Item 2. 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 our Annual Report, and our financial statements and the related notes included in Part I, Item 1 “Financial Statements” of this Report. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Please refer to the section in this Report entitled “Cautionary Note Regarding Forward-Looking Statements.”
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.
In connection with the executive leadership and organizational realignment described under “Recent Events”, we are evaluating the effect of changes to our organizational structure and internal management reporting on the identification of our operating and reportable segments. We continue to report three operating and reportable segments for the periods presented. Depending on how the organizational and internal management reporting changes affect the financial information regularly reviewed by our chief operating decision maker, the Company's Interim Chief Executive Officer, into assessing performance and allocating resources, the evaluation could result in a change to our segment reporting in a future period, including reporting as a single operating and reportable segment. Any such change would be reflected beginning in the period in which the change becomes effective, with prior-period segment information recast as required.
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 $27.9 million, or 6.1%, from $459.3 million in the six months ended June 30, 2025 to $487.2 million in the same period in 2026. The increase was mainly due to installation revenue from the NYCDOT program, and expansion in speed, bus lane, school bus, red light and other services in the Government Solutions segment.
•Generated cash flows from operating activities of $97.2 million and $138.1 million for the six months ended June 30, 2026 and 2025, respectively. Our cash on hand was $49.6 million as of June 30, 2026.
Recent Events
Change in Executive Leadership and Organizational Realignment
On June 1, 2026, we announced that David Roberts had departed as our President and Chief Executive Officer and as a member of our Board of Directors. The Board appointed Jon Keyser, previously our Chief Transformation Officer and Executive Vice President and Chief Legal Officer, as Interim President and Chief Executive Officer and retained an executive search firm to assist with a comprehensive search for a permanent successor.
On June 17, 2026, we announced organizational changes intended to accelerate our transformation initiatives, strengthen customer focus and create a more agile and efficient operating model. These changes build upon a hybrid operating model that centralizes key functions, including Human Resources, Finance, Legal, Government Relations, Engineering and Product Management. Stacey Moser was appointed Chief Customer Officer with responsibility for sales, account management and marketing across our Commercial Services and Government Solutions businesses. We are evaluating the effect of these organizational and internal management reporting changes on our operating and reportable segments. See “Our Segments” above for additional information.
Commercial Services Customer Contracts
We announced that one of our three significant Commercial Services customers had issued a notice terminating its contract with us; that customer subsequently withdrew the notice and entered into a seven-year contract extension on terms materially less favorable to us than the prior agreement, including an option for the customer to modulate its fleet volume. A second significant Commercial Services customer entered into a five-year extension, with options to extend, also on materially less favorable terms than the prior agreement and with fleet volume modulation rights. Within the next twelve months, we expect to engage in contractual renewal discussions with a third significant Commercial Services customer.
Fluctuations in fleet volume under these arrangements could cause our revenue, results of operations, and cash flows to vary from period to period and could have a material adverse effect on our business, financial condition, and results of operations. Additionally, any failure to renew the third customer's agreement on favorable terms or at all or any future termination of such contracts could have a material adverse effect on our business, financial condition, and results of operations.
Goodwill and Intangible Impairment
We recorded a $64.0 million impairment to goodwill in our Parking Solutions segment during the six months ended June 30, 2026, which is presented in a separate line item on the condensed consolidated statements of operations. This was in connection with our 2026 assessment of goodwill impairment where the Parking Solutions reporting unit's carrying value exceeded the estimated fair value. As part of this assessment, we determined that the carrying value of certain intangibles within the Parking Solutions segment were not recoverable and recorded a $40.4 million impairment to intangibles in our Parking Solutions segment during the six months ended June 30, 2026, which is presented in a separate line item on the condensed consolidated statements of operations. Refer to Note 4, Goodwill and Intangible Assets, in Part I, Item 1, Financial Statements, for additional information.
Key Factors Affecting Our Results of Operations
We believe that our performance and future success depends on a number of factors that present opportunities for us but also pose risks and challenges, including those discussed below and in Part I, Item 1A. “Risk Factors” of our Annual Report and in Part II, Item 1A. “Risk Factors” of this Report.
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 Automatic License Plate Recognition, automated enforcement and traffic safety technology by local, state, or national governments, higher interest rates and the impact of government regulations and actions, including tariffs, trade protection measures, military conflicts 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 in the second quarter of 2026 was approximately 1% less than TSA Passenger Volume for the same period in 2025.
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.
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 software-as-a-service (“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.
Impairment of Intangible Assets. This relates to impairment loss recognized on intangibles.
Interest Expense, Net. This includes interest expense and amortization of deferred financing costs and discounts and is net of interest income.
