i3 Verticals, Inc. (Nasdaq: IIIV) (“i3 Verticals” or the “Company”)
today reported its financial results for the fiscal fourth quarter
and year ended September 30, 2018.
Highlights for the fiscal fourth quarter
and full year of 2018 vs. 2017
- Fourth quarter revenue was $84.1 million, an increase of 17%
over the prior year's fourth quarter; Full year revenue was $323.5
million, an increase of 23% over the prior year.
- Fourth quarter net revenue1, which excludes interchange and
related network fees, was $28.1 million, an increase of 38% over
the prior year's fourth quarter; Full year net revenue1 was $109.0
million, an increase of 48% over the prior year.
- Fourth quarter net income was $2.9 million; Full year net
loss was $5.0 million.
- Fourth quarter adjusted EBITDA1 was $7.8 million, an increase
of 36% over the prior year's fourth quarter; Full year adjusted
EBITDA1 was $30.3 million, an increase of 58% over the prior
year.
- Fourth quarter adjusted EBITDA1 as a percentage of net revenue1
was 28%, compared to 28% in the prior year's fourth quarter; Full
year adjusted EBITDA1 as a percentage of net revenue1 was 28%, an
increase from 26% in the prior year.
- Fourth quarter diluted net income per share available to Class
A common stock was $0.09; Full year diluted net loss per share
available to Class A common stock2 was $0.08.
- Fourth quarter and full year pro forma adjusted diluted
earnings per share1, which gives pro forma effect to the Company's
going forward effective tax rate following its Up-C reorganization
in connection with its initial public offering (“IPO”), was $0.19
and $0.57, respectively.
- Integrated payments3 were 45% and 43% of payment volume for the
three months and full year ended September 30, 2018,
respectively.
- Debt was reduced by $74.1 million during the year ended
September 30, 2018, primarily with net proceeds from the Company’s
IPO and the conversion of a portion of its junior subordinated
notes in connection with the IPO. At September 30, 2018, the ratio
of consolidated debt-to-EBITDA, as defined in the Company's Senior
Secured Credit Facility, was 1.27x.
- Since the third quarter earnings release issued on August 9,
2018, the Company has completed three acquisitions, all within the
Proprietary Software and Payments reporting segment. Two of the
acquisitions were within the public sector vertical, and the third
acquisition provided technology that enhances the Burton Platform.
One of the public sector acquisitions was completed during the
fourth quarter. The other two acquisitions were completed
subsequent to September 30, 2018. The aggregate purchase price,
excluding contingent consideration, for these three acquisitions
was $27.1 million.
- Represents a non-GAAP
financial measure. For additional information (including
reconciliation information), see the attached schedules to this
release.
- Diluted loss per Class A common
stock is presented only for the period after the Company’s
Reorganization Transactions (as defined in the Company's
prospectus, dated June 20, 2018, filed with the Securities and
Exchange Commission).
- Integrated payments represents
payment transactions that are generated in situations where payment
technology is embedded within the Company's own proprietary
software, a client’s software or critical business process.
Greg Daily, Chairman and CEO of i3 Verticals,
commented, “We are pleased with our fourth quarter performance. Our
strategy to grow in strategic vertical markets continues to be
validated as we saw healthy organic sales growth, particularly
within our Proprietary Software and Payments segment, in the
quarter. In addition, we continue to strengthen our strategy
through complementary acquisitions, as we now provide a
comprehensive suite of software products in our public sector
vertical, including solutions for property assessments, tax
collection, court payments and sheriff office payments. Our
acquisitions have also accelerated the development of our Burton
Platform, and we now offer point-to-point encryption and have
expanded the number of EMV-enabled devices that process on the
Burton Platform. These enhancements reduce the scope of PCI
compliance costs for our ISV customers and our clients. We continue
to have a strong balance sheet with adequate debt capacity, and our
acquisition pipeline is active and healthy. We believe the
expansion of our integrated payments, coupled with our proprietary
technology, positions us to deliver continued growth in the coming
years.”
