What changed in this filing

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Item 1. Financial Statements

2021-05-17 compared with 2020-11-05 · 289 added, 359 removed, 409 unchanged (61% of the section changed)

3 unchanged sentences

($ in thousands except per share data)

September 30,

(As restated)

Current assets:

1 unchanged sentence

Restricted cash

Accounts receivable (net of allowance for credit loss

of $ 10.1 million at September 30, 2020)

Accounts receivable (net of allowance for credit loss of $ 12.1 million and

$ 11.5 million at March 31, 2021 and December 31, 2020, respectively)

Unbilled receivables

10 unchanged sentences

Accrued liabilities

Payable to related party pursuant to tax receivable agreement, current portion

Current portion of long-term debt

2 unchanged sentences

Operating lease liabilities, net of current portion

Payable to related party pursuant to tax receivable agreement

Payable to related party pursuant to tax receivable agreement, net of current portion

Private placement warrant liabilities

Asset retirement obligation

9 unchanged sentences

Accumulated deficit

Accumulated other comprehensive loss

Accumulated other comprehensive income

Total stockholders' equity

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended September 30,

Nine Months Ended September 30,

AND COMPREHENSIVE (LOSS) INCOME

Three Months Ended March 31,

(In thousands, except per share data)

(As restated)

Service revenue

6 unchanged sentences

Depreciation, amortization and (gain) loss on disposal of assets, net

Impairment of property and equipment

Total costs and expenses

1 unchanged sentence

Interest expense, net

Loss from tax receivable agreement adjustment

Change in fair value of private placement warrants

Loss on extinguishment of debt

Other income, net

Total other expenses

Income before income tax provision

Income tax provision

Net income (loss)

Other comprehensive income (loss):

Total other expenses (income)

(Loss) income before income tax (benefit) provision

Income tax (benefit) provision

Net (loss) income

Other comprehensive loss:

Change in foreign currency translation adjustment

Total comprehensive income (loss)

Net income (loss) per share:

Weighted average shares used in per share calculation:

Basic outstanding

Diluted outstanding

Total comprehensive (loss) income

Net (loss) income per share:

Weighted average shares outstanding:

See accompanying Notes to the Condensed Consolidated Financial Statements .

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three and Nine Months Ended September 30, 2020

For the Three Months Ended March 31, 2021

Comprehensive

2 unchanged sentences

Consideration

Balance as of December 31, 2019

Cumulative effect of adoption of the CECL accounting standard, net of tax

Earn-out shares issued to Platinum Stockholder

Income (Loss)

Balance as of December 31, 2020 (as restated)

Vesting of restricted stock units (" RSU s")

3 unchanged sentences

Balance as of March 31, 2021

For the Three Months Ended March 31, 2020

Balance as of December 31, 2019 (as restated)

Net income (as restated)

Cumulative effect of adoption of the credit loss accounting standard, net of tax

Earn-out shares issued to Platinum Stockholder

Vesting of RSUs

2 unchanged sentences

Other comprehensive loss, net of tax

Balance as of June 30, 2020

Vesting of RSUs

Payment of employee tax withholding related to RSUs vesting

Stock-based compensation

Other comprehensive income, net of tax

Balance as of September 30, 2020

For the Three and Nine Months Ended September 30, 2019

Balance as of December 31, 2018

Cumulative effect of adoption of the new revenue accounting standard

Adjustment to equity infusion from Gores

Adjustment to tax receivable agreement liability

Stock-based compensation

Other comprehensive gain

Balance as of March 31, 2019

Earn-out shares issued to Platinum Stockholder

Vesting of RSUs

Stock-based compensation

Other comprehensive loss

Balance as of June 30, 2019

Adjustment to equity infusion from Gores

Stock-based compensation

Other comprehensive loss

Balance as of September 30, 2019

Balance as of March 31, 2020 (as restated)

See accompanying Notes to the Condensed Consolidated Financial Statements.

1 unchanged sentence

condensed consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

($ in thousands)

(As restated)

Cash Flows from Operating Activities:

3 unchanged sentences

Amortization of deferred financing costs and discounts

Impairment of property and equipment

Loss from tax receivable agreement adjustment

Change in fair value of private placement warrants

Loss on extinguishment of debt

Credit loss expense

1 unchanged sentence

Stock-based compensation

Gain from third-party insurance proceeds

Installation and service parts expense

4 unchanged sentences

Unbilled receivables

Prepaid expenses and other current assets

Prepaid expenses and other assets

Accounts payable and accrued liabilities

6 unchanged sentences

Cash Flows from Financing Activities:

Borrowings of long-term debt

Repayment of long-term debt

Payment of debt issuance costs

Payment of employee tax withholding related to RSU vesting

Net cash used in financing activities

Payment of debt extinguishment costs

Payment of employee tax withholding related to RSUs vesting

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash - beginning of period

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental cash flow information:

2 unchanged sentences

Supplemental non-cash investing and financing activities:

Reduction to tax receivable agreement liability

Gores equity infusion working capital adjustment payable to related party

Earn-out shares issued to Platinum Stockholder

Additions to ARO, property and equipment, and other

Purchases of installation and service parts and property and equipment in accounts payable and accrued liabilities at period-end

Accrued debt issuance costs

Accrued debt extinguishment costs

Earn-out shares issued to Platinum Stockholder

See accompanying Notes to the Condensed Consolidated Financial Statements .

