Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and the related notes that are included in Item 8 of Part II of this Annual Report. This Item generally discusses fiscal years 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between fiscal years 2024 and 2023 are not included, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which specific discussions and comparisons are incorporated herein by reference.
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 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 violation-issuing authorities. Our vision is to continue to develop and use technology and data intelligence to make transportation safer, smarter, and more connected globally.
Our 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 and FMCs in North America. In Europe, we provide tolling and violations processing services.
Our Government Solutions segment offers photo enforcement automated safety solutions and services to states, municipalities, counties, school districts, and law enforcement agencies of all sizes, primarily in the United States, Canada, and Australia. We provide complete, end-to-end speed, red-light, school bus stop arm, and city bus lane enforcement solutions. Our international operations primarily involve the sale of traffic enforcement products and recurring maintenance services related to the equipment and software.
Our Parking Solutions segment provides an integrated suite of parking software, transaction processing, and hardware solutions to universities, municipalities, commercial parking operators, and health care facilities in the United States and Canada.
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.
Executive Summary
We operate under long-term contracts and a reoccurring service revenue model. We continue to execute our strategy to grow revenue organically year over year and focus on initiatives that support our long-term strategy. During the periods presented, we:
Increased total revenue by $99.9 million, or 11.4%, from $879.2 million in fiscal year 2024 to $979.1 million in fiscal year 2025. The increase was mainly due to service revenue resulting from increased product adoption, tolling activity, and activity in our European operations in the Commercial Services segment, and installation revenue from the NYCDOT program, the growth from city bus lane and school bus stop arm enforcement programs, back-office software-as-a-service (“ SaaS ”) programs and higher product sales in the Government Solutions segment.
Generated cash flows from operating activities of $255.8 million and $223.6 million for fiscal years 2025 and 2024, respectively. Our cash on hand was $65.3 million as of December 31, 2025.
Used existing cash on hand of $133.4 million during fiscal year 2025 to repurchase approximately 6.0 million shares authorized under a 2025 share repurchase program.
Continued to focus on debt management and lowering our exposure to higher interest rates, and as a result, we refinanced our debt during fiscal year 2025 which reduced our interest rate by 25 basis points. In addition, we made early repayments of approximately $8.5 million and $9.0 million on our Amended Term Loan and 2021 Term Loan (defined below) during fiscal year 2025 and 2024, respectively.
Recent Events
NYCDOT Red-Light Camera Expansion
In March 2025, NYCDOT instructed us through a change order to our then existing contract with NYCDOT to install additional red-light cameras by year-end 2025 as part of a legislatively authorized expansion. We installed 300 red-light cameras during the third and fourth quarters of 2025, which contributed approximately $38.4 million of revenue in fiscal year 2025, of which approximately $23.9 million was installation services revenue and approximately $14.5 million was product revenue.
NYCDOT Contract Renewal
Our contract with NYCDOT expired on December 31, 2025, and we entered into a new contract with NYCDOT, effective January 1, 2026, to manage New York City’s automated enforcement camera safety program for a five-year period, with an option for the parties to extend for an additional five-year term. The total contract value for the new NYCDOT contract is $998 million. The terms of the new contract are materially different than our prior contract with NYCDOT, including service level agreements, service credits, liquidated damages, cybersecurity, and subcontracting requirements. See also “ Our Commercial Services and Government Solutions segments have several large customers, including NYCDOT, that account for a significant portion of our revenue, and a reduction in demand, materially different terms or pricing in new or amended agreements, or loss of one or more of such customers could have a material adverse effect on our business. ” in Item 1A, “Risk Factors.”
Refinancing
On October 17, 2025, (i) certain of our direct and indirect wholly owned subsidiaries, including VM Consolidated, Inc. (“ VM Consolidated ”), entered into an Amended and Restated Revolving Credit Agreement (the “ Amended and Restated Revolving Credit Agreement ”) which provides for a $150 million senior secured asset-based revolving credit facility with a $35 million sublimit for the issuance of letters of credit, and matures on October 17, 2030 (subject to an earlier maturity date in certain circumstances) (the “ Amended Revolver ”), and (ii) VM Consolidated and certain of our subsidiaries entered into the Amendment and Restatement Agreement No. 2 to the Amended and Restated First Lien Term Loan Credit Agreement dated as of March 26, 2021 (such agreement amended and restated, the “ Amended and Restated Term Loan Agreement ”), to refinance the existing senior secured term loans in an aggregate outstanding principal amount of approximately $688.8 million with a new senior secured term loan of the same principal amount maturing on October 15, 2032 (the “ Amended Term Loan ”). Refer to Note 8, Long-term Debt , in Item 8, Financial Statements and Supplementary Data , for additional information on the refinancing.
