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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, 2024

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

 

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 April 26, 2024, there were 166,524,776 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, 2024

TABLE OF CONTENTS

 

PART I—FINANCIAL INFORMATION

 

4

Item 1. Financial Statements

 

4

Condensed Consolidated Balance Sheets

 

4

Condensed Consolidated Statements of Operations and Comprehensive Income

 

5

Condensed Consolidated Statements of Stockholders’ Equity

 

6

Condensed Consolidated Statements of Cash Flows

 

7

Notes to the Condensed Consolidated Financial Statements

 

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

24

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

32

Item 4. Controls and Procedures

 

33

PART II—OTHER INFORMATION

 

34

Item 1. Legal Proceedings

 

34

Item 1A. Risk Factors

 

34

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

 

34

Item 3. Defaults Upon Senior Securities

 

35

Item 4. Mine Safety Disclosures

 

35

Item 5. Other Information

 

35

Item 6. Exhibits

 

36

SIGNATURES

 

37

 

2


 

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of federal securities laws. All statements contained in this Report 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.

The future events and trends discussed in this Report 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 include the risks and uncertainties described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 (our “Annual Report”), which highlight, among other risks:

customer concentration in our Commercial Services and Government 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 or political acceptance of, or an increase in governmental restrictions regarding, automated and other similar methods of photo enforcement, parking solutions or the use of tolling;
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;
risks and uncertainties related to our international operations;
our failure to acquire necessary intellectual property or adequately protect our intellectual property;
our ability to manage our substantial level of indebtedness; and
our reliance on specialized third-party providers.

You should not rely on forward-looking statements as predictions of future events. We operate in a very competitive and rapidly changing environment and new risks emerge from time to time. The forward-looking statements in this Report represent our views as of the date hereof. We undertake no obligation to update any of these forward-looking statements for any reason or to conform these statements to actual results or revised expectations.

Our Annual Reports 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 Report or any other report or document we file with the SEC. Any reference to our website in this Report 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 Report refer to Verra Mobility Corporation, a Delaware corporation, and its subsidiaries taken as a whole.

3


 

Part I—Financial Information

Item 1. Financial Statements

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In thousands, except per share data)

 

March 31,
2024

 

 

December 31,
2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

149,520

 

 

$

136,309

 

Restricted cash

 

 

3,708

 

 

 

3,413

 

Accounts receivable (net of allowance for credit losses of $20.6 million and
$
18.5 million at March 31, 2024 and December 31, 2023, respectively)

 

 

181,961

 

 

 

197,824

 

Unbilled receivables

 

 

43,323

 

 

 

37,065

 

Inventory

 

 

17,298

 

 

 

17,966

 

Prepaid expenses and other current assets

 

 

42,772

 

 

 

46,961

 

Total current assets

 

 

438,582

 

 

 

439,538

 

Installation and service parts, net

 

 

21,844

 

 

 

22,895

 

Property and equipment, net

 

 

126,975

 

 

 

123,248

 

Operating lease assets

 

 

31,599

 

 

 

33,523

 

Intangible assets, net

 

 

283,412

 

 

 

301,025

 

Goodwill

 

 

834,591

 

 

 

835,835

 

Other non-current assets

 

 

32,855

 

 

 

33,919

 

Total assets

 

$

1,769,858

 

 

$

1,789,983

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

75,573

 

 

$

78,749

 

Deferred revenue

 

 

24,707

 

 

 

28,788

 

Accrued liabilities

 

 

54,067

 

 

 

93,119

 

Tax receivable agreement liability, current portion

 

 

5,098

 

 

 

5,098

 

Current portion of long-term debt

 

 

 

 

 

9,019

 

Total current liabilities

 

 

159,445

 

 

 

214,773

 

Long-term debt, net of current portion

 

 

1,037,700

 

 

 

1,029,113

 

Operating lease liabilities, net of current portion

 

 

27,702

 

 

 

29,124

 

Tax receivable agreement liability, net of current portion

 

 

48,369

 

 

 

48,369

 

Asset retirement obligations

 

 

14,980

 

 

 

14,580

 

Deferred tax liabilities, net

 

 

17,536

 

 

 

18,360

 

Other long-term liabilities

 

 

15,131

 

 

 

14,197

 

Total liabilities

 

 

1,320,863

 

 

 

