PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Verra Mobility Corporation is a leading provider of smart mobility technology solutions across the United States, Australia, Europe, and Canada. The company operates through three segments: Commercial Services, Government Solutions, and Parking Solutions, offering integrated, data-driven solutions for toll and violations management, title and registration, automated safety, and commercial parking. Key markets include commercial fleets, governments, universities, and parking operators - Verra Mobility provides smart mobility technology solutions, including toll and violations management, title and registration, automated safety, and commercial parking management[14](index=14&type=chunk) - The company serves commercial fleet owners (RACs, Direct Fleets, FMCs), governments, universities, parking operators, healthcare facilities, and transportation hubs[14](index=14&type=chunk) 2023 Revenue by Segment | Segment | Revenue (Millions USD) | % of Total Revenue | | :------------------ | :--------------------- | :----------------- | | Commercial Services | $372.8 | 45.6% | | Government Solutions | $358.4 | 43.9% | | Parking Solutions | $86.1 | 10.5% | [Overview](index=5&type=section&id=Overview) Verra Mobility provides integrated, data-driven smart mobility technology solutions to enhance transportation safety, intelligence, and connectivity - Verra Mobility is a leading provider of smart mobility technology solutions, making transportation safer, smarter, and more connected through integrated, data-driven solutions[14](index=14&type=chunk) - The company's solutions include toll and violations management, title and registration services, automated safety and traffic enforcement, and commercial parking management[14](index=14&type=chunk) [Segments](index=5&type=section&id=Segments) The company operates through three distinct segments: Commercial Services, Government Solutions, and Parking Solutions - The company operates through three segments: Commercial Services, Government Solutions, and Parking Solutions[15](index=15&type=chunk) - Commercial Services focuses on automated toll and violations management and title/registration for commercial fleets in North America and violations processing/consumer tolling in Europe[16](index=16&type=chunk) - Government Solutions provides automated safety solutions (red-light, speed, school bus, work zone, city bus lane cameras) to state and local governments in the US, Canada, and Australia[17](index=17&type=chunk) - Parking Solutions, formed after the T2 Systems acquisition in December 2021, offers end-to-end commercial parking management solutions to universities, municipalities, healthcare, and commercial operators in North America[18](index=18&type=chunk)[19](index=19&type=chunk) [Markets and Competition](index=7&type=section&id=Markets%20and%20Competition) The company faces strong competition across fragmented markets, but benefits from growing demand for automated safety solutions and trends in tolling and parking technology - The company faces strong competition across all markets, but no single competitor offers a similarly broad suite of solutions[20](index=20&type=chunk) - Automated safety solutions are increasingly seen as effective tools for traffic safety, with growing demand driven by initiatives like Vision Zero and positive reports from government agencies[21](index=21&type=chunk)[22](index=22&type=chunk) - The tolling industry is fragmented and complex, with trends toward increased toll roads (including dynamic tolling) and cashless payments creating expansion opportunities[23](index=23&type=chunk) - The US RAC industry is highly consolidated, with the top three companies being long-standing customers, and trends in toll road usage create opportunities for fleet market expansion[24](index=24&type=chunk) - The parking industry is fragmented, with a growing need for technology solutions that provide mobile-first, self-service offerings to improve operational efficiency and reduce labor reliance[25](index=25&type=chunk) [Products](index=9&type=section&id=Products) Verra Mobility offers diverse products across its segments, including outsourced toll and violations management, photo enforcement, and comprehensive parking management solutions - Commercial Services offers outsourced toll management (**40.4% of 2023 revenue**), violations management (**4.6% of 2023 revenue**), and title and registration solutions (**0.6% of 2023 revenue**)[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) - Government Solutions provides photo enforcement solutions for red-light, speed, school bus, and bus lane violations, with direct service revenue from these cameras accounting for **39.6% of 2023 total revenues**[29](index=29&type=chunk)[30](index=30&type=chunk) - Parking Solutions includes Parking Access and Revenue Control (PARCS) technology, UNIFI Mobile (launched Dec 2023 for mobile payments, permits, citations), Pay Stations (over **15,600 units**), and Permits & Enforcement software[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) [Intellectual Property](index=11&type=section&id=Intellectual%20Property) The company safeguards its intellectual property through a combination of patents, trademarks, trade secrets, copyrights, and confidentiality agreements - The company protects its intellectual property through patents, trademarks, trade secrets, copyrights, and confidentiality agreements[35](index=35&type=chunk) - Verra Mobility owns approximately **88 U.S. and foreign-issued patents** and pending applications, and approximately **220 registrations and pending applications for trademarks and service marks**[36](index=36&type=chunk)[39](index=39&type=chunk) [Government Regulation](index=12&type=section&id=Government%20Regulation) The company is subject to evolving local, state, and national regulations concerning data privacy, photo enforcement, consumer protection, and anti-corruption - The company is subject to various local, state, and national laws and regulations, including those related to data privacy, photo enforcement, consumer protection, procurement, and anti-corruption[40](index=40&type=chunk) - Privacy and data security laws (e.g., U.S. Driver Privacy Protection Act, GDPR, CCPA) are constantly evolving, increasing compliance complexity and costs[41](index=41&type=chunk)[42](index=42&type=chunk) - Automated photo enforcement programs are regulated at state and local levels, with **21 bills enacted in 2023** to authorize or expand such programs[43](index=43&type=chunk) - Tolling operations are subject to state and local regulations, with increasing scrutiny from state Attorneys General regarding RAC tolling programs and fees[46](index=46&type=chunk) [Human Capital