Financial Performance - Total revenue for Q3 2023 was $210 million, a 6% year-over-year (YoY) increase[7, 11] - Adjusted EBITDA for Q3 2023 was $97 million, a 7% YoY increase[7] - Adjusted EPS for Q3 2023 was $0.29, a 7% YoY increase[8] - Free Cash Flow for Q3 2023 was $52 million, representing a 53% Free Cash Flow conversion[8] Segment Performance - Commercial Services revenue increased by 14% YoY, driven by strong travel demand[7, 19] - Government Solutions service revenue increased by 10% YoY due to a transition from product sales to ARR (Annual Recurring Revenue)[7, 21] - Parking Solutions SaaS & Services revenue increased by 4% YoY[7, 24] Capital Allocation and Guidance - The company executed an accelerated share repurchase for an existing $100 million buyback program[8] - The board authorized a new 18-month, $100 million buyback program[8] - The company increased its 2023 financial guidance, expecting revenue at the upper end of the prior range[27] - Adjusted EPS guidance was revised to $1.05 to $1.10, from the previous $1.00 to $1.10[27]

Verra Mobility Corporation. (NASDAQ:VRRM) Q3 2023 Earnings Conference Call November 9, 2023 12:00 PM ET Company Participants Mark Zindler - Vice President of Investor Relations David Roberts - President & CEO Craig Conti - CFO Conference Call Participants Faiza Alwy - Deutsche Bank Nikolai Cremo - UBS Daniel Moore - CJS Securities Keith Housum - Northcoast Research James Faucette - Morgan Stanley Louie DiPalma - William Blair David Koning - Robert W. Baird Operator Greetings, and welcome to the Verra Mobili ...

[PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, with detailed notes on business, accounting policies, and financial line items [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section details the company's financial position, presenting assets, liabilities, and stockholders' equity at key reporting dates Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | Total Assets | $1,756,075 | $1,756,269 | $(194) | (0.01)% | | Total Liabilities | $1,352,019 | $1,525,199 | $(173,180) | (11.35)% | | Total Stockholders' Equity | $404,056 | $231,070 | $172,986 | 74.87)% | - Total current assets increased by **$48.7 million**, from **$362.6 million** at December 31, 2022, to **$411.3 million** at September 30, 2023, primarily driven by increases in cash and cash equivalents, accounts receivable, and unbilled receivables[15](index=15&type=chunk) - Total liabilities decreased by **$173.2 million**, mainly due to a significant reduction in long-term debt and the elimination of private placement warrant liabilities, which were fully exercised[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) This section outlines the company's financial performance, including revenue, income from operations, and net income for the reported periods Key Financial Highlights (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :------------------------------------------ | :------------------------------ | :------------------------------ | :--------- | :--------- | | Total Revenue | $209,933 | $197,656 | $12,277 | 6.2% | | Income from Operations | $59,173 | $45,498 | $13,675 | 30.1% | | Net Income | $30,308 | $24,576 | $5,732 | 23.3% | | Basic Net Income Per Share | $0.18 | $0.16 | $0.02 | 12.5% | | Diluted Net Income Per Share | $0.18 | $0.15 | $0.03 | 20.0% | | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :------------------------------------------ | :------------------------------ | :------------------------------ | :--------- | :--------- | | Total Revenue | $606,297 | $555,528 | $50,769 | 9.1% | | Income from Operations | $165,485 | $122,665 | $42,820 | 34.9% | | Net Income | $53,993 | $64,257 | $(10,264) | (16.0)% | | Basic Net Income Per Share | $0.35 | $0.42 | $(0.07) | (16.7)% | | Diluted Net Income Per Share | $0.34 | $0.38 | $(0.04) | (10.5)% | - For the three months ended September 30, 2023, total revenue increased by **6.2%** year-over-year, primarily driven by an **11.3%** increase in service revenue, while product sales decreased by **47.7%**[17](index=17&type=chunk) - For the nine months ended September 30, 2023, total revenue increased by **9.1%** year-over-year, with service revenue growing by **12.7%** and product sales decreasing by **37.6%** Net income decreased by **16.0%** for the nine-month period, largely due to a significant change in the fair value of private placement warrants and increased interest expense[17](index=17&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section details changes in stockholders' equity, including impacts from warrant exercises, share repurchases, and earn-out share issuances - Total stockholders' equity increased from **$231.1 million** at December 31, 2022, to **$404.1 million** at September 30, 2023, primarily due to **$202.7 million** from warrant exercises and **$36.6 million** from earn-out shares issued to the Platinum Stockholder, partially offset by **$100.0 million** in share repurchases and an accumulated deficit increase[19](index=19&type=chunk)[21](index=21&type=chunk) - During the nine months ended September 30, 2023, the Company issued **16,273,406 shares** of Class A Common Stock from warrant exercises, including **14,035,449 cash-basis exercises** generating **$161.4 million** in proceeds[19](index=19&type=chunk) - The Company repurchased and retired **4,581 shares** for **$100.0 million** during the nine months ended September 30, 2023, as part of its share repurchase program[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities for the reported periods Cash Flow Summary (Nine Months Ended September 30, in thousands) | Cash Flow Activity | 2023 | 2022 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | Net cash provided by operating activities | $170,371 | $148,776 | $21,595 | 14.5% | | Net cash used in investing activities | $(41,693) | $(36,434) | $(5,259) | 14.4% | | Net cash used in financing activities | $(118,450) | $(159,525) | $41,075 | (25.8)% | | Net increase (decrease) in cash, cash equivalents and restricted cash | $9,215 | $(48,803) | $58,018 | (118.9)% | - Operating cash flows increased by **$21.6 million**, driven by favorable changes in operating assets and liabilities, despite a decrease in net income[24](index=24&type=chunk) - Financing activities used less cash in 2023 compared to 2022, primarily due to **$161.4 million** in proceeds from warrant exercises, partially offsetting **$172.5 million** in early debt repayments and **$100.0 million** in share repurchases[24](index=24&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Description of Business](index=10&type=section&id=1.%20Description%20of%20Business) This note describes Verra Mobility Corporation's global operations and its three primary business segments - Verra Mobility Corporation provides integrated technology solutions and services globally, primarily in the United States, Australia, Canada, and Europe[28](index=28&type=chunk) - The Company operates through three segments: Commercial Services (toll and violation management, title/registration), Government Solutions (photo enforcement), and Parking Solutions (parking software/hardware)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) [2. Significant Accounting Policies](index=10&type=section&id=2.%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and estimates used in preparing the financial statements, including revenue recognition and fair value measurements - The financial statements are prepared in accordance with GAAP, requiring management to make significant estimates and assumptions, including revenue recognition, inventory valuation, credit losses, and fair value measurements[33](index=33&type=chunk)[34](index=34&type=chunk) Significant Customer Revenue Concentration (Percentage of Total Revenue) | Customer/Segment | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :-------------------------------- | :------ | :------ | :------- | :------- | | City of New York Department of Transportation (Government Solutions) | 16.5% | 20.5% | 17.1% | 19.5% | | Hertz Corporation (Commercial Services) | 11.8% | 12.6% | 11.8% | 11.8% | | Avis Budget Group, Inc. (Commercial Services) | 15.1% | 13.9% | 13.8% | 12.9% | | Enterprise Holdings, Inc. (Commercial Services) | 11.6% | 10.3% | 10.5% | 9.7% | - The Company adopted ASU 2020-04 and ASU 2021-01, applying optional expedients for the LIBOR to Term SOFR transition on its 2021 Term Loan, which did not materially impact financial statements[46](index=46&type=chunk)[47](index=47&type=chunk) - The Company entered into a cancellable interest rate swap in December 2022 to hedge interest rate fluctuations on its 2021 Term Loan, paying a fixed rate of **5.17%** on a notional amount of **$675.0 million**[43](index=43&type=chunk) [3. Prepaid Expenses and Other Current Assets](index=13&type=section&id=3.