Verra Mobility Announces First Quarter 2023 Financial Results
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Verra Mobility Announces First Quarter 2023 Financial Results

CIO Review

• Total revenue of $191.9 million

• Net income of $4.6 million

• Generated cash flows from operations of $45.2 million

• Reaffirming 2023 guidance

MESA, Ariz.,-- Verra Mobility Corporation (NASDAQ: VRRM), a leading provider of smart mobility technology solutions, announced today the financial results for the first quarter ended March 31, 2023.

"We delivered another strong quarter financially and continued the operating momentum we demonstrated throughout 2022," said David Roberts, President and CEO, Verra Mobility. "We are benefitting from robust travel demand that has returned to pre-pandemic volume as well as nationwide efforts to improve road safety through investments in automated safety enforcement technology. I am incredibly excited about our future – we are well-positioned in large, growing and attractive markets and we have established a proven operating model to drive consistent execution."

First Quarter 2023 Financial Highlights

• Revenue: Total revenue for the first quarter of 2023 was $191.9 million, an increase of 13% compared to $170.4 million for the first quarter of 2022. Service revenue growth was 15% due to increases in travel volume and related tolling activity in the Commercial Services segment which grew 17%, and the growth in service revenue from our Government Solutions segment, which increased 14% and was driven by the expansion of speed programs. Parking Solutions service revenue increased 10% due to increases in our software as a service (SaaS) product offerings and various services related to parking management solutions.

• Net income: Net income for the first quarter of 2023 was $4.6 million, or $0.03 per share based on 153.1 million diluted weighted average shares outstanding. Net income for the comparable 2022 period was $10.0 million, or $0.06 per share, based on 160.7 million diluted weighted average shares outstanding.

• Adjusted Earnings Per Share (EPS): Adjusted EPS for the first quarter of 2023 was $0.26 per share compared to $0.22 per share for the first quarter of 2022.

• Adjusted EBITDA: Adjusted EBITDA was $87.9 million for the first quarter of 2023 compared to $75.3 million for the same period last year. Adjusted EBITDA margin was 46% of total revenue for 2023 and 44% for 2022. The expansion in Adjusted EBITDA margins was driven primarily by revenue contribution mix and increased volume leverage across our business segments.

We report our results of operations based on three operating segments:

• Commercial Services offers automated toll and violations management and title and registration solutions to rental car companies, fleet management companies and other large fleet owners.

• Government Solutions delivers automated safety solutions to municipalities, school districts and government agencies, including services and technology that enable photo enforcement related to speed, red-light, school bus and city bus lane management.

• Parking Solutions 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.

First Quarter 2023 Segment Detail

• The Commercial Services segment generated total revenue of $85.6 million, a 17% increase compared to $73.5 million in the same period in 2022. Segment profit was $53.6 million, a 15% increase from $46.6 million in the prior year. The increases in revenue and profit compared to the prior period resulted from increased travel volume and the continued adoption to the all-inclusive fee structure as well as the increase in enrolled vehicles and higher tolling activity for our FMC customers. The segment profit margin was 63% for 2023 and 63% for 2022.

• The Government Solutions segment generated total revenue of $85.9 million, a 9% increase compared to $78.8 million in the same period in 2022. The increase was primarily driven by the expansion of speed programs, as speed is the largest product in this segment. The remaining increase is attributable to expansions across red-light, school bus stop arm, and bus lane programs. The segment profit was $31.5 million in 2023 compared to $25.5 million in the prior year with segment profit margins of 37% for 2023 and 32% for 2022. The increase in segment profit and margins is primarily attributable to the increase in recurring service revenue and a reduction in bad debt expense due to improved cash collections.

• The Parking Solutions segment generated total revenue of $20.3 million a 12% increase compared to $18.1 million in the same period in 2022. The segment profit was $2.9 million compared to $3.2 million in the prior year with segment profit margins of 14% for 2023 and 18% for 2022. The decline in segment profit and margins is primarily attributable to a higher mix of hardware versus SaaS and services revenue.

Liquidity: As of March 31, 2023, cash and cash equivalents were $64.3 million, and we generated $45.2 million in cash flows from operations for 2023.

Interest Rate Swap

In 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 Secured Overnight Financing Rate) 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. The notional amount on the interest rate swap is $675.0 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. Any changes in the fair value of the derivative instrument (including accrued interest) and related cash payments are recorded in the condensed consolidated statements of operations within the loss on interest rate swap line item. We recorded a $2.8 million loss during the three months ended March 31, 2023, of which approximately $1.6 million is associated with the derivative instrument re-measured to fair value at the end of the reporting period and $1.2 million relates to the monthly cash payments.

2023 Full Year Guidance

Any guidance that we provide is subject to change as a variety of factors can affect actual operating results. Certain of the factors that may impact our actual operating results are identified below in the safe harbor language included within Forward-Looking Statements of this press release.

We are reaffirming the fiscal year 2023 guidance we issued on March 1, 2023, based on our financial results for the first quarter of 2023 and our current outlook for the remainder of the year, as follows:

• Total revenue of $780 million to $800 million

• Adjusted EBITDA of $360 million to $370 million

• Adjusted EPS of $1.00 to $1.10

• Free Cash Flow of $135 million to $155 million

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