8-K
false000168274500016827452022-11-022022-11-020001682745us-gaap:WarrantMember2022-11-022022-11-02

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 2, 2022

 

VERRA MOBILITY CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

1-37979

81-3563824

(State or other jurisdiction
of incorporation
)

(Commission
File Number
)

(IRS Employer
Identification No.
)

 

1150 N. Alma School Road
Mesa, Arizona
(Address of principal executive offices)

85201
(Zip Code)

(480) 443-7000

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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.

 

 

 

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Item 2.02 Results of Operations and Financial Condition.

On November 2, 2022, Verra Mobility Corporation (the “Company”) issued a press release announcing its financial results for the third quarter ended September 30, 2022. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
 

Item 7.01 Regulation FD Disclosure.

The Company will host a conference call and live webcast to discuss its second quarter 2022 financial results on November 2, 2022, at 5:00 p.m. Eastern time. Live and archived webcasts of the presentation will also be available on the Company’s investor relations website at ir.verramobility.com, although the Company reserves the right to discontinue that availability at any time.

On November 2, 2022, the Company posted supplemental investor materials on its investor relations website. The Company uses its investor relations website as a means of disclosing material non-public information, announcing upcoming investor conferences and for complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor the Company’s investor relations website in addition to following its press releases, SEC filings and public conference calls and webcasts.

The information being furnished pursuant to Item 2.02, including Exhibit 99.1, and Item 7.01 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit Number

 

Description of Exhibits

 

99.1

 

Press Release, dated November 2, 2022, issued by Verra Mobility Corporation.

 

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

2


 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: November 2, 2022

Verra Mobility Corporation

 

 

 

 

By:

/s/ Craig Conti

 

Name:

Craig Conti

 

Title:

Chief Financial Officer

 

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EX-99.1

Exhibit 99.1

https://cdn.kscope.io/feeb6e70cb856f17264df4d57c57942f-img124761870_0.jpg
 

Verra Mobility Announces Third Quarter Financial Results

 

Total revenue of $197.7 million
Net income of $24.6 million
Generated cash flows from operations of $52.4 million
Expected financial performance at the higher end of most recent guidance ranges

 

Mesa, AZ, November 2, 2022 – Verra Mobility Corporation (NASDAQ: VRRM), a leading provider of smart mobility technology solutions, announced today the financial results for the quarter ended September 30, 2022.

“We delivered an outstanding third quarter, highlighted by strong revenue and adjusted EBITDA growth and solid free cash flow generation,” said David Roberts, President and CEO, Verra Mobility. “We are benefitting from several macro trends, including continued robust travel demand by consumers and businesses as well as strong and growing interest in automated enforcement for road safety and increased traffic flow. We are poised to close out 2022 on a high note and are excited to start 2023 with strong operating momentum across our three business units.”

Third Quarter 2022 Financial Highlights

Revenue: Total revenue for the third quarter of 2022 was $197.7 million, an increase of 22% compared to $162.1 million for the third quarter of 2021. Service revenue growth was 27% due to increases in travel volume and related tolling activity in the Commercial Services segment which grew 11%, and the growth in our Government Solutions segment, which increased 20% and was driven by the school zone speed expansion. The remaining increase of $17.1 million in service revenue was contributed by T2 Systems.
Net income: Net income for the third quarter of 2022 was $24.6 million, or $0.15 per share based on 158.3 million diluted weighted average shares outstanding. Net income for the comparable 2021 period was $27.3 million, or $0.14 per share, based on 165.4 million diluted weighted average shares outstanding.
Adjusted Earnings Per Share (EPS): Adjusted EPS for the third quarter of 2022 was $0.27 per share compared to $0.26 per share for the third quarter of 2021.
Adjusted EBITDA: Adjusted EBITDA was $90.9 million for the third quarter of 2022 compared to $82.1 million for the same period last year. Adjusted EBITDA margin was 46% of total revenue for 2022 and 51% for 2021.

 


 

We report our results of operations based on three operating segments:

Commercial Services offers automated toll and violations management and title and registration solutions to rental car companies, fleet management companies and other large fleet owners.
Government Solutions delivers automated safety solutions to municipalities, school districts and government agencies, including services and technology that enable photo enforcement related to speed, red-light, school bus and city bus lane management.
Parking Solutions provides an integrated suite of parking software and hardware solutions to universities, municipalities, parking operators, healthcare facilities and transportation hubs in the United States and Canada.