Share Repurchase Program
In May 2025, 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. On October 23, 2025, our Board of Directors authorized the repurchase of up to an additional $150.0 million of our outstanding shares of Class A Common Stock under the existing May 2025 program, providing us with $250.0 million available for repurchases. Under the repurchase program, we may purchase shares of Class A Common Stock until November 13, 2026 through open market purchases, in privately negotiated transactions or by other means, including trading plans intended to qualify under Rule 10b5-1 of the Exchange Act, and ASR agreements, each as permitted under applicable rules and regulations. The amount and timing of repurchases will be determined at our discretion and will depend on a variety of factors, including price, general business and market conditions, applicable legal requirements, and alternative investment opportunities. The repurchase program does not obligate us to acquire any particular amount of Class A Common Stock or at any specific time intervals and may be modified, suspended, or terminated at any time at our discretion.
During the fourth quarter of fiscal year 2025, we paid $133.4 million to repurchase 6,028,853 shares of our Class A Common Stock through open market transactions, which shares we subsequently retired. Refer to Note 12, Stockholders’ Equity , in Item 8, Financial Statements and Supplementary Data , for additional information on our share repurchases. As of December 31, 2025, $116.6 million remained available under our share repurchase authorization.
Key Factors Affecting Our Results of Operations
We believe that our performance and future success depend on a number of factors that present opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Annual Report entitled “Risk Factors.”
Macroeconomic Conditions
Our business is susceptible to a number of industry-specific and global macroeconomic factors that may cause our actual results of operations to differ from our historical results of operations or current expectations. The factors and trends that we currently believe are or will be most impactful to our results of operations and financial condition include the following: the inflationary impact on items such as wages and travel-related costs, future travel demand, legislation or regulation regarding the adoption, expansion, or prohibition of automated enforcement and traffic safety technology by local, state, or national governments, and the impact of government regulations and actions, including tariffs, trade protection measures, or a government shutdown. We continue to monitor the potential favorable or unfavorable impacts of these and other factors on our business, financial condition, and results of operations.
Travel Demand
Our Commercial Services segment is largely impacted by its customer demand which in turn is impacted by a variety of factors including seasonality, demand for business and leisure travel, reductions in the level of air travel, higher airfare costs, increases in energy prices, general international, national, and local economic conditions and cycles, and consumer confidence, as well as other factors affecting travel levels, such as military conflicts, terrorist incidents, natural disasters, epidemic diseases, or a government shutdown.
We monitor the U.S. Transportation and Security Administration (the “ TSA ”) passenger volume (“ TSA Passenger Volume ”) as one of several measures for Commercial Services revenue growth. TSA Passenger Volume measures the number of passengers screened by the TSA at United States airports, which correlates to the number of vehicles rented by travelers and toll road usage. TSA Passenger Volume increased by less than 1% in fiscal year 2025 compared to fiscal year 2024.
Electronic Tolling Penetration
Our Commercial Services segment, which offers automated toll and violations management solutions to fleet customers, is impacted by the number of toll roads in the United States and Europe and the geographic concentration of such roads.
We monitor the expansion and penetration of toll roadways across the United States and Europe, and the percentage of toll roads that rely on cashless or all-electronic infrastructure. In fiscal year 2025, nine toll facilities were added in the United States, representing over 100 miles of toll roads.
Enabling Legislation
Our Government Solutions segment is positively impacted, in significant part, by enabling legislation that permits photo enforcement programs at the federal, state, and local level in the United States. Accordingly, we depend on national, state, and local governments authorizing the use of automated photo enforcement and not otherwise materially restricting its use.
Primary Components of Our Operating Results
Revenues
Service Revenue. Our Commercial Services segment generates service revenue primarily through the operation and management of tolling programs and processing violations for RACs, FMCs, and other large fleet customers. 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. The cost of certain tolls, violations, and our customers’ share of administration fees are netted against revenue. We also generate service revenue in our Commercial Services segment through processing titles and registrations.
Our Government Solutions segment generates service revenue through the operation and maintenance of photo enforcement systems and certain distinct hardware installation and relocation activities. Revenue drivers in this segment include the number of systems installed and the monthly revenue per system. Ancillary service revenue is generated in our Government Solutions segment from payment processing, pass-through fees for collection expense, and other fees.
Our Parking Solutions segment generates service revenue mainly from offering SaaS, 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 and certain highly interdependent and interrelated installation services in the Government Solutions segment and specialized hardware in the Parking Solutions segment. 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, certain distinct hardware installation and relocation costs, collection and other third-party costs in our segments.
