i3 Verticals Reports First Quarter 2021 Financial Results
Plans to Discuss BIS Acquisition on Earnings Conference Call
Highlights for the fiscal first quarter of 2021 vs. 2020
-
First quarter revenue was
$43.3 million , an increase of 5% over the prior year's first quarter. -
First quarter adjusted net revenue1, which excludes acquisition revenue adjustments, was
$44.9 million , an increase of 8% over the prior year's first quarter.
-
First quarter net loss was
$4.1 million , compared to net income of$1.9 million in the prior year's first quarter. -
First quarter adjusted EBITDA1 was
$10.9 million , a decrease of 8% over the prior year's first quarter. - First quarter adjusted EBITDA1 as a percentage of adjusted net revenue1 was 24.2%, compared to 28.5% in the prior year's first quarter.
-
First quarter diluted net loss per share available to Class A common stock was
$0.13 , compared to diluted net loss per share available to Class A common stock of$0.01 in the prior year's first quarter. -
First quarter pro forma adjusted diluted earnings per share1, which gives pro forma effect to the Company's estimated going forward effective tax rate, was
$0.22 , compared to$0.24 for the prior year's first quarter.
-
Integrated payments2 were 56% of payment volume for the three months ended
December 31, 2020 . -
At
December 31, 2020 , the ratio of consolidated interest coverage ratio was 16.48x, total leverage ratio was 3.67x and consolidated senior leverage ratio was 0.92x. These ratios are defined in our Senior Secured Credit Facility.
-
As previously announced in our press release dated
February 5, 2021 , the Company completed the acquisition of Business Information Systems (“BIS”), a business based in eastTennessee that provides software and electronic payment solutions in a variety of states. BIS will fit within the Company’s public sector vertical. The aggregate purchase price was$87.7 million , consisting of$52.5 million in cash, approximately$35.2 million of Class A common stock and an amount of contingent consideration, which is still being valued. The transaction includes contingent consideration of up to$16.0 million , subject to the satisfaction of certain growth metrics over established time periods.
1. |
Represents a non-GAAP financial measure. For additional information (including reconciliation information), see the attached schedules to this release. |
2. |
Integrated payments represents payment transactions that are generated in situations where payment technology is embedded within the Company's own proprietary software, a client’s software or critical business process. |
“Last week we announced our largest acquisition to date, BIS. The acquisition significantly expands our Public Sector vertical, which now represents almost half of our adjusted net revenue. Our product suite now allows us to approach the Public Sector vertical at multiple levels — from the individual court-level to the statewide level — and we are excited to deliver valuable solutions to our customers we expect to generate continued growth at i3,” concluded Daily.
2021 Outlook
The Company's practice is to provide annual guidance, excluding future acquisitions and transaction-related costs. The Company is providing the following outlook for the fiscal year ending
(in thousands, except share and per share amounts) |
|
||||||
|
Fiscal year ending |
||||||
Adjusted net revenue(1) (non-GAAP) |
$ |
198,000 |
|
- |
$ |
214,000 |
|
Adjusted EBITDA (non-GAAP) |
$ |
50,000 |
|
- |
$ |
56,000 |
|
Depreciation and internally developed software amortization |
$ |
4,250,000 |
|
- |
$ |
4,750,000 |
|
Cash interest expense, net |
$ |
4,250,000 |
|
- |
$ |
4,750,000 |
|
Pro forma weighted average shares of adjusted diluted Class A common stock outstanding |
32,500,000 |
|
- |
34,500,000 |
|
||
Adjusted diluted earnings per share(2) (non-GAAP) |
$ |
0.93 |
|
- |
$ |
1.06 |
|
_______________________ |
|
1. |
Under GAAP, companies must adjust, as necessary, beginning balances of acquired deferred revenue to fair value as part of acquisition accounting as defined by GAAP. For the revised 2021 outlook, the Company has removed the effect of these adjustments to acquisition date fair value from acquisitions that have closed as of the earnings release date. |
2. |
Assumes an effective pro forma tax rate of 25.0% (non-GAAP). |
With respect to the “2021 Outlook” above, reconciliation of adjusted net revenue, adjusted EBITDA and adjusted diluted earnings per share guidance to the closest corresponding GAAP measure on a forward-looking basis is not available without unreasonable efforts. This inability results from the inherent difficulty in forecasting generally and quantifying certain projected amounts that are necessary for such reconciliations. In particular, sufficient information is not available to calculate certain adjustments required for such reconciliations, including changes in the fair value of contingent consideration, income tax expense of
Conference Call
The Company will host a conference call on
To listen to the call live via webcast, participants should visit the “Investors” section of the Company’s website, www.i3verticals.com, and go to the “Events” page approximately 10 minutes prior to the start of the call. The online replay will be available on this page of the Company’s website beginning shortly after the conclusion of the call and will remain available for 30 days.