Third Quarter 2022 Segment Detail

The Commercial Services segment generated total revenue of $86.1 million, a 11% increase compared to $77.3 million in the same period in 2021. Segment profit was $56.4 million, a 10% increase from $51.3 million in the prior year. The increases in revenue and profit resulted from increased travel volume and related tolling activity in 2022 compared to the prior period. The segment profit margin was 65% for 2022 and 66% for 2021.
The Government Solutions segment generated total revenue of $89.7 million, a 6% increase compared to $84.8 million in the same period in 2021. The increase was mainly due to service revenue growth from the school zone speed expansion, offset by a reduction in product sales compared to the prior year. The segment profit was $30.4 million in 2022 compared to $30.7 million in the prior year. The segment profit margin was 34% for 2022 and 36% for 2021.
The Parking Solutions segment generated total revenue of $21.9 million with no comparable amounts in the prior year. The segment profit was $4.2 million with a profit margin of 19% for 2022.

 

Year-To-Date 2022 Financial Highlights

Revenue: Total revenue for year-to-date 2022 was $555.5 million, an increase of 46% compared to $380.6 million for year-to-date 2021. Organic service revenue growth was 29% which was mainly due to increase in travel volume and related tolling activity in the Commercial Services segment, and the organic service revenue growth in our Government Solutions segment, which was 24%, driven by the school zone speed expansion. Redflex and T2 Systems acquisitions contributed approximately $79.7 million to service revenue growth. In addition, product sales increased in 2022 by $6.7 million compared to 2021.
Net income: Net income for year-to-date 2022 was $64.3 million, or $0.38 per share, based on 160.4 million diluted weighted average shares outstanding. Net income for the comparable 2021 period was $22.4 million, or $0.14 per share, based on 164.8 million diluted weighted average shares outstanding.
Adjusted EBITDA: Adjusted EBITDA was $254.9 million for year-to-date 2022, compared to $191.0 million for year-to-date 2021. Adjusted EBITDA margin was 46% of total revenue for year-to-date 2022 and 50% for 2021.

Liquidity: As of September 30, 2022, cash and cash equivalents were $51.6 million and we generated $52.4 million and $148.8 million, respectively, in cash flows from operations for the three and nine months ended September 30, 2022.

Share Repurchases:

In May 2022, our Board of Directors authorized a share repurchase program for up to an aggregate amount of $125.0 million of our outstanding shares of Class A Common Stock over the next 12 months from time to time in open market transactions, accelerated share repurchases (“ASR”) or in privately negotiated transactions, each as permitted under

2

 


 

applicable rules and regulations, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Securities Exchange Act of 1934 (the “Exchange Act”).

On May 12, 2022, we paid $50.0 million, which represented the amount initially authorized for an ASR, and received an initial delivery of 2,739,726 shares of our Class A Common Stock in accordance with an ASR agreement with a third-party financial institution. The final settlement occurred on August 3, 2022, at which time, we received 445,086 additional shares calculated using a volume-weighted average price over the term of the ASR agreement. In addition, we paid $6.9 million and repurchased 445,791 shares of our Class A Common Stock through open market transactions during the nine months ended September 30, 2022. During the third quarter of 2022, we discontinued open market repurchases and our Board of Directors authorized an ASR for the remaining availability under the share repurchase program. On August 19, 2022, we paid $68.1 million for a second ASR, and received an initial delivery of 3,300,000 shares of our Class A Common Stock in accordance with an ASR agreement with a third-party financial institution. The final settlement is expected to occur during the fourth quarter of 2022, at which time, a volume-weighted average price calculation over the term of the ASR agreement will be used to determine the final number and the average price of shares repurchased and retired. We paid a total of $125.0 million for share repurchases and $0.1 million for direct costs during the nine months ended September 30, 2022 using available cash on hand.