Revised 2019 Outlook
The Company's practice is to provide annual
guidance, excluding future acquisitions and transaction-related
costs. The outlook also excludes the effect of software deferred
revenue write-downs resulting from acquisitions that have already
closed.1 The Company is providing the following revised outlook for
the fiscal year ending September 30, 2019:
| (in thousands, except
per share amounts) |
Outlook Range |
| |
Fiscal year ended September 30, 2019 |
| Adjusted net revenue
(non-GAAP) |
$ |
122,000 |
- |
$ |
128,000 |
| Adjusted EBITDA
(non-GAAP) |
$ |
35,000 |
- |
$ |
36,000 |
| Adjusted diluted
earnings per share(2) (non-GAAP) |
$ |
0.84 |
- |
$ |
0.87 |
_______________________
- GAAP require companies to adjust, as
necessary, beginning balances of acquired deferred
revenue to fair value as part
of acquisition accounting as defined by GAAP. For the
2019 outlook, the Company has removed the effect of
these adjustments to acquisition date fair value
from acquisitions that have closed as of the earnings release
date.
- Assumes an effective pro forma tax rate of 25.0%
(non-GAAP).
With respect to the “Revised 2019 Outlook”
above, reconciliation of adjusted net revenue, adjusted EBITDA and
adjusted diluted earnings per share guidance to the closest
corresponding GAAP measure on a forward-looking basis is not
available without unreasonable efforts. This inability results from
the inherent difficulty in forecasting generally and quantifying
certain projected amounts that are necessary for such
reconciliations. In particular, sufficient information is not
available to calculate certain adjustments required for such
reconciliations, including changes in the fair value of contingent
consideration, income tax expenses 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
Thursday, November 29, 2018, at 8:00 a.m. ET, to discuss
financial results and operations. To listen to the call live via
telephone, participants should dial (323) 794-2423
approximately 10 minutes prior to the start of the call.
A telephonic replay will be available from 11:00 a.m. ET on
November 29, 2018, through December 6, 2018, by dialing
(719) 457-0820 and entering Confirmation Code 3349103.
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 &
Presentations” page approximately 10 minutes prior to the start of
the call. The online replay will be available on this page of the
Company’s website beginning shortly after the conclusion of the
call and will remain available for 30 days.
Non-GAAP Measures
This press release contains information prepared
in conformity with GAAP as well as non-GAAP information. It is
management’s intent to provide non-GAAP financial information to
enhance understanding of the Company's consolidated financial
information as prepared in accordance with GAAP. This non-GAAP
information should be considered by the reader in addition to, but
not instead of, the financial statements prepared in accordance
with GAAP. Each non-GAAP financial measure and the most directly
comparable GAAP financial measure are presented so as not to imply
that more emphasis should be placed on the non-GAAP measure. The
non-GAAP financial information presented may be determined or
calculated differently by other companies.
Additional information about non-GAAP financial
measures, including, but not limited to, net revenue, pro forma
adjusted net income, adjusted EBITDA and pro forma adjusted diluted
EPS, and a reconciliation of those measures to the most directly
comparable GAAP measures is included on pages 10-12 in the
financial schedules of this release.
About i3 Verticals
Helping drive the convergence of software and
payments, i3 Verticals delivers integrated payment and software
solutions to small- and medium-sized businesses and other
organizations in strategic vertical markets, such as education,
non-profit, the public sector, property management, and healthcare
and to the business-to-business payments market. With a broad suite
of payment and software solutions that address the specific needs
of its clients in each strategic vertical market, i3 Verticals
processed approximately $11.6 billion in total payment volume for
the 12 months ended September 30, 2018.
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 guidance and
statements of a general economic or industry specific nature.
Forward-looking statements give the Company's current expectations
and projections relating to its financial condition, results of
operations, guidance, plans, objectives, future performance and
business. You can identify forward-looking statements by the fact
that they do not relate strictly to historical or current facts.
These statements may include words such as “anticipate,”
“estimate,” “expect,” “project,” “plan,” “intend,” “believe,”
“may,” “will,” “should,” “could have,” “exceed,” “significantly,”
“likely” and other words and terms of similar meaning in connection
with any discussion of the timing or nature of future operating or
financial performance or other events.