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) This note details the composition and changes in prepaid expenses and other current assets, including prepaid services and an interest rate swap asset Prepaid Expenses and Other Current Assets (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Prepaid services | $10,942 | $9,171 | | Prepaid tolls | $9,005 | $9,978 | | Costs to fulfill a customer contract | $5,452 | $3,193 | | Prepaid computer maintenance | $4,290 | $5,492 | | Prepaid income taxes | $5,814 | $4,629 | | Interest rate swap asset | $2,266 | $— | | Deposits | $1,778 | $2,057 | | Other | $1,650 | $5,084 | | **Total** | **$41,197** | **$39,604** | - Total prepaid expenses and other current assets increased by **$1.6 million** from December 31, 2022, to September 30, 2023, primarily due to increases in prepaid services and costs to fulfill customer contracts, and the recognition of an interest rate swap asset[49](index=49&type=chunk) [4. Goodwill and Intangible Assets](index=13&type=section&id=4.%20Goodwill%20and%20Intangible%20Assets) This note provides a breakdown of goodwill by segment and details changes in intangible assets, including amortization expense Goodwill by Segment (in thousands) | Segment | Dec 31, 2022 | Sep 30, 2023 | Change ($) | | :------------------ | :----------- | :----------- | :--------- | | Commercial Services | $419,720 | $419,808 | $88 | | Government Solutions | $214,618 | $213,867 | $(751) | | Parking Solutions | $199,142 | $199,142 | $0 | | **Total Goodwill** | **$833,480** | **$832,817** | **$(663)** | - Goodwill decreased slightly by **$0.7 million**, primarily due to foreign currency translation adjustments in the Government Solutions segment[50](index=50&type=chunk) Intangible Assets, Net (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | Change ($) | | :-------------------- | :----------- | :----------- | :--------- | | Intangible assets, net | $315,754 | $377,420 | $(61,666) | - Amortization expense for intangible assets decreased significantly, from **$81.0 million** for the nine months ended September 30, 2022, to **$60.9 million** for the same period in 2023, mainly due to certain non-compete and developed technology assets being fully amortized[51](index=51&type=chunk) [5. Accrued Liabilities](index=14&type=section&id=5.%20Accrued%20Liabilities) This note presents the composition and changes in accrued liabilities, including accrued salaries, wages, and interest payable Accrued Liabilities (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Accrued salaries and wages | $21,690 | $19,109 | | Accrued interest payable | $9,235 | $4,459 | | Current deferred tax liabilities | $7,519 | $7,559 | | Current portion of operating lease liabilities | $7,088 | $6,355 | | Restricted cash due to customers | $3,204 | $3,541 | | Payroll liabilities | $3,025 | $2,136 | | Advance deposits | $2,781 | $1,029 | | Accrued commissions | $1,195 | $857 | | Income tax payable | $963 | $269 | | Other | $2,759 | $3,533 | | **Total** | **$59,459** | **$48,847** | - Total accrued liabilities increased by **$10.6 million**, from **$48.8 million** at December 31, 2022, to **$59.5 million** at September 30, 2023, primarily driven by increases in accrued salaries and wages, and accrued interest payable[53](index=53&type=chunk) [6. Long-term Debt](index=15&type=section&id=6.%20Long-term%20Debt) This note details the company's long-term debt, including the 2021 Term Loan and Senior Notes, and discusses early repayments and interest rate changes Long-term Debt Summary (in thousands) | Debt Instrument | Sep 30, 2023 | Dec 31, 2022 | Change ($) | | :-------------------------- | :----------- | :----------- | :--------- | | 2021 Term Loan, due 2028 | $706,842 | $886,106 | $(179,264) | | Senior Notes, due 2029 | $350,000 | $350,000 | $0 | | Less: original issue discounts | $(3,869) | $(5,637) | $1,768 | | Less: unamortized deferred financing costs | $(13,603) | $(18,489) | $4,886 | | **Total long-term debt, net of current portion** | **$1,030,351** | **$1,190,045** | **$(159,694)** | - The Company made early repayments of **$172.5 million** on its 2021 Term Loan during the nine months ended September 30, 2023, reducing the principal outstanding to **$706.8 million**[56](index=56&type=chunk) - The 2021 Term Loan transitioned from LIBOR to Term SOFR in March 2023, with an all-in interest rate of **8.7%** as of September 30, 2023[57](index=57&type=chunk) - The Company recognized a **$3.5 million** loss on extinguishment of debt for the nine months ended September 30, 2023, due to the write-off of deferred financing costs related to early debt repayments[56](index=56&type=chunk) - The Revolver has a **$75.0 million** commitment, with **$74.8 million** available for borrowing as of September 30, 2023, and no outstanding borrowings[62](index=62&type=chunk) [7. Fair Value of Financial Instruments](index=17&type=section&id=7.%20Fair%20Value%20of%20Financial%20Instruments) This note provides fair value measurements for financial instruments, including long-term debt and the interest rate swap Fair Value of Long-term Debt (in thousands) | Debt Instrument | Fair Value Hierarchy Level | Carrying Amount (Sep 30, 2023) | Estimated Fair Value (Sep 30, 2023) | | :---------------- | :------------------------- | :----------------------------- | :-------------------------------- | | 2021 Term Loan | 2 | $693,234 | $708,609 | | Senior Notes | 2 | $346,136 | $318,500 | - All Private Placement Warrants were exercised by September 30, 2023, resulting in a **$49.0 million** reduction in liabilities and an offset to common stock and additional paid-in capital[70](index=70&type=chunk) - The interest rate swap, classified as Level 2, resulted in a **$0.1 million** loss for Q3 2023 and a **$1.9 million** gain for YTD 2023, reflecting fair value remeasurement and cash payments[72](index=72&type=chunk) [8. Net Income Per Share](index=18&type=section&id=8.%20Net%20Income%20Per%20Share) This note presents the calculation of basic and diluted net income per share, including the impact of antidilutive shares Net Income Per Share (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Net Income | $30,308 | $24,576 | $53,993 | $64,257 | | Weighted Average Shares - Basic | 168,089 | 151,429 | 156,196 | 154,067 | | Weighted Average Shares - Diluted | 169,497 | 158,304 | 157,133 | 160,433 | | Net Income Per Share - Basic | $0.18 | $0.16 | $0.35 | $0.42 | | Net Income Per Share - Diluted | $0.18 | $0.15 | $0.34 | $0.38 | - Diluted EPS for Q3 2023 increased to **$0.18** from **$0.15** in Q3 2022, while YTD 2023 diluted EPS decreased to **$0.34** from **$0.38** in YTD 2022[75](index=75&type=chunk) - Antidilutive shares excluded from diluted EPS for YTD 2023 totaled **2,201 thousand**, significantly lower than **8,394 thousand** in YTD 2022, primarily due to the issuance of contingently issuable shares in 2022[75](index=75&type=chunk) [9. Income Taxes](index=19&type=section&id=9.%20Income%20Taxes) This note details the effective income tax rates and explains the factors influencing tax expense for the reported periods Effective Income Tax Rates | Period | Effective Tax Rate | | :-------------------------------- | :----------------- | | Three Months Ended Sep 30, 2023 | 27.5% | | Three Months Ended Sep 30, 2022 | 25.5% | | Nine Months Ended Sep 30, 2023 | 37.1% | | Nine Months Ended Sep 30, 2022 | 30.2% | - The effective income tax rate for the nine months ended September 30, 2023, increased to **37.1%** from **30.2%** in the prior year, primarily due to permanent differences related to mark-to-market adjustments on Private Placement Warrants[78](index=78&type=chunk) [10. Stockholders' Equity](index=19&type=section&id=10.%20Stockholders%27%20Equity) This note describes changes in stockholders' equity, focusing on warrant exercises and the share repurchase program - All **19,999,967 warrants** outstanding as of December 31, 2022, were either exercised or redeemed by September 30, 2023, resulting in the issuance of **16,273,406 shares** of Class A Common Stock and **$161.4 million** in cash proceeds from cash-basis exercises[79](index=79&type=chunk)[80](index=80&type=chunk) - The Company repurchased **$100.0 million** of Class A Common Stock during the nine months ended September 30, 2023, including **$8.1 million** through open market transactions and **$91.9 million** via an Accelerated Share Repurchase (ASR) agreement[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) [11. Stock-Based Compensation](index=21&type=section&id=11.%20Stock-Based%20Compensation) This note details the stock-based compensation expense recognized across operating and selling, general, and administrative categories Stock-Based Compensation Expense (in thousands) | Category | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Operating expenses | $628 | $331 | $1,507 | $829 | | Selling, general and administrative expenses | $3,815 | $4,313 | $10,839 | $12,827 | | **Total stock-based compensation expense** | **$4,443** | **$4,644** | **$12,346** | **$13,656** | - Total stock-based compensation expense decreased by **$1.3 million** for the nine months ended September 30, 2023, compared to the same period in 2022[88](index=88&type=chunk) [12. Other Significant Transactions](index=22&type=section&id=12.