2022 Full Year Guidance

Any guidance that we provide is subject to change as a variety of factors can affect actual operating results. Certain of the factors that may impact our actual operating results are identified below in the safe harbor language included within Forward-Looking Statements of this press release. In addition, our acquisition of T2 Systems includes preliminary allocation of the fair values of assets acquired and liabilities assumed as of the acquisition date. Purchase price allocations are subject to change within the measurement period (up to one year from the acquisition date).

Based on our year-to-date results and our outlook for the remainder of the year, we are expecting to deliver results at the higher end of our 2022 guidance for revenue and adjusted EBITDA, as follows:

Total revenue at the higher end of the previously guided range of $720 million to $740 million
Adjusted EBITDA at the higher end of the previously guided range of $325 million to $335 million


Conference Call Details

Date: November 2, 2022

Time: 5:00 p.m. Eastern Time

U.S. and Canadian Callers Dial-in: 1-800-289-0438

Outside of U.S. and Canada Dial-in: 1-323-794-2423 for international callers with conference ID 3600914

Webcast Information: Available live in the “Investor Relations” section of our website at http://ir.verramobility.com.

An audio replay of the call will also be available until 11:59 p.m. ET on November 16, 2022, by dialing 1-844-512-2921 for the U.S. or Canada, and 1-412-317-6671 for international callers and entering passcode 3600914. In addition, an archived webcast will be available in the “News & Events” section of the Investor Relations website at http://ir.verramobility.com.

 

About Verra Mobility

 

Verra Mobility is a leading provider of smart mobility technology solutions that make transportation safer, smarter and more connected. The Company sits at the center of the mobility ecosystem, bringing together vehicles, hardware, software, data and people to enable safe, efficient solutions for customers globally. Verra Mobility’s transportation safety systems and parking management solutions protect lives, improve urban and motorway mobility and support healthier communities. The Company also solves complex payment, utilization and compliance challenges for fleet

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owners and rental car companies. Headquartered in Arizona, Verra Mobility operates in North America, Europe, Asia and Australia. For more information, please visit www.verramobility.com.

Forward-Looking Statements

This press release contains forward-looking statements which address our expected future business and financial performance, and may contain words such as “goal,” “target,” “future,” “estimate,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “project,” “may,” “should,” “will” or similar expressions. Examples of forward-looking statements include, among others, statements regarding the benefits of our strategic acquisitions, changes in the market for our products and services, expected operating results, such as revenue growth, expansion plans and opportunities, and earnings guidance related to 2022 financial and operational metrics. Forward-looking statements involve risks and uncertainties and a number of factors could cause actual results to differ materially from those currently anticipated. These factors include, but are not limited to: (1) the disruption to our business and results of operations as a result of the COVID-19 pandemic; (2) customer concentration in our Commercial Services and Government Solutions segments; (3) decreases in the prevalence of automated and other similar methods of photo enforcement, parking solutions or the use of tolling; (4) risks and uncertainties related to our government contracts, including but not limited to administrative hurdles, legislative changes, termination rights, audits and investigations; (5) decreased interest in outsourcing from our customers; (6) our ability to properly perform under our contracts and otherwise satisfy our customers; (7) our ability to compete in a highly competitive and rapidly evolving market; (8) our ability to keep up with technological developments and changing customer preferences; (9) the success of our new products and changes to existing products and services; (10) our ability to successfully integrate our recent or future acquisitions; (11) failures in or breaches of our networks or systems, including as a result of cyber-attacks; and (12) other risks and uncertainties indicated from time to time in documents filed or to be filed with the Securities and Exchange Commission (the “SEC”) by Verra Mobility. This press release should be read in conjunction with the information included in our other press releases, reports and other filings with the SEC. Understanding the information contained in these filings is important in order to fully understand our reported financial results and our business outlook for future periods.

Additional Information

We periodically provide information for investors on our corporate website, www.verramobility.com, and our investor relations website, ir.verramobility.com.

We intend to use our website as a means of disclosing material non-public information and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.

Non-GAAP Financial Measures

In addition to disclosing financial results that are determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we also disclose certain non-GAAP financial information in this press release. These financial measures are not recognized measures under GAAP and are not intended to be, and should not be, considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. EBITDA, Adjusted EBITDA, Free Cash Flow, Adjusted Net Income, Adjusted EPS and Adjusted EBITDA Margin are non-GAAP financial measures as defined by SEC rules. These non-GAAP financial measures may be determined or calculated differently by other companies. As a result, they may not be comparable to similarly titled performance measures presented by other companies. Reconciliations of these non-GAAP measurements to the most directly comparable GAAP financial measurements have been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliations.

