VERRA MOBILITY Corp 10-K/A

Item 8. Financial Statements and Supplementary Data 68 VERRA MOBILITY CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Reports of Independent Registered Public Accounting Firm 70 Consolidated Balance Sheets 75 Consolidated Statements of Operations and Comprehensive (Loss) Income 76 Consolidated Statements of Stockholders’ Equity 77 Consolidated Statements of Cash Flows 78 Notes to Consolidated Financial Statements 80 69 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Verra Mobility Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Verra Mobility Corporation (the Company) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2020 and 2019, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2021, except for the effect of the material weakness described in the fourth paragraph, as to which the date is May 14, 2021, expressed an adverse opinion thereon. Restatement of Consolidated Financial Statements As discussed in Note 2 to the consolidated financial statements, the 2020, 2019 and 2018 consolidated financial statements have been restated to correct a misstatement. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit 70 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Commercial Services Revenue Description of the Matter As described in Notes 2 and 18 to the consolidated financial statements, the Company generated commercial services revenue of $180.9 million for the year ended December 31, 2020. The Company‘s commercial services revenue recognition process involves several applications and data sources needed for the initiation, processing, and recording of transactions from the Company’s various commercial services revenue sources, as well as the calculation of commercial services revenue in accordance with the Company’s accounting policy. Auditing the Company's accounting for commercial services revenue from contracts with customers was challenging and complex primarily due to the high volume of transactions, as well as the multiple applications and data sources associated with the commercial services revenue recognition process. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over the commercial services revenue recognition process. This included testing controls over the completeness and accuracy of data within the commercial services revenue systems, the interfaces of data between relevant systems, testing of relevant IT application controls and testing of relevant IT general controls over the IT applications supporting the commercial services revenue recognition process. To test the Company’s accounting for commercial services revenue from contracts with customers, we performed substantive audit procedures that included, among others, testing on a sample basis the completeness and accuracy of the underlying data within the commercial services revenue systems, performing data analytics to test recorded revenue amounts, tracing a sample of sales transactions to supporting documentation, and testing a sample of cash to billings reconciliations. Goodwill impairment considerations Description of the Matter As described in Notes 2 and 6 to the consolidated financial statements, the Company completed interim quantitative goodwill impairment tests as of March 31, 2020 and June 30, 2020, due to identified triggering events. Fair value is estimated by management based on an income approach using a discounted cash flow model which is corroborated with an implied fair value of the reporting units using a market-based approach. Based upon the results of its interim impairment tests, the Company concluded that the fair values of both the commercial services and government solutions reporting units exceeded their carrying values. Auditing the interim quantitative goodwill impairment analyses was complex due to the significant estimation uncertainty in determining the fair values of the commercial services and government solutions reporting units. The significant assumptions used to form the basis of the forecasted results included revenue growth rates, operating margins, discount rates and long-term growth rates. These significant assumptions were forward-looking and could be affected by future economic and market conditions, including the COVID-19 pandemic. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over its interim goodwill impairment assessments. This included testing controls over the estimation process supporting management’s judgment and evaluation of underlying assumptions and estimates with regards to the fair values of each reporting unit. To test the estimated fair values of each reporting unit, our audit procedures included, among others, the evaluation of the Company’s valuation methodology and testing of the significant assumptions described above. For example, we compared the significant assumptions to current industry and market trends, analyst reports, historical actuals and annual financial forecasts presented to the Board of Directors. We performed sensitivity analyses of these significant assumptions to evaluate the changes in the fair value that would result from changes in the assumptions. We also evaluated the reconciliation of the estimated aggregate fair value of the reporting units to the market capitalization of the Company. Additionally, we tested the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. 71 /s/ Ernst & Young LLP We have served as the Company’s auditor since 2013. Phoenix, Arizona March 1, 2021, except for Note 2, as to which the date is May 14, 2021. 72 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Verra Mobility Corporation Opinion on Internal Control over Financial Reporting We have audited Verra Mobility Corporation’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, Verra Mobility Corporation (the Company) has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria. In our report dated March 1, 2021, we expressed an unqualified opinion that the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria. Management has subsequently identified a deficiency in controls for the operation of certain review controls over the accounting for contracts in the Company’s own stock and has further concluded that such deficiency represented a material weakness as of December 31, 2020. As a result, management has revised its assessment, as presented in the accompanying Management’s Report on Internal Control over Financial Reporting, to conclude that the Company’s internal control over financial reporting was not effective as of December 31, 2020. Accordingly, our present opinion on the effectiveness of December 31, 2020’s internal control over financial reporting as of December 31, 2020, as expressed herein, is different from that expressed in our previous report. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment. Management has identified a material weakness related to the operation of certain review controls over the accounting for contracts in the Company’s own stock. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a). This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audits of the consolidated financial statements, and this report does not affect our report dated March 1, 2021, except Note 2, as to which the date is May 14, 2021, which expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. 73 Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Phoenix, Arizona March 1, 2021, except for the effect of the material weakness described in the fourth paragraph above, as to which the date is May 14, 2021. 74 VERRA MOBILITY CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 2020 December 31, 2019 ($ in thousands except per share data) (As restated) (As restated) Assets Current assets: Cash and cash equivalents $ 120,259 $ 131,513 Restricted cash 633 917 Accounts receivable (net of allowance for credit loss of $ 11.5 million and $ 7.6 million at December 31, 2020 and 2019, respectively) 168,783 93,514 Unbilled receivables 14,045 20,003 Prepaid expenses and other current assets 24,317 26,491 Total current assets 328,037 272,438 Installation and service parts, net 7,944 8,841 Property and equipment, net 70,284 72,266 Operating lease assets 29,787 32,177 Intangible assets, net 342,139 434,443 Goodwill 586,435 584,150 Other non-current assets 2,699 3,111 Total assets $ 1,367,325 $ 1,407,426 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 34,509 $ 50,825 Accrued liabilities 15,636 19,547 Payable to related party pursuant to tax receivable agreement, current portion 4,791 5,730 Current portion of long-term debt 9,104 28,779 Total current liabilities 64,040 104,881 Long-term debt, net of current portion 832,941 837,686 Operating lease liabilities, net of current portion 27,986 30,130 Payable to related party pursuant to tax receivable agreement, net of current portion 67,869 61,174 Private placement warrant liabilities 30,866 29,733 Asset retirement obligation 6,409 6,309 Deferred tax liabilities, net 21,148 25,716 Other long-term liabilities 494 2,183 Total liabilities 1,051,753 1,097,812 Commitments and contingencies (Note 17) Stockholders' equity Preferred stock, $ .0001 par value, 1,000 shares authorized with no shares issued and outstanding at December 31, 2020 and 2019 — — Common stock, $ .0001 par value, 260,000 shares authorized with 162,269 and 159,150 shares issued and outstanding at December 31, 2020 and 2019, respectively 16 16 Common stock contingent consideration 36,575 54,862 Additional paid-in capital 373,620 346,891 Accumulated deficit ( 94,850 ) ( 89,578 ) Accumulated other comprehensive income (loss) 211 ( 2,577 ) Total stockholders' equity 315,572 309,614 Total liabilities and stockholders' equity $ 1,367,325 $ 1,407,426 See accompanying Notes to Consolidated Financial Statements. 75 VERRA MOBILITY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME For the Year Ended December 31, 2020 2019 2018 (In thousands, except per share data) (As restated) (As restated) (As restated) Service revenue $ 336,274 $ 416,723 $ 365,076 Product sales 57,319 32,014 5,070 Total revenue 393,593 448,737 370,146 Cost of service revenue 3,967 5,561 5,788 Cost of product sales 29,573 13,919 3,447 Operating expenses 115,729 125,640 108,883 Selling, general and administrative expenses 89,664 85,493 132,827 Depreciation, amortization and (gain) loss on disposal of assets, net 116,844 115,771 103,353 Impairment of property and equipment — 5,898 — Total costs and expenses 355,777 352,282 354,298 Income from operations 37,816 96,455 15,848 Interest expense, net 40,865 60,729 69,550 Change in fair value of private placement warrants 1,133 16,267 ( 3,667 ) Tax receivable agreement liability adjustment 6,850 ( 106 ) — Loss on extinguishment of debt — — 26,486 Other income, net ( 11,885 ) ( 11,092 ) ( 8,795 ) Total other expenses 36,963 65,798 83,574 Income (loss) before income tax provision (benefit) 853 30,657 ( 67,726 ) Income tax provision (benefit) 5,431 13,581 ( 16,241 ) Net (loss) income $ ( 4,578 ) $ 17,076 $ ( 51,485 ) Other comprehensive income (loss): Change in foreign currency translation adjustment 2,788 3,244 ( 5,821 ) Total comprehensive (loss) income $ ( 1,790 ) $ 20,320 $ ( 57,306 ) Net (loss) income per share: Basic $ ( 0.03 ) $ 0.11 $ ( 0.59 ) Diluted $ ( 0.03 ) $ 0.11 $ ( 0.59 ) Weighted average shares outstanding: Basic 161,632 157,890 87,320 Diluted 161,632 160,080 87,320 See accompanying Notes to Consolidated Financial Statements. 76 VERRA MOBILITY CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Common Stock Contingent Additional Paid-in Accumulated Accumulated Other Comprehensive Total Stockholders' Shares Amount Consideration Capital Deficit Income (Loss) Equity (In thousands) (As restated) (As restated) (As restated) Balance as of December 31, 2017 60,484 $ 6 $ — $ 129,020 $ 18,238 $ — $ 147,264 Net loss — — — — ( 51,485 ) — ( 51,485 ) Stock issued in exchange for business acquisitions 12,420 1 — 117,554 — — 117,555 Equity infusion from Gores 39,675 4 — 403,290 — — 403,294 Private placement 43,478 5 — 399,995 — — 400,000 Gores Holdings rollover equity — — — ( 34 ) — — ( 34 ) Capital contribution from Greenlight — — — 169,259 — — 169,259 Return of capital to Greenlight stockholders — — — ( 779,270 ) — — ( 779,270 ) Common stock contingent consideration — — 73,150 — ( 73,150 ) — — Private placement warrant liability adjustment — — — ( 17,133 ) — — ( 17,133 ) Tax receivable payable to Greenlight stockholders — — — ( 69,996 ) — — ( 69,996 ) Underwriting fees — — — ( 14,693 ) — — ( 14,693 ) Transaction costs incurred by Greenlight — — — ( 4,265 ) — — ( 4,265 ) Transaction costs incurred by Gores — — — ( 8,357 ) — — ( 8,357 ) Stock-based compensation — — — 2,272 — — 2,272 Other comprehensive loss — — — — — ( 5,821 ) ( 5,821 ) Balance as of December 31, 2018 156,057 $ 16 $ 73,150 $ 327,642 $ ( 106,397 ) $ ( 5,821 ) $ 288,590 Net income — — — — 17,076 — 17,076 Cumulative effect of adoption of the new revenue accounting standard — — — — ( 257 ) — ( 257 ) Adjustment to equity infusion from Gores — — — ( 7,001 ) — — ( 7,001 ) Adjustment to tax receivable agreement liability — — — 2,940 — — 2,940 Earn-out shares issued to Platinum Stockholder 2,500 — ( 18,288 ) 18,288 — — — Vesting of restricted stock units (" RSUs ") 593 — — — — — — Payment of employee tax withholding related to RSUs vesting — — — ( 4,990 ) — — ( 4,990 ) Stock-based compensation — — — 10,012 — — 10,012 Other comprehensive income — — — — — 3,244 3,244 Balance as of December 31, 2019 159,150 $ 16 $ 54,862 $ 346,891 $ ( 89,578 ) $ ( 2,577 ) $ 309,614 Net loss — — — — ( 4,578 ) — ( 4,578 ) Cumulative effect of adoption of the credit loss accounting standard, net of tax — — — — ( 694 ) — ( 694 ) Earn-out shares issued to Platinum Stockholder 2,500 — ( 18,287 ) 18,287 — — — Vesting of RSUs 619 — — — — — — Payment of employee tax withholding related to RSUs vesting — — — ( 4,147 ) — — ( 4,147 ) Stock-based compensation — — — 12,589 — — 12,589 Other comprehensive income, net of tax — — — — — 2,788 2,788 Balance as of December 31, 2020 162,269 $ 16 $ 36,575 $ 373,620 $ ( 94,850 ) $ 211 $ 315,572 See accompanying Notes to Consolidated Financial Statements. 77 VERRA MOBILITY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS For the Year Ended December 31, 2020 2019 2018 ($ in thousands) (As restated) (As restated) (As restated) Cash Flows from Operating Activities: Net (loss) income $ ( 4,578 ) $ 17,076 $ ( 51,485 ) Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 116,570 115,566 103,346 Amortization of deferred financing costs and discounts 5,437 6,641 9,168 Impairment of property and equipment — 5,898 — Change in fair value of private placement warrants 1,133 16,267 ( 3,667 ) Tax receivable agreement liability adjustment 6,850 ( 106 ) — Credit loss expense 14,387 8,100 6,025 Deferred income taxes ( 4,746 ) ( 10,894 ) ( 24,435 ) Stock-based compensation 12,589 10,012 2,272 Loss on extinguishment of debt — — 26,486 Installation and service parts expense 677 1,166 1,238 Accretion expense 259 350 396 Loss on disposal of assets 274 205 7 Changes in operating assets and liabilities: Accounts receivable, net ( 90,588 ) ( 12,662 ) ( 23,721 ) Unbilled receivables 5,964 ( 6,428 ) ( 6,124 ) Prepaid expenses and other assets 3,829 ( 7,150 ) 2,115 Accounts payable and accrued liabilities ( 16,867 ) ( 8,194 ) 7,125 Other liabilities ( 4,281 ) ( 2,045 ) 513 Net cash provided by operating activities 46,909 133,802 49,259 Cash Flows from Investing Activities: Acquisitions, net of cash and restricted cash acquired — ( 25,519 ) ( 536,699 ) Purchases of installation and service parts and property and equipment ( 24,260 ) ( 29,685 ) ( 26,576 ) Cash proceeds from the sale of assets 107 231 418 Net cash used in investing activities ( 24,153 ) ( 54,973 ) ( 562,857 ) Cash Flows from Financing Activities: Borrowings on revolver — — 468 Repayment on revolver — — ( 468 ) Borrowings of long-term debt — — 1,103,800 Repayment of long-term debt ( 28,779 ) ( 9,104 ) ( 654,851 ) Payment of debt issuance costs ( 1,078 ) ( 426 ) ( 31,753 ) Payment of debt extinguishment costs — — ( 12,187 ) Payment of employee tax withholding related to RSUs vesting ( 4,147 ) ( 4,990 ) — Capitalization from merger with Gores Holdings — — 803,294 Payment of underwriting and transaction costs — — ( 27,266 ) Capital contribution from Greenlight — — 169,259 Distribution to selling shareholders — — ( 779,270 ) Net cash (used in) provided by financing activities ( 34,004 ) ( 14,520 ) 571,026 Effect of exchange rate changes on cash and cash equivalents ( 290 ) 1,040 ( 856 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 11,538 ) 65,349 56,572 Cash, cash equivalents and restricted cash - beginning of period 132,430 67,081 10,509 Cash, cash equivalents and restricted cash - end of period $ 120,892 $ 132,430 $ 67,081 See accompanying Notes to Consolidated Financial Statements . 