Management](index=14&type=section&id=Human%20Capital%20Management) Verra Mobility focuses on attracting, retaining, and developing a diverse workforce through purposeful hiring, internal mobility, and performance-aligned compensation programs - As of December 31, 2023, Verra Mobility had **1,788 employees** (**1,581 full-time, 207 part-time**), with **1,187 full-time in the US** and **394 internationally**[51](index=51&type=chunk) - The company focuses on attracting, retaining, and developing diverse talent through purposeful hiring, internal mobility, and a multifaceted talent development framework[52](index=52&type=chunk) - Compensation programs align with company and individual performance, offering cash compensation, health benefits, 401(k) plans, and equity awards for key leadership[53](index=53&type=chunk) [Corporate Information](index=16&type=section&id=Corporate%20Information) Verra Mobility Corporation, incorporated in Delaware, trades its Class A Common Stock on the Nasdaq Capital Market under the symbol 'VRRM' - Verra Mobility Corporation was originally incorporated in Delaware on August 15, 2016, as Gores Holdings II, Inc., and changed its name after the Business Combination on October 17, 2018[55](index=55&type=chunk) - The company's principal executive office is located in Mesa, AZ, and its Class A Common Stock trades on the Nasdaq Capital Market under the symbol **'VRRM'**[3](index=3&type=chunk)[56](index=56&type=chunk) [Item 1A. Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) Investing in Verra Mobility common stock involves significant risks, including customer concentration in Commercial Services and Government Solutions, unique uncertainties in government contracts, intense competition, and challenges in new product development. The company also faces risks related to its acquisition strategy, data privacy and cybersecurity threats, international operations, intellectual property protection, substantial indebtedness, reliance on third-party vendors, and general economic conditions. Internal control weaknesses and potential litigation further contribute to the risk profile - Customer concentration is a significant risk, with the NYCDOT representing **16.9% of total revenues in fiscal 2023** and the contract expiring December 31, 2024[72](index=72&type=chunk)[270](index=270&type=chunk) - Government contracts are subject to unique risks, including termination rights, payment delays (e.g., **$36.1 million open receivable from NYCDOT as of Dec 31, 2023**), audits, and investigations[73](index=73&type=chunk) - The company's substantial debt, including **$704.6 million outstanding** under its first lien term loan facility as of December 31, 2023, could restrict operating flexibility and increase vulnerability to adverse economic conditions[128](index=128&type=chunk) - A material weakness was identified in internal controls over financial reporting for fiscal year 2023, related to a lack of information technology general controls to prevent management override[163](index=163&type=chunk)[332](index=332&type=chunk)[535](index=535&type=chunk) [Risk Factor Summary](index=18&type=section&id=Risk%20Factor%20Summary) Investing in Verra Mobility common stock carries a high degree of risk across various operational, financial, and market-related areas - Investing in Verra Mobility common stock involves a high degree of risk, including those related to customers, industry, competition, acquisitions, data privacy, cybersecurity, international operations, intellectual property, indebtedness, and vendors[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) [Risks Related to Our Customers, Industry and Competition](index=20&type=section&id=Risks%20Related%20to%20Our%20Customers,%20Industry%20and%20Competition) Customer concentration, unique government contract risks, and intense competition pose significant challenges to the company's business and financial performance - Commercial Services and Government Solutions segments have customer concentration; NYCDOT represented **16.9% of total revenues in fiscal 2023**, and its contract expires December 31, 2024[71](index=71&type=chunk)[72](index=72&type=chunk) - Government contracts carry risks like termination rights, payment delays (e.g., **$36.1 million open receivable from NYCDOT as of Dec 31, 2023**), and audits, which could materially affect the business[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk)[78](index=78&type=chunk) - Decreases in political acceptance or increased governmental restrictions on automated photo enforcement and third-party tolling services could materially impact the Government Solutions and Commercial Services segments[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) - Intense competition, rapid technological changes, and evolving customer preferences pose risks, as competitors may have greater resources or offer more competitive pricing[82](index=82&type=chunk)[83](index=83&type=chunk)[85](index=85&type=chunk) [Risks Related to Our Acquisitions](index=24&type=section&id=Risks%20Related%20to%20Our%20Acquisitions) The company faces risks in successfully implementing its acquisition strategy, integrating acquired businesses, and realizing anticipated financial benefits - Inability to successfully implement the acquisition strategy, including identifying suitable opportunities or consummating transactions on acceptable terms, could materially affect the business[88](index=88&type=chunk) - Difficulties in integrating acquired businesses (e.g., combining management, systems, personnel, or losing key customers) could cause significant disruption and additional costs[89](index=89&type=chunk)[91](index=91&type=chunk) - Failure to realize anticipated benefits or encountering unanticipated expenses and liabilities from acquisitions could materially and adversely affect financial performance[92](index=92&type=chunk) [Risks Related to Data Privacy and Cybersecurity](index=26&type=section&id=Risks%20Related%20to%20Data%20Privacy%20and%20Cybersecurity) Failures or breaches of networks and systems, along with non-compliance with evolving data privacy laws, could lead to significant financial and reputational harm - A failure or breach of networks or systems, including cyber-attacks, could have a material adverse effect due to the substantial volumes of personal and financial information processed[93](index=93&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) - Non-compliance with evolving domestic and foreign laws and regulations relating to personal information, privacy, and data security (e.g., CCPA, GDPR) could lead to significant costs, fines, and reputational damage[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) - Failure to comply with laws related to processing financial