Verra Mobility(VRRM) - 2020 Q3 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements This section outlines the forward-looking nature of statements in the report, subject to various risks and uncertainties, with no obligation for future updates - This report contains forward-looking statements regarding future operating results, financial position, business strategy, plans, products, services, technology offerings, market conditions, growth, expansion, and objectives[8] - These statements are subject to risks and uncertainties, including disruptions from the COVID-19 pandemic, its impact on rental car and photo enforcement revenues, customer concentration, legislative changes, competition, technological developments, and cybersecurity breaches[9][10] - The company does not undertake any obligation to update these forward-looking statements after the report date[11] PART I—FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements. This section presents the unaudited condensed consolidated financial statements for Verra Mobility Corporation, including the balance sheets, statements of operations and comprehensive income (loss), statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining significant accounting policies, acquisitions, and financial instrument details Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates Condensed Consolidated Balance Sheets (September 30, 2020 vs. December 31, 2019) | Metric (in thousands) | Sep 30, 2020 | Dec 31, 2019 | | :-------------------- | :----------- | :----------- | | Total assets | $1,371,971 | $1,407,426 | | Total liabilities | $1,028,049 | $1,068,079 | | Total stockholders' equity | $343,922 | $339,347 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) This section presents the company's financial performance over periods, including revenue, operating income, and net income (loss) Condensed Consolidated Statements of Operations (Three Months Ended September 30) | Metric (in thousands) | 2020 | 2019 | | :-------------------- | :--- | :--- | | Total revenue | $96,908 | $128,240 | | Income from operations | $15,268 | $36,659 | | Net income (loss) | $6,686 | $17,752 | | Basic EPS | $0.04 | $0.11 | | Diluted EPS | $0.04 | $0.11 | Condensed Consolidated Statements of Operations (Nine Months Ended September 30) | Metric (in thousands) | 2020 | 2019 | | :-------------------- | :--- | :--- | | Total revenue | $293,430 | $336,276 | | Income from operations | $27,731 | $72,261 | | Net income (loss) | $(2,029) | $24,163 | | Basic EPS | $(0.01) | $0.15 | | Diluted EPS | $(0.01) | $0.15 | Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's equity, including net income (loss) and stock-based compensation Changes in Stockholders' Equity (Nine Months Ended September 30, 2020) | Metric (in thousands) | Dec 31, 2019 | Sep 30, 2020 | | :-------------------- | :----------- | :----------- | | Total Stockholders' Equity | $339,347 | $343,922 | | Net income (loss) (9M) | N/A | $(2,029) | | Stock-based compensation (9M) | N/A | $9,192 | - The company issued 5,000,000 Earn-Out Shares to the Platinum Stockholder due to stock price thresholds being met on April 26, 2019, and January 27, 2020[88] Condensed Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Nine Months Ended September 30) | Metric (in thousands) | 2020 | 2019 | | :-------------------- | :--- | :--- | | Net cash provided by operating activities | $44,350 | $95,586 | | Net cash used in investing activities | $(18,250) | $(17,478) | | Net cash used in financing activities | $(27,949) | $(7,126) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(2,723) | $70,639 | | Cash, cash equivalents and restricted cash - end of period | $129,707 | $137,720 | - Operating cash flow decreased by $51.2 million, primarily due to a $26.2 million decrease in net income (loss) and a $34.5 million decrease in changes in operating assets and liabilities, including increased accounts receivable and decreased accounts payable[170][171] - Financing cash flow increased by $20.8 million, mainly due to a $19.7 million mandatory prepayment of excess cash flows on the First Lien Term Loan and costs associated with its refinancing[173] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Description of Business This note describes Verra Mobility Corporation's business, including its integrated technology solutions and operating segments - Verra Mobility Corporation provides integrated technology solutions and services to commercial fleets, rental car companies, and state/local governments across the US, Canada, and Europe[27] - The company operates in two segments: Commercial Services (toll and violation management, title/registration) and Government Solutions (red-light, speed, school bus stop arm, and bus lane enforcement)[27][28][29] Note 2. Significant Accounting Policies This note details the significant accounting policies adopted by the company and the impact of recent