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 17, 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 on May 17, 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 $127.0 million resulting from a period of non-payment during fiscal year 2020 and the first quarter of 2021. While NYCDOT resumed payments in the second quarter of 2021, 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 May 2021, our remediation efforts were substantially complete. In 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 (the “ Authorization to Proceed ”) with the installation of an additional 720 school zone speed cameras in 2021. We began installing the additional school zone speed cameras in April 2021 and, as of June 30, 2021, we had installed approximately 158 cameras under the Authorization to Proceed. 46 The Emergency Contract was registered with the NYC Comptroller’s office in May 2021. In June 2021, NYCDOT began making payments under the Emergency Contract and resumed making payments under the Legacy Contract, which prior delays had resulted in $121.0 million of total open receivables as reported in our Form 10-Q for the first quarter of 2021 . In the second quarter of 2021, we received $28.1 million in payments under both contracts. Because we are continuing to install new cameras pursuant to the Authorization to Proceed and performing services related to all installed cameras, we continue to maintain an open receivable balance with NYCDOT. As of 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, we 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 receivable balance of $96.3 million, of which $79.5 million had aged beyond NYCDOT’s 45-day payment terms. The total outstanding receivable from NYCDOT increased by approximately $6.0 million in the second quarter due to additional invoices under the Legacy Contract and the Emergency Contract. We continue to work with NYCDOT to expedite payments for the aged accounts receivables. 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. We cannot guarantee that our stock repurchase program will be consummated, fully or at all, or that it will enhance long-term shareholder value. Stock repurchases could also increase the volatility of the trading price of our stock and could diminish our cash reserves. In August 2021, we announced that our Board of Directors authorized a share repurchase program for up to an aggregate amount of $100 million of our outstanding shares of Class A common stock over the next twelve months. The timing, price, and quantity of purchases under the program will be at the discretion of our management and will depend upon a variety of factors including share price, general and business market conditions, compliance with applicable laws and regulations, corporate and regulatory requirements, and alternative uses of capital. The program may be amended, suspended or discontinued by our Board of Directors at any time. Although our Board of Directors has authorized this stock repurchase program, there is no guarantee as to the exact number of shares, if any, that will be repurchased by us, and we may discontinue purchases at any time if management determines additional purchases are not warranted. We cannot guarantee that the program will be consummated, fully or at all, or that it will enhance long-term stockholder value. The program could affect the trading price of our common stock and increase volatility, and any announcement of a termination of this program may result in a decrease in the trading price of our common stock. In addition, this program could diminish our cash reserves. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not Applicable.