Non-GAAP Measures
This press release contains information prepared in conformity with GAAP as well as non-GAAP information. It is management’s intent to provide non-GAAP financial information to enhance understanding of the Company's consolidated financial information as prepared in accordance with GAAP. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure and the most directly comparable GAAP financial measure are presented so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies.
Additional information about non-GAAP financial measures, including, but not limited to, adjusted net revenue, pro forma adjusted net income, adjusted EBITDA and pro forma adjusted diluted EPS, and a reconciliation of those measures to the most directly comparable GAAP measures is included on pages 9 through 11 in the financial schedules of this release.
About
Helping drive the convergence of software and payments,
Forward-Looking Statements
This release contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact or relating to present facts or current conditions included in this release are forward-looking statements, including any statements regarding the Company's fiscal 2021 financial outlook and statements of a general economic or industry specific nature. Forward-looking statements give the Company's current expectations and projections relating to its financial condition, results of operations, guidance, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “could have,” “exceed,” “significantly,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.
The forward-looking statements contained in this release are based on assumptions that we have made in light of the Company's industry experience and its perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you review and consider information presented herein, you should understand that these statements are not guarantees of future performance or results. They depend upon future events and are subject to risks, uncertainties (many of which are beyond the Company's control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect the Company's actual future performance or results and cause them to differ materially from those anticipated in the forward-looking statements. Certain of these factors and other risks are discussed in the Company's filings with the
Any forward-looking statement made by us in this release speaks only as of the date of this release. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
(Unaudited) ($ in thousands, except share and per share amounts) |
|||||||||
|
Three months ended |
||||||||
|
2020 |
|
2019 |
|
% Change |
||||
|
|
|
|
|
|
||||
Revenue |
$ |
43,313 |
|
|
$ |
41,111 |
|
|
5% |
|
|
|
|
|
|
||||
Operating expenses |
|
|
|
|
|
||||
Other costs of services |
13,666 |
|
|
12,918 |
|
|
6% |
||
Selling general and administrative |
24,962 |
|
|
19,287 |
|
|
29% |
||
Depreciation and amortization |
5,092 |
|
|
4,655 |
|
|
9% |
||
Change in fair value of contingent consideration |
1,904 |
|
|
154 |
|
|
1,136% |
||
Total operating expenses |
45,624 |
|
|
37,014 |
|
|
23% |
||
|
|
|
|
|
|
||||
(Loss) income from operations |
(2,311) |
|
|
4,097 |
|
|
n/m |
||
|
|
|
|
|
|
||||
Interest expense, net |
2,029 |
|
|
2,014 |
|
|
1% |
||
|
|
|
|
|
|
||||
(Loss) income before income taxes |
(4,340) |
|
|
2,083 |
|
|
n/m |
||
|
|
|
|
|
|
||||
(Benefit from) provision for income taxes |
(219) |
|
|
149 |
|
|
n/m |
||
|
|
|
|
|
|
||||
Net (loss) income |
(4,121) |
|
|
1,934 |
|
|
n/m |
||
|
|
|
|
|
|
||||
Net (loss) income attributable to non-controlling interest |
(1,549) |
|
|
2,083 |
|
|
n/m |
||
Net loss attributable to |
$ |
(2,572) |
|
|
$ |
(149) |
|
|
n/m |
|
|
|
|
|
|
||||
Net loss per share available to Class A common stock: |
|
|
|
|
|
||||
Basic |
$ |
(0.13) |
|
|
$ |
(0.01) |
|
|
|
Diluted |
$ |
(0.13) |
|
|
$ |
(0.01) |
|
|
|