accounting pronouncements - The company adopted ASU 2017-04 (simplifying goodwill impairment) as of January 1, 2020, with no material impact on financial statements[33] - The CECL standard (ASU 2016-13) was adopted on January 1, 2020, resulting in a $0.7 million cumulative effect adjustment (net of tax) to accumulated deficit, increasing the allowance for credit loss[34][35] - ASU 2019-12 (simplifying income tax accounting) and ASU 2020-04 (reference rate reform) are effective for fiscal years beginning after December 15, 2020, and their impact is still being determined[36][37] Note 3. Acquisition This note provides details on the acquisition of Pagatelia S.L., including the purchase price and goodwill allocation - On October 31, 2019, Verra Mobility acquired Pagatelia S.L., a Spanish company providing electronic consumer tolling and parking solutions, for $26.6 million[38] Pagatelia Acquisition Purchase Price Allocation (in thousands) | Asset/Liability | Amount | | :-------------- | :----- | | Total assets acquired | $35,442 | | Total liabilities assumed | $8,846 | | Total purchase price | $26,596 | | Goodwill | $17,528 | - Goodwill from the Pagatelia acquisition was assigned to the Commercial Services segment and is not expected to be tax-deductible[38] Note 4. Accounts Receivable, Net This note details accounts receivable, allowance for credit loss, and significant customer concentrations Accounts Receivable and Allowance for Credit Loss (September 30, 2020, in thousands) | Segment | Accounts Receivable, net | Allowance for Credit Loss | | :-------------------- | :----------------------- | :------------------------ | | Commercial Services (Driver-billed) | $8,909 | $1,368 | | Commercial Services (All other) | $53,866 | $5,242 | | Government Solutions | $78,244 | $3,536 | | Total | $141,019 | $10,146 | - Credit loss expense for the nine months ended September 30, 2020, was $10.6 million, with write-offs (net of recoveries) of $8.9 million[42] - The City of New York Department of Transportation (NYCDOT) represented 50.1% of accounts receivable, net, as of September 30, 2020, with $52.1 million in outstanding invoices under the Emergency Contract for which no payments have been received[43][168] Note 5. Prepaid Expenses and Other Current Assets This note provides a breakdown of prepaid expenses and other current assets, including prepaid tolls and services Prepaid Expenses and Other Current Assets (in thousands) | Item | Sep 30, 2020 | Dec 31, 2019 | | :-------------------- | :----------- | :----------- | | Prepaid tolls | $7,214 | $10,116 | | Prepaid services | $4,014 | $5,201 | | Deposits | $3,627 | $3,642 | | Total prepaid expenses and other current assets | $24,714 | $26,491 | Note 6. Goodwill and Intangible Assets This note details the company's goodwill and intangible assets, including amortization expense and impairment tests Goodwill by Segment (in thousands) | Segment | Dec 31, 2019 | Sep 30, 2020 | | :-------------------- | :----------- | :----------- | | Commercial Services | $424,404 | $423,595 | | Government Solutions | $159,746 | $159,746 | | Total | $584,150 | $583,341 | Intangible Assets, Net (in thousands) | Item | Sep 30, 2020 | Dec 31, 2019 | | :-------------------- | :----------- | :----------- | | Trademarks | $5,316 | $13,021 | | Non-compete agreements | $28,294 | $37,715 | | Customer relationships | $252,477 | $283,630 | | Developed technology | $77,439 | $100,077 | | Total intangible assets, net | $363,526 | $434,443 | - Amortization expense was $23.6 million for Q3 2020 and $70.6 million for 9M 2020, with estimated future amortization for 2021 at $85.5 million[46][48] - An interim goodwill impairment test was performed as of March 31, 2020, and June 30, 2020, due to a significant decline in market capitalization related to COVID-19, but no impairment was found[50][51] Note 7. Impairment of Other Long-Lived Assets This note discusses the assessment of impairment indicators for long-lived assets and any recognized impairment charges - No impairment indicators for other long-lived assets were identified as of September 30, 2020[53] - A $5.9 million impairment charge was recognized in the Government Solutions segment for the nine months ended September 30, 2019, due to Texas legislation banning red-light photo enforcement programs[54] Note 8. Accrued Liabilities This note provides a breakdown of accrued liabilities, including related party TRA liability and accrued salaries Accrued Liabilities (in thousands) | Item | Sep 30, 2020 | Dec 31, 2019 | | :-------------------- | :----------- | :----------- | | Current portion of related party TRA liability | $4,636 | $5,730 | | Accrued salaries and wages | $3,313 | $10,319 | | Current portion of operating lease liabilities | $3,137 | $2,970 | | Total accrued liabilities | $17,309 | $25,277 | Note 9. Long-term Debt This note details the company's long-term debt, including the First Lien