%20Other%20Significant%20Transactions) This note discusses the Tax Receivable Agreement liability and the issuance of all Earn-Out Shares to the Platinum Stockholder - The Tax Receivable Agreement (TRA) liability was approximately **$55.9 million** as of September 30, 2023, with no changes recorded for the nine months ended September 30, 2023[91](index=91&type=chunk)[92](index=92&type=chunk) - All four tranches of Earn-Out Shares, totaling **10,000,000 shares**, were issued to the Platinum Stockholder by July 26, 2023, upon meeting specified Common Stock Price Thresholds, with no remaining contingently issuable shares[94](index=94&type=chunk)[96](index=96&type=chunk) [13. Commitments and Contingencies](index=23&type=section&id=13.%20Commitments%20and%20Contingencies) This note outlines the company's non-cancelable purchase commitments and ongoing legal proceedings - The Company had **$20.0 million** in aggregate non-cancelable purchase commitments outstanding as of September 30, 2023, with the majority expected to be incurred within the next twelve months[98](index=98&type=chunk) - The Company is involved in legal proceedings, including a class action lawsuit (Brantley v. City of Gretna) and an antitrust lawsuit (PlusPass Inc. v. Verra Mobility Corporation), but cannot reasonably estimate a range of loss for these actions and has not accrued any liability[101](index=101&type=chunk)[102](index=102&type=chunk) [14. Segment Reporting](index=24&type=section&id=14.%20Segment%20Reporting) This note provides detailed financial information by business segment, including revenue and segment profit Total Revenue by Segment (in thousands) | Segment | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :------------------ | :------ | :------ | :------- | :------- | | Commercial Services | $98,149 | $86,056 | $278,243 | $244,409 | | Government Solutions | $90,285 | $89,728 | $264,462 | $252,084 | | Parking Solutions | $21,499 | $21,872 | $63,592 | $59,035 | | **Total Revenue** | **$209,933** | **$197,656** | **$606,297** | **$555,528** | Segment Profit (in thousands) | Segment | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :------------------ | :------ | :------ | :------- | :------- | | Commercial Services | $65,282 | $56,369 | $179,931 | $159,513 | | Government Solutions | $28,568 | $30,357 | $90,393 | $85,087 | | Parking Solutions | $3,528 | $4,168 | $9,898 | $10,348 | | **Total Segment Profit** | **$97,378** | **$90,894** | **$280,222** | **$254,948** | - Commercial Services revenue increased by **14.1%** in Q3 2023 and **13.8%** YTD, driven by increased travel volume and adoption of all-inclusive fee structures[128](index=128&type=chunk)[145](index=145&type=chunk) - Government Solutions service revenue grew by **9.9%** in Q3 2023 and **12.4%** YTD, primarily due to the expansion of speed programs[129](index=129&type=chunk)[146](index=146&type=chunk) - International revenues increased by **11.9%** in Q3 2023 and **12.4%** YTD, with Australia showing the highest growth[108](index=108&type=chunk) [15. Subsequent Event](index=27&type=section&id=15.%20Subsequent%20Event) This note discloses a new share repurchase program authorized by the Board of Directors after the reporting period - On October 30, 2023, the Board of Directors authorized a new share repurchase program for up to **$100 million** of Class A common stock over the next eighteen months[109](index=109&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting key performance drivers, segment-specific results, and liquidity management strategies for the reported periods [Business Overview](index=28&type=section&id=Business%20Overview) This section provides an overview of Verra Mobility's business as a leading provider of smart mobility technology solutions globally - Verra Mobility is a leading provider of smart mobility technology solutions across the United States, Australia, Canada, and Europe, focusing on integrated, data-driven solutions for transportation challenges[111](index=111&type=chunk) - The company's solutions include toll and violations management, title and registration services, automated safety and traffic enforcement, and commercial parking management[111](index=111&type=chunk) [Executive Summary](index=28&type=section&id=Executive%20Summary) This section summarizes key financial highlights, including revenue growth, cash flow from operations, debt management, and share repurchase activities - Total revenue increased by **9.1%** to **$606.3 million** for the nine months ended September 30, 2023, driven by service revenue growth in Commercial Services and Government Solutions[114](index=114&type=chunk) - Cash flows from operating activities increased to **$170.4 million** for the nine months ended September 30, 2023, partly due to **$161.4 million** from warrant exercises[114](index=114&type=chunk) - The Company made early repayments of **$172.5 million** on its 2021 Term Loan during the nine months ended September 30, 2023, as part of its debt management strategy[114](index=114&type=chunk) - The Company executed a **$100.0 million** share repurchase program during the nine months ended September 30, 2023, including an Accelerated Share Repurchase (ASR) of **$91.9 million**[113](index=113&type=chunk) [Segment Information](index=29&type=section&id=Segment%20Information) This section describes the services and customer bases for each of Verra Mobility's three operating segments - Commercial Services offers toll and violation management and title/registration services for rental car companies (RACs) and fleet management companies (FMCs) in North America and Europe[121](index=121&type=chunk) - Government Solutions provides end-to-end photo enforcement solutions (speed, red-light, school bus stop arm, bus lane) for municipalities and government agencies in the US and Canada[121](index=121&type=chunk) - Parking Solutions delivers integrated parking software and hardware to universities, municipalities, healthcare facilities, and commercial parking operators in the US and Canada[121](index=121&type=chunk) [Primary Components of Our Operating Results](index=29&type=section&id=Primary%20Components%20of%20Our%20Operating%20Results) This section explains the main revenue streams and expense categories that constitute the company's operating results - Service revenue is generated from tolling programs, violation processing, title/registration services (Commercial Services), photo enforcement system operations (Government Solutions), and SaaS, subscription, and citation processing (Parking Solutions)[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - Product sales primarily come from photo enforcement equipment in Government Solutions and specialized hardware in Parking Solutions, with varying customer buying patterns[118](index=118&type=chunk) - Key expenses include cost of service revenue, cost of product sales, operating expenses (payroll, subcontractor, IT), selling, general and administrative expenses (payroll, professional services), depreciation, amortization, interest expense, and adjustments for fair value changes and debt extinguishment[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance for the three and nine months ended September 30, 2023, compared to the prior year [Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022](index=30&type=section&id=Three%20Months%20Ended%20September%2030%2C%202023%20Compared%20to%20Three%20Months%20Ended%20September%2030%2C%202022) This section compares the company's financial performance for the third quarter of 2023 against the same period in 2022, detailing revenue and net income changes Q3 2023 vs Q3 2022 Revenue and Net Income (in thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :----- | :----- | :--------- | :--------- | | Total Revenue | $209,933 | $197,656 | $12,277 | 6.2% | | Service Revenue | $201,029 | $180,617 | $20,412 | 11.3% | | Product Sales | $8,904 | $17,039 | $(8,135) | (47.7)% | | Net Income | $30,308 | $24,576 | $5,732 | 23.3% | - Commercial Services service revenue increased by **14.1%** due to higher travel volume and increased adoption of all-inclusive fee structures by RAC customers[128](index=128&type=chunk) - Government Solutions service revenue grew by **9.9%**, primarily from the expansion of speed programs[129](index=129&type=chunk) - Operating expenses increased by **13.8%** due to higher wages, recurring service costs, and IT expenses, while depreciation and amortization decreased by **21.2%** as certain intangible assets were fully amortized[134](index=134&type=chunk)[135](index=135&type=chunk) - A **$2.0 million** loss on extinguishment of debt was recorded in Q3 2023 due to early repayment of the 2021 Term Loan, contrasting with a **$3.0 million** gain in Q3 2022 from PPP loan forgiveness[138](index=138&type=chunk)[139](index=139&type=chunk) [Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022](index=33&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202023%20Compared%20to%20Nine%20Months%20Ended%20September%2030%2C%202022) This section compares the company's financial performance for the nine months ended September 30, 2023, against the same period in 2022, detailing revenue and net income changes YTD 2023 vs YTD 2022 Revenue and Net Income (in thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :----- | :----- | :--------- | :--------- | | Total Revenue | $606,297 | $555,528 | $50,769 | 9.1% | | Service Revenue | $581,777 | $516,253 | $65,524 | 12.7% | | Product Sales | $24,520 | $39,275 | $(14,755) | (37.6)% | | Net Income | $53,993 | $64,257 | $(10,264) | (16.0)% | - Commercial Services service revenue increased by **13.8%** due to increased travel volume and continued adoption of all-inclusive fee structures, particularly for RAC customers[145](index=145&type=chunk) - Government Solutions service revenue increased by **12.4%**, primarily driven by a **$25.2 million** contribution from the expansion of speed programs[146](index=146&type=chunk) - Operating expenses increased by **17.7%** due to higher wages, recurring service costs, subcontractor costs, and IT expenses[151](index=151&type=chunk) - Interest expense, net, increased by **34.3%** to **$65.8 million**, mainly due to rising interest rates, with the average variable interest rate on the 2021 Term Loan **380 basis points** higher[153](index=153&type=chunk) - A **$25.0 million** loss was recorded from the change in fair value of private placement warrants in YTD 2023, compared to a **$5.1 million** gain in YTD 2022, significantly impacting net income[153](index=153&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources and uses of cash, debt management, and compliance with debt covenants - The Company's primary liquidity sources are cash flows from operations and **$74.8 million** available under its Revolver as of September 30, 2023[160](index=160&type=chunk)[163](index=163&type=chunk) - Cash provided by operating activities increased by **$21.6 million** to **$170.4 million** for the nine months ended September 30, 2023, despite a decrease in net income[170](index=170&type=chunk) - Cash used in financing activities decreased by **$41.1 million** to **$118.5 million**, primarily due to **$161.4 million** in proceeds from warrant exercises, partially offsetting **$172.5 million** in early debt repayments and **$100.0 million** in share repurchases[172](index=172&type=chunk) - The 2021 Term Loan principal outstanding was reduced to **$706.8 million** as of September 30, 2023, following **$172.5 million** in early repayments[175](index=175&type=chunk) - The Company was compliant with all debt covenants as of September 30, 2023[183](index=183&type=chunk) [Off-Balance Sheet Arrangements](index=39&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of material off-balance sheet financing arrangements for the company - The Company does not have any material off-balance sheet financing arrangements as of September 30, 2023[186](index=186&type=chunk) [Critical Accounting Policies, Estimates and Judgments](index=39&type=section&id=Critical%20Accounting%20Policies%2C%20Estimates%20and%20Judgments) This section refers to the company's annual report for a detailed discussion of critical accounting policies and estimates - Management's discussion of critical accounting policies, estimates, and judgments refers to the 2022 Annual Report on Form 10-K[187](index=187&type=chunk) [Recent Accounting Pronouncements](index=39&type=section&id=Recent%20Accounting%20Pronouncements) This section directs readers to Note 2 for information regarding recent accounting pronouncements - Information on recent accounting pronouncements is discussed in Note 2, Significant Accounting Policies, in Part I, Item 1, Financial Statements[189](index=189&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, primarily interest rate risk associated with its variable-rate debt, and outlines hedging strategies employed to mitigate these risks - The Company is exposed to interest rate market risk due to the variable interest rate on its 2021 Term Loan, which had an outstanding balance of **$706.8 million** at September 30, 2023[190](index=190&type=chunk)[191](index=191&type=chunk) - Each **1%** movement in interest rates would result in an approximately **$7.1 million** change in annual interest expense based on the September 30, 2023, outstanding balance[193](index=193&type=chunk) - To hedge against interest rate fluctuations, the Company entered into a cancellable interest rate swap agreement in December 2022, fixing the rate at **5.17%** on a notional amount of **$675.0 million**[194](index=194&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter - The Company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2023[195](index=195&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended September 30, 2023, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[196](index=196&type=chunk) [PART II—OTHER INFORMATION](index=41&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section provides additional information beyond the financial statements, covering legal proceedings, risk factors, equity security sales, and other disclosures [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) This section details the ongoing legal proceedings, specifically an antitrust lawsuit filed by PlusPass Inc. against Verra Mobility, alleging violations of the Clayton Act and Sherman Act related to a 2018 merger and exclusive agreements - PlusPass Inc. filed an antitrust lawsuit against Verra Mobility in November 2020, alleging violations of Section 7 of the Clayton Act and Sections 1 and 2 of the Sherman Act[198](index=198&type=chunk) - The lawsuit claims Verra Mobility used exclusive agreements to acquire and maintain monopoly power in the electronic toll payment collection market for rental cars[198](index=198&type=chunk) - Verra Mobility filed a motion for summary judgment on June 21, 2023, which is pending, and the trial has been moved to April 2024[198](index=198&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes have occurred from the risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2022[199](index=199&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details the company's share repurchase activities during the third quarter of fiscal year 2023, including open market transactions and an Accelerated Share Repurchase (ASR) agreement - The Board of Directors authorized a **$100.0 million** share repurchase program in November 2022[200](index=200&type=chunk) - During the third quarter of fiscal year 2023, the Company repurchased **449,432 shares** for **$8.1 million** through open market transactions[201](index=201&type=chunk) - On September 5, 2023, the Company paid **$91.9 million** for an ASR, receiving an initial delivery of **4,131,551 shares**, with final settlement expected in Q1 2024[201](index=201&type=chunk)[203](index=203&type=chunk) - No unregistered equity securities were sold during the three months ended September 30, 2023[204](index=204&type=chunk) [Item 3. Defaults Upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[205](index=205&type=chunk) [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[206](index=206&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) This section discusses the company's insider trading arrangements and policies, emphasizing alignment of executive compensation with stockholder interests and compliance with Rule 10b5-1 - Executive compensation includes deferred equity awards (performance share units, stock options, restricted stock units) to align with stockholder interests[207](index=207&type=chunk) - Executive officers' transactions in company securities must comply with the Insider Trading Policy and may use Rule 10b5-1 trading plans[208](index=208&type=chunk) - No directors or executive officers adopted, modified, or terminated Rule 10b5-1 trading plans during the three months ended September 30, 2023[209](index=209&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q, including merger agreements, corporate documents, and certifications - The exhibit index includes various documents such as merger agreements, corporate certificates, bylaws, and certifications from principal executive and financial officers[212](index=212&type=chunk) [SIGNATURES](index=45&type=section&id=SIGNATURES) This section contains the official signatures certifying the accuracy and completeness of the report - The report was duly signed on November 9, 2023, by Craig Conti, Chief Financial Officer of Verra Mobility Corporation[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)

Earnings Overview Verra Mobility Q2 2023 Earnings Presentation For the Quarter Ended June 30, 2023 FORWARD-LOOKING STATEMENTS 2 This presentation includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "forecast," "intend," "seek," "target," "anticipate," "believe," "expect," "estimate," "plan," "outlook," and "project" and other sim ...

Verra Mobility Corporation (NASDAQ:VRRM) Q2 2023 Earnings Conference Call August 9, 2023 5:00 PM ET Company Participants Mark Zindler - Vice President of Investor Relations David Roberts - President & CEO Craig Conti - CFO Conference Call Participants Faiza Alwy - Deutsche Bank Nik Cremo - Credit Suisse Daniel Moore - CJS Securities Louie DiPalma - William Blair Operator Good afternoon, ladies and gentlemen, and welcome to the Verra Mobility Second Quarter 2023 Earnings Conference Call. At this time, all li ...

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 June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________. Commission File Number: 001-37979 VERRA MOBILITY CORPORATION (Exact name of registrant as specified in its charter) 1150 North Alma ...

Verra Mobility Corporation (NASDAQ:VRRM) Q1 2023 Earnings Conference Call May 4, 2023 5:00 PM ET Company Participants Mark Zindler - Vice President, Investor Relations David Roberts - Chief Executive Officer Craig Conti - Chief Financial Officer Conference Call Participants Daniel Moore - CJS Securities Faiza Alwy - Deutsche Bank Louie Dipalma - William Blair Keith Housum - Northcoast Research Partners Operator Good afternoon, ladies and gentlemen, and welcome to Verra Mobility's First Quarter 2023 Earning ...

[PART I—FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The company's Q1 2023 financials show revenue growth but a significant net income decline due to higher financial expenses [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets | Metric | March 31, 2023 ($ in thousands) | December 31, 2022 ($ in thousands) | | :-------------------------------- | :-------------------------------- | :--------------------------------- | | Total Assets | 1,710,891 | 1,756,269 | | Total Liabilities | 1,473,783 | 1,525,199 | | Total Stockholders' Equity | 237,108 | 231,070 | | Cash and cash equivalents | 64,267 | 105,204 | | Intangible assets, net | 355,678 | 377,420 | | Long-term debt, net of current portion | 1,140,712 | 1,190,045 | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Condensed Consolidated Statements of Operations and Comprehensive Income | Metric | Three Months Ended March 31, 2023 ($ in thousands) | Three Months Ended March 31, 2022 ($ in thousands) | Change ($ in thousands) | Change (%) | | :------------------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Total Revenue | 191,903 | 170,385 | 21,518 | 12.6% | | Income from Operations | 50,101 | 32,006 | 18,095 | 56.5% | | Interest Expense, net | 22,687 | 14,279 | 8,408 | 58.9% | | Change in fair value of private placement warrants | 14,601 | 3,734 | 10,867 | 291.0% | | Loss on interest rate swap | 2,798 | — | 2,798 | n/a | | Loss on extinguishment of debt | 1,349 | — | 1,349 | n/a | | Net Income | 4,577 | 10,040 | (5,463) | (54.4%) | | Basic EPS | 0.03 | 0.06 | (0.03) | (50.0%) | | Diluted EPS | 0.03 | 0.06 | (0.03) | (50.0%) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Condensed Consolidated Statements of Stockholders' Equity | Metric | Balance as of Dec 31, 2022 ($ in thousands) | Net Income ($ in thousands) | Stock-based Compensation ($ in thousands) | Employee Tax Withholding ($ in thousands) | Balance as of Mar 31, 2023 ($ in thousands) | | :-------------------------------- | :---------------------------------------- | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Total Stockholders' Equity | 231,070 | 4,577 | 3,378 | (2,526) | 237,108 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2023 ($ in thousands) | Three Months Ended March 31, 2022 ($ in thousands) | Change ($ in thousands) | | :------------------------------------------ | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | | Net cash provided by operating activities | 45,217 | 31,247 | 13,970 | | Net cash used in investing activities | (19,584) | (11,865) | (7,719) | | Net cash used in financing activities | (66,626) | (28,652) | (37,974) | | Net decrease in cash, cash equivalents and restricted cash | (41,298) | (7,039) | (34,259) | | Cash, cash equivalents and restricted cash - end of period | 67,817 | 97,393 | (29,576) | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) [1. Description of Business](index=10&type=section&id=1.%20Description%20of%20Business) - Verra Mobility operates in three segments: **Commercial Services, Government Solutions, and Parking Solutions**, offering integrated technology solutions globally[26](index=26&type=chunk) - Commercial Services provides toll and violation management, and title/registration for commercial fleets and rental cars[27](index=27&type=chunk) - Government Solutions offers end-to-end photo enforcement for speed, red-light, school bus stop arm, and bus lane violations to government agencies[28](index=28&type=chunk) - Parking Solutions delivers integrated parking software and hardware for universities, municipalities, healthcare, and commercial operators[29](index=29&type=chunk) [2. Significant Accounting Policies](index=10&type=section&id=2.%20Significant%20Accounting%20Policies) - Financial statements are prepared under GAAP, relying on significant management estimates for revenue recognition, credit losses, and fair value measurements[31](index=31&type=chunk)[33](index=33&type=chunk) [Concentration of Credit Risk](index=11&type=section&id=Concentration%20of%20Credit%20Risk) | Customer | Q1 2023 Revenue Concentration | Q1 2022 Revenue Concentration | Q1 2023 Accounts Receivable Concentration | Q4 2022 Accounts Receivable Concentration | | :---------------------------------- | :---------------------------- | :---------------------------- | :---------------------------------------- | :---------------------------------------- | | City of New York Dept. of Trans. | 17.8% | 19.3% | 26% | 22% | | Hertz Corporation | 11.2% | 11.1% | <10% | <10% | | Avis Budget Group, Inc. | 12.7% | 11.4% | <10% | <10% | | Enterprise Holdings, Inc. | 10.1% | 9.0% | <10% | <10% | [Allowance for Credit Losses](index=11&type=section&id=Allowance%20for%20Credit%20Losses) | Segment | Balance at Jan 1, 2023 ($ in thousands) | Credit Loss Expense ($ in thousands) | Write-offs, net of recoveries ($ in thousands) | Balance at Mar 31, 2023 ($ in thousands) | | :-------------------------------- | :-------------------------------------- | :----------------------------------- | :--------------------------------------------- | :--------------------------------------- | | Commercial Services (Driver-billed) | 9,600 | 3,033 | (972) | 11,661 | | Commercial Services (All other) | 1,577 | (467) | 5 | 1,115 | | Government Solutions | 4,573 | (839) | — | 3,734 | | Parking Solutions | 157 | (30) | (168) | (41) | | Total | 15,907 | 1,697 | (1,135) | 16,469 | - The increase in Commercial Services (Driver-billed) credit loss estimate is due to **increased revenue and transaction volume** from COVID-19 recovery[41](index=41&type=chunk) [Deferred Revenue](index=12&type=section&id=Deferred%20Revenue) | Segment | March 31, 2023 ($ in millions) | December 31, 2022 ($ in millions) | | :-------------------- | :----------------------------- | :------------------------------- | | Government Solutions | 16.0 | 12.2 | | Parking Solutions | 18.0 | 21.2 | [Interest Rate Swap](index=12&type=section&id=Interest%20Rate%20Swap) - Company entered a **$675.0 million notional interest rate swap** in December 2022 to hedge variable interest rate exposure on its 2021 Term Loan[43](index=43&type=chunk) - A **$2.8 million loss** was recorded on the interest rate swap for Q1 2023, including $1.6 million from fair value re-measurement and $1.2 million from cash payments[44](index=44&type=chunk) [Recent Accounting Pronouncements](index=13&type=section&id=Recent%20Accounting%20Pronouncements) - Adopted ASU 2020-04 for **LIBOR to Term SOFR transition** on 2021 Term Loan, with no material financial statement impact[45](index=45&type=chunk)[46](index=46&type=chunk) - Evaluating ASU 2022-03 regarding fair value measurement of equity securities with sale restrictions, effective after December 15, 2023[47](index=47&type=chunk) [3. Prepaid Expenses and Other Current Assets](index=13&type=section&id=3.