5 % 9.3 % $ 6,686 33.0 % $ 31,583 $ 26,854 8.0 % 7.5 % $ 4,729 17.6 % Government Solutions 30,888 20,930 8.7 % 9.6 % 9,958 47.6 % 30,566 30,698 7.7 % 8.6 % (132 ) (0.4 )% Parking Solutions 15,428 — 4.3 % — 15,428 n/a 12,989 14,966 3.3 % 4.2 % (1,977 ) (13.2 )% Corporate and other — 7,432 — 3.4 % (7,432 ) (100.0 )% 1,056 755 0.2 % 0.2 % 301 39.9 % Total selling, general and administrative expenses before stock-based compensation 73,273 48,633 20.5 % 22.3 % 24,640 50.7 % 76,194 73,273 19.2 % 20.5 % 2,921 4.0 % Stock-based compensation 8,514 6,039 2.4 % 2.8 % 2,475 41.0 % 7,024 8,514 1.8 % 2.4 % (1,490 ) (17.5 )% Total selling, general and administrative expenses $ 81,787 $ 54,672 22.9 % 25.1 % $ 27,115 49.6 % $ 83,218 $ 81,787 21.0 % 22.9 % $ 1,431 1.7 % Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net, Interest Expense, Net. Interest expense, net increased by Change in Fair Value of Private Placement Warrants. We recorded a Tax Receivable Agreement Liability Adjustment. We recorded a $1.0 million benefit Gain on Other Income, Net. Other income, net was Income Tax Provision. Income tax provision was $20.4 million representing an effective tax rate of 46.2% for the six months ended June 30, 2023 compared to a tax provision of $19.5 million, representing an effective tax rate of 32.9% for the the Net Liquidity and Capital Resources Our principal sources of liquidity are cash flows from operations and the available We have incurred significant long-term debt as a result of acquisitions completed in prior years. We believe that our existing cash and cash equivalents, cash flows provided by operating activities and our ability 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, We have the ability to borrow under our Revolver to meet obligations as they come due. As of June 30, We made early repayments totaling $10.0 million and $72.5 million on our 2021 Term Loan during the three and six months ended June 30, 2023. Concentration of Credit Risk The City of New York Department of Transportation (“NYCDOT”) represented 39 The following table sets forth certain captions indicated on our statements of cash flows for the respective periods: Six Months Ended June 30, Six Months Ended June 30, ($ in thousands) 2022 2021 2023 2022 Net cash provided by operating activities $ 96,375 $ 37,478 $ 107,927 $ 96,375 Net cash used in investing activities (23,299 ) (115,102 ) (31,525 ) (23,299 ) Net cash (used in) provided by financing activities (86,517 ) 107,030 Net cash provided by (used in) financing activities 27,909 (86,517 ) Cash Flows from Operating Activities Cash provided by operating activities increased by Cash Flows from Investing Activities Cash used in investing activities was Cash Flows from Financing Activities Cash provided by (used in) Long-term Debt 2021 Term Loan In March 2021, VM Consolidated, Inc. (“VM Consolidated”), the Company’s wholly owned subsidiary, entered into an Amendment and Restatement Agreement No.1 to the First Lien Term Loan Credit Agreement (the “2021Term Loan”) with a syndicate of lenders. The 2021 Term Loan has an aggregate borrowing of 40 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 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 Consolidated First Lien Net Leverage Ratio (As Defined by the 2021 Term Loan Agreement) Applicable > 3.70:1.00 50% < 3.70:1.00 and > 3.20:1.00 25% < 3.20:1.00 0% Senior Notes In March 2021, VM Consolidated issued an aggregate principal amount of $350.0 million in Senior Unsecured Notes (the “Senior Notes”), due on April 15, 2029. In connection with the issuance of the Senior Notes, the Company 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. Interest on the Senior Notes is fixed at 5.50% per annum and is payable on April 15 and October 15 of each year. On or after April 15, 2024, Year Percentage 2024 102.750% 2025 101.375% 2026 and thereafter 100.000% In addition, The Revolver Interest on the unused portion of the Revolver is payable quarterly at 0.375% and All borrowings and other extensions of credits under the 2021 Term Loan, 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. Substantially all of Interest Expense See Note 2, Significant Accounting Policies, in Part I, Item 1, Financial Statements, for additional information on the interest rate swap entered into in December 2022 to hedge the Company's exposure against rising interest rates. Off-Balance Sheet Arrangements We do not have any material off-balance sheet financing arrangements as of June 30, Critical Accounting Policies, Estimates and Judgments 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. Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, refer to Note 2, Significant Accounting Policies, in Part I, Item 1, Financial Statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk 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 Based on the June 30, In December 2022, we entered into a cancellable interest rate swap agreement to hedge our exposure to interest rate fluctuations associated with the LIBOR (now transitioned to Term SOFR) portion of the variable interest rate on our 2021 Term Loan. Under the interest rate swap agreement, we pay a fixed rate of 5.17% and the counterparty pays a variable interest rate which is net settled. The notional amount on the interest rate swap is $675.0 million. We have 42 Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under 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 Changes in Internal Control Over Financial Reporting 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 June 30, Part II—Other Information Item 1. Legal Proceedings On November 2, 2020, PlusPass, Inc. (“PlusPass”) commenced an action in the United States District Court, Central District of California, against 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. Discovery is Item 1A. Risk Factors Risks Related to Our Business Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, Numerous countries, including a number of those in which we do business, have agreed to a statement in support of the Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs As of March 31, 2022 — $ — — $ — Share repurchases — — — — As of April 30, 2022 — — — — Share repurchases - ASR (1) 2,739,726 $ 14.60 2,739,726 $ — Share repurchases 167,902 $ 15.46 167,902 $ 72,413,962 As of May 31, 2022 2,907,628 $ 15.40 2,907,628 $ 72,413,962 Share repurchases 168,251 $ 15.63 168,251 $ 69,790,032 As of June 30, 2022 3,075,879 $ 15.53 3,075,879 $ 69,790,032 Sales of Unregistered Securities 44 Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not Applicable. Item 5. Other Information A significant portion