Verra Mobility (NASDAQ: VRRM) posts flat Q1 2026 sales as profit falls
Verra Mobility reported essentially flat revenue of $223.6 million for the quarter ended March 31, 2026, up slightly from $223.3 million a year earlier. Service revenue grew modestly as Government Solutions and Parking Solutions offset lower Commercial Services revenue from fleet management customer churn.
Net income declined to $26.7 million from $32.3 million, with diluted EPS moving from $0.20 to $0.17, as operating expenses rose, particularly in Government Solutions. Operating cash flow fell to $40.8 million from $63.0 million, while cash ended at $46.9 million and total debt, net, at $1.06 billion.
The company repurchased $50.2 million of stock (2.22 million shares) and still has $66.3 million remaining under its authorization. Customer concentration remains a key factor: New York City’s transportation department contributed 15.2% of revenue, and one Commercial Services customer over 10% of revenue is under a short-term extension while renewal terms are negotiated.
Positive
- None.
Negative
- None.
Insights
Flat revenue, lower earnings, heavy buybacks, and notable customer concentration.
Verra Mobility kept quarterly revenue roughly unchanged at $223.6 million, but net income fell 17.3% to $26.7 million as Government Solutions and Parking Solutions costs rose faster than sales. Commercial Services revenue declined 3.5%, mainly from fleet management customer churn.
Cash generation remained solid but lower: operating cash flow was $40.8 million versus $63.0 million a year earlier. Management continued returning capital, repurchasing $50.2 million of shares in the quarter, leaving $66.3 million authorized, while carrying net debt of about $1.06 billion after refinancing its term loan to 2032.
Risk is concentrated in a few relationships. New York City’s transportation department supplied 15.2% of revenue and 23.9% of accounts receivable. A large Commercial Services customer, over 10% of revenue for both 2025 and this quarter, is on a short-term contract extension; management notes that failure to renew, or renewal on worse pricing, would materially affect results.
Key Figures
Key Terms
Tax Receivable Agreement financial
Amended Term Loan financial
Senior Notes financial
accelerated share repurchase financial
allowance for credit losses financial
photo enforcement automated safety solutions technical
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ___________ to ___________.
Commission File Number:
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Securities registered pursuant to Section 12(b) of the Act:
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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:
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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 May 1, 2026, there were
VERRA MOBILITY CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2026
TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION |
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6 |
Item 1. Financial Statements |
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6 |
Condensed Consolidated Balance Sheets |
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6 |
Condensed Consolidated Statements of Operations and Comprehensive Income |
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7 |
Condensed Consolidated Statements of Stockholders’ Equity |
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Condensed Consolidated Statements of Cash Flows |
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9 |
Notes to the Condensed Consolidated Financial Statements |
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11 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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24 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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33 |
Item 4. Controls and Procedures |
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PART II—OTHER INFORMATION |
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34 |
Item 1. Legal Proceedings |
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Item 1A. Risk Factors |
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34 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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35 |
Item 3. Defaults Upon Senior Securities |
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Item 4. Mine Safety Disclosures |
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Item 5. Other Information |
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Item 6. Exhibits |
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SIGNATURES |
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3
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Report other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, products, services, 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 Report 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, 2025 (our “Annual Report”), Part II, Item 1A. “Risk Factors” of this Report, and in other filings with the Securities and Exchange Commission (the “SEC”) which highlight, among other risks:
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. The forward-looking statements in this Report represent our views as of the date hereof. Except as may be required by law, we undertake no obligation to update any of these forward-looking statements for any reason or to conform these statements to actual results or revised expectations.
4
Our Annual Reports 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 Report or any other report or document we file with the SEC. Any reference to our website in this Report 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 Report refer to Verra Mobility Corporation, a Delaware corporation, and its subsidiaries taken as a whole.
5
Part I—Financial Information
Item 1. Financial Statements
VERRA MOBILITY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share data) |
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March 31, |
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December 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable (net of allowance for credit losses of $ |
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Unbilled receivables |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Installation and service parts, net |
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Property and equipment, net |
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Operating lease assets |
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Intangible assets, net |
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Goodwill |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Deferred revenue |
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Accrued liabilities |
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Tax receivable agreement liability, current portion |
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Current portion of debt |
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Total current liabilities |
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Debt, net of current portion |
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Operating lease liabilities, net of current portion |
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Tax receivable agreement liability, net of current portion |
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Asset retirement obligations |
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Deferred tax liabilities, net |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 13) |
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Stockholders' equity |
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Preferred stock, $ |
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Class A common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See accompanying Notes to the Condensed Consolidated Financial Statements.
6
VERRA MOBILITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Unaudited)
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Three Months Ended March 31, |
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(In thousands, except per share data) |
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2026 |
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2025 |
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Service revenue |
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$ |
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$ |
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Product sales |
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Total revenue |
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Cost of service revenue, excluding depreciation and amortization |
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Cost of product sales |
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Operating expenses |
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Selling, general and administrative expenses |
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Depreciation, amortization and (gain) loss on disposal of assets, net |
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Total costs and expenses |
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Income from operations |
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Interest expense, net |
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Loss on extinguishment of debt |
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Other income, net |
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Total other expenses |
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Income before income taxes |
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Income tax provision |
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Net income |
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$ |
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$ |
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Other comprehensive income: |
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Change in foreign currency translation adjustment |
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Total comprehensive income |
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$ |
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$ |
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Net income per share: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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See accompanying Notes to the Condensed Consolidated Financial Statements.
7
VERRA MOBILITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
For the Three Months Ended March 31, 2026 |
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Common |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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(In thousands) |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance as of December 31, 2025 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Share repurchases and retirement |
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— |
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( |
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( |
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— |
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( |
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Vesting of restricted stock units ("RSUs") and performance share units ("PSUs") |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Payment of employee tax withholding related to RSUs and PSUs vesting |
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— |
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— |
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( |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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Balance as of March 31, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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For the Three Months Ended March 31, 2025 |
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Common |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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(In thousands) |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance as of December 31, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Share repurchases and retirement |
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( |
) |
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— |
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( |
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— |
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( |
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Vesting of RSUs and PSUs |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Payment of employee tax withholding related to RSUs and PSUs vesting |
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— |
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— |
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( |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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Balance as of March 31, 2025 |
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$ |
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$ |
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$ |
( |
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$ |
( |
) |
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$ |
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See accompanying Notes to the Condensed Consolidated Financial Statements.
8
VERRA MOBILITY CORPORATION
condensed consolidated Statements of Cash Flows
(Unaudited)
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Three Months Ended March 31, |
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($ in thousands) |
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2026 |
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2025 |
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Cash Flows from Operating Activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Amortization of deferred financing costs and discounts |
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Loss on extinguishment of debt |
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Share-based proceeds from legal settlement |
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( |
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Unrealized loss on remeasurement of share-based proceeds |
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Credit loss expense |
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Deferred income taxes |
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( |
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Stock-based compensation |
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Other |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Unbilled receivables |
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( |
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Inventory |
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( |
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Prepaid expenses and other assets |
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Deferred revenue |
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( |
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( |
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Accounts payable and other current liabilities |
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( |
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( |
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Other liabilities |
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Net cash provided by operating activities |
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Cash Flows from Investing Activities: |
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Purchases of installation and service parts and property and equipment |
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( |
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( |
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Cash proceeds from the sale of assets |
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Net cash used in investing activities |
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( |
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Cash Flows from Financing Activities: |
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Borrowings on Amended Revolver |
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Repayment on Amended Revolver |
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( |
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Repayment of term loan debt |
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( |
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( |
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Equipment financing arrangements |
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Payment of debt issuance costs |
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( |
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( |
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Share repurchases and retirement |
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( |
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Proceeds from the exercise of stock options |
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Payment of employee tax withholding related to RSUs and PSUs vesting |
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( |
) |
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( |
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Net cash used in financing activities |
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( |
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( |
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Effect of exchange rate changes on cash and cash equivalents |
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Net (decrease) increase in cash, cash equivalents and restricted cash |
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( |
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Cash, cash equivalents and restricted cash - beginning of period |
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Cash, cash equivalents and restricted cash - end of period |
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$ |
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$ |
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See accompanying Notes to the Condensed Consolidated Financial Statements.
