$IIIV
i3 Verticals, Inc.

2018 Q2 Form 10-Q Financial Statement

#000172868818000015 Filed on August 13, 2018

View on sec.gov

Income Statement

Concept 2018 Q2 2017 Q2 2016 Q3
Revenue $84.54M $66.33M
YoY Change 27.46%
Cost Of Revenue $55.71M $48.56M
YoY Change 14.71%
Gross Profit $21.62M $13.69M
YoY Change 57.87%
Gross Profit Margin 25.57% 20.65%
Selling, General & Admin $10.70M $6.229M
YoY Change 71.71%
% of Gross Profit 49.47% 45.49%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $3.000M $2.382M
YoY Change 25.94%
% of Gross Profit 13.88% 17.39%
Operating Expenses $10.70M $6.229M
YoY Change 71.71%
Operating Profit $2.923M $2.717M
YoY Change 7.58%
Interest Expense -$2.600M -$1.700M
YoY Change 52.94%
% of Operating Profit -88.95% -62.57%
Other Income/Expense, Net -$2.886M -$1.659M
YoY Change 73.96%
Pretax Income $37.00K $1.058M
YoY Change -96.5%
Income Tax $692.0K $171.0K
% Of Pretax Income 1870.27% 16.16%
Net Earnings -$564.0K $887.0K
YoY Change -163.59%
Net Earnings / Revenue -0.67% 1.34%
Basic Earnings Per Share -$0.01
Diluted Earnings Per Share -$0.01
COMMON SHARES
Basic Shares Outstanding 8.813M shares
Diluted Shares Outstanding 8.813M shares

Balance Sheet

Concept 2018 Q2 2017 Q2 2016 Q3
SHORT-TERM ASSETS
Cash & Short-Term Investments $2.500M
YoY Change
Cash & Equivalents $2.473M $552.0K $3.776M
Short-Term Investments
Other Short-Term Assets $2.700M
YoY Change
Inventory $1.247M
Prepaid Expenses
Receivables $7.955M
Other Receivables $0.00
Total Short-Term Assets $13.20M
YoY Change
LONG-TERM ASSETS
Property, Plant & Equipment $2.227M
YoY Change
Goodwill $80.17M $39.21M $35.06M
YoY Change 104.47%
Intangibles $65.76M
YoY Change
Long-Term Investments
YoY Change
Other Assets $1.308M
YoY Change
Total Long-Term Assets $153.5M
YoY Change
TOTAL ASSETS
Total Short-Term Assets $13.20M
Total Long-Term Assets $153.5M
Total Assets $166.7M $95.51M $100.3M
YoY Change 74.52%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $3.666M
YoY Change
Accrued Expenses $13.39M
YoY Change
Deferred Revenue
YoY Change
Short-Term Debt $0.00
YoY Change
Long-Term Debt Due $5.000M
YoY Change
Total Short-Term Liabilities $24.51M
YoY Change
LONG-TERM LIABILITIES
Long-Term Debt $29.54M
YoY Change
Other Long-Term Liabilities $4.341M
YoY Change
Total Long-Term Liabilities $33.88M
YoY Change
TOTAL LIABILITIES
Total Short-Term Liabilities $24.51M
Total Long-Term Liabilities $33.88M
Total Liabilities $58.39M
YoY Change
SHAREHOLDERS EQUITY
Retained Earnings -$98.00K
YoY Change
Common Stock
YoY Change
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $37.42M
YoY Change
Total Liabilities & Shareholders Equity $166.7M
YoY Change

Cashflow Statement

Concept 2018 Q2 2017 Q2 2016 Q3
OPERATING ACTIVITIES
Net Income -$564.0K $887.0K
YoY Change -163.59%
Depreciation, Depletion And Amortization $3.000M $2.382M
YoY Change 25.94%
Cash From Operating Activities $5.420M $2.010M
YoY Change 169.65%
INVESTING ACTIVITIES
Capital Expenditures -$600.0K -$450.0K
YoY Change 33.33%
Acquisitions
YoY Change
Other Investing Activities -$250.0K -$1.240M
YoY Change -79.84%
Cash From Investing Activities -$850.0K -$1.690M
YoY Change -49.7%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -2.490M 60.00K
YoY Change -4250.0%
NET CHANGE
Cash From Operating Activities 5.420M 2.010M
Cash From Investing Activities -850.0K -1.690M
Cash From Financing Activities -2.490M 60.00K
Net Change In Cash 2.080M 380.0K
YoY Change 447.37%
FREE CASH FLOW
Cash From Operating Activities $5.420M $2.010M
Capital Expenditures -$600.0K -$450.0K
Free Cash Flow $6.020M $2.460M
YoY Change 144.72%

