0001728688-19-000025 | 10-Q | XBRL Viewer

DEI Document - shares	3 Months Ended
DEI Document - shares	Dec. 31, 2018	Feb. 14, 2019
Document Information [Line Items]
Entity Ex Transition Period	false
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Registrant Name	i3 Verticals, Inc.
Entity Central Index Key	0001728688
Current Fiscal Year End Date	--09-30
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Current Reporting Status	No
Class A Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		9,176,659
Class B Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		17,129,460

Condensed Consolidated Balance Sheet (Unaudited) - USD ($) $ in Thousands	Dec. 31, 2018	Sep. 30, 2018
Current assets
Cash and cash equivalents	$ 887	$ 572
Accounts receivable, net	10,374	12,500
Settlement assets	930	863
Prepaid expenses and other current assets	3,278	2,630
Total current assets	15,469	16,565
Property and equipment, net	3,111	2,958
Restricted cash	666	665
Capitalized software, net	6,482	3,372
Goodwill	98,486	83,954
Intangible assets, net	71,224	66,023
Other assets	1,754	1,605
Total assets	197,192	175,142
Current liabilities
Accounts payable	3,388	4,114
Current portion of long-term debt	5,000	5,000
Accrued expenses and other current liabilities	15,371	11,538
Settlement obligations	930	863
Deferred revenue	4,614	4,927
Total current liabilities	29,303	26,442
Long-term debt, less current portion and debt issuance costs, net	49,009	31,776
Other long-term liabilities	4,314	4,726
Liabilities	82,626	62,944
Commitments and contingencies (see Note 9)
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2018 and September 30, 2018	0	0
Additional paid-in-capital	39,513	38,562
Accumulated earnings	914	736
Total Stockholders' equity	40,430	39,301
Non-controlling interest	74,136	72,897
Total equity	114,566	112,198
Total liabilities and stockholders' equity	197,192	175,142
Class A Common Stock
Current liabilities
Common stock	1	1
Class B Common Stock
Current liabilities
Common stock	$ 2	$ 2

Condensed Consolidated Balance Sheet (Unaudited) Parenthetical - $ / shares	Dec. 31, 2018	Sep. 30, 2018
Preferred Stock, par value (in USD per share)	$ 0.0001	$ 0.0001
Preferred Stock authorized (shares)	10,000,000	10,000,000
Preferred Stock issued (shares)	0	0
Preferred Stock outstanding (shares)	0	0
Class A Common Stock
Common Stock, par value (in USD per share)	$ 0.0001	$ 0.0001
Common Stock authorized (shares)	150,000,000	150,000,000
Common Stock issued (shares)	9,108,032	9,112,042
Common Stock, outstanding (shares)	9,108,032	9,112,042
Class B Common Stock
Common Stock, par value (in USD per share)	$ 0.0001	$ 0.0001
Common Stock authorized (shares)	40,000,000	40,000,000
Common Stock issued (shares)	17,213,806	17,213,806
Common Stock, outstanding (shares)	17,213,806	17,213,806

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
$ in Thousands

3 Months Ended

Dec. 31, 2018

Dec. 31, 2017

Income Statement [Abstract]

Revenue

$ 84,868

$ 77,221

Operating expenses

Interchange and network fees

55,829

52,238

Other costs of services

9,790

9,553

Selling general and administrative

12,516

8,845

Depreciation and amortization

3,552

2,856

Change in fair value of contingent consideration

(349)

382

Total operating expenses

81,338

73,874

Income from operations

3,530

3,347

Other expenses

Interest expense, net

914

2,387

Change in fair value of warrant liability

1,681

Total other expenses

914

4,068

Income (loss) before income taxes

2,616

(721)

Provision for (benefit from) income taxes

265

(389)

Net income (loss)

2,351

(332)

Net income attributable to non-controlling interest

2,173

Net income (loss) attributable to i3 Verticals, Inc.

$ 178

$ (332)

Net income per share available to Class A common stockholders(1):

Basic (in USD per share)

^[1]

$ 0.02

Diluted (in USD per share)

^[1]

$ 0.02

Weighted average shares of Class A common stock outstanding(1):

Basic (shares)

^[1]

8,812,630

Diluted (shares)

^[1]

9,903,168

[1]	Basic and diluted net income per Class A common stock are presented only for the period after the Company’s Reorganization Transactions. See Note 1 for a description of the Reorganization Transactions. See Note 13 for the calculation of income per common share.

Condensed Consolidated Statement of Changes in Equity (Unaudited) - USD ($) $ in Thousands	Total	Class A	Class B	Redeemable Class A	Common Stock	Common Stock Class A	Common Stock Class B	Common Stock Class P	Additional Paid-in Capital	Retained Earnings	Retained Earnings Class A	Retained Earnings Redeemable Class A	Noncontrolling Interest
Members' Equity, beginning at Sep. 30, 2017	$ 3,146				$ 1,240	$ 34,924		$ 0		$ (33,018)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss attributable to non-controlling interests	0
Net loss (income)	(332)									(332)
Net income (loss) attributable to i3 Verticals, Inc.	(332)
Distributions to Non-controlling Interest Holders	0
Preferred return on Class A Units and Redeemable Class A Units	(168)	$ (774)		$ (168)		774					$ (774)
Issuance of common stock	104				104
Members' Equity, ending at Dec. 31, 2017	2,750				$ 1,344	35,698		$ 0		(34,292)
Stockholders' Equity, beginning at Sep. 30, 2018	112,198					$ 1	$ 2		$ 38,562	736			$ 72,897
Common Stock, Shares, Outstanding, beginning at Sep. 30, 2018		9,112,042	17,213,806			9,112,042	17,213,806
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity based compensation recognized	951								951
Forfeitures of restricted Class A common stock (shares)						(4,010)
Net loss attributable to non-controlling interests	(2,173)	$ (2,173)											2,173
Net loss (income)	2,351	2,351
Net income (loss) attributable to i3 Verticals, Inc.	178	$ 178								178
Distributions to Non-controlling Interest Holders	(934)												(934)
Common Stock, Shares, Outstanding, ending at Dec. 31, 2018		9,108,032	17,213,806			9,108,032	17,213,806
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Preferred return on Class A Units and Redeemable Class A Units		$ 0		$ 0								$ (168)
Stockholders' Equity, ending at Dec. 31, 2018	$ 114,566					$ 1	$ 2		$ 39,513	$ 914			$ 74,136

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Cash flows from operating activities:
Net income (loss)	$ 2,351	$ (332)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	3,552	2,856
Equity-based compensation	951	0
Provision for doubtful accounts	15	28
Amortization of deferred financing costs	233	221
Loss on disposal of assets	8	5
(Benefit from) provision for deferred income taxes	0	(468)
Non-cash change in fair value of warrant liability	0	1,681
(Decrease) increase in non-cash contingent consideration expense from original estimate	(349)	382
Changes in operating assets:
Accounts receivable	2,111	2,000
Prepaid expenses and other current assets	(628)	(641)
Other assets	(123)	(78)
Changes in operating liabilities:
Accounts payable	(726)	227
Accrued expenses and other current liabilities	446	1,053
Deferred revenue	(877)	(1,081)
Other long-term liabilities	(22)	15
Contingent consideration paid in excess of original estimates	(870)	0
Net cash provided by operating activities	6,072	5,868
Cash flows from investing activities:
Expenditures for property and equipment	(107)	(244)
Expenditures for capitalized software	(412)	(254)
Purchases of merchant portfolios and residual buyouts	(474)	(630)
Acquisitions of businesses, net of cash acquired	(21,000)	(20,862)
Acquisition of other intangibles	(33)	0
Net cash used in investing activities	(22,026)	(21,990)
Cash flows from financing activities:
Proceeds from revolving credit facility	25,000	2,500
Payments of revolving credit facility	(6,750)	(8,600)
Proceeds from notes payable to banks	0	24,671
Payments of notes payable to banks	(1,250)	(1,250)
Payment of debt issuance costs	0	(209)
Payment of equity issuance costs for Class A unit issuances	0	(509)
Cash paid for contingent consideration	(730)	0
Net cash provided by financing activities	16,270	16,603
Net increase in cash, cash equivalents and restricted cash	316	481
Cash, cash equivalents and restricted cash at beginning of period	1,237	1,968
Cash, cash equivalents and restricted cash at end of period	1,553	2,449
Supplemental disclosure of cash flow information:
Cash paid for interest	730	2,259
Cash paid for income taxes	$ 105	$ 14

Organization and Operations	3 Months Ended
Organization and Operations	Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization and Operations	ORGANIZATION AND OPERATIONS i3 Verticals, Inc. (the “Company”) was formed as a Delaware corporation on January 17, 2018. The Company was formed for the purpose of completing an initial public offering (“IPO”) of its Class A common stock and other related transactions in order to carry on the business of i3 Verticals, LLC and its subsidiaries. i3 Verticals, LLC was founded in 2012 and delivers seamlessly integrated payment and software solutions to small- and medium-sized businesses (“SMBs”) and organizations in strategic vertical markets. The Company’s headquarters are located in Nashville, Tennessee, with operations throughout the United States. Unless the context otherwise requires, references to “we,” “us,” “our,” “i3 Verticals” and the “Company” refer to i3 Verticals, Inc. and its subsidiaries, including i3 Verticals, LLC. Initial Public Offering On June 25, 2018, the Company completed the IPO of 7,647,500 shares of its Class A common stock at a public offering price of $13.00 per share. The Company received approximately $92.5 million of net proceeds, after deducting underwriting discounts and commissions, which the Company used to purchase newly issued common units from i3 Verticals, LLC (the “Common Units”), and Common Units from a selling Common Unit holder, in each case at a price per Common Unit equal to the price per share paid by the underwriters for shares of the Company's Class A common stock in the IPO. Reorganization Transactions In connection with the IPO, the Company completed the following transactions (the “Reorganization Transactions”): •i3 Verticals, LLC amended and restated its existing limited liability company agreement to, among other things, (1) convert all existing Class A units, common units (including common units issued upon the exercise of existing warrants) and Class P units of ownership interest in i3 Verticals, LLC into either Class A voting common units of i3 Verticals, LLC (such holders of Class A voting common units referred to herein as the “Continuing Equity Owners”) or Class B non-voting common units of i3 Verticals, LLC (such holders of Class B non-voting common units referred to herein as the “Former Equity Owners”), and (2) appoint i3 Verticals, Inc. as the sole managing member of i3 Verticals, LLC upon its acquisition of Common Units in connection with the IPO; •the Company amended and restated its certificate of incorporation to provide for, among other things, Class A common stock and Class B common stock; •i3 Verticals, LLC and the Company consummated a merger among i3 Verticals, LLC, i3 Verticals, Inc. and a newly formed wholly-owned subsidiary of i3 Verticals, Inc. (“MergerSub”) whereby: (1) MergerSub merged with and into i3 Verticals, LLC, with i3 Verticals, LLC as the surviving entity; (2) Class A voting common units converted into newly issued Common Units in i3 Verticals, LLC together with an equal number of shares of Class B common stock of i3 Verticals, Inc., and (3) Class B non-voting common units converted into Class A common stock of i3 Verticals, Inc. based on a conversion ratio that provided an equitable adjustment to reflect the full value of the Class B non-voting common units; and •the Company issued shares of its Class A common stock pursuant to a voluntary private conversion of certain subordinated notes (the “Junior Subordinated Notes”) by certain related and unrelated creditors of i3 Verticals, LLC. Following the completion of the IPO and Reorganization Transactions, the Company became a holding company and its principal asset is the Common Units in i3 Verticals, LLC that it owns. i3 Verticals, Inc. operates and controls all of i3 Verticals, LLC's operations and, through i3 Verticals, LLC and its subsidiaries, conducts i3 Verticals, LLC's business. i3 Verticals, Inc. has a minority economic interest in i3 Verticals, LLC. •As of December 31, 2018, i3 Verticals, Inc. owned 34.6% of the economic interest in i3 Verticals, LLC. •As of December 31, 2018, the Continuing Equity Owners owned Common Units in i3 Verticals, LLC representing approximately 65.4% of the economic interest in i3 Verticals, LLC, shares of Class A common stock in the Company representing approximately 0.9% of the economic interest and voting power in the Company, and shares of Class B common stock in i3 Verticals, Inc., representing approximately 65.4% of the voting power in the Company. •The Continuing Equity Owners who own Common Units in i3 Verticals, LLC may redeem at each of their options (subject in certain circumstances to time-based vesting requirements) their Common Units for, at the election of i3 Verticals, LLC, cash or newly-issued shares of the Company's Class A common stock. •Combining the Class A common stock and Class B common stock, the Continuing Equity Holders hold approximately 66.3% of the economic interest and voting power in i3 Verticals, Inc. i3 Verticals, Inc. is the sole managing member of i3 Verticals, LLC and as a result, consolidates the financial results of i3 Verticals, LLC and reports a non-controlling interest representing the Common Units of i3 Verticals, LLC held by the Continuing Equity Owners. As the Reorganization Transactions are considered transactions between entities under common control, the financial statements retroactively reflect the accounts of i3 Verticals, LLC for periods prior to the IPO and Reorganization Transactions.

