Announces Public Sector Acquisition and
Inducement Equity Grants
In the last bullet, under Highlights for the fiscal fourth
quarter and full fiscal year of 2020 vs. 2019 heading, the last
sentence should read: The aggregate purchase price was $19.6
million in cash and an amount of contingent consideration, which is
still being valued (instead of: The aggregate purchase price
was $59.6 million in cash and an amount of contingent
consideration, which is still being valued).
The updated release reads:
I3 VERTICALS REPORTS FOURTH QUARTER AND FULL
FISCAL YEAR 2020 FINANCIAL RESULTS
Announces Public Sector Acquisition and
Inducement Equity Grants
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, 2020.
Greg Daily, Chairman and CEO of i3 Verticals, commented, “We are
pleased with our fourth quarter results and the sequential
improvement we saw from the third quarter. We continued to execute
on our M&A strategy and have completed seven acquisitions since
July 1, 2020, all of which are software companies. Our financial
results continued to improve, and our payment volume continued to
recover, despite COVID-19 related challenges in specific verticals
such as Education. We are confident in our ability to deliver solid
financial results in 2021 and to capitalize on the significant
opportunities ahead of us.
“We are also excited that on November 17, 2020, we closed our
most recent acquisition, ImageSoft, which further enhances our
product offering to the Public Sector market. ImageSoft sells
products that eliminate paper-based systems by creating integrated
electronic workflows for courts and government agencies. ImageSoft
is an ideal strategic fit, and we are very optimistic about how
they will help us deliver cutting-edge products to our Public
Sector customers.”
Highlights for the fiscal fourth quarter and full fiscal year
of 2020 vs. 2019
- Fourth quarter revenue was $38.3 million, a decrease of 65%
over the prior year's fourth quarter; Full year revenue was $150.1
million, a decrease of 60% over the prior year. Results for 2020
reflect the adoption of Accounting Standards Codification Topic
606, Revenue from Contracts with Customers1.
- Fourth quarter adjusted net revenue2, which excludes
acquisition revenue adjustments and interchange and related network
fees, was $38.4 million, a decrease of 5% over the prior year's
fourth quarter; Full year adjusted net revenue2 was $151.0 million,
an increase of 10% over the prior year.
- Fourth quarter net loss was $2.0 million; Full year net loss
was $1.0 million.
- Fourth quarter net loss attributable to i3 Verticals, Inc. was
$0.7 million; Full year net loss attributable to i3 Verticals, Inc.
was $0.4 million.
- Fourth quarter adjusted EBITDA2 was $9.7 million, a decrease of
17% over the prior year's fourth quarter; Full year adjusted
EBITDA2 was $38.6 million, a decrease of less than 1% over the
prior year.
- Fourth quarter adjusted EBITDA2 as a percentage of adjusted net
revenue2 was 25%, compared to 29% in the prior year's fourth
quarter; Full year adjusted EBITDA2 as a percentage of adjusted net
revenue2 was 26%, compared to 28% in the prior year.
- Fourth quarter diluted net loss per share available to Class A
common stock was $0.06, compared to $0.07 in the prior year's
fourth quarter; Full year diluted net loss per share available to
Class A common stock was $0.03, compared to $0.29 in the prior
year.
- Fourth quarter and full year ended September 30, 2020 pro forma
adjusted diluted earnings per share2, which gives pro forma effect
to the Company's going forward effective tax rate, was $0.20 and
$0.77, respectively, compared to $0.24 and $0.83 for the fourth
quarter and full year ended September 30, 2019, respectively.
Integrated payments3 were 57% and 55% of payment volume for the
three months and full year ended September 30, 2020,
respectively.
- At September 30, 2020, the ratio of consolidated total
debt-to-EBITDA, as defined in the Company's Senior Secured Credit
Facility, was 2.59x.
- As previously announced in our press release dated October 5,
2020, the Company completed the acquisition of three companies that
strengthen its vertical focus. The first acquisition is within the
Company’s Public Sector vertical and provides software services to
public safety and law enforcement customers. The second acquisition
is within the Company’s Healthcare vertical and offers medical
billing and other software. The final acquisition offers
proprietary technology that will augment the Company’s existing
platform across several verticals. The aggregate purchase price was
$19.6 million in cash and an amount of contingent consideration,
which is still being valued.
1.
Effective October 1, 2019, our revenues
are presented net of interchange and network fees in accordance
with Accounting Standards Codification Topic 606, Revenue from
Contracts with Customers. This change in presentation affected our
reported revenues and operating expenses for the fiscal fourth
quarter and year ended September 30, 2020, by the same amount and
had no effect on our income from operations.
2.
Represents a non-GAAP financial measure.
For additional information (including reconciliation information),
see the attached schedules to this release.
3.
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.
Acquisition of ImageSoft
On November 17, 2020, the Company completed the acquisition of
substantially all of the assets of ImageSoft, Inc. for a purchase
price of $40.0 million in cash and an amount of contingent
consideration, which is still being valued. They sell a combination
of proprietary and third-party software, which eliminates
paper-based systems by creating integrated electronic workflows for
courts and government agencies.
In accordance with Nasdaq Listing Rule 5635(c)(4), the Company
has granted equity awards under its 2020 Acquisition Equity
Incentive Plan to the new employees who agreed to join the Company
in connection with the November 17, 2020 acquisition. The Company
granted options to purchase a total of 250,000 shares of the
Company’s Class A common stock to 140 employees as a material
inducement to enter into employment with the Company. These stock
options will vest ratably over three years, subject to the
employees’ continued service to the Company through each applicable
vesting date. The stock options have an exercise price equal to
$25.31, the closing price per share of the Company’s Class A common
stock as reported by Nasdaq on the date of closing.
2021 Outlook
The COVID-19 pandemic has created significant uncertainty in the
economy and the extent to which the COVID-19 pandemic will impact
the Company's future results is difficult to reasonably estimate at
this time. Therefore, the Company is not providing a financial
outlook for the fiscal year ending September 30, 2021.
Conference Call
The Company will host a conference call on Friday, November 20,
2020, at 8:30 a.m. ET, to discuss financial results and operations.
To listen to the call live via telephone, participants should dial
(929) 477-0577 approximately 10 minutes prior to the start of the
call. A telephonic replay will be available from 11:30 a.m. ET on
November 20, 2020, through November 27, 2020, by dialing (719)
457-0820 and entering Confirmation Code 4271451.
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 to 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 (“SMBs”) and other organizations
in strategic vertical markets, such as education, non-profit, the
public sector, 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
$14.4 billion in total payment volume for the 12 months ended
September 30, 2020.
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 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 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 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 anticipated impact to the
Company’s business operations, payment volume and volume attrition
due to the global pandemic of a novel strain of the coronavirus
(COVID-19); (ii) the Company’s indebtedness and the ability to
maintain compliance with the financial covenants in the Company’s
senior secured credit facility in light of the impacts of the
COVID-19 pandemic; (iii) the ability to meet the Company’s
liquidity needs in light of the impacts of the COVID-19 pandemic;
(iv) the ability to raise additional funds on terms acceptable to
us, if at all, whether debt, equity or a combination thereof; (v)
the triggering of impairment testing of the Company’s fair-valued
assets, including goodwill and intangible assets, in the event of a
decline in the price of the Company’s Class A common stock; (vi)
the ability to generate revenues sufficient to maintain
profitability and positive cash flow; (vii) competition in the
Company's industry and the ability to compete effectively; (viii)
the dependence on non-exclusive distribution partners to market the
Company's products and services; (ix) the ability to keep pace with
rapid developments and changes in the Company's industry and
provide new products and services; (x) liability and reputation
damage from unauthorized disclosure, destruction or modification of
data or disruption of the Company's services; (xi) technical,
operational and regulatory risks related to the Company's
information technology systems and third-party providers’ systems;
(xii) reliance on third parties for significant services; (xiii)
exposure to economic conditions and political risks affecting
consumer and commercial spending, including the use of credit
cards; (xiv) the ability to increase the Company's existing
vertical markets, expand into new vertical markets and execute the
Company's growth strategy; (xv) the ability to successfully
identify acquisition targets, complete those acquisitions and
effectively integrate those acquisitions into the Company's
services; (xvi) potential degradation of the quality of the
Company's products, services and support; (xvii) the ability to
retain clients, many of which are small- and medium-sized
businesses, which can be difficult and costly to retain; (xviii)
the Company's ability to successfully manage its intellectual
property; (xix) the ability to attract, recruit, retain and develop
key personnel and qualified employees; (xx) risks related to laws,
regulations and industry standards; (xxi) operating and financial
restrictions imposed by the Company's senior secured credit
facility; (xxii) risks related to the accounting method for the
Company’s 1.0% Exchangeable Senior Notes due February 15, 2025 (the
“Exchangeable Notes”); (xxiii) the ability to raise the funds
necessary to settle exchanges of the Exchangeable Notes or to
repurchase the Exchangeable Notes upon a fundamental change; (xxiv)
risks related to the conditional exchange feature of the
Exchangeable Notes; and (xxv) the risk factors included in the
Company's Annual Report on Form 10-K for the year ended September
30, 2019 and in our subsequent filings. 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.
i3 Verticals, Inc.
Consolidated Statements of Operations
($ in thousands, except share and
per share amounts)
Three months ended September
30,
Year ended September
30,
2020
2019
% Change
2020
2019
% Change
(unaudited)
(unaudited)
(unaudited)
Revenue
$
38,272
$
108,562
(65)%
$
150,134
$
376,307
(60)%
Operating expenses
Interchange and network fees(1)
69,090
(100)%
242,867
(100)%
Other costs of services
12,356
12,823
(4)%
47,230
44,237
7%
Selling general and administrative
20,117
18,438
9%
78,323
62,860
25%
Depreciation and amortization
4,549
4,689
(3)%
18,217
16,564
10%
Change in fair value of contingent
consideration
52
1,653
(97)%
(1,409)
3,389
n/m
Total operating expenses
37,074
106,693
(65)%
142,361
369,917
(62)%
Income from operations
1,198
1,869
(36)%
7,773
6,390
22%
Other expenses
Interest expense, net
2,305
2,017
14%
8,926
6,004
49%
Other expense
1,792
—
n/m
2,621
—
n/m
Total other expenses
4,097
2,017
103%
11,547
6,004
92%
(Loss) income before income taxes
(2,899)
(148)
1,859%
(3,774)
386
(1,078)%
Benefit from income taxes
(877)
(175)
401%
(2,795)
(177)
1,479%
Net (loss) income
(2,022)
27
(7589)%
(979)
563
(274)%
Net (loss) income attributable to
non-controlling interest
(1,371)
957
n/m
(560)
3,608
n/m
Net loss attributable to i3 Verticals,
Inc.
$
(651)
$
(930)
(30)%
$
(419)
$
(3,045)
(86)%
Net loss per share available to Class A
common stock:
Basic
$
(0.04)
$
(0.07)
$
(0.03)
$
(0.29)
Diluted
$
(0.06)
$
(0.07)
$
(0.03)
$
(0.29)
Weighted average shares of Class A common
stock outstanding(1):
Basic
15,780,082
14,159,957
14,833,378
10,490,981
Diluted
28,069,996
14,159,957
27,429,801
10,490,981
n/m = not meaningful
__________________________
1.
Effective October 1, 2019, our revenues
are presented net of interchange and network fees in accordance
with Accounting Standards Codification Topic 606, Revenue from
Contracts with Customers.
i3 Verticals, Inc. Financial
Highlights
(Unaudited)
($ in thousands, except per share
amounts)
Three months ended September
30,
Year ended September
30,
2020
2019
% Change
2020
2019
% Change
Adjusted net revenue (non-GAAP)
$
38,426
$
40,565
(5)%
$
150,958
$
137,597
10%
Adjusted EBITDA (non-GAAP)
9,682
11,726
(17)%
38,557
38,745
—%
Pro forma adjusted diluted earnings per
share (non-GAAP)
$
0.20
$
0.24
(17)%
$
0.77
$
0.83
(7)%
i3 Verticals, Inc.
Supplemental Volume Information
(Unaudited)
($ in thousands)
Three months ended September
30,
Year ended September
30,
2020
2019
2020
2019
Payment volume(1)
$
3,979,593
$
3,848,579
$
14,377,148
$
13,144,458
__________________________
1.
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)
For the Three Months Ended
September 30, 2020
Merchant Services
Proprietary Software and
Payments
Other
Total
Revenue
$
24,759
$
13,924
$
(411)
$
38,272
Operating expenses
Other costs of services
10,962
1,805
(411)
12,356
Selling general and administrative
6,276
7,335
6,506
20,117
Depreciation and amortization
2,774
1,603
172
4,549
Change in fair value of contingent
consideration
(400)
452
—
52
Income (loss) from operations
$
5,147
$
2,729
$
(6,678)
$
1,198
Payment volume
$
3,614,766
$
364,827
$
—
$
3,979,593
For the Year Ended September
30, 2020(1)
Merchant Services
Proprietary Software and
Payments
Other
Total
Revenue
$
100,949
$
50,953
$
(1,768)
$
150,134
Operating expenses
Other costs of services
43,940
5,057
(1,767)
47,230
Selling general and administrative
26,376
28,187
23,760
78,323
Depreciation and amortization
11,796
5,723
698
18,217
Change in fair value of contingent
consideration
(4,691)
3,282
—
(1,409)
Income (loss) from operations
$
23,528
$
8,704
$
(24,459)
$
7,773
Payment volume
$
13,553,263
$
823,885
$
—
$
14,377,148
________
1.
Effective July 1, 2020, the Company
reassigned a component from the Proprietary Software and Payments
segment to the Merchant Services segment to better align the
Company's business within its segments. The prior period
comparatives have been retroactively adjusted to reflect the
Company's current segment presentation.
i3 Verticals, Inc. Segment
Summary (continued)
(Unaudited)
($ in thousands)
For the Three Months Ended
September 30, 2019(1)
Merchant Services
Proprietary Software and
Payments
Other
Total
Revenue
$
95,584
$
12,978
$
—
$
108,562
Operating expenses
Interchange and network fees
66,940
2,150
—
69,090
Other costs of services
11,713
1,110
—
12,823
Selling general and administrative
7,129
5,916
5,393
18,438
Depreciation and amortization
3,223
1,306
160
4,689
Change in fair value of contingent
consideration
895
758
—
1,653
Income (loss) from operations
$
5,684
$
1,738
$
(5,553)
$
1,869
Payment volume
$
3,666,707
$
181,872
$
—
$
3,848,579
For the Year Ended September
30, 2019(1)
Merchant Services
Proprietary Software and
Payments
Other
Total
Revenue
$
338,968
$
37,339
$
—
$
376,307
Operating expenses
Interchange and network fees
236,170
6,697
—
242,867
Other costs of services
41,487
2,750
—
44,237
Selling general and administrative
27,275
17,059
18,526
62,860
Depreciation and amortization
12,221
3,790
553
16,564
Change in fair value of contingent
consideration
(477)
3,866
—
3,389
Income (loss) from operations
$
22,292
$
3,177
$
(19,079)
$
6,390
Payment volume
$
12,533,107
$
611,351
$
—
$
13,144,458
________
1.
Effective July 1, 2020, the Company
reassigned a component from the Proprietary Software and Payments
segment to the Merchant Services segment to better align the
Company's business within its segments. The prior period
comparatives have been retroactively adjusted to reflect the
Company's current segment presentation.
i3 Verticals, Inc.
Consolidated Balance Sheets
($ in thousands, except share and
per share amounts)
September 30,
September 30,
2020
2019
(unaudited)
Assets
Current assets
Cash and cash equivalents
$
15,568
$
1,119
Accounts receivable, net
17,538
15,335
Prepaid expenses and other current
assets
4,869
4,117
Total current assets
37,975
20,571
Property and equipment, net
5,339
5,026
Restricted cash
5,033
2,081
Capitalized software, net
16,989
15,454
Goodwill
187,005
168,284
Intangible assets, net
109,233
107,419
Deferred tax asset
36,755
28,138
Other assets
5,197
2,329
Total assets
$
403,526
$
349,302
Liabilities and equity
Liabilities
Current liabilities
Accounts payable
3,845
3,438
Accrued expenses and other current
liabilities
24,064
21,560
Deferred revenue
10,986
10,237
Total current liabilities
38,895
35,235
Long-term debt, less current portion and
debt issuance costs, net
90,758
139,298
Long-term tax receivable agreement
obligations
27,565
23,204
Other long-term liabilities
6,140
9,124
Total liabilities
163,358
206,861
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 September 30, 2020 and 2019
—
—
Class A common stock, par value $0.0001
per share, 150,000,000 shares authorized; 18,864,143 and 14,444,115
shares issued and outstanding as of September 30, 2020 and 2019,
respectively
2
1
Class B common stock, par value $0.0001
per share, 40,000,000 shares authorized; 11,900,621 and 12,921,637
shares issued and outstanding as of September 30, 2020 and 2019,
respectively
1
1
Additional paid-in-capital
157,598
82,380
Accumulated deficit
(2,023)
(2,309)
Total stockholders' equity
155,578
80,073
Non-controlling interest
84,590
62,368
Total equity
240,168
142,441
Total liabilities and stockholders'
equity
$
403,526
$
349,302
i3 Verticals, Inc.
Consolidated Cash Flow Data
($ in thousands)
Year ended September
30,
2020
2019
(unaudited)
Net cash provided by operating
activities
$
23,720
$
26,597
Net cash used in investing activities
$
(35,431)
$
(143,728)
Net cash provided by financing
activities
$
29,112
$
119,094
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,
2020
2019
2020
2019
Net (loss) income attributable to i3
Verticals, Inc.
$
(651)
$
(930)
$
(419)
$
(3,045)
Net (loss) income attributable to
non-controlling interest
(1,371)
957
(560)
3,608
Non-GAAP Adjustments:
(Benefit from) provision for income
taxes
(877)
(175)
(2,795)
(177)
Financing-related expenses(1)
43
—
286
—
Non-cash change in fair value of
contingent consideration(2)
52
1,653
(1,409)
3,389
Equity-based compensation(3)
3,002
2,002
10,452
6,124
Acquisition revenue adjustments(4)
154
1,093
824
4,157
Acquisition-related expenses(5)
508
412
1,811
1,859
Acquisition intangible amortization(6)
3,624
3,819
14,497
13,570
Non-cash interest expense(7)
1,429
102
3,844
873
Other taxes(8)
176
8
365
262
Other expenses related to adjustments of
liabilities under Tax Receivable Agreement(9)
323
—
323
—
Non-cash loss on Exchangeable Note
repurchases(10)
1,469
—
2,297
—
COVID-19 related expenses(11)
—
—
239
—
Non-GAAP pro forma adjusted income
before taxes
7,881
8,941
29,755
30,620
Pro forma taxes at effective tax
rate(12)
(1,970)
(2,235)
(7,439)
(7,655)
Pro forma adjusted net
income(13)
$
5,911
$
6,706
$
22,316
$
22,965
Cash interest expense, net(14)
876
1,915
5,082
5,131
Pro forma taxes at effective tax
rate(12)
1,970
2,235
7,439
7,655
Depreciation, non-acquired intangible
asset amortization and internally developed software
amortization(15)
925
870
3,720
2,994
Adjusted EBITDA
$
9,682
$
11,726
$
38,557
$
38,745
________
1.
Financing-related expenses includes
expenses directly related to certain transactions as part of
financing transactions.
2.
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.
3.
Equity-based compensation expense
consisted of $3,002 and $10,452 related to stock options issued
under the Company's 2018 Equity Incentive Plan during the three
months and year ended September 30, 2020, respectively, and $2,002
and $6,124 during the three months and year ended September 30,
2019, respectively.
4.
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.
5.
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.
6.
Acquisition intangible amortization
reflects amortization of intangible assets and software acquired
through business combinations, acquired customer portfolios,
acquired referral agreements and related asset acquisitions.
7.
Non-cash interest expense reflects
amortization of debt discount and debt issuance costs and any
write-offs of debt issuance costs.
8.
Other taxes consist of franchise taxes,
commercial activity taxes, employer payroll taxes related to stock
exercises and other non-income based taxes. Taxes related to
salaries are not included.
9.
Under our Tax Receivable Agreement we have
a liability equal to 85% of certain deferred tax assets resulting
from an increase in the tax basis of our investment in i3
Verticals, LLC. Other expenses related to adjustments of
liabilities under our Tax Receivable Agreement relate to the
remeasurement of the underlying deferred tax asset for changes in
estimated income tax rates.
10.
Non-cash loss on Exchangeable Note
repurchases reflects the loss on retirement of debt the Company
recorded during the relevant periods due to the carrying value
exceeding the fair value of the repurchased portion of the 1.0%
Exchangeable Senior Notes due 2025 (the “Exchangeable Notes”) at
the dates of repurchases.
11.
COVID-19 related expenses reflects
incremental expenses incurred as a result of the COVID-19 pandemic,
including employee severance expenses and legal expenses.
12.
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 2020 and 2019, based on blended
federal and state tax rates, considering the Tax Reform Act for
2018.
13.
Pro forma adjusted net income assumes that
all net income during the period is available to the holders of the
Company’s Class A common stock.
14.
Cash interest expense, net represents all
interest expense net of interest income recorded on the Company's
statement of operations other than non-cash interest expense, which
represents amortization of debt discount and debt issuance costs
and any write-offs of debt issuance costs.
15.
Depreciation, non-acquired intangible
asset amortization 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 thousands, except share and
per share amounts)
Three months ended September
30,
Year ended September
30,
2020
2019
2020
2019
Diluted net loss available to Class A
common stock per share
$
(0.06)
$
(0.07)
$
(0.03)
$
(0.29)
Pro forma adjusted diluted earnings per
share (non-GAAP)(1)
$
0.20
$
0.24
$
0.77
$
0.83
Pro forma adjusted net income(2)
$
5,911
$
6,706
$
22,316
$
22,965
Pro forma weighted average shares of
adjusted diluted Class A common stock outstanding(3)
29,390,270
28,485,235
28,814,308
27,640,495
__________
1.
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.
2.
Pro forma adjusted net income assumes that
all net income during the period is available to the holders of the
Company's Class A common stock. Further, pro forma adjusted diluted
earnings per share assumes that all Common Units in i3 Verticals,
LLC and the associated non-voting Class B common stock were
exchanged for Class A common stock at the beginning of the period
on a one-for-one basis.
3.
Pro forma weighted average shares of
adjusted diluted Class A common stock outstanding include
12,289,914 and 12,596,423 weighted average outstanding shares of
Class A common stock issuable upon the exchange of Common Units in
i3 Verticals, LLC and 1,320,274 and 1,384,507 shares of unvested
Class A common stock and options for the three months and year
ended September 30, 2020, respectively. Pro forma weighted average
shares of adjusted diluted Class A common stock outstanding include
12,921,637 outstanding shares of Class A common stock issuable upon
the exchange of Common Units in i3 Verticals, LLC and 1,403,641 and
1,292,659 shares of unvested Class A common stock and options for
the for the three months and year ended September 30, 2019,
respectively.
i3 Verticals, Inc.
Reconciliation of GAAP Revenue to Non-GAAP Adjusted Net
Revenue
(Unaudited)
($ in thousands)
Three months ended September
30,
Year ended September
30,
2020
2019
2020
2019
Revenue
$
38,272
$
108,562
$
150,134
$
376,307
Acquisition revenue adjustments(1)
154
1,093
824
4,157
Interchange and network fees(2)
(69,090)
(242,867)
Adjusted Net Revenue
$
38,426
$
40,565
$
150,958
$
137,597
__________
1.
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.
2.
Effective October 1, 2019, our revenues
are presented net of interchange and network fees in accordance
with Accounting Standards Codification Topic 606, Revenue from
Contracts with Customers.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201119006294/en/
Clay Whitson Chief Financial Officer (615) 988-9890
cwhitson@i3verticals.com
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