Cost of Product Sales. Cost of product sales consists of the cost to acquire photo enforcement equipment purchased by Government Solutions customers, costs of certain highly interdependent and interrelated installation services, 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.
Selling, General and Administrative Expenses . Selling, general and administrative expenses include payroll and payroll-related costs (including stock-based compensation), real estate lease expense, insurance costs, professional services fees and general corporate expenses.
Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net . Depreciation, amortization and (gain) loss on disposal of assets, net includes depreciation on property, plant and equipment, and amortization of definite-lived intangible assets. This line item also includes any one-time gains or losses incurred in connection with the disposal of certain assets.
Goodwill Impairment. This relates to impairment loss recognized on goodwill from past acquisitions.
Interest Expense, Net . This includes interest expense and amortization of deferred financing costs and discounts and is net of interest income.
Tax Receivable Agreement Liability Adjustment . This consists of adjustments made to our tax receivable agreement liability due to changes in estimates.
Loss on Interest Rate Swap. Loss on interest rate swap related 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 receipts or payments.
Loss on Extinguishment of Debt. Loss on extinguishment of debt consisted of the write-off of pre-existing original issue discounts and deferred financing costs associated with debt extinguishment.
Other Income, Net . Other income, net primarily consists of volume rebates earned from total spend on credit card transactions, gains or losses on foreign currency transactions and other non-operating expenses.
Results of Operations
Fiscal Year 2025 Compared to Fiscal Year 2024
The following table sets forth our statements of operations data and expresses each item as a percentage of total revenue for the periods presented as well as the changes between periods. The tables and information provided in this section were derived from exact numbers and may have immaterial rounding differences.
Year Ended December 31,
Percentage of Revenue
Increase (Decrease)
($ in thousands)
Service revenue
Product sales
Total revenue
Cost of service revenue, excluding depreciation and amortization
Cost of product sales
Operating expenses
Selling, general and administrative expenses
Depreciation, amortization and (gain) loss on disposal of assets, net
Goodwill impairment
Total costs and expenses
Income from operations
Interest expense, net
Tax receivable agreement liability adjustment
Loss on interest rate swap
Loss on extinguishment of debt
Other income, net
Total other expenses
Income before income taxes
Income tax provision
Net income
Service Revenue . Service revenue increased by $76.5 million, or 9.1%, to $918.1 million for fiscal year 2025 from $841.7 million in fiscal year 2024, representing 93.8% and 95.7% of total revenue, respectively. The following table depicts service revenue by segment:
Year Ended December 31,
Percentage of Revenue
Increase (Decrease)
($ in thousands)
Service revenue
Commercial Services
Government Solutions
Parking Solutions
Total service revenue
Commercial Services service revenue increased by $28.1 million, or 6.9%, from $407.7 million in fiscal year 2024 to $435.8 million in fiscal year 2025. This increase was primarily due to increased product adoption and tolling activity compared to the prior year. These factors contributed to a $22.5 million growth in RAC tolling revenue and the remaining increase was driven mainly by an increase of $4.9 million from European operations during the year ended December 31, 2025, compared to the prior year.
Government Solutions service revenue increased by $47.7 million, or 13.0%, from $367.9 million in fiscal year 2024 to $415.6 million in fiscal year 2025. The increase was primarily driven by $24.4 million from installation service revenue driven by the NYCDOT red-light expansion program, $14.2 million from the expansion of city bus lane and school bus stop arm enforcement programs, and the remaining increase was mainly from speed and red-light enforcement and international SaaS programs.
Parking Solutions service revenue increased by $0.6 million to $66.7 million in fiscal year 2025 compared to $66.1 million in fiscal year 2024. The increased revenue was primarily driven by SaaS product offerings and professional services, partially offset by a decrease in subscription services related to parking management solutions.
Product Sales. Product sales increased $23.4 million year-over-year and were $60.9 million and $37.5 million for fiscal years 2025 and 2024, respectively. The increase was primarily due to a $22.1 million increase in product sales in the Government Solutions segment driven by red-light camera sales to NYCDOT and international product sales. Customer buying patterns vary greatly from period to period related to product sales.
Cost of Service Revenue, Excluding Depreciation and Amortization. Cost of service revenue, excluding depreciation and amortization increased from $19.0 million for fiscal year 2024 to $30.3 million for fiscal year 2025, mainly due to NYCDOT installation service costs and increased recurring service costs.
Cost of Product Sales. Cost of product sales increased by approximately $18.5 million from $27.1 million in fiscal year 2024 to $45.5 million in fiscal year 2025, which was in line with the increase in product sales discussed above.
Operating Expenses. Operating expenses increased by $37.3 million, or 12.6%, from $295.9 million for fiscal year 2024 to $333.2 million in fiscal year 2025. The increase in 2025 was primarily in the Government Solutions segment of approximately $32.1 million which was primarily driven by increases in wages and subcontractor and operational equipment costs, partially offset by a decrease in wage expense in the Parking Solutions segment. Operating expenses as a percentage of total revenue increased from 33.7% to 34.0% in fiscal years 2024 and 2025, respectively. The following table presents operating expenses by segment:
Year Ended December 31,
Percentage of Revenue
Increase (Decrease)
($ in thousands)
Operating expenses
Commercial Services
Government Solutions
Parking Solutions
Operating expenses by segment
Other expenses
Total operating expenses
Selling, General and Administrative Expenses . Selling, general and administrative expenses increased by $20.2 million to approximately $215.3 million for fiscal year 2025 compared to $195.1 million for fiscal year 2024. The increase was primarily due to a $10.0 million increase in credit loss expense, $6.7 million in restructuring and transaction expenses, $5.8 million in increased professional services fees, $3.0 million in increased information technology and research and development expenses, and $2.8 million in increased wage expense, partially offset by a decrease in legal expenses compared to the same period in 2024. Selling, general and administrative expenses as a percentage of total revenue decreased from 22.2% to 22.0% in fiscal years 2024 and 2025, respectively. The following table presents selling, general and administrative expenses by segment:
Year Ended December 31,
Percentage of Revenue
Increase (Decrease)
($ in thousands)
Selling, general and administrative expenses
Commercial Services
Government Solutions
Parking Solutions
Selling, general and administrative expenses by segment
Other expenses
Total selling, general and administrative expenses
Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net, increased by $7.2 million to $116.3 million for fiscal year 2025 from $109.1 million for fiscal year 2024. This was primarily due to an increase in depreciation expense related to equipment and software in the 2025 period compared to the 2024 period.
Goodwill Impairment . We recorded an impairment loss of $97.1 million in fiscal year 2024 as a result of our 2024 assessment of goodwill impairment in our Parking Solutions segment. See Note 2, Significant Accounting Policies, in Item 8, Financial Statements and Supplementary Data , of this Annual Report for additional information.
Interest Expense, Net. Interest expense, net, decreased by $9.3 million from $73.9 million in fiscal year 2024 to $64.6 million in fiscal year 2025. This decrease is primarily attributable to a 50 basis-point reduction in the interest rate from refinancing our 2021 Term Loan in October 2024 and a 25 basis-point reduction from refinancing our 2021 Term Loan in October 2025 coupled with decreasing Secured Overnight Financing Rate (“ SOFR ”) rates. See “ Liquidity and Capital Resources ” below.
Tax Receivable Agreement Liability Adjustment . We recorded a loss of approximately $0.7 million in fiscal year 2025 as a result of higher estimated state tax rates due to changes in apportionment. We recorded a gain of approximately $0.3 million in fiscal year 2024 as a result of lower estimated state tax rates due to changes in apportionment.
Loss on Interest Rate Swap . We recorded a $0.5 million loss in fiscal year 2024 of which $1.3 million was associated with the derivative instrument re-measured to fair value at the end of the reporting period offset by $(0.8) million related to the monthly cash proceeds. We exercised our option to cancel the interest rate swap agreement effective as of the end of the third quarter of 2024.
Loss on Extinguishment of Debt . We recorded a $1.3 million loss on extinguishment of debt for fiscal year 2025 related to the write-off of pre-existing deferred financing costs and discounts in connection with the October 2025 refinancing of the 2021 Term Loan. We recorded a $1.7 million loss on extinguishment of debt for fiscal year 2024 related to the write-off of pre-existing deferred financing costs and discounts in connection with the February and October 2024 refinancings of the 2021 Term Loan.
Other Income, Net. Other income, net was $23.2 million in fiscal year 2025 compared to $19.0 million in fiscal year 2024. The increase of approximately $4.2 million was primarily attributable to increases
in volume rebates earned from total spend on credit card transactions due to increased tolling and travel activity as well as favorable impacts from fluctuations in foreign currency rates in the 2025 period.
Income Tax Provision. Income tax provision was $58.3 million, representing an effective tax rate of 29.9% for fiscal year 2025 compared to $47.7 million, representing an effective tax rate of 60.2% for fiscal year 2024. Our effective tax rate for 2025 was lower compared to 2024 primarily due to the impact of permanent differences related to the impairment adjustments in the Parking Solutions segment.
Net Income. We had net income of $136.6 million for fiscal year 2025 compared to a net income of $31.4 million for fiscal year 2024. The $105.2 million increase in net income was primarily due to the goodwill impairment recorded in fiscal year 2024 and the other statement of operations activity discussed above.
Liquidity and Capital Resources
Our principal sources of liquidity are cash flows from operations and the available borrowing under our Amended Revolver.
We believe that our existing cash and cash equivalents, cash flows provided by operating activities, and our ability to borrow under our Amended Revolver will be sufficient to meet operating cash requirements, service debt obligations and fund potential share repurchases for at least the next 12 months and thereafter for the foreseeable future. Our ability to generate sufficient cash from our operating activities depends on our future performance, which is subject to general economic, political, financial, competitive and other factors beyond our control. In addition, our future capital expenditures and other cash requirements could be higher than currently expected due to various factors, including any expansion of our business or strategic acquisitions.
We have incurred significant long-term debt as a result of acquisitions completed in prior years. Should we pursue strategic acquisitions, we may need to raise additional capital, which may be in the form of additional long-term debt, borrowings on our Amended Revolver, or equity financings, all of which may not be available to us on favorable terms or at all. We have the ability to borrow under our Amended Revolver to meet expected obligations as they come due.
We originally entered into the Revolver (defined below) in March 2018 and increased the borrowing capacity thereunder to $125.0 million in May 2025 pursuant to an amendment thereto. On October 17, 2025, we amended and restated the Revolver and entered into the Amended and Restated Revolving Credit Agreement which increased the existing commitment from $125.0 million to $150.0 million and extended the maturity date to October 17, 2030. As of December 31, 2025, we had no outstanding borrowings and $146.3 million available for borrowing, net of letters of credit, under our Amended Revolver. Our cash on hand was $65.3 million as of December 31, 2025.
In fiscal year 2024, we refinanced the 2021 Term Loan which reduced the interest rate by an aggregate 1.00% and eliminated the applicable credit spread adjustment. On October 17, 2025, we refinanced the existing senior secured term loans under the 2021 Term Loan in an aggregate outstanding principal amount of approximately $688.8 million with a new senior secured term loan of the same principal amount maturing on October 15, 2032 and reduced the interest rate by 0.25%. We made early repayments of approximately $8.5 million on our Amended Term Loan during the year ended December 31, 2025, and as a result, the total principal outstanding on the Amended Term Loan was $687.1 million as of December 31, 2025.
At December 31, 2025, the tax receivable agreement liability was approximately $43.7 million. During fiscal year 2025, we made payments totaling approximately $5.2 million related to the 2024 tax year. We expect to make payments of approximately $5.3 million per year for the next seven years and approximately $1.1 million in the final year.
Share Repurchases and Retirement
In October 2023, our Board of Directors authorized a share repurchase program for up to an aggregate amount of $100.0 million of our outstanding shares of Class A Common Stock over an 18-month period. After we repurchased an aggregate 3.5 million shares for approximately $87.3 million in fiscal year 2024, in December 2024, our Board of Directors authorized the repurchase of up to an additional $100.0 million of our outstanding shares of Class A Common Stock under the then-existing program, providing us with approximately $112.7 million available for repurchases. On December 11, 2024, we entered into an ASR agreement with a third-party financial institution and paid $112.7 million to receive an initial delivery of 3,821,958 shares of our Class A Common Stock. The final settlement occurred on March 3, 2025, at which time, we received an additional 685,934 shares calculated using a volume-weighted average price over the term of the ASR agreement. All repurchased shares were subsequently retired. The authorization under this repurchase program ended on April 30, 2025.
During the year ended December 31, 2025, we paid approximately $1.7 million for excise taxes related to 2024 net share repurchases.
In May 2025, our Board of Directors authorized a new share repurchase program for up to an aggregate amount of $100.0 million of our outstanding shares of Class A Common Stock. On October 23, 2025, our Board of Directors authorized a $150.0 million increase to the size of the share repurchase program, authorizing share repurchases up to an aggregate $250.0 million. Under the repurchase program, we may purchase shares of Class A Common Stock until November 13, 2026 through open market purchases, in privately negotiated transactions, or by other means, including trading plans intended to qualify under Rule 10b5-1 of the Exchange Act, and ASR agreements, each as permitted under applicable rules and regulations. The amount and timing of repurchases will be determined at our discretion and will depend on a variety of factors, including price, general business and market conditions, applicable legal requirements, and alternative investment opportunities. The repurchase program does not obligate us to acquire any particular amount of Class A Common Stock or at any specific time intervals and may be modified, suspended, or terminated at any time at our discretion. During the fourth quarter of fiscal year 2025, we paid $133.4 million to repurchase 6,028,853 shares of our Class A Common Stock through open market transactions, which shares we subsequently retired. In addition, we recorded approximately $1.3 million within accrued liabilities related to the excise taxes payable on net share repurchases on the consolidated balance sheets as of December 31, 2025.
The following table sets forth certain captions on our statements of cash flows for the respective periods:
For the Year Ended December 31,
($ in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Cash Flows from Operating Activities
Cash provided by operating activities increased by $32.2 million, from $223.6 million in fiscal year 2024 to $255.8 million in fiscal year 2025. Net income increased $105.2 million from $31.4 million in fiscal year 2024 compared to $136.6 million in fiscal year 2025. The aggregate adjustments to reconcile net income to net cash provided by operating activities decreased by $44.8 million mainly due to the goodwill impairment recorded in the prior year, partially offset by an increase in deferred income taxes, credit loss expense, impairment of long-lived assets and depreciation expense. The aggregate changes in operating assets and liabilities decreased by $28.2 million in fiscal year 2025 primarily due to an increase in the net use of working capital, of which, the majority was attributable to increases in accounts receivable and prepaid assets partially offset by a large payment that reduced accounts payable in the first half of fiscal year 2024.
Cash Flows from Investing Activities
Cash used in investing activities was $118.8 million and $69.7 million for fiscal years 2025 and 2024, respectively. The increase in cash used was primarily driven by a $48.2 million increase for purchases of installation and service parts and property and equipment mainly for the Government Solutions segment compared to the same period in the prior year.
Cash Flows from Financing Activities
Cash used in financing activities was $151.0 million and $211.4 million for fiscal years 2025 and 2024, respectively. The decreased use in cash from financing activities was mainly due to a $66.5 million decrease in share repurchases in fiscal year 2025 compared to fiscal year 2024.
Long-term Debt
2021 Term Loan and Amended 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. The 2021 Term Loan had an aggregate borrowing of $900.0 million, maturing on March 24, 2028. In connection with the 2021 Term Loan borrowings, we had $4.6 million of offering discount costs and $4.5 million in deferred financing costs, both of which were capitalized and are being amortized over the remaining life of the 2021 Term Loan.
In October 2025, VM Consolidated and certain of our subsidiaries entered into the Amended and Restated Term Loan Agreement, to refinance the existing senior secured term loans in an aggregate outstanding principal amount of approximately $688.8 million with a new senior secured term loan of the same principal amount maturing on October 15, 2032. The proceeds from the Amended Term Loan were used in their entirety to prepay in full the outstanding principal amount of the existing term loan under the 2021 Term Loan agreement.
The Amended Term Loan bears interest at a per annum rate equal to SOFR plus an applicable margin of 2.00%, or a base rate plus an applicable margin of 1.00%. As of December 31, 2025, the interest rate on the Amended Term Loan was 5.7%. The Amended Term Loan amortizes in equal quarterly installments in aggregate amounts equal to 1.00% of the original principal amount of the Amended Term Loan beginning March 31, 2026, with the balance payable at maturity, is subject to mandatory prepayment provisions upon the occurrence of certain specified events, and is repayable at any time at the borrowers’ election, provided that repayment of the Amended Term Loan with proceeds of certain indebtedness prior to the six-month anniversary of October 17, 2025 will require a prepayment premium of 1.00% of the aggregate principal amount of such prepayment. We evaluated the refinancing transactions on a lender-by-lender basis and accounted accordingly for debt extinguishment and debt modification costs (for the portion of the transactions that did not meet the accounting criteria for debt extinguishment).
During fiscal years 2025 and 2024, we made early repayments of $8.5 million and $9.0 million, respectively, on the Amended Term Loan and the 2021 Term Loan, as applicable, and as a result, the total principal outstanding was $687.1 million as of December 31, 2025.
We recorded $1.3 million of loss on extinguishment of debt during the fiscal year ended December 31, 2025, primarily related to the write-off of pre-existing deferred financing costs and discounts in connection with the refinancing discussed above and issuance of the Amended Term Loan. We recognized a loss on extinguishment of debt of $1.7 million for the fiscal year ended December 31, 2024, related to the write-off of pre-existing deferred financing costs and discounts in connection with the 2024 refinancing transactions.
In addition, the Amended Term Loan requires mandatory prepayments equal to the product of the excess cash flows of the Company (as defined in the Amended and Restated Term Loan agreement) and the applicable prepayment percentages (calculated as of the last day of the fiscal year), as set forth in the following table:
Consolidated First Lien Net Leverage Ratio (As Defined in the Amended and Restated Term Loan Agreement)
Applicable
Prepayment
Percentage
< 3.70:1.00 and > 3.20:1.00
We did not have mandatory prepayments of excess cash flows for the fiscal years ended December 31, 2025 or 2024.
Senior Notes
In March 2021, VM Consolidated issued an aggregate principal amount of $350.0 million in Senior Unsecured Notes (the “ Senior Notes ”), due on April 15, 2029. In connection with the issuance of the Senior Notes, we incurred $5.7 million in lender and third-party costs, which were capitalized as deferred financing costs and are being amortized over the remaining life of the Senior Notes.
Interest on the Senior Notes is fixed at 5.50% per annum and is payable on April 15 and October 15 of each year. We may redeem all or a portion of the Senior Notes at a redemption price of 101.375% plus accrued and unpaid interest through April 2026 and at face value plus accrued and unpaid interest thereafter.
The Revolver
We entered into a Revolving Credit Agreement in March 2018 (the “ Revolve r”) with a commitment of up to $75.0 million available for loans and letters of credit, which commitment was increased to $125.0 million in May 2025 pursuant to an amendment thereto. On October 17, 2025, certain of our direct and indirect wholly owned subsidiaries, including VM Consolidated, entered into the Amended and Restated Revolving Credit Agreement to amend and restate the Revolver. The Amended and Restated Revolving Credit Agreement provides for a $150.0 million senior secured asset-based revolving credit facility with a $35.0 million sublimit for the issuance of letters of credit, and matures on October 17, 2030 (subject to an earlier maturity date in certain circumstances).
Outstanding borrowings under the Amended Revolver accrue interest at per annum rate equal to SOFR plus a margin ranging from 1.25% to 1.75% or a base rate plus a margin ranging from 0.25% to 0.75%, in each case, depending on the quarterly average undrawn availability under the Amended Revolver in the prior quarter. The Amended and Restated Revolving Credit Agreement also provides for the option, subject to receiving additional commitments from lenders and the satisfaction of certain conditions, to increase the loan commitments under the Amended Revolver by up to an amount equal to the greater of (x) $75.0 million and (y) the amount by which the borrowing base exceeds the aggregate commitments at such time. There were no outstanding borrowings on the Amended Revolver as of December 31, 2025 or the Revolver as of December 31, 2024. The availability to borrow was $146.3 million, net of $3.7 million of outstanding letters of credit at December 31, 2025.
A commitment fee on the unused portion of the Amended Revolver is payable quarterly at (x) 0.375%, when quarterly average usage was less than 50% of the loan commitments in the prior quarter or (y) 0.250%, when quarterly average usage of the Amended Revolver was greater than or equal to 50% of the loan commitments in the prior quarter. We are also required to pay participation and fronting fees at 1.38% on $3.7 million of outstanding letters of credit as of December 31, 2025.
All borrowings and other extensions of credits under the Amended Term Loan, Senior Notes and the Amended Revolver are subject to the satisfaction of customary conditions and restrictive covenants including absence of defaults and accuracy in material respects of representations and warranties. Substantially all of our assets are pledged as collateral under the Amended Term Loan and the Amended Revolver. At December 31, 2025, we were compliant with all debt covenants in our debt agreements.
Interest Expense, Net
We recorded interest expense, including amortization of deferred financing costs and discounts, of $64.6 million and $73.9 million for the fiscal years ended December 31, 2025 and 2024, respectively.
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. Management believes that its estimates and assumptions are reasonable in the circumstances; however, actual results could differ materially from those estimates.
Our significant accounting policies are described in Note 2, Significant Accounting Policies, in Item 8, Financial Statements and Supplementary Data , of this Annual Report. 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. 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. 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. In most instances, we have determined these performance obligations qualify as distinct performance obligations, as the customer can benefit from the service on its own or together with other resources that are readily available to the customer, and our promise to transfer the service is separately identifiable from other promises in the contract. 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.
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 estimates as of the balance sheet date, which includes adjustments for current and future expectations. We identify pools of receivables based on the type of business, industry in which the customer operates, and historical credit loss patterns. We use collection assumptions (typically at the customer level) to estimate expected credit losses. Receivables are written off against the allowance for credit losses when it is probable that amounts will not be collected based on the terms of the customer contracts, and subsequent recoveries reverse the previous write-off and apply to the receivable in the period recovered. No interest or late fees are charged on delinquent accounts. We periodically evaluate the adequacy of our allowance for expected credit losses and adjust appropriately.
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. We first consider the option to assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. 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. An impairment loss is recognized for the amount by which the reporting units’ carrying value exceeds its fair value, up to the total amount of goodwill allocated to the reporting unit. No impairment is recognized if the fair value of the reporting unit exceeds its carrying value.
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. 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 DCF Method is based on projected future cash flows and terminal value estimates discounted to their present values using a market-participant weighted average cost of capital. Significant estimates and assumptions used in the DCF Method include forecasts of future revenue growth rates, EBITDA margin percentages, terminal growth rates, and discount rates. 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. The market approach utilizes a blend of revenue and EBITDA multiples from guideline public companies which are comparable to us in size, profitability and other factors to estimate the fair value of the reporting units. Significant estimates and assumptions used in the market approach include the selection of guideline public companies, revenue and EBITDA projections, the selection of revenue and EBITDA multiples, and the application of a control premium. Our estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain, and actual results may differ from those assumed in our analysis. The determination of whether goodwill is impaired involves a significant level of judgment in these assumptions, and changes in our forecasts, business strategy, government regulations, or economic or market conditions could significantly impact these judgments, potentially decreasing the fair value of one or more reporting units. Any resulting impairment charges could have a material impact on our results of operations.
In connection with our annual impairment assessment for fiscal year 2025, we determined it was more likely than not that the fair values of our reporting units were in excess of their carrying value for our Commercial Services, Government Solutions North America, Government Solutions International, and Parking Solutions reporting units based on qualitative factors. In connection with our annual impairment assessment for fiscal year 2024, we performed a quantitative impairment test for our Parking Solutions reporting unit as of October 1, 2024 and we concluded an impairment to goodwill was necessary because the reporting unit’s carrying value exceeded the estimated fair value. We recorded a $97.1 million impairment of goodwill in our Parking Solutions segment during fiscal year 2024, which is presented in the goodwill impairment line item on the consolidated statements of operations.
We review our long-lived assets other than goodwill for impairment whenever events or circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. 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. Our estimates of cash flows are subjective judgments based on past experiences adjusted for trends and future expectations, and can be significantly impacted by changes in our business or economic conditions. The determination of an asset group’s fair value is also subject to significant judgment and utilizes valuation techniques including discounting estimated future cash flows and market-based analyses. If our estimates or underlying assumptions change in the future, our operating results may be materially impacted. During the year ended December 31, 2025, we recorded a $9.4 million impairment which included a $2.1 million write-down of installation and service parts that no longer had future use within the operating expenses line item in the Government Solutions segment, and a $6.3 million impairment to property and equipment, and a $1.0 million impairment to the customer relationship intangible asset within the selling, general and administrative expenses line item in the Government Solutions segment related to the Company’s exit from the province of Ontario, Canada. During the year ended December 31, 2024, we recorded a $0.2 million impairment related to the write-down of installation and service parts that no longer had future use within the operating expenses line item in our Government Solutions segment. During the year ended December 31, 2023, we recorded a $4.3 million impairment which included a $3.9 million write-down of installation and service parts that no longer had future use within the operating expenses line item in our Government Solutions segment, and a $0.4 million impairment of a Right of Use (“ ROU ”) asset within the selling, general and administrative expenses line item in our Parking Solutions segment.
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. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years, while deferred tax liabilities generally represent items that generate a future tax liability for items where deductions have been accelerated for tax purposes. 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. We calculate the valuation allowance in accordance with the authoritative guidance relating to income taxes, which requires an assessment of both positive and negative evidence regarding the realizability of these deferred tax assets when measuring the need for a valuation allowance. Significant judgment is required in determining any valuation allowance against deferred tax assets. 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. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Judgment is required to assess the future tax consequences of events that have been recognized in our financial statements or tax returns. Variation in the actual outcome of these future tax consequences could materially impact our financial statements.
Private Placement Warrant Liabilities
We accounted for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance. 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. 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. Our Public Warrants met the criteria for equity classification and, accordingly, were reported as a component of stockholders’ equity while our Private Placement Warrants did not meet the criteria for equity classification and were instead classified as a liability. 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. 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 .
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk
We are exposed to interest rate risk due to the variable interest rate on the Amended Term Loan described in “Item 7, 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 Amended Term Loan, which has an outstanding balance of $687.1 million at December 31, 2025. As of December 31, 2025, the interest rate on the Amended Term Loan was 5.7%.
Based on the December 31, 2025 balance outstanding, each 1% movement in interest rates will result in an approximately $6.9 million change in annual interest expense.
VERRA MOBILITY CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
