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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 March 31, 2022

☐ 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
Warrants to purchase Class A Common Stock	VRRMW	OTC Pink Marketplace

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 May 5, 2022, there were 156,225,265 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 MARCH 31, 2022

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		31
Item 3. Quantitative and Qualitative Disclosures About Market Risk		39
Item 4. Controls and Procedures		39
PART II—OTHER INFORMATION		41
Item 1. Legal Proceedings		41
Item 1A. Risk Factors		41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		42
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. 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 I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 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:

•

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

•

customer concentration in our Commercial Services and Government Solutions segments;

•

the impact of COVID-19 on our revenues from key customers in our Commercial Services, Government Solutions and Parking Solutions segments;

•

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;

•

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 implement our acquisition strategy or integrate acquisitions;

•

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

•

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

•

our ability to acquire necessary intellectual property and adequately protect our existing intellectual property;

•

our ability to manage our substantial level of indebtedness;

•

our reliance on a limited number of third-party vendors and service providers;

•

our ability to maintain an effective system of internal controls; and

•

risks and uncertainties related to litigation, disputes and regulatory investigations.

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)


($ in thousands, except per share data)	March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	93,377		$	101,283
Restricted cash		4,016			3,149
Accounts receivable (net of allowance for credit losses of $14.3 million and $12.1 million at March 31, 2022 and December 31, 2021, respectively)		171,906			160,979
Unbilled receivables		39,484			29,109
Inventory, net		15,451			12,093
Prepaid expenses and other current assets		38,745			41,456
Total current assets		362,979			348,069
Installation and service parts, net		15,491			13,332
Property and equipment, net		99,351			96,066
Operating lease assets		39,944			38,862
Intangible assets, net		460,083			487,299
Goodwill		837,910			838,867
Other non-current assets		8,727			14,561
Total assets	$	1,824,485		$	1,837,056
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	63,049		$	67,556
Deferred revenue		27,369			27,141
Accrued liabilities		46,668			38,435
Payable to related party pursuant to tax receivable agreement, current portion		5,107			5,107
Current portion of long-term debt		11,952			36,952
Total current liabilities		154,145			175,191
Long-term debt, net of current portion		1,206,276			1,206,802
Operating lease liabilities, net of current portion		35,850			34,984
Payable to related party pursuant to tax receivable agreement, net of current portion		56,615			56,615
Private placement warrant liabilities		42,200			38,466
Asset retirement obligation		12,032			11,824
Deferred tax liabilities, net		28,286			47,524
Other long-term liabilities		13,266			5,686
Total liabilities		1,548,670			1,577,092
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		312,986			309,883
Accumulated deficit		(71,376	)		(81,416	)
Accumulated other comprehensive loss		(2,386	)		(5,094	)
Total stockholders' equity		275,815			259,964
Total liabilities and stockholders' equity	$	1,824,485		$	1,837,056

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 March 31,
($ in thousands, except per share data)	2022			2021
Service revenue	$	161,134		$	89,763
Product sales		9,251			95
Total revenue		170,385			89,858
Cost of service revenue		3,779			880
Cost of product sales		5,995			27
Operating expenses		51,063			30,492
Selling, general and administrative expenses		41,635			28,443
Depreciation, amortization and (gain) loss on disposal of assets, net		35,907			28,265
Total costs and expenses		138,379			88,107
Income from operations		32,006			1,751
Interest expense, net		14,279			9,164
Change in fair value of private placement warrants		3,734			2,067
Loss on extinguishment of debt		—			5,334
Other income, net		(2,866	)		(3,013	)
Total other expenses		15,147			13,552
Income (loss) before income taxes		16,859			(11,801	)
Income tax provision (benefit)		6,819			(2,886	)
Net income (loss)	$	10,040		$	(8,915	)
Other comprehensive income (loss):
Change in foreign currency translation adjustment		2,708			(190	)
Total comprehensive income (loss)	$	12,748		$	(9,105	)
Net income (loss) per share:
Basic	$	0.06		$	(0.05	)
Diluted	$	0.06		$	(0.05	)
Weighted average shares outstanding:
Basic		156,130			162,297
Diluted		160,749			162,297