78 VERRA MOBIL ITY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) For the Year Ended December 31, 2020 2019 2018 (As restated) (As restated) (As restated) Supplemental cash flow information: Interest paid $ 35,822 $ 55,197 $ 60,441 Income taxes paid, net of refunds 12,638 24,357 762 Supplemental non-cash investing and financing activities: Earn-out shares issued to Platinum Stockholder 18,287 18,288 — Additions to ARO, property and equipment, and other 133 230 147 Purchases of installation and service parts and property and equipment in accounts payable and accrued liabilities at year-end 1,289 4,204 3,179 Tenant improvement allowance included in property and equipment — 581 — Gores equity infusion working capital adjustment payable to related party — 7,001 — Reduction to tax receivable agreement liability — 2,940 — Capital contributions received in Greenlight Acquisition Corporation common stock — — 117,555 Tax receivable agreement established upon merger — — 69,996 See accompanying Notes to Consolidated Financial Statements . 79 VERRA MOBILITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of Business Verra Mobility Corporation (collectively with its subsidiaries, the “ Company ” or “ Verra Mobility ”), formerly known as Gores Holdings II, Inc. (“ Gores ”), was originally incorporated in Delaware on August 15, 2016, as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses. On January 19, 2017, the Company consummated its initial public offering (the “ IPO ”), following which its shares began trading on the Nasdaq Capital Market (“ Nasdaq ”). On June 21, 2018, Gores entered into an Agreement and Plan of Merger (as amended, the “ Merger Agreement ”) with Greenlight Holding II Corporation (“ Greenlight ”), PE Greenlight Holdings, LLC, AM Merger Sub I, Inc., a direct, wholly-owned subsidiary of Gores and AM Merger Sub II, LLC, a direct, wholly-owned subsidiary of Gores. On October 17, 2018, the transactions contemplated by the Merger Agreement (the “ Business Combination ”) were consummated. In connection with the closing of the Business Combination, Gores changed its name to Verra Mobility Corporation. As a result of the Business Combination, Verra Mobility Corporation became the owner, directly or indirectly, of all of the equity interests of Verra Mobility Holdings, LLC and its subsidiaries. Verra Mobility offers integrated technology solutions and services to commercial fleets, rental car companies and state and local governments. The Company has customers located throughout the United States, Canada and Europe. The Company is organized into two operating segments: Commercial Services and Government Solutions (see Note 18). The Commercial Services segment offers toll and violation management solutions for the commercial fleet and rental car industries by partnering with the leading fleet management and rental car companies in North America. Electronic toll payment services enable fleet drivers and rental car customers to use high-speed cashless toll lanes or all-electronic cashless toll roads. The service helps commercial fleets reduce toll management costs, while it provides rental car companies with a revenue-generating, value-added service for their customers. Electronic violation processing services reduce the cost and risk associated with vehicle-issued violations, such as toll, parking or camera-enforced tickets. Title and registration services offer title and registration processing for individuals, rental car companies and fleet management companies. In Europe, the Company provides violations processing through Euro Parking Collection plc (“ EPC ”) and consumer tolling services through Pagatelia S.L (“ Pagatelia ”). The Government Solutions segment provides complete, end-to-end red-light, speed, school bus stop arm and bus lane enforcement solutions. The Company’s programs are designed to reduce traffic violations and resulting collisions, injuries, and fatalities. The Company implements and administers traffic safety programs for municipalities, counties, school districts and law enforcement agencies of all sizes. 2. Significant Accounting Policies (As Restated) Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company prepared in accordance with GAAP. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. Restatement of Previously Issued Financial Statements On April 12, 2021, the Staff of the Division of Corporation Finance of the SEC (the “ Staff ”) released a public statement highlighting the potential accounting implications of certain terms of warrants issued by SPACs. In the statement, the Staff, among other things, described several fact patterns common in warrants issued in connection with the initial public offerings of SPACs and related accounting consequences. The restatement results from the Company’s prior accounting for its Private Placement Warrants, which were incorrectly classified as a component of equity instead of a derivative liability in its consolidated balance sheets. The 80 warrant agreement governing the Warrants includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the Warrant , which affected the accounting treatment for Private Placement Warrants . The Company’s Private Placement Warrants are not indexed to the Company’s common shares in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. As a result, the Private Placement Warrants must be classified as a liability instead of a component of shareholders’ equity, and the Company is required to measure the fair value of the Private Placement Warrants at the end of each reporting period and recognize those changes in fair value in the Company’s consolidated statements of operations. The Private Placement Warrants are deemed equity instruments for income tax purposes, and accordingly, there is no tax accounting relating to changes in the fair value recognized. A summary of the accounting impact of these adjustments to the Company’s consolidated financial statements as of and for the related periods is provided below. In addition, amounts were restated in the following Notes as a result of these adjustments: • Note 2. Significant Accounting Policies • Note 11. Net (Loss) Income Per Share • Note 12. Income Taxes • Note 13. Stockholders’ Equity • Note 18. Segment Reporting • Note 19. Quarterly Financial Information (Unaudited) • Note 20. Guarantor/Non-Guarantor Financial Information (Unaudited) The Company’s previously issued consolidated balance sheets are restated as of December 31, 2020 and 2019. The below reconciliations present certain line items with amounts originally reported and restated amounts after restatement adjustments for the respective period-ends: As of December 31, 2020 As of December 31, 2019 ($ in thousands) (As originally reported) (Restatement adjustments) (As restated) (As originally reported) (Restatement adjustments) (As restated) Total assets $ 1,367,325 $ — $ 1,367,325 $ 1,407,426 $ — $ 1,407,426 Private placement warrant liabilities — 30,866 30,866 — 29,733 29,733 Total liabilities 1,020,887 30,866 1,051,753 1,068,079 29,733 1,097,812 Additional paid-in capital 393,995 ( 20,375 ) 373,620 367,266 ( 20,375 ) 346,891 Accumulated deficit ( 84,359 ) ( 10,491 ) ( 94,850 ) ( 80,220 ) ( 9,358 ) ( 89,578 ) Total stockholders' equity 346,438 ( 30,866 ) 315,572 339,347 ( 29,733 ) 309,614 81 The Company’s previously issued consolidated statements of operations are restated for the years ended December 31, 2020, 2019 and 2018. The Company recalculated the basic and diluted net (loss) income per share calculations for each of the periods affected under the new accounting treatment. The below reconciliations present certain line items with amounts originally reported and restated amounts after restatement adjustments for each of the respective periods: Year Ended December 31, 2020 Year Ended December 31, 2019 ($ in thousands, except per share data) (As originally reported) (Restatement adjustments) (As restated) (As originally reported) (Restatement adjustments) (As restated) Total revenue $ 393,593 $ — $ 393,593 $ 448,737 $ — $ 448,737 Income from operations 37,816 — 37,816 96,455 — 96,455 Change in fair value of private placement warrants — 1,133 1,133 — 16,267 16,267 Total other expenses 35,830 1,133 36,963 49,531 16,267 65,798 Income before income tax provision 1,986 ( 1,133 ) 853 46,924 ( 16,267 ) 30,657 Net (loss) income ( 3,445 ) ( 1,133 ) ( 4,578 ) 33,343 ( 16,267 ) 17,076 Total comprehensive (loss) income ( 657 ) ( 1,133 ) ( 1,790 ) 36,587 ( 16,267 ) 20,320 (Loss) income per share - basic $ ( 0.02 ) $ ( 0.01 ) $ ( 0.03 ) $ 0.21 $ ( 0.10 ) $ 0.11 (Loss) income per share - diluted $ ( 0.02 ) $ ( 0.01 ) $ ( 0.03 ) $ 0.21 $ ( 0.10 ) $ 0.11 Year Ended December 31, 2018 ($ in thousands, except per share data) (As originally reported) (Restatement adjustments) (As restated) Total revenue $ 370,146 $ — $ 370,146 Selling, general and administrative expenses 136,069 ( 3,242 ) 132,827 Income from operations 12,606 3,242 15,848 Change in fair value of private placement warrants — ( 3,667 ) ( 3,667 ) Total other expenses 87,241 ( 3,667 ) 83,574 Loss before income tax benefit ( 74,635 ) 6,909 ( 67,726 ) Net loss ( 58,394 ) 6,909 ( 51,485 ) Total comprehensive loss ( 64,215 ) 6,909 ( 57,306 ) Loss per share - basic $ ( 0.67 ) $ 0.08 $ ( 0.59 ) Loss per share - diluted $ ( 0.67 ) $ 0.08 $ ( 0.59 ) The reconciliations for the consolidated statements of cash flows for the years ended December 31, 2019 and 2020 are not included below as the impact of the error related to the Private Placement Warrants resulted in an adjustment to net income (loss) and change in fair value of private placement warrants and did not change net cash provided by operating activities. The Company’s previously issued consolidated statements of cash flows are restated for the year ended December 31, 2018. The below reconciliation presents certain line items with amounts originally reported and restated amounts after restatement adjustments: Year Ended December 31, 2018 ($ in thousands) (As originally reported) (Restatement adjustments) (As restated) Net loss $ ( 58,394 ) $ 6,909 $ ( 51,485 ) Change in fair value of private placement warrants — ( 3,667 ) ( 3,667 ) Net cash provided by operating activities 46,017 3,242 49,259 Payment of underwriting and transaction costs ( 24,024 ) ( 3,242 ) ( 27,266 ) Net cash provided by financing activities 574,268 ( 3,242 ) 571,026 Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions include the fair values assigned to net assets acquired (including identifiable intangibles) in business combinations, the carrying amounts of long-lived assets and goodwill, the carrying amount of installation and service parts, the allowance for credit loss, fair value of 82 p rivate p lacement w arrant liabilities, valuation allowances on deferred tax assets, asset retirement obligations, contingent consideration and the recognition and measurement of loss contingencies. Management believes that its estimates and assumptions are reasonable in the circumstances; however, actual results could differ materially from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with a remaining maturity of three months or less when acquired to be cash equivalents. Restricted Cash The Company collects citation fees for customers under certain contracts, which it deposits daily into Company bank accounts and transfers to customer-owned bank accounts on a continuous basis. Restricted cash represents customer cash collected but not yet remitted to the customer. Restricted cash is classified as a current asset and the corresponding liability due to customers is classified in current liabilities. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents, accounts receivable and unbilled receivables. The Company limits cash and cash equivalents to highly rated financial institutions. Significant customers are those which represent more than 10 % of the Company’s total revenue and accounts receivable. Revenue from one of the Government Solutions customers as a percent of total revenue is presented below for the years ended December 31, 2020, 2019 and 2018, respectively: For the Year Ended December 31, 2020 2019 2018 City of New York Department of Transportation 31.3 % 14.6 % 9.3 % As of December 31, 2020, the City of New York Department of Transportation (“ NYCDOT ”) represented 58.9 % of accounts receivable, net. The Company provides photo enforcement services to NYCDOT under two primary agreements, (i) a legacy contract relating to photo enforcement cameras that were installed prior to fiscal year 2020 (the “ Legacy Contract ”), and (ii) an emergency contract for the purchase, installation, maintenance and operation of the expanded speed camera program beginning in 2020 (the “ Emergency Contract ”). At December 31, 2020, the Legacy Contract had an open receivable balance of $ 28.8 million, of which $ 20.5 million had aged beyond NYCDOT’s 45-day payment terms. As of December 31, 2020, the Company had invoiced NYCDOT for $ 52.6 million in product revenue and $ 17.4 million in service revenue under the Emergency Contract. NYCDOT has not made any payments against the Emergency Contract to date. In late January 2021, we were informed that the City of New York is investigating matters related to our past installation practices, and it is unclear whether this investigation will impact the timing of the payments. There is no material reserve related to these receivables as amounts were deemed collectible based on current conditions and expectations. For additional information on the risks and uncertainties relating to our contracts with NYCDOT, please see the risk factor entitled “ The New York City Law Department recently advised us that the City of New York is investigating certain aspects of our installation work for our largest customer, NYCDOT ” set forth in Part I, Item 1A. “ Risk Factors .” Significant customer revenue generated through the Company’s Commercial Services partners as a percent of total revenue is presented below for the years ended December 31, 2020, 2019 and 2018, respectively: For the Year Ended December 31, 2020 2019 2018 Hertz Corporation 12.0 % 18.7 % 19.3 % Avis Budget Group, Inc. 9.5 % 14.5 % (a) Enterprise Holdings, Inc. 11.3 % 13.5 % (a) 83 (a) These two customers were part of the Company’s 2018 acquisition of Highway Toll Administration, LLC and Canada Highway Toll Administration. Allowance for Credit Loss Accounts receivable and unbilled receivables are uncollateralized customer obligations arising from the sale of products or services. Accounts receivable and unbilled receivables have normal trade terms of less than one year and are initially stated at the amounts billed to the customers and subsequently measured at amortized cost net of allowance for credit loss. Unbilled receivables are recorded when revenues have been earned but have not been included on a customer invoice through the end of the current period. Unbilled receivables generally represents commercial tolls and violations paid by the Company on a behalf of rental car and fleet management customers that will be invoiced in future periods. The Company reviews historical loss rates, customer payment trends and collection rates on customer balances in accordance with the new current expected credit losses (“ CECL ”) standard implemented on January 1, 2020. Estimated loss rates are developed as of the balance sheet date using historical credit loss experience, adjusted for future expectations using probability-weighted assumptions about potential outcomes. Receivables are written off against the allowance for credit loss when it is probable that amounts will not be collected based on terms of the customer contracts, and subsequent recoveries reverse the previous write-off and apply to the receivable in the period recovered. No interest or late fees are charged on delinquent accounts. The Company periodically evaluates the adequacy of its allowance for expected credit losses by comparing its actual historical write-offs to its previously recorded estimates, and adjusts appropriately. The Company identified portfolio segments based on the type of business, industry in which the customer operates and historical credit loss patterns. The following presents by portfolio segment accounts receivable, net and the activity in the allowance for credit loss for the year ended December 31, 2020: ($ in thousands) Commercial Services (Driver-billed) (1) Commercial Services (All other) Government Solutions Total Accounts receivable, net at January 1, 2020 (2) $ 9,793 $ 51,158 $ 31,744 $ 92,695 Allowance for credit loss at January 1, 2020 (2) $ 5,272 $ 1,406 $ 1,778 $ 8,456 Credit loss expense 6,554 4,941 2,892 14,387 Write-offs, net of recoveries ( 8,616 ) ( 2,074 ) ( 686 ) ( 11,376 ) Allowance for credit loss at December 31, 2020 $ 3,210 $ 4,273 $ 3,984 $ 11,467 Accounts receivable, net at December 31, 2020 $ 11,060 $ 48,169 $ 109,554 $ 168,783 (1) Driver-billed consists of receivables from drivers of rental cars and fleet management companies for which the Company bills on behalf of its customers. Receivables not collected from drivers within a defined number of days are transferred to customers subject to applicable bad debt sharing agreements. (2) This includes a $ 0.8 million increase to allowance for credit loss as a result of adopting the credit loss standard. The allowance for credit loss at December 31, 2020 includes $ 14.4 million of expense for total expected credit losses offset by write-offs, net of recoveries for the fiscal year. The increase in accounts receivable, net in the Government Solutions portfolio segment is due to NYCDOT discussed above, which the Company believes is not at risk of non-payment based on current conditions and expectations . The allowance for doubtful accounts developed under the legacy incurred loss model was $ 7.6 million as of December 31, 2019. Installation and Service Parts Installation and service parts consist of components used in the construction and maintenance of our photo enforcement systems. Installation and service parts are stated at cost and are reclassified to property and equipment 84 upon initiation of construction. Installation and service parts used in repairs and maintenance are recorded in operating expenses. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. All repairs and maintenance costs are expensed as incurred. Depreciation is recorded on a straight-line basis over the estimated useful lives of the related assets as follows: Building 39 years Equipment installed at customer sites 3 - 7 years Computer equipment 3 - 5 years Furniture 5 - 10 years Automobiles 5 - 6 years Software 3 - 5 years Leasehold improvements Shorter of lease term or estimated useful life Equipment installed at customer sites includes certain installation costs that qualify for capitalization. Software costs include certain internal and external costs associated with the development of software that are incurred during the application development stage. In addition, a modification or upgrade to existing software is capitalized only to the extent it results in additional functionality to existing software. Software maintenance and training costs are expensed as incurred. The Company capitalized internally developed software costs of $ 5.1 million, $ 2.1 million and $ 2.2 million during fiscal years 2020, 2019, and 2018 respectively. Goodwill Goodwill represents the excess of the purchase price over the estimated fair value of net tangible and identifiable intangible assets acquired in business combinations. Goodwill is assessed for impairment at least annually at the reporting unit level or more frequently if events or changes in circumstances indicate the carrying value may not be recoverable. If, based on a qualitative analysis, it is determined more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, a one-step quantitative impairment test is performed in accordance with ASU 2017-04. Application of the goodwill impairment test requires judgment, including the identification of reporting units, the assignment of assets (including goodwill) to those reporting units and the determination of the fair value of each reporting unit. The date of the Company’s annual impairment analysis is October 1. As described in Note 18, the Company has two operating segments, which are also the Company’s reporting units. We adopted ASU 2017-04 as of January 1, 2020 as discussed in Recent Accounting Pronouncements below, and followed the one-step quantitative method in evaluating potential goodwill impairment for the first and second quarters of fiscal year 2020 and concluded that there was no impairment. Refer to Note 6, Goodwill and Intangibles Assets for more information. In addition, our annual qualitative analysis did not indicate any impairment as of the fiscal years ended December 31, 2020, 2019 and 2018. Intangible Assets Intangible assets represent existing customer relationships, trademarks, developed technology and non-compete agreements. Intangible assets are amortized over their respective estimated useful lives on a straight-line basis, which approximates the utilization of their expected future benefits. Amortization of intangible assets is included in depreciation, amortization and (gain) loss on disposal of assets, net in the consolidated statements of operations. The Company annually evaluates the estimated remaining useful lives of its intangible assets to determine whether events or changes in circumstances warrant a revision to the remaining period of amortization. 85 Impairment of Long-Lived Assets The Company reviews its long-lived assets (including intangible assets with finite useful lives and installation and service parts) for impairment whenever events or circumstances indicate that the carrying amount of an asset or an asset group may not be fully recoverable. The Company assesses recoverability by comparing the estimated undiscounted future cash flows expected to be generated by the asset or asset group with its carrying value. If the carrying value of the asset or asset group exceeds the estimated undiscounted future cash flows, an impairment loss is recognized for the difference between the estimated fair value and the carrying value. The state of Texas passed legislation as of June 1, 2019 to ban red-light photo enforcement programs across the state, with certain carve-outs for some existing programs. The Company considered this a triggering event for potential impairment and evaluated the recoverability of property and equipment used in the operations of red-light photo enforcement programs in Texas. As a result, the Company recognized an impairment charge in the Government Solutions segment of $ 5.9 million for fiscal year 2019, which is included in impairment of property and equipment in the consolidated statements of operations. We did no t have impairment losses on long-lived assets for the years ended December 31, 2020 or December 31, 2018. Self-Insurance The Company is self-insured for medical costs and has stop-loss insurance policies to limit its exposure to individual and aggregate claims made. Liabilities for these programs are estimated based on outstanding claims and claims estimated to be incurred but not yet reported using historical loss experience. These estimates are subject to variability due to changes in trends of losses for outstanding claims and incurred but not reported claims, including external factors such as the number, and cost of, claims, benefit level changes and claim settlement patterns. Warrants As of December 31, 2020, there were warrants outstanding to acquire 19,999,967 shares of the Company’s Class A Common Stock including: (i) 6,666,666 warrants originally issued to Gores Sponsor II, LLC in a private placement in connection with the IPO (the “ Private Placement Warrants ”); and (ii) 13,333,301 warrants issued in connection with the 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. The Company may redeem the outstanding Warrants at a price of $ 0.01 per warrant, if the last sale price of its 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 it sends 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. The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance under FASB ASC 480, Distinguishing Liabilities from Equity (“ ASC 480 ”) and ASC 815, Derivatives and Hedging (“ ASC 815 ”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares, among other conditions for equity classification. For warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The Company’s Public Warrants meet the criteria for equity classification and accordingly, are reported as component of shareholders’ equity while the Company’s Private Placement Warrants do not meet the criteria for equity classification because the holder of the instrument is not an 86 input into the pricing of a fixed-for-fixed option on equity shares and are instead classified as a liability. The fair value of the Private Placement Warrants is estimated at period-end using a Black - Scholes option pricing model . Shares issuable under the Warrants were considered for inclusion in the diluted share count in accordance with GAAP. As the shares issuable under the Warrants are issuable shares when exercised by the holders, they are included when computing diluted (loss) income per share, if such exercise is dilutive to (loss) income per share. Fair Value of Financial Instruments ASC Topic 820, Fair Value Measurement, includes a single definition of fair value to be used for financial reporting purposes, provides a framework for applying this definition and for measuring fair value under GAAP, and establishes a fair value hierarchy that categorizes into three levels the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are summarized as follows: Level 1 – Fair value is based on observable inputs such as quoted prices for identical assets or liabilities in active markets. Level 2 – Fair value is determined using quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or inputs other than quoted prices that are directly or indirectly observable. Level 3 – Fair value is determined using one or more significant inputs that are unobservable in active markets at the measurement date, such as a pricing model, discounted cash flow, or similar technique. The carrying amounts reported in the Company’s consolidated balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximate fair value due to the immediate to short-term maturity of these financial instruments. The estimated fair value of the Company’s New First Lien Term Loan as of December 31, 2020 and 2019 was categorized in Level 2 of the fair value hierarchy and was calculated based upon available market information. The carrying value and fair value of long-term debt is as follows: Level in December 31, 2020 December 31, 2019 Fair Value Carrying Estimated Carrying Estimated ($ in thousands) Hierarchy Amount Fair Value Amount Fair Value Total long-term debt 2 $ 842,045 $ 861,314 $ 866,465 $ 905,601 The fair value of the private placement warrant liabilities is measured on a recurring basis and is estimated using the Black-Scholes option pricing model using significant unobservable inputs, primarily related to estimated volatility, and is therefore classified within level 3 of the fair value hierarchy. The key assumptions used were as follows: December 31, 2020 December 31, 2019 Stock price $ 13.42 $ 13.99 Strike price $ 11.50 $ 11.50 Volatility 44.0 % 27.0 % Remaining life (in years) 2.8 3.8 Risk-free interest rate 0.16 % 1.65 % Expected dividend yield 0.0 % 0.0 % Estimated fair value $ 4.63 $ 4.46 The following summarizes the changes in the private placement warrant liabilities for the respective periods: December 31, 2020 December 31, 2019 Beginning balance $ 29,733 $ 13,466 Change in fair value included in net (loss) income 1,133 16,267 Ending balance $ 30,866 $ 29,733 87 Asset Retirement Obligation The Company records obligations to perform certain retirement activities on camera and speed enforcement systems in the period that the related assets are placed in service. Asset retirement obligations are contractual obligations to restore property to its initial state. These obligations, which are initially estimated based on discounted cash flow estimates, are accreted to full value over time through charges to operating expenses in the consolidated statements of operations. The associated asset retirement obligation is capitalized as part of the related asset’s carrying value and is depreciated over the asset’s estimated remaining useful life. Deferred Financing Costs Deferred financing costs consist of the costs incurred to obtain long-term financing, including the Company’s credit facilities (See Note 9). These costs, which are a reduction to long-term debt on the consolidated balance sheets, are amortized over the term of the related debt, using the effective interest method for term debt and the straight-line method for revolving credit facilities. Amortization of deferred financing costs for fiscal years 2020, 2019 and 2018 was $ 5.4 million, $ 6.6 million, and $ 9.2 million respectively. Income Taxes The Company accounts for income taxes under the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of differences between the tax basis of assets or liabilities and their carrying amounts in the financial statements. Deferred tax assets generally represent items that can be used as a tax deduction or credit in tax return in future years, while deferred tax liabilities generally represent items that generate a future tax liability for items where deductions have been accelerated for tax purposes. The Company provides a valuation allowance for deferred tax assets if it is more likely than not that some portion or all of the tax assets will not be realized . The Company calculates the valuation allowance in accordance with the authoritative guidance relating to income taxes, which requires an assessment of both positive and negative evidence regarding the realizability of these deferred tax assets when measuring the need for a valuation allowance. Significant judgment is required in determining any valuation allowance against deferred tax assets. The realization of deferred tax assets can be affected by, among other things, the nature, frequency, and severity of current and cumulative losses, forecasts of future profitability, the length of statutory carryforward periods, our experience with utilizing operating losses and tax credit carryforwards by jurisdiction and tax planning alternatives and strategies that may be available. The Company’s effective tax rate is based on income, statutory tax rates, differences in the deductibility of certain expenses and inclusion of certain income items between financial statement and tax return purposes, and tax planning opportunities available to it in the various jurisdictions in which it operates. Under GAAP, if the Company determines that a tax position is more likely than not of being sustained upon audit, based solely on the technical merits of the position, the Company recognizes the benefit. Tax code and regulations require certain items to be included in the tax return at different times than when those items are required to be recorded in the consolidated financial statements. As a result, the effective tax rate reflected in its consolidated financial