19 unchanged sentences

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 Government Solutions segment provides complete, end-to-end speed, red-light, 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.

5 unchanged sentences

In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.

Restatement of Previously Issued Condensed Consolidated Financial Statements

The notes included herein should be read in conjunction with the Company’s restated audited consolidated financial statements included in the Company’s Annual Report on Form 10-K/A filed with the SEC on May 14, 2021 (the “ 2020 Form 10-K/A ”).

We restated the Company’s previously issued consolidated financial statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 and the related quarterly financial information to reflect adjustments resulting from changes to our accounting for private placement warrants.

The impact of the restatement to the three months ended March 31, 2020 was an increase to net income of $ 15.5 million, an increase to private placement warrant liabilities of $ 14.3 million, with offsetting decreases of $ 20.4 million to additional paid-in capital and $ 6.1 million to accumulated deficit line items.

There was no net cash impact to the condensed consolidated statements of cash flows.

Use of Estimates

The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited interim condensed 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, valuation allowances on deferred tax assets, asset retirement obligations, contingent consideration and the recognition and measurement of loss contingencies.

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 allowance for credit loss, fair value of private placement warrant 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.

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 2020, refer to Note 6, Goodwill and Intangible Assets .

The adoption of this guidance did not have a material impact on our condensed 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 condensed consolidated statements of operations and as an allowance for credit loss on our condensed consolidated balance sheet.

See Note 4, Accounts Receivable, Net for additional information.

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 U.S.

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.

Pagatelia Acquisition

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.

Transaction costs were not material.

The allocation of the purchase consideration is summarized as follows:

($ in thousands)

Assets acquired

Customer relationships

Developed technology

Non-compete agreements

Total assets acquired

Liabilities assumed

Accounts payable and accrued expenses

Deferred tax liability

Total liabilities assumed

Total purchase price

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.

The Company did not provide pro forma financial information for Pagatelia as it was not material.

Accounts Receivable, Net

Accounts receivable are uncollateralized customer obligations arising from the sale of products or services.

Accounts receivable have normal trade terms less than one year and are initially stated at the amounts billed to the customers.

Accounts receivable are subsequently measured at amortized cost net of allowance for credit loss.

The Company reviews historical loss rates, customer payment trends and collection rates on customer balances in accordance with the CECL standard.

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.

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.

Concentration of Credit Risk

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:

Three Months Ended March 31,

City of New York Department of Transportation

As of March 31, 2021, the City of New York Department of Transportation (“ NYCDOT ”) represented 63 % 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 March 31, 2021, the Legacy Contract had an open receivable balance of $ 41.3 million, of which $ 33.1 million had aged beyond NYCDOT’s 45-day payment terms.

As of March 31, 2021, the Company had invoiced NYCDOT for $ 52.6 million in product revenue and $ 26.8 million in service revenue under the Emergency Contract.

NYCDOT has not made any payments against the Emergency Contract to date.

There is no material reserve related to these receivables as amounts are deemed collectible based on current conditions and expectations.

Please also see section entitled “ Risk Factors .”

Significant customer revenue generated through the Company’s Commercial Services partners as a percent of total revenue is presented below:

Three Months Ended March 31,

Hertz Corporation

Avis Budget Group, Inc.

Enterprise Holdings, Inc.

Allowance for Credit Loss

The Company reviews historical credit losses and customer payment trends on receivables and develops loss rate estimates as of the balance sheet date, which includes adjustments 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 the 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 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 a ccounts receivable, net and the activity in the a llowance for credit loss for the nine months ended September 30 , 2020 :

The following presents the activity in the allowance for credit loss for the three months ended March 31, 2021 and 2020, respectively:

($ in thousands)

1 unchanged sentence

(Driver-billed) (1)

Government Solutions

Balance at January 1, 2021

Credit loss expense

Write-offs, net of recoveries

Balance at March 31, 2021

($ in thousands)

Commercial Services

(Driver-billed) (1)

Government Solutions

Accounts receivable, net at January 1, 2020 (2)

Allowance for credit loss at January 1, 2020 (2)

Balance at January 1, 2020 (2)

Credit loss expense

Write-offs, net of recoveries

Allowance for credit loss at September 30, 2020

Accounts receivable, net at September 30, 2020

Balance at March 31, 2020

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.

This includes a $ 0.8 million increase to allowance for credit loss as a result of adopting the CECL standard.

The allowance for credit loss at September 30, 2020 reflects a $ 1.9 million reduction to the credit loss expense for the nine months ended September 30, 2020, due to an adjustment for receivables that are no longer subject to the risk of nonpayment from one of our Commercial Services (All other) customers who filed for Chapter 11 bankruptcy.

Concentration of Credit Risk

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 three and nine months ended September 30, 2020 and 2019, respectively:

Three Months Ended September 30,

Nine Months Ended September 30,

City of New York Department of Transportation

As of September 30, 2020, the City of New York Department of Transportation (“ NYCDOT ”) represented 50.1 % 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 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 September 30, 2020, the Legacy Contract had an open receivable balance of $ 16.6 million, of which $ 8.0 million had aged beyond NYCDOT’s 45-day payment terms.

As of September 30, 2020, the Company had invoiced NYCDOT for $ 43.6 million in product revenue and $ 9.5 million in service revenue under the Emergency Contract.

NYCDOT has not made any payments against the Emergency Contract to date.

The Company is working to clear administrative hurdles that will allow NYCDOT to proceed with payment.

Significant customer revenue generated through the Company’s Commercial Services partners as a percent of total revenue is presented below for the three and nine months ended September 30, 2020 and 2019, respectively:

Three Months Ended September 30,

Nine Months Ended September 30,

Hertz Corporation

Avis Budget Group, Inc.

Enterprise Holdings, Inc.

This includes a $ 0.8 million increase to the allowance for credit loss as a result of adopting the credit loss standard.

The Company adjusted down its estimate for credit loss for the three months ended March 31, 2021 to reflect the risk of loss based on customer payment rates in the last 12 months and improved economic conditions for the Commercial Services (All other) and Government Solutions portfolio segments.

The Company’s methodology for the Commercial Services (Driver-billed) portfolio segment has not changed.

The credit loss estimate for the three months ended March 31, 2020 was based on higher probabilities of loss given the uncertainty caused by COVID-19 on the travel industry.

As of March 31, 2021, 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 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.

Recent Accounting Pronouncements

Accounting Standards Adopted

In August 2018, the Financial Accounting Standards Board (“ FASB ”) issued Accounting Standard Update (“ ASU ”) 2018-13, (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement .

The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement.

The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments should be applied retrospectively to all periods presented upon their effective date.

The Company adopted this standard during the first quarter of 2021 and provided relevant disclosures for the private placement warrant liabilities which are a Level 3 measurement, that fall in the scope of the standard.

Fair Value of Financial Instruments.

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 Company adopted the ASU as of January 1, 2021 which did not have a material impact on the Company’s financial statements or related disclosures.

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 Company early adopted this standard as of January 1, 2021 which did not have an impact on the Company’s financial statements and related disclosures, as the Company had no instruments subject to the standard.

If the Company were to issue instruments subject to the standard in the future, such guidance as early adopted by the Company would apply.

Accounting Standards Not Yet Adopted

In March 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 reference rate reform.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

Scope , which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are

affected by the discounting transition.

The amendments are effective as of March 12, 2020 through December 31, 2022, to help stakeholders during the global market-wide reference rate transition period.

The impact of the implementation of this guidance is still being determined by the Company.

Prepaid Expenses and Other Current Assets

1 unchanged sentence

($ in thousands)

September 30,

Prepaid tolls

Prepaid income taxes

Prepaid services

Prepaid computer maintenance

Prepaid supplies

Photo enforcement equipment held for sale

Gain from third-party insurance proceeds

Prepaid insurance

Prepaid income taxes

Total prepaid expenses and other current assets

4 unchanged sentences

Foreign currency translation adjustment

Balance at September 30, 2020

Balance at March 31, 2021

Intangible assets consist of the following as of the respective period-ends:

September 30, 2020

March 31, 2021

December 31, 2020

6 unchanged sentences

Intangible assets, net

Amortization expense was $ 23.6 million and $ 23.1 million for the three months ended September 30, 2020 and 2019, respectively, and was $ 70.6 million and $ 69.4 million for the nine months ended September 30, 2020 and 2019, respectively.

The amortization expense was $ 22.7 million and $ 23.5 million for the three months ended March 31, 2021 and 2020, respectively.

Estimated amortization expense in future years is expected to be:

1 unchanged sentence

Remainder of 2021

Interim Goodwill Impairment Review

During the fourth quarter of each fiscal year, we perform our annual goodwill impairment test for each of our reporting units.

Our reporting units are the same as our two reportable segments (Government Solutions and Commercial Services).

We also test goodwill for impairment whenever events or circumstances occur which, in our judgment, could more likely than not reduce the fair value of one or more reporting units below its carrying amount.

Potential impairment indicators include, but are not limited to (i) a deterioration of the business environments in which we operate;

(ii) downward revisions to internal forecasts, and the magnitude thereof, if any;

and (iii) declines in our market capitalization below our book value, and the magnitude and duration of those declines, if any.

During the first half of fiscal 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 impairment test was performed as of March 31, 2020 and 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.

As of September 30, 2020, we concluded there were no interim indicators of impairment.

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.

Impairment of Other Long-Lived Assets

The Company reviews its other long-lived assets for impairment (including intangible assets with finite useful lives) whenever events or circumstances indicate that the carrying value of an asset or 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 of the asset or asset group and its carrying value.

