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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, 2021

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)

 

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 1, 2021, there were 156,061,922 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, 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

 

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

 

34

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

46

Item 4. Controls and Procedures

 

46

PART II—OTHER INFORMATION

 

47

Item 1. Legal Proceedings

 

47

Item 1A. Risk Factors

 

47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

48

Item 3. Defaults Upon Senior Securities

 

48

Item 4. Mine Safety Disclosures

 

48

Item 5. Other Information

 

48

Item 6. Exhibits

 

49

SIGNATURES

 

51

 

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/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 $80.8 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

3


 

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.

4


 

Part I—Financial Information

Item 1. Financial Statements

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

September 30,
2021

 

 

December 31,
2020

 

($ in thousands except per share data)

 

 

 

 

(As restated)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

128,247

 

 

$

120,259

 

Restricted cash

 

 

2,945

 

 

 

633

 

Accounts receivable (net of allowance for credit loss of $14.7 million and
$
11.5 million at September 30, 2021 and December 31, 2020, respectively)

 

 

174,463

 

 

 

168,783

 

Unbilled receivables

 

 

27,422

 

 

 

14,045

 

Prepaid expenses and other current assets

 

 

39,054

 

 

 

24,317

 

Total current assets

 

 

372,131

 

 

 

328,037

 

Installation and service parts, net

 

 

10,596

 

 

 

7,944

 

Property and equipment, net

 

 

95,786

 

 

 

70,284

 

Operating lease assets

 

 

32,960

 

 

 

29,787

 

Intangible assets, net

 

 

317,031

 

 

 

342,139

 

Goodwill

 

 

637,739

 

 

 

586,435

 

Other non-current assets

 

 

15,673

 

 

 

2,699

 

Total assets

 

$

1,481,916

 

 

$

1,367,325

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

48,632

 

 

$

34,509

 

Accrued liabilities

 

 

53,663

 

 

 

15,636

 

Payable to related party pursuant to tax receivable agreement, current portion

 

 

5,202

 

 

 

4,791

 

Current portion of long-term debt

 

 

9,433

 

 

 

9,104

 

Total current liabilities

 

 

116,930

 

 

 

64,040

 

Long-term debt, net of current portion

 

 

965,362

 

 

 

832,941

 

Operating lease liabilities, net of current portion

 

 

31,570

 

 

 

27,986

 

Payable to related party pursuant to tax receivable agreement, net of current portion

 

 

64,329

 

 

 

67,869

 

Private placement warrant liabilities

 

 

35,933

 

 

 

30,866

 

Asset retirement obligation

 

 

10,708

 

 

 

6,409

 

Deferred tax liabilities, net

 

 

12,378

 

 

 

21,148

 

Other long-term liabilities

 

 

1,040

 

 

 

494

 

Total liabilities

 

 

1,238,250

 

 

 

1,051,753

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock, $0.0001 par value

 

 

 

 

 

 

Common stock, $0.0001 par value

 

 

16

 

 

 

16

 

Common stock contingent consideration

 

 

36,575

 

 

 

36,575

 

Additional paid-in capital

 

 

311,003

 

 

 

373,620

 

Accumulated deficit

 

 

(100,482

)

 

 

(94,850

)

Accumulated other comprehensive (loss) income

 

 

(3,446

)

 

 

211

 

Total stockholders' equity

 

 

243,666

 

 

 

315,572

 

Total liabilities and stockholders' equity

 

$

1,481,916

 

 

$

1,367,325

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

5


 

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

($ in thousands, except per share data)

 

 

 

 

(As restated)

 

 

 

 

 

(As restated)

 

Service revenue

 

$

141,811

 

 

$

82,980

 

 

$

348,000

 

 

$

245,292

 

Product sales

 

 

20,284

 

 

 

13,928

 

 

 

32,610

 

 

 

48,138

 

Total revenue

 

 

162,095

 

 

 

96,908

 

 

 

380,610

 

 

 

293,430

 

Cost of service revenue

 

 

1,412

 

 

 

907

 

 

 

3,624

 

 

 

3,139

 

Cost of product sales

 

 

9,391

 

 

 

7,088

 

 

 

15,562

 

 

 

24,838

 

Operating expenses

 

 

48,309

 

 

 

26,544

 

 

 

115,235

 

 

 

85,502

 

Selling, general and administrative expenses

 

 

31,580

 

 

 

17,511

 

 

 

86,252

 

 

 

64,218

 

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

 

 

29,529

 

 

 

29,590

 

 

 

84,806

 

 

 

88,002

 

Total costs and expenses

 

 

120,221

 

 

 

81,640

 

 

 

305,479

 

 

 

265,699

 

Income from operations

 

 

41,874

 

 

 

15,268

 

 

 

75,131

 

 

 

27,731

 

Interest expense, net

 

 

11,637

 

 

 

9,578

 

 

 

32,481

 

 

 

31,568

 

Change in fair value of private placement warrants

 

 

(5,067

)

 

 

(4,400

)

 

 

5,067

 

 

 

(11,533

)

Tax receivable agreement liability adjustment

 

 

 

 

 

 

 

 

1,661

 

 

 

4,446

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

5,334

 

 

 

 

Other income, net

 

 

(3,494

)

 

 

(4,982

)

 

 

(9,305

)

 

 

(9,430

)

Total other expenses

 

 

3,076

 

 

 

196

 

 

 

35,238

 

 

 

15,051

 

Income before income taxes

 

 

38,798

 

 

 

15,072

 

 

 

39,893

 

 

 

12,680

 

Income tax provision

 

 

11,492

 

 

 

3,986

 

 

 

17,510

 

 

 

3,176

 

Net income

 

$

27,306

 

 

$

11,086

 

 

$

22,383

 

 

$

9,504

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

 

(3,818

)

 

 

2,467

 

 

 

(3,657

)

 

 

(1,408

)

Total comprehensive income

 

$

23,488

 

 

$

13,553

 

 

$

18,726

 

 

$

8,096

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.17

 

 

$

0.07

 

 

$

0.14

 

 

$

0.06

 

Diluted

 

$

0.14

 

 

$

0.07

 

 

$

0.14

 

 

$

0.06

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

159,358

 

 

 

161,744

 

 

 

161,334

 

 

 

161,460

 

Diluted

 

 

165,431

 

 

 

162,568

 

 

 

164,808

 

 

 

161,995

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

6


 

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

For the Three and Nine Months Ended September 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

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,306

 

 

 

 

 

 

27,306

 

Share repurchase and retirement

 

 

(6,849

)

 

 

 

 

 

 

 

 

(71,985

)

 

 

(28,015

)

 

 

 

 

 

(100,000

)

Vesting of RSUs

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

2

 

 

 

 

 

 

 

 

 

21

 

 

 

 

 

 

 

 

 

21

 

Adjustment to employee tax withholding related to RSUs vesting

 

 

 

 

 

 

 

 

 

 

 

29

 

 

 

 

 

 

 

 

 

29

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

3,703

 

 

 

 

 

 

 

 

 

3,703

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,818

)

 

 

(3,818

)

Balance as of September 30, 2021

 

 

155,564

 

 

$

16

 

 

$

36,575

 

 

$

311,003

 

 

$

(100,482

)

 

$

(3,446

)

 

$

243,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three and Nine Months Ended September 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