The forward-looking statements contained in this
release are based on assumptions that we have made in light of the
Company's industry experience and its perceptions of historical
trends, current conditions, expected future developments and other
factors we believe are appropriate under the circumstances. As you
review and consider information presented herein, you should
understand that these statements are not guarantees of future
performance or results. They depend upon future events and are
subject to risks, uncertainties (many of which are beyond the
Company's control) and assumptions. Although we believe that these
forward-looking statements are based on reasonable assumptions, you
should be aware that many factors could affect the Company's actual
future performance or results and cause them to differ materially
from those anticipated in the forward-looking statements. Certain
of these factors and other risks are discussed in the Company's
filings with the U.S. Securities and Exchange Commission (the
“SEC”) and include, but are not limited to: (i) the ability to
generate revenues sufficient to attain and maintain profitability
and positive cash flow; (ii) competition in the Company's industry
and the ability to compete effectively; (iii) the dependence on
non-exclusive distribution partners to market the Company's
products and services; (iv) the ability to keep pace with rapid
developments and changes in the Company's industry and provide new
products and services; (v) liability and reputation damage from
unauthorized disclosure, destruction or modification of data or
disruption of the Company's services; (vi) technical, operational
and regulatory risks related to the Company's information
technology systems and third-party providers’ systems; (vii)
reliance on third parties for significant services; (viii) exposure
to economic conditions and political risks affecting consumer and
commercial spending, including the use of credit cards; (ix) the
ability to increase the Company's existing vertical markets, expand
into new vertical markets and execute the Company's growth
strategy; (x) the ability to successfully complete acquisitions and
effectively integrate those acquisitions into the Company's
services; (xi) degradation of the quality of the Company's
products, services and support; (xii) the ability to retain
clients, many of which are SMBs, which can be difficult and costly
to retain; (xiii) the Company's ability to successfully manage its
intellectual property; (xiv) the ability to attract, recruit,
retain and develop key personnel and qualified employees; (xv)
risks related to laws, regulations and industry standards; (xvi)
the Company's indebtedness and potential increases in its
indebtedness; and (xvii) operating and financial restrictions
imposed by the Company's senior secured credit facility. Should one
or more of these risks or uncertainties materialize, or should any
of these assumptions prove incorrect, the Company's actual results
may vary in material respects from those projected in these
forward-looking statements. More information on potential factors
that could affect the Company’s financial results and performance
is included in the “Risk Factors” section of the Company’s recently
filed registration statement on Form S-1, as amended, and other
filings with the SEC.
Any forward-looking statement made by us in this
release speaks only as of the date of this release. Factors or
events that could cause the Company's actual results to differ may
emerge from time to time, and it is not possible for us to predict
all of them. The Company undertakes no obligation to publicly
update any forward-looking statement, whether as a result of new
information, future developments or otherwise, except as may be
required by law.
|
Contacts: |
|
| Clay Whitson |
Scott Meriwether |
| Chief Financial
Officer |
Senior Vice President -
Finance |
| (615) 988-9890 |
(615)
942-6175 |
|
cwhitson@i3verticals.com |
smeriwether@i3verticals.com |
i3 Verticals, Inc. Consolidated
Statements of Operations($ in thousands, except share and
per share amounts)
| |
Three months ended September 30, |
|
Year ended September 30, |
| |
2018 |
|
2017 |
|
% Change |
|
2018 |
|
2017 |
|
% Change |
| |
(unaudited) |
|
(unaudited) |
|
|
|
(unaudited) |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Revenue |
$ |
84,053 |
|
|
$ |
71,779 |
|
|
17 |
% |
|
$ |
323,508 |
|
|
$ |
262,571 |
|
|
23 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
| Interchange and network
fees |
55,966 |
|
|
51,433 |
|
|
9 |
% |
|
214,543 |
|
|
189,112 |
|
|
13 |
% |
| Other costs of
services |
10,195 |
|
|
8,002 |
|
|
27 |
% |
|
40,314 |
|
|
28,798 |
|
|
40 |
% |
| Selling general and
administrative |
10,848 |
|
|
8,029 |
|
|
35 |
% |
|
40,585 |
|
|
27,194 |
|
|
49 |
% |
| Depreciation and
amortization |
2,963 |
|
|
2,632 |
|
|
13 |
% |
|
11,839 |
|
|
10,085 |
|
|
17 |
% |
| Change in fair value of
contingent consideration |
586 |
|
|
(395 |
) |
|
(248 |
)% |
|
3,866 |
|
|
(218 |
) |
|
n/m |
| Total operating
expenses |
80,558 |
|
|
69,701 |
|
|
16 |
% |
|
311,147 |
|
|
254,971 |
|
|
22 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Income from
operations |
3,495 |
|
|
2,078 |
|
|
68 |
% |
|
12,361 |
|
|
7,600 |
|
|
63 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Other expenses |
|
|
|
|
|
|
|
|
|
|
|
| Interest expense,
net |
849 |
|
|
1,975 |
|
|
(57 |
)% |
|
8,498 |
|
|
6,936 |
|
|
23 |
% |
| Change in fair value of
warrant liability |
— |
|
|
(357 |
) |
|
n/m |
|
8,487 |
|
|
(415 |
) |
|
n/m |
| Total other
expenses |
849 |
|
|
1,618 |
|
|
(48 |
)% |
|
16,985 |
|
|
6,521 |
|
|
160 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) before
income taxes |
2,646 |
|
|
460 |
|
|
475 |
% |
|
(4,624 |
) |
|
1,079 |
|
|
(529 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
| (Benefit from)
provision for income taxes |
(216 |
) |
|
76 |
|
|
(384 |
)% |
|
337 |
|
|
177 |
|
|
90 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
2,862 |
|
|
384 |
|
|
645 |
% |
|
(4,961 |
) |
|
902 |
|
|
(650 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Net income attributable
to non-controlling interest |
2,028 |
|
|
— |
|
|
n/m |
|
1,937 |
|
|
— |
|
|
n/m |
| Net income (loss)
attributable to i3 Verticals, Inc. |
$ |
834 |
|
|
$ |
384 |
|
|
117 |
% |
|
$ |
(6,898 |
) |
|
$ |
902 |
|
|
(865 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Net income per share
available to Class A common stock(1): |
|
|
|
|
|
|
|
|
|
|
|
| Basic |
$ |
0.09 |
|
|
|
|
|
|
$ |
0.08 |
|
|
|
|
|
| Diluted |
$ |
0.09 |
|
|
|
|
|
|
$ |
0.08 |
|
|
|
|
|
| Weighted average shares
of Class A common stock outstanding(1): |
|
|
|
|
|
|
|
|
|
|
|
| Basic |
8,812,630 |
|
|
|
|
|
|
8,812,630 |
|
|
|
|
|
| Diluted |
26,891,688 |
|
|
|
|
|
|
26,873,878 |
|
|
|
|
|
__________________________
- Basic and diluted net income per Class A common stock are
presented only for the period after the Company’s Reorganization
Transactions.
i3 Verticals, Inc. Financial
Highlights(Unaudited)($ in thousands, except per share
amounts)
| |
Three months ended September 30, |
|
Year ended September 30, |
| |
2018 |
|
2017 |
|
% Change |
|
2018 |
|
2017 |
|
% Change |
| |
|
|
|
|
|
|
|
|
|
|
|
| Net revenue
(non-GAAP) |
$ |
28,087 |
|
$ |
20,346 |
|
38 |
% |
|
$ |
108,965 |
|
$ |
73,459 |
|
48 |
% |
| Adjusted EBITDA
(non-GAAP) |
7,849 |
|
5,751 |
|
36 |
% |
|
30,348 |
|
19,264 |
|
58 |
% |
| Pro forma adjusted
diluted earnings per share (non-GAAP) |
$ |
0.19 |
|
|
|
|
|
$ |
0.57 |
|
|
|
|
i3 Verticals, Inc. Supplemental Volume
Information(Unaudited)($ in thousands)
| |
Three months ended September 30, |
|
Year ended September 30, |
| |
2018 |
|
2017 |
|
2018 |
|
2017 |
| |
|
|
|
|
|
|
|
| Payment
volume(1) |
$ |
2,971,220 |
|
$ |
2,772,308 |
|
$ |
11,554,806 |
|
$ |
10,269,435 |
__________________________
- Payment volume is the net dollar value of both 1) Visa,
Mastercard and other payment network transactions processed by the
Company's clients and settled to clients by us and 2) ACH
transactions processed by the Company's clients and settled to
clients by the Company.