Term Loan, refinancing, and interest rates Long-term Debt Summary (in thousands) | Item | Sep 30, 2020 | Dec 31, 2019 | | :-------------------- | :----------- | :----------- | | First Lien Term Loan, due Feb 28, 2025 | $867,918 | $894,421 | | Less: original issue discounts | $(4,218) | $(4,778) | | Less: unamortized deferred financing costs | $(20,972) | $(23,178) | | Total long-term debt | $842,728 | $866,465 | | Less: current portion of long-term debt | $(9,104) | $(28,779) | | Total long-term debt, net of current portion | $833,624 | $837,686 | - The First Lien Term Loan was refinanced in February 2020, reducing the applicable margin by 50 basis points, resulting in an interest rate of 3.4% at September 30, 2020[57][64] - A $19.7 million mandatory prepayment of excess cash flow was made in Q1 2020[58] - The company had $44.0 million available under its Revolver as of September 30, 2020, with no outstanding borrowings[59] - Interest expense, net, decreased by $5.4 million for Q3 2020 (YoY) and $15.0 million for 9M 2020 (YoY), primarily due to lower interest rates and the refinancing[62][144][160] - The company was compliant with all 2018 Credit Facilities covenants as of September 30, 2020[61] Note 10. Fair Value of Financial Instruments This note provides information on the fair value of the company's financial instruments, including long-term debt Fair Value of Long-term Debt (in thousands) | Item | Fair Value Hierarchy Level | Carrying Amount (Sep 30, 2020) | Estimated Fair Value (Sep 30, 2020) | | :-------------------- | :----------------------- | :------------------------------- | :---------------------------------- | | Total long-term debt | 2 | $842,728 | $854,899 | - The carrying amounts for cash, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term maturity[69] Note 11. Net Income (Loss) Per Share This note presents the calculation of basic and diluted net income (loss) per share for the reported periods Net Income (Loss) Per Share (Three Months Ended September 30) | Metric | 2020 | 2019 | | :-------------------- | :--- | :--- | | Net income (loss) (in thousands) | $6,686 | $17,752 | | Basic EPS | $0.04 | $0.11 | | Diluted EPS | $0.04 | $0.11 | Net Income (Loss) Per Share (Nine Months Ended September 30) | Metric | 2020 | 2019 | | :-------------------- | :--- | :--- | | Net income (loss) (in thousands) | $(2,029) | $24,163 | | Basic EPS | $(0.01) | $0.15 | | Diluted EPS | $(0.01) | $0.15 | - Antidilutive shares excluded from diluted EPS calculations for the nine months ended September 30, 2020, totaled 28,969 thousand, including contingently issuable shares and warrants[71] Note 12. Income Taxes This note discusses the company's effective income tax rates, the impact of the CARES Act, and unrecognized tax benefits - The effective income tax rate was 37.4% for Q3 2020 (vs. 27.4% in Q3 2019) and 276.9% for 9M 2020 (vs. 28.8% in 9M 2019), primarily due to lower pre-tax income[76][145][163] - The company applied certain provisions of the CARES Act, including increased interest deduction and delayed FICA payments[75] - Unrecognized tax benefits decreased by $1.0 million during the nine months ended September 30, 2020, primarily due to the statute expiration of prior year tax positions[77] Note 13. Stock-Based Compensation This note details the stock-based compensation expense recognized by the company across different expense categories Stock-Based Compensation Expense (in thousands) | Item | Q3 2020 | Q3 2019 | 9M 2020 | 9M 2019 | | :-------------------- | :------ | :------ | :------ | :------ | | Operating expenses | $183 | $138 | $697 | $614 | | Selling, general and administrative expenses | $2,970 | $2,333 | $8,495 | $6,812 | | Total stock-based compensation expense | $3,153 | $2,471 | $9,192 | $7,426 | Note 14. Related Party Transactions This note describes transactions with related parties, including the Tax Receivable Agreement liability and Earn-Out Shares - The Tax Receivable Agreement (TRA) liability increased by $4.4 million for the nine months ended September 30, 2020, due to higher estimated state tax rates, totaling $70.2 million[81][82][161] - 5,000,000 Earn-Out Shares of Class A Common Stock were issued to the Platinum Stockholder in April 2019 and January 2020, as the stock price exceeded $13.00 and $15.50 thresholds, respectively[84][88] - An additional 5,000,000 Earn-Out Shares remain contingently issuable if further stock price thresholds ($18.00 and $20.50) are met within five years of the Business Combination[84][85][87] Note 15. Commitments and Contingencies This note outlines the company's outstanding commitments, contingencies, and the financial impact of legal settlements - Outstanding letters of credit totaled $6.3 million, and non-cancelable purchase commitments were $8.1 million as of September 30, 2020[89] - The company recognized a $1.4 million gain from the HTA Settlement Agreement and an additional $1.4 