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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 September 30, 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 October 31, 2022, there were 149,875,708 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, 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		6
Condensed Consolidated Statements of Stockholders’ Equity		7
Condensed Consolidated Statements of Cash Flows		9
Notes to the Condensed Consolidated Financial Statements		11
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		48
Item 1. Legal Proceedings		48
Item 1A. Risk Factors		48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		48
Item 3. Defaults Upon Senior Securities		49
Item 4. Mine Safety Disclosures		49
Item 5. Other Information		49
Item 6. Exhibits		50
SIGNATURES		52

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 for the year ended December 31, 2021. 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:

•

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

•

customer concentration in our Commercial Services and Government Solutions segments;

•

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

•

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

•

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;

•

risks and uncertainties related to our share repurchase program; and

•

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

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 occur. 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. 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.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, are available free of charge on our website, verramobility.com, under the heading “Investors” immediately after they are filed with, or furnished to, the SEC. We use our Investor Relations website, ir.verramobility.com, as a means of disclosing information which may be of interest or material to our investors and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, public conference calls, webcasts, and social media. Information contained on or accessible through, including any reports available on, our website is not a part of, and is not incorporated by reference into, this Quarterly Report on Form 10-Q or any other report or document we file with the SEC. Any reference to our website in this Form 10-Q is intended to be an inactive textual reference only.

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, 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 (Note 14)
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

See accompanying Notes to the Condensed Consolidated Financial Statements.

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

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, 2022
	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, 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
Net income		—			—			—		—			29,641			—			29,641
Share repurchases and retirement		(3,076	)		(1	)		—		(6,163	)		(49,117	)		—			(55,281	)
Vesting of RSUs		51			—			—		—			—			—			—
Exercise of stock options		5			—			—		66			—			—			66
Payment of employee tax withholding related to RSUs vesting		—			—			—		(203	)		—			—			(203	)
Stock-based compensation		—			—			—		4,566			—			—			4,566
Other comprehensive loss, net of tax		—			—			—		—			—			(10,381	)		(10,381	)
Balance as of June 30, 2022