Verra Mobility(VRRM) - 2023 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION 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 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 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] - Total liabilities decreased by $173.2 million, mainly due to a significant reduction in long-term debt and the elimination of private placement warrant liabilities, which were fully exercised[15] Condensed Consolidated Statements of Operations and Comprehensive Income This section outlines the company's financial performance, including revenue, income from operations, and net income for the reported periods Key Financial Highlights (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Change ($) | 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] - 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] Condensed Consolidated Statements of Stockholders' Equity 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][21] - 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] - The Company repurchased and retired 4,581 shares for $100.0 million during the nine months ended September 30, 2023, as part of its share repurchase program[19] Condensed Consolidated Statements of Cash Flows This section summarizes cash inflows and outflows from operating, investing, and financing activities for the reported periods Cash Flow Summary (Nine Months Ended September 30, in thousands) | Cash Flow Activity | 2023 | 2022 | Change ($) | 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] - 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] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Description of Business 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] - 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][29][30][31] 2. Significant Accounting Policies 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][34] 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][47] - 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] 3. Prepaid Expenses and Other Current Assets 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 $1.6 million from December 31, 2022, to September 30, 2023, primarily due to increases in prepaid services and costs to fulfill customer contracts, and the recognition of an interest rate swap asset[49] 4. Goodwill and Intangible Assets This note provides a breakdown of goodwill by segment and details changes in intangible assets, including amortization expense Goodwill by Segment (in thousands) | Segment | Dec 31, 2022 | Sep 30, 2023 | Change ($) | | :------------------ | :----------- | :----------- | :--------- | | 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 $0.7 million, primarily due to foreign currency translation adjustments in the Government Solutions segment[50] Intangible Assets, Net (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | Change ($) | | :-------------------- | :----------- | :----------- | :--------- | | 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] 5. Accrued Liabilities 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 $59.5 million at September 30, 2023, primarily driven by increases in accrued salaries and wages, and accrued interest payable[53] 6. Long-term Debt This note details the company's long-term debt, including the 2021 Term Loan and Senior Notes, and discusses early repayments and interest rate changes Long-term Debt Summary (in thousands) | Debt Instrument | Sep 30, 2023 | Dec 31, 2022 | Change ($) | | :-------------------------- | :----------- | :----------- | :--------- | | 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] - 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] - 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] - 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] 7. Fair Value of Financial Instruments 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] - 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] 8. Net Income Per Share 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] - 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] 9. Income Taxes 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] 10. Stockholders' Equity 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][80] - 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][83][84] 11. Stock-Based Compensation 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] 12. Other Significant Transactions 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][92] - 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][96] 13. Commitments and Contingencies 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] - 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][102] 14. Segment Reporting 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][145] - Government Solutions service revenue grew by 9.9% in Q3 2023 and 12.4% YTD, primarily due to the expansion of speed programs[129][146] - International revenues increased by 11.9% in Q3 2023 and 12.4% YTD, with Australia showing the highest growth[108] 15. Subsequent Event 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - The company's solutions include toll and violations management, title and registration services, automated safety and traffic enforcement, and commercial parking management[111] Executive Summary 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] - 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] - 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] - 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] Segment Information 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] - 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] - Parking Solutions delivers integrated parking software and hardware to universities, municipalities, healthcare facilities, and commercial parking operators in the US and Canada[121] Primary Components of Our Operating Results 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][117][118] - Product sales primarily come from photo enforcement equipment in Government Solutions and specialized hardware in Parking Solutions, with varying customer buying patterns[118] - 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][120][121][122][123][124] Results of Operations 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 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] - Government Solutions service revenue grew by 9.9%, primarily from the expansion of speed programs[129] - 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][135] - 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 $3.0 million gain in Q3 2022 from PPP loan forgiveness[138][139] Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022 This section compares the company's financial performance for the nine months ended September 30, 2023, against the same period in 2022, detailing revenue and net income changes YTD 2023 vs YTD 2022 Revenue and Net Income (in thousands) | Metric | 2023 | 2022 | Change ($) | 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] - Government Solutions service revenue increased by 12.4%, primarily driven by a $25.2 million contribution from the expansion of speed programs[146] - Operating expenses increased by 17.7% due to higher wages, recurring service costs, subcontractor costs, and IT expenses[151] - 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] - 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] Liquidity and Capital Resources 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][163] - 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] - 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] - 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] - The Company was compliant with all debt covenants as of September 30, 2023[183] Off-Balance Sheet Arrangements 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] Critical Accounting Policies, Estimates and Judgments 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] Recent Accounting Pronouncements 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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][191] - 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] - 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] Item 4. Controls and Procedures 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] - 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] PART II—OTHER INFORMATION This section provides additional information beyond the financial statements, covering legal proceedings, risk factors, equity security sales, and other disclosures Item 1. Legal Proceedings 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] - 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] - 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 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] - During the third quarter of fiscal year 2023, the Company repurchased 449,432 shares for $8.1 million through open market transactions[201] - 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][203] - No unregistered equity securities were sold during the three months ended September 30, 2023[204] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[205] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[206] Item 5. Other Information 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] - Executive officers' transactions in company securities must comply with the Insider Trading Policy and may use Rule 10b5-1 trading plans[208] - No directors or executive officers adopted, modified, or terminated Rule 10b5-1 trading plans during the three months ended September 30, 2023[209] Item 6. Exhibits 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] 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][216][217]