transactions (e.g., debit/credit card transactions) could result in liability claims, fines, or restrictions on business operations[105](index=105&type=chunk)[106](index=106&type=chunk) [Risks Related to Human Capital Management](index=31&type=section&id=Risks%20Related%20to%20Human%20Capital%20Management) The company's success depends on attracting and retaining key talent, and potential labor disputes or inability to do so could materially affect operations - The company's future success depends on attracting and retaining key executives and skilled personnel, and any inability to do so could materially affect the business[107](index=107&type=chunk)[108](index=108&type=chunk)[110](index=110&type=chunk) - Dependence on qualified subcontractors and potential labor union disagreements (for **26 employees in Staten Island, NY**) could disrupt services and reduce revenues[51](index=51&type=chunk)[108](index=108&type=chunk) [Risks Related to our International Operations](index=33&type=section&id=Risks%20Related%20to%20our%20International%20Operations) International operations expose the company to political instability, currency fluctuations, diverse legal environments, and compliance risks with anti-corruption laws - International operations in markets like the UK, Netherlands, France, Ireland, Spain, Australia, Canada, Hungary, and India expose the company to risks such as political instability, currency fluctuations, and varying legal/regulatory environments[111](index=111&type=chunk)[114](index=114&type=chunk) - Failure to successfully implement the international expansion strategy, including adapting products to new markets and overcoming entry barriers, could adversely affect growth[113](index=113&type=chunk)[115](index=115&type=chunk)[117](index=117&type=chunk) - Non-compliance with anticorruption and anti-money laundering laws (e.g., FCPA, UK Bribery Act) in international operations could result in severe sanctions and reputational harm[118](index=118&type=chunk)[119](index=119&type=chunk) - The proposed global minimum tax (OECD model rules) could increase and negatively impact the company's provision for income taxes as legislation becomes effective[120](index=120&type=chunk) [Risks Related to Our Intellectual Property](index=37&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Failure to protect intellectual property or defend against infringement claims could adversely affect market share, competitive position, and incur significant costs - Failure to acquire necessary intellectual property or adequately protect existing rights could allow competitors to market similar products, dilute brands, and adversely affect market share[122](index=122&type=chunk)[123](index=123&type=chunk) - Measures to monitor and protect intellectual property may be inadequate, leading to challenges, infringement, or misappropriation by third parties, incurring significant resources for defense or enforcement[124](index=124&type=chunk) - Third-party infringement claims or challenges to the validity of the company's intellectual property could harm its image, competitive position, and lead to significant defense or settlement costs[126](index=126&type=chunk)[127](index=127&type=chunk) [Risks Related to Our Indebtedness](index=38&type=section&id=Risks%20Related%20to%20Our%20Indebtedness) Substantial debt increases vulnerability to adverse economic conditions, limits operating flexibility through restrictive covenants, and poses risks of default - Substantial debt, including **$704.6 million outstanding** under the first lien term loan facility as of December 31, 2023, could increase vulnerability to adverse economic conditions and limit additional financing[128](index=128&type=chunk) - Restrictive covenants in debt agreements limit the company's ability to incur additional debt, pay dividends, make acquisitions, or dispose of assets, impacting operating flexibility[129](index=129&type=chunk)[130](index=130&type=chunk) - Failure to comply with debt covenants could result in default, accelerating debt repayment and potentially leading to bankruptcy or insolvency[133](index=133&type=chunk)[134](index=134&type=chunk) - Insufficient cash flows to service debt obligations or inability to obtain additional financing could materially and adversely affect the business and financial condition[135](index=135&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) [Risks Related to Our Class A Common Stock, Related Party Transactions and Organizational Documents](index=42&type=section&id=Risks%20Related%20to%20Our%20Class%20A%20Common%20Stock,%20Related%20Party%20Transactions%20and%20Organizational%20Documents) Stock repurchase programs, anti-takeover provisions, reliance on subsidiary distributions, and potential SEC filing issues present risks to shareholder value and corporate governance - Stock repurchase programs may not enhance long-term shareholder value, could increase stock price volatility, and diminish cash reserves, with a **1% excise tax** on net repurchases applied after January 1, 2023[140](index=140&type=chunk)[144](index=144&type=chunk) - Anti-takeover provisions in the certificate of incorporation and bylaws, along with Delaware law, could impair takeover attempts and make management removal more difficult[145](index=145&type=chunk)[146](index=146&type=chunk) - The company's reliance on operating subsidiaries for distributions to meet financial obligations means their financial condition and debt agreements could limit dividend payments[148](index=148&type=chunk)[149](index=149&type=chunk) - Failure to be current in SEC filings, as occurred in 2021, could adversely impact access to credit facilities, employee retention, and public market fundraising[150](index=150&type=chunk) [Risks Related to Our Vendors](index=47&type=section&id=Risks%20Related%20to%20Our%20Vendors) Heavy reliance on third-party providers and communications networks means their failures or misconduct could significantly disrupt operations and harm reputation - Heavy reliance on third-party providers (subcontractors, manufacturers, software vendors, network providers) means their failure to meet obligations could materially affect business operations[153](index=153&type=chunk) - Misconduct or performance deficiencies by third-party providers could harm the company's reputation or lead to contractual breaches, despite due diligence efforts[155](index=155&type=chunk) - Reliance on communications networks and information systems means any interruption (e.g., power outages, cyber-attacks, software errors) could significantly disrupt operations and damage reputation[156](index=156&type=chunk) [General Risk Factors](index=49&type=section&id=General%20Risk%20Factors) Uncertain economic conditions, internal control