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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, 2023

☐ 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

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.

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)	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.

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.

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.

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		(66,626	)		(28,652	)
Effect of exchange rate changes on cash and cash equivalents		(305	)		2,231
Net decrease in cash, cash equivalents and restricted cash		(41,298	)		(7,039	)
Cash, cash equivalents and restricted cash - beginning of period		109,115			104,432
Cash, cash equivalents and restricted cash - end of period	$	67,817		$	97,393

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)