i3 Verticals, Inc. (Nasdaq: IIIV) (“i3 Verticals” or the “Company”)
today reported its financial results for the fiscal second quarter
ended March 31, 2019.
Highlights for the fiscal second quarter
and six months ended March 31, 2019 vs. 2018
- Second quarter revenue was $85.4 million, an increase of 10%
over the prior year's second quarter; Revenue was $170.3 million
for the six months ended March 31, 2019, an increase of 10% over
the prior year's first six months.
- Second quarter adjusted net revenue1, which excludes
acquisition revenue adjustments and interchange and network fees,
was $31.4 million, an increase of 16% over the prior year's second
quarter; Adjusted net revenue1 was $61.0 million for the six months
ended March 31, 2019, an increase of 17% over the prior year's
first six months.
- Second quarter net loss was $1.2 million; Net income was $1.1
million for the six months ended March 31, 2019.
- Second quarter adjusted EBITDA1 was $8.7 million, an increase
of 13% over the prior year's second quarter; Adjusted EBITDA1 was
$17.3 million for the six months ended March 31, 2019, an increase
of 19% over the prior year's first six months.
- Second quarter adjusted EBITDA1 as a percentage of adjusted net
revenue1 was 28%, compared to 28% in the prior year's second
quarter; Adjusted EBITDA1 as a percentage of adjusted net revenue1
was 28% for the six months ended March 31, 2019, compared to 28% in
the prior year's first six months.
- Second quarter diluted net loss per share available to Class A
common stock was $0.12; Diluted net loss per share available to
Class A common stock was $0.10 for the six months ended
March 31, 2019.
- For the three and six months ended March 31, 2019, pro forma
adjusted diluted earnings per share1, which gives pro forma effect
to the Company's going forward effective tax rate, was $0.20 and
$0.40, respectively.
- Integrated payments2 were 49% and 47% of payment volume for the
three and six months ended March 31, 2019, respectively.
- At March 31, 2019, the ratio of consolidated debt-to-EBITDA, as
defined in the Company's Senior Secured Credit Facility, was 2.06x.
Giving effect to the two acquisitions since March 31, 2019
discussed below, the Company's consolidated debt-to-EBITDA ratio is
currently approximately 2.75x.
- Since the first quarter earnings release issued on February 13,
2019, and as previously announced in our press releases dated March
4, 2019 and April 8, 2019, the Company completed three acquisitions
focused on its Public Sector vertical. Two of the acquisitions were
completed during the second quarter, with the third acquisition,
NET Data, completed subsequent to March 31, 2019.
- Effective May 1, 2019, the Company completed an acquisition in
the Education vertical, which is the Company's first acquisition in
this vertical since its initial public offering. This acquisition
expands the Company's geographic reach within the Education
vertical, primarily in large states such as Florida and Texas, and
also enhances the software offered to this market. The up-front
cash consideration for this acquisition was $10.0 million.
- On May 9, 2019, the Company closed an amended $300 million
Senior Secured Credit Facility. The new credit facility is an
all-revolver structure and was led by Bank of America, N.A., with
Fifth Third Bank serving as joint bookrunner. The maximum senior
debt-to-EBITDA ratio permitted under the credit facility is 3.75x,
with a step-down to 3.50x. Reductions in interest rate spreads were
also achieved in the amended facility.
- Represents a non-GAAP financial measure. For additional
information (including reconciliation information), see the
attached schedules to this release.
- 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 proud of our second quarter performance. Our
recent acquisitions have significantly expanded our presence within
our Public Sector vertical. We have now completed six Public Sector
acquisitions, and five of those were completed subsequent to our
IPO. The Public Sector vertical will be a focus for our company
going forward.
“We are also excited to complete an acquisition
within our Education vertical. The Education vertical is a priority
for i3 Verticals, and we believe in the long-term potential of this
market. We believe the expanded national footprint within Education
provided by our recent acquisition will enable greater growth
potential for the Education market.
“We also are pleased to announce the completion
of our new credit facility. Our acquisition pipeline remains
strong, and our expanded borrowing capacity will help to enable us
to continue to execute strategic acquisitions in our target
vertical markets. We appreciate the support we received from our
bank group.”