Facts In Submission

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<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:5px;padding-top:8px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;font-style:normal;font-weight:bold;text-decoration:none;">Organization and Operations</font></div><div style="line-height:120%;padding-bottom:16px;padding-top:0px;text-align:left;text-indent:24px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">i3 Verticals, Inc. (the &#8220;Company&#8221;) was formed as a Delaware corporation on </font><font style="font-family:Arial;font-size:10pt;color:#000000;">January 17, 2018. The Company was formed for the purpose of completing an initial public offering (</font><font style="font-family:Arial;font-size:10pt;color:#000000;">&#8220;</font><font style="font-family:Arial;font-size:10pt;color:#000000;">IPO</font><font style="font-family:Arial;font-size:10pt;color:#000000;">&#8221;</font><font style="font-family:Arial;font-size:10pt;color:#000000;">) of its Class A common stock and other related transactions in order to carry on the business of i3 Verticals, LLC and its subsidiaries. i3 Verticals, LLC was founded in 2012 </font><font style="font-family:Arial;font-size:10pt;color:#000000;">and delivers seamless integrated payment and software solutions to small- and medium-sized businesses (&#8220;SMBs&#8221;) and organizations in strategic vertical markets. The Company&#8217;s headquarters are in Nashville, Tennessee, with operations throughout the United States. Unless the context otherwise requires, references to &#8220;we,&#8221; &#8220;us,&#8221; &#8220;our,&#8221; &#8220;i3 Verticals&#8221; and the &#8220;Company&#8221; refer to i3 Verticals, Inc. and its subsidiaries, including i3 Verticals, LLC</font><font style="font-family:Arial;font-size:10pt;color:#000000;">.</font></div><div style="line-height:120%;padding-bottom:5px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;font-style:normal;font-weight:bold;text-decoration:none;">Initial Public Offering</font></div><div style="line-height:120%;padding-bottom:16px;padding-top:0px;text-align:left;text-indent:24px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">On June 25, 2018, the Company completed the IPO of </font><font style="font-family:Arial;font-size:10pt;color:#000000;">7,647,500</font><font style="font-family:Arial;font-size:10pt;color:#000000;"> shares of its Class A common stock at a public offering price of </font><font style="font-family:Arial;font-size:10pt;color:#000000;">$13.00</font><font style="font-family:Arial;font-size:10pt;color:#000000;"> per share. The Company received approximately </font><font style="font-family:Arial;font-size:10pt;color:#000000;">$92.5 million</font><font style="font-family:Arial;font-size:10pt;color:#000000;"> of net proceeds, after deducting underwriting discounts and commissions, which the Company used to purchase newly issued common units from i3 Verticals, LLC (the &#8220;Common Units&#8221;), and Common Units from a selling common unit holder, in each case at a price per Common Unit equal to the price per share paid by the underwriters for shares of the Company's Class A common stock in the IPO. </font></div><div style="line-height:120%;padding-bottom:5px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;font-style:normal;font-weight:bold;text-decoration:none;">Reorganization Transactions</font></div><div style="line-height:120%;padding-bottom:16px;padding-top:0px;text-align:left;text-indent:24px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">In connection with the IPO, the Company completed the following transactions (the &#8220;Reorganization Transactions&#8221;):</font></div><table cellpadding="0" cellspacing="0" style="padding-top:0px;padding-bottom:16px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;color:#000000;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">i3 Verticals, LLC amended and restated its existing limited liability company agreement to, among other things, (1) convert all existing Class A units, common units (including common units issued upon the exercise of existing warrants) and Class P units of ownership interest in i3 Verticals, LLC into either Class A voting common units of i3 Verticals, LLC (such holders of Class A voting common units referred to herein as the &#8220;Continuing Equity Owners&#8221;) or Class B non-voting common units of i3 Verticals, LLC (such holders of Class B non-voting common units referred to herein as the &#8220;Former Equity Owners&#8221;), and (2) appoint i3 Verticals, Inc. as the sole managing member of i3 Verticals, LLC upon its acquisition of Common Units in connection with the IPO;</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:0px;padding-bottom:16px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;color:#000000;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">the Company amended and restated its certificate of incorporation to provide for, among other things, Class A common stock and Class B common stock;</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:0px;padding-bottom:16px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;color:#000000;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">i3 Verticals, LLC and the Company consummated a merger among i3 Verticals, LLC, i3 Verticals, Inc. and a newly formed wholly-owned subsidiary of i3 Verticals, Inc. (&#8220;MergerSub&#8221;) whereby: (1) MergerSub merged with and into i3 Verticals, LLC, with i3 Verticals, LLC as the surviving entity; (2) Class A voting common units converted into newly issued Common Units in i3 Verticals, LLC together with an equal number of shares of Class B common stock of i3 Verticals, Inc., and (3) Class B non-voting common units converted into Class A common stock of i3 Verticals, Inc. based on a conversion ratio that provided an equitable adjustment to reflect the full value of the Class B non-voting common units; and</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:0px;padding-bottom:16px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;color:#000000;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">the Company issued shares of its Class A common stock pursuant to a voluntary private conversion of certain subordinated notes (the &#8220;Junior Subordinated Notes&#8221;) by certain related and unrelated creditors of i3 Verticals, LLC.