iiiv-20240510
0001728688FALSE00017286882024-05-102024-05-10


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549  
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 10, 2024 (May 10, 2024) 
 
 
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i3 Verticals, Inc.
(Exact name of registrant as specified in its charter)  
 

 
Delaware
001-38532
82-4052852
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
40 Burton Hills Blvd., Suite 415
Nashville, TN
37215
(Address of principal executive offices)
(Zip Code)
(615) 465-4487
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d- 2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e- 4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.0001 Par ValueIIIVNasdaq Global Select Market
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company.  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐




As provided in General Instruction B.2 of Form 8-K, the information contained in Items 2.02 and 7.01 of this Current Report on Form 8-K (including Exhibits 99.1 and 99.2 hereto) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 2.02.    Results of Operations and Financial Condition.
On May 10, 2024, i3 Verticals, Inc. (the “Company”) issued a press release announcing the results of its operations for the three and six months ended March 31, 2024. A copy of the press release is furnished as Exhibit 99.1 hereto and is hereby incorporated by reference into this Item 2.02.
Item 7.01.    Regulation FD Disclosure.
The Company has also prepared a supplemental presentation (the “Supplemental Presentation”) providing certain supplemental financial information for the three and six months ended March 31, 2024. A copy of the Supplemental Presentation is furnished as Exhibit 99.2 hereto and is hereby incorporated by reference into this Item 7.01. A copy of the Supplemental Presentation is also available on the Investors section of the Company’s website, www.i3verticals.com.
Item 9.01.     Financial Statements and Exhibits.

(d) Exhibits:
Exhibit No.Description
104Cover Page Interactive Date File (embedded within the Inline XBRL document).





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 10, 2024

i3 VERTICALS, INC.
By:
/s/ Clay Whitson
Name:
Clay Whitson
Title:
Chief Financial Officer

Document

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i3 VERTICALS REPORTS SECOND QUARTER 2024 FINANCIAL RESULTS

NASHVILLE, Tenn. (May 10, 2024) – i3 Verticals, Inc. (Nasdaq: IIIV) (“i3 Verticals” or the “Company”) today reported its financial results for the fiscal second quarter ended March 31, 2024.
Highlights for the second quarter and six months ended March 31, 2024 vs. 2023
Second quarter revenue was $94.5 million, an increase of 0.7% over the prior year's second quarter. Revenue for the six months ended March 31, 2024, was $186.5 million, an increase of 3.7% over the prior year's first six months.
Second quarter net income was $3.3 million, compared to net loss of $0.2 million in the prior year's second quarter. Net income for the six months ended March 31, 2024, was $4.9 million, compared to a net loss of $23 thousand in the prior year's first six months.
Second quarter net income attributable to i3 Verticals, Inc. was $1.9 million, compared to net income attributable to i3 Verticals, Inc. of $36 thousand in the prior year's second quarter. Net income attributable to i3 Verticals, Inc. for the six months ended March 31, 2024, was $3.0 million, compared to net loss attributable to i3 Verticals, Inc. of $0.2 million in the prior year's first six months.
Second quarter adjusted EBITDA1 was $25.8 million, an increase of 4.4% over the prior year's second quarter. Adjusted EBITDA1 for the six months ended March 31, 2024, was $51.0 million, an increase of 5.5% over the prior year's first six months.
Second quarter adjusted EBITDA1 as a percentage of revenue was 27.3%, compared to 26.3% in the prior year's second quarter. Adjusted EBITDA1 a percentage of revenue for the six months ended March 31, 2024, was 27.3%, compared to 26.9% in the prior year's first six months.
Second quarter diluted net income per share available to Class A common stock was $0.08, compared to diluted net loss per share available to Class A common stock of $0.00 in the prior year's second quarter. Diluted net income per share available to Class A common stock was $0.13 in the six months ended March 31, 2024, compared to diluted net loss per share available to Class A common stock of $0.01 in the prior year's first six months.
Second quarter pro forma adjusted diluted earnings per share1, which gives pro forma effect to the Company's tax rate, was $0.34 compared to $0.38 for the prior year's second quarter. Pro forma adjusted diluted earnings per share1 for the six months ended March 31, 2024, was $0.70 compared to $0.75 for the prior year's first six months.
Annualized Recurring Revenue ("ARR")2 for the three months ended March 31, 2024 and 2023 was $322.5 million and $305.7 million, respectively, representing a period-to-period growth rate of 5.5%.
Software and related services revenue3 as a percentage of total revenue was 48.3% for the three months ended March 31, 2024.
As of March 31, 2024, consolidated interest coverage ratio was 4.1x and total leverage ratio was 3.5x. These ratios are defined in the Company's 2023 Credit Agreement.
1.Represents a non-GAAP financial measure. For additional information (including reconciliation information), see the attached schedules to this release.
2.Annualized Recurring Revenue (ARR) is the annualized revenue derived from software-as-a-service (“SaaS”) arrangements, transaction-based software-revenue, software maintenance, recurring software-based services, payments revenue and other recurring revenue sources within the quarter. This excludes contracts that are not recurring or are one-time in nature. The Company focuses on ARR because it helps i3 Verticals to assess the health and trajectory of the business. ARR does not have a standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies. It should be reviewed independently of revenue, and it is not a forecast. Additionally, ARR does not take into account seasonality. The active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by i3 Verticals' customers.
3.Software and related services revenue includes the sale of subscriptions, recurring services, ongoing support, licenses, and installation and implementation services specific to software.
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IIIV Reports Second Quarter 2024 Financial Results
Page 2
May 10, 2024
Greg Daily, Chairman and CEO of i3 Verticals, commented, "In the second quarter of fiscal year 2024 we continued to make progress on our recurring revenue sources. SaaS and software transaction-based revenue were both up 10%, while payments was up 6%. Despite certain non-recurring sources of revenue such as license and professional services being temporarily lower, we still expanded our adjusted EBITDA margins by 100 bps year-over-year, a testament to our team’s efforts to drive bottom line results. Looking ahead, we are excited about our pipeline of opportunities as well as our market position in our core vertical markets.”
Update on Exploration of Sale of our Merchant Services Business
The Company previously announced that its Board of Directors initiated a process solely to explore the potential sale of certain assets related to its Merchant Services Business. While that process is ongoing, there is no assurance that the process to explore the sale of the Merchant Services Business will result in any transaction, or if the transaction is completed, the timing or terms of any such transaction. Any decision by the Board to engage in any transaction involving the Merchant Services Business will be aligned with the Board’s objectives of maximizing long-term shareholder value and strengthening the Company’s ongoing operations, and in all cases will be subject to then prevailing market conditions.
Revised 2024 Outlook
The Company's practice is to provide annual guidance, excluding the impact of acquisitions, dispositions and transaction-related costs. In particular, this annual guidance does not take into account any impact of the potential sale of i3 Verticals' Merchant Services Business as described above in the Company's results of operations for the fiscal year ending September 30, 2024, in the event that such sale is completed.
The Company is providing the following revised outlook for the fiscal year ending September 30, 2024:
(in thousands, except share and per share amounts)Previous Outlook RangeRevised Outlook Range
Fiscal year ending September 30, 2024
Revenue$385,000 -$400,000 $380,000 -$394,000 
Adjusted EBITDA (non-GAAP)
$109,000 -$115,000 $107,000 -$113,000 
Depreciation and internally developed software amortization$11,000 -$13,000 $11,000 -$13,000 
Cash interest expense, net$26,000 -$29,000 $27,000 -$29,000 
Pro forma adjusted diluted earnings per share(1)(non-GAAP)
$1.52 -$1.64 $1.49 -$1.57 
_______________________
1.Assumes an effective pro forma tax rate of 25.0% (non-GAAP).

With respect to the “Revised 2024 Outlook” above, reconciliations of adjusted EBITDA and pro forma adjusted diluted earnings per share guidance to the closest corresponding GAAP measure on a forward-looking basis is not available without unreasonable efforts. This inability results from the inherent difficulty in forecasting generally and quantifying certain projected amounts that are necessary for such reconciliations. In particular, sufficient information is not available to calculate certain adjustments required for such reconciliations, including changes in the fair value of contingent consideration, income tax expense of i3 Verticals, Inc. and equity-based compensation expense. The Company expects these adjustments may have a potentially significant impact on future GAAP financial results.
Conference Call
The Company will host a conference call on Friday, May 10, 2024, at 9:00 a.m. ET, to discuss financial results and operations. To listen to the call live via telephone, participants should dial (844) 887-9399 approximately 10 minutes prior to the start of the call. A telephonic replay will be available from 12:00 p.m. ET on May 10, 2024, through May 17, 2024, by dialing (877) 344-7529 and entering Confirmation Code 6854757.
To listen to the call live via webcast, participants should visit the “Investors” section of the Company’s website, www.i3verticals.com, and go to the “Events” page approximately 10 minutes prior to the start of the call. The online replay will be available on this page of the Company’s website beginning shortly after the conclusion of the call and will remain available for 30 days.
Non-GAAP Measures
This press release contains information prepared in conformity with GAAP as well as non-GAAP information. It is management’s intent to provide non-GAAP financial information to enhance understanding of the Company's consolidated financial information as prepared in accordance with GAAP. This non-GAAP information should be
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IIIV Reports Second Quarter 2024 Financial Results
Page 3
May 10, 2024
considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure and the most directly comparable GAAP financial measure are presented for historical periods so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies.
Additional information about non-GAAP financial measures, including, but not limited to, pro forma adjusted net income, adjusted EBITDA and pro forma adjusted diluted EPS, and a reconciliation of those measures to the most directly comparable GAAP measures is included in the financial schedules of this release.
About i3 Verticals
The Company delivers seamless integrated software and services to customers in strategic vertical markets. Building on its sophisticated and diverse platform of software and services solutions, the Company creates and acquires software products to serve the specific needs of public and private organizations in its strategic verticals, including its Public Sector (including Education) and Healthcare verticals.
Forward-Looking Statements
This release contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact or relating to present facts or current conditions included in this release are forward-looking statements, including any statements regarding the Company's fiscal 2024 financial outlook and statements of a general economic or industry specific nature. Forward-looking statements give the Company's current expectations and projections relating to its financial condition, results of operations, guidance, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “could have,” “exceed,” “significantly,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.
The forward-looking statements contained in this release are based on assumptions that we have made in light of the Company's industry experience and its perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you review and consider information presented herein, you should understand that these statements are not guarantees of future performance or results. They depend upon future events and are subject to risks, uncertainties (many of which are beyond the Company's control) and assumptions. Factors that could cause actual results to differ from those expressed or implied by our forward-looking statements include, among other things: the impact of our Board of Directors exploring a potential sale of our Merchant Services Business, including the risks that a definitive agreement will not be reached with respect to a potential transaction or that a potential transaction will not be consummated, potential adverse effects on the market price of our Class A common stock or on our operating results because of the failure to complete such a potential transaction, potential adverse effects of the announcement or the consummation of such potential transaction on the market price of our Class A common stock, significant transaction costs associated with such a potential transaction, and the effect of the announcement or pendency of such potential transaction on our business relationships, operating results, and business generally,
among other factors; ongoing economic and geopolitical conditions, including the impact of inflation and elevated interest rates, competition in our industry and our ability to compete effectively, and regulatory developments; the successful integration of acquired businesses; and future decisions made by us and our competitors. All of these factors are difficult or impossible to predict accurately and many of them are beyond our control. For a further list and description of these and other important risks and uncertainties that may affect our future operations, see Part I, Item 1A - Risk Factors in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, which we may update in Part II, Item 1A - Risk Factors in Quarterly Reports on Form 10-Q we have filed or will file hereafter.
Any forward-looking statement made by us in this release speaks only as of the date of this release and we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
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IIIV Reports Second Quarter 2024 Financial Results
Page 4
May 10, 2024
Contact:
Clay Whitson
Chief Financial Officer
(888) 251-0987
investorrelations@i3verticals.com
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IIIV Reports Second Quarter 2024 Financial Results
Page 5
May 10, 2024
i3 Verticals, Inc. Consolidated Statements of Operations
(Unaudited)
($ in thousands, except share and per share amounts)
Three Months Ended March 31,Six Months Ended March 31,
20242023% Change20242023% Change
Revenue$94,542 $93,872 1%$186,532 $179,901 4%
Operating expenses
Other costs of services21,180 19,930 6%41,604 38,999 7%
Selling, general and administrative54,162 57,204 (5)%107,694 108,207 —%
Depreciation and amortization10,069 9,015 12%19,808 17,691 12%
Change in fair value of contingent consideration(290)2,279 n/m(527)3,722 n/m
Total operating expenses85,121 88,428 (4)%168,579 168,619 —%
Income from operations9,421 5,444 73%17,953 11,282 59%
Other expenses (income)
Interest expense, net7,750 6,199 25%14,457 11,689 24%
Other income(2,257)— n/m(2,150)(203)959%
Total other expenses5,493 6,199 (11)%12,307 11,486 7%
Income (loss) before income taxes3,928 (755)n/m5,646 (204)n/m
Provision for (benefit from) income taxes580 (563)n/m762 (181)n/m
Net income (loss)3,348 (192)n/m4,884 (23)n/m
Net income (loss) attributable to non-controlling interest1,470 (228)n/m1,908 181 954%
Net income (loss) attributable to i3 Verticals, Inc.$1,878 $36 5,117%$2,976 $(204)n/m
Net income (loss) per share attributable to Class A common stockholders:
Basic$0.08 $0.00 $0.13 $(0.01)
Diluted$0.08 $0.00 $0.13 $(0.01)
Weighted average shares of Class A common stock outstanding:
Basic23,331,239 23,135,898 23,299,214 23,066,499 
Diluted23,718,474 34,269,140 23,726,720 23,066,499 
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IIIV Reports Second Quarter 2024 Financial Results
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May 10, 2024
i3 Verticals, Inc. Segment Summary
(Unaudited)
($ in thousands)
For the Three Months Ended March 31, 2024
Software and ServicesMerchant ServicesOtherTotal
Revenue$59,483 $35,075 $(16)$94,542 
Income (loss) from operations$14,064 $7,656 $(12,299)$9,421 
Payment volume(1)
$851,241 $5,437,316 $— $6,288,557 

For the Three Months Ended March 31, 2023
Software and ServicesMerchant ServicesOtherTotal
Revenue$60,797 $33,094 $(19)$93,872 
Income (loss) from operations$13,218 $5,774 $(13,548)$5,444 
Payment volume(1)
$716,426 $5,243,622 $— $5,960,048 

For the Six Months Ended March 31, 2024
Software and ServicesMerchant ServicesOtherTotal
Revenue$116,072 $70,497 $(37)$186,532 
Income (loss) from operations$27,404 $15,789 $(25,240)$17,953 
Payment volume(1)
$1,633,100 $10,888,614 $— $12,521,714 

For the Six Months Ended March 31, 2023
Software and ServicesMerchant ServicesOtherTotal
Revenue$114,010 $65,928 $(37)$179,901 
Income (loss) from operations$24,432 $12,791 $(25,941)$11,282 
Payment volume(1)
$1,368,602 $10,505,461 $— $11,874,063 
__________________________
1.Payment volume is the net dollar value of both (1) Visa, Mastercard and other payment network transactions processed by the Company's customers and settled to customers by the Company and (2) ACH transactions processed by the Company's customers and settled to customers by the Company.
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IIIV Reports Second Quarter 2024 Financial Results
Page 7
May 10, 2024
i3 Verticals, Inc. Consolidated Balance Sheets
($ in thousands, except share and per share amounts)
March 31,September 30,
20242023
(unaudited)
Assets
Current assets
Cash and cash equivalents$3,139 $3,112 
Accounts receivable, net66,539 65,110 
Settlement assets1,586 4,873 
Prepaid expenses and other current assets15,802 12,449 
Total current assets87,066 85,544 
Property and equipment, net11,002 12,308 
Restricted cash2,568 4,415 
Capitalized software, net61,345 62,577 
Goodwill410,772 409,563 
Intangible assets, net221,145 226,952 
Deferred tax asset51,591 52,514 
Operating lease right-of-use assets12,806 13,922 
Other assets7,247 13,698 
Total assets$865,542 $881,493 
Liabilities and equity
Liabilities
Current liabilities
Accounts payable$11,996 $11,064 
Current portion of long-term debt26,223 — 
Accrued expenses and other current liabilities26,854 37,740 
Settlement obligations1,586 4,873 
Deferred revenue36,931 35,275 
Current portion of operating lease liabilities4,421 4,509 
Total current liabilities108,011 93,461 
Long-term debt, less current portion and debt issuance costs, net343,392 385,081 
Long-term tax receivable agreement obligations40,323 40,079 
Operating lease liabilities, less current portion9,362 10,433 
Other long-term liabilities18,354 24,143 
Total liabilities519,442 553,197 
Commitments and contingencies
Stockholders' equity
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized; 0 shares issued and outstanding as of March 31, 2024 and September 30, 2023
— — 
Class A common stock, par value $0.0001 per share, 150,000,000 shares authorized; 23,416,518 and 23,253,272 shares issued and outstanding as of March 31, 2024 and September 30, 2023, respectively
Class B common stock, par value $0.0001 per share, 40,000,000 shares authorized; 10,052,676 and 10,093,394 shares issued and outstanding as of March 31, 2024 and September 30, 2023, respectively
Additional paid-in capital259,242 249,688 
Accumulated deficit(9,968)(12,944)
Total stockholders' equity249,277 236,747 
Non-controlling interest96,823 91,549 
Total equity346,100 328,296 
Total liabilities and equity$865,542 $881,493 
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IIIV Reports Second Quarter 2024 Financial Results
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May 10, 2024
i3 Verticals, Inc. Consolidated Cash Flow Data
(Unaudited)
($ in thousands)
Six Months Ended March 31,
20242023
Net cash provided by operating activities$25,147 $25,884 
Net cash used in investing activities$(12,369)$(111,130)
Net cash (used in) provided by financing activities$(17,885)$83,814 

Reconciliation of GAAP to Non-GAAP Financial Measures
The Company believes that the non-GAAP financial measures presented by the Company provide useful information to investors in understanding and evaluating the Company's ongoing operating results. Accordingly, the Company includes such non-GAAP financial measures when reporting its financial results to shareholders and potential investors in order to provide them with an additional tool to evaluate the Company’s ongoing business operations. The Company believes that these non-GAAP financial measures are representative of comparative financial performance that reflects the economic substance of the Company's current and ongoing business operations.
Although these non-GAAP financial measures assist in measuring the Company's operating results and assessing its financial performance, they are not necessarily comparable to similarly titled measures of other companies due to potential inconsistencies in the method of calculation. The Company believes that the disclosure of these non-GAAP financial measures provides investors with important key financial performance indicators that are utilized by management to assess the Company's operating results, evaluate the business and make operational decisions on a prospective, going-forward basis. Hence, management provides disclosure of these non-GAAP financial measures to give shareholders and potential investors an opportunity to see the Company as viewed by management, to assess the Company with some of the same tools that management utilizes internally and to be able to compare such information with prior periods. The Company believes that disclosure of these non-GAAP financial measures provides investors with additional information to help them better understand its financial statements just as management utilizes these non-GAAP financial measures to better understand the business, manage budgets and allocate resources.
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IIIV Reports Second Quarter 2024 Financial Results
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May 10, 2024
i3 Verticals, Inc. Reconciliation of GAAP Net Income to Non-GAAP Pro Forma Adjusted Net Income and Non-GAAP Adjusted EBITDA
(Unaudited)
($ in thousands)
Three Months Ended March 31,Six Months Ended March 31,
2024202320242023
Net income (loss) attributable to i3 Verticals, Inc.$1,878 $36 $2,976 $(204)
Net income (loss) attributable to non-controlling interest1,470 (228)1,908 181 
Non-GAAP adjustments:
Provision for (benefit from) income taxes580 (563)762 (181)
Non-cash change in fair value of contingent consideration(1)
(290)2,279 (527)3,722 
Equity-based compensation(2)
5,777 6,802 12,285 13,648 
M&A-related expenses(3)
714 358 958 1,085 
Acquisition intangible amortization(4)
7,188 7,273 14,333 14,005 
Non-cash interest expense(5)
262 368 676 729 
Other taxes(6)
106 811 481 886 
Net gain on exchangeable note repurchases and related transactions(7)
(2,257)— (2,257)— 
Gain on investment(8)
— — — (203)
Loss on disposal of property and equipment(9)
— — 107 — 
Non-GAAP pro forma adjusted income before taxes15,428 17,136 31,702 33,668 
Pro forma taxes at effective tax rate(10)
(3,857)(4,284)(7,926)(8,417)
Pro forma adjusted net income(11)
$11,571 $12,852 $23,776 $25,251 
Cash interest expense, net(12)
7,488 5,831 13,781 10,960 
Pro forma taxes at effective tax rate(10)
3,857 4,284 7,926 8,417 
Depreciation and internally developed software amortization(13)
2,881 1,742 5,475 3,686 
Adjusted EBITDA(14)
$25,797 $24,709 $50,958 $48,314 
_______________
1.Non-cash change in fair value of contingent consideration reflects the changes in management’s estimates of future cash consideration to be paid in connection with prior acquisitions from the amount estimated as of the later of the most recent balance sheet date forming the beginning of the income statement period or the original estimates made at the closing of the applicable acquisition.
2.Equity-based compensation expense related to stock options and restricted stock units issued under the Company's 2018 Equity Incentive Plan and 2020 Acquisition Equity Incentive Plan.
3.M&A-related expenses are the professional service and related costs directly related to any merger, acquisition and disposition activity of the Company, which expenses we believe are not reflective of the underlying operational performance of the Company. This also includes financing costs related to the administration of our exchangeable notes.
4.Acquisition intangible amortization reflects amortization of intangible assets and software acquired through business combinations, acquired customer portfolios, acquired referral agreements and related asset acquisitions.
5.Non-cash interest expense reflects amortization of debt issuance costs and any write-offs of debt issuance costs.
6.Other taxes consist of franchise taxes, commercial activity taxes, reserves for ongoing tax audit matters, the employer portion of payroll taxes related to stock option exercises and other non-income-based taxes. Taxes related to salaries are not included.
7.Net gain on exchangeable note repurchases and related transactions reflects the gain on repurchases of exchangeable notes and warrant unwinds, net of the loss on sale of bond hedge unwinds, which occurred during the three months ended March 31, 2024.
8.Gain on investment reflects contingent consideration received for an investment that was sold in a prior year.
9.Loss on disposal of property and equipment is related to the sale of a building purchased through an acquisition.
10.Pro forma corporate income tax expense is based on non-GAAP adjusted income before taxes and is calculated using a tax rate of 25.0% for both 2024 and 2023, based on blended federal and state tax rates.
11.Pro forma adjusted net income represents a non-GAAP financial measure and assumes that all net income during the period is available to the holders of the Company's Class A common stock.
12.Cash interest expense, net represents all interest expense net of interest income recorded on the Company's statement of operations other than non-cash interest expense, which represents amortization of debt issuance costs and any write-offs of debt issuance costs.
13.Depreciation and internally developed software amortization reflects depreciation on the Company's property, plant and equipment, net, and amortization expense on its internally developed capitalized software.
14.Represents a non-GAAP financial measure.
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IIIV Reports Second Quarter 2024 Financial Results
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May 10, 2024
i3 Verticals, Inc. GAAP Diluted EPS and Non-GAAP Pro Forma Adjusted Diluted EPS
(Unaudited)
($ in thousands, except share and per share amounts)
Three Months Ended March 31,Six Months Ended March 31,
2024202320242023
Diluted net income (loss) available to Class A common stock per share$0.08 $0.00 $0.13 $(0.01)
Pro forma adjusted diluted earnings per share(1)(2)
$0.34 $0.38 $0.70 $0.75 
Pro forma adjusted net income(2)
$11,571 $12,852 $23,776 $25,251 
Pro forma weighted average shares of adjusted diluted Class A common stock outstanding(3)
33,810,078 34,269,140 33,819,224 33,814,550 
________________
1.Pro forma adjusted diluted earnings per share, a non-GAAP financial measure, is calculated using pro forma adjusted net income and the pro forma weighted average shares of adjusted diluted Class A common stock outstanding.
2.Pro forma adjusted net income, a non-GAAP financial measure, assumes that all net income during the period is available to the holders of the Company's Class A common stock. Further, pro forma adjusted diluted earnings per share assumes that all Common Units in i3 Verticals, LLC and the associated non-voting Class B common stock were exchanged for Class A common stock at the beginning of the period on a one-for-one basis.
3.Pro forma weighted average shares of adjusted diluted Class A common stock outstanding include 10,091,604 and 10,110,975 outstanding shares of Class A common stock issuable upon the exchange of Common Units in i3 Verticals, LLC and 387,235 and 1,022,267 shares resulting from estimated stock option exercises and restricted stock units vesting as calculated by the treasury stock method for the three months ended March 31, 2024 and 2023, respectively. Pro forma weighted average shares of adjusted diluted Class A common stock outstanding include 10,092,504 and 10,114,598 outstanding shares of Class A common stock issuable upon the exchange of Common Units in i3 Verticals, LLC and 427,506 and 633,453 shares resulting from estimated stock option exercises and restricted stock units vesting as calculated by the treasury stock method for the six months ended March 31, 2024 and 2023, respectively.
-END-
supplementalpresentation
1 Supplemental Information Q2 FISCAL YEAR 2024


 
2 ($ in thousands) Quarter Ended March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 Software and related service revenue SaaS(1) $ 10,843 $ 10,453 $ 10,864 $ 10,170 $ 9,901 $ 9,230 $ 8,833 $ 8,450 $ 7,899 Transaction-based(2) 3,656 3,776 3,827 3,461 3,319 3,331 3,137 3,253 2,642 Maintenance(3) 7,917 8,257 7,986 8,478 8,140 7,417 5,600 5,720 5,672 Recurring software services(4) 11,925 10,859 10,966 11,804 11,266 10,164 10,945 10,768 11,107 Professional services(5) 9,882 9,622 11,443 10,600 11,202 9,775 8,492 8,743 8,251 Software licenses 1,434 655 3,256 2,755 3,479 1,197 3,485 2,072 3,401 Total $ 45,657 $ 43,622 $ 48,342 $ 47,268 $ 47,307 $ 41,114 $ 40,492 $ 39,006 $ 38,972 Year-over-year growth (3) % 6 % 19 % 21 % 21 % Payments revenue $ 44,434 $ 43,995 $ 42,601 $ 41,990 $ 41,909 $ 40,354 $ 39,775 $ 36,683 $ 34,528 Year-over-year growth 6 % 9 % 7 % 14 % 21 % Other revenue Recurring(6) $ 1,853 $ 1,890 $ 1,992 $ 1,956 $ 1,880 $ 2,045 $ 2,001 $ 1,792 $ 1,780 Other 2,598 2,483 3,472 2,717 2,776 2,516 2,982 3,072 2,840 Total $ 4,451 $ 4,373 $ 5,464 $ 4,673 $ 4,656 $ 4,561 $ 4,983 $ 4,864 $ 4,620 Year-over-year growth (4) % (4) % 10 % (4) % 1 % Total revenue $ 94,542 $ 91,990 $ 96,407 $ 93,931 $ 93,872 $ 86,029 $ 85,250 $ 80,553 $ 78,120 Recurring revenue(7) $ 80,628 $ 79,230 $ 78,236 $ 77,859 $ 76,415 $ 72,541 $ 70,291 $ 66,666 $ 63,628 Annualized Recurring Revenue “ARR”(8) Software and related service revenue $ 137,362 $ 133,380 $ 134,572 $ 135,652 $ 130,504 $ 120,568 $ 114,060 $ 112,764 $ 109,280 Payments revenue 177,738 175,980 170,404 167,960 167,636 161,416 159,100 146,732 138,112 Other revenue 7,411 7,560 7,968 7,824 7,520 8,180 8,004 7,168 7,120 Total ARR $ 322,510 $ 316,920 $ 312,944 $ 311,436 $ 305,660 $ 290,164 $ 281,164 $ 266,664 $ 254,512 Year-over-year growth 6 % 9 % 11 % 17 % 20 % Revenue Composition See footnotes continued on the next slide.


 
3 1.) SaaS revenue is earned when we provide, as a service to our customers over time, the right to access our software, generally hosted in a cloud environment. 2.) Transaction-based software revenue is earned when we provide services through our software and charge a per-transaction fee. For example, when we provide electronic filing services for courts and charge fees per filing, or when we stand-ready to process and bill utility customers and charge the utility a fee per bill electronically presented. 3.) Software maintenance revenue is earned when, following the implementation of our software systems, we provide ongoing software support services to assist our customers in operating the systems and to periodically update the software. 4.) Recurring software services are earned when we provide long-term, usually evergreen, contracted services to our customers through our software. The services provided, such as healthcare revenue cycle management, or automated collections management, are integrated into one of our software solutions. 5.) Professional services are earned when we provide customized services to our customers who utilize our software products. Many of our customers contract with us for installation, configuration, training, and data conversion projects, which do not necessarily recur, and as such are excluded from our calculation of ARR. 6.) Recurring other revenue primarily consists of recurring long-term contracts that are not specific to software, such as hardware maintenance plans or field service plans. 7.) Recurring revenue consists of software-as-a-service (“SaaS”) arrangements, transaction-based software-revenue, software maintenance revenue, recurring software-based services, payments revenue and other recurring revenue sources. This excludes contracts that are not recurring or are one-time in nature. 8.) Annualized Recurring Revenue (“ARR”) is the quarterly recurring revenue multiplied by 4. The Company focuses on ARR because it helps to assess the health and trajectory of the business. ARR does not have a standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies. It should be reviewed independently of revenue and it is not a forecast. It does not contemplate seasonality. The active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by the Company’s customers. Annualized Recurring Revenue (“ARR”)


 
4 Q2 Fiscal 2024 GAAP Measures ($ in thousands) Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Software and Services Merchant Services Other Total Software and Services Merchant Services Other Total Income (loss) from operations $ 14,064 $ 7,656 $ (12,299) $ 9,421 $ 13,218 $ 5,774 $ (13,548) $ 5,444 The following is our income (loss) from operations for the three and six months ended March 31, 2024 and 2023 calculated in accordance with GAAP. The presentation also includes references to non-GAAP financial measures presented by the Company. The Company believes that the non-GAAP financial measures presented by the Company provide useful information to investors in understanding and evaluating the Company's ongoing operating results. Accordingly, the Company includes such non-GAAP financial measures when reporting its financial results to shareholders and potential investors in order to provide them with an additional tool to evaluate the Company’s ongoing business operations. The Company believes that these non-GAAP financial measures are representative of comparative financial performance that reflects the economic substance of the Company’s current and ongoing business operations. Although these non-GAAP financial measures assist in measuring the Company's operating results and assessing its financial performance, they are not necessarily comparable to similarly titled measures of other companies due to potential inconsistencies in the method of calculation. The Company believes that the disclosure of these non-GAAP financial measures provides investors with important key financial performance indicators that are utilized by management to assess the Company's operating results, evaluate the business and make operational decisions on a prospective, going-forward basis. Hence, management provides disclosure of these non-GAAP financial measures to give shareholders and potential investors an opportunity to see the Company as viewed by management, to assess the Company with some of the same tools that management utilizes internally and to be able to compare such information with prior periods. The Company believes that disclosure of these non-GAAP financial measures provides investors with additional information to help them better understand its financial statements just as management utilizes these non-GAAP financial measures to better understand the business, manage budgets and allocate resources. ($ in thousands) Six Months Ended March 31, 2024 Six Months Ended March 31, 2023 Software and Services Merchant Services Other Total Software and Services Merchant Services Other Total Income (loss) from operations $ 27,404 $ 15,789 $ (25,240) $ 17,953 $ 24,432 $ 12,791 $ (25,941) $ 11,282


 
5 Q2 Fiscal 2024 Segment Performance(1) ($ in thousands) Three Months Ended March 31, Period over period growth2024 2023 Revenue Software and Services $ 59,483 $ 60,797 (2)% Merchant Services 35,075 33,094 6% Other (16) (19) (16)% Total $ 94,542 $ 93,872 1% Adjusted EBITDA(2) Software and Services $ 20,940 $ 22,075 (5)% Merchant Services 10,140 8,610 18% Other (5,283) (5,976) 12% Total $ 25,797 $ 24,709 4% Volume Software and Services $ 851,241 $ 716,426 19% Merchant Services 5,437,316 5,243,622 4% Total $ 6,288,557 $ 5,960,048 6% 1.) i3 Verticals has two segments, "Software and Services" and “Merchant Services.” i3 Verticals also has an “Other” category, which includes corporate overhead. 2.) Adjusted EBITDA is a non-GAAP financial measure. Refer to the following slides for the reconciliation of non-GAAP financial measures.


 
6 Q2 YTD Fiscal 2024 Segment Performance(1) ($ in thousands) Six Months Ended March 31, Period over period growth2024 2023 Revenue Software and Services $ 116,072 $ 114,010 2% Merchant Services 70,497 65,928 7% Other (37) (37) —% Total $ 186,532 $ 179,901 4% Adjusted EBITDA(2) Software and Services $ 41,107 $ 40,937 —% Merchant Services 20,848 17,994 16% Other (10,997) (10,617) (4)% Total $ 50,958 $ 48,314 5% Volume Software and Services $ 1,633,100 $ 1,368,602 19% Merchant Services 10,888,614 10,505,461 4% Total $ 12,521,714 $ 11,874,063 5% 1.) i3 Verticals has two segments, "Software and Services" and “Merchant Services.” i3 Verticals also has an “Other” category, which includes corporate overhead. 2.) Adjusted EBITDA is a non-GAAP financial measure. Refer to the following slides for the reconciliation of non-GAAP financial measures.


 
7 ($ in thousands) Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Software and Services Merchant Services Other Total Software and Services Merchant Services Other Total Income (loss) from operations $ 14,064 $ 7,656 $ (12,299) $ 9,421 $ 13,218 $ 5,774 $ (13,548) $ 5,444 Interest expense, net — 36 7,714 7,750 — — 6,199 6,199 Other income — — (2,257) (2,257) — — — — (Benefit from) provision for income taxes (29) — 609 580 — — (563) (563) Net income (loss) 14,093 7,620 (18,365) 3,348 13,218 5,774 (19,184) (192) Non-GAAP Adjustments: (Benefit from) provision for income taxes (29) — 609 580 — — (563) (563) Non-cash change in fair value of contingent consideration(1) (290) — — (290) 2,279 — — 2,279 Equity-based compensation(2) — — 5,777 5,777 — — 6,802 6,802 M&A-related expenses(3) — — 714 714 — — 358 358 Acquisition intangible amortization(4) 4,943 2,008 237 7,188 5,264 2,009 — 7,273 Non-cash interest(5) — — 262 262 — — 368 368 Other taxes(6) 28 16 62 106 50 490 271 811 Net gain on exchangeable note repurchases and related transactions(7) — — (2,257) (2,257) — — — — Non-GAAP adjusted income (loss) before taxes 18,745 9,644 (12,961) 15,428 20,811 8,273 (11,948) 17,136 Pro forma taxes at effective tax rate(8) (4,685) (2,410) 3,238 (3,857) (5,203) (2,068) 2,987 (4,284) Pro forma adjusted net income (loss)(9) 14,060 7,234 (9,723) 11,571 15,608 6,205 (8,961) 12,852 Plus: Cash interest expense, net(10) — 36 7,452 7,488 — — 5,831 5,831 Pro forma taxes at effective tax rate(8) 4,685 2,410 (3,238) 3,857 5,203 2,068 (2,987) 4,284 Depreciation and internally developed software amortization(11) 2,195 460 226 2,881 1,264 337 141 1,742 Adjusted EBITDA(12) $ 20,940 $ 10,140 $ (5,283) $ 25,797 $ 22,075 $ 8,610 $ (5,976) $ 24,709 Reconciliation of Non-GAAP Financial Measures The reconciliation of our quarterly income (loss) from operations to non-GAAP pro forma adjusted net income and non-GAAP adjusted EBITDA excluding acquisition revenue adjustments is as follows: See footnotes continued on the next slide.


 
8 1.) Non-cash change in fair value of contingent consideration reflects the changes in management’s estimates of future cash consideration to be paid in connection with prior acquisitions from the amount estimated as of the later of the most recent balance sheet date forming the beginning of the income statement period or the original estimates made at the closing of the applicable acquisition. 2.) Equity-based compensation expense related to stock options and restricted stock units issued under the Company's 2018 Equity Incentive Plan and 2020 Acquisition Equity Incentive Plan. 3.) M&A-related expenses are the professional service and related costs directly related to any merger, acquisition and disposition activity of the Company, which expenses we believe are not reflective of the underlying operational performance of the Company. This also includes financing costs related to the administration of our exchangeable notes. 4.) Acquisition intangible amortization reflects amortization of intangible assets and software acquired through business combinations, acquired customer portfolios, acquired referral agreements and related asset acquisitions. 5.) Non-cash interest expense reflects amortization of debt issuance costs and any write-offs of debt issuance costs. 6.) Other taxes consist of franchise taxes, commercial activity taxes, reserves for ongoing tax audit matters, the employer portion of payroll taxes related to stock option exercises and other non-income-based taxes. Taxes related to salaries are not included. 7.) Net gain on exchangeable note repurchases and related transactions reflects the gain on repurchases of exchangeable notes and warrant unwinds, net of the loss on sale of bond hedge unwinds, which occurred during the three months ended March 31, 2024. 8.) Pro forma corporate income tax expense is based on non-GAAP adjusted income before taxes and is calculated using a tax rate of 25.0% for both 2024 and 2023, based on blended federal and state tax rates. 9.) Pro forma adjusted net income represents a non-GAAP financial measure and assumes that all net income during the period is available to the holders of the Company's Class A common stock. 10.) Cash interest expense, net represents all interest expense net of interest income recorded on the Company's statement of operations other than non-cash interest expense, which represents amortization of debt issuance costs and any write-offs of debt issuance costs. 11.) Depreciation and internally developed software amortization reflects depreciation on the Company's property, plant and equipment, net, and amortization expense on its internally developed capitalized software. 12.) Represents a non-GAAP financial measure. Reconciliation of Non-GAAP Financial Measures


 
9 ($ in thousands) Six Months Ended March 31, 2024 Six Months Ended March 31, 2023 Software and Services Merchant Services Other Total Software and Services Merchant Services Other Total Income (loss) from operations $ 27,404 $ 15,789 $ (25,240) $ 17,953 $ 24,432 $ 12,791 $ (25,941) $ 11,282 Interest expense, net 7 56 14,394 14,457 — — 11,689 11,689 Other income 107 — (2,257) (2,150) — — (203) (203) (Benefit from) provision for income taxes (24) — 786 762 — — (181) (181) Net income (loss) 27,314 15,733 (38,163) 4,884 24,432 12,791 (37,246) (23) Non-GAAP Adjustments: (Benefit from) provision for income taxes (24) — 786 762 — — (181) (181) Non-cash change in fair value of contingent consideration(1) (527) — — (527) 3,709 13 — 3,722 Equity-based compensation(2) — — 12,285 12,285 — — 13,648 13,648 M&A-related expenses(3) — — 958 958 — — 1,085 1,085 Acquisition intangible amortization(4) 9,911 3,947 475 14,333 9,965 4,040 — 14,005 Non-cash interest(5) — — 676 676 — — 729 729 Other taxes(6) 66 310 105 481 59 495 332 886 Net gain on exchangeable note repurchases and related transactions(7) — — (2,257) (2,257) — — — — Gain on investment(8) — — — — — — (203) (203) Loss on disposal of property and equipment(9) 107 — — 107 — — — — Non-GAAP adjusted income (loss) before taxes 36,847 19,990 (25,135) 31,702 38,165 17,339 (21,836) 33,668 Pro forma taxes at effective tax rate(10) (9,211) (4,997) 6,282 (7,926) (9,542) (4,335) 5,460 (8,417) Pro forma adjusted net income (loss)(11) 27,636 14,993 (18,853) 23,776 28,623 13,004 (16,376) 25,251 Plus: Cash interest expense, net(12) 7 56 13,718 13,781 — — 10,960 10,960 Pro forma taxes at effective tax rate(10) 9,211 4,997 (6,282) 7,926 9,542 4,335 (5,460) 8,417 Depreciation and internally developed software amortization(13) 4,253 802 420 5,475 2,772 655 259 3,686 Adjusted EBITDA(14) $ 41,107 $ 20,848 $ (10,997) $ 50,958 $ 40,937 $ 17,994 $ (10,617) $ 48,314 Reconciliation of Non-GAAP Financial Measures See footnotes continued on the next slide. The reconciliation of our fiscal year to date income (loss) from operations to non-GAAP pro forma adjusted net income and non-GAAP adjusted EBITDA excluding acquisition revenue adjustments is as follows:


 
10 1.) Non-cash change in fair value of contingent consideration reflects the changes in management’s estimates of future cash consideration to be paid in connection with prior acquisitions from the amount estimated as of the later of the most recent balance sheet date forming the beginning of the income statement period or the original estimates made at the closing of the applicable acquisition. 2.) Equity-based compensation expense related to stock options and restricted stock units issued under the Company's 2018 Equity Incentive Plan and 2020 Acquisition Equity Incentive Plan. 3.) M&A-related expenses are the professional service and related costs directly related to any merger, acquisition and disposition activity of the Company, which expenses we believe are not reflective of the underlying operational performance of the Company. This also includes financing costs related to the administration of our exchangeable notes. 4.) Acquisition intangible amortization reflects amortization of intangible assets and software acquired through business combinations, acquired customer portfolios, acquired referral agreements and related asset acquisitions. 5.) Non-cash interest expense reflects amortization of debt issuance costs and any write-offs of debt issuance costs. 6.) Other taxes consist of franchise taxes, commercial activity taxes, reserves for ongoing tax audit matters, the employer portion of payroll taxes related to stock option exercises and other non-income-based taxes. Taxes related to salaries are not included. 7.) Net gain on exchangeable note repurchases and related transactions reflects the gain on repurchases of exchangeable notes and warrant unwinds, net of the loss on sale of bond hedge unwinds, which occurred during the three months ended March 31, 2024. 8.) Gain on investment reflects contingent consideration received for an investment that was sold in a prior year. 9.) Loss on disposal of property and equipment is related to the sale of a building purchased through an acquisition. 10.) Pro forma corporate income tax expense is based on non-GAAP adjusted income before taxes and is calculated using a tax rate of 25.0% for both 2024 and 2023, based on blended federal and state tax rates. 11.) Pro forma adjusted net income represents a non-GAAP financial measure and assumes that all net income during the period is available to the holders of the Company's Class A common stock. 12.) Cash interest expense, net represents all interest expense net of interest income recorded on the Company's statement of operations other than non-cash interest expense, which represents amortization of debt issuance costs and any write-offs of debt issuance costs. 13.) Depreciation and internally developed software amortization reflects depreciation on the Company's property, plant and equipment, net, and amortization expense on its internally developed capitalized software. 14.) Represents a non-GAAP financial measure. Reconciliation of Non-GAAP Financial Measures


 
11 ($ in millions) As of March 31, 2024 Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility $ 346.2 1% Exchangeable Senior Notes due 2025 26.2 Less: Cash and Cash Equivalents (3.1) Total debt for use in our Total Leverage Ratio $ 369.3 Reconciliation Between GAAP Debt and Covenant Debt The reconciliation of our GAAP debt, before issuance costs, and the debt balance used in our Total Leverage Ratio is as follows: