Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our Class A Common Stock is currently quoted on Nasdaq under the symbol “VRRM” and our warrants are currently quoted on OTC Pink under the symbol “VRRMW.” Our warrants were previously quoted on Nasdaq under the symbol “VRRMW”; however, our warrants were removed from listing on December 14, 2018 due to an insufficient number of round lot holders following completion of our Business Combination.
The following table sets forth the high and low sales prices per share of our Class A Common Stock as reported on Nasdaq for the two most recent fiscal years:
Fiscal Year 2020
Fiscal Year 2019
High
Low
High
Low
First Quarter
$
17.20
$
5.63
$
11.91
$
9.00
Second Quarter
$
13.17
$
6.16
$
15.07
$
11.73
Third Quarter
$
11.95
$
9.14
$
15.10
$
12.70
Fourth Quarter
$
14.07
$
9.33
$
15.36
$
13.42
Holders of Record
As of December 31, 2020, we had 19 holders of record of our Class A Common Stock. Because many of our shares of Class A Common Stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Warrants
As of December 31, 2020, there were warrants outstanding to acquire 19,999,967 shares of our Class A Common Stock including: (i) 6,666,666 warrants originally issued to Gores Sponsor II, LLC in a private placement in connection with our IPO (the “ Private Placement Warrants ”); and (ii) 13,333,301 warrants issued in connection with our IPO (the “ Public Warrants ” and, together with the Private Placement Warrants, the “ Warrants ”). The Warrants entitle the registered holder to purchase one share of our Class A Common Stock at a price of $11.50 per share, subject to certain adjustments.
The Warrants became exercisable on November 16, 2018, 30 days following the completion of the Business Combination, and expire five years after that date, or earlier upon redemption or liquidation. We may redeem the outstanding Warrants at a price of $0.01 per warrant, if the last sale price of our Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading day period ending on the third business day before we send the notice of redemption to the Warrant holders. The Private Placement Warrants, however, are nonredeemable so long as they are held by Gores Sponsor II, LLC or its permitted transferees.
All Warrants were accounted for as components within equity prior to the issuance of the SEC Statement. As a result of the SEC Statement, we re-evaluated the accounting treatment of our Warrants and concluded that, based on the SEC Statement, the Private Placement Warrants should be, and should previously have been, classified as a liability measured at fair value, with non-cash fair value adjustments recorded in earnings at each reporting period. The Company’s accounting for its Public Warrants, which were classified as a component of equity, remains unchanged. We have measured the changes in fair value for the Private Placement Warrants and recognized them in our consolidated statements of operations at the end of each reporting period. See “ Item 8, Financial Statements and Supplementary Data—Note 2–Restatement of Previously Issued Financial Statements ” for additional information on the accounting treatment of our Warrants.
41
Dividends
We have not paid any cash dividends on our Class A Common Stock to date. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends is within the discretion of our Board. In addition, our Board is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Further, our ability to declare dividends is limited by restrictive covenants in the agreements governing our indebtedness.
Securities Authorized for Issuance Under Equity Compensation Plans
The information required by this item with respect to our equity compensation plans is incorporated by reference to our Proxy Statement for the 2021 annual meeting of stockholders.
Stock Performance Graph
The graph below compares the cumulative total return on our Class A Common Stock with that of the S&P 500 Index and the S&P Composite 1500 Data Processing & Outsourced Services Index. The period shown commences on October 18, 2018 and ends on December 31, 2020, the end of our last fiscal year. The graph assumes an investment of $100 in each of the above on the close of market on October 18, 2018. We did not declare or pay any dividends on our Class A Common Stock during the comparison period. The stock performance graph is not necessarily indicative of future price performance.
This performance graph is not deemed to be incorporated by reference into any of our other filings under the Exchange Act, or the Securities Act, except to the extent we specifically incorporate it by reference into such filings.
Recent Sales of Unregistered Securities and Use of Proceeds
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
42
Earn-O ut Agreement
Under the Merger Agreement, the Platinum Stockholder is entitled to receive additional shares of Class A Common Stock (the “ Earn-Out Shares ”) if the volume weighted average closing sale price of one share of Class A Common Stock on the Nasdaq exceeds certain thresholds for a period of at least 10 days out of 20 consecutive trading days at any time during the five-year period following the closing of the Business Combination (the “ Common Stock Price ”).
The Earn-Out Shares are issued by the Company to the Platinum Stockholder as follows:
Common Stock Price thresholds
One-time issuance of shares
> $13.00 (a)
2,500,000
> $15.50 (a)
2,500,000
> $18.00
2,500,000
> $20.50
2,500,000
(a)
The first and second tranches of Earn-Out Shares have been issued, as discussed below.
If any of the Common Stock Price thresholds above (each, a “ Triggering Event ”) are not achieved within the five-year period following the closing of the Business Combination , the Company will not be required to issue the Earn-Out Shares in respect of such Common Stock Price threshold. In no event shall the Platinum Stockholder be entitled to receive more than an aggregate of 10,000,000 Earn-Out Shares.
If, during the earn-out period, there is a change of control (as defined in the Merger Agreement) that will result in the holders of our Class A Common Stock receiving a per share price equal to or in excess of the applicable Common Stock Price required in connection with any Triggering Event (an “ Acceleration Event ”), then immediately prior to the consummation of such change of control: (a) any such Triggering Event that has not previously occurred shall be deemed to have occurred; and (b) we shall issue the applicable Earn-Out Shares to the cash consideration stockholders (as defined in the Merger Agreement) (in accordance with their respective pro rata cash share), and the recipients of the issued Earn-Out Shares shall be eligible to participate in such change of control.
The Company estimated the original fair value of the contingently issuable shares to be $73.15 million, of which $36.6 million remains contingently issuable as of December 31, 2020. The estimated value is not subject to future revisions during the five-year period discussed above. The Company used a Monte Carlo simulation option-pricing model to arrive at its original estimate. Each tranche was valued separately giving specific consideration to the tranche’s price target. The simulation considered volatility and risk-free rates utilizing a peer group based on a five-year term. This was initially recorded as a distribution to shareholders and was presented as common stock contingent consideration. Upon the occurrence of a Triggering Event, any issuable shares are transferred from common stock contingent consideration to common stock and additional paid-in capital accounts. Any contingently issuable shares not issued as a result of a Triggering Event not being attained by the end of the earn-out period will be canceled.
On April 26, 2019 and on January 27, 2020, the Triggering Events for the issuance of the first and second tranches of Earn-Out Shares occurred, as the volume weighted average closing sale price per share of the Company’s Class A Common Stock as of that date had been greater than $13.00 and $15.50, respectively, for 10 out of 20 consecutive trading days. These Triggering Events resulted in the issuance of an aggregate 5,000,000 shares of the Company’s Class A Common Stock to the Platinum Stockholder and an increase in the Company’s common stock and additional paid-in capital accounts of $36.6 million, with a corresponding decrease to the common stock contingent consideration account. At December 31, 2020, the potential future shares issuable pursuant to the earn-out are between zero and 5.0 million.
Item 6. Selected Financial Data
As a result of the Business Combination discussed above, for accounting purposes, the Business Combination is treated as a reverse acquisition and recapitalization, in which Greenlight is considered the accounting acquirer (and legal acquiree) and Gores is considered the accounting acquiree (and legal acquirer). Our financial statement presentation includes the financial statements of Greenlight and its subsidiaries as “ Predecessor ” for periods prior to the completion of the Business Combination and of Verra Mobility Corporation, including the consolidation of Verra Mobility Holdings, LLC and its subsidiaries, for periods from and after the Closing Date ( “Successor” ).
43
Consolidated Statement s of Operations Data
The following table sets forth our consolidated statements of operations for the respective periods:
Successor
Predecessor
For the Year Ended
December 31,
Period from
June 1, 2017 to
December 31,
Period from
January 1, 2017
to May 31,
For the Year Ended
December 31,
2020
2019
2018
2017
2017
2016
($ in thousands)
(As restated)
(As restated)
(As restated)
Service revenue
$
336,274
$
416,723
$
365,076
$
135,655
$
92,531
$
212,515
Product sales (1)
57,319
32,014
5,070
2,584
1,340
18,235
Total revenue
393,593
448,737
370,146
138,239
93,871
230,750
Cost of service revenue
3,967
5,561
5,788
1,936
1,369
2,638
Cost of product sales (1)
29,573
13,919
3,447
1,590
964
9,505
Operating expenses
115,729
125,640
108,883
50,471
35,968
83,762
Selling, general and administrative expenses
89,664
85,493
132,827
44,882
40,884
53,034
Depreciation, amortization, and (gain) loss on disposal of assets, net (2)
116,844
115,771
103,353
33,113
12,613
33,395
