Equibles

10-Q

VERRA MOBILITY Corp (VRRM)

10-Q 2023-11-09 For: 2023-09-30
View Original
Added on April 04, 2026

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________.

Commission File Number: 001-37979

VERRA MOBILITY CORPORATION

(Exact name of registrant as specified in its charter)

Delaware 81-3563824
(State of (I.R.S. Employer
Incorporation) Identification No.)
1150 North Alma School Road 85201
Mesa, Arizona (Zip Code)
(Address of Principal Executive Offices)

(480) 443-7000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

(Title of Each Class) (Trading Symbol) (Name of Each Exchange on Which Registered)
Class A Common Stock, par value $0.0001 per share VRRM Nasdaq Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES

☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES

☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act:

Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). YES ☐ NO ☒

As of November 6, 2023, there were 166,313,632 shares of the Company’s Class A Common Stock, par value $0.0001 per share, issued and outstanding.

VERRA MOBILITY CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2023

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION 4
Item 1. Financial Statements 4
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Operations and Comprehensive Income 5
Condensed Consolidated Statements of Stockholders’ Equity 6
Condensed Consolidated Statements of Cash Flows 8
Notes to the Condensed Consolidated Financial Statements 10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28
Item 3. Quantitative and Qualitative Disclosures About Market Risk 39
Item 4. Controls and Procedures 40
PART II—OTHER INFORMATION 41
Item 1. Legal Proceedings 41
Item 1A. Risk Factors 41
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 41
Item 3. Defaults Upon Senior Securities 42
Item 4. Mine Safety Disclosures 42
Item 5. Other Information 42
Item 6. Exhibits 43
SIGNATURES 45

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of federal securities laws. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, products, services, and technology offerings, market conditions, growth and trends, expansion plans and opportunities, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “preliminary,” “likely” and similar expressions, and the negative of these expressions, are intended to identify forward-looking statements.

The future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Factors that could cause actual results to differ include the risks and uncertainties described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022, which highlight, among other risks:

• customer concentration in our Commercial Services and Government Solutions segments;

• our ability to manage our substantial level of indebtedness;

• risks and uncertainties related to our government contracts, including legislative changes, termination rights, delays in payments, audits and investigations;

• decreases in the prevalence of automated and other similar methods of photo enforcement, parking solutions or the use of tolling;

• our ability to keep up with technological developments and changing customer preferences;

• our ability to successfully implement our acquisition strategy or integrate acquisitions;

• failure in or breaches of our networks or systems, including as a result of cyber-attacks; and

• our ability to manage the risks, uncertainties and exposures related to our international operations.

You should not rely on forward-looking statements as predictions of future events. We operate in a very competitive and rapidly changing environment and new risks emerge from time to time. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, are available free of charge on our website, verramobility.com, under the heading “Investors” immediately after they are filed with, or furnished to, the SEC. We use our Investor Relations website, ir.verramobility.com, as a means of disclosing information, which may be of interest or material to our investors and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, public conference calls, webcasts, and social media. Information contained on or accessible through, including any reports available on, our website is not a part of, and is not incorporated by reference into, this Quarterly Report on Form 10-Q or any other report or document we file with the SEC. Any reference to our website in this Form 10-Q is intended to be an inactive textual reference only.

Unless the context indicates otherwise, the terms “Verra Mobility,” the “Company,” “we,” “us,” and “our” as used in this Quarterly Report on Form 10-Q refer to Verra Mobility Corporation, a Delaware corporation, and its subsidiaries taken as a whole.

Item 1. Financial Statements

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share data) December 31,<br>2022
Assets
Current assets:
Cash and cash equivalents 114,379 $ 105,204
Restricted cash 3,951 3,911
Accounts receivable (net of allowance for credit losses of 17.6 million and15.9 million at September 30, 2023 and December 31, 2022, respectively) 191,753 163,786
Unbilled receivables 40,069 30,782
Inventory 19,943 19,307
Prepaid expenses and other current assets 41,197 39,604
Total current assets 411,292 362,594
Installation and service parts, net 26,127 22,923
Property and equipment, net 117,827 109,775
Operating lease assets 35,299 37,593
Intangible assets, net 315,754 377,420
Goodwill 832,817 833,480
Other non-current assets 16,959 12,484
Total assets 1,756,075 $ 1,756,269
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 89,760 $ 79,869
Deferred revenue 34,322 31,164
Accrued liabilities 59,459 48,847
Tax receivable agreement liability, current portion 5,007 4,994
Current portion of long-term debt 9,019 21,935
Total current liabilities 197,567 186,809
Long-term debt, net of current portion 1,030,351 1,190,045
Operating lease liabilities, net of current portion 30,552 33,362
Tax receivable agreement liability, net of current portion 50,900 50,900
Private placement warrant liabilities — 24,066
Asset retirement obligations 14,075 12,993
Deferred tax liabilities, net 19,015 21,149
Other long-term liabilities 9,559 5,875
Total liabilities 1,352,019 1,525,199
Commitments and contingencies (Note 13)
Stockholders' equity
Preferred stock, 0.0001 par value, 1,000 shares authorized with no shares issued and outstanding at September 30, 2023 and December 31, 2022 — —
Common stock, 0.0001 par value, 260,000 shares authorized with 166,310and 148,962 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively 17 15
Common stock contingent consideration — 36,575
Additional paid-in capital 549,374 305,423
Accumulated deficit (128,909 ) (98,078 )
Accumulated other comprehensive loss (16,426 ) (12,865 )
Total stockholders' equity 404,056 231,070
Total liabilities and stockholders' equity 1,756,075 $ 1,756,269

All values are in US Dollars.

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands, except per share data) 2023 2022 2023 2022
Service revenue $ 201,029 $ 180,617 $ 581,777 $ 516,253
Product sales 8,904 17,039 24,520 39,275
Total revenue 209,933 197,656 606,297 555,528
Cost of service revenue 5,150 4,144 13,718 11,636
Cost of product sales 6,864 11,317 18,209 25,638
Operating expenses 68,873 60,536 196,373 166,795
Selling, general and administrative expenses 42,276 41,126 125,494 122,913
Depreciation, amortization and (gain) loss on disposal of assets, net 27,597 35,035 87,018 105,881
Total costs and expenses 150,760 152,158 440,812 432,863
Income from operations 59,173 45,498 165,485 122,665
Interest expense, net 20,384 20,260 65,842 49,024
Change in fair value of private placement warrants (553 ) (2,267 ) 24,966 (5,133 )
Tax receivable agreement liability adjustment — — — (965 )
Loss (gain) on interest rate swap 60 — (1,947 ) —
Loss (gain) on extinguishment of debt 1,975 (3,005 ) 3,533 (3,005 )
Other income, net (4,498 ) (2,462 ) (12,766 ) (9,367 )
Total other expenses 17,368 12,526 79,628 30,554
Income before income taxes 41,805 32,972 85,857 92,111
Income tax provision 11,497 8,396 31,864 27,854
Net income $ 30,308 $ 24,576 $ 53,993 $ 64,257
Other comprehensive loss:
Change in foreign currency translation adjustment (4,189 ) (8,167 ) (3,561 ) (15,840 )
Total comprehensive income $ 26,119 $ 16,409 $ 50,432 $ 48,417
Net income per share:
Basic $ 0.18 $ 0.16 $ 0.35 $ 0.42
Diluted $ 0.18 $ 0.15 $ 0.34 $ 0.38
Weighted average shares outstanding:
Basic 168,089 151,429 156,196 154,067
Diluted 169,497 158,304 157,133 160,433

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

For the Three and Nine Months Ended September 30, 2023
Common<br>Stock Common<br>Stock<br>Contingent Additional<br>Paid-in Accumulated Accumulated<br>Other<br>Comprehensive Total<br>Stockholders'
(In thousands) Shares Amount Consideration Capital Deficit Loss Equity
Balance as of December 31, 2022 148,962 $ 15 $ 36,575 $ 305,423 $ (98,078 ) $ (12,865 ) $ 231,070
Net income — — — — 4,577 — 4,577
Vesting of restricted stock units ("RSUs") and performance share units ("PSUs") 313 — — — — — —
Exercise of stock options 53 — — 699 — — 699
Payment of employee tax withholding related to RSUs and PSUs vesting — — — (2,526 ) — — (2,526 )
Exercise of warrants 633 — — — — — —
Stock-based compensation — — — 3,378 — — 3,378
Other comprehensive loss, net of tax — — — — — (90 ) (90 )
Balance as of March 31, 2023 149,961 15 36,575 306,974 (93,501 ) (12,955 ) 237,108
Net income — — — — 19,108 — 19,108
Earn-out shares issued to Platinum Stockholder 2,500 — (18,288 ) 18,288 — — —
Vesting of RSUs and PSUs 121 — — — — — —
Exercise of stock options 127 — — 1,689 — — 1,689
Payment of employee tax withholding related to RSUs and PSUs vesting — — — (502 ) — — (502 )
Exercise of warrants 14,208 2 — 202,652 — — 202,654
Stock-based compensation — — — 4,525 — — 4,525
Other comprehensive income, net of tax — — — — — 718 718
Balance as of June 30, 2023 166,917 17 18,287 533,626 (74,393 ) (12,237 ) 465,300
Net income — — — — 30,308 — 30,308
Earn-out shares issued to Platinum Stockholder 2,500 — (18,287 ) 18,287 — — —
Share repurchases and retirement (4,581 ) — — (15,176 ) (84,824 ) — (100,000 )
Vesting of RSUs and PSUs 7 — — — — — —
Exercise of stock options 34 — — 457 — — 457
Payment of employee tax withholding related to RSUs and PSUs vesting — — — (49 ) — — (49 )
Exercise of warrants 1,433 — — 7,786 — — 7,786
Stock-based compensation — — — 4,443 — — 4,443
Other comprehensive loss, net of tax — — — — — (4,189 ) (4,189 )
Balance as of September 30, 2023 166,310 $ 17 $ — $ 549,374 $ (128,909 ) $ (16,426 ) $ 404,056

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(Unaudited)

For the Three and Nine Months Ended September 30, 2022
Common<br>Stock Common<br>Stock<br>Contingent Additional<br>Paid-in Accumulated Accumulated<br>Other<br>Comprehensive Total<br>Stockholders'
(In thousands) Shares Amount Consideration Capital Deficit Loss Equity
Balance as of December 31, 2021 156,079 $ 16 $ 36,575 $ 309,883 $ (81,416 ) $ (5,094 ) $ 259,964
Net income — — — — 10,040 — 10,040
Vesting of RSUs 154 — — — — — —
Exercise of stock options 7 — — 93 — — 93
Payment of employee tax withholding related to RSUs vesting — — — (1,436 ) — — (1,436 )
Stock-based compensation — — — 4,446 — — 4,446
Other comprehensive income, net of tax — — — — — 2,708 2,708
Balance as of March 31, 2022 156,240 16 36,575 312,986 (71,376 ) (2,386 ) 275,815
Net income — — — — 29,641 — 29,641
Share repurchases and retirement (3,076 ) (1 ) — (6,163 ) (49,117 ) — (55,281 )
Vesting of RSUs 51 — — — — — —
Exercise of stock options 5 — — 66 — — 66
Payment of employee tax withholding related to RSUs vesting — — — (203 ) — — (203 )
Stock-based compensation — — — 4,566 — — 4,566
Other comprehensive loss, net of tax — — — — — (10,381 ) (10,381 )
Balance as of June 30, 2022 153,220 15 36,575 311,252 (90,852 ) (12,767 ) 244,223
Net income — — — — 24,576 — 24,576
Share repurchases and retirement (3,855 ) — — (7,830 ) (61,960 ) — (69,790 )
Vesting of RSUs 122 — — — — — —
Exercise of stock options 64 — — 838 — — 838
Payment of employee tax withholding related to RSUs vesting — — — (1,433 ) — — (1,433 )
Stock-based compensation — — — 4,644 — — 4,644
Other comprehensive loss, net of tax — — — — — (8,167 ) (8,167 )
Balance as of September 30, 2022 149,551 $ 15 $ 36,575 $ 307,471 $ (128,236 ) $ (20,934 ) $ 194,891