In conclusion, Daily added, “While acquisitions
have driven much of our communication to the market, we are pleased
with our core performance. We continue to focus on building our
technology to fuel further organic growth. The progress of our
existing team coupled with our recent acquisitions gives us great
confidence in our future growth opportunities.”
2019 Outlook
The Company announced that it is maintaining its
guidance issued on April 8, 2019, in connection with the Net Data
acquisition. The Company will include expectations for the
acquisition within its Education vertical as part of its fiscal
2020 guidance, but for the remaining months of the fiscal year
ending September 30, 2019, the acquisition is not expected to be
significant as schools will be closed during the summer months.
(in thousands, except per
share amounts) |
Outlook Range |
|
Fiscal year ending September 30, 2019 |
Adjusted net revenue(1) (non-GAAP) |
$ |
127,000 |
- |
$ |
133,000 |
Adjusted EBITDA
(non-GAAP) |
$ |
36,500 |
- |
$ |
39,500 |
Adjusted diluted earnings per
share(2) (non-GAAP) |
$ |
0.85 |
- |
$ |
0.90 |
_______________________
- Under GAAP, companies must adjust, as necessary, beginning
balances of acquired deferred revenue to fair value as part of
acquisition accounting as defined by GAAP. For the 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 “2019 Outlook,”
reconciliation of adjusted net revenue, adjusted EBITDA and
adjusted diluted earnings per share guidance to the closest
corresponding GAAP measure on a forward-looking basis is not
available without unreasonable efforts. This inability results from
the inherent difficulty in forecasting generally and quantifying
certain projected amounts that are necessary for such
reconciliations. In particular, sufficient information is not
available to calculate certain adjustments required for such
reconciliations, including changes in the fair value of contingent
consideration, income tax expense of 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
Tuesday, May 14, 2019, at 8:00 a.m. ET, to discuss financial
results and operations. To listen to the call live via telephone,
participants should dial (323) 794-2551 approximately
10 minutes prior to the start of the call. A telephonic replay
will be available from 11:00 a.m. ET on May 14,
2019, through May 21, 2019, by dialing (719) 457-0820 and
entering Confirmation Code 3915262.
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, adjusted net revenue, pro
forma adjusted net income, adjusted EBITDA and pro forma adjusted
diluted EPS, and a reconciliation of those measures to the most
directly comparable GAAP measures is included on pages 10 through
12 in the financial schedules of this release.
About i3 Verticals
Helping drive the convergence of software and
payments, i3 Verticals delivers seamlessly 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 $11.9 billion in total payment volume for
the 12 months ended March 31, 2019.
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 generally 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 (such as our acquisition pipeline and our 2019 outlook) 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 and
include, but are not limited to: (i) the ability to generate
revenues sufficient to 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 identify acquisition targets, complete those
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 small- and medium-sized
businesses, 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; (xvii)
operating and financial restrictions imposed by the Company's
senior secured credit facility; and (xviii) the risk factors
included in the Company's Annual Report on Form 10-K for the year
ended September 30, 2018. 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.
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(Unaudited)($ in thousands, except
share and per share amounts)
|
Three months ended March 31, |
|
Six months ended March 31, |
|
2019 |
|
|
2018 |
|
|
% Change |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
85,394 |
|
|
$ |
77,699 |
|
|
10 |
% |
|
$ |
170,262 |
|
|
$ |
154,920 |
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
Interchange and network
fees |
54,685 |
|
|
50,634 |
|
|
8 |
% |
|
110,514 |
|
|
102,872 |
|
|
7 |
% |
Other costs of services |
10,193 |
|
|
9,505 |
|
|
7 |
% |
|
19,983 |
|
|
19,058 |
|
|
5 |
% |
Selling general and
administrative |
14,319 |
|
|
10,197 |
|
|
40 |
% |
|
26,835 |
|
|
19,041 |
|
|
41 |
% |
Depreciation and
amortization |
3,898 |
|
|
3,020 |
|
|
29 |
% |
|
7,450 |
|
|
5,876 |
|
|
27 |
% |
Change in fair value of
contingent consideration |
2,502 |
|
|
1,747 |
|
|
43 |
% |
|
2,153 |
|
|
2,129 |
|
|
1 |
% |
Total operating expenses |
85,597 |
|
|
75,103 |
|
|
14 |
% |
|
166,935 |
|
|
148,976 |
|
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
(203 |
) |
|
2,596 |
|
|
(108 |
)% |
|
3,327 |
|
|
5,944 |
|
|
(44 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
1,155 |
|
|
2,618 |
|
|
(56 |
)% |
|
2,069 |
|
|
5,006 |
|
|
(59 |
)% |
Change in fair value of
warrant liability |
— |
|
|
6,564 |
|
|
n/m |
|
|
— |
|
|
8,245 |
|
|
n/m |
|
Total other expenses |
1,155 |
|
|
9,182 |
|
|
(87 |
)% |
|
2,069 |
|
|
13,251 |
|
|
(84 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income
taxes |
(1,358 |
) |
|
(6,586 |
) |
|
n/m |
|
|
1,258 |
|
|
(7,307 |
) |
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit from) provision for
income taxes |
(136 |
) |
|
250 |
|
|
(154 |
)% |
|
129 |
|
|
(139 |
) |
|
(193 |
)% |
Net (loss) income |
(1,222 |
) |
|
(6,836 |
) |
|
n/m |
|
|
1,129 |
|
|
(7,168 |
) |
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to
non‑controlling interest |
(120 |
) |
|
— |
|
|
n/m |
|
|
2,053 |
|
|
— |
|
|
n/m |
|
Net (loss) income attributable
to i3 Verticals, Inc. |
$ |
(1,102 |
) |
|
$ |
(6,836 |
) |
|
(84 |
)% |
|
$ |
(924 |
) |
|
$ |
(7,168 |
) |
|
(87 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share available
to Class A common stock(1): |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.12 |
) |
|
|
|
|
|
$ |
(0.10 |
) |
|
|
|
|
Diluted |
$ |
(0.12 |
) |
|
|
|
|
|
$ |
(0.10 |
) |
|
|
|
|
Weighted average shares of
Class A common stock outstanding(1): |
|
|
|
|
|
|
|
|
|
|
|
Basic |
8,887,050 |
|
|
|
|
|
|
8,849,431 |
|
|
|
|
|
Diluted |
8,887,050 |
|
|
|
|
|
|
8,849,431 |
|
|
|
|
|
n/m = not meaningful________
- Basic and diluted net loss 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 March 31, |
|
Six months ended March 31, |
|
2019 |
|
2018 |
|
% Change |
|
2019 |
|
2018 |
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net revenue
(non‑GAAP) |
$ |
31,448 |
|
$ |
27,065 |
|
16 |
% |
|
$ |
61,018 |
|
$ |
52,048 |
|
17 |
% |
Adjusted EBITDA
(non-GAAP) |
8,747 |
|
7,713 |
|
13 |
% |
|
17,325 |
|
14,561 |
|
19 |
% |
Pro forma adjusted diluted
earnings per share (non-GAAP) |
$ |
0.20 |
|
|
|
|
|
$ |
0.40 |
|
|
|
|
i3 Verticals, Inc. Supplemental Volume
Information(Unaudited)($ in thousands)
|
Three months ended March 31, |
|
Six months ended March 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
Payment volume(1) |
$ |
2,942,808 |
|
$ |
2,758,292 |
|
$ |
5,886,657 |
|
$ |
5,586,221 |
__________
- 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 March 31,
2019 |
|
Merchant Services |
|
Proprietary Software and Payments |
|
Other |
|
Total |
Revenue |
$ |
76,875 |
|
|
$ |
8,519 |
|
|
$ |
— |
|
|
$ |
85,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interchange and network
fees |
|
53,121 |
|
|
|
1,564 |
|
|
|
— |
|
|
|
54,685 |
|
Other costs of services |
|
9,725 |
|
|
|
468 |
|
|
|
— |
|
|
|
10,193 |
|
Selling general and
administrative |
|
6,226 |
|
|
|
3,675 |
|
|
|
4,418 |
|
|
|
14,319 |
|
Depreciation and
amortization |
|
2,917 |
|
|
|
842 |
|
|
|
139 |
|
|
|
3,898 |
|
Change in fair value of
contingent consideration |
|
(390 |
) |
|
|
2,892 |
|
|
|
— |
|
|
|
2,502 |
|
Income (loss) from
operations |
$ |
5,276 |
|
|
$ |
(922 |
) |
|
$ |
(4,557 |
) |
|
$ |
(203 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment volume |
$ |
2,794,120 |
|
|
$ |
148,688 |
|
|
$ |
— |
|
|
$ |
2,942,808 |
|
|
|
|
As of and for the Six Months Ended March 31,
2019 |
|
Merchant Services |
|
Proprietary Software and Payments |
|
Other |
|
Total |
Revenue |
$ |
154,577 |
|
|
$ |
15,685 |
|
$ |
— |
|
|
$ |
170,262 |
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
Interchange and network
fees |
107,485 |
|
|
3,029 |
|
— |
|
|
110,514 |
Other costs of services |
19,121 |
|
|
862 |
|
— |
|
|
19,983 |
Selling general and
administrative |
12,317 |
|
|
6,662 |
|
7,856 |
|
|
26,835 |
Depreciation and
amortization |
5,699 |
|
|
1,503 |
|
248 |
|
|
7,450 |
Change in fair value of
contingent consideration |
(709 |
) |
|
2,862 |
|
— |
|
|
2,153 |
Income (loss) from
operations |
$ |
10,664 |
|
|
$ |
767 |
|
$ |
(8,104 |
) |
|
$ |
3,327 |
|
|
|
|
|
|
|
|
Payment volume |
$ |
5,598,259 |
|
|
$ |
288,398 |
|
$ |
— |
|
|
$ |
5,886,657 |
|
As of and for the Three Months Ended March 31,
2018 |
|
Merchant Services |
|
Proprietary Software and Payments |
|
Other |
|
Total |
Revenue |
$ |
72,226 |
|
$ |
5,473 |
|
$ |
— |
|
|
$ |
77,699 |
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
Interchange and network
fees |
49,292 |
|
1,341 |
|
1 |
|
|
50,634 |
Other costs (benefits) of
services |
9,113 |
|
393 |
|
(1 |
) |
|
9,505 |
Selling general and
administrative |
6,114 |
|
1,943 |
|
2,140 |
|
|
10,197 |
Depreciation and
amortization |
2,406 |
|
581 |
|
33 |
|
|
3,020 |
Change in fair value of
contingent consideration |
1,573 |
|
174 |
|
— |
|
|
1,747 |
Income (loss) from
operations |
$ |
3,728 |
|
$ |
1,041 |
|
$ |
(2,173 |
) |
|
$ |
2,596 |
|
|
|
|
|
|
|
|
Payment volume |
$ |
2,627,705 |
|
$ |
130,587 |
|
$ |
— |
|
|
$ |
2,758,292 |
|
As of and for the Six Months Ended March 31,
2018 |
|
Merchant Services |
|
Proprietary Software and Payments |
|
Other |
|
Total |
Revenue |
$ |
144,906 |
|
$ |
10,017 |
|
$ |
(3 |
) |
|
$ |
154,920 |
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
Interchange and network
fees |
100,339 |
|
2,533 |
|
— |
|
|
102,872 |
Other costs (benefits) of
services |
18,256 |
|
803 |
|
(1 |
) |
|
19,058 |
Selling general and
administrative |
11,002 |
|
3,637 |
|
4,402 |
|
|
19,041 |
Depreciation and
amortization |
4,715 |
|
1,097 |
|
64 |
|
|
5,876 |
Change in fair value of
contingent consideration |
1,448 |
|
681 |
|
— |
|
|
2,129 |
Income (loss) from
operations |
$ |
9,146 |
|
$ |
1,266 |
|
$ |
(4,468 |
) |
|
$ |
5,944 |
|
|
|
|
|
|
|
|
Payment volume |
$ |
5,333,485 |
|
$ |
252,736 |
|
$ |
— |
|
|
$ |
5,586,221 |
i3 Verticals, Inc. Consolidated Balance
Sheets($ in thousands, except share and per share
amounts)
|
March 31, |
|
September 30, |
|
2019 |
|
2018 |
|
(unaudited) |
|
|
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
1,393 |
|
|
$ |
572 |
Accounts receivable, net |
11,703 |
|
|
12,500 |
Settlement assets |
439 |
|
|
863 |
Prepaid expenses and other current assets |
3,246 |
|
|
2,630 |
Total current assets |
16,781 |
|
|
16,565 |
|
|
|
|
Property and equipment, net |
3,055 |
|
|
2,958 |
Restricted cash |
666 |
|
|
665 |
Capitalized software, net |
7,041 |
|
|
3,372 |
Goodwill |
104,651 |
|
|
83,954 |
Intangible assets, net |
82,661 |
|
|
66,023 |
Other assets |
3,644 |
|
|
1,605 |
Total assets |
$ |
218,499 |
|
|
$ |
175,142 |
|
|
|
|
Liabilities and equity |
|
|
|
Liabilities |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
3,359 |
|
|
$ |
4,114 |
Current portion of long-term debt |
5,000 |
|
|
5,000 |
Accrued expenses and other current liabilities |
15,588 |
|
|
11,538 |
Settlement obligations |
439 |
|
|
863 |
Deferred revenue |
4,413 |
|
|
4,927 |
Total current liabilities |
28,799 |
|
|
26,442 |
|
|
|
|
Long-term debt, less current portion and debt issuance costs,
net |
70,241 |
|
|
31,776 |
Other long-term liabilities |
4,724 |
|
|
4,726 |
Total liabilities |
103,764 |
|
|
62,944 |
|
|
|
|
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, 2019
and September 30, 2018 |
— |
|
|
— |
Class A common stock, par value $0.0001 per share, 150,000,000
shares authorized; 9,192,030 and 9,112,042 shares issued and
outstanding as of March 31, 2019 and September 30, 2018,
respectively |
1 |
|
|
1 |
Class B common stock, par value $0.0001 per share, 40,000,000
shares authorized; 17,112,164 and 17,213,806 shares issued and
outstanding as of March 31, 2019 and September 30, 2018,
respectively |
2 |
|
|
2 |
Additional paid-in-capital |
41,284 |
|
|
38,562 |
Accumulated (deficit) earnings |
(188 |
) |
|
736 |
Total Stockholders' equity |
41,099 |
|
|
39,301 |
Non-controlling interest |
73,636 |
|
|
72,897 |
Total equity |
114,735 |
|
|
112,198 |
Total liabilities and
stockholders' equity |
$ |
218,499 |
|
|
$ |
175,142 |
i3 Verticals, Inc. Consolidated Cash Flow
Data(Unaudited)($ in thousands)
|
Six months ended March 31, |
|
2019 |
|
2018 |
|
|
|
|
Net cash provided by operating activities |
$ |
11,424 |
|
|
$ |
9,593 |
|
Net cash used in investing
activities |
$ |
(44,945 |
) |
|
$ |
(30,106 |
) |
Net cash provided by financing
activities |
$ |
34,343 |
|
|
$ |
19,964 |
|
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 March 31, |
|
Six months ended March 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income (loss) attributable to i3 Verticals,
Inc. |
$ |
(1,102 |
) |
|
$ |
(6,836 |
) |
|
$ |
(924 |
) |
|
$ |
(7,168 |
) |
Net income attributable to non-controlling interest |
(120 |
) |
|
— |
|
|
2,053 |
|
|
— |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
Provision for (benefit from) income taxes |
(136 |
) |
|
250 |
|
|
129 |
|
|
(139 |
) |
Offering-related expenses(1) |
— |
|
|
124 |
|
|
— |
|
|
124 |
|
Non-cash change in fair value of contingent consideration(2) |
2,502 |
|
|
1,747 |
|
|
2,153 |
|
|
2,129 |
|
Non-cash change in fair value of warrant liability(3) |
— |
|
|
6,564 |
|
|
— |
|
|
8,245 |
|
Equity-based compensation(4) |
1,363 |
|
|
— |
|
|
2,314 |
|
|
— |
|
Acquisition revenue adjustments(5) |
739 |
|
|
— |
|
|
1,270 |
|
|
— |
|
Acquisition-related expenses(6) |
261 |
|
|
220 |
|
|
621 |
|
|
447 |
|
Acquisition intangible amortization(7) |
3,205 |
|
|
2,370 |
|
|
6,110 |
|
|
4,630 |
|
Non-cash interest expense(8) |
232 |
|
|
248 |
|
|
465 |
|
|
465 |
|
Other taxes(9) |
187 |
|
|
6 |
|
|
190 |
|
|
41 |
|
Non-GAAP pro forma
adjusted income before taxes |
7,131 |
|
|
4,693 |
|
|
14,381 |
|
|
8,774 |
|
Pro forma taxes at effective
