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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 September 30, 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 October 31, 2022, there were 149,875,708 shares of the Company’s Class A Common Stock, par value $0.0001 per share, issued and outstanding.

 

 


 

VERRA MOBILITY CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

 

PART I—FINANCIAL INFORMATION

 

5

Item 1. Financial Statements

 

5

Condensed Consolidated Balance Sheets

 

5

Condensed Consolidated Statements of Operations and Comprehensive Income

 

6

Condensed Consolidated Statements of Stockholders’ Equity

 

7

Condensed Consolidated Statements of Cash Flows

 

9

Notes to the Condensed Consolidated Financial Statements

 

11

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

 

34

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

46

Item 4. Controls and Procedures

 

46

PART II—OTHER INFORMATION

 

48

Item 1. Legal Proceedings

 

48

Item 1A. Risk Factors

 

48

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

 

48

Item 3. Defaults Upon Senior Securities

 

49

Item 4. Mine Safety Disclosures

 

49

Item 5. Other Information

 

49

Item 6. Exhibits

 

50

SIGNATURES

 

52

 

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 II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q and in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include, among other things:

risks and uncertainties related to our government contracts, including legislative changes, termination rights, delays in payments, audits and investigations;
customer concentration in our Commercial Services and Government Solutions segments;
disruption to our business and results of operations as a result of the novel coronavirus pandemic, including variant strains (“COVID-19”);
the impact of COVID-19 on our revenues from key customers in our Commercial Services, Government Solutions and Parking Solutions segments;
decreases in the prevalence of automated and other similar methods of photo enforcement, parking solutions or the use of tolling;
decreased interest in outsourcing from our customers;
our ability to properly perform under our contracts and otherwise satisfy our customers;
our ability to compete in a highly competitive and rapidly evolving market;
our ability to keep up with technological developments and changing customer preferences;
the success of our new products and changes to existing products and services;
our ability to successfully implement our acquisition strategy or integrate acquisitions;
failure in or breaches of our networks or systems, including as a result of cyber-attacks;
our ability to manage the risks, uncertainties and exposures related to our international operations;
our ability to acquire necessary intellectual property and adequately protect our existing intellectual property;
our ability to manage our substantial level of indebtedness;
our reliance on a limited number of third-party vendors and service providers;
our ability to maintain an effective system of internal controls;
risks and uncertainties related to our share repurchase program; and
risks and uncertainties related to litigation, disputes and regulatory investigations.

You should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will occur. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination

3


 

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.

4


 

Part I—Financial Information

Item 1. Financial Statements

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

($ in thousands, except per share data)

 

September 30,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

51,576

 

 

$

101,283

 

Restricted cash

 

 

4,053

 

 

 

3,149

 

Accounts receivable (net of allowance for credit losses of $17.7 million and
$
12.1 million at September 30, 2022 and December 31, 2021, respectively)

 

 

175,153

 

 

 

160,979

 

Unbilled receivables

 

 

32,784

 

 

 

29,109

 

Inventory, net

 

 

17,922

 

 

 

12,093

 

Prepaid expenses and other current assets

 

 

35,955

 

 

 

41,456

 

Total current assets

 

 

317,443

 

 

 

348,069

 

Installation and service parts, net

 

 

19,024

 

 

 

13,332

 

Property and equipment, net

 

 

105,268

 

 

 

96,066

 

Operating lease assets

 

 

36,399

 

 

 

38,862

 

Intangible assets, net

 

 

399,992

 

 

 

487,299

 

Goodwill

 

 

827,694

 

 

 

838,867

 

Other non-current assets

 

 

12,513

 

 

 

14,561

 

Total assets

 

$

1,718,333

 

 

$

1,837,056

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

69,135

 

 

$

67,556

 

Deferred revenue

 

 

32,758

 

 

 

27,141

 

Accrued liabilities

 

 

45,068

 

 

 

38,435

 

Tax receivable agreement liability, current portion

 

 

5,107

 

 

 

5,107

 

Current portion of long-term debt

 

 

9,019

 

 

 

36,952

 

Total current liabilities

 

 

161,087

 

 

 

175,191

 

Long-term debt, net of current portion

 

 

1,204,006

 

 

 

1,206,802

 

Operating lease liabilities, net of current portion

 

 

32,692

 

 

 

34,984

 

Tax receivable agreement liability, net of current portion

 

 

55,650

 

 

 

56,615

 

Private placement warrant liabilities

 

 

33,333

 

 

 

38,466

 

Asset retirement obligation

 

 

12,687

 

 

 

11,824

 

Deferred tax liabilities, net

 

 

18,635

 

 

 

47,524

 

Other long-term liabilities

 

 

5,352

 

 

 

5,686

 

Total liabilities

 

 

1,523,442

 

 

 

1,577,092

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock, $0.0001 par value

 

 

 

 

 

 

Common stock, $0.0001 par value

 

 

15

 

 

 

16

 

Common stock contingent consideration

 

 

36,575

 

 

 

36,575

 

Additional paid-in capital

 

 

307,471

 

 

 

309,883

 

Accumulated deficit

 

 

(128,236

)

 

 

(81,416

)

Accumulated other comprehensive loss

 

 

(20,934

)

 

 

(5,094

)

Total stockholders' equity

 

 

194,891

 

 

 

259,964

 

Total liabilities and stockholders' equity

 

$

1,718,333

 

 

$

1,837,056

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

5


 

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

($ in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

$

180,617

 

 

$

141,811

 

 

$

516,253

 

 

$

348,000

 

Product sales

 

 

17,039

 

 

 

20,284

 

 

 

39,275

 

 

 

32,610

 

Total revenue

 

 

197,656

 

 

 

162,095

 

 

 

555,528

 

 

 

380,610

 

Cost of service revenue

 

 

4,144

 

 

 

1,412

 

 

 

11,636

 

 

 

3,624

 

Cost of product sales

 

 

11,317

 

 

 

9,391

 

 

 

25,638

 

 

 

15,562

 

Operating expenses

 

 

60,536

 

 

 

48,309

 

 

 

166,795

 

 

 

115,235

 

Selling, general and administrative expenses

 

 

41,126

 

 

 

31,580

 

 

 

122,913

 

 

 

86,252

 

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

 

 

35,035

 

 

 

29,529

 

 

 

105,881

 

 

 

84,806

 

Total costs and expenses

 

 

152,158

 

 

 

120,221

 

 

 

432,863

 

 

 

305,479

 

Income from operations

 

 

45,498

 

 

 

41,874

 

 

 

122,665

 

 

 

75,131

 

Interest expense, net

 

 

20,260

 

 

 

11,637

 

 

 

49,024

 

 

 

32,481

 

Change in fair value of private placement warrants

 

 

(2,267

)

 

 

(5,067

)

 

 

(5,133

)

 

 

5,067

 

Tax receivable agreement liability adjustment

 

 

 

 

 

 

 

 

(965

)

 

 

1,661

 

(Gain) loss on extinguishment of debt

 

 

(3,005

)

 

 

 

 

 

(3,005

)

 

 

5,334

 

Other income, net

 

 

(2,462

)

 

 

(3,494

)

 

 

(9,367

)

 

 

(9,305

)

Total other expenses

 

 

12,526

 

 

 

3,076

 

 

 

30,554

 

 

 

35,238

 

Income before income taxes

 

 

32,972

 

 

 

38,798

 

 

 

92,111

 

 

 

39,893

 

Income tax provision

 

 

8,396

 

 

 

11,492

 

 

 

27,854

 

 

 

17,510

 

Net income

 

$

24,576

 

 

$

27,306

 

 

$

64,257

 

 

$

22,383

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

 

(8,167

)

 

 

(3,818

)

 

 

(15,840

)

 

 

(3,657

)

Total comprehensive income

 

$

16,409

 

 

$

23,488

 

 

$

48,417

 

 

$

18,726

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

 

$

0.17

 

 

$

0.42

 

 

$

0.14

 

Diluted

 

$

0.15

 

 

$

0.14

 

 

$

0.38

 

 

$

0.14

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

151,429

 

 

 

159,358

 

 

 

154,067

 

 

 

161,334

 

Diluted

 

 

158,304

 

 

 

165,431

 

 

 

160,433

 

 

 

164,808

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

6


 

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

For the Three and Nine Months Ended September 30, 2022

 

 

 

Common
Stock

 

 

Common
Stock
Contingent

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders'

 

(In thousands)

 

Shares

 

 

Amount

 

 

Consideration

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance as of December 31, 2021

 

 

156,079

 

 

$

16

 

 

$

36,575

 

 

$

309,883

 

 

$

(81,416

)

 

$

(5,094

)

 

$

259,964

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,040

 

 

 

 

 

 

10,040

 

Vesting of restricted stock units ("RSUs")

 

 

154

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

7

 

 

 

 

 

 

 

 

 

93

 

 

 

 

 

 

 

 

 

93

 

Payment of employee tax withholding related to RSUs vesting

 

 

 

 

 

 

 

 

 

 

 

(1,436

)

 

 

 

 

 

 

 

 

(1,436

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

4,446

 

 

 

 

 

 

 

 

 

4,446

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,708

 

 

 

2,708

 

Balance as of March 31, 2022

 

 

156,240

 

 

 

16

 

 

 

36,575

 

 

 

312,986

 

 

 

(71,376

)

 

 

(2,386

)

 

 

275,815

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,641

 

 

 

 

 

 

29,641

 

Share repurchases and retirement

 

 

(3,076

)

 

 

(1

)

 

 

 

 

 

(6,163

)

 

 

(49,117

)

 

 

 

 

 

(55,281

)

Vesting of RSUs

 

 

51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

5

 

 

 

 

 

 

 

 

 

66

 

 

 

 

 

 

 

 

 

66

 

Payment of employee tax withholding related to RSUs vesting

 

 

 

 

 

 

 

 

 

 

 

(203

)

 

 

 

 

 

 

 

 

(203

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

4,566

 

 

 

 

 

 

 

 

 

4,566

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,381

)

 

 

(10,381

)

Balance as of June 30, 2022

 

 

153,220

 

 

 

15

 

 

 

36,575

 

 

 

311,252

 

 

 

(90,852

)

 

 

(12,767

)

 

 

244,223

 

Net income