million gain from third-party insurance proceeds related to this matter in Q3 2020[94][144][162] - Legal and regulatory actions are not expected to have a material adverse impact on the company's financial position[93] - The company expensed $0.6 million in Q3 2020 and $1.1 million in 9M 2020 for severance and other employee separation costs[92] Note 16. Segment Reporting This note provides financial information by operating segment, detailing revenues and segment profit (loss) - The company operates in two segments: Commercial Services (toll and violation management, title and registration) and Government Solutions (traffic safety programs and products)[95] - Segment profit (loss) is measured based on revenues and income (loss) from operations before depreciation, amortization, gain (loss) on asset disposal, and stock-based compensation, and is inclusive of other income, net[96] Segment Revenue and Profit (Three Months Ended September 30, 2020, in thousands) | Segment | Total Revenue | Segment Profit (Loss) | | :-------------------- | :------------ | :-------------------- | | Commercial Services | $44,153 | $30,832 | | Government Solutions | $52,755 | $22,675 | | Corporate and Other | $0 | $(514) | | Total | $96,908 | $52,993 | Segment Revenue and Profit (Nine Months Ended September 30, 2020, in thousands) | Segment | Total Revenue | Segment Profit (Loss) | | :-------------------- | :------------ | :-------------------- | | Commercial Services | $132,667 | $71,434 | | Government Solutions | $160,763 | $64,223 | | Corporate and Other | $0 | $(1,302) | | Total | $293,430 | $134,355 | Note 17. Guarantor/Non-Guarantor Financial Information This note presents condensed consolidating financial information for the parent company, guarantor, and non-guarantor subsidiaries - This note provides condensed consolidating financial information for Verra Mobility Corporation (ultimate parent), its combined guarantor subsidiary (VM Consolidated, Inc.), and combined non-guarantor subsidiaries[99][100] - VM Consolidated, Inc. is the lead borrower of the First Lien Term Loan and Revolver, and is a wholly-owned guarantor subsidiary[99] 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 the significant negative impact of the COVID-19 pandemic on revenues, particularly in the Commercial Services segment (rental car industry) and Government Solutions segment (school closures, reduced traffic) It details revenue and expense trends for the three and nine months ended September 30, 2020, compared to 2019, and discusses liquidity, capital resources, and debt Recent Events Affecting Our Operating Results This section discusses the significant impact of the COVID-19 pandemic on the company's revenues and operations - The COVID-19 pandemic significantly disrupted the global economy and travel industry, leading to reduced airline travel and widespread restrictions[114] - Commercial Services segment revenues decreased significantly due to reduced rental car demand and fleet sizes; Hertz, a key customer, filed for Chapter 11 bankruptcy[115] - Government Solutions segment revenues were negatively impacted by school closures affecting school bus stop arm and school zone speed cameras, and reductions in vehicle traffic[116] - The company shifted most of its workforce to remote operations in March 2020 but has not experienced significant operational disruptions[117] Business Overview This section provides an overview of Verra Mobility's business as a leading provider of smart mobility technology solutions - Verra Mobility is a leading provider of smart mobility technology solutions and services in the US, Canada, and Europe[119] - Solutions include toll and violations management, title and registration, automated safety solutions, and other data-driven solutions for RACs, FMCs, large fleet owners, municipalities, and school districts[119] Segment Information This section details the company's Commercial Services and Government Solutions segments and their respective offerings - Commercial Services offers toll and violation management and title/registration services for RACs and FMCs in North America, and violations processing/consumer tolling in Europe[125] - Government Solutions provides red-light, speed, school bus stop arm, and bus lane enforcement solutions for municipalities and local government agencies[125] - Segment performance is based on revenues and income (loss) from operations before depreciation, amortization, gain/loss on asset disposal, and stock-based compensation, and includes other income, net[121] Executive Summary This section summarizes the company's strategic focus, key financial highlights, and cash position - The company's strategy focuses on growing existing customer revenues, expanding into adjacent markets through innovation or acquisition, and reducing operating costs[122] Key Financial Highlights (Nine Months Ended September 30, in millions) | Metric | 