Verra Mobility Announces Second Quarter 2020 Financial Results

Rhea-AI Summary

Verra Mobility (NASDAQ: VRRM) reported its Q2 2020 financial results, revealing a total revenue of $79.8 million, down 27.2% from $109.6 million in Q2 2019. Service revenue was especially impacted by COVID-19, contributing $62.8 million, while product sales increased to $17.0 million. The company faced a net loss of $(15.4) million, translating to $(0.10) per share. Adjusted EBITDA dropped to $27.6 million from $59.7 million year-over-year. For the first half of 2020, revenue totaled $196.5 million, down 5.5%, with a net loss of $(8.7) million. As of June 30, cash stood at $113.2 million.

Positive

• Product sales grew to $17.0 million in Q2 2020, partially offsetting service revenue decline.
• Generated $22.5 million in net cash from operations for the first half of 2020.
• Maintained cash and cash equivalents of $113.2 million as of June 30, 2020.

Negative

• Total revenue decreased by 27.2% in Q2 2020 compared to Q2 2019.
• Service revenue dropped significantly due to COVID-19 impacts.
• Net loss of $(15.4) million in Q2 2020 compared to a net income of $3.6 million in Q2 2019.
• Adjusted EBITDA fell to $27.6 million from $59.7 million year-over-year.

MESA, Ariz., Aug. 6, 2020 /PRNewswire/ -- Verra Mobility (NASDAQ: VRRM), a leading provider of smart mobility technology solutions, announced today financial results for the three and six months ended June 30, 2020.

"Verra Mobility reported a solid quarter and we are pleased with our execution given the challenging environment. During one of the most difficult quarters in our history, we still provided robust adjusted EBITDA and positive free cash flow," said David Roberts, Chief Executive Officer, Verra Mobility. "Although the near-term business environment is uncertain, we believe our balanced product portfolio provides stability in these uncertain times, and our longer-term growth initiatives give us confidence in our future as a global leader in smart transportation."

Second Quarter 2020 Financial Highlights

• Revenue: Total revenue for the second quarter of 2020 was $79.8 million, down 27.2% compared to $109.6 million for the second quarter of 2019. Within total revenue, service revenue was $62.8 million and product sales contributed $17.0 million. The decline was in our service revenue, due to the significant impact of the novel coronavirus ("COVID-19") on the rental car industry, which was partially offset by growth in product sales.
• Net (loss) income: Net loss for the second quarter of 2020 was $(15.4) million, or $(0.10) per share, based on 161.7 million diluted weighted average shares outstanding. Net income for the comparable 2019 period was $3.6 million, or $0.02 per share, based on 162.0 million diluted weighted average shares outstanding.
• Adjusted EBITDA: Adjusted EBITDA was $27.6 million for the second quarter of 2020, compared to $59.7 million in the same period last year.

First Half of 2020 Financial Highlights

• Revenue: Total revenue for the first half of 2020 was $196.5 million, down 5.5% compared to $208.0 million for the first half of 2019. Within total revenue, service revenue was $162.3 million and product sales contributed $34.2 million. The decline was in our service revenue, due to COVID-19's significant negative impact on the rental car industry, which was partially offset by growth in product sales.
• Net (loss) income: Net loss for the first half of 2020 was $(8.7) million, or $(0.05) per share, based on 161.3 million diluted weighted average shares outstanding. Net income for the comparable 2019 period was $6.4 million, or $0.04 per share, based on 159.2 million diluted weighted average shares outstanding.
• Adjusted EBITDA: Adjusted EBITDA was $82.5 million for the first half of 2020, compared to $110.9 million in the first six months of 2019.

Liquidity: As of June 30, 2020, cash and cash equivalents was $113.2 million. We generated $22.5 million in net cash from operations for the first half of 2020. As of June 30, 2020, we had total debt of $870.2 million, net of cash on hand our net debt was $757.0 million, and a $75 million revolver that is undrawn.

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

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

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

Second Quarter 2020 Segment Detail

• Commercial Services segment generated total revenue of $27.3 million, a decrease of 60% compared to the same period in 2019. Segment profit was $7.2 million, a 84% decrease from $44.1 million in the prior year. The significant decreases in revenue and profit resulted from COVID-19's negative impact on the rental car industry discussed above, the full impact of which is not yet known. Segment profit margin was 26% for 2020 and 65% for the same period in 2019.
• Government Solutions segment generated total revenue of $52.5 million growing 27% over the same period in 2019. The growth in this segment is driven by product sales in the current period which totaled $17.0 million. Segment profit was $20.3 million, a 31% increase from $15.5 million in the prior year. Segment margin was 39% in 2020 compared to 38% for the prior year period.

Quarterly Conference Call

Verra Mobility will host a conference call and a live webcast to discuss financial results for investors and analysts at 3:00 p.m. Mountain Time (5:00 p.m. Eastern Time) on August 6, 2020. To access the conference call, dial (866) 548-4713 for the U.S. or Canada and (323) 794-2093 for international callers with conference ID #7743142. The webcast will be available live in the "Investor Relations" section of the Company's website at http://ir.verramobility.com. An audio replay of the call will also be available until 9:59 p.m. Mountain Time (11:59 p.m. Eastern Time) on August 20, 2020, by dialing (844) 512-2921 for the U.S. or Canada and (412) 317-6671 for international callers, and entering passcode #7743142. In addition, an archived webcast will be available in the "News & Events" section of the Investor Relations page of the Company's website at http://ir.verramobility.com.

About Verra Mobility

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

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

Forward-Looking Statements

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

Non-GAAP Financial Measures

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

 

 

VERRA MOBILITY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
($ in thousands except per share data)		June 30, 2020				December 31, 2019
Assets
Current assets:
Cash and cash equivalents		$	113,239			$	131,513
Restricted cash			711				917
Accounts receivable (net of allowance for credit loss of $12.9 million at June 30, 2020)			125,252				93,514
Unbilled receivables			12,532				20,003
Prepaid expenses and other current assets			18,964				26,491
Total current assets			270,698				272,438
Installation and service parts, net			8,672				8,841
Property and equipment, net			73,604				72,266
Operating lease assets			30,933				32,177
Intangible assets, net			386,363				434,443
Goodwill			581,615				584,150
Other non-current assets			3,237				3,111
Total assets		$	1,355,122			$	1,407,426
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	36,346			$	50,825
Accrued liabilities			19,570				25,277
Current portion of long-term debt			9,104				28,779
Total current liabilities			65,020				104,881
Long-term debt, net of current portion and deferred financing costs			834,317				837,686
Operating lease liabilities, net of current portion			29,240				30,130
Payable to related party pursuant to tax receivable agreement			65,620				61,174
Asset retirement obligation			6,237				6,309
Deferred tax liabilities, net			22,691				25,716
Other long-term liabilities			247				2,183
Total liabilities			1,023,372				1,068,079
Commitments and contingencies
Stockholders' equity
Preferred stock, $.0001 par value			—				—
Common stock, $.0001 par value			16				16
Common stock contingent consideration			36,575				54,862
Additional paid-in capital			391,240				367,266
Accumulated deficit			(89,629)				(80,220)
Accumulated other comprehensive loss			(6,452)				(2,577)
Total stockholders' equity			331,750				339,347
Total liabilities and stockholders' equity		$	1,355,122			$	1,407,426

 

 

VERRA MOBILITY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
(In thousands, except per share data)		2020				2019				2020				2019
Service revenue		$	62,815			$	103,057			$	162,312			$	201,127
Product sales			16,994				6,518				34,210				6,909
Total revenue			79,809				109,575				196,522				208,036
Cost of service revenue			1,013				1,613				2,232				3,002
Cost of product sales			9,060				2,918				17,750				3,194
Operating expenses			26,699				31,795				58,958				61,133
Selling, general and administrative expenses			20,821				20,865				46,707				41,416
Depreciation, amortization and (gain) loss on disposal of assets, net			29,166				28,850				58,412				57,791
Impairment of property and equipment			—				5,898				—				5,898
Total costs and expenses			86,759				91,939				184,059				172,434
(Loss) income from operations			(6,950)				17,636				12,463				35,602
Interest expense, net			9,539				15,656				21,990				31,689
Loss from tax receivable agreement adjustment			4,446				—				4,446				—
Other income, net			(1,523)				(3,345)				(4,448)				(5,552)
Total other expenses			12,462				12,311				21,988				26,137
(Loss) income before income tax (benefit) provision			(19,412)				5,325				(9,525)				9,465
Income tax (benefit) provision			(4,024)				1,734				(810)				3,054
Net (loss) income		$	(15,388)			$	3,591			$	(8,715)			$	6,411
Other comprehensive loss:
Change in foreign currency translation adjustment			(508)				(1,396)				(3,875)				(72)
Total comprehensive (loss) income		$	(15,896)			$	2,195			$	(12,590)			$	6,339
Net (loss) income per share:
Basic		$	(0.10)			$	0.02			$	(0.05)			$	0.04
Diluted		$	(0.10)			$	0.02			$	(0.05)			$	0.04
Weighted average shares used in per share calculation:
Basic outstanding			161,710				157,846				161,317				156,956
Diluted outstanding			161,710				161,977				161,317				159,223

 

 

VERRA MOBILITY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
		Six Months Ended June 30,
($ in thousands)		2020				2019
Cash Flows from Operating Activities:
Net (loss) income		$	(8,715)			$	6,411
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization			58,409				57,804
Amortization of deferred financing costs and discounts			2,106				3,589
Impairment of property and equipment			—				5,898
Loss from tax receivable agreement adjustment			4,446				—
Credit loss expense			10,723				2,736
Deferred income taxes			(2,496)				(11,568)
Stock-based compensation			6,039				4,955
Installation and service parts expense			559				643
Accretion expense			129				183
Loss (gain) on disposal of assets			3				(13)
Changes in operating assets and liabilities:
Accounts receivable, net			(43,183)				(21,433)
Unbilled receivables			7,476				(616)
Prepaid expenses and other current assets			7,979				(4,199)
Accounts payable and accrued liabilities			(17,863)				5,224
Other liabilities			(3,069)				(3,833)
Net cash provided by operating activities			22,543				45,781
Cash Flows from Investing Activities:
Purchases of installation and service parts and property and equipment			(14,301)				(14,192)
Cash proceeds from the sale of assets			49				14
Net cash used in investing activities			(14,252)				(14,178)
Cash Flows from Financing Activities:
Repayment of long-term debt			(24,227)				(4,552)
Payment of debt issuance costs			(922)				(152)
Payment of employee tax withholding related to RSU vesting			(352)				—
Net cash used in financing activities			(25,501)				(4,704)
Effect of exchange rate changes on cash and cash equivalents			(1,270)				10
Net (decrease) increase in cash, cash equivalents and restricted cash			(18,480)				26,909
Cash, cash equivalents and restricted cash - beginning of period			132,430				67,081
Cash, cash equivalents and restricted cash - end of period		$	113,950			$	93,990

 

 

VERRA MOBILITY CORPORATION ADJUSTED EBITDA RECONCILIATION (Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
($ in thousands)		2020				2019				2020				2019
Net (loss) income		$	(15,388)			$	3,591			$	(8,715)			$	6,411
Interest expense, net			9,539				15,656				21,990				31,689
Income tax (benefit) provision			(4,024)				1,734				(810)				3,054
Depreciation and amortization			29,159				28,865				58,409				57,804
EBITDA			19,286				49,846				70,874				98,958
Transaction and other related expenses (i)			80				1,135				603				1,135
Transformation expenses (ii)			515				—				515				—
Impairment of property and equipment (iii)			—				5,898				—				5,898
Loss from tax receivable agreement adjustment (iv)			4,446				—				4,446				—
Stock-based compensation (v)			3,271				2,812				6,039				4,955
Adjusted EBITDA		$	27,598			$	59,691			$	82,477			$	110,946

(i)	Transaction and other related expenses incurred in the six months ended June 30, 2020 primarily relate to costs associated with our Pagatelia acquisition and certain costs for refinancing our debt during the period.
(ii)	Transformation expenses consist of severance and other employee separation costs related to exit activities initiated during the three and six months ended June 30, 2020.
(iii)	This represents an impairment charge on fixed assets that were used and held in our operations.
(iv)	We recorded a $4.4 million charge for the three and six months ended June 30, 2020 which reflects the impact of an increase to our deferred tax rate arising from higher estimated state tax rates due to a change in apportionment.
(v)	Stock-based compensation represents the non-cash charge related to the issuance of awards under the Verra Mobility Corporation 2018 Equity Incentive Plan.

 

 

FREE CASH FLOW (Unaudited)
		Six Months Ended June 30,
($ in thousands)		2020				2019
Net cash provided by operating activities		$	22,543			$	45,781
Purchases of installation and service parts and property and equipment			(14,301)				(14,192)
Free cash flow		$	8,242			$	31,589

 

 

ADJUSTED EPS (Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
(In thousands, except per share data)		2020				2019				2020				2019
Net (loss) income		$	(15,388)			$	3,591			$	(8,715)			$	6,411
Amortization of intangibles			23,531				23,131				47,060				46,261
Transaction and other related expenses			80				1,135				603				1,135
Transformation expenses			515				—				515				—
Impairment of property and equipment			—				5,898				—				5,898
Loss from tax receivable agreement adjustment			4,446				—				4,446				—
Stock-based compensation			3,271				2,812				6,039				4,955
Total adjustments after income tax effect			31,843				32,976				58,663				58,249
Income tax effect on adjustments			(6,601)				(10,738)				(4,989)				(18,796)
Total adjustments after income tax effect			25,242				22,238				53,674				39,453
Adjusted Net Income		$	9,854			$	25,829			$	44,959			$	45,864
Adjusted EPS		$	0.06			$	0.16			$	0.28			$	0.29
Diluted weighted average shares outstanding			161,710				161,977				161,317				159,223

 

EBITDA and Adjusted EBITDA

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

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

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

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

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

Investor Relations Contact
Marc P. Griffin
ICR, Inc., for Verra Mobility
646-277-1290
IR@verramobility.com 

 

 

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SOURCE Verra Mobility

FAQ

What were Verra Mobility's earnings results for Q2 2020?

Verra Mobility reported a net loss of $(15.4) million for Q2 2020, with total revenue of $79.8 million.

How did COVID-19 affect Verra Mobility's financial performance?

COVID-19 significantly impacted service revenue, leading to a 27.2% decline in total revenue during Q2 2020.

What is Verra Mobility's adjusted EBITDA for the first half of 2020?

The adjusted EBITDA for the first half of 2020 was $82.5 million, down from $110.9 million in the same period in 2019.

What is the outlook for Verra Mobility after the Q2 2020 results?

Despite challenges from COVID-19, Verra Mobility maintains confidence in its balanced product portfolio and long-term growth initiatives.