At September 30, 2020, there were no events or circumstances that would indicate that the carrying values of our other long-lived assets may not be recoverable.

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 event an indicator for potential impairment and, as such, 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 the nine months ended September 30, 2019, which is included in impairment of property and equipment in the condensed consolidated statements of operations.

Accrued Liabilities

1 unchanged sentence

($ in thousands)

September 30,

Current portion of related party TRA liability

Accrued salaries and wages

2 unchanged sentences

Payroll liabilities

Accrued sales commissions

Self-insurance liability

Restricted cash due to customers

Accrued interest payable

Total accrued liabilities

2 unchanged sentences

($ in thousands)

September 30,

First Lien Term Loan, due February 28, 2025

2021 Term Loan, due 2028

Senior Notes, due 2029

2018 Term Loan

original issue discounts

3 unchanged sentences

Total long-term debt, net of current portion

In connection with an acquisition in 2018, VM Consolidated, Inc., a wholly-owned subsidiary of the Company, entered into a First Lien Term Loan Credit Agreement (the “ First Lien Term Loan ”), a Second Lien Term Loan Credit Agreement (the “ Second Lien Term Loan ”), (collectively the “ Term Loans ”) and a Revolving Credit Facility Agreement (the “ Revolver ”) with a syndicate of lenders (collectively, the “ 2018 Credit Facilities ”).

The 2018 Credit Facilities initially provided for committed senior secured financing of $ 1.115 billion, consisting of the Term Loans in an aggregate principal amount of $ 1.04 billion and the Revolver available for loans and letters of credit with an aggregate revolving commitment of up to $ 75 million (subject to borrowing eligibility requirements as described below).

In July 2018, the Company amended the 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 Second Lien Term Loan in full contemporaneously with the close of the Business Combination on October 17, 2018 .

The First Lien Term Loan is repayable at 1.0 % per annum of the amount initially borrowed, paid in quarterly installments.

The First Lien Term Loan matures on February 28, 2025 .

The Company refinanced the entire outstanding amount under the First Lien Term Loan on February 20, 2020 which reduced the previous applicable margin by 50 basis points.

The 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 September 30, 2020, the interest rate on the First Lien Term Loan was 3.4 %.

In addition, the 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 First Lien Term Loan agreement)

2021 Term Loan and Senior Notes

In March 2021, VM Consolidated, Inc., the Company’s wholly owned subsidiary, entered into an Amendment and Restatement Agreement No.1 to the First Lien Term Loan Credit Agreement (the “ 2021 Term Loan ”) with a syndicate of lenders.

The 2021 Term Loan has an aggregate borrowing of $ 650 million, maturing on March 26, 2028 , and an accordion feature providing for an additional $ 250 million of term loans, subject to satisfaction of certain requirements.

In connection with the 2021 Term Loan, the Company had an offering discount cost of $ 3.3 million and $ 0.7 million of deferred financing costs, both of which were capitalized and are amortized over the remaining life of the 2021 Term Loan.

In addition, in March 2021, VM Consolidated, Inc.

issued an aggregate principal amount of $ 350.0 million in Senior Unsecured Notes (the “ Senior Notes ”), due on April 15, 2029 .

In connection with the issuance of the Senior Notes, the Company incurred $ 5.7 million in lender and third-party costs, which were capitalized as deferred financing costs and are being amortized over the remaining life of the Senior Notes.

The net proceeds from both the 2021 Term Loan and the Senior Notes were used to repay in full all outstanding debt which was represented by the existing First Lien Term Loan Credit Agreement (as amended, the “ 2018 Term Loan ”) with a balance of $ 865.6 million.

The 2021 Term Loan is repayable at 1.0 % per annum of the amount initially borrowed, paid in quarterly installments.

It bears interest based, at the Company’s 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 March 31, 2021, the interest rate on the 2021 Term Loan was 3.45 %.

In addition, the 2021 Term Loan requires mandatory prepayments equal to the product of the excess cash flows of the Company (as defined in the 2021 Term Loan agreement) and the applicable prepayment percentages (calculated as of the last day of the fiscal year, beginning with the year ending December 31, 2022), as set forth in the following table:

Consolidated first lien net leverage ratio (as defined by the 2021 Term Loan agreement)

< 3.70:1.00 and > 3.20:1.00

The Company made a $ 19.7 million mandatory prepayment of excess cash flow during the first quarter of fiscal 2020, which was classified as current portion of long-term debt in the condensed consolidated balance sheet at December 31, 2019.

Interest on the Senior Notes is fixed at 5.50 % per annum and is payable on April 15 and October 15 of each year (beginning on October 15, 2021) .

On or after April 15, 2024, the Company may redeem all or a portion of the Senior Notes at the redemption prices set forth below in percentages by year, plus accrued and unpaid interest:

2026 and thereafter

In addition, the Company may redeem up to 40 % of the Senior Notes before April 15, 2024, with the net cash proceeds from certain equity offerings.

