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vrrm-10q_20210630.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 June 30, 2021

☐	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 August 4, 2021, there were 162,410,137 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, 2021

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		33
Item 3. Quantitative and Qualitative Disclosures About Market Risk		45
Item 4. Controls and Procedures		45
PART II—OTHER INFORMATION		46
Item 1. Legal Proceedings		46
Item 1A. Risk Factors		46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		47
Item 3. Defaults Upon Senior Securities		47
Item 4. Mine Safety Disclosures		47
Item 5. Other Information		47
Item 6. Exhibits		48
SIGNATURES		50

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/A for the year ended December 31, 2020, filed on May 17, 2021. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

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

•

the impact of payment delays related to $127.0 million in outstanding receivables with the City of New York Department of Transportation (“NYCDOT”);

•

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, delays in payments, 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, including, but not limited to, our June 2021 acquisition of Redflex (as defined herein); and

•

failure 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. The events and circumstances reflected in the forward-looking statements may not occur. Although we believe that the expectations reflected in the

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

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

Part I—Financial Information

Item 1. Financial Statements.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2021			December 31, 2020
($ in thousands except per share data)				(As restated)
Assets
Current assets:
Cash and cash equivalents	$	147,346		$	120,259
Restricted cash		3,159			633
Accounts receivable (net of allowance for credit loss of $12.7 million and $11.5 million at June 30, 2021 and December 31, 2020, respectively)		214,925			168,783
Unbilled receivables		23,871			14,045
Prepaid expenses and other current assets		32,255			24,317
Total current assets		421,556			328,037
Installation and service parts, net		10,186			7,944
Property and equipment, net		94,308			70,284
Operating lease assets		34,662			29,787
Intangible assets, net		340,637			342,139
Goodwill		641,517			586,435
Other non-current assets		16,325			2,699
Total assets	$	1,559,191		$	1,367,325
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	47,403		$	34,509
Accrued liabilities		44,728			15,636
Payable to related party pursuant to tax receivable agreement, current portion		5,202			4,791
Current portion of long-term debt		9,410			9,104
Total current liabilities		106,743			64,040
Long-term debt, net of current portion		966,066			832,941
Operating lease liabilities, net of current portion		32,720			27,986
Payable to related party pursuant to tax receivable agreement, net of current portion		64,329			67,869
Private placement warrant liabilities		41,000			30,866
Asset retirement obligation		10,059			6,409
Deferred tax liabilities, net		20,790			21,148
Other long-term liabilities		1,059			494
Total liabilities		1,242,766			1,051,753
Commitments and contingencies (Note 13)
Stockholders' equity
Preferred stock, $.0001 par value		—			—
Common stock, $.0001 par value		16			16
Common stock contingent consideration		36,575			36,575
Additional paid-in capital		379,235			373,620
Accumulated deficit		(99,773	)		(94,850	)
Accumulated other comprehensive income		372			211
Total stockholders' equity		316,425			315,572
Total liabilities and stockholders' equity	$	1,559,191		$	1,367,325

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 June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
($ in thousands, except per share data)				(As restated)						(As restated)
Service revenue	$	116,426		$	62,815		$	206,189		$	162,312
Product sales		12,231			16,994			12,326			34,210
Total revenue		128,657			79,809			218,515			196,522
Cost of service revenue		1,332			1,013			2,212			2,232
Cost of product sales		6,144			9,060			6,171			17,750
Operating expenses		36,434			26,699			66,926			58,958
Selling, general and administrative expenses		26,229			20,821			54,672			46,707
Depreciation, amortization and (gain) loss on disposal of assets, net		27,012			29,166			55,277			58,412
Total costs and expenses		97,151			86,759			185,258			184,059
Income (loss) from operations		31,506			(6,950	)		33,257			12,463
Interest expense, net		11,680			9,539			20,844			21,990
Change in fair value of private placement warrants		8,067			8,334			10,134			(7,133	)
Tax receivable agreement liability adjustment		1,661			4,446			1,661			4,446
Loss on extinguishment of debt		—			—			5,334			—
Other income, net		(2,798	)		(1,523	)		(5,811	)		(4,448	)
Total other expenses		18,610			20,796			32,162			14,855
Income (loss) before income taxes		12,896			(27,746	)		1,095			(2,392	)
Income tax provision (benefit)		8,904			(4,024	)		6,018			(810	)
Net income (loss)	$	3,992		$	(23,722	)	$	(4,923	)	$	(1,582	)
Other comprehensive income (loss):
Change in foreign currency translation adjustment		351			(508	)		161			(3,875	)
Total comprehensive income (loss)	$	4,343		$	(24,230	)	$	(4,762	)	$	(5,457	)
Net income (loss) per share:
Basic	$	0.02		$	(0.15	)	$	(0.03	)	$	(0.01	)
Diluted	$	0.02		$	(0.15	)	$	(0.03	)	$	(0.01	)
Weighted average shares outstanding:
Basic		162,378			161,710			162,338			161,317
Diluted		166,028			161,710			162,338			161,317

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

For the Three and Six Months Ended June 30, 2021
	Common Stock				Common Stock Contingent			Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
(In thousands)	Shares		Amount		Consideration			Capital			Deficit			Income (Loss)			Equity
Balance as of December 31, 2020 (as restated)		162,269	$	16	$	36,575		$	373,620		$	(94,850	)	$	211		$	315,572
Net loss		—		—		—			—			(8,915	)		—			(8,915	)
Vesting of restricted stock units ("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			—			3,992
Vesting of RSUs		41		—		—			—			—			—			—
Exercise of stock options		7		—		—			87			—			—			87
Payment of employee tax withholding related to RSUs vesting		—		—		—			(96	)		—			—			(96	)
Stock-based compensation		—		—		—			3,573			—			—			3,573
Other comprehensive gain, net of tax		—		—		—			—			—			351			351
Balance as of June 30, 2021		162,408	$	16	$	36,575		$	379,235		$	(99,773	)	$	372		$	316,425

For the Three and Six Months Ended June 30, 2020

Balance as of December 31, 2019 (as restated)		159,150	$	16	$	54,862		$	346,891		$	(89,578	)	$	(2,577	)	$	309,614
Net income (as restated)		—		—		—			—			22,140			—			22,140
Cumulative effect of adoption of the credit loss accounting standard, net of tax		—		—		—			—			(694	)		—			(694	)
Earn-out shares issued to Platinum Stockholder		2,500		—		(18,287	)		18,287			—			—			—
Vesting of RSUs		42		—		—			—			—			—			—
Payment of employee tax withholding related to RSUs vesting		—		—		—			(327	)