statements is different from that reported in its tax returns. Some of these differences are permanent, such as meals and entertainment expenses that are not fully deductible on the Company’s tax returns, and some are temporary differences, such as depreciation expense. Temporary differences create deferred tax assets and liabilities. The Company recognizes benefits on uncertain tax positions if it is more likely than not that such positions will be sustained upon examination based solely on their technical merits. The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. Stock-based Compensation In October 2018, the Company established the Verra Mobility 2018 Equity Incentive Plan (the “ 2018 Plan ”) which provides for a variety of stock-based awards for issuance to employees and directors. We have granted restricted stock units (“ RSUs ”), stock options and performance share units (“ PSUs ”). The Company recognizes the fair value of RSUs based on the Company’s common stock price at market close on the date of the grant. The Company uses the Black-Scholes model to determine the fair value of stock options, 88 and uses the Monte Carlo simulation model to determine the fair value of PSUs containing market conditions. The Black-Scholes model requires an assumption regarding the expected life of the stock option, which the Company estimated to be 6.25 years by applying the short-cut method permitted under SEC Staff Accounting Bulletin No. 110. The expected term of the PSUs granted in 2020 was three years, which matches the awards’ performance period. RSUs and stock options vest based on the continued service of the recipient. PSUs are issued upon continued service along with the relative satisfaction of a market condition that measures the Company’s total stockholder return relative to a comparably calculated return for a peer group during the performance period. In addition, the Black-Scholes and the Monte Carlo models require assumptions to be made regarding the expected volatility of the Company’s stock price. Stock price volatility is determined by averaging an implied volatility with a measure of historical volatility. Stock options granted in 2020 had an expected volatility that ranged from approximately 30 % to 60 % and the risk-free rate ranged from approximately 0.40 % to 0.70 % . The expected volatility of PSUs granted in 2020 was approximately 35 % and the risk-free rate used was approximately 0.60 % . Stock-based compensation expense for share-based awards is determined based on the grant date fair value. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the vesting term of the share based payment award. The compensation expense for the PSUs is recognized over the requisite service period regardless of whether the market condition is satisfied. Forfeitures are accounted for as they occur. See Note 14, Equity Incentive Plan , for more information on the Company’s share-based awards. Revenue Recognition Nature of Goods and Services The following is a description of principal activities – separated by reportable segments – from which the Company generates revenue: a) Commercial Services: This segment offers toll and violation management solutions for the commercial fleet and rental car industries by partnering with the leading fleet management and rental car companies in North America. The Company determined its performance obligation is a distinct stand-ready obligation, as there is an unspecified quantity of services provided that does not diminish, and the customer is being charged only when it uses the Company’s services, such as toll payment, title and registration, etc. Payment terms for contracts with commercial fleet and rental car companies vary, but are usually billed as services are performed. b) Government Solutions: This segment principally generates revenue from providing complete, end-to-end red-light, speed, school bus stop arm, and bus lane enforcement solutions. Products, when sold, are typically sold together with services in a bundle. The average initial term of a contract is 3 to 5 years . Payment terms for contracts with government agencies vary depending on whether the consideration is fixed or variable. Payment terms for contracts with fixed consideration are usually based on equal installments over the duration of the contract. Payment terms for contracts with variable consideration are usually billed and collected as citations are issued or paid. For bundled packages, the Company accounts for individual products and services separately if they are distinct – i.e., if a product or service is separately identifiable from other items in the bundle and if a customer can benefit from it as a stand-alone item. The consideration is allocated between separate products and services in a bundle based on their stand-alone selling prices (“ SSP ”). The Company estimates the SSP of its services based upon observable evidence, market conditions and other relevant inputs. o Product sales (sale of camera and installation) – The Company recognizes revenue when the installation process is completed and the camera is ready to perform the services as expected by the customer. Generally, it occurs at site acceptance or first citation. The Company recognizes revenue for the sale of the camera and installation services at a point in time. o Service revenue – The Company determined its performance obligation is to provide a complete end-to-end safety and enforcement solution. Promises include providing a system to capture images, processing images taken by the camera, forwarding eligible images to the local police department and processing payments on behalf of the municipality. The Company 89 determined that certain of the promises to its customers are capable of being distinct, as they may provide some measure of benefit to the customer either on their own or together with other resources that are readily available to the customer. However, the Company determined that the promises to its customers do not meet the criterion of being distinct within the context of its contracts. The Company would not be able to fulfill its promises individually, as its customers could not obtain the intended benefit from the contract without the Company fulfilling all promises. Accordingly, the Company concluded that each contract represents one service offering and is a single performance obligation to our customer. Further, the Company accounts for all the services as a single continuous service. The Company applies the series guidance for those services as it stands ready to deliver those services over the contract period. The Company recognizes revenue from services over time, as they are performed. Remaining Performance Obligations As of December 31, 2020, the Company had approximately $ 0.2 million of remaining performance obligations in the Government Solutions segment, which include amounts that will be invoiced and recognized in future periods. The remaining performance obligations are limited only to arrangements that meet the definition of a contract under ASC 606 as of December 31, 2020. As these amounts relate to the initial deferral of revenue under a contract, the Company expects to recognize these amounts over a two month period at the end of the contract. Significant Judgments Judgments are required in order to estimate transaction prices. Additional judgments are required for identifying the performance obligations and determining whether the services provided are able to be distinct, determining the transaction price as it relates to the different variable consideration structures identified in our contracts, the estimation of the SSP and the allocation of the transaction price by relative SSPs. Assumptions regarding timing of when control transfers to the customer also requires judgment in order to recognize revenue. Credit Card Rebates The Company earns volume rebates from total spend on purchasing cards and recognizes the income in other income, net in the consolidated statements of operations. For the fiscal years ended December 31, 2020, 2019 and 2018, the Company recorded $ 8.5 million, $ 11.8 million, and $ 8.9 million respectively, related to rebates. Advertising Costs The Company expenses advertising costs as incurred. Advertising costs for the fiscal years ended December 31, 2020, 2019 and 2018, were $ 0.8 million, $ 2.3 million, $ 1.4 million, respectively and were included in selling, general, and administrative expenses in the consolidated statements of operations. Foreign Currency The assets and liabilities of our foreign subsidiaries whose functional currency is not the U.S. dollar are translated into U.S. dollars at current exchange rates while revenue and expenses are translated from functional currencies at average monthly exchange rates. The resulting translation adjustments are recorded in accumulated other comprehensive income (loss) in stockholders’ equity. Certain assets and liabilities denominated in foreign currencies that differ from their functional currencies are re-measured at the exchange rate on the balance sheet date. The foreign currency effect of the re-measurement of these assets and liabilities is included in other income, net in the consolidated statements of operations. The impact of foreign currency re-measurements was gains (losses) of $ 0.4 million, $( 0.6 ) million and $( 0.1 ) million for the fiscal years ended December 31, 2020, 2019 and 2018, respectively. 90 Acquisitions The Company applies the asset acquisition method to account for business acquisitions. The Company allocates the fair value of the purchase price consideration to assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase consideration over the fair value of the identifiable assets and liabilities is recorded as goodwill. The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment, and includes the use of independent valuation specialists to assist the Company in estimating fair values of acquired tangible and intangible assets. Although the Company believes that the assumptions applied in the determination are reasonable based on information available at the date of acquisition, actual results may differ from estimates. Segment Information The Company determined it has two operating and reportable segments (Commercial Services and Government Solutions) for which discrete financial information is available and is regularly reviewed by the Company’s chief operating decision maker function (“ CODM ”) to assess performance and make decisions about the allocation of resources. The CODM consists of the Company’s Chief Executive Officer and certain defined representatives of the Company’s executive management team (See Note 18 for additional information on segment reporting). Recent Accounting Pronouncements Accounting Standards Adopted In January 2017, the Financial Accounting Standards Board (“ FASB ”) issued Accounting Standard Update (“ ASU ”) 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . ASU 2017-04 simplifies the accounting for goodwill impairment and removes Step 2 of the goodwill impairment test. Goodwill impairment is now the amount by which a reporting unit’s carrying value exceeds its fair value limited to the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill for all reporting units, even those with zero or negative carrying amounts. The Company adopted the ASU as of January 1, 2020 and followed the one-step method in evaluating potential goodwill impairment for the first and second quarters of fiscal year 2020, refer to Note 6, Goodwill and Intangible Assets . The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and issued certain amendments within ASU 2019-04, ASU 2019-05 and ASU 2019-11, respectively. The guidance replaced the incurred loss impairment model and applies a new model, current expected credit losses (“ CECL ”), that requires entities to estimate expected credit losses measured over the contractual life of an instrument that consider supportable forecasts of future economic conditions in addition to information about past events and current conditions. An entity is required to measure and record an allowance for credit loss upon initial recognition of a financial asset, and present in-scope assets at the net amount expected to be collected. Under legacy GAAP, the Company recognized credit losses on trade receivables when it was probable that a loss has been incurred. The Company adopted the CECL standard as of January 1, 2020 through a cumulative effect adjustment of $ 0.7 million, net of tax, to the opening balance of accumulated deficit. The adjustment increased accumulated deficit and increased the allowance for credit loss accounts. Subsequent impacts to the allowance for credit loss have been recorded through the credit loss expense account included within selling, general and administrative expenses in our consolidated statements of operations and as an allowance for credit loss on our consolidated balance sheet. See Allowance for Credit Loss above for additional information. 91 Accounting Standards Not Yet Adopted In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU removes specific exceptions to the general principles in Topic 740 in GAAP including the exception to the incremental approach for intra-period tax allocation, exceptions to accounting for basis differences when there are ownership changes in foreign investments, and the exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The ASU also simplifies current guidance in relation to franchise taxes that are partially based on income, transactions with a government that result in a step-up in tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. Early adoption is permitted. The impact of the implementation of this standard is still being determined by the Company. On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides temporary optional guidance to ease the potential burden in accounting for the reference rate reform. It provides optional expedients and exceptions for applying GAAP to contract modifications, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU is in effect for a limited time through December 31, 2022, to help stakeholders during the global market-wide reference rate transition period. The impact of the implementation of this standard is still being determined by the Company. In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . This ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share calculation in certain areas. The ASU is effective for fiscal years beginning after December 15, 2021 including interim periods within those fiscal years. Early adoption is permitted. The Company will early adopt this standard as of January 1, 2021 and does not expect the impact to be material to its consolidated financial statements and related disclosures. 3 . Merger and Acquisition Verra Mobility Merger As described in Note 1, Gores and Greenlight consummated the Business Combination on October 17, 2018. Pursuant to ASC 805, the Business Combination qualified as a reverse acquisition because immediately following completion of the transaction the stockholders of Greenlight immediately prior to the Business Combination maintained effective control of Verra Mobility, the post-combination company. For accounting purposes, Greenlight is deemed the accounting acquirer in the transaction and, consequently, the transaction is treated as recapitalization of Greenlight (i.e. a capital transaction involving the issuance of stock by Greenlight in exchange for the payment of cash by Gores to the selling shareholders of Greenlight). Accordingly, the consolidated assets, liabilities and results of operations of Greenlight are the historical financial statements of Verra Mobility and the Gores assets, liabilities and results of operations are consolidated with Greenlight beginning on the acquisition date. No step-up in basis of intangible assets or goodwill was recorded for this transaction. The Company effected this treatment through opening stockholders’ equity by adjusting the number of common shares outstanding. Other than underwriting and professional fees paid to consummate the transaction, the Business Combination primarily involved the exchange of cash and equity between Gores, Greenlight and the stockholders of the respective companies. During fiscal year 2019, the Company recorded a $ 7.0 million decrease to the additional paid-in capital account for a payable to Platinum Equity, LLC, a related party, for the recapitalization related to the working capital adjustment required by the merger agreements, which was paid during the fourth quarter of fiscal year 2019. Pagatelia Acquisition 92 On October 31, 2019, the Company completed the acquisition of all of the outstanding shares of Pagatelia S.L., (“ Pagatelia ”), a Spanish limited liability company that provides electronic consumer tolling and parking solutions in Spain, Portugal, France and Italy. The purchase consideration for Pagatelia was $ 26.6 million and transaction costs were not material. Pro forma information for Pagatelia was not provided as it was not material. The final allocation of the purchase consideration is summarized as follows: ($ in thousands) Assets acquired Cash $ 1,086 Other assets 5,047 Trademark 771 Customer relationships 5,946 Developed technology 4,624 Non-compete agreements 440 Goodwill 17,528 Total assets acquired 35,442 Liabilities assumed Accounts payable and accrued expenses 6,045 Deferred tax liability 2,801 Total liabilities assumed 8,846 Total purchase price $ 26,596 Goodwill arising from Pagatelia was assigned to the Company’s Commercial Services segment and consists largely of the expected cash flows and future growth anticipated for the Company. The goodwill is not expected to be deductible for tax purposes. The customer relationships value was based on an excess earnings methodology utilizing projected cash flows. The trademark and the developed technology values were based on a relief-from-royalty method. The non-compete agreement values were based on the with-or-without method. The trademark, customer relationships, developed technology and non-compete agreements were assigned useful lives of 8.5 years, 9.5 years, 6.5 years and 3 years, respectively. 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following at December 31: ($ in thousands) 2020 2019 Prepaid tolls $ 9,237 $ 10,116 Deposits 3,474 3,642 Prepaid services 2,989 5,201 Prepaid computer maintenance 2,732 2,923 Prepaid insurance 2,641 1,485 Prepaid income taxes 2,354 1,025 Other 890 2,099 Total prepaid expenses and other current assets $ 24,317 $ 26,491 93 5. Property and Equipment, Net Property and equipment, net, consists of the following at December 31: ($ in thousands) 2020 2019 Equipment installed at customer sites $ 80,880 $ 71,464 Software 19,202 13,839 Leasehold improvements 9,938 8,809 Computer equipment 10,974 8,882 Furniture 2,079 1,681 Automobiles 2,899 2,128 Construction in progress 4,876 4,773 Property and equipment 130,848 111,576 Less: accumulated depreciation ( 60,564 ) ( 39,310 ) Property and equipment, net $ 70,284 $ 72,266 Depreciation expense was $ 23.1 million, $ 22.8 million and $ 22.5 million for the fiscal years ended December 31, 2020, 2019 and 2018, respectively, including depreciation related to costs to develop or implement software for internal use of $ 4.3 million, $ 3.8 million and $ 2.9 million for the fiscal years ended December 31, 2020, 2019 and 2018, respectively. 6. Goodwill and Intangible Assets The following table presents the changes in the carrying amount of goodwill by reportable segment: Commercial Government ($ in thousands) Services Solutions Total Balance at December 31, 2018 $ 404,977 $ 159,746 $ 564,723 Goodwill from Pagatelia acquisition 17,528 — 17,528 Foreign currency translation adjustment 1,899 — 1,899 Balance at December 31, 2019 424,404 159,746 584,150 Foreign currency translation adjustment 2,285 — 2,285 Balance at December 31, 2020 $ 426,689 $ 159,746 $ 586,435 Intangible assets consist of the following as of the respective period-ends: Weighted Weighted At December 31, 2020 Average Average Gross Remaining Amortization Carrying Accumulated ($ in thousands) Useful Life Period Amount Amortization Trademarks 0.3 years 3.0 years $ 32,223 $ 29,358 Non-compete agreements 2.0 years 5.0 years 62,589 37,412 Customer relationships 5.9 years 8.9 years 367,512 123,784 Developed technology 2.3 years 5.5 years 166,217 95,848 Gross carrying value of intangible assets 628,541 $ 286,402 Less: accumulated amortization ( 286,402 ) Intangible assets, net $ 342,139 94 Weighted Weighted At December 31, 2019 Average Average Gross Remaining Amortization Carrying Accumulated ($ in thousands) Useful Life Period Amount Amortization Trademarks 1.5 years 3.0 years $ 32,127 $ 19,106 Non-compete agreements 3.0 years 5.0 years 62,549 24,834 Customer relationships 6.9 years 8.9 years 366,533 82,903 Developed technology 3.3 years 5.5 years 165,708 65,631 Gross carrying value of intangible assets 626,917 $ 192,474 Less: accumulated amortization ( 192,474 ) Intangible assets, net $ 434,443 Amortization expense was $ 93.5 million, $ 92.8 million and $ 80.8 million for fiscal years ended December 31, 2020, 2019 and 2018, respectively. Estimated amortization expense in future years is expected to be: ($ in thousands) 2021 $ 85,935 2022 81,167 2023 52,493 2024 42,000 2025 39,302 Thereafter 41,242 Total $ 342,139 Goodwill Impairment Tests During the first half of fiscal year 2020, our market capitalization declined significantly compared to December 31, 2019. Over the same period, the equity value of our key Commercial Services customers, our peer group companies and the overall U.S. stock market also declined significantly amid market volatility. These declines were driven by the uncertainty surrounding the outbreak of the novel coronavirus (“ COVID-19 ”) and other macroeconomic events. Based on these factors, we concluded that a triggering event occurred and, accordingly, an interim quantitative goodwill impairment test was performed as of March 31, 2020 and again as of June 30, 2020. Based upon the results of our interim impairment tests as of March 31, 2020 and June 30, 2020, we concluded that the fair values of the Government Solutions and Commercial Services reporting units exceeded their carrying values. In addition, there were no indicators of impairment based on the qualitative analysis performed as of October 1 in fiscal years 2020, 2019 and 2018. The current economic conditions due to COVID-19 are still evolving and any significant adverse changes in future periods to our internal forecasts or the external market conditions, if any, could reasonably be expected to negatively affect our key assumptions and may result in a future goodwill impairment charge, which could be material. 95 7 . Accrued Liabilities Accrued liabilities consist of the following at December 31: ($ in thousands) 2020 2019 Accrued salaries and wages $ 4,432 $ 10,319 Current portion of operating lease liabilities 3,179 2,970 Advanced deposits payable 2,922 2,875 Payroll liabilities 1,755 149 Deferred income 750 691 Self-insurance liability 682 411 Other 1,916 2,132 Total accrued liabilities $ 15,636 $ 19,547 8. Asset Retirement Obligation The following table summarizes changes in the Company’s asset retirement obligation for the years ended December 31: ($ in thousands) 2020 2019 Asset retirement obligation, beginning balance $ 6,309 $ 6,750 Liabilities incurred 133 230 Accretion expense 259 350 Liabilities settled ( 292 ) ( 1,021 ) Asset retirement obligation, ending balance $ 6,409 $ 6,309 9. Long-term Debt The following table provides a summary of the Company’s long-term debt at December 31: ($ in thousands) 2020 2019 New First Lien Term Loan, due February 28, 2025 $ 865,642 $ 894,421 Less: original issue discounts ( 3,952 ) ( 4,778 ) Less: unamortized deferred financing costs ( 19,645 ) ( 23,178 ) Total long-term debt 842,045 866,465 Less: current portion of long-term debt ( 9,104 ) ( 28,779 ) Total long-term debt, net of current portion $ 832,941 $ 837,686 The following table presents the aggregate principal payments in future years on long-term debt at December 31, 2020: ($ in thousands) 2021 $ 9,104 2022 9,104 2023 9,104 2024 9,104 2025 829,226 Thereafter — Total $ 865,642 96 In connection with an acquisition, VM Consolidated, Inc., our wholly-owned subsidiary, entered into a First Lien Term Loan Credit Agreement (the “ New First Lien Term Loan ”), a Second Lien Term Loan Credit Agreement (the “ New Second Lien Term Loan ” and together with the New First Lien Term Loan, the “ New Term Loans ”) and a Revolving Credit Agreement (the “ New Revolver ,” and together with the New Term Loans, the “ 2018 Credit Facilities ”) with a syndicate of lenders. The 2018 Credit Facilities initially provided for committed senior secured financing of $ 1.115 billion, consisting of an aggregate principal amount of $ 1.04 billion under the New Term Loans and an aggregate revolving commitment of up to $ 75 million available for loans and letters of credit under the New Revolver (subject to borrowing eligibility requirements as described below). In July 2018, we amended the New First Lien Term Loan to expand the aggregate principal loan amount from $ 840 million to $ 910 million. The additional $ 70 million, along with funds contributed by Platinum Equity, LLC, were used to repay the $ 200 million New Second Lien Term Loan in full contemporaneously with the closing of the Business Combination on October 17, 2018 . The New First Lien Term Loan represents the only debt outstanding under the 2018 Credit Facilities as of December 31, 2020. The 2018 Credit Facilities replaced the previous First Lien Term Loan Credit Agreement (the “ Old First Lien ”), the Second Lien Term Loan Credit Agreement (the “ Old Second Lien ” and together with the Old First Lien, the “ Old Term Loans ” ), which were repaid concurrent with the closing on the 2018 Credit Facilities, and a preexisting Revolving Credit Agreement (the “ Old Revolver ”, collectively with the Old Term Loans, the “ 2017 Credit Facilities ”) which was undrawn at close. The outstanding balances at the date of close on the Old Term Loans, which were repaid in full with proceeds from the 2018 Credit Facilities were $ 323 million and $ 125 million, respectively. The New First Lien Term Loan is repayable at 1.0 % per annum of the amount initially borrowed, paid in quarterly installments. The New First Lien Term Loan matures on February 28, 2025 . The Company refinanced the entire outstanding amount under the New First Lien Term Loan on February 20, 2020, which reduced the previous applicable margin by 50 basis points. The New First Lien Term Loan now bears interest based, at our option, on either (1) LIBOR plus an applicable margin of 3.25 % per annum, or (2) an alternate base rate plus an applicable margin of 2.25 % per annum. As of December 31 , 2020, the interest rate on the New First Lien Term Loan was 3.4 %. In addition, the New First Lien Term Loan requires mandatory prepayments equal to the product of the excess cash flows of the Company (as defined in the loan agreement) and the applicable prepayment percentages (calculated as of the last day of the fiscal year, beginning with the year ending December 31, 2019), as set forth in the following table: Consolidated first lien net leverage ratio (as defined by the New First Lien Term Loan agreement) Applicable prepayment percentage > 3.70:1.00 50 % < 3.70:1.00 and > 3.20:1.00 25 % < 3.20:1.00 0 % The Company made a $ 19.7 million mandatory prepayment of excess cash flow during the first quarter of fiscal year 2020, which was classified as current portion of long-term debt in the consolidated balance sheet at December 31, 2019. We did no t have a mandatory prepayment of excess cash flow for the fiscal year ended December 31, 2020. The New Revolver matures on February 28, 2023. The terms of the New Revolver were not affected by the refinancing of the New First Lien Term Loan discussed above. Borrowing eligibility under the New Revolver is subject to a monthly borrowing base calculation based on (i) certain percentages of eligible accounts receivable and inventory, less (ii) certain reserve items, including outstanding letters of credit and other reserves. The New Revolver bears interest on either (1) LIBOR plus an applicable margin, or (2) an alternate base rate, plus an applicable margin. The margin percentage applied to (1) LIBOR is either 1.25 %, 1.50 %, or 1.75 %, or (2) the base rate is either 0.25 %, 0.50 %, or 0.75 %, depending on the Company’s average availability to borrow under the commitment. At December 31, 2020, the Company had no outstanding borrowings on the New Revolver and availability to borrow was $ 48.8 million, net of $ 6.3 million of outstanding letters of credit. 97 Interest on the unused portion of the New Revolver is payable quarterly at 0.375 % and we are also required to pay participation and fronting fees at 1.38 % on $ 6.3 million of outstanding letters of credit as of December 31, 2020. All borrowings and other extensions of credits under the 2018 Credit Facilities are subject to the satisfaction of customary conditions and restrictive covenants including absence of defaults and accuracy in material respects of representations and warranties. At December 31, 2020, the Company was compliant with the 2018 Credit Facilities covenants. Substantially all of the Company’s assets are pledged as collateral to secure the Company’s indebtedness under the 2018 Credit Facilities. The Company recorded interest expense, including amortization of deferred financing costs and discounts, of $ 40.9 million, $ 60.7 million and $ 69.6 million for the fiscal years ended December 31, 2020, 2019 and 2018, respectively. In connection with the refinancing of the New First Lien Term Loan in February 2020, which the Company determined was to be accounted for as a modification, we incurred $ 0.8 million of lender fees which were capitalized as deferred financing costs and amortized over the remaining life of the New First Lien Term Loan, and $ 0.2 million of legal fees that were expensed as selling, general and administrative expenses on the consolidated statement of operations in the fiscal year ended December 31, 2020. The Company recognized a charge of $ 10.2 million in fiscal year 2018 consisting of a $ 3.8 million prepayment penalty on the Old Term Loan balances, a $ 2.0 million write-off of pre-existing deferred financing costs and $ 4.4 million of lender and third-party costs associated with the issuance of the 2018 Credit Facilities. The Company also recorded a loss on extinguishment of the New Second Lien Term Loan of $ 16.3 million in fiscal year 2018 consisting of a $ 4.0 million prepayment penalty, a $ 3.4 million write-off of pre-existing deferred financing costs and $ 8.9 million of lender and third-party costs associated with the issuance of the loan. The weighted average effective interest rates on the Company’s outstanding borrowing under the 2018 Credit Facilities were 3.4 % and 5.5 % at December 31, 2020 and December 31, 2019, respectively. 10 . Leases The Company adopted the leases guidance under ASC 842, Leases , as of January 1, 2019. The Company’s operating leases primarily consist of office and data center space expiring at various dates through April 2035 . The Company has lease agreements with lease and non-lease components and has elected to account for such components as a single lease component. The Company recognizes and measures contracts containing a lease and determines lease classification at commencement. Right of use operating assets and lease liabilities are measured based on the estimated present value of lease payments over the lease term. In determining the present value of lease payments, the Company used its estimated incremental borrowing rate when the rate implicit in the lease cannot be readily determined. The estimated incremental borrowing rate is based upon information available at lease commencement including publicly available data for debt instruments. The lease term includes periods covered by options to extend when it is reasonably certain the Company will exercise such options as well as periods subsequent to an option to terminate the lease if it is reasonably certain the Company will not exercise the termination option. Operating lease costs are recognized on a straight-line basis over the lease term. Variable lease costs are recognized as incurred. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company does not have material short-term leases and does not engage in subleasing activities. As of December 31, 2020, operating leases have a remaining weighted average lease term of 12.2 years and operating lease liabilities were measured using a weighted average discount rate of 5.4 %. The total operating lease costs for the fiscal years ended December 31, 2020 and 2019 were $ 5.3 million and $ 5.7 million, respectively. Variable lease costs for the fiscal 2020 were approximately $ 1.1 million. The Company has one finance lease that is not material. 98 The following is a summary of the operating lease liabilities as of December 31: ($ in thousands) 2020 2019 Operating lease liabilities, net of current portion $ 27,986 $ 30,130 Current portion 3,179 2,970 Total operating lease liabilities $ 31,165 $ 33,100 The following provides future maturities of operating lease liabilities as of December 31, 2020: ($ in thousands) 2021 $ 4,737 2022 3,641 2023 3,094 2024 2,998 2025 2,992 Thereafter 26,023 Total minimum payments $ 43,485 Less: amount representing interest ( 12,320 ) Total $ 31,165 1 1 . Net (Loss) Income Per Share (As Restated) Basic net (loss) income per share is calculated by dividing net (loss) income by the weighted average shares outstanding during the period, without consideration of common stock equivalents. Diluted net (loss) income per share is calculated by adjusting the weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. The components of basic and diluted net (loss) income per share are as follows: For the Year Ended December 31, 2020 2019 2018 (In thousands, except per share data) (As restated) (As restated) (As restated) Numerator: Net (loss) income $ ( 4,578 ) $ 17,076 $ ( 51,485 ) Denominator: Weighted average shares - basic 161,632 157,890 87,320 Common stock equivalents — 2,190 — Weighted average shares - diluted 161,632 160,080 87,320 Net (loss) income per share - basic $ ( 0.03 ) $ 0.11 $ ( 0.59 ) Net (loss) income per share - diluted $ ( 0.03 ) $ 0.11 $ ( 0.59 ) Antidilutive shares excluded from diluted net (loss) income per share (1) : Contingently issuable shares (2) 5,000 7,500 10,000 Public warrants 13,333 — 13,333 Private placement warrants 6,667 6,667 6,667 Non-qualified stock options 614 — — Performance share units 106 — — Restricted stock units 2,203 3,004 4,437 Total antidilutive shares excluded 27,923 17,171 34,437 (1) These amounts represent outstanding shares as of years ended December 31, 2020, 2019 and 2018. 99 (2) Contingently issuable shares relate to the earn-out agreement as discussed in Note 16, Related Party Transactions . 12 . Income Taxes (As Restated) In December 2019, COVID-19 emerged and has since spread throughout the world causing severe disruption to the global economy. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“ CARES Act ”) was signed into law. There were several income tax provisions and other non-tax matters incorporated into law as a result of the enactment of the CARES Act. The Company applied certain articles of the CARES Act in the income tax provision (benefit), including the increased interest deduction allowed up to 50 percent of adjusted taxable income for tax years 2019 and 2020. For the year ended December 31, 2019, the Company deducted an additional $ 4.7 million in interest expense in the 2019 federal income tax return as a result of the increased adjusted taxable income limitation. In addition, the Company elected to delay the employer-side of the FICA payments until 2021 as provided under the CARES Act. The income (loss) before income tax provision (benefit) consisted of: For the Year Ended December 31, 2020 2019 2018 ($ in thousands) (As restated) (As restated) (As restated) U.S. $ 6,429 $ 33,655 $ ( 68,374 ) Foreign ( 5,576 ) ( 2,998 ) 648 Total income (loss) before income tax provision (benefit) $ 853 $ 30,657 $ ( 67,726 ) The income tax provision (benefit) consisted of the following items: For the Year Ended December 31, ($ in thousands) 2020 2019 2018 Current Federal $ 4,169 $ 16,901 $ 5,687 State 5,399 7,316 1,624 Foreign 652 673 883 Total current 10,220 24,890 8,194 Deferred Federal ( 1,308 ) ( 8,542 ) ( 18,334 ) State ( 2,615 ) ( 2,092 ) ( 5,669 ) Foreign ( 866 ) ( 675 ) ( 432 ) Total deferred ( 4,789 ) ( 11,309 ) ( 24,435 ) Income tax provision (benefit) $ 5,431 $ 13,581 $ ( 16,241 ) 100 A reconciliation to the income tax provision (benefit) from the amounts computed by applying the statutory U.S. federal income tax rate is as follows: For the Year Ended December 31, 2020 2019 2018 ($ in thousands) (As restated) (As restated) (As restated) Income tax provision (benefit) at statutory rate $ 179 $ 6,438 $ ( 14,222 ) State income taxes, net of federal income tax effect 1,188 2,360 ( 3,785 ) Tax rate changes/ valuation of deferred tax items 1,353 998 ( 1,457 ) 162(m) limitation 1,179 1,289 — Non-deductible expenses 1,748 450 676 Unrecognized tax benefits ( 929 ) ( 741 ) 600 Tax impact for change in fair value of warrants 237 3,416 ( 1,452 ) Change in valuation allowance 924 317 2,149 Non-deductible transaction costs 19 270 1,172 Research and development credits ( 121 ) ( 232 ) ( 602 ) Global intangible low tax inclusion — — 478 Other ( 346 ) ( 984 ) 202 Total income tax provision (benefit) $ 5,431 $ 13,581 $ ( 16,241 ) Significant components of the Company’s deferred income tax assets and liabilities consist of the following at December 31: ($ in thousands) 2020 2019 Deferred tax assets: Accrued expenses and other $ 1,027 $ 1,538 Allowance for credit loss 4,838 2,280 Net operating loss carryforward 3,626 2,612 Interest expense limitation carryforward 1,070 5,687 Federal and state income tax credits 1,132 1,060 ASC 842 operating lease liabilities 8,679 8,660 Transaction costs 319 — Other 1,210 1,935 Gross deferred tax assets 21,901 23,772 Valuation allowance ( 3,422 ) ( 2,564 ) Deferred tax assets, net of valuation allowance 18,479 21,208 Deferred tax liabilities: Intangible assets and transaction costs ( 16,358 ) ( 27,489 ) Property and equipment ( 10,285 ) ( 9,941 ) Financing costs ( 3,730 ) ( 482 ) Prepaid assets ( 957 ) ( 604 ) ASC 842 operating lease assets ( 8,297 ) ( 8,408 ) Gross deferred tax liabilities ( 39,627 ) ( 46,924 ) Total deferred tax liabilities, net $ ( 21,148 ) $ ( 25,716 ) In accordance with ASC 740, Income Taxes , deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets can be affected by, among other things, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the length of statutory carryforward periods, the Company’s experience with utilizing operating losses and tax credit carryforwards by jurisdiction, and tax planning alternatives and strategies that may be available. 101 The Company performed an analysis of the reversal of the deferred tax assets and considered the overall business environment, historical earnings and the outlook for future years. The Company determined that it is more likely than not that the benefit from certain state and foreign net operating loss carryforwards will not be realized as of the years ended December 31, 2020 and 2019, and as such provided a valuation allowance of $ 3.4 million and $ 2.6 million, respectively. The valuation allowance could be adjusted in future periods if estimates of future taxable income during the carryforward period are increased or if objective negative evidence in the form of cumulative losses is no longer present. The net operating loss carryforwards represent $ 31.1 million and $ 25.5 million of state net operating losses at December 31, 2020 and 2019, respectively. The Company has certain tax credits of $ 1.5 million and $ 1.8 million at December 31, 2020 and 2019, respectively, which if unused will begin to expire in 2024 . The following table summarizes the activity related to the Company’s unrecognized tax benefits as of December 31: ($ in thousands) 2020 2019 Balance at the beginning of the year $ 1,735 $ 2,529 Increases/(decreases) related to current year tax positions 126 ( 79 ) Increases/(decreases) related to prior year tax positions 299 45 Expiration due to statute of limitations ( 1,207 ) ( 760 ) Balance at the end of the year $ 953 $ 1,735 Included in the balance of unrecognized tax benefits as of December 31, 2020 were $ 0.4 million of tax benefits that, if recognized, would impact the effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. The Company recognized $ 1.0 million for fiscal year 2020 and less than $ 0.1 million for fiscal year 2019, in interest and penalties. At December 31, 2020 and 2019, the Company had accrued interest and penalties of less than $ 0.1 million and $ 0.9 million, respectively. The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based on technical merits, it is more likely than not that the tax position will be sustained under examination. The Company is subject to examination by the Internal Revenue Service and taxing authorities in various states. The Company’s U.S. federal income tax returns remain subject to examination by tax authorities for the years 2017 to 2019 . The Company’s state income tax returns are no longer subject to income tax examination by tax authorities prior to 2016; however, our net operating loss carryforwards and research credit carryforwards arising prior to that year are subject to adjustment. The Company regularly assesses the likelihood of tax deficiencies in each of the tax jurisdictions and, accordingly, makes appropriate adjustments to the tax provision as deemed necessary. 13. Stockholders’ Equity (As Restated) In conjunction with the Business Combination on October 17, 2018, the Company made changes to its capital stock. The Company’s Amended and Restated Certificate of Incorporation authorizes the issuance of 261,000,000 shares of capital stock, consisting of (i) 260,000,000 shares of Class A Common Stock, and (ii) 1,000,000 shares of preferred stock, each at par value of $ 0.0001 per share. The outstanding shares of the Company’s common stock are duly authorized, validly issued, fully paid and non-assessable. 102 14 . Equity Incentive Plan In October 2018, the Company established the Verra Mobility 2018 Equity Incentive Plan (the “ 2018 Plan ”) which provides for a variety of stock-based awards including restricted stock units (“ RSUs ”), performance share units (“ PSUs ”) and non-qualified stock options to employees and directors. The maximum number of shares of the Company’s common stock that may be subject to awards under the 2018 Plan was 10,864,000 as of December 31, 2020, subject to adjustment in accordance with the terms of the 2018 Plan. At December 31, 2020, the Company had an aggregate of 6,002,689 shares of common stock available for future grants under the 2018 Plan. RSUs and PSUs The Company’s RSUs consist of a right to receive shares on one or more vesting dates in the future. RSUs granted to employees vest ratably over four years from their individual award dates, subject to continued employment on the applicable vesting dates. RSUs granted to non-employee directors vest on the earlier of (a) the first anniversary of the vesting start date, or (b) the date immediately prior to the next annual stockholders meeting held by the Company occurring after the date of grant. The Company granted PSUs to senior executives during fiscal year 2020 which consist of a right to receive shares when certain service and market-vesting conditions are met at the end of a three-year period. The level at which the performance condition is attained upon the completion of the performance period determines the actual number of shares of our Class A Common Stock into which the PSUs will be converted. The conversion percentage ranges from 0 % up to 150 % of the target level. The following table summarizes the activity of the Company’s RSUs and PSUs: RSUs and PSUs (1) Shares (in thousands) Weighted Average Grant Date Fair Value Balance at December 31, 2017 — — Granted 4,437 $ 10.13 Vested — — Forfeited — — Balance at December 31, 2018 4,437 $ 10.13 Granted 400 $ 11.32 Vested ( 953 ) $ 10.13 Forfeited ( 880 ) $ 10.17 Balance at December 31, 2019 3,004 $ 10.28 Granted 692 $ 12.42 Vested ( 986 ) $ 10.35 Forfeited ( 401 ) $ 10.82 Balance at December 31, 2020 2,309 $ 10.79 (1) The awards granted in fiscal year 2020 include 116 PSUs that had a weighted average grant date fair value of $ 13.88 , of which 10 units were forfeited. There were no PSUs that vested during fiscal year 2020. The fair value of RSUs vested during fiscal years 2020 and 2019 was $ 10.2 million and $ 9.7 million, respectively. No RSUs granted pursuant to the 2018 Plan vested in 2018. As of December 31, 2020, w e had $ 21.1 million of unrecognized stock-based compensation expense related to unvested RSUs and PSUs, which is expected to be recognized over a weighted average period of 2.2 years. 103 Stock Options During fiscal year 2020, the Company granted stock options that vest ratably over four years from their individual award dates, subject to continued employment on the applicable vesting dates . The Company did not grant stock options for fiscal years 2019 and 2018. The following table summarizes the activity of the Company’s stock options: Stock Options Outstanding Shares (in thousands) Weighted Average Exercise Price Balance at December 31, 2019 — — Granted 720 $ 12.56 Vested — — Forfeited ( 106 ) $ 12.56 Balance at December 31, 2020 614 $ 12.56 The weighted average grant date fair value of options was $ 4.36 and the remaining contractual term is 9.2 years. There were no stock options exercised during the fiscal year 2020. As of December 31, 2020, w e had $ 2.1 million of unrecognized stock-based compensation expense related to unvested stock options which is expected to be recognized over a weighted average period of 3.2 years. The following details the components of stock-based compensation for the respective periods: December 31, ($ in thousands) 2020 2019 2018 Operating expenses $ 837 $ 819 $ 137 Selling, general and administrative expenses 11,752 9,193 2,135 Total stock-based compensation expense $ 12,589 $ 10,012 $ 2,272 Tax benefits attributable to stock-based compensation represented approximately $ 2.9 million, $ 3.4 million and $ 0 of stock-based compensation expense, before limitations under section 162(m) of the Internal Revenue Code, during the years ended December 31, 2020, 2019 and 2018, respectively. 15. Employee Benefit Plan The Company has a 401(k) plan that covers substantially all employees who meet certain eligibility requirements. Covered employees may elect to have a portion of their compensation withheld up to the statutory limit. The 401(k) plan includes a company match that vests immediately. The Company made employer contributions of $ 1.7 million , $ 1.7 million and $ 1.6 million during the fiscal years ended December 31, 2020, 2019 and 2018, respectively. 1 6 . Related Party Transactions Tax Receivable Agreement At the closing of the Business Combination, the Company entered into the Tax Receivable Agreement (“ Tax Receivable Agreement ” or “ TRA ”) with PE Greenlight Holdings, LLC (the “ Platinum Stockholder ”) and Greenlight as the stockholder representative. The TRA generally provides for the payment by the post-closing company to the Platinum Stockholder of 50 % of the net cash savings, if any, in U.S. federal, state and local income tax that the post-closing company actually realizes (or is deemed to realize in certain circumstances) in periods after the closing of the Business Combination as a result of the increase in the tax basis of the intangible assets which resulted from an acquisition by Verra Mobility prior to the Business Combination. The post-closing company generally retains the benefit of the remaining 50 % of these cash savings. The Company estimated the potential maximum benefit to be paid will be approximately $ 70.0 million, and recorded an initial liability and corresponding charge to equity at the closing of the Business Combination. Subsequently, the Company made adjustments to this amount. 104 The Company recorded a $ 6.8 million expense in fiscal year 2020 a nd $ 0.1 million of income in fiscal year 2019 to tax receivable agreement liability adjustment in the consolidated statements of operations. The adjustment in 2020 reflects the impact of an increase to the Company’s deferred tax rate arising from higher estimated state tax rates due to a change in apportionment. At December 31, 2020, the TRA liability was approximately $ 72.7 million of which $ 4.8 million was the current portion and $ 67.9 million was the non-current portion, both of which are included in the respective payable to related party pursuant to tax receivable agreement line items on the consolidated balance sheets. Earn-Out 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 no t 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 earn-out period will be canceled. 105 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. Platinum Stockholder Secondary Offerings On June 10, 2019, the Platinum Stockholder sold 15,000,000 shares of the Company’s Class A Common Stock in a secondary offering. On July 8, 2019, the underwriters of the secondary offering fully exercised the overallotment option granted at the time of the secondary offering to purchase an additional 2,250,000 shares of the Company’s Class A Common Stock at the secondary offering price of $ 12.50 per share, less underwriting discounts and commissions, from the Platinum Stockholder. On November 18, 2019, the Platinum Stockholder sold 17,250,000 shares of the Company’s Class A Common Stock in a secondary offering at a price per share of $ 14.10 . The offering consisted of an initial 15,000,000 shares, along with an additional 2,250,000 shares purchased pursuant to the underwriter’s exercise in full of an overallotment option granted by the Platinum Stockholder. The Company received no proceeds from either secondary offering conducted by the Platinum Stockholder during 2019. The Company incurred $ 1.7 million in expenses related to the secondary offerings during fiscal year 2019, consisting of various registration, filing and professional services fees, which were included in selling, general and administrative expenses in the consolidated statements of operations. Specifically, pursuant to the Amended and Restated Registration Rights Agreement dated as of October 17, 2018, the Company was required to pay, among other things, all registration and filing fees, reasonable fees and expenses of legal counsel for the Platinum Stockholder, and road show and marketing expenses. After giving effect to both secondary offerings and exercises of the overallotment options, the Platinum Stockholder held approximately 13.7 % of the Company’s outstanding Class A Common Stock. Advisory Services Agreement The Company had a corporate advisory services agreement with Advisors whereby it paid a management fee for services and related expenses incurred by Advisors in the provision of those services. The Company paid $ 5.4 million in management fees for fiscal year 2018. In addition, the Company paid $ 9.7 million related to the provision of acquisition related services and $ 2.8 million related to the provision of debt financing related services during fiscal year 2018. The agreement was terminated effective October 17, 2018 in connection with the Business Combination. On January 7, 2019, the Company entered into a new corporate advisory services agreement with Advisors to provide certain transactional and corporate advisory services to the Company as mutually agreed by the parties. No fees are payable under the agreement, but the Company must reimburse Advisors for its out-of-pocket expenses incurred in connection with services rendered. There were no significant payments made during fiscal years 2019 or 2020. 17. Commitments and Contingencies The Company has issued various letters of credit under contractual arrangements with certain of its vendors and customers. Outstanding letters of credit under these arrangements totaled $ 6.3 million at December 31, 2020. The Company has non-cancelable purchase commitments to certain vendors. The aggregate non-cancelable purchase commitments outstanding at December 31, 2020 were $ 6.3 million. 106 The Company is subject to tax audits in the normal course of business and does not have material contingencies recorded related to such audits. The Company accrues for claims and contingencies when losses become probable and reasonably estimable. As of the end of each applicable reporting period, the Company reviews each of its matters and, where it is probable that a liability has been or will be incurred, the Company accrues for all probable and reasonably estimable losses. Where the Company can reasonably estimate a range of loss it may incur regarding such a matter, the Company records an accrual for the amount within the range that constitutes its best estimate. If the Company can reasonably estimate a range but no amount within the range appears to be a better estimate than any other, the Company uses the amount that is the low end of such range. NYC Investigation The New York City Law Department recently advised the Company that the City of New York is investigating certain aspects of the Company’s installation work for its largest customer, NYCDOT. The Company is cooperating with the investigation. It is reasonably possible that the Company becomes subject to claims and assessments by the City of New York. However, at this time, the Company cannot estimate its additional exposure, if any, nor can it estimate whether any potential impact would have a material effect on its results, operations or financial position. Customer Guarantee In the ordinary course of business, the Company occasionally employs contract terms that mitigate the customer’s risk of aggregate revenue decline in connection with the customer’s adoption of additional or changes to service models within its existing portfolio. These agreements require the customer to satisfy numerous conditions to trigger payment, including volume metrics and other operational requirements. The Company has one such guarantee outstanding for the one-year period ending March 31, 2021. At December 31, 2020, the Company has concluded that the likelihood of making payment under this guarantee is remote, and consequently no liability or corresponding contra revenue has been recorded in the Company’s consolidated financial statements. Exit Activities We commenced exit activities consisting of severance and other employee separation costs during the year ended December 31, 2020 and expensed $ 1.1 million as selling, general and administrative expenses on the consolidated statements of operations. These costs were paid during fiscal year 2020. Legal Proceedings The Company is subject to legal and regulatory actions that arise from time to time in the ordinary course of business. The Company records a liability when it believes it is probable a loss will be incurred and the amount of loss or range of loss can be reasonably estimated. The assessment as to whether a loss is probable, reasonably possible or remote, and as to whether a loss or a range of such loss is estimable, often involves significant judgment about future events. The Company has determined that resolution of pending matters is not probable to have a material adverse impact on its consolidated results of operations, cash flows, or financial position, and accordingly, no material contingency accruals are recorded. However, the outcome of litigation is inherently uncertain. As additional information becomes available, the Company reassesses the potential liability. HTA Settlement Agreement During the third quarter of 2020, we entered into a Settlement and Release Agreement with the former owners of Highway Toll Administration, LLC (the “ HTA Settlement Agreement ”) related to certain terms in dispute for which the Company sought indemnification. In connection with the HTA Settlement Agreement, the Company recognized a $ 1.4 million gain for the distribution of escrow funds and a $ 1.4 million gain for the receipt of additional proceeds from a third-party insurance carrier related to this matter, both of which are included in other income, net on the consolidated statements of operations for the fiscal year ended December 31, 2020. 107 18 . Segment Reporting (As Restated) The Company has two operating and reportable segments, Commercial Services and Government Solutions. Commercial Services offers toll and violation management solutions and title and registration services to commercial fleet vehicle owners, rental car companies and violation-issuing authorities. Government Solutions implements and administers traffic safety programs and products for municipalities and local government agencies of all sizes. The Company’s Chief Operating Decision Maker function (“ CODM ”) is comprised of the Company’s CEO and certain defined representatives of the Company’s executive management team. The Company’s CODM monitors operating performance, allocates resources and deploys capital based on these two segments. Segment performance is based on revenues and income from operations before depreciation, amortization, gain (loss) on disposal of assets, net, impairment of property and equipment, and stock-based compensation. The measure also excludes interest expense, net, income taxes and certain other transactions and is inclusive of other income, net. The tables below refer to this measure as segment profit (loss). The aforementioned items are not indicative of operating performance, and, as a result are not included in the measures that are reviewed by the CODM for the segments. Other income, net consists primarily of credit card rebates earned on the prepayment of tolling transactions and is therefore included in segment profit (loss). There are no significant non-cash items reported in segment profit (loss). The Company allocates certain corporate expenses to the two segments using several different factors depending on the item being allocated. These factors range from specific identification to headcount-based to allocate proportionately between the two segments. The corporate and other columns below include items that are not included in segment profit (loss) plus transaction expenses, fees to Advisors and other items designated by the CODM as corporate initiatives . The Company does not disaggregate assets by segment other than equipment installed at customer sites and automobiles, which had carrying values of $ 44.2 million and $ 1.8 million, respectively, at December 31, 2020 and carrying values of $ 46.6 million and $ 1.5 million, respectively, at December 31, 2019 all of which relate solely to the Government Solutions segment. Refer to Note 6, Goodwill and Intangible Assets for goodwill balances by segment. 108 The following tables set forth financial information by segment for the fiscal years ended December 31, 2020, 2019 and 2018: For the Year Ended December 31, 2020 Commercial Government Corporate Services Solutions and Other Total ($ in thousands) (As restated) (As restated) Service revenue $ 180,856 $ 155,418 $ — $ 336,274 Product sales — 57,319 — 57,319 Total revenue 180,856 212,737 — 393,593 Cost of service revenue 2,562 1,405 — 3,967 Cost of product sales — 29,573 — 29,573 Operating expenses 52,505 62,387 — 114,892 Selling, general and administrative expenses 40,978 34,465 2,469 77,912 Other income, net ( 11,774 ) ( 111 ) — ( 11,885 ) Segment profit (loss) $ 96,585 $ 85,018 $ ( 2,469 ) $ 179,134 Segment profit (loss) $ 96,585 $ 85,018 $ ( 2,469 ) $ 179,134 Depreciation and amortization — — 116,570 116,570 Loss on disposal of assets, net 16 258 — 274 Change in fair value of private placement warrants — — 1,133 1,133 TRA liability adjustment — — 6,850 6,850 Stock-based compensation — — 12,589 12,589 Interest expense, net — — 40,865 40,865 Income (loss) before income tax provision $ 96,569 $ 84,760 $ ( 180,476 ) $ 853 For the Year Ended December 31, 2019 Commercial Government Corporate Services Solutions and Other Total ($ in thousands) (As restated) (As restated) Service revenue $ 276,479 $ 140,244 $ — $ 416,723 Product sales — 32,014 — 32,014 Total revenue 276,479 172,258 — 448,737 Cost of service revenue 3,709 1,852 — 5,561 Cost of product sales — 13,919 — 13,919 Operating expenses 66,916 57,905 — 124,821 Selling, general and administrative expenses 41,384 32,696 2,220 76,300 Other income, net ( 10,814 ) ( 278 ) — ( 11,092 ) Segment profit (loss) $ 175,284 $ 66,164 $ ( 2,220 ) $ 239,228 Segment profit (loss) $ 175,284 $ 66,164 $ ( 2,220 ) $ 239,228 Depreciation and amortization — — 115,566 115,566 Loss on disposal of assets, net 145 60 — 205 Change in fair value of private placement warrants — — 16,267 16,267 Impairment of property and equipment — 5,898 — 5,898 TRA liability adjustment ( 106 ) ( 106 ) Stock-based compensation — — 10,012 10,012 Interest expense, net — — 60,729 60,729 Income (loss) before income tax provision $ 175,139 $ 60,206 $ ( 204,688 ) $ 30,657 109 For the Year Ended December 31, 2018 Commercial Government Corporate Services Solutions and Other Total ($ in thousands) (As restated) (As restated) Service revenue $ 222,611 $ 142,465 $ — $ 365,076 Product sales — 5,070 — 5,070 Total revenue 222,611 147,535 — 370,146 Cost of service revenue 3,078 2,710 — 5,788 Cost of product sales — 3,447 — 3,447 Operating expenses 51,221 57,525 — 108,746 Selling, general and administrative expenses 55,370 27,827 47,495 130,692 Other (income) expenses, net ( 8,680 ) ( 117 ) 2 ( 8,795 ) Segment profit (loss) $ 121,622 $ 56,143 $ ( 47,497 ) $ 130,268 Segment profit (loss) $ 121,622 $ 56,143 $ ( 47,497 ) $ 130,268 Depreciation and amortization — — 103,346 103,346 Loss on disposal of assets, net — — 7 7 Change in fair value of private placement warrants — — ( 3,667 ) ( 3,667 ) Stock-based compensation — — 2,272 2,272 Interest expense — — 69,550 69,550 Loss on extinguishment of debt — — 26,486 26,486 (Loss) income before income tax (benefit) $ 121,622 $ 56,143 $ ( 245,491 ) $ ( 67,726 ) The Company operates in the United States, Canada and Europe. Revenues are attributable to countries based upon the location of the customer. During the years ended December 31, 2020, 2019 and 2018, the Company’s international revenues were $ 13.3 million, $ 14.5 million and $ 11.0 million, respectively. Substantially all of the Company’s assets are in the United States. 19. Quarterly Financial Information (Unaudited) (As Restated) First Second Third Fourth Fiscal Year 2020 Quarter Quarter Quarter Quarter ($ in thousands, except per share data) (As restated) (As restated) (As restated) (As restated) Total revenue $ 116,713 $ 79,809 $ 96,908 $ 100,163 Income (loss) from operations 19,413 ( 6,950 ) 15,268 10,085 Net income (loss) 22,140 ( 23,722 ) 11,086 ( 14,082 ) Earnings (loss) per share - basic $ 0.14 $ ( 0.15 ) $ 0.07 $ ( 0.09 ) Earnings (loss) per share - diluted $ 0.04 $ ( 0.15 ) $ 0.07 $ ( 0.09 ) First Second Third Fourth Fiscal Year 2019 Quarter Quarter Quarter Quarter ($ in thousands, except per share data) (As restated) (As restated) (As restated) (As restated) Total revenue $ 98,461 $ 109,575 $ 128,240 $ 112,461 Income from operations 17,966 17,636 36,659 24,194 Net (loss) income ( 5,980 ) ( 4,009 ) 16,618 10,447 (Loss) earnings per share - basic $ ( 0.04 ) $ ( 0.03 ) $ 0.10 $ 0.07 (Loss) earnings per share - diluted $ ( 0.04 ) $ ( 0.03 ) $ 0.10 $ 0.06 110 Restatement of Previously Issued Unaudited Condensed Consolidated Financial Statements The Company has provided certain information from its unaudited condensed consolidated statements of operations in fiscal years 2020 and 2019 in the below reconciliations, which presents amounts originally reported and restated amounts after restatement adjustments: Three Months Ended March 31, 2020 Three Months Ended June 30, 2020 ($ in thousands, except per share data) (As originally reported) (Restatement adjustments) (As restated) (As originally reported) (Restatement adjustments) (As restated) Total revenue $ 116,713 $ — $ 116,713 $ 79,809 $ — $ 79,809 Income (loss) from operations 19,413 — 19,413 ( 6,950 ) — ( 6,950 ) Change in fair value of private placement warrants — ( 15,467 ) ( 15,467 ) — 8,334 8,334 Net income (loss) 6,673 15,467 22,140 ( 15,388 ) ( 8,334 ) ( 23,722 ) Earnings (loss) per share - basic $ 0.04 $ 0.10 $ 0.14 $ ( 0.10 ) $ ( 0.05 ) $ ( 0.15 ) Earnings (loss) per share - diluted $ 0.04 $ — $ 0.04 $ ( 0.10 ) $ ( 0.05 ) $ ( 0.15 ) Three Months Ended September 30, 2020 Three Months Ended December 31, 2020 ($ in thousands, except per share data) (As originally reported) (Restatement adjustments) (As restated) (As originally reported) (Restatement adjustments) (As restated) Total revenue $ 96,908 $ — $ 96,908 $ 100,163 $ — $ 100,163 Income from operations 15,268 — 15,268 10,085 — 10,085 Change in fair value of private placement warrants — ( 4,400 ) ( 4,400 ) — 12,666 12,666 Net income (loss) 6,686 4,400 11,086 ( 1,416 ) ( 12,666 ) ( 14,082 ) Earnings (loss) per share - basic $ 0.04 $ 0.03 $ 0.07 $ ( 0.01 ) $ ( 0.08 ) $ ( 0.09 ) Earnings (loss) per share - diluted $ 0.04 $ 0.03 $ 0.07 $ ( 0.01 ) $ ( 0.08 ) $ ( 0.09 ) Six Months Ended June 30, 2020 Nine Months Ended September 30, 2020 ($ in thousands, except per share data) (As originally reported) (Restatement adjustments) (As restated) (As originally reported) (Restatement adjustments) (As restated) Total revenue $ 196,522 $ — $ 196,522 $ 293,430 $ — $ 293,430 Income from operations 12,463 — 12,463 27,731 — 27,731 Change in fair value of private placement warrants — ( 7,133 ) ( 7,133 ) — ( 11,533 ) ( 11,533 ) Net (loss) income ( 8,715 ) 7,133 ( 1,582 ) ( 2,029 ) 11,533 9,504 (Loss) earnings per share - basic $ ( 0.05 ) $ 0.04 $ ( 0.01 ) $ ( 0.01 ) $ 0.07 $ 0.06 (Loss) earnings per share - diluted $ ( 0.05 ) $ 0.04 $ ( 0.01 ) $ ( 0.01 ) $ 0.07 $ 0.06 111 Three Months Ended March 31, 2019 Three Months Ended June 30, 2019 ($ in thousands, except per share data) (As originally reported) (Restatement adjustments) (As restated) (As originally reported) (Restatement adjustments) (As restated) Total revenue $ 98,461 $ — $ 98,461 $ 109,575 $ — $ 109,575 Income from operations 17,966 — 17,966 17,636 — 17,636 Change in fair value of private placement warrants — 8,800 8,800 — 7,600 7,600 Net income (loss) 2,820 ( 8,800 ) ( 5,980 ) 3,591 ( 7,600 ) ( 4,009 ) Earnings (loss) per share - basic $ 0.02 $ ( 0.06 ) $ ( 0.04 ) $ 0.02 $ ( 0.05 ) $ ( 0.03 ) Earnings (loss) per share - diluted $ 0.02 $ ( 0.06 ) $ ( 0.04 ) $ 0.02 $ ( 0.05 ) $ ( 0.03 ) Three Months Ended September 30, 2019 Three Months Ended December 31, 2019 ($ in thousands, except per share data) (As originally reported) (Restatement adjustments) (As restated) (As originally reported) (Restatement adjustments) (As restated) Total revenue $ 128,240 $ — $ 128,240 $ 112,461 $ — $ 112,461 Income from operations 36,659 — 36,659 24,194 — 24,194 Change in fair value of private placement warrants — 1,134 1,134 — ( 1,267 ) ( 1,267 ) Net income 17,752 ( 1,134 ) 16,618 9,180 1,267 10,447 Earnings (loss) per share - basic $ 0.11 $ ( 0.01 ) $ 0.10 $ 0.06 $ 0.01 $ 0.07 Earnings (loss) per share - diluted $ 0.11 $ ( 0.01 ) $ 0.10 $ 0.06 $ — $ 0.06 Six Months Ended June 30, 2019 Nine Months Ended September 30, 2019 ($ in thousands, except per share data) (As originally reported) (Restatement adjustments) (As restated) (As originally reported) (Restatement adjustments) (As restated) Total revenue $ 208,036 $ — $ 208,036 $ 336,276 $ — $ 336,276 Income from operations 35,602 — 35,602 72,261 — 72,261 Change in fair value of private placement warrants — 16,400 16,400 — 17,534 17,534 Net income (loss) 6,411 ( 16,400 ) ( 9,989 ) 24,163 ( 17,534 ) 6,629 Earnings (loss) per share - basic $ 0.04 $ ( 0.10 ) $ ( 0.06 ) $ 0.15 $ ( 0.11 ) $ 0.04 Earnings (loss) per share - diluted $ 0.04 $ ( 0.10 ) $ ( 0.06 ) $ 0.15 $ ( 0.11 ) $ 0.04 112 The Company has provided certain information affected by the restatement from its unaudited condensed consolidated balance sheets, as of each period indicated in the below reconciliations, which presents amounts originally reported and restated amounts after restatement adjustments: As of March 31, 2020 As of June 30, 2020 ($ in thousands) (As originally reported) (Restatement adjustments) (As restated) (As originally reported) (Restatement adjustments) (As restated) Total assets $ 1,374,129 $ — $ 1,374,129 $ 1,355,122 $ — $ 1,355,122 Private placement warrant liabilities — 14,266 14,266 — 22,600 22,600 Total liabilities 1,029,729 14,266 1,043,995 1,023,372 22,600 1,045,972 Additional paid-in capital 387,994 ( 20,375 ) 367,619 391,240 ( 20,375 ) 370,865 Accumulated deficit ( 74,241 ) 6,109 ( 68,132 ) ( 89,629 ) ( 2,225 ) ( 91,854 ) Total stockholders' equity 344,400 ( 14,266 ) 330,134 331,750 ( 22,600 ) 309,150 As of September 30, 2020 ($ in thousands) (As originally reported) (Restatement adjustments) (As restated) Total assets $ 1,371,971 $ — $ 1,371,971 Private placement warrant liabilities — 18,200 18,200 Total liabilities 1,028,049 18,200 1,046,249 Additional paid-in capital 394,259 ( 20,375 ) 373,884 Accumulated deficit ( 82,943 ) 2,175 ( 80,768 ) Total stockholders' equity 343,922 ( 18,200 ) 325,722 20. Guarantor/Non-Guarantor Financial Information (Unaudited) (As Restated) VM Consolidated, Inc., a wholly-owned subsidiary of the Company, is the lead borrower of the New First Lien Term Loan and the New Revolver. VM Consolidated, Inc. is owned by the Company through a series of holding companies that ultimately end with the Company. VM Consolidated, Inc. is wholly-owned by Greenlight Acquisition Corporation, which is wholly-owned by Greenlight Intermediate Holding Corporation, which is wholly-owned by Greenlight Holding Corporation, which is wholly-owned by Verra Mobility Holdings, LLC, which is wholly-owned by Verra Mobility Corporation or the Company. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, including transactions with the Company’s wholly-owned subsidiary guarantor and non-guarantor subsidiaries. The following financial information presents the consolidated balance sheets as of December 31, 2020 and the related consolidated statements of operations and comprehensive loss and consolidated statements of cash flows for the year ended December 31, 2020 for the Company, combined guarantor subsidiary and combined non-guarantor subsidiaries: 113 Verra Mobility Corporation and Subsidiaries Consolidated Balance Sheets at December 31, 2020 Verra Mobility Corporation (Ultimate Parent) VM Consolidated Inc. (Guarantor Subsidiary) Non- guarantor Subsidiaries Eliminations Consolidated ($ in thousands) (As restated) (As restated) (As restated) (As restated) Assets Current assets: Cash and cash equivalents $ — $ 103,969 $ 16,290 $ — $ 120,259 Restricted cash — 633 — — 633 Accounts receivable (net of allowance for credit loss of $ 11.5 million) — 166,749 2,034 — 168,783 Unbilled receivables — 13,452 593 — 14,045 Investment in subsidiary 146,313 77,200 — ( 223,513 ) — Prepaid expenses and other current assets — 21,586 2,731 — 24,317 Total current assets 146,313 383,589 21,648 ( 223,513 ) 328,037 Installation and service parts, net — 7,944 — — 7,944 Property and equipment, net — 65,547 4,737 — 70,284 Operating lease assets — 29,430 357 — 29,787 Intangible assets, net — 315,533 26,606 — 342,139 Goodwill — 524,766 61,669 — 586,435 Due from affiliates 169,259 — — ( 169,259 ) — Other non-current assets — 2,684 15 — 2,699 Total assets $ 315,572 $ 1,329,493 $ 115,032 $ ( 392,772 ) $ 1,367,325 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ — $ 22,346 $ 12,163 $ — $ 34,509 Accrued liabilities — 11,617 4,019 — 15,636 Payable to related party pursuant to tax receivable agreement, current portion — 4,791 — — 4,791 Current portion of long-term debt — 9,104 — — 9,104 Total current liabilities — 47,858 16,182 — 64,040 Long-term debt, net of current portion — 832,941 — — 832,941 Operating lease liabilities, net of current portion — 27,854 132 — 27,986 Payable to related party pursuant to tax receivable agreement, net of current portion — 67,869 — — 67,869 Private placement warrant liabilities — 30,866 — — 30,866 Asset retirement obligation — 6,409 — — 6,409 Due to affiliates — 152,914 16,345 ( 169,259 ) — Deferred tax liabilities, net — 15,975 5,173 — 21,148 Other long-term liabilities — 494 — — 494 Total liabilities — 1,183,180 37,832 ( 169,259 ) 1,051,753 Total stockholders' equity 315,572 146,313 77,200 ( 223,513 ) 315,572 Total liabilities and stockholders' equity $ 315,572 $ 1,329,493 $ 115,032 $ ( 392,772 ) $ 1,367,325 114 Verra Mobility Corporation and Subsidiaries Consolidated Statements of Operations and Comprehensive Loss Year Ended December 31, 2020 Verra Mobility Corporation (Ultimate Parent) VM Consolidated Inc. (Guarantor Subsidiary) Non- guarantor Subsidiaries Eliminations Consolidated ($ in thousands) (As restated) (As restated) (As restated) (As restated) Service revenue $ — $ 322,972 $ 13,302 $ — $ 336,274 Product sales — 57,319 — — 57,319 Total revenue — 380,291 13,302 — 393,593 Cost of service revenue — 1,774 2,193 — 3,967 Cost of product sales — 29,573 — — 29,573 Operating expenses — 108,659 7,070 — 115,729 Selling, general and administrative expenses — 84,732 4,932 — 89,664 Depreciation, amortization and (gain) loss on disposal of assets, net — 111,968 4,876 — 116,844 Total costs and expenses — 336,706 19,071 — 355,777 Income (loss) from operations — 43,585 ( 5,769 ) — 37,816 Loss from equity investment 4,578 5,361 — ( 9,939 ) — Interest expense, net — 40,865 — — 40,865 Change in fair value of private placement warrants 1,133 — — 1,133 Tax receivable agreement liability adjustment — 6,850 — — 6,850 Other income, net — ( 11,692 ) ( 193 ) — ( 11,885 ) Total other expenses (income) 4,578 42,517 ( 193 ) ( 9,939 ) 36,963 Loss before income tax provision (benefit) ( 4,578 ) 1,068 ( 5,576 ) 9,939 853 Income tax provision (benefit) — 5,646 ( 215 ) — 5,431 Net loss $ ( 4,578 ) $ ( 4,578 ) $ ( 5,361 ) $ 9,939 $ ( 4,578 ) Other comprehensive income: Change in foreign currency translation adjustment — — 2,788 — 2,788 Total comprehensive loss $ ( 4,578 ) $ ( 4,578 ) $ ( 2,573 ) $ 9,939 $ ( 1,790 ) 115 Verra Mobility Corporation and Subsidiaries Consolidated Statements of Cash Flows Year Ended December 31, 2020 Verra Mobility Corporation (Ultimate Parent) VM Consolidated Inc. (Guarantor Subsidiary) Non- guarantor Subsidiaries Eliminations Consolidated ($ in thousands) (As restated) (As restated) (As restated) (As restated) Cash Flows from Operating Activities: Net loss $ ( 4,578 ) $ ( 4,578 ) $ ( 5,361 ) $ 9,939 $ ( 4,578 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization — 111,710 4,860 — 116,570 Amortization of deferred financing costs and discounts — 5,437 — — 5,437 Change in fair value of private placement warrants — 1,133 — — 1,133 Tax receivable agreement liability adjustment — 6,850 — — 6,850 Credit loss expense — 14,355 32 — 14,387 Deferred income taxes — ( 3,798 ) ( 948 ) — ( 4,746 ) Stock-based compensation — 12,589 — — 12,589 Installation and service parts expense — 677 — — 677 Accretion expense — 259 — — 259 Loss on disposal of assets — 258 16 — 274 Loss from equity investment 4,578 5,361 — ( 9,939 ) — Changes in operating assets and liabilities: Accounts receivable, net — ( 92,977 ) 2,389 — ( 90,588 ) Unbilled receivables — 5,864 100 — 5,964 Prepaid expenses and other assets — 3,996 ( 167 ) — 3,829 Accounts payable and accrued liabilities — ( 15,035 ) ( 1,832 ) — ( 16,867 ) Due to affiliates — ( 2,447 ) 2,447 — — Other liabilities — ( 4,281 ) — — ( 4,281 ) Net cash provided by operating activities — 45,373 1,536 — 46,909 Cash Flows from Investing Activities: Purchases of installation and service parts and property and equipment — ( 21,160 ) ( 3,100 ) — ( 24,260 ) Cash proceeds from the sale of assets — 107 — — 107 Net cash used in investing activities — ( 21,053 ) ( 3,100 ) — ( 24,153 ) Cash Flows from Financing Activities: Repayment of long-term debt — ( 28,779 ) — — ( 28,779 ) Payment of debt issuance costs — ( 1,078 ) — — ( 1,078 ) Payment of employee tax withholding related to RSUs vesting — ( 4,147 ) — — ( 4,147 ) Net cash used in financing activities — ( 34,004 ) — — ( 34,004 ) Effect of exchange rate changes on cash and cash equivalents — — ( 290 ) — ( 290 ) Net decrease in cash, cash equivalents and restricted cash — ( 9,684 ) ( 1,854 ) — ( 11,538 ) Cash, cash equivalents and restricted cash - beginning of period — 114,286 18,144 — 132,430 Cash, cash equivalents and restricted cash - end of period $ — $ 104,602 $ 16,290 $ — $ 120,892 116 Verra Mobility Corporation and Subsidiaries Consolidated Statements of Cash Flows (Continued) Year Ended December 31, 2020 Verra Mobility Corporation (Ultimate Parent) VM Consolidated Inc. (Guarantor Subsidiary) Non- guarantor Subsidiaries Eliminations Consolidated Supplemental cash flow information: Interest paid $ — $ 35,822 $ — $ — $ 35,822 Income taxes paid, net of refunds — 12,318 320 — 12,638 Supplemental non-cash investing and financing activities: Earn-out shares issued to Platinum Stockholder 18,287 — — — 18,287 Additions to ARO, property and equipment, and other — 133 — — 133 Purchases of installation and service parts and property and equipment in accounts payable and accrued liabilities at year-end — 1,289 — — 1,289 21. Subsequent Event On January 21, 2021, we entered into a Scheme Implementation Agreement (the “ Agreement ”) with Redflex Holdings Limited, a public company limited by shares, incorporated in Australia and listed on the Australian Securities Exchange (“ Redflex ”), pursuant to which, among other things and subject to the satisfaction or waiver of specified conditions, all of the holders of outstanding equity of Redflex on the record date will sell, and the Company will, or will cause its applicable subsidiary to, purchase one hundred percent ( 100 %) of the outstanding equity of Redflex (the “ Transaction ”). The aggregate consideration payable by the Company under the Agreement will be AUD 146.1 million. The Company will also assume Redflex’s existing cash and indebtedness at the closing of the Transaction. The Company and Redflex have made customary warranties and Redflex has agreed to customary undertakings, including relating to the conduct of its business from the date of the Agreement until the closing of the Transaction, which is expected to take place in the second quarter of 2021. Each party’s obligation to consummate the Transaction is subject to the satisfaction of certain conditions including receipt of required regulatory and court approvals, the approval of the Transaction by the requisite majority of Redflex shareholders, the accuracy of the other party’s warranties and the performance, in all material respects, by the other party of its obligations under the Agreement, and an independent expert issuing a report which concludes that the Transaction is in the best interests of Redflex shareholders. Under the Agreement, Redflex would be obligated to pay the Company a fee in the amount set forth in the Agreement, if (a) any director of Redflex fails to recommend the Transaction or makes a public statement indicating that he or she does not support the Transaction (except in limited circumstances), (b) Redflex consummates a transaction within a certain period under the terms of a deal constituting a Competing Proposal under the Agreement, or (c) the Agreement is validly terminated by the Company due to a material breach by Redflex. Additionally, the Company would be obligated to pay Redflex a fee in the amount set forth in the Agreement if the Company does not pay the consideration in accordance with the Agreement or the Agreement is validly terminated by Redflex due to a material breach by the Company. 117 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.