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


For the Three Months Ended March 31, 2022
	Common Stock				Common Stock Contingent		Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
(In thousands)	Shares		Amount		Consideration		Capital			Deficit			(Loss) Income			Equity
Balance as of December 31, 2021		156,079	$	16	$	36,575	$	309,883		$	(81,416	)	$	(5,094	)	$	259,964
Net income		—		—		—		—			10,040			—			10,040
Vesting of restricted stock units ("RSUs")		154		—		—		—			—			—			—
Exercise of stock options		7		—		—		93			—			—			93
Payment of employee tax withholding related to RSUs vesting		—		—		—		(1,436	)		—			—			(1,436	)
Stock-based compensation		—		—		—		4,446			—			—			4,446
Other comprehensive income, net of tax		—		—		—		—			—			2,708			2,708
Balance as of March 31, 2022		156,240	$	16	$	36,575	$	312,986		$	(71,376	)	$	(2,386	)	$	275,815

For the Three Months Ended March 31, 2021

Balance as of December 31, 2020		162,269	$	16	$	36,575	$	373,620		$	(94,850	)	$	211		$	315,572
Net loss		—		—		—		—			(8,915	)		—			(8,915	)
Vesting of 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

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

condensed consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
($ in thousands)	2022			2021
Cash Flows from Operating Activities:
Net income (loss)	$	10,040		$	(8,915	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		35,675			28,214
Amortization of deferred financing costs and discounts		1,306			1,593
Change in fair value of private placement warrants		3,734			2,067
Loss on extinguishment of debt		—			5,334
Credit loss expense		3,505			2,402
Deferred income taxes		(18,771	)		281
Stock-based compensation		4,446			2,908
Other		354			133
Changes in operating assets and liabilities:
Accounts receivable, net		(14,300	)		(26,672	)
Unbilled receivables		(10,265	)		(859	)
Inventory, net		(5,722	)		(691	)
Prepaid expenses and other assets		8,235			429
Deferred revenue		46			(44	)
Accounts payable and other current liabilities		(477	)		2,374
Other liabilities		13,441			459
Net cash provided by operating activities		31,247			9,013
Cash Flows from Investing Activities:
Payment of contingent consideration		(412	)		—
Purchases of installation and service parts and property and equipment		(11,478	)		(3,704	)
Cash proceeds from the sale of assets		25			56
Net cash used in investing activities		(11,865	)		(3,648	)
Cash Flows from Financing Activities:
Repayment on the revolver		(25,000	)		—
Borrowings of long-term debt		—			996,750
Repayment of long-term debt		(2,255	)		(865,642	)
Payment of debt issuance costs		(54	)		(5,732	)
Payment of debt extinguishment costs		—			(604	)
Proceeds from the exercise of stock options		93			—
Payment of employee tax withholding related to RSUs vesting		(1,436	)		(857	)
Net cash (used in) provided by financing activities		(28,652	)		123,915
Effect of exchange rate changes on cash and cash equivalents		2,231			252
Net (decrease) increase in cash, cash equivalents and restricted cash		(7,039	)		129,532
Cash, cash equivalents and restricted cash - beginning of period		104,432			120,892
Cash, cash equivalents and restricted cash - end of period	$	97,393		$	250,424

Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents	$	93,377		$	249,605
Restricted cash		4,016			819
Total cash, cash equivalents, and restricted cash	$	97,393		$	250,424

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Supplemental cash flow information:
Interest paid	$	8,188	$	6,996
Income taxes paid, net of refunds		1,147		238
Supplemental non-cash investing and financing activities:
Purchases of installation and service parts and property and equipment in accounts payable and accrued liabilities at period-end