</font></div></td></tr></table><div style="line-height:120%;padding-bottom:16px;padding-top:0px;text-align:left;text-indent:24px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">Following the completion of the IPO and Reorganization Transactions, the Company became a holding company and its principal asset is the Common Units of i3 Verticals, LLC that it owns. i3 Verticals, Inc. operates and controls all of i3 Verticals, LLC's operations and, through i3 Verticals, LLC and its subsidiaries, conducts i3 Verticals, LLC's business. i3 Verticals, Inc. has a minority economic interest in i3 Verticals, LLC. </font></div><table cellpadding="0" cellspacing="0" style="padding-top:0px;padding-bottom:16px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;color:#000000;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">As of </font><font style="font-family:Arial;font-size:10pt;color:#000000;">June 30, 2018</font><font style="font-family:Arial;font-size:10pt;color:#000000;">, i3 Verticals, Inc. owned </font><font style="font-family:Arial;font-size:10pt;color:#000000;">34.6%</font><font style="font-family:Arial;font-size:10pt;color:#000000;"> of the economic interest of i3 Verticals, LLC. </font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:0px;padding-bottom:16px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;color:#000000;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">As of </font><font style="font-family:Arial;font-size:10pt;color:#000000;">June 30, 2018</font><font style="font-family:Arial;font-size:10pt;color:#000000;">, the Continuing Equity Owners owned Common Units of i3 Verticals, LLC representing approximately </font><font style="font-family:Arial;font-size:10pt;color:#000000;">65.4%</font><font style="font-family:Arial;font-size:10pt;color:#000000;"> of the economic interest in i3 Verticals, LLC, Class A common stock representing approximately </font><font style="font-family:Arial;font-size:10pt;color:#000000;">0.9%</font><font style="font-family:Arial;font-size:10pt;color:#000000;"> of the economic interest and voting power in the Company, and shares of Class B common stock of i3 Verticals, Inc., representing approximately </font><font style="font-family:Arial;font-size:10pt;color:#000000;">65.4%</font><font style="font-family:Arial;font-size:10pt;color:#000000;"> of the combined voting power of all of the common stock of the Company. </font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:0px;padding-bottom:16px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;color:#000000;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">The Continuing Equity Owners who own Common Units in i3 Verticals, LLC may redeem at each of their options (subject in certain circumstances to time-based vesting requirements) their Common Units for, at the election of i3 Verticals, LLC, cash or newly-issued shares of the Company's Class A common stock. </font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:0px;padding-bottom:16px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;color:#000000;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">Combining the Class A common stock and Class B common stock, the Continuing Equity Holders hold approximately </font><font style="font-family:Arial;font-size:10pt;color:#000000;">66.3%</font><font style="font-family:Arial;font-size:10pt;color:#000000;"> of the economic interest and voting power in i3 Verticals, Inc. </font></div></td></tr></table><div style="line-height:120%;padding-bottom:16px;padding-top:0px;text-align:left;text-indent:24px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">i3 Verticals, Inc. is the sole managing member of i3 Verticals, LLC and as a result, consolidates the financial results of i3 Verticals, LLC and reports a non-controlling interest representing the Common Units of i3 Verticals, LLC held by the Continuing Equity Owners. </font></div><div style="line-height:120%;padding-bottom:16px;padding-top:0px;text-align:left;text-indent:24px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">As the Reorganization Transactions are considered transactions between entities under common control, the financial statements retroactively reflect the accounts of i3 Verticals, LLC for periods prior to the IPO and Reorganization Transactions.</font></div></div>
us-gaap Use Of Estimates
UseOfEstimates
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:5px;padding-top:8px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;font-style:normal;font-weight:bold;text-decoration:none;">Use of Estimates </font></div><div style="line-height:120%;padding-bottom:16px;padding-top:0px;text-align:left;text-indent:24px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;">The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, the value of purchase consideration paid and identifiable assets acquired and assumed in acquisitions, goodwill and intangible asset impairment review, warrant valuation, revenue recognition for multiple element arrangements, loss reserves, assumptions used in the calculation of equity-based compensation and in the calculation of income taxes, and certain tax assets and liabilities as well as the related valuation allowances. Actual results could differ from those estimates. </font></div></div>

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