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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 March 31, 2023

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

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 1, 2023, there were 150,391,591 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, 2023

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

 

30

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

38

Item 4. Controls and Procedures

 

38

PART II—OTHER INFORMATION

 

39

Item 1. Legal Proceedings

 

39

Item 1A. Risk Factors

 

39

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

 

39

Item 3. Defaults Upon Senior Securities

 

39

Item 4. Mine Safety Disclosures

 

39

Item 5. Other Information

 

39

Item 6. Exhibits

 

40

SIGNATURES

 

42

 

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 I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022. 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:

customer concentration in our Commercial Services and Government Solutions segments;
our ability to manage our substantial level of indebtedness;
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;
our ability to keep up with technological developments and changing customer preferences;
our ability to compete in a highly competitive and rapidly evolving market;
decreased interest in outsourcing from our customers;
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;
risks and uncertainties related to our share repurchase program;
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 litigation, disputes and regulatory investigations;
our ability to properly perform under our contracts and otherwise satisfy our customers; and
the impact of COVID-19 on our business and results of operations.

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.

3


 

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.

4


 

Part I—Financial Information

Item 1. Financial Statements

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

($ in thousands, except per share data)

 

March 31,
2023

 

 

December 31,
2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

64,267

 

 

$

105,204

 

Restricted cash

 

 

3,550

 

 

 

3,911

 

Accounts receivable (net of allowance for credit losses of $16.5 million and
$
15.9 million at March 31, 2023 and December 31, 2022, respectively)

 

 

178,251

 

 

 

163,786

 

Unbilled receivables

 

 

34,184

 

 

 

30,782

 

Inventory

 

 

18,923

 

 

 

19,307

 

Prepaid expenses and other current assets

 

 

33,258

 

 

 

39,604

 

Total current assets

 

 

332,433

 

 

 

362,594

 

Installation and service parts, net

 

 

26,481

 

 

 

22,923

 

Property and equipment, net

 

 

111,376

 

 

 

109,775

 

Operating lease assets

 

 

38,012

 

 

 

37,593

 

Intangible assets, net

 

 

355,678

 

 

 

377,420

 

Goodwill

 

 

834,299

 

 

 

833,480

 

Other non-current assets

 

 

12,612

 

 

 

12,484

 

Total assets

 

$

1,710,891

 

 

$

1,756,269

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

71,475

 

 

$

79,869

 

Deferred revenue

 

 

31,105

 

 

 

31,164

 

Accrued liabilities

 

 

52,044

 

 

 

48,847

 

Tax receivable agreement liability, current portion

 

 

4,994

 

 

 

4,994

 

Current portion of long-term debt

 

 

9,019

 

 

 

21,935

 

Total current liabilities

 

 

168,637

 

 

 

186,809

 

Long-term debt, net of current portion

 

 

1,140,712

 

 

 

1,190,045

 

Operating lease liabilities, net of current portion

 

 

33,338

 

 

 

33,362

 

Tax receivable agreement liability, net of current portion

 

 

50,900

 

 

 

50,900

 

Private placement warrant liabilities

 

 

38,667

 

 

 

24,066

 

Asset retirement obligations

 

 

13,411

 

 

 

12,993

 

Deferred tax liabilities, net

 

 

20,920

 

 

 

21,149

 

Other long-term liabilities

 

 

7,198

 

 

 

5,875

 

Total liabilities

 

 

1,473,783

 

 

 

1,525,199

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock, $0.0001 par value

 

 

 

 

 

 

Common stock, $0.0001 par value

 

 

15

 

 

 

15

 

Common stock contingent consideration

 

 

36,575

 

 

 

36,575

 

Additional paid-in capital

 

 

306,974

 

 

 

305,423

 

Accumulated deficit

 

 

(93,501

)

 

 

(98,078

)

Accumulated other comprehensive loss

 

 

(12,955

)

 

 

(12,865

)

Total stockholders' equity

 

 

237,108

 

 

 

231,070

 

Total liabilities and stockholders' equity

 

$

1,710,891

 

 

$

1,756,269

 

 

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 March 31,

 

($ in thousands, except per share data)

 

2023

 

 

2022

 

Service revenue

 

$

184,698

 

 

$

161,134

 

Product sales

 

 

7,205

 

 

 

9,251

 

Total revenue

 

 

191,903

 

 

 

170,385

 

Cost of service revenue

 

 

4,230

 

 

 

3,779

 

Cost of product sales

 

 

5,383

 

 

 

5,995

 

Operating expenses

 

 

61,843

 

 

 

51,063

 

Selling, general and administrative expenses

 

 

40,013

 

 

 

41,635

 

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

 

