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10-Q

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 September 30, 2023

☐ 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)


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

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 ☒

As of November 6, 2023, there were 166,313,632 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 SEPTEMBER 30, 2023

TABLE OF CONTENTS


PART I—FINANCIAL INFORMATION		4
Item 1. Financial Statements		4
Condensed Consolidated Balance Sheets		4
Condensed Consolidated Statements of Operations and Comprehensive Income		5
Condensed Consolidated Statements of Stockholders’ Equity		6
Condensed Consolidated Statements of Cash Flows		8
Notes to the Condensed Consolidated Financial Statements		10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3. Quantitative and Qualitative Disclosures About Market Risk		39
Item 4. Controls and Procedures		40
PART II—OTHER INFORMATION		41
Item 1. Legal Proceedings		41
Item 1A. Risk Factors		41
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities		41
Item 3. Defaults Upon Senior Securities		42
Item 4. Mine Safety Disclosures		42
Item 5. Other Information		42
Item 6. Exhibits		43
SIGNATURES		45

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.

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 include the risks and uncertainties described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022, which highlight, among other risks:

•

customer concentration in our Commercial Services and Government Solutions segments;

•

our ability to manage our substantial level of indebtedness;

•

risks and uncertainties related to our government contracts, including legislative changes, termination rights, delays in payments, audits and investigations;

•

decreases in the prevalence of automated and other similar methods of photo enforcement, parking solutions or the use of tolling;

•

our ability to keep up with technological developments and changing customer preferences;

•

our ability to successfully implement our acquisition strategy or integrate acquisitions;

•

failure in or breaches of our networks or systems, including as a result of cyber-attacks; and

•

our ability to manage the risks, uncertainties and exposures related to our international operations.

You should not rely on forward-looking statements as predictions of future events. We operate in a very competitive and rapidly changing environment and new risks emerge from time to time. 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.

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.

Part I—Financial Information

Item 1. Financial Statements

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands, except per share data)	September 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	114,379		$	105,204
Restricted cash		3,951			3,911
Accounts receivable (net of allowance for credit losses of $17.6 million and $15.9 million at September 30, 2023 and December 31, 2022, respectively)		191,753			163,786
Unbilled receivables		40,069			30,782
Inventory		19,943			19,307
Prepaid expenses and other current assets		41,197			39,604
Total current assets		411,292			362,594
Installation and service parts, net		26,127			22,923
Property and equipment, net		117,827			109,775
Operating lease assets		35,299			37,593
Intangible assets, net		315,754			377,420
Goodwill		832,817			833,480
Other non-current assets		16,959			12,484
Total assets	$	1,756,075		$	1,756,269
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	89,760		$	79,869
Deferred revenue		34,322			31,164
Accrued liabilities		59,459			48,847
Tax receivable agreement liability, current portion		5,007			4,994
Current portion of long-term debt		9,019			21,935
Total current liabilities		197,567			186,809
Long-term debt, net of current portion		1,030,351			1,190,045
Operating lease liabilities, net of current portion		30,552			33,362
Tax receivable agreement liability, net of current portion		50,900			50,900
Private placement warrant liabilities		—			24,066
Asset retirement obligations		14,075			12,993
Deferred tax liabilities, net		19,015			21,149
Other long-term liabilities		9,559			5,875
Total liabilities		1,352,019			1,525,199
Commitments and contingencies (Note 13)
Stockholders' equity
Preferred stock, $0.0001 par value, 1,000 shares authorized with no shares issued and outstanding at September 30, 2023 and December 31, 2022		—			—
Common stock, $0.0001 par value, 260,000 shares authorized with 166,310 and 148,962 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		17			15
Common stock contingent consideration		—			36,575
Additional paid-in capital		549,374			305,423
Accumulated deficit		(128,909	)		(98,078	)
Accumulated other comprehensive loss		(16,426	)		(12,865	)
Total stockholders' equity		404,056			231,070
Total liabilities and stockholders' equity	$	1,756,075		$	1,756,269

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands, except per share data)	2023			2022			2023			2022
Service revenue	$	201,029		$	180,617		$	581,777		$	516,253
Product sales		8,904			17,039			24,520			39,275
Total revenue		209,933			197,656			606,297			555,528
Cost of service revenue		5,150			4,144			13,718			11,636
Cost of product sales		6,864			11,317			18,209			25,638
Operating expenses		68,873			60,536			196,373			166,795
Selling, general and administrative expenses		42,276			41,126			125,494			122,913
Depreciation, amortization and (gain) loss on disposal of assets, net		27,597			35,035			87,018			105,881
Total costs and expenses		150,760			152,158			440,812			432,863
Income from operations		59,173			45,498			165,485			122,665
Interest expense, net		20,384			20,260			65,842			49,024
Change in fair value of private placement warrants		(553	)		(2,267	)		24,966			(5,133	)
Tax receivable agreement liability adjustment		—			—			—			(965	)
Loss (gain) on interest rate swap		60			—			(1,947	)		—
Loss (gain) on extinguishment of debt		1,975			(3,005	)		3,533			(3,005	)
Other income, net		(4,498	)		(2,462	)		(12,766	)		(9,367	)
Total other expenses		17,368			12,526			79,628			30,554
Income before income taxes		41,805			32,972			85,857			92,111
Income tax provision		11,497			8,396			31,864			27,854
Net income	$	30,308		$	24,576		$	53,993		$	64,257
Other comprehensive loss:
Change in foreign currency translation adjustment		(4,189	)		(8,167	)		(3,561	)		(15,840	)
Total comprehensive income	$	26,119		$	16,409		$	50,432		$	48,417
Net income per share:
Basic	$	0.18		$	0.16		$	0.35		$	0.42
Diluted	$	0.18		$	0.15		$	0.34		$	0.38
Weighted average shares outstanding:
Basic		168,089			151,429			156,196			154,067
Diluted		169,497			158,304			157,133			160,433

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


For the Three and Nine Months Ended September 30, 2023

	Common Stock					Common Stock Contingent			Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
(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
Net income		—			—		—			—			30,308			—			30,308
Earn-out shares issued to Platinum Stockholder		2,500			—		(18,287	)		18,287			—			—			—
Share repurchases and retirement		(4,581	)		—		—			(15,176	)		(84,824	)		—			(100,000	)
Vesting of RSUs and PSUs		7			—		—			—			—			—			—
Exercise of stock options		34			—		—			457			—			—			457
Payment of employee tax withholding related to RSUs and PSUs vesting		—			—		—			(49	)		—			—			(49	)
Exercise of warrants		1,433			—		—			7,786			—			—			7,786
Stock-based compensation		—			—		—			4,443			—			—			4,443
Other comprehensive loss, net of tax		—			—		—			—			—			(4,189	)		(4,189	)
Balance as of September 30, 2023		166,310		$