Impairment of property and equipment
—
5,898
—
—
—
522
Total cost and expenses
355,777
352,282
354,298
131,992
91,798
182,856
Income from operations
37,816
96,455
15,848
6,247
2,073
47,894
Interest expense, net (3)
40,865
60,729
69,550
20,858
875
2,706
Change in fair value of private placement warrants (4)
1,133
16,267
(3,667
)
—
—
—
Tax receivable agreement liability adjustment (5)
6,850
(106
)
—
—
—
—
Loss on extinguishment of debt (3)
—
—
26,486
—
—
—
Other income, net (6)
(11,885
)
(11,092
)
(8,795
)
(2,172
)
(1,294
)
(2,471
)
Total other expenses (income)
36,963
65,798
83,574
18,686
(419
)
235
Income (loss) before income taxes
853
30,657
(67,726
)
(12,439
)
2,492
47,659
Income tax provision (benefit) (7)
5,431
13,581
(16,241
)
(30,677
)
1,252
18,661
Net (loss) income
$
(4,578
)
$
17,076
$
(51,485
)
$
18,238
$
1,240
$
28,998
Condensed Consolidated Balance Sheet Data
The following table sets forth selected items from our consolidated balance sheets at December 31:
Successor
Predecessor
($ in thousands)
2020
2019
2018
2017
2016
Cash and cash equivalents
$
120,259
$
131,513
$
65,048
$
8,725
$
2,901
Goodwill and intangibles, net (2)
928,574
1,018,593
1,079,265
498,164
26,983
Total assets
1,367,325
1,407,426
1,344,783
664,865
188,436
Total long-term debt
842,045
866,465
869,353
428,689
69,243
Total liabilities and stockholders' equity
1,367,325
1,407,426
1,344,783
664,865
188,436
(1)
Product sales and the related cost of product sales result from the sale of photo enforcement equipment to certain customers. The number of customers that purchase equipment is limited and their buying patterns vary greatly from period to period.
44
(2)
The purchase accounting resulting from Platinum Equity, LLC’s acquisition of ATS Consolidated, Inc. (now known as VM Consolidated, Inc) ( “ ATS Merger ” ) in May 2017 increased intangible assets subject to amortization to $222.5 million. The related amortization of intangibles expense increased by $17.7 million, $35.4 million, $ 37.8 million and $37.8 million for the period from June 1, 2017 to December 31, 2017 ( “2017 Successor Period” ) and for fiscal years 2018 , 2019 and 20 20 , respectively. On March 1, 2018, we acquired HTA as discussed below . The purchase accounting resulting from the HTA acquisition increased intangible assets subject to amortization to $591.8 million and increased the related amortization expense for the years ended December 31, 2018 , 2019 and 2020 by $43.1 million , $ 51.7 million and $ 51.7 million respectively . On April 6, 2018, we acquired EPC as discussed below . The purchase accounting resulting from the EPC acquisition increased intangible assets subject to amortization to $614.0 million and increased the related amortizatio n expense for the year s ended December 31, 2018 , 2019 and 2020 by $2.3 million , $ 3.0 million and $ 2.3 million respectively . On October 31, 2019, we acquired Pagatelia S.L. which increased intangibles subject to amortization to $62 8. 5 million, and the related amortization expense for the year s ended December 31, 2019 and 2020 by $0.3 million and $ 1.7 million, respectively .
(3)
In connection with the ATS Merger, we entered into a First Lien Term Loan Credit Agreement and a Second Lien Term Loan Credit Agreement of $323 million and $125 million, respectively, and a $40 million Revolving Credit Agreement (collectively the “ 2017 Credit Facilities ”). In connection with the HTA acquisition, we entered into a First Lien Term Loan Credit Agreement and a Second Lien Term Loan Credit Agreement of $840 million and $200 million, respectively, and a $75 million Revolving Credit Agreement (collectively the “ 2018 Credit Facilities ”). The 2018 Credit Facilities replaced the 2017 Credit Facilities. In February 2020, we refinanced the entire amount outstanding under the 2018 Credit Facilities by which we reduced our financing costs. We recorded interest expense including amortization of deferred financing costs of $20.9 million, $69.6 million, $60.7 million and $40.9 million respectively, in the 2017 Successor Period and in fiscal years 2018, 2019 and 2020.
In fiscal 2018, we recorded a $10.2 million loss on extinguishment of debt related to the establishment of the 2018 Credit Facilities, and a $16.3 million loss associated with the repayment of the second lien term loan in October 2018 pursuant to the Business Combination.
(4)
This consists of adjustments to the Private Placement Warrants liability from the remeasurement to fair value at the end of each reporting period.
(5)
This consists of adjustments made to the related party tax receivable agreement liability due to changes in estimates.
( 6 )
Other income, net primarily consists of volume rebates from total spend on purchasing cards.
( 7 )
On December 22, 2017, the U.S. enacted significant changes to the U.S. tax law following the passage and signing of the Tax Act. The Tax Act reduces the U.S. federal corporate tax rate from a maximum 35% to 21% and modified or eliminated other provisions in the tax code. As of December 31, 2017, we re-measured the applicable deferred tax assets and liabilities based on the rates at which they are expected to reverse. The gross deferred tax assets and liabilities were provisionally adjusted, which resulted in a net effect of a $27.3 million decrease to the income tax provision in the 2017 Successor Period. We completed our analysis in 2018 and have recorded the final adjustments in the measurement period provided for in the Tax Act.
Condensed Consolidated Statements of Cash Flows Data
The following table sets forth certain captions within our consolidated statements of cash flows:
Successor
Predecessor
For the Year Ended
December 31,
Period from
June 1, 2017 to
December 31,
Period from
January 1, 2017
to May 31,
For the Year Ended
December 31,
2020
2019
2018
2017
2017
2016
($ in thousands)
(As restated)
Net cash provided by operating activities
$
46,909
$
133,802
$
49,259
$
8,311
$
41,833
$
43,841
Net cash used in investing activities
(24,153
)
(54,973
)
(562,857
)
(553,536
)
(8,786
)
(35,051
)
Net cash (used in) provided by financing activities
(34,004
)
(14,520
)
571,026
555,734
(27,491
)
(7,041
)
45
Non-GAAP Financial Data
The consolidated financial statements included elsewhere in this document are prepared in accordance with generally accepted accounting principles in the United States of America (“ GAAP ”).
The following table sets forth the unaudited non-GAAP measures of Adjusted EBITDA and Adjusted EBITDA Margin %:
Successor
Predecessor
For the Year Ended
December 31,
Period from
June 1, 2017 to
December 31,
Period from
January 1, 2017
to May 31,
For the Year Ended
December 31,
($ in thousands)
2020
2019
2018
2017
2017
2016
Adjusted EBITDA
$
181,845
$
241,391
$
197,610
$
59,901
$
37,991
$
87,116
Adjusted EBITDA Margin %
46.2
%
53.8
%
53.4
%
43.3
%
40.5
%
37.8
%
We define “ Adjusted EBITDA ” as net (loss) income adjusted to exclude (i) interest expense, net, (ii) income taxes, (iii) depreciation and amortization, and (iv) as further adjusted to exclude the impact of certain non-cash and non-recurring items that we do not consider indicative of our ongoing operating performance. These further adjustments are itemized below. Adjusted EBITDA margin % represents Adjusted EBITDA as a percentage of total revenue. We use these metrics to measure our performance from period to period both at the consolidated level as well as within our operating segments, to evaluate and fund incentive compensation programs and to compare our results to those of our competitors. In addition to Adjusted EBITDA being a significant measure of performance for management purposes, we also believe that this presentation provides useful information to investors regarding financial and business trends related to our results of operations and that when non-GAAP financial information is viewed with GAAP financial information, investors are provided with a more meaningful understanding of our ongoing operating performance.
You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments set forth below. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Adjusted EBITDA should not be considered as an alternative to net (loss) income, operating income, cash flows from operating activities or any other performance measures derived in accordance with GAAP, or measures of operating performance or cash flows as measures of liquidity. Adjusted EBITDA and Adjusted EBITDA margin % have important limitations as analytical tools, and should not be considered either in isolation, or as a substitute for analysis of our results as reported under GAAP. In addition, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies and may, therefore, have limitations as a comparative analytical tool. For example, Adjusted EBITDA and Adjusted EBITDA margin % do not reflect:
•
our capital expenditures, future requirements for capital expenditures or contractual commitments;
•
changes in, or cash requirements for, our working capital needs;
•
the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
•
income tax expense or the cash necessary to pay income taxes; and
•
cash requirements for the assets being depreciated and amortized that may have to be replaced in the future.
Our non-GAAP information below should be read in conjunction with our audited consolidated financial statements and the related notes included elsewhere.
46
The following table sets forth our reconciliation of net (loss) income to Adjusted EBITDA (unaudited):
Successor
Predecessor
For the Year Ended
December 31,
Period from
June 1, 2017 to
December 31,
Period from
January 1, 2017
to May 31,
For the Year Ended
December 31,
2020
2019
2018
2017
2017
2016
($ in thousands)
(As
restated)
(As
restated)
(As
restated)
Net (loss) income
$
(4,578
)
$
17,076
$
(51,485
)
$
18,238
$
1,240
$
28,998
Interest expense, net
40,865
60,729
69,550
20,858
875
2,706
Income tax provision (benefit)
5,431
13,581
(16,241
)
(30,677
)
1,252
18,661
Depreciation and amortization
116,570
115,566
103,346
33,151
12,574
33,293
EBITDA
158,288
206,952
105,170
41,570
15,941
83,658
Transaction and other related expenses ( i )
1,895
2,368
53,201
10,190
21,773
1,154
Transformation expenses (ii)
1,090
—
8,765
3,913
—
—
Impairment of property and equipment (iii)
—
5,898
—
—
—
522
Change in fair value of private placement warrants (iv)
1,133
16,267
(3,667
)
—
—
—
Tax receivable agreement liability adjustment (v)
6,850
(106
)
—
—
—
—
Loss on extinguishment of debt (vi)
—
—
26,486
—
—
—
Sponsor fees and expenses (vii)
—
—
5,383
4,228
—
—
Non-cash amortization of contract inducement (viii)
—
—
—
—
277
1,784
Stock-based compensation (ix)
12,589
10,012
2,272
—
—
—
Adjusted EBITDA
$
181,845
$
241,391
$
197,610
$
59,901
$
37,991
$
87,118
( i )
Transaction and other related expenses incurred in fiscal 2016 relate to legal and other professional fees associated with activities leading to the ATS Merger. For the period from January 1, 2017 to May 31, 2017, we recognized $21.8 million of costs related to the ATS Merger, which consisted of $11.9 million of payments under the Verra Mobility’s 2016 equity plan, $1.3 million of transaction bonus payments, $7.9 million of professional fees and other expenses processed through the funds flow and $0.7 million of professional fees paid directly by Verra Mobility. For the 2017 Successor Period, Verra Mobility recognized approximately $10.2 million of costs related to the ATS Merger, which consisted of $8.0 million of payments for acquisition services to Platinum Equity Advisors, LLC, $1.9 million of professional fees and other expenses processed through the funds flow and $0.3 million of professional fees paid directly by Verra Mobility. For fiscal 2018, Verra Mobility recognized an aggregate of $56.4 million of costs related primarily to the Business Combination, HTA and EPC acquisitions, primarily consisting of $28.4 million for payments under the 2018 participation plan, $9.7 million for acquisition services to Platinum Equity Advisors, LLC, $17.4 million of banking, legal and other professional fees and $0.9 million of other costs. For fiscal 2019, we paid $0.7 million for the Pagatelia acquisition and $1.7 million of offering costs that were incurred by us for the secondary offerings by PE Greenlight Holdings, LLC. For fiscal 2020, we incurred acquisition-related costs for Pagatelia, certain costs for refinancing our debt and deal costs mainly for the pending acquisition of Redflex, discussed below.
(ii)
Transformation expenses of $3.9 million, $8.8 million and $1.1 million for the 2017 Successor Period, and for fiscal years 2018 and 2020, respectively, represent one-time costs related to optimizing the expense structure and defining Verra Mobility’s growth strategy. For the 2017 Successor Period, these costs included $1.5 million for strategy consultants, $2.1 million for procurement optimization and $0.2 million for IT optimization. For fiscal 2018, these costs included $5.7 million for strategy consultants, $1.0 million for procurement optimization, $0.6 million for severance to employees of acquired businesses, $0.6 million for IT optimization and $0.9 million of other professional fees. For fiscal 2020, we had $1.1 million of severance and other employee separation costs related to exit activities initiated during the period.
(iii)
This represents an impairment charge on fixed assets during fiscal year 2019 due to a legislation ban of most red-light photo enforcement programs in Texas on June 1, 2019.
47
(iv)
This consists of adjustments to the Private Placement Warrants liability from the remeasurement to fair value at the end of each reporting period.
(v)
This represents adjustments made to the related party tax receivable agreement liability due to changes in estimates.
(vi)
This represents the loss on extinguishment of debt related to the 2017 Credit Facilities which were replaced by the 2018 Credit Facilities in conjunction with the HTA acquisition and the repayment of the second lien term loan in October 2018 pursuant to the Business Combination.
( v i i )
We incurred management fees and related expenses associated with a previous corporate advisory services agreement with Platinum Equity Advisors, LLC which was terminated in connection with the Business Combination.
(vi i i )
In 2014, we paid $10.2 million in connection with a tolling contract with a major rental car company. This amount was capitalized and amortized over the term of the contract as a reduction to revenue. As a result of the ATS Merger, and the resultant purchase price allocation, the contract inducement was subsumed into the larger customer relationship intangible asset recorded for this and other customers.
( i x )
Stock-based compensation represents the non-cash charge related to the issuance of awards under the Verra Mobility 2018 equity incentive plan.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.