We are not providing a quantitative reconciliation of Adjusted EBITDA included in our 2022 financial guidance above, in reliance on the “unreasonable efforts” exception for forward-looking non-GAAP measures set forth in SEC rules because certain financial information, the probable significance of which cannot be determined, is not available

4

 


 

and cannot be reasonably estimated without unreasonable effort and expense. In this regard, we are unable to provide a reconciliation of forward-looking Adjusted EBITDA to GAAP net income, due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. Due to the uncertainty of estimates and assumptions used in preparing forward-looking non-GAAP measures, we caution investors that actual results could differ materially from these non-GAAP financial projections.

We use these non-GAAP financial metrics to measure our performance from period to period both at the consolidated level as well as within our operating segments, to evaluate and fund incentive compensation programs and to compare our results to those of our competitors. In addition, we also believe that these non-GAAP measures provide useful information to investors regarding financial and business trends related to our results of operations and that when non-GAAP financial information is viewed with GAAP financial information, investors are provided with a more meaningful understanding of our ongoing operating performance. These non-GAAP measures have certain limitations as analytical tools and should not be used as substitutes for net income, cash flows from operations, earnings per share or other consolidated income or cash flow data prepared in accordance with GAAP.

 

EBITDA and Adjusted EBITDA

We define EBITDA as net income adjusted to exclude interest expense, net, income taxes, depreciation and amortization. Adjusted EBITDA further excludes certain non-cash expenses and other transactions that management believes are not indicative of our ongoing operating performance. EBITDA and Adjusted EBITDA, as defined, exclude some but not all items that affect our cash flow from operating activities.

 

Free Cash Flow

We define Free Cash Flow as cash flow from operations less capital expenditures.

 

Adjusted Net Income

We define “Adjusted Net Income” as net income adjusted to exclude amortization of intangibles and certain non-cash or non-recurring expenses.

 

Adjusted EPS

We define “Adjusted EPS” as Adjusted Net Income divided by the diluted weighted average shares for the period.

 

Adjusted EBITDA Margin

We define “Adjusted EBITDA Margin” as Adjusted EBITDA as a percentage of total revenue.

 

 

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VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

($ in thousands, except per share data)

 

September 30,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

51,576

 

 

$

101,283

 

Restricted cash

 

 

4,053

 

 

 

3,149

 

Accounts receivable (net of allowance for credit losses of $17.7 million and
$12.1 million at September 30, 2022 and December 31, 2021, respectively)

 

 

175,153

 

 

 

160,979

 

Unbilled receivables

 

 

32,784

 

 

 

29,109

 

Inventory, net

 

 

17,922

 

 

 

12,093

 

Prepaid expenses and other current assets

 

 

35,955

 

 

 

41,456

 

Total current assets

 

 

317,443

 

 

 

348,069

 

Installation and service parts, net

 

 

19,024

 

 

 

13,332

 

Property and equipment, net

 

 

105,268

 

 

 

96,066

 

Operating lease assets

 

 

36,399

 

 

 

38,862

 

Intangible assets, net

 

 

399,992

 

 

 

487,299

 

Goodwill

 

 

827,694

 

 

 

838,867

 

Other non-current assets

 

 

12,513

 

 

 

14,561

 

Total assets

 

$

1,718,333

 

 

$

1,837,056

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

69,135

 

 

$

67,556

 

Deferred revenue

 

 

32,758

 

 

 

27,141

 

Accrued liabilities

 

 

45,068

 

 

 

38,435

 

Tax receivable agreement liability, current portion

 

 

5,107

 

 

 

5,107

 

Current portion of long-term debt

 

 

9,019

 

 

 

36,952

 

Total current liabilities

 

 

161,087

 

 

 

175,191

 

Long-term debt, net of current portion

 

 

1,204,006

 

 

 

1,206,802

 

Operating lease liabilities, net of current portion

 

 

32,692

 

 

 

34,984

 

Tax receivable agreement liability, net of current portion

 

 

55,650

 

 

 

56,615

 

Private placement warrant liabilities

 

 

33,333

 

 

 

38,466

 

Asset retirement obligation

 

 

12,687

 

 

 

11,824

 

Deferred tax liabilities, net

 

 

18,635

 

 

 

47,524

 

Other long-term liabilities

 

 

5,352

 

 

 

5,686

 

Total liabilities

 

 

1,523,442

 

 

 

1,577,092

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock, $0.0001 par value

 

 

 

 

 

 

Common stock, $0.0001 par value

 

 

15

 

 

 

16

 

Common stock contingent consideration

 

 

36,575

 

 

 

36,575

 

Additional paid-in capital

 

 

307,471

 

 

 

309,883

 

Accumulated deficit

 

 

(128,236

)

 

 

(81,416

)

Accumulated other comprehensive loss

 

 

(20,934

)

 

 

(5,094

)

Total stockholders' equity

 

 

194,891

 

 

 

259,964

 

Total liabilities and stockholders' equity

 

$

1,718,333

 

 

$

1,837,056

 

 

 

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VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

($ in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

$

180,617

 

 

$

141,811

 

 

$

516,253

 

 

$

348,000

 

Product sales

 

 

17,039

 

 

 

20,284

 

 

 

39,275

 

 

 

32,610

 

Total revenue

 

 

197,656

 

 

 

162,095

 

 

 

555,528

 

 

 

380,610

 

Cost of service revenue

 

 

4,144

 

 

 

1,412

 

 

 

11,636

 

 

 

3,624

 

Cost of product sales

 

 

11,317

 

 

 

9,391

 

 

 

25,638

 

 

 

15,562

 

Operating expenses

 

 

60,536

 

 

 

48,309

 

 

 

166,795

 

 

 

115,235

 

Selling, general and administrative expenses

 

 

41,126

 

 

 

31,580

 

 

 

122,913

 

 

 

86,252

 

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

 

 

35,035

 

 

 

29,529

 

 

 

105,881

 

 

 

84,806

 

Total costs and expenses

 

 

152,158

 

 

 

120,221

 

 

 

432,863

 

 

 

305,479

 

Income from operations

 

 

45,498

 

 

 

41,874

 

 

 

122,665

 

 

 

75,131

 

Interest expense, net

 

 

20,260

 

 

 

11,637

 

 

 

49,024

 

 

 

32,481

 

Change in fair value of private placement warrants

 

 

(2,267

)

 

 

(5,067

)

 

 

(5,133

)

 

 

5,067

 

Tax receivable agreement liability adjustment

 

 

 

 

 

 

 

 

(965

)

 

 

1,661

 

(Gain) loss on extinguishment of debt

 

 

(3,005

)

 

 

 

 

 

(3,005

)

 

 

5,334

 

Other income, net

 

 

(2,462

)

 

 

(3,494

)

 

 

(9,367

)

 

 

(9,305

)

Total other expenses

 

 

12,526

 

 

 

3,076

 

 

 

30,554

 

 

 

35,238

 

Income before income taxes

 

 

32,972

 

 

 

38,798

 

 

 

92,111

 

 

 

39,893

 

Income tax provision

 

 

8,396

 

 

 

11,492

 

 

 

27,854

 

 

 

17,510

 

Net income

 

$

24,576

 

 

$

27,306

 

 

$

64,257

 

 

$

22,383

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

 

(8,167

)

 

 

(3,818

)

 

 

(15,840

)

 

 

(3,657

)

Total comprehensive income

 

$

16,409

 

 

$

23,488

 

 

$

48,417

 

 

$

18,726

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

 

$

0.17

 

 

$

0.42

 

 

$

0.14

 

Diluted

 

$

0.15

 

 

$

0.14

 

 

$

0.38

 

 

$

0.14

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

151,429

 

 

 

159,358

 

 

 

154,067

 

 

 

161,334

 

Diluted

 

 

158,304

 

 

 

165,431

 

 

 

160,433

 

 

 

164,808

 

 

 

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VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended September 30,

 

($ in thousands)

 

2022

 

 

2021

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

24,576

 

 

$

27,306

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

35,079

 

 

 

29,529

 

Amortization of deferred financing costs and discounts

 

 

1,429

 

 

 

1,132

 

Change in fair value of private placement warrants

 

 

(2,267

)

 

 

(5,067

)

Gain on extinguishment of debt

 

 

(3,005

)

 

 

 

Credit loss expense

 

 

3,856

 

 

 

2,853

 

Deferred income taxes

 

 

(1,610

)

 

 

(7,852

)

Stock-based compensation

 

 

4,644

 

 

 

3,703

 

Other

 

 

(136

)

 

 

(19

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(6,734

)

 

 

37,528

 

Unbilled receivables

 

 

713

 

 

 

(3,557

)

Inventory, net

 

 

(1,659

)

 

 

(550

)

Prepaid expenses and other assets

 

 

(526

)

 

 

(3,287

)

Deferred revenue

 

 

3,374

 

 

 

(886

)

Accounts payable and other current liabilities

 

 

(3,689

)

 

 

12,145

 

Other liabilities

 

 

(1,644

)

 

 

(1,172

)

Net cash provided by operating activities

 

 

52,401

 

 

 

91,806

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

Purchases of installation and service parts and property and equipment

 

 

(13,203

)

 

 

(7,376

)

Cash proceeds from the sale of assets

 

 

68

 

 

 

66

 

Net cash used in investing activities

 

 

(13,135

)

 

 

(7,310

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

Repayment of long-term debt

 

 

(2,254

)

 

 

(1,624

)

Payment of debt issuance costs

 

 

(164

)

 

 

(121

)

Share repurchases and retirement

 

 

(69,790

)

 

 

(100,000

)

Proceeds from exercise of stock options

 

 

838

 

 

 

21

 

(Payment) adjustment of employee tax withholding related to RSUs vesting

 

 

(1,433

)

 

 

29

 

Settlement of contingent consideration

 

 

(205

)

 

 

 

Net cash used in financing activities

 

 

(73,008

)

 

 

(101,695

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(1,190

)

 

 

(2,114

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(34,932

)

 

 

(19,313

)

Cash, cash equivalents and restricted cash - beginning of period

 

 

90,561

 

 

 

150,505

 

Cash, cash equivalents and restricted cash - end of period

 

$

55,629

 

 

$

131,192

 

 

 

 

 

 

 

 

 

 

8

 


 

 

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

($ in thousands)

 

2022

 

 

2021

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

64,257

 

 

$

22,383

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

105,294

 

 

 

84,756

 

Amortization of deferred financing costs and discounts

 

 

4,122

 

 

 

3,854

 

Change in fair value of private placement warrants

 

 

(5,133

)

 

 

5,067

 

Tax receivable agreement liability adjustment

 

 

(965

)

 

 

1,661

 

(Gain) loss on extinguishment of debt

 

 

(3,005

)

 

 

5,334

 

Credit loss expense

 

 

10,892

 

 

 

6,716

 

Deferred income taxes

 

 

(17,310

)

 

 

(8,677

)

Stock-based compensation

 

 

13,656

 

 

 

10,184

 

Other

 

 

624

 

 

 

238

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(25,846

)

 

 

(5,442

)

Unbilled receivables

 

 

(4,205

)

 

 

(5,655

)

Inventory, net

 

 

(9,056

)

 

 

373

 

Prepaid expenses and other assets

 

 

8,405

 

 

 

(5,387

)

Deferred revenue

 

 

6,291

 

 

 

1,260

 

Accounts payable and other current liabilities

 

 

(1,978

)

 

 

14,336

 

Other liabilities

 

 

2,733

 

 

 

(1,717

)

Net cash provided by operating activities

 

 

148,776

 

 

 

129,284

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

Acquisition of business, net of cash and restricted cash acquired

 

 

 

 

 

(107,004

)

Partial payment of contingent consideration

 

 

(647

)

 

 

 

Purchases of installation and service parts and property and equipment

 

 

(35,927

)

 

 

(15,633

)

Cash proceeds from the sale of assets

 

 

140

 

 

 

225

 

Net cash used in investing activities

 

 

(36,434

)

 

 

(122,412

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

Repayment on the revolver

 

 

(25,000

)

 

 

 

Borrowings of long-term debt

 

 

 

 

 

996,750

 

Repayment of long-term debt

 

 

(6,764

)

 

 

(882,905

)

Payment of debt issuance costs

 

 

(410

)

 

 

(6,628

)

Payment of debt extinguishment costs

 

 

 

 

 

(1,066

)

Share repurchases and retirement

 

 

(125,071

)

 

 

(100,000

)

Proceeds from exercise of stock options

 

 

997

 

 

 

108

 

Payment of employee tax withholding related to RSUs vesting

 

 

(3,072

)

 

 

(924

)

Settlement of contingent consideration

 

 

(205

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(159,525

)

 

 

5,335

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(1,620

)

 

 

(1,907

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(48,803

)

 

 

10,300

 

Cash, cash equivalents and restricted cash - beginning of period

 

 

104,432

 

 

 

120,892

 

Cash, cash equivalents and restricted cash - end of period

 

$

55,629

 

 

$

131,192

 

 

 

 

9

 


 

VERRA MOBILITY CORPORATION

 

ADJUSTED EBITDA RECONCILIATION (Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

($ in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

24,576

 

 

$

27,306

 

 

$

64,257

 

 

$

22,383

 

Interest expense, net

 

 

20,260

 

 

 

11,637

 

 

 

49,024

 

 

 

32,481

 

Income tax provision

 

 

8,396

 

 

 

11,492

 

 

 

27,854

 

 

 

17,510

 

Depreciation and amortization

 

 

35,079

 

 

 

29,529

 

 

 

105,294

 

 

 

84,756

 

EBITDA

 

 

88,311

 

 

 

79,964

 

 

 

246,429

 

 

 

157,130

 

Transaction and other related expenses (i)

 

 

2,968

 

 

 

2,678

 

 

 

3,457

 

 

 

10,110

 

Transformation expenses

 

 

243

 

 

 

773

 

 

 

509

 

 

 

1,468

 

Change in fair value of private placement warrants (ii)

 

 

(2,267

)

 

 

(5,067

)

 

 

(5,133

)

 

 

5,067

 

Tax receivable agreement liability adjustment (iii)

 

 

 

 

 

 

 

 

(965

)

 

 

1,661

 

(Gain) loss on extinguishment of debt (iv)

 

 

(3,005

)

 

 

 

 

 

(3,005

)

 

 

5,334

 

Stock-based compensation (v)

 

 

4,644

 

 

 

3,703

 

 

 

13,656

 

 

 

10,184

 

Adjusted EBITDA

 

$

90,894

 

 

$

82,051

 

 

$

254,948

 

 

$

190,954

 

 

(i)
Transaction and other related expenses incurred in 2022 primarily related to T2 Systems acquisition, an acquisition-related adjustment recognized subsequent to the measurement period and other deal costs. Transaction and other related expenses incurred in 2021 primarily related to costs associated with our Redflex acquisition and other deal costs, and certain costs for the debt offering of senior unsecured notes and refinancing the first lien term loan in March 2021.
(ii)
This consists of adjustments to the private placement warrants liability from the re-measurement to fair value at the end of each reporting period.
(iii)
The tax receivable agreement liability adjustment in 2022 is arising from lower estimated state tax rates due to changes in apportionment, whereas in 2021 it was arising from higher estimated state tax rates due to changes in statutory rates.
(iv)
The gain on extinguishment of debt in 2022 is related to the forgiveness of debt related to the Paycheck Protection Program loan assumed during the Redflex acquisition. The loss on extinguishment of debt in 2021 consists of a $4.0 million write-off of pre-existing deferred financing costs and discounts and $1.3 million of lender and third-party costs associated with the issuance of the 2021 first lien term loan.
(v)
Stock-based compensation represents the non-cash charge related to the issuance of awards under the Verra Mobility Corporation 2018 Equity Incentive Plan.

 

 

FREE CASH FLOW (Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

($ in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net cash provided by operating activities

 

$

52,401

 

 

$

91,806

 

 

$

148,776

 

 

$

129,284

 

Purchases of installation and service parts and property and equipment

 

 

(13,203

)

 

 

(7,376

)

 

 

(35,927

)

 

 

(15,633

)

Free cash flow

 

$

39,198

 

 

$

84,430

 

 

$