Verra Mobility(VRRM) - 2025 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents Verra Mobility's unaudited condensed consolidated financial statements for the period ended June 30, 2025, including balance sheets, statements of operations, stockholders' equity, and cash flows, with detailed notes on accounting policies and financial positions Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $1.695 billion from $1.614 billion at year-end 2024, driven by a significant rise in cash and cash equivalents, while total liabilities remained stable and total stockholders' equity grew due to net income Key Balance Sheet Items (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $147,651 | $77,560 | | Accounts receivable, net | $217,359 | $206,503 | | Goodwill | $742,390 | $735,615 | | Total assets | $1,695,432 | $1,614,489 | | Liabilities & Equity | | | | Long-term debt, net | $1,031,430 | $1,034,211 | | Total liabilities | $1,343,330 | $1,349,364 | | Total stockholders' equity | $352,102 | $265,125 | Condensed Consolidated Statements of Operations and Comprehensive Income For the three months ended June 30, 2025, total revenue increased 6.1% year-over-year to $236.0 million, and net income grew 12.7% to $38.6 million, with diluted EPS rising to $0.24 Q2 Financial Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $236,025 | $222,426 | +6.1% | | Income from Operations | $63,194 | $61,169 | +3.3% | | Net Income | $38,575 | $34,223 | +12.7% | | Diluted EPS | $0.24 | $0.20 | +20.0% | Six-Month Financial Performance (in thousands, except per share data) | Metric | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $459,279 | $432,156 | +6.3% | | Income from Operations | $120,579 | $115,522 | +4.4% | | Net Income | $70,914 | $63,372 | +11.9% | | Diluted EPS | $0.44 | $0.38 | +15.8% | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities significantly increased to $138.1 million, while net cash used in investing activities rose due to higher equipment purchases, and cash used in financing activities decreased due to lower share repurchase activity Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $138,113 | $74,368 | | Net cash used in investing activities | ($56,019) | ($27,677) | | Net cash used in financing activities | ($10,920) | ($60,917) | | Net increase (decrease) in cash | $72,771 | ($14,324) | Notes to the Condensed Consolidated Financial Statements The notes provide details on the company's business segments, significant accounting policies, and financial statement line items, including customer concentrations, goodwill, intangible assets, long-term debt, and segment-level financial performance - The company operates through three segments: Commercial Services (toll/violations management), Government Solutions (photo enforcement), and Parking Solutions (software/hardware)[28][29][30] - Significant customer concentration exists: for the six months ended June 30, 2025, NYCDOT represented 15.0% of total revenue, and three Commercial Services customers represented 15.2%, 11.5%, and 10.6% of total revenue, respectively[36][37] - As of June 30, 2025, the Government Solutions segment had remaining performance obligations of $169.5 million, with $75.9 million expected to be recognized as revenue in the next twelve months[43] Segment Revenue and Profit (Six Months Ended June 30, 2025, in thousands) | Segment | Total Revenue | Segment Profit | | :--- | :--- | :--- | | Commercial Services | $210,439 | $135,139 | | Government Solutions | $208,922 | $59,500 | | Parking Solutions | $39,918 | $6,122 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for the three and six months ended June 30, 2025, highlighting a 6.3% year-over-year revenue increase for the six-month period to $459.3 million, driven by increased travel volume and enforcement program expansion, alongside recent events, liquidity, capital resources, and debt obligations - Total revenue for the six months ended June 30, 2025, increased by 6.3% to $459.3 million, driven by growth in the Commercial Services and Government Solutions segments[103] - The company is in contract negotiations with NYCDOT for a new five-year contract expected to commence after the current one expires in December 2025, where a material change in terms could adversely affect financial results[104][12] - A new $100.0 million share repurchase program was authorized on May 17, 2025, valid until November 2026, following the conclusion of the previous ASR program in March 2025[107] - The company's Revolving Credit Agreement commitment was increased from $75.0 million to $125.0 million in May 2025, with no outstanding borrowings as of June 30, 2025[105][159] Results of Operations For Q2 2025, revenue grew 6.1% year-over-year, driven by increases in Commercial Services and Government Solutions service revenue, while operating expenses rose 8.6% due to higher subcontractor costs, and net income increased 12.7% to $38.6 million, aided by reduced net interest expense Q2 2025 vs Q2 2024 Revenue by Segment (in thousands) | Segment | Q2 2025 Revenue | Q2 2024 Revenue | YoY Change | | :--- | :--- | :--- | :--- | | Commercial Services | $109,050 | $103,985 | +4.9% | | Government Solutions | $107,100 | $97,715 | +9.6% | | Parking Solutions | $19,875 | $20,726 | -4.1% | - The increase in Government Solutions service revenue was primarily driven by the expansion of bus lane and school bus stop arm enforcement programs, contributing $4.6 million in Q2 2025[127] - Net interest expense for Q2 2025 decreased by $2.2 million year-over-year to $16.6 million, attributed to voluntary debt prepayments and a lower interest rate from the October 2024 refinancing[133] Liquidity and Capital Resources The company's primary liquidity sources are cash from operations and its Revolver, with $147.7 million cash on hand and $123.9 million available under the upsized $125.0 million Revolver as of June 30, 2025, alongside early debt repayments and a new $100 million share repurchase program - Cash and cash equivalents stood at $147.7 million as of June 30, 2025[159] - The company increased its Revolver commitment to $125.0 million in May 2025 and had $123.9 million available for borrowing as of June 30, 2025[159] - The final settlement of the December 2024 Accelerated Share Repurchase (ASR) agreement occurred on March 3, 2025, with the company receiving an additional 685,934 shares[162] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk associated with its variable-rate 2021 Term Loan, which had an outstanding balance of $691.1 million at a 6.6% interest rate as of June 30, 2025, with a 1% interest rate change estimated to impact annual interest expense by approximately $6.9 million, following the cancellation of its interest rate swap agreement in Q3 2024 - The company is exposed to interest rate risk from its variable-rate 2021 Term Loan, with a balance of $691.1 million at June 30, 2025[183][184] - A 1% movement in interest rates is estimated to change annual interest expense by approximately $6.9 million[185] - The company's interest rate swap agreement was canceled in Q3 2024, leaving it unhedged against interest rate fluctuations on its term loan[185] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, despite changes to certain processes and internal controls over financial reporting resulting from the first phase implementation of a new global ERP system - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[186] - A significant change in internal control over financial reporting occurred during the quarter with the first phase implementation of a new global ERP system[187] PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal actions in the ordinary course of business, notably the Brantley v. City of Gretna class action lawsuit concerning a safety camera program, for which a settlement agreement received preliminary court approval in April 2025, with the final amount yet to be determined - The company is a defendant in the Brantley v. City of Gretna class action lawsuit concerning a safety camera program[191] - A settlement agreement for the Brantley case received preliminary court approval in April 2025, but the final amount is pending final court approval[191] Item 1A. Risk Factors This section updates the company's risk factors, highlighting that share repurchase programs may not enhance long-term shareholder value, could increase stock price volatility, and will diminish cash reserves, further noting the 1% excise tax on net share repurchases that increases program costs - A new risk factor was added concerning share repurchase programs, stating they may not enhance shareholder value and could increase stock price volatility[194] - The company highlights the 1% excise tax on net share repurchases, introduced by the Inflation Reduction Act, which increases the cost of buying back stock[194][199] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities During the three months ended June 30, 2025, Verra Mobility did not purchase any of its Class A Common Stock and did not have any sales of unregistered equity securities - There were no purchases of the company's Class A Common Stock during the three months ended June 30, 2025[200] - There were no sales of unregistered equity securities during the three months ended June 30, 2025[201]