The Company evaluated the refinancing transactions on a lender by lender basis and accounted for the portion of the transaction that did not meet the accounting criteria for debt extinguishment as a debt modification.

Accordingly, the Company recognized a loss on extinguishment of debt of $ 5.3 million on the 2018 Term Loan during the three months ended March 31, 2021 consisting of a $ 4.0 million write-off of pre-existing deferred financing costs and $ 1.3 million of lender and third-party costs associated with the issuance of the new 2021 Term Loan.

The Company has a Revolving Credit Agreement (the “ Revolver ”) which it entered into in fiscal year 2018 in connection with an acquisition, with a revolving commitment of up to $ 75 million available for loans and letters of credit.

The Revolver matures on February 28, 2023.

The terms of the Revolver were not affected by the refinancing of the First Lien Term Loan discussed above.

The terms of the Revolver were not affected by the new debt instruments entered into in March 2021 discussed above.

Borrowing eligibility under the 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.

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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 September 30, 2020, the Company had no outstanding borrowings on the Revolver and availability to borrow under the Revolver was $ 44.0 million, net of $ 6.3 million of outstanding letters of credit.

Interest on the unused portion of the Revolver is payable quarterly at 0.375 %, and the Company is also required to pay participation and fronting fees at 1.38 % on $ 6.3 million of outstanding letters of credit as of September 30, 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 September 30, 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 $ 9.6 million and $ 14.9 million for the three months ended September 30, 2020 and 2019, respectively, and $ 31.6 million and $ 46.6 million for the nine months ended September 30, 2020 and 2019, respectively.

In connection with the refinancing of the First Lien Term Loan in February 2020, which the Company determined was to be accounted for as a modification, the Company incurred $ 0.8 million of lender fees which were capitalized as deferred financing costs and amortized over the remaining life of the First Lien Term Loan, and $ 0.2 million of legal fees that were expensed as selling, general and administrative expenses on the condensed consolidated statement of operations.

The weighted average effective interest rates on the Company’s outstanding borrowing under the 2018 Credit Facilities were 3.4 % and 5.5 % at September 30, 2020 and December 31, 2019, respectively.

At March 31, 2021, the Company had no outstanding borrowings on the Revolver and availability to borrow was $ 49.4 million, net of $ 6.2 million of outstanding letters of credit.

Interest on the unused portion of the Revolver is payable quarterly at 0.375 % and the Company is also required to pay participation and fronting fees at 1.38 % on $ 6.2 million of outstanding letters of credit as of March 31, 2021.

All borrowings and other extensions of credits under the 2021 Term Loan, Senior Notes and the Revolver 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 March 31, 2021, the Company was compliant with all debt covenants.

Substantially all of the Company’s assets are pledged as collateral to secure the Company’s indebtedness under the 2021 Term Loan .

Interest expense

The Company recorded interest expense, including amortization of deferred financing costs and discounts, of $ 9.2 million and $ 12.5 million for the three months ended March 31, 2021 and 2020, respectively.

The weighted average effective interest rates on the Company’s outstanding borrowings were 4.2 % and 3.4 % at March 31, 2021 and December 31, 2020, respectively.

Fair Value of Financial Instruments

GAAP, and establishes a fair value hierarchy that categorizes into three levels the inputs to valuation techniques used to measure fair value.

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:

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The carrying amounts reported in the Company’s condensed 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 First Lien Term Loan as of September 30, 2020 and December 31, 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:

September 30, 2020

The estimated fair value of the Company’s long-term debt was calculated based upon available market information.

The carrying value and the estimated fair value of long-term debt is as follows:

March 31, 2021

December 31, 2020

($ in thousands)

Total long-term debt

Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average shares outstanding during the period, without consideration of common stock equivalents.

Diluted net income (loss) 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 income (loss) per share are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

2021 Term Loan

2018 Term Loan

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:

March 31, 2021

December 31, 2020

Remaining life (in years)

Risk-free interest rate

Expected dividend yield

Estimated fair value

The following summarizes the change in the private placement warrant liabilities for the respective periods:

Three Months Ended March 31,

($ in thousands)

Beginning balance (as restated)

Change in fair value included in net (loss) income

Ending balance

Net (Loss) Income Per Share

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:

Three Months Ended March 31,

(In thousands, except per share data)

Net income (loss)

(As restated)

Net (loss) income

Weighted average shares - basic

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Weighted average shares - diluted

Net income (loss) per share - basic

Net income (loss) per share - diluted

Antidilutive shares excluded from diluted net income (loss) per share (1) :

Net (loss) income per share - basic

Net (loss) income per share - diluted

Antidilutive shares excluded from diluted net (loss) income per share (1) :

Contingently issuable shares (2)

Public warrants

Private placement warrants

Non-qualified stock options

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Total antidilutive shares excluded

These amounts represent the weighted average antidilutive shares for the three months ended September 30, 2020 and 2019, and for the nine months ended September 30, 2019.

The amounts represent the total antidilutive shares outstanding for the nine months ended September 30, 2020.

These amounts represent outstanding shares as of the three months ended March 31, 2021 and 2020.

Contingently issuable shares relate to the earn-out agreement as discussed in Note 11, Related Party Transactions .

Our interim income tax provision is determined using an estimated annual effective tax rate, adjusted for discrete items arising in that period.

The Company’s interim income tax (benefit) provision is determined using an estimated annual effective tax rate, adjusted for discrete items arising in that period.

The estimated annual effective tax rate requires judgment and is dependent upon several factors.

We provide for income taxes under the liability method.

The Company provides for income taxes under the 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.

We provide a valuation allowance for deferred tax assets if it is more likely than not that these items will expire before we are able to realize their benefit.

We calculate 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.

The Company provides a valuation allowance for deferred tax assets if it is more likely than not that these items will expire before the Company is able to realize their benefit.

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.

In December 2019, COVID-19 emerged in China 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.

In December 2019, COVID-19 emerged and spread throughout the world causing severe disruption to the global economy.

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (“ CARES Act ”) was signed into law after COVID-19 was declared a pandemic.

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 interim income tax provision, including the increased interest deduction allowed up to 50 percent of adjusted taxable income for tax years 2019 and 2020.

In addition, the Company delayed the employer-side of the FICA payments until 2021.

The Company will continue to assess other aspects of the CARES Act and will account for them accordingly, if applicable.

Our effective income tax rate was 37.4 % and 27.4 % for the three months ended September 30, 2020 and 2019, respectively, and 276.9 % and 28.8 % for the nine months ended September 30, 2020 and 2019, respectively.

The effective tax rate change was primarily due to lower pre-tax income in the current year, resulting in the Company’s permanent book and tax differences having a proportionately greater impact on the effective tax rate in the current year.

The total amount of unrecognized tax benefits decreased by $ 1.0 million during the nine months ended September 30, 2020 primarily from the statute expiration of prior year tax positions.

As of September 30, 2020, the total amount of unrecognized tax benefits was $ 0.8 million, of which $ 0.2 million would affect our effective tax rate if recognized.

We recognize interest and penalties related to unrecognized tax benefits through income tax expense.

As of September 30, 2020, we had less than $ 0.1 million accrued for the payment of interest and penalties.

The Company elected to delay the employer-side of the FICA payments with the intention of making the payments in 2021.

The Company’s effective income tax benefit rate was 24.5 % for the three months ended March 31, 2021 and the effective income tax rate was 12.7 % for the three months ended March 31, 2020.

The effective tax rate change was primarily due to the Company’s permanent differences related to the mark-to-market adjustment on the private placement warrants, which had a lesser impact on the effective tax rate .

The total amount of unrecognized tax benefits increased by $ 0.2 million during the quarter primarily due to prior year tax positions.

As of March 31, 2021, the total amount of unrecognized tax benefits was $ 1.1 million, of which $ 0.5 million would affect the Company’s effective tax rate if recognized.

The Company recognizes interest and penalties related to unrecognized tax benefits through income tax expense.

As of March 31, 2021, we had less than $ 0.1 million accrued for the payment of interest and penalties.

The Company is subject to examination by the Internal Revenue Service and taxing authorities in various states.

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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 under examination by certain states for tax years 2015 to 2017 , and other state income tax returns are subject to examination for tax years 2014 to 2019 .

Tax returns for years prior to 2014 remain open in a number of states due to tax attributes generated but not yet utilized.

The Company’s state income tax returns are no longer subject to income tax examination by tax authorities prior to 2016;

however, the Company’s net operating loss carryforwards and research credit carryforwards arising prior to that year are subject to adjustment.

The Company is currently under audit by the State of Georgia for the years 2018 and 2019 , however, no material adjustments are anticipated.

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.

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The following details the components of stock-based compensation for the periods presented:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

($ in thousands)

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Tax Receivable Agreement

At the closing of the Business Combination, the Company entered into a tax receivable agreement (“ TRA ”) with PE Greenlight Holdings, LLC (the “ Platinum Stockholder ”) and Greenlight Holding II Corporation as the stockholder representative.

At the closing of the Business Combination, the Company entered into the Tax Receivable Agreement (“ TRA ”) with PE Greenlight Holdings, LLC (the “ Platinum Stockholder ”) and Greenlight Holding II Corporation 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.

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The post-closing company generally will retain 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.

The Company recorded a $ 4.4 million increase to the payable to related party pursuant to tax receivable agreement with an offsetting charge to loss from tax receivable agreement adjustment in the condensed consolidated statements of operations for the nine months ended September 30, 2020.

The adjustment 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 September 30, 2020 , the

TRA was approximately $ 70.2 million of which $ 4.6 million was the current portion included in a ccrued liabilities and $ 65.6 million included in p ayable to related party pursuant to tax receivable agreement on the condensed consolidated balance sheets.

The Company estimated the potential maximum benefit to be paid would 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 adjusted this amount.

At March 31, 2021 , the TRA liability was approximately $ 67.9 million of which $ 5.2 million was the current portion and $ 62.7 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 condensed consolidated balance sheets.

