i3 Verticals Inc
For the period ended Jun 30, 2024. Filed Aug 9, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 9, 2024
IIIV$19.07-1.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-10.
0001728688-24-000061
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0001728688-24-000085
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 178 previous paragraphs and 189 current paragraphs.
119 unchanged; 36 reworded; 33 added; 22 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (33)
Current report
•the impact of recent decisions of the U.S. Supreme Court regarding the actions of federal agencies;
Current report
•risks related to the anticipated sale of our Merchant Services Business pursuant to the terms of the Purchase Agreement; and
Current report
Recent Developments
Current report
Anticipated Sale of Merchant Services Business
Current report
On June 26, 2024, i3 Verticals, Inc., i3 Verticals, LLC, and i3 Holdings Sub, Inc., a wholly-owned subsidiary of i3 Verticals, LLC, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Payroc Buyer, LLC ("Payroc") and Payroc WorldAccess LLC. Pursuant to the terms of the Purchase Agreement, Payroc would purchase the equity interests of certain direct and indirect wholly-owned subsidiaries (the "Acquired Entities") of i3 Verticals, LLC and i3 Holdings Sub, Inc. (i3 Verticals, LLC and i3 Holdings Sub, Inc., collectively, the "Sellers") comprising the Merchant Services segment as well as certain assets within our Software and Services segment related to the Non-profit and Property Management vertical markets, including its associated proprietary technology (collectively, the "Merchant Services Business"), after giving effect to the contribution of certain assets and the assignment of certain liabilities associated with the Merchant Services Business from i3 Verticals, LLC and certain affiliates thereof to the Acquired Entities pursuant to a contribution agreement to be entered into immediately prior to the closing of the transactions pursuant to the Purchase Agreement (such transactions, collectively, the "Transactions"). Pursuant to the terms of the Contribution Agreement, i3 Verticals, LLC and its affiliates would retain certain liabilities related to the Merchant Services Business. The purchase price payable by Payroc to us for the equity interests of the Merchant Services Business would be $440 million (the “Purchase Price”), payable in cash upon the closing of the Transactions, subject to adjustments for closing net working capital and other purchase price adjustments provided in the Purchase Agreement.
Current report
The closing of the Transactions is subject to certain closing conditions set forth in the Purchase Agreement, including the expiration or termination of the waiting period applicable to the Transactions under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Waiting Period"), the absence of certain legal impediments, the accuracy of the representations of the other party (subject to certain materiality qualifiers specified in the Purchase Agreement), the compliance by the other party of its covenants under the Purchase Agreement in all material respects, and, in the case of Payroc's closing obligations, the delivery by us of certain consents associated with the Merchant Services Business and the absence of any material adverse effect with respect to the Merchant Services Business. The HSR Waiting Period expired on August 5, 2024. The consummation of the sale is expected to occur during the three months ending September 30, 2024.
Current report
The Purchase Agreement provides that at the closing of the Transactions, and as a condition to the closing obligations of the parties, the parties and/or their affiliates will enter into certain ancillary agreements, including (i) a transition services agreement, pursuant to which, among other things, the Sellers and/or affiliates thereof will provide certain information technology and operational transition services to Payroc for a period of time after the closing, (ii) a processing services agreement, pursuant to which the parties will provide certain payment processing services to customers of each party, and (iii) a restrictive covenant agreement, pursuant to which i3 Verticals, Inc. and Sellers will be bound by certain confidentiality covenants, non-competition and business relation non-solicitation covenants (with a term ending on the fifth anniversary of the closing of the Transactions) and employee non-solicitation covenants (with a term ending on the third anniversary of the closing of the Transactions), subject to certain limitations, as provided therein.
Current report
As noted above, as a result of the anticipated sale of the Merchant Services Business pursuant to the Purchase Agreement, the historical results of the Merchant Services Business have been reflected as discontinued operations in our condensed consolidated financial statements, and the Company no longer presents a Merchant Services Business segment. See Notes 2 and 15 to our condensed consolidated financial statements for additional information.
Current report
For additional information regarding the Purchase Agreement and the Transactions, see the Current Report on Form 8-K filed by us on June 26, 2024.
Current report
Aggregate costs incurred related to the Transactions during the nine months ended June 30, 2024 were approximately $2,626 and were expensed as incurred. These costs include fees for third-party advisory, consulting, legal and professional services, as well as other items associated with the Transactions that are incremental in nature. The expenses are reflected within selling, general and administrative expenses within our condensed consolidated statements of operations.
Current report
Recent acquisitions
Current report
Effective August 1, 2024, we completed the acquisition of a business to expand our permitting and licensing software offerings in the Public Sector vertical. Total purchase consideration was $18.0 million in cash funded by the proceeds from our revolving credit facility, the issuance of 311,634 shares of our Class A common stock in a private placement, and an amount of contingent consideration of up to $22.0 million, in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreement, through no later than July 2027. The Company is in process of determining the acquisition date fair values of the liabilities for the contingent consideration based on discounted cash flow analyses.
Current report
Acquisitions during the nine months ended June 30, 2024
Current report
Acquisitions during the nine months ended June 30, 2023
Current report
As noted above, as a result of the anticipated sale of the Merchant Services Business pursuant to the Purchase Agreement, the historical results of the Merchant Services Business have been reflected as discontinued operations in our condensed consolidated financial statements, and the Company no longer presents a Merchant Services Business segment.
Current report
We no longer consider processing margin to be a key performance indicator as a result of the fact that such metric is associated with our Merchant Services Business, which is anticipated to be sold pursuant to the Purchase Agreement and is now reflected in discontinued operations.
Current report
As a result of the anticipated sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement, the historical results of the Merchant Services Business have been reflected as discontinued operations in our condensed consolidated financial statements. Prior period results of operations and balance sheet information have been recast to reflect this presentation, and the discussion below relates to our continuing operations after giving effect to the reclassification for the Merchant Services Business as discontinued operations.
Current report
Other costs of services increased $0.8 million, or 19.7%, to $4.7 million for the three months ended June 30, 2024 from $3.9 million for the three months ended June 30, 2023. This increase was primarily driven by an increase in software cost of services of $0.3 million and an increase in payment volume, resulting in increases in processing costs of $0.3 million for the three months ended June 30, 2024 from the three months ended June 30, 2023.
Current report
Selling, general and administrative expenses slightly decreased $12 thousand to $45.0 million for the three months ended June 30, 2024 from the three months ended June 30, 2023. This decrease was primarily driven by a decrease in employment expenses of $1.9 million for the three months ended June 30, 2024 from the three months ended June 30, 2023, partially offset by $1.8 million in transaction costs related to the anticipated sale of the Merchant Services Business during the three months ended June 30, 2024.
