VERRA MOBILITY Corp

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

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.

Service Revenue. Service revenue increased by $11.5 million, or 5.4%, to $223.5 million for the three months ended June 30, 2025 from $212.0 million for the three months ended June 30, 2024, representing 94.7% and 95.3% of total revenue, respectively. The following table depicts service revenue by segment:

Commercial Services service revenue increased by $5.1 million, or 4.9%, from $104.0 million for the three months ended June 30, 2024 to $109.1 million for the three months ended June 30, 2025. The increase was primarily due to increased product adoption and tolling activity compared to the prior year which contributed to a $2.7 million growth in RAC tolling revenue during the three months ended June 30, 2025, compared to the same period in 2024. In addition, we derived $2.2 million of increased revenue from our European operations, partially offset by lower revenue generated from our FMC customers due to customer churn and modest weakness attributable to macroeconomic factors compared to the same period in 2024.

Government Solutions service revenue increased by $6.5 million, or 7.1%, from $91.5 million for the three months ended June 30, 2024, to $98.0 million for the three months ended June 30, 2025. The increase was primarily driven by the expansion of bus lane and school bus stop arm enforcement programs contributing $4.6 million, with the remaining increase driven primarily by speed and red-light enforcement programs.

Parking Solutions service revenue decreased slightly to $16.5 million for the three months ended June 30, 2025, from $16.6 million for the three months ended June 30, 2024. The increased revenue from SaaS product offerings was offset by a decrease in subscription and professional services revenue related to parking management solutions.

Product Sales. Product sales were $12.5 million and $10.4 million for the three months ended June 30, 2025 and 2024, respectively. Product sales increased by $2.1 million, which was due to a $2.9 million increase in product sales to international customers in the Government Solutions segment which was partially offset by a decrease in product sales from the Parking Solutions segment. Customer buying patterns vary greatly from period to period related to product sales.

Cost of Service Revenue, Excluding Depreciation and Amortization. Cost of service revenue, excluding depreciation and amortization remained flat at $4.6 million for both the three months ended June 30, 2025 and 2024.

Cost of Product Sales. Cost of product sales increased by $1.1 million from $7.8 million in the three months ended June 30, 2024 to $8.9 million in the three months ended June 30, 2025, which was in line with the increase in product sales discussed above.

Operating Expenses. Operating expenses increased by $6.4 million, or 8.6%, from $74.9 million for the three months ended June 30, 2024 to $81.3 million for the three months ended June 30, 2025. The increase in 2025 compared to the prior period was primarily in the Government Solutions business for approximately $6.3 million due to increases in subcontractor costs, wages and operational equipment, partially offset by a decrease in operating expenses in the Parking Solutions business. Operating expenses as a percentage of total revenue increased from 33.7% to 34.5% for the three months ended June 30, 2024 and 2025, respectively. The following table presents operating expenses by segment:

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $48.5 million for the three months ended June 30, 2025 compared to $46.3 million for the same period in 2024. This is primarily due to a $2.0 million increase in professional services and $1.7 million increase in credit loss expense, partially offset by a decrease in restructuring expenses compared to the same period in the prior year. Selling, general and administrative expenses as a percentage of total revenue decreased from 20.8% to 20.5% for the three months ended June 30, 2024 and 2025, respectively. The following table presents selling, general and administrative expenses by segment:

Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net, increased by $2.0 million to $29.5 million for the three months ended June 30, 2025 from $27.5 million for the same period in 2024. This was primarily due to an increase in depreciation expense for the Commercial Services and Government Solutions businesses in the 2025 period.

Interest Expense, Net. Interest expense, net decreased by approximately $2.2 million from $18.8 million for the three months ended June 30, 2024 to $16.6 million for the same period in 2025. This was primarily attributable to voluntary principal prepayments made during 2024 and 2025 reducing the balance of the 2021 Term Loan (as defined below) and a 50 basis-point reduction in the interest rate from refinancing our debt in October 2024 coupled with decreasing SOFR rates. See “Liquidity and Capital Resources” below.

Gain on Interest Rate Swap. We recorded a gain of less than $(0.1) million during the three months ended June 30, 2024, of which $0.2 million is associated with the derivative instrument re-measured to fair value at the end of the reporting period offset by $(0.3) million related to the monthly cash proceeds on the interest rate swap. We exercised our option to cancel the interest rate swap agreement effective the end of the third quarter of 2024.

Loss on Extinguishment of Debt. We recorded less than $0.1 million of loss on extinguishment of debt during the three months ended June 30, 2025 related to the write-off of pre-existing deferred financing costs and discounts in connection with the early repayment on the 2021 Term Loan.

Other Income, Net. Other income, net was $6.0 million for the three months ended June 30, 2025 compared to $5.2 million for the three months ended June 30, 2024. The increase was primarily from non-operating income from foreign currency transactions mainly in the Commercial Services business.

Income Tax Provision. Income tax provision was $14.0 million representing an effective tax rate of 26.7% for the three months ended June 30, 2025 compared to a tax provision of $13.4 million, with an effective tax rate of 28.1% for the same period in 2024.

Net Income. We had net income of $38.6 million for the three months ended June 30, 2025, as compared to a net income of $34.2 million for the three months ended June 30, 2024. The $4.4 million increase in net income was primarily due to the decrease in interest expense and the other statement of operations activity discussed above.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

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.

Service Revenue. Service revenue increased by $20.6 million, or 5.0%, to $435.4 million for the six months ended June 30, 2025 from $414.7 million for the six months ended June 30, 2024, representing 94.8% and 96.0% of total revenue, respectively. The following table depicts service revenue by segment:

Commercial Services service revenue increased by $10.6 million, or 5.3%, from $199.9 million for the six months ended June 30, 2024 to $210.4 million for the six months ended June 30, 2025. The increase was primarily due to increased product adoption and tolling activity compared to the prior year. These factors contributed to a $6.9 million growth in RAC tolling revenue and the remaining increase was driven mainly by an increase of $2.0 million from European operations during the six months ended June 30, 2025, compared to the same period in 2024.

Government Solutions service revenue increased by $10.2 million, or 5.6%, from $181.7 million for the six months ended June 30, 2024, to $192.0 million for the six months ended June 30, 2025. The increase was primarily driven by $8.4 million from the expansion of bus lane and school bus stop arm enforcement programs and the remaining increase is mainly from speed and red-light enforcement programs.

Parking Solutions service revenue decreased slightly to $33.0 million for the six months ended June 30, 2025, from $33.1 million for the six months ended June 30, 2024. The increased revenue from SaaS product offerings was offset by a decrease in subscription and professional services related to parking management solutions.

Product Sales. Product sales were $23.9 million and $17.4 million for the six months ended June 30, 2025 and 2024, respectively. Product sales increased by $6.5 million due to a $6.8 million increase in product sales to international customers in the Government Solutions segment which was partially offset by a decrease in product sales from the Parking Solutions segment. Customer buying patterns vary greatly from period to period related to product sales.

Cost of Service Revenue, Excluding Depreciation and Amortization. Cost of service revenue, excluding depreciation and amortization increased from $8.9 million for the six months ended June 30, 2024 to $9.4 million for the six months ended June 30, 2025, mainly due to increased recurring service and third-party costs for our segments.

Cost of Product Sales. Cost of product sales increased by approximately $3.9 million from $13.1 million in the six months ended June 30, 2024 to $17.0 million in the six months ended June 30, 2025, which was in line with the increase in product sales discussed above.

Operating Expenses. Operating expenses increased by $9.5 million, or 6.5%, from $145.5 million for the six months ended June 30, 2024 to approximately $155.1 million for the six months ended June 30, 2025. The increase in 2025 compared to the prior year was primarily in the Government Solutions business for approximately $9.6 million due to increases in subcontractor and operational equipment costs, partially offset by a decrease in operating expenses in the Parking Solutions business. Operating expenses as a percentage of total revenue increased slightly from 33.7% to 33.8% for the six months ended June 30, 2024 and 2025, respectively. The following table presents operating expenses by segment:

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $100.0 million for the six months ended June 30, 2025 compared to $94.5 million for the same period in 2024. This is primarily due to a $4.6 million increase in credit loss expense and $3.6 million in increased professional services fees, partially offset by a decrease in restructuring expenses compared to the same period in 2024. Selling, general and administrative expenses as a percentage of total revenue decreased slightly from 21.9% to 21.8% for the six months ended June 30, 2024 and 2025, respectively. The following table presents selling, general and administrative expenses by segment:

Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net, increased by $2.8 million to $57.3 million for the six months ended June 30, 2025 from $54.5 million for the same period in 2024. This was primarily due to an increase in depreciation expense related to equipment and software in the 2025 period compared to the 2024 period.

Interest Expense, Net. Interest expense, net decreased by $5.3 million from $38.5 million for the six months ended June 30, 2024 to $33.2 million for the same period in 2025. This was primarily attributable to voluntary principal prepayments made during 2024 and 2025 reducing the balance of the 2021 Term Loan and a 50 basis-point reduction in the interest rate from refinancing our debt in October 2024 coupled with decreasing SOFR rates. See “Liquidity and Capital Resources” below.

Gain on Interest Rate Swap. We recorded a $(0.4) million gain during the six months ended June 30, 2024, of which $0.2 million is associated with the derivative instrument re-measured to fair value at the end of the reporting period offset by $(0.6) million related to the monthly cash proceeds on the interest rate swap. We exercised our option to cancel the interest rate swap agreement effective the end of the third quarter of 2024.

Loss on Extinguishment of Debt. We recorded less than $0.1 million of loss on extinguishment of debt during the six months ended June 30, 2025 related to the write-off of pre-existing deferred financing costs and discounts in connection with the early repayments on the 2021 Term Loan. We recorded a $0.6 million loss on extinguishment of debt during the six months ended June 30, 2024 related to the write-off of pre-existing deferred financing costs and discounts in connection with the refinancing of the 2021 Term Loan in February 2024.

Other Income, Net. Other income, net was $10.1 million for the six months ended June 30, 2025 compared to approximately $9.7 million for the six months ended June 30, 2024. The increase was mainly from non-operating income from foreign currency transactions in the 2025 period.

Income Tax Provision. Income tax provision was $26.5 million representing an effective tax rate of 27.2% for the six months ended June 30, 2025 compared to a tax provision of $23.2 million, with an effective tax rate of 26.8% for the same period in 2024.

Net Income. We had net income of $70.9 million for the six months ended June 30, 2025, as compared to a net income of $63.4 million for the six months ended June 30, 2024. The $7.5 million increase in net income was primarily due to the increase in service revenue and product sales, a decrease in interest expense and the other statement of operations activity discussed above.

Liquidity and Capital Resources

Our principal sources of liquidity are cash flows from operations and the available borrowing under our Revolver.

We believe that our existing cash and cash equivalents, cash flows provided by operating activities and our ability to borrow under our Revolver will be sufficient to meet operating cash requirements, service debt obligations and fund potential share repurchases for at least the next 12 months and thereafter for the foreseeable future. Our ability to generate sufficient cash from our operating activities depends on our future performance, which is subject to general economic, political, financial, competitive and other factors beyond our control. In addition, our future capital expenditures and other cash requirements could be higher than currently expected due to various factors, including any expansion of our business or strategic acquisitions.

We have incurred significant long-term debt as a result of acquisitions completed in prior years. Should we pursue strategic acquisitions, we may need to raise additional capital, which may be in the form of additional long-term debt, borrowings on our Revolver, or equity financings, all of which may not be available to us on favorable terms or at all.

We have the ability to borrow under our Revolver to meet obligations as they come due. On May 15, 2025, we exercised our option to increase the commitments under the terms of the Revolver and entered into a fourth amendment to the Revolver which increased the existing commitment from $75.0 million to $125.0 million available for loans and letters of credit. As of June 30, 2025, we had no outstanding borrowings and $123.9 million available for borrowing, net of letters of credit, under our Revolver. Our cash on hand was $147.7 million as of June 30, 2025.

In fiscal year 2024, we refinanced the 2021 Term Loan which reduced the interest rate by an aggregate 1.00% and eliminated the applicable credit spread adjustment. We made early repayments of approximately $2.3 million and $4.5 million on our 2021 Term Loan during the three and six months ended June 30, 2025, and as a result, the total principal outstanding on the 2021 Term Loan was $691.1 million as of June 30, 2025.

