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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, 2022

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 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

 

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, 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

3


 

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.

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,
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.

5


 

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.

6


 

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.

7


 

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.

 

 

8


 

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

 

 

4,057

 

 

 

1,355

 

Accrued debt issuance costs

 

 

 

 

 

635

 

Accrued debt extinguishment costs

 

 

 

 

 

665

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

9


 

VERRA MOBILITY CORPORATION

Notes to the CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Description of Business

Verra Mobility Corporation (collectively with its subsidiaries, the “Company” or “Verra Mobility”), formerly known as Gores Holdings II, Inc. (“Gores”), was originally incorporated in Delaware on August 15, 2016, as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses. On January 19, 2017, the Company consummated its initial public offering (the “IPO”), following which its shares began trading on the Nasdaq Capital Market (“