1,368,516

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 1,000 shares authorized with no shares issued and outstanding at March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.0001 par value, 260,000 shares authorized with 166,516
and
166,555 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

17

 

 

 

17

 

Additional paid-in capital

 

 

557,363

 

 

 

557,513

 

Accumulated deficit

 

 

(94,949

)

 

 

(125,887

)

Accumulated other comprehensive loss

 

 

(13,436

)

 

 

(10,176

)

Total stockholders' equity

 

 

448,995

 

 

 

421,467

 

Total liabilities and stockholders' equity

 

$

1,769,858

 

 

$

1,789,983

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

4


 

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended March 31,

 

(In thousands, except per share data)

 

2024

 

 

2023

 

Service revenue

 

$

202,721

 

 

$

184,698

 

Product sales

 

 

7,009

 

 

 

7,205

 

Total revenue

 

 

209,730

 

 

 

191,903

 

Cost of service revenue, excluding depreciation and amortization

 

 

4,305

 

 

 

4,230

 

Cost of product sales

 

 

5,286

 

 

 

5,383

 

Operating expenses

 

 

70,640

 

 

 

61,843

 

Selling, general and administrative expenses

 

 

48,171

 

 

 

40,013

 

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

 

 

26,975

 

 

 

30,333

 

Total costs and expenses

 

 

155,377

 

 

 

141,802

 

Income from operations

 

 

54,353

 

 

 

50,101

 

Interest expense, net

 

 

19,635

 

 

 

22,687

 

Change in fair value of private placement warrants

 

 

 

 

 

14,601

 

(Gain) loss on interest rate swap

 

 

(396

)

 

 

2,798

 

Loss on extinguishment of debt

 

 

595

 

 

 

1,349

 

Other income, net

 

 

(4,453

)

 

 

(3,756

)

Total other expenses

 

 

15,381

 

 

 

37,679

 

Income before income taxes

 

 

38,972

 

 

 

12,422

 

Income tax provision

 

 

9,823

 

 

 

7,845

 

Net income

 

$

29,149

 

 

$

4,577

 

Other comprehensive loss:

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

 

(3,260

)

 

 

(90

)

Total comprehensive income

 

$

25,889

 

 

$

4,487

 

Net income per share:

 

 

 

 

 

 

Basic

 

$

0.18

 

 

$

0.03

 

Diluted

 

$

0.17

 

 

$

0.03

 

Weighted average shares outstanding:

 

 

 

 

 

 

Basic

 

 

166,241

 

 

 

149,165

 

Diluted

 

 

168,726

 

 

 

153,129

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

5


 

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

For the Three Months Ended March 31, 2024

 

 

 

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, 2023

 

 

166,555

 

 

$

17

 

 

$

 

 

$

557,513

 

 

$

(125,887

)

 

$

(10,176

)

 

$

421,467

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,149

 

 

 

 

 

 

29,149

 

Share repurchases and retirement

 

 

(534

)

 

 

 

 

 

 

 

 

(1,789

)

 

 

1,789

 

 

 

 

 

 

 

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

 

 

445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

50

 

 

 

 

 

 

 

 

 

689

 

 

 

 

 

 

 

 

 

689

 

Payment of employee tax withholding related to RSUs and PSUs vesting

 

 

 

 

 

 

 

 

 

 

 

(4,608

)

 

 

 

 

 

 

 

 

(4,608

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

5,558

 

 

 

 

 

 

 

 

 

5,558

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,260

)

 

 

(3,260

)

Balance as of March 31, 2024

 

 

166,516

 

 

$

17

 

 

$

 

 

$

557,363

 

 

$

(94,949

)

 

$

(13,436

)

 

$

448,995

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 RSUs and 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 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

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

 

6


 

VERRA MOBILITY CORPORATION

condensed consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended March 31,

 

($ in thousands)

 

2024

 

 

2023

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

29,149

 

 

$

4,577

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

26,886

 

 

 

30,309

 

Amortization of deferred financing costs and discounts

 

 

1,361

 

 

 

1,277

 

Change in fair value of private placement warrants

 

 

 

 

 

14,601

 

(Gain) loss on interest rate swap

 

 

(102

)

 

 

1,552

 

Loss on extinguishment of debt

 

 

595

 

 

 

1,349

 

Credit loss expense

 

 

5,247

 

 

 

1,697

 

Deferred income taxes

 

 

696

 

 

 

(2,249

)

Stock-based compensation

 