of the compensation of our executive officers is delivered in the form of deferred equity awards, including performance share units, stock options and restricted stock unit awards. This compensation design is intended to align our executive compensation with the interests of our stockholders by emphasizing performance-based incentive compensation focused on objectives that our Board believes have a significant impact on stockholder value. Following the delivery of shares of our common stock under those equity awards, once any applicable service time or performance-based vesting standards have been satisfied, our executive officers from time to time engage in the open-market sale of some of those shares. Our executive officers may also engage from time to time in other transactions involving our securities. Transactions in our securities by our executive officers are required to be made in accordance with our Insider Trading Policy, which, among other things, requires that the transactions be in accordance with applicable U.S. federal securities laws that prohibit trading while in possession of material nonpublic information. Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables prearranged transactions in securities in a manner that avoids concerns about initiating transactions at a future date while possibly in possession of material nonpublic information. Our Insider Trading Policy permits our executive officers to enter into trading plans designed to comply with Rule 10b5-1. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately after significant events involving our company. During the three months ended June 30, 2023, none of our directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.” 45 Item 6. Exhibits The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q. Exhibit Index Incorporated by Reference Incorporated by Reference Exhibit Number Description Form File No. Exhibit Filing Date Filed Herewith Description Form File No. Exhibit Filing Date Filed Herewith 2.1 8-K 001-37979 2.1 June 21, 2018 8-K 001-37979 2.1 June 21, 2018 2.2 8-K 001-37979 2.2 August 24, 2018 8-K 001-37979 2.2 August 24, 2018 3.1 Second Amended and Restated Certificate of Incorporation of Verra Mobility Corporation. 8-K 001-37979 3.1 October 22, 2018 Second Amended and Restated Certificate of Incorporation of Verra Mobility Corporation. 8-K 001-37979 3.1 October 22, 2018 3.2 8-K 001-37979 3.2 October 22, 2018 8-K 001-37979 3.2 October 22, 2018 4.1 S-1 333-21503 4.2 December 9, 2016 S-1 333-21503 4.2 December 9, 2016 4.2 S-1 333-21503 4.3 December 9, 2016 S-1 333-21503 4.3 December 9, 2016 4.3 8-K 001-37979 4.1 January 19, 2017 8-K 001-37979 4.1 January 19, 2017 4.4 10-K 001-37979 4.4 March 2, 2020 10-K 001-37979 4.4 March 2, 2020 4.5 8-K 001-37979 4.1 May 11, 2023 10.1 Amended and Restated Verra Mobility Corporation Short-Term Incentive Plan. 8-K 001-37979 10.1 April 28, 2022 8-K 001-37979 10.1 February 17, 2023 10.2 8-K 001-37379 10.1 June 1, 2022 8-K 001-37979 10.2 February 17, 2023 31.1 X 31.2 X 32.1* X 32.2* X 10.3 8-K 001-37979 10.3 February 17, 2023 10.4 8-K 001-37979 10.4 February 17, 2023 10.5 8-K 001-37979 10.5 February 17, 2023 10.6 8-K 001-37979 10.6 February 17, 2023 10.7 Verra Mobility Corporation Second Amended and Restated Short-Term Incentive Plan. 8-K 001-37979 10.7 February 17, 2023 10.8 10-Q 001-37979 10.8 May 4, 2023 31.1 X 31.2 X 32.1* X 32.2* 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. Signatures 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. VERRA MOBILITY CORPORATION Date: August By: /s/ (Principal On May 12, 2022, we paid $50.0 million, which represented the aggregate amount authorized for an ASR, and received an initial delivery of 2,739,726 shares of our Class A Common Stock in accordance with an ASR agreement with a third-party financial institution. The final settlement is expected to occurWarrant exercises during the third quarter of fiscal year 2022, at which time,six months ended June 30, 2023.volume-weighted average price calculation over the term of the ASR agreement will be used to determine the final number and33the average price of shares repurchased and retired. In addition, we paid $5.2result, made early repayments totaling $72.5 million and repurchased 336,153 shares ofon our Class A Common Stock through open market transactions2021 Term Loan during the second quarter of fiscal year 2022. Our Board of Directors authorized an aggregate purchase amount of $75 million related to the open market repurchases, of which $69.8 million is available for future repurchases as ofsix months ended June 30, 2022.The Company’s repurchase of shares of its Class A Common Stock in the future depends on a number of factors, including our financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors our management may deem relevant. The timing, volume and nature of such repurchases are subject to market conditions, applicable securities laws and other factors and may be amended, suspended or discontinued at any time.tolltolling and violations processing services.through Redflex primarily involve the sale of traffic enforcement products and related maintenance services.parking operators, healthcare facilities and transportation hubscommercial parking operators in the United States and Canada. (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.professional services provided by third parties and certain recurring servicethird-party costs in our segments.346,666,666 Private Placement Warrants originally issued to Gores Sponsor II, LLC re-measured to fair value at the end of each reporting period.period, or a final re-measurement upon their exercise.Tax receivable agreement liability adjustmentThis consists of adjustments made to our Tax Receivable Agreement liability due to changes in estimates.generally consists of early payment penalties, the write-off of pre-existing original issue discounts and deferred financing costs associated with debt extinguishment.and gaingains or losslosses on foreign currency transactions.transactions and other non-operating expenses.3520222023 Compared to Three Months Ended June 30, 20212022
2022 vs 2021
2023 vs 2022$58.1$21.5 million, or 49.9%12.3%, to $196.1 million for the three months ended June 30, 2023 from $174.5 million for the three months ended June 30, 2022, from $116.4 million for the three months ended June 30, 2021, representing 93.1%95.9% and 90.5%93.1% of total revenue, respectively. The following table depicts service revenue by segment:
2022 vs 2021