tax rate(10) |
(1,783 |
) |
|
(1,173 |
) |
|
(3,595 |
) |
|
(2,195 |
) |
Pro forma adjusted net
income(11) |
$ |
5,348 |
|
|
$ |
3,520 |
|
|
$ |
10,786 |
|
|
$ |
6,579 |
|
Cash interest expense,
net(12) |
923 |
|
|
2,370 |
|
|
1,604 |
|
|
4,541 |
|
Pro forma taxes at effective
tax rate(10) |
1,783 |
|
|
1,173 |
|
|
3,595 |
|
|
2,195 |
|
Depreciation and internally
developed software amortization(13) |
693 |
|
|
650 |
|
|
1,340 |
|
|
1,246 |
|
Adjusted
EBITDA |
$ |
8,747 |
|
|
$ |
7,713 |
|
|
$ |
17,325 |
|
|
$ |
14,561 |
|
________
- Includes costs associated with forming i3 Verticals, Inc. and
other expenses directly related to the certain transactions as part
of any offering.
- 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 $1,363 thousand
and $2,314 thousand related to stock options issued under the
Company's 2018 Equity Incentive Plan during the three and six
months ended March 31, 2019, respectively.
- Under GAAP, companies must adjust, as necessary, beginning
balances of acquired deferred revenue to fair value as part of
acquisition accounting as defined by GAAP. Acquisition revenue
adjustments remove the effect of these adjustments to acquisition
date fair value from acquisitions that have closed as of the date
of this earnings release.
- 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.
- 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% and 25.0% for 2019 and 2018, respectively, 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 was available to the Class A common shareholders.
- Cash interest expense, net represents all interest expense
recorded on the Company's statement of operations other than
non-cash interest expense, which represents amortization of
deferred financing costs.
- 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 March 31,
2019 |
|
Six months ended March 31,
2019 |
Diluted net loss available to Class A common stock per share |
$ |
(0.12 |
) |
|
$ |
(0.10 |
) |
Pro forma adjusted diluted
earnings per share (non-GAAP)(1) |
$ |
0.20 |
|
|
$ |
0.40 |
|
Pro forma weighted average
shares of adjusted diluted Class A common stock outstanding(2) |
27,289,888 |
|
|
27,124,176 |
|
__________
- 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.
- Pro forma weighted average shares of adjusted diluted Class A
common stock outstanding include 17,112,164 outstanding shares of
Class A common stock issuable upon the exchange of Common Units in
i3 Verticals, LLC and 1,290,674 and 1,162,581 shares of
unvested Class A common stock and options for the three and six
months ended March 31, 2019, respectively.
i3 Verticals, Inc. Reconciliation of GAAP
Revenue to Non-GAAP Adjusted Net Revenue(Unaudited)($ in
thousands)
|
Three months ended March 31, |
|
Six months ended March 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue |
$ |
85,394 |
|
|
$ |
77,699 |
|
|
$ |
170,262 |
|
|
$ |
154,920 |
|
Acquisition revenue
adjustments(1) |
739 |
|
|
— |
|
|
1,270 |
|
|
— |
|
Interchange and network
fees |
(54,685 |
) |
|
(50,634 |
) |
|
(110,514 |
) |
|
(102,872 |
) |
Adjusted Net
Revenue |
$ |
31,448 |
|
|
$ |
27,065 |
|
|
$ |
61,018 |
|
|
$ |
52,048 |
|
__________
- Under GAAP, companies must adjust, as necessary, beginning
balances of acquired deferred revenue to fair value as part of
acquisition accounting as defined by GAAP. Acquisition revenue
adjustments remove the effect of these adjustments to acquisition
date fair value from acquisitions that have closed as of the date
of this earnings release.
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