Weighted average shares of Class A common stock outstanding: |
|
|
|
|
|
||||
Basic |
19,129,056 |
|
|
14,233,785 |
|
|
|
||
Diluted |
19,129,056 |
|
|
14,233,785 |
|
|
|
(Unaudited) ($ in thousands, except per share amounts) |
||||||||
|
Three months ended |
|||||||
|
|
2020 |
|
|
2019 |
|
% Change |
|
|
|
|
|
|
|
|||
Adjusted net revenue (non-GAAP) |
$ |
44,908 |
|
$ |
41,624 |
|
8 |
% |
Adjusted EBITDA (non-GAAP) |
$ |
10,878 |
|
$ |
11,859 |
|
(8 |
)% |
Pro forma adjusted diluted earnings per share (non-GAAP) |
$ |
0.22 |
|
$ |
0.24 |
|
(8 |
)% |
(Unaudited) ($ in thousands) |
|||||||
|
Three months ended |
||||||
|
2020 |
|
2019 |
||||
|
|
|
|
||||
Payment volume(1) |
$ |
3,800,527 |
|
|
$ |
3,839,118 |
|
__________________________ | |
1. |
Payment volume is the net dollar value of both 1) |
(Unaudited) ($ in thousands) |
|||||||||||||||
|
For the Three Months Ended |
||||||||||||||
|
Merchant Services |
|
Proprietary Software and Payments |
|
Other |
|
Total |
||||||||
Revenue |
$ |
24,970 |
|
|
$ |
18,776 |
|
|
$ |
(433) |
|
|
$ |
43,313 |
|
|
|
|
|
|
|
|
|
||||||||
Operating expenses |
|
|
|
|
|
|
|
||||||||
Other costs of services |
10,841 |
|
|
3,257 |
|
|
(432) |
|
|
13,666 |
|
||||
Selling general and administrative |
6,444 |
|
|
10,895 |
|
|
7,623 |
|
|
24,962 |
|
||||
Depreciation and amortization |
2,766 |
|
|
2,149 |
|
|
177 |
|
|
5,092 |
|
||||
Change in fair value of contingent consideration |
157 |
|
|
1,747 |
|
|
— |
|
|
1,904 |
|
||||
Income (loss) from operations |
$ |
4,762 |
|
|
$ |
728 |
|
|
$ |
(7,801) |
|
|
$ |
(2,311) |
|
|
|
|
|
|
|
|
|
||||||||
Payment volume |
$ |
3,582,614 |
|
|
$ |
217,913 |
|
|
$ |
— |
|
|
$ |
3,800,527 |
|
|
For the Three Months Ended |
||||||||||||||
|
Merchant Services |
|
Proprietary Software and Payments |
|
Other |
|
Total |
||||||||
Revenue |
$ |
28,239 |
|
|
$ |
13,282 |
|
|
$ |
(410) |
|
|
$ |
41,111 |
|
|
|
|
|
|
|
|
|
||||||||
Operating expenses |
|
|
|
|
|
|
|
||||||||
Other costs of services |
12,174 |
|
|
1,154 |
|
|
(410) |
|
|
12,918 |
|
||||
Selling general and administrative |
6,863 |
|
|
7,395 |
|
|
5,029 |
|
|
19,287 |
|
||||
Depreciation and amortization |
3,072 |
|
|
1,414 |
|
|
169 |
|
|
4,655 |
|
||||
Change in fair value of contingent consideration |
(2,297) |
|
|
2,451 |
|
|
— |
|
|
154 |
|
||||
Income (loss) from operations |
$ |
8,427 |
|
|
$ |
868 |
|
|
$ |
(5,198) |
|
|
$ |
4,097 |
|
|
|
|
|
|
|
|
|
||||||||
Payment volume |
$ |
3,635,056 |
|
|
$ |
204,062 |
|
|
$ |
— |
|
|
$ |
3,839,118 |
|
________ | |
1. |
Effective |
($ in thousands, except share amounts) |
|||||||
|
|
|
|
||||
|
|
2020 |
|
|
2020 |
||
|
(unaudited) |
|
|
||||
Assets |
|
|
|
||||
Current assets |
|
|
|
||||
Cash and cash equivalents |
$ |
10,879 |
|
|
$ |
15,568 |
|
Accounts receivable, net |
|
23,786 |
|
|
|
17,538 |
|
Settlement assets |
|
84 |
|
|
|
— |
|
Prepaid expenses and other current assets |
|
9,747 |
|
|
|
4,869 |
|
Total current assets |
|
44,496 |
|
|
|
37,975 |
|
|
|
|
|
||||
Property and equipment, net |
|
5,946 |
|
|
|
5,339 |
|
Restricted cash |
|
8,569 |
|
|
|
5,033 |
|
Capitalized software, net |
|
23,907 |
|
|
|
16,989 |
|
|
|
219,912 |
|
|
|
187,005 |
|
Intangible assets, net |
|
132,824 |
|
|
|
109,233 |
|
Deferred tax asset |
|
44,966 |
|
|
|
36,755 |
|
Operating lease right-of-use assets |
|
10,560 |
|
|
|
— |
|
Other assets |
|
6,509 |
|
|
|
5,197 |
|
Total assets |
$ |
497,689 |
|
|
$ |
403,526 |
|
|
|
|
|
||||
Liabilities and equity |
|
|
|
||||
Liabilities |
|
|
|
||||
Current liabilities |
|
|
|
||||
Accounts payable |
$ |
6,348 |
|
|
$ |
3,845 |
|
Current portion of long-term debt |
|
— |
|
|
|
— |
|
Accrued expenses and other current liabilities |
|
26,750 |
|
|
|
24,064 |
|
Settlement obligations |
|
84 |
|
|
|
— |
|
Deferred revenue |
|
23,868 |
|
|
|
10,986 |
|
Current portion of operating lease liabilities |
|
2,813 |
|
|
|
— |
|
Total current liabilities |
|
59,863 |
|
|
|
38,895 |
|
|
|
|
|
||||
Long-term debt, less current portion and debt issuance costs, net |
|
141,397 |
|
|
|
90,758 |
|
Long-term tax receivable agreement obligations |
|
34,299 |
|
|
|
27,565 |
|
Operating lease liabilities, less current portion |
|
8,309 |
|
|
|
— |
|
Other long-term liabilities |
|
12,388 |
|
|
|
6,140 |
|
Total liabilities |
|
256,256 |
|
|
|
163,358 |
|
|
|
|
|
||||
Commitments and contingencies |
|
|
|
||||
Stockholders' equity |
|
|
|
||||
Preferred stock, par value |
|
— |
|
|
|
— |
|
Class A common stock, par value |
|
2 |
|
|
|
2 |
|
Class B common stock, par value |
|
1 |
|
|
|
1 |
|
Additional paid-in-capital |
|
169,097 |
|
|
|
157,598 |
|
Accumulated deficit |
|
(4,595) |
|
|
|
(2,023) |
|
Total stockholders' equity |
|
164,505 |
|
|
|
155,578 |
|
Non-controlling interest |
|
76,928 |
|
|
|
84,590 |
|
Total equity |
|
241,433 |
|
|
|
240,168 |
|
Total liabilities and equity |
$ |
497,689 |
|
|
$ |
403,526 |
|
(Unaudited) ($ in thousands) |
|||||||
|
Three months ended |
||||||
|
2020 |
|
2019 |
||||
|
|
|
|
||||
Net cash provided by operating activities |
$ |
11,954 |
|
|
$ |
7,484 |
|
Net cash used in investing activities |
$ |
(61,329) |
|
|
$ |
(1,782) |
|
Net cash provided by (used in) financing activities |
$ |
48,222 |
|
|
$ |
(6,635) |
|
Reconciliation of GAAP to Non-GAAP Financial Measures
The Company believes that non-GAAP financial measures are important to enable investors to understand and evaluate its ongoing operating results. Accordingly,
Although non-GAAP financial measures are often used to measure the Company's operating results and assess its financial performance, they are not necessarily comparable to similarly titled measures of other companies due to potential inconsistencies in the method of calculation.
(Unaudited) ($ in thousands) |
|||||||
|
Three months ended
|
||||||
|
2020 |
|
2019 |
||||
Net loss attributable to |
$ |
(2,572) |
|
|
$ |
(149) |
|
Net (loss) income attributable to non-controlling interest |
(1,549) |
|
|
2,083 |
|
||
Non-GAAP Adjustments: |
|
|
|
||||
(Benefit from) provision for income taxes |
(219) |
|
|
149 |
|
||
Financing-related expenses(1) |
53 |
|
|
— |
|
||
Non-cash change in fair value of contingent consideration(2) |
1,904 |
|
|
154 |
|
||
Equity-based compensation(3) |
3,441 |
|
|
2,124 |
|
||
Acquisition revenue adjustments(4) |
1,595 |
|
|
513 |
|
||
Acquisition-related expenses(5) |
1,010 |
|
|
262 |
|
||
Acquisition intangible amortization(6) |
4,117 |
|
|
3,721 |
|
||
Non-cash interest expense(7) |
1,332 |
|
|
100 |
|
||
Other taxes(8) |
94 |
|
|
54 |
|
||
Non-GAAP pro forma adjusted income before taxes |
9,206 |
|
|
9,011 |
|
||
Pro forma taxes at effective tax rate(9) |
(2,302) |
|
|
(2,253) |
|
||
Pro forma adjusted net income(10) |
$ |
6,904 |
|
|
$ |
6,758 |
|
Cash interest expense, net(11) |
697 |
|
|
1,914 |
|
||
Pro forma taxes at effective tax rate(9) |
2,302 |
|
|
2,253 |
|
||
Depreciation, non-acquired intangible asset amortization and internally developed software amortization(12) |
975 |
|
|
934 |
|
||
Adjusted EBITDA |
$ |
10,878 |
|
|
$ |
11,859 |
|
________ |
||
1. |
Financing-related expenses includes expenses directly related to certain transactions as part of financing transactions. |
|
2. |
Non-cash change in fair value of contingent consideration reflects the changes in management’s estimates of future cash consideration to be paid in connection with prior acquisitions from the amount estimated as of the later of the most recent balance sheet date forming the beginning of the income statement period or the original estimates made at the closing of the applicable acquisition. |
|
3. |
Equity-based compensation expense consisted of |
|
4. |
Under GAAP, companies must adjust, as necessary, beginning balances of acquired deferred revenue to fair value as part of acquisition accounting as defined by GAAP. Acquisition revenue adjustments remove the effect of these adjustments to acquisition date fair value from acquisitions that have closed as of the date of the earnings release. |
|
5. |
Acquisition-related expenses are the professional service and related costs directly related to our acquisitions and are not part of our core performance. |
|
6. |
Acquisition intangible amortization reflects amortization of intangible assets and software acquired through business combinations, acquired customer portfolios, acquired referral agreements and related asset acquisitions. |
|
7. |
Non-cash interest expense reflects amortization of debt discount and debt issuance costs and any write-offs of debt issuance costs. |
|
8. |
Other taxes consist of franchise taxes, commercial activity taxes, employer payroll taxes related to stock exercises and other non-income based taxes. Taxes related to salaries are not included. |
|
9. |
Pro forma corporate income tax expense is based on Non-GAAP adjusted income before taxes and is calculated using a tax rate of 25.0% for both 2020 and 2019, based on blended federal and state tax rates, considering the Tax Reform Act for 2018. |
|
10. |
Pro forma adjusted net income assumes that all net income during the period is available to the holders of the Company’s Class A common stock. |
|
11. |
Cash interest expense, net represents all interest expense net of interest income recorded on the Company's statement of operations other than non-cash interest expense, which represents amortization of debt discount and debt issuance costs and any write-offs of debt issuance costs. |
|
12. |
Depreciation, non-acquired intangible asset amortization and internally developed software amortization reflects depreciation on the Company's property, plant and equipment, net, and amortization expense on its internally developed capitalized software. |
|
(Unaudited) ($ in thousands, except share and per share amounts) |
|||||||
|
Three months ended |
||||||
|
2020 |
|
2019 |
||||
Diluted net loss available to Class A common stock per share |
$ |
(0.13) |
|
|
$ |
(0.01) |
|
Pro forma adjusted diluted earnings per share (non-GAAP)(1) |
$ |
0.22 |
|
|
$ |
0.24 |
|
Pro forma adjusted net income(2) |
$ |
6,904 |
|
|
$ |
6,758 |
|
Pro forma weighted average shares of adjusted diluted Class A common stock outstanding(3) |
32,028,708 |
|
|
28,364,844 |
|
__________ | |
1. |
Pro forma adjusted diluted earnings per share is calculated using pro forma adjusted net income and the pro forma weighted average shares of adjusted diluted Class A common stock outstanding. |
2. |
Pro forma adjusted net income assumes that all net income during the period is available to the holders of the Company's Class A common stock. Further, pro forma adjusted diluted earnings per share assumes that all Common Units in |
3. |
Pro forma weighted average shares of adjusted diluted Class A common stock outstanding include 11,668,199 and 12,921,637 weighted average outstanding shares of Class A common stock issuable upon the exchange of Common Units in |
(Unaudited) ($ in thousands) |
|||||||
|
Three months ended |
||||||
|
2020 |
|
2019 |
||||
Revenue |
$ |
43,313 |
|
|
$ |
41,111 |
|
Acquisition revenue adjustments(1) |
1,595 |
|
|
513 |
|
||
Adjusted Net Revenue |
$ |
44,908 |
|
|
$ |
41,624 |
|
__________ | |
1. |
Under GAAP, companies must adjust, as necessary, beginning balances of acquired deferred revenue to fair value as part of acquisition accounting as defined by GAAP. Acquisition revenue adjustments remove the effect of these adjustments to acquisition date fair value from acquisitions that have closed as of the date of this earnings release. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20210208005850/en/
Chief Financial Officer
(615) 988-9890
cwhitson@i3verticals.com
Source: