i3 Verticals Inc

Previous wording

•our ability to execute on our strategy and achieve our goals following the completion of the sale of our Merchant Services Business;

Current wording

•our ability to execute on our strategy and achieve our goals following the completion of the sale of our Merchant Services Business and the completion of the sale of our Healthcare RCM Business;

Previous wording

•exposure to economic conditions and political risks affecting consumer, commercial and government spending, including any decline in the use of credit cards;

Current wording

•exposure to economic conditions and political risks affecting consumer, commercial and government spending, including as a result of budgetary and political pressures to reduce government spending, as well as any decline in the use of credit cards;

Previous wording

•operating and financial restrictions imposed by our 2023 Senior Secured Credit Facility;

Current wording

•operating and financial restrictions imposed by our 2023 Senior Secured Credit Facility; and

Previous wording

The Company delivers seamless integrated software and services to customers in strategic vertical markets. Building on its broad suite of software and services solutions, the Company creates and acquires software products to serve the specific needs of its customers. The Company's primary strategic verticals are Public Sector and Healthcare.

Current wording

The Company delivers seamless enterprise software to customers in strategic vertical markets. Building on its sophisticated and diverse platform of software and services solutions, the Company creates and acquires software products to serve the specific needs of public and private organizations in the Public Sector.

Previous wording

Inflationary pressures, elevated interest rate levels, monetary policy, and the current geopolitical situation (including the military conflicts in the Middle East and Ukraine), are causing broad economic uncertainty and could potentially cause new, or exacerbate existing, economic challenges that may impact us. These conditions could worsen as a result of adverse economic developments impacting the U.S. and/or global economies, including as a result of monetary policy designed to curb inflation. As the future magnitude, duration and effects of these conditions are difficult to predict at this time, we are unable to predict the extent of the potential effect on our financial results.

Current wording

Inflationary pressures, elevated interest rate levels, monetary policy, the current geopolitical situation (including the military conflicts in the Middle East and Ukraine as well as the current dispute between India and Pakistan), tariff and trade-related developments, and budgetary and political pressures to reduce government spending are causing broad economic uncertainty and could potentially cause new, or exacerbate existing, economic challenges that may impact us. For example, we have business operations in Canada, and the determination of Canadian governmental authorities or businesses to cancel or not renew contracts, or otherwise reduce business, with U.S. companies as a result of current trade tensions with the United States, as has been advocated by certain Canadian governmental authorities, could adversely impact our financial results. As the future magnitude, duration and effects of these conditions are difficult to predict at this time, we are unable to predict the extent of the potential effect on our financial results.

Previous wording

At December 31, 2024, we had $85.6 million of cash and cash equivalents and $450.0 million of available capacity under our 2023 Senior Secured Credit Facility subject to our financial covenants. As of December 31, 2024, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio 3.7x, and 0.1x, 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 March 31, 2025, we had $7.7 million of cash and cash equivalents and $438.0 million of available capacity under our 2023 Senior Secured Credit Facility subject to our financial covenants. As of March 31, 2025, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio 92.5x, and 0.1x, 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

On September 20, 2024, i3 Verticals, LLC, and i3 Holdings Sub, Inc., a wholly-owned subsidiary of i3 Verticals, LLC (“Corporation Seller,” and collectively with i3 Verticals, LLC, the “Sellers”) completed the transactions (such closing, the “Closing”) contemplated by that certain Securities Purchase Agreement dated as of June 26, 2024 (the “Purchase Agreement”), by and among i3 Verticals, LLC, Corporation Seller, the Company (solely for the purpose of providing a guaranty of the obligations of Sellers as set forth in the Purchase Agreement), Payroc Buyer, LLC (“Buyer”), and Payroc WorldAccess, LLC (solely for the purpose of providing a guaranty of the obligations of Buyer as set forth in the Purchase Agreement), the entry into which Purchase Agreement was previously disclosed in a Current Report on Form 8-K filed by the Company on June 26, 2024. Pursuant to the terms of the Purchase Agreement, the Sellers sold to Buyer the equity interests of certain direct and indirect wholly-owned subsidiaries of Sellers (the “Acquired Entities”) primarily comprising the Company's merchant services business, including its associated proprietary technology (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 to the Acquired Entities pursuant to a contribution agreement which was entered into immediately prior to the Closing. Pursuant to the terms of the Purchase Agreement, Buyer paid to Sellers an aggregate purchase price of approximately $438 million (after giving effect to estimated net working capital, indebtedness and cash adjustments), payable in cash at the Closing, subject to post-closing purchase price adjustments. The Merchant Services Business comprised our entire former Merchant Services segment and a small portion of our former Software and Services segment.