9
VERRA MOBILITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
|
|
Three Months Ended March 31, |
|
|||||
Reconciliation of cash, cash equivalents, and restricted cash |
|
2026 |
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2025 |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Total cash, cash equivalents and restricted cash |
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$ |
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$ |
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Supplemental cash flow information: |
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Interest paid |
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$ |
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$ |
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Income taxes paid, net of refunds |
|
|
|
|
|
|
||
Supplemental non-cash information: |
|
|
|
|
|
|
||
Purchases of installation and service parts and property and equipment in accounts payable and accrued liabilities at period-end |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
See accompanying Notes to the Condensed Consolidated Financial Statements.
10
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, Europe, and Canada. Verra Mobility’s goal is to make transportation safer, smarter, and more connected through its integrated, data-driven solutions, including toll and violations management, title and registration services, automated safety and traffic enforcement, and commercial parking management. The Company brings together vehicles, hardware, software, data, and people to solve transportation challenges for customers around the world. The Company is organized into
The Commercial Services segment offers automated toll and violations management and title and registration solutions to rental car companies (“RACs”), direct commercial fleet owner-operators (“Direct Fleets”) and fleet management companies (“FMCs”), and other large fleet owners in North America. Through established relationships with individual tolling authorities throughout the United States, Commercial Services’ toll and violations management solutions facilitate timely payment of tolls and violations incurred by its customers’ vehicles, accurate transfer of liability on customers’ behalf, and billing of, and collections from, individual drivers. It also manages regional toll transponder installation and vehicle association—a critical and highly complex process for RAC, Direct Fleet, and FMC customers—to ensure that transponders and corresponding toll transactions are associated with the correct vehicle. In Europe, the Commercial Services segment provides violations processing through Euro Parking Collection plc and consumer tolling services through Pagatelia S.L.U.
The Government Solutions segment provides photo enforcement automated safety solutions to states, municipalities, counties, school districts, and law enforcement agencies of all sizes, primarily in the United States, Canada, and Australia. The Company’s proprietary technologies are designed to provide government agencies with the information, data, and automated end-to-end administrative capabilities to enforce traffic violations through photo enforcement, with the goal of reducing traffic violations and resulting collisions, injuries, and fatalities. The Company installs, maintains, and manages hardware and software automated safety solutions to process event data, apply customer-specific rules, and connect traffic violations to responsible drivers or vehicle owners on behalf of customers. The Company also offers an end-to-end solution, in which it automatically sends captured events to a customer’s designated enforcement agency, and, once a violation is confirmed, the Company manages citation mailing, billing, and other administrative tasks on behalf of the customer. The international operations for this segment primarily involve the sale of traffic enforcement products and recurring maintenance services related to the equipment and software.
The Parking Solutions segment provides an integrated suite of parking software, transaction processing, 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 customers throughout the United States and Canada.
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.
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. There have been no material changes in the Company’s significant accounting policies from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2025.
11
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
Revenue from a single Government Solutions customer exceeded
Significant customer revenues were generated through three of the Company’s Commercial Services customers, with each exceeding
There were
Allowance for Credit Losses
The Company reviews historical credit losses and customer payment trends on receivables and develops loss estimates as of the balance sheet date, which includes adjustments for current and future expectations. It identifies pools of receivables based on the type of business, industry in which the customer operates and historical credit loss patterns. The Company uses collection assumptions (typically at the customer level) to estimate expected credit losses. 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 periodically evaluates the adequacy of its allowance for expected credit losses and adjusts appropriately.
The following presents the activity in the allowance for credit losses by reportable segment for the three months ended March 31, 2026 and 2025, respectively:
|
|
Commercial |
|
|
Government |
|
|
Parking |
|
|
|
|
||||
($ in thousands) |
|
Services(1) |
|
|
Solutions |
|
|
Solutions |
|
|
Total |
|
||||
Balance at January 1, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Credit loss expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Write-offs, net of recoveries |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at March 31, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Commercial |
|
|
Government |
|
|
Parking |
|
|
|
|
||||
($ in thousands) |
|
Services(1) |
|
|
Solutions |
|
|
Solutions |
|
|
Total |
|
||||
Balance at January 1, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Credit loss expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Write-offs, net of recoveries |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at March 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
12
Remaining Performance Obligations
Deferred revenue represents amounts that have been invoiced in advance and are expected to be recognized as revenue in future periods, and primarily relates to Government Solutions and Parking Solutions customers. As of March 31, 2026 and December 31, 2025, the Company had approximately $
Remaining performance obligations represent the amount of contracted future revenue not yet recognized as the amounts relate to undelivered performance obligations, including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. The Company elected the practical expedients to omit disclosure for the amount of the transaction price allocated to remaining performance obligations with original expected contract length of one year or less and the amount that relates to variable consideration allocated to a wholly unsatisfied performance obligation to transfer a distinct good or service within a series of distinct goods or services that form a single performance obligation. As of March 31, 2026, total transaction price allocated to performance obligations in the Government Solutions segment that were unsatisfied or partially unsatisfied was $
Recent Accounting Pronouncements
Accounting Standards Not Yet Adopted
In November 2024, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The ASU requires public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period at a disaggregated level. The guidance is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard on its financial statements and disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU removes all references to prescriptive and sequential software development stages. The ASU requires entities to begin capitalizing software costs when management authorizes and commits to funding the software project and it is probable that the project will be completed and the software will be used for its intended purpose. The guidance is effective for annual periods beginning after December 15, 2027 and interim periods within fiscal years beginning after December 15, 2027. The guidance can be applied on a prospective basis, a modified basis for in-process projects, or on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard on its financial statements and disclosures.