Summary of Significant Accounting Policies

3 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the reporting and disclosure rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the unaudited condensed consolidated financial statements of the Company and its subsidiaries as of December 31, 2018 and for the three months ended December 31, 2018 and 2017. The results of operations for the three months ended December 31, 2018 and 2017 are not necessarily indicative of the operating results for the full year. It is recommended that these interim condensed consolidated financial statements be read in conjunction with the Company's consolidated financial statements and related footnotes for the years ended September 30, 2018 and 2017, included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2018.

Principles of Consolidation

These interim condensed consolidated financial statements include the accounts of the Company and its subsidiary companies. All significant intercompany accounts and transactions have been eliminated in consolidation.

Restricted Cash

Restricted cash represents funds held-on-deposit with processing banks pursuant to agreements to cover potential merchant losses. It is presented as long-term assets on the accompanying condensed consolidated balance sheets since the related agreements extend beyond the next twelve months. Following the adoption of Accounting Standards Update (“ASU”) No. 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230), the Company includes restricted cash along with the cash and cash equivalents balance for presentation in the condensed consolidated statements of cash flows. The reconciliation between the condensed consolidated balance sheet and the condensed consolidated statement of cash flows is as follows:


	December 31, 2018		December 31, 2017
Cash and cash equivalents on condensed consolidated balance sheet	$	887	$	1,435
Restricted cash	666		1,014
Total cash, cash equivalents and restricted cash on condensed consolidated statement of cash flows	$	1,553	$	2,449

Inventories

Inventories consist of point-of-sale equipment to be sold to customers and are stated at the lower of cost, determined on a weighted average basis, or net realizable value. Inventories were $1,417 and $930 at December 31, 2018 and September 30, 2018, respectively, and are included within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

Acquisitions

Business acquisitions have been recorded using the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), and, accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition. Where relevant, the fair value of contingent consideration included in an acquisition is calculated using a Monte Carlo simulation. The fair value of merchant relationships and non-compete assets acquired is identified using the Income Approach. The fair values of trade names and internally-developed software acquired are identified using the Relief from Royalty Method. The fair value of deferred revenue is identified using the Adjusted Fulfillment Cost Method. After the purchase price has been allocated, goodwill is recorded to the extent the total consideration paid for the acquisition, including the acquisition date fair value of contingent consideration, if any, exceeds the sum of the fair values of the separately identifiable acquired assets and assumed liabilities. Acquisition costs for business combinations are expensed when incurred and recorded in selling general and administrative expenses in the accompanying condensed consolidated statements of operations.

Acquisitions not meeting the accounting criteria to be accounted for as a business combination are accounted for as an asset acquisition. An asset acquisition is recorded at its purchase price, inclusive of acquisition costs, which is allocated among the acquired assets and assumed liabilities based upon their relative fair values at the date of acquisition.

The operating results of an acquisition are included in the Company’s condensed consolidated statements of operations from the date of such acquisition. Acquisitions completed during the three months ended December 31, 2018 contributed $1,169 and $62 to revenue and net income, respectively, to the results in the Company's condensed consolidated statements of operations for the three months then ended.

Revenue Recognition and Deferred Revenue

Revenue is recognized when it is realized or realizable and earned, in accordance with ASC 605, Revenue Recognition (“ASC 605”). Recognition occurs when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been performed; (3) the seller’s price to the

buyer is fixed or determinable; and (4) collectability is reasonably assured. The Company accrues for rights of refund, processing errors or penalties, or other related allowances based on historical experience.

More than 86% of the Company's gross revenue for the three months ended December 31, 2018 and 2017 is derived from volume-based payment processing fees (“discount fees”) and other related fixed transaction or service fees. The remainder is comprised of sales of software licensing subscriptions, ongoing support, and other POS-related solutions the Company provides to its clients directly and through its processing bank relationships.

Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed. Discount fees are recognized at the time the merchants’ transactions are processed. The Company follows the requirements of ASC 605-45 Revenue Recognition—Principal Agent Considerations, in determining its merchant processing services revenue reporting. Generally, where the Company has control over merchant pricing, merchant portability, credit risk and ultimate responsibility for the merchant relationship, revenues are reported at the time of sale on a gross basis equal to the full amount of the discount charged to the merchant. This amount includes interchange fees paid to card issuing banks and assessments paid to payment card networks pursuant to which such parties receive payments based primarily on processing volume for particular groups of merchants. Revenues generated from merchant portfolios where the Company does not have control over merchant pricing, liability for merchant losses or credit risk or rights of portability are reported net of interchange and other fees.

Revenues are also derived from a variety of fixed transaction or service fees, including authorization fees, convenience fees, statement fees, annual fees, and fees for other miscellaneous services, such as handling chargebacks. Revenues derived from service fees are recognized at the time the services are performed and there are no further performance obligations. Revenues from the sale of equipment is recognized upon transfer of ownership and delivery to the customer, after which there are no further performance obligations.

Revenues from sales of the Company’s software licensing subscriptions are recognized when they are realized or realizable and earned. Contractual arrangements are evaluated for indications that multiple element arrangements may exist, including instances where more-than-incidental software deliverables are included. Arrangements may contain multiple elements, such as hardware, software products, maintenance, and professional installation and training services. Revenues are allocated to each element based on the selling price hierarchy. The selling price for a deliverable is based on vendor specific objective evidence of selling price, if available, third party evidence, or estimated selling price. The Company establishes estimated selling price, based on the judgment of the Company's management, considering internal factors such as margin objectives, pricing practices and controls, customer segment pricing strategies and the product life cycle. In arrangements with multiple elements, the Company determines allocation of the transaction price at inception of the arrangement based on the relative selling price of each unit of accounting.

In multiple element arrangements where more-than-incidental software deliverables are included, the Company applies the residual method to determine the amount of software license revenues to be recognized. Under the residual method, if fair value exists for undelivered elements in a multiple-element arrangement, such fair value of the undelivered elements is deferred with the remaining portion of the arrangement consideration recognized upon delivery of the software license or services arrangement. The Company allocates the fair value of each element of a software-related multiple-element arrangement based upon its fair value as determined by vendor specific objective evidence of selling price, with any remaining amount allocated to the software license. If evidence of the fair value cannot be established for the undelivered elements of a software arrangement, then the entire amount of revenue under the arrangement is deferred until these elements have been delivered or objective evidence can be established. These amounts, if any, are included in deferred revenue in the condensed consolidated balance sheets. Revenues related to software licensing subscriptions, maintenance or other support services with terms greater than one month are recognized ratably over the term of the agreement.

Revenues from sales of the Company’s combined hardware and software element are recognized when they are realized or realizable and earned which has been determined to be upon the delivery of the product. Revenues derived from service fees are recognized at the time the services are performed and there are no

further performance obligations. The Company’s training, installation, and repair services are recognized as revenue as these services are performed.

Deferred revenue represents amounts billed to customers by the Company for services contracts. The initial prepaid contract agreement balance is deferred. The balance is then recognized as the services are provided over the contract term. Deferred revenue that is expected to be recognized as revenue within one year is recorded as short-term deferred revenue and the remaining portion is recorded as other long-term liabilities in the condensed consolidated balance sheets.

Interchange and Network Fees and Other Cost of Services

Interchange and network fees consist primarily of fees that are directly related to discount fee revenue. These include interchange fees paid to issuers and assessment fees payable to card associations, which are a percentage of the processing volume the Company generates from Visa and Mastercard, as well as fees charged by card-issuing banks. Other costs of services include costs directly attributable to processing and bank sponsorship costs, which may not be based on a percentage of volume. These costs also include related costs such as residual payments to sales groups, which are based on a percentage of the net revenues generated from merchant referrals. In certain merchant processing bank relationships the Company is liable for chargebacks against a merchant equal to the volume of the transaction. Losses resulting from chargebacks against a merchant are included in other cost of services on the accompanying condensed consolidated statement of operations. The Company evaluates its risk for such transactions and estimates its potential loss from chargebacks based primarily on historical experience and other relevant factors. The reserve for merchant losses is included within accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets. The cost of equipment sold is also included in other cost of services. Interchange and other costs of services are recognized at the time the merchant's transactions are processed.

The Company accounts for all governmental taxes associated with revenue transactions on a net basis.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, the value of purchase consideration paid and identifiable assets acquired and assumed in acquisitions, goodwill and intangible asset impairment review, warrant valuation, revenue recognition for multiple element arrangements, loss reserves, assumptions used in the calculation of equity-based compensation and in the calculation of income taxes, and certain tax assets and liabilities as well as the related valuation allowances. Actual results could differ from those estimates.

During the first quarter of fiscal year 2019, management determined it was appropriate to change the amortization rate for certain of our merchant contract intangible assets to reflect the expected distribution of future cash flows. This change was applied prospectively beginning on October 1, 2018.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Subtopic 350-40). The amendments in ASU No. 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. As a public business entity, the Company is an emerging growth company and has elected to use the extended transition period provided for such companies. As a result, the Company is not required to adopt this ASU until October 1, 2021. Early adoption is permitted,

including adoption in an interim period. The Company elected to early adopt this standard using the prospective method as of October 1, 2018. There was no impact on the Company’s condensed consolidated financial statements for the adoption of ASU No. 2018-15.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820). The amendments in ASU No. 2018-13 provide clarification and modify the disclosure requirements on fair value measurement in Topic 820, Fair Value Measurement. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. As a public business entity, the Company is an emerging growth company and has elected to use the extended transition period provided for such companies. As a result, the Company will not be required to adopt this ASU until October 1, 2021. The Company is currently evaluating the impact of the adoption of this principle on the Company’s condensed consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting (Topic 718). The amendments in ASU No. 2018-07 expand the scope of Topic 718, Compensation—Stock Compensation to include share-based payments issued to nonemployees for goods or services. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. As a public business entity, the Company is an emerging growth company and has elected to use the extended transition period provided for such companies. As a result, the Company will not be required to adopt this ASU until October 1, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of ASU No. 2014-09. The Company is currently evaluating the impact of the adoption of this principle on the Company’s condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The amendments in ASU No. 2016-13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. As a public business entity, the Company is an emerging growth company and has elected to use the extended transition period provided for such companies. As a result, the Company will not be required to adopt this ASU until October 1, 2021. The Company is currently evaluating the impact of the adoption of this principle on the Company’s condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). This ASU amends the existing guidance by recognizing all leases, including operating leases, with a term longer than twelve months on the balance sheet and disclosing key information about the lease arrangements. The effective date of this update is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. As a public business entity, the Company is an emerging growth company and has elected to use the extended transition period provided for such companies. As a result, the Company will not be required to adopt this ASU until October 1, 2020. The update requires modified retrospective transition, with the option to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment and elect various practical expedients. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, which narrows aspects of the guidance issued in the amendments in ASU 2016-02, and ASU 2018-11, Leases—Targeted Improvements (Topic 842), by allowing lessees and lessors to recognize and measure existing leases at the beginning of the period of adoption without modifying the comparative period financial statements (which therefore will remain under prior GAAP, Topic 840, Leases). Since the Company has not yet adopted ASU 2016-02, the effective date and transition requirements will be the same as the effective date and transition requirements in ASU 2016-02. The Company is currently evaluating the impact of the adoption of these principles on the Company’s condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue From Contracts With Customers (Topic 606) (“ASU 2014-09”). The ASU supersedes the revenue recognition requirements in ASC 605. The new standard provides a five-step analysis of transactions to determine when and how revenue is recognized, based upon the core principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires additional disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard, as amended, is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. As an emerging growth company, the Company will not be required to adopt this ASU until October 1, 2019. The amendment allows companies to use either a full retrospective or a modified retrospective approach to adopt this ASU. The FASB issued updates and clarifications to ASU 2014-09, including ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Gross versus Net) issued in March 2016, ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing issued in April 2016 and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients issued in May 2016. Since the Company has not yet adopted ASU 2014-09, the effective date and transition requirements will be the same as the effective date and transition requirements in ASU 2014-09. The Company has formed a project team and is currently assessing the impact of the adoption of these principles on the Company’s condensed consolidated financial statements.

Acquisitions

3 Months Ended

Dec. 31, 2018

Business Combinations [Abstract]

Acquisitions

ACQUISITIONS

During the three months ended December 31, 2018, the Company acquired the following intangible assets and businesses:

Residual Buyouts

From time to time, the Company acquires future commission streams from sales agents in exchange for an upfront cash payment. This results in an increase in overall gross processing volume to the Company. The residual buyouts are treated as asset acquisitions, resulting in recording a residual buyout intangible asset at cost on the date of acquisition. These assets are amortized using a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are expected to be utilized over their estimated useful lives.