Current report
Net income from discontinued operations, net of income taxes
Current report
Net income from discontinued operations, net of income tax, increased $0.7 million, or 14.6%, to $5.5 million for the three months ended June 30, 2024 from $4.8 million for the three months ended June 30, 2023. See Note 2 to our condensed consolidated financial statements for additional information and detail on the financial results of discontinued operations.
Current report
Revenue from discontinued operations increased $1.7 million, partially offset by an increase of $1.5 million in other cost of services for discontinued operations for the three months ended June 30, 2024 from the three months ended June 30, 2023. These increases were primarily driven by increases in payments volume.
Current report
Nine Months Ended June 30, 2024 Compared to Nine Months Ended June 30, 2023
Current report
Other costs of services increased $2.3 million, or 20.1%, to $13.5 million for the nine months ended June 30, 2024 from $11.3 million for the nine months ended June 30, 2023. This increase was primarily driven by an increase in software cost of services of $1.0 million and an increase in payment volume, resulting in increases in processing costs of $0.8 million for the nine months ended June 30, 2024 from the nine months ended June 30, 2023.
Current report
Selling, general and administrative expenses decreased $1.0 million, or 0.7%, to $131.5 million for the nine months ended June 30, 2024 from $132.5 million for the nine months ended June 30, 2023. This decrease was primarily driven by a decrease in employment expenses of $3.0 million, travel expense of $0.2 million, and advertising expenses of $0.2 million for the nine months ended June 30, 2024 from the nine months ended June 30, 2023, partially offset by $2.6 million of costs incurred during the nine months ended June 30, 2024 related to the anticipated sale of the Merchant Services Business.
Current report
Net income from discontinued operations, net of income taxes
Current report
Net income from discontinued operations, net of income tax, increased $0.6 million, or 3.7%, to $17.0 million for the nine months ended June 30, 2024 from $16.3 million for the nine months ended June 30, 2023. See Note 2 to our condensed consolidated financial statements for additional information and detail on the financial results of discontinued operations.
Current report
Revenue from discontinued operations increased $6.2 million, partially offset by an increase of $2.6 million in other cost of services for discontinued operations for the nine months ended June 30, 2024 from the nine months ended June 30, 2023. These increases were primarily driven by increases in payments volume. Additionally, the provision for income taxes increased $1.5 million and depreciation and amortization increased $1.1 million, which also offset the increase in revenue for the nine months ended June 30, 2024 from the nine months ended June 30, 2023.
Current report
On August 8, 2024, the Company announced that its Board of Directors had approved a new share repurchase program for the Company’s Class A common stock, under which the Company may repurchase up to $50 million of outstanding shares of Class A common stock. This share repurchase program will terminate on the earlier of August 8, 2025, or when the maximum dollar amount under the authorization has been expended. Pursuant to this authorization, repurchases may be made from time to time in the open market, through privately negotiated transactions, or otherwise. In addition, any repurchases under the authorization will be subject to prevailing market conditions, liquidity and cash flow considerations, applicable securities laws requirements (including under Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934, as applicable), and other factors.
Current report
Taking into account restrictions under the 2023 Senior Secured Credit Facility, the Company does not anticipate making any repurchases under this authorization until the closing of the transactions under the
Current report
Purchase Agreement. This share repurchase program does not require the Company to acquire any amount of shares of Class A common stock, and may be extended, modified, suspended or discontinued at any time.
Current report
Nine Months Ended June 30, 2024 and 2023
Current report
Credit Facility. The 2023 Senior Secured Credit Facility provides for aggregate commitments of $450 million in the form of a senior secured revolving credit facility (the “Revolver”). In addition, on June 26, 2024, the Borrower entered into the first amendment to the 2023 Senior Secured Credit Facility (the “Amendment”). Among other things, the Amendment permitted the execution of the Purchase Agreement and the consummation of the sale of the Merchant Services Business. Certain provisions of the Amendment were effective as of the date of the Amendment, and certain other provisions are to be effective upon the closing of the sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement.
Removed paragraphs (22)
Previous report
•risks related to the potential sale of certain assets related to our Merchant Services business;
Previous report
On February 8, 2024, we announced that our Board of Directors had initiated a process to explore a potential sale of certain assets related to our Merchant Services business. This process is ongoing. There is no assurance that the process to explore a sale of the Merchant Services business will result in any transaction, or if the transaction is completed, the timing or terms of any such transaction. Our Board of Directors may determine to suspend or terminate the exploration of a potential sale of our Merchant Services business at any time due to various factors. Any potential transaction is also dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, regulatory limitations and the interest of third parties in our business. We do not intend to make any further disclosure concerning these matters unless and until any definitive transaction agreement is reached or we otherwise deem further disclosure is appropriate.
Previous report
Acquisitions during the six months ended March 31, 2024
Previous report
Acquisitions during the six months ended March 31, 2023
Previous report
Merchant Services
Previous report
Our Merchant Services segment provides comprehensive payment solutions to businesses and organizations. Our Merchant Services segment includes third-party integrated payment solutions as well as traditional merchant processing services across our strategic vertical markets.
Previous report
•processing margin.
Previous report
Processing margin is equal to revenue less other cost of services plus residuals expense, which is a component of other cost of services. We focus on processing margin because it represents the profitability of the operating segments, exclusive of sales efforts and overhead. Processing margin is a measure reported to our management for purposes of assessing the operating performance of our business segments, and is presented in our financial statement footnotes in accordance with ASC 280. For additional information regarding processing margin, including the amount of our processing margin for our business segments for the three months ended March 31, 2024 and 2023, see Note 15 to our condensed consolidated financial statements.
Previous report
Revenue increased $0.7 million, or 0.7%, to $94.5 million for the three months ended March 31, 2024 from $93.9 million for the three months ended March 31, 2023. This increase was primarily driven by an increase in payment volume as well as higher recurring software revenue, partially offset by a decrease in non-recurring revenues.
Previous report
Revenue within Merchant Services increased $2.0 million, or 6.0%, to $35.1 million for the three months ended March 31, 2024 from $33.1 million for the three months ended March 31, 2023. Payment volume from new and existing customers increased $0.2 billion, or 3.7%, to $5.4 billion for the three months ended March 31, 2024 from $5.2 billion for the three months ended March 31, 2023.
Previous report
Other costs of services increased $1.3 million, or 6.3%, to $21.2 million for the three months ended March 31, 2024 from $19.9 million for the three months ended March 31, 2023. This increase was primarily driven by an increase in software cost of services within the Software and Services segment driven by the increase in payment volume.
Previous report
Other costs of services within Software and Services increased $0.7 million, or 16.1%, to $4.9 million for the three months ended March 31, 2024 from $4.2 million for the three months ended March 31, 2023, driven primarily by the increase in software cost of services.
Previous report
Other costs of services within Merchant Services increased $0.6 million, or 3.6%, to $16.3 million for the three months ended March 31, 2024 from $15.7 million for the three months ended March 31, 2023, driven primarily by the growth in payment volume.
Previous report
Selling, general and administrative expenses decreased $3.0 million, or 5.3%, to $54.2 million for the three months ended March 31, 2024 from $57.2 million for the three months ended March 31, 2023. This decrease was primarily driven by a decrease in employment expenses, advertising and promotion expenses, non-income tax expense, partially offset by an increase in technology services.
Previous report
Six Months Ended March 31, 2024 Compared to Six Months Ended March 31, 2023
Previous report
Revenue within Software and Services increased $2.1 million, or 1.8%, to $116.1 million for the six months ended March 31, 2024 from $114.0 million for the six months ended March 31, 2023. The increase was primarily driven by an increase in recurring revenues, partially offset by a decrease in software license revenue and professional services revenue in our Public Sector and Healthcare verticals.
Previous report
Revenue within Merchant Services increased $4.6 million, or 6.9%, to $70.5 million for the six months ended March 31, 2024 from $65.9 million for the six months ended March 31, 2023. Payment volume from new and existing customers increased $0.4 billion, or 3.6%, to $10.9 billion for the six months ended March 31, 2024 from $10.5 billion for the six months ended March 31, 2023.
Previous report
Other costs of services increased $2.6 million, or 6.7%, to $41.6 million for the six months ended March 31, 2024 from $39.0 million for the six months ended March 31, 2023. This increase was primarily driven by an increase in software cost of services within the Software and Services.
Previous report
Other costs of services within Software and Services increased $1.5 million, or 18.9%, to $9.2 million for the six months ended March 31, 2024 from $7.8 million for the six months ended March 31, 2023, driven primarily by the increase in software cost of services and an increase in payment volume.
Previous report
Other costs of services within Merchant Services increased $1.1 million, or 3.6%, to $32.4 million for the six months ended March 31, 2024 from $31.3 million for the six months ended March 31, 2023, driven primarily by the growth in payment volume.
Previous report
Selling, general and administrative expenses decreased $0.5 million, or 0.5%, to $107.7 million for the six months ended March 31, 2024 from $108.2 million for the six months ended March 31, 2023. This decrease was primarily driven by a decrease in advertising and promotion expenses, employment costs, bad debt expenses, and travel expenses, partially offset by an increase in technology services.
Previous report
Six Months Ended March 31, 2024 and 2023
Reworded paragraphs (36)
Previous wording
•risks related to the conditional exchange feature of the Exchangeable Notes;
Current wording
•risks related to the exchange feature of the Exchangeable Notes;
Previous wording
At March 31, 2024, we had $3.1 million of cash and cash equivalents and $103.8 million of available capacity under our 2023 Senior Secured Credit Facility subject to our financial covenants. As of March 31, 2024, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio 4.1x, and 3.5x, respectively. For additional information about our Exchangeable Notes and 2023 Senior Secured Credit Facility, see the section entitled “Liquidity and Capital Resources” below.
Current wording
At June 30, 2024, we had $9.7 million of cash and cash equivalents and $98.6 million of available capacity under our 2023 Senior Secured Credit Facility subject to our financial covenants. As of June 30, 2024, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio 3.5x, and 3.6x, respectively. For additional information about our Exchangeable Notes and 2023 Senior Secured Credit Facility, see the section entitled “Liquidity and Capital Resources” below.
Previous wording
During the six months ended March 31, 2024, we completed the acquisition of one business to expand our software offerings. Total purchase consideration was $1.3 million, including $1.1 million in cash funded by the proceeds from our revolving credit facility and $0.2 million in contingent consideration.
Current wording
During the nine months ended June 30, 2024, we completed the acquisition of one business to expand our software offerings. Total purchase consideration was $1.3 million, including $1.1 million in cash funded by the proceeds from our revolving credit facility and $0.2 million in contingent consideration.
Previous wording
During the six months ended March 31, 2023, we completed the acquisition of two other businesses to expand our software offerings. Total purchase consideration was $19.8 million, including $17.0 million in cash funded by the proceeds from our revolving credit facility, $2.0 million of our Class A Common Stock, and $0.8 million in contingent consideration.
Current wording
During the nine months ended June 30, 2023, we completed the acquisition of two other businesses to expand our software offerings. Total purchase consideration was $19.8 million, including $17.0 million in cash funded by the proceeds from our revolving credit facility, the issuance of $2.0 million of our Class A common stock in a private placement, and $0.8 million in contingent consideration.
Previous wording
We generate revenue from software and related services revenue, including the sale of subscriptions, recurring services, ongoing support, licenses, and installation and implementation services specific to software. We also generate revenue from volume-based payment processing fees (“discount fees”) and POS-related solutions that we provide to our customers directly and through our distribution partners. Volume-based fees represent a percentage of the dollar amount of each credit or debit transaction processed. Revenues are also derived from a variety of fixed transaction or service fees, including authorization fees, convenience fees, statement fees, annual fees and fees for other miscellaneous services, such as handling chargebacks.
Current wording
We generate revenue from software and related services revenue, including the sale of subscriptions, recurring services, ongoing support, licenses, and installation and implementation services specific to software. We also generate revenue from volume-based payment processing fees (“discount fees”) that we provide to our customers directly through our software. Volume-based fees represent a percentage of the dollar amount of each credit or debit transaction processed. Revenues are also derived from a variety of fixed transaction or service fees, including authorization fees, convenience fees, statement fees, annual fees and fees for other miscellaneous services, such as handling chargebacks.
Previous wording
Other costs of services. Other costs of services include costs directly attributable to processing and bank sponsorship costs. These also include related costs such as residual payments to our distribution partners, which are based on a percentage of the net revenues (revenue less interchange and network fees) generated from customer referrals. Losses resulting from excessive chargebacks against a customer are included in other cost of services. The cost of equipment sold is also included in cost of services. Other costs of services are recognized at the time the customer’s transactions are processed.
Current wording
Other costs of services. Other costs of services include costs directly related to our software and related services, such as hosting expenses. Additionally, other costs of services include costs directly attributable related to payment processing services such as processing and bank sponsorships. Losses resulting from chargebacks against a customer are included in other cost of services. Residual payments to our distribution partners and the cost of equipment sold is also included in cost of services. Other costs of services are recognized at the time the related revenue is recognized.
Previous wording
•software and related services as a percentage of total revenue;
Current wording
•software and related services as a percentage of total revenue; and
Previous wording
•the dollar volume of payments our customers process through us (“payment volume”); and
Current wording
•the dollar volume of payments our customers process through us (“payment volume”).
Previous wording
ARR is the annualized revenue derived from software-as-a-service (“SaaS”) arrangements, transaction-based software-revenue, software maintenance, recurring software-based services, payments revenue and other recurring revenue sources within the quarter. This excludes contracts that are not recurring or are one-time in nature. We focus on ARR because it helps us to assess the health and trajectory of our business. ARR does not have a standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies. It should be reviewed independently of revenue and it is not a forecast. Additionally, ARR does not take into account seasonality. The active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers. ARR for the three months ended March 31, 2024 and 2023 was $322.5 million and $305.7 million, respectively, representing a period-to-period growth rate of 5.5%.
Current wording
ARR is the annualized revenue derived from software-as-a-service (“SaaS”) arrangements, transaction-based software-revenue, software maintenance, recurring software-based services, payments revenue and other recurring revenue sources within the quarter. This excludes contracts that are not recurring or are one-time in nature. We focus on ARR because it helps us to assess the health and trajectory of our business. ARR does not have a standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies. It should be reviewed independently of revenue and it is not a forecast. Additionally, ARR does not take into account seasonality. The active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers. ARR from continuing operations for the three months ended June 30, 2024 and 2023 was $181.3 million and $174.5 million, respectively, representing a period-to-period growth rate of 4%.
Previous wording
Software and related services revenue includes the sale of subscriptions, recurring services, ongoing support, licenses, and installation and implementation services specific to software. We focus on software and related services revenue as a percentage of total revenue because it is a strategic goal to expand the software services we provide our customers. Software and related services typically result in long-term partnerships with strong recurring revenues. Software and related services revenue as a percentage of total revenue for the three months ended March 31, 2024 and 2023 was 48.3% and 50.4%.
Current wording
Software and related services revenue includes the sale of subscriptions, recurring services, ongoing support, licenses, and installation and implementation services specific to software. We focus on software and related services revenue as a percentage of total revenue because it is a strategic goal to expand the software services we provide our customers. Software and related services typically result in long-term partnerships with strong recurring revenues. Software and related services revenue as a percentage of total revenue from continuing operations for the three months ended June 30, 2024 and 2023 was 74% and 76%.
Previous wording
Our payment volume for the three months ended March 31, 2024 and 2023 was $6.3 billion and $6.0 billion, respectively, representing a period-to-period growth rate of 5.5%. Our payment volume for the six months ended March 31, 2024 and 2023 was $12.5 billion and $11.9 billion, respectively, representing a period-to-period growth rate of 5.5%. We focus on payment volume because it is a reflection of the scale and economic activity of our customer base and because a significant part of our revenue is derived as a percentage of our customers’ dollar volume receipts. Payment volume reflects the addition of new customers and same store payment volume growth of existing customers, partially offset by customer attrition during the period.
Current wording
Our payment volume from continuing operations for the three months ended June 30, 2024 and 2023 was $497.5 million and $409.7 million, respectively, representing a period-to-period growth rate of 21.4%. Our payment volume from continuing operations for the nine months ended June 30, 2024 and 2023 was $1,608.8 million and $1,387.7 million, respectively, representing a period-to-period growth rate of 16%. We focus on payment volume because it is a reflection of the scale and economic activity of our customer base and because a significant part of our revenue is derived as a percentage of our customers’ dollar volume receipts. Payment volume reflects the addition of new customers and same store payment volume growth of existing customers, partially offset by customer attrition during the period.
Previous wording
Revenue within Software and Services decreased $1.3 million, or 2.2%, to $59.5 million for the three months ended March 31, 2024 from $60.8 million for the three months ended March 31, 2023. The decrease was primarily driven by a decrease in software license revenue and professional services revenue, partially offset by an increase in recurring revenues in our Public Sector and Healthcare verticals.
Current wording
Revenue decreased $1.2 million, or 2.1%, to $56.0 million for the three months ended June 30, 2024 from $57.3 million for the three months ended June 30, 2023. This decrease was primarily driven by a decrease of $3.1 million in software license revenue and professional services revenue, partially offset by an increase of $1.7 million in recurring revenues, primarily in our Public Sector vertical.
Previous wording
Depreciation and amortization increased $1.1 million, or 11.7%, to $10.1 million for the three months ended March 31, 2024 from $9.0 million for the three months ended March 31, 2023. Amortization expense increased $0.9 million to $9.1 million for the three months ended March 31, 2024 from $8.2 million for the three months ended March 31, 2023 primarily due to an increase in capitalized software project releases. Depreciation expense increased $0.1 million to $1.0 million for the three months ended March 31, 2024 from $0.8 million for the three months ended March 31, 2023.
Current wording
Depreciation and amortization increased $0.3 million, or 4.6%, to $7.0 million for the three months ended June 30, 2024 from $6.7 million for the three months ended June 30, 2023. Amortization expense increased $0.5 million to $2.5 million for the three months ended June 30, 2024 from $2.0 million for the three months ended June 30, 2023 primarily due to an increase in capitalized software project releases. Depreciation expense decreased $0.1 million to $4.5 million for the three months ended June 30, 2024 from $4.6 million for the three months ended June 30, 2023.
Previous wording
Change in fair value of contingent consideration to be paid in connection with acquisitions was a benefit of $0.3 million for the three months ended March 31, 2024 related to adjustments to the expected present value of consideration to be paid for earnouts. The change in fair value of contingent consideration for the three months ended March 31, 2023 was a charge of $2.3 million.
Current wording
Change in fair value of contingent consideration to be paid in connection with acquisitions was a benefit of $18 thousand for the three months ended June 30, 2024 related to adjustments to the expected present value of consideration to be paid for earnouts. The change in fair value of contingent consideration for the three months ended June 30, 2023 was a charge of $6.2 million.
Previous wording
Interest expense, net, increased $1.6 million, or 25.0%, to $7.8 million for the three months ended March 31, 2024 from $6.2 million for the three months ended March 31, 2023. The increase reflects a higher average interest rate and a higher average outstanding debt balance for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.
Current wording
Interest expense, net, increased $1.2 million, or 17.6%, to $7.9 million for the three months ended June 30, 2024 from $6.7 million for the three months ended June 30, 2023. The increase reflects a higher average interest rate and a higher average outstanding debt balance for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.
Previous wording
The provision for income taxes increased to a provision for $0.6 million for the three months ended March 31, 2024 from a benefit of $0.6 million for three months ended March 31, 2023. Our effective tax rate was 14.8% for the three months ended March 31, 2024. Our effective tax rate differs from the federal statutory rate of 21% primarily due to the tax structure of the Company. The income of majority owned i3 Verticals, LLC is not taxed and the separate loss of the Company has minimal tax effect due to the allocations from i3 Verticals, LLC. i3 Verticals, Inc. is subject to federal, state and local income taxes with respect to its allocable share of any taxable income of i3 Verticals, LLC and is taxed at the prevailing corporate tax rates.
Current wording
The provision for income taxes increased to a provision for $5.3 million for the three months ended June 30, 2024 from a benefit of $0.3 million for three months ended June 30, 2023. Our effective tax rate was (61)% for the three months ended June 30, 2024. Our effective tax rate differs from the federal statutory rate of 21% primarily due to the tax structure of the Company. The income of majority owned i3 Verticals, LLC is not taxed and the separate loss of the Company has minimal tax effect due to the allocations from i3 Verticals, LLC. i3 Verticals, Inc. is subject to federal, state and local income taxes with respect to its allocable share of any taxable income of i3 Verticals, LLC and is taxed at the prevailing corporate tax rates.
Previous wording
Revenue increased $6.6 million, or 3.7%, to $186.5 million for the six months ended March 31, 2024 from $179.9 million for the six months ended March 31, 2023. This increase was partially driven by incremental revenue from an acquisition of $1.5 million, net of intercompany eliminations, which was within the Software and Services segment. In addition to our growth through an acquisition, payment volume from new and existing customers and revenue from existing businesses grew, resulting from growth in recurring revenue, partially offset by a decrease in non-recurring revenues.
Current wording
Revenue increased $0.9 million, or 0.5%, to $169.1 million for the nine months ended June 30, 2024 from $168.1 million for the nine months ended June 30, 2023. This increase was driven by incremental revenue from an acquisition of $1.5 million, net of intercompany eliminations, which was within the Software and Services segment, and an organic increase of $7.0 million in recurring revenues for the nine months ended June 30, 2024 from the nine months ended June 30, 2023. The increases were partially offset by a decrease in software license revenue and professional services revenue of $7.8 million for the nine months ended June 30, 2024 from the nine months ended June 30, 2023.
Previous wording
Depreciation and amortization increased $2.1 million, or 12.0%, to $19.8 million for the six months ended March 31, 2024 from $17.7 million for the six months ended March 31, 2023. Amortization expense increased $1.8 million to $17.9 million for the six months ended March 31, 2024 from $16.1 million for the six months ended March 31, 2023 primarily due to an increase in capitalized software project releases and acquisitions completed during the 2023 fiscal year. Depreciation expense increased $0.3 million to $1.9 million for the six months ended March 31, 2024 from $1.6 million for the six months ended March 31, 2023.
Current wording
Depreciation and amortization increased $1.9 million, or 10.0%, to $21.2 million for the nine months ended June 30, 2024 from $19.3 million for the nine months ended June 30, 2023. Amortization expense increased $1.6 million to $19.2 million for the nine months ended June 30, 2024 from $17.6 million for the nine months ended June 30, 2023 primarily due to an increase in capitalized software project releases and acquisitions completed during the 2023 fiscal year. Depreciation expense increased $0.3 million to $2.0 million for the nine months ended June 30, 2024 from $1.7 million for the nine months ended June 30, 2023.
Previous wording
Change in fair value of contingent consideration to be paid in connection with acquisitions was a benefit of $0.5 million for the six months ended March 31, 2024 related to adjustments to the expected present value of consideration to be paid for earnouts. The change in fair value of contingent consideration for the six months ended March 31, 2023 was a charge of $3.7 million.
Current wording
Change in fair value of contingent consideration to be paid in connection with acquisitions was a benefit of $0.5 million for the nine months ended June 30, 2024 related to adjustments to the expected present value of consideration to be paid for earnouts. The change in fair value of contingent consideration for the nine months ended June 30, 2023 was a charge of $9.9 million.
Previous wording
Interest expense, net, increased $2.8 million, or 23.7%, to $14.5 million for the six months ended March 31, 2024 from $11.7 million for the six months ended March 31, 2023. The increase reflects a higher average interest rate and a higher average outstanding debt balance for the six months ended March 31, 2024, as compared to the six months ended March 31, 2023.
Current wording
Interest expense, net, increased $3.9 million, or 21.1%, to $22.3 million for the nine months ended June 30, 2024 from $18.4 million for the nine months ended June 30, 2023. The increase reflects a higher average interest rate and a higher average outstanding debt balance for the nine months ended June 30, 2024, as compared to the nine months ended June 30, 2023.
Previous wording
Other income increased $1.9 million to $2.2 million expense for the six months ended March 31, 2024 from other income of $0.2 million for the six months ended March 31, 2023. Other income during the six months ended March 31, 2024, reflects the gain on the Exchangeable Note Repurchases and gain on Warrant Unwinds, net of the loss on Note Hedge Unwinds and loss on the sale of a building purchased through acquisition. Other income during the six months ended March 31, 2023, reflects continent consideration received for an investment that was sold in a prior year.
Current wording
Other income increased $1.9 million to $2.2 million for the nine months ended June 30, 2024 from other income of $0.3 million for the nine months ended June 30, 2023. Other income during the nine months ended June 30, 2024 reflects the gain on the Exchangeable Note Repurchases and gain on Warrant Unwinds, net of the loss on Note Hedge Unwinds and loss on the sale of a building purchased through acquisition. Other income during the nine months ended June 30, 2023 reflects contingent consideration received for an investment that was sold in a prior year.
Previous wording
The provision for income taxes increased to a provision of $0.8 million for the six months ended March 31, 2024 from a benefit of $0.2 million for six months ended March 31, 2023. Our effective tax rate was 13% for the six months ended March 31, 2024. Our effective tax rate differs from the federal statutory rate of 21% primarily due to the tax structure of the Company. The income of majority owned i3 Verticals, LLC is not taxed and the separate loss of the Company has minimal tax effect due to the allocations from i3 Verticals, LLC. i3 Verticals, Inc. is subject to federal, state and local income taxes with respect to its allocable share of any taxable income of i3 Verticals, LLC and is taxed at the prevailing corporate tax rates.
Current wording
The provision for income taxes increased to a provision of $3.5 million for the nine months ended June 30, 2024 from a benefit of $0.5 million for nine months ended June 30, 2023. Our effective tax rate was 21% for the nine months ended June 30, 2024. Our effective tax rate differs from the federal statutory rate of 21% primarily due to the tax structure of the Company. The income of majority owned i3 Verticals, LLC is not taxed and the separate loss of the Company has minimal tax effect due to the allocations from i3 Verticals, LLC. i3 Verticals, Inc. is subject to federal, state and local income taxes with respect to its allocable share of any taxable income of i3 Verticals, LLC and is taxed at the prevailing corporate tax rates.
Previous wording
We have historically financed our operations and working capital through net cash from operating activities. As of March 31, 2024, we had $3.1 million of cash and cash equivalents and available borrowing capacity of $103.8 million under our 2023 Senior Secured Credit Facility, subject to the financial covenants. We usually minimize cash balances by making payments on our revolving line of credit to minimize borrowings and interest expense. As of March 31, 2024, we had borrowings outstanding of $346.2 million under the 2023 Senior Secured Credit Facility. For additional information about our 2023 Senior Secured Credit Facility, see the section entitled "— 2023 Senior Secured Credit Facility" below.
Current wording
We have historically financed our operations and working capital through net cash from operating activities. As of June 30, 2024, we had $9.7 million of cash and cash equivalents and available borrowing capacity of $98.6 million under our 2023 Senior Secured Credit Facility, subject to the financial covenants. We usually minimize cash balances by making payments on our revolving line of credit to minimize borrowings and interest expense. As of June 30, 2024, we had borrowings outstanding of $351.4 million under the 2023 Senior Secured Credit Facility. For additional information about our 2023 Senior Secured Credit Facility, see the section entitled "— 2023 Senior Secured Credit Facility" below.
Previous wording
Our primary cash needs are to fund working capital requirements, invest in our technology infrastructure, fund acquisitions and related contingent consideration, make scheduled principal and interest payments on our outstanding indebtedness and pay tax distributions to members. We consistently have positive cash flow provided by operations and expect that our cash flow from operations, current cash and cash equivalents and available borrowing capacity under the 2023 Senior Secured Credit Facility will be sufficient to fund our operations and planned capital expenditures and to service our debt obligations for at least the next twelve months and foreseeable future. Our growth strategy includes acquisitions. We expect to fund acquisitions through a combination of net cash from operating activities, borrowings under our 2023 Senior Secured Credit Facility and through the issuance of equity and debt securities. As a holding company, we depend on distributions or loans from i3 Verticals, LLC to access funds earned by our operations. The covenants contained in the 2023 Senior Secured Credit Facility may restrict i3 Verticals, LLC’s ability to provide funds to i3 Verticals, Inc.
Current wording
Our primary cash needs are to fund working capital requirements, invest in our technology infrastructure, fund acquisitions and related contingent consideration, make scheduled principal and interest payments on our outstanding indebtedness and pay tax distributions to members of i3 Verticals, LLC, and, following the completion of the transactions under the Purchase Agreement, potential repurchases of shares of Class A common stock under our share repurchase program, as discussed below. We consistently have positive cash flow provided by operations and expect that our cash flow from operations, current cash and cash equivalents and available borrowing capacity under the 2023 Senior Secured Credit Facility will be sufficient to fund our operations and planned capital expenditures, to service our debt obligations, to pay tax distributions to members of i3 Verticals, LLC, and make potential repurchases of shares of Class A common stock under our share repurchase program for at least the next twelve months and foreseeable future. Our growth strategy includes acquisitions. We expect to fund acquisitions through a combination of net cash from operating activities, borrowings under our 2023 Senior Secured Credit Facility and through the issuance of equity and debt securities. As a holding company, we depend on distributions or loans from i3 Verticals, LLC to access funds earned by our operations. The covenants contained in the 2023 Senior Secured Credit Facility may restrict i3 Verticals, LLC’s ability to provide funds to i3 Verticals, Inc.
Previous wording
Our liquidity profile reflects our completed offering in February 2020 of an aggregate principal amount of $138.0 million in 1.0% Exchangeable Senior Notes due 2025, with substantially all the proceeds being used to pay down outstanding borrowings under our Prior Senior Secured Credit Facility. After giving effect to the repurchase of $90.8 million in aggregate principal amount of the 1.0% Exchangeable Senior Notes on January 18, 2024 as described below as well as the repurchase of $21.0 million in aggregate principal amount of Exchangeable Senior Notes in open market purchases in 2020, the aggregate principal amount of the Exchangeable Notes that is currently outstanding is $26.2 million. We may elect from time to time to purchase our outstanding debt in open market purchases, privately negotiated transactions or otherwise. Any such debt repurchases will depend upon prevailing market conditions, our liquidity requirements, contractual restrictions, applicable securities law and other factors.
Current wording
Our liquidity profile reflects our completed offering in February 2020 of an aggregate principal amount of $138.0 million in 1.0% Exchangeable Senior Notes due 2025, with substantially all the proceeds being used to pay down outstanding borrowings under our Prior Senior Secured Credit Facility. After giving effect to the repurchase of $90.8 million in aggregate principal amount of the 1.0% Exchangeable Senior Notes on January 18, 2024 as described below as well as the repurchase of $21.0 million in aggregate principal amount of Exchangeable Senior Notes in open market purchases in 2020, the aggregate principal amount of the Exchangeable Notes that is currently outstanding is $26.2 million. The Exchangeable Notes mature on February 15, 2025, unless earlier exchanged, redeemed or repurchased. We may elect from time to time to purchase our outstanding debt in open market purchases, privately negotiated transactions or otherwise. Any such debt repurchases will depend upon prevailing market conditions, our liquidity requirements, contractual restrictions, applicable securities law and other factors.
Previous wording
Our 2023 Senior Secured Credit Facility, as amended, requires us to maintain a consolidated interest coverage ratio not less than 3.0 to 1.0 and total leverage ratio not exceeding 5.0 to 1.0. As of March 31, 2024, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio of 4.1x and 3.5x, respectively. Although we believe our liquidity position remains strong, there can be no assurance that we will be able to raise additional funds, in the form of debt or equity, or to amend our 2023 Senior Secured Credit Facility on terms acceptable to us, if at all, even if we determined such actions were necessary in the future.
Current wording
Our 2023 Senior Secured Credit Facility, as amended, requires us to maintain a consolidated interest coverage ratio not less than 3.0 to 1.0 and total leverage ratio not exceeding 5.0 to 1.0. As of June 30, 2024, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio of 3.5x and 3.6x, respectively. Although we believe our liquidity position remains strong, there can be no assurance that we will be able to raise additional funds, in the form of debt or equity, or to amend our 2023 Senior Secured Credit Facility on terms acceptable to us, if at all, even if we determined such actions were necessary in the future. Upon the completion of the transactions pursuant to the Purchase Agreement, we anticipate using the net proceeds from such transactions to fully satisfy the outstanding amount of the Revolver under the 2023 Senior Secured Credit Facility at such time, and to use the remaining net proceeds for general corporate purposes, which may include repurchases under our share repurchase authorization as described below. In addition, upon the completion of the transactions pursuant to the Purchase Agreement, [in connection with the taxable income that will be recognized for federal income tax purposes by the members of i3 Verticals, LLC, a pass-through entity, in connection therewith, we expect that i3 Verticals, LLC will be required to make a tax distribution in early 2025 to the members of i3 Verticals, LLC, including i3 Verticals, Inc.
Previous wording
The following table presents a summary of cash flows from operating, investing and financing activities for the following comparative periods.
Current wording
The discussion of our cash flows that follows does not include the impact of any adjustments to remove the Merchant Services Business as discontinued operations and is stated on a total company consolidated basis. The following table presents a summary of cash flows from operating, investing and financing activities for the following comparative periods.
Previous wording
Net cash provided by operating activities decreased $0.7 million to $25.1 million for the six months ended March 31, 2024 from $25.9 million for the six months ended March 31, 2023. Our net income increased from a net loss of $23 thousand for the six months ended March 31, 2023 to net income of $4.9 million for the six months ended March 31, 2024. Some of this increase in net income was driven by non-cash income and reductions in non-cash expenses that do not impact cash flows from operating activities. The primary drivers of the decrease in cash provided by operating activities, despite the increase in net income, were a decrease in non-cash contingent consideration of $4.2 million for the six months ended March 31, 2024 compared to the six months ended March 31, 2023; an increase in changes in net operating assets and liabilities of $1.4 million, which are impacted by the timing of collections and payments, for the six months ended March 31, 2024 compared to the six months ended March 31, 2023; a gain on the repurchase of exchangeable notes of $2.4 million in the six months ended March 31, 2024; and a decrease in equity-based compensation expense of $1.4 million for the six months ended March 31, 2024 compared to the six months ended March 31, 2023. These changes were partially offset by an increase in depreciation and amortization of $2.1 million for the six months ended March 31, 2024 compared to the six months ended March 31, 2023.
Current wording
Net cash provided by operating activities increased $6.9 million to $33.3 million for the nine months ended June 30, 2024 from $26.4 million for the nine months ended June 30, 2023. Our net loss decreased from a net loss of $6.1 million for the nine months ended June 30, 2023 to a net loss of $3.4 million for the nine months ended June 30, 2024. The primary driver of the increase in cash provided by operating activities was an increase in changes in net operating assets and liabilities of $15.6 million, which are impacted by the timing of collections and payments, for the nine months ended June 30, 2024 compared to the nine months ended June 30, 2023. This increase was partially offset by non-cash income and reductions in non-cash expenses that increase net loss but do not impact cash flows from operating activities. These changes in non-cash income and expenses included a decrease in changes in non-cash contingent consideration of $10.5 million, a decrease in equity-based compensation expense of $3.5 million, an increase in depreciation and amortization of $3.0 million, a gain on the repurchase of exchangeable notes of $2.4 million, and an increase in the provision for deferred income taxes of $2.2 million for the nine months ended June 30, 2024 compared to the nine months ended June 30, 2023.
Previous wording
Net cash used in investing activities decreased $98.8 million to $12.4 million for the six months ended March 31, 2024 from $111.1 million for the six months ended March 31, 2023. The largest driver of the decrease in cash used in investing activities was a decrease of $100.9 million in cash used in acquisitions, net of cash acquired, during the six months ended March 31, 2024 compared to the six months ended March 31, 2023. This change was partially offset by an increase of $3.8 million in purchases of merchant portfolios and residual buyouts during the six months ended March 31, 2024 compared to the six months ended March 31, 2023.
Current wording
Net cash used in investing activities decreased $98.7 million to $16.8 million for the nine months ended June 30, 2024 from $115.4 million for the nine months ended June 30, 2023. The largest driver of the decrease in cash used in investing activities was a decrease of $100.9 million in cash used in acquisitions, net of cash acquired, during the nine months ended June 30, 2024 compared to the nine months ended June 30, 2023. This change was partially offset by an increase of $4.1 million in purchases of merchant portfolios and residual buyouts during the nine months ended June 30, 2024 compared to the nine months ended June 30, 2023.
Previous wording
Net cash flow from financing activities changed $101.7 million to $17.9 million net cash used in financing activities for the six months ended March 31, 2024 from $83.8 million net cash provided by financing activities for the six months ended March 31, 2023. The change in net cash flow from financing activities was primarily related to the $87.2 million payments for the repurchases of exchangeable notes and warrants, offset by the proceeds from the sale of the exchangeable senior note hedges. The remaining factors were the result of a decrease in proceeds from the revolving credit facility of $59.4 million, partially offset by a decrease in payments on the revolving credit facility of $47.2 million during the six months ended March 31, 2024 compared to the six months ended March 31, 2023.
Current wording
Net cash flow from financing activities changed $100.7 million to $15.2 million net cash used in financing activities for the nine months ended June 30, 2024 from $85.5 million net cash provided by financing activities for the nine months ended June 30, 2023. The change in net cash flow from financing activities was primarily related to the $87.2 million payments for the repurchases of exchangeable notes and warrants, offset by the proceeds from the sale of the exchangeable senior note hedges. The remaining factors were the result of a decrease in proceeds from the revolving credit facility of $14.4 million and an increase in net payments for settlement obligations of $6.8 million, partially offset by a decrease in payments on the revolving credit facility of $4.9 million and a decrease in cash paid for contingent consideration of $4.1 million during the nine months ended June 30, 2024 compared to the nine months ended June 30, 2023.
Previous wording
On May 8, 2023, i3 Verticals, LLC (the “Borrower”), entered into that certain Credit Agreement (the “2023 Senior Secured Credit Facility”) with the guarantors and lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (“JPMorgan”). The 2023 Senior Secured Credit Facility replaces the Prior Senior Secured Credit Facility. The 2023 Senior Secured Credit Facility provides for aggregate commitments of $450 million in the form of a senior secured revolving credit facility (the “Revolver”).
Current wording
On May 8, 2023, i3 Verticals, LLC (the “Borrower”), entered into that certain Credit Agreement (the “2023 Senior Secured Credit Facility”) with the guarantors and lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (“JPMorgan”). The 2023 Senior Secured Credit Facility replaces the Prior Senior Secured
Previous wording
The 2023 Senior Secured Credit Facility provides that the Borrower has the right to seek additional commitments to provide additional term loan facilities or additional revolving credit commitments in an aggregate principal amount up to, as of any date of determination, the sum of (i) the greater of $100 million and 100% of the Borrower’s consolidated EBITDA (as defined in the 2023 Senior Secured Credit Facility) for the most recently completed four quarter period, plus (ii) the amount of certain prepayments of certain indebtedness, so long as, among other things, after giving pro forma effect to the incurrence of such additional borrowings and any related transactions, the Borrower’s consolidated interest coverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not be less than 3.0 to 1.0 and the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not exceed 5.0 to 1.0. As of March 31, 2024, the Borrower's consolidated interest coverage ratio was 4.1x and total leverage ratio was 3.5x.
Current wording
The 2023 Senior Secured Credit Facility provides that the Borrower has the right to seek additional commitments to provide additional term loan facilities or additional revolving credit commitments in an aggregate principal amount up to, as of any date of determination, the sum of (i) the greater of $100 million and 100% of the Borrower’s consolidated EBITDA (as defined in the 2023 Senior Secured Credit Facility) for the most recently completed four quarter period, plus (ii) the amount of certain prepayments of certain indebtedness, so long as, among other things, after giving pro forma effect to the incurrence of such additional borrowings and any related transactions, the Borrower’s consolidated interest coverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not be less than 3.0 to 1.0 and the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not exceed 5.0 to 1.0. As of June 30, 2024, the Borrower's consolidated interest coverage ratio was 3.5x and total leverage ratio was 3.6x.
Previous wording
On February 18, 2020, i3 Verticals, LLC issued $138.0 million aggregate principal amount of its 1.0% Exchangeable Notes due February 15, 2025. The Exchangeable Notes bear interest at a fixed rate of 1.0% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020. The Exchangeable Notes are exchangeable into cash, shares of the Company's Class A common stock, or a combination thereof, at i3 Verticals, LLC's election. The Exchangeable Notes mature on February 15, 2025, unless earlier exchanged, redeemed or repurchased. The net proceeds from the sale of the Exchangeable Notes were approximately $132.8 million, after deducting discounts and commissions to the certain initial purchasers and other estimated fees and expenses. i3 Verticals, LLC used a portion of the net proceeds of the Exchangeable Notes offering to pay down outstanding borrowings under the Prior Senior Secured Credit Facility in connection with the effectiveness of the operative provisions of the amendment to the Prior Senior Secured Credit Facility and to pay the cost of the Note Hedge Transactions. As of March 31, 2024, $26.2 million of the original aggregate principal amount of $138.0 million was outstanding.
Current wording
On February 18, 2020, i3 Verticals, LLC issued $138.0 million aggregate principal amount of its 1.0% Exchangeable Notes due February 15, 2025. The Exchangeable Notes bear interest at a fixed rate of 1.0% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020. The Exchangeable Notes are exchangeable into cash, shares of the Company's Class A common stock, or a combination thereof, at i3 Verticals, LLC's election. Beginning on August 15, 2024, the Exchangeable Notes may be exchanged by the holders thereof at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The Exchangeable Notes mature on February 15, 2025, unless earlier exchanged, redeemed or repurchased. The net proceeds from the sale of the Exchangeable Notes were approximately $132.8 million, after deducting discounts and commissions to the certain initial purchasers and other estimated fees and expenses. i3 Verticals, LLC used a portion of the net proceeds of the Exchangeable Notes offering to pay down outstanding borrowings under the Prior Senior Secured Credit Facility in connection with the effectiveness of the operative provisions of the amendment to the Prior Senior Secured Credit Facility and to pay the cost of the Note Hedge Transactions. As of June 30, 2024, $26.2 million of the original aggregate principal amount of $138.0 million was outstanding.
Previous wording
The following table summarizes our material cash requirements as of March 31, 2024 related to leases and borrowings:
Current wording
The following table summarizes our material cash requirements as of June 30, 2024, including those related to leases and borrowings:
Previous wording
We have non-exclusive agreements with several processors to provide us services related to transaction processing and transmittal, transaction authorization and data capture, and access to various reporting tools. Certain of these agreements require us to submit a minimum monthly number of transactions for processing. If we submit a number of transactions that is lower than the minimum, we are required to pay to the processor the fees it would have received if we had submitted the required minimum number of transactions.
Current wording
We have non-exclusive agreements with several processors to provide us services related to transaction processing and transmittal, transaction authorization and data capture, and access to various reporting tools. Certain of these agreements require us to submit a minimum monthly number of transactions for processing. If we submit a number of transactions that is lower than the minimum, we are required to pay to the processor the fees it would have received if we had submitted the required minimum number of transactions. These agreements with processors are included in the Merchant Services Business, and following the closing of the transactions pursuant to the Purchase Agreement, we will no longer be a party to these agreements.
Previous wording
As of March 31, 2024, the total amount due under the Tax Receivable Agreement was $40.3 million, and payments to the Continuing Equity Owners related to exchanges through March 31, 2024 will range from $0 to $3.3 million per year and are expected to be paid over the next 24 years. The amounts recorded as of March 31, 2024, approximate the current estimate of expected tax savings and are subject to change after the filing of the Company’s U.S. federal and state income tax returns. Future payments under the Tax Receivable Agreement with respect to subsequent exchanges would be in addition to these amounts.
Current wording
As of June 30, 2024, the total amount due under the Tax Receivable Agreement was $40.4 million, and payments to the Continuing Equity Owners related to exchanges through June 30, 2024 will range from $0 to $3.3 million per year and are expected to be paid over the next 24 years. The amounts recorded as of June 30, 2024, approximate the current estimate of expected tax savings and are subject to change after the filing of the Company’s U.S. federal and state income tax returns. Future payments under the Tax Receivable Agreement with respect to subsequent exchanges would be in addition to these amounts.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
There was no other income during the three months ended June 30, 2024. Other income of $0.1 million during the three months ended June 30, 2023 reflects contingent consideration received for an investment that was sold in a prior year.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Other income of $2.3 million during the three months ended March 31, 2024, reflects the gain on the Exchangeable Note Repurchases and gain on Warrant Unwinds, net of the loss on Note Hedge Unwinds. There was no other income during the three months ended March 31, 2023.