13
3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following at:
($ in thousands) |
|
March 31, |
|
|
December 31, |
|
||
Prepaid services |
|
$ |
|
|
$ |
|
||
Income taxes receivable |
|
|
|
|
|
|
||
Prepaid tolls |
|
|
|
|
|
|
||
Short term investments |
|
|
|
|
|
|
||
Deposits |
|
|
|
|
|
|
||
Prepaid insurance |
|
|
|
|
|
|
||
Costs to fulfill a customer contract |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
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, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign currency translation adjustment |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Balance at March 31, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Intangible assets consist of the following as of the respective period-ends:
|
|
March 31, 2026 |
|
|
December 31, 2025 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Gross |
|
|
|
|
|
Gross |
|
|
|
|
||||
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
Accumulated |
|
||||
($ in thousands) |
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amortization |
|
||||
Trademarks |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Patent |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer relationships |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Developed technology |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross carrying value of intangible assets |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Less: accumulated amortization |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Intangible assets, net |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
Amortization expense was $
Estimated amortization expense in future years is expected to be:
($ in thousands) |
|
|
|
|
Remainder of 2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
14
5. Accrued Liabilities
Accrued liabilities consist of the following at:
($ in thousands) |
|
March 31, |
|
|
December 31, |
|
||
Accrued salaries and wages |
|
$ |
|
|
$ |
|
||
Accrued interest payable |
|
|
|
|
|
|
||
Income taxes payable |
|
|
|
|
|
|
||
Current portion of operating lease liabilities |
|
|
|
|
|
|
||
Advanced deposits |
|
|
|
|
|
|
||
Restricted cash due to customers |
|
|
|
|
|
|
||
Self-insurance liability |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued liabilities |
|
$ |
|
|
$ |
|
||
6. Debt, Net
The following table provides a summary of the Company’s debt, net at:
($ in thousands) |
|
March 31, |
|
|
December 31, |
|
||
Amended Term Loan |
|
$ |
|
|
$ |
|
||
Senior Notes |
|
|
|
|
|
|
||
Amended Revolver |
|
|
|
|
|
|
||
Other debt(1) |
|
|
|
|
|
|
||
Less: original issue discounts |
|
|
( |
) |
|
|
( |
) |
Less: unamortized deferred financing costs |
|
|
( |
) |
|
|
( |
) |
Total debt, net |
|
|
|
|
|
|
||
Less: current portion of debt |
|
|
( |
) |
|
|
( |
) |
Total debt, net of current portion |
|
$ |
|
|
$ |
|
||
(1)
2021 Term Loan and Amended 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 had an aggregate borrowing of $
15
In October 2025, VM Consolidated and certain of the Company’s subsidiaries entered into the Amendment and Restatement Agreement No. 2 to the Amended and Restated First Lien Term Loan Credit Agreement dated as of March 26, 2021 (such agreement amended and restated, the “Amended and Restated Term Loan Agreement”), to refinance the existing senior secured term loans in an aggregate outstanding principal amount of approximately $
The Amended Term Loan bears interest at a per annum rate equal to SOFR plus an applicable margin of
During the three months ended March 31, 2026, the Company made a quarterly repayment of $
The Company recorded less than $
In addition, the Amended Term Loan requires mandatory prepayments equal to the product of the excess cash flows of the Company (as defined in the Amended and Restated 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 in the Amended and Restated Term Loan Agreement) |
|
Applicable |
> 3.70:1.00 |
|
|
< 3.70:1.00 and > 3.20:1.00 |
|
|
< 3.20:1.00 |
|
Senior Notes
In March 2021, VM Consolidated issued an aggregate principal amount of $
Interest on the Senior Notes is fixed at
The Revolver
The Company entered into a Revolving Credit Agreement in March 2018 (the “Revolver”) with a commitment of up to $
16
Outstanding borrowings under the Amended Revolver accrue interest at per annum rate equal to SOFR plus a margin ranging from
A commitment fee on the unused portion of the Amended Revolver is payable quarterly at (x) an annual rate of
All borrowings and other extensions of credits under the Amended Term Loan, Senior Notes and the Amended 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 under the Amended Term Loan and the Amended Revolver. At March 31, 2026, the Company was compliant with all debt covenants in its debt agreements.
From time to time, the Company enters into equipment financing arrangements in the normal course of business, including certain equipment leases accounted for as financing arrangements. Amounts outstanding under these arrangements are included in "Other debt" in the table above and were not material to the Company’s overall financial position as of March 31, 2026.
Interest Expense, Net
The Company recorded interest expense, including amortization of deferred financing costs and discounts, of $
The weighted average effective interest rate on the Company’s outstanding borrowings was
7. Fair Value of Financial Instruments
Accounting Standards Codification 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.
17
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 debt, net was calculated based upon available market information.
|
|
Level in |
|
March 31, 2026 |
|
|
December 31, 2025 |
|
||||||||||||||
|
|
Fair Value |
|
Carrying |
|
|
Estimated |
|
|
Carrying |
|
|
Estimated |
|
||||||||
($ in thousands) |
|
Hierarchy |
|
Amount |
|
|
Fair Value |
|
|
Amount |
|
|
Fair Value |
|
||||||||
Term Loan |
|
2 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Senior Notes |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amended Revolver |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
||
Other debt(1) |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
||
(1) Other debt consists of immaterial equipment financing arrangements entered into in the normal course of business, including certain equipment leases accounted for as financing arrangements.
As a result of a legal settlement finalized in February 2026, the Company received ordinary shares of a publicly traded company based in Australia. The shares are classified as short-term investments within the prepaid expenses and other current assets line on the condensed consolidated balance sheets and are measured at fair value on a quarterly basis. The fair value of these shares is determined using quoted closing market prices on the Australian Securities Exchange, an active exchange, as of the measurement date. Accordingly, the investment is classified within Level 1 of the fair value hierarchy.
|
|
Three Months Ended |
|
|
($ in thousands) |
|
March 31, 2026 |
|
|
Beginning balance |
|
$ |
|
|
Equity securities acquired from legal settlement |
|
|
|
|
Change in fair value of equity securities |
|
|
( |
) |
Foreign currency translation adjustment |
|
|
( |
) |
Ending balance |
|
$ |
|
|
The Company has an equity investment measured at cost with a carrying value of $
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.
18
The components of basic and diluted net income per share are as follows:
|
|
Three Months Ended March 31, |
|
|||||
(In thousands, except per share data) |
|
2026 |
|
|
2025 |
|
||
Numerator: |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Denominator: |
|
|
|
|
|
|
||
Weighted average shares - basic |
|
|
|
|
|
|
||
Common stock equivalents |
|
|
|
|
|
|
||
Weighted average shares - diluted |
|
|
|
|
|
|
||
Net income per share - basic |
|
$ |
|
|
$ |
|
||
Net income per share - diluted |
|
$ |
|
|
$ |
|
||
Antidilutive shares excluded from diluted net income per share: |
|
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
|
||
Non-qualified stock options |
|
|
|
|
|
|
||
Performance share units |
|
|
|
|
|
|
||
Total antidilutive shares excluded |
|
|
|
|
|
|
||
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
10. Stockholders’ Equity
Share Repurchases and Retirement
In October 2023, the Company’s Board of Directors authorized a share repurchase program for up to an aggregate amount of $
19
In May 2025, the Company’s Board of Directors authorized a new share repurchase program for up to an aggregate amount of $
In the first quarter of fiscal year 2026, the Company paid $
11. Stock-Based Compensation
The following details the components of stock-based compensation for the respective periods:
|
|
Three Months Ended March 31, |
|
|||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
||
Operating expenses |
|
$ |
|
|
$ |
|
||
Selling, general and administrative expenses |
|
|
|
|
|
|
||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
||
12. Tax Receivable Agreement
In October 2018, the Company entered into a Tax Receivable Agreement (“TRA”) with PE Greenlight Holdings, LLC. On August 3, 2022, PE Greenlight Holdings, LLC 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
At March 31, 2026, the TRA liability was $
13. Commitments and Contingencies
The Company has issued various letters of credit under contractual arrangements with certain of its domestic and international vendors and customers. Outstanding letters of credit under these arrangements totaled $
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.
20
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. When necessary, the Company accrues estimated amounts related to legal proceedings within accrued liabilities on the condensed consolidated balance sheets. The ultimate cost of litigation or settlement could be materially different than the amount of the current estimates and accruals and could have a material adverse impact on the Company’s consolidated financial position, results of operations, or cash flows.
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 (the “City”) and its safety camera vendor, Redflex Traffic Systems, Inc., in April 2016. The Company acquired Redflex Traffic Systems, Inc. as part of its June 2021 purchase of Redflex Holdings Limited. The plaintiff class, which was certified on March 30, 2021, alleged 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 sought 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. The parties entered into a settlement agreement and preliminary approval was granted by the court in April 2025. The court provided final approval of the settlement on September 18, 2025. The settlement did not have a material impact on the Company’s financial position or income statement. The class action settlement has been fully administered and a final dismissal order was entered on March 11, 2026.
