Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ ☐No No ☒

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.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒☒

The aggregate market value of the voting and non‑voting common equity held by non‑affiliates of the registrant on June 30, ~~2020,~~2021, computed by reference to the closing price reported on the Nasdaq Capital Market on such date was ~~$1,366,421,691 (132,920,398~~$2,103,974,431 (136,888,382 shares at a closing price per share of ~~$10.28)~~$15.37).

As of ~~February 24, 2021,~~April 20, 2022, the registrant had ~~162,268,865~~156,225,265 shares of Class A Common Stock, par value $0.0001 per share, issued and outstanding.

This Annual Report on Form 10-K contains forward-looking statements within the meaning of federal securities laws. All statements contained in this Annual Report on Form 10-K other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, products, services, and technology offerings, future impacts or disruption to our business as a result of the novel coronavirus (“COVID-19”), market conditions, growth and trends, expected cost reductions, synergies related to our recent or future acquisitions, 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 are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs.

These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described under Part I, Item 1A, “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Annual Report on Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely on forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Annual Report on Form 10-K or to conform these statements to actual results or revised expectations.

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

~~Verra Mobility Corporation, formerly known as Gores Holdings II, Inc. (“Gores~~”) was originally incorporated in Delaware on August 15, 2016, as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses. On ~~January 19, 2017, we consummated our initial public offering (the “IPO”), following which our shares began trading on the Nasdaq Capital Market (“Nasdaq”).~~

~~On June 21, 2018, Gores, AM Merger Sub I, Inc., a direct, wholly-owned subsidiary of Gores (“First Merger Sub”), AM Merger Sub II, LLC, a direct, wholly-owned subsidiary of Gores (“Second Merger Sub”), Greenlight Holding II Corporation (“Greenlight”), and PE Greenlight Holdings, LLC (the “Platinum Stockholder”) entered into an Agreement and Plan of Merger as amended on August 23, 2018 by that certain Amendment No. 1 to Agreement and Plan of Merger (as amended, the “Merger Agreement”), which provided for, among other things, (i) the merger of First Merger Sub with and into Greenlight, with Greenlight continuing as the surviving corporation (the “First Merger~~”) and (ii) immediately following the First Merger and as part of the same overall transaction as the First Merger, the merger of Greenlight with and into Second Merger Sub, with Second Merger Sub continuing as the surviving entity (the “~~Second Merger” and, together with the First Merger, the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”).~~

~~In connection with the closing of the Business Combination on October 17, 2018 (the “Closing Date~~”), Gores changed its name from Gores Holdings II, Inc. to Verra Mobility Corporation, changed its trading symbols on Nasdaq from “GSHT,” and “GSHTW,” to “VRRM” and “VRRMW,” and Second Merger Sub changed its name from AM Merger Sub II, LLC to Verra Mobility Holdings, LLC. As a result of the Business Combination, Verra Mobility Corporation became the owner, directly or indirectly, of all of the equity interests of Verra Mobility Holdings, LLC and its subsidiaries.

We are a leading provider of smart mobility technology solutions and services throughout the United States, ~~Canada~~Australia, Europe and ~~Europe~~.Canada. We provide integrated technology solutions and services which include toll and violations management, title and registration, automated safety solutions, parking enforcement and citation and other data driven solutions to our customers, which include rental car companies (“RACs”), fleet management companies (“FMCs”), other large fleet owners, municipalities, school districts, universities, parking operators, healthcare facilities, transportation hubs and ~~violation issuing~~other violation-issuing authorities. Our solutions simplify the smart mobility ecosystem by utilizing what we believe are ~~industry leading~~industry-leading capabilities, information and technology expertise, and integrated hardware and software to efficiently facilitate the automated processing of tolls and violations, automated safety, and parking solutions for hundreds of agencies and millions of end users annually, while also making cities and roadways safer for everyone.

Based in Mesa, Arizona, we operate through ~~two~~three primary segments – Commercial Services, Government Solutions and ~~Government~~Parking Solutions. Through our Commercial Services segment, we believe we are the ~~market leading~~market-leading provider of automated toll and violations management and title and registration solutions to RACs, FMCs and other large fleet owners in the United States and Canada. In Europe, we provide violations processing through Euro Parking Collection plc (“EPC”) and consumer tolling services through Pagatelia S.L (“Pagatelia”). Through our Government Solutions segment, we believe we are the market-leading provider of automated safety solutions to municipalities, counties, school districts and law enforcement agencies (which are collectively referred to herein as “local government agencies”), including services and technology that enable photo enforcement via road safety camera programs related to red-light, speed, school bus, and city bus lanes. Through our Parking Solutions segment, we provide end-to-end parking management solutions to universities, parking operators, healthcare facilities and municipalities in North America.

Our Commercial Services segment generated approximately ~~$180.9~~$260.9 million in revenue for ~~2020,~~2021, or approximately ~~46%~~47.4% of our total revenue. The Commercial Services segment is the market-leading provider of automated toll and violations management and title and registration solutions to RACs, FMCs and other large fleet owners in North ~~America.~~America and Europe. Through our established relationships with more than 50 individual tolling authorities throughout the United States, we provide an automated and outsourced administrative solution for our customers while also providing a value-added convenience for vehicle drivers and benefits to the tolling and issuing authorities. Without our toll and violations management solutions, our customers would bear the expense and administrative burden of matching tolls or violations to the responsible vehicle and driver, and then either transferring liability or paying the fee or fine directly (for which it may then need to bill the driver) – in either case within specified time periods to avoid the potential imposition of penalties. We mitigate these risks by ensuring timely payment for tolls and violations incurred by our customers’ vehicles or by performing timely transfers of liability on our customers’ behalf, and then billing and collecting from the driver as applicable. We also manage regional toll transponder installation and vehicle association, an especially critical and highly complex component for RAC and FMC customers, to ensure that the transponder (and corresponding toll transactions) are associated with the correct vehicle.

We have long-standing relationships with the three largest RACs in the United States, – Avis Budget Group, Enterprise Holdings, Inc. and The Hertz Corporation, – among ~~others, as well as~~others. We also have relationships with key European RACs and the six largest FMCs in the United States, which are Element, ARI, Enterprise Fleet Management, Wheels, LeasePlan and Donlen. We provide coverage for more than 95% of all toll roads in the United States, ~~and currently~~ one toll road in Canada, and multiple toll roads in France, Ireland and Spain, processing more than ~~171~~224 million toll transactions and ~~1.3~~1.4 million traffic violations in ~~2020. Following the acquisition of EPC in April 2018, we extended~~2021. In Europe, our customer base ~~to include~~includes violation-issuing authorities ~~in Europe~~ and ~~expanded our commercial~~we offer services ~~to include~~including identification, notification, and collection of unpaid traffic, parking, and public ~~transportation related~~transportation-related violations incurred by ~~vehicle~~ drivers not originating in the country where the violation occurred. ~~We expanded our presence in Europe to include electronic toll collection on highways and car parks throughout Spain, Portugal, France and Italy through our acquisition of Pagatelia in October 2019.~~

Our Government Solutions segment generated approximately ~~$212.7~~$283.2 million in revenue for ~~2020,~~2021, or approximately ~~54%~~51.4% of our total revenue. This segment works with local government agencies to help make cities and roadways safer for everyone through automated safety solutions. WeIn the United States, we provide local government agencies with road safety cameras to detect and process traffic violations for red-light, speed, school bus, and city bus lanes. Our proprietary hardware and software technologies provide local government agencies the information, data, and automated end-to-end administrative capabilities to enforce traffic violations through photo enforcement. On behalf of our customers, we install, maintain, and manage automated safety solution hardware and software that processes event data, applies customer specific rules and connects a traffic violation to the responsible driver or vehicle owner. Additionally, upon law enforcement’s determination that a violation has occurred, we manage the citation mailing, billing, and other administrative tasks on behalf of many of our customers. For customers outside of the United States, we design, engineer, and maintain roadside photo enforcement technology, which is sold to local municipalities and maintained with maintenance contracts to support the technology.

We are a critical partner to local government agencies ~~across~~around the ~~United States,~~world, helping to facilitate and increase public safety, improve public transportation, enhance law enforcement officer safety and act as a police force multiplier by allowing law enforcement to focus on serious crimes rather than routine traffic violations. WeIn North America, we currently have more than ~~5,800~~9,000 red-light, speed, school bus and city bus lane road safety cameras installed across ~~nearly 160~~approximately 265 jurisdictions and school districts in 1723 states, ~~and~~ the District of ~~Columbia.~~Columbia and four provinces. On an annual basis, we process approximately ~~10.9~~13.8 million violations on behalf of our municipality and school district customers, including New York City, ~~Seattle, Washington D.C.~~Nassau County (New York), ~~Austin Independent School District, Philadelphia, Orlando~~Chicago, Baltimore, New Orleans, Orange County (Florida) and ~~Atlanta Public Schools.~~Seattle. Outside of the United States, we have partnered with 15 agencies, including state governments and police departments, to provide photo enforcement programs. Our current combined international client base includes over 1,300 systems, with products including red light, fixed speed, mobile speed, point-to-point speed, railroad crossing, bus lane enforcement and weigh-in-motion solutions. In ~~January~~June 2021, we ~~entered into an agreement to acquire 100% of outstanding equity~~completed our acquisition of Redflex Holdings Limited (“Redflex”), which ifexpanded our presence in North America, Europe and Australia.

We formed our Parking Solutions business unit after our acquisition of T2 Systems Parent Corporation (“T2 Systems”) in the fourth quarter of 2021. Our Parking Solutions segment generated $6.5 million in revenue for the post-acquisition period of December 7 to December 31, 2021. Our Parking Solutions segment is a North American leader of end-to-end commercial parking management solutions in the markets we serve. This segment serves over 2,000 customers in the university, municipal, healthcare and commercial operator markets. Our proprietary software and hardware technologies provides our customers with solutions needed to manage and monetize parking and enforcement operations. In 2021, we processed over 115,000 transactions using our various parking solutions systems. Each need requires technology solutions for parking access and revenue control, single- and multi-space pay stations, integrated physical and mobile payments, back-office parking rate management, permit issuance and management, online citation payment, event parking, occupancy, and back-office management of violations, amongst other requirements.

The Parking Solutions segment has over 2,000 customers throughout the United States and Canada. Customers include top-tier university customers, such as Arizona State University and Texas A&M University, as well as major municipalities and commercial parking operators, such as City of Houston, EasyPark Vancouver, MD Anderson Cancer Center, Reef Technologies, SP+ and Diamond Parking. In December 2021, we completed ~~would expand~~an acquisition of NuPark (“NuPark”) which expanded our presence in the United ~~States, Europe and Australia.~~States.

Tolling is an important feature of the United States transportation landscape, with United States tolling authorities collecting ~~nearly $21~~over $20 billion in toll revenues in ~~2018.~~2020. As a result, tolling is one of the most effective and equitable ways to pay for highway infrastructure. In addition to the overall growth in tolling reflected in the U.S. Department of Transportation Federal Highway Administration’s tracking of total toll bridge, tunnel and road mileage, there is also a growing movement towards cashless and all-electronic tolling, which allows for more

convenient, accurate and reliable processing and collection of toll incurrence fees and mitigates congestion on toll roads. The tolling industry is highly fragmented and complex as it is comprised of more than 50 individual tolling authorities, each operating as independent organizations with specific coverage regions and disparate technology platforms.

Our Commercial Services customers consist of RACs, FMCs and other large fleet owners. RAC industry revenue in the United States ~~fell 27%~~are estimated to have grown 21% in ~~2020~~2021 compared to ~~2019,~~2020, due ~~in large part~~ to a partial recovery from the COVID-19 pandemic. The ~~nearly $23~~approximately $28 billion United States RAC industry is highly consolidated, with three companies accounting for a significant majority of United States RAC revenues in ~~2020.~~2021. In addition to the larger nationwide RACs, smaller independent companies operate regionally throughout the United States. ~~The RAC industry is driven by increases in the average number of days a vehicle is rented.~~ While the COVID-19 pandemic negatively affected RAC industry trends in fiscal 2020, the length of rentals returned to previous seasonality patterns beginning in the second half of ~~2020.~~2020 and the RAC industry was positively impacted by increases in the average number of days vehicles were rented in 2021. The industry is also being impacted by the growth in usage cases for rental cars in urban areas and partnerships with rideshare providers to rent vehicles to their independent drivers, leading to additional rental transactions. Management believes the European RAC market, while more fragmented than the U.S. market, is large in size. According to Automotive Fleet Magazine, there are nearly 6.4 million fleet vehicles in the United States, approximately 3.1 million of which are under management by FMCs. The fleet industry in North America is primarily centered on vocational vehicles utilized for transporting people along with the tools, parts and equipment required to perform their jobs, largely insulating the industry from disruptions caused by today’s rideshare and carshare services. ~~In Europe,~~Management believes the ~~FMC~~European RAC market, while more fragmented than the U.S. market, is ~~estimated to be more than 6 million vehicles, with over half under management by the top five European FMCs.~~large in size.

As the number of vehicle miles traveled continues to increase and cities and municipalities ~~struggle to deal~~wrestle with the evolving challenges of managing traffic congestion, road safety and accessible transportation networks, automated enforcement ~~photo-enforcement~~ solutions continue to ~~play a prominent role in~~serve as an effective tool for comprehensive safety and mobility initiatives. According to ~~the National Highway Traffic Safety Administration, speeding~~United States Department of Transportation statistics, almost 95% of people who die using U.S. transportation networks are killed on our streets, roads and ~~red-light running cause around 10,000 fatalities each year.~~highways, resulting in more than 350,000 deaths between 2011 and 2020. In 2020, the Congressional Research Service found cameras to be an effective tool for law enforcement and other agencies to reduce the number of traffic-related violations, collisions, injuries and fatalities, and the American Association of State Highway and Transportation Officials has called on states to support greater use of automated speed enforcement. ~~A 2019 Accident Analysis & Prevention article reported that that red-light cameras reduce total crashes by as much as 12%. A 2019 research article published~~New York City’s Automated Speed Enforcement Program 2014-2020 Report, noted a 72% average reduction in ~~PLOS ONE noted that speed cameras reduce traffic collisions by as much as 15% on average for the treated sites.~~dangerous speeding at its fixed camera locations. Additionally, programs like Vision Zero, a collaborative campaign helping communities reach their goals of eliminating all traffic fatalities and severe injuries, across most major U.S. cities and around the world, are driving capital investment to make meaningful strides in traffic safety.

The parking industry consists of a highly fragmented mix of end customers, including universities, municipalities, private operators, healthcare providers and airports, among other industries. These customers each have different parking needs such as off-street parking, on-street parking, permits, enforcement and consumer engagement. T2 Systems has customer relationships with more than 21% of higher education institutions in its target tiers, and about 5% of municipal customers in its target tiers according to internal analysis. The broader parking market in which T2 System’s operates – North American municipalities, universities and healthcare providers – represents up to a $4 billion market according to a 2020 market estimate.

We believe there is significant opportunity in ~~both~~ Commercial Services, Government Solutions and ~~Government~~Parking Solutions as states, counties, municipalities, universities, parking operators, healthcare facilities and ~~municipalities~~transportation hubs seek creative solutions to address safety initiatives, reduced tax revenues and budgets for roads and other transportation infrastructure.

In Commercial Services, we believe that as state and local governments fund a growing list of infrastructure, maintenance and construction projects, there will be an increase in the number of toll roads, including new express

and high occupancy lanes in urban areas. We expect this trend will also increase utilization of dynamic tolling, which allows toll rates to fluctuate based on traffic trends and real-time congestion. In addition, ~~nearly half~~over 60% of the toll roads in the United States have transitioned to cashless or all-electronic payment. These trends create significant opportunities for us to expand our market presence while developing relationships with both new and existing RACs, FMCs, consumers and tolling authorities.

In Government Solutions, public attention given to traffic safety issues for drivers, pedestrians, children, bicyclists and law enforcement is intensifying and state and local governments are facing shortfalls in transportation revenue. In this context, smart technology solutions have emerged as an effective and revenue-positive method to address traffic safety issues. We believe that as public focus intensifies, the demand for our Government Solutions offerings will grow as well, and that we are positioned to take advantage of these opportunities.

In Parking Solutions, all market segments are focused on strategies to offset costs in reaction to downturns caused by the COVID-19 pandemic and market participants are struggling to attract and retain labor. At the same time, consumers are increasingly willing to adopt mobile solutions to simplify their transportation needs, creating market opportunities to advance self-service options. We believe that technology solutions that provide mobile-first, self-service offerings, improve operational efficiency, reduce reliance on parking-related labor, and commercial models that reduce up-front costs provide solutions for market needs and establish a long-term operating model.

We are an industry leader in the deployment of products and services that meet the increasingly complex and continuously evolving requirements of both existing and new customers. We are continuously looking toward the future, ensuring the development of relevant solutions today that will work tomorrow. We seek to understand developing customer, consumer, and government trends that will shape tomorrow’s smart mobility experiences both in the United States and internationally, all in an effort to ensure more people around the world reach their destination safely and ~~easily.~~efficiently.

We believe leveraging our differentiated capabilities into new and growing end markets, such as ridesharing, carsharing and autonomous vehicles, provides attractive growth opportunities. The ridesharing and carsharing market, which includes vehicles leased to individual drivers, gives us a low-risk opportunity to grow Commercial Services revenues while at the same time insulating us from any market shift between ridesharing, carsharing and RACs. Further, this growth prospect comes at little additional investment as we are able to leverage the same technologies and solutions we have already developed for our RAC and FMC customers. As an already established leader, we believe we are well-positioned to be a first mover and to become a provider of choice in these new end markets.

Urban enforcement, curb management and citation processing solutions in the smart city movement also present significant opportunities for us. Our existing technologies and solutions could be ~~adopted~~adapted to take advantage of this market, providing an additional avenue for growth.

As state and local governments seek solutions to increase mobility and safety solutions in a challenging revenue environment, our Government Solutions business unit represents an opportunity to leverage our long-standing relationships with state and local governments in order to provide other smart mobility technology solutions, such as automatic license plate recognition, parking payment and enforcement, and new developing ~~technologies, such as connected vehicle technology.~~urban mobility technologies.

We believe there is significant opportunity to expand into attractive markets across Europe and beyond, and to that end, we have established ~~a location in the Netherlands to serve as~~ our European headquarters in Amsterdam, the Netherlands, from which we ~~are launching~~have launched our RAC and FMC tolling solution business in Europe. ~~In September 2019,~~Our European tolling business has established relationships with tolling authorities throughout Spain, Portugal, France, Italy and Ireland, through which we ~~entered into a partnership with APRR, Europe’s fourth-largest motorway operator, which enables us~~offer interoperable electronic tolling directly to ~~provide our toll management services~~consumers, through white-label partnerships and to French customers. In January 2021, we signed an agreement with Rent A Car France to expand electronic toll collection throughout France after a successful pilot program. Also in January 2021, we entered into an agreement to acquire 100% of outstanding equity of Redflex, which, if completed, would expand our presence in the United States, Europe and Australia.

RAC customers, depending on location. We also ~~intend~~gained certification as a European Electronic Toll Service (“EETS”) provider in Spain in June 2021. EETS regulation applies to ~~leverage~~all European Union member states with current or future toll infrastructure development plans. Additionally, our ~~recent acquisitions of EPC and Pagatelia and the anticipated acquisition of Redflex to further bolster our growth into new and existing markets globally.~~

~~Through EPC we now have the capability to~~European violations business can provide services in more than 1820 languages and more than 10 currencies and to leverage existing connections with approximately 30 vehicle licensing authorities and over ~~450~~600 toll and ticket-issuing authorities for whom we bill violators in more than ~~130~~ 135

countries. ~~Additionally, Pagatelia has established relationships with tolling authorities throughout Spain, Portugal, France~~Furthermore, in June 2021, we closed an agreement to acquire Redflex, which expanded our Government Solutions business into Australia and ~~Italy, through which it offers interoperable electronic tolling both directly to consumers~~Europe, and ~~through white-label partners. Through these recent acquisitions we have an opportunity to provide~~enhances our existing ~~and new RAC and FMC customers with a convenient and effective solution similar to our current offering~~presence in the United ~~States.~~States and Canada.

In addition to organic growth initiatives, we have significant opportunities to increase our competitive positioning and strengthen our portfolio of products and solutions through strategic acquisitions. We have demonstrated the ability to identify and execute strategic acquisitions, as we did with ~~Highway Toll Administration LLC~~Redflex and ~~Canada Highway Toll Administration (collectively, “HTA”) and EPC in 2018 and Pagatelia in 2019, as well as our recent agreement to acquire Redflex~~T2 Systems in 2021. We constantly monitor the market for potential acquisition targets, which are evaluated based on their potential strategic impact, including growth potential, synergies, end-market development, customer relationships, technology, and cash flow. Our management team has a strong ~~track~~ record of pursing accretive acquisitions, and, where applicable, integrating acquisitions and driving synergies, and has identified a strong pipeline for future acquisitions.

We provide fully outsourced toll management solutions for our RAC and FMC customers while also providing a value-added convenience for vehicle drivers via our established relationships and integrations with more than 50 individual tolling authorities throughout the United States. This comprehensive network allows RAC and FMC drivers the convenience of using cashless and all-electronic tolls. Additionally, this service helps prevent the liability and business disruption of costly toll violations incurred by vehicles owned by RAC and FMC customers and eliminates their need to manage a nationwide program internally. Our proprietary software technology and hardware allow us to effectively match a toll to the specific RAC or FMC vehicle and driver so that the toll can accurately and reliably be billed and collected on behalf of, or directly from, the RAC or FMC. Toll management solutions accounted for approximately ~~36%~~40% of our ~~2020~~2021 revenues.

Our violations management solutions process violations incurred by the drivers of RAC and FMC vehicles by working with more than 8,000 domestic ~~violation issuing~~violation-issuing authorities (more than 400 of which we are directly integrated with) to either pay the fine on behalf of the vehicle owner (for which we are able to bill the driver) or to transfer liability directly to the vehicle driver. Vehicle-issued violations include parking and photo enforcement violations. In Europe, we specialize in the identification, notification, and collection of unpaid traffic, parking and public transport related fees, charges, and penalties issued to foreign registered vehicles or persons on behalf of issuing authorities in more than 17 European countries. Violation management solutions accounted for approximately 7%5% of our ~~2020~~2021 revenues.

Our title and registration solutions provide RAC and FMC customers with an integrated, end-to-end solution for managing vehicle titles and registrations and annual renewals. We provide automated title and registration solutions by leveraging connections with individual departments of motor vehicles for electronic title and registration processing in 20 states. Title and registration solutions accounted for approximately 3%2% of our ~~2020~~2021 revenues.

We serve as a value-add partner to local government agencies by providing ~~road safety cameras~~photo enforcement solutions that promote traffic safety and reduce traffic violations. We work with our customers to identify problematic traffic areas and install, maintain, and manage the technology platform needed to capture images or videos of drivers committing traffic violations. Red-light cameras are placed at intersections to capture vehicles running red lights. Similarly, speed safety cameras are used to capture vehicles exceeding speed limits, either on a fixed basis or in a mobile platform, and often in school zones. School bus cameras are fixed to the side of buses to capture vehicles passing school buses with extended stop arms. Finally, bus lane cameras are designed to capture vehicles illegally driving in restricted bus lanes.

Applying rules specified by each customer, we automatically send the captured event to the designated enforcement agency of the customer, where an authorized individual determines if a violation occurred. Direct

service revenue from red-light cameras, speed cameras, school bus cameras, and city bus lane cameras ~~for red-light, speed, school bus and city bus lane solutions~~ accounted for approximately ~~36%~~38% of our ~~2020~~2021 revenues. Other segment service revenue consists primarily of ancillary revenue streams, ~~including product revenues and other ancillary services,~~ which ~~comprise~~comprised 3% of total revenue. Product sales to customers are not recurring and are dependent on our customers’ needs, and account for ~~15%~~10% of total revenue.

Our Parking Access and Revenue Control (“PARCS”) technology solutions include both software and hardware offerings which work in concert to help our customers manage their gated, gateless and license plate recognition-based parking lot and parking garage needs. We have installed over 2,000 PARCS lanes to date. Our related software is the industry’s original hosted parking management software, which allows management of our customers’ PARCS solutions from a computer or mobile device.

Our pay stations hardware technology has interoperability with over 50 third-party systems, as well as our PARCS and parking enforcement solutions. They are powered by a highly configurable and data driven software technology which supports the enforcement, mobile payments, and back-office and accounting needs of our customers. Our fleet of Pay Stations hardware exceeded 16,000 units at December 31, 2021.

Our Permits & Enforcement (“PE”) software technology solutions allow our customers to control who is parking in their facilities and when and where drivers can park using physical or virtual permits, allowing customers to control traffic and maximize their parking-related revenues. This technology also provides enforcement officers with real-time information and custom notifications on their enforcement devices. Citations management features also help to organize fine escalations and notification letters to parking violators.

We have a diverse customer base across the United States, ~~Canada,~~Europe, Australia and ~~Europe.~~Canada. We are a top provider of toll management solutions, violations management solutions, and title and registration solutions for nearly every major RAC and FMC provider nationwide, including the Hertz Corporation, Avis Budget Group, Enterprise Holdings, Inc., Fox Rent a Car, Sixt Rent A Car, Element, ARI, Donlen ~~Wheels~~ and ~~The Hertz Corporation.~~Wheels. In addition, we provide automated safety solutions to local government agencies including New York City, Nassau County (New York), Chicago, Baltimore, New Orleans, Orange County (Florida), Seattle, ~~Washington D.C., Austin Independent School District, Philadelphia, Orlando~~Highways England, New South Wales (Australia) and ~~Atlanta Public Schools.~~the Department of Justice and Community Safety in Victoria (Australia). We also provide end-to-end parking management solutions to universities, municipalities, parking operators, healthcare facilities and transportation hubs in North America. For many of our customers, we provide more than one product or service offering, addressing the diverse and varied needs of our clients.

There is no single competitor that provides a similarly broad suite of solutions. However, in our Government Solutions segment, we face competition in certain automated safety solutions from other vendors in the areas of red-light, school bus and speed photo enforcement. In our Commercial Services segment, we face competition from both our own customers, as they may choose to invest in their own internal solutions, and vendors offering or seeking to offer new technologies or financial models, and we must continue to innovate for our offerings to remain competitive. In Parking Solutions, we face competition from a variety of segment-specific competitors in our markets in the United States and Canada.

We rely on a combination of patents, trademarks, trade secrets, copyrights and confidentiality agreements to protect our intellectual property. We take steps to protect new intellectual property to safeguard our ongoing technological innovations and strengthen our brand, and believe we take appropriate action against infringement or misappropriation of our intellectual property rights by others. We review third-party intellectual property rights to help avoid infringement, and to identify strategic opportunities.

Our general policy is to seek patent protection for ~~those~~our inventions likely to be incorporated into our products and services or where obtaining such proprietary rights will improve our competitive position. We own approximately ~~61 U.S.~~92 U.S.- and foreign-issued patents and pending patent applications, including patents and rights to patent applications acquired through strategic transactions, which relate to various aspects of our products and technology. Our patent portfolio evolves as new patents are awarded to us and as older patents expire. Patents expire at various dates, generally 20 years from their original filing dates. While we believe that our portfolio of patents and applications has value, in general no single patent is essential to our business or any individual segment. In addition, any of our proprietary rights could be challenged, invalidated or circumvented, or may not provide significant competitive advantages.

Our business relies on both internally developed and externally licensed software, as well as internally, externally and co-developed hardware, to operate and provide our systems and deliver our services. We claim copyright on all internally developed software. We generally rely on common law protection for our copyrighted works. In addition, we rely on maintaining source code confidentiality to assure our market competitiveness. With respect to externally sourced software and hardware, we rely on contracts to retain our continued access for our business usage. From time to time, these agreements may expire or be subject to renegotiation.

We have approximately ~~120~~195 registrations and pending applications in the United States and foreign jurisdictions for trademarks and service marks, reflecting our many products and services. These registrations and applications include our historic and acquired brands, as well as Verra Mobility. These marks may have a perpetual life, subject to periodic renewal and may be subject to cancellation or invalidation based on certain use requirements and third-party challenges, or on other grounds. We vigorously enforce and protect our marks.

We are subject to various local, state and federal laws, regulations and administrative practices regulating matters such as data privacy, photo enforcement, consumer protection, procurement, licensing requirements, anti-kickback, equal employment, minimum wages and the environment, among others. Our operations are subject to regulation by various U.S. federal agencies, including the U.S. Department of Transportation, (“USDOT”), the Federal Trade Commission, (“FTC”), the Federal Communications Commission, the Consumer Product Safety Commission and the Environmental Protection Agency, as well as comparable state and local agencies, including the departments of transportation, departments of motor vehicles, and offices of ~~inspector general.~~inspectors general, and laws related to financial and banking regulations. Following the acquisition of EPC and Pagatelia, and in connection with our European expansion efforts, we are ~~now~~ subject to laws, regulations and administrative practices addressing many of these same matters in Europe, including those specifically relating to accessing and use of information obtained from vehicle licensing authorities, as well as European regulations to traffic enforcement and collections and other financial and banking regulations.

As part of our business, we collect, receive, process, use, transmit, disclose, and ~~disclose~~ retain information relating to identifiable individuals (“personal information ~~directly or for our customers~~”) and, therefore, are subject to various laws protecting privacy and security of personal information, including the U.S. Driver Privacy Protection Act, the General Data Protection Regulation (the “GDPR”) in the European Union ~~(the~~(the “E.U.”), the Data Protection Act of 2018 in the United Kingdom (the “UK Data Protection Act”), the California Consumer Privacy Act (the “CCPA”) and other state privacy laws in the United ~~States~~.States. We are also subject to similar restrictions and audit requirements pursuant to our contracts with the organizations from which we gain access to personal information, such as departments of motor vehicles and the National Law Enforcement Telecommunications System. Privacy laws and regulations are constantly evolving and changing, are subject to differing interpretations and may be inconsistent among countries and state and local jurisdictions, or conflict with other rules. As we expand our operations in foreign countries, or as U.S. federal or state law changes, our liability exposure and the complexity and cost of compliance with data and privacy requirements, including the GDPR, the UK Data Protection Act, the CCPA and other US state privacy laws, will increase. Laws and practices regarding handling and use of personal and other information by companies have also come under increased public scrutiny, and governmental authorities, consumer agencies and consumer advocacy groups have called for increased regulation and changes in industry practices. Our foreign photo enforcement programs are also subject to regulation in the various countries in which we operate.

Automated photo enforcement camera programs in the United States are typically regulated at the state and local level, not the federal level. Since 2010, there have been over 1,500 pieces of legislation introduced nationwide related to the photo enforcement industry. In general, photo enforcement is administrated by local government agencies, under either state enabling legislation or under home rule authority established under the relevant state

constitution. Where enabling legislation is not required, local ordinances impose further restrictions within a given jurisdiction. Whether in a state requiring enabling legislation or in home-rule states where municipalities pass ordinances permitting photo enforcement, if the legislation or ordinance is subsequently repealed, not renewed if required, or if the authority for a local ordinance is revoked, photo enforcement activities would stop. At times, state Attorneys General have issued opinions interpreting photo enforcement laws and the permissibility of certain practices or other requirements of practice that further restrict private activities. For example, the Attorneys General of Arizona, Tennessee and Virginia have each issued opinions in recent years that impacted photo enforcement activities.

State and local regulation ~~affect~~affects our Commercial Services segment as well, particularly with respect to tolling. Over the past few years, bills have been introduced in multiple states to limit whether and how much RACs can charge their customers for the use of a toll transponder, limit the administrative penalties and fees that can be assessed for processing tolls, and/or impose increased disclosure requirements on RACs with respect to tolling ~~charges.~~or violation processing fees. In addition, there has been an increase in interest and greater focus on RAC tolling programs from state Attorneys General related to tolling issues from a consumer protection perspective.

Our Government Solutions customers are typically local government agencies, and our operations within this segment are therefore subject to ~~state and local~~various procurement laws pertaining to gifts and entertainment, payments of commissions and contingency fees, conflicts of interest, licensing and permitting requirements and other matters. These laws are overseen by different government agencies, depending on the jurisdiction, including departments of procurements services, contracting offices and offices of inspector general. In large municipalities, many of which have their own offices of the inspector general, these laws and regulations tend to be much more detailed and impose greater restrictions.

To successfully navigate this regulatory landscape, we have a dedicated government relations team that works with state ~~legislators~~ and local ~~authorities,~~policymakers, often with the help of lobbyists and consultants, to track and help support favorable camera-enforcement safety and toll-related legislation. Through this network, we have a presence in ~~every state~~most states in which our Government Solutions ~~segment does~~and Commercial Services segments do business. These lobbying activities are subject to state and local lobbying regulations and registration requirements.

In connection with the installation of photo enforcement systems, we or our customers routinely obtain permits from various state and local permitting authorities, and we monitor our compliance with the rules and regulations of the USDOT and state departments of transportation relating to matters such as training, policies and procedures. As a government contractor providing photo enforcement services directly or through subcontractors (including design, engineering, construction, installation, and maintenance) in various locations throughout the ~~country,~~United States and internationally, we are at times required to obtain licenses regarding general contracting, performance of engineering services, performance of electrical work, performance of private investigative work and processing license plate and related personal information, and periodically receive notices from regulatory authorities regarding these matters and inquiring as to our compliance with the applicable state, local and ~~local~~foreign laws and regulations.

We believe we are in substantial compliance with the laws and regulations that regulate our business. There are, however, significant uncertainties involving the application of various legal requirements, the violation of which could result in, among other things, fines, penalties, revocation of permits or licenses, cessation of operations in a given jurisdiction and other adverse consequences. See “Risk Factors” for a discussion of our regulatory risks.

~~Verra Mobility is~~Our employees are critical to our success as a leading provider of smart mobility ~~technology solutions and services throughout the United States, Canada, and Europe, and our employees are critical to our success.~~solutions. To continue producing and delivering high-quality solutions and services to our customers, and to compete and succeed in our highly competitive and rapidly evolving market, it is critical that we continue to attract, retain and develop a diverse group of talented individuals at all levels of our organization.

As of December 31, ~~2020,~~2021, we had ~~640~~1,433 employees, comprised of 1,306 full-time employees and 127 part-time employees. Of our full-time employees, ~~585~~933 were located in the United States and 55373 were located internationally. None of our employees are represented by a labor union or covered by a collective bargaining

agreement, except for our 2429 employees in Staten Island, New York. We believe our relations with our employees are good, and we have not experienced a strike or other significant work stoppage.

Our success depends upon attracting, retaining and developing a diverse group of talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals, contribute their own unique perspective and skill set and create long-term value for our stockholders. We have implemented purposeful hiring strategies that include opportunities for internal mobility and promotion and an employee referral program, both of which we believe will further strengthen our growing employee base and promote retention at our Company. Of the ~~140~~311 positions filled in fiscal ~~2020, 55~~2021, 57 were internal candidates or referred by current Verra Mobility employees. We have a multifaceted talent development framework that includes functional training, management training and targeted development problems, such as our Six Sigma training that aims to further enhance operational skills in our Government Solutions business unit. We also develop our employees through an annual performance review and assessment process that incorporates a dual-performance rating system and provides each employee with concrete, actionable feedback that will enable them to succeed at our Company.

Our compensation programs are designed to align the compensation of our employees with the Company’s and individual performance, and to provide a compensation package that will attract, retain, motivate and reward employees to achieve superior results. The structure of our compensation programs balances incentives for both short-term and long-term performance. In addition to cash compensation, we offer employees benefits such as ~~life insurance,~~ health (medical, dental and vision) insurance, health savings accounts, flexible spending accounts, life insurance, accident insurance, paid time off, paid parental leave and a company-sponsored 401(k) ~~plan.~~plan, and related benefits for non-U.S. employees. For key leadership positions, we also provide compensation packages that include annual incentive bonuses and long-term equity awards.

We seek employees who collaborate and value differences, think and act globally, foster an engaging climate, and recognize and develop others. We engage and survey our employee population to gather insight, feedback, and data about employees’ engagement, workplace experiences, and manager effectiveness. Survey results inform and support corporate, business unit, department, and team action plans, with the goal of enhancing workplace satisfaction and overall employee well-being and effectiveness.

We were originally incorporated in Delaware on August 15, 2016, under the name “Gores Holdings II, Inc.” (“Gores”) as a special purpose acquisition company, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses. On January 19, 2017,~~, we~~ Gores consummated ~~our~~ its initial public offering (the “IPO”), following which ~~our~~its shares began trading on Nasdaq. On June 21, 2018, Gores entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with Greenlight Holding II Corporation, PE Greenlight Holdings, LLC (the “Platinum Stockholder”), AM Merger Sub I, Inc., a direct, wholly owned subsidiary of Gores, and AM Merger Sub II, LLC, a direct, wholly owned subsidiary of Gores. On October 17, 2018, ~~we consummated~~the transactions contemplated by the Merger Agreement (the “Business Combination”) were consummated. In conjunction with the Business Combination ~~and~~we changed our name to “Verra Mobility Corporation” and we became the owner, directly or indirectly, of all the equity interests of Verra Mobility Holdings, LLC and its subsidiaries.

Our principal executive office is located at1150 North Alma School Road, Mesa, AZ 85201.Our telephone number is (480) 443-7000. Our website address is www.verramobility.com. The information on, or accessible through, our website does not constitute part of, and is not incorporated into, this Annual Report on Form 10-K.

The trade names, trademarks, and service marks appearing in this Annual Report on Form 10-K include registered marks and marks in which we claim common law rights, such as Verra Mobility and the Verra Mobility logo, all of which are our intellectual property. This Annual Report on Form 10-K contains additional trade names,

trademarks, and service marks of other companies that are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us, by these companies. We have omitted the ® and ™ designations, as applicable, for the trademarks used in this Annual Report on Form 10-K.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the Securities and Exchange Commission (the “SEC”). We are subject to the informational requirements of the Exchange Act, and we file or furnish reports, proxy statements and other information with the SEC. Such reports and other information we file with the SEC are available free of charge at http://ir.verramobility.com/financial-information/sec-filings when such reports ~~are~~become available on the SEC’s website. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. We periodically provide other information for investors on our corporate website, www.verramobility.com, and our investor relations website, ir.verramobility.com. This includes press releases and other information about financial performance, information on corporate governance and details related to our annual meeting of stockholders. The information contained on the websites referenced in this Annual Report on Form 10-K is not incorporated by reference into this filing. Further, our references to website URLs are intended to be inactive textual references only.

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. Our business, operating results, financial condition, financial performance or prospects could be materially and adversely affected by any of these risks and uncertainties, as well as by risks and uncertainties not currently known to us or that we currently do not believe are material. If any of these risks occurs, the trading price of our common stock could decline, and you might lose all or part of your investment. Our business, operating results, financial performance, or prospects could also be harmed. These risks and uncertainties include, but are not limited to, the following:

Risks Related to Our Class A Common Stock, Warrants, Related Party Transactions and Organizational Documents

Due to the risk factors discussed below, as well as other factors affecting our business, operating results, financial condition, financial performance or prospects,, our past financial performance should not be considered to be a reliable indicator of our future performance, and investors should not use historical trends to anticipate results or trends in future periods.

Our business and results of operations may be adversely affected by the COVID-19 pandemic.

The COVID-19 ~~outbreak~~pandemic and related government actions taken to reduce the spread of the virus have caused severe disruption to the global economy. In order to comply with certain government restrictions and safeguard our employees, we have ~~temporarily~~ shifted most of our workforce to remote operations and have implemented changes in our physical locations to ensure social distancing. ~~While~~The Omicron variant of COVID-19, which is presently thought to be the most transmissible and contagious variant of COVID-19, has caused a surge in COVID-19 cases globally. The impact of the Omicron variant, or other variants that may emerge in the future, cannot be predicted at this time, and could depend on numerous factors, including the availability of vaccines in different parts of the world, vaccination rates, the effectiveness of COVID-19 vaccines against future variants, and the response by governmental bodies to reinstate mandated business closures, orders to “shelter in place” and travel and transportation restrictions. Additionally, we ~~have not experienced any significant disruptions in~~may experience labor constraints resulting from COVID-19-related quarantine measures or employee turnover due to resistance to vaccine mandates imposed by local, state or federal governments or our customers. Any labor constraints or staffing shortages suffered by us or our key suppliers could disrupt our operations, ~~to date, these measures may result in decreases in productivity, an increased risk of information~~

~~security breaches and delays in responses to our customers,~~ which could ~~harm customer relations~~have a material adverse effect on our business, financial condition and ~~adversely impact our business.~~ results of operation.

COVID-19 may also cause us to temporarily suspend or ultimately forego strategic acquisitions, business initiatives or expansions into new markets. Also, our existing customers may seek to terminate or renegotiate their contracts with us or seek pricing concessions as a result of changes in their business needs or financial condition. The measures implemented to contain COVID-19 have had, and ~~we expect will~~may continue to have, a significant negative effect on our business, financial condition, results of operations, cash flows and liquidity ~~position, both in the near term and on a year-over-year basis.~~position.

Historical data regarding our business, results of operations, financial condition and liquidity may not reflect the impact of the COVID-19 pandemic and related containment measures and therefore does not purport to be representative of our future performance.

~~The information included in this~~This Annual Report on Form 10-K and our other reports filed with the SEC include information regarding our business, properties, results of operations, financial condition and liquidity as of dates and for periods before the impact of COVID-19 and related containment measures (including quarantines, governmental orders requiring the closure of certain businesses, limiting travel, requiring that individuals stay at home or shelter in place and closing borders, and vaccines). This historical information therefore may not reflect the adverse impacts of COVID-19 and the related containment measures. Accordingly, investors are cautioned not to unduly rely on historical information regarding our business, results of operations, financial condition or liquidity, as that data does not reflect the adverse impact of COVID-19 and therefore does not purport to be representative of the future results of operations, financial condition, liquidity or other financial or operating results.

The New York City Law Department recently advised us that the City of New York is investigating certain aspects of our installation work for our largest customer, NYCDOT. While we are cooperating with the investigation, including remediating issues identified to us, we cannot predict when this matter will be resolved, how much it may cost to do so, any liabilities, fines or penalties that may be assessed against us in connection with this matter, or the timing of receivables to be paid to us.

We provide photo enforcement and school zone enforcement services to NYCDOT, which was our largest customer by revenue in 2020 (31.3% of total revenue for the year ended December 31, 2020), under two primary contracts: a legacy contract relating to red light, bus lane, mobile speed and fixed speed photo enforcement cameras that were installed prior to fiscal year 2020 (the “~~Legacy Contract”), and an emergency contract for the purchase, installation, maintenance and operation of an expanded fixed speed camera program beginning in 2020 (the “Emergency Contract”).~~In late 2019, we concluded that some of our system installations under the Legacy Contract did not meet New York City’s requirements related to the depth of buried electrical conduit and the color of grounding wire. We disclosed these issues to NYCDOT and in the fourth quarter of 2020 agreed to remediate the affected sites. Since that time, we have been actively remediating the affected installations and, as of December 31, 2020, we incurred costs of $~~0.9 million and accrued an additional~~ $~~2.1 million to complete the remediation.~~

In addition, during 2020 we worked with NYCDOT to address various administrative hurdles that we understood at the time to be delaying payments on our invoices under the Legacy Contract and the registration of the Emergency Contract, which is a condition to payment under that contract. In late January 2021, we were separately informed that the City of New York’s Law Department is investigating matters related to the Company’s previously disclosed conduit depth issue as well as whether the Company unnecessarily installed new poles where existing infrastructure could have been used. We are fully cooperating with the investigation.

The installation issues described in this risk factor did not have any impact on the camera operations or the overall effectiveness of the photo enforcement programs. We will continue to perform work for NYCDOT under the Legacy Contract and the Emergency Contract, and are finalizing operating and compliance procedures that govern the remaining remediation and future work for NYCDOT.

~~At December 31, 2020, NYCDOT had an open receivables balance on these contracts of~~ ~~$98.9 million~~, ~~of which $80.4 million had aged beyond NYCDOT’s 45-day payment terms. This~~ ~~$98.9 million~~ ~~balance is up from the $10.0~~ ~~million owed at December 31, 2019. We expect the NYCDOT open receivables balance to increase by approximately $7.3 million per month until~~ ~~it is paid. Largely as a result of NYCDOT’s non-payment of receivables~~

and a slowing in our business generally due to COVID-19, our net cash provided by operating activities declined from $133.8 million in 2019 to $46.9 million in 2020. Further, because of their overdue nature, our NYCDOT receivables are not eligible for inclusion in our borrowing base calculation under our revolving credit facility. Availability under that facility was $48.8 million, net of $6.3 million of outstanding letters of credit, at December 31, 2020, as compared to $63.5 million, net of $0.1 million of outstanding letters of credit, at December 31, 2019.

We cannot predict when this matter will be resolved or how much it may cost, any liabilities, fines or penalties that may be assessed against us or the timing of payments on the outstanding receivables. The failure to resolve the matter with the City of New York in a timely and effective manner could have a material adverse effect on our business, financial condition and results of operations.

Our Commercial Services and Government Solutions segments ~~both~~ have customer concentration that could have a material adverse effect on our business.

Our business experiences customer concentration from time to time. For example, ourour Commercial Services segment is dependent on certain key customers, including those in the RAC industry, such as Avis Budget Group, Inc., Enterprise Holdings, Inc. and The Hertz Corporation. The health of the RAC industry is impacted by a variety of factors, including seasonality, increases in energy prices, general international, national and local economic conditions and cycles, as well as other factors affecting travel levels, such as military conflicts, terrorist incidents, natural disasters and epidemic diseases. For example, as described elsewhere in these risk factors, the COVID-19 pandemic continues to adversely affect our key customers in the RAC industry and, correspondingly, revenues in our Commercial Services segment.

We also experience customer concentration in our Government Solutions segment. ~~As discussed above,~~ The New York City Department of Transportation (“NYCDOT”) represented approximately ~~31.3%~~26.6% of our total revenues during fiscal ~~2020,~~2021, and our contract with NYCDOT, like many other contracts, is subject to unique risks and uncertainties, including termination rights, delays in payment and audits and investigations, any of which could have a material adverse effect on our business. In the future, a small number of customers in our Government Solutions segment may continue 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.

The COVID-19 pandemic has adversely affected our revenues from key customers in both our Commercial Services segment and our Government Solutions segment and may adversely affect our revenues in our Parking Solutions segment.

The COVID-19 pandemic continues to have ~~a significant negative~~an impact on both the RAC ~~industry, including key~~and FMC businesses. Travel has declined compared to pre-pandemic levels, while supply chain disruptions have impacted RACs’ and FMCs’ ability to access vehicles for their fleets. Although these headwinds continue, our customers have improved utilization of their existing fleets and have shown improvements in our Commercial Services segment. Reduced airline travel and widespread travel restrictions resulted in declining customer demand and many RACs have responded by reducing fleet sizes. In May 2020, The Hertz Corporation, one of our key Commercial Services customers, filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code, as amended, in the United States Bankruptcy Court for the District of Delaware. Because revenue from agreements with our RAC customers is largely based on a margin-share model, any changes to our RAC customers’ pricing or pricing model for tolling, such as changing from charging their customers per rental day to per toll usage day, could have a material impact on the revenue we realize under those agreements. Further, although we have long-term agreements with many of our RAC customers, most provide the customer with a termination right in certain situations, including if we commit an uncured material breach of the agreement.business performance. The full extent and duration of COVID-19’s impact on the RAC industry and the financial health of our key RAC customers cannot be predicted at this time. If our RAC customers continue to experience adversity in their businesses or file for bankruptcy, they may delay or default on their payment commitments to us or request to modify or renegotiate pre-existing contractual commitments on terms that are less favorable to us, any of which could have a material adverse effect on our business, financial condition and results of operations.

Revenue from our customers in our Government Solutions segment also continues to be impacted by ~~COVID‑~~COVID 19. ~~Stay at home orders, the~~The switch to remote operations for large amounts of the population, and ~~the related~~other containment measures have additionally resulted in reductions in vehicle traffic, which in turn resulted in some of our Government Solutions customers temporarily taking enforcement camera systems offline. Additionally, school closures resulting from COVID-19 have resulted in limited operations of our school bus stop arm solutions. Continued or additional measures or changes in laws or regulations, whether in the United States or abroad, that further impair the ability or desire of individuals to gather or travel due to the risk of the spreading of COVID-19, including laws or regulations banning travel or requiring the closure of schools, could have a material adverse effect

on our Government Solutions segment, as well as our business, financial condition and results of operations.

Additionally, current trends toward remote work and learning environments, reduced activity in urban environments, the tendency for customers to shop and enjoy entertainment from home and a reduction in travel, may collectively reduce vehicle traffic at parking garages and parking lots and negatively impact our Parking Solutions segment. Continued or additional trends toward remote work, learning and leisure may have an adverse effect on our Parking Solutions segment, as well as our business, financial condition and results of operations.

Our government contracts are subject to unique risks and uncertainties, including termination rights, delays in payment, audits and investigations, any of which could have a material adverse effect on our business.

We enter into government contracts from time to time with customers in our Government Solutions ~~segment~~and Parking Solutions segments that are subject to various uncertainties, restrictions and regulations, which could result in withholding or delay of payments to us.For example, asas of December 31, ~~2020,~~2021, NYCDOT had an open receivable balance of ~~$99.4~~$63.2 million, which represented ~~58.9%~~39% of our accounts receivable, net, of which ~~$80.9~~$26.0 million had aged beyond NYCDOT’s ~~45‑day~~45-day payment ~~terms. For additional information on the risks and uncertainties relating to our contracts with NYCDOT, please see the risk factor entitled “The New York City Law Department recently advised us that the City of New York is investigating certain aspects of our installation work for our largest customer, NYCDOT” above~~terms.

Government entities typically finance projects through appropriated funds. While these projects are often planned and executed as multi-year projects, government entities usually reserve the right to change the scope of or terminate these projects for lack of approved funding or at their convenience. Changes in government or political developments, including administrative hurdles, budget deficits, shortfalls or uncertainties, government spending reductions or other debt or funding constraints, could result in our government contracts being reduced in price or scope or terminated altogether, as well as limit our ability to win new government work in the future.

Moreover, if a government customer does not follow the requisite procurement or ordinance-specific administrative procedures, the contract may be subject to protest or voidable regardless of whether we bear any responsibility for the error. Our government contracts are subject to underlying laws and regulations related to government contractors, and often include other one-sided, customer-friendly provisions and certifications, including broad indemnification provisions and uncapped exposure or liquidated damages for certain liabilities, which can impose obligations, requirements and liabilities on us that are beyond those associated with a typical commercial arrangement.

In addition, government contracts are generally subject to audits and investigations by government agencies or higher-tier government contractors. If improper or illegal activities or contractual non-compliance are identified, including improper billing or vendor non-compliance, we may be subject to various civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, the imposition of fines, penalties and sanctions, and suspensions or debarment from doing business for or on behalf of the government in the future. If penalties or other restrictions are imposed in one jurisdiction, itthey could also implicate similar provisions of contracts with other government customers in other jurisdictions. Further, the negative publicity related to these penalties, sanctions or findings in government audits or investigations could harm

our reputation and hinder our ability to compete for new contracts with government customers and in the private sector. Any of the foregoing or any other reduction in revenue from government customers could have a material adverse effect on our business, financial condition and results of operations.

Any decreases in the prevalence or political acceptance of, or an increase in governmental restrictions regarding, automated and other similar methods of photo enforcement or the use of third-party tolling service providers could have a material adverse effect on our business.

We provide automated safety solutions to national, state and local government agencies, generating revenues through automated photo enforcement of red-light, school bus, speed limit and bus lane laws. In ~~2020,~~2021, revenues from this segment represented approximately ~~54.1~~%51.4% of our total revenues. Therefore, we depend on ~~federal,~~national, state and local governments authorizing the use of automated photo enforcement and not otherwise materially restricting its use. In states that have enabling legislation, if that legislation is not renewed or is otherwise repealed, use of automated enforcement technology can be suspended until new legislation is passed. For example, in June 2019, the state of Texas passed a law prohibiting red-light photo enforcement programs across the state, with certain carve-outs for some existing programs. The passage of this law resulted in a loss of revenue in the years ended December 31, 2019, 2020 and ~~2020~~2021 and a related impairment of assets in the year ended December 31, 2019.

Ballot initiatives, referendums, opinions of attorneys general and legal challenges can also be used to restrict the use of automated enforcement or to impose additional licensing requirements on its use. For example, the Attorneys General in the states of Arizona, Tennessee and Virginia have issued opinions that had the effect of limiting the use of these enforcement technologies or impacting the manner in which photo enforcement programs operate. Usage may also be affected if there is an unfavorable shift in political support for, or public sentiment towards, automated enforcement, or as a result of one or more scandals related to its use.

Similarly, our Commercial Services business may be materially impacted if there is an unfavorable shift in

political support for or public sentiment towards tolling or its use is materially restricted or limited, including through the imposition of limits on the fees RAC companies can charge their customers for tolling or violation processing services. Any material restriction or limitation on the use of automated enforcement or material reduction in its use in the markets we serve, or any similar changes with respect to tolling, could have a material adverse effect on our business, financial condition and results of operations.

We face intense competition and any failure to keep up with technological developments and changing customer preferences could have a material adverse effect on our business.

The markets for our solutions are increasingly competitive, rapidly evolving and fragmented, and are subject to changing technology and shifting customer needs. A number of vendors develop and market products and services that compete to varying extents with our offerings, and we expect this competition to continue to intensify. The rapid rate of technological change in our industry could increase the chances that we will face competition from new products or services designed by companies that we do not currently compete with. Moreover, we face competition from our own customers as they may choose to invest in developing their own internal solutions.

Competition in our markets is primarily based on (a) the quality, reliability and efficacy of the solution; (b) customer awareness of offerings; (c) pricing; (d) functionality and features, including ease of use and broad application; (e) the customer or end-user experience; (f) the breadth and depth of products and services offered; (g) reputation and track record; (h) technical expertise; and (i) security.

Currently, we compete with several other companies, ranging from small, regional or specialized firms to large, diversified companies. Some of our existing competitors and potential new competitors have longer operating histories, greater name recognition, less debt, more established customer bases and significantly greater financial, technical, research and development, marketing and other resources than we do. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. In some cases, our competitors may be better positioned to initiate or withstand substantial price competition, and we may have to reduce our pricing to retain existing business or obtain new business. If we are not able to maintain favorable pricing for our solutions, our profit margin and profitability could suffer. In addition, if a prospective customer is currently using a competing solution, the customer may be unwilling to switch to our solution without setup support services or other incentives. Certain existing and new competitors may be better positioned to acquire competitive solutions, effectively negotiate third-party licenses and other strategic relationships, and take advantage of acquisition or other similar expansion opportunities. Industry consolidation could further increase competition, and competitors may also establish relationships or form alliances. Any failure to achieve our target pricing levels, maintain existing customer relationships, generate additional customer wins or otherwise successfully compete would have a material adverse effect on our business, financial condition and results of operations.

Our new products and services and changes to existing products and services may not succeed.

Our ability to retain, increase and engage our customer base and to increase our revenue depends, in large part, on our ability to continue to evolve existing solutions and to create successful new solutions. We may introduce significant changes to our existing solutions or acquire or introduce new and unproven products and services, including using technologies or entering markets or industries in which we have little or no experience. For example, in September 2018, we launched Peasy, our cloud-based, pay-as-you-go tolling solution targeting consumers, a market segment that we had not previously targeted directly. Consumer adoption of Peasy was slower than anticipated, and the product did not generate meaningful revenue during the year ended December 31, 2020, and we therefore ceased actively marketing and ~~further~~new investment in ~~Peasy.~~Peasy in 2021. We have only indirect exposure to the consumer segment through our business with the RAC industry and parking operators, but in those instances, our customer controls the pricing, marketing, consumer disclosures and other aspects of the consumer relationship. As such, the consumers’ view of us and their willingness to try our solutions may be impacted by their experience with our tolling services delivered by our RAC customers and parking solutions offered by our parking customers. Additionally, our rollout of European RAC tolling has been slower than anticipated. The failure of any new or enhanced solution to achieve customer adoption or our failure to otherwise successfully monetize our development efforts could have a material adverse effect on our business, financial condition and results of operations.

We regularly pursue contracts and contract renewals, particularly in our Government Solutions ~~segment,~~and Parking Solutions segments, that require competitive bidding, which can involve substantial costs and could have a material adverse effect on our business.

Many of the government contracts and renewals for which we bid, particularly those for certain larger government customers, are extremely complex and require the investment of significant resources in order to prepare accurate bids and proposals. Further, a significant percentage of new customer growth opportunities in our Government Solutions, Parking Solutions and EPC businesses are only accessible through competitive bidding. Competitive bidding imposes substantial costs and presents several risks, including significant time and effort and the commitment of resources, regardless of whether the job is ultimately won. We may also be unable to meet the requirements of a solicitation or may have to incur substantial costs to be able to do so. These and other unanticipated costs related to the competitive bidding process, including advancing or defending bid protests, and any failure to win renewals or new customer accounts through the competitive bidding process, could have a material adverse effect on our business, financial condition and results of operations.

Our inability to recover capital and other investments in connection with our contracts could have a material adverse effect on our business.

We sometimes make significant capital, and other investments, to attract and retain certain contracts, such as the cost of purchasing information technology equipment, constructing and installing photo enforcement systems and developing and implementing software and labor resources. The net book value of certain assets recorded, including a portion of our intangible assets, could be impaired in the event of the early termination of some or all of a contract or a reduction in volume and services under the contract for any number of reasons, including the failure or deterioration of the customer’s business, a customer’s exercise of contract termination or program cancellation rights or a change in law or interpretation thereof that suspends or terminates photo enforcement activities. Any failure to recover our ~~investments~~investments’ underlying customer agreements could have a material adverse effect on our business, financial condition and results of operations. For example, in June 2019, the state of Texas passed a law prohibiting red-light photo enforcement programs across the state, with certain carve-outs for some existing programs. The passage of this law resulted in a loss of revenue in the years ended December 31, 2019, 2020 and ~~2020~~2021 and a related impairment of assets for the year ended December 31, 2019.

Our inability to successfully implement our acquisition strategy could have a material adverse effect on our business.

We have grown in large part as a result of our ~~recent~~ acquisitions, ~~including the acquisitions of HTA, EPC and Pagatelia, and we recently signed an agreement to acquire Redflex,~~ and we anticipate continuing to grow in this manner. Although we expect to regularly consider additional strategic transactions in the future, we may not identify suitable opportunities or, if we do identify prospects, it may not be possible to consummate a transaction on acceptable terms. Antitrust or other competition laws may also limit our ability to acquire or work collaboratively with certain businesses or to fully realize the benefits of a prospective or completed acquisition. Furthermore, a significant change in our business or the economy, an unexpected decrease in our cash flows or any restrictions imposed by our indebtedness may limit our ability to obtain the necessary capital or otherwise impede our ability to

complete a transaction. Regularly considering strategic transactions can also divert management’s attention and lead to significant due diligence and other expenses regardless of whether we pursue or consummate any transaction. Failure to identify suitable transaction partners and to consummate transactions on acceptable terms, as well as the commitment of time and resources in connection with such transactions, could have a material adverse effect on our business, financial condition and results of operations.

The inability to successfully integrate our recent or future acquisitions could have a material adverse effect on our business.

~~In January 2021 we entered into an agreement to acquire Redflex,~~We have integrated, and ~~we recently acquired HTA, EPC and Pagatelia. The integration of~~may in the future integrate, certain acquired businesses into our existing operations, which requires significant time and exposes us to significant risks and additional ~~costs. Integrating these~~costs, and ~~other~~integrating such acquired businesses may strain our resources. Further, we may have difficulty integrating the operations, systems, controls, procedures or products of such acquired businesses and may not be able to do so in a timely, efficient and cost-effective manner.

~~We have not fully integrated HTA, EPC or Pagatelia and may encounter one or more~~ of the issues discussed above, or others of which we are not yet aware. We have determined not to fully integrate HTA’s operating systems onto our legacy information technology systems, which could lead to separate risks and inefficiencies. acquired business.

Any ~~of these acquisition or other~~ integration-related issues could cause significant disruption to our business, divert the attention of management and lead to substantial additional costs and delays. Our inability to successfully integrate acquired businesses could have a material adverse effect on our business, financial condition and results of operations.

The agreements governing our acquisition of businesses may not contain indemnification provisions that fully protect us and as a result we may face unexpected liabilities.

Certain of the agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the acquired business before we acquired it. In most of these agreements, however, the liability of the former owners is limited and certain former owners may be unable to meet their indemnification responsibilities. We have further obtained representation and warranty insurance related to some acquisitions in lieu of, or in addition to, the indemnification by the previous owners. These indemnification provisions or insurance policies may not protect us fully or at all, and as a result we may face unexpected liabilities that adversely affect our business and financial statements.

Any failure to realize the anticipated benefits of an acquisition, including unanticipated expenses and liabilities related to acquisitions, could have a material adverse effect on our business.

We pursue each acquisition with the expectation that the transaction will result in various benefits, including growth opportunities and synergies from increased efficiencies. However, ~~even if we are able to successfully integrate an acquired business,~~ we may not realize some or all of the anticipated benefits of our acquisitions within ~~the~~our anticipated timeframes or at all. Furthermore, we may experience increased competition that limits our ability to expand our business, we may not be able to capitalize on expected business opportunities, and general industry and business conditions may deteriorate. Acquisitions also expose us to significant risks and costs, and business and operational overlaps may lead to hidden costs. These costs can include unforeseen pre-acquisition liabilities, or the impairment of customer relationships or acquired assets such as ~~goodwill.~~goodwill, or exposure to oversight, operational and business control risks associated with a newly acquired business. We may also incur costs and inefficiencies to the extent an acquisition expands the industries, markets or geographies in which we operate due to our limited exposure to and experience in a given industry, market or region. For example, our January 2021 agreement to acquire Redflex exposes us to currency fluctuations and conversion risks because the purchase price is in Australian dollars, which presents the risk of loss from the conversion of U.S. dollars to Australian dollars at the time of closing. Significant acquisitions may also require us to incur additional debt to finance the transactions, which could limit our flexibility in using our cash flow from operations for other purposes. For example, we financed our December 2021 acquisition

of T2 Systems by accessing additional debt financing under our credit agreement. Acquisitions often involve post-transaction disputes with the counterparty regarding a number of matters, including disagreements over the amount of a purchase price or other working capital adjustment or disputes regarding whether certain liabilities are covered by the indemnification provisions of the transaction agreement. We may underestimate the level of certain costs or the exposure we may face as a result of acquired liabilities. If any of these or other factors limit our ability to achieve the anticipated benefits of a transaction, or we encounter other unexpected transaction-related costs and liabilities, our business, financial condition and results of operations could be materially and adversely affected.

A failure in or breach of our networks or systems, including as a result of cyber-attacks, could have a material adverse effect on our business.

We act as a trusted business partner in both front office and back office platforms, interacting with our customers and other third parties. Our customers include large, multinational corporations and government agencies who depend upon our operational efficiency, non-interruption of service, and accuracy and security of information. We receive, process, transmit and store substantial volumes of information relating to identifiable individuals, both in our role as a back-end or direct-to-consumer service provider and as an employer, and receive, process and implement financial transactions, and disburse funds, which requires us to receive debit and credit card information. We also use third-party providers such as subcontractors, software vendors, utility providers and network providers, upon whom we rely to offer our products, services and solutions. As a result of these and other aspects of our business, the integrity, security and accuracy of our systems and information technology, and that of the third parties

with which we interact, including our customers and other government agencies with which we work, are extremely important.

Our cybersecurity and processing systems, as well as those of the third parties with which we interact, may be damaged, disrupted or otherwise breached for a number of reasons, including power outages, computer and telecommunication failures, computer viruses, malware or other destructive software, internal design, manual or usage errors, cyber-attacks, terrorism, workplace violence or wrongdoing, catastrophic events, natural disasters and severe weather ~~conditions, and~~ ~~remote work arrangements instituted in response to COVID-19~~.conditions. Our visibility and role as a processor of transactions containing personally identifiable information may also put us at a greater risk of being targeted by hackers. In the normal course of our business, we have been the target of malicious cyber-attack attempts. ~~The perception that~~ Additionally, trends toward remote work as a result of the COVID-19 pandemic has made companies’ information technology systems more vulnerable ~~has additionally~~through increased ~~the already significant volume of such attempts.~~cyber-attack attempts.

In addition, numerous and evolving cybersecurity threats, including advanced and persistent cyber-attacks, phishing and social engineering schemes could compromise the confidentiality, availability and integrity of data in our systems as well as those of the third parties with which we interact. The security measures and procedures we and the third parties with which we interact have in place to protect sensitive consumer data and other information may not be successful or sufficient to counter all data breaches, cyber-attacks, or system failures. Further, employee error or malfeasance, faulty password management or other irregularities may result in a defeat of security measures or a system breach. Although we devote significant resources to our cybersecurity programs and have implemented security measures to protect our systems and data, and to prevent, detect and respond to data security incidents, in each case that we believe are reasonable and appropriate, these efforts, and the efforts of third parties with which we interact, may not prevent these or other threats.

Moreover, because the techniques used to obtain unauthorized access, or to disable or degrade systems change frequently, have become increasingly more complex and sophisticated, and may be difficult to detect for periods of time, we and the third parties with which we interact may not anticipate these acts or respond adequately or timely. As these threats continue to evolve and increase, we may be required to devote significant additional resources in order to modify and enhance our security controls and to identify and remediate any security vulnerabilities or diligencing those of third parties.

If we are sued in connection with any data security breach or system failure, we could be involved in protracted litigation. In addition, a breach could lead to unfavorable publicity and significant damage to our brand, the loss of existing and potential customers, allegations by customers that we have not performed or breached our contractual obligations, or decreased use and acceptance of our solutions. A breach or failure may also subject us to additional regulations or governmental or regulatory scrutiny, which could result in significant compliance costs, fines or enforcement actions, or potential restrictions imposed by regulators on our ability to operate our business. A security breach would also likely require us to devote significant management and other resources to address the

problems created by the security breach. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

We are subject to laws and regulations of the United States and foreign jurisdictions relating to personal information, privacy and data ~~retention and individually identifiable information,~~security, and failure to comply with these laws and regulations, whether or not inadvertent, ~~and changes to these laws,~~ could have a material adverse effect on our business.

~~We receive, process, transmit~~Personal information is used both as part of our business and ~~store information relating to identifiable individuals, both~~ in our role as ~~a service provider and as~~ an employer. In addition, ~~we receive, process, transmit and store other sensitive data, such as photographs taken and video recorded,~~ as part of our Government Solutions, ~~programs.~~Commercial Services and Parking Solutions programs, we process other data which may be considered personal information or sensitive personal information in certain jurisdictions, such as photographs and video recordings. As a result, we are subject to various laws and regulations regarding personal information, privacy and data ~~retention,~~security, including ~~regulations~~those promulgated by the United States federal government and its agencies, ~~such as the FTC,~~ and state, local and foreign ~~agencies.~~governments, agencies, and public authorities. Our ~~data~~personal information handling also is subject to contractual obligations and industry standards. In the United States, various laws and regulations apply to the collection, processing, disclosure, and security of certain types of data, including the use of contact information and other data for marketing, advertising and other communications with individuals and businesses. Additionally, the FTC and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, dissemination and security of data. A number of foreign countries and governmental bodies, including the European Union (“EU”), have laws and regulations dealing with the handling and processing of personal information obtained from their residents, which in certain cases are more restrictive than those in the United States. These laws often include obligations on companies to notify individuals of security breaches involving particular personal information, which could result from breaches experienced by us or our third-party

~~These~~Laws, regulations and ~~other laws, regulations and~~industry standards relating to privacy are rapidly evolving, can be subject to significant change and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. ~~The~~These laws and regulations may also be subject to new or different interpretations. For example, in June 2018, California enacted the CCPA, which took effect in January 1, 2020. The CCPA creates several new obligations for companies which process personal information. It also gives California residents expanded rights to access, delete and obtain a copy of their personal information; opt out of certain personal information sharing and receive detailed information about how their personal data is processed. The law provides for civil penalties against companies that fail to comply. The California Attorney General’s regulations governing compliance with the CCPA went into effect in August 2020, with additional amendments effective as of March 2021. A violation of these regulations constitutes a violation of the CCPA. A new California privacy law, the California Privacy Rights Act (“CPRA”), creates obligations relating to personal information beginning on January 1, 2022, with implementing regulations expected on or before July 1, 2022, and enforcement beginning July 1, 2023. It substantially amends and amplifies the requirements of the CCPA, as well as creates a new agency responsible for enforcing California’s privacy laws. Unlike the CCPA, the CPRA applies to employee personal information in addition to consumer personal information. In 2021, Virginia and Colorado also enacted comprehensive state privacy laws, which become operative on January 1, 2023, and July 1, 2023, respectively. Additionally, dozens of other state legislatures have introduced privacy bills, and Congress is considering several privacy bills at the federal level.

Foreign laws concerning personal information, privacy and data security may be more restrictive and burdensome than those of the United States. Given that data is highly mobile and transferable, many data protection and privacy laws of foreign nations seek to have wide extraterritorial jurisdiction over conduct occurring outside geographical boundaries of the relevant jurisdiction. For example, on May 25, 2018, the E.U. General Data Protection Regulation GDPR replaced ~~prior EU regulations, effectively extending~~the 1995 Data Protection Directive. The GDPR extends the scope of EUE.U. data protection law to ~~all non-EU~~non-E.U. companies processing data of EUE.U. residents when certain conditions are satisfied. The GDPR contains numerous, more stringent requirements and changes from prior EUE.U. law, including more robust privacy and compliance obligations ~~on data processors,~~for both companies and their service providers, greater rights for ~~data subjects, and~~individuals, heavier documentation requirements for data protection compliance ~~programs.~~programs and restrictions on transfers of personal data to non-E.U. countries. The GDPR ~~also~~ provides for ~~increased~~ fines of the greater of up to €20 million or ~~up to~~ 4% of the noncompliant company’s annual global ~~revenue of the noncompliant company.~~revenue. Further, ~~certain of~~ our ~~U.S.~~ customers, through contractual requirements, could require us to ~~conform all aspects~~comply with certain of ~~our business to~~ these ~~more~~ stringent ~~regulations,~~requirements regardless of whether ~~all of~~ our ~~operations are~~business is actually subject to the GDPR.

From a security perspective, federal, state and foreign laws and regulations create requirements to take reasonable technical, physical and organizational measures to protect the security of personal information. Laws and regulations also include obligations to notify individuals and government regulators of an actual or perceived data security breach involving particular personal information, whether that breach was experienced by us or our third-party service providers. Penalties for failure to adequately protect personal information, or provide timely notice of such failure, vary by jurisdiction. In ~~June 2018, California enacted~~the United States, most state data breach notification laws consider violations to be unfair or deceptive trade practices and give the relevant state attorneys general (“AGs”) the authority to levy fines or bring enforcement actions. Such AG investigations, which are often time consuming, expensive and burdensome, may lead to civil penalties. Some laws, such as the CCPA ~~which took effect in January 2020. The CCPA gives California residents expanded rights to access~~ and ~~delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal data is used. The law~~CPRA, also ~~provides for civil penalties against companies that fail to comply and creates~~grant affected individuals a private right of action for certain data breaches under which they may sue for money damages. In the United States, lawyers specialized in pursuing cases on behalf of individuals who are affected by a data breach regularly bring suit against companies that have suffered data breaches. ~~Significant regulations~~In the E.U., failure to ~~implement portions~~comply with the GDPR’s security or notification requirements could result in significant monetary fines. Additionally, our failure to maintain adequate levels of ~~the CCPA were finalized in August of 2020, but a newly proposed set of rule changes was proposed in December 2020. Moreover, a ballot initiative for new~~data security and privacy ~~laws, including the creation of a new privacy regulatory enforcement agency, will create further changes~~may negatively impact our ability to the California Privacy Laws through January 2023, when the new laws are scheduled to take effect. Additionally, other state legislatures have proposed bills which will be taken up in 2021, and Congress is considering several privacy bills at the federal level.secure customer contracts.

The costs of compliance with these privacy-related laws, regulations and industry standards are high and may limit the use or adoption of our smart mobility technology solutions and services, reduce overall demand for our solutions and services, or slow the pace at which we generate ~~revenues.~~revenue. Moreover, if our policies, procedures or measures relating to these issues fail to comply, or regulators assert we have failed to comply, with ~~the~~ applicable laws, regulations or industry standards, we may be subject to governmental enforcement actions, litigation, regulatory investigations, fines, penalties and negative publicity, and our application providers, customers and partners may lose trust in or stop doing business with us entirely. We expect that there will continue to be new proposed laws, regulations and industry standards concerning personal information, privacy and data ~~protection and information security~~retention in the United States, the EUE.U. and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and industry standards may have on our business. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

We publicly post our privacy policies and practices concerning our processing, use and disclosure of the personally identifiable information provided to us by our website visitors and mobile app users. Our publication of our privacy policies and other statements we publish that provide promises and assurances about privacy and security can subject us to potential liability if they are found to be insufficient, defective, deceptive or misrepresentative of our practices.22

We are subject to domestic and foreign laws relating to processing certain financial transactions, including debit or credit card transactions, and failure to comply with those laws, even if inadvertent, could have a material adverse effect on our business.

We process, support and execute financial transactions as part of our business and disburse funds on behalf of certain of our customers. This activity includes receiving debit and credit card information, processing payments for and due to our customers and disbursing funds on payment or debit cards to payees of our customers. As a result, we may be subject to numerous U.S. federal and state and foreign jurisdiction laws and regulations, including the Electronic Fund Transfer Act, the Currency and Foreign Transactions Reporting Act of 1970 (commonly known as the Bank Secrecy Act) and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”).

We are also subject to or voluntarily comply with a number of other laws and regulations relating to privacy and information security, electronic fund transfers, payment services and convenience fees. If we were found to be in violation of applicable laws and regulations, we could be subject to additional liability, including governmental fines or other sanctions, and we could be forced to otherwise change our business practices in certain jurisdictions, or be required to obtain additional licenses or regulatory approvals.

We have implemented policies and procedures to preserve and protect credit card and other payment data against loss, corruption, misappropriation caused by systems failures, unauthorized access or misuse. Notwithstanding these policies and procedures, we could be subject to liability claims by individuals and customers whose data resides in our databases for the misuse of that information. If we fail to meet appropriate compliance levels, this could negatively impact our ability to utilize credit cards as a method of payment, or collect and store credit card information, which could disrupt our business. Failure to comply with these laws may subject us to, among other things, additional costs or changes to our business practices, liability for monetary damages, fines or criminal prosecution, unfavorable publicity, restrictions on our ability to process and support financial transactions and allegations by customers that we have not performed our contractual obligations, any of which could have a material adverse effect on our business, financial condition and results of operations.

We depend on the services of key executives and any inability to attract and retain key management personnel could have a material adverse effect on our business.

Our future success depends upon the continued services of our executive officers, including our Chief Executive Officer and Chief Financial Officer, who have critical experience and relationships that we rely on to implement our business plan and growth strategy. Additionally, as our business grows, we may need to attract and hire additional management personnel. We have employment agreements with some members of senior management that include non-competition provisions; however, we cannot prevent our executives from terminating their employment and may not be able to fully enforce non-competition provisions limiting former executives or key personnel from competing with us following any departure. Moreover, we do not carry “key-man” life insurance on the lives of our executive officers, employees or advisors. Our ability to retain our key management personnel or to identify and attract additional management personnel or suitable replacements should any members of the management team leave or be terminated is dependent on a number of factors, including the competitive nature of the employment market and our industry. Any failure to retain key management personnel or to attract additional or suitable replacement personnel could cause uncertainty among investors, employees, customers and others concerning our future direction and performance and could have a material adverse effect on our business, financial condition and results of operations.

A failure to attract and retain necessary skilled personnel and qualified subcontractors could have a material adverse effect on our business.

Our business depends on highly skilled technical, managerial, engineering, sales, marketing and customer support personnel and qualified and competent subcontractors. Competition for these personnel is intense, especially during times of low unemployment or economic recovery or growth. Any failure to attract, hire, assimilate in a timely manner and retain and motivate key qualified personnel, particularly software development, product development, analytics and other technical personnel, or inability to contract with qualified, competent subcontractors, could impair our success. Additionally, certain portions of our Government Solutions operations are dependent on employees and subcontractors who are subject to a collective bargaining agreement. When the collective bargaining agreement becomes subject to renegotiation or if we face union organizing drives, any

disagreement between us and the union on important issues may lead to a strike, work slowdown or other job actions in one or more locations we serve. A strike, work slowdown or other job action could disrupt our services, resulting in reduced revenues or contract cancellations. State or local law in some jurisdictions requires that subcontractors for our Government Solutions segment are certified by the jurisdiction, and the failure on the part of our subcontractors to obtain and maintain such certification could impact their ability to perform services for us. Further, our acquisition activity could increase the challenge of retaining our key employees and subcontractors and those of the acquired businesses. The loss of any key technical employee or the termination of a key subcontractor relationship, and any inability to identify suitable replacements or offer reasonable terms to these candidates, could have a material ~~and~~ adverse effect on our business, financial condition and results of operations.

Our operations in international markets expose us to additional risks, and failure to manage those risks could have a material adverse effect on our business.

We have subsidiaries in various international markets around the world, including in the United Kingdom (“UKU.K.”), the Netherlands, France, Ireland, Spain, Australia, Canada and Hungary. The success of our business depends, in part, on our ability to successfully manage these foreign operations. Our

international operations subject us to risks that could increase expenses, restrict our ability to operate, result in lost revenues or otherwise materially and adversely affect our business, including:

~~The UK formally exited the EU on~~On January 31, 2020, the U.K. withdrew from the E.U., commonly referred to as “Brexit.” The U.K. and the ~~transition period, during~~E.U. agreed to a trade and cooperation agreement, which ~~EU rules~~came into force on May 1, 2021 (the “Trade and ~~regulations continued to apply, ended on December 31, 2020.~~Cooperation Agreement”). The ~~EU-UK~~ Trade and Cooperation Agreement (“~~TCA”), finally agreed to between~~provides for, among other things, zero-rate tariffs and zero quotas on the ~~EU and UK on December 24, 2020, came into force on January 1, 2021, and is expected to be formally approved by the EU legislature in March 2021. The TCA goes some way to liberalizing trade in~~movement of goods between the UKU.K. and ~~EU. However, in~~the E.U. In terms of trade in services ~~cooperation between national authorities,~~ and business travel between the ~~TCA~~U.K. and E.U., however, the Trade and Cooperation Agreement introduces rules that are ~~far~~ more restrictive than those ~~offered by membership~~ in ~~the EU’s Single Market, and the overall impact on the movement of goods, services, people and capital between~~place when the U.K. ~~and~~was a member of the EU, as well as customer behavior, economic conditions, interest rates, currency exchange rates, availability of capital or other matters remains to be seen. Economists predict that Brexit will lead to some short-term disruption in the UK and a longer-term reduction in GDP.E.U. The impact of these more restrictive rules, including additional inspections and documentation checks, on U.K.-E.U. cross-border services may have an impact on our ~~wholly owned subsidiary, EPC, as their~~U.K. subsidiaries. Their effects have yet to become ~~clearer.~~fully clear, particularly because COVID-19 restrictions have also interrupted cross-border services between the U.K. and E.U. Also, the inability for the UKU.K. and EUE.U. vehicle licensing authorities to transfer certain data using current methods may have an impact on EPC’s ability to obtain information that is necessary to its operations in certain parts of the ~~EU.~~E.U. These restrictions may have an impact on EPC’s ability to obtain information that is necessary to its operations in certain parts of the ~~EU. In addition, EPC’s ability~~E.U.

Brexit has created and may continue to ~~obtain information~~create legal, political and economic risks and uncertainties for our U.K. operations. The main source of uncertainty arises from ~~its customers outside~~ the ~~UK may also be adversely impacted. The EU has agreed~~difference of opinion between the U.K. and E.U. on how to implement the Brexit settlement in Northern Ireland. Both sides are in the process of negotiating

amendments to the Northern Ireland Protocol, but agreement remains elusive. If the impasse continues, there is a risk that either side could resort to retaliatory measures under the ~~TCA~~terms of the Trade and Cooperation Agreement. Retaliatory measures include the possibility of tariffs being applied to ~~allow EU personal data to be transferred~~imports from the E.U. to the ~~UK for up~~U.K. and from the U.K. to ~~six additional months on current terms, pending an expected ‘adequacy’ decision~~the E.U., and new barriers to cross-border services being erected.

Additionally, Brexit may cause fluctuations in ~~June 2021, which will allow permanent free flow~~the value of ~~personal data.~~the U.K. pound sterling and E.U. euro. Fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our expenses, earnings, cash flows, results of operations and revenues.

We have limited or no control over these and other factors related to international operations and our strategies to address these risks may not correctly anticipate any problems that arise or be successful in expanding our solutions from the United States into new European markets. Any failure to successfully manage these and other similar risks could have a material adverse effect on our business, financial condition and results of operations.

Our growth strategy is, in part, dependent on successfully implementing our international expansion strategy.

Our growth strategy includes expanding our global footprint, which may involve moving into regions and countries beyond those in which we currently operate. In order to achieve widespread acceptance in new markets we may enter, we may need to develop new products and services or tailor our existing products and services to that market’s unique customs, cultures and standards. We have an office in the Netherlands to serve as the headquarters for our European business, as well as EPC offices in London and Budapest and a Pagatelia office in Madrid. Additionally, we have subsidiaries in France and Ireland. Management of these and any future ~~European~~international subsidiaries may divert our resources and require significant attention from management. In addition to the risks inherent in

conducting international business, expanding ~~into Europe~~internationally with new and existing customers poses additional risks, including:

If we are unable to effectively manage these risks, our relationships with our existing and prospective customers, strategic partners and employees and our operations outside the United States may be adversely affected.

In many cases, we will have limited or no experience in a particular region or country where we intend to launch operations. Moreover, learning the customs and cultures, particularly with respect to consumer preferences, differing technology standards and language barriers, is a difficult task. Our failure to do so effectively could slow our growth in those regions or countries. In many of these markets, long-standing relationships between potential customers and their local partners and protective regulations, including local content requirements and approvals, and disparate networks and systems used by each country, will create barriers to entry. Difficulties in foreign financial markets and economies and of foreign financial institutions, particularly in emerging markets, could also adversely affect demand in the affected areas. For this strategy to be successful, we must generate sufficient revenues and margins from the new markets to offset the expense of the expansion. Moreover, as the scale of our international operations increases, we will be more susceptible to the general risks related to our existing international operations discussed above. If we are unable to further expand internationally or if we are unable to effectively and efficiently manage the complexity of our expanded operations and compete in these new regions and countries, our business, financial condition and results of operations could be adversely affected.

Failure to comply with anticorruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act and similar laws associated with our activities outside of the United States, could have a material adverse effect on our business.

Our operations subject us to anticorruption and other similar laws and regulations of multiple jurisdictions, both within the United States and internationally, which are often evolving, including the Foreign Corrupt Practices Act (the “FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the Patriot Act, and comparable foreign anti-bribery and anti-money laundering laws and regulations, including the United Kingdom Bribery Act of 2010. Our ~~domestic activities, particularly those related to our~~ Government Solutions business ~~are also~~is subject to a number of international, federal, state and local laws and regulations regarding similar matters. These laws and regulations prohibit companies and their employees and third-party intermediaries from authorizing, offering or providing, directly or indirectly,

improper payments or other benefits to government officials, political parties and private-sector recipients for the purpose of obtaining or retaining business, directing business to any person or securing any advantage.

We use various third parties to conduct our business, both domestically and abroad, and we can be held liable for the corrupt or ~~other~~ illegal activities of our employees, representatives, contractors or subcontractors, partners, and agents, those of the third parties with which we do business or those of any businesses we acquire, even if we do not explicitly authorize such activities or if they occurred prior to our acquisition of the relevant business. Safeguards we implement to discourage these practices may prove to be ineffective and any internal investigations may not uncover any such practices that may exist. Violations of the FCPA or other applicable anti-bribery, anti-corruption, and anti-money laundering laws by us or any of these third parties can result in severe criminal or civil sanctions, or other liabilities or proceedings against us, including class action lawsuits, whistleblower complaints, enforcement

actions by the SEC, Department of Justice, and U.S. state and local and foreign regulators, adverse media coverage, non-responsibility determinations by procuring agencies, and suspension or debarment from government contracts, any of which could have a material adverse effect on our business, financial condition and results of operations.

Failure to acquire necessary intellectual property or adequately protect our intellectual property could have a material adverse effect on our business.

Our success depends, in part, on our ability to protect and defend our intellectual property against infringement, misappropriation and dilution. To protect our intellectual property rights, we rely on a combination of patent, trademark, copyright, trade secret and unfair competition laws of the United States and other countries, as well as contract provisions. We have registered certain patents and trademarks and have applications pending in the United States and foreign jurisdictions for some inventions and trademarks, including the Verra Mobility word mark and logo, for which some registrations have been granted and some applications are pending. However, not all of the trademarks and inventions we currently use have been registered in all of the countries in which we do business, and they may never be registered in all of those countries, and the applications we submit for these protections may not be granted. While we make efforts to acquire rights to intellectual property necessary for our operations, these measures may not adequately protect our rights in any given case, particularly in those countries where the laws do not protect proprietary rights as fully as in the United States.

If we fail to acquire necessary intellectual property rights or adequately protect or assert our intellectual property rights, competitors may manufacture and market similar products and services, or dilute our brands, which could adversely affect our market share. It may be possible for third parties to reverse engineer, otherwise obtain, copy, and use software or information that we regard as proprietary. In addition, our competitors may avoid application of our existing or future intellectual property rights. Further, patent rights, copyrights and contractual provisions may not prevent our competitors from developing, using or selling products or services that are similar to or address the same market as, our products and services. Failure to obtain registrations for the Verra Mobility word mark or logo may have a significant adverse impact on our brand. Moreover, some of our trademarks and services are descriptive or include descriptive elements, which may make it difficult to enforce our rights or prevent others from adopting and using similar marks. Competitive products and services could reduce the market value of our brands, products and services, inhibit attracting new customers or maintaining existing customers, lower our profits, and could have a material adverse effect on our business, financial condition and results of operations.

Our measures to monitor and protect our intellectual property may not be adequate to maintain or enforce our patents, trademarks or other intellectual property rights.

Despite our efforts to monitor and protect our intellectual property, we may not be able to maintain or enforce our patents, trademarks or other intellectual property rights. Unauthorized third parties may use our trademarks and service marks, or marks that are similar thereto, to impinge on our goodwill, cause consumer confusion or dilute our rights in the marks. We are aware of products, software and marks similar to our intellectual property being used by other persons. Although we believe that such uses will not adversely affect us, further or currently unknown unauthorized uses or other infringement of our trademarks or service marks could diminish the value of our intellectual property and may adversely affect our business. Even where we have effectively secured protection for our intellectual property, our competitors may challenge, infringe, misappropriate or dilute our intellectual property and our employees, consultants, contractors, customers and suppliers may breach their contractual obligations not to reveal or use our confidential information, including trade secrets. Additionally, defending or enforcing our intellectual property rights and agreements, and seeking an injunction or compensation for infringements or misappropriations, could result in expending significant resources and diverting management attention, which in turn may have a material adverse effect on our business, financial condition and results of operations.

We have been and may become subject to third-party infringement claims or challenges to the validity of our intellectual property that could have a material adverse effect on our business.

We have faced, and may in the future face, claims for infringement, misappropriation or other violations of intellectual property rights from intellectual property owners in areas where we operate or intend to operate, including in foreign jurisdictions. Such claims may or may not be unfounded. Regardless of whether such claims have merit, our image, brands, competitive position and ability to expand our operations into other jurisdictions may be harmed and we may incur significant costs related to defense or settlement. If such claims were decided against us or a third party we indemnify pursuant to license terms, we could be required to pay damages, develop or adopt non-infringing products or services, or acquire a license to the intellectual property that is the subject of the asserted claim, which license may not be available on acceptable terms or at all.

Defending or settling claims would require the expenditure of additional capital, and negative publicity could arise, even if the matter was ultimately decided in our favor. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Growth into new territories and technologies may be hindered or blocked by pre-existing third-party rights.

We act to obtain and protect intellectual property rights to operate successfully in those territories where we operate and intend to expand. Certain intellectual property rights including rights in trademarks and patents are national in character, and are obtained on a country-by-country basis by the first person to obtain protection through use or registration in that country in connection with specified products and services. As our business grows, we continuously evaluate the potential for expansion into new territories and new products and services. There is a risk with each expansion, including for pending applications, that growth will be limited or unavailable due to pre-existing third-party intellectual property rights.

Our substantial level of indebtedness could cause our business to suffer and incurring additional debt could intensify debt-related risks.

We have a substantial amount of debt, including approximately ~~$865.6~~$895 million outstanding under our first lien term loan facility as of December 31, ~~2020.~~2021, which includes the additional $250 million available under our incremental term loan facility, borrowed in December 2021 in connection with the acquisition of T2 Systems. Additionally, pursuant to an indenture, VM Consolidated, Inc. issued an aggregate principal amount of $350 million in Senior Unsecured Notes (the “Senior Notes”) due 2029. We may also incur substantial additional debt in the future to, among other things, finance our acquisition strategy. ~~Depending on borrowing availability, we~~We have the ~~ability~~option to ~~draw up to $75.0 million of~~increase commitments under our revolving credit ~~facility, which includes an option for an uncommitted accordion to increase commitments~~agreement by up to $50.0 million, all of which will be secured. ~~Our borrowing availability at December 31, 2020 was $48.8 million due to the large ineligible accounts receivable balance with NYCDOT.~~ We also have the ability to draw ~~upon the uncommitted accordion provided under the~~an unlimited amount from our first lien term loan facility, ~~of up to $200.0 million, plus the sum of all voluntary prepayments of the first lien term loan facility and certain permitted indebtedness, plus an unlimited amount~~ subject to the satisfaction of a maximum total net leverage ratio or minimum fixed charge coverage ratio, ~~in each case,~~ on a pro forma basis, all of which will be secured. Our substantial debt could have important consequences, any of which could be intensified if new debt is added to our current debt levels. For example, it could:

Our failure to comply with covenants under our debt instruments could adversely affect our business and financial condition.

The agreements governing our indebtedness contain restrictive covenants that will limit our and our subsidiaries’ ability to engage in activities that may be in our and their long-term best ~~interests.~~interests and informational covenants, requiring the delivery of, including other items, our quarterly and annual financial statements within a specified time following the end of the respective quarter or fiscal year. The creditors who hold our debt could accelerate amounts due in the event that we default on these covenants, which could potentially trigger a default or acceleration of the maturity of our other debt. If we are unable to comply with any covenant, such as our ability to timely prepare and furnish our financial statements, we may need to obtain waivers from the required creditors under our indebtedness instruments to avoid being in default.

Restrictive covenants in the agreements governing our indebtedness could restrict our operating flexibility.

The agreements governing our indebtedness limit our ability to take certain actions. These restrictions may limit our ability to operate our businesses, prohibit or limit our ability to enhance our operations or take advantage of potential business opportunities as they arise and cause us to take actions that are not favorable to stockholders.

The agreements governing our indebtedness restrict, among other things and subject to certain exceptions, our and our restricted subsidiaries’ ability to:

Under our first lien term loan facility, we could be required to make periodic prepayments based on excess cash flow (as defined by the first lien term loan agreement) thereby limiting the amount of cash flow that can be reinvested in our business. For example, under our revolving credit facility, if availability goes below a certain threshold, we will be required to comply with a minimum “consolidated fixed charge coverage ratio” financial covenant as calculated therein. Moreover, if availability falls below a certain threshold for a specified number of business days, we could be required to remit our cash funds to a dominion account maintained by the administrative agent to the revolving credit facility, which would require daily review and approval of operating disbursements by the administrative agent.

Our ability to comply with the covenants and restrictions contained in agreements governing our indebtedness may be affected by economic conditions and by financial, market and competitive factors, many of which are beyond our control. Our ability to comply with these covenants in future periods will also depend substantially on the pricing and sales volume of our products, our success at implementing cost reduction initiatives and our ability to successfully implement our overall business strategy. The breach of any of these covenants or restrictions could result in a default under one or more of the agreements governing our indebtedness that would permit the applicable

lenders to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest. In that case, we may be unable to borrow under our revolving credit agreement or otherwise, may not be able to repay the amounts due under the agreements governing our indebtedness, and may not be able to make cash available by dividend, debt repayment or otherwise. In addition, our lenders could proceed against the collateral securing that indebtedness. Any of the foregoing could have serious consequences to our financial position, results of operations or cash flows and could cause us to become bankrupt or insolvent.

The agreements governing our indebtedness contain cross default or cross acceleration provisions that may cause all of the debt issued under those instruments to become immediately due and payable because of a default under an unrelated debt instrument.

The agreements governing our indebtedness contain numerous covenants and require us, if availability goes below a certain threshold, to comply with a minimum “consolidated fixed charge coverage ratio” financial covenant as calculated in the revolving credit agreement. Our failure to comply with the obligations contained in these agreements or other instruments governing our indebtedness could result in an event of default under the applicable instrument, which could result in the related debt and the debt issued under other instruments (together with accrued and unpaid interest and other fees) becoming immediately due and payable. In such event, we would need to raise funds from alternative sources, which funds may not be available to us on favorable terms, on a timely basis or at all. Alternatively, such a default could require us to sell assets and otherwise curtail our operations in order to pay

our creditors. These alternative measures could have a material adverse effect on our business, financial position, results of operations or cash flows.

If we do not generate sufficient cash flows, we may not be able to service all of our indebtedness.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash, make scheduled payments or to refinance our debt obligations depends on our successful financial and operating performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our control.

If our cash flow and capital resources are insufficient to fund our debt service obligations or to repay indebtedness when it matures, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets or operations, reducing or delaying capital investments or seeking to raise additional capital. We may not be able to refinance our debt and any refinancing of our debt could be at higher interest rates and may require us to comply with more restrictive covenants that could further restrict our business operations and our ability to make cash available for dividends and distributions and payments on our other debt obligations (if any). Our ability to implement successfully any such alternative financing plans will be dependent on a range of factors, including general economic conditions, the level of activity in mergers and acquisitions and capital markets generally, and the terms of our various debt instruments then in effect. In addition, a significant portion of our outstanding indebtedness is secured by substantially all of our assets including our subsidiaries’ assets, and any successor credit facilities are likely to be secured on a similar basis. As such, our ability to seek additional financing or our ability to make cash available for dividends and distributions and payments on our other debt obligations (if any) could be impaired as a result of such security interests and the agreements governing such security interests. Moreover, as a result of these security interests, the underlying assets would only be available to satisfy claims of our general creditors or holders of our equity securities if we were to become insolvent to the extent the value of such assets exceeded the amount of our indebtedness and other obligations.

Our inability to generate sufficient cash flow to satisfy our debt obligations or to refinance our obligations on commercially reasonable terms could have a material adverse effect on our business, including our financial condition and results of operations.

The London InterBank Offered Rate, or LIBOR, is scheduled to be phased out by the end of 2021. In the United States, the Alternative Reference Rates Committee, the working group formed to recommend an alternative rate to LIBOR, has identified the Secured Overnight Financing Rate as its preferred alternative rate for USD LIBOR. Our debt instrument has an interest rate that is based on LIBOR and will not have matured prior to the phase-out of LIBOR. Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative floating borrowing rate, may adversely affect our borrowing costs. We cannot predict the effect of the potential changes to LIBOR or the establishment and use of alternative floating borrowing rates on our outstanding debt that is based on LIBOR. Transitioning to a different borrowing rate may result in less favorable pricing on our debt instruments and could have an adverse effect on our financial results and cash flows.

We may require additional financing to fund our operations or growth, whether organic or through acquisitions. Our failure to secure additional financing could have a material adverse effect on our continued development or growth. None of our officers, directors or stockholders is required to provide any future financing to us.

The London InterBank Offered Rate, or LIBOR, is scheduled to be phased out beginning in 2022. In the United States, the Alternative Reference Rates Committee, the working group formed to recommend an alternative rate to LIBOR, has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for USD LIBOR. Our debt instrument has an interest rate that is based on LIBOR, and subject to certain conditions, SOFR will replace it. Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative floating borrowing rate, including SOFR, may adversely affect our borrowing costs. Transitioning to a different borrowing rate, including SOFR, may result in less favorable pricing on our debt instruments and could have an adverse effect on our financial results and cash flows.

Risks Related to Our Class A Common Stock, Warrants, Related Party Transactions and Organizational Documents

~~Platinum Equity, LLC, its sponsored funds and affiliated private equity investment vehicles (collectively, “Platinum Equity~~”) beneficially owned approximately 14.94% of our Class A Common Stock as of December 31, 2020. As long as Platinum Equity owns or controls a significant percentage of our outstanding voting power, it will have the ability to influence corporate actions requiring stockholder approval, including the election and removal of

directors and the size of our Board, any amendment to our certificate of incorporation or bylaws, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. Platinum Equity��s influence over our management could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which could cause the market price of our securities to decline or prevent security holders from realizing a premium over the market price for such securities. Under the Merger Agreement, Platinum Equity is entitled to receive additional shares of our Class A Common Stock if the volume weighted average closing price of our Class A Common Stock exceeds certain thresholds, as described in Part II, Item 5, below. Additionally, the earn-out shares issuable to the Platinum Stockholder accelerate upon a qualifying change of control. Finally, because our certificate of incorporation opts out of Section 203 of the DGCL regulating certain business combinations with interested stockholders, Platinum Equity may transfer shares to a third party by transferring their securities without the approval of our Board or other stockholders, which may limit the price that investors are willing to pay in the future for our securities.

~~Pursuant~~Our failure to the Investor Rights Agreement, the Platinum Stockholder has the right to nominate up to three directors to the Board, depending on its ownership percentage. If one of the Platinum Stockholder’s nominees is elected, one of the Platinum Stockholder’s nominees will serve as the chairman of the Board, and the Platinum Stockholder will have the right to appoint one representative to each committee of the Board. The Platinum Stockholder’s right to nominate directors to the Board is subject to its ownership percentage of the total outstanding shares of Class A Common Stock. Jacob Kotzubei, the Chairman ofbe current in our Board and Bryan Kelln are the current Platinum Stockholder nominees serving on our Board, the terms of whom run through our 2021 annual stockholder meeting. Changes in the Platinum Stockholder’s ownership percentage during its respective nominees’ terms do not require any director, including the Platinum Stockholder’s nominees, to resign from the Board.

~~Platinum Equity’s interests may not align~~filings with the ~~interests of our other security holders. Accordingly, Platinum Equity~~SEC could cause us to enter into transactions or agreements of which our stockholders would not approve or make decisions with which they would not agree. Further, Platinum Equity is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. Platinum Equity may also pursue acquisition opportunities that may be complementarypose significant risks to our business, each of which could materially and as a result, those acquisition opportunities may not be available to us. In recognition that principals, members, directors, managers, partners, stockholders, officers, employees and other representatives of Platinum Equity and its affiliates and investment funds may serve asadversely affect our directors or officers, our certificate of incorporation provides, among other things, that none of Platinum Equity or any principal, member, director, manager, partner, stockholder, officer, employee or other representative of Platinum Equity has any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business that we do. In the event that any of these persons or entities acquires knowledge of a potential transaction or matter which may be a corporate opportunity for itself and us, we will not have any expectancy in such corporate opportunity, and these persons and entities will not have any duty to communicate or offer such corporate opportunity to us and may pursue or acquire such corporate opportunity for themselves or direct such opportunity to another person. We are also party to a corporate advisory services agreement with Platinum Equity Advisors, LLC (“~~Advisors~~”), pursuant to which Advisors will provide us with certain transactional and corporate advisory services as mutually agreed between us and Advisors. These potential conflicts of interest could have a material adverse effect on our business, financial condition and results of ~~operations~~operations.

Under the Exchange Act, the Company (as reporting company) is required to provide investors on a regular basis with periodic reports that contain important financial and business information. Examples of these reports include the annually filed Form 10-K and the quarterly filed Form 10-Q. Periodic reports help investors to make informed investment decisions about the purchase or sale of a reporting company’s securities. The timely and complete submission of periodic reports provides investors with information to help them make informed investment decisions. The SEC’s Divisions of Enforcement and Corporation Finance jointly established the Delinquent Filings Program in 2004 to encourage reporting companies that are delinquent in filing their periodic reports to submit their periodic reports or rectify deficient periodic reports. The SEC’s Delinquent Filings Group in its Division of Enforcement conducts investigations into possible violations of the federal securities laws’ periodic reporting obligations and prosecutes administrative proceedings against companies when appropriate. The Division of Corporation Finance identifies reporting companies that are delinquent filers and usually provides them with notice of their failure to submit periodic reports. If a reporting company identified as a delinquent filer fails to submit its periodic reports, Section 12(k) of the Exchange Act gives the SEC the authority to suspend trading in a security for up to 10 trading days if the SEC believes that a suspension is required to protect investors and the public interest. A trading suspension by the SEC halts the trading in a security on all trading platforms (e.g., national securities exchanges, over-the-counter market, or alternative trading systems). In addition, Section 12(j) gives the SEC the authority to revoke, or suspend for up to twelve months, an issuer’s securities registration if, after an administrative hearing, the SEC finds that an issuer violated the Exchange Act by failing to file its periodic reports.

Our inability to timely file our periodic reports with the SEC could have an adverse impact on our ability to, among other things, ~~attractive corporate opportunities~~(i) access our credit facilities, (ii) attract and retain key employees, and (iii) raise funds in the public markets, and any of these events could materially and adversely affect our financial condition and results of operations. In addition, given our delay in timely filing this Annual Report on Form 10-K, we have lost our status as a “well known seasoned issuer,” including the registration advantages associated with such status, for at least the next 12 months even after we become current with our delinquent filings with the SEC. As a result, we will not be able to register any new shares of our securities on certain short-form registration statements under the Securities Act, such as Forms S-3, until we have filed all reports required under the Exchange Act for a continuous period of 12 months. Should we wish to register the offer and sale of our securities to the public prior to the time we are ~~allocated by Platinum Equity~~eligible to ~~themselves or their other affiliates.~~use Form S-3, both our transaction costs and the amount of time required to complete the transaction could increase, making it more difficult to execute any such transaction successfully and potentially harming our financial condition.

We are required to pay PE Greenlight Holdings, LLC for a significant portion of the tax benefit relating to pre-Business Combination tax attributes of Verra Mobility.

At the closing of the Business Combination, we entered into the Tax Receivable Agreement with the PE Greenlight Holdings, LLC (the “Platinum Stockholder”) and the stockholder representative (as may be amended from time to time, the “Tax Receivable Agreement”). The Tax Receivable Agreement provides for the payment by us to the Platinum Stockholder of 50% of the net cash savings, if any, in U.S. federal, state and local income tax that we actually realize (or are deemed to realize in certain circumstances) in periods after the closing of the Business Combination as a result of the increase in the tax basis of the intangible assets of Highway Toll Administration, LLC (“HTA”) resulting from the acquisition of HTA by Verra Mobility prior to the Business Combination. We will generally retain the benefit of the remaining 50% of these cash savings.

Under certain circumstances (including an election by us, a material breach of our obligations under the Tax Receivable Agreement, or certain transactions constituting a change in control or divestiture of the HTA assets

under the Tax Receivable Agreement), payments under the Tax Receivable Agreement may accelerate, and we may be required to make such payments in a lump sum based on certain valuation assumptions, including that we and our

subsidiaries will generate sufficient taxable income to fully utilize the applicable deductions generated by the intangible assets of HTA.

Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Our certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions will include:

Our bylaws include a forum selection clause, which may impact the ability of our stockholders to bring actions against us.

Subject to certain limitations, our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware will be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring: (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees or our stockholders; (c) any action asserting a claim arising pursuant to any provision of the ~~DGCL~~Delaware General Corporate Law or our certificate of incorporation or bylaws; or (d) any action asserting a claim governed by the internal affairs doctrine. In addition, our bylaws provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the federal securities laws of the United States against us, our officers, directors, employees or underwriters. These limitations on the forum in which stockholders may initiate action against us could create costs or, inconvenience or otherwise adversely affect our stockholders’ ability to seek legal redress. If a court were to find the forum-selection provisions contained in our bylaws to be unenforceable, we may incur additional costs associated with resolving proceedings in forums other than the Court of Chancery in the State of Delaware and the federal district courts of the United States.

Resales of the shares of our securities could depress the market price of our securities.

~~Platinum Equity beneficially owned approximately 14.94% of our Class A Common Stock as of December~~ 31 ~~2020. All such~~

We had 156,078,561 shares of Class A Common Stock, ~~held by Platinum Equity have been registered for resale under~~

par value $0.0001 (our “the Securities Act. Pursuant to a registration rights agreement that we entered into with Platinum Equity and certain other stockholders in connection with the Business Combination, such stockholders are entitled to make up to six demands, excluding short form demands, that we register shares of our Class A Common Stock ~~held by these parties, in addition to certain “piggy-back” registration rights such stockholders have.~~

~~We had approximately 162,268,865 shares of Class A Common Stock~~”) outstanding as of December 31, ~~2020.~~2021. We have registered the 10,864,000 shares of Class A Common Stock that we may issue under the Verra Mobility Corporation 2018 Equity Incentive Plan so that they may be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.

There may be a large number of our securities sold in the market in the near future. These sales, or the perception in the market that the holders of a large number of securities intend to sell securities, could reduce the market price of our securities. Such sales of our securities or the perception of such sales may depress the market price of our securities.

Our only significant asset is our ownership interest in our operating subsidiaries and such ownership may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our Class A Common Stock or satisfy our other financial obligations, including our obligations under the Tax Receivable Agreement.

We have no direct operations and no significant assets other than our ownership interest in our operating subsidiaries. We depend on our operating subsidiaries for distributions, loans and other payments to generate the funds necessary to meet our financial obligations, including our expenses as a publicly traded company, to pay any dividends with respect to our Class A Common Stock, and to satisfy our obligations under the Tax Receivable Agreement. The financial condition and operating requirements of our operating subsidiaries may limit our ability to obtain cash from our operating subsidiaries. The earnings from, or other available assets of, our operating subsidiaries may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our Common Stock or satisfy our other financial obligations, including our obligations under the Tax Receivable Agreement.

The ability of our operating subsidiaries (other than subsidiaries which have been designated as unrestricted pursuant to our ability to do so in certain limited circumstances) to make distributions, loans and other payments to us for the purposes described above and for any other purpose ~~are~~is governed by the terms of the ~~Rollover Credit~~Debt Agreements and will be subject to the negative covenants set forth therein. Any loans or other extensions of credit will be subject to the investment covenants under the Rollover Credit Agreements. The “~~Rollover Credit~~Debt Agreements” means, collectively: (i) the Amendment and Restatement Agreement No. 1 to First Lien Term Loan Credit Agreement, dated as of March ~~1, 2018,~~26, 2021, among Greenlight Acquisition Corporation, a Delaware corporation; VM Consolidated, Inc. (formerly known as ATS Consolidated, Inc.), a Delaware corporation; American Traffic Solutions, Inc., a Kansas corporation; and Lasercraft, Inc., the subsidiary guarantors party thereto, a Georgia corporation; the lenders party thereto from time to time; and Bank of America, N.A. as ~~the administrative agent~~Administrative Agent and ~~the collateral agent;~~Collateral Agent; and (ii) the Revolving Credit Agreement, dated as of March 1, 2018, among Greenlight Acquisition Corporation, a Delaware corporation; VM Consolidated, Inc., a Delaware corporation; the other Borrowers (for this purpose only, as defined therein) party thereto from time to time; the lenders party thereto from time to time; and Bank of America, as the administrative agent and the collateral ~~agent,~~agent; and (iii) the Indenture governing VM Consolidated, Inc.’s 5.50% Senior Notes Due 2029, among VM Consolidated, Inc., Wilmington Trust, National Association, and the Guarantors named therein, dated as of March 26, 2021, in the case of each of the foregoing (i) and (ii), as amended or otherwise modified from time to ~~time.~~time..

If our Class A Common Stock is delisted from Nasdaq, a market for our securities may not continue, which would adversely affect the liquidity and price of our securities.

The price of our securities may vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities are not listed on, or become delisted from, Nasdaq for any reason, including for failure to maintain compliance with rules for continued listing on Nasdaq, and are quoted on the OTC Bulletin Board or OTC Pink, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. On March 3, 2022, we received a notice from Nasdaq stating that because we had not yet filed this Annual Report on Form 10-K, we were no longer in compliance with Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports with the SEC. On March 17, 2022, we submitted to Nasdaq a plan to regain compliance with Nasdaq’s requirements for continued listing and on March 31, 2022, Nasdaq granted us an extension until May 2, 2022, to regain compliance with Nasdaq’s requirements for continued listing. There can be no assurance that Nasdaq will consider us in compliance with the listing rules after the filing of this Annual Report on Form 10-K, that we will be able to maintain compliance with Nasdaq’s rules for continued listing, including the requirements that we timely file our future periodic reports with the SEC, or that our Class A Common Stock will remain listed on Nasdaq.

Our warrants using the trading symbol “VRRMW” were removed from listing by Nasdaq on December 14, 2018, due to an insufficient number of round lot holders following completion of the Business Combination. Those warrants are now quoted on OTC Pink under the symbol “VRRMW.” Accordingly, the liquidity of our warrants may be more limited than if they were quoted or listed on Nasdaq or another national securities exchange. Our securities holders may be unable to sell their securities unless a market can be sustained.

The valuation of our warrants could increase the volatility in our net income (loss) in our consolidated statements of operations and comprehensive income (loss).

The warrants originally issued to Gores Sponsor II, LLC in a private placement in connection with the IPO (the "Private Placement Warrants") are remeasured at the end of each reporting period and any changes in the fair value of the liability are recorded as a gain or loss on the consolidated statements of operations. Significant changes in the fair value of the Private Placement Warrants may create volatility and adversely affect our net income (loss) from period to period.

The change in fair value of our warrants is the result of changes in stock price and warrants outstanding at each reporting period. The change in fair value of warrant liabilities represents the mark-to-market fair value adjustments to the outstanding warrants issued in connection with the IPO. Significant changes in our stock price or number of warrants outstanding may adversely affect our net income (loss) in our consolidated statements of operations and comprehensive income (loss).

Our business could be negatively affected as a result of actions of activist stockholders or others.

We may be subject to actions or proposals from stockholders or others that may not align with our business strategies or the interests of our other stockholders. Responding to such actions can be costly and time-consuming, disrupt our business and operations, and divert the attention of our Board, management, and employees from the pursuit of our business strategies. Such activities could interfere with our ability to execute our strategic plan. Activist stockholders or others may create perceived uncertainties as to the future direction of our business or strategy which may be exploited by our competitors and may make it more difficult to attract and retain qualified personnel and potential guests, and may affect our relationships with current guests, vendors, investors, and other third parties. In addition, a proxy contest for the election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation expenses and require significant time and attention by management and our Board. The perceived uncertainties as to our future direction also could affect the market price and volatility of our securities.

Our reliance on third-party providers could have a material adverse effect on our business.

We rely heavily on third-party providers, including subcontractors, manufacturers, software vendors, software application developers, and utility and network providers, to meet their obligations to us in a timely and high-quality manner. For example, we rely on third parties such as the National Law Enforcement Telecommunications System,

Polk, DMVDesk, CVR and Dealertrack to provide a direct connection to state departments of motor vehicles (and their European equivalents) and other governmental agencies with which we do not have direct relationships for the driver and other information we use in our business. Our ability to offer our solutions would be materially affected if this access was unavailable or materially restricted, or if the price we pay increased significantly. Our Government Solutions business also relies on a number of third-party manufacturers, including camera manufacturers and automated license plate recognition providers, and outsources some engineering, construction, maintenance, printing and mailing, call center, image review and violations processing work. Further, if one or more tolling authorities cancels our accounts, or stops providing transponders and we are unable to obtain transponders through other sources, our Commercial Services business would be affected. Our Parking Solutions business also relies on a number of domestic and foreign third-party manufacturers in the production of our Pay Station, PARCS and PE hardware solutions, and our inability to access third-party providers could have a material adverse effect on our business.

We also outsource a meaningful percentage of our software development work to third parties. Some of our agreements with these third parties include termination rights, allowing the third party to terminate the arrangement in certain circumstances. For example, the agreements with our third-party payment processors give them the right to terminate the relationship if we fail to keep credit card chargeback and retrieval rates below certain thresholds. If any of our third-party providers are unable or unwilling to meet their obligations to us, fail to satisfy our expectations or those of our customers, including those imposed through flow-down provisions in prime contracts, or if they terminate or refuse to renew their relationships with us on substantially similar terms, we may be unable to find adequate replacements within a reasonable time frame, on favorable commercial terms or at all, and our business, financial condition and results of operations could be materially and adversely affected.

While we perform some due diligence on these third parties and take measures to ensure that they comply with applicable laws and regulations, we do not have an extensive screening or review process and ultimately cannot guarantee our third-party providers will comply with applicable laws, the terms of their agreements or flow-down requirements from our customers. Misconduct or performance deficiencies by any of our third-party providers may be perceived as misconduct or poor performance by us, cause us to fall short on our contractual obligations to our customers or harm our reputation, any of which could have a material adverse effect on our business, financial condition and results of operations.

We rely on communications networks and information systems and any interruption could have a material adverse effect on our business.

We rely heavily on the satisfactory performance and availability of our information technology infrastructure and systems, including our websites and network infrastructure, to conduct our business. We rely on third-party communications service and system providers to provide technology services and link our systems with our customers’ networks and systems, including a reliable network backbone with the necessary speed, data capacity and security. We also rely on third-party vendors, including data center, bandwidth and telecommunications equipment providers. A failure or interruption that results in the unavailability of any of our information systems or a major disruption of communications between a system and the ~~customer(s)~~customers we serve could disrupt the effective operation of our solutions and otherwise adversely impact our ability to manage our business effectively. We may experience system and service interruptions or disruptions for a variety of reasons, including as the result of network failures, power outages, cyber-attacks, employee errors, software errors, an unusually high volume of transactions, or localized conditions such as fire, explosions or power outages or broader geographic events such as earthquakes, storms, floods, epidemics, strikes, acts of war, civil unrest or terrorist acts. We have taken steps to mitigate our exposure to certain service disruptions by investing in redundant or blended circuits, although the redundant or blended circuits may also suffer disruption. Because we are dependent in part on independent third parties for the implementation and maintenance of certain aspects of our systems and because some of the causes of system interruptions may be outside of our control, we may not be able to remedy such interruptions in a timely manner, or at all. Any interruption or delay in or cessation of these services and systems could significantly disrupt operations, impact customers, damage our reputation, result in litigation, decrease the overall use and acceptance of our solutions, result in lost data and be costly, time consuming and difficult to remedy, any of which could have a material adverse effect on our business, financial condition and results of operations.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results.

As a public company, we are required to comply with Section 404 of the Sarbanes Oxley Act of 2002 (“SOX”), which requires, among other things, that companies maintain disclosure controls and procedures to ensure timely disclosure of material information, and that management ~~review~~reviews the effectiveness of those controls on a

quarterly basis. During fiscal year 2021, we identified material weaknesses in our internal controls over financial reporting related to: (i) the monitoring and control activities over the acquisition of Redflex Holdings Limited due to the lack of sufficient qualified accounting resources to timely identify and assess accounting implications of revenue arrangements assumed as part of the acquisition and to provide adequate controls over the completeness and accuracy of inputs used in accounting for the business combination; and (ii) the design and maintenance of certain revenue and reporting controls related to a third-party application utilized in performing certain control activities and used in the preparation of our consolidated financial statements. As a result of these material weaknesses, management concluded that our internal control over financial reporting was not effective as of December 31, 2021.

During fiscal year 2021, we also identified a material weakness in our internal control over the operation of certain controls over the review of the accounting for our Private Placement Warrants related to the April 12, 2021 SEC Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies. This material weakness resulted in a material misstatement of our private placement warrant liability, change in fair value of private placement warrant liability, additional paid-in capital and accumulated deficit as of December 31, 2020 and 2019 and for years ended December 31, 2020, 2019 and 2018. We restated our consolidated financial statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 upon completing our management’s evaluation of the SEC Staff statement as a part of our remediation measures. As a result of these material weaknesses, management concluded that our internal control over financial reporting was not effective as of December 31, 2020. We completed the remediation measures related to the material weakness during fiscal year 2021.

During fiscal year 2019, we identified a material weakness in our internal control over financial reporting related to ineffective information technology general controls in the area of user access over certain systems that support our financial reporting process. As a result, management concluded that our internal control over financial reporting was not effective as of December 31, 2019. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement on a company’s annual or interim financial statements will not be prevented or detected on a timely basis. TheThis material weakness did not result in any misstatement of our financial statements for any period ~~presented. During~~presented and during fiscal year 2020, we completed the remediation measures related to the material ~~weakness and management concluded that our internal control over financial reporting was effective as of the fiscal year ended December 31, 2020.~~weakness.

We cannot be certain that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be able to comply with our obligations under Section 404 of SOX. If we fail to maintain the adequacy of our internal controls, we cannot assure our stockholders that we will be able to conclude in the future that we have effective internal control over financial reporting, and/or we may encounter difficulties in implementing or improving our internal controls, which could harm our operating results or cause us to fail to meet our reporting obligations. If we fail to maintain effective internal controls, investors may lose confidence in the accuracy and completeness orof our financial reports, the market price of our securities may be negatively affected, and we could be subject to sanctions or investigation by regulatory authorities, such as the SEC or Nasdaq.

~~Compliance and reporting requirements related to being a public company may strain our resources and divert management’s attention.~~

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members. As a public company, we are subject to the reporting requirements of the Exchange Act, SOX, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly, and increase demand on our systems and resources. We experience additional costs associated with being a public company, including costs associated with compliance with the auditor attestation requirement of Section 404 of SOX.

Moreover, the demands on management in operating a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies, are significant. Our management team may not successfully or efficiently manage us as a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These obligations and constituents require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, results of operations and financial condition.

Litigation and other disputes and regulatory investigations could have a material adverse effect on our business.

From time to time, we may be involved in litigation and other disputes or regulatory investigations that arise in and outside the ordinary course of business. We expect that the number, frequency and significance of these matters may increase as our business expands and we grow as a company. ~~Disputes and litigation~~Litigation, disputes, or regulatory investigations may relate to, among other things, intellectual property, commercial arrangements, negligence and fiduciary duty claims, vicarious liability based upon conduct of individuals or entities outside of our control, including our third-party service providers, antitrust claims, deceptive trade practices, claims related to invoicing, personal injury claims, general fraud claims and employment law claims, including compliance with wage and hour ~~regulations.~~regulations and contractual requirements. An adverse determination may result in liability to us for the claim and may also result in the imposition of penalties and/or fines. Like other companies that handle sensitive personal and payment information, we also face the possibility of allegations regarding employee fraud or misconduct. In addition to more general litigation, at times we are also 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 our RAC customers alleging faulty disclosures regarding our services.

As a public company, we may also be subject to securities class action and stockholder derivative lawsuits. 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 similar and other matters, including tax assessments.

These investigations can be commenced at the initiative of the governmental authority or as a result of complaints by private citizens, regardless of whether the complaint has any merit. At times, we are also required to

obtain licensing and permitting, including with respect to matters such as general contracting, performance of engineering services, performance of electrical work and performance of private investigative work. Although we carry general liability insurance coverage, our insurance may not cover all potential claims to which we are exposed, whether as a result of a dispute, litigation or governmental investigation, and it may not adequately indemnify us for all liability that may be imposed.

Any claims against us or investigation into our business and activities, whether meritorious or not, could be time consuming, result in significant legal and other expenses, require significant amounts of management time and result in the diversion of significant operational resources. Class action lawsuits can often be particularly burdensome given the breadth of claims, large potential damages and significant costs of defense. In the case of intellectual property litigation and proceedings, adverse outcomes could include the cancellation, invalidation or other loss of material intellectual property rights used in our business and injunctions prohibiting our use of business processes or technology that is subject to third-party patents or other third-party intellectual property rights. Legal or regulatory matters involving our directors, officers or employees in their individual capacities can also create exposure for us because we may be obligated or may choose to indemnify the affected individuals against liabilities and expenses they incur in connection with such matters. Regulatory investigations, including with respect to proper licensing, payment of wages, procurement practices or permitting, can also lead to enforcement actions, fines and penalties, the loss of a license or permit or the assertion of private litigation claims. Risks associated with these liabilities are often difficult to assess or quantify and their existence and magnitude can remain unknown for significant periods of time, making the amount of any legal reserves related to these legal liabilities difficult to determine and, if a reserve is established, subject to future revision. Future results of operations could be adversely affected if any reserve that we establish for a legal liability is increased or the underlying legal proceeding, investigation or other contingency is resolved for an amount in excess of established reserves. Because litigation and other disputes and regulatory investigations are inherently unpredictable, the results of any of these matters may have a material adverse effect on our business, financial condition and results of operations.

Any failure to keep up with technological developments and changing customer preferences could have a material adverse effect on our business.

We operate in dynamic industries that are characterized by rapid technological change, frequent product and service innovation and evolving industry standards. We may be required to implement new technologies or adapt to existing but different technologies from those currently used. Our future success will depend on our ability to adapt and innovate to keep up with technological developments and changes in third-party technologies, including those of our customers and tolling and issuing authorities, to the extent our integrations are interdependent. As a result, we expect we will need to invest significant resources in research and development, often before knowing whether these investments will eventually be successful. The success of new solutions and enhancements and new features for existing solutions depends on several factors, including adequate testing, timely completion, appropriate introduction and market acceptance. Further, we may be required to make changes due to an inability to secure necessary intellectual property protections or licenses. Our inability to anticipate or timely and successfully develop or acquire new products and services or enhance our existing products and services to keep pace with technological changes and meet evolving customer requirements could decrease demand for our solutions and otherwise have a material adverse effect on our business, financial condition and results of operations.

Risks related to laws and regulations and any changes in those laws could have a material adverse effect on our business.

We are subject to multiple, and sometimes conflicting, laws and regulations in the countries, states and localities in which we operate. We are required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. For instance, we have incurred, and may continue to incur, significant expenses related to legal, accounting, and other professional services in connection with the internal investigation regarding potential revenue recognition matters at the Company’s subsidiary, Redflex. These expenses, the delay in timely filing this Annual Report on Form 10-K, and the diversion of the attention of the management team that has occurred, and is expected to continue, has adversely affected, and could continue to adversely affect, our business, financial condition, and cash flows.

In addition to the laws and regulations discussed elsewhere in these risk factors regarding data privacy, foreign operations and other matters, we are subject to laws regarding transportation safety, consumer protection, procurement, anti-kickback, labor and employment matters, competition and antitrust, payment processing, intellectual

property, environmental matters, and other trade-related laws and regulations. Certain of our operations are also subject to oversight by the ~~U.S. Department of Transportation,~~USDOT, the Federal Communications Commission, the U.S. Consumer Product Safety Commission, and the Environmental Protection Agency, as well as comparable state and local agencies, including departments of transportation, departments of motor vehicles, professional licensing authorities and offices of inspector general. Our Government Solutions segment is also subject to laws related to the use of

automated traffic enforcement, the capture, access and retention of data and matters related to government contracting.

In connection with our European, ~~expansion,~~Australian and Canadian operations, we are subject to laws, regulations and administrative practices addressing many of these and other matters in ~~Europe.~~those jurisdictions.

Recent years have seen a substantial increase in the number of new laws and regulations and the rate of change and enforcement of many of these types of laws and regulations. We cannot predict the nature, scope or impact of future laws, regulatory requirements or similar standards may have on our business, whether implemented through changes to existing laws or the way they are administered or interpreted, or through entirely new regulations. Future laws, regulations, and standards or any changed interpretation or administration of existing laws or regulations could limit the use or adoption of one or more of our solutions or require us to incur additional ~~cost~~costs or impact our ability to develop and market new solutions. However, we may not be able to respond in a reasonable or cost-effective manner, or at all. Even if we make what we believe are appropriate changes, there is no certainty those actions will comply.

Any alleged or actual violations of any law or regulation, change in law or regulation or changes in the interpretation of existing laws or regulations may subject us to government scrutiny, including government or regulatory investigations and enforcement actions, civil and criminal fines and penalties, and negative publicly, or otherwise have a material adverse effect on our business, financial condition and results of operations.

Our failure to properly perform under our contracts or otherwise satisfy our customers could have a material adverse effect on our business.

Our business model depends in large part on our ability to retain existing work and attract new work from existing customers. If a customer is not satisfied with our products, services or solutions or the timeliness or quality of our work, we may incur additional costs to address the problem, the profitability of that contract may be impaired, we may experience payment delays, it could do harm to our reputation and hinder our ability to win new work from prospective customers. Failure to properly transition new customers to our systems or existing customers to our different systems, properly budget transition costs or accurately estimate contract costs could also result in delays and general customer dissatisfaction. ~~Other than our agreements with customers in the RAC industry, many~~Many of our contracts may be terminated by the customer upon specified advance notice without cause. Any failure to properly perform under our contracts or meet our customers’ expectations could have a material adverse effect on our business, financial condition and results of operations.

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.

We are subject to income taxes in ~~the United States and Europe,~~numerous countries, and our domestic tax liabilities are subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

In addition, we are subject to audits of our income, sales and other transaction taxes by U.S. federal and state authorities, as well as foreign tax authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.

Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to certain factors, some of which are beyond our control, resulting in a decline in our stock price.

Our quarterly operating results may fluctuate significantly because of several factors, including:

If securities or industry analysts cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our securities adversely, then the price and trading volume of our securities could decline.

The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. If any of the analysts that may cover us change their recommendation regarding our securities adversely, or provide more favorable relative recommendations about our competitors, the price of our securities would likely decline. If any analyst that may cover us ceases covering us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the price or trading volume of our securities to decline.

We lease all of the properties used in our business, including 108,956 square feet of office space for our corporate headquarters in Mesa, ~~AZ.~~Arizona. In addition to the corporate headquarters, we ~~also~~ lease office space in various locations for corporate and administrative purposes and ~~lease~~ several small warehouse locations. We do not consider any of these properties to be material to our overall business.

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.

~~For information on~~On November 2, 2020, PlusPass, Inc. (“PlusPass”) commenced an action in the ~~investigation relating~~United States District Court, Central District of California, against Verra Mobility, The Gores Group LLC, Platinum Equity LLC, and ATS Processing Services, Inc., alleging civil violations of federal antitrust statutes: Section 7 of the Clayton Act, and Sections 1 and 2 of the Sherman Act. On November 20, 2020, PlusPass filed a First Amended Complaint. On February 9, 2021, the defendants filed motions to ~~our contracts with NYCDOT, please see~~dismiss, and PlusPass subsequently abandoned various theories and claims and dismissed The Gores Group LLC, Platinum Equity LLC, and ATS Processing Services, Inc. On April 27, 2021, PlusPass filed a Second Amended Complaint (“SAC”), alleging that Verra Mobility violated Section 7 of the ~~risk factor entitled “The New York City Law Department recently advised us~~Clayton Act through the merger of HTA and American Traffic Solutions, Inc. in 2018, and that Verra Mobility violated Sections 1 and 2 of the ~~City~~Sherman Act by using exclusive agreements in restraint of ~~New York~~trade and other allegedly anticompetitive means to acquire and maintain monopoly power in the market for the administration of electronic toll payment collection for rental cars. PlusPass seeks injunctive relief, divestiture by Verra Mobility of HTA, damages in an amount to be determined, and attorneys’ fees and costs. On May 28, 2021, Verra Mobility filed a motion to dismiss the SAC in its entirety, which was denied in August 2021. Discovery is ~~investigating certain aspects~~ongoing. Verra Mobility believes that all of ~~our installation work for our largest customer, NYCDOT” set forth~~PlusPass’s claims are without merit and will defend itself vigorously in ~~Part I, Item 1A. “~~this litigation.

~~Risk Factors.~~”

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our Class A Common Stock is currently quoted on Nasdaq under the symbol “VRRM” and our warrants are currently quoted on OTC Pink under the symbol “VRRMW.” Our warrants were previously quoted on Nasdaq under the symbol “VRRMW”; however, our warrants were removed from listing on December 14, 2018 due to an insufficient number of round lot holders following completion of our Business Combination.

The following table sets forth the high and low sales prices per share of our Class A Common Stock as reported on Nasdaq for the two most recent fiscal years:

As of December 31, ~~2020,~~2021, we had 198 holders of record of our Class A Common Stock. Because many of our shares of Class A Common Stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

As of December 31, ~~2020,~~2021, there were warrants outstanding to acquire 19,999,967 shares of our Class A Common Stock including: (i) 6,666,666 ~~warrants originally issued to Gores Sponsor II, LLC in a private placement in connection with our IPO (the “~~Private Placement ~~Warrants”);~~Warrants; and (ii) 13,333,301 warrants issued in connection with ~~our~~the IPO (the “Public Warrants” and, together with the Private Placement Warrants, the “Warrants”). The Warrants entitle the registered holder to purchase one share of our Class A Common Stock at a price of $11.50 per share, subject to certain adjustments.

The Warrants became exercisable on November 16, 2018, 30 days following the completion of the Business Combination, and expire five years after that date, or earlier upon redemption or liquidation. We may redeem the outstanding Warrants at a price of $0.01 per warrant, if the last sale price of our Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 ~~trading day~~trading-day period ending on the third business day before we send the notice of redemption to the Warrant holders. The Private Placement Warrants, however, are nonredeemable so long as they are held by Gores Sponsor II, LLC or its permitted transferees.

We have not paid any cash dividends on our Class A Common Stock to date. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends is within the discretion of our Board. In addition, our Board is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Further, our ability to declare dividends is limited by restrictive covenants in the agreements governing our indebtedness.

The information required by this item with respect to our equity compensation plans is incorporated by reference to our Proxy Statement for the ~~2021~~2022 annual meeting of stockholders.

The graph ~~below~~above compares the cumulative total return on our Class A Common Stock with that of the S&P 500 Index and the S&P Composite 1500 Data Processing & Outsourced Services Index. The period shown commences on October 18, 2018 and ends on December 31, ~~2020,~~2021, the end of our last fiscal year. The graph assumes an investment of $100 in each of the above on the close of market on October 18, 2018. We did not declare or pay any dividends on our Class A Common Stock during the comparison period. The stock performance graph is not necessarily indicative of future price performance.

This performance graph is not deemed to be incorporated by reference into any of our other filings under the Exchange Act, or the Securities Act, except to the extent we specifically incorporate it by reference into such filings.

~~None.~~(1) On August 9, 2021, we announced that our Board authorized a share repurchase program for up to an aggregate amount of $100 million of Class A Common Stock. On August 20, 2021, we repurchased and retired 6,849,315 shares of Class A Common Stock from the Platinum Stockholder at a price per share of $14.60, which was equal to the price at which the underwriter purchased shares of Class A Common Stock from the Platinum Stockholder in a concurrent underwritten secondary offering. We paid $100 million to fund the share repurchase using existing

cash on hand. As of December 31, 2021, zero dollars remained available for repurchase under our share repurchase program.

Under the Merger Agreement, the Platinum Stockholder is entitled to receive additional shares of Class A Common Stock (the “Earn-Out Shares”) if the volume weighted average closing sale price of one share of Class A Common Stock on the Nasdaq exceeds certain thresholds for a period of at least 10 days out of 20 consecutive trading days at any time during the five-year period following the closing of the Business Combination (the “Common Stock Price”).

The Earn-Out Shares are issued by the Company to the Platinum Stockholder as follows:

	(a)		2,500,000
> $15.50 ~~The first and second tranches of Earn-Out Shares have been issued, as discussed below.~~(a)		2,500,000
> $18.00		2,500,000
> $20.50		2,500,000

(a)

The first and second tranches of Earn-Out Shares have been issued, as discussed below.

If any of the Common Stock Price thresholds above (each, a “Triggering Event”) are not achieved within the five-year period following the closing of the Business Combination, the Company will not be required to issue the Earn-Out Shares in respect of such Common Stock Price threshold. In no event shall the Platinum Stockholder be entitled to receive more than an aggregate of 10,000,000 Earn-Out Shares.

If, during the earn-out period, there is a change of control (as defined in the Merger Agreement) that will result in the holders of our Class A Common Stock receiving a per share price equal to or in excess of the applicable Common Stock Price required in connection with any Triggering Event (an “Acceleration Event”), then immediately prior to the consummation of such change of control: (a) any such Triggering Event that has not previously occurred shall be deemed to have occurred; and (b) wethe Company shall issue the applicable Earn-Out Shares to the cash consideration stockholders (as defined in the Merger Agreement) (in accordance with their respective pro rata cash share), and the recipients of the issued Earn-Out Shares shall be eligible to participate in such change of control.

The Company estimated the original fair value of the contingently issuable shares to be $73.15 million, of which $36.6 million remains contingently issuable as of December 31, ~~2020.~~2021. The estimated value is not subject to future revisions during the five-year period discussed above. The Company used a Monte Carlo simulation option-pricing model to arrive at its original estimate. Each tranche was valued separately giving specific consideration to the tranche’s price target. The simulation considered volatility and risk-free rates utilizing a peer group based on a five-year term. This was initially recorded as a distribution to shareholders and was presented as common stock contingent consideration. Upon the occurrence of a Triggering Event, any issuable shares are transferred from common stock contingent consideration to common stock and additional paid-in capital accounts. Any contingently issuable shares not issued as a result of a Triggering Event not being attained by the end of the earn-out period will be canceled.

On April 26, 2019 and on January 27, 2020, the Triggering Events for the issuance of the first and second tranches of Earn-Out Shares occurred, as the volume weighted average closing sale price per share of the Company’s Class A Common Stock as of that date had been greater than $13.00 and $15.50, respectively, for 10 out of 20 consecutive trading days. These Triggering Events resulted in the issuance of an aggregate 5,000,000 shares of the Company’s Class A Common Stock to the Platinum Stockholder and an increase in the Company’s common stock and additional paid-in capital accounts of $36.6 million, with a corresponding decrease to the common stock contingent consideration account. At December 31, ~~2020,~~2021, the potential future shares issuable pursuant to the earn-out are between zero and 5.0 million.

Item 6. Selected Financial Data

As a result of the Business Combination discussed above, for accounting purposes, the Business Combination is treated as a reverse acquisition and recapitalization, in which Greenlight is considered the accounting acquirer (and legal acquiree) and Gores is considered the accounting acquiree (and legal acquirer). Our financial statement

41Not applicable.

~~presentation includes the financial statements of Greenlight and its subsidiaries as “Predecessor~~” for periods prior to the completion of the Business Combination and of Verra Mobility Corporation, including the consolidation of Verra Mobility Holdings, LLC and its subsidiaries, for periods from and after the Closing Date (~~“Successor”~~).

~~Consolidated Statements of Operations Data~~

~~The following table sets forth our consolidated statements of operations for the respective periods:~~

Successor

Predecessor

For the Year Ended
December 31,

Period from
June 1, 2017 to
December 31,

Period from
January 1, 2017
to May 31,

For the Year Ended
December 31,

($ in thousands)

2020

2019

2018

2017

2017

2016

Service revenue

$
336,274

$
416,723

$
365,076

$
135,655

$
92,531

$
212,515

Product sales ⁽¹⁾

57,319

32,014

5,070

2,584

1,340

18,235

Total revenue

393,593

448,737

370,146

138,239

93,871

230,750

Cost of service revenue

3,967

5,561

5,788

1,936

1,369

2,638

Cost of product sales ⁽¹⁾

29,573

13,919

3,447

1,590

964

9,505

Operating expenses

115,729

125,640

108,883

50,471

35,968

83,762

Selling, general and administrative expenses

89,664

85,493

136,069

44,882

40,884

53,034

Depreciation, amortization, and (gain) loss on disposal of assets, net ⁽²⁾

116,844

115,771

103,353

33,113

12,613

33,395

Impairment of property and equipment

—

5,898

—

—

—

522

Total cost and expenses

355,777

352,282

357,540

131,992

91,798

182,856

Income from operations

37,816

96,455

12,606

6,247

2,073

47,894

Interest expense, net ⁽³⁾

40,865

60,729

69,550

20,858

875

2,706

Tax receivable agreement liability
adjustment ⁽⁴⁾

6,850

(106
)

—

—

—

—

Loss on extinguishment of debt ⁽³⁾

—

—

26,486

—

—

—

Other income, net ⁽⁵⁾

(11,885
)

(11,092
)

(8,795
)

(2,172
)

(1,294
)

(2,471
)
Total other expenses (income)

35,830

49,531

87,241

18,686

(419
)

235

Income (loss) before income taxes

1,986

46,924

(74,635
)

(12,439
)

2,492

47,659

Income tax provision (benefit) ⁽⁶⁾

5,431

13,581

(16,241
)

(30,677
)

1,252

18,661

Net (loss) income

$
(3,445
)

$
33,343

$
(58,394
)

$
18,238

$
1,240

$
28,998

~~Condensed Consolidated Balance Sheet Data~~

~~The following table sets forth selected items from our consolidated balance sheets at December 31:~~

Successor

Predecessor

($ in thousands)

2020

2019

2018

2017

2016

Cash and cash equivalents

$
120,259

$
131,513

$
65,048

$
8,725

$
2,901

Goodwill and intangibles, net ⁽²⁾

928,574

1,018,593

1,079,265

498,164

26,983

Total assets

1,367,325

1,407,426

1,344,783

664,865

188,436

Total long-term debt

842,045

866,465

869,353

428,689

69,243

Total liabilities and stockholders' equity

1,367,325

1,407,426

1,344,783

664,865

188,436

~~(1)~~

Product sales and the related cost of product sales result from the sale of photo enforcement equipment to certain customers. The number of customers that purchase equipment is limited and their buying patterns vary greatly from period to period.

~~(2)~~

~~The purchase accounting resulting from Platinum Equity, LLC’s acquisition of ATS Consolidated, Inc. (now known as VM Consolidated, Inc) (~~“~~ATS Merger~~”) in May 2017 increased intangible assets subject to amortization to $222.5 million. The related amortization of intangibles expense increased by $17.7 million, $35.4 million, $37.8 million and $37.8 million for the period from June 1, 2017 to December 31, 2017 (~~“2017 Successor Period”~~) and for fiscal years 2018, 2019 and 2020, respectively. On March 1, 2018, we acquired HTA as discussed below. The purchase accounting resulting from the HTA acquisition increased intangible assets subject to amortization to $591.8 million and increased the related amortization expense for the years ended December 31, 2018, 2019 and 2020 by $43.1 million, $51.7 million and $51.7 million respectively. On April 6, 2018, we acquired EPC as discussed below. The purchase accounting resulting from the EPC acquisition increased intangible assets subject to amortization to $614.0 million and increased the related amortization expense for the years ended December 31, 2018, 2019 and 2020 by $2.3 million, $3.0 million and $2.3 million respectively. On October 31, 2019, we acquired Pagatelia S.L. which increased intangibles subject to amortization to $628.5 million, and the related amortization expense for the years ended December 31, 2019 and 2020 by $0.3 million and $1.7 million, respectively.

~~(3)~~

In connection with the ATS Merger, we entered into a First Lien Term Loan Credit Agreement and a Second Lien Term Loan Credit Agreement of $323 million and $125 million, respectively, and a $40 million Revolving Credit Agreement (collectively the “~~2017 Credit Facilities~~”). In connection with the HTA acquisition, we entered into a First Lien Term Loan Credit Agreement and a Second Lien Term Loan Credit Agreement of $840 million and $200 million, respectively, and a $75 million Revolving Credit Agreement (collectively the “~~2018 Credit Facilities~~”). The 2018 Credit Facilities replaced the 2017 Credit Facilities. In February 2020, we refinanced the entire amount outstanding under the 2018 Credit Facilities by which we reduced our financing costs. We recorded interest expense including amortization of deferred financing costs of $20.9 million, $69.6 million, $60.7 million and $40.9 million respectively, in the 2017 Successor Period and in fiscal years 2018, 2019 and 2020.

In fiscal 2018, we recorded a $10.2 million loss on extinguishment of debt related to the establishment of the 2018 Credit Facilities, and a $16.3 million loss associated with the repayment of the second lien term loan in October 2018 pursuant to the Business Combination.

~~(4)~~

~~This consists of adjustments made to the related party tax receivable agreement liability due to changes in estimates.~~

~~(5)~~

~~Other income, net primarily consists of volume rebates from total spend on purchasing cards.~~

~~(6)~~

On December 22, 2017, the U.S. enacted significant changes to the U.S. tax law following the passage and signing of the Tax Act. The Tax Act reduces the U.S. federal corporate tax rate from a maximum 35% to 21% and modified or eliminated other provisions in the tax code. As of December 31, 2017, we re-measured the applicable deferred tax assets and liabilities based on the rates at which they are expected to reverse. The gross deferred tax assets and liabilities were provisionally adjusted, which resulted in a net effect of a $27.3 million decrease to the income tax provision in the 2017 Successor Period. We completed our analysis in 2018 and have recorded the final adjustments in the measurement period provided for in the Tax Act.

~~Condensed Consolidated Statements of Cash Flows Data~~

~~The following table sets forth certain captions within our consolidated statements of cash flows:~~

Successor

Predecessor

For the Year Ended
December 31,

Period from
June 1, 2017 to
December 31,

Period from
January 1, 2017
to May 31,

For the Year Ended
December 31,

($ in thousands)

2020

2019

2018

2017

2017

2016

Net cash provided by operating activities

$
46,909

$
133,802

$
46,017

$
8,311

$
41,833

$
43,841

Net cash used in investing activities

(24,153
)

(54,973
)

(562,857
)

(553,536
)

(8,786
)

(35,051
)
Net cash (used in) provided by
financing activities

(34,004
)

(14,520
)

574,268

555,734

(27,491
)

(7,041
)

~~Non-GAAP Financial Data~~

~~The consolidated financial statements included elsewhere in this document are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).~~

~~The following table sets forth the unaudited non-GAAP measures of Adjusted EBITDA and Adjusted EBITDA Margin %:~~

Successor

Predecessor

For the Year Ended
December 31,

Period from
June 1, 2017 to
December 31,

Period from
January 1, 2017
to May 31,

For the Year Ended
December 31,

2020

2019

2018

2017

2017

2016

($ in thousands)

Adjusted EBITDA

$
181,845

$
241,391

$
197,610

$
59,901

$
37,991

$
87,116

Adjusted EBITDA Margin %

46.2
%

53.8
%

53.4
%

43.3
%

40.5
%

37.8
%

~~We define “Adjusted EBITDA~~” as net (loss) income adjusted to exclude (i) interest expense, net, (ii) income taxes, (iii) depreciation and amortization, and (iv) as further adjusted to exclude the impact of certain non-cash and non-recurring items that we do not consider indicative of our ongoing operating performance. These further adjustments are itemized below. Adjusted EBITDA margin % represents Adjusted EBITDA as a percentage of total revenue. 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.

You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments set forth below. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Adjusted EBITDA should not be considered as an alternative to net (loss) income, operating income, cash flows from operating activities or any other performance measures derived in accordance with GAAP, or measures of operating performance or cash flows as measures of liquidity. Adjusted EBITDA and Adjusted EBITDA margin % have important limitations as analytical tools, and should not be considered either in isolation, or as a substitute for analysis of our results as reported under GAAP. In addition, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies and may, therefore, have limitations as a comparative analytical tool. For example, Adjusted EBITDA and Adjusted EBITDA margin % do not reflect:

•

~~our capital expenditures, future requirements for capital expenditures or contractual commitments;~~

•

~~changes in, or cash requirements for, our working capital needs;~~

•

~~the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;~~

•

~~income tax expense or the cash necessary to pay income taxes; and~~

•

~~cash requirements for the assets being depreciated and amortized that may have to be replaced in the future.~~

~~Our non-GAAP information below should be read in conjunction with our audited consolidated financial statements and the related notes included elsewhere.~~

~~The following table sets forth our reconciliation of net (loss) income to Adjusted EBITDA (unaudited):~~

Successor

Predecessor

For the Year Ended
December 31,

Period from
June 1, 2017 to
December 31,

Period from
January 1, 2017
to May 31,

For the Year Ended
December 31,

($ in thousands)

2020

2019

2018

2017

2017

2016

Net (loss) income

$
(3,445
)

$
33,343

$
(58,394
)

$
18,238

$
1,240

$
28,998

Interest expense, net

40,865

60,729

69,550

20,858

875

2,706

Income tax provision (benefit)

5,431

13,581

(16,241
)

(30,677
)

1,252

18,661

Depreciation and amortization

116,570

115,566

103,346

33,151

12,574

33,293

EBITDA

159,421

223,219

98,261

41,570

15,941

83,658

Transaction and other related expenses ⁽ⁱ⁾

1,895

2,368

56,443

10,190

21,773

1,154

Transformation expenses ⁽ⁱⁱ⁾

1,090

—

8,765

3,913

—

—

Impairment of property and equipment ⁽ⁱⁱⁱ⁾

—

5,898

—

—

—

522

Loss on extinguishment of debt ^(iv)

—

—

26,486

—

—

—

Sponsor fees and expenses ^(v)

—

—

5,383

4,228

—

—

Non-cash amortization of contract inducement ^(vi)

—

—

—

—

277

1,784

Tax receivable agreement liability adjustment ^(vii)

6,850

(106
)

—

—

—

—

Stock-based compensation ^(viii)

12,589

10,012

2,272

—

—

—

Adjusted EBITDA

$
181,845

$
241,391

$
197,610

$
59,901

$
37,991

$
87,118

~~(i)~~

Transaction and other related expenses incurred in fiscal 2016 relate to legal and other professional fees associated with activities leading to the ATS Merger. For the period from January 1, 2017 to May 31, 2017, we recognized $21.8 million of costs related to the ATS Merger, which consisted of $11.9 million of payments under the Verra Mobility’s 2016 equity plan, $1.3 million of transaction bonus payments, $7.9 million of professional fees and other expenses processed through the funds flow and $0.7 million of professional fees paid directly by Verra Mobility. For the 2017 Successor Period, Verra Mobility recognized approximately $10.2 million of costs related to the ATS Merger, which consisted of $8.0 million of payments for acquisition services to Platinum Equity Advisors, LLC, $1.9 million of professional fees and other expenses processed through the funds flow and $0.3 million of professional fees paid directly by Verra Mobility. For fiscal 2018, Verra Mobility recognized an aggregate of $56.4 million of costs related primarily to the Business Combination, HTA and EPC acquisitions, primarily consisting of $28.4 million for payments under the 2018 participation plan, $9.7 million for acquisition services to Platinum Equity Advisors, LLC, $17.4 million of banking, legal and other professional fees and $0.9 million of other costs. For fiscal 2019, we paid $0.7 million for the Pagatelia acquisition and $1.7 million of offering costs that were incurred by usfor the secondary offerings by PE Greenlight Holdings, LLC. For fiscal 2020, we incurred acquisition-related costs for Pagatelia, certain costs for refinancing our debt and deal costs mainly for the pending acquisition of Redflex, discussed below.

~~(ii)~~

Transformation expenses of $3.9 million, $8.8 million and $1.1 million for the 2017 Successor Period, and for fiscal years 2018 and 2020, respectively, represent one-time costs related to optimizing the expense structure and defining Verra Mobility’s growth strategy. For the 2017 Successor Period, these costs included $1.5 million for strategy consultants, $2.1 million for procurement optimization and $0.2 million for IT optimization. For fiscal 2018, these costs included $5.7 million for strategy consultants, $1.0 million for procurement optimization, $0.6 million for severance to employees of acquired businesses, $0.6 million for IT optimization and $0.9 million of other professional fees. For fiscal 2020, we had $1.1 million of severance and other employee separation costs related to exit activities initiated during the period.

~~(iii)~~

~~This represents an impairment charge on fixed assets during fiscal year 2019 due to a legislation ban of most red-light photo enforcement programs in Texas on June 1, 2019.~~

~~(iv)~~

This represents the loss on extinguishment of debt related to the 2017 Credit Facilities which were replaced by the 2018 Credit Facilities in conjunction with the HTA acquisition and the repayment of the second lien term loan in October 2018 pursuant to the Business Combination.

~~(v)~~

We incurred management fees and related expenses associated with a previous corporate advisory services agreement with Platinum Equity Advisors, LLC which was terminated in connection with the Business Combination.

~~(vi)~~

In 2014, we paid $10.2 million in connection with a tolling contract with a major rental car company. This amount was capitalized and amortized over the term of the contract as a reduction to revenue. As a result of the ATS Merger, and the resultant purchase price allocation, the contract inducement was subsumed into the larger customer relationship intangible asset recorded for this and other customers.

~~(vii)~~

~~This represents adjustments made to the related party tax receivable agreement liability due to changes in estimates.~~

~~(viii)~~

~~Stock-based compensation represents the non-cash charge related to the issuance of awards under the Verra Mobility 2018 equity incentive plan.~~

Item 7. 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 the consolidated financial statements and the related notes that are included in Item 8 of Part II of this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled “Risk Factors.” Please also refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Business Overview

We believe we are a leading provider of smart mobility technology solutions and services throughout the United States, ~~Canada~~Australia, Europe and ~~Europe.~~Canada. These solutions and services include toll and violations management, title and registration, automated safety solutions, parking enforcement and citation, and other data-driven solutions, to our customers, which include RACs, FMCs,, other large fleet owners, municipalities, school districts, universities, parking operators, healthcare facilities and transportation hubs and other violation-issuing authorities. Our solutions simplify the smart mobility ecosystem by utilizing what we believe are industry-leading capabilities, information and technology expertise, and integrated hardware and software to efficiently facilitate the automated processing of tolls and violations, automated safety and ~~safety~~parking solutions for hundreds of agencies and millions of end users annually, while also making cities and roadways safer for everyone.

~~Recent Events~~

~~COVID-19’s Impact on Our Operating Results~~

In December 2019, COVID-19 emerged and has since spread throughout the world. The World Health Organization declared COVID-19 a pandemic in March 2020, and it continues to significantly disrupt the global economy. In the United States and abroad, many federal, state and local governments have instituted travel restrictions, stay-at-home orders, social distancing orders, and border closures in order to minimize the spread of the virus. Although we began to see moderate signs of recovery towards the latter half of 2020 due to an increase in travel activity and the availability of COVID-19 vaccines, we expect that COVID-19 will continue to have a significant negative impact on the global economy and travel industry, including RACs in future quarters.

Revenues from RACs in our Commercial Services segment decreased significantly in 2020 as a result of reduced airline travel and widespread travel restrictions related to COVID-19. Our RAC customers have experienced reductions in volume and revenue. Many of these RAC customers have reduced their rental fleet sizes in response to the decline in customer demand. On May 22, 2020, The Hertz Corporation, one of our key Commercial Services customers, filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code, as amended, in the United States Bankruptcy Court for the District of Delaware. While there were moderate improvements in travel demand towards the latter half of 2020, the full extent and duration of COVID-19’s impact on the RAC industry and the financial health of our key RAC customers cannot be predicted at this time. These trends have had, and are expected to continue to have, a significant negative effect on revenues in our Commercial Services segment.

In our Government Solutions segment, school closures resulting from the COVID-19 pandemic have negatively impacted revenues from our school bus stop arm camera and school zone speed camera products. Reductions in vehicle traffic in jurisdictions where we operate photo enforcement programs, payment rates for photo enforcement tickets and temporary inactivity of school zone speed cameras have all negatively impacted service revenue in our Government Solutions segment. We cannot predict the duration or full impact of COVID-19 on our overall business and results of operations at this time, but we expect the impact to continue into the first half of 2021.Executive Summary

As a precautionary measure in response to COVID-19, we shifted most of our workforce to remote operations in March 2020 and we have implemented changes in our physical locations to ensure social distancing. We have not experienced any significant disruptions in our operations as a result of these measures.

In light of the extraordinary impact of COVID-19 and related containment measures on the global economy and our business, prior trends in our business may not be applicable to our operations for the duration of the pandemic.

~~Pending Acquisition~~

On January 21, 2021, we entered into an agreement pursuant to which all of the holders of Redflex’s outstanding equity as of the record date will sell, and we will cause one of our subsidiaries to purchase, one hundred percent (100%) of the outstanding equity of Redflex. The aggregate consideration payable by us under the agreement will be AUD 146.1 million, and the closing of the acquisition is expected to take place in the second quarter of 2021, subject to the satisfaction or waiver of specified conditions. For additional information, see Note 21, ~~Subsequent Event, in Item 8, Financial Statements and Supplementary Data.~~

~~Segment Information~~

~~We have two operating and reportable segments, Commercial Services and Government Solutions:~~

•

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

•

Our Government Solutions segment provides complete, end-to-end red-light, speed, school bus stop arm and bus lane enforcement solutions. We implement and administer traffic safety programs and products for municipalities and local government agencies of all sizes.

~~Executive Summary~~

We operate with long-term contracts and a highly reoccurring service revenue model. We continue to execute on our strategy of growing revenues with existing customers, expanding offerings into adjacent markets through innovation or acquisition and reducing operating costs. During the periods presented, we:

•

~~Executed on the growth strategy by completing strategic acquisitions:~~

•

Executed on our growth strategy by completing strategic acquisitions:

~~HTA~~Redflex – ~~We acquired HTA during the first quarter of 2018 which strengthened our position in tolling and related services to RAC and FMC customers.~~

~~EPC~~ ~~– In~~During the second quarter of ~~2018,~~2021, we acquired ~~EPC~~Redflex Holdings Limited (“Redflex”), which ~~provided a platform~~provides intelligent traffic management products and services to ~~expand~~its customers. Through our ~~RAC~~acquisition of Redflex, we expanded our current footprint in the United States and ~~FMC solutions into Europe.~~gained access to international markets.

~~Pagatelia~~T2 Systems – During the fourth quarter of ~~2019,~~2021, we acquired ~~Pagatelia~~T2 Systems Parent Corporation (“T2 Systems”), which provides ~~consumer tolling~~an integrated suite of parking software and ~~parking~~hardware solutions and ~~is accelerating~~supports our ~~European expansion.~~strategy to diversify into new markets and increase opportunities to cross sell to customers within our overall portfolio.

•

Generated total revenue of $393.6 million in fiscal year 2020 compared to $448.7 million in fiscal year 2019. We grew product sales by $25.3 million year over year; however, due to the ongoing impact of COVID-19, our service revenue declined significantly, as discussed below. During fiscal year 2019, we grew total revenue by $78.6 million, from $370.1 million in fiscal year 2018 to $448.7 million in fiscal year 2019. Acquisitions contributed $21.6 million to the revenue growth, while expansion in existing products and customers contributed to the remaining growth.

•

Increased total revenue by $157.0 million, or 40%, from $393.6 million in fiscal year 2020 to $550.6 million in fiscal year 2021. Our acquisitions contributed $45.0 million to revenue growth, and the remaining increase was mainly from Commercial Services service revenue resulting from improved travel demand that positively impacted our RAC customers. During fiscal year 2020, total revenue declined by $55.1 million, from $448.7 million in fiscal year 2019 to $393.6 million in fiscal year 2020 due to the significant negative impact from COVID-19.

•

Generated cash flows from operating activities of $46.9 million, $133.8 million, and $46.0 million for fiscal years 2020, 2019 and 2018, respectively. Our cash on hand was $120.3 million as of December 31, 2020.

•

Generated cash flows from operating activities of $193.2 million, $46.9 million, and $133.8 million for fiscal years 2021, 2020 and 2019, respectively. Our cash on hand was $101.3 million as of December 31, 2021.

Significant Events Impacting Our Business

Impact from COVID-19

COVID-19 emerged in December 2019 and was declared a pandemic by the World Health Organization in March 2020 as it significantly disrupted the global economy. In the United States and abroad, many federal, state and local governments have instituted travel restrictions, stay-at-home orders, social distancing orders, and border closures in order to minimize the spread of the virus. Revenues from RACs in our Commercial Services segment decreased significantly in 2020 as a result of reduced airline travel and other restrictions that impacted our customers’ volume and revenue. In our Government Solutions segment, school closures resulting from the

43•

Reduced our financing costs by refinancing our term loan in February 2020, which reduced the applicable margin on our interest rate by 50 basis points. Our interest expense, net was $40.9 million, $60.7 million, and $69.6 million for fiscal years 2020, 2019 and 2018, respectively. We had a $19.9 million decrease in interest expense during fiscal year 2020 compared to fiscal year 2019.

~~Factors Affecting Our Operating Results~~

~~Our operating~~COVID-19 pandemic have negatively impacted revenues from our school bus stop arm camera and school zone speed camera products. Reductions in vehicle traffic in jurisdictions where we operate photo enforcement programs and payment rates for photo enforcement tickets have all negatively impacted service revenue in our Government Solutions segment.

In 2021, our business results were positively impacted from an increase in travel activity and the availability of COVID-19 vaccines, especially in the United States. Many of the widespread restrictions have been lifted, and the travel industry experienced a strong recovery, especially leisure travel, which increased our revenue from our RAC customers. In addition, reopening of schools throughout the United States and increase in vehicle traffic has contributed to revenue growth from our Government Solutions products and services. However, there remains continued uncertainty about the pandemic and its ongoing impact on our operational and financial performance ~~are influenced~~due to the potential spread of new variants and other developments outside our control, and any future restrictions in travel and the related impact on demand for our products and services. For instance, the Omicron variant of COVID-19 has caused a surge in COVID-19 cases globally resulting in the reintroduction of travel restrictions in some countries.

T2 Systems Acquisition

On December 7, 2021, we acquired T2 Systems which offers an integrated suite of parking software and hardware solutions to its customers. This acquisition supports our strategy to expand and diversify into new markets within the mobility sector. We included the financial results of T2 Systems in the consolidated financial statements from the date of acquisition and reported within the newly created Parking Solutions segment.

Pursuant to the Agreement and Plan of Merger (the “T2 Merger Agreement”) entered into on November 1, 2021 by ~~the following merger and acquisitions activity during the periods discussed herein:~~

~~Business Combination~~

We ~~were originally incorporated in Delaware on August 15, 2016 as Gores Holdings II,~~VM Consolidated Inc., our indirect wholly owned subsidiary, Project Titan Merger Sub, Inc., a wholly owned subsidiary of VM Consolidated Inc. (“~~Gores~~T2 Merger Sub”), T2 Systems, and Thoma Bravo Discover Fund, L.P., a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses. On January 19, 2017, we consummated our initial public offering, following which our shares began trading on the Nasdaq CapitalDelaware limited partnership, solely in its capacity as representative, T2 ~~Market~~.

~~On June 21, 2018, Gores, First~~ Merger Sub ~~Second Merger Sub, Greenlight~~merged with and ~~PE Greenlight Holdings, LLC entered~~ into ~~the~~ T2 Systems (the “T2Merger ~~Agreement, which provided for, among other things, (i) the First Merger and (ii) immediately following the First Merger and~~”), with T2 Systems surviving as ~~part~~an indirect wholly owned subsidiary of the ~~same overall transaction as the First Merger, the Second Merger. In connection with the closing of this Business Combination on October 17, 2018, we changed our name to Verra Mobility Corporation. As~~Company. The Company paid a ~~result of the Business Combination, we became the owner, directly or indirectly, of all of the equity interests of Verra Mobility Holdings, LLC (formerly Second Merger Sub) and its subsidiaries.~~

~~HTA Acquisition and Refinancing~~

~~On March 1, 2018, we acquired HTA for an aggregate~~ purchase price of ~~$603.3~~$353.2 million. Transaction costs for T2 Systems were $2.7 million ~~consisting of $525.0 million in cash, $9.7 million in purchase price adjustments, a $11.3 million payment~~which primarily related to ~~the sellers for certain tax items,~~professional fees and the issuance of equity in Greenlight with a fair value of approximately $57.3 million. The receipt of the equity was treated for accounting purposes as a capital contribution from Greenlight Acquisition Corporation. We recognized $15.6 million of costsother expenses related to the ~~transaction~~acquisition, and were included within the selling, general and administrative expenses in ~~fiscal year 2018.~~

~~In connection with~~ the ~~HTA acquisition, we refinanced the 2017 Credit Facilities (defined below) and entered into the 2018 Credit Facilities (defined below), which provided for term loans with an aggregate principal amount~~consolidated statements of ~~$1.04 billion and a revolver with an aggregate commitment of up to $75.0 million.~~operations. See Note 9, 3, ~~Long-term Debt~~Acquisitions, in Item 8, Financial Statements and Supplementary ~~Data.~~Data, for additional details.

~~EPC Acquisition~~

Share Repurchase and Retirement

On ~~April 6, 2018,~~August 9, 2021, we ~~acquired EPC~~announced that our Board authorized a share repurchase program for up to an aggregate ~~purchase price~~amount of $62.9 million. The purchase consideration consisted primarily of equity in Greenlight and working capital adjustments, which aggregated $2.6 million. The receipt of equity was treated for accounting purposes as a capital contribution from Greenlight Acquisition Corporation. We recognized $3.0$100 million of ~~costs related~~our outstanding shares of Class A Common Stock. On August 20, 2021, we repurchased and retired 6,849,315 shares of our Class A Common Stock from the Platinum Stockholder at a price per share of $14.60, which was equal to the ~~transaction~~price at which the underwriter purchased shares of Class A Common Stock from the Platinum Stockholder in ~~fiscal year 2018.~~a concurrent underwritten secondary offering. We paid $100 million to fund the share repurchase using cash on hand. See Note 16, Related Party Transactions, in Item 8, Financial Statements and Supplementary Data, for additional details on the secondary offering by the Platinum Stockholder.

~~Pagatelia~~

Redflex Acquisition

On ~~October 31, 2019,~~June 17, 2021, we completed the acquisition of ~~all~~Redflex, a public company limited by shares, incorporated in Australia and formerly listed on the Australian Securities Exchange. Redflex is a provider of intelligent traffic management products and services that are sold and managed in the Asia Pacific, North America, Europe, and Middle East regions. Redflex designs, manufactures, and operates a wide range of platform-based solutions, utilizing advanced sensor and image capture technologies that enable active management of state and local motorways. We included the financial results of Redflex in the consolidated financial statements from the date of acquisition and reported within the Government Solutions segment.

Pursuant to the Scheme Implementation Agreement (the “Agreement”) entered into by us and Redflex on January 21, 2021, as amended by the Deed of Amendment and Consent, dated April 30, 2021, VM Consolidated, Inc., purchased one hundred percent of the outstanding ~~shares~~equity of ~~Pagatelia, a Spanish limited liability company that provides electronic consumer~~Redflex at A$0.96 per share resulting in consideration of A$152.5 million, or approximately US$117.9 million. Transaction costs for Redflex were $9.7 million which

primarily related to professional fees and other expenses related to the acquisition, and were included within the selling, general and administrative expenses in the consolidated statements of operations. See Note 3. Acquisitions, in Item 8, Financial Statements and Supplementary Data, for additional details on the Redflex acquisition.

Segments

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

•

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

•

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

•

Our newly created Parking Solutions segment provides an integrated suite of parking software and hardware solutions to universities, municipalities, parking operators, healthcare facilities and transportation hubs in ~~Spain, Portugal, France~~the United States and ~~Italy.~~Canada.

Segment performance is based on revenues and income from operations before depreciation, amortization, gain (loss) on disposal of assets, net, impairment of property and equipment, and stock-based compensation. The ~~purchase consideration for Pagatelia was $26.6 million which we paid during fiscal year 2019~~measure also excludes interest expense, net, income taxes ~~. Transaction costs were not material.~~and certain other transactions and is inclusive of other income, net.

Primary Components of Our Operating Results

Revenues

~~Total revenue consists of service revenue generated by our Commercial Services and Government Solutions segments and product sales generated by the Government Solutions segment.~~

Service Revenue. Our Commercial Services segment generates service revenue primarily through the ~~management~~operation and ~~operation~~management of tolling programs and processing violations for RACs, FMCs and other large fleet customers. These solutions are ~~full service~~full-service offerings by which we enroll the license plates of our customers’ vehicles and transponders with tolling ~~authorities, process payments~~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 ~~registrations~~ and ~~violations~~registrations for our customers.

Our Government Solutions segment generates service revenue through the operation and maintenance of photo enforcement systems. This revenue is generally tied to long-term contracts, and revenue is recognized either when services are performed or when citations are issued or paid, depending on the terms of the customer contract. Revenue drivers in this segment include the number of systems installed and the monthly revenue per system. Ancillary service revenue is generated in our Government Solutions segment from payment processing, pass-through fees for collection expense, and other fees.

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

Product Sales. Product sales are generated by the sale of photo enforcement equipment ~~to certain~~in the Government Solutions ~~customers. A small number of customers purchase this equipment,~~segment and ~~their~~specialized hardware in the Parking Solutions segment. Customer buying patterns vary greatly from period to ~~period. We recognize~~period related to product ~~sales revenue when the equipment is accepted or installed.~~sales.

~~Cost~~Costs and Expenses

Cost of Service Revenue. Cost of service revenue consists of collection and other professional services provided by third parties ~~and~~ associated with the delivery of certain ancillary services performed by ~~both~~ our ~~Government Solutions and Commercial Services~~ segments.

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

Operating Expenses. Operating expenses include payroll and payroll-related costs (including stock-based compensation), costs related to the operation of our call centers and other operational costs, including transaction processing, print, postage and communication costs.

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

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

Impairment of Property and Equipment. Impairment of property and equipment includes impairment charges for fixed assets which were held and used in our operations.

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

Change in Fair Value of Private Placement Warrants. Change in fair value of private placement warrants consists of liability adjustments related to the 6,666,666 Private Placement Warrants originally issued to Gores Sponsor II, LLC re-measured to fair value at the end of each reporting period.

Tax Receivable Agreement Liability Adjustment. ~~This~~Tax receivable agreement liability adjustment consists of adjustments made to ~~the related party TRA liability~~our Tax Receivable Agreement due to changes in estimates.

Loss on Extinguishment of Debt. Loss on extinguishment of debt generally consists of early payment penalties, the write-off of original issue discounts and deferred financing costs associated with debt extinguishment.

Other Income, Net. Other income, net primarily consists of volume rebates earned from total spend on purchasing cards and gain or loss on foreign currency transactions.

5046

Results of Operations

Fiscal Year ~~2020~~2021 Compared to Fiscal Year ~~2019~~2020

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.


	Year Ended December 31,																		Year Ended December 31,
							Percentage of Revenue						Increase (Decrease) 2020 vs 2019												Percentage of Revenue						Increase (Decrease) 2021 vs 2020
($ in thousands)	2020			2019			2020			2019			$			%			2021			2020			2021			2020			$			%
Service revenue	$	336,274		$	416,723			85.4	%		92.9	%	$	(80,449	)		(19.3	)%	$	492,846		$	336,274			89.5	%		85.4	%	$	156,572			46.6	%
Product sales		57,319			32,014			14.6	%		7.1	%		25,305			79.0	%		57,744			57,319			10.5	%		14.6	%		425			0.7	%
Total revenue		393,593			448,737			100.0	%		100.0	%		(55,144	)		(12.3	)%		550,590			393,593			100.0	%		100.0	%		156,997			39.9	%
Cost of service revenue		3,967			5,561			1.0	%		1.2	%		(1,594	)		(28.7	)%		5,337			3,967			1.0	%		1.0	%		1,370			34.5	%
Cost of product sales		29,573			13,919			7.5	%		3.1	%		15,654			112.5	%		29,809			29,573			5.4	%		7.5	%		236			0.8	%
Operating expenses		115,729			125,640			29.4	%		28.0	%		(9,911	)		(7.9	)%		163,370			115,729			29.7	%		29.4	%		47,641			41.2	%
Selling, general and administrative expenses		89,664			85,493			22.8	%		19.1	%		4,171			4.9	%		123,407			89,664			22.4	%		22.8	%		33,743			37.6	%
Depreciation, amortization and (gain) loss on disposal of assets, net		116,844			115,771			29.7	%		25.8	%		1,073			0.9	%		116,801			116,844			21.2	%		29.7	%		(43	)		(0.0	)%
Impairment of property and equipment		—			5,898			—			1.3	%		(5,898	)		(100.0	)%
Total costs and expenses		355,777			352,282			90.4	%		78.5	%		3,495			1.0	%		438,724			355,777			79.7	%		90.4	%		82,947			23.3	%
Income from operations		37,816			96,455			9.6	%		21.5	%		(58,639	)		(60.8	)%		111,866			37,816			20.3	%		9.6	%		74,050			195.8	%
Interest expense, net		40,865			60,729			10.4	%		13.5	%		(19,864	)		(32.7	)%		44,942			40,865			8.1	%		10.4	%		4,077			10.0	%
Change in fair value of private placement warrants																				7,600			1,133			1.4	%		0.3	%		6,467			570.8	%
Tax receivable agreement liability adjustment		6,850			(106	)		1.7	%		0.0	%		6,956			6562.3	%		(1,016	)		6,850			-0.2	%		1.7	%		(7,866	)		(114.8	)%
Loss on extinguishment of debt																				5,334			—			1.0	%		—			5,334		n/a
Other income, net		(11,885	)		(11,092	)		(3.0	)%		(2.4	)%		(793	)		7.1	%		(12,895	)		(11,885	)		(2.3	)%		(3.0	)%		(1,010	)		8.5	%
Total other expenses		35,830			49,531			9.1	%		11.1	%		(13,701	)		(27.7	)%		43,965			36,963			8.0	%		9.4	%		7,002			18.9	%
Income before income tax provision		1,986			46,924			0.5	%		10.4	%		(44,938	)		(95.8	)%
Income before income taxes																				67,901			853			12.3	%		0.2	%		67,048			7860.3	%
Income tax provision		5,431			13,581			1.4	%		3.0	%		(8,150	)		(60.0	)%		26,452			5,431			4.8	%		1.4	%		21,021			387.1	%
Net (loss) income	$	(3,445	)	$	33,343			(0.9	)%		7.4	%	$	(36,788	)		(110.3	)%
Net income (loss)																			$	41,449		$	(4,578	)		7.5	%		(1.2	)%	$	46,027			1005.4	%

Service Revenue. Service revenue increased by $156.6 million, or 46.6%, to $492.8 million for fiscal year 2021 from $336.3 million in fiscal year 2020, representing 89.5% and 85.4% of total revenue, respectively. The following table depicts service revenue by segment:


	Year Ended December 31,
					Percentage of Revenue						Increase (Decrease) 2021 vs 2020
($ in thousands)	2021		2020		2021			2020			$		%
Service revenue
Commercial Services	$	260,899	$	180,856		47.4	%		46.0	%	$	80,043		44.3	%
Government Solutions		227,992		155,418		41.4	%		39.4	%		72,574		46.7	%
Parking Solutions		3,955		—		0.7	%		—			3,955	n/a
Total service revenue	$	492,846	$	336,274		89.5	%		85.4	%	$	156,572		46.6	%

Commercial Services service revenue includes toll and violation management revenues from RACs and FMCs. Commercial Services service revenue increased by $80.0 million, or 44.3%, from $180.9 million in fiscal year 2020 to $260.9 million in fiscal year 2021. This increase was primarily due to the wide distribution of COVID-19 vaccines and the lifting of travel restrictions that positively impacted the travel industry in 2021. Our RAC customers experienced a rebound in leisure travel that impacted our volume in 2021 compared to the prior year which was negatively impacted by the COVID-19 pandemic.

Government Solutions service revenue includes revenue from speed, red-light, school bus stop arm and bus lane photo enforcement systems. Service revenue was $228.0 million and $155.4 million for the years ended

December 31, 2021, and 2020, respectively, and it increased by $72.6 million. The acquisition of Redflex on June 17, 2021 contributed $33.0 million to our year-over-year growth. Organic growth excluding Redflex was $39.6 million which was primarily driven by the expansion of school zone speed programs. Speed is our largest product in this segment and grew $33.5 million in the current year excluding Redflex. We added 805 speed cameras in 2020 which provided year-over-year growth in 2021 and 752 speed cameras in 2021 which provided growth in the current year and will continue to provide growth into 2022. The remaining growth can be attributable to improvement in variable rate programs that returned to more normalized volume as COVID-19 restrictions lifted throughout 2021.

Parking Solutions service revenue of $4.0 million resulted from the December 7, 2021 acquisition of T2 systems with no revenue in the comparable period.

Product Sales. Product sales increased slightly year over year and were $57.7 million and $57.3 million for fiscal years 2021 and 2020, respectively, which relate to revenue generated from Government Solutions and Parking Solutions customers who purchase their equipment. We generated product revenue of $8.1 million from the Redflex and T2 Systems acquisitions for which there was no revenue in the comparable period. Prior to these acquisitions, product revenue was limited to a few large customers whose buying patterns vary greatly from period to period. Product sales for these customers decreased by $7.7 million due to a decline of 60 units sold and to a lesser extent from product mix.

Cost of Service Revenue.Cost of service revenue increased from $4.0 million for fiscal year 2020 to $5.3 million for fiscal year 2021. The $1.3 million increase resulted from increased costs from third-party professional services associated with the delivery of certain ancillary services, a portion of which related to the Parking Solutions segment with no comparable costs in the prior year.

Cost of Product Sales. Cost of product sales increased slightly year over year and was $29.8 million and $29.6 million for fiscal years 2021 and 2020, respectively. This was mainly due to a decrease from the timing of installations at a single customer that is expanding its school zone speed program, offset by an increase from the inclusion of Redflex and T2 Systems product sales in the 2021 period with no comparable amounts in the prior year.

Operating Expenses. Operating expenses increased by $47.6 million, or 41.2%, from $115.7 million for fiscal year 2020 to $163.4 million in fiscal year 2021. The increase was primarily attributable to increases of $20.4 million in wages expense, $13.4 million for subcontractor expenses and $9.4 million of recurring services resulting from increased operations in 2021, which were lower in the 2020 year due to the impact from the COVID-19 pandemic. Operating expenses as a percentage of total revenue increased from 29.4% to 29.7% in fiscal years 2020 and 2021, respectively. This slight increase represents improved operating leverage corresponding to the revenue improvement in the Commercial Services segment and decreased operating leverage for the Government Solutions business with the addition of Redflex which historically had lower margins than the Verra Mobility business. The following table presents operating expenses by segment:


	Year Ended December 31,
					Percentage of Revenue						Increase (Decrease) 2021 vs 2020
($ in thousands)	2021		2020		2021			2020			$			%
Operating expenses
Commercial Services	$	65,718	$	52,505		12.0	%		13.3	%	$	13,213			25.2	%
Government Solutions		96,284		62,387		17.5	%		15.9	%		33,897			54.3	%
Parking Solutions		553		—		0.1	%		—			553		n/a
Total operating expenses before stock-based compensation		162,555		114,892		29.6	%		29.2	%		47,663			41.5	%
Stock-based compensation		815		837		0.1	%		0.2	%		(22	)		(2.6	)%
Total operating expenses	$	163,370	$	115,729		29.7	%		29.4	%	$	47,641			41.2	%

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $33.7 million to $123.4 million for fiscal year 2021 compared to $89.7 million for fiscal year 2020. The increase is primarily due to $12.4 million in transaction costs incurred related to the Redflex and T2 systems acquisitions, increased wages expense due to the reinstatement of employee bonus accrual in 2021, and increased wages, rent, information technology and other professional expenses from the inclusion of Redflex operations for approximately 200 days in 2021 with no comparable amounts in prior year. These increases were partially offset by a $4.9 million reduction to the credit loss expense resulting from changes in loss rate estimates based on improved economic conditions. Selling, general and administrative expenses as a percentage of total revenue decreased from 22.8% to

22.4% in fiscal years 2020 and 2021, respectively.The following table presents selling, general and administrative expenses by segment:


	Year Ended December 31,
					Percentage of Revenue						Increase (Decrease) 2021 vs 2020
($ in thousands)	2021		2020		2021			2020			$		%
Selling, general and administrative expenses
Commercial Services	$	42,873	$	40,978		7.8	%		10.4	%	$	1,895		4.6	%
Government Solutions		52,380		34,465		9.5	%		8.8	%		17,915		52.0	%
Parking Solutions		1,488		—		0.3	%		—			1,488	n/a
Corporate and other		13,697		2,469		2.5	%		0.6	%		11,228		454.8	%
Total selling, general and administrative expenses before stock-based compensation		110,438		77,912		20.1	%		19.8	%		32,526		41.7	%
Stock-based compensation		12,969		11,752		2.3	%		3.0	%		1,217		10.4	%
Total selling, general and administrative expenses	$	123,407	$	89,664		22.4	%		22.8	%	$	33,743		37.6	%

Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net, remained consistent at $116.8 million for both fiscal years 2021 and 2020. This was mainly due to a decrease from certain trademark intangibles being fully amortized for ten months in fiscal year 2021, offset by increased depreciation and amortization expense resulting from the Redflex and T2 Systems acquisitions in 2021 with no comparable amounts in the prior year.

Interest Expense, Net. Interest expense, net increased by $4.0 million from $40.9 million in fiscal year 2020 to $44.9 million in fiscal year 2021. This increase was primarily a result of the additional borrowing of $350 million in unsecured notes at a higher fixed rate, offset by the reduction in the variable rate on our first lien term loan facility. See “Liquidity and Capital Resources” below.

Change in Fair Value of Private Placement Warrants. We recorded losses of $7.6 million and $1.1 million in fiscal years 2021 and 2020, respectively, related to the changes in fair value of our Private Placement Warrants which are accounted for as liabilities on our consolidated balance sheets. The change in fair value is the result of re-measurement of the liability at the end of each reporting period.

Tax Receivable Agreement Liability Adjustment. We recorded a $1.0 million tax benefit in fiscal year 2021 and a $6.8 million tax expense in fiscal year 2020. The liability adjustment in 2021 is a result of lower estimated state tax rates due to changes in apportionment, whereas in 2020 it is a result of higher state tax rates due to changes in apportionment.

Loss on Extinguishment of Debt. Loss on extinguishment of debt was $5.3 million for fiscal year 2021 consisting of a $4.0 million write-off of pre-existing deferred financing costs and discounts and $1.3 million of lender and third-party costs associated with the issuance of the new 2021 Term Loan, as discussed and defined below.

Other Income, Net. Other income, net was $12.9 million in fiscal year 2021 compared to $11.9 million in fiscal year 2020. The increase of $1.0 million was primarily due to increased tolling activity as a result of COVID-19 recovery in the travel industry, offset by a total of $2.8 million in gains recorded in fiscal year 2020 from a settlement agreement and related insurance proceeds.

Income Tax Provision. Income tax provision was $26.5 million representing an effective tax rate of 39.0% for fiscal year 2021 compared to $5.4 million, representing an effective tax rate of 636.7% for fiscal year 2020. The Company’s effective tax rate for 2021 was lower compared to 2020 primarily due to an increase in pretax income in 2021, resulting in the Company’s permanent book and tax differences having a proportionately lesser impact on the effective tax rate for 2021.

Net Income (Loss). We had net income of $41.4 million for fiscal year 2021 compared to a net loss of $4.6 million for 2020. The $46.0 million increase in net income was primarily due to the significant recovery in the travel industry positively impacting our RAC customers and from the other statement of operations activity discussed above.

Fiscal Year 2020 Compared to Fiscal Year 2019


	Year Ended December 31,
							Percentage of Revenue						Increase (Decrease) 2020 vs 2019
($ in thousands)	2020			2019			2020			2019			$			%
Service revenue	$	336,274		$	416,723			85.4	%		92.9	%	$	(80,449	)		(19.3	)%
Product sales		57,319			32,014			14.6	%		7.1	%		25,305			79.0	%
Total revenue		393,593			448,737			100.0	%		100.0	%		(55,144	)		(12.3	)%
Cost of service revenue		3,967			5,561			1.0	%		1.2	%		(1,594	)		(28.7	)%
Cost of product sales		29,573			13,919			7.5	%		3.1	%		15,654			112.5	%
Operating expenses		115,729			125,640			29.4	%		28.0	%		(9,911	)		(7.9	)%
Selling, general and administrative expenses		89,664			85,493			22.8	%		19.1	%		4,171			4.9	%
Depreciation, amortization and (gain) loss on disposal of assets, net		116,844			115,771			29.7	%		25.8	%		1,073			0.9	%
Impairment of property and equipment		—			5,898			—			1.3	%		(5,898	)		(100.0	)%
Total costs and expenses		355,777			352,282			90.4	%		78.5	%		3,495			1.0	%
Income from operations		37,816			96,455			9.6	%		21.5	%		(58,639	)		(60.8	)%
Interest expense, net		40,865			60,729			10.4	%		13.5	%		(19,864	)		(32.7	)%
Change in fair value of private placement warrants		1,133			16,267			0.3	%		3.6	%		(15,134	)		(93.0	)%
Tax receivable agreement liability adjustment		6,850			(106	)		1.7	%		0.0	%		6,956			6562.3	%
Other income, net		(11,885	)		(11,092	)		(3.0	)%		(2.4	)%		(793	)		7.1	%
Total other expenses		36,963			65,798			9.4	%		14.7	%		(28,835	)		(43.8	)%
Income before income tax provision		853			30,657			0.2	%		6.8	%		(29,804	)		(97.2	)%
Income tax provision		5,431			13,581			1.4	%		3.0	%		(8,150	)		(60.0	)%
Net (loss) income	$	(4,578	)	$	17,076			(1.2	)%		3.8	%	$	(21,654	)		(126.8	)%

Service Revenue. Service revenue decreased by $80.4 million, or 19.3%, to $336.3 million for fiscal year 2020 from $416.7 million in fiscal year 2019, representing 85.4% and 92.9% of total revenue, respectively. The following table depicts service revenue by segment:

Year Ended December 31,

Percentage of Revenue

Increase (Decrease)
2020 vs 2019

($ in thousands)

2020

2019

2020

2019

$

%

Service revenue

Commercial Services

$
180,856

$
276,479

46.0
%

61.6
%

$
(95,623
)

(34.6
)%
Government Solutions

155,418

140,244

39.4
%

31.3
%

15,174

10.8
%
Total service revenue

$
336,274

$
416,723

85.4
%

92.9
%

$
(80,449
)

(19.3
)%


	Year Ended December 31,
					Percentage of Revenue						Increase (Decrease) 2020 vs 2019
($ in thousands)	2020		2019		2020			2019			$			%
Service revenue
Commercial Services	$	180,856	$	276,479		46.0	%		61.6	%	$	(95,623	)		(34.6	)%
Government Solutions		155,418		140,244		39.4	%		31.3	%		15,174			10.8	%
Total service revenue	$	336,274	$	416,723		85.4	%		92.9	%	$	(80,449	)		(19.3	)%

Commercial Services service revenue includes toll and violation management revenues from commercial fleet and rental car companies. Commercial Services service revenue decreased by $95.6 million, or 34.6%, from $276.5 million in fiscal year 2019 to $180.9 million in fiscal year 2020. This decrease was primarily due to the COVID-19 pandemic and related containment measures, which ~~continue to have~~had a significant negative impact on the RAC industry beginning in March 2020. As a result, our revenue declined 55% from the first quarter of 2020 to $27.3 million in the second quarter of 2020 which was the bulk of the decline. We ~~have~~had seen sequential improvement in service revenue to $44.2 million and $48.2 million in the third and fourth quarters of 2020,

respectively which could be attributed to typical seasonality or to signs of recovery. Although increased availability and distribution of COVID-19 vaccines and the gradual lifting of travel restrictions could positively impact the travel industry in 2021, we anticipate that the impact from COVID-19 will result in year over year revenue declines through March 2021 and that full year 2021 service revenue may not recover to 2019 levels.

Government Solutions service revenue includes revenue from red-light, speed, school bus stop arm and bus lane photo enforcement systems. Service revenue increased by $15.2 million to $155.4 million for fiscal year 2020 from 140.2 million in fiscal year 2019. Our red-light photo enforcement service revenue declined $6.7 million during fiscal year 2020 compared to fiscal year 2019. This was primarily due to a $3.5 million decline from the loss of certain Texas programs on June 1, 2019, due to a legislative change that banned most red-light photo enforcement programs in the state. The remainder of the decline was primarily attributed to the impact from COVID-19 on variable rate clients. We also had a $4.3 million decrease in service revenue from the suspension of school bus stop arm cameras as most school buses were not operating for much of this period. These declines were mainly offset by speed program revenue, which grew approximately $25.7 million in fiscal year 2020, compared to the same period in 2019, due to an increase in the total number of camera systems installed.

There was an average of 4,027 active camera systems during fiscal year 2020 compared to an average of 4,738 for fiscal year 2019. The decline in active camera systems was primarily due to 1,347 cameras that were temporarily inactive due to COVID-19, and the loss of Texas programs noted above. These declines were partially offset by the expansion of speed enforcement systems with existing customers.

Service revenue for the ~~year~~2020 period was negatively impacted ~~from~~by COVID-19 beginning in March 2020 which led to reduction in vehicle traffic as a result of stay-at-home orders and early school closures and delayed re-openings in certain jurisdictions in which we operate. We saw growth in our speed program revenue in 2020 and aniticipate continued growth in 2021 based on the full year impact of 2020 camera installations. However, we anticipate the negative impacts of COVID-19 will continue to impact our other revenue programs in future quarters.

Product Sales. Product sales were $57.3 million and $32.0 million for fiscal years 2020 and 2019, respectively, which relate to revenue generated from Government Solutions customers who purchase their equipment. Product sales increased by $25.3 million which was primarily driven by sales to a single customer that is currently expanding its existing school zone speed program. A small number of customers purchase this equipment, and their buying patterns vary greatly from period to period. ~~Without a specific notice to proceed with additional installation, we anticipate product revenue for 2021 to be in line with 2018.~~

Cost of Service Revenue. Cost of service revenue decreased year over year, from $5.6 million for fiscal year 2019 to $4.0 million for fiscal year 2020. The decrease resulted from decreased costs of collection and other third-party professional services ~~and~~ associated with the delivery of certain ancillary services performed by ~~both of our segments.~~us.

Cost of Product Sales. Cost of product sales increased by $15.7 million from $13.9 million in fiscal year 2019 to $29.6 million in fiscal year 2020 and was driven by the increase in product sales volume.

Operating Expenses. Operating expenses decreased by $9.9 million, or 7.9%, from $125.6 million for fiscal year 2019 to $115.7 million in fiscal year 2020. This decrease was primarily attributable to decreases of $4.6 million in employee wages due to furloughs, reduced headcount and bonus expense, and $9.1 million in transaction processing and other volume related costs, which were partially offset by increases in subcontractor expenses and operational equipment costs. Operating expenses as a percentage of total revenue increased from 28.0% to 29.4% in fiscal years 2019 and 2020, respectively. The following table presents operating expenses by segment:

Year Ended December 31,

Percentage of Revenue

Increase (Decrease)
2020 vs 2019

($ in thousands)

2020

2019

2020

2019

$

%

Operating expenses

Commercial Services

$
52,505

$
66,916

13.3
%

14.9
%

$
(14,411
)

(21.5
)%
Government Solutions

62,387

57,905

15.9
%

12.9
%

4,482

7.7
%
Total operating expenses before stock-based compensation

114,892

124,821

29.2
%

27.8
%

(9,929
)

(8.0
)%
Stock-based compensation

837

819

0.2
%

0.2
%

18

2.2
%
Total operating expenses

$
115,729

$
125,640

29.4
%

28.0
%

$
(9,911
)

(7.9
)%

5251


	Year Ended December 31,
					Percentage of Revenue						Increase (Decrease) 2020 vs 2019
($ in thousands)	2020		2019		2020			2019			$			%
Operating expenses
Commercial Services	$	52,505	$	66,916		13.3	%		14.9	%	$	(14,411	)		(21.5	)%
Government Solutions		62,387		57,905		15.9	%		12.9	%		4,482			7.7	%
Total operating expenses before stock-based compensation		114,892		124,821		29.2	%		27.8	%		(9,929	)		(8.0	)%
Stock-based compensation		837		819		0.2	%		0.2	%		18			2.2	%
Total operating expenses	$	115,729	$	125,640		29.4	%		28.0	%	$	(9,911	)		(7.9	)%

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $4.2 million to $89.7 million for fiscal year 2020 compared to $85.5 million for fiscal year 2019. We recorded a $14.4 million credit loss expense during the year as a result of the new credit loss accounting standard, which contributed to a $6.3 million year over year increase. We also had increases to ~~stock based~~stock-based compensation and consulting fees of $2.6 million and $1.5 million, respectively. These increases were partially offset by an aggregate $7.6 million of cost-cutting measures including the elimination of the bonus payout and the related expense along with reductions to marketing and non-essential travel. Selling, general and administrative expenses as a percentage of total revenue increased from 19.1% to 22.8% in fiscal years 2019 and 2020, respectively.The following table presents selling, general and administrative expenses by segment:


	Year Ended December 31,																Year Ended December 31,
					Percentage of Revenue						Increase (Decrease) 2020 vs 2019										Percentage of Revenue						Increase (Decrease) 2020 vs 2019
($ in thousands)	2020		2019		2020			2019			$			%			2020		2019		2020			2019			$			%
Selling, general and administrative expenses
Commercial Services	$	40,978	$	41,384		10.4	%		9.2	%	$	(406	)		(1.0	)%	$	40,978	$	41,384		10.4	%		9.2	%	$	(406	)		(1.0	)%
Government Solutions		34,465		32,696		8.8	%		7.3	%		1,769			5.4	%		34,465		32,696		8.8	%		7.3	%		1,769			5.4	%
Corporate and other		2,469		2,220		0.6	%		0.5	%		249			11.2	%		2,469		2,220		0.6	%		0.5	%		249			11.2	%
Total selling, general and administrative expenses before stock-based compensation		77,912		76,300		19.8	%		17.0	%		1,612			2.1	%		77,912		76,300		19.8	%		17.0	%		1,612			2.1	%
Stock-based compensation		11,752		9,193		3.0	%		2.1	%		2,559			27.8	%		11,752		9,193		3.0	%		2.1	%		2,559			27.8	%
Total selling, general and administrative expenses	$	89,664	$	85,493		22.8	%		19.1	%	$	4,171			4.9	%	$	89,664	$	85,493		22.8	%		19.1	%	$	4,171			4.9	%

Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net, increased from $115.8 million in fiscal year 2019 to $116.8 million in fiscal year 2020. The increase is primarily due to the increased depreciation and amortization expense resulting from the Pagatelia acquisition included in the entire fiscal year 2020 compared to only two months in 2019.

Impairment of Property and Equipment. Impairment of property and equipment for the fiscal year 2019 included a $5.9 million impairment charge as a result of legislation that banned most red-light photo enforcement programs in Texas on June 1, 2019, which was in the Government Solutions segment.

Interest Expense, Net. Interest expense, net decreased by $19.9 million from $60.7 million in fiscal year 2019 to $40.9 million in fiscal year 2020. This decrease was primarily as a result of lower interest rates coupled with the refinancing of our ~~New First Lien~~2018 Term Loan (as defined ~~and discussed~~ below) in February 2020, which reduced the applicable margin on the interest rate by 50 basis points. ~~See “Liquidity~~

Change in Fair Value of Private Placement Warrants. We recorded losses of $1.1 million and ~~Capital Resources~~$16.3 million in fiscal years 2020 and 2019, respectively, related to the changes in fair value of our Private Placement Warrants~~” below.~~

which are accounted for as liabilities on our consolidated balance sheets. The change in fair value is the result of re-measurement of the liability at the end of each reporting period.

Tax Receivable Agreement Liability Adjustment. We recorded a $6.8 million charge in fiscal year 2020 and income of $0.1 million in fiscal year 2019. The adjustment in 2020 reflects the impact of an increase to the Company’s deferred tax rate arising from higher ~~estimated~~ state tax rates due to a change in apportionment.

Other Income, Net. Other income, net was $11.9 million in fiscal year 2020 compared to $11.1 million in fiscal year 2019. The increase of $0.8 million was primarily due to a ~~$1.4~~total of $2.8 million ~~gain~~in gains recorded in fiscal year 2020 from a settlement agreement and related ~~to the HTA Settlement Agreement and another $1.4 million gain for the receipt of~~ insurance proceeds, ~~related to this matter, both of which are further discussed in Note 17,~~ ~~Commitments and Contingencies~~, partially offset by the decreased volume in purchasing card rebates resulting from COVID-19’s impact on toll usage.

Income Tax Provision. Income tax provision was $5.4 million representing an effective tax rate of ~~273.4%~~636.7% for fiscal year 2020 compared to $13.6 million, representing an effective tax rate of ~~28.9%~~44.3% for fiscal year 2019. The effective tax rate change was primarily due to lower pre-tax income in 2020, resulting in the Company’s permanent book and tax differences having a proportionately greater impact on the effective tax rate in the ~~current~~2020 year.

Net (Loss) Income. We had a net loss of ~~$3.4~~$4.6 million for fiscal year 2020 compared to net income of ~~$33.3~~$17.1 million for 2019. The ~~$36.8~~$21.7 million decrease in net income was primarily due to the decline in revenue from the impact of COVID-19 on our RAC customers, and the other statement of operations activity discussed above.

~~Fiscal Year 2019 Compared to Fiscal Year 2018~~

Year Ended December 31,

Percentage of Revenue

Increase (Decrease)
2019 vs 2018

($ in thousands)

2019

2018

2019

2018

$

%

Service revenue

$
416,723

$
365,076

92.9
%

98.6
%

$
51,647

14.1
%
Product sales

32,014

5,070

7.1
%

1.4
%

26,944

531.4
%
Total revenue

448,737

370,146

100.0
%

100.0
%

78,591

21.2
%
Cost of service revenue

5,561

5,788

1.2
%

1.6
%

(227
)

(3.9
)%
Cost of product sales

13,919

3,447

3.1
%

0.9
%

10,472

303.8
%
Operating expenses

125,640

108,883

28.0
%

29.4
%

16,757

15.4
%
Selling, general and administrative expenses

85,493

136,069

19.1
%

36.8
%

(50,576
)

(37.2
)%
Depreciation, amortization and (gain) loss on disposal of assets, net

115,771

103,353

25.8
%

27.9
%

12,418

12.0
%
Impairment of property and equipment

5,898

—

1.3
%

—

5,898

n/a

Total costs and expenses

352,282

357,540

78.5
%

96.6
%

(5,258
)

(1.5
)%
Income from operations

96,455

12,606

21.5
%

3.4
%

83,849

665.2
%
Interest expense, net

60,729

69,550

13.5
%

18.8
%

(8,821
)

(12.7
)%
Tax receivable agreement liability adjustment

(106
)

—

0.0
%

—

(106
)

n/a

Loss on extinguishment of debt

—

26,486

—

7.2
%

(26,486
)

(100.0
)%
Other income, net

(11,092
)

(8,795
)

(2.4
)%

(2.4
)%

(2,297
)

26.1
%
Total other expenses

49,531

87,241

11.1
%

23.6
%

(37,710
)

(43.2
)%
Income (loss) before income tax provision (benefit)

46,924

(74,635
)

10.4
%

(20.2
)%

121,559

162.9
%
Income tax provision (benefit)

13,581

(16,241
)

3.0
%

(4.4
)%

29,822

183.6
%
Net income (loss)

$
33,343

$
(58,394
)

7.4
%

(15.8
)%

$
91,737

157.1
%

~~Service Revenue~~. Service revenue increased by $51.6 million, or 14.1%, to $416.7 million for fiscal year 2019 from $365.1 million for fiscal year 2018, representing 92.9% and 98.6% of total revenue, respectively. The following table depicts service revenue by segment:

Year Ended December 31,

Percentage of Revenue

Increase (Decrease)
2019 vs 2018

($ in thousands)

2019

2018

2019

2018

$

%

Service revenue

Commercial Services

$
276,479

$
222,611

61.6
%

60.1
%

$
53,868

24.2
%
Government Solutions

140,244

142,465

31.3
%

38.5
%

(2,221
)

(1.6
)%
Total service revenue

$
416,723

$
365,076

92.9
%

98.6
%

$
51,647

14.1
%

Commercial Services service revenue includes toll and violation management revenues from commercial fleet and rental car companies. Service revenue increased by $53.9 million, or 24.2%, from $222.6 million for fiscal year 2018 to $276.5 million for fiscal year 2019. We acquired HTA, a toll and violation processor, on March 1, 2018, and

EPC, a European violations processor, on April 6, 2018. These acquisitions contributed $21.6 million to service revenue growth during the period presented. The remaining service revenue was mainly due to a $28.9 million increase from improved volumes in both billable days and tolls processed across our tolling products.

Government Solutions service revenue includes revenue from red-light, speed, school bus arm and bus lane photo enforcement systems. Service revenue decreased by $2.2 million, to $140.2 million for fiscal year 2019 from $142.5 million for fiscal ~~year~~ ~~2018.~~ Our red-light photo enforcement service revenue declined $9.5 million compared to fiscal year 2018. This was primarily due to a $2.7 million decline from the loss of certain Florida programs and $4.5 million due to the loss of Texas programs on June 1, 2019 due to a legislative change that banned most red-light photo enforcement programs in the state. The loss of most of our red-light programs in Texas has negatively impacted year over year service revenue comparison for the next two quarters. The remaining decline resulted from lower price per system in variable contracts. Pricing of red-light photo enforcement programs can be impacted by timing of transaction volume in our variable contracts as well as the pricing of contract renewals. The Company exited its street light maintenance offering at the end of the first quarter of 2019, resulting in a $2.5 million decrease year over year. This street light maintenance offering was not part of our core business and did not meet our profitability criteria. These declines were offset by speed program revenue, which grew approximately $10 million due to increases in the total number of camera systems installed and higher average pricing.

Our previous reporting of installed camera systems included systems connected to suspended programs or spare systems at client locations. We re-evaluated our metric during the first quarter of 2019, and only reported installed camera systems that generated revenue, as we believe this is a more meaningful presentation. There were an average of 4,738 camera systems installed during fiscal year 2019 compared to an average of 4,306 for fiscal year 2018. The increase in camera systems was primarily due to new installations of school bus arm systems and the expansion of speed enforcement systems with existing customers. This increase was partially offset by a decline in red-light photo enforcement systems primarily due to the loss of certain Florida and Texas programs noted above.

~~Product Sales.~~ Product sales of $32.0 million and $5.1 million for fiscal years 2019 and 2018, respectively, included revenue generated from Government Solutions customers who purchased their equipment. Product sales increased by $26.9 million primarily driven by sales to a single customer who was expanding their existing school zone speed program.

~~Cost of Service Revenue.Cost of service revenue decreased slightly by $0.2 million, to $5.6 million for fiscal year 2019 from $5.8 million in fiscal~~ ~~year~~ ~~2018. The decline in cost was consistent with a slight decline in ancillary revenue generated from supporting red-light programs.~~

~~Cost of Product Sales.~~ ~~Cost of product sales increased by $10.5 million, to $13.9 million for fiscal year 2019 compared to $3.4 million in fiscal year 2018, and was consistent with the change in product sales.~~

~~Operating Expenses.~~ Operating expenses were $125.6 million for fiscal year 2019, which increased $16.8 million from $108.9 million in fiscal year 2018 mainly due to the inclusion of HTA and EPC operations for the full year compared to only ten months and nine months, respectively, in 2018, but have decreased as a percentage of revenue from 29.4% to 28.0% in fiscal years 2018 and 2019, respectively. Operating expenses by segment appear in the table below:

Year Ended December 31,

Percentage of Revenue

Increase (Decrease)
2019 vs 2018

($ in thousands)

2019

2018

2019

2018

$

%

Operating expenses

Commercial Services

$
66,916

$
51,221

14.9
%

13.8
%

$
15,695

30.6
%
Government Solutions

57,905

57,525

12.9
%

15.6
%

380

0.7
%
Total operating expenses before stock-based compensation

124,821

108,746

27.8
%

29.4
%

16,075

14.8
%
Stock-based compensation

819

137

0.2
%

—

682

497.8
%
Total operating expenses

$
125,640

$
108,883

28.0
%

29.4
%

$
16,757

15.4
%

~~Selling, General and Administrative Expenses~~. Selling, general and administrative expenses were $85.5 million for fiscal year 2019. Expenses in this line item decreased by $50.6 million from $136.1 million in fiscal year 2018 primarily due to $56.4 million of transaction expenses for the Business Combination, HTA and EPC acquisitions, non-recurring expenses of $8.8 million and $5.4 million related to fees paid under a corporate advisory services agreement in fiscal year 2018 for which there were no comparable amounts in fiscal year 2019. The decrease was partially offset by the increase in stock-based compensation expense recorded in fiscal year 2019. Selling, general and administrative expenses as a percentage of total revenue decreased from 36.8% to 19.1% for fiscal years 2018 and 2019, respectively, and are presented by segment in the table below:

Year Ended December 31,

Percentage of Revenue

Increase (Decrease)
2019 vs 2018

($ in thousands)

2019

2018

2019

2018

$

%

Selling, general and administrative expenses

Commercial Services

$
41,384

$
55,370

9.2
%

15.0
%

$
(13,986
)

(25.3
)%
Government Solutions

32,696

27,827

7.3
%

7.5
%

4,869

17.5
%
Corporate and other

2,220

50,737

0.5
%

13.7
%

(48,517
)

(95.6
)%
Total selling, general and administrative expenses before stock-based compensation

76,300

133,934

17.0
%

36.2
%

(57,634
)

(43.0
)%
Stock-based compensation

9,193

2,135

2.1
%

0.6
%

7,058

330.6
%
Total selling, general and administrative expenses

$
85,493

$
136,069

19.1
%

36.8
%

$
(50,576
)

(37.2
)%

~~Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net.~~ Depreciation, amortization and (gain) loss on disposal of assets, net, of $115.8 million for fiscal year 2019 included $22.8 million of depreciation and $92.8 million of amortization. The increase of $12.4 million from $103.4 million in fiscal year 2018 is primarily due to the inclusion of amortization expense resulting from the HTA and EPC acquisitions for the entire fiscal year 2019 compared to partial periods in the 2018 period.

~~Impairment of Property and Equipment.~~ Impairment of property and equipment for fiscal year 2019 consists of a $5.9 million impairment charge as a result of a legislation ban of most red-light photo enforcement programs in Texas on June 1, 2019, which was in the Government Solutions segment.

~~Interest Expense, Net.~~ Interest expense, net decreased by $8.8 million from $69.5 million in fiscal year 2018 to $60.7 million in 2019. The average debt balances as of December 31, 2018 and 2019 were $887.8 million and $899.7 million, respectively. Although the average debt balances remained relatively consistent, interest expense was higher in the 2018 period due to the New Second Lien Term Loan, which had a higher interest rate. The decrease in interest expense in 2019 is due to the full payoff of the New Second Lien Term Loan in the fourth quarter of 2018 and increase in interest income of $1.1 million during fiscal year 2019. See “Liquidity and Capital Resources.”

~~Tax Receivable Agreement Liability Adjustment. We recorded $0.1 million of income in fiscal year 2019 resulting from changes in taxable income and tax rates.~~

~~Loss on Extinguishment of Debt.~~ This represents the loss on extinguishment of debt related to the 2017 Credit Facilities which were replaced by the 2018 Credit facilities in conjunction with the HTA acquisition and the repayment of the New Second Lien Term Loan in October 2018 pursuant to the Business Combination. See “~~Liquidity and Capital Resources~~.”

~~Other Income, Net.~~ ~~Other income, net increased $2.3 million, from $8.8 million in fiscal year 2018 to $11.1 million for fiscal year 2019~~ ~~primarily due to the increased purchasing card rebates resulting from the inclusion of HTA operations for the entire period in fiscal~~ ~~year~~ ~~2019 compared to ten months in the 2018 period.~~ ~~We pay a high volume of tolls on behalf of our customers with purchasing cards which generate rebates based on volume, payment terms and rebate frequency.~~

~~Income Tax Provision (Benefit).~~ The income tax provision was $13.6 million for fiscal year 2019 compared to an income tax benefit of $(16.2) million for fiscal year 2018. The effective tax rate was 28.9% in 2019 compared to an effective tax benefit rate of (21.8)% for 2018. Our effective tax rate for 2019 was higher compared to 2018 primarily due to the impact of permanent items on pre-tax book income in 2019, which increased the effective tax rate, versus the impact of permanent items on a pre-tax book loss in 2018, which had the impact of decreasing the effective tax rate. Our effective tax rate differed from the statutory federal income tax rate in 2019 and 2018 primarily due to state taxes, the impact of permanent items such as transaction costs, executive compensation, changes in uncertain tax positions, changes in the valuation allowance, lobbying expenses and meals.

~~Net Income (Loss).~~ We had net income of $33.3 million for fiscal year 2019, compared to a net loss of $58.4 million for 2018. The increase in net income was primarily due to expenses in the 2018 period related to an aggregate of $97.1 million of acquisition, refinancing (including loss on extinguishment of debt) and integration costs associated with the HTA and EPC acquisitions for which there were no comparable amounts in fiscal year 2019. This increase was partially offset by related amortization expense and an impairment charge, noted above.

~~Liquidity and Capital Resources~~

Our principal sources of liquidity are cash flow from operations and available borrowings under our ~~2018 Credit Facilities (as defined~~ Revolver (defined below).

We have incurred significant long-term debt as a result of acquisitions completed in prior ~~years.~~years as well as the Redflex and T2 Systems acquisitions in the current year.

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

~~We have the ability to borrow under our New Revolver to meet obligations as they come due. As of~~At December 31, ~~2020,~~2021, we had ~~$48.8~~$25.0 million ~~available for borrowing, net~~in outstanding borrowings on the Revolver, which was repaid in full in January 2022. The borrowings on the Revolver were used in the normal course of ~~letters of credit, under our New Revolver.~~business to ensure sufficient cash balances globally.

Concentration of Credit Risk

~~As of December 31, 2020, NYCDOT represented 58.9% of accounts receivable, net.~~

The ~~Company provides photo enforcement services to NYCDOT under the Legacy Contract and the Emergency Contract. At December 31, 2020, the Legacy Contract had an open receivable balance of~~ ~~$28.8~~ ~~million, of which~~ ~~$20.5~~ ~~million had aged beyond NYCDOT’s 45-day payment terms. As of December 31, 2020, the Company had invoiced NYCDOT for~~ ~~$52.6 million~~ ~~in product revenue and~~ ~~$17.4~~ ~~million in service revenue under the Emergency Contract. NYCDOT has not made any payments against the Emergency Contract to date. In late January 2021, we were informed that the~~ City of New York Department of Transportation (“NYCDOT”) represented 39% and 59% of total accounts receivable, net as of December 31, 2021 and 2020, respectively. The total outstanding receivables balance decreased $35.7 million at December 31, 2021 compared to the outstanding balance at December 31, 2020 as the Company collected $182 million during 2021 from the customer. There is ~~investigating matters~~no material reserve related to ~~our past installation practices,~~NYCDOT open receivables as amounts are deemed collectible based on current conditions and ~~it is unclear whether this investigation will impact the timing of the payments. Refer to~~ expectations.~~Concentration of Credit Risk~~ ~~within Note 2~~ ~~to the consolidated financial statements~~ for additional information on significant customers’ revenue concentration. For information on the risks and uncertainties relating to our contracts with NYCDOT and other government entities, please see the risk factors entitled “~~The New York City Law Department recently advised us that the City of New York is investigating certain aspects of our installation work for our largest customer, NYCDOT” and “~~Our government contracts are subject to unique risks and uncertainties, including termination rights, delays in payment, audits and investigations, any of which could have a material adverse effect on our business~~” set forth in Part I, Item 1A. “Risk Factors.~~”

5753

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


	For the Year Ended December 31,									For the Year Ended December 31,
($ in thousands)	2020			2019			2018			2021			2020			2019
Net cash provided by operating activities	$	46,909		$	133,802		$	46,017		$	193,171		$	46,909		$	133,802
Net cash used in investing activities		(24,153	)		(54,973	)		(562,857	)		(475,970	)		(24,153	)		(54,973	)
Net cash (used in) provided by financing activities		(34,004	)		(14,520	)		574,268
Net cash provided by (used in) financing activities											268,722			(34,004	)		(14,520	)

Cash Flows from Operating Activities

Cash provided by operating activities increased by $146.3 million, from $46.9 million in 2020 to $193.2 million in 2021. Net income increased $46.0 million from a $4.6 million loss in 2020 compared to $41.4 million income in 2021. The adjustments to net income (loss) included increases of $6.5 million for the changes in the fair value of private placement warrants year over year and $5.3 million loss on extinguishment of debt, partially offset by decreases from lower credit loss expense, changes in deferred income taxes and the tax receivable agreement liability adjustments year over year. Changes in operating assets and liabilities were mainly driven by a significant reduction in the accounts receivable balance from $182 million in payments received from NYCDOT in 2021, and increases in accounts payable and accrued liabilities resulting from increases in accrued interest at the end of 2021, reinstatement of the bonus accrual in 2021 and increased liabilities related to Redflex which were not in the comparable prior period.

Cash provided by operating activities decreased by $86.9 million, from $133.8 million in ~~fiscal year~~ 2019 to $46.9 million in ~~fiscal year~~ 2020. Net income year over year decreased by ~~$36.8~~$21.7 million, from ~~$33.3~~$17.1 million income in 2019 to a ~~$3.4~~$4.6 million loss in 2020. The ~~aggregate~~ adjustments to net income (loss) ~~income increased $15.4 million mainly due to~~included a $6.3 million increase in credit loss expense ~~related to~~from the adoption of the credit loss standard, the $7.0 million increase in the tax receivable agreement liability adjustment and a $6.1 million change in deferred income taxes. These increases were partially offset by a decrease of $15.1 million from the change in fair value of our private placement warrants, and a $5.9 million impairment of property and equipment in fiscal year 2019 with no comparable amount in 2020.

There was an aggregate $65.5 million decrease ~~year over year~~in 2020 compared to 2019 in the changes in operating assets and liabilities, which was driven primarily by a $77.9 million increase in accounts receivables primarily due to collection delays on the accounts receivable associated with our fixed speed camera product sales to NYCDOT, combined with a decrease in accounts payable and accrued liabilities due to the payout of the 2019 bonus accrual with no accrual for fiscal year 2020 and a decrease in other accruals which was consistent with our decrease in certain revenue streams. ~~For additional information on NYCDOT’s impact on our cash provided by operating activities, please see the risk factor entitled “The New York City Law Department recently advised us that the City of New York is investigating certain aspects of our installation work for our largest customer, NYCDOT” set forth in Part I, Item 1A. “Risk Factors.~~”

Cash provided by operating activities increased $87.8 million from $46.0 million in fiscal year 2018 to $133.8 million in fiscal year 2019. The change in cash provided by operating activities year over year was primarily due to a net income increase of $91.7 million from a loss of $58.4 million in fiscal year 2018 to income of $33.3 million in fiscal year 2019. The growth in net income was driven by the inclusion of the results of HTA and EPC operations for the full year in 2019 versus only partial periods in the 2018 period. It is also attributable to $97.1 million of transaction (the Business Combination, HTA and EPC acquisitions), non-recurring transformation, sponsor fee expenses and loss on extinguishment of debt in fiscal year 2018 for which there were no comparable amounts in fiscal year 2019.

Aggregate adjustments to reconcile net income (loss) to net cash provided by operations increased by $12.5 million. The increase was primarily due to inclusion of the amortization of intangibles associated with the HTA and EPC acquisitions and stock-based compensation for the full year in 2019 versus partial periods in 2018. The $26.5 million loss on extinguishment of debt in fiscal year 2018 for which there was no comparable amount in 2019 was offset by a $5.9 million impairment charge in the 2019 period for which there were no comparable amount in 2018. There was an aggregate $16.5 million decrease in the change in operating assets and liabilities which was primarily driven by an increase in prepaid expenses and the change in accrued liabilities offset by the change in accounts receivables.

Cash Flows from Investing Activities

Cash used in investing activities in 2021 was mainly related to acquisitions of Redflex, T2 Systems and NuPark. We acquired one hundred percent of the outstanding equity of Redflex on June 17, 2021 at A$0.96 per share for total consideration of A$152.5 million, or approximately US$117.9 million. On December 7, 2021, we acquired all of the outstanding shares of T2 Systems for $353.2 million, net of $14.1 million of cash acquired. On December 13, 2021, we acquired NuPark for $7.0 million, which included approximately $5.0 million of cash paid.

Cash used in investing activities was $24.2 million in ~~fiscal year~~ 2020 ~~which was~~ mainly related to purchases of installation and service parts and property and equipment.

Cash used in investing activities was $55.0 million ~~and $562.9 million for fiscal years~~in 2019 ~~and 2018, respectively. The change in cash used in investing activities year over year~~which was ~~primarily~~mainly due to ~~acquisitions. Cash paid~~the acquisition of Pagatelia for ~~the Pagatelia acquisition in fiscal~~ ~~year~~ ~~2019 was~~ $26.6 million, net of $1.1 million of cash ~~acquired. Cash consideration for the HTA acquisition was $531.7 million net of $3.0 million of cash~~ acquired, and ~~for EPC it was $2.6~~$29.7 million ~~net~~from purchases of ~~$9.0 million of cash acquired.~~installation and service parts and property and equipment.

Cash Flows from Financing Activities

Cash provided by financing activities was $268.7 million in 2021. We had aggregate borrowings of $1.3 billion during 2021 consisting of the 2021 Term Loan (which included $250 million incremental borrowing), Senior Notes and the Revolver (defined below) and repayments of $884.5 million on outstanding debt related to the 2018 and 2021 Term Loans, and debt assumed as part of the Redflex and T2 acquisitions that was subsequently paid. The 2018 Term Loan had been fully repaid in March 2021. The aggregate borrowings net of the repayments along with existing cash on hand were used to fund the close of the Redflex and T2 systems acquisitions in June 2021 and December 2021, respectively, and the share repurchase and retirement for $100 million in August 2021 (discussed above).

Cash used in financing activities was $34.0 million and $14.5 million for fiscal years 2020 and 2019, respectively. The cash used in 2020 increased primarily as a result of a $19.7 million mandatory prepayment of excess cash flows made pursuant to the terms of the ~~New First Lien~~2018 Term Loan ~~(as defined below),~~ and costs associated with refinancing ~~the New First Lien~~it.

Long-term Debt

2021 Term Loan ~~in February 2020.~~and Senior Notes

Cash provided by financing activities was $574.3 million for fiscal year 2018 and was due to our entering into the 2018 Credit Facilities to fund the HTA acquisition and to repay the outstanding balance on the 2017 Credit Facilities, which totaled approximately $450.5 million, as well as the repayment of the New Second Lien Term Loan in full and the $70.0 million increase to the New First Lien Term Loan in conjunction with the Business Combination. Additionally, cash received in connection with the Business Combination was $803.3 million. Cash payments made in connection with the issuance of the 2018 Credit Facilities, the repayment of the 2017 Credit Facilities and the Business Combination were $29.5 million, $8.2 million and $24.0 million, respectively. Additionally, there was a $779.2 million distribution to the selling shareholders in the Business Combination that was partially offset by a $169.3 million capital contribution from Greenlight.

~~Debt~~

In ~~connection with the an acquisition,~~ March 2021, VM Consolidated, Inc., ~~our wholly-owned~~the Company’s wholly owned subsidiary, entered into aan Amendment and Restatement Agreement No.1 to the First Lien Term Loan Credit Agreement (the “~~New First Lien~~ 2021Term Loan~~”), a Second Lien Term Loan Credit Agreement (the “New Second Lien Term Loan” and together with the New First Lien Term Loan, the “New Term Loans”) and a Revolving Credit Agreement (the “New Revolver~~,” ~~and together with the New Term Loans, the “2018 Credit Facilities~~”) with a syndicate of lenders. The ~~2018 Credit Facilities initially provided~~2021 Term Loan has an aggregate borrowing of $650 million, maturing on March 26, 2028, and an accordion feature providing for ~~committed senior secured~~an additional $250 million of term loans, subject to satisfaction of certain requirements. In connection with the 2021 Term Loan, the Company had an offering discount cost of $3.3 million and $0.7 million of deferred financing costs, both of ~~$1.115 billion, consisting~~which were capitalized and are amortized over the remaining life of the 2021 Term Loan.

In addition, in March 2021, VM Consolidated, Inc. issued Senior Unsecured Notes (the “Senior Notes”) in an aggregate principal amount of ~~$1.04 billion under~~$350 million, due on April 15, 2029. In connection with the ~~New Term Loans~~issuance of the Senior Notes, the Company incurred $5.7 million in lender and ~~an aggregate revolving commitment~~third-party costs, which were capitalized as deferred financing costs and are being amortized over the remaining life of ~~up to $75 million available for loans and letters of credit under~~ the ~~New Revolver (subject to borrowing eligibility requirements as described below).~~ Senior Notes.

~~In July 2018, we amended~~The net proceeds from both the ~~New First Lien~~2021 Term Loan ~~to expand~~and the ~~aggregate principal loan amount from $840 million to $910 million. The additional $70 million, along with funds contributed by Platinum Equity, LLC,~~Senior Notes received in March 2021 were used to repay ~~the $200 million New Second Lien Term Loan~~ in full ~~contemporaneously with~~all outstanding debt which was represented by the ~~closing of the Business Combination on October 17, 2018. The New First Lien Term Loan represents the only debt outstanding under the 2018 Credit Facilities as of December 31, 2020.~~

~~The 2018 Credit Facilities replaced the previous~~ First Lien Term Loan Credit Agreement ~~(the~~(as amended, the “~~Old First Lien”), the Second Lien~~2018 Term Loan ~~Credit Agreement (the “Old Second Lien~~”) with a balance of $865.6 million.

On December 7, 2021, VM Consolidated Inc, entered into an agreement to exercise the accordion feature under the 2021 Term Loan, borrowing $250 million in incremental term loans (“Incremental Term Loan” ~~and together~~). The proceeds from the Incremental Term Loan were used, along with cash on hand, to fund the acquisition of T2 Systems, including repaying in full all outstanding debt for T2 Systems. In connection with the ~~Old First Lien,~~Incremental Term Loan, the “~~Old Term Loans~~”),Company had an offering discount cost of $1.3 million and $3.8 million of deferred financing costs, both of which were ~~repaid concurrent with~~capitalized and are amortized over the ~~closing on~~remaining life of the ~~2018 Credit Facilities, and a preexisting Revolving Credit Agreement (the “Old Revolver”, collectively with the Old~~2021 Term ~~Loans, the “2017 Credit Facilities”) which was undrawn at close.~~Loan. The ~~outstanding balances at~~Incremental Term Loan accrued interest from the date of ~~close on~~borrowing until December 31, 2021, at which time, it was combined with the ~~Old~~2021 Term ~~Loans,~~Loan to be a single tranche of term loan borrowings. The total principal outstanding under the 2021 Term Loan, which ~~were repaid in full with proceeds from~~includes the ~~2018 Credit Facilities were $323~~Incremental Term Loan, was $895.1 million ~~and $125 million, respectively.~~at December 31, 2021.

The ~~New First Lien~~2021 Term Loan is repayable at 1.0% per annum of the amount initially borrowed, paid in quarterly installments. The New First Lien Term Loan matures on February 28, 2025. We refinanced the entire outstanding amount under the New First Lien Term Loan on February 20, 2020, which reduced the previous applicable margin by 50 basis points. The New First Lien Term Loan nowIt bears interest based, at ~~our~~the Company’s option, on either (1) LIBOR plus an applicable margin of 3.25% per annum, or (2) an alternate base rate plus an applicable margin of 2.25% per annum. As of December 31,~~, 2020,~~ 2021, the interest rate on the ~~New First Lien~~2021 Term Loan was ~~3.4~~3.6%.%.

In addition, the ~~New First Lien~~2021 Term Loan requires mandatory prepayments equal to the product of the excess cash flows of the Company (as defined in the ~~loan~~2021 Term Loan agreement) and the applicable prepayment percentages (calculated as of the last day of the fiscal year, beginning with the year ending December 31, ~~2019)~~2022), as set forth in the following table:


Consolidated ~~first lien net leverage ratio (as defined~~First Lien Net Leverage Ratio (As Defined by the ~~New First Lien~~2021 Term Loan ~~agreement)~~Agreement)	Applicable ~~prepayment~~ ~~percentage~~	Prepayment Percentage
> 3.70:1.00	50%
< 3.70:1.00 and > 3.20:1.00	25%
< 3.20:1.00	0%

~~We made~~Interest on the Senior Notes is fixed at 5.50% per annum and is payable on April 15 and October 15 of each year (beginning on October 15, 2021). On or after April 15, 2024, the Company may redeem all or a ~~$19.7~~portion of the Senior Notes at the redemption prices set forth below in percentages by year, plus accrued and unpaid interest:


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

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

The Company evaluated the March 2021 refinancing transactions on a lender-by-lender basis and accounted for the portion of the transaction that did not meet the accounting criteria for debt extinguishment as a debt modification. Accordingly, the Company recognized a loss on extinguishment of debt of $5.3 million ~~mandatory prepayment of excess cash flow~~on the 2018 Term Loan during the ~~first quarter~~year ended December 31, 2021, consisting of a $4.0 million write-off of pre-existing deferred financing costs and discounts and $1.3 million of lender and third-party costs associated with the issuance of the new 2021 Term Loan.

PPP Loan

During fiscal year 2020, ~~which~~Redflex received a loan from the U.S. Small Business Administration (“SBA”) as part of the Paycheck Protection Program (“PPP Loan”) to offset certain employment and other allowable costs incurred as a result of the COVID-19 pandemic. At December 31, 2021, the loan amount outstanding was ~~classified as~~$2.9 million and is payable within a year, and is included in the current portion of long-term ~~debt in the consolidated balance sheet at~~debt. In early 2021, Redflex applied for forgiveness of this loan and, as of December 31, ~~2019. We did not have~~2021, was still awaiting approval from the SBA.

The Revolver

The Company has a ~~mandatory prepayment~~Revolving Credit Agreement (the “Revolver”) with a commitment of ~~excess cash flow~~up to $75 million available for ~~the fiscal year ended December 31, 2020.~~

loans and letters of credit. The ~~New~~ Revolver matures on ~~February 28, 2023. The terms of the New Revolver were not affected by the refinancing of the New First Lien Term Loan discussed above.~~December 20, 2026. Borrowing eligibility under the ~~New~~ Revolver is subject to a monthly borrowing base calculation based on (i) certain percentages of eligible accounts receivable and inventory, less (ii) certain reserve items, including outstanding letters of credit and other reserves. ~~We may at any time, on not more than five occasions, request an increase to the New Revolver of up to an aggregate amount of $50 million.~~ The ~~New~~ Revolver bears interest on either (1) LIBOR plus an applicable margin, or (2) an alternate base rate, plus an applicable margin. The margin percentage applied to (1) LIBOR is either 1.25%, 1.50%, or 1.75%, or (2) the base rate is either 0.25%, 0.50%, or 0.75%, depending on ~~our~~the Company’s average availability to borrow under the commitment. At December 31,~~, 2020, we~~ 2021, the Company had no$25.0 million in outstanding borrowings on the ~~New~~ Revolver, ~~and our availability to borrow~~which was ~~$48.8~~ repaid in full in January 2022.~~million, net of~~ ~~$6.3~~ ~~million of outstanding letters of credit.~~

Interest on the unused portion of the ~~New~~ Revolver is payable quarterly at 0.375% and ~~we are~~the Company is also required to pay participation and fronting fees at 1.38% on ~~$6.3~~$6.2 million of outstanding letters of credit as of December 31, ~~2020.~~2021.

All borrowings and other extensions of credits under the ~~2018 Credit Facilities~~2021 Term Loan, Senior Notes and the Revolver are subject to the satisfaction of customary conditions and restrictive covenants including absence of defaults and accuracy in material respects of representations and warranties. At December 31, ~~2020, we were~~2021, the Company was compliant with ~~the 2018 Credit Facilities~~all debt covenants. Substantially all of ~~our~~the Company’s assets are pledged as collateral to secure the Company’s indebtedness under the ~~2018 Credit Facilities.~~2021 Term Loan and the Revolver.

Interest Expense

We recorded interest expense, including amortization of deferred financing costs and discounts, of ~~$40.9~~ $44.9 million, $40.9 million and $60.7 million ~~and~~ ~~$69.6~~ ~~million~~ for the fiscal years ~~2020, 2019 and 2018 respectively.~~

In connection with the refinancing of the New First Lien Term Loan in February 2020, which we determined was to be accounted for as a modification, we incurred $0.8 million of lender fees which were capitalized as deferred financing costs and amortized over the remaining life of the New First Lien Term Loan, and $0.2 million of legal fees that were expensed as selling, general and administrative expenses on the consolidated statement of operations in the fiscal year ended December 31, ~~2020.~~

We recognized a charge of $10.2 million in fiscal year 2018 consisting of a $3.8 million prepayment penalty on the Old Term Loan balances, a $2.0 million write-off of preexisting deferred financing costs and $4.4 million of lender and third-party costs associated with the issuance of the 2018 Credit Facilities. We also recorded a loss on extinguishment of the New Second Lien Term Loan of $16.3 million in fiscal year 2018 consisting of a $4.0 million prepayment penalty, a $3.4 million write-off of pre-existing deferred financing costs and $8.9 million of lender and third-party costs associated with the issuance of the loan.

~~Commitments and Contingencies~~

We have issued various letters of credit under contractual arrangements with certain of our vendors and customers. Outstanding letters of credit under these arrangements totaled $6.3 million and $0.1 million at December 31,2021, 2020 and 2019 respectively. ~~The letters of credit are not released until all services have been provided or the contract has been canceled.~~

~~The following table summarizes our contractual commitments at December 31, 2020:~~

Payments due by period

($ in thousands)
Total

1 year

2 - 3 years

4 - 5 years

Thereafter

Long-term debt, including current maturities ⁽¹⁾
$
865,642

$
9,104

$
18,208

$
838,330

$
—

Interest on long-term debt ⁽²⁾

121,585

29,693

58,445

33,447

—

Operating lease payments

43,485

4,737

6,735

5,990

26,023

Purchase obligations

6,302

6,302

—

—

—

⁽¹⁾

~~Amounts for 2021, 2022-2023, and 2024-2025 represent quarterly installment payments with respect to the New First Lien Term Loan.~~

⁽²⁾

~~This reflects the interest rate for the New First Lien Term Loan in effect at December 31, 2020.~~

~~Off-Balance Sheet Arrangements~~

~~We do not have any material off-balance sheet financing arrangements nor do we have any interest in entities referred to as variable interest entities as of December 31, 2020.~~

Critical Accounting Policies

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management believes

that its estimates and assumptions are reasonable in the circumstances; however, actual results could differ materially from those estimates.

Our significant accounting policies are described in Note 2, Significant Accounting Policies, in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. We believe that the critical accounting policies listed below involve our more significant judgments, assumptions, and estimates and, therefore, could have the greatest potential impact on the financial statements.

Revenue Recognition and Deferred Revenue

Nature of Goods and Services

The following is a description of principal activities – separated by reportable segments – from which the Company generates revenue:

Commercial Services. The Commercial Services segment offers toll and violation management solutions for the commercial fleet and rental car industries. ~~We have~~The Company determined ~~our~~its performance obligation is a distinct stand-ready obligation, as there is an unspecified quantity of services provided that does not diminish, and the customer is being charged only when it uses ~~our~~the Company’s services, such as toll payment, title and registration, etc. Payment terms for contracts with commercial fleet and rental car companies vary, but are usually billed as services are performed.

Government Solutions. The Government Solutions segment principally generates revenue by providing complete, end-to-end speed, red-light, ~~speed,~~ school bus stop arm, and bus lane enforcement solutions. Products, when sold, are typically sold together with the services in a ~~bundle.~~bundle for a majority of customers. The average initial term of a contract is 3 to 5 years. Payment terms for contracts with government agencies vary depending on whether the consideration is fixed or variable. Payment terms for contracts with fixed consideration are usually based on equal installments over the duration of the contract. Payment terms for contracts with variable consideration are usually billed and collected as citations are issued or paid. In instances when the consideration expected from the customer is subject to variation, any variable consideration affecting revenue recognition is allocated to the distinct period (the monthly period) that it relates to.

For bundled packages, ~~we account~~the Company accounts for individual products and services separately if they are distinct – i.e., if a product or service is separately identifiable from other items in the bundle and if a customer can benefit from it as a

stand-alone item. The consideration is allocated between separate products and services in a bundle based on their stand-alone selling prices (“SSP”). ~~We estimate~~The Company estimates the SSP ~~of our~~for its services based upon observable evidence, market conditions and other relevant inputs. If products are sold without the related services, no allocation is required.

•

Product sales (sale of camera systems and installation) – the Company recognizes revenue when the installation process is completed and the camera system is ready to perform the services as expected by the customer. Generally, this occurs at site acceptance or first citation. The Company recognizes revenue for the sale of the camera system and installation services at a point in time.

•

Service revenue – the Company has determined its performance obligation is to provide a complete end-to-end safety and enforcement solution. Promises include providing a system to capture images, processing images taken by the camera, forwarding eligible images to the police department and processing payments on behalf of the municipality. The Company has determined that certain of the promises to its customers are capable of being distinct as they are capable of providing some measure of benefit to the customer either on their own or together with other resources that are readily available to the customer. However, the Company has determined the promises to its customers do not meet the criterion of being distinct within the context of its contracts. The Company would not be able to fulfill its promises individually as its customers could not obtain the intended benefit from the contract without the Company fulfilling all promises. Accordingly, the Company concluded that each contract represents one service offering and is a single performance obligation to the customer. Further, the Company accounts for all the services as a single continuous service. The Company applied the series guidance for those services as it stands ready to deliver those services over the contract period. The Company recognizes revenue from services over time, as they are performed.

•

Product sales (sale of camera and installation) – we recognize revenue when the installation process is completed and the camera is ready to perform the services as expected by the customer. Generally, this occurs at site acceptance or first citation. We recognize revenue for the sale of the camera and installation services at a point in time.

•

Service revenue – we have determined our performance obligation is to provide a complete end-to-end safety and enforcement solution. Promises include providing a system to capture images, processing images taken by the camera, forwarding eligible images to the local police department and processing payments on behalf of the municipality. We determined certain of the promises to our customers are capable of being distinct as they are capable of providing some measure of benefit to the customer either on their own or together with other resources that are readily available to the customer. However, we have determined the promises to our customers do not meet the criterion of being distinct within the context of our contracts. We would not be able to fulfill our promises individually as our customers could not obtain the intended benefit from the contract without us fulfilling all promises. Accordingly, we concluded that each contract represents one service offering and is a single performance obligation to our customer. Further, we account for all the services as a single continuous service. We applied the series guidance for those services as we stand ready to deliver those services over the contract period. We recognize revenue from services over time, as they are performed.

~~Remaining Performance Obligations~~

As of December 31, 2020 weand 2021, the Company had approximately ~~$0.2~~$0.3 million and $8.9 million of ~~remaining performance obligations~~deferred revenue in the Government Solutions ~~segment, which includes~~segment. Deferred revenue represents amounts that ~~will~~have been invoiced in advance which are expected to be ~~invoiced and~~ recognized as revenue in future periods. The majority of the remaining performance obligations ~~are limited only to arrangements that meet the definition of a contract~~ as of December 31, ~~2020. As these amounts relate~~2021 are expected to be completed and recognized in 2022 and $3.2 million is expected to be recognized ratably between 2023 through 2027.

Parking Solutions. The newly acquired T2 Systems business offers an integrated suite of parking software and hardware solutions to its customers. Revenue since the date of acquisition was derived primarily from the sale of software as a service (“SaaS”) and specialized hardware. For bundled packages, the Company accounts for individual products and services separately if they are distinct and allocate the transaction price based on the relative SSP.

•

Revenue derived from the Company’s SaaS products is recognized ratably over the contractual service period beginning on the date the service is made available to the ~~initial deferral~~customer.

•

Revenue from hardware product sales is recognized at a point in time when ownership is transferred to the customer.

As of December 31, 2021, the Company had approximately $20.9 million of deferred revenue ~~under a contract, we expect~~which represents amounts that have been invoiced in advance to ~~recognize these amounts over a two-month period at~~ the ~~end of the contract.~~Parking Solutions customers and are expected to be recognized as revenue in 2022.

Significant Judgments

~~Under the new revenue standard, significant judgments are~~Significant judgment is required in order to identify contracts with customers and estimate transaction prices. Additional judgments are required for identifying the performance obligations and determining whether the services provided are able to be distinct, determining the transaction price as it relates to the different variable consideration structures identified in our contracts, the estimation of the SSP and the allocation of the transaction price by relative SSPs. Assumptions regarding timing of when control transfers to the customer also requires significant judgment in order to recognize revenue.

Allowance for Credit ~~Loss~~Losses

~~In accordance with the current expected~~

We review historical credit losses ~~standard discussed in Note 2 to our consolidated financial statements, we review historical loss rates,~~and customer payment trends on receivables and ~~collection rates on customer balances. Estimated~~develop loss ~~rates are developed~~rate estimates as of the balance sheet date, ~~using historical credit loss experience~~which includes adjustments for current and ~~adjusted for~~ future expectations using probability-weighted assumptions about potential outcomes. Receivables are written off against the allowance for credit ~~loss~~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. The Company periodically evaluates the adequacy of its allowance for expected credit losses by comparing its actual historical write-offs to its previously recorded estimates and adjusts appropriately. This includes evaluation by portfolio segment the changes in expectations based on the newest information available on customer payment trends and risk characteristics, and adjusting the probability-weighting either upward or downward that is most representative of the expected credit losses. We adjusted down our estimate for credit loss as of December 31, 2021 for the Commercial Services (All other) portfolio segment to reflect improved economic conditions based on customer payment trends in

6258

the last 12 months, as compared to as of December 31, 2020 which was based on higher probabilities of loss given the uncertainty caused by COVID-19 on the travel industry.

Acquisitions

We have made a number of acquisitions to date and may continue to do so in the future. We apply the ~~asset~~ acquisition method to account for business ~~acquisitions.~~combinations. We allocate the fair value of the purchase price consideration to assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase consideration over the fair value of the identifiable assets and liabilities is recorded as goodwill.

The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment and includes the use of independent valuation specialists to assist us in estimating fair values of acquired tangible and intangible assets. Fair values of acquired assets and their respective useful lives are based on, among other factors, critical estimates of expected cash flows, customer turnover and anticipated growth from acquired customers, discount rates and royalty cost savings. Although we believe that the assumptions applied in the determination are reasonable based on information available at the date of acquisition, actual results may differ from estimates. Differences between estimates and actual results may result in adjustment to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever occurs first. Adjustments to fair values of assets and liabilities made after the end of the measurement period are recognized within our consolidated statements of operations as a current period gain or loss.

During the fourth quarter of 2021, we early adopted Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires consistent recognition and measurement of contract assets and contract liabilities whether or not they are acquired in a business combination. As a result, we did not measure deferred revenue at fair value for business combinations completed in fiscal year 2021.

Impairment of Goodwill and Long-Lived Assets

We assess goodwill for impairment annually on October 1, or more frequently if events or circumstances indicate that the carrying amounts may not be fully recoverable. We first consider the option to assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If we conclude that it is more likely than not that the fair value is less than the carrying amount, we then perform a one-step quantitative impairment test by comparing the reporting unit’s fair value with its carrying ~~value in accordance with ASU 2017-04, which we adopted as of January 1, 2020. Refer to Note 2,~~ ~~Significant Accounting Policies~~ ~~for more information on our adoption of ASU 2017-04. Pursuant to ASU 2017-04, an~~value. An impairment loss is recognized for the amount by which the reporting units’ carrying value exceeds its fair value, up to the total amount of goodwill allocated to the reporting unit. No impairment is recognized if the fair value of the reporting unit exceeds its carrying value.

The process of evaluating goodwill requires significant judgment including the identification of reporting units and the determination of the fair value of each reporting unit. If necessary, we determine fair values of our reporting units based on an income approach or more specifically, a discounted cash flow method (“DCF Method”). The DCF Method is based on projected future cash flows and terminal value estimates discounted to their present values. Terminal value represents athe present value an investor would pay on the valuation date for the rights to the cash flows of the business for the years subsequent to the discrete cash flow projection period. We consider the DCF Method to be the most appropriate valuation technique since it is based on our long-term financial projections. In addition to determining the fair value of our reporting units based on the DCF method, we also compare the aggregate values of our net corporate assets and the reporting unit fair values to our overall market capitalization and use certain market-based valuation techniques to assess the reasonableness of the reporting unit fair values determined in accordance with the DCF Method. The key inputs used in the DCF Method include revenue growth rates, gross margin percentage, selling, general and administrative expense percentage and discount rates that are at or above our weighted-average cost of capital. We apply discount rates that are commensurate with the risks and uncertainties inherent in the respective reporting units and our internally developed projections of future cash flows.

During the first half of fiscal 2020, our market capitalization declined significantly compared to December 31, 2019. Over the same period, the equity value of our key Commercial Services customers, our peer group companies and the overall U.S. stock market also declined significantly amid market volatility. These declines were driven by the uncertainty surrounding the outbreak of COVID-19 and other macroeconomic events. Based on these factors, we concluded that a triggering event occurred and, accordingly, interim quantitative impairment tests wereOur qualitative analyses performed as of March 31, 2020 and as of June 30, 2020. In connection with these tests, we concluded the fair values of the Government Solutions and Commercial Services reporting units exceeded their respective carrying values and that an adjustment to goodwill was not required. The fair values of our reporting units as of March 31, 2020 and June 30, 2020 were determined in accordance with the DCF Method described above using our most currently available financial forecasts assuming a long-term growth rate of 2% and a discount rate of 12%. To understand the sensitivity that a change in discount rate could have on our reporting units’ fair values, the Company also applied discount rates

ranging from 11% to 14% and concluded the fair values of the both reporting units exceeded their respective carrying values in each instance. In addition, we completed our annual goodwill impairment test as of October 1 for fiscal years 2021, 2020 ~~for our two reporting units. In doing so, we conducted a qualitative assessment~~ and concluded no adjustment to goodwill was necessary because our most current long-term financial forecasts continued to meet or exceed the forecasted results used in connection with the interim quantitative impairment tests performed at March 31 and June 30, 2020. In addition, there were no2019 did not have indicators of impairment based on the qualitative analysis performed as of the fiscal years ended December 31, 2019 and 2018. The current economic conditions due to COVID-19 are still evolving and any significant adverse changes in future periods to our internal forecasts or the external market conditions, if any, could reasonably be expected to negatively affect our key assumptions and may result in a future goodwill impairment charge, which could be material.impairment.

We review our long-lived assets other than goodwill, for impairment whenever events or circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. We assess recoverability by comparing the estimated undiscounted future cash flows expected to be generated by the asset or asset group with its carrying value. If the carrying value of the asset or asset group exceeds the estimated undiscounted future cash flows, an impairment loss is recognized for the difference between the estimated fair value and the carrying value. Our estimates of cash flows are subjective judgments based on past experiences adjusted for trends and future

expectation, and can be significantly impacted by changes in our business or economic conditions. The determination of asset group fair value is also subject to significant judgment and utilizes valuation techniques including discounting estimated future cash flows and market-based analyses. If our estimates or underlying assumptions change in the future, our operating results may be materially impacted.

The state of Texas passed legislation as of June 1, 2019, to ban red-light photo enforcement programs across the state, with certain carve-outs for some existing programs. We considered this a triggering event for potential impairment and evaluated the recoverability of property and equipment used in the operations of red-light photo enforcement programs in Texas. As a result, we recognized an impairment charge in the Government Solutions segment of $5.9 million for the year ended December 31, 2019, which is included in impairment of property and equipment in the consolidated statements of operations. We did not have any indicators of impairment ~~losses on~~related to long-lived assets for the years ended December 31, 2020 or December 31, ~~2018.~~2021.

Income Taxes

We account for income taxes under the asset and 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. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years, while deferred tax liabilities generally represent items that generate a future tax liability for items where deductions have been accelerated for tax purposes. We provide a valuation allowance for deferred tax assets if it is more likely than not that some portion or all of the tax assets will not be ~~realized~~.realized. We calculate 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 realization of deferred tax assets can be affected by, among other things, the nature, frequency, and severity of current and cumulative losses, forecasts of future profitability, the length of statutory carryforward periods, our experience with utilizing operating losses and tax credit carryforwards by jurisdiction, the reversal of existing taxable temporary differences and tax planning alternatives and strategies that may be available.

Our effective tax rate is based on income, statutory tax rates, differences in the deductibility of certain expenses and inclusion of certain income items between financial statement and tax return purposes, and tax planning opportunities available to us in the various jurisdictions in which we operate. Under GAAP, if we determine that a tax position is more likely than not of being sustained upon audit, based solely on the technical merits of the position, we recognize the benefit. Tax code and regulations require certain items to be included in the tax return at different times than when those items are required to be recorded in the consolidated financial statements. As a result, our effective tax rate reflected in our consolidated financial statements is different from that reported in our tax returns. Some of these differences are permanent, such as meals and entertainment expenses that are not fully deductible on our tax returns, and some are temporary differences, such as depreciation expense. Temporary differences create deferred tax assets and liabilities.

~~We recognize benefits on uncertain tax positions if it is more likely than not that such positions will be sustained upon examination based solely on their technical merits.~~ Our policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax ~~expense~~provision or benefit.

Tax Receivable Agreement

At the closing of the Business Combination, we entered into the Tax Receivable Agreement (“~~TRA~~”) with the Platinum ~~Stockholder~~ ~~and Greenlight as the stockholder representative.~~Stockholder. The ~~TRA~~Tax Receivable Agreement generally provides for the payment ~~by the post-closing company~~ to the Platinum Stockholder of 50% of the net cash savings, if any, in U.S. federal, state and local income tax that ~~the post-closing company~~we actually ~~realizes~~realize (or isare deemed to realize in certain circumstances) in periods after the closing of the Business Combination as a result of the increase in the tax basis of ~~the intangible assets which resulted from our acquisition of HTA~~certain acquired intangibles prior to the Business Combination. We generally ~~will~~ retain the benefit of the remaining 50% of these cash savings. We estimated the potential maximum benefit to be paid will be approximately ~~$70~~$70.0 million, and recorded an initial liability and corresponding charge to equity at the closing of the Business Combination. Subsequently, ~~we made adjustments to~~the Company adjusted this amount.

We recorded a $6.8 million expense in fiscal year 2020 and $0.1 million of income in fiscal year 2019 to tax receivable agreement liability adjustment in the consolidated statements of operations. The adjustment in 2020 reflects the impact of an increase to the Company’s deferred tax rate arising from higher estimated state tax rates due to a change in apportionment.

At December 31, ~~2020,~~2021, the ~~TRA~~Tax Receivable Agreement liability was approximately ~~$72.7~~$61.7 million of which ~~$4.8~~$5.1 million was the current portion and ~~$67.9~~$56.6 million was the non-current portion, both of which are included in the respective payable to the related party pursuant to tax receivable agreement line items on the consolidated balance ~~sheets.~~

sheets. The Company made a $4.8 million payment during the first quarter of 2021 and a $5.1 million payment during the fourth quarter of 2021 related to tax years 2019 and 2020, respectively.

We recorded a $1.0 million tax benefit in fiscal year 2021, a $6.8 million tax expense in fiscal year 2020 and a $0.1 million tax benefit in fiscal year 2019. The Tax Receivable Agreement liability adjustment in 2021 is a result of lower estimated state tax rates due to changes in apportionment, whereas in 2020 it is a result of higher state tax rates due to changes in apportionment.

The remaining tax life of these intangible assets is approximately 1412 years. The ultimate timing of payments of the ~~TRA~~Tax Receivable Agreement liability is uncertain due to the realization of the benefits from the ~~HTA~~related intangibles involving uncertainties in the amount and timing of our future taxable income. We expect to fund future payments through cash flow from operations.

Private Placement Warrant Liabilities

We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance under the Financial Accounting Standards Board (“FASB”) ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own common shares, among other conditions for equity classification.

For warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. Our Public Warrants meet the criteria for equity classification and accordingly, are reported as a component of shareholders’ equity while our Private Placement Warrants do not meet the criteria for equity classification and are instead classified as a liability. The fair value of the Private Placement Warrants is estimated at period-end using a Black-Scholes option pricing model, which is a Level 3 fair value measurement exposed to valuation risk. The risk of exposure is estimated using a sensitivity analysis of potential changes in the significant unobservable inputs, primarily the volatility input that is the most susceptible to valuation risk. A 5% increase to the volatility input at December 31, 2021 would increase the estimated fair value of $5.77 by $0.30 per unit. A 5% decrease to the volatility input at December 31, 2021 would decrease the estimated fair value by $0.30 per unit.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, refer to Note 2, Significant Accounting Policies, in Item 8, Financial Statements and Supplementary Data.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to interest rate market risk due to the variable interest rate on the ~~New First Lien~~2021 Term Loan and revolving borrowings described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital ~~Resources~~Resources.”.”

Interest rate risk represents our exposure to fluctuations in interest rates associated with the variable rate debt represented by the ~~New First Lien~~2021 Term Loan, which has an outstanding balance of ~~$865.6~~$895 million at December 31, ~~2020. We refinanced the entire amount outstanding on the New First Lien~~2021. The 2021 Term Loan ~~in February 2020 which reduced the previous applicable margin by 50 basis points. The New First Lien Term Loan now~~presently bears interest based, at our option, on either (1) LIBOR plus an applicable margin of 3.25% per annum, or (2) an alternate base rate plus an applicable margin of 2.25% per annum. At December 31, ~~2020,~~2021, the interest rate on the ~~New First Lien~~2021 Term Loan was ~~3.4%~~3.6%. Based on the December 31, ~~2020~~2021 balance outstanding, each 1% movement in interest rates will result in an approximately ~~$8.7~~$9.2 million change in annual interest expense.

We have not engaged in any hedging activities during fiscal year ~~2020.~~2021. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.

VERRA MOBILITY CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Item 8. Financial Statements and Supplementary Data

~~VERRA MOBILITY CORPORATION~~

~~INDEX TO CONSOLIDATED FINANCIAL STATEMENTS~~



	Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)	6763
Consolidated Balance Sheets	7067
Consolidated Statements of Operations and Comprehensive Income (Loss) ~~Income~~	7168
Consolidated Statements of Stockholders’ Equity	7269
Consolidated Statements of Cash Flows	7370
Notes to Consolidated Financial Statements	7572

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Verra Mobility Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Verra Mobility Corporation (the Company) as of December 31, ~~2020~~2021 and ~~2019,~~2020, and the related consolidated statements of operations and comprehensive income (loss) ~~income,~~, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, ~~2020,~~2021, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, ~~2020~~2021 and ~~2019,~~2020, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2020,~~2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, ~~2020,~~2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated ~~March 1, 2021~~April 22, 2022 expressed an ~~unqualified~~adverse opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Commercial Services Revenue

Description of the Matter

As described in Notes 2 and 18 to the consolidated financial statements, the Company generated commercial services revenue of ~~$180.9~~$260.9 million for the year ended December 31, ~~2020.~~2021.

The ~~Company‘s~~Company's commercial services revenue recognition process involves several applications and data sources needed for the initiation, processing, and recording of transactions from the Company’s various commercial services revenue sources, as well as the calculation of commercial services revenue in accordance with the Company’s accounting policy. Auditing the Company's accounting for commercial services revenue from contracts with customers was challenging and complex primarily due to the high volume of transactions, as well as the multiple applications and data sources associated with the commercial services revenue recognition process.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over the commercial services revenue recognition process. This included testing controls over the completeness and accuracy of data within the commercial services revenue systems, the interfaces of data between relevant systems, testing of relevant IT application controls and testing of relevant IT general controls over the IT applications supporting the commercial services revenue recognition process.

To test the Company’s accounting for commercial services revenue from contracts with customers, we performed substantive audit procedures that included, among others, testing on a sample basis the completeness and accuracy of the underlying data within the commercial services revenue systems, performing data analytics to test recorded revenue amounts, tracing a sample of sales transactions to supporting documentation, and testing a sample of cash to billings reconciliations.

~~Goodwill impairment considerations~~Business Combinations

Description of the Matter

As described in ~~Notes 2 and 6~~Note 3 to the consolidated financial statements, during 2021, the Company completed ~~interim quantitative goodwill impairment tests as~~two business combinations, (1) T2 Systems Parent Corporation for total purchase consideration of ~~March 31, 2020~~$353.2 million and June 30, 2020, due to identified triggering events. Fair value is estimated by management based on an income approach using a discounted cash flow model which is corroborated with an implied fair value(2) Redflex Holdings Limited for total purchase consideration of $117.9 million.

Auditing management’s accounting for the reporting units using a market-based approach. Based upon the results of its interim impairment tests, the Company concluded that the fair values of both the commercial services and government solutions reporting units exceeded their carrying values.

~~Auditing the interim quantitative goodwill impairment analyses~~acquisition was complex due to the significant estimation uncertainty in determining the fair ~~values~~value of certain acquired finite-lived intangible assets, specifically the customer relationships related to T2 Systems Parent Corporation totaling $164.3 million and the customer relationships of Redflex Holdings Limited totaling $25.9 million. These customer relationship intangible assets were valued using an income-based approach. The fair value determination of the ~~commercial services~~acquired customer relationship intangible assets required management to make estimates and ~~government solutions reporting units. The~~ significant assumptions ~~used to form the basis of the forecasted results included~~regarding future cash flows, including revenue growth rates, ~~operating margins,~~earnings metrics, and discount ~~rates and long-term growth rates.~~rate. These significant assumptions were forward-looking and could be affected by future market and economic ~~and market conditions, including the COVID-19 pandemic.~~conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over its interim goodwill impairment assessments. This included testing controls over the estimation process supporting management’s judgment and evaluation of underlying assumptions and estimates with regards to the fair values of each reporting unit.

To test the estimated fair ~~values~~value of ~~each reporting unit,~~the customer relationship intangible assets, our audit procedures included, among others, assessing the ~~evaluation of~~fair value methodology used by the ~~Company’s valuation methodology~~Company and testing of the significant assumptions ~~described above.~~and the underlying data used by the Company in its analyses. For example, we compared the significant assumptions used to current industry, market and ~~market~~economic trends, ~~analyst reports, historical actuals and annual financial forecasts presented~~ to the ~~Board~~historical results of ~~Directors.~~the acquired businesses, and to other guideline companies. We also performed sensitivity analyses ~~of these~~over the significant assumptions used to evaluate the changes in the fair value of each estimate that would result from changes in the assumptions. We ~~also evaluated the reconciliation of the estimated aggregate fair value of the reporting units to the market capitalization of the Company. Additionally, we~~ tested the completeness and accuracy of the underlying data ~~supporting~~used in the ~~significant~~valuation. We involved firm valuation specialists to assist us in our evaluation of the Company’s valuation model, related assumptions and ~~estimates.~~outputs of the valuation model.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2013.

Phoenix, Arizona

~~March 1, 2021~~April 22, 2022

6864

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Verra Mobility Corporation

Opinion on Internal Control over Financial Reporting

We have audited Verra Mobility Corporation’s internal control over financial reporting as of December 31, ~~2020,~~2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, Verra Mobility Corporation (the Company) has not maintained ~~in all material respects,~~ effective internal control over financial reporting as of December 31, ~~2020,~~2021, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Redflex Holdings Limited and T2 Systems Parent Corporation, which is included in the 2021 consolidated financial statements of the Company and constituted approximately 7.4% of total assets as of December 31, 2021 and approximately 8.2% of revenues for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Redflex Holdings Limited and T2 Systems Parent Corporation.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment. Management identified a material weakness related to the Company’s monitoring activities over the acquisition of Redflex Holdings Limited, a material weakness related to control activities over the acquisition of Redflex Holdings Limited and a material weakness related to controls specific to a third-party application.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, ~~2020~~2021 and ~~2019,~~2020, and the related consolidated statements of operations and comprehensive income (loss) ~~income,~~, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, ~~2020,~~2021, and the related notes and the financial statement schedule listed in the Index at Item 15(a) and our report dated ~~March 1, 2021~~April 22, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Phoenix, Arizona

~~March 1, 2021~~April 22, 2022

VERRA MOBILITY CORPORATION

CONSOLIDATED BALANCE SHEETS

($ in thousands except per share data)	December 31, 2020			December 31, 2019

(In thousands, except per share data)							December 31, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	120,259		$	131,513		$	101,283		$	120,259
Restricted cash		633			917			3,149			633
Accounts receivable (net of allowance for credit loss of $11.5 million and $7.6 million at December 31, 2020 and 2019, respectively)		168,783			93,514
Accounts receivable (net of allowance for credit losses of $12.1 million and $11.5 million at December 31, 2021 and 2020, respectively)								160,979			168,783
Unbilled receivables		14,045			20,003			29,109			14,045
Inventory, net								12,093			113
Prepaid expenses and other current assets		24,317			26,491			41,456			24,204
Total current assets		328,037			272,438			348,069			328,037
Installation and service parts, net		7,944			8,841			13,332			7,944
Property and equipment, net		70,284			72,266			96,066			70,284
Operating lease assets		29,787			32,177			38,862			29,787
Intangible assets, net		342,139			434,443			487,299			342,139
Goodwill		586,435			584,150			838,867			586,435
Other non-current assets		2,699			3,111			14,561			2,699
Total assets	$	1,367,325		$	1,407,426		$	1,837,056		$	1,367,325
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	34,509		$	50,825		$	67,556		$	34,509
Deferred revenue								27,141			749
Accrued liabilities		15,636			19,547			38,435			14,887
Payable to related party pursuant to tax receivable agreement, current portion		4,791			5,730			5,107			4,791
Current portion of long-term debt		9,104			28,779			36,952			9,104
Total current liabilities		64,040			104,881			175,191			64,040
Long-term debt, net of current portion		832,941			837,686			1,206,802			832,941
Operating lease liabilities, net of current portion		27,986			30,130			34,984			27,986
Payable to related party pursuant to tax receivable agreement, net of current portion		67,869			61,174			56,615			67,869
Private placement warrant liabilities								38,466			30,866
Asset retirement obligation		6,409			6,309			11,824			6,409
Deferred tax liabilities, net		21,148			25,716			47,524			21,148
Other long-term liabilities		494			2,183			5,686			494
Total liabilities		1,020,887			1,068,079			1,577,092			1,051,753
Commitments and contingencies (Note 17)
Stockholders' equity
Preferred stock, $.0001 par value, 1,000 shares authorized with 0 shares issued and outstanding at December 31, 2020 and 2019		—			—
Common stock, $.0001 par value, 260,000 shares authorized with 162,269 and 159,150 shares issued and outstanding at December 31, 2020 and 2019, respectively		16			16
Preferred stock, $0.0001 par value, 1,000 shares authorized with 0 shares issued and outstanding at December 31, 2021 and 2020								—			—
Common stock, $0.0001 par value, 260,000 shares authorized with 156,079 and 162,269 shares issued and outstanding at December 31, 2021 and 2020, respectively								16			16
Common stock contingent consideration		36,575			54,862			36,575			36,575
Additional paid-in capital		393,995			367,266			309,883			373,620
Accumulated deficit		(84,359	)		(80,220	)		(81,416	)		(94,850	)
Accumulated other comprehensive income (loss)		211			(2,577	)
Accumulated other comprehensive (loss) income								(5,094	)		211
Total stockholders' equity		346,438			339,347			259,964			315,572
Total liabilities and stockholders' equity	$	1,367,325		$	1,407,426		$	1,837,056		$	1,367,325

See accompanying Notes to Consolidated Financial Statements.

7067

VERRA MOBILITY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS) ~~INCOME~~

	For the Year Ended December 31,
(In thousands, except per share data)	2020			2019			2018
										For the Year Ended December 31,
($ in thousands, except per share data)										2021			2020			2019
Service revenue	$	336,274		$	416,723		$	365,076		$	492,846		$	336,274		$	416,723
Product sales		57,319			32,014			5,070			57,744			57,319			32,014
Total revenue		393,593			448,737			370,146			550,590			393,593			448,737
Cost of service revenue		3,967			5,561			5,788			5,337			3,967			5,561
Cost of product sales		29,573			13,919			3,447			29,809			29,573			13,919
Operating expenses		115,729			125,640			108,883			163,370			115,729			125,640
Selling, general and administrative expenses		89,664			85,493			136,069			123,407			89,664			85,493
Depreciation, amortization and (gain) loss on disposal of assets, net		116,844			115,771			103,353			116,801			116,844			115,771
Impairment of property and equipment		—			5,898			—			—			—			5,898
Total costs and expenses		355,777			352,282			357,540			438,724			355,777			352,282
Income from operations		37,816			96,455			12,606			111,866			37,816			96,455
Interest expense, net		40,865			60,729			69,550			44,942			40,865			60,729
Change in fair value of private placement warrants											7,600			1,133			16,267
Tax receivable agreement liability adjustment		6,850			(106	)		—			(1,016	)		6,850			(106	)
Loss on extinguishment of debt		—			—			26,486			5,334			—			—
Other income, net		(11,885	)		(11,092	)		(8,795	)		(12,895	)		(11,885	)		(11,092	)
Total other expenses		35,830			49,531			87,241			43,965			36,963			65,798
Income (loss) before income tax provision (benefit)		1,986			46,924			(74,635	)
Income tax provision (benefit)		5,431			13,581			(16,241	)
Net (loss) income	$	(3,445	)	$	33,343		$	(58,394	)
Other comprehensive income (loss):
Income before income taxes											67,901			853			30,657
Income tax provision											26,452			5,431			13,581
Net income (loss)										$	41,449		$	(4,578	)	$	17,076
Other comprehensive (loss) income:
Change in foreign currency translation adjustment		2,788			3,244			(5,821	)		(5,305	)		2,788			3,244
Total comprehensive (loss) income	$	(657	)	$	36,587		$	(64,215	)
Net (loss) income per share:
Total comprehensive income (loss)										$	36,144		$	(1,790	)	$	20,320
Net income (loss) per share:
Basic	$	(0.02	)	$	0.21		$	(0.67	)	$	0.26		$	(0.03	)	$	0.11
Diluted	$	(0.02	)	$	0.21		$	(0.67	)	$	0.25		$	(0.03	)	$	0.11
Weighted average shares outstanding:
Basic		161,632			157,890			87,320			159,983			161,632			157,890
Diluted		161,632			161,522			87,320			163,778			161,632			160,080

See accompanying Notes to Consolidated Financial Statements.

7168

VERRA MOBILITY CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


	Common Stock					Common Stock Contingent			Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
(In thousands)	Shares			Amount		Consideration			Capital			Deficit			(Loss) Income			Equity
Balance as of December 31, 2018		156,057		$	16	$	73,150		$	327,642		$	(106,397	)	$	(5,821	)	$	288,590
Net income		—			—		—			—			17,076			—			17,076
Cumulative effect of adoption of the new revenue accounting standard		—			—		—			—			(257	)		—			(257	)
Adjustment to equity infusion from Gores		—			—		—			(7,001	)		—			—			(7,001	)
Adjustment to tax receivable agreement liability		—			—		—			2,940			—			—			2,940
Earn-out shares issued to Platinum Stockholder		2,500			—		(18,288	)		18,288			—			—			—
Vesting of restricted stock units ("RSUs")		593			—		—			—			—			—			—
Payment of employee tax withholding related to RSUs vesting		—			—		—			(4,990	)		—			—			(4,990	)
Stock-based compensation		—			—		—			10,012			—			—			10,012
Other comprehensive income		—			—		—			—			—			3,244			3,244
Balance as of December 31, 2019		159,150		$	16	$	54,862		$	346,891		$	(89,578	)	$	(2,577	)	$	309,614
Net loss		—			—		—			—			(4,578	)		—			(4,578	)
Cumulative effect of adoption of the credit loss accounting standard, net of tax		—			—		—			—			(694	)		—			(694	)
Earn-out shares issued to Platinum Stockholder		2,500			—		(18,287	)		18,287			—			—			—
Vesting of RSUs		619			—		—			—			—			—			—
Payment of employee tax withholding related to RSUs vesting		—			—		—			(4,147	)		—			—			(4,147	)
Stock-based compensation		—			—		—			12,589			—			—			12,589
Other comprehensive income, net of tax		—			—		—			—			—			2,788			2,788
Balance as of December 31, 2020		162,269		$	16	$	36,575		$	373,620		$	(94,850	)	$	211		$	315,572
Net income		—			—		—			—			41,449			—			41,449
Share repurchase and retirement		(6,849	)		—		—			(71,985	)		(28,015	)		—			(100,000	)
Vesting of RSUs		647			—		—			—			—			—			—
Exercise of stock options		12			—		—			155			—			—			155
Payment of employee tax withholding related to RSUs vesting		—			—		—			(5,691	)		—			—			(5,691	)
Stock-based compensation		—			—		—			13,784			—			—			13,784
Other comprehensive loss, net of tax		—			—		—			—			—			(5,305	)		(5,305	)
Balance as of December 31, 2021		156,079		$	16	$	36,575		$	309,883		$	(81,416	)	$	(5,094	)	$	259,964

Common
Stock

Common
Stock
Contingent

Additional
Paid-in

Accumulated

Accumulated
Other
Comprehensive

Total
Stockholders'

(In thousands)

Shares

Amount

Consideration

Capital

Deficit

Income (Loss)

Equity

Balance as of December 31, 2017

60,484

$
6

$
—

$
129,020

$
18,238

$
—

$
147,264

Net loss

—

—

—

—

(58,394
)

—

(58,394
)
Stock issued in exchange for business acquisitions

12,420

1

—

117,554

—

—

117,555

Equity infusion from Gores

39,675

4

—

403,290

—

—

403,294

Private placement

43,478

5

—

399,995

—

—

400,000

Gores Holdings rollover equity

—

—

—

(34
)

—

—

(34
)
Capital contribution from Greenlight

—

—

—

169,259

—

—

169,259

Return of capital to Greenlight stockholders

—

—

—

(779,270
)

—

—

(779,270
)
Common stock contingent consideration

—

—

73,150

—

(73,150
)

—

—

Tax receivable payable to Greenlight stockholders

—

—

—

(69,996
)

—

—

(69,996
)
Underwriting fees

—

—

—

(15,345
)

—

—

(15,345
)
Transaction costs incurred by Gores

—

—

—

(8,728
)

—

—

(8,728
)
Stock-based compensation

—

—

—

2,272

—

—

2,272

Other comprehensive loss

—

—

—

—

—

(5,821
)

(5,821
)
Balance as of December 31, 2018

156,057

$
16

$
73,150

$
348,017

$
(113,306
)

$
(5,821
)

$
302,056

Net income

—

—

—

—

33,343

—

33,343

Cumulative effect of adoption of the new revenue accounting standard

—

—

—

—

(257
)

—

(257
)
Adjustment to equity infusion from Gores

—

—

—

(7,001
)

—

—

(7,001
)
Adjustment to tax receivable agreement liability

—

—

—

2,940

—

—

2,940

Earn-out shares issued to Platinum Stockholder

2,500

—

(18,288
)

18,288

—

—

—

Vesting of restricted stock units ("RSUs")

593

—

—

—

—

—

—

Payment of employee tax withholding related to RSUs vesting

—

—

—

(4,990
)

—

—

(4,990
)
Stock-based compensation

—

—

—

10,012

—

—

10,012

Other comprehensive income

—

—

—

—

—

3,244

3,244

Balance as of December 31, 2019

159,150

$
16

$
54,862

$
367,266

$
(80,220
)

$
(2,577
)

$
339,347

Net loss

—

—

—

—

(3,445
)

—

(3,445
)
Cumulative effect of adoption of the credit loss accounting standard, net of tax

—

—

—

—

(694
)

—

(694
)
Earn-out shares issued to Platinum Stockholder

2,500

—

(18,287
)

18,287

—

—

—

Vesting of RSUs

619

—

—

—

—

—

—

Payment of employee tax withholding related to RSUs vesting

—

—

—

(4,147
)

—

—

(4,147
)
Stock-based compensation

—

—

—

12,589

—

—

12,589

Other comprehensive income, net of tax

—

—

—

—

—

2,788

2,788

Balance as of December 31, 2020

162,269

$
16

$
36,575

$
393,995

$
(84,359
)

$
211

$
346,438

See accompanying Notes to Consolidated Financial Statements.

7269

VERRA MOBILITY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Year Ended December 31,
($ in thousands)	2021			2020			2019
Cash Flows from Operating Activities:
Net income (loss)	$	41,449		$	(4,578	)	$	17,076
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		116,753			116,570			115,566
Amortization of deferred financing costs and discounts		5,170			5,437			6,641
Impairment of property and equipment		—			—			5,898
Change in fair value of private placement warrants		7,600			1,133			16,267
Tax receivable agreement liability adjustment		(1,016	)		6,850			(106	)
Loss on extinguishment of debt		5,334			—			—
Credit loss expense		9,588			14,391			8,100
Deferred income taxes		(10,640	)		(4,746	)		(10,894	)
Stock-based compensation		13,784			12,589			10,012
Other		308			1,210			1,721
Changes in operating assets and liabilities:
Accounts receivable, net		14,946			(90,592	)		(12,662	)
Unbilled receivables		(7,753	)		5,964			(6,428	)
Inventory, net		2,798			—			—
Prepaid expenses and other assets		(5,097	)		3,829			(7,150	)
Deferred revenue		(3,966	)		58			316
Accounts payable and other current liabilities		8,296			(16,925	)		(8,510	)
Other liabilities		(4,383	)		(4,281	)		(2,045	)
Net cash provided by operating activities		193,171			46,909			133,802
Cash Flows from Investing Activities:
Acquisitions, net of cash and restricted cash acquired		(451,237	)		—			(25,519	)
Purchases of installation and service parts and property and equipment		(24,998	)		(24,260	)		(29,685	)
Cash proceeds from the sale of assets		265			107			231
Net cash used in investing activities		(475,970	)		(24,153	)		(54,973	)
Cash Flows from Financing Activities:
Borrowings on revolver		25,000			—			—
Borrowings of long-term debt		1,245,500			—			—
Repayment of long-term debt		(884,530	)		(28,779	)		(9,104	)
Payment of debt issuance costs		(10,646	)		(1,078	)		(426	)
Payment of debt extinguishment costs		(1,066	)		—			—
Share repurchase and retirement		(100,000	)		—			—
Proceeds from exercise of stock options		155			—			—
Payment of employee tax withholding related to RSUs vesting		(5,691	)		(4,147	)		(4,990	)
Net cash provided by (used in) financing activities		268,722			(34,004	)		(14,520	)
Effect of exchange rate changes on cash and cash equivalents		(2,383	)		(290	)		1,040
Net (decrease) increase in cash, cash equivalents and restricted cash		(16,460	)		(11,538	)		65,349
Cash, cash equivalents and restricted cash - beginning of period		120,892			132,430			67,081
Cash, cash equivalents and restricted cash - end of period	$	104,432		$	120,892		$	132,430

Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets
Cash and cash equivalents	$	101,283		$	120,259		$	131,513
Restricted cash		3,149			633			917
Total cash, cash equivalents, and restricted cash	$	104,432		$	120,892		$	132,430

For the Year Ended December 31,

($ in thousands)

2020

2019

2018

Cash Flows from Operating Activities:

Net (loss) income

$
(3,445
)

$
33,343

$
(58,394
)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

116,570

115,566

103,346

Amortization of deferred financing costs and discounts

5,437

6,641

9,168

Impairment of property and equipment

—

5,898

—

Tax receivable agreement liability adjustment

6,850

(106
)

—

Credit loss expense

14,387

8,100

6,025

Deferred income taxes

(4,746
)

(10,894
)

(24,435
)
Stock-based compensation

12,589

10,012

2,272

Loss on extinguishment of debt

—

—

26,486

Installation and service parts expense

677

1,166

1,238

Accretion expense

259

350

396

Loss on disposal of assets

274

205

7

Changes in operating assets and liabilities:

Accounts receivable, net

(90,588
)

(12,662
)

(23,721
)
Unbilled receivables

5,964

(6,428
)

(6,124
)
Prepaid expenses and other assets

3,829

(7,150
)

2,115

Accounts payable and accrued liabilities

(16,867
)

(8,194
)

7,125

Other liabilities

(4,281
)

(2,045
)

513

Net cash provided by operating activities

46,909

133,802

46,017

Cash Flows from Investing Activities:

Acquisitions, net of cash and restricted cash acquired

—

(25,519
)

(536,699
)
Purchases of installation and service parts and property and equipment

(24,260
)

(29,685
)

(26,576
)
Cash proceeds from the sale of assets

107

231

418

Net cash used in investing activities

(24,153
)

(54,973
)

(562,857
)
Cash Flows from Financing Activities:

Borrowings on revolver

—

—

468

Repayment on revolver

—

—

(468
)
Borrowings of long-term debt

—

—

1,103,800

Repayment of long-term debt

(28,779
)

(9,104
)

(654,851
)
Payment of debt issuance costs

(1,078
)

(426
)

(31,753
)
Payment of debt extinguishment costs

—

—

(12,187
)
Payment of employee tax withholding related to RSUs vesting

(4,147
)

(4,990
)

—

Capitalization from merger with Gores Holdings

—

—

803,294

Payment of underwriting and transaction costs

—

—

(24,024
)
Capital contribution from Greenlight

—

—

169,259

Distribution to selling shareholders

—

—

(779,270
)
Net cash (used in) provided by financing activities

(34,004
)

(14,520
)

574,268

Effect of exchange rate changes on cash and cash equivalents

(290
)

1,040

(856
)
Net (decrease) increase in cash, cash equivalents and restricted cash

(11,538
)

65,349

56,572

Cash, cash equivalents and restricted cash - beginning of period

132,430

67,081

10,509

Cash, cash equivalents and restricted cash - end of period

$
120,892

$
132,430

$
67,081

See accompanying Notes to Consolidated Financial Statements.

7370

VERRA MOBILITY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)


	For the Year Ended December 31,
	2021		2020		2019
Supplemental cash flow information:
Interest paid	$	35,786	$	35,822	$	55,197
Income taxes paid, net of refunds		35,774		12,638		24,357
Supplemental non-cash investing and financing activities:
Earn-out shares issued to Platinum Stockholder		—		18,287		18,288
Additions related to asset retirement obligations, property and equipment, and other (a)		1,397		133		230
Purchases of installation and service parts and property and equipment in accounts payable and accrued liabilities at year-end		1,714		1,289		4,204
Contingent consideration related to NuPark acquisition		1,450		—		—
Tenant improvement allowance included in property and equipment		—		—		581
Gores equity infusion working capital adjustment payable to related party		—		—		7,001
Reduction to tax receivable agreement liability		—		—		2,940

(a) Asset retirement obligations of $3.9 million assumed as part of the Redflex acquisition are excluded from these additions.

For the Year Ended December 31,

2020

2019

2018

Supplemental cash flow information:

Interest paid
$
35,822

$
55,197

$
60,441

Income taxes paid, net of refunds

12,638

24,357

762

Supplemental non-cash investing and financing activities:

Earn-out shares issued to Platinum Stockholder

18,287

18,288

—

Additions to ARO, property and equipment, and other

133

230

147

Purchases of installation and service parts and property and equipment in accounts payable and accrued liabilities at year-end

1,289

4,204

3,179

Tenant improvement allowance included in property and equipment

—

581

—

Gores equity infusion working capital adjustment payable to related party

—

7,001

—

Reduction to tax receivable agreement liability

—

2,940

—

Capital contributions received in Greenlight Acquisition Corporation common stock

—

—

117,555

Tax receivable agreement established upon merger

—

—

69,996

See accompanying Notes to Consolidated Financial Statements.

7471

VERRA MOBILITY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Description of Business

~~Description of Business~~

Verra Mobility Corporation (collectively with its subsidiaries, the “Company” or “Verra Mobility”), formerly known as Gores Holdings II, Inc. (“Gores”), was originally incorporated in Delaware on August 15, 2016, as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses. On January 19, 2017, the Company consummated its initial public offering (the “IPO”), following which its shares began trading on the Nasdaq Capital Market (“Nasdaq”). On June 21, 2018, Gores entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with Greenlight Holding II Corporation (“Greenlight”), PE Greenlight Holdings, LLC, AM Merger Sub I, Inc., a direct, ~~wholly-owned~~wholly owned subsidiary of Gores and AM Merger Sub II, LLC, a direct, ~~wholly-owned~~wholly owned subsidiary of Gores. On October 17, 2018, the transactions contemplated by the Merger Agreement (the “Business Combination”) were consummated. In connection with the closing of the Business Combination, Gores changed its name to Verra Mobility Corporation. As a result of the Business Combination, Verra Mobility Corporation became the owner, directly or indirectly, of all of the equity interests of Verra Mobility Holdings, LLC and its subsidiaries.

Verra Mobility offers integrated technology solutions and services to ~~commercial fleets, rental car companies and state and local governments. The Company has~~its customers who are located throughout the world, primarily within the United States, Australia, Canada and Europe. The Company is organized into 23 operating segments: Commercial Services, Government Solutions and ~~Government~~Parking Solutions (see Note 18).

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

The Government Solutions segment offers photo enforcement solutions and services to its customers. Through its acquisition of Redflex Holdings Limited (“Redflex”) on June 17, 2021, the Company expanded its current footprint in the United States and gained access to international markets (see Note 3. Acquisitions). The Government Solutions segment provides complete, end-to-end speed, red-light, ~~speed,~~ school bus stop arm and bus lane enforcement ~~solutions. The Company’s~~solutions within the United States and Canada. These programs are designed to reduce traffic violations and resulting collisions, injuries, and fatalities. The Company implements and administers traffic safety programs for municipalities, counties, school districts and law enforcement agencies of all sizes. The international operations acquired through Redflex primarily involve the sale of traffic enforcement products and related maintenance services.

The Parking Solutions segment offers an integrated suite of parking software and hardware solutions to its customers which include universities, municipalities, parking operators, healthcare facilities and transportation hubs. The Company added this new operating segment as a result of the acquisition of T2 Systems Parent Corporation (“T2 Systems”) on December 7, 2021, which allows the Company to diversify its operations into the parking solutions space (see Note 3. Acquisitions). The Parking Solutions segment develops specialized hardware and parking management software which provides a platform for the issuance of parking permits, enforcement, gateless vehicle counting, event parking and citation services. T2 Systems also produces and markets its proprietary software as a service to its customers throughout the United States and Canada.

The accompanying consolidated financial statements include the accounts of the Company prepared in accordance with ~~GAAP.~~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 consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.

Accounts receivable and unbilled receivables are uncollateralized customer obligations arising from the sale of products or services. Accounts receivable and unbilled receivables have normal trade terms of less than one year and are initially stated at the amounts billed to the customers and subsequently measured at amortized cost net of allowance for credit ~~loss.~~losses. Unbilled receivables are recorded when revenues have been earned but have not been included on a customer invoice through the end of the current period. ~~Unbilled receivables generally represents commercial tolls and violations paid by the Company on a behalf of rental car and fleet management customers that will be invoiced in future periods.~~

The Company reviews historical ~~loss rates,~~credit losses and customer payment trends on receivables and ~~collection rates on customer balances in accordance with the new current expected credit losses (“CECL”) standard implemented on January 1, 2020. Estimated~~develops loss ~~rates are developed~~rate estimates as of the balance sheet date, ~~using historical credit loss experience, adjusted~~which includes adjustments for current and future expectations using probability-weighted assumptions about potential outcomes. Receivables are written off against the allowance for credit ~~loss~~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. NaN interest or late fees are charged on delinquent accounts. The Company periodically evaluates the adequacy of its allowance for expected credit losses by comparing its actual historical write-offs to its previously recorded estimates, and adjusts appropriately.

Installation and service parts consist of components used in the construction and maintenance of our photo enforcement systems. Installation and service parts are stated at cost and are reclassified to property and equipment upon initiation of construction. Installation and service parts used in repairs and maintenance are recorded inas operating expenses.

Depreciation expense was ~~$23.1~~$26.8 million, ~~$22.8~~$23.1 million and ~~$22.5~~$22.8 million for the fiscal years ended December 31, 2021, 2020 ~~2019~~ and ~~2018,~~2019, respectively, including depreciation related to costs to develop or implement software for internal use of ~~$4.3~~$4.4 million, ~~$3.8~~$4.3 million and ~~$2.9~~$3.8 million for the fiscal years ended December 31, 2021, 2020 and 2019, respectively.

Amortization expense was ~~$93.5~~$89.9 million, ~~$92.8~~$93.5 million and ~~$80.8~~$92.8 million for fiscal years ended December 31, 2021, 2020 and 2019, ~~and 2018,~~ respectively.

The following table presents the aggregate principal and interest payments in future years on long-term debt atas of December 31, ~~2020:~~2021:

(1) This excludes $2.9 million principal related to the PPP Loan that is expected to be forgiven, as discussed below.

(2) The variable interest rates in effect as of December 31, 2021, was used to calculate interest payments for the 2021 Term Loan and the Revolver borrowings.

In ~~connection with an acquisition,~~ March 2021, VM Consolidated, Inc., ~~our wholly-owned~~the Company’s wholly owned subsidiary, entered into aan Amendment and Restatement Agreement No.1 to the First Lien Term Loan Credit Agreement (the “~~New First Lien~~ 2021Term Loan~~”), a Second Lien Term Loan Credit Agreement (the “New Second Lien Term Loan” and together with the New First Lien Term Loan, the “New Term Loans”) and a Revolving Credit Agreement (the “New Revolver~~,” ~~and together with the New Term Loans, the “2018 Credit~~

~~Facilities~~”) with a syndicate of lenders. The 2021 Term Loan has an aggregate borrowing of $650 ~~The 2018 Credit Facilities initially provided~~million, maturing on March 26, 2028, and an accordion feature providing for ~~committed senior secured~~an additional $250 million of term loans, subject to satisfaction of certain requirements. In connection with the 2021 Term Loan, the Company had an offering discount cost of $3.3 million and

$0.7 million of deferred financing costs, both of ~~$1.115 billion, consisting~~which were capitalized and are amortized over the remaining life of the 2021 Term Loan.

In addition, in March 2021, VM Consolidated, Inc. issued an aggregate principal amount of ~~$1.04 billion under~~$350 million in Senior Unsecured Notes (the “Senior Notes”), due on April 15, 2029. In connection with the ~~New Term Loans~~issuance of the Senior Notes, the Company incurred $5.7 million in lender and ~~an aggregate revolving commitment~~third-party costs, which were capitalized as deferred financing costs and are being amortized over the remaining life of ~~up to $75 million available for loans and letters of credit under~~ the ~~New Revolver (subject to borrowing eligibility requirements as described below).~~ Senior Notes.

The net proceeds from both the ~~New First Lien~~2021 Term Loan ~~to expand~~and the ~~aggregate principal loan amount from $840 million to $910 million. The additional $70 million, along with funds contributed by Platinum Equity, LLC,~~Senior Notes received in March 2021 were used to repay ~~the $200 million New Second Lien Term Loan~~ in full ~~contemporaneously with~~all outstanding debt which was represented by the ~~closing of the Business Combination on October 17, 2018. The New First Lien Term Loan represents the only debt outstanding under the 2018 Credit Facilities as of December 31, 2020.~~

~~The 2018 Credit Facilities replaced the previous~~ First Lien Term Loan Credit Agreement ~~(the ��Old First Lien”),~~(as amended, the ~~Second Lien~~“2018 Term Loan ~~Credit Agreement (the “Old Second Lien~~”) with a balance of $865.6 million.

On December 7, 2021, VM Consolidated Inc, entered into an agreement to exercise the accordion feature under the 2021 Term Loan, borrowing $250 million in incremental term loans (“Incremental Term Loan” ~~and together~~). The proceeds from the Incremental Term Loan were used, along with cash on hand, to fund the acquisition of T2 Systems, including repaying in full all outstanding debt for T2 Systems. In connection with the ~~Old First Lien,~~Incremental Term Loan, the “~~Old Term Loans~~Company had an offering discount cost of $”1.3), million and $3.8 million of deferred financing costs, both of which were ~~repaid concurrent with~~capitalized and are amortized over the ~~closing on~~remaining life of the ~~2018 Credit Facilities, and a preexisting Revolving Credit Agreement (the “Old Revolver”, collectively with the Old~~2021 Term ~~Loans, the “2017 Credit Facilities”) which was undrawn at close.~~Loan. The ~~outstanding balances at~~Incremental Term Loan accrued interest from the date of ~~close on~~borrowing until December 31, 2021, at which time, it was combined with the ~~Old~~2021 Term ~~Loans,~~Loan to be a single tranche of term loan borrowings. The total principal outstanding under the 2021 Term Loan, which ~~were repaid in full with proceeds from~~includes the ~~2018 Credit Facilities were $323~~Incremental Term Loan, was $895.1 million ~~and $125 million, respectively.~~at December 31, 2021.

The ~~New First Lien~~2021 Term Loan is repayable at ~~1.0%~~1.0% per annum of the amount initially borrowed, paid in quarterly installments. The New First Lien Term Loan matures on February 28, 2025. The Company refinanced the entire outstanding amount under the New First Lien Term Loan on February 20, 2020, which reduced the previous applicable margin by 50 basis points. The New First Lien Term Loan nowIt bears interest based, at ~~our~~the Company’s option, on either (1) LIBOR plus an applicable margin of ~~3.25%~~3.25% per annum, or (2) an alternate base rate plus an applicable margin of ~~2.25%~~2.25% per annum. As of December 31,~~, 2020,~~ 2021, the interest rate on the ~~New First Lien~~2021 Term Loan was ~~3.4~~3.6%.

~~The Company adopted the leases guidance under ASC 842,~~ ~~Leases, as of January 1, 2019.~~ The Company’s operating leases primarily consist of office and ~~data center space~~equipment leases expiring at various dates through April 2035. The Company has lease agreements with lease and non-lease components and has elected to account for such components as a single lease component. The Company recognizes and measures contracts containing a lease and determines lease classification at commencement. Right of use operating assets and lease liabilities are measured based on the estimated present value of lease payments over the lease term. In determining the present value of lease payments, the Company used its estimated incremental borrowing rate when the rate implicit in the lease cannot be readily determined. The estimated incremental borrowing rate is based upon information available at lease commencement including publicly available data for debt instruments. The lease term includes periods covered by options to extend when it is reasonably certain the Company will exercise such options as well as periods subsequent to an option to terminate the lease if it is reasonably certain the Company will not exercise the termination option. Certain of the lease agreements have rent abatement and escalating rental payment provisions. Operating lease costs are recognized on a straight-line basis over the lease term. Variable lease costs are recognized as incurred. The Company’s lease agreements do not contain any material residual value guarantees or

material restrictive covenants. The Company does not have material short-term leases and does not engage in subleasing activities.

As of December 31, ~~2020,~~2021, operating leases have a remaining weighted average lease term of ~~12.2~~9.5 years and operating lease liabilities were measured using a weighted average discount rate of ~~5.4%~~4.9%. The total operating lease costs for the fiscal years ended December 31, 2021, 2020 and 2019 were ~~$5.3~~$7.5 million, $5.3 million and ~~$5.7~~$5.7 million, respectively. Variable lease costs for ~~the~~ fiscal years ended December 31, 2021 and 2020 were approximately ~~$1.1 million.~~$ ~~The~~1.4 million and $1.1 million, respectively. Finance leases for the Company ~~has one finance lease that is not material.~~are immaterial.

The following provides future maturities of operating lease liabilities as of December 31, ~~2020:~~2021:

Significant components of the Company’s deferred income tax assets and liabilities consist of the following at December 31:

In accordance with ASC 740, Income Taxes, deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets can be affected by, among other things, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the length of statutory carryforward periods, the Company’s experience with utilizing operating losses and tax credit carryforwards by jurisdiction, and tax planning alternatives and strategies that may be available.

The Company performed an analysis of the reversal of the deferred tax assets and considered the overall business environment, historical earnings and the outlook for future years. The Company determined that it is more likely than not that the benefit from certain state and foreign net operating loss carryforwards will not be realized as of the years ended December 31, ~~2020~~2021 and ~~2019,~~2020, and as such provided a valuation allowance of ~~$3.4~~$3.8 million and ~~$2.6~~$3.4 million, respectively. The valuation allowance could be adjusted in future periods if estimates of future taxable income during the carryforward period are increased or if objective negative evidence in the form of cumulative losses is no longer present.

The net operating loss carryforwards represent $~~$31.1~~158.7 million and ~~$25.5~~$31.1 million of federal, state and foreign net operating losses at December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. The federal net operating loss carryforward at December 31, 2021 consists of $12.1 million of losses that were generated prior to 2018 and will expire by 2036 if not previously utilized and $26.0 million of losses that were generated after 2017 with no expiration date. The Company also has certain tax credits of $~~$1.5~~6.4 million and ~~$1.8~~$1.5 million at December 31, ~~2020~~2021 and ~~2019,~~2020, respectively, which if unused will begin to expire in ~~2024.~~2025.

Included in the balance of unrecognized tax benefits as of December 31, ~~2020~~2021 were ~~$0.4~~$1.7 million of tax benefits that, if recognized, would impact the effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. The Company recognized ~~$1.0~~less than $0.1 million for fiscal year ~~2020~~2021 and ~~less than $0.1~~$1.0 million for fiscal year ~~2019,~~2020, in interest and penalties. At December 31, ~~2020~~2021 and ~~2019,~~2020, the Company had accrued interest and penalties of less than ~~$0.1~~$0.1 million ~~and $0.9 million, respectively.~~at the end of both periods. The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based on technical merits, it is more likely than not that the tax position will be sustained under examination.

The Company is subject to examination by the Internal Revenue Service and taxing authorities in various states. The ~~Company’s~~Company files U.S. federal and various foreign income tax returns ~~remain~~which are subject to examination by ~~tax~~the taxing authorities in the respective jurisdictions, generally for ~~the~~three or four years ~~2017 to 2019.~~after they are filed. The Company’s state income tax returns are generally no longer subject to income tax examination by tax authorities prior to ~~2016;~~2017; however, ~~our~~the Company’s net operating loss carryforwards and research credit carryforwards arising prior to that year are subject to adjustment. The Company is currently under audit by various state tax jurisdictions for the years 2018 and 2019, however, no material adjustments are anticipated. The Company regularly assesses the likelihood of tax deficiencies in each of the tax jurisdictions and, accordingly, makes appropriate adjustments to the tax provision as deemed necessary.

~~In conjunction with the Business Combination on October 17, 2018, the Company made changes to its capital stock.~~ The Company’s Amended and Restated Certificate of Incorporation authorizes the issuance of 261,000,000 shares of capital stock, consisting of (i) 260,000,000 shares of Class A Common Stock, and (ii) 1,000,000 shares of preferred stock, each at par value of ~~$0.0001~~$0.0001 per share. The outstanding shares of the Company’s common stock are duly authorized, validly issued, fully paid and non-assessable.

As of December 31, 2020, there were warrants outstanding to acquire 19,999,967 shares of the Company’s Class A Common Stock including: (i) 6,666,666 warrants originally issued to Gores Sponsor II, LLC in a private placement in connection with the IPO (the “~~Private Placement Warrants”); and (ii) 13,333,301 warrants issued in~~

~~connection with the IPO (the “Public Warrants” and, together with the Private Placement Warrants, the “Warrants”). The Warrants entitle the registered holder to purchase one share of our Class A Common Stock at a price of $11.50 per share, subject to certain adjustments.~~

~~The Warrants became exercisable on November 16, 2018, 30 days following the completion of the Business Combination, and expire five years after that date, or earlier upon redemption or liquidation.~~ The Company ~~may redeem the outstanding Warrants at~~authorized a ~~price of $0.01 per warrant, if the last sale price of its Class A Common Stock equals or exceeds $18.00 per~~ share ~~for any 20 trading days within a 30 trading day period ending on~~repurchase program during the third ~~business day before it sends the notice~~quarter of ~~redemption to the Warrant holders. The Private Placement Warrants, however, are nonredeemable so long~~2021 as ~~they are held by Gores Sponsor II, LLC or its permitted transferees.~~discussed below in Note 16, Related Party Transactions.

In October 2018, the Company established the Verra Mobility 2018 Equity Incentive Plan (the “2018 Plan”) which provides for a variety of stock-based awards including restricted stock units (“RSUs”), performance share units (“PSUs”) and non-qualified stock options to employees and non-employee directors. The maximum number of shares of the Company’s common stock that may be subject to awards under the 2018 Plan was 10,864,000 as of December 31, ~~2020,~~2021, subject to adjustment in accordance with the terms of the 2018 Plan. At December 31, ~~2020,~~2021, the Company had an aggregate of ~~6,002,689~~4,809,837 shares of common stock available for future grants under the 2018 Plan.

The Company’s RSUs consist of a right to receive shares on one or more vesting dates in the future. RSUs granted to employees vest ratably over four years from their individual award dates, subject to continued employment on the applicable vesting dates. RSUs granted to non-employee directors vest on the earlier of (a) the first anniversary of the vesting start date, or (b) the date immediately prior to the next annual stockholders meeting held by the Company occurring after the date of grant.

The Company ~~granted~~grants PSUs to senior executives ~~during fiscal year 2020~~ which consist of a right to receive shares ~~when certain service and market-vesting conditions are met~~ at the end of a three-year period. PSUs are issued upon continued service along with the relative satisfaction of a market condition that measures the Company’s total stockholder return relative to a comparably calculated return for a peer group during the performance period. The level at which the performance condition is attained upon the completion of the performance period determines the actual number of shares of ~~our~~the Class A Common Stock into which the PSUs will be converted. The conversion percentage ranges from 0%0% up to ~~150%~~150% of the target level.

The fair value of RSUs vested during fiscal years 2021, 2020 and 2019 was $10.6 million, $10.2 million and $$9.7 million, respectively.There were 0 ~~NaN RSUs granted pursuant~~PSUs that vested to ~~the 2018 Plan vested in 2018.~~ date.As of December 31, ~~2020, w~~2021, we e had ~~$21.1~~$15.6 million and $2.0 million of unrecognized stock-based compensation expense related to unvested RSUs and PSUs, respectively, which is expected to be recognized over a weighted average period of ~~2.2~~ 2.0 years.

During fiscal ~~year~~years 2020 and 2021, the Company granted stock options that vest ratably over four years from their individual award dates, subject to continued employment on the applicable vesting dates, with a contractual term of . ten years. The Company did not grant stock options ~~for~~during fiscal ~~years 2019 and 2018.~~year 2019. The following table summarizes the activity of the Company’s stock options:

The weighted average ~~grant date~~ fair value of options granted in fiscal year 2020 and 2021 was ~~$4.36~~$4.36 and ~~the remaining contractual term is 9.2 years.~~$6.47, respectively. There were 141,218 stock options that vested in fiscal year 2021 with a total fair value of $0.6 million. There were 0 stock options that vested in fiscal year 2020. The Company received approximately $0.2 million related to stock options exercised during ~~the~~ fiscal year ~~2020.~~2021. As of December 31, ~~2020, w~~2021, we had $~~e had~~ 4.4~~$2.1~~ million of unrecognized stock-based compensation expense related to unvested stock options which is expected to be recognized over a weighted average period of ~~3.2~~ 2.8 years.

Tax benefits attributable to stock-based compensation represented approximately $4.6 million, $2.9 ~~million,~~ ~~$3.4~~ million and ~~$0 of stock-based compensation expense,~~$3.4 million, before limitations under section 162(m) of the Internal Revenue Code, during the years ended December 31, 2021, 2020 and 2019, ~~and 2018,~~ respectively.

The Company has a 401(k) plan that covers ~~substantially all~~U.S. employees who meet certain eligibility requirements. Covered employees may elect to have a portion of their compensation withheld up to the statutory limit. The 401(k) plan includes a company match that vests immediately. The Company made employer contributions of $1.9 million, $1.7 ~~million, $1.7~~ million and ~~$1.6~~$1.7 million during the fiscal years ended December 31, 2021, 2020 and 2019, ~~and 2018,~~ respectively.

The Company also makes superannuation contributions for eligible non-U.S. based employees in accordance with the employer contribution rate set by the applicable country. The expense related to these contributions was $1.1 million during the fiscal year ended December 31, 2021.

At the closing of the Business Combination, the Company entered into the Tax Receivable Agreement (“Tax Receivable Agreement~~” or “TRA~~”) with PE Greenlight Holdings, LLC (the “Platinum Stockholder”) ~~and Greenlight as the stockholder representative.~~. The ~~TRA~~Tax Receivable Agreement generally provides for the payment ~~by the post-closing company~~ to the Platinum Stockholder of ~~50%~~50% of the net cash savings, if any, in U.S. federal, state and local income tax that the ~~post-closing company~~Company actually realizes (or is deemed to realize in certain circumstances) in periods after

the closing of the Business Combination as a result of the ~~increase in the~~increased tax basis of ~~the intangible assets which resulted from an acquisition by Verra Mobility~~certain acquired intangibles prior to the Business Combination. The ~~post-closing company~~Company generally retains the benefit of the remaining ~~50%~~50% of these cash savings. The Company estimated the potential maximum benefit to be paid will be approximately $70.0 million, and recorded an initial liability and corresponding charge to equity at the closing of the Business Combination. Subsequently, the Company made adjustments to this amount.

The Company recorded a $6.8 million expense in fiscal year 2020 and $0.1 million of income in fiscal year 2019 to tax receivable agreement liability adjustment in the consolidated statements of operations. The adjustment in 2020 reflects the impact of an increase to the Company’s deferred tax rate arising from higher estimated state tax rates due to a change in apportionment. At December 31, ~~2020,~~2021, the ~~TRA~~Tax Receivable Agreement liability was approximately ~~$72.7~~$61.7 million of which ~~$4.8~~$5.1 million was the current portion and ~~$67.9~~$56.6 million was the non-current portion, both of which are included in the respective payable to the related party pursuant to tax receivable agreement line items on the consolidated balance sheets. The Company made a $4.8 million payment during the first quarter of 2021 and a $5.1 million payment during the fourth quarter of 2021 related to tax years 2019 and 2020, respectively.

The Company recorded a $1.0 million tax benefit in fiscal year 2021, a $6.8 million tax expense in fiscal year 2020 and a $0.1 million tax benefit in fiscal year 2019. The Tax Receivable Agreement liability adjustment in 2021 is a result of lower estimated state tax rates due to changes in apportionment, whereas in 2020 it is a result of higher state tax rates due to changes in apportionment.

The Company has issued various letters of credit under contractual arrangements with certain of its domestic vendors and customers. Outstanding letters of credit under these arrangements totaled ~~$6.3~~$6.2 million and $6.3 million at December 31, ~~2020.~~2021 and 2020, respectively. In addition, the Company has $1.8 million of bank guarantees at December 31, 2021 required to support bids and contracts with certain international customers.

The Company has non-cancelable purchase commitments to certain vendors. The aggregate non-cancelable purchase commitments outstanding at December 31, ~~2020~~2021 were ~~$6.3~~$36.5 million.

The majority of these outstanding commitments are expected to be incurred in 2022 and approximately $2.0 million expected to be incurred in 2024.

The Company is subject to tax audits in the normal course of business and does not have material contingencies recorded related to such audits.

The Company accrues for claims and contingencies when losses become probable and reasonably estimable. As of the end of each applicable reporting period, the Company reviews each of its matters and, where it is probable that a liability has been or will be incurred, the Company accrues for all probable and reasonably estimable losses. Where the Company can reasonably estimate a range of loss it may incur regarding such a matter, the Company records an accrual for the amount within the range that constitutes its best estimate. If the Company can reasonably estimate a range but no amount within the range appears to be a better estimate than any other, the Company uses the amount that is the low end of such range.

The New York City Law Department recently advised the Company that the City of New York is investigating certain aspects of the Company’s installation work for its largest customer, NYCDOT. The Company is cooperating with the investigation. It is reasonably possible that the Company becomes subject to claims and assessments by the City of New York. However, at this time, the Company cannot estimate its additional exposure, if any, nor can it estimate whether any potential impact would have a material effect on its results, operations or financial position.

In the ordinary course of business, the Company occasionally employs contract terms that mitigate the customer’s risk of aggregate revenue decline in connection with the customer’s adoption of additional or changes to service models within its existing portfolio. These agreements require the customer to satisfy numerous conditions to trigger payment, including volume metrics and other operational requirements. The Company has 1 such guarantee outstanding for the ~~one-year~~ period ending March 31, 2021. At December 31, 2020, the Company has concluded that the likelihood of making payment under this guarantee is remote, and consequently 0 liability or corresponding contra revenue has been recorded in the Company’s consolidated financial statements.

We commenced exit activities consisting of severance and other employee separation costs during the year ended December 31, 2020 and expensed $1.1 million as selling, general and administrative expenses on the consolidated statements of operations. These costs were paid during fiscal year 2020.

The Company is subject to legal and regulatory actions that arise from time to time in the ordinary course of business. The Company records a liability when it believes it is probable a loss will be incurred, and the amount of loss or range of loss can be reasonably estimated. The assessment as to whether a loss is probable, reasonably possible or remote, and as to whether a loss or a range of such loss is estimable, often involves significant judgment about future events. The Company has determined that resolution of pending matters is not probable to have a material adverse impact on its consolidated results of operations, cash flows, or financial position, and accordingly, no material contingency accruals are recorded. However, the outcome of litigation is inherently uncertain. As additional information becomes available, the Company reassesses the potential liability.

Brantley v. City of Gretna is a class action lawsuit filed in the 24th Judicial District Court of Jefferson Parish, Louisiana against the City of Gretna (“City”) and its safety camera vendor, Redflex Traffic Systems, Inc. in April 2016. The plaintiff class, which was certified on March 30, 2021, alleges that the City’s safety camera program was implemented and operated in violation of local ordinances and the state constitution, including that the City’s hearing process violated the plaintiffs’ due process rights for lack of a “neutral” arbiter of liability for traffic infractions. Plaintiffs seek recovery of traffic infraction fines paid. The City and Redflex Traffic Systems, Inc. have appealed the trial court’s ruling granting class certification, which remains pending. Based on the information available to the Company at present, it cannot reasonably estimate a range of loss for this action and, accordingly, it has not accrued any liability associated with this action.

During the third quarter of 2020, we entered into a Settlement and Release Agreement with the former owners of Highway Toll Administration, LLC (the “HTA Settlement Agreement”) related to certain terms in dispute for which the Company sought indemnification. In connection with the HTA Settlement Agreement, the Company recognized a ~~$1.4~~$1.4 million gain for the distribution of escrow funds and a ~~$1.4~~$1.4 million gain for the receipt of additional proceeds from a third-party insurance carrier related to this matter, both of which ~~are~~were included in other income, net on the consolidated statements of operations for the fiscal year ended December 31, 2020.

~~18.~~

~~Segment Reporting~~

18.

Segment Reporting

The Company has 23 operating and reportable segments, Commercial Services, Government Solutions and ~~Government Solutions.~~Parking Solutions. Commercial Services offers toll and violation management solutions and title and registration services to commercial fleet vehicle owners, rental car companies and violation-issuing authorities. Government Solutions implements and administers traffic safety programs and products for municipalities and local government agencies of all sizes. As a result of the acquisition of T2 Systems completed in December 2021, the Company added a new reportable segment determined based on the type of products and services offered. T2 Systems provides an integrated suite of parking software and hardware solutions to its customers. The Company’s Chief Operating Decision Maker function (“CODM”) is comprised of the Company’s CEO and certain defined representatives of the Company’s executive management team. The Company’s CODM monitors operating performance, allocates resources and deploys capital based on these 23 segments.

Segment performance is based on revenues and income from operations before depreciation, amortization, gain (loss) on disposal of assets, net, impairment of property and equipment, 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 (loss). 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 consists primarily of credit card rebates earned on the prepayment of tolling transactions and is therefore included in segment profit (loss). ~~There are no significant non-cash items reported in segment profit (loss).~~

The Company allocates certain corporate expenses to the 23 segments using several different factors depending on the item being allocated. These factors range from specific identification to headcount-based to allocate proportionately between the 23 segments. The corporate and other columns below include items that are not included in segment profit (loss), plus transaction expenses ~~fees to Advisors~~ and other items designated by the CODM as corporate ~~initiatives~~initiatives..

The Company ~~does~~does not disaggregate assets by segment other than equipment installed at customer sites and automobiles, which had carrying values of ~~$44.2~~$61.8 million and ~~$1.8~~$2.7 million, respectively, at December 31, 2021 and carrying values of $42.4 million and $1.8 million, respectively, at December 31, 2020 ~~and carrying values of $46.6 million and $1.5 million, respectively, at December 31, 2019~~ all of which relate solely to the Government Solutions segment. Refer to Note 6, Goodwill and Intangible Assets for goodwill balances by segment.

~~100~~102

The following tables set forth financial information by segment for the fiscal years ended December 31, 2021, 2020 ~~2019~~ and ~~2018:~~2019:


	For the Year Ended December 31, 2021
	Commercial			Government			Parking			Corporate
($ in thousands)	Services			Solutions			Solutions			and Other			Total
Service revenue	$	260,899		$	227,992		$	3,955		$	—		$	492,846
Product sales		—			55,163			2,581			—			57,744
Total revenue		260,899			283,155			6,536			—			550,590
Cost of service revenue		3,183			1,500			654			—			5,337
Cost of product sales		—			28,381			1,428			—			29,809
Operating expenses		65,718			96,284			553			—			162,555
Selling, general and administrative expenses		42,873			52,380			1,488			13,697			110,438
Other income, net		(10,837	)		(2,040	)		(18	)		—			(12,895	)
Segment profit (loss)	$	159,962		$	106,650		$	2,431		$	(13,697	)	$	255,346
Segment profit (loss)	$	159,962		$	106,650		$	2,431		$	(13,697	)	$	255,346
Depreciation and amortization		—			—			—			116,753			116,753
Loss on disposal of assets, net		—			48			—			—			48
Change in fair value of private placement warrants		—			—			—			7,600			7,600
Tax receivable agreement liability adjustment		—			—			—			(1,016	)		(1,016	)
Stock-based compensation		—			—			—			13,784			13,784
Loss on extinguishment of debt		—			—			—			5,334			5,334
Interest expense, net		—			—			—			44,942			44,942
Income (loss) before income taxes	$	159,962		$	106,602		$	2,431		$	(201,094	)	$	67,901


	For the Year Ended December 31, 2020
	Commercial			Government			Corporate
($ in thousands)	Services			Solutions			and Other			Total
Service revenue	$	180,856		$	155,418		$	—		$	336,274
Product sales		—			57,319			—			57,319
Total revenue		180,856			212,737			—			393,593
Cost of service revenue		2,562			1,405			—			3,967
Cost of product sales		—			29,573			—			29,573
Operating expenses		52,505			62,387			—			114,892
Selling, general and administrative expenses		40,978			34,465			2,469			77,912
Other income, net		(11,774	)		(111	)		—			(11,885	)
Segment profit (loss)	$	96,585		$	85,018		$	(2,469	)	$	179,134
Segment profit (loss)	$	96,585		$	85,018		$	(2,469	)	$	179,134
Depreciation and amortization		—			—			116,570			116,570
Loss on disposal of assets, net		16			258			—			274
Change in fair value of private placement warrants		—			—			1,133			1,133
Tax receivable agreement liability adjustment		—			—			6,850			6,850
Stock-based compensation		—			—			12,589			12,589
Interest expense, net		—			—			40,865			40,865
Income (loss) before income taxes	$	96,569		$	84,760		$	(180,476	)	$	853

For the Year Ended December 31, 2020

Commercial

Government

Corporate

($ in thousands)

Services

Solutions

and Other

Total

Service revenue

$
180,856

$
155,418

$
—

$
336,274

Product sales

—

57,319

—

57,319

Total revenue

180,856

212,737

—

393,593

Cost of service revenue

2,562

1,405

—

3,967

Cost of product sales

—

29,573

—

29,573

Operating expenses

52,505

62,387

—

114,892

Selling, general and administrative expenses

40,978

34,465

2,469

77,912

Other income, net

(11,774
)

(111
)

—

(11,885
)
Segment profit (loss)

$
96,585

$
85,018

$
(2,469
)

$
179,134

Segment profit (loss)

$
96,585

$
85,018

$
(2,469
)

$
179,134

Depreciation and amortization

—

—

116,570

116,570

Loss on disposal of assets, net

16

258

—

274

TRA liability adjustment

—

—

6,850

6,850

Stock-based compensation

—

—

12,589

12,589

Interest expense, net

—

—

40,865

40,865

Income (loss) before income tax provision

$
96,569

$
84,760

$
(179,343
)

$
1,986

For the Year Ended December 31, 2019

Commercial

Government

Corporate

($ in thousands)

Services

Solutions

and Other

Total

Service revenue

$
276,479

$
140,244

$
—

$
416,723

Product sales

—

32,014

—

32,014

Total revenue

276,479

172,258

—

448,737

Cost of service revenue

3,709

1,852

—

5,561

Cost of product sales

—

13,919

—

13,919

Operating expenses

66,916

57,905

—

124,821

Selling, general and administrative expenses

41,384

32,696

2,220

76,300

Other income, net

(10,814
)

(278
)

—

(11,092
)
Segment profit (loss)

$
175,284

$
66,164

$
(2,220
)

$
239,228

Segment profit (loss)

$
175,284

$
66,164

$
(2,220
)

$
239,228

Depreciation and amortization

—

—

115,566

115,566

Loss on disposal of assets, net

145

60

—

205

Impairment of property and equipment

—

5,898

—

5,898

TRA liability adjustment

(106
)

(106
)
Stock-based compensation

—

—

10,012

10,012

Interest expense, net

—

—

60,729

60,729

Income (loss) before income tax provision

$
175,139

$
60,206

$
(188,421
)

$
46,924

~~101~~103


	For the Year Ended December 31, 2019
	Commercial			Government			Corporate
($ in thousands)	Services			Solutions			and Other			Total
Service revenue	$	276,479		$	140,244		$	—		$	416,723
Product sales		—			32,014			—			32,014
Total revenue		276,479			172,258			—			448,737
Cost of service revenue		3,709			1,852			—			5,561
Cost of product sales		—			13,919			—			13,919
Operating expenses		66,916			57,905			—			124,821
Selling, general and administrative expenses		41,384			32,696			2,220			76,300
Other income, net		(10,814	)		(278	)		—			(11,092	)
Segment profit (loss)	$	175,284		$	66,164		$	(2,220	)	$	239,228
Segment profit (loss)	$	175,284		$	66,164		$	(2,220	)	$	239,228
Depreciation and amortization		—			—			115,566			115,566
Loss on disposal of assets, net		145			60			—			205
Change in fair value of private placement warrants		—			—			16,267			16,267
Impairment of property and equipment		—			5,898			—			5,898
Tax receivable agreement liability adjustment		—			—			(106	)		(106	)
Stock-based compensation		—			—			10,012			10,012
Interest expense, net		—			—			60,729			60,729
Income (loss) before income taxes	$	175,139		$	60,206		$	(204,688	)	$	30,657

For the Year Ended December 31, 2018

Commercial

Government

Corporate

($ in thousands)

Services

Solutions

and Other

Total

Service revenue

$
222,611

$
142,465

$
—

$
365,076

Product sales

—

5,070

—

5,070

Total revenue

222,611

147,535

—

370,146

Cost of service revenue

3,078

2,710

—

5,788

Cost of product sales

—

3,447

—

3,447

Operating expenses

51,221

57,525

—

108,746

Selling, general and administrative expenses

55,370

27,827

50,737

133,934

Other (income) expenses, net

(8,680
)

(117
)

2

(8,795
)
Segment profit (loss)

$
121,622

$
56,143

$
(50,739
)

$
127,026

Segment profit (loss)

$
121,622

$
56,143

$
(50,739
)

$
127,026

Depreciation and amortization

—

—

103,346

103,346

Loss on disposal of assets, net

—

—

7

7

Stock-based compensation

—

—

2,272

2,272

Interest expense

—

—

69,550

69,550

Loss on extinguishment of debt

—

—

26,486

26,486

(Loss) income before income tax (benefit)

$
121,622

$
56,143

$
(252,400
)

$
(74,635
)

The Company primarily operates inwithin the United States, Australia, Canada, United Kingdom and in various other countries in Europe. Revenues ~~are attributable to countries based upon the location of the customer. During~~from international customers for the years ended December 31, 2021, 2020 and 2019 ~~and 2018, the Company’s international revenues~~ were ~~$13.3~~$40.0 million, ~~$14.5~~$13.3 million and ~~$11.0~~$14.5 million, respectively. ~~Substantially all~~Revenues from Australia, United Kingdom and Canada represented $13.9 million, $16.3 million and $6.9 million, respectively for the year ended December 31, 2021. Revenues earned from goods transferred to customers at a point in time were approximately $57.7 million, $57.3 million and $32.0 million for the years ended December 31, 2021, 2020 and 2019, respectively. Property and equipment, net located in foreign countries was $14.8 million as of December 31, 2021, of which Canada represented $6.7 million and Australia represented $6.1 million. Property and equipment, net was $4.7 million as of December 31, 2020 and it was not material for any individual foreign country in which the ~~Company’s assets are in the United States.~~Company operated.

VM Consolidated, Inc., a ~~wholly-owned~~wholly owned subsidiary of the Company, is the lead borrower of the ~~New First Lien~~2021 Term Loan, Senior Notes and the ~~New~~ Revolver. VM Consolidated, Inc. is owned by the Company through a series of holding companies that ultimately end with the Company. VM Consolidated, Inc. is ~~wholly-owned~~wholly owned by Greenlight Acquisition Corporation, which is ~~wholly-owned~~wholly owned by Greenlight Intermediate Holding Corporation, which is ~~wholly-~~

wholly owned by Greenlight Holding Corporation, which is ~~wholly-owned~~wholly owned by Verra Mobility Holdings, LLC, which is ~~wholly-owned~~wholly owned by Verra Mobility Corporation or the Company. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, including transactions with the Company’s ~~wholly-owned subsidiary~~wholly owned guarantor subsidiaries and non-guarantor subsidiaries.

During fiscal year 2021, the Company completed the acquisitions for Redflex and T2 Systems and as a result the composition of the guarantor and non-guarantor subsidiaries has been modified to appropriately include the respective entities. Subsidiaries with foreign operations are generally included in the combined non-guarantor subsidiaries column and subsidiaries with domestic operations are included in the combined guarantor subsidiaries column.

The following financial information presents the consolidated balance sheets as of December 31, ~~2020~~2021 and the related consolidated statements of operations and comprehensive ~~loss~~income and the consolidated statements of cash flows for the year ended December 31, ~~2020~~2021 for the Company, combined guarantor ~~subsidiary~~subsidiaries and combined non-guarantor subsidiaries:

~~Transaction~~”). The aggregate consideration payable by the Company under the Agreement will be AUD 146.1 million. The Company will also assume Redflex’s existing cash and indebtedness at the closing of the Transaction. The Company and Redflex have made customary warranties and Redflex has agreed to customary undertakings, including relating to the conduct of its business from the date of the Agreement until the closing of the Transaction, which is expected to take place in the second quarter of 2021. Each party’s obligation to consummate the Transaction is subject to the satisfaction of certain conditions including receipt of required regulatory and court approvals, the approval of the Transaction by the requisite majority of Redflex shareholders, the accuracy of the other party’s warranties and the performance, in all material respects, by the other party of its obligations under the Agreement, and an independent expert issuing a report which concludes that the Transaction is in the best interests of Redflex shareholders. Under the Agreement, Redflex would be obligated to pay the Company a fee in the amount set forth in the Agreement, if (a) any director of Redflex fails to recommend the Transaction or makes a public statement indicating that he or she does not support the Transaction (except in limited circumstances), (b) Redflex consummates a transaction within a certain period under the terms of a deal constituting a Competing Proposal under the Agreement, or (c) the Agreement is validly terminated by the Company due to a material breach by Redflex. Additionally, the Company would be obligated to pay Redflex a fee in the amount set forth in the Agreement if the Company does not pay the consideration in accordance with the Agreement or the Agreement is validly terminated by Redflex due to a material breach by the Company.

Item 9. Changes in and Disagreements with ~~Accountants~~Accountants on Accounting and Financial Disclosure

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to ~~Rule 13a-15 under~~Rules 13a-15(e) and 15d-15(e) of the Exchange Act. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that our management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based ~~on this~~upon their evaluation of our disclosure controls and procedures, our Chief Executive Officer and our Chief Financial Officer concluded that, as of December 31, ~~2020,~~2021, due to the material weaknesses described below, our disclosure controls and procedures were designed at a reasonable assurance level and were effective to provide reasonable assurance that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.not effective.

Our management is responsible for establishing and maintaining adequate internal control over financial ~~reporting.~~reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. ~~Our~~Based on this evaluation, due to the material weaknesses described below, management concluded that our system of internal control over financial reporting was not effective.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We identified material weaknesses in our internal control over financial reporting ~~was effective~~ as of December 31, ~~2020.~~2021. The first material weakness related to the monitoring activities over the acquisition of Redflex Holdings Limited due to the lack of sufficient qualified accounting resources, including those with the appropriate level of technical revenue recognition knowledge, to timely identify and assess accounting implications of the revenue arrangements assumed as part of the acquisition which resulted in the incorrect application of generally accepted accounting principles, as well as insufficient oversight and review of certain related journal entries.

In addition, we identified a material weakness related to control activities over the acquisition of Redflex Holdings Limited due to the lack of sufficient qualified accounting resources to provide adequate controls over the

completeness and accuracy of ~~Material Weakness~~inputs used in certain valuation and opening balance sheet adjustments recorded in connection with the business combination.

In addition, we determined we had a material weakness related to certain revenue and reporting controls because we did not design and maintain effective controls specific to a third-party application. The third-party application was utilized in performing certain control activities and used in the preparation of our consolidated financial statements. Specifically, the third-party service organization, Vena Solutions, provided a SOC 1 Type II report that was prepared by Vena Solutions personnel who falsely asserted that it had been audited by an independent auditor. We ~~are committed~~were not made aware of this until after December 31, 2021 and were unable to ~~maintaining~~design compensating controls that were contemporaneous with the relevant control activities.

The process of implementing an effective financial reporting system is a ~~strong~~continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. We continue to evaluate and take actions to improve our internal control ~~environment. Following the identification~~over financial reporting, which includes but is not limited to formalizing a monitoring control of our acquisitions, hiring additional resources to address purchase accounting control deficiencies, and implementing additional review procedures within our financial reporting process.

To remediate the material ~~weakness~~weaknesses described above, we have and will continue to hire additional resources with the sufficient technical accounting knowledge necessary to timely identify and assess accounting implications due to acquisitions. Additionally, we are implementing a process, which includes relevant controls, to independently validate revenue and reporting data used in ~~internal~~the preparation of our consolidated financial statements. The material weaknesses will not be considered remediated until the applicable remedial controls ~~described~~operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of these material weaknesses will be completed prior to the end of 2022.

Notwithstanding the material weaknesses, management has concluded that the financial statements included elsewhere in ~~our~~this Annual Report ~~on Form 10-K~~present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with GAAP.

In accordance with guidance issued by the SEC, registrants are permitted to exclude material business combinations from their final assessment of internal control over financial reporting for the first fiscal year ~~ended December 31, 2019 related to ineffective information technology (“~~IT~~”) general controls~~ in ~~the area~~which an acquisition occurred. Our management's evaluation of ~~user access~~internal control over ~~certain IT systems that support the Company’s~~ financial reporting ~~processes,~~excluded the internal control activities of Redflex and T2 systems, which we ~~initiated remediation measures during 2020~~acquired in June and December of 2021, respectively, as discussed in Note 3 to ~~address the material weakness. Based on the implementation work and~~our consolidated financial statements. We have included the results of ~~testing performed,~~Redflex and T2 Systems in our ~~management concluded that~~consolidated financial statements from the ~~previously identified material weakness has been remediated~~date of acquisition. Total revenue excluded from our assessment of internal control over financial reporting represented approximately 8.2% of our consolidated total revenue in 2021. Total assets excluded from our assessment of internal control over financial reporting represented approximately 7.4% of our consolidated total assets as of December 31, ~~2020.~~2021.

~~Our independent registered public accounting firm, Ernst & Young LLP, has audited the~~The effectiveness of our internal control over financial reporting as of December 31, ~~2020,~~2021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included ~~in Item 8 of this Annual Report on Form 10-K.~~below.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements and projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

~~Except for~~In June and December of 2021, we acquired Redflex and T2 Systems, respectively, both of which operated under their own set of systems and internal controls. We are working to transition Redflex’s internal control framework in 2022 and T2 Systems will continue to operate under its own set of systems and internal controls.

For the ~~remediation measures described above,~~quarter ended December 31, 2021, there were no changes toin our internal control over financial reporting ~~that occurred during~~identified in connection with the ~~quarter ended December 31, 2020~~evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Subsequent to December 31, 2021 and in connection with the identification of the material weaknesses discussed above, we are taking remediation steps to improve our internal control over financial reporting.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

~~109~~Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

The information required by this Item is incorporated by reference from our Proxy Statement to be filed in connection with our ~~2021~~2022 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, ~~2020.~~2021.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

The financial statements filed as part of this Annual Report on Form 10-K are listed in the “Index to Consolidated Financial Statements” under Part II, Item 8 of this Annual Report on Form 10-K.

Schedules not listed above are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or notes to the consolidated financial statements under Part II, Item 8 of this Annual Report on Form 10-K.

The exhibits listed below are filed as part of this Annual Report. References under the caption “Incorporated by Reference” to exhibits or other filings indicate that the exhibit or other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference.

* 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.

Pursuant to the requirements of Section 13 or 15(d) 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.

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints David M. Roberts and Patricia D. Chiodo, and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or her or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:

Consolidated Valuation and Qualifying Accounts for the Years Ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019


Delaware		81-3563824
(State of Incorporation)		(I.R.S. Employer Identification No.)


1150 North Alma School Road Mesa, Arizona		85201
(Address of Principal Executive Offices)		(Zip Code)


PART I	54
Item 1. Business	54
Item 1A. Risk Factors	13
Item 1B. Unresolved Staff Comments	3738
Item 2. Properties	3738
Item 3. Legal Proceedings	3839
Item 4. Mine Safety Disclosures	3839
PART II	3940
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3940
Item 6. Selected Financial Data	4142
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	4743
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	6661
Item 8. Financial Statements and Supplementary Data	6662
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~108~~109
Item 9A. Controls and Procedures	~~108~~109
Item 9B. Other Information	~~109~~111
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	111
PART III	~~110~~112
Item 10. Directors, Executive Officers and Corporate Governance	~~110~~112
Item 11. Executive Compensation	~~110~~112
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~110~~112
Item 13. Certain Relationships and Related Transactions, and Director Independence	~~110~~112
Item 14. Principal Accountant Fees and Services	~~110~~112
PART IV	~~111~~113
Item 15. Exhibit and Financial Statement Schedules	~~111~~113
Item 16. Form 10-K Summary	~~116~~119
SIGNATURES	~~117~~120
POWER OF ATTORNEY	~~118~~121
Appendix A, Schedule II	~~119~~122


	Fiscal Year 2020				Fiscal Year 2019				Fiscal Year 2021				Fiscal Year 2020
	High		Low		High		Low		High		Low		High		Low
First Quarter	$	17.20	$	5.63	$	11.91	$	9.00	$	15.38	$	12.54	$	17.20	$	5.63
Second Quarter	$	13.17	$	6.16	$	15.07	$	11.73	$	15.94	$	13.38	$	13.17	$	6.16
Third Quarter	$	11.95	$	9.14	$	15.10	$	12.70	$	17.50	$	14.26	$	11.95	$	9.14
Fourth Quarter	$	14.07	$	9.33	$	15.36	$	13.42	$	17.01	$	13.47	$	14.07	$	9.33


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


($ in thousands)	Commercial Services (Driver-billed)(1)			Commercial Services (All other)			Government Solutions			Total(3)
Balance at January 1, 2020 (2)	$	5,272		$	1,406		$	1,778		$	8,456
Credit loss expense		6,554			4,945			2,892			14,391
Write-offs, net of recoveries		(8,616	)		(2,074	)		(686	)		(11,376	)
Balance at December 31, 2020	$	3,210		$	4,277		$	3,984		$	11,471
Credit loss expense (income)		11,040			(1,138	)		(314	)		9,588
Write-offs, net of recoveries		(8,853	)		(47	)		(21	)		(8,921	)
Balance at December 31, 2021	$	5,397		$	3,092		$	3,649		$	12,138


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


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


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


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


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1)
August 1-31, 2021		6,849,315	$	14.60		6,849,315	$	—
Total		6,849,315	$	14.60		6,849,315	$	—

				Successor									Predecessor
	For the Year Ended December 31,									Period from June 1, 2017 to December 31,			Period from January 1, 2017 to May 31,			For the Year Ended December 31,
($ in thousands)	2020			2019			2018			2017			2017			2016
Service revenue	$	336,274		$	416,723		$	365,076		$	135,655		$	92,531		$	212,515
Product sales ⁽¹⁾		57,319			32,014			5,070			2,584			1,340			18,235
Total revenue		393,593			448,737			370,146			138,239			93,871			230,750
Cost of service revenue		3,967			5,561			5,788			1,936			1,369			2,638
Cost of product sales ⁽¹⁾		29,573			13,919			3,447			1,590			964			9,505
Operating expenses		115,729			125,640			108,883			50,471			35,968			83,762
Selling, general and administrative expenses		89,664			85,493			136,069			44,882			40,884			53,034
Depreciation, amortization, and (gain) loss on disposal of assets, net ⁽²⁾		116,844			115,771			103,353			33,113			12,613			33,395
Impairment of property and equipment		—			5,898			—			—			—			522
Total cost and expenses		355,777			352,282			357,540			131,992			91,798			182,856
Income from operations		37,816			96,455			12,606			6,247			2,073			47,894
Interest expense, net ⁽³⁾		40,865			60,729			69,550			20,858			875			2,706
Tax receivable agreement liability adjustment ⁽⁴⁾		6,850			(106	)		—			—			—			—
Loss on extinguishment of debt ⁽³⁾		—			—			26,486			—			—			—
Other income, net ⁽⁵⁾		(11,885	)		(11,092	)		(8,795	)		(2,172	)		(1,294	)		(2,471	)
Total other expenses (income)		35,830			49,531			87,241			18,686			(419	)		235
Income (loss) before income taxes		1,986			46,924			(74,635	)		(12,439	)		2,492			47,659
Income tax provision (benefit) ⁽⁶⁾		5,431			13,581			(16,241	)		(30,677	)		1,252			18,661
Net (loss) income	$	(3,445	)	$	33,343		$	(58,394	)	$	18,238		$	1,240		$	28,998

	Year Ended December 31,
							Percentage of Revenue						Increase (Decrease) 2019 vs 2018
($ in thousands)	2019			2018			2019			2018			$			%
Service revenue	$	416,723		$	365,076			92.9	%		98.6	%	$	51,647			14.1	%
Product sales		32,014			5,070			7.1	%		1.4	%		26,944			531.4	%
Total revenue		448,737			370,146			100.0	%		100.0	%		78,591			21.2	%
Cost of service revenue		5,561			5,788			1.2	%		1.6	%		(227	)		(3.9	)%
Cost of product sales		13,919			3,447			3.1	%		0.9	%		10,472			303.8	%
Operating expenses		125,640			108,883			28.0	%		29.4	%		16,757			15.4	%
Selling, general and administrative expenses		85,493			136,069			19.1	%		36.8	%		(50,576	)		(37.2	)%
Depreciation, amortization and (gain) loss on disposal of assets, net		115,771			103,353			25.8	%		27.9	%		12,418			12.0	%
Impairment of property and equipment		5,898			—			1.3	%		—			5,898		n/a
Total costs and expenses		352,282			357,540			78.5	%		96.6	%		(5,258	)		(1.5	)%
Income from operations		96,455			12,606			21.5	%		3.4	%		83,849			665.2	%
Interest expense, net		60,729			69,550			13.5	%		18.8	%		(8,821	)		(12.7	)%
Tax receivable agreement liability adjustment		(106	)		—			0.0	%		—			(106	)	n/a
Loss on extinguishment of debt		—			26,486			—			7.2	%		(26,486	)		(100.0	)%
Other income, net		(11,092	)		(8,795	)		(2.4	)%		(2.4	)%		(2,297	)		26.1	%
Total other expenses		49,531			87,241			11.1	%		23.6	%		(37,710	)		(43.2	)%
Income (loss) before income tax provision (benefit)		46,924			(74,635	)		10.4	%		(20.2	)%		121,559			162.9	%
Income tax provision (benefit)		13,581			(16,241	)		3.0	%		(4.4	)%		29,822			183.6	%
Net income (loss)	$	33,343		$	(58,394	)		7.4	%		(15.8	)%	$	91,737			157.1	%

	Payments due by period
($ in thousands)	Total		1 year		2 - 3 years		4 - 5 years		Thereafter
Long-term debt, including current maturities ⁽¹⁾	$	865,642	$	9,104	$	18,208	$	838,330	$	—
Interest on long-term debt ⁽²⁾		121,585		29,693		58,445		33,447		—
Operating lease payments		43,485		4,737		6,735		5,990		26,023
Purchase obligations		6,302		6,302		—		—		—

($ in thousands)	Commercial Services (Driver-billed) ⁽¹⁾			Commercial Services (All other)			Government Solutions			Total
Accounts receivable, net at January 1, 2020 ⁽²⁾	$	9,793		$	51,158		$	31,744		$	92,695

Allowance for credit loss at January 1, 2020 ⁽²⁾	$	5,272		$	1,406		$	1,778		$	8,456
Credit loss expense		6,554			4,941			2,892			14,387
Write-offs, net of recoveries		(8,616	)		(2,074	)		(686	)		(11,376	)
Allowance for credit loss at December 31, 2020	$	3,210		$	4,273		$	3,984		$	11,467

Accounts receivable, net at December 31, 2020	$	11,060		$	48,169		$	109,554		$	168,783


Building		39 years
Equipment installed at customer sites		~~3-7~~3-7 years
Computer equipment		~~3-5~~3-5 years
Furniture		~~5-10~~3-10 years
Automobiles		~~5-6~~3-7 years
Software		~~3-5~~3-7 years
Leasehold improvements		Shorter of lease term or estimated useful life


	Level in	December 31, 2021				December 31, 2020
	Fair Value	Carrying		Estimated		Carrying		Estimated
($ in thousands)	Hierarchy	Amount		Fair Value		Amount		Fair Value
2021 Term Loan	2	$	871,467	$	895,125	$	—	$	—
Senior Notes	2		344,918		355,250		—		—
2018 Term Loan	2		—		—		842,045		861,314
Revolver	2		24,435		25,000		—		—


	December 31, 2021			December 31, 2020
Stock price	$	15.43		$	13.42
Strike price	$	11.50		$	11.50
Volatility		48.0	%		44.0	%
Remaining life (in years)		1.8			2.8
Risk-free interest rate		0.66	%		0.16	%
Expected dividend yield		0.0	%		0.0	%
Estimated fair value	$	5.77		$	4.63

($ in thousands)
Assets acquired
Cash	$	1,086
Other assets		5,047
Trademark		771
Customer relationships		5,946
Developed technology		4,624
Non-compete agreements		440
Goodwill		17,528
Total assets acquired		35,442

Liabilities assumed
Accounts payable and accrued expenses		6,045
Deferred tax liability		2,801
Total liabilities assumed		8,846
Total purchase price	$	26,596


($ in thousands)	Reported At June 30, 2021		Measurement Period Adjustments			At December 31, 2021
Assets acquired
Cash and cash equivalents	$	8,760	$	—		$	8,760
Restricted cash		2,163		—			2,163
Accounts receivable		6,870		—			6,870
Unbilled receivables		7,744		(2,461	)		5,283
Property and equipment		27,541		2,268			29,809
Deferred tax assets		9,192		1,123			10,315
Other assets		13,729		5,518			19,247
Trademark		900		—			900
Customer relationships		23,500		2,400			25,900
Developed technology		18,200		—			18,200
Total assets acquired		118,599		8,848			127,447

Liabilities assumed
Accounts payable and accrued liabilities		30,137		1,799			31,936
Deferred revenue		1,772		6,276			8,048
Long-term debt		14,014		—			14,014
Other long-term liabilities		9,948		1,788			11,736
Total liabilities assumed		55,871		9,863			65,734
Goodwill		55,199		1,015			56,214
Total purchase consideration	$	117,927	$	—		$	117,927


($ in thousands)
2022	$	106,360
2023		77,609
2024		67,117
2025		64,419
2026		57,617
Thereafter		114,177
Total	$	487,299

($ in thousands)
2021	$	85,935
2022		81,167
2023		52,493
2024		42,000
2025		39,302
Thereafter		41,242
Total	$	342,139


($ in thousands)			Principal		Interest (2)
2021	$	9,104
2022(1)		9,104	$	34,019	$	51,859
2023		9,104		9,019		51,508
2024		9,104		9,019		51,266
2025		829,226		9,019		50,849
2026				9,019		50,519
Thereafter		—		1,200,030		82,296
Total	$	865,642	$	1,270,125	$	338,297


($ in thousands)
2022	$	7,361
2023		6,731
2024		6,264
2025		4,794
2026		4,324
Thereafter		23,498
Total minimum payments		52,972
Less: amount representing interest		(12,228	)
Total	$	40,744

	RSUs and PSUs ⁽¹⁾
	Shares (in thousands)			Weighted Average Grant Date Fair Value		RSUs					PSUs
Balance at December 31, 2017		—			—
Granted		4,437		$	10.13
Vested		0			0
Forfeited		0			0
						Shares (in thousands)			Weighted Average Grant Date Fair Value		Shares (in thousands)			Weighted Average Grant Date Fair Value
Balance at December 31, 2018		4,437		$	10.13		4,437		$	10.13		—		$	—
Granted		400		$	11.32		400		$	11.32		—		$	—
Vested		(953	)	$	10.13		(953	)	$	10.13		—		$	—
Forfeited		(880	)	$	10.17		(880	)	$	10.17		—		$	—
Balance at December 31, 2019		3,004		$	10.28		3,004		$	10.28		—		$	—
Granted		692		$	12.42		576		$	12.12		116		$	13.88
Vested		(986	)	$	10.35		(986	)	$	10.35		—		$	—
Forfeited		(401	)	$	10.82		(391	)	$	10.74		(10	)	$	13.88
Balance at December 31, 2020		2,309		$	10.79		2,203		$	10.64		106		$	13.88
Granted							736		$	14.12		154		$	16.28
Vested							(1,018	)	$	10.41		—		$	—
Forfeited							(229	)	$	13.40		(31	)	$	16.97
Balance at December 31, 2021							1,692		$	11.92		229		$	15.07

	Stock Options Outstanding
	Shares (in thousands)			Weighted Average Exercise Price
Balance at December 31, 2019		0			0
Granted		720		$	12.56
Vested		0			0
Forfeited		(106	)	$	12.56
Balance at December 31, 2020		614		$	12.56


	Stock Options Outstanding
	Shares (in thousands)			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value ($ in thousands)
Balance at December 31, 2019		0			0
Granted		720		$	12.56
Exercised		—			—
Forfeited		(106	)	$	12.56
Balance at December 31, 2020		614		$	12.56
Granted		731		$	13.95
Exercised		(12	)	$	12.62		$	36
Forfeited		(170	)	$	14.29
Balance at December 31, 2021		1,163		$	13.18	8.7 years	$	2,636

Exercisable at December 31, 2021		141		$	12.55	8.2 years	$	407
Unvested and expected to vest at December 31, 2021		1,022		$	13.26	8.8 years	$	2,229


	December 31,						For the Year Ended December 31,
($ in thousands)	2020		2019		2018		2021		2020		2019
Operating expenses	$	837	$	819	$	137	$	815	$	837	$	819
Selling, general and administrative expenses		11,752		9,193		2,135		12,969		11,752		9,193
Total stock-based compensation expense	$	12,589	$	10,012	$	2,272	$	13,784	$	12,589	$	10,012

	For the Year Ended December 31, 2018
	Commercial			Government			Corporate
($ in thousands)	Services			Solutions			and Other			Total
Service revenue	$	222,611		$	142,465		$	—		$	365,076
Product sales		—			5,070			—			5,070
Total revenue		222,611			147,535			—			370,146
Cost of service revenue		3,078			2,710			—			5,788
Cost of product sales		—			3,447			—			3,447
Operating expenses		51,221			57,525			—			108,746
Selling, general and administrative expenses		55,370			27,827			50,737			133,934
Other (income) expenses, net		(8,680	)		(117	)		2			(8,795	)
Segment profit (loss)	$	121,622		$	56,143		$	(50,739	)	$	127,026
Segment profit (loss)	$	121,622		$	56,143		$	(50,739	)	$	127,026
Depreciation and amortization		—			—			103,346			103,346
Loss on disposal of assets, net		—			—			7			7
Stock-based compensation		—			—			2,272			2,272
Interest expense		—			—			69,550			69,550
Loss on extinguishment of debt		—			—			26,486			26,486
(Loss) income before income tax (benefit)	$	121,622		$	56,143		$	(252,400	)	$	(74,635	)

	First		Second			Third		Fourth
($ in thousands, except per share data)	Quarter		Quarter			Quarter		Quarter
For the year ended December 31, 2020
Total revenue	$	116,713	$	79,809		$	96,908	$	100,163
Income (loss) from operations		19,413		(6,950	)		15,268		10,085
Net income (loss)		6,673		(15,388	)		6,686		(1,416	)
Earnings (loss) per share - basic and diluted	$	0.04	$	(0.10	)	$	0.04	$	(0.01	)


	First		Second			Third		Fourth
($ in thousands, except per share data)	Quarter		Quarter			Quarter		Quarter
For the year ended December 31, 2019
Total revenue	$	98,461	$	109,575		$	128,240	$	112,461
Income from operations		17,966		17,636			36,659		24,194
Net income		2,820		3,591			17,752		9,180
Earnings per share - basic and diluted	$	0.02	$	0.02		$	0.11	$	0.06




($ in thousands)	Verra Mobility Corporation (Ultimate Parent)		VM Consolidated Inc. (Guarantor Subsidiary)		Non- guarantor Subsidiaries		Eliminations			Consolidated		Verra Mobility Corporation (Ultimate Parent)		Guarantor Subsidiaries		Non- guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	103,969	$	16,290	$	—		$	120,259	$	—	$	65,840	$	35,443	$	—		$	101,283
Restricted cash		—		633		—		—			633		—		3,149		—		—			3,149
Accounts receivable (net of allowance for credit loss of $11.5 million)		—		166,749		2,034		—			168,783
Accounts receivable (net of allowance for credit losses of $12.1 million)													—		150,181		10,798		—			160,979
Unbilled receivables		—		13,452		593		—			14,045		—		24,220		4,889		—			29,109
Investment in subsidiary		177,179		77,200		—		(254,379	)		—		90,705		157,016		—		(247,721	)		—
Inventory, net													—		1,186		10,907		—			12,093
Prepaid expenses and other current assets		—		21,586		2,731		—			24,317		—		31,665		9,791		—			41,456
Total current assets		177,179		383,589		21,648		(254,379	)		328,037		90,705		433,257		71,828		(247,721	)		348,069
Installation and service parts, net		—		7,944		—		—			7,944		—		13,332		—		—			13,332
Property and equipment, net		—		65,547		4,737		—			70,284		—		81,294		14,772		—			96,066
Operating lease assets		—		29,430		357		—			29,787		—		31,754		7,108		—			38,862
Intangible assets, net		—		315,533		26,606		—			342,139		—		367,965		119,334		—			487,299
Goodwill		—		524,766		61,669		—			586,435		—		684,914		153,953		—			838,867
Due from affiliates		169,259		—		—		(169,259	)		—		169,259		—		—		(169,259	)		—
Other non-current assets		—		2,684		15		—			2,699		—		10,368		4,193		—			14,561
Total assets	$	346,438	$	1,329,493	$	115,032	$	(423,638	)	$	1,367,325	$	259,964	$	1,622,884	$	371,188	$	(416,980	)	$	1,837,056
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	—	$	22,346	$	12,163	$	—		$	34,509	$	—	$	48,175	$	19,381	$	—		$	67,556
Deferred revenue													—		17,170		9,971		—			27,141
Accrued liabilities		—		11,617		4,019		—			15,636		—		27,569		10,866		—			38,435
Payable to related party pursuant to tax receivable agreement, current portion		—		4,791		—		—			4,791		—		5,107		—		—			5,107
Current portion of long-term debt		—		9,104		—		—			9,104		—		36,952		—		—			36,952
Total current liabilities		—		47,858		16,182		—			64,040		—		134,973		40,218		—			175,191
Long-term debt, net of current portion		—		832,941		—		—			832,941		—		1,206,802		—		—			1,206,802
Operating lease liabilities, net of current portion		—		27,854		132		—			27,986		—		29,803		5,181		—			34,984
Payable to related party pursuant to tax receivable agreement, net of current portion		—		67,869		—		—			67,869		—		56,615		—		—			56,615
Private placement warrant liabilities													—		38,466		—		—			38,466
Asset retirement obligation		—		6,409		—		—			6,409		—		11,799		25		—			11,824
Due to affiliates		—		152,914		16,345		(169,259	)		—		—		26,059		143,200		(169,259	)		—
Deferred tax liabilities, net		—		15,975		5,173		—			21,148		—		22,470		25,054		—			47,524
Other long-term liabilities		—		494		—		—			494		—		5,192		494		—			5,686
Total liabilities		—		1,152,314		37,832		(169,259	)		1,020,887		—		1,532,179		214,172		(169,259	)		1,577,092
Total stockholders' equity		346,438		177,179		77,200		(254,379	)		346,438		259,964		90,705		157,016		(247,721	)		259,964
Total liabilities and stockholders' equity	$	346,438	$	1,329,493	$	115,032	$	(423,638	)	$	1,367,325	$	259,964	$	1,622,884	$	371,188	$	(416,980	)	$	1,837,056


		Incorporated by Reference						Incorporated by Reference
Exhibit Number	Description	Form	File No.	Exhibit	Filing Date	Filed Herewith	Description	Form	File No.	Exhibit	Filing Date	Filed Herewith

2.1	Merger Agreement, dated as of June 21, 2018, by and among Gores Holdings II, Inc., AM Merger Sub I, Inc., AM Merger Sub II, LLC, Greenlight Holding II Corporation and PE Greenlight Holdings, LLC, in its capacity as the Stockholder Representative.	8-K	001-37979	2.1	June 21, 2018		Merger Agreement, dated as of June 21, 2018, by and among Gores Holdings II, Inc., AM Merger Sub I, Inc., AM Merger Sub II, LLC, Greenlight Holding II Corporation and PE Greenlight Holdings, LLC, in its capacity as the Stockholder Representative.	8-K	001-37979	2.1	June 21, 2018

2.2	Amendment No. 1 to Agreement and Plan of Merger, dated as of August 23, 2018, by and among Gores Holdings II, Inc., AM Merger Sub I, Inc., AM Merger Sub II, LLC, Greenlight Holding II Corporation and PE Greenlight Holdings, LLC, in its capacity as the Stockholder Representative.	8-K	001-37979	2.2	Aug. 24, 2018		Amendment No. 1 to Agreement and Plan of Merger, dated as of August 23, 2018, by and among Gores Holdings II, Inc., AM Merger Sub I, Inc., AM Merger Sub II, LLC, Greenlight Holding II Corporation and PE Greenlight Holdings, LLC, in its capacity as the Stockholder Representative.	8-K	001-37979	2.2	Aug. 24, 2018

2.3	Scheme Implementation Agreement, dated as of January 21, 2021, by and between Verra Mobility Corporation and Redflex Holdings Limited.	8-K	001-37979	2.1	Jan. 21, 2021		Scheme Implementation Agreement, dated as of January 21, 2021, by and between Verra Mobility Corporation and Redflex Holdings Limited.	8-K	001-37979	2.1	Jan. 21, 2021

2.4							Deed of Amendment and Consent, dated as of April 30, 2021, by and between Verra Mobility Corporation and Redflex Holdings Limited.	8-K	001-37979	2.1	April 30, 2021

2.5							Agreement and Plan of Merger, dated as of November 1, 2021, by and between T2 Systems Parent Corporation, VM Consolidated, Inc., Project Titan Merger Sub, Inc. and Thoma Bravo Discover Fund, L.P.	8-K	001-37979	2.1	Nov. 2, 2021

3.1	Second Amended and Restated Certificate of Incorporation of Verra Mobility Corporation.	8-K	001-37979	3.1	Oct. 22, 2018		Second Amended and Restated Certificate of Incorporation of Verra Mobility Corporation.	8-K	001-37979	3.1	Oct. 22, 2018

3.2	Amended and Restated Bylaws of Verra Mobility Corporation.	8-K	001-37979	3.2	Oct. 22, 2018		Amended and Restated Bylaws of Verra Mobility Corporation.	8-K	001-37979	3.2	Oct. 22, 2018

4.1	Specimen Class A Common Stock Certificate.	S-1	333-21503	4.2	Dec. 9, 2016		Specimen Class A Common Stock Certificate.	S-1	333-21503	4.2	Dec. 9, 2016

4.2	Specimen Warrant Certificate.	S-1	333-21503	4.3	Dec. 9, 2016		Specimen Warrant Certificate.	S-1	333-21503	4.3	Dec. 9, 2016

4.3	Warrant Agreement, dated January 12, 2017, between the Registrant and Continental Stock Transfer & Trust Company, as warrant agent.	8-K	001-37979	4.1	Jan. 19, 2017		Warrant Agreement, dated January 12, 2017, between the Registrant and Continental Stock Transfer & Trust Company, as warrant agent.	8-K	001-37979	4.1	Jan. 19, 2017
4.4	First Amendment to Warrant Agreement, dated January 15, 2020, by and among the Registrant, Continental Stock Transfer & Trust Company and American Stock Transfer & Trust Company.	10-K	001-37979	4.4	Mar. 2, 2020
4.5	Description of Verra Mobility Corporation’s Securities Registered Pursuant to Section 12 of the Exchange Act.	10-K	001-37979	4.5	Mar. 2, 2020


10.6	Amendment No. 1 to Revolving Credit Agreement, dated as of July 24, 2018, among Greenlight Acquisition Corporation, VM Consolidated, Inc. (formerly known as ATS Consolidated Inc.), each of the other borrowers party thereto, the lenders party thereto and Bank of America, N.A. as Administrative Agent and Collateral Agent.	8-K	001-37979	10.7	Oct. 22, 2018

10.7	Amendment No. 2 to Revolving Credit Agreement, dated as of October 29, 2021, by and among Greenlight Acquisition Corporation, VM Consolidated, Inc., each of the other borrowers party thereto, the lenders party thereto and Bank of America, N.A. as Administrative Agent and Collateral Agent.					X

10.8	Amendment No. 3 to Revolving Credit Agreement, dated as of December 20, 2021, by and among Greenlight Acquisition Corporation, VM Consolidated, Inc., each of the other borrowers party thereto, the lenders party thereto and Bank of America, N.A. as Administrative Agent and Collateral Agent.	8-K	001-37979	10.1	Dec. 20, 2021

10.9	Amendment and Restatement Agreement No. 1 to First Lien Term Loan Credit Agreement, dated as of March 26, 2021, by and among Greenlight Acquisition Corporation, VM Consolidated, Inc., American Traffic Solutions, Inc., Lasercraft, Inc. the subsidiary guarantors party thereto, the lenders party thereto and Bank of America, N.A., as Administrative Agent and Collateral Agent.	8-K	001-37979	10.1	Mar. 29, 2021

10.10	Amendment No. 1 to Amendment and Restatement Agreement No. 1 to First Lien Term Loan Credit Agreement, dated as of March 26, 2021, by and among Greenlight Acquisition Corporation, VM Consolidated, Inc., American Traffic Solutions, Inc., Lasercraft, Inc. the subsidiary guarantors party thereto, the lenders party thereto and Bank of America, N.A., as Administrative Agent and Collateral Agent.	8-K	001-37979	10.1	Dec. 7, 2021

10.11#	Amended and Restated Executive Employment Agreement, dated as of March 25, 2021, by and between VM Consolidated, Inc. and David Roberts.	10-Q	001-37979	10.3	May 17, 2021


	VERRA MOBILITY CORPORATION

Date: ~~March 01, 2021~~April 22, 2022	By:	/s/ David Roberts
		David Roberts
		President and Chief Executive Officer
		(Principal Executive Officer)


Signature		Capacity in Which Signed	Date

/s/ David Roberts		President, Chief Executive Officer and Director	~~March 01, 2021~~April 22, 2022
David Roberts	(Principal Executive Officer)

/s/ Patricia D. Chiodo		Chief Financial Officer	~~March 01, 2021~~April 22, 2022
Patricia D. Chiodo	(Principal Financial and Accounting Officer)

/s/ Patrick Byrne		Director	~~March 01, 2021~~April 22, 2022
Patrick Byrne

/s/ Douglas Davis		Director	~~March 01, 2021~~April 22, 2022
Douglas Davis

/s/ ~~Bryan Kelln~~Sarah Farrell		Director	~~March 01, 2021~~April 22, 2022
~~Bryan Kelln~~Sarah Farrell

/s/ ~~Jacob Kotzubei~~Michael Huerta		Director	~~March 01, 2021~~April 22, 2022
~~Jacob Kotzubei~~Michael Huerta

/s/ John Rexford		Director	~~March 01, 2021~~April 22, 2022
John Rexford

/s/ Cynthia Russo		Director	~~March 01, 2021~~April 22, 2022
Cynthia Russo


	Beginning		Charged/Credited to		Charged to Other		Charges Utilized/			Ending
($ in thousands)	Balance		Net Income (Loss)		Account		Write-offs			Balance
Allowance for Credit Losses
Year Ended December 31, 2021	$	11,471	$	9,588	$	—	$	(8,921	)	$	12,138
Year Ended December 31, 2020 (1)		8,456		14,391		—		(11,376	)		11,471
Year Ended December 31, 2019		6,221		8,100		—		(6,684	)		7,637

Tax Valuation Allowance
Year Ended December 31, 2021	$	3,422	$	363	$	—	$	—		$	3,785
Year Ended December 31, 2020		2,564		858		—		—			3,422
Year Ended December 31, 2019		2,254		310		—		—			2,564