Loss on Extinguishment of Debt. Loss on extinguishment of debt consists 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
Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025
The following table sets forth our statements of operations data and expresses each item as a percentage of total revenue for the periods presented as well as the changes between periods. The tables and information provided in this section were derived from exact numbers and may have immaterial rounding differences.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
Percentage of Revenue |
|
|
Increase (Decrease)
2026 vs 2025 |
|
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Service revenue |
|
$ |
246,710 |
|
|
$ |
223,477 |
|
|
|
93.6 |
% |
|
|
94.7 |
% |
|
$ |
23,233 |
|
|
|
10.4 |
% |
Product sales |
|
|
16,881 |
|
|
|
12,548 |
|
|
|
6.4 |
% |
|
|
5.3 |
% |
|
|
4,333 |
|
|
|
34.5 |
% |
Total revenue |
|
|
263,591 |
|
|
|
236,025 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
27,566 |
|
|
|
11.7 |
% |
Cost of service revenue, excluding depreciation and amortization |
|
|
14,210 |
|
|
|
4,629 |
|
|
|
5.4 |
% |
|
|
2.0 |
% |
|
|
9,581 |
|
|
|
207.0 |
% |
Cost of product sales |
|
|
14,035 |
|
|
|
8,946 |
|
|
|
5.3 |
% |
|
|
3.8 |
% |
|
|
5,089 |
|
|
|
56.9 |
% |
Operating expenses |
|
|
90,577 |
|
|
|
81,317 |
|
|
|
34.4 |
% |
|
|
34.5 |
% |
|
|
9,260 |
|
|
|
11.4 |
% |
Selling, general and administrative expenses |
|
|
43,990 |
|
|
|
48,466 |
|
|
|
16.7 |
% |
|
|
20.5 |
% |
|
|
(4,476 |
) |
|
|
(9.2 |
)% |
Depreciation, amortization and (gain) loss on disposal of assets, net |
|
|
29,167 |
|
|
|
29,473 |
|
|
|
11.1 |
% |
|
|
12.4 |
% |
|
|
(306 |
) |
|
|
(1.0 |
)% |
Goodwill impairment |
|
|
64,037 |
|
|
|
— |
|
|
|
24.3 |
% |
|
|
0.0 |
% |
|
|
64,037 |
|
|
|
100.0 |
% |
Impairment of intangible assets |
|
|
40,354 |
|
|
|
— |
|
|
|
15.2 |
% |
|
|
0.0 |
% |
|
|
40,354 |
|
|
|
100.0 |
% |
Total costs and expenses |
|
|
296,370 |
|
|
|
172,831 |
|
|
|
112.4 |
% |
|
|
73.2 |
% |
|
|
123,539 |
|
|
|
71.5 |
% |
(Loss) income from operations |
|
|
(32,779 |
) |
|
|
63,194 |
|
|
|
(12.4 |
)% |
|
|
26.8 |
% |
|
|
(95,973 |
) |
|
|
(151.9 |
)% |
Interest expense, net |
|
|
15,486 |
|
|
|
16,572 |
|
|
|
5.9 |
% |
|
|
7.0 |
% |
|
|
(1,086 |
) |
|
|
(6.6 |
)% |
Loss on extinguishment of debt |
|
|
— |
|
|
|
23 |
|
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
(23 |
) |
|
|
(100.0 |
)% |
Other income, net |
|
|
(6,040 |
) |
|
|
(6,003 |
) |
|
|
(2.3 |
)% |
|
|
(2.5 |
)% |
|
|
(37 |
) |
|
|
0.6 |
% |
Total other expenses |
|
|
9,446 |
|
|
|
10,592 |
|
|
|
3.6 |
% |
|
|
4.5 |
% |
|
|
(1,146 |
) |
|
|
(10.8 |
)% |
(Loss) income before income taxes |
|
|
(42,225 |
) |
|
|
52,602 |
|
|
|
(16.0 |
)% |
|
|
22.3 |
% |
|
|
(94,827 |
) |
|
|
(180.3 |
)% |
Income tax provision |
|
|
5,953 |
|
|
|
14,027 |
|
|
|
2.3 |
% |
|
|
6.0 |
% |
|
|
(8,074 |
) |
|
|
(57.6 |
)% |
Net (loss) income |
|
$ |
(48,178 |
) |
|
$ |
38,575 |
|
|
|
(18.3 |
)% |
|
|
16.3 |
% |
|
$ |
(86,753 |
) |
|
|
(224.9 |
)% |
Service Revenue. Service revenue increased by $23.2 million, or 10.4%, to $246.7 million for the three months ended June 30, 2026 from $223.5 million for the three months ended June 30, 2025, representing 93.6% and 94.7% of total revenue, respectively. The following table depicts service revenue by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
Percentage of Revenue |
|
|
Increase (Decrease)
2026 vs 2025 |
|
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Services |
|
$ |
115,061 |
|
|
$ |
109,050 |
|
|
|
43.7 |
% |
|
|
46.2 |
% |
|
$ |
6,011 |
|
|
|
5.5 |
% |
Government Solutions |
|
|
115,033 |
|
|
|
97,971 |
|
|
|
43.6 |
% |
|
|
41.5 |
% |
|
|
17,062 |
|
|
|
17.4 |
% |
Parking Solutions |
|
|
16,616 |
|
|
|
16,456 |
|
|
|
6.3 |
% |
|
|
7.0 |
% |
|
|
160 |
|
|
|
1.0 |
% |
Total service revenue |
|
$ |
246,710 |
|
|
$ |
223,477 |
|
|
|
93.6 |
% |
|
|
94.7 |
% |
|
$ |
23,233 |
|
|
|
10.4 |
% |
Commercial Services service revenue increased by $6.0 million, or 5.5%, from $109.1 million for the three months ended June 30, 2025 to $115.1 million for the three months ended June 30, 2026. The increase was primarily due to increased product adoption and tolling activity compared to the prior year which contributed to a $4.1 million growth in RAC tolling revenue, with the remainder primarily driven by higher violations processing compared to the same period in 2025.
Government Solutions service revenue increased by $17.1 million, or 17.4%, from $98.0 million for the three months ended June 30, 2025, to $115.0 million for the three months ended June 30, 2026. The increase was primarily driven by a $12.0 million increase in New York City revenues associated with new camera installations, net of pricing changes under the new contract. The remaining $5.1 million in growth is attributable to expansion in bus lane, speed and other services.
Parking Solutions service revenue increased to $16.6 million for the three months ended June 30, 2026, from $16.5 million for the three months ended June 30, 2025. The increased revenue was primarily driven by SaaS product offerings, partially offset by decreases in subscription services and professional services related to parking management solutions.
Product Sales. Product sales were $16.9 million and $12.5 million for the three months ended June 30, 2026 and 2025, respectively. The increase was entirely due to an increase in product sales in the Government Solutions segment. Customer buying patterns vary greatly from period to period related to product sales.
Cost of Service Revenue, Excluding Depreciation and Amortization. Cost of service revenue, excluding depreciation and amortization increased from $4.6 million for the three months ended June 30, 2025 to $14.2 million for the same period in 2026, mainly due to NYCDOT installation service costs and increased recurring service costs.
Cost of Product Sales. Cost of product sales increased by $5.1 million from $8.9 million in the three months ended June 30, 2025 to $14.0 million in the three months ended June 30, 2026, which was due to increased product sales primarily driven by the New York City expansion, partially offset by lower margin on product sales in the second quarter 2026 compared to the second quarter of 2025.
Operating Expenses. Operating expenses increased by $9.3 million, or 11.4%, from $81.3 million for the three months ended June 30, 2025 to $90.6 million for the three months ended June 30, 2026. The increase in 2026 compared to the prior year period was primarily in the Government Solutions segment of approximately $7.7 million driven by increases in subcontractor, information technology, rent and recurring services costs. Operating expenses as a percentage of total revenue decreased from 34.5% to 34.4% for the three months ended June 30, 2025 and 2026, respectively. The following table presents operating expenses by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
Percentage of Revenue |
|
|
Increase (Decrease)
2026 vs 2025 |
|
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Services |
|
$ |
24,015 |
|
|
$ |
23,501 |
|
|
|
9.1 |
% |
|
|
10.0 |
% |
|
$ |
514 |
|
|
|
2.2 |
% |
Government Solutions |
|
|
60,126 |
|
|
|
52,415 |
|
|
|
22.8 |
% |
|
|
22.2 |
% |
|
|
7,711 |
|
|
|
14.7 |
% |
Parking Solutions |
|
|
4,821 |
|
|
|
3,898 |
|
|
|
1.9 |
% |
|
|
1.7 |
% |
|
|
923 |
|
|
|
23.7 |
% |
Operating expenses by segment |
|
|
88,962 |
|
|
|
79,814 |
|
|
|
33.8 |
% |
|
|
33.9 |
% |
|
|
9,148 |
|
|
|
11.5 |
% |
Other expenses |
|
|
1,615 |
|
|
|
1,503 |
|
|
|
0.6 |
% |
|
|
0.6 |
% |
|
|
112 |
|
|
|
7.5 |
% |
Total operating expenses |
|
$ |
90,577 |
|
|
$ |
81,317 |
|
|
|
34.4 |
% |
|
|
34.5 |
% |
|
$ |
9,260 |
|
|
|
11.4 |
% |
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased to $44.0 million for the three months ended June 30, 2026 compared to $48.5 million for the same period in 2025. This was primarily due to a $7.2 million decrease in stock-based compensation and a $1.2 million decrease in credit loss expense partially offset by a $4.1 million increase in expenses related to organization restructuring and executive transition costs compared to the same period in the prior year. Selling, general and administrative expenses as a percentage of total revenue decreased from 20.5% to 16.7% for the three months ended June 30, 2025 and 2026, respectively. The following table presents selling, general and administrative expenses by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
Percentage of Revenue |
|
|
Increase (Decrease)
2026 vs 2025 |
|
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Services |
|
$ |
18,249 |
|
|
$ |
18,823 |
|
|
|
6.9 |
% |
|
|
8.0 |
% |
|
$ |
(574 |
) |
|
|
(3.0 |
)% |
Government Solutions |
|
|
16,782 |
|
|
|
17,660 |
|
|
|
6.4 |
% |
|
|
7.5 |
% |
|
|
(878 |
) |
|
|
(5.0 |
)% |
Parking Solutions |
|
|
6,059 |
|
|
|
6,500 |
|
|
|
2.3 |
% |
|
|
2.7 |
% |
|
|
(441 |
) |
|
|
(6.8 |
)% |
Selling, general and administrative expenses by segment |
|
|
41,090 |
|
|
|
42,983 |
|
|
|
15.6 |
% |
|
|
18.2 |
% |
|
|
(1,893 |
) |
|
|
(4.4 |
)% |
Other expenses |
|
|
2,900 |
|
|
|
5,483 |
|
|
|
1.1 |
% |
|
|
2.3 |
% |
|
|
(2,583 |
) |
|
|
(47.1 |
)% |
Total selling, general and administrative expenses |
|
$ |
43,990 |
|
|
$ |
48,466 |
|
|
|
16.7 |
% |
|
|
20.5 |
% |
|
$ |
(4,476 |
) |
|
|
(9.2 |
)% |
Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net, decreased slightly by $0.3 million to $29.2 million for the three months ended June 30, 2026 from $29.5 million for the same period in 2025.
Goodwill Impairment. We recorded an impairment loss of $64.0 million for the three months ended June 30, 2026, as a result of the May 2026 assessment of goodwill impairment in our Parking Solutions segment. See Note 4, Goodwill and Intangible Assets, for additional information.
Impairment of Intangible Assets. We recorded an impairment loss of $40.4 million for the three months ended June 30, 2026, as a result of the May 2026 interim impairment assessment of long-lived assets in our Parking Solutions segment. See Note 4, Goodwill and Intangible Assets, for additional information.
Interest Expense, Net. Interest expense, net decreased by approximately $1.1 million from $16.6 million for the three months ended June 30, 2025 to $15.5 million for the same period in 2026. This was primarily attributable to 25 basis-point reduction in the interest rate as a result of refinancing our 2021 Term Loan in October 2025 coupled with decreasing SOFR rates. See “Liquidity and Capital Resources” below.
Loss on Extinguishment of Debt. We recorded less than $0.1 million of loss on extinguishment of debt during the three months ended June 30, 2025 related to the write-off of pre-existing deferred financing costs and discounts in connection with the early repayment on the 2021 Term Loan.
Other Income, Net. Other income, net remained flat at $6.0 million for both the three months ended June 30, 2026 and 2025.
Income Tax Provision. Income tax provision was $6.0 million representing an effective tax rate of (14.1)% for the three months ended June 30, 2026 compared to a tax provision of $14.0 million, with an effective tax rate of 26.7% for the same period in 2025. The decrease in effective tax rate variance was primarily driven by the goodwill impairment recorded for the three months ended June 30, 2026, which is not deductible for tax purposes.
Net (Loss) Income. We had net loss of $(48.2) million for the three months ended June 30, 2026, as compared to a net income of $38.6 million for the three months ended June 30, 2025. The $86.8 million decrease was primarily due to impairment on goodwill and intangible assets recorded for the three months ended June 30, 2026 and an increase in operating expenses, partially offset by increased gross margin on product sales and installation services and a decrease in selling, general and administrative expenses and the other statement of operations activity discussed above.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
The following table sets forth our statements of operations data and expresses each item as a percentage of total revenue for the periods presented as well as the changes between periods. The tables and information provided in this section were derived from exact numbers and may have immaterial rounding differences.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
Percentage of Revenue |
|
|
Increase (Decrease)
2026 vs 2025 |
|
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Service revenue |
|
$ |
460,102 |
|
|
$ |
435,379 |
|
|
|
94.4 |
% |
|
|
94.8 |
% |
|
$ |
24,723 |
|
|
|
5.7 |
% |
Product sales |
|
|
27,057 |
|
|
|
23,900 |
|
|
|
5.6 |
% |
|
|
5.2 |
% |
|
|
3,157 |
|
|
|
13.2 |
% |
Total revenue |
|
|
487,159 |
|
|
|
459,279 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
27,880 |
|
|
|
6.1 |
% |
Cost of service revenue, excluding depreciation and amortization |
|
|
21,601 |
|
|
|
9,412 |
|
|
|
4.4 |
% |
|
|
2.0 |
% |
|
|
12,189 |
|
|
|
129.5 |
% |
Cost of product sales |
|
|
22,325 |
|
|
|
16,978 |
|
|
|
4.6 |
% |
|
|
3.7 |
% |
|
|
5,347 |
|
|
|
31.5 |
% |
Operating expenses |
|
|
176,520 |
|
|
|
155,056 |
|
|
|
36.2 |
% |
|
|
33.8 |
% |
|
|
21,464 |
|
|
|
13.8 |
% |
Selling, general and administrative expenses |
|
|
84,843 |
|
|
|
99,967 |
|
|
|
17.4 |
% |
|
|
21.8 |
% |
|
|
(15,124 |
) |
|
|
(15.1 |
)% |
Depreciation, amortization and (gain) loss on disposal of assets, net |
|
|
58,458 |
|
|
|
57,287 |
|
|
|
12.0 |
% |
|
|
12.5 |
% |
|
|
1,171 |
|
|
|
2.0 |
% |
Goodwill impairment |
|
|
64,037 |
|
|
|
— |
|
|
|
13.1 |
% |
|
|
0.0 |
% |
|
|
64,037 |
|
|
|
100.0 |
% |
Impairment of intangible assets |
|
|
40,354 |
|
|
|
— |
|
|
|
8.4 |
% |
|
|
0.0 |
% |
|
|
40,354 |
|
|
|
100.0 |
% |
Total costs and expenses |
|
|
468,138 |
|
|
|
338,700 |
|
|
|
96.1 |
% |
|
|
73.8 |
% |
|
|
129,438 |
|
|
|
38.2 |
% |
Income from operations |
|
|
19,021 |
|
|
|
120,579 |
|
|
|
3.9 |
% |
|
|
26.2 |
% |
|
|
(101,558 |
) |
|
|
(84.2 |
)% |
Interest expense, net |
|
|
30,893 |
|
|
|
33,208 |
|
|
|
6.3 |
% |
|
|
7.2 |
% |
|
|
(2,315 |
) |
|
|
(7.0 |
)% |
Loss on extinguishment of debt |
|
|
— |
|
|
|
48 |
|
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
(48 |
) |
|
|
(100.0 |
)% |
Other income, net |
|
|
(10,134 |
) |
|
|
(10,112 |
) |
|
|
(2.0 |
)% |
|
|
(2.2 |
)% |
|
|
(22 |
) |
|
|
0.2 |
% |
Total other expenses |
|
|
20,759 |
|
|
|
23,144 |
|
|
|
4.3 |
% |
|
|
5.0 |
% |
|
|
(2,385 |
) |
|
|
(10.3 |
)% |
(Loss) income before income taxes |
|
|
(1,738 |
) |
|
|
97,435 |
|
|
|
(0.4 |
)% |
|
|
21.2 |
% |
|
|
(99,173 |
) |
|
|
(101.8 |
)% |
Income tax provision |
|
|
19,696 |
|
|
|
26,521 |
|
|
|
4.0 |
% |
|
|
5.8 |
% |
|
|
(6,825 |
) |
|
|
(25.7 |
)% |
Net (loss) income |
|
$ |
(21,434 |
) |
|
$ |
70,914 |
|
|
|
(4.4 |
)% |
|
|
15.4 |
% |
|
$ |
(92,348 |
) |
|
|
(130.2 |
)% |
Service Revenue. Service revenue increased by $24.7 million, or 5.7%, to $460.1 million for the six months ended June 30, 2026 from $435.4 million for the six months ended June 30, 2025, representing 94.4% and 94.8% of total revenue, respectively. The following table depicts service revenue by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
Percentage of Revenue |
|
|
Increase (Decrease)
2026 vs 2025 |
|
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Services |
|
$ |
212,868 |
|
|
$ |
210,439 |
|
|
|
43.7 |
% |
|
|
45.8 |
% |
|
$ |
2,429 |
|
|
|
1.2 |
% |
Government Solutions |
|
|
213,123 |
|
|
|
191,953 |
|
|
|
43.7 |
% |
|
|
41.8 |
% |
|
|
21,170 |
|
|
|
11.0 |
% |
Parking Solutions |
|
|
34,111 |
|
|
|
32,987 |
|
|
|
7.0 |
% |
|
|
7.2 |
% |
|
|
1,124 |
|
|
|
3.4 |
% |
Total service revenue |
|
$ |
460,102 |
|
|
$ |
435,379 |
|
|
|
94.4 |
% |
|
|
94.8 |
% |
|
$ |
24,723 |
|
|
|
5.7 |
% |
Commercial Services service revenue increased by $2.4 million, or 1.2%, from $210.4 million for the six months ended June 30, 2025 to $212.9 million for the six months ended June 30, 2026. The increase was primarily due to increased product adoption and tolling activity compared to the prior year which contributed to a $4.6 million growth in RAC tolling revenue, partially offset by lower revenue generated from our FMC customers due to customer churn.
Government Solutions service revenue increased by $21.2 million, or 11.0%, from $192.0 million for the six months ended June 30, 2025, to $213.1 million for the six months ended June 30, 2026. The increase was primarily driven by $12.6 million in revenue from speed, bus lane, school bus, red light and other services. The remaining $8.6 million in growth comes from installation revenue on new camera installations for New York City net of price changes on the new contract.
Parking Solutions service revenue increased to $34.1 million for the six months ended June 30, 2026, from $33.0 million for the six months ended June 30, 2025. The increased revenue was primarily driven by SaaS product offerings and professional services, partially offset by a decrease in subscription services related to parking management solutions.
Product Sales. Product sales were $27.1 million and $23.9 million for the six months ended June 30, 2026 and 2025, respectively. Product sales increased by $3.2 million, which was due to a $3.8 million increase in product sales in the Government Solutions segment partially offset by a $0.6 million decrease in product sales in the Parking Solutions segment. Customer buying patterns vary greatly from period to period related to product sales.
Cost of Service Revenue, Excluding Depreciation and Amortization. Cost of service revenue, excluding depreciation and amortization increased from $9.4 million for the six months ended June 30, 2025 to $21.6 million for the same period in 2026, mainly due to NYCDOT installation service costs and increased recurring service costs.
Cost of Product Sales. Cost of product sales increased by $5.3 million from $17.0 million in the six months ended June 30, 2025 to $22.3 million in the six months ended June 30, 2026, which was due to increased product sales compared to the same period in 2025.
Operating Expenses. Operating expenses increased by $21.5 million, or 13.8%, from $155.1 million for the six months ended June 30, 2025 to $176.5 million for the six months ended June 30, 2026. The increase in 2026 compared to the prior year period was primarily in the Government Solutions segment for approximately $17.2 million driven by increases in subcontractor, information technology, rent, recurring services costs and wages, approximately $2.5 million in the Parking Solutions segment driven by wages, information technology and subcontractor costs and approximately $1.3 million in the Commercial Services segment driven by recurring services. Operating expenses as a percentage of total revenue increased from 33.8% to 36.2% for the six months ended June 30, 2025 and 2026, respectively. The following table presents operating expenses by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
Percentage of Revenue |
|
|
Increase (Decrease)
2026 vs 2025 |
|
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Services |
|
$ |
46,877 |
|
|
$ |
45,579 |
|
|
|
9.6 |
% |
|
|
9.9 |
% |
|
$ |
1,298 |
|
|
|
2.8 |
% |
Government Solutions |
|
|
116,614 |
|
|
|
99,376 |
|
|
|
23.9 |
% |
|
|
21.6 |
% |
|
|
17,238 |
|
|
|
17.3 |
% |
Parking Solutions |
|
|
9,963 |
|
|
|
7,500 |
|
|
|
2.1 |
% |
|
|
1.7 |
% |
|
|
2,463 |
|
|
|
32.8 |
% |
Operating expenses by segment |
|
|
173,454 |
|
|
|
152,455 |
|
|
|
35.6 |
% |
|
|
33.2 |
% |
|
|
20,999 |
|
|
|
13.8 |
% |
Other expenses |
|
|
3,066 |
|
|
|
2,601 |
|
|
|
0.6 |
% |
|
|
0.6 |
% |
|
|
465 |
|
|
|
17.9 |
% |
Total operating expenses |
|
$ |
176,520 |
|
|
$ |
155,056 |
|
|
|
36.2 |
% |
|
|
33.8 |
% |
|
$ |
21,464 |
|
|
|
13.8 |
% |
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased to $84.8 million for the six months ended June 30, 2026 compared to $100.0 million for the same period in 2025. This was primarily due to a $9.2 million decrease related to a legal settlement finalized in February 2026, a $7.1 million decrease in share-based compensation and a $6.6 million decrease in credit loss expense partially offset by an $8.3 million increase in expenses related to organization restructuring and executive transition costs compared to the same period in the prior year. Selling, general and administrative expenses as a percentage of total revenue decreased from 21.8% to 17.4% for the six months ended June 30, 2025 and 2026, respectively. The following table presents selling, general and administrative expenses by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
Percentage of Revenue |
|
|
Increase (Decrease)
2026 vs 2025 |
|
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Services |
|
$ |
35,372 |
|
|
$ |
38,405 |
|
|
|
7.3 |
% |
|
|
8.4 |
% |
|
$ |
(3,033 |
) |
|
|
(7.9 |
)% |
Government Solutions |
|
|
35,651 |
|
|
|
36,963 |
|
|
|
7.3 |
% |
|
|
8.0 |
% |
|
|
(1,312 |
) |
|
|
(3.5 |
)% |
Parking Solutions |
|
|
11,520 |
|
|
|
13,758 |
|
|
|
2.3 |
% |
|
|
3.0 |
% |
|
|
(2,238 |
) |
|
|
(16.3 |
)% |
Selling, general and administrative expenses by segment |
|
|
82,543 |
|
|
|
89,126 |
|
|
|
16.9 |
% |
|
|
19.4 |
% |
|
|
(6,583 |
) |
|
|
(7.4 |
)% |
Other expenses |
|
|
2,300 |
|
|
|
10,841 |
|
|
|
0.5 |
% |
|
|
2.4 |
% |
|
|
(8,541 |
) |
|
|
(78.8 |
)% |
Total selling, general and administrative expenses |
|
$ |
84,843 |
|
|
$ |
99,967 |
|
|
|
17.4 |
% |
|
|
21.8 |
% |
|
$ |
(15,124 |
) |
|
|
(15.1 |
)% |
Depreciation, Amortization and (Gain) Loss on Disposal of Assets, Net. Depreciation, amortization and (gain) loss on disposal of assets, net, increased by $1.2 million to $58.5 million for the six months ended June 30, 2026 from $57.3 million for the same period in 2025. This was primarily due to an increase in depreciation expense related to equipment, vehicles and internally developed software in the 2026 period compared to the 2025 period.
Interest Expense, Net. Interest expense, net decreased by approximately $2.3 million from $33.2 million for the six months ended June 30, 2025 to $30.9 million for the same period in 2026. This was primarily attributable to a 25 basis-point reduction in the interest rate as a result of refinancing our 2021 Term Loan in October 2025 coupled with decreasing SOFR rates. See “Liquidity and Capital Resources” below.
Goodwill Impairment. We recorded an impairment loss of $64.0 million for the six months ended June 30, 2026, as a result of the May 2026 interim impairment assessment of goodwill in our Parking Solutions segment. See Note 4, Goodwill and Intangible Assets, for additional information.
Impairment of Intangible Assets. We recorded an impairment loss of $40.4 million for the six months ended June 30, 2026, as a result of the May 2026 assessment of long-lived assets in our Parking Solutions segment. See Note 4, Goodwill and Intangible Assets, for additional information.
Loss on Extinguishment of Debt. We recorded less than $0.1 million of loss on extinguishment of debt during the six months ended June 30, 2025 related to the write-off of pre-existing deferred financing costs and discounts in connection with the early repayment on the 2021 Term Loan.
Other Income, Net. Other income, net remained flat at $10.1 million for both the six months ended June 30, 2026 and 2025.
Income Tax Provision. Income tax provision was $19.7 million representing an effective tax rate of (1,133.5)% for the six months ended June 30, 2026 compared to a tax provision of $26.5 million, with an effective tax rate of 27.2% for the same period in 2025. The decrease in effective tax rate variance was primarily driven by the goodwill impairment recorded for the six months ended June 30, 2026, which is not deductible for tax purposes.
Net (Loss) Income. We had net loss of $(21.4) million for the six months ended June 30, 2026, as compared to a net income of $70.9 million for the six months ended June 30, 2025, primarily driven by the impairment of goodwill and intangible assets.
Liquidity and Capital Resources
Our principal sources of liquidity are cash flows from operations and the available borrowing under our Amended Revolver.
We believe that our existing cash and cash equivalents, cash flows provided by operating activities, and our ability to borrow under our Amended Revolver will be sufficient to meet operating cash requirements, service debt obligations and fund potential share repurchases for at least the next 12 months and thereafter for the foreseeable future. Our ability to generate sufficient cash from our operating activities depends on our future performance, which is subject to general economic, political, financial, competitive and other factors beyond our control. In addition, our future capital expenditures and other cash requirements could be higher than currently expected due to various factors, including any expansion of our business or strategic acquisitions.
We have incurred significant long-term debt as a result of acquisitions completed in prior years. Should we pursue strategic acquisitions, we may need to raise additional capital, which may be in the form of additional long-term debt, borrowings on our Amended Revolver, or equity financings, all of which may not be available to us on favorable terms or at all. We have the ability to borrow under our Amended Revolver to meet expected obligations as they come due.
We originally entered into the Revolver in March 2018 and increased the borrowing capacity thereunder to $125.0 million in May 2025 pursuant to an amendment thereto. In fiscal year 2025, we amended and restated the Revolver and entered into the Amended and Restated Revolving Credit Agreement which increased the existing commitment from $125.0 million to $150.0 million and extended the maturity date to October 17, 2030. As of June 30, 2026, we had no outstanding borrowings and $115.4 million available for borrowing, net of letters of credit, under our Amended Revolver. Our cash on hand was $49.6 million as of June 30, 2026.
In fiscal year 2025, we refinanced the existing senior secured term loans under the 2021 Term Loan in an aggregate outstanding principal amount of approximately $688.8 million with a new senior secured term loan of the same principal amount maturing on October 15, 2032 and reduced the interest rate by 0.25%. We made quarterly repayments totaling $3.4
million on our Amended Term Loan during the six months ended June 30, 2026, and as a result, the total principal outstanding on the Amended Term Loan was $683.6 million as of June 30, 2026.
At June 30, 2026, the tax receivable agreement liability was approximately $38.7 million. We expect to make payments of approximately $5.3 million per year for the next seven years and approximately $1.1 million in the final year.
Share Repurchases and Retirement
In October 2023, our Board of Directors authorized a share repurchase program for up to an aggregate amount of $100.0 million of our outstanding shares of Class A Common Stock over an 18-month period. After we repurchased an aggregate 3.5 million shares for approximately $87.3 million in fiscal year 2024, in December 2024, our Board of Directors authorized the repurchase of up to an additional $100.0 million of our outstanding shares under the then-existing program, providing us with approximately $112.7 million available for repurchases. In December 2024, we entered into an ASR agreement with a third-party financial institution and paid $112.7 million to receive an initial delivery of 3,821,958 shares of our Class A Common Stock. The final settlement occurred on March 3, 2025, at which time, we received an additional 685,934 shares of Class A Common Stock calculated using a volume-weighted average price over the term of the ASR agreement. All repurchased shares were subsequently retired. The prior repurchase authorization expired on April 30, 2025.
In May 2025, our Board of Directors authorized a new share repurchase program for up to an aggregate amount of $100.0 million of our outstanding shares of Class A Common Stock over an 18-month period. On October 23, 2025, our Board of Directors authorized the repurchase of up to an additional $150.0 million of our outstanding shares of Class A Common Stock under the existing May 2025 program, providing us with $250.0 million available for repurchases. During the fourth quarter of fiscal year 2025, we paid $133.4 million to repurchase 6,028,853 shares of our Class A Common Stock through open market transactions. All repurchased shares were subsequently retired.
During the six months ended June 30, 2026, we paid $50.2 million to repurchase 2,215,800 shares of our Class A Common Stock through open market transactions, which were subsequently retired. In addition, we recorded approximately $0.5 million within accrued liabilities on the condensed consolidated balance sheets as of June 30, 2026 for direct costs related to the excise tax payable on net share repurchases. During the six months ended June 30, 2026, we made approximately $1.4 million of excise tax payments. As of June 30, 2026, $66.3 million remains available under our authorized share repurchase program.
The following table sets forth certain captions indicated on our statements of cash flows for the respective periods:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
($ in thousands) |
|
2026 |
|
|
2025 |
|
Net cash provided by operating activities |
|
$ |
97,246 |
|
|
$ |
138,113 |
|
Net cash used in investing activities |
|
|
(54,837 |
) |
|
|
(56,019 |
) |
Net cash used in financing activities |
|
|
(57,987 |
) |
|
|
(10,920 |
) |
Cash Flows from Operating Activities
Cash provided by operating activities decreased by $40.9 million from $138.1 million for the six months ended June 30, 2025 to $97.2 million for the six months ended June 30, 2026. Net (loss) income year-over-year decreased by $92.3 million, from $70.9 million in 2025 to $(21.4) million in 2026. The aggregate adjustments to reconcile net (loss) income to net cash provided by operating activities increased $86.7 million mainly due to the impairment on goodwill and intangible assets recorded for the current period and the mark-to-market adjustment on the share-based proceeds, partially offset by share-based proceeds acquired from a legal settlement finalized in February 2026, a decrease in credit loss expense and a decrease in stock-based compensation. The aggregate changes in operating assets and liabilities decreased by $35.3 million in 2026 compared to the prior year primarily due to an increase in the net use of working capital, of which, the majority is attributable to an increase in unbilled receivables and inventory, partially offset by an increase in accounts payable.
Cash Flows from Investing Activities
Cash used in investing activities was $54.8 million and $56.0 million for the six months ended June 30, 2026 and 2025, respectively. The decrease in cash used was primarily driven by a $1.1 million decrease 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 $58.0 million and $10.9 million for the six months ended June 30, 2026 and 2025, respectively. The increased use in cash from financing activities was mainly due to $51.6 million of share repurchases in fiscal year 2026 and no comparable repurchases in the prior year period.
Debt, Net
2021 Term Loan and Amended Term Loan
In March 2021, VM Consolidated, our wholly owned subsidiary, entered into the 2021 Term Loan with a syndicate of lenders. The 2021 Term Loan had an aggregate borrowing of $900.0 million, maturing on March 24, 2028. In connection with the 2021 Term Loan borrowings, we had $4.6 million of offering discount costs and $4.5 million in deferred financing costs, both of which were capitalized and amortized over the life of the 2021 Term Loan. Such offering discount costs and deferred financing costs have subsequently been adjusted as needed as a result of refinancing activity discussed below which prompted re-evaluation of unamortized amounts on a lender-by-lender basis.
In October 2025, VM Consolidated and certain of our subsidiaries entered into the Amendment and Restatement Agreement No. 2 to the Amended and Restated First Lien Term Loan Credit Agreement dated as of March 26, 2021, to refinance the existing senior secured term loans in an aggregate outstanding principal amount of approximately $688.8 million with a new senior secured term loan of the same principal amount maturing on October 15, 2032. The proceeds from the Amended Term Loan were used in their entirety to prepay in full the outstanding principal amount of the existing term loan under the 2021 Term Loan agreement.
The Amended Term Loan bears interest at a per annum rate equal to SOFR plus an applicable margin of 2.00%, or a base rate plus an applicable margin of 1.00%. As of June 30, 2026, the interest rate on the Amended Term Loan was 5.6%. 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. We evaluated the refinancing transactions on a lender-by-lender basis and accounted accordingly for debt extinguishment and debt modification costs (for the portion of the transactions that did not meet the accounting criteria for debt extinguishment).
During the six months ended June 30, 2026, we made quarterly repayments totaling $3.4 million on the Amended Term Loan. During the six months ended June 30, 2025, we made voluntary prepayments totaling $4.5 million on the 2021 Term Loan. As a result, the total principal outstanding was $683.6 million as of June 30, 2026.
We recorded less than $0.1 million of loss on extinguishment of debt during both the three and six months ended June 30, 2025, related to the write-off of pre-existing deferred financing costs and discounts in connection with the early repayments.
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 |
|
50% |
< 3.70:1.00 and > 3.20:1.00 |
|
25% |
< 3.20:1.00 |
|
0% |
Senior Notes
In March 2021, VM Consolidated issued an aggregate principal amount of $350.0 million in Senior Notes, due on April 15, 2029. In connection with the issuance of the Senior Notes, we incurred $5.7 million in lender and third-party costs, which were capitalized as deferred financing costs and are being amortized over the remaining life of the Senior Notes.
Interest on the Senior Notes is fixed at 5.50% per annum and is payable on April 15 and October 15 of each year. We may redeem all or a portion of the Senior Notes at face value plus accrued and unpaid interest.
The Revolver
We entered into a Revolving Credit Agreement in March 2018 with a commitment of up to $75.0 million available for loans and letters of credit. In May 2025, pursuant to an amendment thereto, such commitment was increased to $125.0 million. On October 17, 2025, certain of our direct and indirect wholly owned subsidiaries, including VM Consolidated, entered into the Amended and Restated Revolving Credit Agreement to amend and restate the Revolver. The Amended and Restated Revolving Credit Agreement provides for a $150.0 million senior secured asset-based revolving credit facility with a $35.0 million sublimit for the issuance of letters of credit, and matures on October 17, 2030 (subject to an earlier maturity date in certain circumstances).
Outstanding borrowings under the Amended Revolver accrue interest at per annum rate equal to SOFR plus a margin ranging from 1.25% to 1.75% or a base rate plus a margin ranging from 0.25% to 0.75%, in each case, depending on the quarterly average undrawn availability under the Amended Revolver in the prior quarter. The Amended and Restated Revolving Credit Agreement also provides for the option, subject to receiving additional commitments from lenders and the satisfaction of certain conditions, to increase the loan commitments under the Amended Revolver by up to an amount equal to the greater of (x) $75.0 million and (y) the amount by which the borrowing base exceeds the aggregate commitments at such time. There were no outstanding borrowings on the Amended Revolver as of June 30, 2026 or December 31, 2025. The availability to borrow was $115.4 million at June 30, 2026, calculated as our borrowing base which consists of certain eligible accounts receivable and inventory balances, less any outstanding borrowings and letters of credit up to the maximum commitment available.
A commitment fee on the unused portion of the Amended Revolver is payable quarterly at (x) an annual rate of 0.375%, when quarterly average usage was less than 50% of the loan commitments in the prior quarter or (y) an annual rate of 0.250%, when quarterly average usage of the Amended Revolver was greater than or equal to 50% of the loan commitments in the prior quarter. We are also required to pay participation and fronting fees at 1.38% on $3.7 million of outstanding letters of credit as of June 30, 2026.
All borrowings and other extensions of credits under the Amended Term Loan, Senior Notes and the Amended Revolver are subject to the satisfaction of customary conditions and restrictive covenants including absence of defaults and accuracy in material respects of representations and warranties. Substantially all of the Company’s assets are pledged as collateral under the Amended Term Loan and the Amended Revolver. At June 30, 2026, we were compliant with all debt covenants in our debt agreements.
From time to time, we enter into equipment financing arrangements in the normal course of business, including certain equipment leases and purchases accounted for as financing arrangements. Amounts outstanding under these arrangements are included in “Other debt” in Note 6, Debt, Net, in Part I, Item 1, Financial Statements, and were not material to our overall financial position, liquidity, or capital resources as of June 30, 2026.
Interest Expense, Net
We recorded interest expense, including amortization of deferred financing costs and discounts, of $15.5 million and $16.6 million for the three months ended June 30, 2026 and 2025, respectively, and $30.9 million and $33.2 million for the six months ended June 30, 2026 and 2025, respectively.
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet financing arrangements as of June 30, 2026.
Critical Accounting Policies, Estimates and Judgments
The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Please refer to our Annual Report for our critical accounting policies, estimates and judgments. We believe that our estimates and assumptions are reasonable in the circumstances; however, actual results could differ materially from those estimates.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, refer to Note 2, Significant Accounting Policies, in Part I, Item 1, Financial Statements.