14. Segment Reporting
The Company has
The operating and reportable segments were determined based on how the Company’s Chief Operating Decision Maker (“CODM”) regularly reviews the operating results of the various components of the Company for which discrete financial information is available, including based on the nature of the products and services and the type of customer. The Company defines the CODM as its Chief Executive Officer. The Company’s CODM primarily uses actual revenues and segment profit (defined below) as compared to previously budgeted amounts to evaluate the operating performance, allocate resources, and deploy capital to the 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 CODM does not use discrete asset information to evaluate operating performance at the segment level, and as such, the Company has not reported assets disaggregated by reportable segment.
21
The following tables set forth financial information by segment for the respective periods:
|
|
For the Three Months Ended March 31, 2026 |
|
|||||||||||||
|
|
Commercial |
|
|
Government |
|
|
Parking |
|
|
|
|
||||
($ in thousands) |
|
Services |
|
|
Solutions |
|
|
Solutions |
|
|
Total |
|
||||
Service revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Product sales |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of service revenue, excluding depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of product sales |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on disposal of assets, net |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Other (income) expense, net |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Segment profit |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other reconciling items (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
(1)
|
|
For the Three Months Ended March 31, 2025 |
|
|||||||||||||
|
|
Commercial |
|
|
Government |
|
|
Parking |
|
|
|
|
||||
($ in thousands) |
|
Services |
|
|
Solutions |
|
|
Solutions |
|
|
Total |
|
||||
Service revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Product sales |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of service revenue, excluding depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of product sales |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on disposal of assets, net |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Other income, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Segment profit |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other reconciling items (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
(1)
The Company provides information on credit loss expense by reportable segment, refer to Note 2, Significant Accounting Policies, for additional details.
22
The Company primarily operates within the United States, Australia, United Kingdom, Canada, and in various other countries in Europe and Asia.
|
|
Three Months Ended March 31, |
|
|||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
||
Australia |
|
$ |
|
|
$ |
|
||
United Kingdom |
|
|
|
|
|
|
||
Canada |
|
|
|
|
|
|
||
All other |
|
|
|
|
|
|
||
Total international revenues |
|
$ |
|
|
$ |
|
||
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our Annual Report, and our financial statements and the related notes included in Part I, Item 1 “Financial Statements” of this Report. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Please refer to the section in this Report entitled “Cautionary Note Regarding Forward-Looking Statements.”
Overview
We are a leading provider of smart mobility technology solutions, principally operating throughout the United States, Australia, Europe, and Canada. 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 commercial fleet owners such as RACs, Direct Fleets, and FMCs, as well as governments, universities, parking operators, healthcare facilities, transportation hubs, and violation-issuing authorities. Our vision is to continue to develop and use technology and data intelligence to make transportation safer, smarter, and more connected globally.
Our Segments
We have three operating and reportable segments: Commercial Services, Government Solutions, and Parking Solutions:
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.
Executive Summary
We operate under long-term contracts and a 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 strategy. During the periods presented, we:
24
Recent Events
Share Repurchases
During the first quarter of fiscal year 2026, we paid $50.2 million to repurchase 2,215,800 shares of our Class A Common Stock through open market transactions, which shares we subsequently retired. Refer to Note 10, Stockholders’ Equity, in Part 1, Item 1, Financial Statements, for additional information on our share repurchases. As of March 31, 2026, $66.3 million remained available under our share repurchase authorization.
New Headquarters
During the first quarter of fiscal year 2026, we completed our relocation to a new corporate headquarters building in Mesa, Arizona. The new headquarters consists of approximately 40,000 square feet of leased office space. We expect this relocation to support our continued growth and enhance operational efficiency.
Commercial Services Customer Contracts
We are currently operating under a short-term contract extension and are engaged in contract negotiations with one of our significant Commercial Services customers which represented over 10% of our total revenue for the three months ended March 31, 2026 and the year ended December 31, 2025. There is no assurance that we will be successful in negotiating a renewal agreement and if we are unable to enter into a renewal agreement, or if we enter in a new renewal agreement and it has materially different terms and pricing that are unfavorable as compared to our current agreement, this would have a material adverse effect on our business, financial condition and results of operations.
Key Factors Affecting Our Results of Operations
We believe that our performance and future success depends on a number of factors that present opportunities for us but also pose risks and challenges, including those discussed below and in Part I, Item 1A. “Risk Factors” of our Annual Report and in Part II, Item 1A. “Risk Factors” of this Report.
Macroeconomic Conditions
Our business is susceptible to a number of industry-specific and global macroeconomic factors that may cause our actual results of operations to differ from our historical results of operations or current expectations. The factors and trends that we currently believe are or will be most impactful to our results of operations and financial condition include the following: the inflationary impact on items such as wages and travel-related costs, future travel demand, legislation or regulation regarding the adoption, expansion, or prohibition of automated enforcement and traffic safety technology by local, state, or national governments, and the impact of government regulations and actions, including tariffs, trade protection measures, military conflicts or a government shutdown. We continue to monitor the potential favorable or unfavorable impacts of these and other factors on our business, financial condition, and results of operations.
Travel Demand
Our Commercial Services segment is largely impacted by its customer demand which in turn is impacted by a variety of factors including seasonality, demand for business and leisure travel, reductions in the level of air travel, higher airfare costs, increases in energy prices, general international, national, and local economic conditions and cycles, and consumer confidence, as well as other factors affecting travel levels, such as military conflicts, terrorist incidents, natural disasters, epidemic diseases, or a government shutdown.
We monitor the U.S. Transportation and Security Administration (the “TSA”) passenger volume (“TSA Passenger Volume”) as one of several measures for Commercial Services revenue growth. TSA Passenger Volume measures the number of passengers screened by the TSA at United States airports, which correlates to the number of vehicles rented by travelers and toll road usage. TSA Passenger Volume in the first quarter of 2026 was approximately 1.5% greater than TSA Passenger Volume for the same period in 2025.
Electronic Tolling Penetration
Our Commercial Services segment, which offers automated toll and violations management solutions to fleet customers, is impacted by the number of toll roads in the United States and Europe and the geographic concentration of such roads. We monitor the expansion and penetration of toll roadways across the United States and Europe and the percentage of toll roads that rely on cashless or all-electronic infrastructure.
25
Enabling Legislation
Our Government Solutions segment is positively impacted, in significant part, by enabling legislation that permits photo enforcement programs at the federal, state, and local level in the United States. Accordingly, we depend on national, state, and local governments authorizing the use of automated photo enforcement and not otherwise materially restricting its use.
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 and certain distinct hardware installation and relocation activities. 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 SaaS, 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 and certain highly interdependent and interrelated installation services 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, Excluding Depreciation and Amortization. Cost of service revenue, excluding depreciation and amortization consists of recurring service costs, certain distinct hardware installation and relocation costs, collection and other third-party costs in our segments.
Cost of Product Sales. Cost of product sales consists of the cost to acquire photo enforcement equipment purchased by Government Solutions customers, costs of certain highly interdependent and interrelated installation services, and costs to develop 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, 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.
Loss on Extinguishment of Debt. Loss on extinguishment of debt consists of the write-off of pre-existing original issue discounts and deferred financing costs associated with debt extinguishment.
26
Other Income, Net. Other income, net primarily consists of volume rebates earned from total spend on credit card transactions, gains or losses on foreign currency transactions, and other non-operating expenses.
Results of Operations
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
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 March 31, |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
Percentage of Revenue |
|
|
Increase (Decrease) |
|
||||||||||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
||||||
Service revenue |
|
$ |
213,392 |
|
|
$ |
211,902 |
|
|
|
95.4 |
% |
|
|
94.9 |
% |
|
$ |
1,490 |
|
|
|
0.7 |
% |
Product sales |
|
|
10,176 |
|
|
|
11,352 |
|
|
|
4.6 |
% |
|
|
5.1 |
% |
|
|
(1,176 |
) |
|
|
(10.4 |
)% |
Total revenue |
|
|
223,568 |
|
|
|
223,254 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
314 |
|
|
|
0.1 |
% |
Cost of service revenue, excluding depreciation and amortization |
|
|
7,391 |
|
|
|
4,783 |
|
|
|
3.3 |
% |
|
|
2.1 |
% |
|
|
2,608 |
|
|
|
54.5 |
% |
Cost of product sales |
|
|
8,290 |
|
|
|
8,032 |
|
|
|
3.7 |
% |
|
|
3.6 |
% |
|
|
258 |
|
|
|
3.2 |
% |
Operating expenses |
|
|
85,943 |
|
|
|
73,739 |
|
|
|
38.4 |
% |
|
|
33.0 |
% |
|
|
12,204 |
|
|
|
16.6 |
% |
Selling, general and administrative expenses |
|
|
40,853 |
|
|
|
51,501 |
|
|
|
18.3 |
% |
|
|
23.1 |
% |
|
|
(10,648 |
) |
|
|
(20.7 |
)% |
Depreciation, amortization and (gain) loss on disposal of assets, net |
|
|
29,291 |
|
|
|
27,814 |
|
|
|
13.1 |
% |
|
|
12.5 |
% |
|
|
1,477 |
|
|
|
5.3 |
% |
Total costs and expenses |
|
|
171,768 |
|
|
|
165,869 |
|
|
|
76.8 |
% |
|
|
74.3 |
% |
|
|
5,899 |
|
|
|
3.6 |
% |
Income from operations |
|
|
51,800 |
|
|
|
57,385 |
|
|
|
23.2 |
% |
|
|
25.7 |
% |
|
|
(5,585 |
) |
|
|
(9.7 |
)% |
Interest expense, net |
|
|
15,407 |
|
|
|
16,636 |
|
|
|
6.9 |
% |
|
|
7.5 |
% |
|
|
(1,229 |
) |
|
|
(7.4 |
)% |
Loss on extinguishment of debt |
|
|
— |
|
|
|
25 |
|
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
(25 |
) |
|
|
(100.0 |
)% |
Other income, net |
|
|
(4,094 |
) |
|
|
(4,109 |
) |
|
|
(1.8 |
)% |
|
|
(1.9 |
)% |
|
|
15 |
|
|
|
(0.4 |
)% |
Total other expenses |
|
|
11,313 |
|
|
|
12,552 |
|
|
|
5.1 |
% |
|
|
5.6 |
% |
|
|
(1,239 |
) |
|
|
(9.9 |
)% |
Income before income taxes |
|
|
40,487 |
|
|
|
44,833 |
|
|
|
18.1 |
% |
|
|
20.1 |
% |
|
|
(4,346 |
) |
|
|
(9.7 |
)% |
Income tax provision |
|
|
13,743 |
|
|
|
12,494 |
|
|
|
6.1 |
% |
|
|
5.6 |
% |
|
|
1,249 |
|
|
|
10.0 |
% |
Net income |
|
$ |
26,744 |
|
|
$ |
32,339 |
|
|
|
12.0 |
% |
|
|
14.5 |
% |
|
$ |
(5,595 |
) |
|
|
(17.3 |
)% |
Service Revenue. Service revenue increased by $1.5 million, or 0.7%, to $213.4 million for the three months ended March 31, 2026 from $211.9 million for the three months ended March 31, 2025, representing 95.4% and 94.9% of total revenue, respectively. The following table depicts service revenue by segment:
|
|
Three Months Ended March 31, |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
Percentage of Revenue |
|
|
Increase (Decrease) |
|
||||||||||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
||||||
Service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial Services |
|
$ |
97,807 |
|
|
$ |
101,389 |
|
|
|
43.7 |
% |
|
|
45.4 |
% |
|
$ |
(3,582 |
) |
|
|
(3.5 |
)% |
Government Solutions |
|
|
98,090 |
|
|
|
93,982 |
|
|
|
43.9 |
% |
|
|
42.1 |
% |
|
|
4,108 |
|
|
|
4.4 |
% |
Parking Solutions |
|
|
17,495 |
|
|
|
16,531 |
|
|
|
7.8 |
% |
|
|
7.4 |
% |
|
|
964 |
|
|
|
5.8 |
% |
Total service revenue |
|
$ |
213,392 |
|
|
$ |
211,902 |
|
|
|
95.4 |
% |
|
|
94.9 |
% |
|
$ |
1,490 |
|
|
|
0.7 |
% |
Commercial Services service revenue decreased by $3.6 million, or 3.5%, from $101.4 million for the three months ended March 31, 2025 to $97.8 million for the three months ended March 31, 2026. The decrease was primarily due to $3.6 million of lower revenue generated from our FMC customers due to customer churn.
27
Government Solutions service revenue increased by $4.1 million, or 4.4%, from $94.0 million for the three months ended March 31, 2025, to $98.1 million for the three months ended March 31, 2026. The increase was primarily driven by $7.5 million in revenue from expansions in speed, red light and bus lane programs outside of NYCDOT, partially offset by a $3.4 million decrease in revenue primarily driven by the pricing change, net of installation revenue from new camera installations under the new NYCDOT contract.
Parking Solutions service revenue increased to $17.5 million for the three months ended March 31, 2026, from $16.5 million for the three months ended March 31, 2025. The increased revenue was primarily driven by SaaS product offerings and professional services, partially offset by a decrease in subscription services related to parking management solutions.
Product Sales. Product sales were $10.2 million and $11.3 million for the three months ended March 31, 2026 and 2025, respectively. Product sales decreased by $1.2 million, which was due to a $0.6 million decrease in product sales in the Government Solutions segment and $0.6 million decrease 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, Excluding Depreciation and Amortization. Cost of service revenue, excluding depreciation and amortization increased from $4.8 million for the three months ended March 31, 2025 to $7.4 million for the same period in 2026, mainly due to NYCDOT installation service costs and increased recurring service costs.
Cost of Product Sales. Cost of product sales increased by $0.3 million from $8.0 million in the three months ended March 31, 2025 to $8.3 million in the three months ended March 31, 2026, which was due to decreased margins in the first quarter 2026 compared to the first quarter of 2025.
