VERRA MOBILITY Corp

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

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 $1.5 million, or 0.7%, to $213.4 million for the three months ended March 31, 2026 from $211.9 million for the three months ended March 31, 2025, representing 95.4% and 94.9% of total revenue, respectively. The following table depicts service revenue by segment:

Commercial Services service revenue decreased by $3.6 million, or 3.5%, from $101.4 million for the three months ended March 31, 2025 to $97.8 million for the three months ended March 31, 2026. The decrease was primarily due to $3.6 million of lower revenue generated from our FMC customers due to customer churn.

Government Solutions service revenue increased by $4.1 million, or 4.4%, from $94.0 million for the three months ended March 31, 2025, to $98.1 million for the three months ended March 31, 2026. The increase was primarily driven by $7.5 million in revenue from expansions in speed, red light and bus lane programs outside of NYCDOT, partially offset by a $3.4 million decrease in revenue primarily driven by the pricing change, net of installation revenue from new camera installations under the new NYCDOT contract.

Parking Solutions service revenue increased to $17.5 million for the three months ended March 31, 2026, from $16.5 million for the three months ended March 31, 2025. The increased revenue was primarily driven by SaaS product offerings and professional services, partially offset by a decrease in subscription services related to parking management solutions.

Product Sales. Product sales were $10.2 million and $11.3 million for the three months ended March 31, 2026 and 2025, respectively. Product sales decreased by $1.2 million, which was due to a $0.6 million decrease in product sales in the Government Solutions segment and $0.6 million decrease in product sales in 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 $4.8 million for the three months ended March 31, 2025 to $7.4 million for the same period in 2026, mainly due to NYCDOT installation service costs and increased recurring service costs.

Cost of Product Sales. Cost of product sales increased by $0.3 million from $8.0 million in the three months ended March 31, 2025 to $8.3 million in the three months ended March 31, 2026, which was due to decreased margins in the first quarter 2026 compared to the first quarter of 2025.

Operating Expenses. Operating expenses increased by $12.2 million, or 16.6%, from $73.7 million for the three months ended March 31, 2025 to $85.9 million for the three months ended March 31, 2026. The increase in 2026 compared to the prior year period was primarily in the Government Solutions segment of approximately $9.5 million driven by increases in wages, subcontractor, information technology and recurring services costs and approximately $1.5 million in the Parking Solutions segment driven by wages, subcontractor and information technology costs. Operating expenses as a percentage of total revenue increased from 33.0% to 38.4% for the three months ended March 31, 2025 and 2026, respectively. The following table presents operating expenses by segment:

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased to $40.9 million for the three months ended March 31, 2026 compared to $51.5 million for the same period in 2025. This was primarily due to a $10.3 million decrease related to a legal settlement finalized in February 2026 and a $5.5 million decrease in credit loss expense partially offset by a $4.2 million increase in restructuring expense and a $2.1 million increase in consulting fees compared to the same period in the prior year. Selling, general and administrative expenses as a percentage of total revenue decreased from 23.1% to 18.3% for the three months ended March 31, 2025 and 2026, 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 $1.5 million to $29.3 million for the three months ended March 31, 2026 from $27.8 million for the same period in 2025. This was primarily due to an increase in depreciation expense related to equipment, vehicles and software in the 2026 period compared to the 2025 period.

Interest Expense, Net. Interest expense, net decreased by approximately $1.2 million from $16.6 million for the three months ended March 31, 2025 to $15.4 million for the same period in 2026. This was primarily attributable to a 25 basis-point reduction in the interest rate as a result of refinancing our 2021 Term Loan in October 2025 coupled with decreasing SOFR rates. See “Liquidity and Capital Resources” below.

Loss on Extinguishment of Debt. We recorded less than $0.1 million of loss on extinguishment of debt during the three months ended March 31, 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 $4.1 million for both of the three months ended March 31, 2026 and 2025.

Income Tax Provision. Income tax provision was $13.7 million representing an effective tax rate of 33.9% for the three months ended March 31, 2026 compared to a tax provision of $12.5 million, with an effective tax rate of 27.9% for the same period in 2025. The increase in effective tax rate variance was primarily driven by tax deductions related to stock compensation and the tax impact of the legal settlement finalized in February 2026.

Net Income. We had net income of $26.7 million for the three months ended March 31, 2026, as compared to a net income of $32.3 million for the three months ended March 31, 2025. The $5.6 million decrease in net income was primarily due to the increase in operating expenses, decrease in product sales and the other statement of operations activity discussed above, partially offset by the legal settlement finalized in February 2026.

Liquidity and Capital Resources

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

We believe that our existing cash and cash equivalents, cash flows provided by operating activities, and our ability to borrow under our Amended 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 Amended 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 Amended Revolver to meet expected obligations as they come due.

We originally entered into the Revolver in March 2018 and increased the borrowing capacity thereunder to $125.0 million in May 2025 pursuant to an amendment thereto. In fiscal year 2025, we amended and restated the Revolver and entered into the Amended and Restated Revolving Credit Agreement which increased the existing commitment from $125.0 million to $150.0 million and extended the maturity date to October 17, 2030. As of March 31, 2026, we had $26.0 million outstanding borrowings and $78.3 million available for borrowing, net of letters of credit, under our Amended Revolver. Our cash on hand was $46.9 million as of March 31, 2026.

In fiscal year 2025, we refinanced the existing senior secured term loans under the 2021 Term Loan in an aggregate outstanding principal amount of approximately $688.8 million with a new senior secured term loan of the same principal amount maturing on October 15, 2032 and reduced the interest rate by 0.25%. We made a quarterly repayment of approximately $1.7 million on our Amended Term Loan during the three months ended March 31, 2026, and as a result, the total principal outstanding on the Amended Term Loan was $685.4 million as of March 31, 2026.

At March 31, 2026, the tax receivable agreement liability was approximately $43.7 million. We expect to make payments of approximately $5.3 million per year for the next seven years and approximately $1.1 million in the final year.

Share Repurchases and Retirement

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. In December 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 of Class A Common Stock calculated using a volume-weighted average price over the term of the ASR agreement. All repurchased shares were subsequently retired. The prior repurchase authorization expired on April 30, 2025.

In May 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 over an 18-month period. On October 23, 2025, our Board of Directors authorized the repurchase of up to an additional $150.0 million of our outstanding shares of Class A Common Stock under the existing May 2025 program, providing us with $250.0 million available for repurchases. During the fourth quarter of fiscal year 2025, we paid $133.4 million to repurchase 6,028,853 shares of our Class A Common Stock through open market transactions. All repurchased shares were subsequently retired.

In the first quarter of fiscal year 2026, we paid $50.2 million to repurchase 2,215,800 shares of our Class A Common Stock through open market transactions, which were subsequently retired. In addition, we recorded approximately $0.5 million within accrued liabilities on the condensed consolidated balance sheets as of March 31, 2026 for direct costs related to the excise tax payable on net share repurchases. As of March 31, 2026, $66.3 million remains available under our authorized share repurchase 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 decreased by $22.2 million from $63.0 million for the three months ended March 31, 2025 to $40.8 million for the three months ended March 31, 2026. Net income year-over-year decreased by $5.6 million, from $32.3 million in 2025 to $26.7 million in 2026. The aggregate adjustments to reconcile net income to net cash provided by operating activities decreased $7.6 million mainly due to the share-based proceeds acquired from a legal settlement finalized in February 2026, and a decrease in credit loss expense, partially offset by an increase in deferred income taxes and the mark-to-market adjustment on the share-based proceeds. The aggregate changes in operating assets and liabilities decreased by $9.0 million in 2026 compared to the prior year primarily due to an increase in the net use of working capital, of which, the majority is attributable to an increase in unbilled receivables and inventory and a decrease in accrued liabilities, partially offset by a decrease in net accounts receivable and prepaid assets.

Cash Flows from Investing Activities

Cash used in investing activities was $31.1 million and $21.2 million for the three months ended March 31, 2026 and 2025, respectively. The increase in cash used was primarily driven by a $10.0 million increase for purchases of installation and service parts and property and equipment mainly for the Government Solutions segment compared to the same period in the prior year.

Cash Flows from Financing Activities

Cash used in financing activities was $28.6 million and $8.7 million for the three months ended March 31, 2026 and 2025, respectively. The increased use in cash from financing activities was mainly due to $50.2 million of share repurchases in the first quarter of fiscal year 2026 and no comparable repurchases in the prior year period, partially offset by net borrowings of $26.0 million on our Amended Revolver.

Debt, Net

2021 Term Loan and Amended Term Loan

In March 2021, VM Consolidated, our wholly owned subsidiary, entered into the 2021 Term Loan with a syndicate of lenders. The 2021 Term Loan had 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 amortized over the life of the 2021 Term Loan. Such offering discount costs and deferred financing costs have subsequently been adjusted as needed as a result of refinancing activity discussed below which prompted re-evaluation of unamortized amounts on a lender-by-lender basis.

In October 2025, VM Consolidated and certain of our subsidiaries entered into the Amendment and Restatement Agreement No. 2 to the Amended and Restated First Lien Term Loan Credit Agreement dated as of March 26, 2021, to refinance the existing senior secured term loans in an aggregate outstanding principal amount of approximately $688.8 million with a new senior secured term loan of the same principal amount maturing on October 15, 2032. The proceeds from the Amended Term Loan were used in their entirety to prepay in full the outstanding principal amount of the existing term loan under the 2021 Term Loan agreement.

The Amended Term Loan bears interest at a per annum rate equal to SOFR plus an applicable margin of 2.00%, or a base rate plus an applicable margin of 1.00%. As of March 31, 2026, the interest rate on the Amended Term Loan was 5.7%. The Amended Term Loan amortizes in equal quarterly installments in aggregate amounts equal to 1.00% of the original principal amount of the Amended Term Loan beginning March 31, 2026, with the balance payable at maturity, is subject to mandatory prepayment provisions upon the occurrence of certain specified events, and is repayable at any time at the borrowers’ election, provided that repayment of the Amended Term Loan with proceeds of certain indebtedness prior to the six-month anniversary of October 17, 2025 will require a prepayment premium of 1.00% of the aggregate principal amount of such prepayment. We evaluated the refinancing transactions on a lender-by-lender basis and accounted accordingly for debt extinguishment and debt modification costs (for the portion of the transactions that did not meet the accounting criteria for debt extinguishment).

During the three months ended March 31, 2026, we made a quarterly repayment of $1.7 million on the Amended Term Loan. During the three months ended March 31, 2025, we made a voluntary prepayment totaling $2.3 million on the 2021 Term Loan. As a result, the total principal outstanding was $685.4 million as of March 31, 2026.

We recorded less than $0.1 million of loss on extinguishment of debt for the three months ended March 31, 2025, related to the write-off of pre-existing deferred financing costs and discounts in connection with the early repayment.

In addition, the Amended Term Loan requires mandatory prepayments equal to the product of the excess cash flows of the Company (as defined in the Amended and Restated 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 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 a redemption price of 101.375% plus accrued and unpaid interest through April 2026 and at face value plus accrued and unpaid interest thereafter.

The Revolver

We entered into a Revolving Credit Agreement in March 2018 with a commitment of up to $75.0 million available for loans and letters of credit, which commitment was increased to $125.0 million. In May 2025, pursuant to an amendment thereto, such commitment was increased to $125.0 million. On October 17, 2025, certain of our direct and indirect wholly owned subsidiaries, including VM Consolidated, entered into the Amended and Restated Revolving Credit Agreement to amend and restate the Revolver. The Amended and Restated Revolving Credit Agreement provides for a $150.0 million senior secured asset-based revolving credit facility with a $35.0 million sublimit for the issuance of letters of credit, and matures on October 17, 2030 (subject to an earlier maturity date in certain circumstances).

Outstanding borrowings under the Amended Revolver accrue interest at per annum rate equal to SOFR plus a margin ranging from 1.25% to 1.75% or a base rate plus a margin ranging from 0.25% to 0.75%, in each case, depending on the quarterly average undrawn availability under the Amended Revolver in the prior quarter. The Amended and Restated Revolving Credit Agreement also provides for the option, subject to receiving additional commitments from lenders and the satisfaction of certain conditions, to increase the loan commitments under the Amended Revolver by up to an amount equal to the greater of (x) $75.0 million and (y) the amount by which the borrowing base exceeds the aggregate commitments at such time. There were $26.0 million of outstanding borrowings on the Amended Revolver as of March 31, 2026. There were no outstanding borrowings on the Amended Revolver as of December 31, 2025. The availability to borrow was $78.3 million at March 31, 2026, calculated as our borrowing base which consists of certain eligible accounts receivable and inventory balances, less any outstanding borrowings and letters of credit up to the maximum commitment available.

A commitment fee on the unused portion of the Amended Revolver is payable quarterly at (x) an annual rate of 0.375%, when quarterly average usage was less than 50% of the loan commitments in the prior quarter or (y) an annual rate of 0.250%, when quarterly average usage of the Amended Revolver was greater than or equal to 50% of the loan commitments in the prior quarter. We are also required to pay participation and fronting fees at 1.38% on $3.7 million of outstanding letters of credit as of March 31, 2026.

All borrowings and other extensions of credits under the Amended Term Loan, Senior Notes and the Amended 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 the Company’s assets are pledged as collateral under the Amended Term Loan and the Amended Revolver. At March 31, 2026, we were compliant with all debt covenants in our debt agreements.

From time to time, we enter into equipment financing arrangements in the normal course of business, including certain equipment leases accounted for as financing arrangements. Amounts outstanding under these arrangements are included in “Other debt” in Note 6, Debt, Net, in Part I, Item 1, Financial Statements, and were not material to our overall financial position, liquidity, or capital resources as of March 31, 2026.

Interest Expense, Net

We recorded interest expense, including amortization of deferred financing costs and discounts, of $15.4 million and $16.6 million for the three months ended March 31, 2026 and 2025, respectively.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet financing arrangements as of March 31, 2026.

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.