i3 Verticals Reports First Quarter 2025 Financial Results

NASHVILLE, Tenn.--(BUSINESS WIRE)--i3 Verticals, Inc. (Nasdaq: IIIV) (“i3 Verticals” or the “Company”) today reported its financial results for the fiscal first quarter ended December 31, 2024. Highlights from continuing operations1 for the three months ended December 31, 2024 vs. 2023 Revenue from continuing operations was $61.7 million, an increase of 12.1% over the prior year's first quarter. Net income from continuing operations was $3.3 million, compared to net loss from continuing operations of $4.2 million in the prior year's first quarter. Net income from continuing operations attributable to i3 Verticals, Inc. was $2.2 million, compared to net loss from continuing operations attributable to i3 Verticals, Inc. of $2.9 million in the prior year's first quarter. Adjusted EBITDA from continuing operations2 was $16.4 million, an increase of 17.0% over the prior year's first quarter. Adjusted EBITDA from continuing operations2 as a percentage of revenue was 26.5%, compared to 25.4% in the prior year's first quarter. Diluted net income per share attributable to Class A common stock from continuing operations3 was $0.09, compared to diluted net loss per share attributable to Class A common stock from continuing operations of $0.12 in the prior year's first quarter. Pro forma adjusted diluted earnings per share from continuing operations2,3, which gives pro forma effect to the Company's tax rate, was $0.31 compared to $0.12 for the prior year's first quarter. Annualized Recurring Revenue ("ARR") from continuing operations4 for the three months ended December 31, 2024 and 2023 was $193.3 million and $179.6 million, respectively, representing a period-to-period growth rate of 7.6%. As of December 31, 2024, consolidated interest coverage ratio was 3.7x and total leverage ratio was 0.1x. These ratios are defined in the Company's 2023 Credit Agreement. 1. As a result of the sale of the Company’s merchant services business, which was completed on September 20, 2024, the historical results of i3 Verticals' merchant services business have been reflected in discontinued operations in the consolidated statement of operations included in this earnings release, and continuing operations reflect the Company's remaining operations after giving effect to such classification. Prior period results have been recast to reflect this presentation. 2. Represents a non-GAAP financial measure. For additional information (including reconciliation information), see the attached schedules to this release. 3. Diluted net income per share attributable to Class A common stock from continuing operations and pro forma adjusted diluted earnings per share from continuing operations both exclude discontinued operations but include the consolidated cash interest expense. 4. 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. Greg Daily, Chairman and CEO of i3 Verticals, commented, “We are pleased to have started fiscal 2025 on a strong note and are happy to share our results with investors. This year, we expect to see significant improvements in our SaaS growth, which began this quarter with a 16% increase over the prior year. We anticipate this positive momentum will continue throughout the year. “Even after divesting our merchant services business, we retained robust payment capabilities, and our ability to integrate these services with our proprietary vertical market software remains a key competitive advantage. We still have multiple large addressable markets where we can integrate payments within our existing software footprint. Payments revenue grew 7% this quarter, and we expect that revenue line to reaccelerate, alongside SaaS, to drive continued recurring revenues. “2025 is shaping up to be a great year for our company. Our balance sheet is strong, our revenue growth is trending upward, and our margins are headed in the right direction. We are excited about the opportunities ahead.” 2025 Outlook The Company's practice is to provide annual guidance, excluding the impact of acquisitions, dispositions and transaction-related costs. The Company is reaffirming its outlook for continuing operations for the fiscal year ended September 30, 2025: (in thousands, except share and per share amounts) Fiscal year ending September 30, 2025 Revenue $ 243,000 - $ 263,000 Adjusted EBITDA (non-GAAP) $ 63,000 - $ 71,500 Depreciation and internally developed software amortization $ 12,000 - $ 14,000 Cash interest expense, net $ 1,000 - $ 2,000 Pro forma adjusted diluted earnings per share(1)(non-GAAP) $ 1.05 - $ 1.25 _______________________ 1. Assumes an effective pro forma tax rate of 25.0% (non-GAAP). With respect to the “2025 Outlook” above, reconciliations of adjusted EBITDA from continuing operations and pro forma adjusted diluted earnings per share from continuing operations guidance to the closest corresponding GAAP measure on a forward-looking basis are 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, February 7, 2025, at 8:30 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 11:30 a.m. ET on February 7, 2025, through February 14, 2025, by dialing (877) 344-7529 and entering Confirmation Code 5368210. To listen to the call live via webcast, participants should visit the “Investors” section of the Company’s website, www.i3verticals.com, and go to the “Events” page approximately 10 minutes prior to the start of the call. The online replay will be available on this page of the Company’s website beginning shortly after the conclusion of the call and will remain available for 30 days. Non-GAAP Measures This press release contains information prepared in conformity with GAAP as well as non-GAAP information. It is management’s intent to provide non-GAAP financial information to enhance understanding of the Company's consolidated financial information as prepared in accordance with GAAP. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure and the most directly comparable GAAP financial measure are presented 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 from continuing operations, adjusted EBITDA from continuing operations and pro forma adjusted diluted EPS from continuing operations, 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 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 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 2025 and fiscal 2025 financial outlook for continuing operations 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: ongoing and future 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; our ability to execute on our strategy and achieve our goals following the completion of the sale of our merchant services business; 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 have updated and may further 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. i3 Verticals, Inc. Consolidated Statements of Operations (Unaudited) ($ in thousands, except share and per share amounts) Three Months Ended December 31, 2024 2023 % Change Revenue $ 61,691 $ 55,054 12% Operating expenses Other costs of services (excluding depreciation and amortization)(1) 21,031 19,577 7% Selling, general and administrative(1) 28,900 27,175 6% Depreciation and amortization 7,684 7,054 9% Change in fair value of contingent consideration 1,377 (237 ) n/m Total operating expenses 58,992 53,569 10% Income from operations 2,699 1,485 82% Other (income) expenses Interest expense 680 6,687 (90)% Other (income) expense (1,826 ) 107 n/m Total other (income) expenses (1,146 ) 6,794 n/m Income (loss) before income taxes 3,845 (5,309 ) n/m Provision for (benefit from) income taxes 523 (1,094 ) n/m Net income (loss) from continuing operations 3,322 (4,215 ) Net (loss) income from discontinued operations, net of income taxes (214 ) 5,751 Net income 3,108 1,536 102% Net income (loss) from continuing operations attributable to non-controlling interest 1,128 (1,330 ) Net (loss) income from discontinued operations attributable to non-controlling interest (76 ) 1,768 Net income attributable to non-controlling interest 1,052 438 140% Net income (loss) from continuing operations attributable to i3 Verticals, Inc. 2,194 (2,885 ) Net (loss) income from discontinued operations attributable to i3 Verticals, Inc. (138 ) 3,983 Net income attributable to i3 Verticals, Inc. $ 2,056 $ 1,098 87% Net income (loss) per share attributable to Class A common stockholders from continuing operations: Basic $ 0.09 $ (0.12 ) Diluted $ 0.09 $ (0.12 ) Net (loss) income per share attributable to Class A common stockholders from discontinued operations: Basic $ (0.01 ) $ 0.17 Diluted $ (0.01 ) $ 0.16 Weighted average shares of Class A common stock outstanding: Basic, for continuing operations 23,551,352 23,267,290 Diluted, for continuing operations 34,057,196 23,267,290 Basic, for discontinued operations 23,551,352 23,267,290 Diluted, for discontinued operations 23,551,352 33,828,461 __________________________________ 1. Following the disposal of the Company's Merchant Services Business in the fourth quarter of fiscal year 2024, the Company’s core business is providing software solutions for key verticals. Given the change in the Company's business model, the Company has reclassified certain expenses to better align with the primary industry in which it now operates. During the first quarter of fiscal year 2025, the Company revised its presentation of certain expenses in the Condensed Consolidated Statements of Operations from selling, general and administrative expenses to other costs of services. The Company reclassified personnel costs related to installation of the Company's software, conversion of client data, training client personnel, customer support activities and various other services provided directly to customers from selling, general and administrative to other costs of services. The Company also reclassified certain hosting and related software costs for directly supporting the Company's customers from selling, general and administrative to other costs of services. Prior period results have been reclassified to conform to the current presentation. i3 Verticals, Inc. Segment Summary from Continuing Operations (Unaudited) ($ in thousands) For the Three Months Ended December 31, 2024 Public Sector Healthcare Other Total Revenue $ 48,785 $ 13,171 $ (265 ) $ 61,691 Adjusted EBITDA(1) $ 19,243 $ 3,748 $ (6,619 ) $ 16,372 Adjusted EBITDA Margin(1) 39 % 28 % n/m 27 % Income (loss) from operations $ 11,791 $ 2,634 $ (11,726 ) $ 2,699 For the Three Months Ended December 31, 2023 Public Sector Healthcare Other Total Revenue $ 43,498 $ 11,580 $ (24 ) $ 55,054 Adjusted EBITDA(1) $ 17,359 $ 2,794 $ (6,165 ) $ 13,988 Adjusted EBITDA Margin(1) 40 % 24 % n/m 25 % Income (loss) from operations $ 11,532 $ 2,160 $ (12,207 ) $ 1,485 ________________________ 1. Adjusted EBITDA and Adjusted EBITDA margin as presented at a segment level are measures reported to the Company's management for purposes of making decisions about allocating resources and assessing the performance of our business segments, and these measures are presented in the Company's financial statement footnotes in accordance with ASC 280. Adjusted EBITDA margin represents adjusted EBITDA as a percentage of revenue. Adjusted EBITDA and Adjusted EBITDA margin, as presented on a consolidated basis, are non-GAAP financial measures. For additional information regarding these non-GAAP financial measures, including reconciliations of consolidated Adjusted EBITDA to the most comparable GAAP measure, see below under "Reconciliation of GAAP to Non-GAAP Financial Measures." i3 Verticals, Inc. Consolidated Balance Sheets (Unaudited) ($ in thousands, except share and per share amounts) December 31, September 30, 2024 2024 Assets Current assets Cash and cash equivalents $ 85,552 $ 86,541 Accounts receivable, net 51,342 55,988 Settlement assets 1,205 632 Prepaid expenses and other current assets 15,006 10,232 Total current assets 153,105 153,393 Property and equipment, net 7,583 8,677 Restricted cash 2,450 2,424 Capitalized software, net 57,249 58,592 Goodwill 280,678 280,678 Intangible assets, net 159,574 162,816 Deferred tax asset 48,481 48,445 Operating lease right-of-use assets 7,942 8,954 Other assets 9,167 6,696 Total assets $ 726,229 $ 730,675 Liabilities and equity Liabilities Current liabilities Accounts payable $ 7,402 $ 5,370 Current portion of long-term debt 26,223 26,223 Accrued expenses and other current liabilities 82,997 89,972 Settlement obligations 1,205 632 Deferred revenue 42,259 39,029 Current portion of operating lease liabilities 3,345 3,505 Total current liabilities 163,431 164,731 Long-term tax receivable agreement obligations 29,326 29,347 Operating lease liabilities, less current portion 5,423 6,317 Other long-term liabilities 16,915 14,921 Total liabilities 215,095 215,316 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 December 31, 2024 and September 30, 2024 — — Class A common stock, par value $0.0001 per share, 150,000,000 shares authorized; 23,437,250 and 23,882,035 shares issued and outstanding as of December 31, 2024 and September 30, 2024, respectively 2 2 Class B common stock, par value $0.0001 per share, 40,000,000 shares authorized; 10,015,099 and 10,032,676 shares issued and outstanding as of December 31, 2024 and September 30, 2024, respectively 1 1 Additional paid-in capital 272,532 279,335 Accumulated earnings 102,453 100,397 Total stockholders' equity 374,988 379,735 Non-controlling interest 136,146 135,624 Total equity 511,134 515,359 Total liabilities and equity $ 726,229 $ 730,675 i3 Verticals, Inc. Consolidated Cash Flow Data (Unaudited) ($ in thousands) Three Months Ended December 31, 2024 2023 Net cash provided by operating activities $ 11,495 $ 14,405 Net cash used in investing activities $ (1,418 ) $ (7,171 ) Net cash used in financing activities $ (10,467 ) $ (8,550 ) Reconciliation of GAAP to Non-GAAP Financial Measures The Company discloses adjusted EBITDA from continuing operations, pro forma adjusted net income from continuing operations and pro forma adjusted diluted EPS from continuing operations because the Company believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating the Company's ongoing operating results. Accordingly, the Company discloses these non-GAAP financial measures when reporting its financial results to stockholders 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 financial 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 financial results, evaluate the Company's business and make operational decisions on a prospective, going-forward basis. Hence, management provides disclosure of these non-GAAP financial measures to give stockholders 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. i3 Verticals, Inc. Reconciliation of GAAP Net Income (Loss) from Continuing Operations to Non-GAAP Pro Forma Adjusted Net Income from Continuing Operations and Non-GAAP Adjusted EBITDA from Continuing Operations (Unaudited) ($ in thousands) Three Months Ended December 31, 2024 2023 Net income (loss) from continuing operations attributable to i3 Verticals, Inc. $ 2,194 $ (2,885 ) Net income (loss) from continuing operations attributable to non-controlling interest 1,128 (1,330 ) Net income (loss) from continuing operations 3,322 (4,215 ) Non-GAAP adjustments: Provision for (benefit from) income taxes 523 (1,094 ) Non-cash change in fair value of contingent consideration(1) 1,377 (237 ) Equity-based compensation from continuing operations(2) 3,814 5,358 M&A-related activity(3) 51 244 Acquisition intangible amortization(4) 4,913 4,856 Non-cash interest expense(5) 280 414 Other taxes(6) 252 84 (Gain) loss on disposal of property and equipment(7) (585 ) 107 Non-GAAP pro forma adjusted income before taxes from continuing operations(12) $ 13,947 $ 5,517 Pro forma taxes at effective tax rate(8) (3,487 ) (1,379 ) Pro forma adjusted net income from continuing operations(9) $ 10,460 $ 4,138 Cash interest (income) expense, net(10) (346 ) 6,273 Pro forma taxes at effective tax rate(8) 3,487 1,379 Depreciation and internally developed software amortization(11) 2,771 2,198 Adjusted EBITDA from continuing operations(12) $ 16,372 $ 13,988 ________________ 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 activity is the net impact of professional service and related costs directly related to any merger, acquisition and disposition activity of the Company and revenue earned through post-sale non-recurring activities with divestitures. i3 Verticals believes these activities are not reflective of the underlying operational performance of the Company. 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. (Gain) loss on disposal of property and equipment is related to the sale of buildings and automobiles purchased through acquisitions. 8. Pro forma corporate income tax expense is based on non-GAAP adjusted income before taxes from continuing operations and is calculated using a tax rate of 25.0% for both the three months ended December 31, 2024 and 2023, based on blended federal and state tax rates. 9. Pro forma adjusted net income from continuing operations 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 (income) 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. i3 Verticals, Inc. GAAP Diluted EPS from Continuing Operations and Non-GAAP Pro Forma Adjusted Diluted EPS from Continuing Operations (Unaudited) ($ in thousands, except share and per share amounts) Three Months Ended December 31, 2024 2023 Diluted net income (loss) attributable to Class A common stock per share from continuing operations(1) $ 0.09 $ (0.12 ) Pro forma adjusted diluted earnings per share from continuing operations(1)(2)(3) $ 0.31 $ 0.12 Pro forma adjusted net income from continuing operations(3) $ 10,460 $ 4,138 Pro forma weighted average shares of adjusted diluted Class A common stock outstanding(4) 34,057,196 33,828,461 ________________ 1. Diluted net income per share attributable to Class A common stock from continuing operations and pro forma adjusted diluted earnings per share from continuing operations both exclude discontinued operations but include the consolidated cash interest expense. 2. Pro forma adjusted diluted earnings per share from continuing operations, a non-GAAP financial measure, is calculated using pro forma adjusted net income from continuing operations and the pro forma weighted average shares of adjusted diluted Class A common stock outstanding. 3. Pro forma adjusted net income from continuing operations, a non-GAAP financial measure, assumes that all net income from continuing operations during the period is available to the holders of the Company's Class A common stock. Further, pro forma adjusted diluted earnings per share from continuing operations 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. 4. Pro forma weighted average shares of adjusted diluted Class A common stock outstanding include 10,026,180 and 10,093,394 outstanding shares of Class A common stock issuable upon the exchange of Common Units in i3 Verticals, LLC and 479,664 and 467,777 shares resulting from estimated stock option exercises and restricted stock units vesting as calculated by the treasury stock method for the three months ended December 31, 2024 and 2023, respectively

i3 Verticals Reports First Quarter 2025 Financial Results

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