Operating Expenses. Operating expenses increased by $12.2 million, or 16.6%, from $73.7 million for the three months ended March 31, 2025 to $85.9 million for the three months ended March 31, 2026. The increase in 2026 compared to the prior year period was primarily in the Government Solutions segment of approximately $9.5 million driven by increases in wages, subcontractor, information technology and recurring services costs and approximately $1.5 million in the Parking Solutions segment driven by wages, subcontractor and information technology costs. Operating expenses as a percentage of total revenue increased from 33.0% to 38.4% for the three months ended March 31, 2025 and 2026, respectively. The following table presents operating expenses by segment:
|
|
Three Months Ended March 31, |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
Percentage of Revenue |
|
|
Increase (Decrease) |
|
||||||||||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial Services |
|
$ |
22,862 |
|
|
$ |
22,078 |
|
|
|
10.2 |
% |
|
|
9.9 |
% |
|
$ |
784 |
|
|
|
3.6 |
% |
Government Solutions |
|
|
56,488 |
|
|
|
46,961 |
|
|
|
25.3 |
% |
|
|
21.0 |
% |
|
|
9,527 |
|
|
|
20.3 |
% |
Parking Solutions |
|
|
5,142 |
|
|
|
3,602 |
|
|
|
2.3 |
% |
|
|
1.6 |
% |
|
|
1,540 |
|
|
|
42.8 |
% |
Operating expenses by segment |
|
|
84,492 |
|
|
|
72,641 |
|
|
|
37.8 |
% |
|
|
32.5 |
% |
|
|
11,851 |
|
|
|
16.3 |
% |
Other expenses |
|
|
1,451 |
|
|
|
1,098 |
|
|
|
0.6 |
% |
|
|
0.5 |
% |
|
|
353 |
|
|
|
32.1 |
% |
Total operating expenses |
|
$ |
85,943 |
|
|
$ |
73,739 |
|
|
|
38.4 |
% |
|
|
33.0 |
% |
|
$ |
12,204 |
|
|
|
16.6 |
% |
28
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased to $40.9 million for the three months ended March 31, 2026 compared to $51.5 million for the same period in 2025. This was primarily due to a $10.3 million decrease related to a legal settlement finalized in February 2026 and a $5.5 million decrease in credit loss expense partially offset by a $4.2 million increase in restructuring expense and a $2.1 million increase in consulting fees compared to the same period in the prior year. Selling, general and administrative expenses as a percentage of total revenue decreased from 23.1% to 18.3% for the three months ended March 31, 2025 and 2026, respectively. The following table presents selling, general and administrative expenses by segment:
|
|
Three Months Ended March 31, |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
Percentage of Revenue |
|
|
Increase (Decrease) |
|
||||||||||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
||||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial Services |
|
$ |
17,123 |
|
|
$ |
19,582 |
|
|
|
7.7 |
% |
|
|
8.8 |
% |
|
$ |
(2,459 |
) |
|
|
(12.6 |
)% |
Government Solutions |
|
|
18,869 |
|
|
|
19,303 |
|
|
|
8.4 |
% |
|
|
8.6 |
% |
|
|
(434 |
) |
|
|
(2.2 |
)% |
Parking Solutions |
|
|
5,461 |
|
|
|
7,258 |
|
|
|
2.4 |
% |
|
|
3.3 |
% |
|
|
(1,797 |
) |
|
|
(24.8 |
)% |
Selling, general and administrative expenses by segment |
|
|
41,453 |
|
|
|
46,143 |
|
|
|
18.5 |
% |
|
|
20.7 |
% |
|
|
(4,690 |
) |
|
|
(10.2 |
)% |
Other expenses |
|
|
(600 |
) |
|
|
5,358 |
|
|
|
-0.2 |
% |
|
|
2.4 |
% |
|
|
(5,958 |
) |
|
|
(111.2 |
)% |
Total selling, general and administrative expenses |
|
$ |
40,853 |
|
|
$ |
51,501 |
|
|
|
18.3 |
% |
|
|
23.1 |
% |
|
$ |
(10,648 |
) |
|
|
(20.7 |
)% |
Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net, increased by $1.5 million to $29.3 million for the three months ended March 31, 2026 from $27.8 million for the same period in 2025. This was primarily due to an increase in depreciation expense related to equipment, vehicles and software in the 2026 period compared to the 2025 period.
Interest Expense, Net. Interest expense, net decreased by approximately $1.2 million from $16.6 million for the three months ended March 31, 2025 to $15.4 million for the same period in 2026. This was primarily attributable to a 25 basis-point reduction in the interest rate as a result of refinancing our 2021 Term Loan in October 2025 coupled with decreasing SOFR rates. See “Liquidity and Capital Resources” below.
Loss on Extinguishment of Debt. We recorded less than $0.1 million of loss on extinguishment of debt during the three months ended March 31, 2025 related to the write-off of pre-existing deferred financing costs and discounts in connection with the early repayment on the 2021 Term Loan.
Other Income, Net. Other income, net was $4.1 million for both of the three months ended March 31, 2026 and 2025.
Income Tax Provision. Income tax provision was $13.7 million representing an effective tax rate of 33.9% for the three months ended March 31, 2026 compared to a tax provision of $12.5 million, with an effective tax rate of 27.9% for the same period in 2025. The increase in effective tax rate variance was primarily driven by tax deductions related to stock compensation and the tax impact of the legal settlement finalized in February 2026.
Net Income. We had net income of $26.7 million for the three months ended March 31, 2026, as compared to a net income of $32.3 million for the three months ended March 31, 2025. The $5.6 million decrease in net income was primarily due to the increase in operating expenses, decrease in product sales and the other statement of operations activity discussed above, partially offset by the legal settlement finalized in February 2026.
Liquidity and Capital Resources
Our principal sources of liquidity are cash flows from operations and the available borrowing under our Amended Revolver.
29
We believe that our existing cash and cash equivalents, cash flows provided by operating activities, and our ability to borrow under our Amended Revolver will be sufficient to meet operating cash requirements, service debt obligations and fund potential share repurchases for at least the next 12 months and thereafter for the foreseeable future. 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.
We have incurred significant long-term debt as a result of acquisitions completed in prior years. Should we pursue strategic acquisitions, we may need to raise additional capital, which may be in the form of additional long-term debt, borrowings on our Amended 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 Amended Revolver to meet expected obligations as they come due.
We originally entered into the Revolver in March 2018 and increased the borrowing capacity thereunder to $125.0 million in May 2025 pursuant to an amendment thereto. In fiscal year 2025, we amended and restated the Revolver and entered into the Amended and Restated Revolving Credit Agreement which increased the existing commitment from $125.0 million to $150.0 million and extended the maturity date to October 17, 2030. As of March 31, 2026, we had $26.0 million outstanding borrowings and $78.3 million available for borrowing, net of letters of credit, under our Amended Revolver. Our cash on hand was $46.9 million as of March 31, 2026.
In fiscal year 2025, we refinanced the existing senior secured term loans under the 2021 Term Loan in an aggregate outstanding principal amount of approximately $688.8 million with a new senior secured term loan of the same principal amount maturing on October 15, 2032 and reduced the interest rate by 0.25%. We made a quarterly repayment of approximately $1.7 million on our Amended Term Loan during the three months ended March 31, 2026, and as a result, the total principal outstanding on the Amended Term Loan was $685.4 million as of March 31, 2026.
At March 31, 2026, the tax receivable agreement liability was approximately $43.7 million. We expect to make payments of approximately $5.3 million per year for the next seven years and approximately $1.1 million in the final year.
Share Repurchases and Retirement
In October 2023, 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. After we repurchased an aggregate 3.5 million shares for approximately $87.3 million in fiscal year 2024, in December 2024, our Board of Directors authorized the repurchase of up to an additional $100.0 million of our outstanding shares under the then-existing program, providing us with approximately $112.7 million available for repurchases. In December 2024, we entered into an ASR agreement with a third-party financial institution and paid $112.7 million to receive an initial delivery of 3,821,958 shares of our Class A Common Stock. The final settlement occurred on March 3, 2025, at which time, we received an additional 685,934 shares of Class A Common Stock calculated using a volume-weighted average price over the term of the ASR agreement. All repurchased shares were subsequently retired. The prior repurchase authorization expired on April 30, 2025.
In May 2025, our Board of Directors authorized a new 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. On October 23, 2025, our Board of Directors authorized the repurchase of up to an additional $150.0 million of our outstanding shares of Class A Common Stock under the existing May 2025 program, providing us with $250.0 million available for repurchases. During the fourth quarter of fiscal year 2025, we paid $133.4 million to repurchase 6,028,853 shares of our Class A Common Stock through open market transactions. All repurchased shares were subsequently retired.
In the first quarter of fiscal year 2026, we paid $50.2 million to repurchase 2,215,800 shares of our Class A Common Stock through open market transactions, which were subsequently retired. In addition, we recorded approximately $0.5 million within accrued liabilities on the condensed consolidated balance sheets as of March 31, 2026 for direct costs related to the excise tax payable on net share repurchases. As of March 31, 2026, $66.3 million remains available under our authorized share repurchase program.
