8-K
0001682745false00016827452023-03-012023-03-010001682745us-gaap:WarrantMember2023-03-012023-03-01

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

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

Date of Report (Date of earliest event reported): March 1, 2023

 

VERRA MOBILITY CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

1-37979

81-3563824

(State or other jurisdiction
of incorporation
)

(Commission
File Number
)

(IRS Employer
Identification No.
)

 

1150 N. Alma School Road
Mesa, Arizona
(Address of principal executive offices)

85201
(Zip Code)

(480) 443-7000

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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.

 

 

 

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Item 2.02 Results of Operations and Financial Condition.

On March 1, 2023, Verra Mobility Corporation (the “Company”) issued a press release announcing its financial results for the quarter and fiscal year ended December 31, 2022. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
 

Item 7.01 Regulation FD Disclosure.

The Company will host a conference call and live webcast to discuss its fourth quarter and full year 2022 financial results on March 1, 2023, at 5:00 p.m. Eastern time. Live and archived webcasts of the presentation will also be available on the Company’s investor relations website at ir.verramobility.com, although the Company reserves the right to discontinue that availability at any time.

On March 1, 2023, the Company posted supplemental investor materials on its investor relations website. The Company uses its investor relations website as a means of disclosing material non-public information, announcing upcoming investor conferences and for complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor the Company’s investor relations website in addition to following its press releases, SEC filings and public conference calls and webcasts.

The information being furnished pursuant to Item 2.02, including Exhibit 99.1, and Item 7.01 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit Number

 

Description of Exhibits

 

99.1

 

Press Release, dated March 1, 2023, issued by Verra Mobility Corporation.

 

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

2


 

SIGNATURE

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

 

Dated: March 1, 2023

Verra Mobility Corporation

 

 

 

 

By:

/s/ Craig Conti

 

Name:

Craig Conti

 

Title:

Chief Financial Officer

 

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EX-99

Exhibit 99.1

https://cdn.kscope.io/007b4fca54c5d60ab0348bf8ebd6ea76-img124761870_0.jpg 

 

 

 

 

Verra Mobility Announces Fourth Quarter and Full Year 2022 Financial Results

 

Full year 2022 revenue of $741.6 million
Full year 2022 net income of $92.5 million
Full year 2022 cash flows from operations of $218.3 million

 

MESA, Ariz., March 1, 2023 – Verra Mobility Corporation (NASDAQ: VRRM), a leading provider of smart mobility technology solutions, announced today the financial results for the fourth quarter and full year ended December 31, 2022.

 

“We had a great finish to the year, exceeding the high end of our guidance and surpassing all other measures we were tracking,” said David Roberts, President and CEO, Verra Mobility. “Our strategy is aligned with the key macro trends across our portfolio. Travel demand by both consumers and businesses remains strong and cashless tolling continues to become more prevalent across the U.S. to help increase traffic efficiencies and reduce congestion. Furthermore, nationwide efforts to improve road safety are driving the need for investments in automated safety enforcement technology. We have tremendous momentum to start the year – our business fundamentals are strong, and we have a proven operating model to create significant value.”

Fourth Quarter 2022 Financial Highlights

Revenue: Total revenue for the fourth quarter of 2022 was $186.1 million, an increase of 9% compared to $170.0 million for the fourth quarter of 2021. Service revenue growth was 24% when compared to fourth quarter of 2021 due to increases in travel volume and related tolling activity in the Commercial Services segment, which grew 14%, and the growth in the Government Solutions segment, which increased 19% and was primarily driven by school zone speed expansion. T2 Systems contributed $15.1 million in service revenue, with no directly comparable amounts in the prior year as T2 Systems was acquired in December 2021.
Net income: Net income for the fourth quarter of 2022 was $28.2 million, or $0.13 per share based on 154.8 million diluted weighted average shares outstanding. Net income for the comparable 2021 period was $19.1 million, or $0.12 per share, based on 160.0 million diluted weighted average shares outstanding.
Adjusted Earnings Per Share (EPS): Adjusted EPS for the fourth quarter of 2022 was $0.25 per share compared to $0.24 per share for the fourth quarter of 2021.

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Adjusted EBITDA: Adjusted EBITDA was $83.6 million for the fourth quarter of 2022 compared to $80.0 million for the same period last year. Adjusted EBITDA margin was 45% of total revenue for 2022 and 47% for 2021.