2020 | 2019 | | :-------------------- | :--- | :--- | | Total revenue | $293.4 | $336.3 | | Cash flows from operating activities | $44.4 | $95.6 | | Interest expense, net | $31.6 | $46.6 | - Cash on hand was $129.2 million as of September 30, 2020[126] Primary Components of Our Operating Results This section breaks down the main components of the company's revenue and expenses impacting operating results - Total revenue comprises service revenue (Commercial Services: toll/violation management, title/registration; Government Solutions: photo enforcement operations) and product sales (Government Solutions: photo enforcement equipment)[123][124][125] - Key expenses include cost of service revenue (third-party collection/professional services), cost of product sales (equipment acquisition/installation), operating expenses (payroll, call center, transaction processing), SG&A (payroll, leases, professional services), D&A, impairment, interest expense, TRA adjustment, and other income (volume rebates, foreign currency)[127][128][129][130][131][132] Results of Operations This section analyzes the company's financial performance for the three and nine months ended September 30, 2020, compared to 2019 Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019 This section compares the company's financial performance for the third quarter of 2020 against the same period in 2019 - For Q3 2020, total revenue decreased by 24.4% to $96.9 million, driven by a 43.1% decline in Commercial Services revenue due to COVID-19's impact on rental car companies, partially offset by a 17.2% increase in Government Solutions service revenue from speed program expansion Net income fell by 62.3% to $6.7 million[135][136][146] Q3 2020 vs. Q3 2019 Financial Performance (in thousands) | Metric | 2020 | 2019 | Change ($) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Total revenue | $96,908 | $128,240 | $(31,332) | (24.4)% | | Service revenue | $82,980 | $110,757 | $(27,777) | (25.1)% | | Product sales | $13,928 | $17,483 | $(3,555) | (20.3)% | | Income from operations | $15,268 | $36,659 | $(21,391) | (58.4)% | | Net income | $6,686 | $17,752 | $(11,066) | (62.3)% | - Operating expenses decreased by $6.4 million (19.5%) due to lower employee and transaction processing costs, while SG&A decreased by $3.8 million (17.8%) due to reduced credit loss expense and cost cutbacks[142][143] - Other income, net, increased by $2.3 million, primarily due to gains from the HTA Settlement Agreement and insurance proceeds[144] Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019 This section compares the company's financial performance for the nine months ended September 30, 2020, against the same period in 2019 - For 9M 2020, total revenue decreased by 12.7% to $293.4 million Commercial Services service revenue declined by 36.3% due to COVID-19, while Government Solutions product sales surged by 97.4% and service revenue grew by 8.7% from speed program expansion The company reported a net loss of $(2.0) million, a significant decrease from $24.2 million net income in 2019[149][150][154][164] 9M 2020 vs. 9M 2019 Financial Performance (in thousands) | Metric | 2020 | 2019 | Change ($) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Total revenue | $293,430 | $336,276 | $(42,846) | (12.7)% | | Service revenue | $245,292 | $311,884 | $(66,592) | (21.4)% | | Product sales | $48,138 | $24,392 | $23,746 | 97.4% | | Income from operations | $27,731 | $72,261 | $(44,530) | (61.6)% | | Net (loss) income | $(2,029) | $24,163 | $(26,192) | (108.4)% | - Operating expenses decreased by $8.6 million (9.1%) due to lower employee wages and transaction processing costs[157] - SG&A expenses increased by $1.5 million (2.4%), primarily due to a $5.3 million increase in credit loss expense under the new CECL standard and higher stock-based compensation, partially offset by cost cutbacks[158] - A $4.4 million charge was recorded for the tax receivable agreement adjustment due to higher estimated state tax rates[161] Liquidity and Capital Resources This section discusses the company's sources of liquidity, cash flow trends, and ability to meet financial obligations - The company's primary liquidity sources are cash flow from operations and borrowings under its 2018 Credit Facilities[165] - Cash provided by operating activities decreased by $51.2 million to $44.4 million for the nine months ended September 30, 2020, primarily due to lower net income and increased accounts receivable[170][171] - Cash used in financing activities increased to $27.9 million for 9M 2020, mainly due to a $19.7 million mandatory prepayment of excess cash flows on the First Lien Term Loan[173] - As of September 30, 2020, the company had $44.0 million available for borrowing under its Revolver[178] - The company believes existing cash, operating cash flows, and Revolver availability will be sufficient to meet operating cash requirements and service debt obligations for at least the next 12 months[167] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements as of the reporting date - The company had no off-balance sheet arrangements as of September 30, 2020[183] Critical Accounting Policies, Estimates and Judgments This section highlights the significant estimates and judgments made by management in preparing the financial statements - The preparation of financial statements requires management to make significant estimates and assumptions, including fair values in business combinations, carrying amounts of long-lived assets and goodwill, allowance for credit loss, deferred tax asset valuation allowances, asset retirement obligations, contingent consideration, and loss contingencies[184] Recent Accounting Pronouncements This section refers to Note 2 for details on recent accounting pronouncements and their impact - Refer to Note 2, Significant Accounting Policies, in Item 1, Financial Statements, for details on recent accounting pronouncements[186] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate market risk due to its variable-rate First Lien Term Loan, which had an outstanding balance of $867.9 million at September 30, 2020 A 1% movement in interest rates would result in an approximately $8.7 million change in annual interest expense The company has not engaged in hedging activities and does not expect to - The company is exposed to interest rate market risk from its variable-rate First Lien Term Loan, with an outstanding balance of $867.9 million at September 30, 2020[187] - A 1% change in interest rates would result in an approximately $8.7 million change in annual interest expense[187] - The company has not engaged in and does not expect to engage in hedging activities for market risk[188] Item 4. Controls and Procedures The company's disclosure controls and procedures were deemed ineffective as of September 30, 2020, due to a previously disclosed material weakness in internal control over financial reporting No material changes occurred in internal control over financial reporting during Q3 2020, and remediation efforts are underway, expected to be completed before the end of fiscal year 2020 - Disclosure controls and procedures were not effective as of September 30, 2020, due to a material weakness in internal control over financial reporting[189] - No material changes in internal control over financial reporting occurred during Q3 2020[190] - Remediation efforts for the material weakness are ongoing and expected to be completed before the end of fiscal year 2020[191] PART II—OTHER INFORMATION This part contains other information, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings The company reported no material legal proceedings - There are no material legal proceedings to report[193] Item 1A. Risk Factors This section supplements the risk factors from the Annual Report on Form 10-K, primarily focusing on the adverse impacts of the COVID-19 pandemic Key risks include significant negative effects on business, financial condition, and results of operations due to reduced travel, impacts on rental car customers (e.g., Hertz bankruptcy), and disruptions to photo enforcement programs from school closures and reduced traffic Historical data may not reflect these ongoing impacts - The COVID-19 pandemic has adversely affected the company's business and results of operations, leading to potential decreases in productivity, increased security risks, and delays in customer responses[196] - Revenues from key rental car customers (Commercial Services segment) and photo enforcement programs (Government Solutions segment) have been negatively impacted by COVID-19, with Hertz filing for bankruptcy[197][198] - Historical financial data may not accurately reflect the ongoing adverse impacts of the COVID-19 pandemic[201] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds - There were no unregistered sales of equity securities or use of proceeds to report[202] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There were no defaults upon senior securities to report[203] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company[204] Item 5. Other Information The company reported no other information - There is no other information to report[205] Item 6. Exhibits This section lists the exhibits filed as part of, or incorporated by reference into, the Quarterly Report on Form 10-Q, including merger agreements, corporate documents, warrant agreements, and certifications - The exhibit index includes various documents such as merger agreements, corporate organizational documents, warrant agreements, and certifications (e.g., CEO/CFO certifications)[209][210] SIGNATURES This section confirms the official signing of the report by the company's President, CEO, and CFO - The report was signed by David Roberts (President and CEO) and Patricia Chiodo (CFO) on November 5, 2020[214]