Current wording

On September 20, 2024, i3 Verticals, LLC, and i3 Holdings Sub, Inc., a wholly-owned subsidiary of i3 Verticals, LLC (“Corporation Seller,” and collectively with i3 Verticals, LLC, the “Sellers”) completed the transactions (such closing, the “Closing”) contemplated by that certain Securities Purchase Agreement dated as of June 26, 2024 (the “Merchant Services Purchase Agreement”), by and among i3 Verticals, LLC, Corporation Seller, the Company (solely for the purpose of providing a guaranty of the obligations of Sellers as set forth in the Merchant Services Purchase Agreement), Payroc Buyer, LLC (“Merchant Services Buyer”), and Payroc WorldAccess, LLC (solely for the purpose of providing a guaranty of the obligations of Merchant Services Buyer as set forth in the Merchant Services Purchase Agreement), the entry into which Merchant Services Purchase Agreement was previously disclosed in a Current Report on Form 8-K filed by the Company on June 26, 2024.

Previous wording

As a result of the sale of the Merchant Services Business, the historical results of the Merchant Services segment and a small portion of the historical Software and Services segment which had been included in the Merchant Services Business have been reflected as discontinued operations in our consolidated financial statements. After giving effect to these developments, the Company has two reportable segments, Public Sector and Healthcare, and an Other category.

Current wording

As a result of the sale of the Merchant Services Business, the historical results of the Merchant Services segment and a small portion of the historical Software and Services segment which had been included in the Merchant Services Business have been reflected as discontinued operations in our consolidated financial statements.

Previous wording

Acquisitions during the three months ended December 31, 2024

Current wording

Acquisitions during the six months ended March 31, 2025

Previous wording

During the three months ended December 31, 2024, we did not complete any acquisitions.

Current wording

During the six months ended March 31, 2025, we did not complete any acquisitions.

Previous wording

During the three months ended December 31, 2023, 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 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.

Previous wording

Other costs of services. Other costs of services include costs directly related to our software and related services. Additionally, other costs of services include costs directly attributable related to payment processing services such as processing and bank sponsorship. 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. Amortization arising from capitalized software development is not included in other cost of services. Other costs of services are recognized at the time the related revenue is recognized. Following the disposal of our Merchant Services Business in the fourth quarter of fiscal year 2024, our core business is providing software solutions for key verticals. Given the change in our business model, we have reclassified certain expenses to better align with the primary industry in which we now operate. During the first quarter of fiscal year 2025, we revised our presentation of certain expenses in the Condensed Consolidated Statements of Operations from selling, general and administrative expenses to other costs of services. We reclassified personnel costs related to installation of our software, conversion of client data, training client personnel, customer support activities and various other services provided directly to customers from selling, general and administrative to other costs of services. We also reclassified certain hosting and related software costs for directly supporting our customers from selling, general and administrative to other costs of services. Refer to Note 3 for discussion of the change in the current and prior period presentation.

Current wording

Other costs of services. Other costs of services include costs directly related to our software and related services. Additionally, other costs of services include costs directly attributable related to payment processing services such as processing and bank sponsorship. 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. Amortization arising from capitalized software development is not included in other cost of services. Other costs of services are recognized at the time the related revenue is recognized. Following the disposal of our Merchant Services Business in the fourth quarter of fiscal year 2024, our core business is providing software solutions for key verticals. Given the change in our business model following the sale of our Merchant Services Business, we have reclassified certain expenses to better align with the primary industry in which we now operate. During the first quarter of fiscal year 2025, we revised our presentation of certain expenses in the Condensed Consolidated Statements of Operations from selling, general and administrative expenses to other costs of services. We reclassified personnel costs related to installation of our software, conversion of client data, training client personnel, customer support activities and various other services provided directly to customers from selling, general and administrative to other costs of services. We also reclassified certain hosting and related software costs for directly supporting our customers from selling, general and administrative to other costs of services. Refer to Note 3 for discussion of the change in the current and prior period presentation.

Previous wording

Selling, general and administrative. Selling, general and administrative expenses include certain salaries and other employment costs, professional services, internal technology expenses, rent and utilities and other operating costs. Salaries and other employment costs within selling, general and administrative include individuals associated with shared services, product development, sales and other functions. Following the disposal of our Merchant Services Business in the fourth quarter of fiscal year 2024, our core business is providing software solutions for key verticals. Given the change in our business model, we have reclassified certain expenses to better align with the primary industry in which we now operate. During the first quarter of fiscal year 2025, we revised our presentation of certain expenses in the Condensed Consolidated Statements of Operations from selling, general and administrative expenses to other costs of services. Refer to Note 3 for discussion of the change in the current and prior period presentation.

Current wording

Selling, general and administrative. Selling, general and administrative expenses include certain salaries and other employment costs, professional services, internal technology expenses, rent and utilities and other operating costs. Salaries and other employment costs within selling, general and administrative include individuals associated with shared services, product development, sales and other functions. Following the disposal of our Merchant Services Business in the fourth quarter of fiscal year 2024, our core business is providing software solutions for key verticals. Given the change in our business model following the sale of our Merchant Services Business, we have reclassified certain expenses to better align with the primary industry in which we now operate. During the first quarter of fiscal year 2025, we revised our presentation of certain expenses in the Condensed Consolidated Statements of Operations from selling, general and administrative expenses to other costs of services. Refer to Note 3 for discussion of the change in the current and prior period presentation.

Previous wording

Interest (income) expense, net. Our interest expense consists of interest on our outstanding indebtedness under our 2023 Senior Secured Credit Facility, our Prior Senior Secured Credit Facility and Exchangeable Notes, and amortization of debt issuance costs. Interest income is generated from cash and cash equivalents held at financial institutions.

Current wording

Interest expense. Our interest expense consists of interest on our outstanding indebtedness under our 2023 Senior Secured Credit Facility, and prior to their maturity, the Exchangeable Notes, and amortization of debt issuance costs.

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 from continuing operations for the three months ended December 31, 2024 and 2023 was $193.3 million and $179.6 million, respectively, representing a period-to-period growth rate of 8%.

Current wording

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 March 31, 2025 and 2024 was $199.1 million and $186.8 million, respectively, representing a period-to-period growth rate of 7%.

Previous wording

Adjusted EBITDA margin is used by the Company to measure operating performance and for purposes of making decisions about allocating resources to our business segments. Adjusted EBITDA margin for any particular period is adjusted EBITDA as a percentage of revenue for such period. Adjusted EBITDA is calculated as earnings adjusted to exclude interest, tax, depreciation, amortization, stock-compensation expense, non-cash changes in the fair value of contingent consideration, M&A-related expenses, and certain other adjustments that management believes are not reflective of our underlying operations. Adjusted EBITDA and Adjusted EBITDA margin are presented at a segment level in our financial statement footnotes in accordance with ASC 280 – “Segment Reporting.” Adjusted EBITDA margin for our public sector segment was 39% and 40% for the three months ended December 31, 2024 and 2023, respectively. Further, Adjusted EBITDA margin for our healthcare segment was 28% and 24% for the three months ended December 31, 2024 and 2023, respectively. For additional information regarding Adjusted EBITDA and Adjusted EBITDA margin, see Note 16. Adjusted EBITDA and Adjusted EBITDA margin, when presented on a consolidated basis in our other public disclosures, are non-GAAP financial measures.

Current wording

Adjusted EBITDA margin is used by the Company to measure operating performance and for purposes of making decisions about allocating resources to our business segments. Adjusted EBITDA margin for any particular period is adjusted EBITDA as a percentage of revenue for such period. Adjusted EBITDA is calculated as earnings adjusted to exclude interest, tax, depreciation, amortization, stock-compensation expense, non-cash changes in the fair value of contingent consideration, M&A-related expenses, and certain other adjustments that management believes are not reflective of our underlying operations. Adjusted EBITDA and Adjusted EBITDA margin are presented at a segment level in our financial statement footnotes in accordance with ASC 280 – “Segment Reporting.” Adjusted EBITDA margin for our public sector segment was 41% for both the three months ended March 31, 2025 and 2024. Further, Adjusted EBITDA margin for our healthcare segment was 16% for both the three months ended March 31, 2025 and 2024. For additional information regarding Adjusted EBITDA and Adjusted EBITDA margin, see Note 16. Adjusted EBITDA and Adjusted EBITDA margin, when presented on a consolidated basis in our other public disclosures, are non-GAAP financial measures.

