Verra Mobility Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report; the supplied filing text does not provide standalone fourth-quarter results. Verra Mobility provides toll and violation management, automated traffic enforcement, title and registration, and parking technology services across North America, Australia and Europe.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $741.6 million | $550.6 million |
| Service revenue | $695.2 million | $492.8 million |
| Product sales | $46.4 million | $57.7 million |
| Income from operations | $164.7 million; 22.2% of revenue | $111.9 million; 20.3% of revenue |
| Net income | $92.5 million; 12.5% of revenue | $41.4 million; 7.5% of revenue |
| Diluted earnings per share | $0.50 | $0.25 |
| Cash from operating activities | $218.3 million | $193.2 million |
| Cash and cash equivalents at year-end | $105.2 million | $101.3 million |
- Capital expenditures for property, equipment, installation and service parts were $48.2 million; operating cash flow less these expenditures was approximately $170.2 million, calculated from reported figures.
- Current assets were $362.6 million and current liabilities $186.8 million at year-end. Revolver availability was $74.8 million, net of letters of credit.
- Debt principal totaled approximately $1.236 billion: $886.1 million under the variable-rate term loan and $350.0 million of 5.50% senior notes. The term loan rate was 7.6% at year-end; reported debt carrying value, net of discounts and financing costs, was $1.212 billion.
- Interest expense, net, rose to $69.4 million from $44.9 million. A $675 million interest-rate swap was entered into in December 2022; management reported a $1.0 million gain on the swap for the year.
Material changes versus FY2021
- Revenue rose $191.0 million, or 34.7%. Management attributed $113.9 million of the increase to Redflex and T2 Systems; the remainder was mainly higher travel and toll activity and expansion of speed-camera programs.
- Service revenue increased 41.1%, while product sales declined 19.7%, primarily reflecting variable Government Solutions customer purchases. Management expected product sales to remain below the preceding three years after completion of the New York City camera installation program in 2022.
- Commercial Services revenue was $326.0 million, up 24.9%; Government Solutions total revenue was $336.7 million; Parking Solutions revenue was $79.0 million, compared with only 23 days of activity in FY2021 after its acquisition.
- Operating income increased 47.2%, and net income more than doubled. Higher revenue and operating leverage contributed, while expenses also grew with full-year inclusion of acquired businesses. Interest expense increased with higher debt and interest rates.
- Operating cash flow increased $25.2 million. Investing cash outflow fell substantially versus FY2021, when acquisitions drove $476.0 million of investing outflows.
Outlook, risks and unusual items
- No numerical FY2023 revenue or earnings guidance is provided in the supplied filing text. Management said 632 speed cameras added in 2022 are expected to support growth in 2023 and beyond, and described continued growth through organic expansion, innovation and acquisitions as its strategy.
- Customer concentration is material: New York City DOT generated 19.5% of FY2022 revenue and represented 22% of year-end net accounts receivable ($35.6 million). Avis Budget Group and Hertz generated 13.0% and 11.1% of revenue, respectively. Government contracts may be changed or terminated, and political or legal restrictions on photo enforcement or tolling could affect demand.
- Debt, variable-rate exposure and restrictive covenants are significant risks. The company reported covenant compliance at year-end and expects a $12.9 million mandatory excess-cash-flow debt prepayment in Q1 2023. Management said cash, operating cash flow and revolver availability should meet operating needs and debt service for at least 12 months.
- PlusPass antitrust litigation remained pending, with trial set for November 2023; the company disputes the claims. In the Brantley v. City of Gretna class action, the company said it could not reasonably estimate a loss. It reported no material contingency accrual for pending matters overall.
- Other notable items: $3.0 million gain from forgiveness of Redflex’s PPP loan; $14.4 million non-cash gain from remeasurement of private-placement warrant liabilities; $1.3 million impairment of a privately held equity investment; and $0.7 million impairment on ended photo-enforcement programs.
- The company repurchased approximately 7.9 million shares for $125.1 million in 2022 and authorized a further $100 million repurchase program, with no purchases under the new program by year-end. The filing also notes the 1% federal excise tax on covered net stock repurchases beginning in 2023.
- Management and the auditor concluded internal control over financial reporting was effective as of December 31, 2022; prior material weaknesses were reported as remediated. The auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Whether NYCDOT’s $35.6 million receivable is collected on schedule and whether the customer concentration changes.
- Revenue growth and margins excluding the contribution from Redflex and T2 Systems, and the recurring economics of Parking Solutions.
- Cash conversion, capital spending, scheduled debt service and the $12.9 million mandatory prepayment; also assess the effect of rates on variable debt despite the swap.
- Developments in the PlusPass and Gretna proceedings and any resulting financial or operational exposure.
- Progress against management’s growth expectations, including speed-camera deployments and the anticipated lower level of product sales.