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

condensed consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30,
($ in thousands) 2023 2022
Cash Flows from Operating Activities:
Net income $ 53,993 $ 64,257
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 86,835 105,294
Amortization of deferred financing costs and discounts 3,600 4,122
Change in fair value of private placement warrants 24,966 (5,133 )
Tax receivable agreement liability adjustment — (965 )
Gain on interest rate swap (3,361 ) —
Loss (gain) on extinguishment of debt 3,533 (3,005 )
Credit loss expense 7,553 10,892
Deferred income taxes (7,236 ) (17,310 )
Stock-based compensation 12,346 13,656
Other 306 624
Changes in operating assets and liabilities:
Accounts receivable (35,854 ) (25,846 )
Unbilled receivables (9,529 ) (4,205 )
Inventory (1,061 ) (9,056 )
Prepaid expenses and other assets 2,948 8,405
Deferred revenue 3,475 6,291
Accounts payable and other current liabilities 27,059 (1,978 )
Other liabilities 798 2,733
Net cash provided by operating activities 170,371 148,776
Cash Flows from Investing Activities:
Payment of contingent consideration — (647 )
Payments for interest rate swap (1,414 ) —
Purchases of installation and service parts and property and equipment (40,501 ) (35,927 )
Cash proceeds from the sale of assets 222 140
Net cash used in investing activities (41,693 ) (36,434 )
Cash Flows from Financing Activities:
Repayment on the revolver — (25,000 )
Repayment of long-term debt (179,264 ) (6,764 )
Payment of debt issuance costs (362 ) (410 )
Proceeds from the exercise of warrants 161,408 —
Share repurchases and retirement (100,000 ) (125,071 )
Proceeds from the exercise of stock options 2,845 997
Payment of employee tax withholding related to RSUs and PSUs vesting (3,077 ) (3,072 )
Settlement of contingent consideration — (205 )
Net cash used in financing activities (118,450 ) (159,525 )
Effect of exchange rate changes on cash and cash equivalents (1,013 ) (1,620 )
Net increase (decrease) in cash, cash equivalents and restricted cash 9,215 (48,803 )
Cash, cash equivalents and restricted cash - beginning of period 109,115 104,432
Cash, cash equivalents and restricted cash - end of period $ 118,330 $ 55,629

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

Nine Months Ended September 30,
2023 2022
Supplemental cash flow information:
Interest paid $ 60,370 $ 40,068
Income taxes paid, net of refunds 37,627 43,455
Supplemental non-cash investing and financing activities:
Earn-out shares issued to Platinum Stockholder 36,575 —
Purchases of installation and service parts and property and equipment in accounts payable and accrued liabilities at period-end 6,927 6,420
Increase in additional paid-in capital due to exercise of private placement warrants 49,032 —

See accompanying Notes to the Condensed Consolidated Financial Statements.

VERRA MOBILITY CORPORATION

Notes to the CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business

Verra Mobility Corporation (collectively with its subsidiaries, the “Company” or “Verra Mobility”) offers integrated technology solutions and services to its customers who are located throughout the world, primarily within the United States, Australia, Canada and Europe. The Company is organized into three operating segments: Commercial Services, Government Solutions and Parking Solutions (see Note 14, Segment Reporting).

The Company’s Commercial Services segment offers toll and violation management solutions for the commercial fleet and rental car industries by partnering with the leading fleet management and rental car companies in North America. Electronic toll payment services enable fleet drivers and rental car customers to use high-speed cashless toll lanes or all-electronic cashless toll roads. The service helps commercial fleets reduce toll management costs, while it provides rental car companies with a revenue-generating, value-added service for their customers. Electronic violation processing services reduce the cost and risk associated with vehicle-issued violations, such as toll, parking or camera-enforced tickets. Title and registration services offer title and registration processing for individuals, rental car companies and fleet management companies. In Europe, the Company provides violations processing through Euro Parking Collection plc and consumer tolling services through Pagatelia S.L.

The Company’s Government Solutions segment offers photo enforcement solutions and services to its customers. 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 international operations for this segment primarily involve the sale of traffic enforcement products and related maintenance services.

The Company’s Parking Solutions segment offers an integrated suite of parking software and hardware solutions to its customers, which include universities, municipalities, healthcare facilities and commercial parking operators. This segment develops specialized hardware and parking management software that provides a platform for the issuance of parking permits, enforcement, gateless vehicle counting, event parking and citation services. It also produces and markets its proprietary software as a service to its customers throughout the United States and Canada.

The Company was originally incorporated in Delaware on August 15, 2016, under the name “Gores Holdings II, Inc.” (“Gores”) as a special purpose acquisition company. On January 19, 2017, Gores consummated its initial public offering (the “IPO”), following which its shares began trading on Nasdaq. On June 21, 2018, Gores entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with Greenlight Holding II Corporation, PE Greenlight Holdings, LLC (the “Platinum Stockholder”), AM Merger Sub I, Inc., a direct, wholly owned subsidiary of Gores, and AM Merger Sub II, LLC, a direct, wholly owned subsidiary of Gores. On October 17, 2018, the Company consummated the transactions contemplated by the Merger Agreement (the “Business Combination”) and changed its name to “Verra Mobility Corporation.” As a result of the Business Combination, Verra Mobility Corporation became the owner, directly or indirectly, of all of the equity interests of Verra Mobility Holdings, LLC and its subsidiaries.

2. Significant Accounting Policies

Principles of Consolidation

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 condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.

10

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 condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions include those related to allocating the transaction price for revenue recognition, inventory valuation, allowance for credit losses, fair value of the private placement warrant liabilities, fair value of the interest rate swap, self-insurance liability, valuation allowance on deferred tax assets, uncertain tax positions, apportionment for state income taxes, the tax receivable agreement liability, fair value of privately-held securities, impairment assessments of goodwill, intangible assets and other long-lived 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.

Concentration of Credit Risk

Significant customers are those which represent more than 10% of the Company’s total revenue or accounts receivable, net. Revenue from the single Government Solutions customer exceeding 10% of total revenue is presented below:

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
City of New York Department of Transportation 16.5 % 20.5 % 17.1 % 19.5 %

The City of New York Department of Transportation (“NYCDOT”) represented 13% and 22% of total accounts receivable, net as of September 30, 2023 and December 31, 2022, respectively. There is no material reserve related to NYCDOT open receivables as amounts are deemed collectible based on current conditions and expectations. No other Government Solutions customer exceeded 10% of total accounts receivable, net as of any period presented.

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

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Hertz Corporation 11.8 % 12.6 % 11.8 % 11.8 %
Avis Budget Group, Inc. 15.1 % 13.9 % 13.8 % 12.9 %
Enterprise Holdings, Inc. 11.6 % 10.3 % 10.5 % 9.7 %

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

There were no significant customer concentrations that exceeded 10% of total revenue or accounts receivable, net for the Parking Solutions segment as of or for any period presented.

Allowance for Credit Losses

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 current and future expectations using probability-weighted assumptions about potential outcomes. Receivables are written off against the allowance for credit losses 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 evaluates the adequacy of its allowance for expected credit losses by comparing its actual write-offs to its previously recorded estimates and adjusts appropriately.

The Company identified portfolio segments based on the type of business, industry in which the customer operates and historical credit loss patterns. The following presents the activity in the allowance for credit losses for the nine months ended September 30, 2023 and 2022, respectively:

11

($ in thousands) Commercial Services<br>(Driver-billed) (1) Commercial <br>Services <br>(All other) Government Solutions Parking Solutions Total
Balance at January 1, 2023 $ 9,600 $ 1,577 $ 4,573 $ 157 $ 15,907
Credit loss expense 8,622 756 (1,964 ) 139 7,553
Write-offs, net of recoveries (5,031 ) (104 ) (185 ) (562 ) (5,882 )
Balance at September 30, 2023 $ 13,191 $ 2,229 $ 2,424 $ (266 ) $ 17,578
($ in thousands) Commercial Services<br>(Driver-billed) (1) Commercial <br>Services <br>(All other) Government Solutions Parking Solutions Total
Balance at January 1, 2022 $ 5,397 $ 3,092 $ 3,649 $ — $ 12,138
Credit loss expense 8,867 835 694 496 10,892
Write-offs, net of recoveries (2,810 ) (2,089 ) (26 ) (430 ) (5,355 )
Balance at September 30, 2022 $ 11,454 $ 1,838 $ 4,317 $ 66 $ 17,675

(1) Driver-billed consists of receivables from drivers of rental cars and fleet management companies for which the Company bills on behalf of its customers. Receivables not collected from drivers within a defined number of days are transferred to customers subject to applicable bad debt sharing agreements.

Deferred Revenue

Deferred revenue represents amounts that have been invoiced in advance and are expected to be recognized as revenue in future periods, and it primarily relates to Government Solutions and Parking Solutions customers. The Company had approximately $12.9 million and $12.2 million of deferred revenue in the Government Solutions segment as of September 30, 2023 and December 31, 2022, respectively. The majority of the remaining performance obligations as of September 30, 2023 are expected to be completed and recognized as revenue in the next 12 months and $4.1 million is expected to be recognized from 2024 through 2027. The Company had approximately $25.6 million and $21.2 million of deferred revenue in the Parking Solutions segment as of September 30, 2023 and December 31, 2022, respectively. The majority of the remaining performance obligations as of September 30, 2023 are expected to be completed and recognized as revenue in the next 12 months and $0.5 million is expected to be recognized after September 30, 2024.

Interest Rate Swap

In December 2022, the Company entered into a cancellable interest rate swap agreement to hedge its exposure to interest rate fluctuations associated with the LIBOR (now transitioned to Term Secured Overnight Financing Rate “SOFR,” as discussed below) portion of the variable interest rate on its 2021 Term Loan. Under the interest rate swap agreement, the Company pays a fixed rate of 5.17% and the counterparty pays a variable interest rate. The Company entered into an International Swaps and Derivatives Association, Inc. Master Agreement with the counterparty which provides for the net settlement of all, or a specified group, of derivative transactions through a single payment. The notional amount on the interest rate swap is $675.0 million. The Company has the option to effectively terminate the interest rate swap agreement starting in December 2023, and monthly thereafter until December 2025. The Company is treating the interest rate swap as an economic hedge for accounting purposes and any changes in the fair value of the derivative instrument (including accrued interest) and related cash payments are recorded in the condensed consolidated statements of operations within the loss (gain) on interest rate swap line item.

The Company recorded a $0.1 million loss during the three months ended September 30, 2023, of which $0.2 million is associated with the derivative instrument re-measured to fair value at the end of the reporting period, netted by $0.1 million related to the monthly cash payments. The Company recorded a $1.9 million gain during the nine months ended September 30, 2023, of which $3.3 million is associated with the derivative instrument re-measured to fair value at the end of the reporting period, netted by $1.4 million related to the monthly cash payments. The effect of remeasurement to fair value is recorded within the operating activities section and the monthly cash payments are recorded within the investing activities section in the condensed consolidated statements of cash flows. See below for further discussion on the fair value measurement of the interest rate swap, and Note 6, Long-term Debt, for additional information on the Company's mix of fixed and variable debt.

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Recent Accounting Pronouncements

Accounting Standards Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. It provides optional expedients and exceptions for applying GAAP to contract modifications, subject to meeting certain criteria, that reference LIBOR or another reference rate that is discontinued. 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.

In March 2023, the Company amended its 2021 Term Loan agreement to transition away from LIBOR to Term SOFR with the cessation of LIBOR in June 2023. As a result, the Company adopted the standard and elected to apply the optional expedients which enabled it to consider the change in the benchmark interest rate as a continuation of the existing loan agreement and account for it prospectively. The adoption of this standard did not have a material impact to the condensed consolidated financial statements.

Accounting Standards Not Yet Adopted

On June 30, 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The ASU clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities. The guidance is effective for fiscal years, including interim periods beginning after December 15, 2023. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its financial statements.

3. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following at:

($ in thousands) September 30,<br>2023 December 31,<br>2022
Prepaid services $ 10,942 $ 9,171
Prepaid tolls 9,005 9,978
Costs to fulfill a customer contract 5,452 3,193
Prepaid computer maintenance 4,290 5,492
Prepaid income taxes 5,814 4,629
Interest rate swap asset 2,266 —
Deposits 1,778 2,057
Other 1,650 5,084
Total prepaid expenses and other current assets $ 41,197 $ 39,604

4. Goodwill and Intangible Assets

The following table presents the changes in the carrying amount of goodwill by reportable segment:

Commercial Government Parking
($ in thousands) Services Solutions Solutions Total
Balance at December 31, 2022 $ 419,720 $ 214,618 $ 199,142 $ 833,480
Foreign currency translation adjustment 88 (751 ) — (663 )
Balance at September 30, 2023 $ 419,808 $ 213,867 $ 199,142 $ 832,817

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

September 30, 2023 December 31, 2022
Weighted Weighted
Average Gross Average Gross
Remaining Carrying Accumulated Remaining Carrying Accumulated
($ in thousands) Useful Life Amount Amortization Useful Life Amount Amortization
Trademarks 0.4 years $ 36,113 $ 32,718 0.4 years $ 36,151 $ 32,233
Non-compete agreements zero 62,541 62,541 0.1 years 62,529 60,926
Customer relationships 4.7 years 557,223 273,108 5.5 years 557,570 227,102
Developed technology 0.9 years 200,553 172,309 1.2 years 201,548 160,117
Gross carrying value of intangible assets 856,430 $ 540,676 857,798 $ 480,378
Less: accumulated amortization (540,676 ) (480,378 )
Intangible assets, net $ 315,754 $ 377,420

Amortization expense was $18.9 million and $26.6 million for the three months ended September 30, 2023 and 2022, respectively, and was $60.9 million and $81.0 million for the nine months ended September 30, 2023 and 2022, respectively.

Estimated amortization expense in future years is expected to be:

( in thousands)
Remainder of 2023 16,721
2024 66,881
2025 64,183
2026 57,229
2027 28,125
Thereafter 82,615
Total 315,754

All values are in US Dollars.

5. Accrued Liabilities

Accrued liabilities consist of the following at:

($ in thousands) September 30,<br>2023 December 31,<br>2022
Accrued salaries and wages $ 21,690 $ 19,109
Accrued interest payable 9,235 4,459
Current deferred tax liabilities 7,519 7,559
Current portion of operating lease liabilities 7,088 6,355
Restricted cash due to customers 3,204 3,541
Payroll liabilities 3,025 2,136
Advance deposits 2,781 1,029
Accrued commissions 1,195 857
Income tax payable 963 269
Other 2,759 3,533
Total accrued liabilities $ 59,459 $ 48,847

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6. Long-term Debt

The following table provides a summary of the Company’s long-term debt at:

($ in thousands) September 30,<br>2023 December 31,<br>2022
2021 Term Loan, due 2028 $ 706,842 $ 886,106
Senior Notes, due 2029 350,000 350,000
Less: original issue discounts (3,869 ) (5,637 )
Less: unamortized deferred financing costs (13,603 ) (18,489 )
Total long-term debt 1,039,370 1,211,980
Less: current portion of long-term debt (9,019 ) (21,935 )
Total long-term debt, net of current portion $ 1,030,351 $ 1,190,045

2021 Term Loan

In March 2021, VM Consolidated, Inc. (“VM Consolidated”), 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 $900.0 million, maturing on March 26, 2028, which includes the incremental borrowing of $250.0 million in December 2021 as a result of exercising the accordion feature available under the agreement. In connection with the 2021 Term Loan borrowings, the Company had $4.6 million of offering discount costs and $4.5 million in deferred financing costs, both of which were capitalized and are being amortized over the remaining life of the 2021 Term Loan.

During the nine months ended September 30, 2023, the Company made early repayments of $172.5 million on the 2021 Term Loan and as a result, the total principal outstanding was $706.8 million as of September 30, 2023. The Company recognized a loss on extinguishment of debt of $2.0 million and $3.5 million for the three and nine months ended September 30, 2023, respectively, related to the write-off of pre-existing deferred financing costs and discounts.

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. In March 2023, the Company amended its 2021 Term Loan agreement to transition away from LIBOR to Term SOFR with the cessation of LIBOR in June 2023. To compensate for the differences in reference rates utilized, the amended agreement also includes a credit spread adjustment of 0.11448% for an interest period of one-month duration, 0.26161% for a three-month duration, 0.42826% for a six-month duration, and 0.71513% for twelve-months duration in addition to Term SOFR and the applicable margin. The Company has applied the optional expedients in ASC 848, Reference Rate Reform, and elected to treat the change in the benchmark interest rate to Term SOFR as a continuation of the existing loan agreement and account for it prospectively. As of September 30, 2023, the new all-in interest rate on the 2021 Term Loan was 8.7%.

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), as set forth in the following table:

Consolidated First Lien Net Leverage Ratio (As Defined by the 2021 Term Loan Agreement) Applicable<br>Prepayment<br>Percentage
> 3.70:1.00 50%
< 3.70:1.00 and > 3.20:1.00 25%
< 3.20:1.00 0%

Senior Notes

In March 2021, VM Consolidated 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.

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Interest on the Senior Notes is fixed at 5.50% per annum and is payable on April 15 and October 15 of each year. 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:

Year Percentage
2024 102.750%
2025 101.375%
2026 and thereafter 100.000%

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.

PPP Loan

During fiscal year 2020, one of the Company’s wholly owned subsidiaries received a $2.9 million 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. In early 2021, the Company applied for forgiveness of this loan, and on September 23, 2022, it was notified by the SBA that the loan, together with accrued interest, had been fully forgiven under the provisions of the PPP Loan program. Accordingly, the Company recognized a $3.0 million gain on extinguishment of debt in the condensed consolidated statement of operations for the three and nine months ended September 30, 2022.

The Revolver

The Company has a Revolving Credit Agreement (the “Revolver”) with a commitment of up to $75.0 million available for loans and letters of credit. The Revolver matures on December 20, 2026. 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) Term SOFR plus an applicable margin, or (2) an alternate base rate, plus an applicable margin. The margin percentage applied to (1) Term SOFR 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. There is a credit spread adjustment of 0.10% for a one-month duration, 0.15% for a three-month duration, and 0.25% for a six-month duration, in addition to Term SOFR and the applicable margin percentages. There are no outstanding borrowings on the Revolver as of September 30, 2023 or December 31, 2022. The availability to borrow was $74.8 million, net of $0.2 million of outstanding letters of credit at September 30, 2023.

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 $0.2 million of outstanding letters of credit as of September 30, 2023.

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. Substantially all of the Company’s assets are pledged as collateral to secure the Company’s indebtedness under the 2021 Term Loan. At September 30, 2023, the Company was compliant with all debt covenants.

Interest Expense

The Company recorded interest expense, including amortization of deferred financing costs and discounts, of $20.4 million and $20.3 million for the three months ended September 30, 2023 and 2022, respectively, and $65.8 million and $49.0 million for the nine months ended September 30, 2023 and 2022, respectively.

The weighted average effective interest rates on the Company’s outstanding borrowings were 7.6% and 7.0% at September 30, 2023 and December 31, 2022, respectively.

See Note 2, Significant Accounting Policies, for additional information on the interest rate swap entered into in December 2022 to hedge the Company's exposure against rising interest rates.

7. Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement, includes a single definition of fair value to be used for financial reporting purposes, provides a framework for applying this definition and for measuring fair value under GAAP, and establishes a fair value hierarchy that categorizes into three levels the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are summarized as follows:

Level 1 – Fair value is based on observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2 – Fair value is determined using quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or inputs other than quoted prices that are directly or indirectly observable.

Level 3 – Fair value is determined using one or more significant inputs that are unobservable in active markets at the measurement date, such as a pricing model, discounted cash flow, or similar technique.

The carrying amounts reported in the Company’s 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 long-term debt was calculated based upon available market information. The carrying value and the estimated fair value of long-term debt are as follows:

Level in September 30, 2023 December 31, 2022
Fair Value Carrying Estimated Carrying Estimated
($ in thousands) Hierarchy Amount Fair Value Amount Fair Value
2021 Term Loan 2 $ 693,234 $ 708,609 $ 866,365 $ 883,891
Senior Notes 2 346,136 318,500 345,615 313,250

The Company had issued Private Placement Warrants in connection with the IPO to acquire shares of the Company's Class A Common Stock which had a five-year term and expired in October 2023. As of September 30, 2023, all Private Placement Warrants were exercised by the warrant holders. The fair value of the Private Placement Warrants liabilities was measured on a recurring basis and was estimated using the Black-Scholes option pricing model using significant unobservable inputs, and was therefore classified within level 3 of the fair value hierarchy. The key assumptions used at December 31, 2022 were as follows:

December 31, 2022
Stock price $ 13.83
Strike price $ 11.50
Volatility 44.0 %
Remaining life (in years) 0.8
Risk-free interest rate 4.74 %
Expected dividend yield 0.0 %
Estimated fair value (per warrant) $ 3.61

The following summarizes the changes in fair value of Private Placement Warrant liabilities included in net income and the impact of exercises for the respective periods:

Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2023 2022 2023 2022
Beginning balance $ 5,430 $ 35,600 $ 24,066 $ 38,466
Change in fair value of private placement warrants (553 ) (2,267 ) 24,966 (5,133 )
Exercise of warrants (4,877 ) — (49,032 ) —
Ending balance $ — $ 33,333 $ — $ 33,333

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Change in fair value of private placement warrants consists of adjustments related to the Private Placement Warrants liabilities re-measured to fair value at the end of each reporting period and the final mark-to-market adjustments for exercised warrants. During the nine months ended September 30, 2023, there were 6.7 million exercises of Private Placement Warrants which reduced our Private Placement Warrants liabilities by $49.0 million with an offset to common stock at par value and the remaining to additional paid in capital.

The Company has an equity investment measured at cost with a carrying value of $1.9 million as of September 30, 2023, and is only adjusted to fair value if there are identified events that would indicate a need for an upward or downward adjustment or changes in circumstances that may indicate impairment. The estimation of fair value requires the use of significant unobservable inputs, such as voting rights and obligations in the securities held, and is therefore classified within level 3 of the fair value hierarchy. There were no identified events that required a fair value adjustment during the nine months ended September 30, 2023.

The recurring fair value measurement of the interest rate swap was valued based on observable inputs for similar assets and liabilities including swaption values and other observable inputs for interest rates and yield curves and is classified within level 2 of the fair value hierarchy. The following presents the changes in the fair value of the interest rate swap in the gross balances within the below line items for the respective periods:

($ in thousands) Three Months Ended <br>September 30, 2023 Nine Months Ended<br> September 30, 2023
Prepaid expenses and other current assets
Beginning balance $ 2,263 $ —
Change in fair value of interest rate swap 3 2,266
Ending balance $ 2,266 $ 2,266
Other non-current assets
Beginning balance $ 2,296 $ 1,973
Change in fair value of interest rate swap (204 ) 119
Ending balance $ 2,092 $ 2,092
Accrued liabilities
Beginning balance $ — $ 977
Change in fair value of interest rate swap — (977 )
Ending balance $ — $ —

The Company separately classifies the current and non-current components based on the value of settlements due within 12 months (current) and greater than 12 months (non-current). For additional information on the interest rate swap, refer to Note 2, Significant Accounting Policies.

8. Net Income Per Share

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

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The components of basic and diluted net income per share are as follows:

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands, except per share data) 2023 2022 2023 2022
Numerator:
Net income $ 30,308 $ 24,576 $ 53,993 $ 64,257
Denominator:
Weighted average shares - basic 168,089 151,429 156,196 154,067
Common stock equivalents 1,408 6,875 937 6,366
Weighted average shares - diluted 169,497 158,304 157,133 160,433
Net income per share - basic $ 0.18 $ 0.16 $ 0.35 $ 0.42
Net income per share - diluted $ 0.18 $ 0.15 $ 0.34 $ 0.38
Antidilutive shares excluded from diluted net income per share:
Contingently issuable shares (1) — 5,000 — 5,000
ASR shares (2) 985 984 985 984
Non-qualified stock options 139 1,110 761 1,224
Performance share units 12 — 341 166
Restricted stock units 107 51 114 1,020
Total antidilutive shares excluded 1,243 7,145 2,201 8,394

(1) Contingently issuable shares related to the earn-out agreement as discussed in Note 12, Other Significant Transactions.

(2) Had the accelerated share repurchase (“ASR”) initiated in the third quarter of 2023 described in Note 10, Stockholders' Equity, been settled as of September 30, 2023, determined based on the volume-weighted average price per share since its effective date, the counterparties would have been required to deliver these additional estimated shares to the Company. However, the Company cannot predict the final number of shares to be received under the current ASR agreement until its completion, which is expected to occur during the first quarter of 2024. The final shares that were received by the Company for the August 2022 ASR were 943,361.

9. Income Taxes

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. 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.

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.

The Company’s effective income tax rate was 27.5% and 25.5% for the three months ended September 30, 2023 and 2022, respectively, and 37.1% and 30.2% for the nine months ended September 30, 2023 and 2022, respectively. The primary driver for the effective tax rate variance is the permanent difference related to the mark-to-market adjustments on the Private Placement Warrants.

10. Stockholders’ Equity

Warrants

As of December 31, 2022, there were 19,999,967 warrants outstanding to acquire 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) the remaining warrants issued in connection with the IPO (the “Public Warrants” and, together with the Private Placement Warrants, the “Warrants”). The Warrants had a five-year term and expired in October 2023, unless they were redeemed or liquidated prior to expiration. As of September 30, 2023, all Warrants were either exercised by the holder or redeemed by the Company.

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During the nine months ended September 30, 2023, the Company processed the exercise of 19,999,333 Warrants in exchange for the issuance of 16,273,406 shares of Class A Common Stock. There were 14,035,449 shares issued in exchange for cash-basis warrant exercises resulting in the receipt of $161.4 million in cash proceeds as of September 30, 2023. The remaining Warrant exercises were completed on a cashless basis. In addition, the Company redeemed 634 Public Warrants at a price of $0.01 per warrant, as the last sale price of the Class A Common Stock was equal to or exceeded $18.00 per share for 20 trading days within a 30 trading-day period before the Company sent the notice of redemption to the Warrant holders.

