Verra Mobility Announces Third Quarter 2020 Financial Results

MESA, Ariz., Nov. 5, 2020 /PRNewswire/ — Verra Mobility (NASDAQ: VRRM), a leading provider of smart mobility technology solutions, announced today financial results for the three and nine months ended September 30, 2020.

“We are very pleased with the Company’s performance in the third quarter, including modest signs of improvement in Commercial Services, continued strength in Government Solutions and a return to profitability with very strong cash flow generation,” said David Roberts, Chief Executive Officer, Verra Mobility. “Despite the ongoing challenges presented to our business, we continue to see strong margins and incremental contract wins that further demonstrate the strength of our model and importance of our mission.”

Third Quarter 2020 Financial Highlights

  • Revenue: Total revenue for the third quarter of 2020 was $96.9 million, down 24.4% compared to $128.2 million for the third quarter of 2019. Within total revenue, service revenue was $83.0 million and product sales contributed $13.9 million. The decline was mainly in our Commercial Services service revenue, due to the significant impact of the novel coronavirus (“COVID-19“) on the rental car industry, which was partially offset by growth in Government Solutions service revenue.
  • Net income: Net income for the third quarter of 2020 was $6.7 million, or $0.04 per share, based on 162.6 million diluted weighted average shares outstanding. Net income for the comparable 2019 period was $17.8 million, or $0.11 per share, based on 163.7 million diluted weighted average shares outstanding.
  • Adjusted EBITDA: Adjusted EBITDA was $53.5 million for the third quarter of 2020, compared to $70.8 million in the same period last year.

Year-To-Date 2020 Financial Highlights

  • Revenue: Total revenue for year-to-date 2020 was $293.4 million, down 12.7% compared to $336.3 million for the year-to-date 2019 period. Within total revenue, service revenue was $245.3 million and product sales contributed $48.1 million. The decline was in our Commercial Services service revenue, due to COVID-19’s significant negative impact on the rental car industry, which was offset by growth in product sales and service revenue in our Government Solutions segment.
  • Net (loss) income: Net loss for year-to-date 2020 was $(2.0) million, or $(0.01) per share, based on 161.5 million diluted weighted average shares outstanding. Net income for the comparable 2019 period was $24.2 million, or $0.15 per share, based on 160.7 million diluted weighted average shares outstanding.
  • Adjusted EBITDA: Adjusted EBITDA was $136.0 million for year-to-date 2020, compared to $181.8 million for year-to-date 2019.

Liquidity: As of September 30, 2020, cash and cash equivalents were $129.2 million. We generated $44.4 million in net cash from operations for year-to-date 2020. As of September 30, 2020, we had total debt of $867.9 million, net of cash on hand our net debt was $738.7 million, and a $44.0 million availability to borrow on the revolver that is undrawn.

The operating results for year-to-date 2020 were impacted by COVID-19, which emerged in late 2019 in China and has since spread throughout the world. COVID-19 has had and continues to have a significant negative impact on the global economy, including the rental car industry due to reduced airline travel and widespread travel restrictions throughout the world. Refer to the section below entitled, Forward Looking Statements, for further discussion on risks and uncertainties.

The Company reports its results of operations based on two operating segments:

  • Commercial Services delivers market-leading automated toll and violations management and title and registration solutions to rental car companies, fleet management companies and other large fleet owners.
  • Government Solutions delivers market-leading automated safety solutions to municipalities and school districts, including services and technology that enable photo enforcement related to red-light, speed, school bus, and city bus lanes.

Third Quarter 2020 Segment Detail

  • Commercial Services segment generated total revenue of $44.2 million, a decrease of 43% compared to the same period in 2019. Segment profit was $30.8 million, a 40% decrease from $51.1 million in the prior year. The significant decreases in revenue and profit resulted from COVID-19’s negative impact on the rental car industry discussed above, the full impact of which is not yet known. Segment profit margin was 70% for 2020 and 66% for the same period in 2019.
  • Government Solutions segment generated total revenue of $52.8 million growing 4% over the same period in 2019. The growth in this segment is driven by service revenue increase for the period offset by a decline in product sales. Segment profit was $22.7 million, a 15% increase from $19.8 million in the prior year. Segment margin was 43% in 2020 compared to 39% for the prior year period.

Quarterly Conference Call

Verra Mobility will host a conference call and live webcast to discuss financial results for investors and analysts at 3:00 p.m. Mountain Time (5:00 p.m. Eastern Time) on November 5, 2020. To access the conference call, dial (866) 548-4713 for the U.S. or Canada and (323) 794-2093 for international callers with conference ID #6595730. The webcast will be available live in the “Investor Relations” section of the Company’s website at http://ir.verramobility.com. An audio replay of the call will also be available until 9:59 p.m. Mountain Time (11:59 p.m. Eastern Time) on November 19, 2020, by dialing (844) 512-2921 for the U.S. or Canada and (412) 317-6671 for international callers, and entering passcode #6595730. In addition, an archived webcast will be available in the “News & Events” section of the Investor Relations page of the Company’s website at http://ir.verramobility.com.

About Verra Mobility

Verra Mobility is committed to developing and using the latest in technology and data intelligence to help make transportation safer and easier. As a global company, Verra Mobility sits at the center of the mobility ecosystem – one that brings together vehicles, devices, information, and people to solve complex challenges faced by our customers and the constituencies they serve.

Verra Mobility serves the world’s largest commercial fleets and rental car companies to manage tolling transactions and violations for millions of vehicles. As a leading provider of connected systems, Verra Mobility processes millions of transactions each year through connectivity with more than 50 individual tolling authorities and more than 400 issuing authorities. Verra Mobility also fosters the development of safe cities, partnering with law enforcement agencies, transportation departments and school districts across North America operating thousands of red-light, speed, bus lane and school bus stop arm safety cameras. Arizona-based Verra Mobility operates in more than 15 countries. For more information, visit www.verramobility.com.

Forward-Looking Statements

This press release contains forward-looking statements which address the Company’s expected future business and financial performance, and may contain words such as “goal,” “target,” “future,” “estimate,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “project,” “may,” “should,” “will” or similar expressions. Examples of forward-looking statements include, among others, statements regarding the benefits of the Company’s strategic acquisitions, changes in the market for our products and services, expected operating results, such as revenue growth, expansion plans and opportunities, and earnings guidance related to 2020 financial and operational metrics. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those currently anticipated. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward looking statements. These factors include, but are not limited to: (1) the disruption to our business and results of operations as a result of the COVID-19 pandemic; (2) the impact of the COVID-19 pandemic on our revenues from key customers in the rental car industry and from photo enforcement programs; (3) customer concentration in our Commercial Services and Government Solutions segments; (4) decreases in the prevalence of automated photo enforcement or the use of tolling; (5) risks and uncertainties related to our government contracts, including but not limited to administrative hurdles, legislative changes, termination rights, audits and investigations; (6) decreased interest in outsourcing from our customers; (7) our ability to properly perform under our contracts and otherwise satisfy our customers; (8) our ability to compete in a highly competitive and rapidly evolving market; (9) our ability to keep up with technological developments and changing customer preferences; (10) the success of our new products and changes to existing products and services; (11) our ability to successfully integrate our recent or future acquisitions; (12) failures in or breaches of our networks or systems, including as a result of cyber-attacks; and (13) other risks and uncertainties indicated from time to time in documents filed or to be filed with the Securities and Exchange Commission (the “SEC”) by Verra Mobility. The forward-looking statements herein represent the judgment of the Company, as of the date of this release, and Verra Mobility disclaims any intent or obligation to update forward-looking statements. This press release should be read in conjunction with the information included in the Company’s other press releases, reports and other filings with the SEC. Understanding the information contained in these filings is important in order to fully understand the Company’s reported financial results and our business outlook for future periods.

Non-GAAP Financial Measures

In addition to disclosing financial results that are determined in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company also discloses certain non-GAAP financial information in this press release. These financial measures are not recognized measures under GAAP and are not intended to be and should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. EBITDA, Adjusted EBITDA, Free Cash Flow, Adjusted Net Income and Adjusted EPS are non-GAAP financial measures as defined by SEC rules. These non-GAAP financial measures may be determined or calculated differently by other companies. Reconciliations of these non-GAAP measurements to the most directly comparable GAAP financial measurements have been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliations.

VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


($ in thousands except per share data)


September 30,

2020



December 31,

2019


Assets









Current assets:









Cash and cash equivalents


$

129,158



$

131,513


Restricted cash



549




917


Accounts receivable (net of allowance for credit loss of $10.1 million at September 30, 2020)



141,019




93,514


Unbilled receivables



16,145




20,003


Prepaid expenses and other current assets



24,714




26,491


Total current assets



311,585




272,438


Installation and service parts, net



6,916




8,841


Property and equipment, net



73,155




72,266


Operating lease assets



30,548




32,177


Intangible assets, net



363,526




434,443


Goodwill



583,341




584,150


Other non-current assets



2,900




3,111


Total assets


$

1,371,971



$

1,407,426


Liabilities and Stockholders’ Equity









Current liabilities:









Accounts payable


$

45,601



$

50,825


Accrued liabilities



17,309




25,277


Current portion of long-term debt



9,104




28,779


Total current liabilities



72,014




104,881


Long-term debt, net of current portion



833,624




837,686


Operating lease liabilities, net of current portion



28,723




30,130


Payable to related party pursuant to tax receivable agreement



65,620




61,174


Asset retirement obligation



6,391




6,309


Deferred tax liabilities, net



21,514




25,716


Other long-term liabilities



163




2,183


Total liabilities



1,028,049




1,068,079


Commitments and contingencies









Stockholders’ equity









Preferred stock, $.0001 par value







Common stock, $.0001 par value



16




16


Common stock contingent consideration



36,575




54,862


Additional paid-in capital



394,259




367,266


Accumulated deficit



(82,943)




(80,220)


Accumulated other comprehensive loss



(3,985)




(2,577)


Total stockholders’ equity



343,922




339,347


Total liabilities and stockholders’ equity


$

1,371,971



$

1,407,426


VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)




Three Months Ended September 30,



Nine Months Ended September 30,


(In thousands, except per share data)


2020



2019



2020



2019


Service revenue


$

82,980



$

110,757



$

245,292



$

311,884


Product sales



13,928




17,483




48,138




24,392


Total revenue



96,908




128,240




293,430




336,276


Cost of service revenue



907




1,388




3,139




4,390


Cost of product sales



7,088




7,238




24,838




10,432


Operating expenses



26,544




32,965




85,502




94,098


Selling, general and administrative expenses



17,511




21,293




64,218




62,709


Depreciation, amortization and (gain) loss on disposal of

assets, net



29,590




28,697




88,002




86,488


Impairment of property and equipment












5,898


Total costs and expenses



81,640




91,581




265,699




264,015


Income from operations



15,268




36,659




27,731




72,261


Interest expense, net



9,578




14,932




31,568




46,621


Loss from tax receivable agreement adjustment









4,446





Other income, net



(4,982)




(2,727)




(9,430)




(8,279)


Total other expenses



4,596




12,205




26,584




38,342


Income before income tax provision



10,672




24,454




1,147




33,919


Income tax provision



3,986




6,702




3,176




9,756


Net income (loss)


$

6,686



$

17,752



$

(2,029)



$

24,163


Other comprehensive income (loss):

















Change in foreign currency translation adjustment



2,467




(1,664)




(1,408)




(1,736)


Total comprehensive income (loss)


$

9,153



$

16,088



$

(3,437)



$

22,427


Net income (loss) per share:

















Basic


$

0.04



$

0.11



$

(0.01)



$

0.15


Diluted


$

0.04



$

0.11



$

(0.01)



$

0.15


Weighted average shares used in per share calculation:

















Basic outstanding



161,744




158,610




161,460




157,514


Diluted outstanding



162,568




163,705




161,460




160,723


VERRA MOBILITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)




Nine Months Ended September 30,


($ in thousands)


2020



2019


Cash Flows from Operating Activities:









Net (loss) income


$

(2,029)



$

24,163


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









Depreciation and amortization



87,828




86,501


Amortization of deferred financing costs and discounts



3,725




5,066


Impairment of property and equipment






5,898


Loss from tax receivable agreement adjustment



4,446





Credit loss expense



10,628




5,347


Deferred income taxes



(3,920)




(9,426)


Stock-based compensation



9,192




7,426


Gain from third-party insurance proceeds



(1,400)





Installation and service parts expense



704




1,055


Accretion expense



197




269


Loss (gain) on disposal of assets



174




(13)


Changes in operating assets and liabilities:









Accounts receivable, net



(58,913)




(26,353)


Unbilled receivables



3,866




(2,117)


Prepaid expenses and other current assets



8,655




(9,512)


Accounts payable and accrued liabilities



(15,134)




12,258


Other liabilities



(3,669)




(4,976)


Net cash provided by operating activities



44,350




95,586


Cash Flows from Investing Activities:









Purchases of installation and service parts and property and equipment



(18,317)




(17,492)


Cash proceeds from the sale of assets



67




14


Net cash used in investing activities



(18,250)




(17,478)


Cash Flows from Financing Activities:









Repayment of long-term debt



(26,503)




(6,827)


Payment of debt issuance costs



(960)




(299)


Payment of employee tax withholding related to RSU vesting



(486)





Net cash used in financing activities



(27,949)




(7,126)


Effect of exchange rate changes on cash and cash equivalents



(874)




(343)


Net (decrease) increase in cash, cash equivalents and restricted cash



(2,723)




70,639


Cash, cash equivalents and restricted cash – beginning of period



132,430




67,081


Cash, cash equivalents and restricted cash – end of period


$

129,707



$

137,720


VERRA MOBILITY CORPORATION



ADJUSTED EBITDA RECONCILIATION (Unaudited)




Three Months Ended September 30,



Nine Months Ended September 30,


($ in thousands)


2020



2019



2020



2019


Net income (loss)


$

6,686



$

17,752



$

(2,029)



$

24,163


Interest expense, net



9,578




14,932




31,568




46,621


Income tax provision



3,986




6,702




3,176




9,756


Depreciation and amortization



29,419




28,697




87,828




86,501


EBITDA



49,669




68,083




120,543




167,041


Transaction and other related expenses (i)



132




287




735




1,422


Transformation expenses (ii)



575







1,090





Impairment of property and equipment (iii)












5,898


Loss from tax receivable agreement adjustment (iv)









4,446





Stock-based compensation (v)



3,153




2,471




9,192




7,426


Adjusted EBITDA


$

53,529



$

70,841



$

136,006



$

181,787


(i) 

Transaction and other related expenses incurred in the three and nine months ended September 30, 2020 primarily relate to acquisition-related costs mainly for Pagatelia S.L and certain costs for refinancing our debt during the period. For the 2019 period, these related to secondary offering costs incurred by us for PE Greenlight Holdings, LLC and transaction expenses.

(ii)

Transformation expenses consist of severance and other employee separation costs related to exit activities initiated during the three and nine months ended September 30, 2020.

(iii)

This represents an impairment charge on fixed assets that were used and held in our operations.

(iv)

The $4.4 million charge for the nine months ended September 30, 2020 reflects the impact of an increase to our deferred tax rate arising from higher estimated state tax rates due to a change in apportionment.

(v)

Stock-based compensation represents the non-cash charge related to the issuance of awards under the Verra Mobility Corporation 2018 Equity Incentive Plan.

FREE CASH FLOW (Unaudited)




Nine Months Ended September 30,


($ in thousands)


2020



2019


Net cash provided by operating activities


$

44,350



$

95,586


Purchases of installation and service parts and property and equipment



(18,317)




(17,492)


Free cash flow


$

26,033



$

78,094


ADJUSTED EPS (Unaudited)




Three Months Ended September 30,


(In thousands, except per share data)


2020



2019


Net income


$

6,686



$

17,752


Amortization of intangibles



23,559




23,131


Transaction and other related expenses



132




287


Transformation expenses



575





Impairment of property and equipment







Loss from tax receivable agreement adjustment







Stock-based compensation



3,153




2,471


Total adjustments before income tax effect



27,419




25,889


Income tax effect on adjustments



(10,241)




(7,095)


Total adjustments after income tax effect



17,178




18,794


Adjusted Net Income


$

23,864



$

36,546











Adjusted EPS


$

0.15



$

0.22


Diluted weighted average shares outstanding



162,568




163,705


Adjusted EPS for the nine months ended September 30, 2020 and 2019 has not been presented as it is not meaningful due to the year-to-date 2020 effective tax rate.

EBITDA and Adjusted EBITDA

We define EBITDA as net income (loss) adjusted to exclude interest expense, net, income taxes, depreciation and amortization. Adjusted EBITDA further excludes certain non-cash expenses and other transactions that management believes are not indicative of our ongoing operating performance. EBITDA and Adjusted EBITDA, as defined, exclude some but not all items that affect our cash flow from operating activities, as a result, they may not be comparable to similarly titled performance measures presented by other companies.

We use these metrics to measure our performance from period to period both at the consolidated level as well as within our operating segments, to evaluate and fund incentive compensation programs and to compare our results to those of our competitors. In addition to Adjusted EBITDA being a significant measure of performance for management purposes, we also believe that this presentation provides useful information to investors regarding financial and business trends related to our results of operations and that when non-GAAP financial information is viewed with GAAP financial information, investors are provided with a more meaningful understanding of our ongoing operating performance. EBITDA and Adjusted EBITDA have certain limitations as analytical tools and should not be used as substitutes for net income (loss), cash flows from operations, or other consolidated income or cash flow data prepared in accordance with GAAP.

Free Cash Flow
We define Free Cash Flow as cash flow from operations less capital expenditures.

Adjusted Net Income
We define “Adjusted Net Income as net income (loss) adjusted to exclude amortization of intangibles and certain non-cash or non-recurring expenses.

Adjusted EPS
We define “Adjusted EPS” as Adjusted Net Income divided by the diluted weighted average shares for the period.

Investor Relations Contact
Marc P. Griffin

ICR, Inc., for Verra Mobility

646-277-1290

[email protected] 

SOURCE Verra Mobility

Related Links

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