weaknesses, potential litigation, and changes in laws and regulations pose broad risks to the company's financial health and operations - Uncertainty about current and future economic conditions (e.g., higher interest rates, inflation, recession, political instability) can materially adversely affect demand for products and services[157](index=157&type=chunk)[158](index=158&type=chunk) - Failure to maintain an effective system of internal controls or identify material weaknesses could adversely affect financial reporting, diminish investor confidence, and lead to a decline in securities value[159](index=159&type=chunk)[160](index=160&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) - Litigation, disputes, and regulatory investigations (e.g., intellectual property, antitrust, consumer fraud, licensing) could be time-consuming, costly, and result in significant liabilities or reputational damage[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) - Changes in laws and regulations, or their interpretation, could limit solution adoption, increase costs, or lead to government scrutiny and penalties[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk) [Item 1B. Unresolved Staff Comments](index=55&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments[182](index=182&type=chunk) [Item 1C. Cybersecurity](index=55&type=section&id=Item%201C.%20Cybersecurity) Verra Mobility's Board, through the Audit Committee, oversees a comprehensive cybersecurity program integrated into its enterprise-wide risk management. The program focuses on governance, cross-functional collaboration, technical safeguards, incident response planning, third-party risk management, and employee education. Regular assessments and testing are conducted, with no current cybersecurity threats deemed likely to have a material effect on the company - The Board, via the Audit Committee, oversees the cybersecurity program as part of enterprise-wide risk management, based on NIST, ISO, and other industry frameworks[183](index=183&type=chunk)[184](index=184&type=chunk) - Key areas of the cybersecurity program include governance (led by VP of Cybersecurity reporting to CTO), collaboration with third-party firms, technical safeguards (firewalls, intrusion detection, access controls), incident response, third-party risk management, and employee training[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - As of the report date, no cybersecurity threats, including previous incidents, are believed to be reasonably likely to have a material effect on the company's business strategy, results of operations, cash flows, or financial condition[195](index=195&type=chunk) [Item 2. Properties](index=58&type=section&id=Item%202.%20Properties) Verra Mobility leases all properties used in its business, including its corporate headquarters in Mesa, Arizona, and various other office and small warehouse locations. None of these properties are considered material to the overall business - Verra Mobility leases all properties for its business, including its **108,956 square feet corporate headquarters in Mesa, Arizona**[196](index=196&type=chunk) - No single property is considered material to the company's overall business[196](index=196&type=chunk) [Item 3. Legal Proceedings](index=59&type=section&id=Item%203.%20Legal%20Proceedings) Verra Mobility is subject to various legal and regulatory actions in the ordinary course of business. A significant antitrust lawsuit filed by PlusPass, Inc. in November 2020 was fully resolved in February 2024 through a confidential business arrangement, for which Verra Mobility accrued $31.5 million at December 31, 2023. Other pending matters are not expected to have a material adverse impact - The company is subject to legal and regulatory actions, including intellectual property, commercial arrangements, and class action lawsuits challenging automated photo enforcement[198](index=198&type=chunk) - An antitrust lawsuit filed by PlusPass, Inc. in November 2020 was resolved in February 2024 through a confidential business arrangement, involving the acquisition of certain assets from PlusPass[199](index=199&type=chunk)[527](index=527&type=chunk) - Verra Mobility accrued **$31.5 million** for the PlusPass matter at December 31, 2023, presented within selling, general and administrative expenses[199](index=199&type=chunk)[513](index=513&type=chunk) - The company is unable to estimate a reasonably possible range of loss for the Brantley v. City of Gretna class action lawsuit, which alleges violations in the city's safety camera program[512](index=512&type=chunk) [Item 4. Mine Safety Disclosures](index=59&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Verra Mobility Corporation - The disclosure for mine safety is not applicable[200](index=200&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=60&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Verra Mobility's Class A Common Stock is quoted on Nasdaq under 'VRRM'. The company had eight holders of record as of February 23, 2024. All outstanding warrants expired or were exercised in 2023, generating $161.4 million in cash proceeds. The company has not paid cash dividends and its ability to do so is limited by debt covenants. Share repurchase programs were active in 2022 and 2023, with a new $100.0 million program authorized in October 2023. All earn-out shares under the Merger Agreement were issued by July 2023 - Class A Common Stock is quoted on Nasdaq under the symbol **'VRRM'**[202](index=202&type=chunk) - As of February 23, 2024, there were **eight holders of record** for Class A Common Stock[203](index=203&type=chunk) - During fiscal year 2023, **19,999,333 warrants were exercised**, resulting in the issuance of **16,273,406 shares of Class A Common Stock** and **$161.4 million in cash proceeds**[205](index=205&type=chunk)[227](index=227&type=chunk)[269](index=269&type=chunk) - The company has not paid cash dividends on its Class A Common Stock, and future payments are dependent on revenues, earnings, capital requirements, and limited by debt covenants[206](index=206&type=chunk) - A new share repurchase program for up to **$100.0 million** was authorized in October 2023, following **$100.0 million in repurchases** during 2023 under a prior program[143](index=143&type=chunk)[215](index=215&type=chunk)[224](index=224&type=chunk)[268](index=268&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[217](index=217&type=chunk)[219](index=219&type=chunk)[504](index=504&type=chunk)[506](index=506&type=chunk) [Item 6. [Reserved]](index=63&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=64&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Verra Mobility achieved a 10.2% increase in total revenue to $817.3 million in fiscal year 