At June 30, 2025, the Tax Receivable Agreement liability was approximately $43.2 million. During the second quarter of 2025, we made an estimated payment of $5.0 million related to the 2024 tax year. We expect to make payments of approximately $5.2 million per year for the next eight years and approximately $1.1 million in the final year.

In October 2023, our Board of Directors authorized a share repurchase program for up to an aggregate amount of $100.0 million of our outstanding shares of Class A Common Stock over an 18-month period. After we repurchased an aggregate 3.5 million shares for approximately $87.3 million in fiscal year 2024, in December 2024, our Board of Directors authorized the repurchase of up to an additional $100.0 million of our outstanding shares under the then-existing program, providing us with approximately $112.7 million available for repurchases. On December 11, 2024, we entered into an ASR agreement with a third-party financial institution and paid $112.7 million to receive an initial delivery of 3,821,958 shares of our Class A Common Stock. The final settlement occurred on March 3, 2025, at which time, we received an additional 685,934 shares calculated using a volume-weighted average price over the term of the ASR agreement. All repurchased shares were subsequently retired. The authorization under this repurchase program ended on April 30, 2025.

During the second quarter of 2025, we paid approximately $1.7 million for excise taxes related to 2024 net share repurchases.

On May 17, 2025, our Board of Directors authorized a new share repurchase program for up to an aggregate amount of $100.0 million of our outstanding shares of Class A Common Stock. Under the repurchase program, we may purchase shares of Class A Common Stock until November 2026 through open market purchases, in privately negotiated transactions or by other means, including trading plans intended to qualify under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, and ASR agreements, each as permitted under applicable rules and regulations. The amount and timing of repurchases will be determined at our discretion and will depend on a variety of factors, including price, general business and market conditions, applicable legal requirements, and alternative investment opportunities. The repurchase program does not obligate us to acquire any particular amount of Class A Common Stock or at any specific time intervals and may be modified, suspended or terminated at any time at our discretion. We have not yet repurchased shares of Class A Common Stock under this program.

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

Cash Flows from Operating Activities

Cash provided by operating activities increased by $63.7 million from $74.4 million for the six months ended June 30, 2024 to $138.1 million for the six months ended June 30, 2025. Net income year-over-year increased by $7.5 million, from $63.4 million in 2024 to $70.9 million in 2025. The aggregate adjustments to reconcile net income to net cash provided by operating activities increased $2.6 million mainly due to increased credit loss expense, depreciation expense and stock-based compensation, which were partially offset by a change in deferred income taxes. The aggregate changes in operating assets and liabilities increased by $53.6 million in 2025 compared to the prior year primarily due to a reduction in the net use of working capital, of which, the majority is attributable to a large payment that reduced accounts payable and other current liabilities in the first half of 2024. In addition, changes in prepaid and other current assets also contributed to the increase in 2025 compared to the prior year.

Cash Flows from Investing Activities

Cash used in investing activities was $56.0 million and $27.7 million for the six months ended June 30, 2025 and 2024, respectively. The increase in cash used was primarily driven by a $27.8 million increase for purchases of installation and service parts and property and equipment mainly for the Government Solutions business compared to the same period in the prior year.

Cash Flows from Financing Activities

Cash used in financing activities was $10.9 million and $60.9 million for the six months ended June 30, 2025 and 2024, respectively. The decreased use in cash from financing activities was mainly due to $51.5 million of share repurchases in 2024 and no comparable repurchases in the current year.

Long-term Debt, Net

2021 Term Loan

In March 2021, VM Consolidated, Inc. (“VM Consolidated”), our wholly owned subsidiary, entered into an Amendment and Restatement Agreement No.1 to the First Lien Term Loan Credit Agreement (the “2021 Term Loan”) with a syndicate of lenders. The 2021 Term Loan has an aggregate borrowing of $900.0 million, maturing on March 24, 2028. In connection with the 2021 Term Loan borrowings, we had $4.6 million of offering discount costs and $4.5 million in deferred financing costs, both of which were capitalized and are being amortized over the remaining life of the 2021 Term Loan.

In February 2024, VM Consolidated entered into a third amendment to the 2021 Term Loan (the “Third Amendment”) and in October 2024, a fourth amendment to the 2021 Term Loan (the “Fourth Amendment”) to refinance the 2021 Term Loan (the “Refinancing Transactions”). Pursuant to the Third Amendment and Fourth Amendment, the interest rate was reduced by an aggregate 1.00% to Term Secured Overnight Financing Rate (“SOFR”) plus 2.25% from SOFR plus 3.25% with the SOFR floor unchanged at 0.00%. The credit spread adjustment, ranging from 0.11448% to 0.71513%, was eliminated. In addition, the 2021 Term Loan was amended to remove a provision for principal repayments which were previously required to be paid in quarterly installments.

During each of the six months ended June 30, 2025 and 2024, we made early repayments of $4.5 million on the 2021 Term Loan, and as a result the total principal outstanding was $691.1 million as of June 30, 2025.

We recorded less than $0.1 million of loss on extinguishment of debt during both the three and six months ended June 30, 2025, related to the write-off of pre-existing deferred financing costs and discounts in connection with the early repayments. We recognized a $0.6 million loss on extinguishment of debt for the six months ended June 30, 2024, related to the write-off of pre-existing deferred financing costs and discounts in connection with the refinancing of the 2021 Term Loan in February 2024.

The 2021 Term Loan bears interest based at our option, on either (i) SOFR plus an applicable margin of 2.25% per annum, or (ii) an alternate base rate plus an applicable margin of 1.25% per annum. As of June 30, 2025, the interest rate on the 2021 Term Loan was 6.6%.

In addition, the 2021 Term Loan requires mandatory prepayments equal to the product of the excess cash flows of the Company (as defined in the 2021 Term Loan agreement) and the applicable prepayment percentages (calculated as of the last day of the fiscal year), as set forth in the following table:

Senior Notes

In March 2021, VM Consolidated issued an aggregate principal amount of $350.0 million in Senior Unsecured Notes (the “Senior Notes”), due on April 15, 2029. In connection with the issuance of the Senior Notes, we incurred $5.7 million in lender and third-party costs, which were capitalized as deferred financing costs and are being amortized over the remaining life of the Senior Notes.

Interest on the Senior Notes is fixed at 5.50% per annum and is payable on April 15 and October 15 of each year. We may redeem all or a portion of the Senior Notes at the redemption prices set forth below in percentages by year, plus accrued and unpaid interest:

The Revolver

On May 15, 2025, we exercised our option to increase the commitments under the terms of the Revolver and entered into a fourth amendment to the Revolver which increased the existing commitment from $75.0 million to $125.0 million available for loans and letters of credit. The Revolver matures on December 18, 2026. Borrowing eligibility under the 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. The Revolver bears interest on either (1) SOFR plus an applicable margin, or (2) an alternate base rate, plus an applicable margin. The margin percentage applied to (1) SOFR 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 average availability to borrow under the commitment. There is a credit spread adjustment of 0.10% for a one-month duration, 0.15% for a three-month duration, and 0.25% for a six-month duration, in addition to SOFR and the applicable margin percentages. There were no outstanding borrowings on the Revolver as of June 30, 2025 or December 31, 2024. The availability to borrow was $123.9 million, net of $1.1 million of outstanding letters of credit at June 30, 2025.

Interest on the unused portion of the Revolver is payable quarterly at 0.375% and we are also required to pay participation and fronting fees at 1.38% on $1.1 million of outstanding letters of credit as of June 30, 2025.

All borrowings and other extensions of credits under the 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. Substantially all of our assets are pledged as collateral to secure our indebtedness under the 2021 Term Loan. At June 30, 2025, we were compliant with all debt covenants in our debt agreements.

Interest Expense, Net

We recorded interest expense, including amortization of deferred financing costs and discounts, of $16.6 million and $18.8 million for the three months ended June 30, 2025 and 2024, respectively, and $33.2 million and $38.5 million for the six months ended June 30, 2025 and 2024, respectively.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet financing arrangements as of June 30, 2025.

Critical Accounting Policies, Estimates and Judgments

The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Please refer to our Annual Report for our critical accounting policies, estimates and judgments. We believe that our estimates and assumptions are reasonable in the circumstances; however, actual results could differ materially from those estimates.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, refer to Note 2, Significant Accounting Policies, in Part I, Item 1, Financial Statements.