For details on the Private Placement Warrants liabilities as a result of the Warrant exercises and the changes in fair value of the liabilities recorded in the condensed consolidated statement of operations, refer to Note 7, Fair Value of Financial Instruments.

Share Repurchases and Retirement

Fiscal Year 2023

In November 2022, the Company's Board of Directors authorized a share repurchase program for up to an aggregate amount of $100.0 million of the Company's outstanding shares of Class A Common Stock over an 18-month period in open market, ASR or privately negotiated transactions, each as permitted under applicable rules and regulations, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Exchange Act.

The Company paid $8.1 million to repurchase 449,432 shares of its Class A Common Stock through open market transactions during the three months ended September 30, 2023, which it subsequently retired. On September 5, 2023, the Company used the remaining availability under the share repurchase program for an ASR and paid approximately $91.9 million to receive an initial delivery of 4,131,551 shares of its Class A Common Stock in accordance with an ASR agreement with a third-party financial institution. The final settlement is expected to occur during the first quarter of fiscal year 2024, at which time, a volume-weighted average price calculation over the term of the ASR agreement will be used to determine the final number and the average price of shares repurchased and retired. The Company accounted for the ASR as a common stock repurchase and a forward contract indexed to its own common stock. The Company determined that the equity classification criteria was met for the forward contract, therefore, it did not account for it as a derivative instrument.

The Company paid a total of $100.0 million for share repurchases during the three and nine months ended September 30, 2023, and accounted for the transactions by deducting the par value from common stock, reducing $15.2 million from additional paid-in capital calculated using an average share price, and by increasing accumulated deficit for the remaining cost of $84.8 million.

Fiscal Year 2022

In May 2022, the Company’s Board of Directors authorized a share repurchase program for up to an aggregate amount of $125.0 million of its outstanding shares of Class A Common Stock over a twelve-month period.

On May 12, 2022, the Company paid $50.0 million for an ASR and received an initial delivery of 2,739,726 shares of its Class A Common Stock in accordance with an ASR agreement with a third-party financial institution. The final settlement occurred during the third quarter of fiscal year 2022, at which time, the Company received 445,086 additional shares calculated using a volume-weighted average price over the term of the ASR agreement. In addition, during the second and third quarters of 2022, the Company paid $6.9 million and repurchased 445,791 shares of its Class A Common Stock through open market transactions. The Company then initiated a second ASR during the third quarter of 2022 for the remaining availability under the share repurchase program. On August 19, 2022, the Company paid $68.1 million for the second ASR, and received an initial delivery of 3,300,000 shares of its Class A Common Stock in accordance with an ASR agreement with a third-party financial institution. The final settlement occurred during the fourth quarter of fiscal year 2022. The Company accounted for each ASR transaction as a common stock repurchase and a forward contract indexed to its own common stock. The Company determined that the equity classification criteria was met for the forward contracts, therefore, it did not account for them as derivative instruments.

The Company paid a total of $125.0 million for shares repurchases and $0.1 million for direct costs during the nine months ended September 30, 2022 and accounted for the transactions by deducting the par value from common stock, reducing $14.0 million from additional paid-in capital calculated using an average share price, and by increasing accumulated deficit for the remaining cost of $111.1 million. The repurchases under the May 2022 share repurchase program were completed prior to the authorization of the November 2022 share repurchase program discussed above.

11. Stock-Based Compensation

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

Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2023 2022 2023 2022
Operating expenses $ 628 $ 331 $ 1,507 $ 829
Selling, general and administrative expenses 3,815 4,313 10,839 12,827
Total stock-based compensation expense $ 4,443 $ 4,644 $ 12,346 $ 13,656

12. Other Significant Transactions

Tax Receivable Agreement

At the closing of the Business Combination, the Company entered into a Tax Receivable Agreement (“TRA”) with the Platinum Stockholder. On August 3, 2022, the Platinum Stockholder sold and transferred to Lakeside Smart Holdco L.P (“Lakeside”), all of its rights, remaining interests and obligations as of that date under the TRA. The TRA provides for the payment to Lakeside of 50.0% of the net cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes (or is deemed to realize in certain circumstances) in periods after the closing of the Business Combination as a result of the increased tax basis of certain acquired intangibles prior to the Business Combination. The Company generally retains the benefit of the remaining 50.0% 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.

At September 30, 2023, the TRA liability was approximately $55.9 million of which $5.0 million was the current portion and $50.9 million was the non-current portion, both of which are included in the respective tax receivable agreement liability line items on the condensed consolidated balance sheets.

There were no changes to the TRA liability for the nine months ended September 30, 2023. The Company recorded a $1.0 million benefit for the nine months ended September 30, 2022 which resulted from lower estimated state tax rates due to changes in apportionment.

Earn-Out Agreement

Under the Merger Agreement, the Platinum Stockholder was 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 exceeded 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 were issued by the Company to the Platinum Stockholder upon meeting the below Common Stock Price Thresholds (each, a “Triggering Event”):

Common Stock Price Thresholds One-time Issuance of Shares
> $13.00 (a) 2,500,000
> $15.50 (a) 2,500,000
> $18.00 (a) 2,500,000
> $20.50 (a) 2,500,000

(a) All four tranches of Earn-Out Shares have been issued, as discussed below.

The Company estimated the original fair value of the contingently issuable shares to be $73.15 million, which was not subject to future revisions during the five-year period discussed above. The Company used a Monte Carlo simulation option-pricing model to arrive at its original estimate. Each tranche was valued separately giving specific consideration to the tranche’s price target. The simulation considered volatility and risk-free rates utilizing a peer group based on a five-year term. This was initially recorded as a distribution to shareholders and was presented as common stock contingent consideration. Upon the occurrence of each Triggering Event, any issuable shares were transferred from common stock contingent consideration to common stock and additional paid-in capital accounts.

On April 26, 2019, January 27, 2020, June 14, 2023, and July 26, 2023, the Triggering Events for the issuance of the first, second, third and fourth 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 each date had been greater than $13.00, $15.50, $18.00, and $20.50, respectively, for 10 out of 20 consecutive trading days. These Triggering Events resulted in the issuance of an aggregate 10,000,000 shares of the Company’s Class A Common Stock to the Platinum Stockholder and an aggregate increase in the Company’s common stock and additional paid-in capital accounts of $73.15 million, with a corresponding decrease to the common stock contingent consideration account. As of September 30, 2023, there are no shares that remain contingently issuable under the Earn-Out agreement.

13. Commitments and Contingencies

The Company had $1.9 million of bank guarantees at September 30, 2023 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 September 30, 2023 were $20.0 million. The majority of these outstanding commitments are expected to be incurred in the next twelve months, and approximately $2.9 million is expected to be incurred subsequent to September 30, 2024.

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.

Legal Proceedings

The Company is subject to legal and regulatory actions that arise from time to time in the ordinary course of business. The Company records a liability when it believes it is probable a loss will be incurred and the amount of loss or range of loss can be reasonably estimated. The assessment as to whether a loss is probable, reasonably possible or remote, and as to whether a loss or a range of such loss is estimable, often involves significant judgment about future events. The Company has determined that resolution of pending matters is not probable to have a material adverse impact on its 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.

Brantley v. 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. appealed the trial court’s ruling granting class certification, which was denied and their petition for discretionary review of the certification ruling by the Louisiana Supreme Court was declined. Merits discovery in the trial court is underway. Trial has been scheduled for March 2025. 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.

PlusPass Inc. (“PlusPass”) v. Verra Mobility Corporation, et al. is a lawsuit filed in the United States District Court, Central District of California, against Verra Mobility, The Gores Group LLC, Platinum Equity LLC, and ATS Processing Services, Inc., in November 2020. PlusPass filed amended complaints on November 20, 2020 and April 27, 2021. PlusPass alleges that Verra Mobility violated Section 7 of the Clayton Act through a merger of Highway Toll Administration, LLC (“HTA”) and American Traffic Solutions, Inc. (“ATS”) in 2018, and that Verra Mobility violated Sections 1 and 2 of the Sherman Antitrust Act of 1890 by using exclusive agreements in restraint of trade and other allegedly anticompetitive means to acquire and maintain monopoly power in the market for the administration of electronic toll payment collection for rental cars. PlusPass seeks injunctive relief, divestiture by Verra Mobility of HTA, damages in an amount to be determined, and attorneys’ fees and costs. On May 28, 2021, Verra Mobility filed a motion to dismiss PlusPass’ second amended complaint in its entirety, which was denied in August 2021. Discovery is closed. Verra Mobility filed a motion for summary judgment on June 21, 2023, which is pending. Trial had been set for November 2023, but was moved by the court to April 2024. Verra Mobility believes that all of PlusPass' claims are without merit and will defend itself vigorously in this litigation. 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.

14. Segment Reporting

The Company has three operating and reportable segments: Commercial Services, Government Solutions and Parking Solutions. Commercial Services offers toll and violation management solutions and title and registration services to commercial fleet vehicle owners, rental car companies and violation-issuing authorities. Government Solutions implements and administers traffic safety programs and products for municipalities and government agencies of all sizes. Parking Solutions provides an integrated suite of parking software and hardware solutions to its customers. 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 three segments.

Segment performance is based on revenues and income from operations before depreciation, amortization and stock-based compensation. The measure also excludes interest expense, net, income taxes and certain other transactions and is inclusive of other income, net. The tables below refer to this measure as segment profit. The aforementioned items are not indicative of operating performance, and, as a result are not included in the measures that are reviewed by the CODM for the segments. Other income, net included in segment profit below consists primarily of credit card rebates earned on the prepayment of tolling transactions and gains or losses on foreign currency transactions, and excludes certain non-operating expenses inapplicable to segments.

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

For the Three Months Ended September 30, 2023
Commercial Government Parking Corporate
($ in thousands) Services Solutions Solutions and Other Total
Service revenue $ 98,149 $ 85,092 $ 17,788 $ — $ 201,029
Product sales — 5,193 3,711 — 8,904
Total revenue 98,149 90,285 21,499 — 209,933
Cost of service revenue 567 578 4,005 — 5,150
Cost of product sales — 3,584 3,280 — 6,864
Operating expenses 21,174 42,395 4,676 — 68,245
Selling, general and administrative expenses 15,544 15,181 6,002 — 36,727
Loss on disposal of assets, net — 54 13 — 67
Other income, net (4,418 ) (75 ) (5 ) — (4,498 )
Segment profit $ 65,282 $ 28,568 $ 3,528 $ — $ 97,378
Segment profit $ 65,282 $ 28,568 $ 3,528 $ — $ 97,378
Depreciation and amortization — — — 27,530 27,530
Transaction and other related expenses — — — 152 152
Transformation expenses — — — 1,582 1,582
Change in fair value of private placement warrants — — — (553 ) (553 )
Loss on interest rate swap — — — 60 60
Loss on extinguishment of debt — — — 1,975 1,975
Stock-based compensation — — — 4,443 4,443
Interest expense, net — — — 20,384 20,384
Income before income taxes $ 65,282 $ 28,568 $ 3,528 $ (55,573 ) $ 41,805

24

For the Three Months Ended September 30, 2022
Commercial Government Parking Corporate
($ in thousands) Services Solutions Solutions and Other Total
Service revenue $ 86,056 $ 77,441 $ 17,120 $ — $ 180,617
Product sales — 12,287 4,752 — 17,039
Total revenue 86,056 89,728 21,872 — 197,656
Cost of service revenue 478 481 3,185 — 4,144
Cost of product sales — 7,496 3,821 — 11,317
Operating expenses 18,952 36,868 4,385 — 60,205
Selling, general and administrative expenses 14,126 15,034 6,218 — 35,378
(Gain) loss on disposal of assets, net — (54 ) 10 — (44 )
Other (income) expense, net (3,869 ) (454 ) 85 — (4,238 )
Segment profit $ 56,369 $ 30,357 $ 4,168 $ — $ 90,894
Segment profit $ 56,369 $ 30,357 $ 4,168 $ — $ 90,894
Depreciation and amortization — — — 35,079 35,079
Transaction and other related expenses — — — 2,968 2,968
Transformation expenses — — — 243 243
Change in fair value of private placement warrants — — — (2,267 ) (2,267 )
Gain on extinguishment of debt — — — (3,005 ) (3,005 )
Stock-based compensation — — — 4,644 4,644
Interest expense, net — — — 20,260 20,260
Income before income taxes $ 56,369 $ 30,357 $ 4,168 $ (57,922 ) $ 32,972
For the Nine Months Ended September 30, 2023
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Commercial Government Parking Corporate
($ in thousands) Services Solutions Solutions and Other Total
Service revenue $ 278,243 $ 253,319 $ 50,215 $ — $ 581,777
Product sales — 11,143 13,377 — 24,520
Total revenue 278,243 264,462 63,592 — 606,297
Cost of service revenue 1,738 1,770 10,210 — 13,718
Cost of product sales — 7,309 10,900 — 18,209
Operating expenses 61,819 119,398 13,649 — 194,866
Selling, general and administrative expenses 47,127 45,747 18,991 — 111,865
Loss on disposal of assets, net — 170 13 — 183
Other income, net (12,372 ) (325 ) (69 ) — (12,766 )
Segment profit $ 179,931 $ 90,393 $ 9,898 $ — $ 280,222
Segment profit $ 179,931 $ 90,393 $ 9,898 $ — $ 280,222
Depreciation and amortization — — — 86,835 86,835
Transaction and other related expenses — — — 484 484
Transformation expenses — — — 2,306 2,306
Change in fair value of private placement warrants — — — 24,966 24,966
Gain on interest rate swap — — — (1,947 ) (1,947 )
Loss on extinguishment of debt — — — 3,533 3,533
Stock-based compensation — — — 12,346 12,346
Interest expense, net — — — 65,842 65,842
Income before income taxes $ 179,931 $ 90,393 $ 9,898 $ (194,365 ) $ 85,857