The following table sets forth certain captions indicated on our statements of cash flows for the respective periods:
|
|
Three Months Ended March 31, |
|
|||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
||
Net cash provided by operating activities |
|
$ |
40,841 |
|
|
$ |
62,965 |
|
Net cash used in investing activities |
|
|
(31,087 |
) |
|
|
(21,219 |
) |
Net cash used in financing activities |
|
|
(28,581 |
) |
|
|
(8,734 |
) |
30
Cash Flows from Operating Activities
Cash provided by operating activities decreased by $22.2 million from $63.0 million for the three months ended March 31, 2025 to $40.8 million for the three months ended March 31, 2026. Net income year-over-year decreased by $5.6 million, from $32.3 million in 2025 to $26.7 million in 2026. The aggregate adjustments to reconcile net income to net cash provided by operating activities decreased $7.6 million mainly due to the share-based proceeds acquired from a legal settlement finalized in February 2026, and a decrease in credit loss expense, partially offset by an increase in deferred income taxes and the mark-to-market adjustment on the share-based proceeds. The aggregate changes in operating assets and liabilities decreased by $9.0 million in 2026 compared to the prior year primarily due to an increase in the net use of working capital, of which, the majority is attributable to an increase in unbilled receivables and inventory and a decrease in accrued liabilities, partially offset by a decrease in net accounts receivable and prepaid assets.
Cash Flows from Investing Activities
Cash used in investing activities was $31.1 million and $21.2 million for the three months ended March 31, 2026 and 2025, respectively. The increase in cash used was primarily driven by a $10.0 million increase for purchases of installation and service parts and property and equipment mainly for the Government Solutions segment compared to the same period in the prior year.
Cash Flows from Financing Activities
Cash used in financing activities was $28.6 million and $8.7 million for the three months ended March 31, 2026 and 2025, respectively. The increased use in cash from financing activities was mainly due to $50.2 million of share repurchases in the first quarter of fiscal year 2026 and no comparable repurchases in the prior year period, partially offset by net borrowings of $26.0 million on our Amended Revolver.
Debt, Net
2021 Term Loan and Amended Term Loan
In March 2021, VM Consolidated, our wholly owned subsidiary, entered into the 2021 Term Loan with a syndicate of lenders. The 2021 Term Loan had an aggregate borrowing of $900.0 million, maturing on March 24, 2028. 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 amortized over the life of the 2021 Term Loan. Such offering discount costs and deferred financing costs have subsequently been adjusted as needed as a result of refinancing activity discussed below which prompted re-evaluation of unamortized amounts on a lender-by-lender basis.
In October 2025, VM Consolidated and certain of our subsidiaries entered into the Amendment and Restatement Agreement No. 2 to the Amended and Restated First Lien Term Loan Credit Agreement dated as of March 26, 2021, to refinance the existing senior secured term loans in an aggregate outstanding principal amount of approximately $688.8 million with a new senior secured term loan of the same principal amount maturing on October 15, 2032. The proceeds from the Amended Term Loan were used in their entirety to prepay in full the outstanding principal amount of the existing term loan under the 2021 Term Loan agreement.
The Amended Term Loan bears interest at a per annum rate equal to SOFR plus an applicable margin of 2.00%, or a base rate plus an applicable margin of 1.00%. As of March 31, 2026, the interest rate on the Amended Term Loan was 5.7%. The Amended Term Loan amortizes in equal quarterly installments in aggregate amounts equal to 1.00% of the original principal amount of the Amended Term Loan beginning March 31, 2026, with the balance payable at maturity, is subject to mandatory prepayment provisions upon the occurrence of certain specified events, and is repayable at any time at the borrowers’ election, provided that repayment of the Amended Term Loan with proceeds of certain indebtedness prior to the six-month anniversary of October 17, 2025 will require a prepayment premium of 1.00% of the aggregate principal amount of such prepayment. We evaluated the refinancing transactions on a lender-by-lender basis and accounted accordingly for debt extinguishment and debt modification costs (for the portion of the transactions that did not meet the accounting criteria for debt extinguishment).
During the three months ended March 31, 2026, we made a quarterly repayment of $1.7 million on the Amended Term Loan. During the three months ended March 31, 2025, we made a voluntary prepayment totaling $2.3 million on the 2021 Term Loan. As a result, the total principal outstanding was $685.4 million as of March 31, 2026.
We recorded less than $0.1 million of loss on extinguishment of debt for the three months ended March 31, 2025, related to the write-off of pre-existing deferred financing costs and discounts in connection with the early repayment.
31
In addition, the Amended Term Loan requires mandatory prepayments equal to the product of the excess cash flows of the Company (as defined in the Amended and Restated 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 in the Amended and Restated Term Loan Agreement) |
|
Applicable |
> 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 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. We may redeem all or a portion of the Senior Notes at a redemption price of 101.375% plus accrued and unpaid interest through April 2026 and at face value plus accrued and unpaid interest thereafter.
The Revolver
We entered into a Revolving Credit Agreement in March 2018 with a commitment of up to $75.0 million available for loans and letters of credit, which commitment was increased to $125.0 million. In May 2025, pursuant to an amendment thereto, such commitment was increased to $125.0 million. On October 17, 2025, certain of our direct and indirect wholly owned subsidiaries, including VM Consolidated, entered into the Amended and Restated Revolving Credit Agreement to amend and restate the Revolver. The Amended and Restated Revolving Credit Agreement provides for a $150.0 million senior secured asset-based revolving credit facility with a $35.0 million sublimit for the issuance of letters of credit, and matures on October 17, 2030 (subject to an earlier maturity date in certain circumstances).
Outstanding borrowings under the Amended Revolver accrue interest at per annum rate equal to SOFR plus a margin ranging from 1.25% to 1.75% or a base rate plus a margin ranging from 0.25% to 0.75%, in each case, depending on the quarterly average undrawn availability under the Amended Revolver in the prior quarter. The Amended and Restated Revolving Credit Agreement also provides for the option, subject to receiving additional commitments from lenders and the satisfaction of certain conditions, to increase the loan commitments under the Amended Revolver by up to an amount equal to the greater of (x) $75.0 million and (y) the amount by which the borrowing base exceeds the aggregate commitments at such time. There were $26.0 million of outstanding borrowings on the Amended Revolver as of March 31, 2026. There were no outstanding borrowings on the Amended Revolver as of December 31, 2025. The availability to borrow was $78.3 million at March 31, 2026, calculated as our borrowing base which consists of certain eligible accounts receivable and inventory balances, less any outstanding borrowings and letters of credit up to the maximum commitment available.
A commitment fee on the unused portion of the Amended Revolver is payable quarterly at (x) an annual rate of 0.375%, when quarterly average usage was less than 50% of the loan commitments in the prior quarter or (y) an annual rate of 0.250%, when quarterly average usage of the Amended Revolver was greater than or equal to 50% of the loan commitments in the prior quarter. We are also required to pay participation and fronting fees at 1.38% on $3.7 million of outstanding letters of credit as of March 31, 2026.
All borrowings and other extensions of credits under the Amended Term Loan, Senior Notes and the Amended 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 under the Amended Term Loan and the Amended Revolver. At March 31, 2026, we were compliant with all debt covenants in our debt agreements.
From time to time, we enter into equipment financing arrangements in the normal course of business, including certain equipment leases accounted for as financing arrangements. Amounts outstanding under these arrangements are included in “Other debt” in Note 6, Debt, Net, in Part I, Item 1, Financial Statements, and were not material to our overall financial position, liquidity, or capital resources as of March 31, 2026.