2023 vs 2022$18.4$9.6 million, or 27.7%11.3%, from $66.5$84.9 million for the three months ended June 30, 20212022 to $84.9$94.5 million for the three months ended June 30, 2023, which was primarily due to increased travel volume and related tolling activity compared to the prior year. An increase in the volume of tolls incurred by RAC vehicles along with the continued adoption of the all-inclusive fee structure, shifting from an incidental or daily usage rate by our large RAC customers, contributed to a $9.5 million growth in revenue. In addition, the increase in enrolled vehicles as well as higher tolling activity for our FMC customers contributed to a $2.2 million growth in revenue during the three months ended June 30, 2023, compared to the same period in 2022. These increases were partially offset by lower revenue generated from processing titles and registrations compared to the prior year.increasegrowth was primarily due to the increase in travel volumeincreased revenue from software as a service product offerings, professional services and citation processing services related tolling activity in 2022 compared to 2021, which was negatively impacted by the COVID-19 pandemic. The volume of tolls incurred by RAC vehicles increased along with a shift towards an all-inclusive fee structure from an incidental or daily usage rate and higher pricing for certain products contributed to a $13.2 million increase, and the volume of tolls incurred by our FMC customers contributed to a $3.1 million increase in revenue during the three months ended June 30, 2022 compared to the same period in 2021.parking management solutions.Government Solutions service revenue includes revenue from speed, red-light, school bus stop armProduct Sales. Product sales were $8.4 million and bus lane photo enforcement systems. Service revenue increased by $24.7 million to $74.7$13.0 million for the three months ended June 30, 2022 compared to $49.9 million in the same period in 2021. The Redflex acquisition contributed approximately $13.9 million to our36growth. Organic growth excluding Redflex was approximately $10.8 million, which was primarily driven by the expansion of school zone speed programs,2023 and speed is the largest product in this segment. We added 752 speed cameras in 2021, excluding Redflex, which provided growth in 2022, and 268 speed cameras for the three months ended June 30, 2022 which provided growth in the current quarter and will continue to provide growth for the remainder of 2022. The remaining growth is attributable to other expansions and improvement in variable rate programs that recovered from COVID-19 to more normalized volumes.Parking Solutions service revenue of $14.9 million resulted from the acquisition of T2 systems in December 2021 with no revenue in the comparable period.Product Sales. Product sales were $13.0 million and $12.2 million for the three months ended June 30, 2022 and 2021, respectively. Product sales increaseddecreased by approximately $0.8$4.6 million, which was mainly due to $4.1 million of product revenue from the inclusion of T2 Systems for which there was no revenue in the comparable 2021 period, offset by a $3.3$5.6 million decrease in product sales to Government Solutions customers, including Redflex.offset by growth of $1.0 million in product sales in the Parking Solutions segment. Customer buying patterns vary greatly from period to period related to product sales.$1.3 million for the three months ended June 30, 2021 to $3.7 million for the three months ended June 30, 2022.2022 to $4.3 million for the three months ended June 30, 2023. The $2.4$0.6 million increase was mainly attributabledue to the inclusion ofincreased recurring service costs in the Parking Solutions segment with no comparable amounts inand the prior year.Commercial Services segments.increaseddecreased by $2.2$2.3 million from $6.1 million in the three months ended June 30, 2021 to $8.3 million in the three months ended June 30, 2022 to $6.0 million in the three months ended June 30, 2023, which was mainly due to a $3.4 million increase in costs from the inclusion of T2 Systems for which there was no comparable amount in the prior year offset by a $1.3 million decrease in costs in the Government Solutions segment offset by an increase in costs in the Parking Solutions segment.$18.8$10.5 million, or 51.5%19.0%, from $36.4 million for the three months ended June 30, 2021 to $55.2 million for the three months ended June 30, 2022.2022 to $65.7 million for the three months ended June 30, 2023. The increase in 20222023 was primarily attributable to increaseincreases of $7.1 million in wages expense, $1.4 million for subcontractor costs and $1.0 million of recurring services, subcontractor expenses and information technologyservice costs resulting from the inclusion of Redflex for the full three-month period as compared to 12 days in 2021 and the inclusion of T2 Systems operations with no comparable amounts in the prior period. Operating expenses as a percentage of total revenue increased from 28.3%29.4% to 29.4%32.1% for the three months ended June 30, 20212022 and 2022,2023, respectively. This increase mainly represents improved operating leverage corresponding to the increased revenue in the Commercial Services segment and decreased operating leverage for the Government Solutions business with the addition of Redflex, which historically had lower margins than the Verra Mobility business. The following table presents operating expenses by segment:
2022 vs 20213734
2023 vs 2022$40.2$43.2 million for the three months ended June 30, 20222023 compared to $26.2$40.2 million for the same period in 2021.2022. The increase iswas primarily due to increased wages and other general expenses from the inclusion$1.9 million of Redflex for the full three-month period as compared to 12 days in 2021 and the inclusion of T2 Systems with no comparable amounts in the prior year. In addition, we had increases of $3.6 million ofhigher professional services costs $2.1 million related to credit loss expense and $1.0$0.7 million of stock-based compensation expense, which were partially offset by a $3.0 million decrease in transaction costsinformation technology expenses compared to the prior year.period. Selling, general and administrative expenses as a percentage of total revenue increaseddecreased from 20.4%21.4% to 21.4%21.1% for the three months ended June 30, 20212022 and 2022,2023, respectively. The following table presents selling, general and administrative expenses by segment:
2022 vs 2021
2023 vs 2022increaseddecreased by $7.9$5.8 million to $34.9$29.1 million for the three months ended June 30, 20222023 from $27.0$34.9 million for the same period in 2021.2022. This was mainly due to increased amortizationcertain non-compete and depreciation expense resulting from the inclusion of Redflexdeveloped technology intangible assets being fully amortized for the full three-month period ended June 30, 2023 as compared to 12 daysthe prior year which included the amortization expense. This decrease was partially offset by increase in 2021 and the inclusion of T2 Systems with no comparable amountsdepreciation expense in the prior year.2023 period.$2.8$8.3 million from $11.7$14.5 million for the three months ended June 30, 20212022 to $14.5$22.8 million for the same period in 2022. This increase2023 which is primarily attributable to $1.2 billion inrising interest rates. The average outstanding debt duringvariable interest rate on the 2021 Term Loan was 470 basis points higher for the three months ended June 30, 2022, which included the $250.0 million of incremental term loan borrowing,2023 compared to $1.0 billion in average outstanding debt for the same period in 2021.prior period. See “Liquidity and Capital Resources.”gainloss of $6.6$10.9 million and a lossgain of $8.1$6.6 million for the three months ended June 30, 20222023 and 2021,2022, 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.period, or a final re-measurement upon their exercise.and a $1.7 million charge for the three months ended June 30, 2022 and 2021, respectively. The TRA liability adjustment in 2022 is arisingwhich arose from lower estimated state tax rates due to changes in apportionment, whereasapportionment.it is arising from higher estimated state tax rates due to changes in statutory rates.Term Loan.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 $4.5 million for the three months ended June 30, 2023 compared to $4.0 million for the three months ended June 30, 2022, compared to $2.8 million for the three months ended June 30, 2021.2022. The increase of $1.2$0.5 million is primarily attributable to volume rebates earned from total spend on purchasing cards from increased tolling activity due to increasedand travel especially in the RAC industry.activity.three months ended June 30, 2022 compared to a tax provision of $8.9 million, representing an effective tax rate of 69.0% for the same period in 2021.2022. The primary driver for the effective tax rate variance is due to the permanent differences related to the mark-to-market adjustment on the private placement warrants and the increase in pre-tax income for 2022 compared to 2021, resulting in the Company’s permanent book and tax differences having a proportionately lesser impact on the effective tax rate for 2022.Private Placement Warrants.382022, as compared to a net income of $4.02022. The $10.5 million for the three months ended June 30, 2021. The $25.6 million increasedecrease in net income was primarily due to increases in service revenue across all business segments, the change in the fair value of the private placement warrantsPrivate Placement Warrants, increased interest expense, and the other statement of operations activity discussed above.20222023 Compared to Six Months Ended June 30, 20212022
2022 vs 2021
2023 vs 2022$129.4$45.1 million, or 62.8%13.4%, to $380.7 million for the six months ended June 30, 2023 from $335.6 million for the six months ended June 30, 2022, from $206.2 million for the six months ended June 30, 2021, representing 93.8%96.1% and 94.4%93.8% of total revenue, respectively. The following table depicts service revenue by segment:
2022 vs 2021
2023 vs 2022$46.2$21.7 million, or 41.2%13.7%, from $112.2$158.4 million for the six months ended June 30, 20212022 to $158.4$180.1 million for the six months ended June 30, 2023. The increase was primarily due to increased travel volume and related tolling activity compared to the prior year which was still recovering from the COVID-19 pandemic, especially during January and February of 2022. An increase in the volume of tolls incurred by RAC vehicles along with the continued adoption of the all-inclusive fee structure, shifting from an incidental or daily usage rate by our large RAC customers, contributed to a $18.3 million growth in revenue. In addition, the increase in enrolled vehicles as well as higher tolling activity for our FMC customers contributed to a $3.8 million growth in revenue during the six months ended June 30, 2023, compared to the same period in 2022. These increases were partially offset by lower revenue generated from processing titles and registrations compared to the prior year.increasegrowth was primarily due to the increase in travel volume in 2022 comparedincreased revenue from software as a service product offerings, professional services and citation processing services related to 2021 which was negatively impacted by the COVID-19 pandemic, especially the first three months of 2021. The volume of tolls incurred by RAC vehicles increased along with a shift towards an all-inclusive fee structure from an incidental or daily usage rate and higher pricing for certain products contributed to a $32.1 million increase, and the volume of tolls incurred by our FMC customers contributed to a $7.8 million increase in revenue during the six months ended June 30, 2022 compared to the same period in 2021.parking management solutions.39Product Sales.Government Solutions service revenue includes revenue from speed, red-light, school bus stop arm and bus lane photo enforcement systems. Service revenue increased by $53.9 Product sales were $15.6 million and was $147.9 million and $94.0$22.2 million for the six months ended June 30, 2023 and 2022, and 2021, respectively. The Redflex acquisition contributed $30.9 million to our growth. Organic growth excluding Redflex was $22.9Product sales decreased by approximately $6.6 million, which was primarily driven by the expansion of school zone speed programs, and speed is the largest product in this segment. We added 752 speed cameras in 2021, excluding Redflex, which provided year-over-year growth in 2022, and 379 speed cameras in the six months ended June 30, 2022 which provided growth in the current period and will continue to provide growth for the remainder of 2022. The remaining growth is attributable to other expansions and improvement in variable rate programs that recovered from COVID-19 to more normalized volumes.Parking Solutions service revenue of $29.4 million resulted from our acquisition of T2 systems in December 2021 with no revenue in the comparable six-month period.Product Sales. Product sales increased by $9.9 million, and were $22.2 million and $12.3 million for the six months ended June 30, 2022 and 2021, respectively. The increase in 2022 was mainly due to an aggregate $12.2a $8.5 million of product revenue generated from Redflex, which only included 12 days of activity in the 2021 period and T2 Systems for which there was no revenue in the comparable 2021 period, offset by a decrease in product sales for ato Government Solutions customer whosecustomers, offset by a $1.9 million growth in product sales in the Parking Solutions segment. Customer buying patterns variedvary greatly from period to period.period related to product sales.$2.2 million for the six months ended June 30, 2021 to $7.5 million for the six months ended June 30, 2022.2022 to $8.6 million for the six months ended June 30, 2023. The $5.3$1.1 million increase was mainly attributabledue to the inclusion ofincreased recurring service costs in the Parking Solutions segment with no comparable amounts in the prior year.segment.increaseddecreased by $8.1$3.0 million from $6.2 million in the six months ended June 30, 2021 to $14.3 million in the six months ended June 30, 2022 to $11.3 million in the six months ended June 30, 2023, which was mainly due to increaseda decrease in costs fromin the inclusion of Redflex and T2 Systems operations.Government Solutions segment offset by an increase in costs in the Parking Solutions segment.$39.3$21.2 million, or 58.8%20.0%, from $66.9 million for the six months ended June 30, 2021 to $106.3 million for the six months ended June 30, 2022.2022 to $127.5 million for the six months ended June 30, 2023. The increase in 2023 was primarily attributable to increases of $12.8 million in wages expense, $3.0 million for subcontractor expenses,costs and $2.5 million of recurring services and information technologyservice costs resulting from the inclusion of Redflex for the full six-month period in 2022 compared to only 12 days in 2021 and T2 Systems operations in 2022 with no comparable amounts in the prior year.period. Operating expenses as a percentage of total revenue decreasedincreased from 30.6%29.7% to 29.7%32.2% for the six months ended June 30, 20212022 and 2022,2023, respectively. The following table presents operating expenses by segment:
2022 vs 20214037
2023 vs 2022by $27.1 million to $81.8$83.2 million for the six months ended June 30, 20222023 compared to $54.7$81.8 million for the same period in 2021. The increase2022. This is primarily due to increased wages,an aggregate $2.3 million increase in professional services, information technology and other generalmarketing expenses, due to the inclusion of Redflex for the full six-month period as compared to 12 days in the prior year and T2 Systems operations included in the six months ended June 30, 2022 with no comparable amounts in the prior year. In addition, we had increases of $5.8 million for professional services, $3.2 million for credit loss expense, and $2.5 million related to stock-based compensation expense compared to the prior year, which wereare partially offset by a $6.9 million decrease in transaction costs comparedcredit loss expense due to 2021.improved economic conditions based on customer payment trends in the last 12 months. Selling, general and administrative expenses as a percentage of total revenue decreased from 25.1%22.9% to 22.9%21.0% for the six months ended June 30, 20212022 and 2022,2023, respectively. The following table presents selling, general and administrative expenses by segment:
2022 vs 2021
2023 vs 2022increaseddecreased by approximately $15.6$11.4 million to $70.8$59.4 million for the six months ended June 30, 20222023 from $55.3$70.8 million for the same period in 2021.2022. This was mainly due to increased amortizationcertain non-compete and depreciation expense from the inclusion of Redflex for the full six-month period in 2022 compared to only 12 days in 2021 and T2 Systems operations with no comparable amounts in the prior year, partially offset by a decrease due to certain trademark intangiblesdeveloped technology intangible assets being fully amortized forin the six months ended June 30, 2022.2023 as compared to the prior year.$7.9$16.7 million from $20.8$28.8 million for the six months ended June 30, 20212022 to approximately $28.8$45.5 million for the same period in 2022. This increase2023 which is primarily attributable to $1.2 billion inrising interest rates. The average outstanding debt duringvariable interest rate on the 2021 Term Loan was 450 basis points higher for the six months ended June 30, 2022,2023 compared to $943 million in average outstanding debt for the same period in 2021.prior period. See “Liquidity and Capital Resources.”gainloss of $2.9$25.5 million and a lossgain of $10.1$2.9 million for the six months ended June 30, 20222023 and 2021,2022, 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.period, or a final re-measurement upon their exercise.and a $1.7 million charge for the six months ended June 30, 2022 and 2021, respectively. The TRA liability adjustment in 2022which is arising from lower estimated state tax rates due to changes in apportionment, whereas in 2021 it was arising from higher estimated state tax rates due to changes in statutory rates.apportionment.Loss38ExtinguishmentInterest Rate Swap. We recorded a $2.0 million gain during the six months ended June 30, 2023, of Debtwhich approximately $3.6 million is associated with the derivative instrument re-measured to fair value at the end of the reporting period and $1.6 million related to the monthly cash payments on the interest rate swap.. Loss on extinguishment of debt. We recorded a $1.6 million loss on extinguishment of debt during the six months ended June 30, 2023 related to the write-off of pre-existing deferred financing costs and discounts in connection with the early repayment of $72.5 million on the 2021 Term Loan.$5.3$8.3 million for the six months ended June 30, 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 2021 Term Loan, as discussed and defined 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 was2023 compared to $6.9 million for the six months ended June 30, 2022, compared to $5.8 million for the six months ended June 30, 2021.2022. The increase of $1.1$1.4 million is primarily attributable to volume rebates earned from total spend on purchasing cards from increased tolling activity due to increasedand travel in 2022, especially in the RAC industry.activity.six months ended June 30, 2022 compared to $6.0 million representing an effective tax rate of 549.6% for the same period in 2021.2022. The primary driver for the effective tax rate variance is due to the permanent differences related to the mark-to-market adjustment on41private placement warrants and the increase in pre-tax income for 2022 compared to 2021, resulting in the Company’s permanent book and tax differences having a proportionately lesser impact on the effective tax rate for 2022.Private Placement Warrants.Income (Loss).Income. We had net income of $23.7 million for the six months ended June 30, 2023, as compared to a net income of $39.7 million for the six months ended June 30, 2022, as compared to a net loss of $4.92022. The $16.0 million for the six months ended June 30, 2021. The increasedecrease in net income of $44.6 million was mainlyprimarily due to increasesthe change in service revenue and product sales,fair value of Private Placement Warrants, increased interest expense, and the other statement of operations activity discussed above.borrowingsborrowing under our Revolver (defined below).borrowingsborrowing on our Revolver, or equity financings, all of which may not be available to us on favorable terms or at all.2022,2023, we had $68.8$74.8 million available for borrowing, net of letters of credit, under our Revolver.On May 7, 2022, our BoardDuring the six months ended June 30, 2023, we processed the exercise of Directors authorized a share repurchase program17.0 million Warrants in exchange for up to an aggregate amountthe issuance of $125.0 million of our outstanding14,840,070 shares of Class A Common Stock overStock. There were 13,782,411 shares issued in exchange for cash-basis warrant exercises resulting in the next 12 months from time to timereceipt of $105.8 million in open market transactions, ASRs or in privately negotiated transactions, each as permitted under applicable rules and regulations. On May 12, 2022, we paid $50.0 million, which represented the aggregate amount authorized for an ASR, and received an initial delivery of 2,739,726 shares of our Class A Common Stock in accordance with an ASR agreement with a third-party financial institution. The final settlement is expected to occur during the third quarter of fiscal year 2022, at which time, a volume-weighted average price calculation over the term of the ASR agreement will be used to determine the final number and the average price of shares repurchased. In addition, we paid $5.2 million and repurchased 336,153 shares of our Class A Common Stock through open market transactions during the second quarter of fiscal year 2022. Our Board of Directors authorized an aggregate purchase amount of $75.0 million related to the open market repurchases, of which $69.8 million is available for future repurchasescash proceeds as of June 30, 2022. We used existing2023 and $52.7 million of cash proceeds received in July 2023. The remaining Warrant exercises were completed on hand to fund all share repurchases during 2022. See Note 11, Stockholders' Equity, for additional details on the share repurchases.a cashless basis.25%17% and 39%22% of total accounts receivable, net as of June 30, 20222023 and December 31, 2021,2022, respectively. There is no material reserve related to NYCDOT open receivables as amounts are deemed collectible based on current conditions and expectations.$58.9$11.6 million from $37.5 million for the six months ended June 30, 2021 to $96.4 million for the six months ended June 30, 2022.2022 to $107.9 million for the six months ended June 30, 2023. Net income year over year increaseddecreased by $44.6approximately $16.0 million, from $(4.9) million in 2021 to $39.7 million in 2022. Adjustments2022 to $23.7 million in 2023. The aggregate adjustments to reconcile net income (loss) to net cash provided by operating activities decreased $14.7increased $23.4 million in 2022 compared to 2021. This was primarilymainly due to the change in deferred income taxes,42changes in the fair value of the private placement warrant liability, the TRA liability adjustmentwarrants and the $5.3 million loss on extinguishment of debtchange in 2021 with no comparable amount in the 2022 period. These decreases weredeferred income taxes, partially offset mainly by increased depreciation anddecreased amortization resulting from our recent acquisitions, combined with increases in the credit loss expense and stock-based compensation expenses.year over year. The majoraggregate changes in operating assets and liabilities increased by $4.2 million in 2023 compared to prior year primarily due to the prior period were driventiming of accrued and other payables and fluctuation in inventory levels offset by a decrease in accounts receivable balances mainly for the NYCDOT customer, and decreasean increase in prepaid and other assets.current expenses.$23.3$31.5 million and $115.1$23.3 million for the six months ended June 30, 2023 and 2022, and 2021, respectively. TheThere was an increase in cash used in 2022 was primarily2023 related to the purchases of installation and service parts and property and equipment. Theequipment compared to the prior year, and due to the monthly cash usedpayments on the interest rate swap entered into in 2021 was primarily relatedDecember 2022 to VM Consolidated’s acquisition of 100% 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.hedge our exposure to rising interest rates. provided by financing activities was $(86.5)$27.9 million and $107.0$(86.5) million for the six months ended June 30, 2023 and 2022, andrespectively. The cash provided by financing activities in 2023 was mainly due to the $105.8 million proceeds from the exercise of warrants issued in connection with the IPO, partially offset by early repayments totaling $72.5 million on our 2021 respectively.Term Loan. The cash used in 2022 was mainly due to the repurchases of 3.1 million shares of the Company’sCompany's Class A Common Stock for $55.3 million in the second quarter of 2022 (as discussed further in Note 11. Stockholders’ Equity),and the repayment of $25.0 million of borrowing on the Revolver in January 2022 and the quarterly principal paymentspayment on the 2021 Term Loan.We had aggregate borrowings of $996.8 million during 2021 consisting of the 2021 Term Loan and Senior Notes and repayments of $881.3 million on outstanding debt related to the 2018 and 2021 Term Loans (defined below), and debt assumed as part of the Redflex acquisition that was subsequently paid. The 2018 Term Loan was fully repaid in March 2021. The aggregate borrowings net of the repayments were used in part to fund the close of the Redflex acquisition. and Senior Notes$650.0$900.0 million, maturing on March 26, 2028, and anwhich includes the incremental borrowing of $250.0 million in December 2021 as a result of exercising the accordion feature providing for an additional $250.0 million of term loans, subject to satisfaction of certain requirements.available under the agreement. In connection with the 2021 Term Loan weborrowings, the Company had an$4.6 million of offering discount cost of $3.3costs and $4.5 million and $0.7 million ofin deferred financing costs, both of which were capitalized and are being amortized over the remaining life of the 2021 Term Loan.In addition, in March 2021, VM Consolidated issued an aggregate principal amountDuring the six months ended June 30, 2023, the Company made early repayments of $350.0$72.5 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 as a result, the Senior Notes were used in March 2021 to repay in full alltotal principal outstanding was $809.1 million as of June 30, 2023. The Company recognized a loss on extinguishment of debt which was represented by the 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 entered into an agreement to exercise the accordion feature under the 2021 Term Loan, borrowing $250.0 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$0.2 million and $3.8$1.6 million for the three and six months ended June 30, 2023, respectively, related to the write-off of pre-existing 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 $890.6 million at June 30, 2022.discounts.ourthe Company’s 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. In March 2023, the Company amended its 2021 Term Loan agreement to transition away from LIBOR to Term SOFR with the cessation of LIBOR in June 2023. To compensate for the differences in reference rates utilized, the amended agreement also includes a credit spread adjustment of 0.11448% for an interest period of one-month duration, 0.26161% for a three-month duration, 0.42826% for a six-month duration, and 0.71513% for twelve-months duration in addition to Term SOFR and the applicable margin. As of June 30, 2022,2023, the new all-in interest rate on the 2021 Term Loan was 6.1%8.5%.43year, beginning with the year ending December 31, 2022)year), as set forth in the following table:
Prepayment
Percentagewethe Company 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:wethe Company 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 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 six months ended June 30, 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 2021 Term Loan.PPP LoanDuring fiscal year 2020, Redflex received a loan from the U.S. Small Business Administration (“SBA”) as part of the Paycheck Protection Program to offset certain employment and other allowable costs incurred as a result of the COVID-19 pandemic. At June 30, 2022, the loan amount outstanding was $2.9 million and was included in the current portion of long-term debt. In early 2021, Redflex applied for forgiveness of this loan and, as of June 30, 2022, was still awaiting approval from the SBA for loan forgiveness. In April 2022, the original maturity as of April 2022 was extended to September 2022 by the lender.We haveThe Company has a Revolving Credit Agreement (the “Revolver”) with a commitment of up to $75$75.0 million available for loans and letters of credit. The Revolver matures on 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) LIBORTerm SOFR plus an applicable margin, or (2) an alternate base rate, plus an applicable margin. The margin percentage applied to (1) LIBORTerm SOFR 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 ourthe Company’s average availability to borrow under the commitment. At December 31, 2021, we had $25.0 millionThere is a credit spread adjustment of 0.10% for a one-month duration, 0.15% for a three-month duration, and 0.25% for a six-month duration, in addition to Term SOFR and the applicable margin percentages. There are no outstanding borrowings on the Revolver which was repaid in full in January 2022. Atas of June 30, 2022, the2023 or December 31, 2022. The availability to borrow was $68.8$74.8 million, net of $6.2$0.2 million of outstanding letters of credit.credit at June 30, 2023.we arethe Company is also required to pay participation and fronting fees at 1.38% on $6.2$0.2 million of outstanding letters of credit as of June 30, 2022.2023.ourthe Company’s assets are pledged as collateral to secure ourthe Company’s indebtedness under the 2021 Term Loan. At June 30, 2022, we were2023, the Company was compliant with all debt covenants.4441WeThe Company recorded interest expense, including amortization of deferred financing costs and discounts, of $14.5$22.8 million and $11.7$14.5 million for the three months ended June 30, 20222023 and 2021,2022, respectively, and $28.8$45.5 million and $20.8$28.8 million for the six months ended June 30, 2023 and 2022, and 2021, respectively.2022.2023.SignificantRefer to our 2022 Annual Report on Form 10-K for our critical accounting policies, estimates and assumptions include those related to the fair values assigned to net assets acquired (including identifiable intangibles) in business combinations, revenue recognition, inventory valuation, allowance for credit losses, fair value of the private placement warrant liabilities, valuation 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 believesjudgments. We believe that itsour estimates and assumptions are reasonable in the circumstances; however, actual results could differ materially from those estimates.Refer toFor a discussion of our 2021 Annual Report on Form 10-K for our criticalsignificant accounting policies, estimates and judgments.refer to Note 2, Significant Accounting Policies, in Part I, Item 1, Financial Statements.$890.6$809.1 million at June 30, 2022.2023. 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. In March 2023, we amended our 2021 Term Loan agreement to transition away from LIBOR to Term SOFR with the cessation of LIBOR in June 2023. To compensate for the differences in reference rates utilized, the amended agreement also includes a credit spread adjustment of 0.11448% for an interest period of one-month duration, 0.26161% for a three-month duration, 0.42826% for a six-month duration, and 0.71513% for twelve-months duration in addition to Term SOFR and the applicable margin. At June 30, 2022,2023, the new all-in interest rate on the 2021 Term Loan was 6.1%, up approximately 250 basis points from March 31, 2022. 8.5%.20222023 balance outstanding, each 1% movement in interest rates will result in an approximately $8.9$8.1 million change in annual interest expense. Due to the limited history of the use of the new benchmark rate, we are unable to estimate the future impact to our borrowing costs as a result of the discontinuation of the LIBOR benchmark.not engagedthe option to effectively terminate the interest rate swap agreement starting in any hedging activities duringDecember 2023, and monthly thereafter until December 2025, in the event interest rates decrease. We recorded a $4.8 million gain for the three months ended June 30, 2023 and a $2.0 million gain on the interest rate swap for the six months ended June 30, 2022. We do not expect to engage2023. See Note 2, Significant Accounting Policies, in any hedging activities with respect toPart I, Item 1, Financial Statements for additional information on the market risk to which we are exposed.interest rate swap.procedures asprocedures. Based on the results of June 30, 2022 and, based on their evaluation, haveour assessment, our management concluded the controls and procedures were ineffective as the material weaknesses in internal control over financial reporting that were disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 were not yet remediated during the first half of fiscal year 2022.45RemediationAs 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 continue to take steps to remediate the material weaknesses identified as of December 31, 2021. However, we will not be able to demonstrate that this material weakness has been fully remediated or that our controls are operating effectively, until we complete our remediation efforts and both we and our independent registered public accounting firm conduct a year-end assessment of our internal control over financial reporting for the fiscal year ended December 31, 2022, pursuant to Section 404was effective as of the Sarbanes-Oxley Act of 2002. 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:June 30, 2023.•Design and implement controls to properly recognize revenue within our recent acquisitions.•Evaluate the sufficiency, experience, and training of our internal personnel and hire additional personnel.•Design and implement controls to validate revenue and reporting data used in the preparation of our consolidated financial statements.20222023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.4643underway and trialclosed. Verra Mobility filed a motion for summary judgment on June 21, 2023, which is pending. Trial has been set for SeptemberNovember 2023. Verra Mobility believes that all of PlusPass' claims are without merit and will defend itself vigorously in this litigation.20212022 includes a discussion of our risk factors. Other than the risk factor below, there have been no material changes from the risk factors described in our Annual Report on Form 10-K.10-K and subsequent Quarterly Reports on Form 10-Q. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future SEC filings.We cannot guaranteeNumerous countries, including a number of those in which we do business, have agreed to a statement in support of Economic Co-operation and Development ("OECD") model rules that propose a global minimum tax, which if adopted, may increase and negatively impact our stock repurchase program will be consummated fully or that it will enhance long-term shareholder value. Stock repurchases could also increase the volatilityprovision for income taxes.trading priceOECD model rules that propose a global minimum tax rate of 15% that would apply to multinational companies with consolidated revenue above €750 million. Certain countries, including European Union member states, have enacted or are expected to enact legislation to be effective as early as 2024, with widespread implementation of a global minimum tax expected by 2025. As the legislation becomes effective in countries in which we do business, our stocktaxes could increase and could diminishnegatively impact our cash reserves.provision for income taxes. We will continue to monitor pending legislation and implementation by individual countries and evaluate the potential impact on our business in future periods.In May 2022, our Board of Directors authorized a share repurchase program for up to an aggregate amount of $125 million of our outstanding shares of Class A common stock over the following 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, general and business market conditions, compliance with applicable laws and regulations, corporate and regulatory requirements, and alternative uses of 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 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 that it will enhance long-term stockholder value. The program could affect the trading price of our common stock and increase volatility, and any announcement of a termination of this program may result in a decrease in the trading price of our common stock. In addition, this program could diminish our cash reserves.On May 7, 2022, the Company’s Board of Directors authorized a share repurchase program for up to an aggregate amount of $125.0 million of its outstanding shares of Class A common stock over the next 12 months from time to time in open market transactions, ASRs or in privately negotiated transactions, each as permitted under applicable rules and regulations, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Exchange Act. The Company authorized an aggregate purchase amount of $75.0 million related to the open market repurchases and $50.0 million for the ASR, as discussed above.None.The following details the purchases of the Company's Class A Common Stock during the three months ended June 30, 2022:47(1) On May 12, 2022, the Company paid $50.0 million and received an initial delivery of 2,739,726 shares of its Class A Common Stock in accordance with an ASR agreement with a third-party financial institution. The final settlement is expected to occur during the third quarter of fiscal year 2022, at which time, a volume-weighted average price calculation over the term of the ASR agreement will be used to determine the final number and the average price of shares repurchased and retired.We did not have any sales of unregistered equity securities during the three months ended June 30, 2022.None.None.Insider Trading Arrangements and Policies.484946101.INSInline XBRL Instance Document (the instance does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).X101.SCHInline XBRL Taxonomy Extension Schema Document.X101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.X101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.X101.LABInline XBRL Taxonomy Extension Label Linkbase Document.X101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.X104Cover 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.
50473, 20229, 2023David RobertsCraig ContiDavid RobertsCraig ContiPresident and Chief ExecutiveFinancial OfficerExecutiveFinancial Officer)5148