During the three months ended December 31, 2018, the Company purchased $474 in residual buyouts using a combination of cash on hand and borrowings on the Company's revolving line of credit. The acquired residual buyout intangible assets have an estimated amortization period of two years.

Business Combinations

During the three months ended December 31, 2018, the Company completed the acquisitions of two unrelated businesses which were considered individually immaterial but collectively material. The acquisitions expanded the Company’s software offerings in the public sector vertical market and provided technology that enhances the Company’s Burton Platform. Total purchase consideration was $25,000, including $21,000 in revolving line of credit proceeds and $4,000 of contingent cash consideration. The purchase price allocations assigned for these acquisitions are preliminary.

The goodwill associated with the acquisitions of the two businesses is deductible for tax purposes. The acquired merchant relationships intangible assets have estimated amortization periods of between thirteen and sixteen years. The trade names have a weighted-average amortization period of six years. The weighted-average amortization period for all intangibles acquired is fifteen years. The acquired capitalized software has an estimated amortization period of seven years.

Acquisition-related costs for these businesses amounted to approximately $225 and were expensed as incurred.

Certain provisions in the purchase agreements provide for additional consideration of up to $14,000, in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreements, through no later than October 2020. The Company determined the acquisition date fair values of the liabilities for the contingent consideration based on discounted cash flow analyses. In each subsequent reporting period, the Company will reassess its current estimates of performance relative to the targets and adjust the contingent liabilities to their fair values through earnings. See additional disclosures in Note 7.

Summary of Business Combinations

The preliminary fair values assigned to certain assets and liabilities assumed, as of the acquisition dates, during the three months ended December 31, 2018 were as follows:


Inventories	$	26
Prepaid expenses and other current assets	20
Property and equipment	298
Capitalized software	3,200
Acquired merchant relationships	7,000
Trade name	500
Goodwill	14,532
Total assets acquired	25,576

Accrued expenses and other current liabilities	12
Deferred revenue, current	564
Net assets acquired	$	25,000

Pro Forma Results of Operations for Business Combinations

The following unaudited supplemental pro forma results of operations have been prepared as though each of the acquired businesses in the three months ended December 31, 2018 had occurred on October 1, 2017. Pro forma adjustments were made to reflect the impact of depreciation and amortization, changes to executive compensation and the revised debt load, all in accordance with ASC 805. This supplemental pro forma information does not purport to be indicative of the results of operations that would have been attained had the acquisitions been made on these dates, or of results of operations that may occur in the future.


	Three months ended December 31,
	2018		2017
Revenue	$	85,492	$	79,553
Net income (loss)	$	2,024	$	(195)

Goodwill and Intangible Assets

3 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill are as follows:


	Merchant Services		Proprietary Software and Payments		Other		Total
Balance at September 30, 2018 (net of accumulated impairment losses of $11,458, $0 and $0, respectively)	$	69,666	$	14,288	$	—	$	83,954
Goodwill attributable to acquisitions during the three months ended December 31, 2018	—		14,532		—		14,532
Balance at December 31, 2018	$	69,666	$	28,820	$	—	$	98,486

Intangible assets consisted of the following as of December 31, 2018:


	Cost		Accumulated Amortization		Carrying Value		Amortization Life and Method
Finite-lived intangible assets:
Merchant relationships	$	101,791	$	(36,204)	$	65,587	13 to 16 years – accelerated or straight-line
Non-compete agreements	1,890		(655)		1,235		2 to 5 years – straight-line
Website development costs	51		(17)		34		3 years – straight-line
Trade names	4,217		(2,098)		2,119		2 to 7 years – straight-line
Residual buyouts	2,517		(1,068)		1,449		2 years – straight-line
Referral and exclusivity agreements	915		(147)		768		1 to 10 years – straight-line
Total finite-lived intangible assets	111,381		(40,189)		71,192

Indefinite-lived intangible assets:
Trademarks	32		—		32
Total identifiable intangible assets	$	111,413	$	(40,189)	$	71,224

Amortization expense for intangible assets amounted to $2,802 and $2,260 during the three months ended December 31, 2018 and 2017, respectively.

Based on net carrying amounts at December 31, 2018, the Company's estimate of future amortization expense for intangible assets are presented in the table below for fiscal years ending September 30:


2019 (nine months remaining)	$	7,921
2020	8,779
2021	7,312
2022	6,685
2023	5,881
Thereafter	34,614
	$	71,192

Long-Term Debt, Net

3 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

Long-Term Debt, Net

LONG-TERM DEBT, NET

A summary of long-term debt, net as of December 31, 2018 and September 30, 2018 is as follows:


		December 31,		September 30,
	Maturity	2018		2018
Term loans to bank under the Senior Secured Credit Facility	October 30, 2022	33,750		35,000
Revolving lines of credit to banks under the Senior Secured Credit Facility	October 30, 2022	21,500		3,250
Debt issuance costs, net		(1,241)		(1,474)
Total long-term debt, net of issuance costs		54,009		36,776
Less current portion of long-term debt		(5,000)		(5,000)
Long-term debt, net of current portion		$	49,009	$	31,776

Senior Secured Credit Facility

On October 30, 2017, the Company replaced its existing credit facility with the Senior Secured Credit Facility. The Company concluded that the Senior Secured Credit Facility should be accounted for as a debt modification based on the guidance in ASC 470-50. The Senior Secured Credit Facility consists of term loans in the original principal amount of $40,000 and a $110,000 revolving line of credit. The Senior Secured Credit Facility accrues interest, payable monthly, at the prime rate plus a margin of 0.50% to 2.00% (0.50% as of December 31, 2018) or at the 30-day LIBOR rate plus a margin of 2.75% to 4.00% (2.75% as of December 31, 2018), in each case depending on the ratio of consolidated debt-to-EBITDA, as defined in the agreement. Additionally, the Senior Secured Credit Facility requires the Company to pay unused commitment fees of up to 0.15% to 0.30% (0.15% as of December 31, 2018) on any undrawn amounts under the revolving line of credit. The maturity date of the Senior Secured Credit Facility is October 30, 2022. Principal payments of $1,250 are due on the last day of each calendar quarter until the maturity date, when all outstanding principal and accrued and unpaid interest are due. At December 31, 2018, there was $88,500 available for borrowing under the revolving line of credit.

The Senior Secured Credit Facility is secured by substantially all assets of the Company. The lenders under the Senior Secured Credit Facility hold senior rights to collateral and principal repayment over all other creditors.

The provisions of the Senior Secured Credit Facility place certain restrictions and limitations upon the Company. These include, among others, restrictions on liens, investments, indebtedness, fundamental changes and dispositions; maintenance of certain financial ratios; and certain non-financial covenants pertaining to the activities of the Company during the period covered. The Company was in compliance with such covenants as of December 31, 2018. In addition, the Senior Secured Credit Facility restricts the Company's ability to make dividends or other distributions to the holders of the Company's equity. The Company is permitted to (i) make cash distributions to the holders of the Company's equity in order to pay taxes incurred by owners of equity in i3 Verticals, LLC, by reason of such ownership, (ii) move intercompany cash between subsidiaries that are joined to the Senior Secured Credit Facility, (iii) repurchase equity from employees, directors, officers or consultants after the Reorganization Transactions in an aggregate amount not to exceed $1,500 per year, and (iv) make other dividends or distributions in an aggregate amount not to exceed 5% of the net cash proceeds received from any additional common equity issuance after the IPO. The Company is also permitted to make non-cash dividends in the form of additional equity issuances. All other forms of dividends or distributions are prohibited under the Senior Secured Credit Facility.

Mezzanine Warrants

During 2013, the Company issued notes payable in the aggregate principal amount of $10,500 (the “Mezzanine Notes”) to three creditors. In June 2018, all of the outstanding aggregate principal balance and accrued interest on the Mezzanine Notes was repaid with proceeds from the Company’s IPO.

In connection with the issuance of the Mezzanine Notes, the Company granted warrants (the “Mezzanine Warrants”) to purchase 1,423,688 common units in i3 Verticals, LLC. The Mezzanine Warrants were determined to have no material value as of the grant date. The intrinsic value of the Mezzanine Warrants was $767 as of September 30, 2017, and they had an exercise price of $0.01. On June 25, 2018, in conjunction with the Reorganization Transactions described in Note 1, all existing Mezzanine Warrants were exercised for common units in i3 Verticals, LLC. The intrinsic value of the Mezzanine Warrants at that date was $9,241. The change in the fair market value of the warrants for the three months ended December 31, 2017 is reflected within the condensed consolidated statement of operations.

Debt issuance costs

The Company incurred no debt issuance costs during the three months ended December 31, 2018. During the three months ended December 31, 2017, the Company incurred debt issuance costs totaling $1,113 in connection with the issuance of long-term debt. The debt issuance costs are being amortized over the related term of the debt using the straight-line method and are presented net against long-term debt in the condensed consolidated balance sheets. As part of the April 2016 amendment to the Company’s previous senior credit facility (the “2016 Senior Secured Credit Facility”), the Company expensed a nominal amount of unamortized debt issuance costs related to the exit of a participating bank from the 2016 Senior Secured Credit Facility. The amortization of deferred debt issuance costs is included in interest expense and amounted to approximately $233 and $221 during the three months ended December 31, 2018 and 2017, respectively.

Income Taxes	3 Months Ended
Income Taxes	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Income Taxes	INCOME TAXES i3 Verticals, Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from i3 Verticals, LLC based on i3 Verticals, Inc.’s economic interest in i3 Verticals, LLC. i3 Verticals, LLC's members, including the Company, are liable for federal, state and local income taxes based on their share of i3 Verticals, LLC's pass-through taxable income. i3 Verticals, LLC is not a taxable entity for federal income tax purposes but is subject to and reports entity level tax in both Tennessee and Texas. In addition, certain subsidiaries of i3 Verticals, LLC are corporations that are subject to state and federal income taxes. The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the Company’s estimated tax rate changes, it makes a cumulative adjustment in that period. The Company’s provision for income taxes was $265 for the three months ended December 31, 2018 and a benefit of $389 for the three months ended December 31, 2017. On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law. The legislation contains several key tax provisions, including the reduction of the federal corporate income tax rate to 21% effective January 1, 2018, as well as a variety of other changes, including limitation of the tax deductibility of interest expense, acceleration of expensing of certain business assets and reductions in the amount of executive pay that could qualify as a tax deduction. The SEC staff issued Staff Accounting Bulletin No. 118, which allowed us to record provisional amounts during a measurement period not to extend beyond one year after the enactment date. As of December 22, 2018, the Company has completed its accounting for all of the enactment-date income tax effects of the Tax Cuts and Jobs Act. The Company made no material adjustments to the provisional amounts recorded. Tax Receivable Agreement On June 25, 2018, the Company entered into a Tax Receivable Agreement with i3 Verticals, LLC and each of the Continuing Equity Owners (the “Tax Receivable Agreement”) that provides for the payment by the Company to the Continuing Equity Owners of 85% of the amount of certain tax benefits, if any, that it actually realizes, or in some circumstances, is deemed to realize in its tax reporting, as a result of (i) future redemptions funded by the Company or exchanges, or deemed exchanges in certain circumstances, of Common Units of i3 Verticals, LLC for Class A common stock of i3 Verticals, Inc. or cash, and (ii) certain additional tax benefits attributable to payments made under the Tax Receivable Agreement. These tax benefit payments are not conditioned upon one or more of the Continuing Equity Owners maintaining a continued ownership interest in i3 Verticals, LLC. If a Continuing Equity Owner transfers Common Units but does not assign to the transferee of such units its rights under the Tax Receivable Agreement, such Continuing Equity Owner generally will continue to be entitled to receive payments under the Tax Receivable Agreement arising in respect of a subsequent exchange of such Common Units. In general, the Continuing Equity Owners’ rights under the Tax Receivable Agreement may not be assigned, sold, pledged or otherwise alienated to any person, other than certain permitted transferees, without (a) the Company's prior written consent, which should not be unreasonably withheld, conditioned or delayed, and (b) such persons becoming a party to the Tax Receivable Agreement and agreeing to succeed to the applicable Continuing Equity Owner’s interest therein. The Company expects to benefit from the remaining 15% of the tax benefits, if any, that the Company may realize. The Company recognized a deferred tax asset in the amount of $960 and a corresponding liability of $816, representing 85% of the tax benefits due to the Continuing Equity Owners as of December 31, 2018.

Fair Value Measurements

3 Months Ended

Dec. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

The Company applies the provisions of ASC 820, Fair Value Measurement, which defines fair value, establishes a framework for its measurement and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or the price paid to transfer a liability as of the measurement date. A three-tier, fair-value reporting hierarchy exists for disclosure of fair value measurements based on the observability of the inputs to the valuation of financial assets and liabilities. The three levels are:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets.