2023, driven by growth in Commercial Services and Government Solutions. Net income decreased by 38.3% to $57.0 million, primarily due to changes in warrant fair value, a legal settlement, and higher interest expenses. The company focused on debt management, making $172.5 million in early repayments on its 2021 Term Loan, and maintained strong liquidity with $136.3 million cash on hand and $74.8 million available under its Revolver Key Financial Highlights (FY2023 vs. FY2022) | Metric | FY2023 (Millions USD) | FY2022 (Millions USD) | Change ($) | Change (%) | | :------------------------------------------ | :-------------------- | :-------------------- | :--------- | :--------- | | Total Revenue | $817.3 | $741.6 | $75.7 | 10.2% | | Net Income | $57.0 | $92.5 | $(35.5) | (38.3)% | | Cash Flows from Operating Activities | $206.1 | $218.3 | $(12.2) | (5.6)% | | Cash on Hand (as of Dec 31) | $136.3 | $105.2 | $31.1 | 29.6% | | 2021 Term Loan Outstanding (as of Dec 31) | $704.6 | $886.1 | $(181.5) | (20.5)% | - The increase in total revenue was mainly due to service revenue from increased travel volume and higher adoption of all-inclusive product offerings in Commercial Services, and expansion of speed programs in Government Solutions[224](index=224&type=chunk) - Net income decreased primarily due to the change in fair value of Private Placement Warrants liability, a legal settlement, and higher interest expenses[260](index=260&type=chunk) [Business Overview](index=64&type=section&id=Business%20Overview) Verra Mobility is a global provider of smart mobility technology solutions, aiming to make transportation safer, smarter, and more connected - Verra Mobility is a leading provider of smart mobility technology solutions, operating globally, with a vision to make transportation safer, smarter, and more connected[222](index=222&type=chunk) - The company offers integrated, data-driven solutions for toll and violations management, title and registration, automated safety and traffic enforcement, and commercial parking management[222](index=222&type=chunk) [Executive Summary](index=64&type=section&id=Executive%20Summary) Verra Mobility operates with a recurring service revenue model, focusing on organic growth, debt management, and shareholder returns through share repurchases - Verra Mobility operates under long-term contracts and a highly recurring service revenue model, focusing on organic revenue growth and long-term vision initiatives[223](index=223&type=chunk) Executive Summary Key Metrics (FY2023) | Metric | Value (Millions USD) | Change YoY | | :-------------------------------- | :------------------- | :--------- | | Total Revenue | $817.3 | +10% | | Cash Flows from Operating Activities | $206.1 | - | | Cash on Hand (Dec 31, 2023) | $136.3 | - | | Share Repurchases | $100.0 | - | | Early Debt Repayments (2021 Term Loan) | $172.5 | - | - The company authorized a new **$100.0 million share repurchase program** in October 2023, with no shares repurchased under it yet[224](index=224&type=chunk)[226](index=226&type=chunk) - All **19,999,333 warrants were exercised** in fiscal year 2023, generating **$161.4 million in cash proceeds**, with no outstanding warrants as of the report date[227](index=227&type=chunk) [Segments](index=66&type=section&id=Segments) Verra Mobility's performance is analyzed across its three operating segments: Commercial Services, Government Solutions, and Parking Solutions - Verra Mobility has three operating and reportable segments: Commercial Services, Government Solutions, and Parking Solutions[228](index=228&type=chunk) - Segment performance is based on revenues and income from operations before depreciation, amortization, and stock-based compensation, excluding interest expense, income taxes, and certain other transactions[228](index=228&type=chunk) [Primary Components of Our Operating Results](index=66&type=section&id=Primary%20Components%20of%20Our%20Operating%20Results) Operating results are driven by service revenue and product sales, offset by various costs and expenses including operating, selling, general, administrative, and interest expenses - Service revenue is generated from toll/violation management (Commercial Services), photo enforcement (Government Solutions), and SaaS/subscription/professional services (Parking Solutions)[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk) - Product sales come from photo enforcement equipment (Government Solutions) and specialized hardware (Parking Solutions), with varying customer buying patterns[232](index=232&type=chunk) - Costs and expenses include cost of service revenue, cost of product sales, operating expenses (payroll, subcontractors, IT), selling, general and administrative expenses (legal settlement, wages), depreciation/amortization, interest expense, and other non-operating items[233](index=233&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk) [Results of Operations](index=69&type=section&id=Results%20of%20Operations) The company's financial performance in 2023 showed increased total revenue but decreased net income, influenced by service revenue growth, legal settlements, and higher interest expenses Consolidated Statements of Operations Data (FY2023 vs. FY2022) | Metric (in thousands) | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Service revenue | $783,595 | $695,218 | $88,377 | 12.7% | | Product sales | $33,715 | $46,380 | $(12,665) | (27.3)% | | Total revenue | $817,310 | $741,598 | $75,712 | 10.2% | | Total costs and expenses | $628,496 | $576,893 | $51,603 | 8.9% | | Income from operations | $188,814 | $164,705 | $24,109 | 14.6% | | Interest expense, net | $86,701 | $69,372 | $17,329 | 25.0% | | Net income | $57,015 | $92,475 | $(35,460) | (38.3)% | - Commercial Services service revenue increased by **14.4% to $372.8 million**, driven by increased travel volume, tolling activity, and adoption of all-inclusive fee structures[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk) - Government Solutions service revenue increased by **11.8% to $344.0 million**, primarily due to the expansion of speed programs (**$29.9 million contribution**)[242](index=242&type=chunk)[245](index=245&type=chunk) - Selling, general and administrative expenses increased by **$35.4 million**, primarily due to a **$31.5 million legal settlement** and higher wage expenses, partially offset by lower credit loss expense[250](index=250&type=chunk) - Depreciation, amortization and (gain) loss on disposal of assets, net, decreased by **$27.0 million** due to certain intangible assets being fully amortized[252](index=252&type=chunk) - Interest expense, net, increased by **$17.3 million** due to higher interest rates, with the average variable interest rate on the 2021 Term Loan approximately **350 basis points higher in 2023**[253](index=253&type=chunk) [Liquidity and Capital Resources](index=75&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily supported by operating cash flows and available credit, with significant debt repayments and a recent term loan refinancing - Principal liquidity sources are cash flows from operations and available borrowing under the Revolver[261](index=261&type=chunk) - As of December 31, 2023, cash on hand was **$136.3 million**, and **$74.8 million** was available for borrowing under the Revolver[263](index=263&type=chunk) - Early repayments totaling **$172.5 million** were made on the 2021 Term Loan during fiscal year 2023, with the outstanding principal at **$704.6 million**[264](index=264&type=chunk)[277](index=277&type=chunk) - The NYCDOT represented **18% of total accounts receivable, net**, as of December 31, 2023, down from **22% in 2022**[270](index=270&type=chunk) Cash Flow Summary (FY2023 vs. FY2022) | Cash Flow Activity (in thousands) | 2023 | 2022 | | :-------------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $206,101 | $218,337 | | Net cash used in investing activities | $(58,290) | $(48,592) |\n| Net cash used in financing activities | $(117,793) | $(164,932) | - The 2021 Term Loan was refinanced in February 2024, reducing the interest rate by **50 basis points to SOFR + 2.75%** and eliminating the credit spread adjustment, resulting in **61.5 basis points total savings**[264](index=264&type=chunk)[280](index=280&type=chunk)[526](index=526&type=chunk) - The Senior Notes have a fixed interest rate of **5.50% per annum**, due April 15, 2029[282](index=282&type=chunk)[450](index=450&type=chunk) - The PPP Loan of **$2.9 million** was fully forgiven in September 2022, resulting in a **$3.0 million gain on extinguishment of debt**[283](index=283&type=chunk)[451](index=451&type=chunk) [Critical Accounting Estimates](index=83&type=section&id=Critical%20Accounting%20Estimates) Key accounting estimates involve significant management judgment in areas such as revenue recognition, credit losses, business combinations, goodwill impairment, income taxes, and warrant fair value - Significant judgments are required for revenue recognition, particularly in estimating standalone selling prices (SSP) and allocating transaction prices for contracts with multiple performance obligations[291](index=291&type=chunk) - Allowance for credit losses involves reviewing historical losses and customer payment trends, with adjustments for current and future expectations using probability-weighted assumptions[293](index=293&type=chunk) - Business combinations are accounted for using the acquisition method, requiring considerable management judgment in allocating fair values to acquired assets and liabilities, including goodwill[294](index=294&type=chunk)[295](index=295&type=chunk) - Goodwill impairment is assessed annually, involving significant judgment in determining reporting unit fair values using discounted cash flow and market approaches; no impairment was recognized for Parking Solutions in 2023[296](index=296&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk)[299](index=299&type=chunk) - Income tax accounting requires judgment in determining valuation allowances against deferred tax assets and recognizing tax benefits from uncertain tax positions[301](index=301&type=chunk) - Private Placement Warrants were classified as liabilities and re-measured to fair value at each reporting period using a Black-Scholes option pricing model until their exercise in 2023[302](index=302&type=chunk)[304](index=304&type=chunk) [Recent Accounting Pronouncements](index=89&type=section&id=Recent%20Accounting%20Pronouncements) The company adopted ASU 2020-04 and is evaluating the impact of ASU 2022-03, ASU 2023-07, and ASU 2023-09 on its financial statements - The company adopted ASU 2020-04 (Reference Rate Reform) in March 2023, applying optional expedients for the transition from LIBOR to Term SOFR, with no material impact[428](index=428&type=chunk)[429](index=429&type=chunk) - ASU 2022-03 (Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions) is effective after December 15, 2023, and is not expected to have a material impact[431](index=431&type=chunk) - ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes) are effective for fiscal years beginning after December 15, 2023, and 2024, respectively, and the company is evaluating their impact[432](index=432&type=chunk)[433](index=433&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=89&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Verra Mobility is exposed to interest rate market risk from its variable rate debt, which is partially hedged by an interest rate swap agreement - The company is exposed to interest rate market risk from its variable rate 2021 Term Loan, with an outstanding balance of **$704.6 million** at December 31, 2023[306](index=306&type=chunk) - Each **1% movement in interest rates** would result in an approximately **$7.0 million change in annual interest expense**[307](index=307&type=chunk) - An interest rate swap agreement, entered in December 2022, hedges exposure to interest rate fluctuations, with the company paying a fixed rate of **5.17%** on a notional amount of **$675.0 million**[308](index=308&type=chunk)[395](index=395&type=chunk) - The company recorded a **$0.8 million loss** on the interest rate swap in fiscal year 2023, compared to a **$1.0 million gain** in fiscal year 2022[256](index=256&type=chunk)[308](index=308&type=chunk)[396](index=396&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=90&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for Verra Mobility Corporation, including the balance sheets, statements of operations and comprehensive income, stockholders' equity, and cash flows, along with detailed notes. The independent registered public accounting firm issued an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting due to a material weakness. Key accounting policies, financial instrument fair values, and segment reporting are also detailed - Deloitte & Touche LLP issued an **unqualified opinion** on the consolidated financial statements for the year ended December 31, 2023[313](index=313&type=chunk) - Deloitte & Touche LLP expressed an **adverse opinion** on the company's internal control over financial reporting as of December 31, 2023, due to a material weakness related to information technology general controls[314](index=314&type=chunk)[326](index=326&type=chunk)[332](index=332&type=chunk) - Critical audit matters included the evaluation of goodwill for the Parking Solutions reporting unit and revenue recognition in the Government Solutions segment, both involving significant management and auditor judgment[318](index=318&type=chunk)[321](index=321&type=chunk) - The notes to consolidated financial statements provide detailed information on significant accounting policies, including revenue recognition, allowance for credit losses, acquisitions, goodwill and long-lived asset impairment, income taxes, and financial instruments[353](index=353&type=chunk)[354](index=354&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk)[369](index=369&type=chunk)[380](index=380&type=chunk)[387](index=387&type=chunk)[407](index=407&type=chunk) [Reports of Independent Registered Public Accounting Firm](index=91&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor issued an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting due to a material weakness - Deloitte & Touche LLP issued an **unqualified opinion** on the consolidated financial statements for the year ended December 31, 2023[313](index=313&type=chunk) - An **adverse opinion** was issued on the company's internal control over financial reporting as of December 31, 2023, due to a material weakness in IT general controls[314](index=314&type=chunk)[326](index=326&type=chunk)[332](index=332&type=chunk) - Critical audit matters included the evaluation of goodwill for the Parking Solutions reporting unit and revenue recognition in the Government Solutions segment, both requiring high auditor judgment[318](index=318&type=chunk)[321](index=321&type=chunk) [Consolidated Balance Sheets](index=100&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets reflect the company's financial position, showing changes in assets, liabilities, and stockholders' equity Consolidated Balance Sheet Highlights (as of Dec 31, 2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | | :-------------------- | :----------- | :----------- | | Total Assets | $1,789,983 | $1,756,269 | | Total Liabilities | $1,368,516 | $1,525,199 | | Total Stockholders' Equity | $421,467 | $231,070 | | Cash and cash equivalents | $136,309 | $105,204 | | Long-term debt, net | $1,029,113 | $1,190,045 | - Total assets increased by **$33.7 million**, while total liabilities decreased by **$156.7 million**, leading to a significant increase in total stockholders' equity[340](index=340&type=chunk) [Consolidated Statements of Operations and Comprehensive Income](index=102&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) These statements detail the company's revenues, expenses, and net income, along with other comprehensive income, for the reported periods Consolidated Statements of Operations (FY2023 vs. FY2022) | Metric (in thousands) | 2023 | 2022 | 2021 | | :-------------------- | :--------- | :--------- | :--------- | | Total revenue | $817,310 | $741,598 | $550,590 | | Income from operations | $188,814 | $164,705 | $111,866 | | Net income | $57,015 | $92,475 | $41,449 | | Basic EPS | $0.36 | $0.61 | $0.26 | | Diluted EPS | $0.36 | $0.50 | $0.25 | - Total revenue increased by **10.2% in 2023**, while net income decreased by **38.3%** due to factors like warrant fair value changes and legal settlements[242](index=242&type=chunk)[260](index=260&type=chunk)[343](index=343&type=chunk) [Consolidated Statements of Stockholders' Equity](index=103&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement outlines changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit Stockholders' Equity Summary (as of Dec 31, 2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | | :-------------------- | :----------- | :----------- | | Common Stock Shares | 166,555 | 148,962 | | Common Stock Amount | $17 | $15 | | Common Stock Contingent Consideration | $0 | $36,575 | | Additional Paid-in Capital | $557,513 | $305,423 | | Accumulated Deficit | $(125,887) | $(98,078) | | Total Stockholders' Equity | $421,467 | $231,070 | - Total stockholders' equity increased significantly from **$231.1 million in 2022 to $421.5 million in 2023**, driven by warrant exercises and net income[346](index=346&type=chunk) - The issuance of earn-out shares to the Platinum Stockholder resulted in a decrease in common stock contingent consideration and a corresponding increase in common stock and additional paid-in capital[346](index=346&type=chunk)[506](index=506&type=chunk) [Consolidated Statements of Cash Flows](index=104&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) These statements categorize cash flows into operating, investing, and financing activities, providing insight into the company's cash generation and usage Consolidated Statements of Cash Flows (FY2023 vs. FY2022) | Cash Flow Activity (in thousands) | 2023 | 2022 | 2021 | | :-------------------------------- | :--------- | :--------- | :--------- | | Net cash provided by operating activities | $206,101 | $218,337 | $193,171 | | Net cash used in investing activities | $(58,290) | $(48,592) | $(475,970) |\n| Net cash used in financing activities | $(117,793) | $(164,932) | $268,722 | - Net cash provided by operating activities decreased by **$12.2 million in 2023**, primarily due to lower net income, partially offset by changes in operating assets and liabilities[272](index=272&type=chunk) - Cash used in financing activities decreased in 2023, mainly due to **$161.4 million in proceeds from warrant exercises**, offsetting **$172.5 million in debt repayments** and **$100.0 million in share repurchases**[274](index=274&type=chunk) [Notes to Consolidated Financial Statements](index=107&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on the company's business, significant accounting policies, debt, income taxes, segment reporting, and subsequent events - Note 1 provides a description of Verra Mobility's business and its three operating segments: Commercial Services, Government Solutions, and Parking Solutions[354](index=354&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk) - Note 2 details significant accounting policies, including revenue recognition, allowance for credit losses, goodwill impairment, and fair value measurements[359](index=359&type=chunk)[369](index=369&type=chunk)[380](index=380&type=chunk)[398](index=398&type=chunk) - Note 8 outlines long-term debt, including the 2021 Term Loan (**$704.6 million outstanding**) and Senior Notes (**$350.0 million**), and the subsequent refinancing of the Term Loan in February 2024[443](index=443&type=chunk)[444](index=444&type=chunk)[449](index=449&type=chunk)[526](index=526&type=chunk) - Note 11 details income tax provisions, including a reconciliation to the statutory U.S. federal income tax rate and significant deferred tax assets and liabilities[467](index=467&type=chunk)[468](index=468&type=chunk) - Note 17 provides segment reporting, showing revenue and segment profit for Commercial Services, Government Solutions, and Parking Solutions, along with asset allocation[515](index=515&type=chunk)[520](index=520&type=chunk)[521](index=521&type=chunk)[522](index=522&type=chunk) - Note 18 discloses subsequent events, including the Third Amendment to the 2021 Term Loan and the confidential business arrangement with PlusPass[526](index=526&type=chunk)[527](index=527&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=160&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) Verra Mobility reported no changes in or disagreements with accountants on accounting and financial disclosure - There were no changes in or disagreements with accountants on accounting and financial disclosure[529](index=529&type=chunk) [Item 9A. Controls and Procedures](index=160&type=section&id=Item%209A.%20Controls%20and%20Procedures) Verra Mobility's disclosure controls and procedures were deemed not effective as of December 31, 2023, due to a material weakness in internal control over financial reporting. This material weakness stems from a lack of information technology general controls to prevent management override, specifically system limitations in segregation of duties and insufficient mitigating controls for manual journal entries and revenue invoices. The company is committed to remediation efforts, including a comprehensive assessment, enhancing segregation of duties with new software, implementing compensating controls, and employee training - Disclosure controls and procedures were not effective as of December 31, 2023, due to a material weakness in internal control over financial reporting[531](index=531&type=chunk) - A material weakness was identified in the design and operation of internal controls related to a lack of information technology general controls to prevent management override[535](index=535&type=chunk) - Specific issues include system limitations preventing proper segregation of duties and a lack of mitigating business process level controls for manual journal entries and certain manual revenue invoices[535](index=535&type=chunk) - Remediation efforts include a comprehensive assessment, enhancing segregation of duties (with new software), implementing compensating controls, and employee training[537](index=537&type=chunk)[538](index=538&type=chunk)[539](index=539&type=chunk)[540](index=540&type=chunk) [Item 9B. Other Information](index=162&type=section&id=Item%209B.%20Other%20Information) Executive compensation is heavily weighted towards performance-based equity awards to align with stockholder interests. Executive officers may engage in open-market sales of shares from these awards or other transactions, which are governed by the company's Insider Trading Policy and may utilize Rule 10b5-1 trading plans. No directors or executive officers adopted, modified, or terminated such trading plans during the three months ended December 31, 2023 - Executive compensation emphasizes performance-based equity awards to align with stockholder value[545](index=545&type=chunk)[546](index=546&type=chunk) - Executive officers' transactions in company securities are governed by the Insider Trading Policy and may use Rule 10b5-1 trading plans[547](index=547&type=chunk) - No directors or executive officers adopted, modified, or terminated Rule 10b5-1 trading plans during Q4 2023[548](index=548&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=164&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to Verra Mobility Corporation - The disclosure regarding foreign jurisdictions that prevent inspections is not applicable[548](index=548&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=165&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's proxy statement for the 2024 annual meeting of stockholders - Information is incorporated by reference from the 2024 annual meeting of stockholders proxy statement[549](index=549&type=chunk) [Item 11. Executive Compensation](index=165&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's proxy statement for the 2024 annual meeting of stockholders - Information is incorporated by reference from the 2024 annual meeting of stockholders proxy statement[550](index=550&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=165&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the company's proxy statement for the 2024 annual meeting of stockholders - Information is incorporated by reference from the 2024 annual meeting of stockholders proxy statement[551](index=551&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=165&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from the company's proxy statement for the 2024 annual meeting of stockholders - Information is incorporated by reference from the 2024 annual meeting of stockholders proxy statement[552](index=552&type=chunk) [Item 14. Principal Accountant Fees and Services](index=165&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's proxy statement for the 2024 annual meeting of stockholders - Information is incorporated by reference from the 2024 annual meeting of stockholders proxy statement[553](index=553&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=166&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists the financial statements and supplementary data filed as part of the Annual Report, including consolidated financial statements and Schedule II. It also provides a comprehensive exhibit index, detailing various agreements, certificates, and policies incorporated by reference or filed herewith - The section lists consolidated financial statements and Appendix A, Schedule II – Consolidated Valuation and Qualifying Accounts[555](index=555&type=chunk)[556](index=556&type=chunk) - A detailed exhibit index is provided, including merger agreements, certificates of incorporation, bylaws, credit agreements, employment agreements, equity incentive plans, and certifications[557](index=557&type=chunk)[558](index=558&type=chunk)[560](index=560&type=chunk)[561](index=561&type=chunk)[563](index=563&type=chunk)[564](index=564&type=chunk)[565](index=565&type=chunk)[567](index=567&type=chunk) [Item 16. Form 10-K Summary](index=177&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company did not provide a summary for Form 10-K in this report - No Form 10-K Summary is provided[570](index=570&type=chunk)

Exhibit 99.1 Verra Mobility Announces Fourth Quarter and Full Year 2023 Financial Results MESA, Ariz., February 29, 2024 /PRNewswire/ – Verra Mobility Corporation (NASDAQ: VRRM), a leading provider of smart mobility technology solutions, announced today the financial results for the fourth quarter and full year ended December 31, 2023. "We delivered fantastic results for the fourth quarter, highlighted by robust revenue and Adjusted EBITDA performance," said David Roberts, President and CEO, Verra Mobility. ...

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)