What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-09 compared with 2021-05-17 · 311 added, 145 removed, 553 unchanged (45% of the section changed)

8 unchanged sentences

Accounts receivable (net of allowance for credit loss of $ 12.7 million and

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

$ 11.5 million at June 30, 2021 and December 31, 2020, respectively)

Unbilled receivables

34 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE (LOSS) INCOME

Three Months Ended March 31,

AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands, except per share data)

(As restated)

Service revenue

7 unchanged sentences

Total costs and expenses

Income from operations

Income (loss) from operations

Interest expense, net

Change in fair value of private placement warrants

Tax receivable agreement liability adjustment

Loss on extinguishment of debt

Other income, net

Total other expenses (income)

(Loss) income before income tax (benefit) provision

Income tax (benefit) provision

Net (loss) income

Other comprehensive loss:

Total other expenses

Income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

Other comprehensive income (loss):

Change in foreign currency translation adjustment

Total comprehensive (loss) income

Net (loss) income per share:

Total comprehensive income (loss)

Net income (loss) per share:

Weighted average shares outstanding:

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended March 31, 2021

For the Three and Six Months Ended June 30, 2021

Comprehensive

4 unchanged sentences

Balance as of December 31, 2020 (as restated)

Vesting of restricted stock units (" RSU s")

Vesting of restricted stock units (" RSUs ")

Payment of employee tax withholding related to RSUs vesting

2 unchanged sentences

Balance as of March 31, 2021

For the Three Months Ended March 31, 2020

Vesting of RSUs

Exercise of stock options

Payment of employee tax withholding related to RSUs vesting

Stock-based compensation

Other comprehensive gain, net of tax

Balance as of June 30, 2021

For the Three and Six Months Ended June 30, 2020

Balance as of December 31, 2019 (as restated)

7 unchanged sentences

Balance as of March 31, 2020 (as restated)

Net loss (as restated)

Vesting of RSUs

Payment of employee tax withholding related to RSUs vesting

Stock-based compensation

Other comprehensive loss, net of tax

Balance as of June 30, 2020 (as restated)

See accompanying Notes to the Condensed Consolidated Financial Statements.

1 unchanged sentence

condensed consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

($ in thousands)

1 unchanged sentence

Cash Flows from Operating Activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

1 unchanged sentence

Change in fair value of private placement warrants

Tax receivable agreement liability adjustment

Loss on extinguishment of debt

2 unchanged sentences

Stock-based compensation

Installation and service parts expense

Accretion expense

Loss (gain) on disposal of assets

Changes in operating assets and liabilities:

6 unchanged sentences

Cash Flows from Investing Activities:

Acquisition of business, net of cash and restricted cash acquired

Purchases of installation and service parts and property and equipment

6 unchanged sentences

Payment of debt extinguishment costs

Proceeds from exercise of stock options

Payment of employee tax withholding related to RSUs vesting

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental cash flow information:

3 unchanged sentences

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 .

VERRA MOBILIT Y CORPORATION

VERRA MOBILITY CORPORATION

Notes to the CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7 unchanged sentences

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.

Verra Mobility offers integrated technology solutions and services to commercial fleets, rental car companies, state and local governments domestically, and government agencies internationally.

The Company has customers located throughout the world, primarily within the United States, Australia, Europe and Canada.

The Company is organized into two operating segments:

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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 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.

The Government Solutions segment offers photo enforcement solutions and services to its customers.

Through its recent acquisition of Redflex Holdings Limited (“ Redflex ”) on June 17, 2021, the Company expanded its current footprint in the United States and gained access to international markets (see Note 3).

The Government Solutions segment provides complete, end-to-end speed, red-light, school bus stop arm and bus lane enforcement solutions within the United States and Canada.

These 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.

The newly acquired international operations through Redflex primarily involve the sale of traffic enforcement products and related maintenance services.

Significant Accounting Policies

Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of the Company prepared in accordance with generally accepted accounting principles in the United States of America (“ GAAP ”).

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company prepared in accordance with generally accepted accounting principles in the United States of America (“ GAAP ”).

All intercompany balances and transactions have been eliminated in consolidation.

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.

In the opinion of the Company’s management, the unaudited 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.

The Company restated its 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 was a $ 8.3 million decrease for the three months ended June 30, 2020 and a $ 7.1 million increase for the six months ended June 30, 2020 to net income, and an increase to private placement warrant liabilities of $ 22.6 million as of June 30, 2020, with an offsetting decrease of $ 20.4 million to additional paid-in capital and an increase of $ 2.2 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 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.

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 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 intangible assets) in business combinations, the carrying amounts of inventory, 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;

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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,

Significant customers are those which represent more than 10 % of the Company’s total revenue or accounts receivable.

Revenue from the single Government Solutions customer exceeding 10% as a percent of total revenue is presented below:

Three Months Ended June 30,

Six Months Ended June 30,

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.

As of June 30, 2021, the City of New York Department of Transportation (“ NYCDOT ”) represented 59 % of total 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,

At June 30, 2021, the Legacy Contract had an open receivable balance of $ 30.8 million, of which $ 22.3 million had aged beyond NYCDOT’s 45-day payment terms.

As of June 30, 2021, the Company had invoiced NYCDOT for $ 64.4 million in product revenue and $ 36.7 million in service revenue under the Emergency Contract, and the Emergency Contract had an open receivables balance of $ 96.3 million, of which $ 79.5 million had aged beyond the 45-day payment terms.

The total outstanding receivables balance has increased approximately $ 6 million in the second quarter of 2021 compared to the first quarter due to additional invoices under both contracts.

The Company collected $ 28.1 million during the second quarter of 2021 related to both contracts.

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

No other Government Solutions customer exceeded 10% of total accounts receivable as of any period presented.

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

Three Months Ended June 30,

Six Months Ended June 30,

Hertz Corporation

1 unchanged sentence

Enterprise Holdings, Inc.

Customer revenue for the period was below 10% of total revenue.

No Commercial Services customer exceeded 10% of total accounts receivable as of any period presented.

Allowance for Credit Loss

3 unchanged sentences

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

The following presents the activity in the allowance for credit loss for the six months ended June 30, 2021 and 2020, respectively:

($ in thousands)

5 unchanged sentences

Write-offs, net of recoveries

Balance at March 31, 2021

Balance at June 30, 2021

($ in thousands)

5 unchanged sentences

Write-offs, net of recoveries

Balance at March 31, 2020

Balance at June 30, 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.

1 unchanged sentence

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 adjusted down its estimate for credit loss as of June 30, 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.

The credit loss estimate as of June 30, 2020 was based on higher probabilities of loss given the uncertainty caused by COVID-19 on the travel industry.

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.

As of March 31, 2021, there were warrants outstanding to acquire 19,999,967 shares of the Company’s Class A Common Stock including:

As of June 30, 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 ”);

2 unchanged sentences

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 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.

7 unchanged sentences

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.

As the shares issuable under the Warrants are issuable shares when exercised by the holders, they are included when computing diluted income (loss) per share, if such exercise is dilutive to income (loss) 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 .

In August 2018, the Financial Accounting Standards Board (“ FASB ”) issued Accounting Standards 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.

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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.

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.

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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.

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.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.

This ASU provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic.

It specifically addresses the treatment, measurement and recognition of the effect of a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option if it remains equity-classified after the modification or exchange.

The amendments are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments.

Early adoption is permitted.

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

Redflex Acquisition

On June 17, 2021, the Company completed the previously announced acquisition of Redflex, a public company limited by shares, incorporated in Australia and listed on the Australian Securities Exchange.

Redflex is a provider of intelligent traffic management products and services that are sold and managed in the Asia Pacific, North America, United Kingdom, Europe, and Middle East regions.

Redflex develops, manufactures, and operates a wide range of platform-based solutions, utilizing advanced sensor and image capture technologies that enable active management of state and local motorways.

The Company has included the financial results of Redflex in the condensed consolidated financial statements from the date of acquisition, which were not material.

Pursuant to the Scheme Implementation Agreement (the “ Agreement ”) entered into by the Company and Redflex on January 21, 2021, as amended by the Deed of Amendment and Consent, dated April 30, 2021, VM Consolidated, Inc., an indirect wholly owned subsidiary of the Company, purchased one hundred percent of the outstanding equity of Redflex at A$0.96 per share at consideration of A$ 152.5 million, or approximately US$ 117.9 million.

Transaction costs for Redflex were $7.4 million which primarily related to professional fees and other expenses related to the acquisition, and were included within the selling, general and administrative expenses in the condensed consolidated statements of operations.

The allocation of the preliminary purchase consideration is summarized as follows:

($ in thousands)

Assets acquired

Cash and cash equivalents (including restricted cash of $ 2.2 million)

Accounts receivable

Unbilled receivables

Property and equipment

Deferred tax assets

Customer relationships

Developed technology

Total assets acquired

Liabilities assumed

Accounts payable and accrued expenses

Deferred revenue

Long-term debt

Other long-term liabilities

Total liabilities assumed

Total purchase consideration

The primary areas that remain preliminary relate to the fair values of intangible assets acquired, certain tangible assets and liabilities acquired, legal and other contingencies as of the acquisition date, income and non-income based taxes and residual goodwill.

The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

Goodwill consists largely of the expected cash flows and future growth anticipated for the Company and was assigned to the Company’s Government Solutions segment.

Management has determined that the Redflex international operations represent a new reporting unit for the purposes of assessing potential impairment of goodwill, and as a result of the acquisition, the Government Solutions segment has two reporting units.

The total operating and reportable segments for the Company has not changed as the manner in which the Company allocates resources and monitors operating performance has not changed.

The goodwill is not expected to be deductible for tax purposes.

The preliminary customer relationships value was based on the multi-period excess earnings methodology utilizing projected cash flows.

The preliminary values for the trademark and the developed technology related assets were based on a relief-from-royalty method.

The trademark, customer relationships and the developed technology related assets were assigned preliminary useful lives of 5.0 years, 10.0 years, and 9.2 years, respectively.

Pro Forma Financial Information

The pro forma information below gives effect to the Redflex acquisition as if it had been completed on the first day of each period presented.

The pro forma results of operations are presented for information purposes only.

As such, they are not necessarily indicative of the Company’s results had the Redflex acquisition been completed on the first day of each period presented, nor do they intend to represent the Company’s future results.

The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the acquisition and does not reflect additional revenue opportunities following the acquisition of Redflex.

The pro forma information includes adjustments to record the assets and liabilities associated with the Redflex acquisition at their respective preliminary fair values based on available information.

Three Months Ended

Six Months Ended

($ in thousands)

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Net income (loss)

The pro forma results primarily include adjustments related to amortization of intangibles, depreciation expense, interest expense and related debt extinguishment costs from the debt refinancing transactions and exclusion of acquisition-related costs and certain capitalized costs related to operating leases and developed technology.

Prepaid Expenses and Other Current Assets

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($ in thousands)

Prepaid tolls

Prepaid income taxes

Prepaid tolls

Prepaid services

Photo enforcement equipment inventory

Prepaid computer maintenance

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Balance at December 31, 2020

Goodwill from Redflex acquisition

Foreign currency translation adjustment

Balance at March 31, 2021

Balance at June 30, 2021

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

March 31, 2021

June 30, 2021

December 31, 2020

6 unchanged sentences

Intangible assets, net

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

Amortization expense was $ 21.2 million and $ 23.5 million for the three months ended June 30, 2021 and 2020, respectively, and was $ 44.0 million and $ 47.1 million for the six months ended June 30, 2021 and 2020, respectively.

Estimated amortization expense in future years is expected to be:

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Accrued salaries and wages

Income taxes payable

Accrued interest payable

Current portion of operating lease liabilities

Advanced deposits payable

Payroll liabilities

Self-insurance liability

Restricted cash due to customers

Advanced deposits payable

Deferred revenue

Total accrued liabilities

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issued an aggregate principal amount of $ 350 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.

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.

1 unchanged sentence

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 %.

As of June 30, 2021, the interest rate on the 2021 Term Loan was 3.4 %.

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:

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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.

Accordingly, the Company recognized a loss on extinguishment of debt of $ 5.3 million on the 2018 Term Loan during the six months ended June 30, 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.

During fiscal year 2020, Redflex received a loan from the U.S.

Small Business Administration (“ SBA ”) as part of the Paycheck Protection Program (“ PPP Loan ”) to offset certain employment and other allowable costs incurred as a result of the COVID-19 pandemic.

At June 30, 2021, the loan amount outstanding was $ 2.9 million and is payable within a year, and is included in the current portion of long-term debt.

In early 2021, Redflex applied for forgiveness of this loan and awaits approval from the SBA.

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 new debt instruments entered into in March 2021 discussed above.

The terms of the Revolver were not affected by other debt instruments 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.

The 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 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.

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 June 30 , 2021, the Company had no outstanding borrowings on the Revolver and availability to borrow was $ 57.0 million , net of $ 6.2 million of outstanding letters of credit.

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.

At June 30 , 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.

The Company recorded interest expense, including amortization of deferred financing costs and discounts, of $ 11.7 million and $ 9.5 million for the three months ended June 30 , 2021 and 2020, respectively, and $ 20.8 million and $ 22.0 million for the six months ended June 30 , 2021 and 2020, respectively.

The weighted average effective interest rates on the Company’s outstanding borrowings were 4.1 % and 3.4 % at June 30 , 2021 and December 31, 2020, respectively.

Fair Value of Financial Instruments

4 unchanged sentences

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 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 carrying amounts reported in the Company’s condensed consolidated balance sheets for cash, accounts receivable, accounts payable, accrued expenses and the PPP Loan approximate fair value due to the immediate to short-term maturity of these financial instruments.

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

The carrying value and the estimated fair value are as follows:

June 30, 2021

December 31, 2020

4 unchanged sentences

The key assumptions used were as follows:

March 31, 2021

June 30, 2021

December 31, 2020

3 unchanged sentences

Estimated fair value

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

Three Months Ended March 31,

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

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

Beginning balance (as restated)

Change in fair value included in net (loss) income

(As restated)

Beginning balance

Change in fair value included in net income (loss)

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,

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 June 30,

Six Months Ended June 30,

(In thousands, except per share data)

(As restated)

Net (loss) income

(As restated)

Net income (loss)

Weighted average shares - basic

1 unchanged sentence

Weighted average shares - diluted

Net (loss) income per share - basic

Net (loss) income per share - diluted

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

Net income (loss) per share - basic

Net income (loss) per share - diluted

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

Contingently issuable shares (2)

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Total antidilutive shares excluded

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

These amounts represent the outstanding shares as of the three and six months ended June 30, 2021 and 2020.

Contingently issuable shares relate to the earn-out agreement as discussed in Note 12, Related Party Transactions .

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 Company’s interim income tax 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.

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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 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 elected to delay the employer-side of the FICA payments with the intention of making the payments in 2021 and 2022.

The Company’s effective income tax rate was 69.0 % and 14.5 % for the three months ended June 30, 2021 and 2020, respectively, and 549.6 % and 33.9 % for the six months ended June 30, 2021 and 2020, respectively.

The primary driver of the effective tax rate variance is due to the Company’s permanent differences related to the mark-to-market adjustment on the private placement warrants.

The total amount of unrecognized tax benefits increased by $ 0.2 million during fiscal year 2021 primarily due to prior year tax positions.

As of June 30, 2021, the total amount of unrecognized tax benefits was $ 1.1 million, of which $ 0.5 million would affect our 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.

As of June 30, 2021, the Company 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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The following details the components of stock-based compensation for the periods presented:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

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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.

At June 30, 2021, the TRA liability was approximately $ 69.5 million of which $ 5.2 million was the current portion and $ 64.3 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 sheet.

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.

The Company recorded a $ 1.7 million charge for the three and six months ended June 30, 2021 and a $ 4.4 million charge for the three and six months ended June 30, 2020.

The TRA liability adjustment in 2021 is arising from higher estimated state tax rates due to changes in statutory rates, whereas in 2020 it is arising from higher estimated state tax rates due to a change in apportionment.

Earn-Out Agreement

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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 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 June 30, 2021.

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

4 unchanged sentences

Upon the occurrence of a Triggering Event, any issuable shares would be 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.

Any contingently issuable shares not issued as a result of a Triggering Event not being attained by the end of the earn-out period will be canceled.

On April 26, 2019 and on January 27, 2020, the Triggering Events for the issuance of the first and second tranches of Earn-Out Shares occurred, as the volume weighted average closing sale price per share of the Company’s Class A Common Stock as of that date had been greater than $ 13.00 and $ 15.50 , respectively, for 10 out of 20 consecutive trading days.

These Triggering Events resulted in the issuance of an aggregate 5,000,000 shares of the Company’s Class A Common Stock to the Platinum Stockholder and an increase in the Company’s common stock and additional paid-in capital accounts of $ 36.6 million, with a corresponding decrease to the common stock contingent consideration account.

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

At June 30, 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 $ 6.2 million at March 31, 2021.

The Company has issued various letters of credit under contractual arrangements with certain of its domestic vendors and customers.

Outstanding letters of credit under these arrangements totaled $ 6.2 million at June 30, 2021.

In addition, the Company has $ 3.0 million of bank guarantees and bonds at June 30, 2021 required to support bids and contracts with certain international customers.

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

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

The aggregate non-cancelable purchase commitments outstanding at June 30, 2021 were $ 38.2 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.

5 unchanged sentences

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

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 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.

The Company was informed in March 2021 by the NYC Law Department that it had concluded its investigation, and an agreement was reached in principle to resolve the matter for approximately $ 1.3 million, which was accrued during the three months ended March 31, 2021, subject to final administrative approvals.

Legal Proceedings

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As additional information becomes available, the Company reassesses the potential liability.

City of Gretna is a class action lawsuit filed in the 24th Judicial District Court of Jefferson Parish, Louisiana against the City of Gretna (“ City ”) and its safety camera vendor, Redflex Traffic Systems, Inc.

in April 2016.

The plaintiff class, which was certified on March 30, 2021, alleges that the City’s safety camera program was implemented and operated in violation of local ordinances and the state constitution, including that the City’s hearing process violated the plaintiffs’ due process rights for lack of a “neutral” arbiter of liability for traffic infractions.

Plaintiffs seek recovery of traffic infraction fines paid.

The City and Redflex Traffic Systems, Inc.

have initiated an appeal of the trial court’s ruling granting class certification, which remains pending.

Based on the information available to the Company at present, it cannot reasonably estimate a range of loss for this action and, accordingly, it has not accrued any liability associated with this action.

Segment Reporting

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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.

Government Solutions implements and administers traffic safety programs and products for municipalities and local and foreign 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, and stock-based compensation.

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.

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

3 unchanged sentences

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

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

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

For the Three Months Ended June 30, 2021

($ in thousands)

10 unchanged sentences

Depreciation and amortization

Gain on disposal of assets, net

Change in fair value of private placement warrants

Tax receivable agreement liability adjustment

Stock-based compensation

Interest expense, net

Income (loss) before income tax provision

For the Three Months Ended June 30, 2020

($ in thousands)

(As restated)

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

Change in fair value of private placement warrants

Tax receivable agreement liability adjustment

Stock-based compensation

Interest expense, net

Loss on extinguishment of debt

Income (loss) before income tax benefit

For the Three Months Ended March 31, 2020

For the Six Months Ended June 30, 2021

($ 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

Change in fair value of private placement warrants

Tax receivable agreement liability adjustment

Stock-based compensation

Interest expense, net

Loss on extinguishment of debt

Income (loss) before income tax provision

For the Six Months Ended June 30, 2020

($ in thousands)

(As restated)

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Depreciation and amortization

Gain on disposal of assets, net

Loss (gain) on disposal of assets, net

Change in fair value of private placement warrants

Tax receivable agreement liability adjustment

Stock-based compensation

Interest expense, net

Income (loss) before income tax provision

Income (loss) before income tax benefit

The Company primarily operates within the United States, Australia, Europe and Canada.

Revenues are attributable to countries based upon the location of the customer.

Revenues from international customers were $ 5.0 million and $ 3.0 million for the three months ended June 30, 2021 and 2020, respectively, and were $ 7.8 million and $ 6.9 million for the six months ended June 30, 2021 and 2020, respectively.

The Company does not disaggregate assets by segment other than certain customer equipment and vehicles related to the Government Solutions segment.

Refer to Note 5, Goodwill and Intangible Assets for goodwill balances by segment.

Guarantor/Non-Guarantor Financial Information

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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.

The following financial information presents the condensed consolidated balance sheets as of June 30, 2021 and the related condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2021 and the condensed consolidated statements of cash flows for the six months ended June 30, 2021 for the Company, the combined guarantor subsidiary and the combined non-guarantor subsidiaries.

Verra Mobility Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

at March 31, 2021

at June 30, 2021

($ in thousands)

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Verra Mobility Corporation and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income

Three Months Ended June 30, 2021

($ 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

Change in fair value of private placement warrants

Tax receivable agreement liability adjustment

Other income, net

Total other expenses

Income (loss) before income taxes

Income tax provision

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

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

($ in thousands)

14 unchanged sentences

Change in fair value of private placement warrants

Tax receivable agreement liability adjustment

Loss on extinguishment of debt

1 unchanged sentence

Total other expenses

Loss before income tax benefit

Income tax benefit

Other comprehensive loss:

(Loss) income before income taxes

Income tax provision (benefit)

Other comprehensive income:

Change in foreign currency translation adjustment

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

($ in thousands)

6 unchanged sentences

Change in fair value of private placement warrants

Tax receivable agreement liability adjustment

Loss on extinguishment of debt

2 unchanged sentences

Stock-based compensation

Installation and service parts expense

Accretion expense

Loss on disposal of assets

Loss from equity investment

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Cash Flows from Investing Activities:

Acquisition of business, net of cash and restricted cash acquired

Purchases of installation and service parts and property and equipment

7 unchanged sentences

Payment of debt extinguishment costs

Proceeds from exercise of stock options

Capital contribution from VM Consolidated Inc.

7 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Continued)

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

Verra Mobility

5 unchanged sentences

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.

On July 29, 2021, the Company’s Board of Directors authorized a share repurchase program for up to an aggregate amount of $ 100 million of its outstanding shares of Class A common stock over the next twelve months.

The level at which the Company repurchases depends on a number of factors, including its financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors its management may deem relevant.

The timing, volume and nature of repurchases are subject to market conditions, applicable securities laws and other factors and may be amended, suspended or discontinued at any time.

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