The carrying value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, settlement assets and obligations, accounts receivable, other assets, accounts payable, and accrued expenses, approximated their fair values as of December 31, 2018 and 2017, because of the relatively short maturity dates on these instruments. The carrying amount of debt approximates fair value as of December 31, 2018 and 2017, because interest rates on these instruments approximate market interest rates.

The Company has no Level 1 or Level 2 financial instruments. The following tables present the changes in the Company's Level 3 financial instruments that are measured at fair value on a recurring basis.


	Accrued Contingent Consideration
Balance at September 30, 2018	5,999
Contingent consideration accrued at time of business combination	4,000
Change in fair value of contingent consideration included in Operating expenses	(349)
Contingent consideration paid	(1,600)
Balance at December 31, 2018	$	8,050


	Mezzanine Warrants		Accrued Contingent Consideration
Balance at September 30, 2017	$	767	$	3,340
Change in the fair value of warrant liabilities, included in Other expenses	1,681		—
Contingent consideration accrued at time of business combination	—		1,420
Change in fair value of contingent consideration included in Operating expenses	—		382
Contingent consideration paid	—		—
Balance at December 31, 2017	$	2,448	$	5,142

Approximately $6,254 and $3,813 of contingent consideration was recorded in accrued expenses and other current liabilities as of December 31, 2018 and September 30, 2018, respectively. Approximately $1,796 and $2,186 of contingent consideration was recorded in other long-term liabilities as of December 31, 2018 and September 30, 2018, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Equity-Based Compensation

3 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Equity-Based Compensation

EQUITY-BASED COMPENSATION

A summary of equity-based compensation expense recognized during the three months ended December 31, 2018 and 2017 is as follows:


	Three months ended December 31,
	2018		2017
Stock options	$	951	$	—

Amounts are included in general and administrative expense on the condensed consolidated statements of operations. No income tax benefits were recognized related to equity-based compensation during the three months ended December 31, 2018 and 2017.

TRA Non-Participation Compensatory Shares

On June 25, 2018, the Company entered into the Tax Receivable Agreement as described in Note 6. The Former Equity Owners did not participate in the Tax Receivable Agreement. Therefore, as part of the Reorganization Transactions, the Class B common units held by the Former Equity Owners were converted into shares of Class A common stock based on a conversion ratio that provided an equitable adjustment to reflect the full value of the Class B common units. For employees who are Former Equity Owners, this arrangement was a modification under ASC 718.

Stock Options

In May 2018, the Company adopted the 2018 Equity Incentive Plan (the “2018 Plan”) under which the Company may grant up to 3,500,000 stock options and other equity-based awards to employees, directors and officers. The number of shares of Class A common stock available for issuance under the 2018 Plan includes an annual increase on the first day of each year, beginning with the 2019 calendar year, equal to 4.0% of the outstanding shares of all classes of the Company's common stock as of the last day of the immediately preceding calendar year, unless the Company’s board of directors determines prior to the last trading day of December of the immediately preceding calendar year that the increase shall be less than 4%. In connection with the IPO, the Company granted 2,045,000 stock options to its directors and certain employees. The stock options were granted with an exercise price of $13.00 per share and vest ratably over a three-year period.

The fair value of the stock option awards during the three months ended December 31, 2018 and from June 20, 2018 through September 30, 2018 was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:


	December 31, 2018		September 30, 2018
Expected volatility⁽¹⁾	26.6	%	26.3	%
Expected dividend yield⁽²⁾	—	%	—	%
Expected term⁽³⁾	6 years		6 years
Risk-free interest rate⁽⁴⁾	2.9	%	2.8	%

_________________

1.Expected volatility is based on the historical volatility of a selected peer group over a period equivalent to the expected term.

2.The Company has assumed a dividend yield of zero as management has no plans to declare dividends in the foreseeable future.

3.Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method.

4.The risk-free rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term.

A summary of stock option activity for the three months ended December 31, 2018 is as follows:


	Stock Options	Weighted Average Exercise Price
Outstanding at beginning of period	2,138,500	$	13.13
Granted	822,250	21.28
Exercised	—	—
Forfeited	(7,500)	13.00
Outstanding at end of period	2,953,250	$	15.40

The weighted-average grant date fair value of stock options granted during the three months ended December 31, 2018 was $6.93. As of December 31, 2018, there were 2,953,250 stock options outstanding, of which none were exercisable. As of December 31, 2018, total unrecognized compensation expense related to unvested stock options, including an estimate for pre-vesting forfeitures, was $12,803, which is expected to be recognized over a weighted-average period of 2.7 years.

Commitments and Contingencies

3 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Leases

The Company utilizes office space and equipment under operating leases. Rent expense under these leases amounted to $493 and $323 during the three months ended December 31, 2018 and 2017, respectively.

A summary of approximate future minimum payments under these leases as of December 31, 2018 is as follows:


Years ending September 30:
2019 (nine months remaining)	$	1,576
2020	1,978
2021	1,541
2022	1,386
2023	1,271
Thereafter	1,294
Total	$	9,046

Minimum Processing Commitments

The Company has non-exclusive agreements with several processors to provide it services related to transaction processing and transmittal, transaction authorization and data capture, and access to various reporting tools. Certain of these agreements require the Company to submit a minimum monthly number of transactions for processing. If the Company submits a number of transactions that is lower than the minimum, it is required to pay to the processor the fees it would have received if it had submitted the required minimum number of transactions. As of December 31, 2018, such minimum fee commitments were as follows:


Years ending September 30:
2019 (nine months remaining)	$	1,904
2020	2,866
2021	2,757
2022	3,346
2023	3,621
Thereafter	243
Total	$	14,737

Litigation

With respect to all legal, regulatory and governmental proceedings, and in accordance with ASC 450-20, Contingencies—Loss Contingencies, the Company considers the likelihood of a negative outcome. If the Company determines the likelihood of a negative outcome with respect to any such matter is probable and the amount of the loss can be reasonably estimated, the Company records an accrual for the estimated amount of loss for the expected outcome of the matter. If the likelihood of a negative outcome with respect to material matters is reasonably possible and the Company is able to determine an estimate of the amount of possible loss or a range of loss, whether in excess of a related accrued liability or where there is no accrued liability, the Company discloses the estimate of the amount of possible loss or range of loss. However, the Company in some instances may be unable to estimate an amount of possible loss or range of loss based on the significant uncertainties involved in, or the preliminary nature of, the matter, and in these instances the Company will disclose the nature of the contingency and describe why the Company is unable to determine an estimate of possible loss or range of loss.

In addition, the Company is involved in ordinary course legal proceedings, which include all claims, lawsuits, investigations and proceedings, including unasserted claims, which are probable of being asserted, arising in the ordinary course of business and otherwise not described below. The Company has considered all such ordinary course legal proceedings in formulating its disclosures and assessments.

On June 14, 2016, Expert Auto Repair, Inc., for itself and on behalf of a class of additional plaintiffs, and Jeff Straight initiated a class action lawsuit against the Company, as alleged successor to Merchant Processing Solutions, LLC, in the Los Angeles County Superior Court of California, seeking damages, restitution and declaratory and injunctive relief (the “Expert Auto Litigation”). The plaintiffs alleged that Merchant Processing Solutions, LLC, the Company's alleged predecessor, engaged in unfair business practices in the merchant services sector including unfairly inducing merchants to obtain credit and debit card processing services and thereafter assessing them with improper fees. Subject to final court approval, the Company has entered into a settlement agreement to settle the plaintiffs’ claims for $995. On April 10, 2018, the Court granted conditional class certification and preliminary approval of the agreed settlement and scheduled the final fairness hearing and final approval of the settlement in December 2018. Notice was provided to all class members and they were given an opportunity to either file a claim, opt-out, file an objection or do nothing (in which case they would be included in the class settlement). The deadline for class members to take one of these four actions was November 8, 2018. No class member opted out or filed an objection to the settlement before that deadline. The hearing on final approval by the Court of the class settlement was held on December 14, 2018, at which time the Court gave final class certification and approval of the agreed settlement. The Court then filed the applicable final judgment and order on January 23, 2019, and the Company intends to fund the settlement in April 2019. The reserved amount is reflected in accrued expenses and other current liabilities as of December 31, 2018. The amount was included in general and administrative expenses in the consolidated statement of operations for the year ended September 30, 2017.

In connection with the Expert Auto Litigation, on November 3, 2016 the Company's insurance carrier, Starr Indemnity and Liability Company, Inc. (“Starr”), filed a complaint against the Company in the United States District Court for the Middle District of Tennessee, seeking a declaration from the court that Starr's policy provided no coverage for the Expert Auto Litigation. This action was subsequently dismissed for lack of subject matter jurisdiction, prompting Starr to move the court to reconsider and on February 15, 2017 to file a complaint against the Company in the Twentieth Judicial District of the Davidson County Chancery Court of Tennessee repeating its federal court claims (although Starr has since dismissed the complaint in the Davidson County Chancery Court). Thereafter, after reconsidering its dismissal for lack of subject matter jurisdiction, the United States District Court for the Middle District of Tennessee revived Starr’s complaint, allowing Starr’s action to continue in federal court.

On April 13, 2018, the court issued an order to (i) stay discovery in the matter, (ii) allow Starr to file a motion for judgment on the pleadings by May 21, 2018 (which was filed) and (iii) require the Company to respond to such motion by June 8, 2018 (which the Company did). In the meantime, the Company filed its answer and counterclaim to Starr’s complaint and Starr then filed a motion to dismiss a portion of this counterclaim. On August 7, 2018, the court denied Starr's motion for judgment on the pleadings and also denied Starr's motion to dismiss in relation to the Company's counterclaim.

Following the denial of Starr’s motion, Starr requested the court’s permission to file a motion for leave to file a first amended complaint to allege an additional basis for denying coverage. The court granted Starr’s request to file such motion. Following the briefing by the parties, the court granted Starr’s motion and ordered it to file and serve its first amended complaint within ten days, which Starr did. In response, the Company filed its answer to Starr’s first amended complaint in which the Company again asserted its counterclaim against Starr.

On December 26, 2018, Starr filed a motion for partial summary judgment on the pleadings. The Company has until March 22, 2019 to respond to this motion.

Discovery has begun and trial is currently set for November 19, 2019.

The Company intends to continue to vigorously defend against Starr’s claims and to continue to pursue its own counterclaim.

Other

The Company's subsidiary CP-PS, LLC has certain indemnification obligations in favor of FDS Holdings, Inc. related to the acquisition of certain assets of Merchant Processing Solutions, LLC in February 2014. The Company has incurred expenses related to these indemnification obligations in prior periods and may have additional expenses in the future. However, after taking into consideration the evaluation of such matters by the Company’s legal counsel, the Company’s management believes at this time that the anticipated outcome of any existing or potential indemnification liabilities related to this matter will not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Related Party Transactions	3 Months Ended
Related Party Transactions	Dec. 31, 2018
Related Party Transactions [Abstract]
Related Party Transactions	RELATED PARTY TRANSACTIONS Prior to the Company's IPO and Reorganization Transactions, portions of the Junior Subordinated Notes held by related creditors were outstanding. Interest expense to related parties for the Company’s Junior Subordinated Notes amounted to $157 during the three months ended December 31, 2017. Prior to the Company's IPO and Reorganization Transactions, the Mezzanine Notes held by related creditors were outstanding. Interest expense to related parties for the Company’s Mezzanine Notes amounted to $322 during the three months ended December 31, 2017. In April, 2016, the Company entered into a purchase agreement to purchase certain assets of Axia, LLC. On April 29, 2016, the Company entered into a Processing Services Agreement (the “Axia Tech Agreement”) with Axia Technologies, LLC (“Axia Tech”), an entity controlled by the previous owner of Axia, LLC. Under the Axia Tech Agreement, the Company agreed to provide processing services for certain merchants as designated by Axia Tech from time to time. In accordance with ASC 605-45, revenue from the processing services is recognized net of interchange, residual expense and other fees. The Company earned net revenues related to the Axia Tech Agreement of $18 and $11 during the three months ended December 31, 2018 and 2017, respectively. i3 Verticals, LLC, Greg Daily, the Company’s CEO and Clay Whitson, the Company’s CFO, own 2.0%, 10.7% and 0.4%, respectively, of the outstanding equity of Axia Tech. In connection with the Company’s IPO, the Company and i3 Verticals, LLC entered into a Tax Receivable Agreement with the Continuing Equity Owners that provides for the payment by the Company to the Continuing Equity Owners of 85% of the amount of certain tax benefits, if any, that it actually realizes, or in some circumstances, is deemed to realize in its tax reporting, as a result of (i) future redemptions funded by the Company or exchanges, or deemed exchanges in certain circumstances, of Common Units of i3 Verticals, LLC for Class A common stock of i3 Verticals, Inc. or cash, and (ii) certain additional tax benefits attributable to payments made under the Tax Receivable Agreement. See Note 6 for further information. As of December 31, 2018, the total amount due under the Tax Receivable Agreement was $816.

Segments

3 Months Ended

Dec. 31, 2018

Segment Reporting [Abstract]

Segments

SEGMENTS

The Company determines its operating segments based on ASC 280, Segment Reporting, how the chief operating decision making group monitors and manages the performance of the business and the level at which financial information is reviewed. The Company’s operating segments are strategic business units that offer different products and services.

The Company's core business is delivering seamlessly integrated payment and software solutions to SMBs and organizations in strategic vertical markets. This is accomplished through the Merchant Services and Proprietary Software and Payments segments.

The Merchant Services segment provides comprehensive payment solutions to businesses and organizations. The Merchant Services segment includes third-party integrated payment solutions as well as traditional payment services across the Company's strategic vertical markets.

The Proprietary Software and Payments segment delivers embedded payment solutions to the Company's clients through company-owned software. Payments are delivered through both the payment facilitator (“PayFac”) model and the traditional merchant processing model. The Company's Proprietary Software and Payments clients are primarily in the education, property management and public sector markets.

The Other category includes corporate overhead expenses when presenting reportable segment information.

The Company primarily uses processing margin to measure operating performance. The following is a summary of reportable segment operating performance for the three months ended December 31, 2018 and 2017.


	As of and for the Three Months Ended December 31, 2018
	Merchant Services		Proprietary Software and Payments		Other		Total
Revenue	$	77,702	$	7,166	$	—	$	84,868

Operating expenses
Interchange and network fees	54,364		1,465		—		55,829
Other costs of services	9,396		394		—		9,790
Selling general and administrative	6,091		2,987		3,438		12,516
Depreciation and amortization	2,782		661		109		3,552
Change in fair value of contingent consideration	(319)		(30)		—		(349)
Income (loss) from operations	$	5,388	$	1,689	$	(3,547)	$	3,530

Processing margin⁽¹⁾	$	17,627	$	5,461	$	—	$	23,088
Total assets	$	141,136	$	51,976	$	4,080	$	197,192
Goodwill	$	69,666	$	28,820	$	—	$	98,486

__________________________

1.Processing margin is equal to revenue less interchange and network fees, less other costs of services. $3,685, $154 and $0 of residual expense, a component of other costs of services, are added back to the Merchant Services segment, Proprietary Software and Payments segment, and Other category, respectively.


	As of and for the Three Months Ended December 31, 2017
	Merchant Services		Proprietary Software and Payments		Other		Total
Revenue	$	72,679	$	4,545	$	(3)	$	77,221

Operating expenses
Interchange and network fees	51,047		1,192		(1)		52,238
Other costs of services	9,143		410		—		9,553
Selling general and administrative	4,886		1,695		2,264		8,845
Depreciation and amortization	2,310		517		29		2,856
Change in fair value of contingent consideration	(125)		507		—		382
Income (loss) from operations	$	5,418	$	224	$	(2,295)	$	3,347

Processing margin⁽¹⁾	$	15,685	$	3,078	$	(2)	$	18,761
Total assets	$	140,369	$	20,832	$	3,229	$	164,430
Goodwill	$	66,267	$	10,625	$	—	$	76,892

__________________________

1.Processing margin is equal to revenue less interchange and network fees, less other costs of services. $3,196, $135 and $0 of residual expense, a component of other costs of services, are added back to the Merchant Services segment, Proprietary Software and Payments segment, and Other category, respectively.

Non-Controlling Interest	3 Months Ended
Non-Controlling Interest	Dec. 31, 2018
Noncontrolling Interest [Abstract]
Non-Controlling Interests	NON-CONTROLLING INTEREST i3 Verticals, Inc. is the sole managing member of i3 Verticals, LLC, and as a result, consolidates the financial results of i3 Verticals, LLC and reports a non-controlling interest representing the Common Units of i3 Verticals, LLC held by the Continuing Equity Owners. Changes in i3 Verticals, Inc.’s ownership interest in i3 Verticals, LLC while i3 Verticals, Inc. retains its controlling interest in i3 Verticals, LLC will be accounted for as equity transactions. As such, future redemptions or direct exchanges of Common Units of i3 Verticals, LLC by the Continuing Equity Owners will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in capital when i3 Verticals, LLC has positive or negative net assets, respectively. As of December 31, 2018, i3 Verticals, Inc. owned 9,108,032 of i3 Verticals, LLC's Common Units, representing a 34.6% economic ownership interest in i3 Verticals, LLC.

Earnings Per Share

3 Months Ended

Dec. 31, 2018

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS PER SHAREBasic earnings per share of Class A common stock is computed by dividing net income available to i3 Verticals, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income available to i3 Verticals, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

Prior to the IPO, the i3 Verticals, LLC membership structure included Class A units, common units and Class P units. The Company analyzed the calculation of earnings per unit for periods prior to the IPO using the two-class method and determined that it resulted in values that would not be meaningful to the users of these condensed consolidated financial statements. Therefore, earnings per share information has not been presented for the three months ended December 31, 2017.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the three months ended December 31, 2018:


	Three months ended December 31, 2018
Basic net income per share:
Numerator
Net income	$	2,351
Less: Net income attributable to non-controlling interests	2,173
Net income attributable to Class A common stockholders	$	178
Denominator
Weighted average shares of Class A common stock outstanding⁽¹⁾	8,812,630
Basic net income per share	$	0.02

Dilutive net income per share:
Numerator
Net income attributable to Class A common stockholders	$	178
Denominator
Weighted average shares of Class A common stock outstanding⁽¹⁾	8,812,630
Weighted average effect of dilutive securities⁽²⁾	1,090,538
Weighted average shares of Class A common stock outstanding - diluted	9,903,168
Diluted net income per share	$	0.02

____________________

1.Excludes 295,402 restricted Class A common stock units.

2.For the three months ended December 31, 2018, the following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted earnings per share of Class A common stock:

a.17,213,806 shares of Class B common stock, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive, and

b.754,750 stock options were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive.

Shares of the Company's Class B common stock do not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented.

Significant Non-cash Transactions

3 Months Ended

Dec. 31, 2018

Cash Flow, Noncash Investing and Financing Activities Disclosure [Abstract]

Significant Non-cash Transactions

SIGNIFICANT NON-CASH TRANSACTIONS

The Company engaged in the following significant non-cash investing and financing activities during the three months ended December 31, 2018 and 2017:


	Three months ended December 31,
	2018		2017
Common Units issued as part of acquisitions' purchase consideration	$	—	$	104
Acquisition date fair value of contingent consideration in connection with business combinations	$	4,000	$	1,420
Replacement of 2016 Senior Secured Credit Facility with Senior Secured Credit Facility	$	—	$	87,525
Preferred return on Redeemable Class A Units	$	—	$	168
Preferred return on Class A Units	$	—	$	774
Debt issuance costs financed with proceeds from Senior Secured Credit Facility	$	—	$	904
Required distributions to non-controlling interest holders for tax obligations	$	934	$	—

Subsequent Events	3 Months Ended
Subsequent Events	Dec. 31, 2018
Subsequent Events [Abstract]
Subsequent Events	SUBSEQUENT EVENTSOn January 14, 2019, the Company made an investment of $1,000 in a hospitality software and payments company.

Summary of Significant Accounting Policies (Policies)	3 Months Ended
Summary of Significant Accounting Policies (Policies)	Dec. 31, 2018
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the reporting and disclosure rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the unaudited condensed consolidated financial statements of the Company and its subsidiaries as of December 31, 2018 and for the three months ended December 31, 2018 and 2017. The results of operations for the three months ended December 31, 2018 and 2017 are not necessarily indicative of the operating results for the full year. It is recommended that these interim condensed consolidated financial statements be read in conjunction with the Company's consolidated financial statements and related footnotes for the years ended September 30, 2018 and 2017, included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2018.
Principles of Consolidation	Principles of Consolidation These interim condensed consolidated financial statements include the accounts of the Company and its subsidiary companies. All significant intercompany accounts and transactions have been eliminated in consolidation.
Restricted Cash	Restricted Cash Restricted cash represents funds held-on-deposit with processing banks pursuant to agreements to cover potential merchant losses. It is presented as long-term assets on the accompanying condensed consolidated balance sheets since the related agreements extend beyond the next twelve months. Following the adoption of Accounting Standards Update (“ASU”) No. 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230), the Company includes restricted cash along with the cash and cash equivalents balance for presentation in the condensed consolidated statements of cash flows.
Inventories	Inventories Inventories consist of point-of-sale equipment to be sold to customers and are stated at the lower of cost, determined on a weighted average basis, or net realizable value.
Acquisitions	Acquisitions Business acquisitions have been recorded using the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), and, accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition. Where relevant, the fair value of contingent consideration included in an acquisition is calculated using a Monte Carlo simulation. The fair value of merchant relationships and non-compete assets acquired is identified using the Income Approach. The fair values of trade names and internally-developed software acquired are identified using the Relief from Royalty Method. The fair value of deferred revenue is identified using the Adjusted Fulfillment Cost Method. After the purchase price has been allocated, goodwill is recorded to the extent the total consideration paid for the acquisition, including the acquisition date fair value of contingent consideration, if any, exceeds the sum of the fair values of the separately identifiable acquired assets and assumed liabilities. Acquisition costs for business combinations are expensed when incurred and recorded in selling general and administrative expenses in the accompanying condensed consolidated statements of operations. Acquisitions not meeting the accounting criteria to be accounted for as a business combination are accounted for as an asset acquisition. An asset acquisition is recorded at its purchase price, inclusive of acquisition costs, which is allocated among the acquired assets and assumed liabilities based upon their relative fair values at the date of acquisition. The operating results of an acquisition are included in the Company’s condensed consolidated statements of operations from the date of such acquisition.
Revenue Recognition and Deferred Revenue	Revenue Recognition and Deferred Revenue Revenue is recognized when it is realized or realizable and earned, in accordance with ASC 605, Revenue Recognition (“ASC 605”). Recognition occurs when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been performed; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. The Company accrues for rights of refund, processing errors or penalties, or other related allowances based on historical experience. More than 86% of the Company's gross revenue for the three months ended December 31, 2018 and 2017 is derived from volume-based payment processing fees (“discount fees”) and other related fixed transaction or service fees. The remainder is comprised of sales of software licensing subscriptions, ongoing support, and other POS-related solutions the Company provides to its clients directly and through its processing bank relationships. Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed. Discount fees are recognized at the time the merchants’ transactions are processed. The Company follows the requirements of ASC 605-45 Revenue Recognition—Principal Agent Considerations, in determining its merchant processing services revenue reporting. Generally, where the Company has control over merchant pricing, merchant portability, credit risk and ultimate responsibility for the merchant relationship, revenues are reported at the time of sale on a gross basis equal to the full amount of the discount charged to the merchant. This amount includes interchange fees paid to card issuing banks and assessments paid to payment card networks pursuant to which such parties receive payments based primarily on processing volume for particular groups of merchants. Revenues generated from merchant portfolios where the Company does not have control over merchant pricing, liability for merchant losses or credit risk or rights of portability are reported net of interchange and other fees. Revenues are also derived from a variety of fixed transaction or service fees, including authorization fees, convenience fees, statement fees, annual fees, and fees for other miscellaneous services, such as handling chargebacks. Revenues derived from service fees are recognized at the time the services are performed and there are no further performance obligations. Revenues from the sale of equipment is recognized upon transfer of ownership and delivery to the customer, after which there are no further performance obligations. Revenues from sales of the Company’s software licensing subscriptions are recognized when they are realized or realizable and earned. Contractual arrangements are evaluated for indications that multiple element arrangements may exist, including instances where more-than-incidental software deliverables are included. Arrangements may contain multiple elements, such as hardware, software products, maintenance, and professional installation and training services. Revenues are allocated to each element based on the selling price hierarchy. The selling price for a deliverable is based on vendor specific objective evidence of selling price, if available, third party evidence, or estimated selling price. The Company establishes estimated selling price, based on the judgment of the Company's management, considering internal factors such as margin objectives, pricing practices and controls, customer segment pricing strategies and the product life cycle. In arrangements with multiple elements, the Company determines allocation of the transaction price at inception of the arrangement based on the relative selling price of each unit of accounting. In multiple element arrangements where more-than-incidental software deliverables are included, the Company applies the residual method to determine the amount of software license revenues to be recognized. Under the residual method, if fair value exists for undelivered elements in a multiple-element arrangement, such fair value of the undelivered elements is deferred with the remaining portion of the arrangement consideration recognized upon delivery of the software license or services arrangement. The Company allocates the fair value of each element of a software-related multiple-element arrangement based upon its fair value as determined by vendor specific objective evidence of selling price, with any remaining amount allocated to the software license. If evidence of the fair value cannot be established for the undelivered elements of a software arrangement, then the entire amount of revenue under the arrangement is deferred until these elements have been delivered or objective evidence can be established. These amounts, if any, are included in deferred revenue in the condensed consolidated balance sheets. Revenues related to software licensing subscriptions, maintenance or other support services with terms greater than one month are recognized ratably over the term of the agreement. Revenues from sales of the Company’s combined hardware and software element are recognized when they are realized or realizable and earned which has been determined to be upon the delivery of the product. Revenues derived from service fees are recognized at the time the services are performed and there are no further performance obligations. The Company’s training, installation, and repair services are recognized as revenue as these services are performed. Deferred revenue represents amounts billed to customers by the Company for services contracts. The initial prepaid contract agreement balance is deferred. The balance is then recognized as the services are provided over the contract term. Deferred revenue that is expected to be recognized as revenue within one year is recorded as short-term deferred revenue and the remaining portion is recorded as other long-term liabilities in the condensed consolidated balance sheets. Interchange and Network Fees and Other Cost of Services Interchange and network fees consist primarily of fees that are directly related to discount fee revenue. These include interchange fees paid to issuers and assessment fees payable to card associations, which are a percentage of the processing volume the Company generates from Visa and Mastercard, as well as fees charged by card-issuing banks. Other costs of services include costs directly attributable to processing and bank sponsorship costs, which may not be based on a percentage of volume. These costs also include related costs such as residual payments to sales groups, which are based on a percentage of the net revenues generated from merchant referrals. In certain merchant processing bank relationships the Company is liable for chargebacks against a merchant equal to the volume of the transaction. Losses resulting from chargebacks against a merchant are included in other cost of services on the accompanying condensed consolidated statement of operations. The Company evaluates its risk for such transactions and estimates its potential loss from chargebacks based primarily on historical experience and other relevant factors. The reserve for merchant losses is included within accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets. The cost of equipment sold is also included in other cost of services. Interchange and other costs of services are recognized at the time the merchant's transactions are processed. The Company accounts for all governmental taxes associated with revenue transactions on a net basis.
Use of Estimates	Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, the value of purchase consideration paid and identifiable assets acquired and assumed in acquisitions, goodwill and intangible asset impairment review, warrant valuation, revenue recognition for multiple element arrangements, loss reserves, assumptions used in the calculation of equity-based compensation and in the calculation of income taxes, and certain tax assets and liabilities as well as the related valuation allowances. Actual results could differ from those estimates. During the first quarter of fiscal year 2019, management determined it was appropriate to change the amortization rate for certain of our merchant contract intangible assets to reflect the expected distribution of future cash flows. This change was applied prospectively beginning on October 1, 2018.
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Subtopic 350-40). The amendments in ASU No. 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. As a public business entity, the Company is an emerging growth company and has elected to use the extended transition period provided for such companies. As a result, the Company is not required to adopt this ASU until October 1, 2021. Early adoption is permitted, including adoption in an interim period. The Company elected to early adopt this standard using the prospective method as of October 1, 2018. There was no impact on the Company’s condensed consolidated financial statements for the adoption of ASU No. 2018-15. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820). The amendments in ASU No. 2018-13 provide clarification and modify the disclosure requirements on fair value measurement in Topic 820, Fair Value Measurement. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. As a public business entity, the Company is an emerging growth company and has elected to use the extended transition period provided for such companies. As a result, the Company will not be required to adopt this ASU until October 1, 2021. The Company is currently evaluating the impact of the adoption of this principle on the Company’s condensed consolidated financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting (Topic 718). The amendments in ASU No. 2018-07 expand the scope of Topic 718, Compensation—Stock Compensation to include share-based payments issued to nonemployees for goods or services. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. As a public business entity, the Company is an emerging growth company and has elected to use the extended transition period provided for such companies. As a result, the Company will not be required to adopt this ASU until October 1, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of ASU No. 2014-09. The Company is currently evaluating the impact of the adoption of this principle on the Company’s condensed consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The amendments in ASU No. 2016-13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. As a public business entity, the Company is an emerging growth company and has elected to use the extended transition period provided for such companies. As a result, the Company will not be required to adopt this ASU until October 1, 2021. The Company is currently evaluating the impact of the adoption of this principle on the Company’s condensed consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). This ASU amends the existing guidance by recognizing all leases, including operating leases, with a term longer than twelve months on the balance sheet and disclosing key information about the lease arrangements. The effective date of this update is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. As a public business entity, the Company is an emerging growth company and has elected to use the extended transition period provided for such companies. As a result, the Company will not be required to adopt this ASU until October 1, 2020. The update requires modified retrospective transition, with the option to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment and elect various practical expedients. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, which narrows aspects of the guidance issued in the amendments in ASU 2016-02, and ASU 2018-11, Leases—Targeted Improvements (Topic 842), by allowing lessees and lessors to recognize and measure existing leases at the beginning of the period of adoption without modifying the comparative period financial statements (which therefore will remain under prior GAAP, Topic 840, Leases). Since the Company has not yet adopted ASU 2016-02, the effective date and transition requirements will be the same as the effective date and transition requirements in ASU 2016-02. The Company is currently evaluating the impact of the adoption of these principles on the Company’s condensed consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue From Contracts With Customers (Topic 606) (“ASU 2014-09”). The ASU supersedes the revenue recognition requirements in ASC 605. The new standard provides a five-step analysis of transactions to determine when and how revenue is recognized, based upon the core principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires additional disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard, as amended, is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. As an emerging growth company, the Company will not be required to adopt this ASU until October 1, 2019. The amendment allows companies to use either a full retrospective or a modified retrospective approach to adopt this ASU. The FASB issued updates and clarifications to ASU 2014-09, including ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Gross versus Net) issued in March 2016, ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing issued in April 2016 and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients issued in May 2016. Since the Company has not yet adopted ASU 2014-09, the effective date and transition requirements will be the same as the effective date and transition requirements in ASU 2014-09. The Company has formed a project team and is currently assessing the impact of the adoption of these principles on the Company’s condensed consolidated financial statements.
Fair Value Measurement	The Company applies the provisions of ASC 820, Fair Value Measurement, which defines fair value, establishes a framework for its measurement and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or the price paid to transfer a liability as of the measurement date. A three-tier, fair-value reporting hierarchy exists for disclosure of fair value measurements based on the observability of the inputs to the valuation of financial assets and liabilities. The three levels are: Level 1 — Quoted prices for identical instruments in active markets. Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets.

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Reconciliation Between Cash on the Balance Sheet and the Statement of Cash Flows

The reconciliation between the condensed consolidated balance sheet and the condensed consolidated statement of cash flows is as follows:


	December 31, 2018		December 31, 2017
Cash and cash equivalents on condensed consolidated balance sheet	$	887	$	1,435
Restricted cash	666		1,014
Total cash, cash equivalents and restricted cash on condensed consolidated statement of cash flows	$	1,553	$	2,449

Acquisitions (Tables)

3 Months Ended

Dec. 31, 2018

Business Combinations [Abstract]

Schedule of Preliminary Purchase Consideration of the Acquired Assets and Assumed Liabilities

The preliminary fair values assigned to certain assets and liabilities assumed, as of the acquisition dates, during the three months ended December 31, 2018 were as follows:


Inventories	$	26
Prepaid expenses and other current assets	20
Property and equipment	298
Capitalized software	3,200
Acquired merchant relationships	7,000
Trade name	500
Goodwill	14,532
Total assets acquired	25,576

Accrued expenses and other current liabilities	12
Deferred revenue, current	564
Net assets acquired	$	25,000

Pro Forma Information

This supplemental pro forma information does not purport to be indicative of the results of operations that would have been attained had the acquisitions been made on these dates, or of results of operations that may occur in the future.


	Three months ended December 31,
	2018		2017
Revenue	$	85,492	$	79,553
Net income (loss)	$	2,024	$	(195)

Goodwill and Intangible Assets (Tables)

3 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Changes in Carrying Amount of Goodwill

Changes in the carrying amount of goodwill are as follows:


	Merchant Services		Proprietary Software and Payments		Other		Total
Balance at September 30, 2018 (net of accumulated impairment losses of $11,458, $0 and $0, respectively)	$	69,666	$	14,288	$	—	$	83,954
Goodwill attributable to acquisitions during the three months ended December 31, 2018	—		14,532		—		14,532
Balance at December 31, 2018	$	69,666	$	28,820	$	—	$	98,486

Schedule of Finite-Lived Intangible Assets

Intangible assets consisted of the following as of December 31, 2018:


	Cost		Accumulated Amortization		Carrying Value		Amortization Life and Method
Finite-lived intangible assets:
Merchant relationships	$	101,791	$	(36,204)	$	65,587	13 to 16 years – accelerated or straight-line
Non-compete agreements	1,890		(655)		1,235		2 to 5 years – straight-line
Website development costs	51		(17)		34		3 years – straight-line
Trade names	4,217		(2,098)		2,119		2 to 7 years – straight-line
Residual buyouts	2,517		(1,068)		1,449		2 years – straight-line
Referral and exclusivity agreements	915		(147)		768		1 to 10 years – straight-line
Total finite-lived intangible assets	111,381		(40,189)		71,192

Indefinite-lived intangible assets:
Trademarks	32		—		32
Total identifiable intangible assets	$	111,413	$	(40,189)	$	71,224

Schedule of Indefinite-Lived Intangible Assets

Intangible assets consisted of the following as of December 31, 2018:


	Cost		Accumulated Amortization		Carrying Value		Amortization Life and Method
Finite-lived intangible assets:
Merchant relationships	$	101,791	$	(36,204)	$	65,587	13 to 16 years – accelerated or straight-line
Non-compete agreements	1,890		(655)		1,235		2 to 5 years – straight-line
Website development costs	51		(17)		34		3 years – straight-line
Trade names	4,217		(2,098)		2,119		2 to 7 years – straight-line
Residual buyouts	2,517		(1,068)		1,449		2 years – straight-line
Referral and exclusivity agreements	915		(147)		768		1 to 10 years – straight-line
Total finite-lived intangible assets	111,381		(40,189)		71,192

Indefinite-lived intangible assets:
Trademarks	32		—		32
Total identifiable intangible assets	$	111,413	$	(40,189)	$	71,224

Schedule of Future Amortization Expense of Finite-lived Intangible Assets

Based on net carrying amounts at December 31, 2018, the Company's estimate of future amortization expense for intangible assets are presented in the table below for fiscal years ending September 30:


2019 (nine months remaining)	$	7,921
2020	8,779
2021	7,312
2022	6,685
2023	5,881
Thereafter	34,614
	$	71,192

Long-Term Debt, Net (Tables)

3 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

Summary of Long-term Debt

A summary of long-term debt, net as of December 31, 2018 and September 30, 2018 is as follows:


		December 31,		September 30,
	Maturity	2018		2018
Term loans to bank under the Senior Secured Credit Facility	October 30, 2022	33,750		35,000
Revolving lines of credit to banks under the Senior Secured Credit Facility	October 30, 2022	21,500		3,250
Debt issuance costs, net		(1,241)		(1,474)
Total long-term debt, net of issuance costs		54,009		36,776
Less current portion of long-term debt		(5,000)		(5,000)
Long-term debt, net of current portion		$	49,009	$	31,776

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.22)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=114775744&loc=d3e28541-108399

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21506-112644

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(e),(f))
-URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690

Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
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-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=114775744&loc=d3e28551-108399

Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
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-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21521-112644

Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21538-112644

Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 470
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=75038535&loc=d3e64711-112823

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 55
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=114775985&loc=d3e28878-108400

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21475-112644

+ Details

Fair Value Measurements (Tables)

3 Months Ended

Dec. 31, 2018

Fair Value Disclosures [Abstract]

Changes in Level 3 Financial Instruments Measured on a Recurring Basis

The following tables present the changes in the Company's Level 3 financial instruments that are measured at fair value on a recurring basis.


	Accrued Contingent Consideration
Balance at September 30, 2018	5,999
Contingent consideration accrued at time of business combination	4,000
Change in fair value of contingent consideration included in Operating expenses	(349)
Contingent consideration paid	(1,600)
Balance at December 31, 2018	$	8,050


	Mezzanine Warrants		Accrued Contingent Consideration
Balance at September 30, 2017	$	767	$	3,340
Change in the fair value of warrant liabilities, included in Other expenses	1,681		—
Contingent consideration accrued at time of business combination	—		1,420
Change in fair value of contingent consideration included in Operating expenses	—		382
Contingent consideration paid	—		—
Balance at December 31, 2017	$	2,448	$	5,142

Equity-Based Compensation (Tables)

3 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Equity-Based Compensation Expense

A summary of equity-based compensation expense recognized during the three months ended December 31, 2018 and 2017 is as follows:


	Three months ended December 31,
	2018		2017
Stock options	$	951	$	—

Fair Value of Stock Option Awards


	December 31, 2018		September 30, 2018
Expected volatility⁽¹⁾	26.6	%	26.3	%
Expected dividend yield⁽²⁾	—	%	—	%
Expected term⁽³⁾	6 years		6 years
Risk-free interest rate⁽⁴⁾	2.9	%	2.8	%

_________________

1.Expected volatility is based on the historical volatility of a selected peer group over a period equivalent to the expected term.