i3 Verticals, Inc. Segment
Summary(Unaudited)($ in thousands)
| |
As of and for the Three Months Ended September
30, 2018 |
| |
Merchant Services |
|
Proprietary Software and Payments |
|
Other |
|
Total |
| Revenue |
$ |
78,258 |
|
$ |
5,795 |
|
$ |
— |
|
|
$ |
84,053 |
| |
|
|
|
|
|
|
|
| Operating expenses |
|
|
|
|
|
|
|
| Interchange and network
fees |
54,683 |
|
1,283 |
|
— |
|
|
55,966 |
| Other costs of
services |
9,450 |
|
746 |
|
(1 |
) |
|
10,195 |
| Selling general and
administrative |
6,164 |
|
2,057 |
|
2,627 |
|
|
10,848 |
| Depreciation and
amortization |
2,395 |
|
482 |
|
86 |
|
|
2,963 |
| Change in fair value of
contingent consideration |
237 |
|
349 |
|
— |
|
|
586 |
| Income (loss) from
operations |
$ |
5,329 |
|
$ |
878 |
|
$ |
(2,712 |
) |
|
$ |
3,495 |
| |
|
|
|
|
|
|
|
| Payment volume |
$ |
2,850,503 |
|
$ |
120,717 |
|
$ |
— |
|
|
$ |
2,971,220 |
| |
As of and for the Year ended September 30,
2018 |
| |
Merchant Services |
|
Proprietary Software and Payments |
|
Other |
|
Total |
| Revenue |
$ |
302,929 |
|
$ |
20,582 |
|
$ |
(3 |
) |
|
$ |
323,508 |
| |
|
|
|
|
|
|
|
| Operating expenses |
|
|
|
|
|
|
|
| Interchange and network
fees |
209,695 |
|
4,848 |
|
— |
|
|
214,543 |
| Other costs of
services |
38,399 |
|
1,916 |
|
(1 |
) |
|
40,314 |
| Selling general and
administrative |
23,291 |
|
7,602 |
|
9,692 |
|
|
40,585 |
| Depreciation and
amortization |
9,535 |
|
2,097 |
|
207 |
|
|
11,839 |
| Change in fair value of
contingent consideration |
1,772 |
|
2,094 |
|
— |
|
|
3,866 |
| Income (loss) from
operations |
$ |
20,237 |
|
$ |
2,025 |
|
$ |
(9,901 |
) |
|
$ |
12,361 |
| |
|
|
|
|
|
|
|
| Payment volume |
$ |
11,072,266 |
|
$ |
482,540 |
|
$ |
— |
|
|
$ |
11,554,806 |
i3 Verticals, Inc. Segment Summary
(continued)(Unaudited)($ in thousands)
| |
As of and for the Three Months Ended September
30, 2017 |
| |
Merchant Services |
|
Proprietary Software and Payments |
|
Other |
|
Total |
| Revenue |
$ |
67,560 |
|
|
$ |
4,239 |
|
$ |
(20 |
) |
|
$ |
71,779 |
|
| |
|
|
|
|
|
|
|
| Operating expenses |
|
|
|
|
|
|
|
| Interchange and network
fees |
50,360 |
|
|
1,073 |
|
— |
|
|
51,433 |
|
| Other costs of
services |
7,459 |
|
|
563 |
|
(20 |
) |
|
8,002 |
|
| Selling general and
administrative |
4,383 |
|
|
1,926 |
|
1,720 |
|
|
8,029 |
|
| Depreciation and
amortization |
2,097 |
|
|
504 |
|
31 |
|
|
2,632 |
|
| Change in fair value of
contingent consideration |
(400 |
) |
|
5 |
|
— |
|
|
(395 |
) |
| Income (loss) from
operations |
$ |
3,661 |
|
|
$ |
168 |
|
$ |
(1,751 |
) |
|
$ |
2,078 |
|
| |
|
|
|
|
|
|
|
| Payment volume |
$ |
2,668,734 |
|
|
$ |
103,574 |
|
$ |
— |
|
|
$ |
2,772,308 |
|
| |
As of and for the Year ended September 30,
2017 |
| |
Merchant Services |
|
Proprietary Software and Payments |
|
Other |
|
Total |
| Revenue |
$ |
248,005 |
|
$ |
14,582 |
|
|
$ |
(16 |
) |
|
$ |
262,571 |
|
| |
|
|
|
|
|
|
|
| Operating expenses |
|
|
|
|
|
|
|
| Interchange and network
fees |
185,141 |
|
3,971 |
|
|
— |
|
|
189,112 |
|
| Other costs of
services |
27,350 |
|
1,559 |
|
|
(111 |
) |
|
28,798 |
|
| Selling general and
administrative |
13,858 |
|
7,194 |
|
|
6,142 |
|
|
27,194 |
|
| Depreciation and
amortization |
8,029 |
|
1,938 |
|
|
118 |
|
|
10,085 |
|
| Change in fair value of
contingent consideration |
192 |
|
(410 |
) |
|
— |
|
|
(218 |
) |
| Income (loss) from
operations |
$ |
13,435 |
|
$ |
330 |
|
|
$ |
(6,165 |
) |
|
$ |
7,600 |
|
| |
|
|
|
|
|
|
|
| Payment volume |
$ |
9,883,947 |
|
$ |
385,488 |
|
|
$ |
— |
|
|
$ |
10,269,435 |
|
i3 Verticals, Inc. Consolidated Balance
Sheets($ in thousands, except share and per share
amounts)
| |
September 30, |
|
September 30, |
| |
2018 |
|
2017 |
| |
(unaudited) |
|
|
| Assets |
|
|
|
| Current assets |
|
|
|
| Cash and cash
equivalents |
$ |
572 |
|
$ |
955 |
|
| Accounts receivable,
net |
12,500 |
|
8,412 |
|
| Settlement assets |
863 |
|
5,196 |
|
| Prepaid expenses and
other current assets |
2,630 |
|
1,141 |
|
| Total current
assets |
16,565 |
|
15,704 |
|
| |
|
|
|
| Property and equipment,
net |
2,958 |
|
1,420 |
|
| Restricted cash |
665 |
|
1,013 |
|
| Capitalized software,
net |
3,372 |
|
3,778 |
|
| Goodwill |
83,954 |
|
58,517 |
|
| Intangible assets,
net |
66,023 |
|
59,259 |
|
| Other assets |
1,605 |
|
300 |
|
| Total assets |
$ |
175,142 |
|
$ |
139,991 |
|
| |
|
|
|
| Liabilities, Redeemable
Class A Units and equity |
|
|
|
| Liabilities |
|
|
|
| Current
liabilities |
|
|
|
| Accounts payable |
4,114 |
|
1,600 |
|
| Current portion of
long-term debt |
5,000 |
|
4,000 |
|
| Accrued expenses and
other current liabilities |
11,538 |
|
6,706 |
|
| Settlement
obligations |
863 |
|
5,196 |
|
| Deferred revenue |
4,927 |
|
2,719 |
|
| Total current
liabilities |
26,442 |
|
20,221 |
|
| |
|
|
|
| Long-term debt, less
current portion and debt issuance costs, net |
31,776 |
|
106,836 |
|
| Other long-term
liabilities |
4,726 |
|
2,065 |
|
| Total liabilities |
62,944 |
|
129,122 |
|
| |
|
|
|
| Commitments and
contingencies |
|
|
|
| Redeemable Class A
units; 0 and 4,900,000 Units authorized, issued and outstanding as
of September 30, 2018 and September 30, 2017, respectively |
— |
|
7,723 |
|
| Stockholders' /
Members' equity |
|
|
|
| Members' equity |
— |
|
36,164 |
|
| Preferred stock, par
value $0.0001 per share, 10,000,000 shares authorized; 0 shares
issued and outstanding as of September 30, 2018 |
— |
|
— |
|
| Class A common stock,
par value $0.0001 per share, 150,000,000 shares authorized;
9,112,042 shares issued and outstanding as of September 30,
2018 |
1 |
|
— |
|
| Class B common stock,
par value $0.0001 per share, 40,000,000 shares authorized;
17,213,806 shares issued and outstanding as of September 30,
2018 |
2 |
|
— |
|
| Additional
paid-in-capital |
38,562 |
|
— |
|
| Accumulated earnings
(deficit) |
736 |
|
(33,018 |
) |
| Total Stockholders' /
Members' equity |
39,301 |
|
3,146 |
|
| Non-controlling
interest |
72,897 |
|
— |
|
| Total equity |
112,198 |
|
3,146 |
|
| Total liabilities,
Redeemable Class A Units and members' / stockholders' equity
(deficit) |
$ |
175,142 |
|
$ |
139,991 |
|
i3 Verticals, Inc. Consolidated Cash Flow
Data($ in thousands)
| |
Year ended September 30, |
| |
2018 |
|
2017 |
| |
(unaudited) |
|
|
| |
|
|
|
| Net cash provided by
operating activities |
$ |
18,080 |
|
|
$ |
8,330 |
|
| Net cash used in
investing activities |
$ |
(38,055 |
) |
|
$ |
(47,903 |
) |
| Net cash provided by
financing activities |
$ |
19,244 |
|
|
$ |
37,352 |
|
Reconciliation of GAAP to Non-GAAP
Financial Measures
The Company believes that non-GAAP financial
measures are important to enable investors to understand and
evaluate its ongoing operating results. Accordingly, i3 Verticals
includes 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. i3 Verticals believes that the non-GAAP
financial measures are representative of comparative financial
performance that reflects the economic substance of i3 Verticals’
current and ongoing business operations.
Although non-GAAP financial measures are often
used to measure the Company's operating results and assess its
financial performance, they are not necessarily comparable to
similarly titled measures of other companies due to potential
inconsistencies in the method of calculation. i3 Verticals believes
that its provision of 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 non-GAAP financial measures to give shareholders and
potential investors an opportunity to see i3 Verticals as viewed by
management, to assess i3 Verticals with some of the same tools that
management utilizes internally and to be able to compare such
information with prior periods. i3 Verticals believes that
inclusion of 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 to Non-GAAP Pro Forma Adjusted Net Income and Non-GAAP
Adjusted EBITDA(Unaudited)($ in thousands)
| |
Three months ended September 30, |
|
Year ended September 30, |
| |
2018 |
|
2017 |
|
2018 |
|
2017 |
| Net income
(loss) attributable to i3 Verticals, Inc. |
$ |
834 |
|
|
$ |
384 |
|
|
$ |
(6,898 |
) |
|
$ |
902 |
|
| Net
income attributable to non-controlling interest |
|
2,028 |
|
|
|
— |
|
|
|
1,937 |
|
|
|
— |
|
| Non-GAAP
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Benefit
from) provision for income taxes |
|
(216 |
) |
|
|
76 |
|
|
|
337 |
|
|
|
177 |
|
|
Offering-related expenses(1) |
|
— |
|
|
|
— |
|
|
|
124 |
|
|
|
— |
|
| Non-cash
change in fair value of contingent consideration(2) |
|
586 |
|
|
|
(395 |
) |
|
|
3,866 |
|
|
|
(218 |
) |
| Non-cash
change in fair value of warrant liability(3) |
|
— |
|
|
|
(357 |
) |
|
|
8,487 |
|
|
|
(415 |
) |
|
Equity-based compensation(4) |
|
750 |
|
|
|
— |
|
|
|
1,567 |
|
|
|
— |
|
|
Acquisition-related expenses(5) |
|
53 |
|
|
|
430 |
|
|
|
531 |
|
|
|
766 |
|
|
Acquisition intangible amortization(6) |
|
2,378 |
|
|
|
2,003 |
|
|
|
9,384 |
|
|
|
7,669 |
|
| Non-cash
interest expense(7) |
|
233 |
|
|
|
124 |
|
|
|
1,072 |
|
|
|
453 |
|
| Other
taxes(8) |
|
2 |
|
|
|
11 |
|
|
|
60 |
|
|
|
36 |
|
| Legal
settlement(9) |
|
— |
|
|
|
995 |
|
|
|
— |
|
|
|
995 |
|
| Non-GAAP pro
forma adjusted income before taxes |
|
6,648 |
|
|
|
3,271 |
|
|
|
20,467 |
|
|
|
10,365 |
|
| Pro forma taxes at
effective tax rate(10) |
|
(1,662 |
) |
|
|
(818 |
) |
|
|
(5,117 |
) |
|
|
(2,591 |
) |
| Pro forma
adjusted net income(11) |
$ |
4,986 |
|
|
$ |
2,453 |
|
|
$ |
15,350 |
|
|
$ |
7,774 |
|
| Cash interest expense,
net(12) |
|
616 |
|
|
|
1,851 |
|
|
|
7,426 |
|
|
|
6,483 |
|
| Pro forma taxes at
effective tax rate(13) |
|
1,662 |
|
|
|
818 |
|
|
|
5,117 |
|
|
|
2,591 |
|
| Depreciation and
internally developed software amortization(14) |
|
585 |
|
|
|
629 |
|
|
|
2,455 |
|
|
|
2,416 |
|
| Adjusted
EBITDA |
$ |
7,849 |
|
|
$ |
5,751 |
|
|
$ |
30,348 |
|
|
$ |
19,264 |
|
______________
- Includes costs associated with forming i3 Verticals, Inc. and
other expenses directly related to the Reorganization Transactions
(as defined in the Company's prospectus, dated June 20, 2018, filed
with the Securities and Exchange Commission).
- 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.
- Non-cash change in warrant liability reflects the fair value
change in certain warrants for the Company's common units
associated with the Company's mezzanine notes in the aggregate
principal amount of $10.5 million. These warrants are accounted for
as liabilities on the Company's consolidated balance sheets and
were repaid with proceeds from its IPO.
- Equity-based compensation expense consisted of $750 and $826
related to stock options issued under the Company's 2018 Equity
Incentive Plan during the three months and year ended September 30,
2018, respectively. Additionally, during the year ended September
30, 2018, the Company incurred $741 related to tax receivables
agreement (TRA) non-participation compensatory shares. TRA
non-participation compensatory shares were issued to former equity
owners as part of the Reorganization Transactions in conjunction
with the IPO.
- Acquisition-related expenses are the professional service and
related costs directly related to the Company's acquisitions and
are not part of its core performance.
- Acquisition intangible amortization reflects amortization of
intangible assets and software acquired through business
combinations, acquired customer portfolios, acquired referral
agreements and related asset acquisitions.
- Non-cash interest expense reflects amortization of deferred
financing costs.
- Other taxes consist of franchise taxes, commercial activity
taxes and other non-income based taxes. Taxes related to salaries
or employment are not included.
- Legal settlement is a charge from certain legal
proceedings.
- Pro forma corporate income tax expense is based on Non-GAAP
adjusted income before taxes and is calculated using tax rates of
25.0% for 2018 and 2017, based on blended federal and state tax
rates, considering the Tax Reform Act for 2018.
- Pro forma adjusted net income assumes that the effect of the
Reorganization Transactions and the Company's IPO occurred prior to
the year ended September 30, 2018, and that all net income during
that period is available to the Class A common shareholders.
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.
- Cash interest expense, net represents all interest expense
recorded on statement of operations other than non-cash interest
expense, which represents amortization of deferred financing
costs.
- Pro forma corporate income tax expense is based on Non-GAAP
adjusted income before taxes and is calculated using tax rates of
25.0% for 2018 and 2017, based on blended federal and state tax
rates, considering the Tax Reform Act for 2018.
- 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.
i3 Verticals, Inc. GAAP Diluted EPS and
Non-GAAP Pro Forma Adjusted Diluted EPS(Unaudited)($ in
ones)
| |
Three months ended September 30,
2018 |
Year ended September 30, 2018 |
| Diluted net income
(loss) available to Class A common stock per share |
$ |
0.09 |
|
$ |
0.08 |
| Pro forma adjusted
diluted earnings per share (non-GAAP)(1) |
$ |
0.19 |
|
$ |
0.57 |
| Pro forma weighted
average shares of adjusted diluted Class A common stock
outstanding(2) |
26,891,688 |
|
26,873,878 |
_______________
- Pro forma adjusted diluted earnings per share is calculated
using pro forma adjusted net income and the pro forma weighted
average shares of adjusted diluted Class A common stock
outstanding. It presumes that the effect of the Reorganization
Transactions and the Company's IPO occurred prior to the year ended
September 30, 2018, and that all net income during that period is
available to the Class A common shareholders. 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.
- Pro forma weighted average shares of adjusted diluted Class A
common stock outstanding include 17,213,806 outstanding shares of
Class A common stock issuable upon the exchange of Common Units in
i3 Verticals, LLC and 865,252 and 847,442 shares of
unvested Class A common stock and options for the three months and
year ended September 30, 2018, respectively.
i3 Verticals, Inc. Reconciliation of GAAP
Revenue to Non-GAAP Net Revenue(Unaudited)($ in
thousands)
| |
Three months ended September 30, |
|
Year ended September 30, |
| |
2018 |
|
2017 |
|
2018 |
|
2017 |
| Revenue |
$ |
84,053 |
|
$ |
71,779 |
|
$ |
323,508 |
|
$ |
262,571 |
| Interchange and network
fees |
55,966 |
|
51,433 |
|
214,543 |
|
189,112 |
| Net
Revenue |
$ |
28,087 |
|
$ |
20,346 |
|
$ |
108,965 |
|
$ |
73,459 |
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