 

30,333

 

 

 

35,907

 

Total costs and expenses

 

 

141,802

 

 

 

138,379

 

Income from operations

 

 

50,101

 

 

 

32,006

 

Interest expense, net

 

 

22,687

 

 

 

14,279

 

Change in fair value of private placement warrants

 

 

14,601

 

 

 

3,734

 

Loss on interest rate swap

 

 

2,798

 

 

 

 

Loss on extinguishment of debt

 

 

1,349

 

 

 

 

Other income, net

 

 

(3,756

)

 

 

(2,866

)

Total other expenses

 

 

37,679

 

 

 

15,147

 

Income before income taxes

 

 

12,422

 

 

 

16,859

 

Income tax provision

 

 

7,845

 

 

 

6,819

 

Net income

 

$

4,577

 

 

$

10,040

 

Other comprehensive (loss) income:

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

 

(90

)

 

 

2,708

 

Total comprehensive income

 

$

4,487

 

 

$

12,748

 

Net income per share:

 

 

 

 

 

 

Basic

 

$

0.03

 

 

$

0.06

 

Diluted

 

$

0.03

 

 

$

0.06

 

Weighted average shares outstanding:

 

 

 

 

 

 

Basic

 

 

149,165

 

 

 

156,130

 

Diluted

 

 

153,129

 

 

 

160,749

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

6


 

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

For the Three Months Ended March 31, 2023

 

 

 

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, 2022

 

 

148,962

 

 

$

15

 

 

$

36,575

 

 

$

305,423

 

 

$

(98,078

)

 

$

(12,865

)

 

$

231,070

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,577

 

 

 

 

 

 

4,577

 

Vesting of restricted stock units ("RSUs") and performance share units ("PSUs")

 

 

313

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

53

 

 

 

 

 

 

 

 

 

699

 

 

 

 

 

 

 

 

 

699

 

Payment of employee tax withholding related to RSUs and PSUs vesting

 

 

 

 

 

 

 

 

 

 

 

(2,526

)

 

 

 

 

 

 

 

 

(2,526

)

Exercise of public warrants

 

 

633

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

3,378

 

 

 

 

 

 

 

 

 

3,378

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(90

)

 

 

(90

)

Balance as of March 31, 2023

 

 

149,961

 

 

$

15

 

 

$

36,575

 

 

$

306,974

 

 

$

(93,501

)

 

$

(12,955

)

 

$

237,108

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 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

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

 

7


 

VERRA MOBILITY CORPORATION

condensed consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended March 31,

 

($ in thousands)

 

2023

 

 

2022

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

4,577

 

 

$

10,040

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

30,309

 

 

 

35,675

 

Amortization of deferred financing costs and discounts

 

 

1,277

 

 

 

1,306

 

Change in fair value of private placement warrants

 

 

14,601

 

 

 

3,734

 

Loss on interest rate swap

 

 

1,552

 

 

 

 

Loss on extinguishment of debt

 

 

1,349

 

 

 

 

Credit loss expense

 

 

1,697

 

 

 

3,505

 

Deferred income taxes

 

 

(2,249

)

 

 

(18,771

)

Stock-based compensation

 

 

3,378

 

 

 

4,446

 

Other

 

 

8

 

 

 

354

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(16,222

)

 

 

(14,300

)

Unbilled receivables

 

 

(3,464

)

 

 

(10,265

)

Inventory

 

 

180

 

 

 

(5,722

)

Prepaid expenses and other assets

 

 

6,232

 

 

 

8,235

 

Deferred revenue

 

 

95

 

 

 

46

 

Accounts payable and other current liabilities

 

 

(4,291

)

 

 

(477

)

Other liabilities

 

 

6,188

 

 

 

13,441

 

Net cash provided by operating activities

 

 

45,217

 

 

 

31,247

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

Payment of contingent consideration

 

 

 

 

 

(412

)

Payments for interest rate swap

 

 

(1,246

)

 

 

 

Purchases of installation and service parts and property and equipment

 

 

(18,372

)

 

 

(11,478

)

Cash proceeds from the sale of assets

 

 

34

 

 

 

25

 

Net cash used in investing activities

 

 

(19,584

)

 

 

(11,865

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

Repayment on the revolver

 

 

 

 

 

(25,000

)

Repayment of long-term debt

 

 

(64,755

)

 

 

(2,255

)

Payment of debt issuance costs

 

 

(44

)

 

 

(54

)

Proceeds from the exercise of stock options

 

 

699

 

 

 

93

 

Payment of employee tax withholding related to RSUs and PSUs vesting

 

 

(2,526

)

 

 

(1,436

)

Net cash used in financing activities