2.The Company has assumed a dividend yield of zero as management has no plans to declare dividends in the foreseeable future.

3.Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method.

4.The risk-free rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term.

Summary of Stock Option Activity

A summary of stock option activity for the three months ended December 31, 2018 is as follows:


	Stock Options	Weighted Average Exercise Price
Outstanding at beginning of period	2,138,500	$	13.13
Granted	822,250	21.28
Exercised	—	—
Forfeited	(7,500)	13.00
Outstanding at end of period	2,953,250	$	15.40

Commitments and Contingencies (Tables)

3 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Schedule of Approximate Future Minimum Rental Payments for Operating Leases

A summary of approximate future minimum payments under these leases as of December 31, 2018 is as follows:


Years ending September 30:
2019 (nine months remaining)	$	1,576
2020	1,978
2021	1,541
2022	1,386
2023	1,271
Thereafter	1,294
Total	$	9,046

Minimum Fee Commitments

As of December 31, 2018, such minimum fee commitments were as follows:


Years ending September 30:
2019 (nine months remaining)	$	1,904
2020	2,866
2021	2,757
2022	3,346
2023	3,621
Thereafter	243
Total	$	14,737

Segments (Tables)

3 Months Ended

Dec. 31, 2018

Segment Reporting [Abstract]

Summary of Reportable Segment Performance


	As of and for the Three Months Ended December 31, 2018
	Merchant Services		Proprietary Software and Payments		Other		Total
Revenue	$	77,702	$	7,166	$	—	$	84,868

Operating expenses
Interchange and network fees	54,364		1,465		—		55,829
Other costs of services	9,396		394		—		9,790
Selling general and administrative	6,091		2,987		3,438		12,516
Depreciation and amortization	2,782		661		109		3,552
Change in fair value of contingent consideration	(319)		(30)		—		(349)
Income (loss) from operations	$	5,388	$	1,689	$	(3,547)	$	3,530

Processing margin⁽¹⁾	$	17,627	$	5,461	$	—	$	23,088
Total assets	$	141,136	$	51,976	$	4,080	$	197,192
Goodwill	$	69,666	$	28,820	$	—	$	98,486

__________________________


	As of and for the Three Months Ended December 31, 2017
	Merchant Services		Proprietary Software and Payments		Other		Total
Revenue	$	72,679	$	4,545	$	(3)	$	77,221

Operating expenses
Interchange and network fees	51,047		1,192		(1)		52,238
Other costs of services	9,143		410		—		9,553
Selling general and administrative	4,886		1,695		2,264		8,845
Depreciation and amortization	2,310		517		29		2,856
Change in fair value of contingent consideration	(125)		507		—		382
Income (loss) from operations	$	5,418	$	224	$	(2,295)	$	3,347

Processing margin⁽¹⁾	$	15,685	$	3,078	$	(2)	$	18,761
Total assets	$	140,369	$	20,832	$	3,229	$	164,430
Goodwill	$	66,267	$	10,625	$	—	$	76,892

__________________________

Earnings Per Share (Tables)

3 Months Ended

Dec. 31, 2018

Earnings Per Share [Abstract]

Schedule of Reconciliations of the Numerators and Denominators Used to Compute Basic and Diluted Earnings Per Share


	Three months ended December 31, 2018
Basic net income per share:
Numerator
Net income	$	2,351
Less: Net income attributable to non-controlling interests	2,173
Net income attributable to Class A common stockholders	$	178
Denominator
Weighted average shares of Class A common stock outstanding⁽¹⁾	8,812,630
Basic net income per share	$	0.02

Dilutive net income per share:
Numerator
Net income attributable to Class A common stockholders	$	178
Denominator
Weighted average shares of Class A common stock outstanding⁽¹⁾	8,812,630
Weighted average effect of dilutive securities⁽²⁾	1,090,538
Weighted average shares of Class A common stock outstanding - diluted	9,903,168
Diluted net income per share	$	0.02

____________________

1.Excludes 295,402 restricted Class A common stock units.

a.17,213,806 shares of Class B common stock, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive, and

Significant Non-cash Transactions (Tables)

3 Months Ended

Dec. 31, 2018

Cash Flow, Noncash Investing and Financing Activities Disclosure [Abstract]

Schedule of Significant Noncash Transactions

The Company engaged in the following significant non-cash investing and financing activities during the three months ended December 31, 2018 and 2017:


	Three months ended December 31,
	2018		2017
Common Units issued as part of acquisitions' purchase consideration	$	—	$	104
Acquisition date fair value of contingent consideration in connection with business combinations	$	4,000	$	1,420
Replacement of 2016 Senior Secured Credit Facility with Senior Secured Credit Facility	$	—	$	87,525
Preferred return on Redeemable Class A Units	$	—	$	168
Preferred return on Class A Units	$	—	$	774
Debt issuance costs financed with proceeds from Senior Secured Credit Facility	$	—	$	904
Required distributions to non-controlling interest holders for tax obligations	$	934	$	—

Organization and Operations (Details) - USD ($) $ / shares in Units, $ in Millions	Jun. 25, 2018	Dec. 31, 2018
IPO
Subsidiary, Sale of Stock [Line Items]
Shares issued (shares)	7,647,500
Public offering price (in USD per share)	$ 13.00
Net proceeds from IPO	$ 92.5
i3Verticals, LLC
Subsidiary, Sale of Stock [Line Items]
Non-controlling interest, ownership interest (percent)		34.60%
Class A Common and Class B Common Stock \| Continuing Equity Owner
Subsidiary, Sale of Stock [Line Items]
Shareholders ownership interest (percent)		66.30%
Class B Common Stock \| Continuing Equity Owner
Subsidiary, Sale of Stock [Line Items]
Shareholders ownership interest (percent)		65.40%
Class A Common Stock \| Continuing Equity Owner
Subsidiary, Sale of Stock [Line Items]
Shareholders ownership interest (percent)		0.90%

Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Sep. 30, 2018	Sep. 30, 2017
Concentration Risk [Line Items]
Cash and cash equivalents on consolidated balance sheet	$ 887	$ 1,435	$ 572
Restricted cash	666	1,014
Total cash and cash equivalents on consolidated statement of cash flows	1,553	2,449	$ 1,237	$ 1,968
Inventories	1,417	$ 930
Revenue from acquisitions	1,169
Net income from acquisitions	$ 62
Product Concentration Risk \| Gross Revenue
Concentration Risk [Line Items]
Discount fees as percent of gross revenue (percent)	86.00%	86.00%

Acquisitions - Additional Information (Details) $ in Thousands	3 Months Ended
	Dec. 31, 2018 USD ($)
Finite-Lived Intangible Assets [Line Items]
Estimated amortization period	15 years
Residual buyouts
Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired	$ 474
Estimated amortization period	2 years

Acquisitions (Details) $ in Thousands	3 Months Ended
Acquisitions (Details) $ in Thousands	Dec. 31, 2018 USD ($) business	Sep. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
Business Acquisition [Line Items]
Number of Businesses Acquired \| business	2
Proceeds from issuance of long-term debt used to fund the acquisition	$ 21,000
Contingent cash consideration	4,000
Total purchase consideration	25,000
Acquisition-related costs	$ 225
Estimated amortization period	15 years
Potential additional consideration	$ 14,000
Goodwill	$ 98,486	$ 83,954	$ 76,892
Capitalized software
Business Acquisition [Line Items]
Estimated amortization period	7 years
Trade name
Business Acquisition [Line Items]
Estimated amortization period	6 years
Minimum \| Acquired merchant relationships
Business Acquisition [Line Items]
Estimated amortization period	13 years
Maximum \| Acquired merchant relationships
Business Acquisition [Line Items]
Estimated amortization period	16 years
2019 Acquisitions
Business Acquisition [Line Items]
Inventories	$ 26
Prepaid expenses and other current assets	20
Property and equipment	298
Goodwill	14,532
Total assets acquired	25,576
Accrued expenses and other current liabilities	12
Deferred revenue, current	564
Net assets acquired	25,000
2019 Acquisitions \| Capitalized software
Business Acquisition [Line Items]
Intangible assets	3,200
2019 Acquisitions \| Acquired merchant relationships
Business Acquisition [Line Items]
Intangible assets	7,000
2019 Acquisitions \| Trade name
Business Acquisition [Line Items]
Intangible assets	$ 500

Acquisitions - Pro Forma Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Business Combinations [Abstract]
Revenue	$ 85,492	$ 79,553
Net income (loss)	$ 2,024	$ (195)

Goodwill and Intangible Assets - Changes in Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2018	Sep. 30, 2018
Goodwill [Roll Forward]
Goodwill, beginning	$ 83,954
Goodwill attributable acquisitions	14,532
Goodwill, ending	98,486
Merchant Services
Goodwill [Roll Forward]
Goodwill, beginning	69,666
Goodwill attributable acquisitions	0
Goodwill, ending	69,666
Accumulated impairment losses		$ 11,458
Proprietary Software and Payments
Goodwill [Roll Forward]
Goodwill, beginning	14,288
Goodwill attributable acquisitions	14,532
Goodwill, ending	28,820
Accumulated impairment losses		0
Other
Goodwill [Roll Forward]
Goodwill, beginning	0
Goodwill attributable acquisitions	0
Goodwill, ending	$ 0
Accumulated impairment losses		$ 0

Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Sep. 30, 2018
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 111,381
Finite-lived intangible assets, accumulated amortization	(40,189)
Finite-lived intangible assets, carrying value	71,192
Total identifiable intangible assets, cost	111,413
Total identifiable intangible assets, carrying value	71,224		$ 66,023
Amortization expense of intangible assets	2,802	$ 2,260
Trademarks
Finite-Lived Intangible Assets [Line Items]
Indefinite-lived Intangible Assets	32
Merchant relationships
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	101,791
Finite-lived intangible assets, accumulated amortization	(36,204)
Finite-lived intangible assets, carrying value	$ 65,587
Merchant relationships \| Minimum
Finite-Lived Intangible Assets [Line Items]
Amortization life	13 years
Merchant relationships \| Maximum
Finite-Lived Intangible Assets [Line Items]
Amortization life	16 years
Non-compete agreements
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 1,890
Finite-lived intangible assets, accumulated amortization	(655)
Finite-lived intangible assets, carrying value	$ 1,235
Non-compete agreements \| Minimum
Finite-Lived Intangible Assets [Line Items]
Amortization life	2 years
Non-compete agreements \| Maximum
Finite-Lived Intangible Assets [Line Items]
Amortization life	5 years
Website development costs
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 51
Finite-lived intangible assets, accumulated amortization	(17)
Finite-lived intangible assets, carrying value	$ 34
Amortization life	3 years
Trade names
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 4,217
Finite-lived intangible assets, accumulated amortization	(2,098)
Finite-lived intangible assets, carrying value	$ 2,119
Trade names \| Minimum
Finite-Lived Intangible Assets [Line Items]
Amortization life	2 years
Trade names \| Maximum
Finite-Lived Intangible Assets [Line Items]
Amortization life	7 years
Residual buyouts
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 2,517
Finite-lived intangible assets, accumulated amortization	(1,068)
Finite-lived intangible assets, carrying value	$ 1,449
Amortization life	2 years
Referral and exclusivity
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 915
Finite-lived intangible assets, accumulated amortization	(147)
Finite-lived intangible assets, carrying value	$ 768
Referral and exclusivity \| Minimum
Finite-Lived Intangible Assets [Line Items]
Amortization life	1 year
Referral and exclusivity \| Maximum
Finite-Lived Intangible Assets [Line Items]
Amortization life	10 years

Goodwill and Intangible Assets - Future Amortization Expense (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2019 (nine months remaining)	$ 7,921
2020	8,779
2021	7,312
2022	6,685
2023	5,881
Thereafter	34,614
Finite-lived intangible assets, carrying value	$ 71,192

Long-Term Debt, Net - Summary of Long-term Debt (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Sep. 30, 2018
Debt Instrument [Line Items]
Debt issuance costs, net	$ (1,241)	$ (1,474)
Total long-term debt, net of issuance costs	54,009	36,776
Less current portion of long-term debt	(5,000)	(5,000)
Long-term debt, net of current portion	49,009	31,776
Secured Debt \| Term loans to bank under the Senior Secured Credit Facility
Debt Instrument [Line Items]
Long-term debt	33,750	35,000
Line of Credit \| Revolving lines of credit to banks under the Senior Secured Credit Facility
Debt Instrument [Line Items]
Long-term debt	$ 21,500	$ 3,250

Long-Term Debt, Net - Additional Information (Details) - USD ($)		3 Months Ended
	Dec. 31, 2018	Dec. 31, 2018	Dec. 31, 2017	Jun. 25, 2018	Oct. 30, 2017	Sep. 30, 2017	Dec. 31, 2013
Debt Instrument [Line Items]
Debt issuance costs	$ 0	$ 0	$ 1,113,000
Amortization of deferred debt issuance costs		233,000	$ 221,000
Term loans to bank under the Senior Secured Credit Facility \| Secured Debt
Debt Instrument [Line Items]
Original principal amount					$ 40,000,000
Senior Secured Credit Facility \| Line of Credit
Debt Instrument [Line Items]
Revolving line of credit borrowing capacity					$ 110,000,000
Unused commitment fee (percent)	0.15%
Quarterly principal payment		1,250,000
Remaining borrowing capacity	$ 88,500,000	88,500,000
Debt covenant, equity repurchase limit from employees, directors, officers or consultants		$ 1,500,000
Debt covenant, dividend or distribution limit as percent of net cash proceeds from additional common equity issuance (percent)		5.00%
Senior Secured Credit Facility \| Line of Credit \| Minimum
Debt Instrument [Line Items]
Unused commitment fee (percent)		0.15%
Senior Secured Credit Facility \| Line of Credit \| Maximum
Debt Instrument [Line Items]
Unused commitment fee (percent)		0.30%
Senior Secured Credit Facility \| Line of Credit \| Prime Rate
Debt Instrument [Line Items]
Basis spread on variable rate (percent)	0.50%
Senior Secured Credit Facility \| Line of Credit \| Prime Rate \| Minimum
Debt Instrument [Line Items]
Basis spread on variable rate (percent)		0.50%
Senior Secured Credit Facility \| Line of Credit \| Prime Rate \| Maximum
Debt Instrument [Line Items]
Basis spread on variable rate (percent)		2.00%
Senior Secured Credit Facility \| Line of Credit \| 30-day LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate (percent)	2.75%
Senior Secured Credit Facility \| Line of Credit \| 30-day LIBOR \| Minimum
Debt Instrument [Line Items]
Basis spread on variable rate (percent)		2.75%
Senior Secured Credit Facility \| Line of Credit \| 30-day LIBOR \| Maximum
Debt Instrument [Line Items]
Basis spread on variable rate (percent)		4.00%
Notes payable to Mezzanine Lenders \| Notes Payable
Debt Instrument [Line Items]
Original principal amount							$ 10,500,000
Warrants outstanding (shares)	1,423,688	1,423,688
Intrinsic value of warrants				$ 9,241,000		$ 767,000
Warrant exercise price (in USD per share)						$ 0.01

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Jun. 25, 2018
Class of Stock [Line Items]
Provision for (benefit from) income taxes	$ 265	$ (389)
Percent of tax benefits payable to continuing equity owners			85.00%
Tax benefits retained (percent)			15.00%
Continuing Equity Owner \| Class B Common Stock
Class of Stock [Line Items]
Deferred tax asset recognized	960
Tax benefits due to Continuing Equity Owners	$ 816

Fair Value Measurements (Details) - USD ($) $ in Thousands	3 Months Ended
Fair Value Measurements (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Sep. 30, 2018
Mezzanine Warrants
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance, beginning		$ 767
Change in the fair value of warrant liabilities, included in Other expenses		1,681
Balance, ending		2,448
Accrued Contingent Consideration
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance, beginning	$ 5,999	3,340
Change in the fair value of warrant liabilities, included in Other expenses	(349)	382
Contingent consideration accrued at time of business combination	4,000	1,420
Contingent consideration paid	(1,600)
Balance, ending	8,050	$ 5,142
Accrued Expenses and Other Current Liabilities
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Contingent consideration	6,254		$ 3,813
Other Long-term Liabilities
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Contingent consideration	$ 1,796		$ 2,186

Equity-Based Compensation (Details) - USD ($)	3 Months Ended			12 Months Ended
Equity-Based Compensation (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017	Jun. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Income tax benefits related to equity-based compensation		$ 0	$ 0	$ 0	$ 0
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	$ 951,000	$ 0

Equity-Based Compensation - Additional Information (Details) - $ / shares		3 Months Ended
	Jun. 25, 2018	Dec. 31, 2018	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted to directors and certain employees (shares)		822,250
Options granted, exercise price (in USD per share)		$ 21.28
2018 Equity Incentive Award Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for grant under the plan (shares)		3,500,000
Additional Class A common shares added at the beginning of calendar year as percentage of common stock outstanding at end of previous year (percent)		4.00%	4.00%
Directors and Certain Employees \| IPO \| Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted to directors and certain employees (shares)	2,045,000
Options granted, exercise price (in USD per share)	$ 13.00
Award vesting period	3 years

Equity-Based Compensation - Fair Value of Stock Option Awards (Details) - Stock Options	3 Months Ended
	Dec. 31, 2018	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility (percent)	26.60%	26.30%
Expected dividend yield (percent)	0.00%	0.00%
Expected term	6 years	6 years
Risk-free interest rate (percent)	2.90%	2.80%

Equity-Based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Dec. 31, 2018	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding at beginning of period (shares)	2,138,500
Granted (shares)	822,250
Exercised (shares)	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period	(7,500)
Outstanding at end of period (shares)	2,953,250
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Outstanding at beginning of period, weighted average exercise price (in USD per share)	$ 15.40	$ 13.13
Granted, weighted average exercise price (in USD per share)	21.28
Exercised, weighted average exercise price (in USD per share)	0
Forfeited, weighted average exercise price (in USD per share)	13.00
Outstanding at end of period, weighted average exercise price (in USD per share)	15.40	$ 13.13
Granted, weighted average grant date fair value (in USD per share)	$ 6.93
Options exercisable at end of period (shares)	0
Unrecognized compensation expense related to unvested options at end of period	$ 12,803
Period for recognition of unrecognized compensation cost	2 years 8 months 12 days

Commitments and Contingencies -Operating Leases (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
Operating leases for office space and equipment	$ 493	$ 323
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2019 (nine months remaining)	1,576
2020	1,978
2021	1,541
2022	1,386
2023	1,271
Thereafter	1,294
Total	$ 9,046

Commitments and Contingencies - Minimum Fee Commitments (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2019 (nine months remaining)	$ 1,904
2020	2,866
2021	2,757
2022	3,346
2023	3,621
Thereafter	243
Total	$ 14,737

Commitments and Contingencies - Litigation (Details) $ in Thousands	Apr. 10, 2018 USD ($)
Expert Auto Litigation \| Settled Litigation \| Damages from Product Defects
Loss Contingencies [Line Items]
Legal settlement	$ 995

Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Jun. 25, 2018
Related Party Transaction [Line Items]
Percent of tax benefits payable to continuing equity owners			85.00%
Notes Payable \| Affiliated Entity
Related Party Transaction [Line Items]
Related party interest expense		$ 322
Junior Subordinated Notes \| Unsecured Debt \| Affiliated Entity
Related Party Transaction [Line Items]
Related party interest expense		157
Continuing Equity Owner \| Class B Common Stock
Related Party Transaction [Line Items]
Tax benefits due to Continuing Equity Owners	$ 816
Axia Tech \| Affiliated Entity
Related Party Transaction [Line Items]
Net revenue from related party	$ 18	$ 11
i3Verticals, LLC \| Affiliated Entity
Related Party Transaction [Line Items]
Ownership interest in Axia Tech (percent)	2.00%
Chief Executive Officer \| Affiliated Entity
Related Party Transaction [Line Items]
Ownership interest in Axia Tech (percent)	10.70%
Chief Financial Officer \| Affiliated Entity
Related Party Transaction [Line Items]
Ownership interest in Axia Tech (percent)	0.40%

Segments (Details) - USD ($) $ in Thousands	3 Months Ended
Segments (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Sep. 30, 2018
Segment Reporting Information [Line Items]
Revenue	$ 84,868	$ 77,221
Operating expenses
Interchange and network fees	55,829	52,238
Other costs of services	9,790	9,553
Selling general and administrative	12,516	8,845
Depreciation and amortization	3,552	2,856
Change in fair value of contingent consideration	(349)	382
Income from operations	3,530	3,347
Processing margin	23,088	18,761
Assets	197,192	164,430	$ 175,142
Goodwill	98,486	76,892	83,954
Merchant Services
Segment Reporting Information [Line Items]
Revenue	77,702	72,679
Operating expenses
Interchange and network fees	54,364	51,047
Other costs of services	9,396	9,143
Selling general and administrative	6,091	4,886
Depreciation and amortization	2,782	2,310
Change in fair value of contingent consideration	(319)	(125)
Income from operations	5,388	5,418
Processing margin	17,627	15,685
Assets	141,136	140,369
Goodwill	69,666	66,267	69,666
Residual expense	3,685	3,196
Proprietary Software and Payments
Segment Reporting Information [Line Items]
Revenue	7,166	4,545
Operating expenses
Interchange and network fees	1,465	1,192
Other costs of services	394	410
Selling general and administrative	2,987	1,695
Depreciation and amortization	661	517
Change in fair value of contingent consideration	(30)	507
Income from operations	1,689	224
Processing margin	5,461	3,078
Assets	51,976	20,832
Goodwill	28,820	10,625	14,288
Residual expense	154	135
Other
Segment Reporting Information [Line Items]
Revenue	0	(3)
Operating expenses
Interchange and network fees	0	(1)
Other costs of services	0	0
Selling general and administrative	3,438	2,264
Depreciation and amortization	109	29
Change in fair value of contingent consideration	0	0
Income from operations	(3,547)	(2,295)
Processing margin	0	(2)
Assets	4,080	3,229
Goodwill	0	0	$ 0
Residual expense	$ 0	$ 0

Non-Controlling Interest (Details) - i3Verticals, LLC	Dec. 31, 2018 shares
Noncontrolling Interest [Line Items]
Non-controlling interest, common units (shares)	9,108,032
Non-controlling interest, ownership interest (percent)	34.60%

Earnings Per Share (Details) - USD ($)
$ / shares in Units, $ in Thousands

3 Months Ended

Dec. 31, 2018

Dec. 31, 2017

Numerator

Net income

$ 2,351

$ (332)

Less: Net income attributable to non-controlling interests

2,173

Net income (loss) attributable to i3 Verticals, Inc.

$ 178

$ (332)

Denominator

Basic (shares)

^[1]

8,812,630

Basic (in USD per share)

^[1]

$ 0.02

Dilutive net income per share:

Weighted average effect of dilutive securities (shares)

1,090,538

Weighted average shares of Class A common stock outstanding - diluted (shares)

^[1]

9,903,168

Diluted (in USD per share)

^[1]

$ 0.02

Class A Common Stock

Numerator

Net income

$ 2,351

Less: Net income attributable to non-controlling interests

2,173

Net income (loss) attributable to i3 Verticals, Inc.

$ 178

Denominator

Basic (shares)

^[1]

8,812,630

Basic (in USD per share)

^[1]

$ 0.02

Dilutive net income per share:

Net income (loss) attributable to Class A common stockholders - diluted

$ 178

Weighted average shares of Class A common stock outstanding - diluted (shares)

9,903,168

[1]	Basic and diluted net income per Class A common stock are presented only for the period after the Company’s Reorganization Transactions. See Note 1 for a description of the Reorganization Transactions. See Note 13 for the calculation of income per common share.

Earnings Per Share - Antidilutive Securities (Details)	3 Months Ended
Earnings Per Share - Antidilutive Securities (Details)	Dec. 31, 2018 shares
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (shares)	754,750
Restricted Class A Common Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (shares)	295,402
Class B Common Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (shares)	17,213,806

Significant Non-cash Transactions (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Other Significant Noncash Transactions [Line Items]
Common units issued as part of acquisitions' purchase consideration	$ 0	$ 104
Acquisition date fair value of contingent consideration in connection with business combinations	4,000	1,420
Replacement of 2016 Senior Secured Credit Facility with Senior Secured Credit Facility	0	87,525
Preferred return on Class A Units and Redeemable Class A Units		168
Debt issuance costs financed with proceeds from Senior Secured Credit Facility	0	904
Required Distributions to Members for Tax Obligations	934	0
Redeemable Class A
Other Significant Noncash Transactions [Line Items]
Preferred return on Class A Units and Redeemable Class A Units	0	168
Class A Common Stock
Other Significant Noncash Transactions [Line Items]
Preferred return on Class A Units and Redeemable Class A Units	$ 0	$ 774

Subsequent Events (Details) $ in Thousands	Jan. 14, 2019 USD ($)
Subsequent Event
Subsequent Event [Line Items]
Investment Owned, at Cost	$ 1