25

For the Nine Months Ended September 30, 2022
Commercial Government Parking Corporate
($ in thousands) Services Solutions Solutions and Other Total
Service revenue $ 244,409 $ 225,337 $ 46,507 $ — $ 516,253
Product sales — 26,747 12,528 — 39,275
Total revenue 244,409 252,084 59,035 — 555,528
Cost of service revenue 1,576 1,517 8,543 — 11,636
Cost of product sales — 16,116 9,522 — 25,638
Operating expenses 53,004 103,660 9,302 — 165,966
Selling, general and administrative expenses 40,980 45,732 21,184 — 107,896
Loss on disposal of assets, net — 572 15 — 587
Other (income) expense, net (10,664 ) (600 ) 121 — (11,143 )
Segment profit $ 159,513 $ 85,087 $ 10,348 $ — $ 254,948
Segment profit $ 159,513 $ 85,087 $ 10,348 $ — $ 254,948
Depreciation and amortization — — — 105,294 105,294
Transaction and other related expenses — — — 3,457 3,457
Transformation expenses — — — 509 509
Change in fair value of private placement warrants — — — (5,133 ) (5,133 )
Tax receivable agreement liability adjustment — — — (965 ) (965 )
Gain on extinguishment of debt — — — (3,005 ) (3,005 )
Stock-based compensation — — — 13,656 13,656
Interest expense, net — — — 49,024 49,024
Income before income taxes $ 159,513 $ 85,087 $ 10,348 $ (162,837 ) $ 92,111

The Company primarily operates within the United States, Australia, Canada, United Kingdom and in various other countries in Europe and Asia. Revenues earned from goods transferred to customers at a point in time were approximately $8.9 million and $17.0 million for the three months ended September 30, 2023 and 2022, respectively and were $24.5 million and $39.3 million for the nine months ended September 30, 2023 and 2022, respectively.

The following table details the revenues from international operations for the respective periods:

Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2023 2022 2023 2022
Australia $ 13,461 $ 9,576 $ 33,431 $ 25,793
Canada 6,535 8,097 22,336 23,757
United Kingdom 4,923 4,517 17,585 15,716
All other 1,008 986 2,430 2,140
Total international revenues $ 25,927 $ 23,176 $ 75,782 $ 67,406

26

15. Subsequent Event

On October 30, 2023, 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 eighteen 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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read together with our Annual Report on Form 10-K for the year ended December 31, 2022, and our financial statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022. Please also refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Business Overview

We are a leading provider of smart mobility technology solutions throughout the United States, Australia, Canada and Europe. We make transportation safer, smarter and more connected through our integrated, data-driven solutions, including toll and violations management, title and registration services, automated safety and traffic enforcement and commercial parking management. We bring together vehicles, hardware, software, data, and people to solve transportation challenges for customers around the world, including fleet owners such as rental car companies (“RACs”) and fleet management companies (“FMCs”), governments, universities, healthcare facilities, commercial parking operators and other violation-issuing authorities. Our vision is to continue to develop and use technology and data intelligence to make transportation safer, smarter and more connected.

Executive Summary

We operate under long-term contracts and a highly reoccurring service revenue model. We continue to execute our strategy to grow revenue organically year over year and focus on initiatives that support our long-term vision. During the periods presented, we:

• Increased total revenue by $50.8 million, or 9.1%, from $555.5 million in the nine months ended September 30, 2022 to $606.3 million in the same period in 2023. The increase was mainly due to service revenue resulting from increased travel volume and higher adoption of the all-inclusive product offering in the Commercial Services segment and the expansion of speed programs in the Government Solutions segment.

• Generated cash flows from operating activities of $170.4 million and $148.8 million for the nine months ended September 30, 2023 and 2022, respectively. Our cash on hand was $114.4 million as of September 30, 2023, due in part to $161.4 million of cash proceeds received from Warrant exercises partially offset by $100 million paid for share repurchases during the nine months ended September 30, 2023.

• Continued to focus on debt management and lowering our exposure to higher interest rates, and as a result, made early repayments totaling $172.5 million on our 2021 Term Loan during the nine months ended September 30, 2023.

Recent Events

In November 2022, our Board of Directors authorized a share repurchase program for up to an aggregate amount of $100.0 million of our outstanding shares of Class A Common Stock over an 18-month period in open market, accelerated share repurchase (“ASR”) or privately negotiated transactions, each as permitted under applicable rules and regulations, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Exchange Act.

We paid $8.1 million to repurchase 449,432 shares of our Class A Common Stock through open market transactions during the third quarter of fiscal year 2023, which we subsequently retired. On September 5, 2023, we used the remaining availability under the share repurchase program for an ASR and paid approximately $91.9 million to receive an initial delivery of 4,131,551 shares of our Class A Common Stock in accordance with an ASR agreement with a third-party financial institution. The final settlement is expected to occur during the first quarter of fiscal year 2024, at which time, a volume-weighted average price calculation over the term of the ASR agreement will be used to determine the final number and the average price of shares repurchased and retired. We paid a total of $100.0 million for shares repurchases during the nine months ended September 30, 2023.

Segment Information

We have three operating and reportable segments, Commercial Services, Government Solutions and Parking Solutions:

• Our Commercial Services segment offers toll and violation management solutions and title and registration services for RACs and FMCs in North America. In Europe, we provide tolling and violations processing services.

• Our Government Solutions segment offers photo enforcement solutions and services to its customers. We provide complete, end-to-end speed, red-light, school bus stop arm and bus lane enforcement solutions within the United States and Canada. The international operations primarily involve the sale of traffic enforcement products and related maintenance services.

• Our Parking Solutions segment provides an integrated suite of parking software and hardware solutions to universities, municipalities, healthcare facilities and commercial parking operators in the United States and Canada.

Segment performance is based on revenues and income from operations before depreciation, amortization, and stock-based compensation. The measure also excludes interest expense, net, income taxes and certain other transactions and is inclusive of other income, net.

Primary Components of Our Operating Results

Revenues

Service Revenue. Our Commercial Services segment generates service revenue primarily through the operation and management of tolling programs and processing violations for RACs, FMCs and other large fleet customers. These solutions are full-service offerings by which we enroll the license plates of our customers’ vehicles and transponders with tolling authority accounts, pay tolls and violations on the customers’ behalf and, through proprietary technology, integrate with customer data to match the toll or violation to the driver and then bill the driver (or our customer, as applicable) for use of the service. The cost of certain tolls, violations and our customers’ share of administration fees are netted against revenue. We also generate service revenue in our Commercial Services segment through processing titles and registrations.

Our Government Solutions segment generates service revenue through the operation and maintenance of photo enforcement systems. Revenue drivers in this segment include the number of systems installed and the monthly revenue per system. Ancillary service revenue is generated in our Government Solutions segment from payment processing, pass-through fees for collection expense, and other fees.

Our Parking Solutions segment generates service revenue mainly from offering software as a service, subscription fees, professional services and citation processing services related to parking management solutions to its customers.

Product Sales. Product sales are generated by the sale of photo enforcement equipment in the Government Solutions segment and specialized hardware in the Parking Solutions segment. Customer buying patterns vary greatly from period to period related to product sales.

Costs and Expenses

Cost of Service Revenue. Cost of service revenue consists of recurring service costs, collection and other third-party costs in our segments.

Cost of Product Sales. Cost of product sales consists of the cost to acquire and install photo enforcement equipment purchased by Government Solutions customers and costs to develop and install hardware sold to Parking Solutions customers.

Operating Expenses. Operating expenses primarily include payroll and payroll-related costs (including stock-based compensation), subcontractor costs, payment processing and other operational costs, including print, postage and communication costs.

Selling, General and Administrative Expenses. Selling, general and administrative expenses include payroll and payroll-related costs (including stock-based compensation), real estate lease expense, insurance costs, professional services fees, acquisition costs and general corporate expenses.

Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net includes depreciation on property, plant and equipment, and amortization of definite-lived intangible assets. This line item also includes any one-time gains or losses incurred in connection with the disposal of certain assets.

Interest Expense, Net. This includes interest expense and amortization of deferred financing costs and discounts and is net of interest income.

Change in Fair Value of Private Placement Warrants. Change in fair value of private placement warrants consists of liability adjustments related to the Private Placement Warrants originally issued to Gores Sponsor II, LLC re-measured to fair value at the end of each reporting period, and the final re-measurement upon their exercise.

Tax Receivable Agreement Liability Adjustment. This consists of adjustments made to our Tax Receivable Agreement liability due to changes in estimates.

Loss (Gain) on Interest Rate Swap. Loss (gain) on interest rate swap relates to the changes associated with the derivative instrument re-measured to fair value at the end of the reporting period and the related periodic cash payments.

Loss (Gain) on Extinguishment of Debt. Loss (gain) on extinguishment of debt consists of the write-off of pre-existing original issue discounts and deferred financing costs associated with debt extinguishment, and any gains recognized as a result of loan forgiveness.

Other Income, Net. Other income, net primarily consists of volume rebates earned from total spend on purchasing cards, gains or losses on foreign currency transactions and other non-operating expenses.

Results of Operations

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

The following table sets forth our statements of operations data and expresses each item as a percentage of total revenue for the periods presented as well as the changes between periods. The tables and information provided in this section were derived from exact numbers and may have immaterial rounding differences.

Three Months Ended September 30,
Percentage of Revenue Increase (Decrease) 2023 vs 2022
($ in thousands) 2023 2022 2023 2022 %
Service revenue $ 201,029 $ 180,617 95.8 % 91.4 % 11.3 %
Product sales 8,904 17,039 4.2 % 8.6 % ) (47.7 )%
Total revenue 209,933 197,656 100.0 % 100.0 % 6.2 %
Cost of service revenue 5,150 4,144 2.5 % 2.1 % 24.3 %
Cost of product sales 6,864 11,317 3.3 % 5.7 % ) (39.3 )%
Operating expenses 68,873 60,536 32.8 % 30.6 % 13.8 %
Selling, general and administrative expenses 42,276 41,126 20.1 % 20.8 % 2.8 %
Depreciation, amortization and (gain) loss on disposal of assets, net 27,597 35,035 13.1 % 17.7 % ) (21.2 )%
Total costs and expenses 150,760 152,158 71.8 % 76.9 % ) (0.9 )%
Income from operations 59,173 45,498 28.2 % 23.1 % 30.1 %
Interest expense, net 20,384 20,260 9.7 % 10.3 % 0.6 %
Change in fair value of private placement warrants (553 ) (2,267 ) (0.3 )% (1.1 )% (75.6 )%
Loss on interest rate swap 60 — 0.0 % — n/a
Loss (gain) on extinguishment of debt 1,975 (3,005 ) 1.0 % (1.5 )% (165.7 )%
Other income, net (4,498 ) (2,462 ) (2.1 )% (1.2 )% ) 82.7 %
Total other expenses 17,368 12,526 8.3 % 6.5 % 38.7 %
Income before income taxes 41,805 32,972 19.9 % 16.6 % 26.8 %
Income tax provision 11,497 8,396 5.5 % 4.2 % 36.9 %
Net income $ 30,308 $ 24,576 14.4 % 12.4 % 23.3 %

All values are in US Dollars.

Service Revenue. Service revenue increased by $20.4 million, or 11.3%, to $201.0 million for the three months ended September 30, 2023 from $180.6 million for the three months ended September 30, 2022, representing 95.8% and 91.4% of total revenue, respectively. The following table depicts service revenue by segment:

Three Months Ended September 30,
Percentage of Revenue Increase (Decrease) 2023 vs 2022
($ in thousands) 2023 2022 2023 2022 %
Service revenue
Commercial Services $ 98,149 $ 86,056 46.8 % 43.5 % 14.1 %
Government Solutions 85,092 77,441 40.5 % 39.2 % 9.9 %
Parking Solutions 17,788 17,120 8.5 % 8.7 % 3.9 %
Total service revenue $ 201,029 $ 180,617 95.8 % 91.4 % 11.3 %

All values are in US Dollars.

Commercial Services service revenue increased by $12.1 million, or 14.1%, from $86.1 million for the three months ended September 30, 2022 to $98.1 million for the three months ended September 30, 2023, which was primarily due to increased travel volume and related tolling activity compared to the prior year. An increase in the volume of tolls incurred by RAC vehicles along with the continued adoption of the all-inclusive fee structure, shifting from an incidental or daily usage rate by our large RAC customers, contributed to a $11.3 million growth in revenue. In addition, the increase in enrolled vehicles as well as higher tolling activity for our FMC customers contributed to a $2.7 million growth in revenue during the three months ended September 30, 2023, compared to the same period in 2022. These increases were partially offset by lower revenue generated from processing titles and registrations compared to the prior year.

Government Solutions service revenue increased by $7.7 million to $85.1 million for the three months ended September 30, 2023 compared to $77.4 million in the same period in 2022. The increase was primarily driven by the expansion of speed programs, as speed is the largest product in this segment and contributed approximately $6.0 million to the service revenue growth. The remaining increase is attributable to expansions across red-light and bus lane programs.

Parking Solutions service revenue grew by $0.7 million to $17.8 million for the three months ended September 30, 2023, from $17.1 million for the three months ended September 30, 2022. The growth was primarily due to increased revenue from software as a service product offerings and citation processing services related to parking management solutions.

Product Sales. Product sales were $8.9 million and $17.0 million for the three months ended September 30, 2023 and 2022, respectively. Product sales decreased by approximately $8.1 million, which was mainly due to a $7.1 million decrease in product sales to Government Solutions customers and a decrease of $1.0 million in product sales in the Parking Solutions segment. Customer buying patterns vary greatly from period to period related to product sales.

Cost of Service Revenue. Cost of service revenue increased from $4.1 million for the three months ended September 30, 2022 to $5.2 million for the three months ended September 30, 2023. The $1.1 million increase was mainly due to increased recurring service costs in the Parking Solutions and the Commercial Services segments.

Cost of Product Sales. Cost of product sales decreased by $4.4 million from $11.3 million in the three months ended September 30, 2022 to $6.9 million in the three months ended September 30, 2023, which was in line with the decrease in product sales in the Government Solutions and Parking Solutions segments, discussed above.

Operating Expenses. Operating expenses increased by $8.3 million, or 13.8%, from $60.5 million for the three months ended September 30, 2022 to $68.9 million for the three months ended September 30, 2023. The increase in 2023 was primarily attributable to increases of $5.4 million in wages expense, $1.1 million of recurring service costs and $1.0 million for information technology expenses compared to the prior period. Operating expenses as a percentage of total revenue increased from 30.6% to 32.8% for the three months ended September 30, 2022 and 2023, respectively. The following table presents operating expenses by segment:

Three Months Ended September 30,
Percentage of Revenue Increase (Decrease) 2023 vs 2022
($ in thousands) 2023 2022 2023 2022 %
Operating expenses
Commercial Services $ 21,174 $ 18,952 10.1 % 9.6 % 11.7 %
Government Solutions 42,395 36,868 20.2 % 18.6 % 15.0 %
Parking Solutions 4,676 4,385 2.2 % 2.2 % 6.6 %
Total operating expenses before stock-based compensation 68,245 60,205 32.5 % 30.4 % 13.4 %
Stock-based compensation 628 331 0.3 % 0.2 % 89.7 %
Total operating expenses $ 68,873 $ 60,536 32.8 % 30.6 % 13.8 %

All values are in US Dollars.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $1.1 million to $42.3 million for the three months ended September 30, 2023 compared to $41.1 million for the same period in 2022. The increase was primarily due to $2.3 million of higher wages expense, partially offset by decreases in professional services expense and credit loss expense based on customer payment trends in the last 12 months. Selling, general and administrative expenses as a percentage of total revenue decreased from 20.8% to 20.1% for the three months ended September 30, 2022 and 2023, respectively. The following table presents selling, general and administrative expenses by segment:

Three Months Ended September 30,
Percentage of Revenue Increase (Decrease) 2023 vs 2022
($ in thousands) 2023 2022 2023 2022 %
Selling, general and administrative expenses
Commercial Services $ 15,544 $ 14,126 7.4 % 7.2 % 10.0 %
Government Solutions 15,181 15,034 7.2 % 7.6 % 1.0 %
Parking Solutions 6,002 6,218 2.9 % 3.1 % ) (3.5 )%
Corporate and other 1,734 1,435 0.8 % 0.7 % 20.8 %
Total selling, general and administrative expenses before stock-based compensation 38,461 36,813 18.3 % 18.6 % 4.5 %
Stock-based compensation 3,815 4,313 1.8 % 2.2 % ) (11.5 )%
Total selling, general and administrative expenses $ 42,276 $ 41,126 20.1 % 20.8 % 2.8 %

All values are in US Dollars.

Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net, decreased by $7.4 million to $27.6 million for the three months ended September 30, 2023 from $35.0 million for the same period in 2022. This was mainly due to certain non-compete and developed technology intangible assets being fully amortized for the three-month period ended September 30, 2023 as compared to the prior year which included the amortization expense. This decrease was partially offset by an increase in depreciation expense in the 2023 period.

Interest Expense, Net. Interest expense, net increased by $0.1 million from $20.3 million for the three months ended September 30, 2022 to $20.4 million for the same period in 2023 which is primarily attributable to rising interest rates offset by voluntary early repayments. See “Liquidity and Capital Resources.”

Change in Fair Value of Private Placement Warrants. We recorded gains of $0.6 million and $2.3 million for the three months ended September 30, 2023 and 2022, respectively, related to the changes in fair value of our Private Placement Warrants, which were accounted for as liabilities on our condensed consolidated balance sheets. The change in fair value was the result of re-measurement of the liability at the end of each reporting period, and the final re-measurement upon their exercise.

Loss on Interest Rate Swap. We recorded a $0.1 million loss during the three months ended September 30, 2023, of which approximately $0.2 million is associated with the derivative instrument re-measured to fair value at the end of the reporting period, offset by $0.1 million related to the monthly cash payments on the interest rate swap.

Loss (Gain) on Extinguishment of Debt. We recorded a $2.0 million loss on extinguishment of debt during the three months ended September 30, 2023 related to the write-off of pre-existing deferred financing costs and discounts in connection with the

early repayment of $100 million on the 2021 Term Loan. We recorded a $3.0 million gain on extinguishment of debt during the three months ended September 30, 2022 related to the forgiveness of the PPP loan, discussed below.

Other Income, Net. Other income, net was $4.5 million for the three months ended September 30, 2023 compared to $2.5 million for the three months ended September 30, 2022. The increase of $2.0 million is primarily attributable to income resulting from volume rebates earned from total spend on purchasing cards from increasing tolling activity, and a one-time adjustment recognized in the third quarter of 2022 for a previous acquisition subsequent to the measurement period with no comparable amount in the 2023 period.

Income Tax Provision. Income tax provision was $11.5 million representing an effective tax rate of 27.5% for the three months ended September 30, 2023 compared to a tax provision of $8.4 million, representing an effective tax rate of 25.5% for the same period in 2022. The primary driver for the effective tax rate variance is due to the permanent differences related to the mark-to-market adjustment on the Private Placement Warrants and the PPP loan forgiveness recorded in 2022.

Net Income. We had net income of $30.3 million for the three months ended September 30, 2023, as compared to a net income of $24.6 million for the three months ended September 30, 2022. The $5.7 million increase in net income was primarily due to the increase in total revenue, decreased amortization expense and the other statement of operations activity discussed above.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

The following table sets forth our statements of operations data and expresses each item as a percentage of total revenue for the periods presented as well as the changes between periods. The tables and information provided in this section were derived from exact numbers and may have immaterial rounding differences.

Nine Months Ended September 30,
Percentage of Revenue Increase (Decrease) 2023 vs 2022
($ in thousands) 2023 2022 2023 2022 %
Service revenue $ 581,777 $ 516,253 96.0 % 92.9 % 12.7 %
Product sales 24,520 39,275 4.0 % 7.1 % ) (37.6 )%
Total revenue 606,297 555,528 100.0 % 100.0 % 9.1 %
Cost of service revenue 13,718 11,636 2.2 % 2.1 % 17.9 %
Cost of product sales 18,209 25,638 3.0 % 4.6 % ) (29.0 )%
Operating expenses 196,373 166,795 32.4 % 30.0 % 17.7 %
Selling, general and administrative expenses 125,494 122,913 20.7 % 22.1 % 2.1 %
Depreciation, amortization and (gain) loss on disposal of assets, net 87,018 105,881 14.4 % 19.1 % ) (17.8 )%
Total costs and expenses 440,812 432,863 72.7 % 77.9 % 1.8 %
Income from operations 165,485 122,665 27.3 % 22.1 % 34.9 %
Interest expense, net 65,842 49,024 10.9 % 8.8 % 34.3 %
Change in fair value of private placement warrants 24,966 (5,133 ) 4.1 % (0.9 )% (586.4 )%
Tax receivable agreement liability adjustment — (965 ) — (0.2 )% (100.0 )%
Gain on interest rate swap (1,947 ) — (0.3 )% — ) n/a
Loss (gain) on extinguishment of debt 3,533 (3,005 ) 0.5 % (0.5 )% (217.6 )%
Other income, net (12,766 ) (9,367 ) (2.1 )% (1.7 )% ) 36.3 %
Total other expenses 79,628 30,554 13.1 % 5.5 % 160.6 %
Income before income taxes 85,857 92,111 14.2 % 16.6 % ) (6.8 )%
Income tax provision 31,864 27,854 5.3 % 5.0 % 14.4 %
Net income $ 53,993 $ 64,257 8.9 % 11.6 % ) (16.0 )%

All values are in US Dollars.

Service Revenue. Service revenue increased by $65.5 million, or 12.7%, to $581.8 million for the nine months ended September 30, 2023 from $516.3 million for the nine months ended September 30, 2022, representing 96.0% and 92.9% of total revenue, respectively. The following table depicts service revenue by segment:

Nine Months Ended September 30,
Percentage of Revenue Increase (Decrease) 2023 vs 2022
($ in thousands) 2023 2022 2023 2022 %
Service revenue
Commercial Services $ 278,243 $ 244,409 45.9 % 44.0 % 13.8 %
Government Solutions 253,319 225,337 41.8 % 40.6 % 12.4 %
Parking Solutions 50,215 46,507 8.3 % 8.3 % 8.0 %
Total service revenue $ 581,777 $ 516,253 96.0 % 92.9 % 12.7 %

All values are in US Dollars.

Commercial Services service revenue increased by $33.8 million, or 13.8%, from $244.4 million for the nine months ended September 30, 2022 to $278.2 million for the nine months ended September 30, 2023. The increase was primarily due to increased travel volume and related tolling activity compared to the prior year which was still recovering from the COVID-19 pandemic, especially during January and February of 2022. An increase in the volume of tolls incurred by RAC vehicles along with the continued adoption of the all-inclusive fee structure, shifting from an incidental or daily usage rate by our large RAC customers, contributed to a $29.6 million growth in revenue. In addition, the increase in enrolled vehicles as well as higher tolling activity for our FMC customers contributed to a $6.5 million growth in revenue during the nine months ended September 30, 2023, compared to the same period in 2022. These increases were partially offset by lower revenue generated from processing titles and registrations compared to the prior year.

Government Solutions service revenue increased by $28.0 million to $253.3 million for the nine months ended September 30, 2023 compared to $225.3 million in the same period in 2022. The increase was primarily driven by the expansion of speed programs, as speed is the largest product in this segment and contributed approximately $25.2 million to the service revenue growth. The remaining increase is attributable to expansions across red-light, school bus stop-arm and bus lane programs.

Parking Solutions service revenue grew by $3.7 million to $50.2 million for the nine months ended September 30, 2023, from $46.5 million for the nine months ended September 30, 2022. The growth was primarily due to increased revenue from software as a service product offerings, professional services and citation processing services related to parking management solutions.

Product Sales. Product sales were $24.5 million and $39.3 million for the nine months ended September 30, 2023 and 2022, respectively. Product sales decreased by approximately $14.8 million, which was mainly due to a $15.6 million decrease in product sales to Government Solutions customers, offset by a $0.8 million growth in product sales in the Parking Solutions segment. Customer buying patterns vary greatly from period to period related to product sales.

Cost of Service Revenue. Cost of service revenue increased from $11.6 million for the nine months ended September 30, 2022 to $13.7 million for the nine months ended September 30, 2023. The $2.1 million increase was mainly due to increased recurring service costs in the Parking Solutions segment.