We report our results of operations based on three operating segments:

Commercial Services offers automated toll and violations management and title and registration solutions to rental car companies, fleet management companies and other large fleet owners.
Government Solutions delivers automated safety solutions to municipalities, school districts and government agencies, including services and technology that enable photo enforcement related to speed, red-light, school bus and city bus lane management.
Parking Solutions provides an integrated suite of parking software and hardware solutions to universities, municipalities, parking operators, healthcare facilities and transportation hubs in the United States and Canada.

Fourth Quarter 2022 Segment Detail

The Commercial Services segment generated total revenue of $81.6 million, a 14% increase compared to $71.5 million in the same period in 2021. Segment profit was $49.0 million, a 12% increase from $43.8 million in the prior year. The increases in revenue and profit resulted from increased travel volume and related tolling activity in 2022 compared to the prior period. The segment profit margin was 60% for 2022 and 61% for 2021.
The Government Solutions segment generated total revenue of $84.6 million, an 8% decrease compared to $92.0 million in the same period in 2021. The decrease compared to the prior year was mainly due to a decline in one-time product sales associated with the completion of the New York City school zone expansion, partially offset by recurring service revenue growth of 19% primarily from the same school zone speed program. The segment profit was $30.7 million in 2022 compared to $33.6 million in the prior year. The segment profit margin was 36% for 2022 and 37% for 2021.
The Parking Solutions segment generated total revenue of $19.9 million with no directly comparable amounts in the prior year as the T2 Systems acquisition was executed on December 7, 2021. The segment profit was $3.9 million with a profit margin of 20% for 2022.

 

Full Year 2022 Financial Highlights

Revenue: Total revenue for fiscal year 2022 was $741.6 million, an increase of 35% compared to $550.6 million for fiscal year 2021. Organic service revenue growth was 25% which was mainly due to increases in travel volume and related tolling activity in the Commercial Services segment, and the organic service revenue growth in the Government Solutions segment, which was 22%, driven by the school zone speed expansion. The Redflex and T2 Systems acquisitions contributed approximately $95 million to service revenue growth. In addition, product sales decreased in 2022 by $11.3 million compared to 2021 due to the completion of the New York City school zone speed camera installations.

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Net income: Net income for fiscal year 2022 was $92.5 million, or $0.50 per share, based on 159.0 million diluted weighted average shares outstanding. Net income for the comparable 2021 period was $41.4 million, or $0.25 per share, based on 163.8 million diluted weighted average shares outstanding.
Adjusted EPS: Adjusted EPS for fiscal year 2022 was $1.02 per share compared to $0.79 per share for the fiscal year 2021.
Adjusted EBITDA: Adjusted EBITDA was $338.5 million for fiscal year 2022, compared to $270.9 million for year-to-date 2021. Adjusted EBITDA margin was 46% of total revenue for fiscal year 2022 and 49% for 2021.

Liquidity: As of December 31, 2022, cash and cash equivalents were $105.2 million, and we generated $218.3 million in cash flows from operations for 2022.

Share Repurchases:

In May 2022, our Board of Directors authorized a share repurchase program for up to an aggregate amount of $125.0 million of our outstanding shares of Class A common stock over a 12-month period in open market, accelerated share repurchases (“ASR”) or privately negotiated transactions, each as permitted under applicable rules and regulations.

We subsequently paid $50.0 million in May 2022 to repurchase outstanding shares of our Class A Common Stock through an ASR and received an initial delivery of 2,739,726 shares. The final settlement occurred in August 2022, at which time, we received 445,086 additional shares. In addition, during the second and third quarters, we paid $6.9 million and repurchased 445,791 shares of our Class A Common Stock through open market transactions. Our Board of Directors authorized a second ASR during the third quarter of 2022 for the remaining availability under the share repurchase program, and we paid $68.1 million in August 2022 and received an initial delivery of 3,300,000 shares of our Class A Common Stock. The final settlement occurred in November 2022, at which time we received 943,361 additional shares.

In November 2022, our Board of Directors authorized a new share repurchase program for up to an aggregate amount of $100.0 million of our outstanding shares of Class A common stock over an 18-month period in open market, ASR or privately negotiated transactions, each as permitted under applicable rules and regulations. The Company has not yet repurchased shares under this repurchase program.

Interest Rate Swap

In December 2022, we entered into a cancellable interest rate swap agreement to hedge our exposure to interest rate fluctuations associated with the LIBOR portion of the variable interest rate on our 2021 Term Loan. Under the interest rate swap agreement, we pay a fixed rate and the counterparty pays a variable interest rate which is net settled. The notional amount on the interest rate swap is $675 million. We have the option to terminate the interest rate swap agreement starting in December 2023, and monthly thereafter until December 2025, in the event interest rates decrease. Any changes in the fair value of the derivative instrument (including accrued interest) are recorded in the consolidated statements of operations within the gain on interest rate swap line item, and we recorded a $1.0 million gain for the year ended December 31, 2022.

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2023 Full Year Guidance

Any guidance that we provide is subject to change as a variety of factors can affect actual operating results. Certain of the factors that may impact our actual operating results are identified below in the safe harbor language included within Forward-Looking Statements of this press release.

We are providing the following forward-looking guidance, which includes Adjusted EBITDA and Adjusted EPS, both non-GAAP financial measures (defined below):

Total revenue of $780 million to $800 million
Adjusted EBITDA of $360 million to $370 million
Adjusted EPS of $1.00 to $1.10
Free Cash Flow of $135 million to $155 million

 

We are not providing a quantitative reconciliation of Adjusted EBITDA or Adjusted EPS, both of which are included in our 2023 financial guidance above, in reliance on the "unreasonable efforts" exception for forward-looking non-GAAP measures set forth in SEC rules because certain financial information, the probable significance of which cannot be determined, is not available and cannot be reasonably estimated without unreasonable effort and expense. In this regard, we are unable to provide a reconciliation of forward-looking Adjusted EBITDA to GAAP net income (loss) as well as Adjusted EPS to net income (loss) per share, due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. Due to the uncertainty of estimates and assumptions used in preparing forward-looking non-GAAP measures, we caution investors that actual results could differ materially from these non-GAAP financial projections.

Conference Call Details

Date: March 1, 2023

Time: 5:00 p.m. Eastern Time

U.S. and Canadian Callers Dial-in: 1-888-886-7786

Outside of U.S. and Canada Dial-in: 1-416-764-8658 for international callers with conference ID 68881102

Request a return call: Available by clicking on the following link and requesting a return call: callme.viavid.com

Webcast Information: Available live in the “Investor Relations” section of our website at http://ir.verramobility.com.

An audio replay of the call will also be available until 11:59 p.m. ET on March 15, 2023, by dialing 1-844-512-2921 for the U.S. or Canada, and 1-412-317-6671 for international callers and entering passcode 68881102. In addition, an archived webcast will be available in the “News & Events” section of the Investor Relations website at http://ir.verramobility.com.

 

About Verra Mobility

 

Verra Mobility is a leading provider of smart mobility technology solutions that make transportation safer, smarter and more connected. The Company sits at the center of the mobility ecosystem, bringing together vehicles, hardware, software, data and people to enable safe, efficient solutions for customers globally. Verra Mobility’s transportation safety systems and parking management solutions protect lives, improve urban and motorway mobility and support healthier communities. The Company also solves complex payment, utilization and

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compliance challenges for fleet owners and rental car companies. Headquartered in Arizona, Verra Mobility operates in North America, Europe, Asia and Australia. For more information, please visit www.verramobility.com.

Forward-Looking Statements

This press release contains forward-looking statements which address our expected future business and financial performance, and may contain words such as “goal,” “target,” “future,” “estimate,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “project,” “may,” “should,” “will” or similar expressions. Examples of forward-looking statements include, among others, statements regarding the benefits of our strategic acquisitions, changes in the market for our products and services, expected operating results, such as revenue growth, expansion plans and opportunities, and earnings guidance related to 2022 financial and operational metrics. Forward-looking statements involve risks and uncertainties and a number of factors could cause actual results to differ materially from those currently anticipated. These factors include, but are not limited to: (1) customer concentration in our Commercial Services and Government Solutions segments; (2) decreases in the prevalence of automated and other similar methods of photo enforcement, parking solutions or the use of tolling; (3) risks and uncertainties related to our government contracts, including but not limited to administrative hurdles, legislative changes, termination rights, audits and investigations; (4) decreased interest in outsourcing from our customers; (5) our ability to properly perform under our contracts and otherwise satisfy our customers; (6) the disruption to our business and results of operations as a result of the COVID-19 pandemic; (7) our ability to keep up with technological developments and changing customer preferences; (8) the success of our new products and changes to existing products and services; (9) our ability to successfully integrate our recent or future acquisitions; (10) failures in or breaches of our networks or systems, including as a result of cyber-attacks; and (11) other risks and uncertainties indicated from time to time in documents filed or to be filed with the Securities and Exchange Commission (the “SEC”) by Verra Mobility. This press release should be read in conjunction with the information included in our other press releases, reports and other filings with the SEC. Understanding the information contained in these filings is important in order to fully understand our reported financial results and our business outlook for future periods.

