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What changed in VERRA MOBILITY Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of VERRA MOBILITY Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+386 added−422 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-01)

Top changes in VERRA MOBILITY Corp's 2023 10-K

386 paragraphs added · 422 removed · 284 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

72 edited+14 added−10 removed20 unchanged
Biggest changeThis segment generated approximately $79.0 million in revenue for 2022, or 6 approximately 10.6% of our total revenue. 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.
Biggest changeParking Solutions Our Parking Solutions segment, formed after our acquisition of T2 Systems Parent Corporation (“ T2 Systems ”) in December 2021, generated approximately $86.1 million in revenue for 2023, or approximately 10.5% of our total revenue. T2 Systems is a North American leader of end-to-end commercial parking management solutions.
Through our established relationships with 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.
Through our established relationships with 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 tolling and issuing authorities.
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.
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 7 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.
For key leadership positions, we also provide compensation packages that include annual incentive bonuses and long-term equity awards. 11 Employee Engagement We seek employees who collaborate and value differences, think and act globally, foster an engaging climate, and recognize and develop others.
For key leadership positions, we also provide compensation packages that include annual incentive bonuses and long-term equity awards. Employee Engagement We seek employees who collaborate and value differences, think and act globally, foster an engaging climate, and recognize and develop others.
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.
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 illegally running red lights.
As part of our business, we collect, receive, process, use, transmit, disclose, and retain information relating to identifiable individuals (“ personal information ”) and, therefore, are subject to various laws protecting privacy and security of personal information, including but not limited to the U.S.
Privacy and Data Security As part of our business, we collect, receive, process, use, transmit, disclose, and retain information relating to identifiable individuals (“ personal information ”) and, therefore, are subject to various laws protecting privacy and security of personal information, including but not limited to the U.S.
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.
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 regularly review third-party intellectual property rights to help avoid infringement, and to identify strategic opportunities.
Our Government Solutions customers are typically government agencies, and our operations within this segment are therefore subject to various procurement laws pertaining to gifts and entertainment, payments of commissions and contingency fees, conflicts of interest, licensing and permitting requirements and other matters.
Government Contracting Our Government Solutions customers are typically government agencies, and our operations within this segment are therefore subject to various laws pertaining to procurement, gifts and entertainment, payments of commissions and contingency fees, conflicts of interest, licensing and permitting requirements and other matters.
Item 1. B usiness Overview We are a leading provider of smart mobility technology solutions throughout the United States, Australia, Europe and Canada. We make transportation safer, smarter and more connected through our integrated, data-driven solutions, including toll and violations management, title and registration services, automated safety and traffic enforcement and commercial parking management.
Item 1. B usiness Overview We are a leading provider of smart mobility technology solutions, principally operating throughout the United States, Australia, Europe and Canada. We make transportation safer, smarter and more connected through our integrated, data-driven solutions, including toll and violations management, title and registration services, automated safety and traffic enforcement and commercial parking management.
Products Commercial Services Toll management solutions We provide fully outsourced toll management solutions for our fleet owner customers, including RACs and FMCs, 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.
Products Commercial Services Toll management solutions We provide fully outsourced toll management solutions for our fleet owner customers, including RACs, Direct Fleets and FMCs, 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.
Corporate Information We were originally incorporated in Delaware on August 15, 2016, under the name “Gores Holdings II, Inc.” (“ Gores ”) as a special purpose acquisition company. On January 19, 2017, Gores consummated its initial public offering (the “ IPO ”), following which its shares began trading on Nasdaq.
Corporate Information We were originally incorporated in Delaware on August 15, 2016, under the name “Gores Holdings II, Inc.” (“ Gores ”) as a special purpose acquisition company. On January 19, 2017, Gores consummated its initial public offering (the “ IPO ”), following which its shares began trading on the Nasdaq Capital Market (“ Nasdaq ”).
Driver Privacy Protection Act, the General Data Protection Regulation (the “ GDPR ”) in the European Union (the “ E.U. ”), the Data Protection Act of 2018 in the United Kingdom, the Canadian Personal Information Protection and Electronic Documents Act, the Australia Privacy Act of 1988, New Zealand’s Privacy Act of 2020, the California Consumer Privacy Act (the “ CCPA ”) and other national and state privacy laws.
Driver Privacy Protection Act, the General Data Protection Regulation (the “ GDPR ”) in the European Union (the “ E.U. ”), the Data Protection Act of 2018 and the GDPR in the United Kingdom, the Canadian Personal Information Protection and Electronic Documents Act, the Australia Privacy Act of 1988, New Zealand’s Privacy Act of 2020, the California Consumer Privacy Act, as amended (the “ CCPA ”), and other national and state privacy laws.
We own approximately 82 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.
We own approximately 88 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.
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.
Similarly, speed safety cameras are used to capture vehicles exceeding posted speed limits, either on a fixed basis or in a mobile platform, and often in school zones or work zones. School bus safety cameras are fixed to the side of buses to capture vehicles passing school buses with extended stop arms.
We believe that these trends create sizable opportunities for us to expand our tolling market presence while developing relationships with tolling authorities. Commercial Fleet Our Commercial Services customers consist of RACs, FMCs and other large fleet owners.
We believe that these trends create sizable opportunities for us to expand our tolling market presence while developing relationships with tolling authorities. Commercial Fleet Our Commercial Services customers consist of RACs, Direct Fleets, FMCs and other large fleet owners.
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.
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.
We believe our Government Solutions segment is the market-leading provider of automated safety solutions in the United States, Canada and Australia to state and local governments. In the United States, we provide government agencies with road safety cameras to detect and process traffic violations for red-light, speed, school bus, and city bus lanes.
We believe our Government Solutions segment is a market-leading provider of automated safety solutions in the United States, Canada and Australia to state and local governments. In the United States, we provide government agencies with road safety cameras to detect and process traffic violations for red-light, speed, school bus, work zone and city bus lanes.
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 become available on the SEC’s website.
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 Securities and Exchange Commission (the “ SEC ”) are available free of charge at http://ir.verramobility.com/financial-information/sec-filings when such reports become available on the SEC’s website.
Compensation and Benefits 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.
Compensation and Benefits Our compensation programs are designed to align the compensation of our employees with the performance of the Company and the individual employee, 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.
Violations management solutions 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 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.
Violations management solutions Our violations management solutions process violations incurred by the drivers of RAC, Direct Fleet and FMC vehicles by working with more than 8,700 domestic 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.
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.
This comprehensive network provides RAC, Direct Fleet 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, Direct Fleet and FMC customers and eliminates their need to manage a nationwide program internally.
Finally, bus lane cameras are designed to capture vehicles illegally driving in restricted bus lanes. 8 For customers of our end-to-end solutions, we automatically send captured events to the designated enforcement agency of the customer, where an authorized individual determines if a violation occurred.
Finally, bus lane cameras are designed to capture vehicles illegally driving or parking in restricted bus lanes. 6 For customers of our end-to-end solutions, we automatically send captured events to the designated enforcement agency of the customer, where an authorized individual determines if a violation occurred.
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 17 European countries. Violation management solutions accounted for approximately 4.6% of our 2022 revenues.
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 18 European countries. Violation management solutions accounted for approximately 4.6% of our 2023 total revenues.
We have long-standing relationships with, among others, the three largest RACs in the United States, Avis Budget Group, Enterprise Holdings, Inc. and The Hertz Corporation. We also have relationships with key European RACs and the five largest FMCs in the United States.
We have long-standing relationships with, among others, the three largest RACs in the United States, Avis Budget Group, Enterprise Mobility and The Hertz Corporation. We also have relationships with key European RACs and the five largest FMCs in the United States.
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 approximately 30% of higher education institutions in its target tiers, according to internal analysis.
These customers each have different parking needs such as off-street parking, on-street parking, permits, transaction processing, enforcement and consumer engagement. T2 Systems has customer relationships with approximately 35% of higher education institutions in its target tiers, according to internal analysis.
We bring together vehicles, hardware, software, data, and people to solve transportation challenges for customers around the world, including fleet owners such as rental car companies (“ RACs ”) and fleet management companies (“ FMCs ”), governments, universities, parking operators, healthcare facilities, transportation hubs and other violation-issuing authorities.
We bring together vehicles, hardware, software, data and people to solve transportation challenges for customers around the world, including commercial fleet owners such as rental car companies (“ RACs ”), direct commercial fleet owner-operators (“ Direct Fleets ”) and fleet management companies (“ FMCs ”), as well as governments, universities, parking operators, healthcare facilities, transportation hubs and other violation-issuing authorities.
We believe that our 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. In Europe, our Commercial Services segment provides violations processing through Euro Parking Collection plc (“ EPC ”) and consumer tolling services through Pagatelia S.L.U. (“ Pagatelia ”).
We believe that our Commercial Services segment is a market-leading provider of automated toll and violations management and title and registration solutions to RACs, Direct Fleets, FMCs and other large fleet owners in North America. In Europe, our Commercial Services segment provides violations processing through Euro Parking Collection plc and consumer tolling services through Pagatelia S.L.U.
Title and registration solutions 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 Our title and registration solutions provide RAC, Direct Fleet 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 title and registration processing in 19 states.
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, 95% of toll road transactions in the United States are cashless or all-electronic payment.
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, approximately 67% of toll roads in the United States are cashless or all-electronic payment.
Markets and Competition There is no single competitor that provides a similarly broad suite of solutions across our business segments. 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, speed and bus lane photo enforcement.
Markets and Competition Although we face strong competition in all of the markets in which we operate, there is no single competitor that provides a similarly broad suite of solutions across our business segments. In our Government Solutions segment, we face competition in certain automated safety solutions from other vendors in red-light, school bus, speed and bus lane photo enforcement.
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 believe that technology solutions that provide mobile-first, self-service offerings improve operational efficiency by reducing reliance on parking-related labor. Such commercial models reduce up-front costs to address market needs and establish a long-term operating model.
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 16,800 units at December 31, 2022.
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 15,600 units at December 31, 2023.
The approximately $36 billion United States RAC industry is highly consolidated, with three companies, with which we have long-standing relationships, accounting for a significant majority of United States RAC revenues in 2022.
The approximately $38.3 billion United States RAC industry is highly consolidated, with three companies—with which we have long-standing relationships—accounting for a significant majority of United States RAC revenues in 2023.
Our toll and violations management solutions help ensure timely payment for tolls and violations incurred by our customers’ vehicles and perform timely transfers of liability on our customers’ behalf, and billing and collecting from the driver as applicable.
Our toll and violations management solutions help ensure timely payment of tolls and violations incurred by our customers’ vehicles and perform timely transfers of liability on our customers’ behalf, and driver billing and collections, as applicable.
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 37.2% of our 2022 revenues.
Our proprietary software technology and hardware allow us to effectively match a toll to the specific RAC, Direct Fleet 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, Direct Fleet or FMC. Toll management solutions accounted for approximately 40.4% of our 2023 total revenues.
Direct service revenue from red-light cameras, speed cameras, school bus cameras and city bus lane cameras accounted for approximately 38.3% of our 2022 revenues. Other segment service revenue consists primarily of ancillary revenue streams, which comprised 3.2% of total revenue.
Direct service revenue from red-light cameras, speed cameras, school bus cameras and city bus lane cameras accounted for approximately 39.6% of our 2023 total revenues. Other segment service revenue consists primarily of ancillary revenue streams, which comprised 2.5% of total revenue.
We also manage regional toll transponder installation and vehicle association, a critical and highly complex process for RAC and FMC customers, to ensure that the transponder (and corresponding toll transactions) are associated with the correct vehicle. Government Solutions Our Government Solutions segment generated approximately $336.7 million in revenue for 2022, or approximately 45.4% of our total revenue.
We also manage regional toll transponder installation and vehicle association—a critical and highly complex process for RAC, Direct Fleet and FMC customers—to ensure that the transponders (and corresponding toll transactions) are associated with the correct vehicle. Government Solutions Our Government Solutions segment generated approximately $358.4 million in revenue for 2023, or approximately 43.9% of our total revenue.
Title and registration solutions accounted for approximately 2.2% of our 2022 revenues. Government Solutions We serve as a value-add partner to government agencies by providing photo enforcement solutions that promote traffic safety and reduce traffic violations.
Title and registration solutions accounted for approximately 0.6% of our 2023 total revenues. Government Solutions We serve as a value-add partner to government agencies by providing photo enforcement solutions that promote road safety and help reduce traffic violations.
Product sales to customers are not recurring and are dependent on our customers’ needs, and account for 3.9% of total revenue.
Product sales to customers are not recurring and are dependent on our customers’ needs, and account for 1.8% of total revenue for 2023.
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 is not incorporated by reference into this filing. Further, our references to website URLs are intended to be inactive textual references only.
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 is not incorporated by reference into this filing.
As a government contractor providing photo enforcement services directly or through subcontractors (including design, engineering, construction, installation, and maintenance) in various locations throughout the 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 foreign laws and regulations.
As a government contractor providing photo enforcement services directly or through subcontractors (including design, engineering, construction, installation, and maintenance) in various locations throughout the 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.
These marks may have a perpetual life, subject to 9 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.
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.
(“ Redflex ”), and in connection with our European expansion efforts, we are subject to laws, regulations and administrative practices addressing many of these same matters in Europe, Australia and Canada, 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.
We are also subject to laws, regulations and administrative practices addressing many of these same matters in Europe, Australia, Canada and New Zealand, including those specifically relating to accessing and use of information obtained from vehicle licensing authorities, traffic enforcement and collections and financial and banking regulations.
Talent Acquisition and Development 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 believe our relations with our employees are good, and we have not experienced a strike or other significant work stoppage. 9 Talent Acquisition and Development Our success depends upon attracting, retaining and developing a diverse group of talented individuals who possess the knowledge and 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.
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. Intellectual Property We rely on a combination of patents, trademarks, trade secrets, copyrights and confidentiality agreements to protect our intellectual property.
Citations management features also help to organize fine escalations and notification letters to parking violators. Intellectual Property We rely on a combination of patents, trademarks, trade secrets, copyrights and confidentiality agreements to protect our intellectual property.
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.
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. We have a multifaceted talent development framework that includes functional training, management training and targeted development programs.
Permits & Enforcement 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.
Permits & Enforcement Our Permits & Enforcement 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.
The trade names, trademarks, and service marks appearing in this Annual Report 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.
The information on, or accessible through, our website does not constitute part of, and is not incorporated into, this Annual Report. 10 The trade names, trademarks, and service marks appearing in this Annual Report 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.
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.
Department of Transportation issued a report in 2022 stating that automated enforcement can provide significant safety benefits and save lives. Programs like Vision Zero, a collaborative campaign helping communities towards 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.
For many international customers, we design, engineer, and maintain roadside photo enforcement technology, including both hardware and software, which is sold or licensed to government agencies and often maintained with maintenance contracts to support the technology. Parking Solutions We formed our Parking Solutions segment after our acquisition of T2 Systems Parent Corporation (“ T2 Systems ”) in December 2021.
For many international customers, we design, engineer and maintain roadside photo enforcement technology, including both hardware and software, which is sold or licensed to government agencies and often maintained with maintenance contracts to support the technology.
In our Commercial Services segment, we face competition from both our own customers, who 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 to remain competitive.
In our Commercial Services segment, we face competition from both our own customers, who may choose to invest in their own internal solutions, and vendors offering or seeking to offer new technologies or financial models. In Parking Solutions, we face competition from a variety of competitors in our markets in the United States and Canada.
We have approximately 214 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.
We have approximately 220 registrations and pending applications in the United States and foreign jurisdictions for trademarks and service marks, reflecting our many products and services.
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.
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.
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.
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. Photo Enforcement Automated photo enforcement camera programs in the United States are typically regulated at the state and local level.
These laws are overseen by different government agencies, depending on the jurisdiction, including departments of procurements services, contracting offices and offices of inspector general. 10 To successfully navigate this regulatory landscape, we have a dedicated government relations team that works with national, state and local policymakers, often with the help of lobbyists and consultants, to track and help support favorable camera-enforcement safety and toll-related legislative outcomes.
To successfully navigate this complex statutory and regulatory landscape, we have a dedicated government relations team that works with national, state and local policymakers, often with the help of lobbyists and consultants, to track and help support favorable camera-enforcement safety and toll-related legislative outcomes.
We believe that the above-mentioned trends toward the use of toll roads additionally create significant opportunities for us to expand our fleet market presence while developing relationships with both new and existing RACs, FMCs, and other fleet consumers.
We believe that the above-mentioned trends toward the use of toll roads additionally create significant opportunities for us to expand our fleet market presence while developing relationships with both new and existing RACs, Direct Fleets, FMCs, and other fleet consumers. 5 Parking The parking industry consists of a highly fragmented mix of end customers, including universities, municipalities, private operators, healthcare providers and airports, among other industries.
To continue delivering high-quality solutions to our customers and succeed in our highly competitive and rapidly evolving market, it is critical that we continue to attract, retain and develop diverse groups of talented individuals at all levels of our organization. As of December 31, 2022, we had 1,570 employees, comprised of 1,396 full-time employees and 174 part-time employees.
Human Capital Management Our employees are critical to our success as a leading provider of smart mobility solutions. To continue delivering high-quality solutions to our customers and succeed in our highly competitive and rapidly evolving market, it is critical that we continue to attract, retain and develop diverse groups of talented individuals at all levels of our organization.
Through this network, we have a presence in most states in which our Government Solutions and Commercial Services segments do business. These lobbying activities are subject to state and local regulations and registration requirements. In connection with the installation of photo enforcement systems, we or our customers routinely obtain permits from various permitting authorities.
Through this network, we have a presence in most states in which our Government Solutions and Commercial Services segments do business. These lobbying activities are subject to state and local regulations and registration requirements. We believe we are in substantial compliance with the laws and regulations that regulate our business.
Of our full-time employees, 1,032 were located in the United States and 364 were located internationally. None of our employees are represented by a labor union or covered by a collective bargaining agreement, except for our 20 employees in Staten Island, New York.
None of our employees are represented by a labor union or covered by a collective bargaining agreement, except for our 26 employees in Staten Island, New York.
In Parking Solutions, we face competition from a variety of segment-specific competitors in our markets in the United States and Canada. Tolling The tolling industry is highly fragmented and complex, as it is comprised of more than 80 tolling operators with specific coverage regions and disparate technology platforms, processing requirements and business rules.
Tolling The tolling industry is highly fragmented and complex, as it is comprised of more than 130 tolling operators with specific coverage regions and disparate technology platforms, processing requirements and business rules.
New York City’s Automated Speed Enforcement Program 2014-2020 Report, noted a 72% average reduction in dangerous speeding at its fixed camera locations.
In New York City, fixed camera locations yielded a 73% average reduction in dangerous speeding, according to the New York City’s Automated Speed Enforcement Program 2022 Report.
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. 7 Parking The parking industry consists of a highly fragmented mix of end customers, including universities, municipalities, private operators, healthcare providers and airports, among other industries.
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.
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.
In 2023, we processed over 162 million transactions using our various parking solutions systems, including 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, and back-office management of violations.
We expect product sales to be at levels below the preceding three years due to the completion of the New York City camera installation program in 2022 Parking Solutions Parking Access and Revenue Control 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.
Parking Solutions Parking Access and Revenue Control 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. As of December 31, 2023, we installed over 2,800 PARCS lanes.
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 2021 market estimate.
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 2021 market estimate. Parking Solutions market participants are struggling to attract and retain labor and consumers are increasingly willing to adopt mobile solutions to simplify their transportation needs, creating market opportunities to advance self-service options.
On October 17, 2018, we consummated the transactions contemplated by the Merger Agreement (the “ Business Combination ”) and we changed our name to “Verra Mobility Corporation.” Our principal executive office is located at 1150 North Alma School Road, Mesa, AZ 85201. Our telephone number is (480) 443-7000. Our website address is www.verramobility.com.
Our principal executive office is located at 1150 North Alma School Road, Mesa, AZ 85201. Our telephone number is (480) 443-7000. Our website address is www.verramobility.com.
Our vision is to develop and use technology and data intelligence to make transportation safer, smarter and more connected. Segments Our solutions are offered through three segments: (i) Commercial Services, (ii) Government Solutions and (iii) Parking Solutions. Commercial Services Our Commercial Services segment generated approximately $326.0 million in revenue for 2022, or approximately 44.0% of our total revenue.
Segments Our solutions are offered through three segments: (i) Commercial Services, (ii) Government Solutions and (iii) Parking Solutions. Commercial Services Our Commercial Services segment generated approximately $372.8 million in revenue for 2023, or approximately 45.6% of our total revenue.
Public attention given to traffic safety issues for drivers, pedestrians, children, bicyclists and law enforcement is intensifying and 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.
Public attention given to traffic safety issues for drivers, pedestrians, children, bicyclists and law enforcement is increasing and smart technology solutions have emerged as an effective and cost-neutral method to address traffic safety issues. Furthermore, automated safety systems have the potential to free up law enforcement resources to allow law enforcement to address other pressing community issues.
In general, photo enforcement is administrated by state, provincial or 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.
In 2023, 21 bills were enacted at the state-level to authorize, expand or positively reform automated photo enforcement programs. In general, photo enforcement is administrated by state, provincial or local government agencies, under either state enabling legislation or under home rule authority established under the relevant state 8 constitution.
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 international, state and local agencies, including the departments of transportation, departments of motor vehicles, and offices of inspectors general, and laws related to financial and banking regulations.
Department of Transportation, (“ USDOT ”), the Federal Trade Commission, (“ FTC ”), the Federal Communications Commission, the Consumer Product Safety Commission and the Environmental Protection Agency.
We have installed over 2,500 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. Pay Stations Our pay stations hardware technology has interoperability with over 50 third-party systems, as well as our PARCS and parking enforcement solutions.
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. UNIFI Mobile Our UNIFI Mobile offering was launched in December 2023 to enhance the efficiency of processing parking-related transactions for parking operators and end-users.
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.
In 2022, the Governors Highway Safety Association concluded that the expanded use of automated enforcement is essential to reversing the tragic increase in deaths and injuries on the nation’s roadways, and found automated enforcement to be an effective tool for law enforcement and other agencies. Furthermore, the U.S.
Removed
Our proprietary software and hardware technologies provides our customers with solutions needed to manage and monetize parking and enforcement operations. In 2022, we processed over 163 million transactions using our various parking solutions systems.
Added
This segment serves approximately 2,000 customers in the university, municipal, healthcare and commercial operator 4 markets. Our proprietary software, transaction processing and hardware technologies provide our customers with solutions to manage and monetize their parking and enforcement operations.
Removed
Parking Solutions 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.
Added
UNIFI Mobile is a unified, mobile-first and web-enabled platform for various parking-related transactions, including parking session payments, permit purchases, citation payments and account management. The first two offerings as part of UNIFI Mobile’s suite of apps included Scan & Pay and Tempo, both of which were launched in December 2023.
Removed
Following the acquisition of EPC, Pagatelia and Redflex Holdings Limited, now known as Redflex Holdings Pty Ltd.
Added
Scan & Pay allows operators to print a QR code on parking citations for end-users to scan and pay, and Tempo is an application for end-users to efficiently and conveniently purchase parking sessions from parking operators. Pay Stations Our pay stations hardware technology has interoperability with over 155 third-party systems, as well as our PARCS and parking enforcement solutions.
Removed
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.
Added
Where enabling legislation is not required, local ordinances impose further restrictions within a given jurisdiction. In connection with the installation of photo enforcement systems, we or our customers routinely obtain permits from various permitting authorities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur 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. 13 We enter into government contracts from time to time with customers that are subject to various uncertainties, restrictions and regulations, which could result in withholding or delay of payments to us.
Biggest changeThe loss of any of our top Government Solutions customers could have a material adverse effect on 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.
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.
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 have breached our contractual obligations, or decreased use and acceptance of our solutions.
For example, it could: • increase our vulnerability to adverse economic and industry conditions; • limit our ability to obtain additional financing for future working capital, capital expenditures, strategic acquisitions and other general corporate requirements; • expose us to interest rate fluctuations because the interest rate on certain of our debt is variable; • require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, 23 thereby reducing the availability of our cash flow for operations and other purposes; • make it more difficult for us to satisfy our general business obligations, including our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness; • limit our ability to refinance indebtedness or increase the associated costs; • require us to sell assets to reduce debt or influence our decision about whether to do so; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate or prevent us from carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins; and • place us at a competitive disadvantage compared to any competitors that have less debt or comparable debt at more favorable interest rates and that, as a result, may be better positioned to withstand economic downturns.
For example, it could: • increase our vulnerability to adverse economic and industry conditions; • limit our ability to obtain additional financing for future working capital, capital expenditures, strategic acquisitions and other general corporate requirements; • expose us to interest rate fluctuations because the interest rate on certain of our debt is variable; • require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow for operations and other purposes; • make it more difficult for us to satisfy our general business obligations, including our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness; • limit our ability to refinance indebtedness or increase the associated costs; • require us to sell assets to reduce debt or influence our decision about whether to do so; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate or prevent us from carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins; and • place us at a competitive disadvantage compared to any competitors that have less debt or comparable debt at more favorable interest rates and that, as a result, may be better positioned to withstand economic downturns.
In addition to the risks inherent in conducting international business, expanding internationally with new and existing customers poses additional risks, including: • lack of acceptance of our products and services; • tax issues, including administration of value-added tax, restrictions on repatriating earnings, and with respect to our corporate operating structure and intercompany arrangements; • our ability to adapt our marketing and selling efforts to different cultures and customers; • a different competitive environment, including a number of smaller competitors and a more fragmented business model, as well as competition from other market participants; • our ability to obtain and protect intellectual property rights to operate successfully in each territory due to pre-existing third-party intellectual property rights; and • an unfamiliar regulatory environment, including different local, provincial and national regulations.
In addition to the risks inherent in conducting international business, expanding internationally with new and existing customers poses additional risks, including: • lack of acceptance of our products and services; • tax issues, including administration of value-added tax, restrictions on repatriating earnings, and with respect to our corporate operating structure and intercompany arrangements; • our ability to adapt our marketing and selling efforts to different cultures and customers; • a different competitive environment, including a number of smaller competitors and a more fragmented 20 business model, as well as competition from other market participants; • our ability to obtain and protect intellectual property rights to operate successfully in each territory due to pre-existing third-party intellectual property rights; and • an unfamiliar regulatory environment, including different local, provincial and national regulations.
The agreements governing our indebtedness restrict, among other things and subject to certain exceptions, our and our restricted subsidiaries’ ability to: • incur additional indebtedness; • pay dividends or other payments on capital stock; • guarantee other obligations; • grant liens on assets; • make loans, acquisitions or other investments; • transfer or dispose of assets; • make optional payments or modify certain debt instruments; • engage in transactions with affiliates; • amend organizational documents; • engage in mergers or consolidations; • enter into arrangements that restrict the ability to pay dividends; • engage in business activities that are materially different from existing business activities; • change the nature of the business we conduct; and • designate subsidiaries as unrestricted subsidiaries.
The agreements governing our indebtedness restrict, among other things and subject to certain exceptions, our and our restricted subsidiaries’ ability to: • incur additional indebtedness; • pay dividends or other payments on capital stock; 23 • guarantee other obligations; • grant liens on assets; • make loans, acquisitions or other investments; • transfer or dispose of assets; • make optional payments or modify certain debt instruments; • engage in transactions with affiliates; • amend organizational documents; • engage in mergers or consolidations; • enter into arrangements that restrict the ability to pay dividends; • engage in business activities that are materially different from existing business activities; • change the nature of the business we conduct; and • designate subsidiaries as unrestricted subsidiaries.
These provisions include: • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; 26 • a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board of Directors (our “ Board ”); • the requirement that directors may only be removed from the Board for cause; • the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members of our Board or our Chief Executive Officer, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • the requirement that changes or amendments to certain provisions of our certificate of incorporation or bylaws must be approved by holders of at least two-thirds of our Common Stock; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
These provisions include: • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board; • the requirement that directors may only be removed from the Board for cause; • the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members of our Board or our Chief Executive Officer, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • the requirement that changes or amendments to certain provisions of our certificate of incorporation or bylaws must be approved by holders of at least two-thirds of our Common Stock; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
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: • political, social, and economic instability, including European sovereign debt issues and tightening of government budgets; • wars, civil unrest, acts of terrorism and other conflicts; • increased complexity and costs of managing or overseeing foreign operations, including adapting and localizing our services to specific regions and countries and relying on different third-party service providers; • complying with tariffs, trade restrictions, and trade agreements and any changes thereto; • foreign exchange and other restrictions and limitations on the transfer or repatriation of funds; • adverse tax consequences; • fluctuations in currency exchange rates; • complying with varying legal and regulatory environments in multiple foreign jurisdictions, including with respect to data and consumer privacy and payment processing, labor matters and VAT, and unexpected changes in these laws, regulatory requirements, and the enforcement thereof; and • limited protection of our intellectual property and other assets as compared to the laws of the United States.
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: • political, social, and economic instability, including European sovereign debt issues and tightening of government budgets; • wars, civil unrest, acts of terrorism and other conflicts; • increased complexity and costs of managing or overseeing foreign operations, including adapting and localizing our services to specific regions and countries and relying on different third-party service providers; • complying with tariffs, trade restrictions, and trade agreements and any changes thereto; • foreign exchange and other restrictions and limitations on the transfer or repatriation of funds; • adverse tax consequences; • fluctuations in currency exchange rates; • complying with varying legal and regulatory environments, and managing public perception, in multiple foreign jurisdictions, including with respect to data and consumer privacy and payment processing, labor matters and VAT, and unexpected changes in these laws, regulatory requirements, and the enforcement thereof; and • limited protection of our intellectual property and other assets as compared to the laws of the United States.
These difficulties could include: 16 • combining management teams, strategies and philosophies; • merging or linking different accounting and financial reporting systems and systems of internal controls; • assimilating personnel, human resources and other administrative departments and potentially contrasting corporate cultures; • merging computer, technology and other information networks and systems; • disrupting our relationship with or losing key customers, suppliers or personnel; and • interference with, or loss of momentum in, our ongoing business or that of the acquired business.
These difficulties could include: • combining management teams, strategies and philosophies; • merging or linking different accounting and financial reporting systems and systems of internal controls; • assimilating personnel, human resources and other administrative departments and potentially contrasting corporate cultures; • merging computer, technology and other information networks and systems; • disrupting our relationship with or losing key customers, suppliers or personnel; and • interference with, or loss of momentum in, our ongoing business or that of the acquired business.
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 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 13 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 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. 21 In many cases, we will have limited or no experience in a particular region or country where we intend to launch operations.
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.
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 22 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.
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.
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.
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 26 of action arising under the federal securities laws of the United States against us, our officers, directors, employees or underwriters.
Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. 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.
Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. 18 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.
In addition, during the second and third quarters, we paid $6.9 million and repurchased 445,791 shares of our Class A Common Stock through open market transactions. During the third quarter of 2022, we discontinued open market repurchases and our Board of Directors authorized a second ASR for the remaining availability under the share repurchase program.
In addition, during the second and third quarters, we paid $6.9 million and repurchased 445,791 shares of our Class A Common Stock through open market transactions. During the third quarter of 2022, we discontinued open market repurchases and our Board authorized a second ASR for the remaining availability under the share repurchase program.
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. 32 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.
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.
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.
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 14 without setup support services or other incentives.
We expect that there will continue to be new proposed laws, regulations and industry standards concerning personal information, privacy and data retention in the United States, the E.U. and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and industry standards may have on our business.
We expect that there will continue to be new proposed laws, regulations and industry standards concerning personal information, privacy and data retention in the United States, the E.U. and other jurisdictions, and we cannot yet determine the impact of such future laws, regulations and industry standards may have on our business.
In that case, we may be unable to borrow under our revolving credit agreement or otherwise, may not be able to repay the amounts 24 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.
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.
Future laws, regulations, and standards or any changed interpretation or administration of existing laws or regulations could limit the continued use or adoption of one or more of our solutions, require us to incur additional costs, impact our ability to develop and market new solutions or impact our ability to retain existing business and secure new business.
Future 31 laws, regulations, and standards or any changed interpretation or administration of existing laws or regulations could limit the continued use or adoption of one or more of our solutions, require us to incur additional costs, impact our ability to develop and market new solutions or impact our ability to retain existing business and secure new business.
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.
Our ability to generate cash, make scheduled payments or to refinance our debt obligations depends on our successful financial and operating 24 performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our control.
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.
In addition, numerous and evolving cybersecurity threats, including advanced and persistent cyber-attacks, phishing and social engineering schemes could compromise our systems and the confidentiality, availability and integrity of data in our systems, as well as the systems and data of the third parties with which we interact.
There is no guarantee as to the exact number of shares that we will repurchase and we cannot guarantee that the program will enhance long-term stockholder value. The share repurchase program could affect the trading price of our common stock and increase volatility.
There is no guarantee as to the exact number of shares that we will repurchase and we cannot guarantee that the program will enhance long-term stockholder value. These share repurchase program could affect the trading price of our common stock and increase volatility.
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 Pty Ltd. 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 30 preparation of our consolidated financial statements.
Additionally, 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 Pty Ltd. 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.
Further, 14 our relationships and commercial account agreements with tolling authorities, issuing authorities, motor vehicle departments and other governmental agencies significantly enhances and enables our service offerings, and changes in those relationship or agreements could significantly adversely impact our business.
Further, our relationships and commercial account agreements with tolling authorities, issuing authorities, motor vehicle departments and other governmental agencies significantly enhances and enables our service offerings, and changes in those relationship or agreements could significantly adversely impact our business.
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.
Further, we may have difficulty 15 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.
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 and contractual requirements.
Litigation, disputes, or regulatory investigations may relate to, among other things, intellectual property, antitrust claims, commercial arrangements, negligence and fiduciary duty claims, vicarious liability based 30 upon conduct of individuals or entities outside of our control, including our third-party service providers, deceptive trade practices, claims related to invoicing, personal injury claims, claims related to licensing, general fraud claims and employment law claims, including compliance with wage and hour regulations and contractual requirements.
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. 29 We rely on communications networks and information systems and any interruption could have a material adverse effect on our business.
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. 28 We rely on communications networks and information systems and any interruption could have a material adverse effect on our business.
Risks Related to Our Customers, Industry and Competition • Our Commercial Services and Government Solutions segments have customer concentration that could 12 have a material adverse effect on our business. • 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. • Any decreases in the prevalence or political acceptance of, or an increase in governmental restrictions regarding, automated and other similar methods of photo enforcement, the use of third-party tolling service providers, the ability to charge service or other fees to customers for services provided, could have a material adverse effect on our business.
Risks Related to Our Customers, Industry and Competition • Our Commercial Services and Government Solutions segments have customer concentration that could have a material adverse effect on our business. • 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. • Any decreases in the prevalence or political acceptance of, or an increase in governmental restrictions regarding, automated and other similar methods of photo enforcement, the use of third-party tolling and violations processing service providers, the ability to charge service or other fees to customers for services provided, could have a material adverse effect on our business.
We face intense competition and any failure to keep up with technological developments, changing customer preferences and new laws and policies 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, shifting customer needs and new laws and policies.
We face intense competition and any failure to keep up with technological developments, changing customer preferences and new laws and policies 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, shifting customer needs, contract renewals and new laws and policies.
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.
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 event processing work.
For example, our 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.
For example, our Commercial Services segment is dependent on certain key customers, including those in the RAC industry, such as Avis Budget Group, Inc., Enterprise Mobility and The Hertz Corporation.
We subsequently paid $50.0 million in May 2022 to repurchase outstanding shares of our Class A Common Stock through an ASR, and received an initial delivery of 2,739,726 shares. The final settlement occurred in August 2022, at which time we received 445,086 additional shares.
We subsequently paid $50.0 million in May 2022 to repurchase outstanding shares of our Class A Common Stock through an accelerated share repurchase (“ ASR ”), and received an initial delivery of 2,739,726 shares. The final settlement occurred in August 2022, at which time we received 445,086 additional shares.
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.
(“ VM Consolidated ”) 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.
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.
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 relating to the accounting for warrants during fiscal year 2021.
We sometimes make significant capital and other investments to attract and retain these contracts, such as the cost of purchasing information technology equipment, constructing and installing photo enforcement systems and developing and implementing software and labor resources. In 2022, revenues from this segment represented approximately 45% of our total revenues.
We sometimes make significant capital and other investments to attract and retain these contracts, such as the cost of purchasing information technology equipment, constructing and installing photo enforcement systems and developing and implementing software and labor resources. In 2023, revenues from this segment represented approximately 43.9% of our total revenues.
Further, our acquisition activity could increase the challenge of retaining our key employees and subcontractors and those of the acquired businesses.
Additionally, our acquisition activity could increase the challenge of retaining our key employees and subcontractors and those of the acquired businesses.
The New York City Department of Transportation (“ NYCDOT ”) represented approximately 19.5% of our total revenues during fiscal 2022, 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.
The New York City Department of Transportation (“ NYCDOT ”) represented approximately 16.9% of our total revenues during fiscal 2023, 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.
Any failure to evolve existing solutions or create new successful solutions could have a material adverse effect on our business, financial condition and results of operations. 15 We regularly pursue contracts and contract renewals, particularly in our Government Solutions and Parking Solutions segments, that require competitive bidding, which can involve substantial costs and could have a material adverse effect on our business .
Any failure to evolve existing solutions or create new successful solutions could have a material adverse effect on our business, financial condition and results of operations. We regularly pursue contracts and contract renewals that require competitive bidding, which can involve substantial costs and could have a material adverse effect on our business .
Adverse macroeconomic conditions, including higher interest rates, inflation, slower growth or recession, barriers to trade, changes to fiscal and monetary policy, tighter credit, high unemployment, currency fluctuations, and other events beyond our control, such as economic sanctions, natural disasters, pandemics, including the COVID-19 pandemic, epidemics, political instability, armed conflicts and wars, including the Russia-Ukraine war, can materially adversely affect demand for our products and services.
Adverse and uncertain macroeconomic conditions, including higher interest rates, inflation, slower growth or recession, barriers to trade, changes to fiscal and monetary policy, tighter credit, high unemployment, currency fluctuations, and other events beyond our control, such as economic sanctions, natural disasters, pandemics, epidemics, political instability, armed conflicts and wars, can materially adversely affect demand for our products and services.
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.
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.
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 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.
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.
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.
Risks Related to Our Customers, Industry and Competition Our Commercial Services and Government Solutions segments have customer concentration that could have a material adverse effect on our business. Our business experiences customer concentration from time to time.
Risks Related to Our Customers, Industry and Competition Our Commercial Services and Government Solutions segments have customer concentration that could have a material adverse effect on our business. Our business experiences varying levels of customer concentration.
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 for 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.
Many of the contracts and renewals for which we bid, particularly those for certain larger government customers, are extremely complex and require the investment for significant resources in order to prepare accurate bids and proposals. Further, a significant percentage of new customer growth opportunities and contract renewals or extensions in our business segments are only accessible through competitive bidding.
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.
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 warrants originally issued to Gores Sponsor II, LLC in a private placement in connection with the IPO (the “ 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.
In November 2022, 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 in open market transactions, ASRs or privately negotiated transactions. The Company has not yet repurchased shares under this repurchase program.
In November 2022, 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 in open market transactions, ASRs or privately negotiated transactions.
The GDPR contains numerous, more stringent requirements and changes from prior E.U. law, including more robust privacy and compliance obligations for both companies and their service providers, greater rights for individuals, heavier documentation requirements for data protection compliance programs and restrictions on transfers of personal data to non-E.U. countries.
The GDPR contains numerous, more stringent requirements and changes from prior E.U. law, including more robust privacy and compliance obligations for both companies and their service providers, greater rights for individuals, heavier documentation requirements for data protection compliance programs, restrictions on transfers of personal data to non-E.U. countries, and prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances.
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 CCPA created 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 disclosures; and receive detailed information about how their personal data is processed. The law provides for civil penalties against companies that fail to comply.
Moreover, if our policies, procedures or measures relating to these issues fail to comply, or regulators assert we have failed to comply, with 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.
Moreover, if our policies, procedures or measures relating to these issues fail to comply, or regulators assert we have failed to comply, with applicable laws, regulations or industry standards, we may be subject to governmental enforcement actions, litigation, regulatory investigations, fines, algorithmic disgorgement, the inability to use previously-collected personal information or the inability to collect new personal information, other penalties and negative publicity, and our application providers, customers and partners may lose trust in or stop doing business with us entirely.
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.
Litigation and other disputes and regulatory investigations could have a material adverse effect on our business. From time to time, and as more discussed in the section entitled “ Legal Proceedings ,” we may be involved in litigation and other disputes or regulatory investigations that arise in and outside the ordinary course of business.
The costs are high and deadlines are short for compliance with these privacy-related laws, regulations, contractual requirements and industry standards, each of which may limit our ability to compete for new business, do business with certain government agencies or continue to access certain data 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 revenue.
The costs could be high and deadlines short for compliance with these privacy- and data security-related laws, regulations, contractual requirements and industry standards, each of which may limit our ability to compete for new business, do business with certain government agencies, including our existing customers, or continue to access certain data, and may limit the use or adoption of our smart mobility technology solutions and services, reduce overall demand for our solutions and services, slow the pace at which we generate revenue, subject us to fines or penalties, or cause us to breach contractual commitments to our customers.
Our personal information handling also is subject to contractual obligations and industry standards. 18 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. These laws and regulations may also be subject to new or different interpretations.
Our personal information handling also is subject to our published privacy policies and notices, contractual obligations and industry standards. 17 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.
Our inability to timely file our periodic reports with the SEC, as occurred with our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, could have an adverse impact on our ability to, among other things, (i) access our credit facilities, (ii) attract and retain key employees, and (iii) raise funds in the public markets, any of which could materially and adversely affect our financial condition and results of operations.
Our inability to timely file our periodic reports with the SEC, as occurred with our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, could have an adverse impact on our ability to, among other things, (i) access our credit facilities, (ii) attract and retain key employees, and (iii) raise funds in the public markets, any of which could materially and adversely affect our financial condition and results of operations. 27 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.
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. 17 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.
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.
Risks Related to our International Operations • Our international operations expose us to additional risks, and failure to manage those risks could have a material adverse effect on our business. Risks Related to Our Intellectual Property • Failure to acquire necessary intellectual property or adequately protect our intellectual property could have a material adverse effect on our business.
Risks Related to our International Operations • Our international operations expose us to additional risks, and failure to manage those risks could have a material adverse effect on our business.
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.
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.
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.
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. 22 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.
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 adverse effect on our business, financial condition and results of operations. 20 Risks Related to our International 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.
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 adverse effect on our business, financial condition and results of operations.
Risks Related to Our Indebtedness 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 $886 million outstanding under our first lien term loan facility as of December 31, 2022.
Risks Related to Our Indebtedness 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 $704.6 million outstanding under our first lien term loan facility as of December 31, 2023. Additionally, pursuant to an indenture, VM Consolidated, Inc.
Any loans or other extensions of credit will be subject to the investment covenants under the Rollover Credit Agreements. The “ Debt Agreements ” means, collectively: (i) the 27 Amendment and Restatement Agreement No. 1 to First Lien Term Loan Credit Agreement, dated as of March 26, 2021, among Greenlight Acquisition Corporation, a Delaware corporation; VM Consolidated, Inc.
The “ Debt Agreements ” means, collectively: (i) the Amendment and Restatement Agreement No. 1 to First Lien Term Loan Credit Agreement, dated as of March 26, 2021, among Greenlight Acquisition Corporation, a Delaware corporation; VM Consolidated, Inc.
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.
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.
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 ”). 19 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.
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 have grown in large part as a result of our acquisitions, 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.
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.
This provision is expected to apply to any stock repurchases initiated after January 1, 2023. In May 2022, our Board of Directors authorized a share repurchase program for up to an aggregate amount of $125 million of our outstanding shares of Class A Common Stock.
In May 2022, our Board of Directors (our “ Board ”) authorized a share repurchase program for up to an aggregate amount of $125 million of our outstanding shares of Class A Common Stock.
For example, on May 25, 2018, the E.U. General Data Protection Regulation GDPR replaced the 1995 Data Protection Directive. The GDPR extends the scope of E.U. data protection law to non-E.U. companies processing data of E.U. residents when certain conditions are satisfied.
The GDPR extends the scope of E.U. data protection law to non-E.U. companies processing data of E.U. residents when certain conditions are satisfied.
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. 31 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.
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.
Risks Related to Our Indebtedness • Our substantial level of indebtedness could cause our business to suffer and incurring additional debt could intensify debt-related risks. Risks Related to Our Vendors • Our reliance on specialized third-party providers could have a material adverse effect on our business.
Risks Related to Our Vendors • Our reliance on specialized third-party providers could have a material adverse effect on our business.
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.
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.
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.
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 GDPR replaced the 1995 Data Protection Directive.
Further, our customers, through contractual requirements, could require us to comply with certain of these stringent requirements regardless of whether our business is actually subject to the GDPR.
The GDPR fine framework can be up to 20 million Euros, or up to 4% of the company’s total global turnover of the preceding fiscal year, whichever is higher. Further, our customers, through contractual requirements, could require us to comply with certain of these stringent requirements regardless of whether our business is actually subject to the GDPR.
These and other economic factors can materially adversely affect our business, results of operations, financial condition and stock price. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results.
These and other economic factors can materially adversely affect our business, results of operations, financial condition and stock price.
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.
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.
Risks Related to Our Intellectual Property 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.
Risks Related to Our Intellectual Property • Failure to acquire necessary intellectual property or adequately protect our intellectual property could have a material adverse effect on our business. 12 Risks Related to Our Indebtedness • Our substantial level of indebtedness could cause our business to suffer and incurring additional debt could intensify debt-related risks.
We cannot guarantee that our stock repurchase program will enhance long-term shareholder value. Stock repurchases could also increase the volatility of the trading price of our stock and could diminish our cash reserves. In addition, Congress enacted the Inflation Reduction Act on August 16, 2022, which (among other provisions) provides a 1% excise tax on net stock repurchases.
Risks Related to Our Class A Common Stock, Related Party Transactions and Organizational Documents We cannot guarantee that our stock repurchase programs will enhance long-term shareholder value. Stock repurchases could also increase the volatility of the trading price of our stock and could diminish our cash reserves.
We have subsidiaries in various international markets around the world, including in the United Kingdom, 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.
The success of our business depends, in part, on our ability to successfully manage these foreign operations.
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.
Unless extended, our contract with NYCDOT expires December 31, 2024, and we anticipate that the next contract for the NYCDOT photo safety program will be subject to competitive procurement. 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.
Removed
For example, as of December 31, 2022, NYCDOT had an open receivable balance of $35.6 million, which represented 22% of our accounts receivable, net . Government entities typically finance projects through appropriated funds.
Added
We enter into government contracts from time to time with customers that are subject to various uncertainties, restrictions and regulations, which could result in withholding or delay of payments to us. For example, as of December 31, 2023, NYCDOT had an open receivable balance of $36.1 million, which represented 18.0% of our total accounts receivable, net .
Removed
Our business and results of operations may be adversely affected by COVID-19, including emerging variant strains, and its impact on our customers. The government and private business actions taken to curtail the spread of COVID-19 continue to have significant negative effects globally.
Added
Furthermore, we may be required to perform work under expired or terminated government contracts and may be restricted from recognizing revenue from such contracts.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe do not consider any of these properties to be material to our overall business. 33
Biggest changeWe do not consider any of these properties to be material to our overall business. 34

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest change(“ PlusPass ”) commenced an action in the 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 Antitrust Act of 1914 (the “ Clayton Act ”), and Sections 1 and 2 of the Sherman Act.
Biggest change(“ PlusPass ”) commenced an action in the 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 Section 7 of the Clayton Antitrust Act of 1914 and Sections 1 and 2 of the Sherman Act.
Removed
On November 20, 2020, PlusPass filed a First Amended Complaint. On February 9, 2021, the defendants filed motions to dismiss, and PlusPass subsequently abandoned various theories and claims and dismissed The Gores Group LLC, Platinum Equity LLC, and ATS Processing Services, Inc.
Added
In February 2024, Verra Mobility and PlusPass entered into a confidential business arrangement pursuant to which Verra Mobility (i) acquired certain assets from PlusPass and (ii) fully and finally resolved all litigation and disputes between the parties.
Removed
On April 27, 2021, PlusPass filed a Second Amended Complaint (“ SAC ”), alleging that Verra Mobility violated Section 7 of the Clayton Act through the merger of Highway Toll Administration, LLC (“ HTA ”) and American Traffic Solutions, Inc.
Added
Verra Mobility accrued $31.5 million for this matter at December 31, 2023, which is presented within selling, general and administrative expenses in the consolidated statements of operations for the year ended December 31, 2023. For more information, please refer to Note 18, Subsequent Events , in “Item 8, Financial Statements and Supplementary Data. ” Item 4.
Removed
(“ ATS ”) in 2018, and that Verra Mobility violated Sections 1 and 2 of the Sherman Antitrust Act of 1890 by using exclusive agreements in restraint of 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.
Added
Mine Saf ety Disclosures Not applicable. 35 PART II
Removed
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 underway and trial has been set for November 2023.
Removed
Verra Mobility believes that all of PlusPass' claims are without merit and will defend itself vigorously in this litigation. Item 4. Mine Saf ety Disclosures Not applicable. 34 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMarket for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities Market Information 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.” 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: Fiscal Year 2022 Fiscal Year 2021 High Low High Low First Quarter $ 18.13 $ 14.10 $ 15.38 $ 12.54 Second Quarter $ 16.73 $ 12.70 $ 15.94 $ 13.38 Third Quarter $ 17.31 $ 14.92 $ 17.50 $ 14.26 Fourth Quarter $ 17.60 $ 12.76 $ 17.01 $ 13.47 Holders of Record As of December 31, 2022, we had six holders of record of our Class A Common Stock.
Biggest changeThe 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: Fiscal Year 2023 Fiscal Year 2022 High Low High Low First Quarter $ 17.87 $ 13.48 $ 18.13 $ 14.10 Second Quarter $ 19.82 $ 16.22 $ 16.73 $ 12.70 Third Quarter $ 21.54 $ 17.04 $ 17.31 $ 14.92 Fourth Quarter $ 23.29 $ 18.62 $ 17.60 $ 12.76 Holders of Record As of February 23, 2024, we had eight holders of record of our Class A Common Stock.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item with respect to our equity compensation plans is incorporated by reference to our Proxy Statement for the 2023 annual meeting of stockholders. 35 Stock Performance Graph The graph above compares the cumulative total return on our Class A Common Stock with that of the S&P 500 Index, the S&P Composite 1500 Data Processing & Outsourced Services Index and the Russell 2000 Index.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item with respect to our equity compensation plans is incorporated by reference to our proxy statement for the 2024 annual meeting of stockholders. 36 Stock Performance Graph The graph above compares the cumulative total return on our Class A Common Stock with that of the S&P 500 Index, the S&P Composite 1500 Data Processing & Outsourced Services Index and the Russell 2000 Index.
Earn-Out Agreement 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 ”).
Earn-Out under Merger Agreement Under the Merger Agreement, the Platinum Stockholder was 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 exceeded 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 period shown commences on October 18, 2018 and ends on December 31, 2022, 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 period shown commences on December 31, 2018 and ends on December 31, 2023, 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 December 31, 2018. We did not declare or pay any dividends on our Class A Common Stock during the comparison period.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In May 2022, our Board of Directors authorized a share repurchase program for up to an aggregate amount of $125.0 million of our outstanding shares of Class A common stock over a 12-month period in open market, accelerated share repurchase (“ ASR ”) or privately negotiated transactions, each as permitted under applicable rules and regulations, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Exchange Act.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In November 2022, 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 in open market, ASR or privately negotiated transactions, each as permitted under applicable rules and regulations, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Exchange Act.
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.
On April 26, 2019, January 27, 2020, June 14, 2023, and July 26, 2023, the Triggering Events for the issuance of the first, second, third, and fourth tranches of Earn-Out Shares occurred, as the volume weighted average closing sale price per share of our Class A Common Stock as of that date had been greater than $13.00, $15.50, $18.00, and $20.50, 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.
These Triggering Events resulted in the issuance of an aggregate 10,000,000 shares of our Class A Common Stock to the Platinum Stockholder and an increase in our common stock and additional paid-in capital accounts of $73.15 million, with a corresponding decrease to the common stock contingent consideration account.
The Earn-Out Shares are issued by the Company to the Platinum Stockholder as follows: Common Stock Price Thresholds One-time Issuance of Shares > $13.00 (a) 2,500,000 > $15.50 (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.
The Earn-Out Shares were issued by the Company to the Platinum Stockholder upon meeting the below Common Stock Price Thresholds (each, a “ Triggering Event ”): Common Stock Price Thresholds One-time Issuance of Shares > $13.00 (a) 2,500,000 > $15.50 (a) 2,500,000 > $18.00 (a) 2,500,000 > $20.50 (a) 2,500,000 (a) All four tranches of Earn-Out Shares have been issued, as discussed below.
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.
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 each Triggering Event, any issuable shares were transferred from common stock contingent consideration to common stock and additional paid-in capital accounts.
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 period ending on the third business day before we send the notice of redemption to the Warrant holders.
In addition, we redeemed 634 Public Warrants at a price of $0.01 per warrant, as the last sale price of the Class A Common Stock was equal to or exceeded $18.00 per share for 20 trading days within a 30 trading-day period before we sent the notice of redemption to the Warrant holders.
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.
We estimated the original fair value of the contingently issuable shares to be $73.15 million, which was not subject to future revisions during the five-year period discussed above. We used a Monte Carlo simulation option-pricing model to arrive at our original estimate. Each tranche was valued separately giving specific consideration to the tranche’s price target.
In November 2022, 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 in open market, ASR or privately negotiated transactions, each as permitted under applicable rules and regulations, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Exchange Act.
On October 30, 2023, 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, in open market, ASR or privately negotiated transactions.
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.
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.
In addition, during the second and third quarters, we paid $6.9 million and repurchased 445,791 shares of our Class A Common Stock through open market transactions.
We paid $8.1 million to repurchase 449,432 shares of our Class A Common Stock through open market transactions during the third quarter of fiscal year 2023, which we subsequently retired.
Our Board of Directors authorized a second ASR during the third quarter of 2022 for the remaining availability under the share repurchase program and we paid $68.1 million in August 2022 and received an initial delivery of 3,300,000 36 shares of our Class A Common Stock.
On September 5, 2023, we used the remaining availability under the share repurchase program for an ASR and paid approximately $91.9 million to receive an initial delivery of 4,131,551 shares of our Class A Common Stock in accordance with an ASR agreement with a third-party financial institution.
Removed
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.
Added
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock is currently quoted on Nasdaq under the symbol “VRRM”.
Removed
The Private Placement Warrants, however, are nonredeemable so long as they are held by Gores Sponsor II, LLC or its permitted transferees. Dividends We have not paid any cash dividends on our Class A Common Stock to date.
Added
The Warrants had a five-year term and expired in October 2023, unless they were redeemed or exercised prior to expiration. During the fiscal year ended December 31, 2023, we processed the exercise of 19,999,333 Warrants in exchange for the issuance of 16,273,406 shares of Class A Common Stock.
Removed
Further, our ability to declare dividends is limited by restrictive covenants in the agreements governing our indebtedness.
Added
There were 14,035,449 shares issued in exchange for cash-basis warrant exercises resulting in the receipt of $161.4 million in cash proceeds as of December 31, 2023. The remaining Warrant exercises were completed on a cashless basis.
Removed
We subsequently paid $50.0 million in May 2022 to repurchase outstanding shares of our Class A Common Stock through an ASR, and received an initial delivery of 2,739,726 shares. The final settlement occurred in August 2022, at which time we received 445,086 additional shares.
Added
As of December 31, 2023, all Warrants were either exercised by the holder or redeemed by the Company. Dividends 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.
Removed
The final settlement occurred in November 2022, at which time we received 943,361 additional shares.
Added
The final settlement occurred on January 12, 2024, at which time, we received 534,499 additional shares calculated using a volume-weighted average price over the term of the ASR agreement. 37 There were no repurchases of our Class A Common Stock during the three months ended December 31, 2023.
Removed
The Company has not yet repurchased shares under this repurchase program.
Added
We paid a total of $100.0 million for share repurchases during the twelve months ended December 31, 2023.
Removed
The following details the purchases of the Company's Class A Common Stock during the three months ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet to be Purchased Under the Plans or Programs As of October 1, 2022 — $ — — $ — Share repurchases — $ — — $ — As of October 31, 2022 — $ — — $ — Share repurchases (1) 943,361 $ 16.27 943,361 $ — As of November 30, 2022 943,361 $ — 943,361 $ 100,000,000 Share repurchases — $ — — $ — As of December 31, 2022 943,361 $ — 943,361 $ 100,000,000 (1) This relates to the final share settlement of the second ASR on November 4, 2022.
Added
The level at which we repurchase depends on a number of factors, including our financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors that our management may deem relevant.
Removed
The expiration of the five-year period is October 17, 2023.
Added
The timing, volume and nature of repurchases are subject to market conditions, applicable securities laws and other factors and may be amended, suspended or discontinued at any time. We have not yet repurchased shares under this program.
Removed
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.
Added
At December 31, 2023, there are no shares that remain contingently issuable under the earn-out provided by the Merger Agreement. Item 6. [Reserved] 38
Removed
In no event shall the Platinum Stockholder be entitled to receive more than an aggregate of 10,000,000 Earn-Out Shares.
Removed
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, 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) the 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. 37 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, 2022.
Removed
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.
Removed
At December 31, 2022, the potential future shares issuable pursuant to the earn-out are between zero and 5.0 million. Item 6. Selected Financial Data Not applicable. 38

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

113 edited+40 added−85 removed21 unchanged
Biggest changeYear Ended December 31, Percentage of Revenue Increase (Decrease) 2022 vs 2021 ($ in thousands) 2022 2021 2022 2021 $ % Service revenue $ 695,218 $ 492,846 93.7 % 89.5 % $ 202,372 41.1 % Product sales 46,380 57,744 6.3 % 10.5 % (11,364 ) (19.7 )% Total revenue 741,598 550,590 100.0 % 100.0 % 191,008 34.7 % Cost of service revenue 16,330 5,337 2.2 % 1.0 % 10,993 206.0 % Cost of product sales 30,932 29,809 4.2 % 5.4 % 1,123 3.8 % Operating expenses 226,324 163,370 30.5 % 29.7 % 62,954 38.5 % Selling, general and administrative expenses 163,133 123,407 22.0 % 22.4 % 39,726 32.2 % Depreciation, amortization and (gain) loss on disposal of assets, net 140,174 116,801 18.9 % 21.2 % 23,373 20.0 % Total costs and expenses 576,893 438,724 77.8 % 79.7 % 138,169 31.5 % Income from operations 164,705 111,866 22.2 % 20.3 % 52,839 47.2 % Interest expense, net 69,372 44,942 9.4 % 8.1 % 24,430 54.4 % Change in fair value of private placement warrants (14,400 ) 7,600 (2.0 )% 1.4 % (22,000 ) (289.5 )% Tax receivable agreement liability adjustment (720 ) (1,016 ) (0.1 )% (0.2 )% 296 (29.1 )% Gain on interest rate swap (996 ) — (0.1 )% — (996 ) n/a (Gain) loss on extinguishment of debt (3,005 ) 5,334 (0.4 )% 1.0 % (8,339 ) (156.3 )% Other income, net (12,654 ) (12,895 ) (1.7 )% (2.3 )% 241 (1.9 )% Total other expenses 37,597 43,965 5.1 % 8.0 % (6,368 ) (14.5 )% Income before income taxes 127,108 67,901 17.1 % 12.3 % 59,207 87.2 % Income tax provision 34,633 26,452 4.6 % 4.8 % 8,181 30.9 % Net income $ 92,475 $ 41,449 12.5 % 7.5 % $ 51,026 123.1 % Service Revenue .
Biggest changeYear Ended December 31, Percentage of Revenue Increase (Decrease) 2023 vs 2022 ($ in thousands) 2023 2022 2023 2022 $ % Service revenue $ 783,595 $ 695,218 95.9 % 93.7 % $ 88,377 12.7 % Product sales 33,715 46,380 4.1 % 6.3 % (12,665 ) (27.3 )% Total revenue 817,310 741,598 100.0 % 100.0 % 75,712 10.2 % Cost of service revenue, excluding depreciation and amortization 18,232 16,330 2.2 % 2.2 % 1,902 11.6 % Cost of product sales 25,231 30,932 3.1 % 4.2 % (5,701 ) (18.4 )% Operating expenses 273,288 226,324 33.4 % 30.5 % 46,964 20.8 % Selling, general and administrative expenses 198,550 163,133 24.3 % 22.0 % 35,417 21.7 % Depreciation, amortization and (gain) loss on disposal of assets, net 113,195 140,174 13.9 % 18.9 % (26,979 ) (19.2 )% Total costs and expenses 628,496 576,893 76.9 % 77.8 % 51,603 8.9 % Income from operations 188,814 164,705 23.1 % 22.2 % 24,109 14.6 % Interest expense, net 86,701 69,372 10.6 % 9.4 % 17,329 25.0 % Change in fair value of private placement warrants 24,966 (14,400 ) 3.1 % (2.0 )% 39,366 (273.4 )% Tax receivable agreement liability adjustment (3,077 ) (720 ) (0.4 )% (0.1 )% (2,357 ) 327.4 % Loss (gain) on interest rate swap 817 (996 ) 0.1 % (0.1 )% 1,813 (182.0 )% Loss (gain) on extinguishment of debt 3,533 (3,005 ) 0.4 % (0.4 )% 6,538 (217.6 )% Other income, net (11,123 ) (12,654 ) (1.3 )% (1.7 )% 1,531 (12.1 )% Total other expenses 101,817 37,597 12.5 % 5.1 % 64,220 170.8 % Income before income taxes 86,997 127,108 10.6 % 17.1 % (40,111 ) (31.6 )% Income tax provision 29,982 34,633 3.6 % 4.6 % (4,651 ) (13.4 )% Net income $ 57,015 $ 92,475 7.0 % 12.5 % $ (35,460 ) (38.3 )% Service Revenue .
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 primarily include payroll and payroll-related costs (including stock-based compensation), subcontractor costs, payment processing and other operational costs, including print, postage and communication costs.
Cost of product sales consists of the cost to acquire and install photo enforcement equipment purchased by Government Solutions customers and costs to develop hardware sold to Parking Solutions customers. Operating Expenses . Operating expenses primarily include payroll and payroll-related costs (including stock-based compensation), subcontractor costs, payment processing and other operational costs, including print, postage and communication costs.
Parking Solutions’ customer arrangements containing multiple performance obligations typically include the sale and installation of parking access hardware systems, the licensing of SaaS products and/or the performance of maintenance services over a contractual term.
Parking Solutions’ customer arrangements containing multiple performance obligations typically include the sale of parking access hardware systems, the licensing of SaaS products, installation and/or the performance of maintenance services over a contractual term.
These solutions are full-service offerings by which we enroll the license plates of our customers’ vehicles and transponders with tolling 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 40 customer, as applicable) for use of the service.
These solutions are full-service offerings by which we enroll the license plates of our customers’ vehicles and transponders with tolling 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.
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 in the Government Solutions segment and specialized hardware in the Parking Solutions segment.
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. 40 Product Sales. Product sales are generated by the sale of photo enforcement equipment in the Government Solutions segment and specialized hardware in the Parking Solutions segment.
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.
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, principally within the United States and Canada.
In November 2022, 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 in open market, ASR or privately negotiated transactions, each as permitted under applicable rules and regulations, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Exchange Act.
Share Repurchases In November 2022, 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 in open market, ASR or privately negotiated transactions, each as permitted under applicable rules and regulations, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1 of the Exchange Act.
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.
Critical Accounting Estimates 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.
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.
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 loss and other tax carryforwards by jurisdiction, the reversal of existing taxable temporary differences and tax planning alternatives and strategies that may be available.
Business Overview We are a leading provider of smart mobility technology solutions throughout the United States, Australia, Europe and Canada. We make transportation safer, smarter and more connected through our integrated, data-driven solutions, including toll and violations management, title and registration services, automated safety and traffic enforcement and commercial parking management.
Business Overview We are a leading provider of smart mobility technology solutions, principally operating throughout the United States, Australia, Europe and Canada. We make transportation safer, smarter and more connected through our integrated, data-driven solutions, including toll and violations management, title and registration services, automated safety and traffic enforcement and commercial parking management.
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 Judgment is required for the estimation of the standalone selling price (" SSP ") and the allocation of the transaction price by relative SSPs.
We believe that the critical accounting estimates listed below involve our more significant judgments, assumptions, and estimates and, therefore, could have the greatest potential impact on the financial statements. Revenue Recognition Judgment is required for the estimation of the standalone selling price (“ SSP ”) and the allocation of the transaction price by relative SSPs.
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.
The fair value of the Private Placement Warrants was estimated at period-end using a Black-Scholes option pricing model, which was a Level 3 fair value measurement exposed to valuation risk. The risk of exposure was estimated using a sensitivity analysis of potential changes in the significant unobservable inputs, primarily the volatility input that was the most susceptible to valuation risk.
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) LIBOR plus an applicable margin, or (2) an alternate base rate, plus an applicable margin.
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) Term SOFR plus an applicable margin, or (2) an alternate base rate, plus an applicable margin.
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.
If we conclude that it is more likely than not that the fair value is less than the carrying amount, we then perform a quantitative impairment test by comparing the reporting unit’s fair value with its carrying value.
On or after April 15, 2024, the Company 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: 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.
On or after April 15, 2024, 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: Year Percentage 2024 102.750% 2025 101.375% 2026 and thereafter 100.000% In addition, we may redeem up to 40% of the Senior Notes before April 15, 2024, with the net cash proceeds from certain equity offerings at a redemption price of 105.50%.
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.
For warrants that did not meet all the criteria for equity classification, the warrants were 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 were recognized as a non-cash gain or loss on the statements of operations.
In connection with the issuance of the Senior Notes, the Company 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.
In connection with the issuance of the Senior Notes, we incurred $5.7 million in lender and 47 third-party costs, which were capitalized as deferred financing costs and are being amortized over the remaining life of the Senior Notes.
Customer buying patterns vary greatly from period to period related to product sales. Costs and Expenses Cost of Service Revenue. Cost of service revenue consists of recurring service costs, collection and other third-party costs in our segments. Cost of Product Sales.
Customer buying patterns vary greatly from period to period related to product sales. Costs and Expenses Cost of Service Revenue, Excluding Depreciation and Amortization. Cost of service revenue, excluding depreciation and amortization consists of recurring service costs, collection and other third-party costs in our segments. Cost of Product Sales.
PPP Loan During fiscal year 2020, Redflex received a $2.9 million 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.
PPP Loan During fiscal year 2020, one of our wholly owned subsidiaries received a $2.9 million 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.
Long-term Debt 2021 Term Loan and Senior Notes In March 2021, VM Consolidated, Inc., the Company’s wholly owned subsidiary (“ VM Consolidated ”), 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.
Long-term Debt 2021 Term Loan In March 2021, 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.
In early 2021, Redflex applied for forgiveness of this loan, and on September 23, 2022, the Company was notified by the SBA that the loan, together with accrued interest, had been fully forgiven under the provisions of the PPP Loan program.
In early 2021, we applied for forgiveness of this loan, and on September 23, 2022, we were notified by the SBA that the loan, together with accrued interest, had been fully forgiven under the provisions of the PPP Loan program.
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.
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 commercial fleet customers, including RACs, Direct Fleets and FMCs in North America.
We believe that our existing cash and cash equivalents, cash flows provided by operating activities and our ability to borrow under our Revolver (as defined below) will be sufficient to meet operating cash requirements and service debt obligations for at least the next 12 months.
We believe that our existing cash and cash equivalents, cash flows provided by operating activities and our ability to borrow under our Revolver (as defined below) 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.
The international operations through Redflex primarily involve the sale of traffic enforcement products and related maintenance services. • Our Parking Solutions segment provides an integrated suite of parking software and hardware solutions to universities, municipalities, parking operators, healthcare facilities and transportation hubs in the United States and Canada.
Our international operations primarily involve the sale of traffic enforcement products and related maintenance services. • Our Parking Solutions segment provides an integrated suite of parking software, transaction processing and hardware solutions to universities, municipalities, healthcare facilities and commercial parking operators in the United States and Canada.
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.
We provide a valuation allowance against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.
Within our Government Solutions and Parking Solutions operating segments, some customer arrangements include multiple performance obligations. Government Solutions’ customer arrangements containing multiple performance obligations typically include the sale and installation of photo-enforcement cameras and the performance of maintenance services on such cameras over a contractual term.
Within our Government Solutions and Parking Solutions operating segments, some customer arrangements include multiple performance obligations. Government Solutions’ customer arrangements containing multiple performance obligations typically include the sale and installation of photo-enforcement cameras, license of back-office software, processing payments on behalf of the customer and the performance of maintenance services on such cameras over a contractual term.
Accordingly, the Company recognized a $3.0 million gain on extinguishment of debt in the consolidated statement of operations for the year ended December 31, 2022. The Revolver The Company has a Revolving Credit Agreement (the “ Revolver ”) with a commitment of up to $75.0 million available for loans and letters of credit. The Revolver matures on December 20, 2026.
Accordingly, we recognized a $3.0 million gain on extinguishment of debt in the consolidated statements of operations for the year ended December 31, 2022. The Revolver We have a Revolving Credit Agreement (the “ Revolver ”) with a commitment of up to $75.0 million available for loans and letters of credit. The Revolver matures on December 18, 2026.
For warrants that meet all of the criteria for equity 54 classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance.
For warrants that met all of the criteria for equity classification, the warrants were required to be recorded as a component of additional paid-in capital at the time of issuance.
Income tax provision was $34.6 million representing an effective tax rate of 27.2% for fiscal year 2022 compared to $26.5 million, representing an effective tax rate of 39.0% for fiscal year 2021.
Income tax provision was $30.0 million representing an effective tax rate of 34.5% for fiscal year 2023 compared to $34.6 million, representing an effective tax rate of 27.2% for fiscal year 2022.
Segment performance is based on revenues and income from operations before depreciation, amortization, and stock-based compensation. The measure also excludes interest expense, net, income taxes and certain other transactions and is inclusive of other income, net.
Segment performance is based on revenues and income from operations before depreciation, amortization, and stock-based compensation. The measure also excludes interest expense, net, income taxes and certain other transactions and is inclusive of other income, net. Primary Components of Our Operating Results Revenues Service Revenue.
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.
Our Public 51 Warrants met the criteria for equity classification and accordingly, were reported as a component of shareholders’ equity while our Private Placement Warrants did not meet the criteria for equity classification and were instead classified as a liability.
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.
The excess of the purchase consideration over the fair value of the identifiable assets and liabilities is recorded as goodwill. 49 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.
(Gain) loss on extinguishment of debt generally consists of early payment penalties and the write-off of original issue discounts and deferred financing costs associated with debt extinguishment, and any gains recognized as a result of loan forgiveness. 41 Other Income, Net .
Loss (gain) on extinguishment of debt consists of losses from the write-off of pre-existing original issue discounts and deferred financing costs associated with debt extinguishment, and any gains recognized as a result of loan forgiveness. Other Income, Net .
The Company’s effective tax rate for 2022 was lower compared to 2021 primarily due to an increase in pre-tax income in 2022 combined with the permanent differences related to the mark-to-market adjustment on the private placement warrants and the adjustments to the carrying value of the Company’s tax receivable agreement liability. Net Income.
Our effective tax rate for 2023 was higher compared to 2022 primarily due to a decrease in pre-tax income in 2023 combined with the impact of permanent differences related to the mark-to-market adjustment on the Private Placement Warrants and the adjustments to the carrying value of our tax receivable agreement liability. Net Income.
Operating expenses as a percentage of total revenue increased from 29.7% to 30.5% in fiscal years 2021 and 2022, respectively.
Operating expenses as a percentage of total revenue increased from 30.5% to 33.4% in fiscal years 2022 and 2023, respectively.
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. Acquisitions We apply the acquisition method to account for business combinations.
This includes evaluation by portfolio segment the changes in expectations based on the newest information available on customer payment trends, travel forecasts and other risk characteristics and adjusting the probability-weighting either upward or downward that is most representative of the expected credit losses.
We recorded $0.7 million of impairment related to certain photo enforcement programs that ended during the year ended December 31, 2022 within the depreciation, amortization and (gain) loss on disposal of assets, net line item on the consolidated statements of operations. Income Taxes We account for income taxes under the asset and liability method.
We recorded $0.7 million of impairment related to certain photo enforcement programs that ended during the year ended December 31, 2022 within the depreciation, amortization and (gain) loss on disposal of assets, net line item on the consolidated statements of operations. We did not have any indicators of impairment related to long-lived assets for the year ended December 31, 2021.
The Company periodically evaluates the adequacy of its allowance for expected credit losses by comparing its actual historical write-offs to its previously 52 recorded estimates and adjusts appropriately.
We periodically evaluate the adequacy of our allowance for expected credit losses by comparing our actual historical write-offs to our previously recorded estimates and adjust appropriately.
See “ Liquidity and Capital Resources ” below. Change in Fair Value of Private Placement Warrants . We recorded a $14.4 million gain and a $7.6 million loss in fiscal years 2022 and 2021, respectively, related to the changes in fair value of our Private Placement Warrants which are accounted for as liabilities on our consolidated balance sheets.
We recorded a loss of $25.0 million and a gain of $14.4 million in fiscal years 2023 and 2022, respectively, related to the changes in fair value of our Private Placement Warrants which were accounted for as liabilities on our consolidated balance sheets.
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 consists of adjustments made to our Tax Receivable Agreement liability due to changes in estimates.
Change in fair value of private placement warrants consists of liability adjustments related to the Private Placement Warrants originally issued to Gores Sponsor II, LLC re-measured to fair value at the end of each reporting period, and the final re-measurement upon their exercise. Tax Receivable Agreement Liability Adjustment .
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.
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.
We bring together vehicles, hardware, software, data, and people to solve transportation challenges for customers around the world, including fleet owners such as RACs and FMCs, governments, universities, parking operators, healthcare facilities, transportation hubs and other violation-issuing authorities. Executive Summary We operate under long-term contracts and a highly reoccurring service revenue model.
We bring together vehicles, hardware, software, data and people to solve transportation challenges for customers around the world, including commercial fleet owners such as RACs, Direct Fleets and FMCs, as well as governments, universities, parking operators, healthcare facilities, transportation hubs and other violation-issuing authorities.
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 which were capitalized and are amortized over the remaining life of the 2021 Term Loan.
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.
For arrangements that contain multiple performance obligations, we exercise judgement in allocating the transaction price based on the relative SSP method by comparing the SSP of each distinct performance obligation to the total value of the contract. We determine the SSP based on our historical pricing and discounting practices for the distinct performance obligation when sold separately.
For arrangements that contain multiple performance obligations, we exercise judgment in allocating the transaction price based on the relative SSP method by comparing the SSP of each distinct performance obligation to the total value of the contract. We apply judgment in determining the SSP for each distinct performance obligation.
The adjustments to net income included decreases of $37.1 million for the changes in the fair value of private placement warrants, (gain) loss on extinguishment of debt and changes in deferred income taxes year over year, partially offset by increases of $29.7 million from depreciation and amortization, credit loss expense, and stock-based compensation expense year over year.
The adjustments to net income included increases of $50.2 million from changes in the fair value of private placement warrants, loss (gain) on extinguishment of debt and impairment of long-lived assets and ROU assets year over year, partially offset by decreases of $40.7 million from lower amortization, credit loss expense and changes in deferred income taxes year over year.
Selling, general and administrative expenses increased by $39.7 million to $163.1 million for fiscal year 2022 compared to $123.4 million for fiscal year 2021.
Selling, general and administrative expenses increased by $35.4 million to approximately $198.6 million for fiscal year 2023 compared to $163.1 million for fiscal year 2022.
As of December 31, 2022, the interest rate on the 2021 Term Loan was 7.6%.
As of December 31, 2023, the new all-in interest rate on the 2021 Term Loan was 8.7%.
See Note 2, Significant Accounting Policies , in Item 8, Financial Statements and Supplementary Data for additional information on the interest rate swap entered into in December 2022 to hedge our exposure against rising interest rates.
Interest income earned was $4.2 million for the fiscal year ended December 31, 2023 and less than $0.1 million for both fiscal years ended December 31, 2022 and 2021. 48 See Note 2, Significant Accounting Policies , in Item 8, Financial Statements and Supplementary Data for additional information on the interest rate swap entered into in December 2022 to hedge our exposure against rising interest rates.
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, beginning with the year ending December 31, 2022), as set forth in the following table: 50 Consolidated First Lien Net Leverage Ratio (As Defined by the 2021 Term Loan Agreement) Applicable Prepayment Percentage > 3.70:1.00 50% 3.70:1.00 and > 3.20:1.00 25% 3.20:1.00 0% The Company will make a $12.9 million mandatory prepayment of excess cash flows during the first quarter of fiscal year 2023, which was classified as current portion of long-term debt in the consolidated balance sheet at December 31, 2022.
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: Consolidated First Lien Net Leverage Ratio (As Defined by the 2021 Term Loan Agreement) Applicable Prepayment Percentage > 3.70:1.00 50% 3.70:1.00 and > 3.20:1.00 25% 3.20:1.00 0% We did not have mandatory prepayments of excess cash flows for the fiscal years ended December 31, 2023 or 2022.
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.
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 have four reporting units for the purposes of assessing potential impairment of goodwill which include Commercial Services, Government Solutions North America, Government Solutions International and Parking Solutions.
Interest Expense The Company recorded interest expense, including amortization of deferred financing costs and discounts, of $69.4 million, $44.9 million and $40.9 million for the fiscal years ended December 31, 2022, 2021 and 2020 respectively.
At December 31, 2023, we were compliant with all debt covenants. Interest Expense, Net We recorded interest expense, net of interest income, including amortization of deferred financing costs and discounts, of $86.7 million, $69.4 million and $44.9 million for the fiscal years ended December 31, 2023, 2022 and 2021 respectively.
The following table sets forth certain captions on our statements of cash flows for the respective periods: For the Year Ended December 31, ($ in thousands) 2022 2021 2020 Net cash provided by operating activities $ 218,337 $ 193,171 $ 46,909 Net cash used in investing activities (48,592 ) (475,970 ) (24,153 ) Net cash (used in) provided by financing activities (164,932 ) 268,722 (34,004 ) Cash Flows from Operating Activities Cash provided by operating activities increased by $25.2 million, from $193.2 million in 2021 to $218.3 million in 2022.
The following table sets forth certain captions on our statements of cash flows for the respective periods: For the Year Ended December 31, ($ in thousands) 2023 2022 Net cash provided by operating activities $ 206,101 $ 218,337 Net cash used in investing activities (58,290 ) (48,592 ) Net cash used in financing activities (117,793 ) (164,932 ) Cash Flows from Operating Activities Cash provided by operating activities decreased by $12.2 million, from $218.3 million in 2022 to $206.1 million in 2023.
Redflex and T2 Systems contributed $113.9 million to revenue growth, and the remaining increase was mainly due to service revenue resulting from increased travel volume and tolling activity in 2022 in the Commercial Services segment and expansion of speed programs in the Government Solutions segment; and • Generated cash flows from operating activities of $218.3 million, $193.2 million, and $46.9 million for fiscal years 2022, 2021 and 2020, respectively.
The increase was mainly due to service revenue resulting from increased travel volume and higher adoption of the all-inclusive product offering in the Commercial Services segment and expansion of speed programs in the Government Solutions segment. • Generated cash flows from operating activities of $206.1 million and $218.3 million for fiscal years 2023 and 2022, respectively.
Service revenue increased by $202.4 million, or 41.1%, to $695.2 million for fiscal year 2022 from $492.8 million in fiscal year 2021, representing 93.7% and 89.5% of total revenue, respectively.
Service revenue increased by $88.4 million, or 12.7%, to $783.6 million for fiscal year 2023 from $695.2 million in fiscal year 2022, representing 95.9% and 93.7% of total revenue, respectively.
The 2021 Term Loan is repayable at 1.0% per annum of the amount initially borrowed, paid in quarterly installments. It bears interest based, at 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.
It 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.
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. In connection with our 2022 assessment of goodwill impairment, we qualitatively concluded that our Commercial Services and Government Solutions North America reporting units did not have indicators of impairment.
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.
Gain on Interest Rate Swap . We recorded a $1.0 million gain related to the interest rate swap associated with mark-to-market adjustments from re-measuring to fair value at the end of the reporting period. (Gain) Loss on Extinguishment of Debt .
We recorded a $1.0 million gain in fiscal year 2022 associated with the derivative instrument re-measured to fair value at the end of the reporting period. Loss (Gain) on Extinguishment of Debt .
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.
As of December 31, 2023, all Warrants were either exercised by the holder or redeemed by the Company. 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 .
Gain on Interest Rate Swap. Gain on interest rate swap relates to the gain associated with the derivative instrument re-measured to fair value at the end of each reporting period. (Gain) Loss on Extinguishment of Debt.
This consists of adjustments made to our tax receivable agreement liability due to changes in estimates. Loss (Gain) on Interest Rate Swap. Loss (gain) on interest rate swap relates to the changes associated with the derivative instrument re-measured to fair value at the end of each reporting period and the related periodic cash payments. Loss (Gain) on Extinguishment of Debt.
In November 2022, 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 in open market, ASR or privately negotiated transactions, each as permitted under applicable rules and regulations.
We paid a total of $100.0 million for share repurchases during the twelve months ended December 31, 2023. 45 On October 30, 2023, our Board of Directors authorized a new share repurchase program for up to an aggregate amount of $100.0 million of our outstanding shares of Class A Common Stock over an 18-month period in open market, ASR or privately negotiated transactions.
The following table presents selling, general and administrative expenses by segment: Year Ended December 31, Percentage of Revenue Increase (Decrease) 2022 vs 2021 ($ in thousands) 2022 2021 2022 2021 $ % Selling, general and administrative expenses Commercial Services $ 56,105 $ 42,386 7.5 % 7.7 % $ 13,719 32.4 % Government Solutions 61,235 51,052 8.3 % 9.3 % 10,183 19.9 % Parking Solutions 27,104 1,361 3.7 % 0.2 % 25,743 1891.5 % Corporate and other 3,156 15,639 0.4 % 2.8 % (12,483 ) (79.8 )% Total selling, general and administrative expenses before stock-based compensation 147,600 110,438 19.9 % 20.0 % 37,162 33.6 % Stock-based compensation 15,533 12,969 2.1 % 2.4 % 2,564 19.8 % Total selling, general and administrative expenses $ 163,133 $ 123,407 22.0 % 22.4 % $ 39,726 32.2 % Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net.
The following table presents selling, general and administrative expenses by segment: Year Ended December 31, Percentage of Revenue Increase (Decrease) 2023 vs 2022 ($ in thousands) 2023 2022 2023 2022 $ % Selling, general and administrative expenses Commercial Services $ 61,607 $ 56,105 7.5 % 7.5 % $ 5,502 9.8 % Government Solutions 62,597 61,235 7.7 % 8.3 % 1,362 2.2 % Parking Solutions 23,988 27,104 2.9 % 3.7 % (3,116 ) (11.5 )% Corporate and other 35,370 3,156 4.4 % 0.4 % 32,214 1020.7 % Total selling, general and administrative expenses before stock-based compensation 183,562 147,600 22.5 % 19.9 % 35,962 24.4 % Stock-based compensation 14,988 15,533 1.8 % 2.1 % (545 ) (3.5 )% Total selling, general and administrative expenses $ 198,550 $ 163,133 24.3 % 22.0 % $ 35,417 21.7 % Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net.
Liquidity and Capital Resources Our principal sources of liquidity are cash flows from operations and the available borrowing under our Revolver (defined below). We have incurred significant long-term debt as a result of acquisitions completed in prior years.
Liquidity and Capital Resources Our principal sources of liquidity are cash flows from operations and the available borrowing under our Revolver (defined below).
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.
Income Taxes The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year, and to recognize deferred tax assets and liabilities for the expected future consequences of differences between the tax basis of assets or liabilities and their carrying amounts in the financial statements.
The final settlement occurred on November 4, 2022, at which time, we received 943,361 additional shares calculated using a volume-weighted average price over the term of the ASR agreement. We used 39 existing cash on hand and paid a total of $125.0 million for shares repurchases and $0.1 million for direct costs during the year ended December 31, 2022.
The final settlement occurred on January 12, 2024, at which time, we received 534,499 additional shares calculated using a volume-weighted average price over the term of the ASR agreement. We paid a total of $100.0 million for share repurchases during the twelve months ended December 31, 2023.
The following table depicts service revenue by segment: Year Ended December 31, Percentage of Revenue Increase (Decrease) 2022 vs 2021 ($ in thousands) 2022 2021 2022 2021 $ % Service revenue Commercial Services $ 325,971 $ 260,899 44.0 % 47.4 % $ 65,072 24.9 % Government Solutions 307,639 227,992 41.4 % 41.4 % 79,647 34.9 % Parking Solutions 61,608 3,955 8.3 % 0.7 % 57,653 1457.7 % Total service revenue $ 695,218 $ 492,846 93.7 % 89.5 % $ 202,372 41.1 % Commercial Services service revenue includes mainly toll and violation management revenues from RACs and FMCs.
The following table depicts service revenue by segment: Year Ended December 31, Percentage of Revenue Increase (Decrease) 2023 vs 2022 ($ in thousands) 2023 2022 2023 2022 $ % Service revenue Commercial Services $ 372,786 $ 325,971 45.6 % 44.0 % $ 46,815 14.4 % Government Solutions 344,034 307,639 42.1 % 41.4 % 36,395 11.8 % Parking Solutions 66,775 61,608 8.2 % 8.3 % 5,167 8.4 % Total service revenue $ 783,595 $ 695,218 95.9 % 93.7 % $ 88,377 12.7 % Commercial Services service revenue includes mainly toll and violation management revenues from RACs and FMCs.
We did not have a mandatory prepayment of excess cash flow for the fiscal year ended December 31, 2021. Interest on the Senior Notes is fixed at 5.50% per annum and is payable on April 15 and October 15 of each year.
Interest on the Senior Notes is fixed at 5.50% per annum and is payable on April 15 and October 15 of each year.
Results of Operations Fiscal Year 2022 Compared to Fiscal Year 2021 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.
Other income, net primarily consists of volume rebates earned from total spend on purchasing cards, gains or losses on foreign currency transactions and other non-operating expenses. 41 Results of Operations Fiscal Year 2023 Compared to Fiscal Year 2022 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.
There is no material reserve related to NYCDOT open receivables as amounts are deemed collectible based on current conditions and expectations.
Concentration of Credit Risk The NYCDOT represented 18% and 22% of total accounts receivable, net as of December 31, 2023 and 2022, respectively. There is no material reserve related to NYCDOT open receivables as amounts are deemed collectible based on current conditions and expectations.
Accordingly, the Company recognized a loss on extinguishment of debt of $5.3 million on the 2018 Term Loan during the 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 2021 Term Loan.
We recorded a $3.5 million loss on extinguishment of debt during the year ended December 31, 2023 related to the write-off of pre-existing deferred financing costs and discounts in connection with the early repayment of $172.5 million on the 2021 Term Loan.
Cash Flows from Investing Activities Cash used in investing activities in 2022 and in 2020 was primarily related to purchases of installation and service parts and property and equipment. Cash used in investing activities in 2021 was mainly related to acquisitions of Redflex, T2 Systems and NuPark.
Cash Flows from Investing Activities Cash used in investing activities in 2023 and 2022 was primarily related to purchases of installation and service parts and property and equipment mainly in our Government Solutions business of $57.0 million and $48.2 million, respectively.
The following table presents operating expenses by segment: Year Ended December 31, Percentage of Revenue Increase (Decrease) 2022 vs 2021 ($ in thousands) 2022 2021 2022 2021 $ % Operating expenses Commercial Services $ 72,328 $ 65,718 9.8 % 12.0 % $ 6,610 10.1 % Government Solutions 139,961 96,284 18.9 % 17.5 % 43,677 45.4 % Parking Solutions 12,905 553 1.7 % 0.1 % 12,352 2233.6 % Total operating expenses before stock-based compensation 225,194 162,555 30.4 % 29.6 % 62,639 38.5 % Stock-based compensation 1,130 815 0.1 % 0.1 % 315 38.7 % Total operating expenses $ 226,324 $ 163,370 30.5 % 29.7 % $ 62,954 38.5 % Selling, General and Administrative Expenses .
The following table presents operating expenses by segment: Year Ended December 31, Percentage of Revenue Increase (Decrease) 2023 vs 2022 ($ in thousands) 2023 2022 2023 2022 $ % Operating expenses Commercial Services $ 83,828 $ 72,328 10.3 % 9.8 % $ 11,500 15.9 % Government Solutions 168,736 139,961 20.6 % 18.9 % 28,775 20.6 % Parking Solutions 18,236 12,905 2.2 % 1.7 % 5,331 41.3 % Total operating expenses before stock-based compensation 270,800 225,194 33.1 % 30.4 % 45,606 20.3 % Stock-based compensation 2,488 1,130 0.3 % 0.1 % 1,358 120.2 % Total operating expenses $ 273,288 $ 226,324 33.4 % 30.5 % $ 46,964 20.8 % Selling, General and Administrative Expenses .
Our Board of Directors authorized a second ASR during the third quarter of 2022 for the remaining availability under the share repurchase program. On August 19, 2022, we paid $68.1 million for this second ASR and received an initial delivery of 3,300,000 shares of our Class A Common Stock in accordance with an ASR agreement with a third-party financial institution.
On September 5, 2023, we used the remaining availability under the share repurchase program for an ASR and paid approximately $91.9 million to receive an initial delivery of 4,131,551 shares of our Class A Common Stock in accordance with an ASR agreement with a third-party financial institution.
Government Solutions service revenue includes revenue from speed, red-light, school bus stop arm and bus lane photo enforcement systems. Service revenue was $307.6 million and $228.0 million for the years ended December 31, 2022, and 2021, respectively, and it increased by $79.6 million. Redflex operations contributed $37.4 million to our growth year-over-year.
Government Solutions service revenue includes revenue from speed, red-light, school bus stop arm and bus lane photo enforcement systems. Service revenue increased by $36.4 million to $344.0 million in fiscal year 2023 compared to $307.6 million in fiscal year 2022.
Allowance for Credit Losses We review historical credit losses and customer payment trends on receivables and develop loss rate estimates as of the balance sheet date, which includes adjustments for current and future expectations using probability-weighted assumptions about potential outcomes.
See Note 2, Significant Accounting Policies , in Item 8, Financial Statements and Supplementary Data for additional information on the Company’s policy for recognition of revenue. Allowance for Credit Losses We review historical credit losses and customer payment trends on receivables and develop loss rate estimates as of the balance sheet date, which includes adjustments for current and future expectations.
The slight decrease was primarily due to income resulting from volume rebates earned from total spend on purchasing cards from increased tolling activity, especially in the RAC industry, offset by a $1.3 million impairment related to an equity investment and the remaining due to other non-operating expenses incurred in 2022. 44 Income Tax Provision.
The decrease was primarily due to a $5.6 million tax settlement payment related to a prior year acquisition, partially offset by an increase in volume rebates earned from total spend on purchasing cards from increased tolling and travel activity. 44 Income Tax Provision.
Commercial Services service revenue increased by $65.1 million, or 24.9%, from $260.9 million in fiscal year 42 2021 to $326.0 million in fiscal year 2022. This increase was primarily due to the increase in travel volume in 2022 compared to 2021 which was negatively impacted by the COVID-19 pandemic, especially in the first three months of 2021.
Commercial Services service revenue increased by $46.8 million, or 14.4%, from $326.0 million in fiscal year 2022 to $372.8 million in fiscal year 2023. This increase was primarily due to increased travel volume and related tolling activity compared to the prior year which was still recovering from the COVID-19 pandemic, especially during January and February of 2022.
In addition, 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.
See Note 18, Subsequent Events , in Item 8, Financial Statements and Supplementary Data , for additional information. Senior Notes In March 2021, VM Consolidated issued an aggregate principal amount of $350.0 million in Senior Notes due on April 15, 2029.
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 ”).
We estimate the fair value of our reporting units based on a combination of an income approach or more specifically, a discounted cash flow method (“ DCF Method ”) and a market approach employing the public company market multiple method.
The change in fair value is the result of re-measurement of the liability at the end of each reporting period. 47 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 change in fair value was the result of re-measurement of the liability at the end of each reporting period, and the final re-measurement upon their exercise. Tax Receivable Agreement Liability Adjustment . We recorded a gain of approximately $3.1 million in fiscal year 2023 as a result of tax settlement adjustments related to a previous acquisition.
We recorded a $3.0 million gain on extinguishment of debt during the year ended December 31, 2022 related to the forgiveness of the PPP loan, which is further discussed below.
Gain on extinguishment of debt was $3.0 million for the year ended December 31, 2022 related to the forgiveness of the PPP loan, discussed below. Other Income, Net. Other income, net was $11.1 million in fiscal year 2023 compared to $12.7 million in fiscal year 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+4 added−0 removed1 unchanged
Biggest changeIn December 2022, we entered into a cancellable interest rate swap agreement to hedge our exposure to interest rate fluctuations associated with the LIBOR portion of the variable interest rate on our 2021 Term Loan. Under the interest rate swap agreement, we pay a fixed rate and the counterparty pays a variable interest rate which is net settled.
Biggest changeIn December 2022, we entered into a cancellable interest rate swap agreement to hedge our exposure to interest rate fluctuations associated with the LIBOR (now transitioned to Term SOFR) portion of the variable interest rate on our 2021 Term Loan.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources .” Interest rate risk represents our exposure to fluctuations in interest rates associated with the variable rate debt represented by the 2021 Term Loan, which has an outstanding balance of $886.1 million at December 31, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources .” Interest rate risk represents our exposure to fluctuations in interest rates associated with the variable rate debt represented by the 2021 Term Loan, which has an outstanding balance of $704.6 million at December 31, 2023.
See Note 2, Significant Accounting Policies , in Item 8, Financial Statements and Supplementary Data for additional information on the interest rate swap. 55 VERRA MOBILITY CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
See Note 2, Significant Accounting Policies , in “Item 8, Financial Statements and Supplementary Data ” for additional information on the interest rate swap. 52 VERRA MOBILITY CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The 2021 Term Loan 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, 2022, the interest rate on the 2021 Term Loan was 7.6%.
The 2021 Term Loan 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.
The notional amount on the interest rate swap is $675 million. We have the option to terminate the interest rate swap agreement starting in December 2023, and monthly thereafter until December 2025, in the event interest rates decrease. We recorded a $1.0 million gain on interest rate swap for the year ended December 31, 2022.
We have the option to terminate the interest rate swap agreement starting in December 2023, and monthly thereafter until December 2025, in the event interest rates decrease. We recorded a $0.8 million loss and a $1.0 million gain on the interest rate swap for the years ended December 31, 2023 and 2022, respectively.
Based on the December 31, 2022 balance outstanding, each 1% movement in interest rates will result in an approximately $8.9 million change in annual interest expense.
At December 31, 2023, the all-in interest rate on the 2021 Term Loan was 8.7%. Based on the December 31, 2023 balance outstanding, each 1% movement in interest rates will result in an approximately $7.0 million change in annual interest expense.
Added
In March 2023, we amended our 2021 Term Loan agreement to transition away from LIBOR to Term SOFR with the cessation of LIBOR in June 2023.
Added
To compensate for the differences in reference rates utilized, the amended agreement also includes a credit spread adjustment of 0.11448% for an interest period of one-month duration, 0.26161% for a three-month duration, 0.42826% for a six-month duration, and 0.71513% for twelve-months duration in addition to Term SOFR and the applicable margin.
Added
Due to the limited history of the use of the new benchmark rate, we are unable to estimate the future impact to our borrowing costs as a result of the discontinuation of the LIBOR benchmark.
Added
Under the interest rate swap agreement, we pay a fixed rate of 5.17% and the counterparty pays a variable interest rate which is net settled. The notional amount on the interest rate swap is $675.0 million.

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