Cost of Product Sales. Cost of product sales decreased by $7.4 million from $25.6 million in the nine months ended September 30, 2022 to $18.2 million in the nine months ended September 30, 2023, which was in line with the decrease in product sales in the Government Solutions segment offset by an increase in costs in the Parking Solutions segment.

Operating Expenses. Operating expenses increased by $29.6 million, or 17.7%, from $166.8 million for the nine months ended September 30, 2022 to $196.4 million for the nine months ended September 30, 2023. The increase in 2023 was primarily attributable to increases of $18.2 million in wages expense, $3.7 million of recurring service costs, $3.4 million for subcontractor costs and $2.4 million of information technology costs compared to the prior period. Operating expenses as a percentage of total revenue increased from 30.0% to 32.4% for the nine months ended September 30, 2022 and 2023, respectively. The following table presents operating expenses by segment:

Nine Months Ended September 30,
Percentage of Revenue Increase (Decrease) 2023 vs 2022
($ in thousands) 2023 2022 2023 2022 %
Operating expenses
Commercial Services $ 61,819 $ 53,004 10.2 % 9.5 % 16.6 %
Government Solutions 119,398 103,660 19.7 % 18.7 % 15.2 %
Parking Solutions 13,649 9,302 2.3 % 1.7 % 46.7 %
Total operating expenses before stock-based compensation 194,866 165,966 32.2 % 29.9 % 17.4 %
Stock-based compensation 1,507 829 0.2 % 0.1 % 81.8 %
Total operating expenses $ 196,373 $ 166,795 32.4 % 30.0 % 17.7 %

All values are in US Dollars.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $125.5 million for the nine months ended September 30, 2023 compared to $122.9 million for the same period in 2022. This is primarily due to $3.9 million in higher wage expenses, and increases in professional services, information technology and other general expenses, which are partially offset by a decrease in $3.3 million of credit loss expense based on customer payment trends in the last 12 months and lower stock-based compensation expense compared to prior year. Selling, general and administrative expenses as a percentage of total revenue decreased from 22.1% to 20.7% for the nine months ended September 30, 2022 and 2023, respectively. The following table presents selling, general and administrative expenses by segment:

Nine Months Ended September 30,
Percentage of Revenue Increase (Decrease) 2023 vs 2022
($ in thousands) 2023 2022 2023 2022 %
Selling, general and administrative expenses
Commercial Services $ 47,127 $ 40,980 7.8 % 7.4 % 15.0 %
Government Solutions 45,747 45,732 7.5 % 8.2 % 0.0 %
Parking Solutions 18,991 21,184 3.1 % 3.8 % ) (10.4 )%
Corporate and other 2,790 2,190 0.5 % 0.4 % 27.4 %
Total selling, general and administrative expenses before stock-based compensation 114,655 110,086 18.9 % 19.8 % 4.2 %
Stock-based compensation 10,839 12,827 1.8 % 2.3 % ) (15.5 )%
Total selling, general and administrative expenses $ 125,494 $ 122,913 20.7 % 22.1 % 2.1 %

All values are in US Dollars.

Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net, decreased by $18.9 million to $87.0 million for the nine months ended September 30, 2023 from $105.9 million for the same period in 2022. This was mainly due to certain non-compete and developed technology intangible assets being fully amortized in the nine months ended September 30, 2023 as compared to the prior year. This decrease was partially offset by an increase in depreciation expense in the 2023 period.

Interest Expense, Net. Interest expense, net increased by $16.8 million from $49.0 million for the nine months ended September 30, 2022 to $65.8 million for the same period in 2023 which is primarily attributable to rising interest rates. The average variable interest rate on the 2021 Term Loan was 380 basis points higher for the nine months ended September 30, 2023 compared to the prior period. See “Liquidity and Capital Resources.”

Change in Fair Value of Private Placement Warrants. We recorded a loss of $25.0 million and a gain of $5.1 million for the nine months ended September 30, 2023 and 2022, respectively, related to the changes in fair value of our Private Placement Warrants, which were accounted for as liabilities on our condensed consolidated balance sheets. The change in fair value was the result of re-measurement of the liability at the end of each reporting period, and the final re-measurement upon their exercise.

Tax Receivable Agreement Liability Adjustment. We recorded a $1.0 million benefit for the nine months ended September 30, 2022 which was from lower estimated state tax rates due to changes in apportionment.

Gain on Interest Rate Swap. We recorded a $1.9 million gain during the nine months ended September 30, 2023, of which approximately $3.3 million is associated with the derivative instrument re-measured to fair value at the end of the reporting period and $1.4 million related to the monthly cash payments on the interest rate swap.

Loss (Gain) on Extinguishment of Debt. We recorded a $3.5 million loss on extinguishment of debt during the nine months ended September 30, 2023 related to the write-off of pre-existing deferred financing costs and discounts in connection with the early repayment of $172.5 million on the 2021 Term Loan. We recorded a $3.0 million gain on extinguishment of debt during the nine months ended September 30, 2022 related to the forgiveness of the PPP loan, discussed below.

Other Income, Net. Other income, net was $12.8 million for the nine months ended September 30, 2023 compared to $9.4 million for the nine months ended September 30, 2022. The increase of $3.4 million is primarily attributable to volume rebates earned from total spend on purchasing cards from increased tolling and travel activity.

Income Tax Provision. Income tax provision was $31.9 million representing an effective tax rate of 37.1% for the nine months ended September 30, 2023 compared to a tax provision of $27.9 million, representing an effective tax rate of 30.2% for the same period in 2022. The primary driver for the effective tax rate variance is due to the permanent differences related to the mark-to-market adjustments on the Private Placement Warrants.

Net Income. We had net income of $54.0 million for the nine months ended September 30, 2023, as compared to a net income of $64.3 million for the nine months ended September 30, 2022. The $10.3 million decrease in net income was primarily due to the change in fair value of Private Placement Warrants, increased interest expense, and the other statement of operations activity discussed above.

Liquidity and Capital Resources

Our principal sources of liquidity are cash flows from operations and the available borrowing under our Revolver (defined below).

We have incurred significant long-term debt as a result of acquisitions completed in prior years.

We believe that our existing cash and cash equivalents, cash flows provided by operating activities and our ability to borrow under our Revolver (as defined below) will be sufficient to meet operating cash requirements and service debt obligations for at least the next 12 months. Our ability to generate sufficient cash from our operating activities depends on our future performance, which is subject to general economic, political, financial, competitive and other factors beyond our control. In addition, our future capital expenditures and other cash requirements could be higher than currently expected due to various factors, including any expansion of our business or strategic acquisitions. Should we pursue strategic acquisitions, we may need to raise additional capital, which may be in the form of additional long-term debt, borrowing on our Revolver, or equity financings, all of which may not be available to us on favorable terms or at all.

We have the ability to borrow under our Revolver to meet obligations as they come due. As of September 30, 2023, we had $74.8 million available for borrowing, net of letters of credit, under our Revolver.

We made early repayments totaling $100.0 million and $172.5 million on our 2021 Term Loan during the three and nine months ended September 30, 2023, respectively.

Warrants

During the nine months ended September 30, 2023, we processed the exercise of 19,999,333 Warrants in exchange for the issuance of 16,273,406 shares of Class A Common Stock. There were 14,035,449 shares issued in exchange for cash-basis warrant exercises resulting in the receipt of $161.4 million in cash proceeds as of September 30, 2023, and the remaining Warrant exercises were completed on a cashless basis. In addition, there were 634 Public Warrants that were redeemed and as a result, there were no outstanding Warrants as of September 30,2023 as further discussed in Note 10, Stockholders' Equity.

Share Repurchases and Retirement

In November 2022, our Board of Directors authorized a share repurchase program for up to an aggregate amount of $100.0 million of our outstanding shares of Class A Common Stock over an 18-month period in open market, ASR or privately

negotiated transactions, each as permitted under applicable rules and regulations, any of which may use prearranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Exchange Act.

We paid $8.1 million to repurchase 449,432 shares of our Class A Common Stock through open market transactions during the third quarter of fiscal year 2023, which we subsequently retired. On September 5, 2023, we used the remaining availability under the share repurchase program for an ASR and paid approximately $91.9 million to receive an initial delivery of 4,131,551 shares of our Class A Common Stock in accordance with an ASR agreement with a third-party financial institution. The final settlement is expected to occur during the first quarter of fiscal year 2024, at which time, a volume-weighted average price calculation over the term of the ASR agreement will be used to determine the final number and the average price of shares repurchased and retired. We paid a total of $100.0 million for share repurchases during the nine months ended September 30, 2023.

Concentration of Credit Risk

The City of New York Department of Transportation (“NYCDOT”) represented 13% and 22% of total accounts receivable, net as of September 30, 2023 and December 31, 2022, respectively. There is no material reserve related to NYCDOT open receivables as amounts are deemed collectible based on current conditions and expectations.

The following table sets forth certain captions indicated on our statements of cash flows for the respective periods:

Nine Months Ended September 30,
($ in thousands) 2023 2022
Net cash provided by operating activities $ 170,371 $ 148,776
Net cash used in investing activities (41,693 ) (36,434 )
Net cash used in financing activities (118,450 ) (159,525 )

Cash Flows from Operating Activities

Cash provided by operating activities increased by $21.6 million from $148.8 million for the nine months ended September 30, 2022 to $170.4 million for the nine months ended September 30, 2023. Net income year over year decreased by approximately $10.3 million, from $64.3 million in 2022 to $54.0 million in 2023. The aggregate adjustments to reconcile net income to net cash provided by operating activities increased $20.4 million mainly due to the change in fair value of private placement warrants, the change in deferred income taxes and the loss (gain) on extinguishment of debt, partially offset by decreased amortization expense year over year. The aggregate changes in operating assets and liabilities increased by $11.5 million in 2023 compared to prior year primarily due to the timing of accrued and other payables and fluctuation in inventory levels offset by an increase in accounts receivables and unbilled receivables.

Cash Flows from Investing Activities

Cash used in investing activities was $41.7 million and $36.4 million for the nine months ended September 30, 2023 and 2022, respectively. There was an increase in cash used in 2023 related to the purchases of installation and service parts and property and equipment compared to the prior year, and due to the monthly cash payments on the interest rate swap entered into in December 2022 to hedge our exposure to rising interest rates.

Cash Flows from Financing Activities

Cash used in financing activities was $118.5 million and $159.5 million for the nine months ended September 30, 2023 and 2022, respectively. The cash used in financing activities in 2023 was mainly due to early repayments totaling $172.5 million on our 2021 Term Loan and $100.0 million of share repurchases, which were partially offset by $161.4 million of proceeds from the exercise of warrants issued in connection with the IPO. The cash used in 2022 was mainly due to the repurchases of 6.9 million shares of our Class A Common Stock for $125.1 million, the repayment of $25.0 million of borrowing on the Revolver in January 2022 and the quarterly principal payments on the 2021 Term Loan.

Long-term Debt

2021 Term Loan

In March 2021, VM Consolidated, Inc. (“VM Consolidated”), our 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 $900.0 million, maturing on March 26, 2028, which includes the incremental borrowing of $250.0 million in December 2021 as a result of exercising the accordion feature available under the agreement. In connection with the 2021 Term Loan borrowings, we had $4.6 million of offering discount costs and $4.5 million in deferred financing costs, both of which were capitalized and are being amortized over the remaining life of the 2021 Term Loan.

During the nine months ended September 30, 2023, we made early repayments of $172.5 million on the 2021 Term Loan and as a result, the total principal outstanding was $706.8 million as of September 30, 2023. We recognized a loss on extinguishment of debt of $2.0 million and $3.5 million for the three and nine months ended September 30, 2023, respectively, related to the write-off of pre-existing deferred financing costs and discounts.

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 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. In March 2023, we amended our 2021 Term Loan agreement to transition away from LIBOR to Term SOFR with the cessation of LIBOR in June 2023. To compensate for the differences in reference rates utilized, the amended agreement also includes a credit spread adjustment of 0.11448% for an interest period of one-month duration, 0.26161% for a three-month duration, 0.42826% for a six-month duration, and 0.71513% for twelve-months duration in addition to Term SOFR and the applicable margin. As of September 30, 2023, the new all-in interest rate on the 2021 Term Loan was 8.7%.

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), as set forth in the following table:

Consolidated First Lien Net Leverage Ratio (As Defined by the 2021 Term Loan Agreement) Applicable<br>Prepayment<br>Percentage
> 3.70:1.00 50%
< 3.70:1.00 and > 3.20:1.00 25%
< 3.20:1.00 0%

Senior Notes

In March 2021, VM Consolidated 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, we 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.