Additional Information

We periodically provide information for investors on our corporate website, www.verramobility.com, and our investor relations website, ir.verramobility.com.

We intend to use our website as a means of disclosing material non-public information and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.

Non-GAAP Financial Measures

In addition to disclosing financial results that are determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we also disclose certain non-GAAP financial information in this press release. These financial measures are not recognized measures under GAAP and are not intended to be, and should not be, considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. EBITDA, Adjusted EBITDA, Free Cash Flow, Adjusted Net Income, Adjusted EPS and Adjusted EBITDA Margin are non-GAAP financial measures as defined by SEC rules. These non-GAAP financial measures may be determined or calculated differently by other companies. As a result, they may not be comparable to similarly titled performance measures presented by other companies. Reconciliations of these non-GAAP measurements to the most directly comparable GAAP financial measurements have been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliations.

We are not providing a quantitative reconciliation of Adjusted EBITDA included in our 2023 financial guidance above, in reliance on the “unreasonable efforts” exception for forward-looking non-GAAP measures set forth in SEC rules because certain financial information, the probable significance of which cannot be determined, is not available and cannot be reasonably estimated without unreasonable effort and expense. In this regard, we are unable to provide a reconciliation of forward-looking Adjusted EBITDA to GAAP net income, due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. Due to the uncertainty of estimates and assumptions used in preparing forward-looking non-GAAP measures, we caution investors that actual results could differ materially from these non-GAAP financial projections.

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We use these non-GAAP financial metrics to measure our performance from period to period both at the consolidated level as well as within our operating segments, to evaluate and fund incentive compensation programs and to compare our results to those of our competitors. In addition, we also believe that these non-GAAP measures provide useful information to investors regarding financial and business trends related to our results of operations and that when non-GAAP financial information is viewed with GAAP financial information, investors are provided with a more meaningful understanding of our ongoing operating performance. These non-GAAP measures have certain limitations as analytical tools and should not be used as substitutes for net income, cash flows from operations, earnings per share or other consolidated income or cash flow data prepared in accordance with GAAP.

 

EBITDA and Adjusted EBITDA

We define EBITDA as net income adjusted to exclude interest expense, net, income taxes, depreciation and amortization. Adjusted EBITDA further excludes certain non-cash expenses and other transactions that management believes are not indicative of our ongoing operating performance. EBITDA and Adjusted EBITDA, as defined, exclude some but not all items that affect our cash flow from operating activities.

 

Free Cash Flow

We define Free Cash Flow as cash flow from operations less capital expenditures.

 

Adjusted Net Income

We define “Adjusted Net Income” as net income adjusted to exclude amortization of intangibles and certain non-cash or non-recurring expenses.

 

Adjusted EPS

We define “Adjusted EPS” as Adjusted Net Income divided by the diluted weighted average shares for the period.

 

Adjusted EBITDA Margin

We define “Adjusted EBITDA Margin” as Adjusted EBITDA as a percentage of total revenue.

 

 

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VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In thousands, except per share data)

 

 

December 31,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

105,204

 

 

$

101,283

 

Restricted cash

 

 

 

3,911

 

 

 

3,149

 

Accounts receivable (net of allowance for credit losses of $15.9 million and $12.1 million at December 31, 2022 and 2021, respectively)

 

 

 

163,786

 

 

 

160,979

 

Unbilled receivables

 

 

 

30,782

 

 

 

29,109

 

Inventory

 

 

 

19,307

 

 

 

12,093

 

Prepaid expenses and other current assets

 

 

 

39,604

 

 

 

41,456

 

Total current assets

 

 

 

362,594

 

 

 

348,069

 

Installation and service parts, net

 

 

 

22,923

 

 

 

13,332

 

Property and equipment, net

 

 

 

109,775

 

 

 

96,066

 

Operating lease assets

 

 

 

37,593

 

 

 

38,862

 

Intangible assets, net

 

 

 

377,420

 

 

 

487,299

 

Goodwill

 

 

 

833,480

 

 

 

838,867

 

Other non-current assets

 

 

 

12,484

 

 

 

14,561

 

Total assets

 

 

$

1,756,269

 

 

$

1,837,056

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

 

$

79,869

 

 

$

67,556

 

Deferred revenue

 

 

 

31,164

 

 

 

27,141

 

Accrued liabilities

 

 

 

48,847

 

 

 

38,435

 

Tax receivable agreement liability, current portion

 

 

 

4,994

 

 

 

5,107

 

Current portion of long-term debt

 

 

 

21,935

 

 

 

36,952

 

Total current liabilities

 

 

 

186,809

 

 

 

175,191

 

Long-term debt, net of current portion

 

 

 

1,190,045

 

 

 

1,206,802

 

Operating lease liabilities, net of current portion

 

 

 

33,362

 

 

 

34,984

 

Tax receivable agreement liability, net of current portion

 

 

 

50,900

 

 

 

56,615

 

Private placement warrant liabilities

 

 

 

24,066

 

 

 

38,466

 

Asset retirement obligation

 

 

 

12,993

 

 

 

11,824

 

Deferred tax liabilities, net

 

 

 

21,149

 

 

 

47,524

 

Other long-term liabilities

 

 

 

5,875

 

 

 

5,686

 

Total liabilities

 

 

 

1,525,199

 

 

 

1,577,092

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value

 

 

 

 

 

 

Common stock, $0.0001 par value

 

 

15

 

 

 

16

 

Common stock contingent consideration

 

 

36,575

 

 

 

36,575

 

Additional paid-in capital

 

 

 

305,423

 

 

 

309,883

 

Accumulated deficit

 

 

 

(98,078

)

 

 

(81,416

)

Accumulated other comprehensive loss

 

 

 

(12,865

)

 

 

(5,094

)

Total stockholders' equity

 

 

 

231,070

 

 

 

259,964

 

Total liabilities and stockholders' equity

 

 

$

1,756,269

 

 

$

1,837,056

 

 

 

 

 

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VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

($ in thousands, except per share data)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Service revenue

 

$

178,965

 

 

$

144,846

 

 

$

695,218

 

 

$

492,846

 

Product sales

 

 

7,105

 

 

 

25,134

 

 

 

46,380

 

 

 

57,744

 

Total revenue

 

 

186,070

 

 

 

169,980

 

 

 

741,598

 

 

 

550,590

 

Cost of service revenue

 

 

4,694

 

 

 

1,713

 

 

 

16,330

 

 

 

5,337

 

Cost of product sales

 

 

5,294

 

 

 

14,247

 

 

 

30,932

 

 

 

29,809

 

Operating expenses

 

 

59,529

 

 

 

48,135

 

 

 

226,324

 

 

 

163,370

 

Selling, general and administrative expenses

 

 

40,220

 

 

 

37,155

 

 

 

163,133

 

 

 

123,407

 

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

 

 

34,293

 

 

 

31,995

 

 

 

140,174

 

 

 

116,801

 

Total costs and expenses

 

 

144,030

 

 

 

133,245

 

 

 

576,893

 

 

 

438,724

 

Income from operations

 

 

42,040

 

 

 

36,735

 

 

 

164,705

 

 

 

111,866

 

Interest expense, net

 

 

20,348

 

 

 

12,461

 

 

 

69,372

 

 

 

44,942

 

Change in fair value of private placement warrants

 

 

(9,267

)

 

 

2,533

 

 

 

(14,400

)

 

 

7,600

 

Tax receivable agreement liability adjustment

 

 

245

 

 

 

(2,677

)

 

 

(720

)

 

 

(1,016

)

Gain on interest rate swap

 

 

(996

)

 

 

 

 

 

(996

)

 

 

 

(Gain) loss on extinguishment of debt

 

 

 

 

 

 

 

 

(3,005

)

 

 

5,334

 

Other income, net

 

 

(3,287

)

 

 

(3,590

)

 

 

(12,654

)

 

 

(12,895

)

Total other expenses

 

 

7,043

 

 

 

8,727

 

 

 

37,597

 

 

 

43,965

 

Income before income taxes

 

 

34,997

 

 

 

28,008

 

 

 

127,108

 

 

 

67,901

 

Income tax provision

 

 

6,779

 

 

 

8,942

 

 

 

34,633

 

 

 

26,452

 

Net income

 

$

28,218

 

 

$

19,066

 

 

$

92,475

 

 

$

41,449

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

 

8,069

 

 

 

(1,648

)

 

 

(7,771

)

 

 

(5,305

)

Total comprehensive income

 

$

36,287

 

 

$

17,418

 

 

$

84,704

 

 

$

36,144

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.19

 

 

$

0.12

 

 

$

0.61

 

 

$

0.26

 

Diluted

 

$

0.13

 

 

$

0.12

 

 

$

0.50

 

 

$

0.25

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

149,227

 

 

 

155,953

 

 

 

152,848

 

 

 

159,983

 

Diluted

 

 

154,825

 

 

 

159,965

 

 

 

159,026

 

 

 

163,778

 

 

 

8

 


 

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

Three Months Ended December 31,

 

($ in thousands)

 

2022

 

 

2021

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

28,218

 

 

$

19,066

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

33,390

 

 

 

31,997

 

Amortization of deferred financing costs and discounts

 

 

1,350

 

 

 

1,316

 

Change in fair value of private placement warrants

 

 

(9,267

)

 

 

2,533

 

Tax receivable agreement liability adjustment

 

 

245

 

 

 

(2,677

)

Gain on interest rate swap

 

 

(996

)

 

 

 

Credit loss expense

 

 

3,589

 

 

 

2,872

 

Deferred income taxes

 

 

(45

)

 

 

(1,963

)

Stock-based compensation

 

 

3,007

 

 

 

3,600

 

Impairment on a privately-held equity investment

 

 

1,340

 

 

 

 

Other

 

 

1,030

 

 

 

70

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

8,161

 

 

 

20,388

 

Unbilled receivables

 

 

2,269

 

 

 

(2,098

)

Inventory

 

 

(1,254

)

 

 

2,425

 

Prepaid expenses and other assets

 

 

(4,099

)

 

 

290

 

Deferred revenue

 

 

(1,700

)

 

 

(5,226

)

Accounts payable and other current liabilities

 

 

8,491

 

 

 

(6,040

)

Other liabilities

 

 

(4,168

)

 

 

(2,666

)

Net cash provided by operating activities

 

 

69,561

 

 

 

63,887

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

Acquisitions, net of cash and restricted cash acquired

 

 

 

 

 

(344,233

)

Purchases of installation and service parts and property and equipment

 

 

(12,259

)

 

 

(9,365

)

Cash proceeds from the sale of assets

 

 

101

 

 

 

40

 

Net cash used in investing activities

 

 

(12,158

)

 

 

(353,558

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

Borrowings on revolver

 

 

 

 

 

25,000

 

Borrowings of long-term debt

 

 

 

 

 

248,750

 

Repayment of long-term debt

 

 

(2,255

)

 

 

(1,625

)

Payment of debt issuance costs

 

 

(37

)

 

 

(4,018

)

Proceeds from exercise of stock options

 

 

337

 

 

 

47

 

Payment of employee tax withholding related to RSUs vesting

 

 

(3,452

)

 

 

(4,767

)

Net cash (used in) provided by financing activities

 

 

(5,407

)

 

 

263,387

 

Effect of exchange rate changes on cash and cash equivalents

 

 

1,490

 

 

 

(476

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

53,486

 

 

 

(26,760

)

Cash, cash equivalents and restricted cash - beginning of period

 

 

55,629

 

 

 

131,192

 

Cash, cash equivalents and restricted cash - end of period

 

$

109,115

 

 

$

104,432

 

 

 

 

 

 

 

 

 

 

9

 


 

 

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

 

 

 

For the Year Ended December 31,

 

($ in thousands)

 

2022

 

 

2021

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

92,475

 

 

$

41,449

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

138,684

 

 

 

116,753

 

Amortization of deferred financing costs and discounts

 

 

5,472

 

 

 

5,170

 

Change in fair value of private placement warrants

 

 

(14,400

)

 

 

7,600

 

Tax receivable agreement liability adjustment

 

 

(720

)

 

 

(1,016

)

Gain on interest rate swap

 

 

(996

)

 

 

 

(Gain) loss on extinguishment of debt

 

 

(3,005

)

 

 

5,334

 

Credit loss expense

 

 

14,481

 

 

 

9,588

 

Deferred income taxes

 

 

(17,355

)

 

 

(10,640

)

Stock-based compensation

 

 

16,663

 

 

 

13,784

 

Impairment on a privately-held equity investment

 

 

1,340

 

 

 

 

Other

 

 

1,654

 

 

 

308

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(17,685

)

 

 

14,946

 

Unbilled receivables

 

 

(1,936

)

 

 

(7,753

)

Inventory

 

 

(10,310

)

 

 

2,798

 

Prepaid expenses and other assets

 

 

4,306

 

 

 

(5,097

)

Deferred revenue

 

 

4,591

 

 

 

(3,966

)

Accounts payable and other current liabilities

 

 

6,513

 

 

 

8,296

 

Other liabilities

 

 

(1,435

)

 

 

(4,383

)

Net cash provided by operating activities

 

 

218,337

 

 

 

193,171

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

Acquisitions, net of cash and restricted cash acquired

 

 

 

 

 

(451,237

)

Payment of contingent consideration

 

 

(647

)

 

 

 

Purchases of installation and service parts and property and equipment

 

 

(48,186

)

 

 

(24,998

)

Cash proceeds from the sale of assets

 

 

241

 

 

 

265

 

Net cash used in investing activities

 

 

(48,592

)

 

 

(475,970

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

Borrowings on revolver

 

 

 

 

 

25,000

 

Repayment on revolver

 

 

(25,000

)

 

 

 

Borrowings of long-term debt

 

 

 

 

 

1,245,500

 

Repayment of long-term debt

 

 

(9,019

)

 

 

(884,530

)

Payment of debt issuance costs

 

 

(447

)

 

 

(10,646

)

Payment of debt extinguishment costs

 

 

 

 

 

(1,066

)

Share repurchase and retirement

 

 

(125,071

)

 

 

(100,000

)

Proceeds from exercise of stock options

 

 

1,334

 

 

 

155

 

Payment of employee tax withholding related to RSUs vesting

 

 

(6,524

)

 

 

(5,691

)

Payment of contingent consideration

 

 

(205

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(164,932

)

 

 

268,722

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(130

)

 

 

(2,383

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

4,683

 

 

 

(16,460

)

Cash, cash equivalents and restricted cash - beginning of period

 

 

104,432

 

 

 

120,892

 

Cash, cash equivalents and restricted cash - end of period

 

$

109,115

 

 

$

104,432

 

 

 

 

10

 


 

VERRA MOBILITY CORPORATION

 

ADJUSTED EBITDA RECONCILIATION (Unaudited)

 

 

 

Three Months Ended December 31,

 

 

For the Year Ended December 31,

 

($ in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

28,218

 

 

$

19,066

 

 

$

92,475

 

 

$

41,449

 

Interest expense, net

 

 

20,348

 

 

 

12,461

 

 

 

69,372

 

 

 

44,942

 

Income tax provision

 

 

6,779

 

 

 

8,942

 

 

 

34,633

 

 

 

26,452

 

Depreciation and amortization

 

 

33,390

 

 

 

31,997

 

 

 

138,684

 

 

 

116,753

 

EBITDA

 

 

88,735

 

 

 

72,466

 

 

 

335,164

 

 

 

229,596

 

Transaction and other related expenses (i)

 

 

(76

)

 

 

3,842

 

 

 

3,381

 

 

 

13,952

 

Transformation expenses (ii)

 

 

604

 

 

 

220

 

 

 

1,113

 

 

 

1,688

 

Change in fair value of private placement warrants (iii)

 

 

(9,267

)

 

 

2,533

 

 

 

(14,400

)

 

 

7,600

 

Tax receivable agreement liability adjustment (iv)

 

 

245

 

 

 

(2,677

)

 

 

(720

)

 

 

(1,016

)

Gain on interest rate swap (v)

 

 

(996

)

 

 

 

 

 

(996

)

 

 

 

(Gain) loss on extinguishment of debt (vi)

 

 

 

 

 

 

 

 

(3,005

)

 

 

5,334

 

Stock-based compensation (vii)

 

 

3,007

 

 

 

3,600

 

 

 

16,663

 

 

 

13,784

 

Impairment on privately-held equity investment (viii)

 

 

1,340

 

 

 

 

 

 

1,340

 

 

 

 

Adjusted EBITDA

 

$

83,592

 

 

$

79,984

 

 

$

338,540

 

 

$

270,938

 

 

(i)
Transaction and other related expenses incurred in 2022 primarily related to T2 Systems acquisition, an acquisition-related adjustment recognized subsequent to the measurement period and other deal costs. Transaction and other related expenses incurred in the three and twelve months ended December 31, 2021 primarily related to costs associated with our Redflex and T2 Systems acquisitions and other deal costs, and certain costs for the debt offering of senior unsecured notes and refinancing the first lien term loan in March 2021.
(ii)
Transformation expenses consist of severance and other employee separation costs related to exit activities initiated during each respective period.
(iii)
This consists of adjustments to the private placement warrants liability from the re-measurement to fair value at the end of each reporting period.
(iv)
The tax receivable agreement liability adjustments in 2022 and 2021 are arising from lower estimated state tax rates due to changes in apportionment.
(v)
We recorded a $1.0 million gain related to the interest rate swap associated with mark-to-market adjustments from re-measuring to fair value at the end of the reporting period.
(vi)
The gain on extinguishment of debt in 2022 is related to the forgiveness of debt related to the Paycheck Protection Program loan assumed during the Redflex acquisition. The loss on extinguishment of debt in 2021 consists 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 first lien term loan.
(vii)
Stock-based compensation represents the non-cash charge related to the issuance of awards under the Verra Mobility Corporation 2018 Equity Incentive Plan.
(viii)
This relates to an impairment recorded during 2022 for a Redflex-related equity investment.

 

FREE CASH FLOW (Unaudited)

 

 

 

For the Year Ended December 31,

 

($ in thousands)

 

2022

 

 

2021

 

Net cash provided by operating activities

 

$

218,337

 

 

$

193,171

 

Purchases of installation and service parts and property and equipment

 

 

(48,186

)

 

 

(24,998

)

Free cash flow

 

$

170,151

 

 

$

168,173

 

 

11

 


 

 

 

ADJUSTED EPS (Unaudited)

 

 

 

Three Months Ended December 31,

 

 

For the Year Ended December 31,

 

(In thousands, except per share data)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

28,218

 

 

$

19,066

 

 

$

92,475

 

 

$

41,449

 

Amortization of intangibles

 

 

25,132

 

 

 

23,086

 

 

 

106,161

 

 

 

89,944

 

Transaction and other related expenses

 

 

(76

)

 

 

3,842

 

 

 

3,381

 

 

 

13,952

 

Transformation expenses

 

 

604

 

 

 

220

 

 

 

1,113

 

 

 

1,688

 

Change in fair value of private placement warrants

 

 

(9,267

)

 

 

2,533

 

 

 

(14,400

)

 

 

7,600

 

Tax receivable agreement liability adjustment

 

 

245

 

 

 

(2,677

)

 

 

(720

)

 

 

(1,016

)

(Gain) loss on extinguishment of debt

 

 

 

 

 

 

 

 

(3,005

)

 

 

5,334

 

Gain on interest rate swap

 

 

(996

)

 

 

 

 

 

(996

)

 

 

 

Stock-based compensation

 

 

3,007

 

 

 

3,600

 

 

 

16,663

 

 

 

13,784

 

Impairment on privately-held equity investment

 

 

1,340

 

 

 

 

 

 

1,340

 

 

 

 

Total adjustments before income tax effect

 

 

19,989

 

 

 

30,604

 

 

 

109,537

 

 

 

131,286

 

Income tax effect on adjustments

 

 

(8,855

)

 

 

(10,762

)

 

 

(40,423

)

 

 

(43,646

)

Total adjustments after income tax effect

 

 

11,134

 

 

 

19,842

 

 

 

69,114

 

 

 

87,640

 

Adjusted Net Income

 

$

39,352

 

 

$

38,908

 

 

$

161,589

 

 

$

129,089

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EPS

 

$

0.25

 

 

$

0.24

 

 

$

1.02

 

 

$

0.79

 

Diluted weighted average shares outstanding

 

 

154,825

 

 

 

159,965

 

 

 

159,026

 

 

 

163,778

 

 

(1) Beginning in the third quarter of 2022, we removed the (i) change in fair value of private placement warrants (ii) tax receivable agreement liability adjustment (iii) (gain) loss on extinguishment of debt and (iv) impairment on privately-held equity investment from total adjustments before income tax effect prior to applying our annual estimated effective income tax rate to calculate the income tax effect on adjustments. These discrete items are being removed because they do not impact taxable income. In addition, we began using our annual estimated effective tax rate in lieu of the period-to-date effective tax rate from our consolidated statements of operations, in calculating the income tax effect on total adjustments to net income. We believe that our annual estimated effective income tax rate provides investors a more meaningful effective tax rate than our period-to-date effective tax rate, which included the discrete items named above.
 

 

 

Investor Relations Contact

Mark Zindler

mark.zindler@verramobility.com

 

 

 

 

12