The Company made a $ 4.8 million payment during the first quarter of 2021 related to the current portion payable as of December 31, 2020.

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 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 ”).

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:

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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 Greenlight Acquisition Corporation (“ Parent ”) 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:

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 the Company’s 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) Parent 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 September 30, 2020.

and (b) the Company 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 March 31, 2021.

The estimated value is not subject to future revisions during the five-year period discussed above.

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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 March 31, 2021, the potential future Earn-Out Shares issuable are between zero and 5.0 million.

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 September 30, 2020.

Outstanding letters of credit under these arrangements totaled $ 6.2 million at March 31, 2021.

The Company has non-cancelable purchase commitments to certain vendors.

The aggregate non-cancelable purchase commitments outstanding at September 30, 2020 were $ 8.1 million.

The aggregate non-cancelable purchase commitments outstanding at March 31, 2021 were $ 32.3 million.

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

In January 2021, the New York City Law Department advised the Company that the City of New York was investigating certain matters related to the Company’s installation work for its largest customer, NYCDOT.

We were informed in March 2021 by the NYC Law Department that it had concluded its investigation, and we reached an agreement in principle to resolve the matter for approximately $ 1.3 million, subject to final administrative approvals.

Customer Guarantee

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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 September 30, 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 condensed consolidated financial statements.

Exit Activities

We commenced exit activities related to severance and other employee separation costs during the three and nine months ended September 30, 2020.

We expensed $ 0.6 million and $ 1.1 million for the three and nine months ended September 30, 2020, respectively, as selling, general and administrative expenses on the condensed consolidated statements of operations.

We accrued $ 0.3 million as of September 30, 2020, the majority of which related to the Commercial Services segment.

The Company expects to pay the amount before the end of fiscal 2020.

The Company had one such guarantee outstanding for the one-year period ending March 31, 2021.

The Company has no t accrued any liability or corresponding contra revenue has been recorded in the Company’s financial statements, as the required conditions to trigger payment have not been met.

Legal Proceedings

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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 condensed consolidated results of operations, cash flows, or financial position, and accordingly, no material contingency accruals are recorded.

The Company has determined that resolution of pending matters is not probable to have a material adverse impact on its 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 quarter ended September 30, 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 in October 2020 from a third party insurance carrier related to this matter, both of which are included in other income, net on the condensed consolidated statements of operations for the three and nine months ended September 30, 2020.

Segment Reporting

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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 (loss) from operations before depreciation, amortization, gain (loss) on disposal of assets, net, and stock-based compensation.

Segment performance is based on revenues and income from operations before depreciation, amortization, gain (loss) on disposal of assets, net, and stock-based compensation.

The measure also excludes interest expense, net, income taxes and certain other transactions and is inclusive of other income, net.

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There are no significant non-cash items reported in segment profit (loss).

The following tables set forth financial information by segment for the respective periods:

For the Three Months Ended September 30, 2020

($ in thousands)

Service revenue

Product sales

Total revenue

Cost of service revenue

Cost of product sales

Operating expenses

Selling, general and administrative expenses

Other income, net

Segment profit (loss)

Depreciation and amortization

Loss on disposal of assets, net

Stock-based compensation

Interest expense, net

Income (loss) before income tax provision

For the Three Months Ended September 30, 2019

($ in thousands)

Service revenue

Product sales

Total revenue

Cost of service revenue

Cost of product sales

Operating expenses

Selling, general and administrative expenses

Other income, net

Segment profit (loss)

Depreciation and amortization

Stock-based compensation

Interest expense, net

Income (loss) before income tax provision

For the Nine Months Ended September 30, 2020

The following tables set forth financial information by segment for the three months ended March 31, 2021 and 2020, respectively:

For the Three Months Ended March 31, 2021

($ in thousands)

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Loss on disposal of assets, net

Loss from tax receivable agreement adjustment

Change in fair value of private placement warrants

Stock-based compensation

Interest expense, net

Income (loss) before income tax provision

For the Nine Months Ended September 30, 2019

Loss on extinguishment of debt

Income (loss) before income tax benefit

For the Three Months Ended March 31, 2020

($ in thousands)

(As restated)

Service revenue

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Gain on disposal of assets, net

Impairment of property and equipment

Change in fair value of private placement warrants

Stock-based compensation

2 unchanged sentences

Guarantor/Non-Guarantor Financial Information

VM Consolidated, Inc., a wholly-owned subsidiary of the Company, is the lead borrower of the First Lien Term Loan and the Revolver.

VM Consolidated, Inc., a wholly owned subsidiary of the Company, is the lead borrower of the 2021 Term Loan, Senior Notes and the Revolver.

VM Consolidated, Inc.

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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 guarantor subsidiary and non-guarantor subsidiaries.

The following financial information presents the condensed consolidated balance sheets as of September 30, 2020 and the related condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months

ended September 30, 2020 and c onde nsed consolidated statements of cash f lows for the nine months ended September 30 , 2020 for the Company, combined guarantor subsidiar y and combined non-guarantor subsidiaries.