Interest on the Senior Notes is fixed at 5.50% per annum and is payable on April 15 and October 15 of each year. On or after April 15, 2024, we 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:

Year Percentage
2024 102.750%
2025 101.375%
2026 and thereafter 100.000%

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

PPP Loan

During fiscal year 2020, one of our wholly owned subsidiaries received a $2.9 million 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. In early 2021, the Company applied for forgiveness of this loan, and on September 23, 2022, it was notified by the SBA that the loan, together with accrued interest, had been fully forgiven under the provisions of the PPP Loan program. Accordingly, we recognized a $3.0 million gain on extinguishment of debt in the condensed consolidated statement of operations for the three and nine months ended September 30, 2022.

The Revolver

We have a Revolving Credit Agreement (the “Revolver”) with a commitment of up to $75.0 million available for loans and letters of credit. The Revolver matures on December 20, 2026. 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) Term SOFR plus an applicable margin, or (2) an alternate base rate, plus an applicable margin. The margin percentage applied to (1) Term SOFR 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 our average availability to borrow under the commitment. There is a credit spread adjustment of 0.10% for a one-month duration, 0.15% for a three-month duration, and 0.25% for a six-month duration, in addition to Term SOFR and the applicable margin percentages. There are no outstanding borrowings on the Revolver as of September 30, 2023 or December 31, 2022. The availability to borrow was $74.8 million, net of $0.2 million of outstanding letters of credit at September 30, 2023.

Interest on the unused portion of the Revolver is payable quarterly at 0.375% and we are also required to pay participation and fronting fees at 1.38% on $0.2 million of outstanding letters of credit as of September 30, 2023.

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. Substantially all of our assets are pledged as collateral to secure our indebtedness under the 2021 Term Loan. At September 30, 2023, we were compliant with all debt covenants.

Interest Expense

We recorded interest expense, including amortization of deferred financing costs and discounts, of $20.4 million and $20.3 million for the three months ended September 30, 2023 and 2022, respectively, and $65.8 million and $49.0 million for the nine months ended September 30, 2023 and 2022, respectively.

See Note 2, Significant Accounting Policies, in Part I, Item 1, Financial Statements, for additional information on the interest rate swap entered into in December 2022 to hedge our exposure against rising interest rates.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet financing arrangements as of September 30, 2023.

Critical Accounting Policies, Estimates and Judgments

The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Refer to our 2022 Annual Report on Form 10-K for our critical accounting policies, estimates and judgments. We believe that our estimates and assumptions are reasonable in the circumstances; however, actual results could differ materially from those estimates.

For a discussion of our significant accounting policies, refer to Note 2, Significant Accounting Policies, in Part I, Item 1, Financial Statements.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, refer to Note 2, Significant Accounting Policies, in Part I, Item 1, Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to interest rate market risk due to the variable interest rate on the 2021 Term Loan described in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.

Interest rate risk represents our exposure to fluctuations in interest rates associated with the variable rate debt represented by the 2021 Term Loan, which has an outstanding balance of $706.8 million at September 30, 2023. The 2021 Term Loan 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. In March 2023, we amended our 2021 Term Loan agreement to transition

away from LIBOR to Term SOFR with the cessation of LIBOR in June 2023. To compensate for the differences in reference rates utilized, the amended agreement also includes a credit spread adjustment of 0.11448% for an interest period of one-month duration, 0.26161% for a three-month duration, 0.42826% for a six-month duration, and 0.71513% for twelve-months duration in addition to Term SOFR and the applicable margin. At September 30, 2023, the new all-in interest rate on the 2021 Term Loan was 8.7%.

Based on the September 30, 2023 balance outstanding, each 1% movement in interest rates will result in an approximately $7.1 million change in annual interest expense. Due to the limited history of the use of the new benchmark rate, we are unable to estimate the future impact to our borrowing costs as a result of the discontinuation of the LIBOR benchmark.

In December 2022, we entered into a cancellable interest rate swap agreement to hedge our exposure to interest rate fluctuations associated with the LIBOR (now transitioned to Term SOFR) portion of the variable interest rate on our 2021 Term Loan. Under the interest rate swap agreement, we pay a fixed rate of 5.17% and the counterparty pays a variable interest rate which is net settled. The notional amount on the interest rate swap is $675.0 million. We have the option to effectively terminate the interest rate swap agreement starting in December 2023, and monthly thereafter until December 2025, in the event interest rates decrease. We recorded a $0.1 million loss for the three months ended September 30, 2023 and a $1.9 million gain on the interest rate swap for the nine months ended September 30, 2023. See Note 2, Significant Accounting Policies, in Part I, Item 1, Financial Statements for additional information on the interest rate swap.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. Our Chief Executive Officer and Chief Financial Officer, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures. Based on the results of our assessment, our management concluded that our internal control over financial reporting was effective as of September 30, 2023.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 1. Legal Proceedings

On November 2, 2020, PlusPass, Inc. (“PlusPass”) commenced an action in the United States District Court, Central District of California, against Verra Mobility, The Gores Group LLC, Platinum Equity LLC, and ATS Processing Services, Inc., alleging civil violations of Section 7 of the Clayton Antitrust Act of 1914 (the “Clayton Act”) and Sections 1 and 2 of the Sherman Act. On November 20, 2020, PlusPass filed a First Amended Complaint. On February 9, 2021, the defendants filed motions to dismiss, and PlusPass subsequently abandoned various theories and claims and dismissed The Gores Group LLC, Platinum Equity LLC, and ATS Processing Services, Inc. On April 27, 2021, PlusPass filed a Second Amended Complaint (“SAC”), alleging that Verra Mobility violated Section 7 of the Clayton Act through the merger of Highway Toll Administration, LLC (“HTA”) and American Traffic Solutions, Inc. (“ATS”) in 2018, and that Verra Mobility violated Sections 1 and 2 of the Sherman Antitrust Act of 1890 by using exclusive agreements in restraint of trade and other allegedly anticompetitive means to acquire and maintain monopoly power in the market for the administration of electronic toll payment collection for rental cars. PlusPass seeks injunctive relief, divestiture by Verra Mobility of HTA, damages in an amount to be determined, and attorneys’ fees and costs. On May 28, 2021, Verra Mobility filed a motion to dismiss the SAC in its entirety, which was denied in August 2021. Discovery is closed. Verra Mobility filed a motion for summary judgment on June 21, 2023, which is pending. Trial had been set for November 2023, but was moved by the court to April 2024. Verra Mobility believes that all of PlusPass' claims are without merit and will defend itself vigorously in this litigation.

Item 1A. Risk Factors

Risks Related to Our Business

Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 includes a discussion of our risk factors. There have been no material changes from the risk factors described in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future SEC filings.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

Purchases of Equity Securities

In November 2022, our Board of Directors authorized a share repurchase program for up to an aggregate amount of $100.0 million of our outstanding shares of Class A Common Stock over an 18-month period in open market, ASR or privately negotiated transactions, each as permitted under applicable rules and regulations, any of which may use prearranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Exchange Act.

We paid $8.1 million to repurchase 449,432 shares of our Class A Common Stock through open market transactions during the third quarter of fiscal year 2023, which we subsequently retired. On September 5, 2023, we used the remaining availability under the share repurchase program for an ASR and paid approximately $91.9 million to receive an initial delivery of 4,131,551 shares of our Class A Common Stock in accordance with an ASR agreement with a third-party financial institution. The final settlement is expected to occur during the first quarter of fiscal year 2024, at which time, a volume-weighted average price calculation over the term of the ASR agreement will be used to determine the final number and the average price of shares repurchased and retired. We paid a total of $100.0 million for share repurchases during the nine months ended September 30, 2023.

The following details our purchases of our Class A Common Stock during the three months ended September 30, 2023:

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Publicly Announced Plans or Programs
As of July 1, 2023 — $ — — $ 100,000,000
Share repurchases — $ — — $ —
As of July 31, 2023 — $ — — $ 100,000,000
Share repurchases 209,444 $ 18.67 209,444 $ 96,206,656
As of August 31, 2023 209,444 $ 18.67 209,444 $ 96,206,656
Share repurchases 239,988 $ 18.01 239,988 $ 91,875,359
Share repurchases - ASR (1) 4,131,551 $ 17.79 4,131,551 $ —
As of September 30, 2023 4,580,983 $ 18.36 4,580,983 $ —

(1) On September 5, 2023, we paid approximately $91.9 million to receive an initial delivery of 4,131,551 shares of our Class A Common Stock in accordance with an ASR agreement with a third-party financial institution. The final settlement is expected to occur during the first quarter of fiscal year 2024, at which time, a volume-weighted average price calculation over the term of the ASR agreement will be used to determine the final number and the average price of shares repurchased and retired.

Sales of Unregistered Securities

We did not have any sales of unregistered equity securities during the three months ended September 30, 2023.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Insider Trading Arrangements and Policies.

A significant portion of the compensation of our executive officers is delivered in the form of deferred equity awards, including performance share units, stock options and restricted stock unit awards. This compensation design is intended to align our executive compensation with the interests of our stockholders by emphasizing performance-based incentive compensation focused on objectives that our Board believes have a significant impact on stockholder value. Following the delivery of shares of our common stock under those equity awards, once any applicable service time or performance-based vesting standards have been satisfied, our executive officers from time to time engage in the open-market sale of some of those shares. Our executive officers may also engage from time to time in other transactions involving our securities.

Transactions in our securities by our executive officers are required to be made in accordance with our Insider Trading Policy, which, among other things, requires that the transactions be in accordance with applicable U.S. federal securities laws that prohibit trading while in possession of material nonpublic information. Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables prearranged transactions in securities in a manner that avoids concerns about initiating transactions at a future date while possibly in possession of material nonpublic information. Our Insider Trading Policy permits our executive officers to enter into trading plans designed to comply with Rule 10b5-1. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately after significant events involving our company.

During the three months ended September 30, 2023, none of our directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

Item 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

Exhibit Index

Incorporated by Reference
Exhibit<br><br>Number Description Form File No. Exhibit Filing Date Filed<br><br>Herewith
2.1 Merger Agreement, dated as of June 21, 2018, by and among Gores Holdings II, Inc., AM Merger Sub I, Inc., AM Merger Sub II, LLC, Greenlight Holding II Corporation and PE Greenlight Holdings, LLC, in its capacity as the Stockholder Representative. 8-K 001-37979 2.1 June 21, 2018
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated as of August 23, 2018, by and among Gores Holdings II, Inc., AM Merger Sub I, Inc., AM Merger Sub II, LLC, Greenlight Holding II Corporation and PE Greenlight Holdings, LLC, in its capacity as the Stockholder Representative. 8-K 001-37979 2.2 August 24, 2018
3.1 Second Amended and Restated Certificate of Incorporation of Verra Mobility Corporation. 8-K 001-37979 3.1 October 22, 2018
3.2 Amended and Restated Bylaws of Verra Mobility Corporation. 8-K 001-37979 3.2 October 22, 2018
31.1 Certification of Principal Executive Officer Pursuant to Rules 13a‑14(a) and 15d‑14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X
31.2 Certification of Principal Financial Officer Pursuant to Rules 13a‑14(a) and 15d‑14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X
32.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X
32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X
101.INS Inline XBRL Instance Document (the instance does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). X
101.SCH Inline XBRL Taxonomy Extension Schema Document. X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. X
104 Cover Page Interactive Data File (embedded within the Inline XBRL document) X
--- --- ---
* This certification is deemed not filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

VERRA MOBILITY CORPORATION
Date: November 9, 2023 By: /s/ Craig Conti
Craig Conti
Chief Financial Officer
(Principal Financial Officer)

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a)

as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David Roberts, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Verra Mobility Corporation;

2. Based on my knowledge, this Quarterly Report on Form 10-Q does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report on Form 10-Q;

3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report on Form 10-Q is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Quarterly Report on Form 10-Q our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q based on such evaluation; and

d) Disclosed in this Quarterly Report on Form 10-Q any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 9, 2023 By: /s/ David Roberts
David Roberts
President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a)

as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Craig Conti, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Verra Mobility Corporation;

2. Based on my knowledge, this Quarterly Report on Form 10-Q does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report on Form 10-Q;

3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report on Form 10-Q is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Quarterly Report on Form 10-Q our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 9, 2023 By: /s/ Craig Conti
Craig Conti
Chief Financial Officer

EX-32.1

Exhibit 32.1

VERRA MOBILITY CORPORATION

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the periodic report of Verra Mobility Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2023 as filed with the Securities and Exchange Commission (the “Report”), I, David Roberts, President and Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Dated: November 9, 2023 By: /s/ David Roberts
David Roberts
President and Chief Executive Officer

EX-32.2

Exhibit 32.2

VERRA MOBILITY CORPORATION

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the periodic report of Verra Mobility Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2023 as filed with the Securities and Exchange Commission (the “Report”), I, Craig Conti, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Dated: November 9, 2023 By: /s/ Craig Conti
Craig Conti
Chief Financial Officer

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