VERRA MOBILITY Corp 10-Q

Item 1A. Risk Factors Risks Related to Our Business Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2020 filed on May 14, 2021 includes a discussion of our risk factors. The information presented below supplements, and should be read in conjunction with, the risk factors and information disclosed in our Annual Report on Form 10-K/A. Except as presented below, there have been no material changes from the risk factors described in our Annual Report on Form 10-K/A filed May 14, 2021. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future SEC filings. Our largest customer, NYCDOT, has outstanding receivables with us totaling $121.0 million. We are working with NYCDOT to clear administrative hurdles that are delaying payment, but we cannot predict when this matter will be resolved, how much it may cost or the timing of their payments to us. We provide photo enforcement and school zone enforcement services to NYCDOT, which was our largest customer by revenue in 2020 (31.3% of total revenue for the year ended December 31, 2020), under two primary contracts: a legacy contract relating to red light, bus lane, mobile speed and fixed speed photo enforcement cameras that were installed prior to fiscal year 2020 (the “ Legacy Contract ”), and an emergency contract for the purchase, installation, maintenance and operation of an expanded fixed speed camera program beginning in 2020 (the “ Emergency Contract ”). In late 2019, we concluded that some of our system installations under the Legacy Contract did not meet New York City’s requirements related to the depth of buried electrical conduit and the color of grounding wire. We disclosed these issues to NYCDOT and in the fourth quarter of 2020 agreed to remediate the affected sites. As of the date of this Quarterly Report on Form 10-Q, our remediation efforts were substantially complete . In late January 2021, we were separately informed that the City of New York’s Law Department (the “ NYC Law Department ”) was investigating matters related to our previously disclosed conduit depth issue as well as matters related to whether we unnecessarily installed new poles where existing infrastructure could have been used. 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. The installation issues described above and investigated by the NYC Law Department did not have any impact on the camera operations or the overall effectiveness of the photo enforcement programs. We continue to perform work for NYCDOT under the Legacy Contract and the Emergency Contract, and in March 2021, we received an Authorization to Proceed with the installation of an additional 720 school zone speed cameras in 2021. In addition to the matters described above, we are actively working with NYCDOT to address various administrative hurdles that have delayed the registration of the Emergency Contract, which is a condition to receiving payment under that contract, and that are delaying payments on our invoices under the Legacy 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. We expect the NYCDOT open receivables balance to increase by approximately $7.3 million per month until it is paid, which does not account for any additional invoices related to product revenue for new cameras installed in fiscal 2021 or associated service revenue. We will start installing cameras against the order for 720 new school zone speed cameras in the second quarter, which will increase the receivable balance based on the timing of the installation schedule if the invoices remain unpaid. We cannot predict when these matters will be finally resolved, how much it may cost or the timing of the payments to us on the outstanding receivables. The failure to resolve these matters with the City of New York in a timely and effective manner could have a material adverse effect on our business, financial condition and results of operations. 39 Item 2. Unregistered Sales of Equi ty Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not Applicable.