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) Prepaid Expenses and Other Current Assets | Category | March 31, 2023 ($ in thousands) | December 31, 2022 ($ in thousands) | | :------------------------------ | :------------------------------ | :------------------------------- | | Prepaid services | 9,762 | 9,171 | | Prepaid tolls | 8,544 | 9,978 | | Prepaid computer maintenance | 4,871 | 5,492 | | Costs to fulfill a customer contract | 4,413 | 3,193 | | Prepaid insurance | 2,254 | 3,112 | | Prepaid income taxes | 1,424 | 4,629 | | Deposits | 1,665 | 2,057 | | Other | 325 | 1,972 | | Total | 33,258 | 39,604 | [4. Goodwill and Intangible Assets](index=13&type=section&id=4.%20Goodwill%20and%20Intangible%20Assets) Goodwill and Intangible Assets | Metric | March 31, 2023 ($ in thousands) | December 31, 2022 ($ in thousands) | | :------------------------ | :------------------------------ | :------------------------------- | | Goodwill | 834,299 | 833,480 | | Intangible assets, net | 355,678 | 377,420 | - Amortization expense for Q1 2023 was **$22.0 million**, contributing to the decrease in net intangible assets[50](index=50&type=chunk) [5. Accrued Liabilities](index=14&type=section&id=5.%20Accrued%20Liabilities) Accrued Liabilities | Category | March 31, 2023 ($ in thousands) | December 31, 2022 ($ in thousands) | | :---------------------------------- | :------------------------------ | :------------------------------- | | Accrued salaries and wages | 12,484 | 19,109 | | Accrued interest payable | 9,080 | 4,459 | | Current deferred tax liabilities | 7,559 | 7,559 | | Current portion of operating lease liabilities | 6,869 | 6,355 | | Income tax payable | 3,794 | 269 | | Restricted cash due to customers | 3,196 | 3,541 | | Payroll liabilities | 3,293 | 2,136 | | Current portion of interest rate swap liability | 1,413 | 977 | | Other | 4,356 | 4,442 | | Total | 52,044 | 48,847 | [6. Long-term Debt](index=15&type=section&id=6.%20Long-term%20Debt) Long-term Debt | Metric | March 31, 2023 ($ in thousands) | December 31, 2022 ($ in thousands) | | :------------------------------------ | :------------------------------ | :------------------------------- | | 2021 Term Loan, due 2028 | 821,351 | 886,106 | | Senior Notes, due 2029 | 350,000 | 350,000 | | Total long-term debt, net of current portion | 1,140,712 | 1,190,045 | - Early repayments of **$62.5 million** were made on the 2021 Term Loan during Q1 2023, reducing the principal outstanding to $821.4 million[58](index=58&type=chunk)[164](index=164&type=chunk) - Weighted average effective interest rate on outstanding borrowings increased to **7.4%** at March 31, 2023, from 7.0% at December 31, 2022[64](index=64&type=chunk) [2021 Term Loan and Senior Notes](index=15&type=section&id=2021%20Term%20Loan%20and%20Senior%20Notes) - 2021 Term Loan (totaling $900.0 million originally) matures March 26, 2028, and Senior Notes ($350.0 million) mature April 15, 2029[54](index=54&type=chunk)[55](index=55&type=chunk)[57](index=57&type=chunk) - The 2021 Term Loan transitioned from LIBOR to Term SOFR in March 2023, with an all-in interest rate of **8.17%** as of March 31, 2023[59](index=59&type=chunk)[165](index=165&type=chunk) - Senior Notes bear a fixed interest rate of **5.50%** per annum[60](index=60&type=chunk)[166](index=166&type=chunk) [The Revolver](index=16&type=section&id=The%20Revolver) - Revolving Credit Agreement has a **$75.0 million** commitment, maturing December 20, 2026[61](index=61&type=chunk)[168](index=168&type=chunk) - As of March 31, 2023, **$74.8 million** was available for borrowing under the Revolver, with no outstanding borrowings[61](index=61&type=chunk)[168](index=168&type=chunk) [Interest Expense](index=16&type=section&id=Interest%20Expense) | Metric | Three Months Ended March 31, 2023 ($ in thousands) | Three Months Ended March 31, 2022 ($ in thousands) | Change ($ in thousands) | Change (%) | | :-------------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Interest Expense, net | 22,687 | 14,279 | 8,408 | 58.9% | [7. Fair Value of Financial Instruments](index=16&type=section&id=7.%20Fair%20Value%20of%20Financial%20Instruments) Fair Value of Financial Instruments | Financial Instrument | Fair Value Hierarchy Level | March 31, 2023 Estimated Fair Value ($ in thousands) | December 31, 2022 Estimated Fair Value ($ in thousands) | | :----------------------- | :------------------------- | :------------------------------------------------- | :------------------------------------------------- | | 2021 Term Loan | 2 | 823,405 | 883,891 | | Senior Notes | 2 | 313,250 | 313,250 | - Private placement warrant liabilities are Level 3, with a fair value of **$38.667 million** at March 31, 2023, and a **$14.601 million** change in fair value recorded in Q1 2023[69](index=69&type=chunk) - The interest rate swap is classified as Level 2, with changes in fair value included in other non-current assets and accrued liabilities[70](index=70&type=chunk)[71](index=71&type=chunk) [8. Net Income Per Share](index=18&type=section&id=8.%20Net%20Income%20Per%20Share) Net Income Per Share | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net Income Per Share - Basic | $0.03 | $0.06 | | Net Income Per Share - Diluted | $0.03 | $0.06 | | Weighted Average Shares - Basic (in thousands) | 149,165 | 156,130 | | Weighted Average Shares - Diluted (in thousands) | 153,129 | 160,749 | - Antidilutive shares excluded from diluted EPS totaled **13.287 million** in Q1 2023, including contingently issuable shares and private placement warrants[73](index=73&type=chunk) [9. Income Taxes](index=18&type=section&id=9.%20Income%20Taxes) Income Taxes | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Effective Income Tax Rate | 63.2% | 40.4% | - Primary driver for the effective tax rate variance is permanent differences from the **mark-to-market adjustment on private placement warrants**[76](index=76&type=chunk) - Total unrecognized tax benefits increased by $0.2 million to **$11.4 million** in Q1 2023, with $2.8 million potentially impacting the effective tax rate[77](index=77&type=chunk) [10. Stockholders' Equity](index=19&type=section&id=10.%20Stockholders'%20Equity) - **18,092,120 warrants** outstanding as of March 31, 2023, including 6,666,666 Private Placement Warrants[79](index=79&type=chunk) - Approximately **1.9 million Public Warrants** were exercised cashless for 632,745 Class A Common Stock shares in Q1 2023[80](index=80&type=chunk) [Warrants](index=19&type=section&id=Warrants) - All outstanding warrants (18,092,120) expire in **October 2023**[79](index=79&type=chunk)[81](index=81&type=chunk) - Public Warrants are redeemable if Class A Common Stock price exceeds **$18.00** for 20 trading days within a 30-day period; Private Placement Warrants are nonredeemable if held by original sponsor[81](index=81&type=chunk) [Share Repurchase Program](index=19&type=section&id=Share%20Repurchase%20Program) - Board authorized a **$100.0 million** share repurchase program in November 2022, spanning 18 months[82](index=82&type=chunk) - **No shares have been repurchased** under the program as of March 31, 2023[82](index=82&type=chunk) [11. Stock-Based Compensation](index=20&type=section&id=11.%20Stock-Based%20Compensation) Stock-Based Compensation | Category | Three Months Ended March 31, 2023 ($ in thousands) | Three Months Ended March 31, 2022 ($ in thousands) | Change ($ in thousands) | Change (%) | | :-------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Operating expenses | 332 | 214 | 118 | 55.1% | | Selling, general and administrative expenses | 3,046 | 4,232 | (1,186) | (28.0%) | | Total stock-based compensation expense | 3,378 | 4,446 | (1,068) | (24.0%) | - Decrease in stock-based compensation primarily due to **accelerated RSU vesting** for an executive officer's separation in Q1 2022[84](index=84&type=chunk) [12. Other Significant Transactions](index=21&type=section&id=12.%20Other%20Significant%20Transactions) [Tax Receivable Agreement](index=21&type=section&id=Tax%20Receivable%20Agreement) - TRA requires payment of **50% of net cash tax savings** from increased tax basis of acquired intangibles[86](index=86&type=chunk) - TRA liability was **$55.9 million** at March 31, 2023 ($5.0 million current, $50.9 million non-current)[87](index=87&type=chunk) [Earn-Out Agreement](index=21&type=section&id=Earn-Out%20Agreement) - Platinum Stockholder can receive up to **10,000,000 Earn-Out Shares** based on Class A Common Stock price thresholds within five years of the Business Combination[88](index=88&type=chunk)[90](index=90&type=chunk) - Two tranches (5,000,000 shares) have been issued; **$36.6 million remains contingently issuable** for future tranches as of March 31, 2023[92](index=92&type=chunk)[93](index=93&type=chunk) [13. Commitments and Contingencies](index=23&type=section&id=13.%20Commitments%20and%20Contingencies) - **$2.0 million** in bank guarantees and **$21.1 million** in non-cancelable purchase commitments as of March 31, 2023[94](index=94&type=chunk) - Accrues for probable and reasonably estimable losses from claims and contingencies; **no material adverse impact anticipated** from current legal matters[96](index=96&type=chunk)[97](index=97&type=chunk) [Legal Proceedings](index=23&type=section&id=Legal%20Proceedings) - Defendant in *Brantley v. City of Gretna*, a class action regarding a safety camera program, with **no estimable loss or accrued liability**[98](index=98&type=chunk) - Defendant in *PlusPass, Inc. v. Verra Mobility*, an antitrust lawsuit alleging Clayton and Sherman Act violations, with trial set for **November 2023**[183](index=183&type=chunk) [14. Segment Reporting](index=23&type=section&id=14.%20Segment%20Reporting) - Company operates in **Commercial Services, Government Solutions, and Parking Solutions** segments[99](index=99&type=chunk) - Segment profit excludes depreciation, amortization, stock-based compensation, interest expense, and income taxes[100](index=100&type=chunk)[120](index=120&type=chunk) Segment Performance | Segment | Q1 2023 Total Revenue ($ in thousands) | Q1 2022 Total Revenue ($ in thousands) | Q1 2023 Segment Profit ($ in thousands) | Q1 2022 Segment Profit ($ in thousands) | | :-------------------- | :------------------------------------- | :------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Commercial Services | 85,639 | 73,465 | 53,556 | 46,608 | | Government Solutions | 85,923 | 78,828 | 31,465 | 25,481 | | Parking Solutions | 20,341 | 18,092 | 2,850 | 3,206 | | Total | 191,903 | 170,385 | 87,871 | 75,295 | International Revenue | International Revenue Source | Q1 2023 ($ in thousands) | Q1 2022 ($ in thousands) | | :--------------------------- | :----------------------- | :----------------------- | | Australia | 9,701 | 7,782 | | Canada | 7,221 | 8,588 | | United Kingdom | 6,736 | 6,207 | | All other | 688 | 652 | | Total International Revenues | 24,346 | 23,229 | [15. Guarantor/Non-Guarantor Financial Information](index=25&type=section&id=15.%20Guarantor/Non-Guarantor%20Financial%20Information) - VM Consolidated is the lead borrower for the 2021 Term Loan and Senior Notes, wholly owned by Verra Mobility Corporation[106](index=106&type=chunk) - Financial information is presented separately for the Ultimate Parent, guarantor subsidiaries, and non-guarantor subsidiaries[107](index=107&type=chunk) [16. Subsequent Event](index=29&type=section&id=16.%20Subsequent%20Event) - On May 2, 2023, the Company made an early repayment of **$10.0 million** on its 2021 Term Loan[116](index=116&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses robust revenue growth, improved operating cash flows, and debt management amid declining net income [Business Overview](index=30&type=section&id=Business%20Overview) - Verra Mobility provides smart mobility technology solutions globally, including toll/violations management, automated safety enforcement, and parking management[119](index=119&type=chunk) - Solutions are integrated and data-driven, serving fleet owners, governments, universities, healthcare facilities, and commercial parking operators[119](index=119&type=chunk) [Executive Summary](index=30&type=section&id=Executive%20Summary) - Total revenue increased by **12.6% to $191.9 million** in Q1 2023, driven by service revenue growth in Commercial Services and Government Solutions[121](index=121&type=chunk) - Cash flows from operating activities increased to **$45.2 million** in Q1 2023 from $31.2 million in Q1 2022[121](index=121&type=chunk) - Company made early repayments of **$62.5 million** on its 2021 Term Loan in Q1 2023 as part of debt management efforts[121](index=121&type=chunk) [Primary Components of Our Operating Results](index=31&type=section&id=Primary%20Components%20of%20Our%20Operating%20Results) [Revenues](index=31&type=section&id=Revenues) - Commercial Services generates service revenue from tolling programs and violation processing for RACs and FMCs[123](index=123&type=chunk) - Government Solutions service revenue comes from operating and maintaining photo enforcement systems, with drivers including system count and monthly revenue per system[124](index=124&type=chunk) - Product sales are from photo enforcement equipment (Government Solutions) and specialized hardware (Parking Solutions), with sales patterns varying significantly[125](index=125&type=chunk) [Costs and Expenses](index=31&type=section&id=Costs%20and%20Expenses) - Cost of service revenue includes recurring service, collection, and third-party costs[126](index=126&type=chunk) - Operating expenses primarily consist of payroll, subcontractor costs, and payment processing[127](index=127&type=chunk) - Selling, general and administrative expenses include payroll, real estate lease, insurance, and professional services fees[128](index=128&type=chunk) - Non-operating expenses include interest expense, changes in fair value of private placement warrants, losses on interest rate swaps, and debt extinguishment losses[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Results of Operations | Metric | Q1 2023 ($ in thousands) | Q1 2022 ($ in thousands) | Change ($ in thousands) | Change (%) | | :------------------------------------------------- | :----------------------- | :----------------------- | :---------------------- | :--------- | | Total Revenue | 191,903 | 170,385 | 21,518 | 12.6% | | Service Revenue | 184,698 | 161,134 | 23,564 | 14.6% | | Product Sales | 7,205 | 9,251 | (2,046) | (22.1%) | | Income from Operations | 50,101 | 32,006 | 18,095 | 56.5% | | Net Income | 4,577 | 10,040 | (5,463) | (54.4%) | - Commercial Services service revenue increased by **$12.2 million (16.6%)** due to increased travel volume and adoption of all-inclusive fee structures[133](index=133&type=chunk)[134](index=134&type=chunk) - Government Solutions service revenue increased by **$10.0 million (13.7%)**, primarily driven by the expansion of speed programs[133](index=133&type=chunk)[135](index=135&type=chunk) - Net income decreased due to increased interest expense (**$8.4 million**) and a significant increase in the change in fair value of private placement warrants (**$10.9 million**)[142](index=142&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) - Principal liquidity sources are cash flows from operations and available borrowing under the Revolver[149](index=149&type=chunk) - Management believes **existing liquidity is sufficient** for the next 12 months[151](index=151&type=chunk) - Cash provided by operating activities increased by **$14.0 million to $45.2 million** in Q1 2023[156](index=156&type=chunk) - Cash used in investing activities increased due to capital purchases and interest rate swap payments[157](index=157&type=chunk) - Cash used in financing activities increased significantly due to **$62.5 million in early repayments** on the 2021 Term Loan[158](index=158&type=chunk) [Long-term Debt](index=36&type=section&id=Long-term%20Debt) - 2021 Term Loan outstanding balance was **$821.4 million** at March 31, 2023, after $62.5 million in early repayments[164](index=164&type=chunk) - The 2021 Term Loan's all-in interest rate was **8.17%** at March 31, 2023, following its transition to Term SOFR[165](index=165&type=chunk) - Senior Notes have an aggregate principal of **$350.0 million** with a fixed interest rate of 5.50%[161](index=161&type=chunk)[166](index=166&type=chunk) [The Revolver](index=37&type=section&id=The%20Revolver) - Revolver commitment of **$75.0 million**, maturing December 20, 2026[168](index=168&type=chunk) - **$74.8 million available for borrowing** as of March 31, 2023, with no outstanding borrowings[168](index=168&type=chunk) [Interest Expense](index=37&type=section&id=Interest%20Expense) | Metric | Three Months Ended March 31, 2023 ($ in thousands) | Three Months Ended March 31, 2022 ($ in thousands) | Change ($ in thousands) | Change (%) | | :-------------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Interest Expense, net | 22,687 | 14,279 | 8,408 | 58.9% | [Off-Balance Sheet Arrangements](index=37&type=section&id=Off-Balance%20Sheet%20Arrangements) - **No material off-balance sheet financing arrangements** as of March 31, 2023[172](index=172&type=chunk) [Critical Accounting Policies, Estimates and Judgments](index=37&type=section&id=Critical%20Accounting%20Policies,%20Estimates%20and%20Judgments) - Financial statements require significant management estimates and assumptions; detailed policies are in the 2022 Annual Report on Form 10-K[173](index=173&type=chunk) [Recent Accounting Pronouncements](index=37&type=section&id=Recent%20Accounting%20Pronouncements) - Refer to Note 2 for discussion of recent accounting pronouncements[175](index=175&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company details its interest rate risk from its variable-rate term loan and its use of a swap to hedge this exposure - Exposed to interest rate market risk from **$821.4 million variable rate 2021 Term Loan**[177](index=177&type=chunk) - A **1% interest rate movement** would change annual interest expense by approximately **$8.2 million**[178](index=178&type=chunk) - Entered a **$675.0 million notional interest rate swap** in December 2022 to hedge exposure, resulting in a **$2.8 million loss** in Q1 2023[179](index=179&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) The company confirms the effectiveness of its disclosure controls and reports no material changes to internal controls [Evaluation of Disclosure Controls and Procedures](index=38&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Disclosure controls and procedures were **effective** as of March 31, 2023[180](index=180&type=chunk) [Changes in Internal Control Over Financial Reporting](index=38&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - **No material changes** in internal control over financial reporting during Q1 2023[181](index=181&type=chunk) [PART II—OTHER INFORMATION](index=39&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company details its involvement in two lawsuits and does not anticipate a material adverse impact from these matters - Company is a defendant in *PlusPass, Inc. v. Verra Mobility*, an antitrust lawsuit alleging violations of Section 7 of the Clayton Act and Sections 1 and 2 of the Sherman Act[183](index=183&type=chunk) - The lawsuit concerns the 2018 merger of HTA and ATS and alleged anticompetitive practices in electronic toll payment collection for rental cars[183](index=183&type=chunk) - Trial is set for **November 2023**, and Verra Mobility intends to vigorously defend against the claims[183](index=183&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2022 Annual Report - **No material changes** to risk factors from the 2022 Annual Report on Form 10-K[184](index=184&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales or repurchases of its equity securities during the reporting period - **No unregistered sales or purchases** of equity securities[185](index=185&type=chunk)[186](index=186&type=chunk) [Item 3. Defaults Upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon its senior securities during the period - **No defaults** upon senior securities[187](index=187&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - **Not Applicable**[188](index=188&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) The company reports no other information for this period - **No other information** to report[189](index=189&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with or incorporated by reference into the quarterly report - Lists exhibits filed or incorporated by reference, including merger agreements, corporate documents, warrant agreements, and equity incentive plan forms[191](index=191&type=chunk)[193](index=193&type=chunk)[195](index=195&type=chunk)

| --- | --- | --- | --- | --- | --- | --- | --- | |-------|-------|-------|----------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | VERRA | | | | | | | | | | | | | | | ← ← | | | MOBILITY" | | | | | | | | | Safe. Smart. Connect | | | | | Investor Overview Verra Mobility Q4 2022 Investor Presentation For the Year Ended December 31, 2022 Forward-looking Statements 2 This presentation includes "forward-looking statements" within the meaning of the "safe harbor" provisi ...

Verra Mobility Corporation (NASDAQ:VRRM) Q4 2022 Earnings Conference Call March 1, 2023 5:00 PM ET Company Participants Mark Zindler - Vice President, Investor Relations David Roberts - Chief Executive Officer Craig Conti - Chief Financial Officer Conference Call Participants Daniel Moore - CJS Securities David Koning - Robert W. Baird Faiza Alwy - Deutsche Bank Louie Dipalma - William Blair Keith Housum - Northcoast Research Partners Operator Good afternoon, ladies and gentlemen, and welcome to Verra Mob ...