SEC Filing | Verra Mobility

View:

Download DOC

Download PDF

Download XLS

Download XBRL

vrrm-10q_20200930.htm

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, 2020

☐	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:

Class A Common Stock, par value $0.0001 per share		VRRM		Nasdaq Capital Market
(Title of Each Class)		(Trading Symbol)		(Name of Each Exchange on Which Registered)

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 October 30, 2020, there were 162,268,865 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, 2020

TABLE OF CONTENTS


PART I—FINANCIAL INFORMATION		5
Item 1. Financial Statements.		5
Condensed Consolidated Balance Sheets		5
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)		6
Condensed Consolidated Statements of Stockholders’ Equity		7
Condensed Consolidated Statements of Cash Flows		8
Notes to the Condensed Consolidated Financial Statements		10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Item 3. Quantitative and Qualitative Disclosures About Market Risk		41
Item 4. Controls and Procedures		42
PART II—OTHER INFORMATION		43
Item 1. Legal Proceedings		43
Item 1A. Risk Factors		43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		44
Item 3. Defaults Upon Senior Securities		44
Item 4. Mine Safety Disclosures		44
Item 5. Other Information		44
Item 6. Exhibits		45
SIGNATURES		47

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, Part II, Item 1A, “Risk Factors” of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, and in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2019. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

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

•

disruption to our business and results of operations as a result of the novel coronavirus (“COVID-19”) pandemic;

•

the impact of the COVID-19 pandemic on our revenues from key customers in the rental car industry and from photo enforcement programs;

•

historical data regarding our business, results of operations, financial condition and liquidity may not reflect the impact of COVID-19;

•

customer concentration in our Commercial Services and Government Solutions segments;

•

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

•

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

•

decreased interest in outsourcing from our customers;

•

our ability to properly perform under our contracts and otherwise satisfy our customers;

•

our ability to compete in a highly competitive and rapidly evolving market;

•

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

•

the success of our new products and changes to existing products and services;

•

our ability to successfully integrate our recent or future acquisitions; and

•

failures in or breaches of our networks or systems, including as a result of cyber-attacks.

You should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations.

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

Part I—Financial Information

Item 1. Financial Statements.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

($ in thousands except per share data)	September 30, 2020			December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	129,158		$	131,513
Restricted cash		549			917
Accounts receivable (net of allowance for credit loss of $10.1 million at September 30, 2020)		141,019			93,514
Unbilled receivables		16,145			20,003
Prepaid expenses and other current assets		24,714			26,491
Total current assets		311,585			272,438
Installation and service parts, net		6,916			8,841
Property and equipment, net		73,155			72,266
Operating lease assets		30,548			32,177
Intangible assets, net		363,526			434,443
Goodwill		583,341			584,150
Other non-current assets		2,900			3,111
Total assets	$	1,371,971		$	1,407,426
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	45,601		$	50,825
Accrued liabilities		17,309			25,277
Current portion of long-term debt		9,104			28,779
Total current liabilities		72,014			104,881
Long-term debt, net of current portion		833,624			837,686
Operating lease liabilities, net of current portion		28,723			30,130
Payable to related party pursuant to tax receivable agreement		65,620			61,174
Asset retirement obligation		6,391			6,309
Deferred tax liabilities, net		21,514			25,716
Other long-term liabilities		163			2,183
Total liabilities		1,028,049			1,068,079
Commitments and contingencies (Note 15)
Stockholders' equity
Preferred stock, $.0001 par value		—			—
Common stock, $.0001 par value		16			16
Common stock contingent consideration		36,575			54,862
Additional paid-in capital		394,259			367,266
Accumulated deficit		(82,943	)		(80,220	)
Accumulated other comprehensive loss		(3,985	)		(2,577	)
Total stockholders' equity		343,922			339,347
Total liabilities and stockholders' equity	$	1,371,971		$	1,407,426

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands, except per share data)	2020			2019			2020			2019
Service revenue	$	82,980		$	110,757		$	245,292		$	311,884
Product sales		13,928			17,483			48,138			24,392
Total revenue		96,908			128,240			293,430			336,276
Cost of service revenue		907			1,388			3,139			4,390
Cost of product sales		7,088			7,238			24,838			10,432
Operating expenses		26,544			32,965			85,502			94,098
Selling, general and administrative expenses		17,511			21,293			64,218			62,709
Depreciation, amortization and (gain) loss on disposal of assets, net		29,590			28,697			88,002			86,488
Impairment of property and equipment		—			—			—			5,898
Total costs and expenses		81,640			91,581			265,699			264,015
Income from operations		15,268			36,659			27,731			72,261
Interest expense, net		9,578			14,932			31,568			46,621
Loss from tax receivable agreement adjustment		—			—			4,446			—
Other income, net		(4,982	)		(2,727	)		(9,430	)		(8,279	)
Total other expenses		4,596			12,205			26,584			38,342
Income before income tax provision		10,672			24,454			1,147			33,919
Income tax provision		3,986			6,702			3,176			9,756
Net income (loss)	$	6,686		$	17,752		$	(2,029	)	$	24,163
Other comprehensive income (loss):
Change in foreign currency translation adjustment		2,467			(1,664	)		(1,408	)		(1,736	)
Total comprehensive income (loss)	$	9,153		$	16,088		$	(3,437	)	$	22,427
Net income (loss) per share:
Basic	$	0.04		$	0.11		$	(0.01	)	$	0.15
Diluted	$	0.04		$	0.11		$	(0.01	)	$	0.15
Weighted average shares used in per share calculation:
Basic outstanding		161,744			158,610			161,460			157,514
Diluted outstanding		162,568			163,705			161,460			160,723

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, 2020
	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, 2019		159,150	$	16	$	54,862		$	367,266		$	(80,220	)	$	(2,577	)	$	339,347
Net income		—		—		—			—			6,673			—			6,673
Cumulative effect of adoption of the CECL accounting standard, net of tax		—		—		—			—			(694	)		—			(694	)
Earn-out shares issued to Platinum Stockholder		2,500		—		(18,287	)		18,287			—			—			—
Vesting of restricted stock units ("RSUs")		42		—		—			—			—			—			—
Payment of employee tax withholding related to RSUs vesting		—		—		—			(327	)		—			—			(327	)
Stock-based compensation		—		—		—			2,768			—			—			2,768
Other comprehensive loss, net of tax		—		—		—			—			—			(3,367	)		(3,367	)
Balance as of March 31, 2020		161,692		16		36,575			387,994			(74,241	)		(5,944	)		344,400
Net loss		—		—		—			—			(15,388	)		—			(15,388	)
Vesting of RSUs		45		—		—			—			—			—			—
Payment of employee tax withholding related to RSUs vesting		—		—		—			(25	)		—			—			(25	)
Stock-based compensation		—		—		—			3,271			—			—			3,271
Other comprehensive loss, net of tax		—		—		—			—			—			(508	)		(508	)
Balance as of June 30, 2020		161,737		16		36,575			391,240			(89,629	)		(6,452	)		331,750
Net income		—		—		—			—			6,686			—			6,686
Vesting of RSUs		33		—		—			—			—			—			—
Payment of employee tax withholding related to RSUs vesting		—		—		—			(134	)		—			—			(134	)
Stock-based compensation		—		—		—			3,153			—			—			3,153
Other comprehensive income, net of tax		—		—		—			—			—			2,467			2,467
Balance as of September 30, 2020		161,770	$	16	$	36,575		$	394,259		$	(82,943	)	$	(3,985	)	$	343,922

For the Three and Nine Months Ended September 30, 2019

Balance as of December 31, 2018		156,057	$	16	$	73,150		$	348,017		$	(113,306	)	$	(5,821	)	$	302,056
Net income		—		—		—			—			2,820			—			2,820
Cumulative effect of adoption of the new revenue accounting standard		—		—		—			—			(257	)		—			(257	)
Adjustment to equity infusion from Gores		—		—		—			(6,205	)		—			—			(6,205	)
Adjustment to tax receivable agreement liability		—		—		—			2,940			—