Previous wording

As a result of the sale of the Merchant Services Business, 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 wording

As a result of the sale of the Merchant Services Business, 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. In addition, as noted above, since the Healthcare RCM Business was not classified as held for sale according to GAAP as of March 31, 2025, the current period and historical results of the Healthcare RCM Business are presented within results from continuing operations.

Previous wording

Other costs of services increased $1.5 million, or 7.4%, to $21.0 million for the three months ended December 31, 2024 from $19.6 million for the three months ended December 31, 2023. This increase included incremental other costs of services from an acquisition within the Public Sector vertical of $0.3 million, net of intercompany eliminations. The remaining increase was primarily driven by an increase in internal personnel costs of $1.4 million partially offset by a decrease of $0.5 million in stock compensation expense within other costs of services for the three months ended December 31, 2024 from the three months ended December 31, 2023.

Current wording

Other costs of services increased $1.0 million, or 4.9%, to $22.2 million for the three months ended March 31, 2025 from $21.1 million for the three months ended March 31, 2024. This increase included incremental other costs of services from an acquisition within the Public Sector vertical of $0.3 million. The remaining increase was primarily driven by an increase in internal personnel costs of $0.3 million and an increase of $0.4 million in software costs, partially offset by a decrease of $0.5 million in stock compensation expense within other costs of services for the three months ended March 31, 2025 from the three months ended March 31, 2024.

Previous wording

Depreciation and amortization increased $0.6 million, or 8.9%, to $7.7 million for the three months ended December 31, 2024 from $7.1 million for the three months ended December 31, 2023. Amortization expense increased $0.6 million to $7.0 million for the three months ended December 31, 2024 from $6.4 million for the three months ended December 31, 2023 primarily due to an increase in capitalized software project releases, driving an increase in amortization expense. Depreciation expense increased slightly by $48 thousand to $0.7 million for the three months ended December 31, 2024 from $0.6 million for the three months ended December 31, 2023.

Current wording

Depreciation and amortization increased $0.6 million, or 9.0%, to $7.8 million for the three months ended March 31, 2025 from $7.2 million for the three months ended March 31, 2024. Amortization expense increased $0.6 million to $7.1 million for the three months ended March 31, 2025 from $6.5 million for the three months ended March 31, 2024 primarily due to an increase in capitalized software project releases, driving an increase in amortization expense. Depreciation expense increased slightly by $57 thousand to $0.7 million for the three months ended March 31, 2025 from $0.7 million for the three months ended March 31, 2024.

Previous wording

Change in fair value of contingent consideration to be paid in connection with acquisitions was a charge of $1.4 million for the three months ended December 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 December 31, 2023 was a benefit of $0.2 million.

Current wording

Change in fair value of contingent consideration to be paid in connection with acquisitions was a charge of $0.4 million for the three months ended March 31, 2025 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, 2024 was a benefit of $0.3 million.

Previous wording

Interest expense decreased $6.0 million, or 89.8%, to $0.7 million for the three months ended December 31, 2024 from $6.7 million for the three months ended December 31, 2023. The decrease reflects a lower average outstanding debt balance for the three months ended December 31, 2024, as compared to the three months ended December 31, 2023.

Current wording

Interest expense decreased $7.3 million, or 94.2%, to $0.4 million for the three months ended March 31, 2025 from $7.7 million for the three months ended March 31, 2024. The decrease reflects a lower average outstanding debt balance for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024.

Previous wording

The provision for income taxes increased to a provision for $0.5 million for the three months ended December 31, 2024 from a benefit of $1.1 million for three months ended December 31, 2023. Our effective tax rate was 14% for the three months ended December 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 at the entity-level. 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 $3.1 million for the three months ended March 31, 2025 from a benefit of $0.7 million for three months ended March 31, 2024. Our effective tax rate was 74% for the three months ended March 31, 2025. 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 at the entity-level. 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 had $0.2 million in net loss from discontinued operations, net of income tax, for the three months ended December 31, 2024 compared to $5.8 million in net income from discontinued operations, net of income tax, for the three months ended December 31, 2023. See Note 2 to our condensed consolidated financial statements for additional information and detail on the financial results of discontinued operations.

Current wording

We had $0.3 million in net loss from discontinued operations, net of income tax, for the three months ended March 31, 2025 compared to $5.7 million in net income from discontinued operations, net of income tax, for the three months ended March 31, 2024. See Note 2 to our condensed consolidated financial statements for additional information and detail on the financial results of discontinued operations.

Previous wording

The net loss from discontinued operations, net of income tax, for the three months ended December 31, 2024 reflects adjustments to the gain on the sale of the Merchant Services Business. The net income from discontinued operations, net of income tax, for the three months ended December 31, 2023 included a complete quarter of business activity, including revenue of $36.9 million, operating expenses of $29.9 million, and a provision for income taxes of $1.3 million.

Current wording

The net loss from discontinued operations, net of income tax, for the three months ended March 31, 2025 reflects adjustments to the gain on the sale of the Merchant Services Business. The net income from discontinued operations, net of income tax, for the three months ended March 31, 2024 included a complete quarter of business activity, including revenue of $36.6 million, operating expenses of $29.6 million, and a provision for income taxes of $1.2 million.

Previous wording

Revenue within Public Sector increased $5.3 million, or 12.2%, to $48.8 million for the three months ended December 31, 2024 from $43.5 million for the three months ended December 31, 2023. This increase included incremental revenue from an acquisition of $1.2 million, net of intercompany eliminations. The remaining increase was primarily driven by an increase in recurring revenues of $3.0 million and an increase of $0.7 million in software license revenue.

Current wording

Revenue within Public Sector increased $10.6 million, or 11.7%, to $101.2 million for the six months ended March 31, 2025 from $90.6 million for the six months ended March 31, 2024. This increase included incremental revenue from an acquisition of $5.4 million, net of any intercompany eliminations. The remaining increase was primarily driven by an increase in recurring revenues of $5.9 million and an increase of $2.0 million in software license revenue.

Previous wording

Revenue within Healthcare increased $1.6 million, or 13.7%, to $13.2 million for the three months ended December 31, 2024 from $11.6 million for the three months ended December 31, 2023. This increase was mostly driven by an increase in software license revenue of $1.6 million.

Current wording

Revenue within Healthcare increased $1.4 million, or 6.2%, to $24.0 million for the six months ended March 31, 2025 from $22.6 million for the six months ended March 31, 2024. This increase was mostly driven by an increase in software license revenue of $1.8 million, partially offset by a decrease in revenue cycle management revenues of $0.3 million, driven by an unusually large snow storm on the Gulf Coast that reduced volumes of procedures within our customer base, and a decrease in professional services revenue of $0.1 million.

Previous wording

Selling, general and administrative expenses increased $1.7 million to $28.9 million for the three months ended December 31, 2024 from from $27.2 million for the three months ended December 31, 2023. This increase included incremental SG&A expenses from an acquisition within the Public Sector vertical of $0.9 million, net of intercompany eliminations The remaining increase was primarily driven by an increase in internal personnel costs of $1.6 million and internal technology costs $0.5 million for the three months ended December 31, 2024 from the three months ended December 31, 2023, partially offset by a decrease in stock compensation expense within selling, general and administrative expenses of $1.0 million and a decrease in professional services expense of $0.3 million for the three months ended December 31, 2024 from the three months ended December 31, 2023.

Current wording

Selling, general and administrative expenses increased $3.0 million, or 5.5%, to $57.6 million for the six months ended March 31, 2025 from from $54.6 million for the six months ended March 31, 2024. This increase included incremental expenses from an acquisition within the Public Sector vertical of $1.9 million, net of any intercompany eliminations. The remaining increase was primarily driven by an increase in internal and external personnel costs of $1.9 million and internal technology costs $1.0 million for the six months ended March 31, 2025 from the six months ended March 31, 2024, partially offset by a decrease in stock compensation expense within selling, general and administrative expenses of $1.7 million and a decrease in professional services expense of $0.2 million for the six months ended March 31, 2025 from the six months ended March 31, 2024.

Previous wording

Other income was $1.8 million during the three months ended December 31, 2024, and other expense was $0.1 million during the three months ended December 31, 2023. Other income during the the three months ended December 31, 2024 reflects income generated from cash held at financial institutions of $0.7 million, a gain on disposal of property and equipment of $0.6 million related to the sale of a building and automobiles purchased through previous acquisitions and income from the Transition Services Agreement and Processing Services Agreement related to the sale of the Merchant Services Business of $0.5 million. Other expense during the three months ended December 31, 2023 reflects a loss on disposal of property and equipment related to the sale of a building purchased through an acquisition.

Current wording

Other income was $2.5 million during the six months ended March 31, 2025, and other income was $2.2 million during the six months ended March 31, 2024. Other income during the the six months ended March 31, 2025 reflects income from the Transition Services Agreement and Processing Services Agreement related to the sale of the Merchant Services Business of $1.0 million, income generated from cash held at financial institutions of $0.9 million, and a gain on disposal of property and equipment of $0.6 million related to the sale of a building purchased through previous acquisitions. 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.

Previous wording

We have historically financed our operations and working capital through net cash from operating activities. As of December 31, 2024, we had $85.6 million of cash and cash equivalents and available borrowing capacity of $450.0 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 December 31, 2024, we had no borrowings outstanding 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 March 31, 2025, we had $7.7 million of cash and cash equivalents and available borrowing capacity of $438.0 million under our 2023 Senior Secured Credit Facility (which was subsequently reduced in connection with the Second Amendment, as described below), 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, 2025, we had borrowings outstanding of $12.0 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. In addition, as noted above, on May 5, 2025, we sold our Healthcare RCM Business pursuant to the terms of the Healthcare RCM Purchase Agreement, for a purchase price of approximately $96 million, paid in cash at closing, subject to post-closing net working capital and other purchase price adjustments as provided in the Healthcare RCM Purchase Agreement.

Previous wording

Our primary cash needs are to fund working capital requirements, make capital expenditures and otherwise invest in our technology infrastructure, fund acquisitions and related contingent consideration, make scheduled principal and interest payments on our outstanding indebtedness, pay tax distributions to members of i3 Verticals, LLC as discussed below, and make 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 cash needs as described above 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, make capital expenditures and otherwise invest in our technology infrastructure, fund acquisitions and related contingent consideration, make scheduled principal and interest payments on our outstanding indebtedness, pay tax distributions to members of i3 Verticals, LLC as discussed below, and make 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 cash needs as described above for at least the next twelve months and foreseeable future. Our growth strategy includes acquisitions. We expect to fund acquisitions through a combination of cash on hand, 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. 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.

Current wording

Our liquidity profile has reflected 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. We repurchased $90.8 million in aggregate principal amount of the 1.0% Exchangeable Senior Notes on January 18, 2024 as described below, and also repurchased of $21.0 million in aggregate principal amount of Exchangeable Senior Notes in open market purchases in 2020. The Exchangeable Notes matured on February 15, 2025, and we paid $26.4 million in satisfaction of the outstanding principal and accrued interest in connection therewith.

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 December 31, 2024, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio of 3.7x and 0.1x, 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. 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 sale of our Merchant Services Business, we used the net proceeds from such transactions to fully satisfy the then outstanding amount of the Revolver under the 2023 Senior Secured Credit Facility, and have used and expect to continue to use the remaining net proceeds for general corporate purposes, including repurchases under our share repurchase authorization as described below.

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 March 31, 2025, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio of 92.5x and 0.1x, 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. 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.

Previous wording

In January 2025, i3 Verticals, LLC, a pass-through entity in which the Company holds a majority ownership interest, made a tax distribution (the “LLC Tax Distribution”) to the Company and the other members of i3 Verticals, LLC (the “Continuing Equity Owners”) related to the taxable income associated with the gain on the sale of the Merchant Services Business completed in September 2024 that is anticipated to be recognized for 2024 federal income tax purposes by members of the Company. As a result of differences in the amount of net taxable income allocable to the Company and to the Continuing Equity Owners and the higher assumed tax rate of the Continuing Equity Owners than the tax rate of the Company, this LLC Tax Distribution resulted in the Company holding cash in excess of the Company’s tax liabilities, its obligation to make payments under its tax receivables agreement, and any other expected liabilities of the Company. Thereafter, on January 23, 2025, the Company and i3 Verticals, LLC effected certain recapitalization actions in order to reduce excess cash held at the Company following this LLC Tax Distribution. For additional information regarding the ownership interest of the Company in i3 Verticals, LLC and the capitalization of i3 Verticals, LLC, see Note 1 to the accompanying unaudited condensed consolidated financial statements contained in this report. For additional information regarding these recapitalization transactions, see Note 20 to the accompanying unaudited condensed consolidated financial statements contained in this report.