Interest Expense, Net
We recorded interest expense, including amortization of deferred financing costs and discounts, of $15.4 million and $16.6 million for the three months ended March 31, 2026 and 2025, respectively.
32
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet financing arrangements as of March 31, 2026.
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. Please refer to our Annual Report 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.
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 risk due to the variable interest rates on the Amended Term Loan and Amended Revolver 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 Amended Term Loan and Amended Revolver, which have outstanding balances of $685.4 million and $26.0 million at March 31, 2026, respectively. As of March 31, 2026, the interest rates were 5.7% and 4.9% on the Amended Term Loan and the Amended Revolver, respectively.
Based on the March 31, 2026 balance outstanding, each 1% movement in interest rates will result in an approximately $7.1 million change in annual interest expense.
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 evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2026. Based upon such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.
Changes in Internal Control Over Financial Reporting
There have been no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
In 2025, we completed the first phase of a multi-phase implementation of a new global enterprise resource planning (“ERP”) system that will replace components of our existing operating and financial systems. The new ERP system is designed to accurately maintain the flow of financial information, enhance operational functionality, and accelerate information reporting to our management. During the first half of 2025, we completed the implementation of new applications, interfaces, and reports which support our financial reporting, which resulted in changes to certain of our processes and internal controls. The new ERP implementation is substantially complete and is expected to be fully complete in fiscal year 2026.
33
Part II—Other Information
Item 1. Legal Proceedings
We are subject to legal and regulatory actions that arise from time to time in the ordinary course of business, and may be subject to similar or other claims in the future. Legal disputes and other claims and proceedings may relate to, among other things, intellectual property, commercial arrangements, negligence and fiduciary duty claims, vicarious liability based on conduct of individuals or entities outside of our control, including our third-party service providers, antitrust claims, deceptive trade practices, general fraud claims, and employment law claims, including compliance with wage and hour regulations. In addition to more general litigation, at times we have also been a named party in claims made against our customers, including putative class actions challenging the legality and constitutionality of automated photo enforcement and other similar programs of our Government Solutions customers, and consumer fraud claims brought against us and our Commercial Services customers alleging faulty disclosures regarding our services. From time to time, we may also be reviewed or investigated by U.S. federal, state, or local regulators, or regulators in the foreign jurisdictions in which we operate regarding these and other matters, including proper licensing and tax assessments. All litigation is inherently unpredictable and we could incur judgments or enter into settlements or claims in the future that could materially impact our results.
As described in our Annual Report and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2025 and June 30, 2025, 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 (the “City”) and its safety camera vendor, Redflex Traffic Systems, Inc., in April 2016. The Company acquired Redflex Traffic Systems, Inc. as part of its June 2021 purchase of Redflex Holdings Limited. The plaintiff class, which was certified on March 30, 2021, alleged 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 sought 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. The parties entered into a settlement agreement and preliminary approval was granted by the court in April 2025. The court provided final approval of the settlement on September 18, 2025. The class action settlement has been fully administered and a final dismissal order was entered on March 11, 2026.
When necessary, we accrue estimated amounts related to legal proceedings within accrued liabilities on the condensed consolidated balance sheets. The information contained in Note 13, Commitments and Contingencies, included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.
Item 1A. Risk Factors
Part I, Item 1A. “Risk Factors” in our Annual Report includes a discussion of our risk factors. Other than the risk factors below, there have been no material changes from the risk factors described in our Annual Report. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future SEC filings.
Our Commercial Services and Government Solutions segments have several large customers, including NYCDOT, that account for a significant portion of our revenue, and a reduction in demand, materially different terms or pricing in new or amended agreements, or loss of one or more of such customers could have a material adverse effect on our business.
Our business experiences varying levels of customer concentration. For example, in our Government Solutions segment, NYCDOT represented approximately 15.2% and 15.4% of our total revenues for the quarters ended March 31, 2026 and 2025, respectively. Our contract with NYCDOT expired on December 31, 2025, and we entered into a new contract with NYCDOT, effective January 1, 2026, to manage New York City’s automated enforcement camera safety programs for a five-year period. The terms of the new contract are materially different than our prior contract with NYCDOT, including service level agreements, service credits, liquidated damages, cybersecurity, and subcontracting requirements. If we do not successfully perform the contract pursuant to its terms, it could have a material adverse effect on our business, financial condition, and results of operations. We may continue to rely on a small number of customers in our Government Solutions segment to represent a significant portion of our total revenues in any given period. The loss of any of our top Government Solutions customers could have a material adverse effect on our business, financial condition, and results of operations.
34
We also experience customer concentration in our Commercial Services segment. Three of our Commercial Services customers collectively accounted for 35.2% and 37.9% of our total revenues for the quarters ended March 31, 2026 and 2025, respectively. We face risks associated with the renewal of Commercial Services customer agreements. We are currently operating under a short-term contract extension and are engaged in contract negotiations with one of our significant Commercial Services customers which represented over 10% of our total revenue for the three months ended March 31, 2026 and the year ended December 31, 2025. There is no assurance that we will be successful in negotiating a renewal agreement and if we are unable to enter into a renewal agreement, or if we enter in a new renewal agreement and it has materially different terms and pricing that are unfavorable as compared to our current agreement, this would have a material adverse effect on our business, financial condition, and results of operations. We will enter into contract renewal discussions with our other two significant Commercial Services customers over the next eighteen months, and if we are unable to renew such customer agreements, or if the terms or pricing of such agreements are materially different from the current agreements, this would have a material impact on our business, financial condition, and results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities
The following details the purchases of our Class A Common Stock during the three months ended March 31, 2026:
Period |
|
Total Number of Shares Purchased |
|
|
Average Price Paid per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
|
Maximum Dollar Value of Shares that May Yet to be Purchased Under the Plans or Programs (1) |
|
||||
January 1, 2026 - January 31, 2026 |
|
|
2,215,800 |
|
|
$ |
22.68 |
|
|
|
2,215,800 |
|
|
$ |
66,317,515 |
|
February 1, 2026 - February 28, 2026 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
66,317,515 |
|
March 1, 2026 - March 31, 2026 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
66,317,515 |
|
Total |
|
|
2,215,800 |
|
|
$ |
22.68 |
|
|
|
2,215,800 |
|
|
$ |
66,317,515 |
|
(1) Represents amounts outstanding under our authorized share repurchase program. On May 17, 2025, our Board of Directors authorized a new share repurchase program to repurchase 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 purchases, in privately negotiated transactions, or by other means, including trading plans intended to qualify under Rule 10b5-1of the Exchange Act, and ASR agreements. On October 23, 2025, our Board of Directors authorized the repurchase of up to an additional $150.0 million of our outstanding shares of Class A Common Stock under the existing share repurchase program, providing the Company with an aggregate $250.0 million available for repurchases. The program may be suspended or terminated at any time by the Company and will terminate on November 13, 2026, if not terminated or extended prior to that date. As of March 31, 2026, we had $66.3 million available under the share repurchase authorization.
Sales of Unregistered Securities
We did not have any sales of unregistered equity securities during the three months ended March 31, 2026.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Insider Trading Arrangements
During the three months ended March 31, 2026, none of our directors or officers (as defined in Rule 16a-1(f) promulgated under the Exchange Act)
35
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Report.
Exhibit Index
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|
Incorporated by Reference |
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Exhibit Number |
Description |
Form |
File No. |
Exhibit |
Filing Date |
Filed Herewith |
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 |
3.1 |
November 9, 2023 |
|
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 With Embedded Linkbase Documents. |
|
|
|
|
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. |
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36
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 |
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|
|
|
Date: May 6, 2026 |
By: |
/s/ Craig Conti |
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|
Craig Conti |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |
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|
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37