 

5,558

 

 

 

3,378

 

Other

 

 

319

 

 

 

8

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

10,223

 

 

 

(16,222

)

Unbilled receivables

 

 

(6,501

)

 

 

(3,464

)

Inventory

 

 

479

 

 

 

180

 

Prepaid expenses and other assets

 

 

5,565

 

 

 

6,232

 

Deferred revenue

 

 

(3,831

)

 

 

95

 

Accounts payable and other current liabilities

 

 

(40,783

)

 

 

(4,291

)

Other liabilities

 

 

(529

)

 

 

6,188

 

Net cash provided by operating activities

 

 

34,332

 

 

 

45,217

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

Cash received (payments) for interest rate swap

 

 

294

 

 

 

(1,246

)

Purchases of installation and service parts and property and equipment

 

 

(14,279

)

 

 

(18,372

)

Cash proceeds from the sale of assets

 

 

48

 

 

 

34

 

Net cash used in investing activities

 

 

(13,937

)

 

 

(19,584

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

Repayment of long-term debt

 

 

(2,255

)

 

 

(64,755

)

Payment of debt issuance costs

 

 

(107

)

 

 

(44

)

Proceeds from the exercise of stock options

 

 

689

 

 

 

699

 

Payment of employee tax withholding related to RSUs and PSUs vesting

 

 

(4,608

)

 

 

(2,526

)

Net cash used in financing activities

 

 

(6,281

)

 

 

(66,626

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(608

)

 

 

(305

)

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

 

 

13,506

 

 

 

(41,298

)

Cash, cash equivalents and restricted cash - beginning of period

 

 

139,722

 

 

 

109,115

 

Cash, cash equivalents and restricted cash - end of period

 

$

153,228

 

 

$

67,817

 

 

 

 

 

 

 

 

Reconciliation of cash, cash equivalents, and restricted cash
to the condensed consolidated balance sheets

 

 

 

 

 

 

Cash and cash equivalents

 

$

149,520

 

 

$

64,267

 

Restricted cash

 

 

3,708

 

 

 

3,550

 

Total cash, cash equivalents, and restricted cash

 

$

153,228

 

 

$

67,817

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

 

 

7


 

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Supplemental cash flow information:

 

 

 

 

 

 

Interest paid

 

$

14,973

 

 

$

17,064

 

Income taxes paid, net of refunds

 

 

3,690

 

 

 

2,631

 

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

 

 

3,915

 

 

 

5,179

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

8


 

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”) offers integrated technology solutions and services to its customers who are located throughout the world, primarily within the United States, Australia, Canada and Europe. The Company is organized into three operating segments: Commercial Services, Government Solutions and Parking Solutions (see Note 14, Segment Reporting).

The Commercial Services segment offers automated toll and violations management and title and registration solutions to rental car companies (“RACs”), direct commercial fleet owner-operators (“Direct Fleets”) and fleet management companies (“FMCs”) and other large fleet owners in North America. Through its established relationships with individual tolling authorities throughout the United States, the segment provides an automated and outsourced administrative solution for its customers while also providing a value-added convenience for vehicle drivers and benefits to tolling and issuing authorities. The toll and violations management solutions help ensure timely payment of tolls and violations incurred by the customers’ vehicles and perform timely transfers of liability on the customers’ behalf, and driver billing and collections, as applicable. It also manages regional toll transponder installation and vehicle association—a critical and highly complex process for RAC, Direct Fleet and FMC customers—to ensure that the transponders (and corresponding toll transactions) are associated with the correct vehicle. In Europe, the Commercial Services segment provides violations processing through Euro Parking Collection plc and consumer tolling services through Pagatelia S.L.U.

The Government Solutions segment offers photo enforcement solutions and services to its customers. The Government Solutions segment provides complete, end-to-end speed, red-light, school bus stop arm and bus lane enforcement solutions within the United States and Canada. These programs are designed to reduce traffic violations and resulting collisions, injuries and fatalities. The Company implements and administers traffic safety programs for municipalities, counties, school districts and law enforcement agencies of all sizes. The international operations for this segment primarily involve the sale of traffic enforcement products and related maintenance services.

The Parking Solutions segment offers an integrated suite of parking software, transaction processing and hardware solutions to its customers, which include universities, municipalities, healthcare facilities and commercial parking operators. This segment develops specialized hardware and parking management software that provides a platform for the issuance of parking permits, enforcement, gateless vehicle counting, event parking and citation services. It also produces and markets its proprietary software as a service to its customers throughout the United States and Canada.

2. Significant Accounting Policies

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.

Use of Estimates

The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. There have been no material changes in the Company's significant accounting policies from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023.

9


 

Management believes that its estimates and assumptions are reasonable in the circumstances; however, actual results could differ materially from those estimates.

Concentration of Credit Risk

Significant customers are those which represent more than 10% of the Company’s total revenue or accounts receivable, net. Revenue from the single Government Solutions customer exceeding 10% of total revenue is presented below:

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

City of New York Department of Transportation

 

 

16.6

%

 

 

17.8

%

 

The City of New York Department of Transportation (“NYCDOT”) represented 14% and 18% of total accounts receivable, net as of March 31, 2024 and December 31, 2023, respectively. There is no material reserve related to NYCDOT open receivables as amounts are deemed collectible based on current conditions and expectations. No other Government Solutions customer exceeded 10% of total accounts receivable, net as of any period presented.

Significant customer revenues generated through the Company’s Commercial Services partners as a percent of total revenue are presented below:

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Hertz Corporation

 

 

11.8

%

 

 

11.2

%

Avis Budget Group, Inc.

 

 

13.1

%

 

 

12.7

%

Enterprise Mobility

 

 

11.5

%

 

 

10.1

%

No Commercial Services customer exceeded 10% of total accounts receivable, net as of any period presented.

There were no significant customer concentrations that exceeded 10% of total revenue or accounts receivable, net for the Parking Solutions segment as of or for any period presented.

Allowance for Credit Losses

The Company reviews historical credit losses and customer payment trends on receivables and develops loss rate estimates as of the balance sheet date, which includes adjustments for current and future expectations using probability-weighted assumptions about potential outcomes. Receivables are written off against the allowance for credit losses when it is probable that amounts will not be collected based on the terms of the customer contracts, and subsequent recoveries reverse the previous write-off and apply to the receivable in the period recovered. No interest or late fees are charged on delinquent accounts. The Company evaluates the adequacy of its allowance for expected credit losses by comparing its actual write-offs to its previously recorded estimates and adjusts appropriately.

The Company identified portfolio segments based on the type of business, industry in which the customer operates and historical credit loss patterns. The following presents the activity in the allowance for credit losses for the three months ended March 31, 2024 and 2023, respectively:

10


 

 

($ in thousands)

 

Commercial Services
(Driver-billed)
(1)

 

 

Commercial
Services
(All other)

 

 

Government Solutions

 

 

Parking Solutions

 

 

Total

 

Balance at January 1, 2024

 

$

13,726

 

 

$

1,935

 

 

$

2,426

 

 

$

426

 

 

$

18,513

 

Credit loss expense (income)

 

 

5,077

 

 

 

145

 

 

 

106

 

 

 

(81

)

 

 

5,247

 

Write-offs, net of recoveries

 

 

(2,776

)

 

 

(398

)

 

 

(2

)

 

 

(9

)

 

 

(3,185

)

Balance at March 31, 2024

 

$

16,027

 

 

$

1,682

 

 

$

2,530

 

 

$

336

 

 

$

20,575

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

Commercial Services
(Driver-billed)
(1)

 

 

Commercial
Services
(All other)

 

 

Government Solutions

 

 

Parking Solutions

 

 

Total

 

Balance at January 1, 2023

 

$

9,600

 

 

$

1,577

 

 

$

4,573

 

 

$

157

 

 

$

15,907

 

Credit loss expense (income)

 

 

3,033

 

 

 

(467

)

 

 

(839

)

 

 

(30

)

 

 

1,697

 

Write-offs, net of recoveries

 

 

(972

)

 

 

5

 

 

 

 

 

 

(168

)

 

 

(1,135

)

Balance at March 31, 2023

 

$

11,661

 

 

$

1,115

 

 

$

3,734

 

 

$

(41

)

 

$

16,469

 

 

(1)
Driver-billed consists of receivables from drivers of rental cars for which the Company bills on behalf of its customers. Receivables not collected from drivers within a defined number of days are transferred to customers subject to applicable bad debt sharing agreements.

 

Remaining Performance Obligations

Deferred revenue represents amounts that have been invoiced in advance and are expected to be recognized as revenue in future periods, and it primarily relates to Government Solutions and Parking Solutions customers. The Company had approximately $11.7 million and $13.1 million of deferred revenue in the Government Solutions segment as of March 31, 2024 and December 31, 2023, respectively. During the three months ended March 31, 2024 and 2023, the Company recognized $3.0 million and $1.5 million, respectively, of revenue excluding exchange rate impact related to amounts that were included in deferred revenue as of December 31, 2023 and 2022, respectively. The Company had approximately $17.6 million and $19.7 million of deferred revenue in the Parking Solutions segment as of March 31, 2024 and December 31, 2023, respectively. The Company recognized $8.6 million and $8.7 million of revenue during the three months ended March 31, 2024 and 2023, respectively, related to amounts that were included in deferred revenue as of December 31, 2023 and 2022.

Transaction price allocated to the remaining performance obligations includes deferred revenue above and unbilled amounts that are expected to be recognized as revenue in future periods. As of March 31, 2024, total transaction price allocated to performance obligations in the Government Solutions segment that were unsatisfied or partially unsatisfied was $310.5 million, of which $179.7 million is expected to be recognized as revenue in the next twelve months and the rest over the remaining performance obligation period. The Company elected the practical expedients to omit disclosure for the amount of the transaction price allocated to remaining performance obligations with original expected contract length of one year or less and the amount that relates to variable consideration allocated to a wholly unsatisfied performance obligation to transfer a distinct good or service within a series of distinct goods or services that form a single performance obligation.

 

Interest Rate Swap

In December 2022, the Company entered into a cancellable interest rate swap agreement to hedge its exposure to interest rate fluctuations associated with the LIBOR (now transitioned to Term Secured Overnight Financing Rate, “SOFR) portion of the variable interest rate on its 2021 Term Loan. Under the interest rate swap agreement, the Company pays a fixed rate of 5.17% and the counterparty pays a variable interest rate. The Company entered into an International Swaps and Derivatives Association, Inc. Master Agreement with the counterparty which provides for the net settlement of all, or a specified group, of derivative transactions through a single payment. The notional amount on the interest rate swap is $675.0 million. The Company has the option to effectively terminate the interest rate swap agreement starting in December 2023, and monthly thereafter until December 2025. The Company is treating the interest rate swap as an economic hedge for accounting purposes and any changes in the fair value of the derivative instrument (including accrued interest) and related cash payments are recorded in the condensed consolidated statements of operations within the (gain) loss on interest rate swap line item.

The Company recorded a $0.4 million gain during the three months ended March 31, 2024, of which $0.1 million is associated with the derivative instrument re-measured to fair value at the end of the reporting period, and $0.3 million of monthly cash proceeds received. The Company recorded a $2.8 million loss during the three months ended March 31, 2023, of which approximately $1.6 million is associated with the derivative instrument re-measured to fair value at the end of the reporting period and $1.2 million relates to the monthly cash payments made. The effect of remeasurement to fair value is recorded within the operating activities section and the monthly cash proceeds received or payments made are recorded within

11


 

the investing activities section in the condensed consolidated statements of cash flows. See Note 7, Fair Value of Financial Instruments, for further discussion on the fair value measurement of the interest rate swap, and Note 6, Long-term Debt, for additional information on the Company's mix of fixed and variable debt.

 

Recent Accounting Pronouncements

Accounting Standard Adopted

On June 30, 2022, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The ASU clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities. The Company adopted this standard as of January 1, 2024. The adoption of this standard did not have an impact on the Company's financial statements or disclosures.

Accounting Standards Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU intends to enhance disclosure related to significant segment expenses regularly provided to the Chief Operating Decision Maker (“CODM”), amounts presented as “other” within segment profit (loss), require that all annual disclosures are also reported for interim periods, further define the CODM and how they use segment profit (loss) to allocate resources, and require that entities with only a single reportable segment provide all required segment disclosures. The guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires companies to disclose specific categories in the rate reconciliation, provide additional disclosure for reconciling items that exceed proscribed thresholds, and enhance disclosure regarding income taxes paid and sources of income (loss) from continuing operations including the tax expense (or benefit) disaggregated by federal, state and foreign taxes. The guidance is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its financial statements.

3. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following at:

 

($ in thousands)

 

March 31,
2024

 

 

December 31,
2023

 

Prepaid services

 

$

11,114

 

 

$

10,496

 

Prepaid tolls

 

 

7,512

 

 

 

9,174

 

Prepaid computer maintenance

 

 

7,334

 

 

 

6,775

 

Costs to fulfill a customer contract

 

 

5,501

 

 

 

5,852

 

Prepaid income taxes

 

 

4,851

 

 

 

9,830

 

Prepaid insurance

 

 

2,738

 

 

 

1,755

 

Deposits

 

 

2,405

 

 

 

2,322

 

Other

 

 

1,317

 

 

 

757

 

Total prepaid expenses and other current assets

 

$

42,772

 

 

$

46,961

 

 

4. Goodwill and Intangible Assets

The following table presents the changes in the carrying amount of goodwill by reportable segment:

 

 

 

Commercial

 

 

Government

 

 

Parking

 

 

 

 

($ in thousands)

 

Services

 

 

Solutions

 

 

Solutions

 

 

Total

 

Balance at December 31, 2023

 

$

422,091

 

 

$

214,602

 

 

$

199,142

 

 

$

835,835

 

Foreign currency translation adjustment

 

 

(691

)

 

 

(553

)

 

 

 

 

 

(1,244

)

Balance at March 31, 2024

 

$

421,400

 

 

$

214,049

 

 

$

199,142

 

 

$

834,591

 

 

12


 

 

Intangible assets consist of the following as of the respective period-ends:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

Average

 

Gross

 

 

 

 

 

Average

 

Gross

 

 

 

 

 

 

Remaining

 

Carrying

 

 

Accumulated

 

 

Remaining

 

Carrying

 

 

Accumulated

 

($ in thousands)

 

Useful Life

 

Amount

 

 

Amortization

 

 

Useful Life

 

Amount

 

 

Amortization

 

Trademarks (a)

 

5.9 years

 

$

4,740

 

 

$

1,598

 

 

0.3 years

 

$

36,190

 

 

$

32,882

 

Patent

 

4.6 years

 

 

500

 

 

 

42

 

 

4.8 years

 

 

500

 

 

 

17

 

Non-compete agreements (a)

 

 

 

 

 

 

 

 

 

0.0 years

 

 

62,540

 

 

 

62,540

 

Customer relationships

 

4.3 years

 

 

558,713

 

 

 

303,372

 

 

4.5 years

 

 

558,801

 

 

 

288,065

 

Developed technology (a)

 

4.6 years

 

 

39,677

 

 

 

15,206

 

 

0.8 years

 

 

201,657

 

 

 

175,159

 

Gross carrying value of intangible assets

 

 

 

 

603,630

 

 

$

320,218

 

 

 

 

 

859,688

 

 

$

558,663

 

Less: accumulated amortization

 

 

 

 

(320,218

)

 

 

 

 

 

 

 

(558,663

)

 

 

 

Intangible assets, net

 

 

 

$

283,412

 

 

 

 

 

 

 

$

301,025

 

 

 

 

 

(a)
Certain fully amortized intangible assets were removed as of March 31, 2024 as compared to the amounts reported in the December 31, 2023 Annual Report on Form 10-K, resulting in an increase in the weighted average remaining useful lives compared to the prior year which relates to the remaining intangible assets that are being amortized.

Amortization expense was $16.7 million and $22.0 million for the three months ended March 31, 2024 and 2023, respectively.

 

Estimated amortization expense in future years is expected to be:

 

($ in thousands)

 

 

 

Remainder of 2024

 

$

50,237

 

2025

 

 

64,285

 

2026

 

 

57,316

 

2027

 

 

28,403

 

2028

 

 

22,474

 

Thereafter

 

 

60,697

 

Total

 

$

283,412

 

 

5. Accrued Liabilities

Accrued liabilities consist of the following at:

 

($ in thousands)

 

March 31,
2024

 

 

December 31,
2023

 

Accrued salaries and wages

 

$

14,518

 

 

$

27,905

 

Accrued interest payable

 

 

9,366

 

 

 

4,594

 

Current deferred tax liabilities

 

 

7,593

 

 

 

7,574

 

Current portion of operating lease liabilities

 

 

6,665

 

 

 

7,133

 

Payroll liabilities

 

 

4,894

 

 

 

3,214

 

Restricted cash due to customers

 

 

3,148

 

 

 

2,835

 

Advanced deposits

 

 

2,964

 

 

 

2,308

 

Income taxes payable

 

 

1,869