Current wording

In January 2025, i3 Verticals, LLC, a pass-through entity in which the Company holds a majority ownership interest, made a tax distribution (the “LLC Tax Distribution”) to the Company and the other members of i3 Verticals, LLC (the “Continuing Equity Owners”) related to the taxable income associated with the gain on the sale of the Merchant Services Business completed in September 2024 that was anticipated to be recognized for 2024 federal income tax purposes by members of the Company. As a result of differences in the amount of net taxable income allocable to the Company and to the Continuing Equity Owners and the higher assumed tax rate of the Continuing Equity Owners than the tax rate of the Company, this LLC Tax Distribution resulted in the Company holding cash in excess of the Company’s tax liabilities, its obligation to make payments under its tax receivables agreement, and any other expected liabilities of the Company. Thereafter, on January 23, 2025, the Company and i3 Verticals, LLC effected certain recapitalization actions in order to reduce excess cash held at the Company following this LLC Tax Distribution. For additional information regarding the ownership interest of the Company in i3 Verticals, LLC and the capitalization of i3 Verticals, LLC, see Note 1 to the accompanying unaudited condensed consolidated financial statements contained in this report. For additional information regarding these recapitalization transactions, see Note 15 to the accompanying unaudited condensed consolidated financial statements contained in this report.

Previous wording

Net cash provided by operating activities decreased $2.9 million to $11.5 million for the three months ended December 31, 2024 from $14.4 million for the three months ended December 31, 2023. Our net income increased from $1.5 million for the three months ended December 31, 2023 to $3.1 million for the three months ended December 31, 2024. The primary driver of the decrease in cash provided by operating activities despite the increase in net income was reductions in non-cash expenses that increase net income but do not impact cash flows from operating activities. These changes in non-cash income and expenses included a decrease in equity-based compensation expense of $2.7 million, a decrease in depreciation and amortization of $2.1 million, a decrease in the provision for deferred income taxes of $0.9 million and a decrease in other non-cash adjustments to net income of $0.8 million, which includes gains on sales of property and equipment as well as other non-cash adjustments to net income. These reductions in non-cash expenses were partially offset by an increase in changes in non-cash contingent consideration of $1.6 million and an increase in changes in net operating assets and liabilities of $0.8 million, which are impacted by the timing of collections and payments, for the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

Current wording

Net cash provided by operating activities decreased $40.8 million to net cash used in operating activities of $15.6 million for the six months ended March 31, 2025 from net cash provided by operating activities of $25.1 million for the six months ended March 31, 2024. Our net income decreased from $4.9 million for the six months ended March 31, 2024 to $3.9 million for the six months ended March 31, 2025. The primary driver of the decrease in cash provided by operating activities was cash paid for income taxes of $34.2 million during the six months ended March 31, 2025, primarily consisting of income taxes related to the sale of the Merchant Services Business, which were accrued in fiscal year 2024, but paid in the six months ended March 31, 2025. The decrease in cash provided by operating activities was also driven by reductions in net operating assets and liabilities, excluding the impact of income taxes, of $11.2 million, which are impacted by the timing of collections and payments, for the six months ended March 31, 2025 compared to the six months ended March 31, 2024. In addition, there was a decrease in contingent consideration paid in excess of original estimates of $3.1 million and an increase in changes in non-cash contingent consideration of $2.3 million, for the six months ended March 31, 2025 compared to the six months ended March 31, 2024.

Previous wording

Net cash used in investing activities decreased $5.8 million to $1.4 million for the three months ended December 31, 2024 from $7.2 million for the three months ended December 31, 2023. The largest drivers of the decrease in cash used in investing activities were a decrease of $2.9 million in purchases of merchant portfolios and residual buyouts, a decrease of $1.1 million in cash used in acquisitions, net of cash acquired, an increase of $0.8 million in proceeds from the sale of property and equipment and a decrease of $0.7 million in expenditures for capitalized software during the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

Current wording

Net cash used in investing activities decreased $8.7 million to $3.7 million for the six months ended March 31, 2025 from $12.4 million for the six months ended March 31, 2024. The largest drivers of the decrease in cash used in investing activities were a decrease of $4.2 million in purchases of merchant portfolios and residual buyouts, a decrease of $1.9 million in expenditures for capitalized software, a decrease of $1.1 million in cash used in acquisitions (net of cash acquired) and an increase of $0.9 million in proceeds from the sale of property and equipment during the six months ended March 31, 2025 compared to the six months ended March 31, 2024.

Previous wording

Net cash used in financing activities increased $1.9 million to $10.5 million net cash used in financing activities for the three months ended December 31, 2024 from $8.6 million net cash provided by financing activities for the three months ended December 31, 2023. The largest driver of the increase in cash used in financing activities was $11.2 million cash paid for repurchases of class A common stock during the three months ended December 31, 2024. This increase in cash used in financing activities was partially offset by no net activity in the revolving credit facility during the three months ended December 31, 2024, compared to a net $7.0 million in payments on the revolving credit facility in excess of proceeds from the revolving credit facilities during the three months ended December 31, 2023, and a decrease in net payments for settlement obligations of $1.9 million during the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

Current wording

Net cash used in financing activities increased $42.1 million to $60.0 million net cash used in financing activities for the six months ended March 31, 2025 from $17.9 million net cash used by financing activities for the six months ended March 31, 2024. The increase in net cash used in financing activities was driven by net borrowings from in excess of payments on the revolving credit facility decreased $61.7 million during the six months ended March 31, 2025 from the six months ended March 31, 2024, as well as $26.2 million in payments to extinguish the Exchangeable Notes, $23.8 million in payments for required distributions on behalf of members for tax obligations and $10.0 million in payments for required distributions to members under the Tax Receivable Agreement during the six months ended March 31, 2025, which did not occur during the six months ended March 31, 2024. These uses of cash for financing activities were partially offset by $87.8 million in payments for repurchases of Exchangeable Notes during the six months ended March 31, 2024, which did not recur during the six months ended March 31, 2025, and a decrease in net payments for settlement obligations of $2.7 million during the six months ended March 31, 2025 compared to the six months ended March 31, 2024.

Previous wording

On May 8, 2023, i3 Verticals, LLC (the “Borrower”), entered into that certain Credit Agreement (as amended, 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

Current wording

On May 8, 2023, i3 Verticals, LLC (the “Borrower”), entered into that certain Credit Agreement (as amended by the first amendment dated June 26, 2024, 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. As amended by the Second Amendment described below, the 2023 Senior Secured Credit Facility provides for aggregate commitments of $400 million in the form of a senior secured revolving credit facility (the “Revolver”). In addition, on February 11, 2025, the Borrower entered into a letter agreement with the administrative agent and the lenders under the 2023 Senior Secured Credit Facility providing the Borrower with a one-time consent to an earlier reduction in the pricing of the revolving loans than what is otherwise permitted by the terms of the 2023 Senior Secured Credit Facility. Such reduction became effective as of September 27, 2024, which is the date that the Borrower paid down the outstanding balance of the revolving loans with proceeds of the sale of the Merchant Services Business and achieved a consolidated total net leverage ratio of less than 2.0 to 1.0, instead of November 26, 2024, which is the date that the Borrower delivered its compliance certificate for the fiscal quarter ending September 30, 2024. Further, on May 5, 2025, the Borrower entered into a second amendment (the “Second Amendment”) to the 2023 Senior Secured Credit Facility to permit the Healthcare RCM Transactions. The Second Amendment also permanently reduces the aggregate lender commitments under the Revolver from $450 million to $400 million.

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 December 31, 2024, the Borrower's consolidated interest coverage ratio was 3.7x and total leverage ratio was 0.1x.

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 March 31, 2025, the Borrower's consolidated interest coverage ratio was 92.5x and total leverage ratio was 0.1x.

Previous wording

In addition to paying interest on outstanding principal under the Revolver, the Borrower will be required to pay a commitment fee equal to the product of between 0.15% and 0.30% (the applicable percentage depending on the Borrower’s consolidated total net leverage ratio as reflected in the schedule above, 0.15% at December 31, 2024) times the actual daily amount by which $450 million exceeds the total amount outstanding under the Revolver and available to be drawn under all outstanding letters of credit.

Current wording

In addition to paying interest on outstanding principal under the Revolver, the Borrower will be required to pay a commitment fee equal to the product of between 0.15% and 0.30% (the applicable percentage depending on the Borrower’s consolidated total net leverage ratio as reflected in the schedule above, 0.15% at March 31, 2025) times the actual daily amount by which $400 million (as of the effectiveness of the Second Amendment) exceeds the total amount outstanding under the Revolver and available to be drawn under all outstanding letters of credit.

Previous wording

In addition, if the total amount borrowed under the Revolver exceeds $450 million at any time, the 2023 Senior Secured Credit Facility requires the Borrower to prepay such excess outstanding amounts.

Current wording

In addition, if the total amount borrowed under the Revolver exceeds $400 million (as of the effectiveness of the Second Amendment) at any time, the 2023 Senior Secured Credit Facility requires the Borrower to prepay such excess outstanding amounts.