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 condensed consolidated balance sheets as of March 31, 2021 and the related condensed consolidated statements of operations and comprehensive loss and condensed consolidated statements of cash flows for the three months ended March 31, 2021 for the Company, combined guarantor subsidiary and combined non-guarantor subsidiaries.

Verra Mobility Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

at September 30, 2020

at March 31, 2021

($ in thousands)

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Accrued liabilities

Payable to related party pursuant to tax receivable agreement, current portion

Current portion of long-term debt

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Operating lease liabilities, net of current portion

Payable to related party pursuant to tax receivable agreement

Payable to related party pursuant to tax receivable agreement, net of current portion

Private placement warrant liabilities

Due to affiliates

6 unchanged sentences

Verra Mobility Corporation and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income

Three Months Ended September 30, 2020

($ in thousands)

Verra Mobility

(Ultimate Parent)

Service revenue

Product sales

Total revenue

Cost of service revenue

Cost of product sales

Operating expenses

Selling, general and administrative expenses

Depreciation, amortization and (gain) loss on disposal of assets, net

Total costs and expenses

Income (loss) from operations

(Income) loss from equity investment

Interest expense, net

Other income, net

Total other (income) expenses

Income (loss) before income tax provision (benefit)

Income tax provision (benefit)

Net income (loss)

Other comprehensive income:

Change in foreign currency translation adjustment

Total comprehensive income

Verra Mobility Corporation and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

($ in thousands)

13 unchanged sentences

Interest expense, net

Loss from tax receivable agreement adjustment

Change in fair value of private placement warrants

Loss on extinguishment of debt

Other income, net

Total other expenses (income)

Loss before income tax provision (benefit)

Income tax provision (benefit)

Total other expenses

Loss before income tax benefit

Income tax benefit

Other comprehensive loss:

3 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

($ in thousands)

5 unchanged sentences

Amortization of deferred financing costs and discounts

Loss from tax receivable agreement adjustment

Change in fair value of private placement warrants

Loss on extinguishment of debt

Credit loss expense

1 unchanged sentence

Stock-based compensation

Gain from third-party insurance proceeds

Installation and service parts expense

5 unchanged sentences

Unbilled receivables

Prepaid expenses and other current assets

Prepaid expenses and other assets

Accounts payable and accrued liabilities

5 unchanged sentences

Cash proceeds from the sale of assets

Cash contribution to subsidiary

Net cash used in investing activities

Cash Flows from Financing Activities:

Borrowings of long-term debt

Repayment of long-term debt

Payment of debt issuance costs

Payment of debt extinguishment costs

Capital contribution from VM Consolidated Inc.

Payment of employee tax withholding related to RSUs vesting

Net cash used in financing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash, cash equivalents and restricted cash

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash - beginning of period

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Continued)

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Verra Mobility

4 unchanged sentences

Supplemental non-cash investing and financing activities:

Earn-out shares issued to Platinum Stockholder

Additions to ARO, property and equipment, and other

Purchases of installation and service parts and property and equipment in accounts payable and accrued liabilities at period-end

Accrued debt issuance costs

Accrued debt extinguishment costs

Subsequent Event

Pending Acquisition

On January 22, 2021, the Company entered into a Scheme Implementation Agreement (the “ Scheme 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 all of the holders of Redflex’s outstanding shares as of the record date will sell, and the Company will cause one of its subsidiaries to purchase, one hundred percent ( 100 %) of the outstanding equity of Redflex (the “ Scheme ”).

On April 29, 2021, the Company entered into a Deed of Amendment and Consent (the “ Scheme Amendment ”) with Redflex to amend the Scheme Agreement to increase the consideration payable to Redflex shareholders in the transaction from A$ 0.92 in cash per share to A$ 0.96 in cash per share (the “ Price Increase ”), resulting in an increase in the aggregate consideration payable by us under the Scheme Agreement from A$ 146.1 million to A$ 152.5 million (or approximately US $ 112.9 million to US $ 117.9 million) based on the exchange rate between the Australian Dollar and U.S.

Dollar as of the date of this Quarterly Report on Form 10-Q.

Except for the Price Increase, the material terms of the Scheme Agreement remained unchanged.

On May 9, 2021, Redflex shareholders approved the Scheme, including the Price Increase.

Separately, at a hearing held on May 13, 2021, the second Federal Court of Australia approved the Scheme, including a change approved by the Redflex shareholder vote that allows the regulatory approval from the General Authority for Competition in the Kingdom of Saudi Arabia (the “ GAC Approval ”), which is currently a condition precedent to the transaction, to become a condition subsequent that can be satisfied on or before August 13, 2021 (the “ Outside Date ”).

If the GAC Approval is not obtained on or before the Outside Date, the transaction would not close.

The aggregate consideration payable by us will be A$ 152.5 million, and the closing of the acquisition is projected to take place in the second or third quarter of 2021 (approximately 7 business days after receiving notification of GAC approval), subject to timely receipt of the GAC Approval.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements