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Item 1. Financial Statements

2024-08-09 compared with 2024-05-10 · 429 added, 358 removed, 739 unchanged (52% of the section changed)

1 unchanged sentence

i3 Verticals, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share amounts)

March 31, September 30,

June 30, September 30,

Current assets

3 unchanged sentences

Prepaid expenses and other current assets 11,279 9,512

Current assets held for sale 237,002 17,269

Total current assets 308,036 85,544

7 unchanged sentences

Other assets 2,626 8,803

Long-term assets held for sale — 219,354

Total assets $ 861,722 $ 881,493

7 unchanged sentences

Current portion of operating lease liabilities 3,477 3,657

Current liabilities held for sale 13,953 12,197

Total current liabilities 103,287 93,461

3 unchanged sentences

Other long-term liabilities 17,238 23,078

Long-term liabilities held for sale — 2,530

Total liabilities 515,807 553,197

2 unchanged sentences

Preferred stock, par value $ 0.0001 per share, 10,000,000 shares authorized;

0 shares issued and outstanding as of March 31, 2024 and September 30, 2023

0 shares issued and outstanding as of June 30, 2024 and September 30, 2023

Class A common stock, par value $ 0.0001 per share, 150,000,000 shares authorized;

23,416,518 and 23,253,272 shares issued and outstanding as of March 31, 2024 and September 30, 2023, respectively

23,442,698 and 23,253,272 shares issued and outstanding as of June 30, 2024 and September 30, 2023, respectively

Class B common stock, par value $ 0.0001 per share, 40,000,000 shares authorized;

10,052,676 and 10,093,394 shares issued and outstanding as of March 31, 2024 and September 30, 2023, respectively

10,032,676 and 10,093,394 shares issued and outstanding as of June 30, 2024 and September 30, 2023, respectively

Additional paid-in capital 267,176 249,688

8 unchanged sentences

(In thousands, except share and per share amounts)

Three months ended March 31, Six months ended March 31, 2024

Three months ended June 30, Nine months ended June 30, 2024

2024 2023 2024 2023

6 unchanged sentences

Total operating expenses 56,706 61,837 165,759 172,962

Income from operations 9,421 5,444 17,953 11,282

(Loss) income from operations ( 669 ) ( 4,577 ) 3,300 ( 4,824 )

Other expenses (income)

2 unchanged sentences

Total other expenses 7,906 6,633 20,157 18,119

Income (loss) before income taxes 3,928 ( 755 ) 5,646 ( 204 )

Loss before income taxes ( 8,575 ) ( 11,210 ) ( 16,857 ) ( 22,943 )

Provision for (benefit from) income taxes 5,271 ( 292 ) 3,507 ( 500 )

Net income (loss) 3,348 ( 192 ) 4,884 ( 23 )

Net income (loss) attributable to non-controlling interest 1,470 ( 228 ) 1,908 181

Net income (loss) attributable to i3 Verticals, Inc.

Net loss from continuing operations ( 13,846 ) ( 10,918 ) ( 20,364 ) ( 22,443 )

Net income from discontinued operations, net of income taxes 5,548 4,840 16,950 16,342

Net loss ( 8,298 ) ( 6,078 ) ( 3,414 ) ( 6,101 )

Net loss from continuing operations attributable to non-controlling interest ( 2,416 ) ( 2,392 ) ( 3,944 ) ( 5,702 )

Net income from discontinued operations attributable to non-controlling interest 1,663 1,469 5,099 4,960

Net (loss) income attributable to non-controlling interest ( 753 ) ( 923 ) 1,155 ( 742 )

Net loss from continuing operations attributable to i3 Verticals, Inc.

( 11,430 ) ( 8,526 ) ( 16,420 ) ( 16,741 )

Net income (loss) per share attributable to Class A common stockholders:

Net income from discontinued operations attributable to i3 Verticals, Inc.

3,885 3,371 11,851 11,382

Net loss attributable to i3 Verticals, Inc.

$ ( 7,545 ) $ ( 5,155 ) $ ( 4,569 ) $ ( 5,359 )

Net loss per share attributable to Class A common stockholders from continuing operations:

Basic $ ( 0.49 ) $ ( 0.37 ) $ ( 0.70 ) $ ( 0.72 )

Diluted $ ( 0.49 ) $ ( 0.37 ) $ ( 0.70 ) $ ( 0.72 )

Weighted average shares of Class A common stock outstanding:

Net income per share attributable to Class A common stockholders from discontinued operations:

Basic $ 0.17 $ 0.15 $ 0.51 $ 0.49

Diluted $ 0.15 $ 0.13 $ 0.46 $ 0.44

Net loss per share attributable to Class A common stockholders:

Basic and diluted $ ( 0.32 ) $ ( 0.22 ) $ ( 0.20 ) $ ( 0.23 )

Weighted average shares of Class A common stock outstanding:

Basic 23,420,811 23,179,638 23,339,598 23,104,212

Diluted, for continuing operations 23,420,811 23,179,638 23,339,598 23,104,212

Diluted, for discontinued operations 33,707,331 33,845,584 33,781,826 33,956,879

See Notes to the Interim Condensed Consolidated Financial Statements

19 unchanged sentences

Balance at March 31, 2024 23,416,518 2 10,052,676 1 259,242 ( 9,968 ) 96,823 346,100

Equity-based compensation — — — — 5,102 — — 5,102

Net loss — — — — — ( 7,545 ) ( 753 ) ( 8,298 )

Distributions to non-controlling interest holders — — — — — — ( 839 ) ( 839 )

Redemption of common units in i3 Verticals, LLC 20,000 — ( 20,000 ) — 192 — ( 192 ) —

Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — 4,300 — — 4,300

Exercise of equity-based awards 6,180 — — — ( 450 ) — — ( 450 )

Allocation of equity to non-controlling interests — — — — ( 1,210 ) — 1,210 —

Balance at June 30, 2024 23,442,698 $ 2 10,032,676 $ 1 $ 267,176 $ ( 17,513 ) $ 96,249 $ 345,915

See Notes to the Interim Condensed Consolidated Financial Statements

20 unchanged sentences

Balance at March 31, 2023 23,167,730 2 10,108,218 1 234,442 ( 12,337 ) 89,703 311,811

Equity-based compensation — — — — 7,198 — — 7,198

Net loss — — — — — ( 5,155 ) ( 923 ) ( 6,078 )

Exercise of equity-based awards 25,717 — — — 11 — — 11

Allocation of equity to non-controlling interests — — — — ( 1,734 ) — 1,734 —

Balance at June 30, 2023 23,193,447 $ 2 10,108,218 $ 1 $ 239,917 $ ( 17,492 ) $ 90,514 $ 312,942

See Notes to the Interim Condensed Consolidated Financial Statements

2 unchanged sentences

(In thousands)

Six months ended March 31,

Nine months ended June 30,

Cash flows from operating activities:

Net income (loss) $ 4,884 $ ( 23 )

Net loss $ ( 3,414 ) $ ( 6,101 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

5 unchanged sentences

Gain on repurchases of warrants ( 105 ) —

Provision for (benefit from) income taxes ( 1,238 ) ( 208 )

Provision for deferred income taxes 4,078 1,860

Non-cash lease expense 3,534 3,464

27 unchanged sentences

(In thousands)

Six months ended March 31,

Nine months ended June 30,

Cash flows from financing activities:

5 unchanged sentences

Payments of debt issuance costs ( 906 ) ( 694 )

Net payments for settlement obligations (1)

Net (payments for) proceeds from settlement obligations (1)

( 3,518 ) 3,253

4 unchanged sentences

Net cash (used in) provided by financing activities ( 15,215 ) 85,482

Net decrease in cash, cash equivalents and restricted cash ( 5,107 ) ( 1,432 )

Net increase (decrease) in cash, cash equivalents and restricted cash 1,296 ( 3,563 )

Cash, cash equivalents and restricted cash at beginning of period 12,400 23,765

39 unchanged sentences

(the “Continuing Equity Owners”).

DISCONTINUED OPERATIONS

During the three months ended June 30, 2024, the Company made the strategic decision to discontinue a significant segment of its operations constituting its Merchant Services Business (as defined below).

In this regard, 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 of i3 Verticals, LLC and i3 Holdings Sub, Inc.

(such wholly-owned subsidiaries, the "Acquired Entities") comprising the Merchant Services segment as well as certain non-core assets within the Company's 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 (the "Contribution") 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").

The purchase price payable by Payroc to the Company for the equity interests of the Merchant Services Business would be $ 440,000 (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.

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 the Company 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.

As a result of the anticipated sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement, certain assets and liabilities of the Merchant Services Business met the held for sale criteria and the

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

disposal group also met the criteria for discontinued operations reporting as of June 30, 2024.

As such, the financial results and related assets and liabilities of this discontinued segment have been presented separately from continuing operations in the accompanying unaudited condensed consolidated financial statements.

The Company evaluated the disposal group for possible impairment and determined that it was more likely than not that the fair value of the reporting unit exceeded carrying value based on the purchase price of the Transactions less estimated incremental costs to sell.

As such, the Company expects to record a gain on the sale upon closing of the Transactions.

In connection with the closing of the Transactions, the Company will enter into a Transition Services Agreement, pursuant to which, among other things, the Company or affiliates thereof will provide certain information technology and operational transition services to Payroc for a period of time after the closing, and a Processing Services Agreement with Payroc, pursuant to which the parties will provide certain payment processing services to customers of each party following the closing in accordance with the terms thereof.

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 the Company's condensed consolidated statements of operations.

The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations of the Merchant Services Business:

June 30, September 30,

Current assets

Cash and cash equivalents $ — $ 7

Accounts receivable, net 16,158 14,325

Prepaid expenses and other current assets 2,510 2,937

Total current assets 18,668 17,269

Property and equipment, net 1,942 2,249

Restricted cash 200 200

Capitalized software, net 4,026 4,520

Goodwill 141,580 141,580

Intangible assets, net 62,276 63,803

Operating lease right-of-use assets 3,047 2,107

Other assets 5,263 4,895

Total assets $ 237,002 $ 236,623

Liabilities and equity

Current liabilities

Accounts payable $ 4,712 $ 4,695

Accrued expenses and other current liabilities 2,959 4,160

Deferred revenue 1,934 2,490

Current portion of operating lease liabilities 1,162 852

Total current liabilities 10,767 12,197

Operating lease liabilities, less current portion 2,017 1,465

Other long-term liabilities 1,169 1,065

Total liabilities $ 13,953 $ 14,727

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The financial results of the Merchant Services Business are presented as income from discontinued operations, net of income taxes on the Company’s consolidated statements of operations.

The following table presents financial results of Merchant Services Business for the three and nine months ended June 30, 2024 and 2023:

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

Revenue $ 38,383 $ 36,671 $ 111,893 $ 105,694

Operating expenses

Other costs of services 18,116 16,588 50,902 48,259

Selling, general and administrative 10,305 10,381 31,484 31,123

Depreciation and amortization 3,088 2,493 8,649 7,560

Change in fair value of contingent consideration — — — 14

Total operating expenses 31,509 29,462 91,035 86,956

Income from operations 6,874 7,209 20,858 18,738

Interest expense, net — — 56 —

Pretax income from discontinued operations 6,874 7,209 20,802 18,738

Provision for income taxes 1,326 2,369 3,852 2,396

Net income from discontinued operations 5,548 4,840 16,950 16,342

Net income from discontinued operations attributed to non-controlling interest 1,663 1,469 5,099 4,960

Net income from discontinued operations attributable to i3 Verticals, Inc.

3,885 3,371 11,851 11,382

The Company has elected to not separately disclose discontinued operations on its condensed consolidated statement of cash flows.

The following table presents cash flows from discontinued operations for major captions on the condensed consolidated financial statements:

Nine months ended June 30,

Depreciation and amortization $ 8,649 $ 7,560

Equity-based compensation $ 2,576 $ 3,062

Non-cash lease expense $ 803 $ 774

Contingent consideration paid in excess of original estimates $ — $ ( 3,211 )

Expenditures for property and equipment $ ( 626 ) $ ( 1,136 )

Expenditures for capitalized software $ ( 817 ) $ ( 1,101 )

Purchases of merchant portfolios and residual buyouts $ ( 4,585 ) $ ( 462 )

Acquisitions of businesses, net of cash and restricted cash acquired $ — $ ( 4,497 )

Right-of-use assets obtained in exchange for operating lease obligations $ 1,739 $ 785

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2 unchanged sentences

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the unaudited condensed consolidated financial statements of the Company and its subsidiaries as of March 31, 2024 and for the three and six months ended March 31, 2024 and 2023.

The results of operations for the three and six months ended March 31, 2024 and 2023 are not necessarily indicative of the operating results for the full year.

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the unaudited condensed consolidated financial statements of the Company and its subsidiaries as of June 30, 2024 and for the three and nine months ended June 30, 2024 and 2023.

The results of operations for the three and nine months ended June 30, 2024 and 2023 are not necessarily indicative of the operating results for the full year.

As permitted by the rules and regulations of the SEC, certain information and disclosures otherwise included in the notes to the consolidated financial statements have been condensed or omitted from the summary of significant accounting policies.

3 unchanged sentences

These interim condensed consolidated financial statements include the accounts of the Company and its subsidiary companies.

All significant intercompany accounts and transactions have been eliminated in consolidation.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

All intercompany accounts and transactions have been eliminated in consolidation.

Restricted Cash

8 unchanged sentences

With the exception of merchant reserves, settlement assets or settlement obligations are generally collected and paid within one to four days .

Settlement assets and settlement obligations were both $ 1,586 as of March 31, 2024 and $ 4,873 as of September 30, 2023, respectively.

Settlement assets and settlement obligations were both $ 1,355 as of June 30, 2024 and $ 4,873 as of September 30, 2023, respectively.

Reclassifications

1 unchanged sentence

These reclassifications have no impact on the Company’s previously reported consolidated net income (loss).

Discontinued operations

The results of operations for the Company's Merchant Services Business have been reclassified as discontinued operations for all periods presented in the condensed consolidated statements of operations.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

and liabilities subject to the sale of the Merchant Services Business have been reclassified as held for sale for all periods presented in the condensed consolidated balance sheets.

Refer to Note 2 for additional information.

Change in presentation

3 unchanged sentences

The following tables present the effects of the change in presentation within the Condensed Consolidated Statements of Cash Flows:

For the Six Months Ended March 31, 2024

For the Nine Months Ended June 30, 2024

As Previously Reported Adjustment As Adjusted

5 unchanged sentences

Net cash used in financing activities ( 11,697 ) ( 3,518 ) ( 15,215 )

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

For the Six Months Ended March 31, 2023

For the Nine Months Ended June 30, 2023

As Previously Reported Adjustment As Adjusted

3 unchanged sentences

Cash flows from financing activities:

Net payments for settlement obligations — ( 355 ) ( 355 )

Net cash provided by (used in) financing activities 84,169 ( 355 ) 83,814

Net proceeds from settlement obligations — 3,253 3,253

Net cash provided by financing activities 82,229 3,253 85,482

Inventories consist of point-of-sale equipment to be sold to customers and are stated at the lower of cost, determined on a weighted average or specific basis, or net realizable value.

Inventories were $ 3,978 and $ 4,138 at March 31, 2024 and September 30, 2023, respectively, and are included within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

Inventories were $ 2,254 and $ 2,038 at June 30, 2024 and September 30, 2023, respectively, and are included within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

In connection with the anticipated sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement, $ 1,886 and $ 2,100 at June 30, 2024 and September 30, 2023, respectively, of the Company's inventories were classified as "Assets held for sale" in the accompanying condensed consolidated balance sheets and were not included in these amounts.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Business acquisitions have been recorded using the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), and, accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition.

12 unchanged sentences

The Company’s leases do not provide a readily determinable implicit interest rate and the Company uses its incremental borrowing rate to measure the lease liability and corresponding right-of-use asset.

The incremental borrowing rate is a fully collateralized rate that considers the

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Company’s credit rating, market conditions and the term of the lease.

The incremental borrowing rate is a fully collateralized rate that considers the Company’s credit rating, market conditions and the term of the lease.

The Company accounts for all components in a lease arrangement as a single combined lease component.

6 unchanged sentences

The Company utilized the portfolio approach practical expedient within ASC 606-10-10-4 Revenue from Contracts with Customers—Objectives and the significant financing component practical expedient within ASC 606-10-32-18 Revenue from Contracts with Customers—The Existence of a Significant Financing Component in the Contract in performing the analysis.

The Company's revenue for the six months ended March 31, 2024 and 2023 is derived from the following sources:

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The Company's revenue from continuing operations for the nine months ended June 30, 2024 and 2023 is derived from the following sources:

• Software and related services — Includes sales of software as a service, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to our software offerings

8 unchanged sentences

Revenue from SaaS arrangements is recognized over time, over the term of the agreement.

Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed or a specified per transaction amount, depending on the card type.

Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed or a specified per transaction amount.

The Company frequently enters into agreements with customers under which the customer engages the Company to provide both payment authorization services and transaction settlement services for all of the cardholder transactions of the customer, regardless of which issuing bank and card network to which the transaction relates.

4 unchanged sentences

Discount fees are recognized each day based on the volume or transaction count at the time the merchants’ transactions are processed.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The Company follows the requirements of ASC 606-10-55 Revenue from Contracts with Customers—Principal versus Agent Considerations , which states that the determination of whether a company should recognize revenue based on the gross amount billed to a customer or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement.

4 unchanged sentences

(1) the Company has no discretion over which card issuing bank will be used to process a transaction and is unable to direct the activity of the merchant to another card issuing bank, and (2) interchange and card network rates are pre-established by the card issuers or card networks, and the Company has no latitude in determining these fees.

Therefore, revenue allocated to the payment authorization performance obligation is presented net of interchange and card network fees paid to the card issuing banks and card networks, respectively, for the six months ended March 31, 2024 and 2023.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

With regards to the Company's discount fees, generally, where the Company has control over merchant pricing, merchant portability, credit risk and ultimate responsibility for the merchant relationship, revenues are reported at the time of sale equal to the full amount of the discount charged to the merchant, less interchange and network fees.

11 unchanged sentences

The Company’s professional services, including training, installation, and repair services are recognized as revenue as these services are performed.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The tables below present a disaggregation of the Company's revenue from contracts with customers by product by segment.

Refer to Note 14 for discussion of the Company's segments.

The tables below present a disaggregation of the Company's revenue from contracts with customers by product for continuing operations.

In connection with the anticipated sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement, the revenues relates to the Acquired Entities were classified as "discontinued operations" in the accompanying condensed consolidated statement of operations and were not included in these amounts.

The Company's products are defined as follows:

• Software and related services — Includes SaaS, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to our software offerings

• Payments — Includes discount fees, gateway fees and other related fixed transaction or service fees

• Payments — Includes discount fees and other related fixed transaction or service fees

• Other — Includes sales of equipment, non-software related professional services and other revenues

For the Three Months Ended March 31, 2024

Software and Services Merchant Services Other Total

Software and related services revenue $ 42,130 $ 3,537 $ ( 10 ) $ 45,657

Payments revenue 14,855 29,585 ( 6 ) 44,434

Other revenue 2,498 1,953 — 4,451

Total revenue $ 59,483 $ 35,075 $ ( 16 ) $ 94,542

For the Three Months Ended March 31, 2023

Software and Services Merchant Services Other Total

Software and related services revenue $ 44,099 $ 3,217 $ ( 9 ) $ 47,307

Payments revenue 14,285 27,634 ( 10 ) 41,909

Other revenue 2,413 2,243 — 4,656

Total revenue $ 60,797 $ 33,094 $ ( 19 ) $ 93,872

For the Six Months Ended March 31, 2024

Software and Services Merchant Services Other Total

For the Three Months Ended June 30, 2024

For the Three Months Ended June 30, 2023

Software and related services revenue $ 41,419 $ 43,696

2 unchanged sentences

Total revenue $ 56,037 $ 57,260

For the Six Months Ended March 31, 2023

Software and Services Merchant Services Other Total

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

For the Nine Months Ended June 30, 2024 For the Nine Months Ended June 30, 2023

Software and related services revenue $ 123,419 $ 125,421

2 unchanged sentences

Total revenue $ 169,059 $ 168,138

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The tables below present a disaggregation of the Company's revenue from contracts with customers by timing of transfer of goods or services by segment.

The tables below present a disaggregation of the Company's revenue from contracts with customers from continuing operations by timing of transfer of goods or services.

The Company's revenue included in each category are defined as follows:

• Revenue earned over time — Includes discount fees, gateway fees, sales of SaaS, ongoing support or other stand-ready obligations and professional services

• Revenue earned over time — Includes discount fees, sales of SaaS, ongoing support or other stand-ready obligations and professional services

• Revenue earned at a point in time — Includes point in time service fees that are not stand-ready obligations, software licenses sold as functional intellectual property and other equipment

For the Three Months Ended March 31, 2024

Software and Services Merchant Services Other Total

Revenue earned over time $ 55,361 $ 30,095 $ ( 10 ) $ 85,446

Revenue earned at a point in time 4,122 4,980 ( 6 ) 9,096

Total revenue $ 59,483 $ 35,075 $ ( 16 ) $ 94,542

For the Three Months Ended March 31, 2023

Software and Services Merchant Services Other Total

Revenue earned over time $ 54,568 $ 27,984 $ ( 9 ) $ 82,543

Revenue earned at a point in time 6,229 5,110 ( 10 ) 11,329

Total revenue $ 60,797 $ 33,094 $ ( 19 ) $ 93,872

For the Six Months Ended March 31, 2024

Software and Services Merchant Services Other Total

For the Three Months Ended June 30, 2024

For the Three Months Ended June 30, 2023

Revenue earned over time $ 52,809 $ 52,919

1 unchanged sentence

Total revenue $ 56,037 $ 57,260

For the Six Months Ended March 31, 2023

Software and Services Merchant Services Other Total

For the Nine Months Ended June 30, 2024 For the Nine Months Ended June 30, 2023

Revenue earned over time $ 159,490 $ 154,816

6 unchanged sentences

Under this structure, the license revenue is recognized upfront while a portion of the revenue is unbilled.

Unbilled amounts

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

associated with these services are presented as accounts receivable as the Company has an unconditional right to payment for services performed.

As of March 31, 2024 and September 30, 2023, the Company’s contract assets from contracts with customers was $ 11,478 and $ 15,131 , respectively.

Unbilled amounts associated with these services are presented as accounts receivable as the Company has an unconditional right to payment for services performed.

As of June 30, 2024 and September 30, 2023, the Company’s contract assets from contracts with customers was $ 8,558 and $ 15,131 , respectively.

Contract Liabilities

4 unchanged sentences

Deferred revenue that is expected to be recognized as revenue within one year is recorded as short-term deferred revenue and the remaining portion is recorded as other long-term liabilities in the condensed consolidated balance sheets.

The terms for most of the Company's contracts with a deferred revenue component are one year.

The terms for

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

most of the Company's contracts with a deferred revenue component are one year.

Substantially all of the Company's deferred revenue is anticipated to be recognized within the next year.

The following tables present the changes in deferred revenue as of and for the six months ended March 31, 2024 and 2023, respectively:

The following tables present the changes in deferred revenue as of and for the nine months ended June 30, 2024 and 2023, respectively:

Balance at September 30, 2023

5 unchanged sentences

Balance at March 31, 2024

Deferral of revenue 9,587

Recognition of unearned revenue ( 14,850 )

Balance at June 30, 2024

Balance at September 30, 2022

5 unchanged sentences

Balance at March 31, 2023

Deferral of revenue 7,622

Recognition of unearned revenue ( 14,283 )

Balance at June 30, 2023

Costs to Obtain and Fulfill a Contract

The Company capitalizes incremental costs to obtain new contracts and contract renewals and amortizes these costs on a straight-line basis as an expense over the benefit period, which is generally the contract term, unless a commensurate payment is not expected at renewal.

As of March 31, 2024 and September 30, 2023, the Company had $ 5,417 and $ 4,966 , respectively, of capitalized contract costs, which relates to commissions paid to employees and agents as well as other incentives given to customers to obtain new sales, included within “Other assets" on the condensed consolidated balance sheets.

The Company recorded expense related to these costs of $ 241 and $ 470 for the three and six months ended March 31, 2024, respectively and $ 193 and $ 376 for the three and six months ended March 31, 2023.

As of June 30, 2024 and September 30, 2023, the Company had $ 869 and $ 632 , respectively, of capitalized contract costs, which relates to commissions paid to employees and agents as well as other incentives given to customers to obtain new sales, included within “Other assets" on the condensed consolidated balance sheets.

The Company recorded expense from continuing operations related to these costs of $ 24 and $ 64 for the three and nine months ended June 30, 2024, respectively and $ 13 and $ 33 for the three and nine months ended June 30, 2023.

In connection with the anticipated sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement, $ 4,729 and $ 4,334 at June 30, 2024 and September 30, 2023, respectively, of the Company's capitalized contract costs were classified as "Assets held for sale" in the accompanying condensed consolidated balance sheets and were not included in these amounts.

The Company expenses sales commissions as incurred for the Company's sales commission plans that are paid on recurring monthly revenues, portfolios of existing customers, or have a substantive stay requirement prior to payment.

3 unchanged sentences

Other Cost of Services

Other costs of services include third-party processing costs directly attributable to processing and bank sponsorship costs, which may not be based on a percentage of volume.

These costs also include related costs such as residual payments to sales groups, which are based on a percentage of the net revenues generated from merchant referrals.

In certain merchant processing bank relationships the Company is liable for chargebacks against a merchant equal to the volume of the transaction.

Losses resulting from chargebacks against a merchant are included in other cost of services on the accompanying condensed consolidated statement of operations.

The Company evaluates its risk for such transactions and estimates its potential loss from chargebacks based primarily on historical experience and other relevant factors.

The reserve for merchant losses is included within accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets.

The cost of equipment and software sold is also included in other cost of services.

Other costs of services are recognized at the time the associated revenue is earned.

Other costs of services include costs directly related to the Company's 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.

The Company accounts for all governmental taxes associated with revenue transactions on a net basis.

15 unchanged sentences

2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

ASU 2023-07 improves interim disclosure requirements for segment reporting, including clarifications regarding the measure of profit and loss used to asses segment performance and the allocation of resources.

ASU 2023-07 improves interim disclosure requirements for segment reporting, including clarifications regarding the measure of profit and loss used to assess segment performance and the allocation of resources.

Further, it enhances the disclosures for reporting segment expenses and will require the Company to report significant expenses regularly provided by the chief operating decision maker.

6 unchanged sentences

(in thousands, except unit, share and per share amounts)

During the six months ended March 31, 2024 and 2023, the Company acquired the following intangible assets and businesses:

Residual Buyouts

From time to time, the Company acquires future commission streams (or "residuals") from sales agents in exchange for an upfront cash payment.

This results in an increase in overall gross processing volume to the Company.

The residual buyouts are treated as asset acquisitions, resulting in recording a residual buyout intangible asset at cost on the date of acquisition.

These assets are amortized using a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are expected to be utilized over their estimated useful lives.

During the six months ended March 31, 2024 and 2023, the Company purchased residuals for $ 4,466 and $ 387 of consideration, respectively.

The purchases were funded with a combination of cash on hand and borrowings on the Company's revolving credit facility.

The acquired residual buyout intangible asset has an estimated amortization period of eight years .

Referral Agreements

From time to time, the Company enters into referral agreements with agent banks (“Referral Partners”).

Under these agreements, the Referral Partner refers its customers to the Company for credit card processing services.

Total consideration paid for these agreements in the six months ended March 31, 2023 was $ 420 , all of which was settled with cash on hand.

Because the Company pays an up-front fee to compensate the Referral Partner, the amount is treated as an asset acquisition in which the Company has acquired an intangible stream of referrals.

This asset is amortized over a straight-line period of five years .

Business Combinations during the six months ended March 31, 2024

During the six months ended March 31, 2024 the Company completed the acquisition of a business to expand the Company’s software offerings.

During the nine months ended June 30, 2024 and 2023, the Company acquired the following intangible assets and businesses:

Business Combinations during the nine months ended June 30, 2024

During the nine months ended June 30, 2024 the Company completed the acquisition of a business to expand the Company’s software offerings.

Total purchase consideration was $ 1,270 , including $ 1,100 in cash consideration, funded by proceeds from the Company's revolving credit facility, and $ 170 of contingent consideration.

In connection with this acquisition, the Company allocated approximately $ 5 to property and equipment, approximately $ 40 to capitalized software, approximately $ 220 to customer relationships and the remainder, approximately $ 1,005 , to goodwill, all of which is deductible for tax purposes.

Certain of the purchase price allocations assigned for this acquisition is considered preliminary as of March 31, 2024.

Certain of the purchase price allocations assigned for this acquisition is considered preliminary as of June 30, 2024.

The acquired customer relationships intangible assets have an estimated amortization periods of ten years .

4 unchanged sentences

and Celtic Systems Pvt.

During the six months ended March 31, 2023, the Company completed the acquisition of Celtic Cross Holdings, Inc., in Scottsdale, Arizona and Celtic Systems Pvt.

During the nine months ended June 30, 2023, the Company completed the acquisition of Celtic Cross Holdings, Inc., in Scottsdale, Arizona and Celtic Systems Pvt.

in Vadodara, India (collectively "Celtic") to expand the Company’s software offerings in the Public Sector vertical.

3 unchanged sentences

The acquired customer relationships intangible assets has an estimated amortization period of eighteen years .

The trade name and non-compete agreements associated with the acquisition have amortization periods of five years and three years ,

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

respectively.

The trade name and non-compete agreements associated with the acquisition have amortization periods of five years and three years , respectively.

The weighted-average amortization period for all intangibles acquired is eighteen years .

1 unchanged sentence

Acquisition-related costs for this acquisition amounted to approximately $ 1,782 and were expensed as incurred.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Summary of Celtic Cross Holdings, Inc.

19 unchanged sentences

In connection with this acquisition, the Company allocated approximately $ 159 of the consideration to net working capital, approximately $ 374 to property and equipment, approximately $ 670 to capitalized software, approximately $ 8,400 to customer relationships, approximately $ 100 to trade names, and the remainder, approximately $ 12,229 , to goodwill, of which $ 2,864 is deductible for tax purposes, and approximately $ 2,178 to other long-term liabilities.

Certain of the purchase price allocations assigned for one of these acquisitions is considered preliminary as of March 31, 2024.

Certain of the purchase price allocations assigned for one of these acquisitions is considered preliminary as of June 30, 2024.

The acquired capital software and customer relationships intangible asset have estimated amortization periods of seven to eight years and ten to fifteen years , respectively.

3 unchanged sentences

PREPAID EXPENSES AND OTHER CURRENT ASSETS

A summary of the Company's prepaid expenses and other current assets as of March 31, 2024 and September 30, 2023 is as follows:

March 31, September 30,

A summary of the Company's prepaid expenses and other current assets as of June 30, 2024 and September 30, 2023 is as follows:

June 30, September 30,

Inventory $ 2,254 $ 2,038

4 unchanged sentences

Prepaid expenses and other current assets (1)

$ 11,279 $ 9,512

__________________________

In connection with the anticipated sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement, $ 2,510 and $ 2,937 at June 30, 2024 and September 30, 2023, respectively, of the Company's prepaid expenses and other current assets were classified as "Assets held for sale" in the accompanying condensed consolidated balance sheets and were not included in these amounts.

GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill are as follows:

Software and Services Merchant Services Other Total

Balance at September 30, 2023 (1)

Goodwill attributable to preliminary purchase price adjustments and acquisitions during the nine months ended June 30, 2024 1,209

Balance at June 30, 2024 (1)

__________________________

Goodwill attributable to preliminary purchase price adjustments and acquisitions during the six months ended March 31, 2024 1,209 — — 1,209

Balance at March 31, 2024 $ 288,822 $ 121,950 $ — $ 410,772

Intangible assets consisted of the following as of March 31, 2024:

In connection with the anticipated sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement, $ 141,580 at both June 30, 2024 and September 30, 2023 of the Company's goodwill was classified as "Assets held for sale" in the accompanying condensed consolidated balance sheets and were not included in these amounts.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Intangible assets consisted of the following as of June 30, 2024:

Cost Accumulated

1 unchanged sentence

Finite-lived intangible assets:

Merchant relationships $ 310,721 $ ( 106,892 ) $ 203,829 9 to 25 years – accelerated or straight-line

Customer relationships $ 187,920 $ ( 35,924 ) $ 151,996 9 to 25 years – accelerated or straight-line

Non-compete agreements 298 ( 171 ) 127 3 to 6 years – straight-line

1 unchanged sentence

Trade names 4,641 ( 2,745 ) 1,896 3 to 7 years – straight-line

Residual buyouts 18,686 ( 4,134 ) 14,552 8 years – straight-line

Referral and exclusivity agreements 420 ( 105 ) 315 5 years – straight-line

Total finite-lived intangible assets 192,866 ( 38,844 ) 154,022

2 unchanged sentences

Total identifiable intangible assets (1)

Amortization expense for intangible assets amounted to $ 5,270 and $ 10,505 for the three and six months ended March 31, 2024, respectively, and $ 5,157 and $ 10,216 for the three and six months ended March 31, 2023, respectively.

$ 192,883 $ ( 38,844 ) $ 154,039

__________________________

In connection with the anticipated sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement, $ 62,276 at June 30, 2024 of the Company's net identifiable intangible assets was classified as "Assets held for sale" in the accompanying condensed consolidated balance sheets and were not included in these amounts.

Amortization expense from continuing operations for intangible assets amounted to $ 3,072 and $ 9,331 for the three and nine months ended June 30, 2024, respectively, and $ 3,227 and $ 9,561 for the three and nine months ended June 30, 2023, respectively.

Based on net carrying amounts at June 30, 2024, the Company's estimate of future amortization expense for continuing operations for intangible assets are presented in the table below for fiscal years ending September 30:

2024 (three months remaining) $ 3,064

Thereafter 104,236

i3 VERTICALS, Inc.

1 unchanged sentence

(in thousands, except unit, share and per share amounts)

Based on net carrying amounts at March 31, 2024, the Company's estimate of future amortization expense for intangible assets are presented in the table below for fiscal years ending September 30:

2024 (six months remaining) $ 10,435

Thereafter 130,716

ACCRUED EXPENSES AND OTHER LIABILITIES

A summary of the Company's accrued expenses and other current liabilities as of March 31, 2024 and September 30, 2023 is as follows is as follows:

March 31, September 30,

A summary of the Company's accrued expenses and other current liabilities as of June 30, 2024 and September 30, 2023 is as follows is as follows:

June 30, September 30,

Accrued wages, bonuses, commissions and vacation $ 6,745 $ 6,888

7 unchanged sentences

Accrued expenses and other current liabilities (1)

A summary of the Company's long-term liabilities as of March 31, 2024 and September 30, 2023 is as follows:

March 31, September 30,

$ 22,827 $ 33,580

__________________________

In connection with the anticipated sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement, $ 2,959 and $ 4,160 at June 30, 2024 and September 30, 2023, respectively, of the Company's accrued expenses and other current liabilities were classified as "Assets held for sale" in the accompanying condensed consolidated balance sheets and were not included in these amounts.

A summary of the Company's long-term liabilities as of June 30, 2024 and September 30, 2023 is as follows:

June 30, September 30,

Accrued contingent consideration — long-term portion $ 111 $ 1,414

2 unchanged sentences

Total other long-term liabilities (1)

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

$ 17,238 $ 23,078

__________________________

In connection with the anticipated sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement, $ 1,169 and $ 1,065 at June 30, 2024 and September 30, 2023, respectively, of the Company's other long-term liabilities were classified as "Assets held for sale" in the accompanying condensed consolidated balance sheets and were not included in these amounts.

LONG-TERM DEBT, NET

A summary of long-term debt, net as of March 31, 2024 and September 30, 2023 is as follows:

March 31, September 30,

A summary of long-term debt, net as of June 30, 2024 and September 30, 2023 is as follows:

June 30, September 30,

Maturity 2024 2023

6 unchanged sentences

Long-term debt, net of current portion $ 347,892 $ 385,081

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

2020 Exchangeable Notes Offering

1 unchanged sentence

The Company received approximately $ 132,762 in net proceeds from the sale of the Exchangeable Notes, as determined by deducting estimated offering expenses paid to third-parties from the aggregate principal amount.

The Exchangeable Notes bear interest at a fixed rate of 1.00 % per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020.

The Exchangeable Notes will mature on February 15, 2025, unless converted or repurchased at an earlier date.

i3 Verticals, LLC issued the Exchangeable Notes pursuant to an Indenture, dated as of February 18, 2020, among i3 Verticals, LLC, the Company and U.S.

Bank National Association, as trustee.

Bank Trust Company National Association, as trustee (the “Indenture”).

The Exchangeable Notes bear interest at a fixed rate of 1.00 % per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020.

In accordance with the terms of the Indenture, beginning on August 15, 2024, the Exchangeable Notes may be exchanged at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

The Exchangeable Notes will mature on February 15, 2025, unless exchanged or repurchased at an earlier date.

For a discussion of the terms of the Exchangeable Notes, refer to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

Non-cash interest expense, including amortization of debt issuance costs, related to the Exchangeable Notes for the three and six months ended March 31, 2024 was $ 104 and $ 359 , respectively and $ 233 and $ 460 for the three and six months ended March 31, 2023.

Total unamortized debt issuance costs related to the Exchangeable Notes were $ 216 and $ 1,501 as of March 31, 2024 and September 30, 2023, respectively.

Non-cash interest expense, including amortization of debt issuance costs, related to the Exchangeable Notes for the three and nine months ended June 30, 2024 was $ 61 and $ 420 , respectively and $ 241 and $ 701 for the three and nine months ended June 30, 2023.

Total unamortized debt issuance costs related to the Exchangeable Notes were $ 154 and $ 1,501 as of June 30, 2024 and September 30, 2023, respectively.

During fiscal year 2020, we repurchased $ 21,000 in aggregate principal amount of Exchangeable Notes in open market purchases.

1 unchanged sentence

The repurchase payments were determined by the Company’s average stock price over the 15 trading-day measurement period ending January 16, 2024.

The closing of the Exchangeable Note Purchases occurred on January 18, 2024, and the Company paid $ 87,391 to repurchase $ 90,777 in aggregate principal amount of its Exchangeable Notes and to repay approximately $ 386 in accrued interest on the repurchased portion of the Exchangeable Notes.

The closing of the Exchangeable Note Repurchases occurred on January 18, 2024, and the Company paid $ 87,391 to repurchase $ 90,777 in aggregate principal amount of its Exchangeable Notes and to repay approximately $ 386 in accrued interest on the repurchased portion of the Exchangeable Notes.

The Company wrote off $ 926 of debt issuance costs in connection with the repurchase transactions.

These repurchases resulted in a decrease in the Company's total leverage ratio, and following the completion of the repurchases of these Exchangeable Notes, approximately $ 26,223 in aggregate principal amount of the Exchangeable Notes remained outstanding, with terms unchanged.

The Company recorded a gain on retirement of debt of $ 2,397 due to the estimated acquisition price exceeding the net carrying amount of the repurchased

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

portion of the Exchangeable Notes, adjusted for unamortized debt issuance costs and costs and third-party fees related to the transaction.

As of March 31, 2024, the aggregate principal amount outstanding of the Exchangeable Notes was $ 26,223 .

The estimated fair value of the Exchangeable Notes was $ 25,043 as of March 31, 2024.

The Company recorded a gain on retirement of debt of $ 2,397 due to the estimated acquisition price exceeding the net carrying amount of the repurchased portion of the Exchangeable Notes, adjusted for unamortized debt issuance costs and costs and third-party fees related to the transaction.

As of June 30, 2024, the aggregate principal amount outstanding of the Exchangeable Notes was $ 26,223 .

The estimated fair value of the Exchangeable Notes was $ 25,227 as of June 30, 2024.

The estimated fair value of the Exchangeable Notes was determined through consideration of quoted market prices for similar instruments.

1 unchanged sentence

Exchangeable Note Hedge Transactions

On February 12, 2020, concurrently with the pricing of the Exchangeable Notes, and on February 13, 2020, concurrently with the exercise by the initial purchasers of their right to purchase additional Exchangeable Notes, i3 Verticals, LLC entered into exchangeable note hedge transactions with respect to Class A common stock (the “Note Hedge Transactions”) with certain financial institutions (collectively, the “Counterparties”).

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

“Note Hedge Transactions”) with certain financial institutions (collectively, the “Counterparties”).

The Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Exchangeable Notes, the same number of shares of Class A common stock that initially underlie the Exchangeable Notes in the aggregate and are exercisable upon exchange of the Exchangeable Notes.

16 unchanged sentences

The Company received approximately $ 14,669 from the offering and sale of the Warrants.

The Warrants do not require separate accounting as a derivative as they meet a scope exception for

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

certain contracts involving an entity's own equity.

The Warrants do not require separate accounting as a derivative as they meet a scope exception for certain contracts involving an entity's own equity.

The premiums paid for the Warrants have been included as a net increase to additional paid-in capital within stockholders' equity.

1 unchanged sentence

Also in December 2023, i3 Verticals, LLC entered into agreements with the Counterparties to terminate the portion of the Warrants corresponding to the Exchangeable Note Repurchases.

On January 18, 2024, in connection with the Exchangeable Note Repurchases, the Company and i3 Verticals, LLC terminated the corresponding portions of the and Warrants ("Warrant Unwinds"), and the Company paid $ 433 for the repurchase of the Warrant Unwinds and recorded a gain on the repurchase of the Warrant Unwinds of $ 105 .

On January 18, 2024, in connection with the Exchangeable Note Repurchases, the Company and i3 Verticals, LLC terminated the corresponding portions of the Warrants ("Warrant Unwinds"), and the Company paid $ 433 for the repurchase of the Warrant Unwinds and recorded a gain on the repurchase of the Warrant Unwinds of $ 105 .

2023 Senior Secured Revolving Credit Facility

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”).

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Bank, N.A., as administrative agent (“JPMorgan”).

The 2023 Senior Secured Credit Facility replaced the prior senior secured credit facility of the Company which was entered into on May 9, 2019 (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”).

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.

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 4.1 x and total leverage ratio was 3.5 x.

As of June 30, 2024, the Borrower's consolidated interest coverage ratio was 3.5 x and total leverage ratio was 3.6 x.

The provision of any such additional amounts under the additional term loan facilities or additional revolving credit commitments are subject to certain additional conditions and the receipt of certain additional commitments by existing or additional lenders.

2 unchanged sentences

Borrowings under the Revolver will be made, at the Borrower’s option, at the Adjusted Term SOFR rate or the base rate, plus, in each case, an applicable margin.

The Adjusted Term SOFR rate will be the rate of interest per annum equal to the Term SOFR rate (based upon an interest period of one, three or six months), plus 0.10 %, plus an applicable margin of 2.00 % to 3.00 % ( 3.00 % at March 31, 2024).

The Adjusted Term SOFR rate shall not be less than 0 % in any event.

The base rate is a fluctuating rate of interest per annum equal to the highest of (a) the greater of the federal funds rate or the overnight bank funding rate, plus ½ of 1%, (b) Wall Street Journal prime rate and (c) the Adjusted Term SOFR rate for an interest period of one month, plus 1 %, plus an applicable margin of 1.00 % to 2.00 % ( 2.00 % at March 31, 2024).

The base rate shall not be less than 1 % in any event.

10 unchanged sentences

0.15 % 2.00 % 2.00 % 1.00 %

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, 0.30 % at March 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.

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, 0.30 % at June 30, 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.

The Borrower will be permitted to voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans under the 2023 Senior Secured Credit Facility, whether such amounts are issued under the Revolver or under the additional term loan facilities or additional revolving credit facilities, at any time without premium or penalty.

14 unchanged sentences

Debt issuance costs

The Company did not incur any debt issuance costs during the three and six months ended March 31, 2024, and incurred $ 265 in debt issuance costs during the six months ended March 31, 2023.

During the three and six months ended March 31, 2024.

the Company wrote off $ 926 of debt issuance costs in connection with the Exchangeable Note Repurchases.

The Company incurred $ 906 in debt issuance costs during the three and nine months ended June 30, 2024, and incurred $ 2,814 and $ 3,079 in debt issuance costs during the three and nine months ended June 30, 2023, respectively.

During the nine months ended June 30, 2024, the Company wrote off $ 926 of debt issuance costs in connection with the Exchangeable Note Repurchases.

The Company's debt issuance costs are being amortized over the related term of the debt using the straight-line method, which is not materially different than the effective interest rate method, and are presented net against long-term debt in the condensed consolidated balance sheets.

The amortization of deferred debt issuance costs is included in interest expense and amounted to approximately $ 262 and $ 676

The amortization of deferred debt issuance costs is included in interest expense and amounted to approximately $ 221 and $ 897 during the three and nine months ended June 30, 2024, respectively, and $ 583 and $ 1,312 during the three and nine months ended June 30, 2023, respectively.

i3 VERTICALS, Inc.

1 unchanged sentence

(in thousands, except unit, share and per share amounts)

during the three and six months ended March 31, 2024, respectively, and $ 368 and $ 729 during the three and six months ended March 31, 2023, respectively.

i3 Verticals, Inc.

6 unchanged sentences

Each quarter, the Company updates its estimate of the annual effective tax rate, and if the Company’s estimated tax rate changes, it makes a cumulative adjustment in that period.

The Company’s provision for income taxes was a provision of $ 580 and $ 762 for the three and six months ended March 31, 2024, respectively and a benefit of $ 563 and $ 181 during the three and six months ended March 31, 2023, respectively.

The Company’s provision for income taxes for continuing operations was a provision of $ 5,271 and a provision for $ 3,507 for the three and nine months ended June 30, 2024, respectively and a benefit of $ 292 and $ 500 during the three and nine months ended June 30, 2023, respectively.

Tax Receivable Agreement

5 unchanged sentences

The Company expects to benefit from the remaining 15 % of the tax benefits, if any, that the Company may realize.

During the six months ended March 31, 2024, the Company acquired an aggregate of 40,718 Common Units in i3 Verticals, LLC in connection with the redemption of Common Units from the Continuing Equity Owners.

During the nine months ended June 30, 2024, the Company acquired an aggregate of 60,718 Common Units in i3 Verticals, LLC in connection with the redemption of Common Units from the Continuing Equity Owners.

which resulted in an increase in the tax basis of our investment in i3 Verticals, LLC subject to the provisions of the Tax Receivable Agreement.

As a result of the exchange, during the six months ended March 31, 2024, the Company recognized an increase to its net deferred tax assets in the amount of $ 286 , and corresponding Tax Receivable Agreement liabilities of $ 243 , representing 85 % of the tax benefits due to Continuing Equity Owners.

The deferred tax asset and corresponding Tax Receivable Agreement liability balances were $ 38,009 and $ 40,323 , respectively, as of March 31, 2024.

As a result of the exchange, during the nine months ended June 30, 2024, the Company recognized an increase to its net deferred tax assets in the amount of $ 426 , and corresponding Tax Receivable Agreement liabilities of $ 362 , representing 85 % of the tax benefits due to Continuing Equity Owners.

The deferred tax asset and corresponding Tax Receivable Agreement liability balances were $ 38,148 and $ 40,441 , respectively, as of June 30, 2024.

Payments to the Continuing Equity Owners related to exchanges through June 30, 2024 will range from $ 0 to $ 3,263 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

i3 VERTICALS, Inc.

1 unchanged sentence

(in thousands, except unit, share and per share amounts)

Payments to the Continuing Equity Owners related to exchanges through March 31, 2024 will range from $ 0 to $ 3,256 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.

Company’s U.S.

federal and state income tax returns.

2 unchanged sentences

At contract inception, the Company determines whether an arrangement is or contains a lease, and for each identified lease, evaluates the classification as operating or financing.

The Company had no finance leases as of March 31, 2024.

The Company had no finance leases as of June 30, 2024.

Leased assets and obligations are recognized at the lease commencement date based on the present value of fixed lease payments to be made over the term of the lease.

Renewal and termination options are factored into determination of the lease term only if the option is reasonably certain to be exercised.

The weighted-average remaining lease term at March 31, 2024 and 2023 was two years and four years , respectively.

The Company had no significant short-term leases during the three and six months ended March 31, 2024 and 2023.

The weighted-average remaining lease term at June 30, 2024 and 2023 was two and four years , respectively.

The Company had no significant short-term leases during the three and nine months ended June 30, 2024 and 2023.

The incremental borrowing rates were determined based on a portfolio approach considering the Company’s current secured borrowing rate adjusted for market conditions and the length of the lease term.

The weighted-average discount rate used in the measurement of our lease liabilities was 7.4 % and 7.3 % as of March 31, 2024 and 2023, respectively.

The weighted-average discount rate used in the measurement of our lease liabilities was 7.6 % and 7.7 % as of June 30, 2024 and 2023, respectively.

Operating lease cost is recognized on a straight-line basis over the lease term.

Operating lease costs were $ 1,318 and $ 2,651 for the three and six months ended March 31, 2024, respectively, and $ 1,405 and $ 2,909 for the three and six months ended March 31, 2023, respectively, which are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Total operating lease costs include variable lease costs of approximately $ 39 and $ 49 , for the three and six months ended March 31, 2024, respectively, and $ 9 and $ 20 for the three and six months ended March 31, 2023, respectively, which are primarily comprised of costs of maintenance and utilities and changes in rates, and are determined based on the actual costs incurred during the period.

Operating lease costs from continuing operations were $ 1,026 and $ 3,090 for the three and nine months ended June 30, 2024, respectively, and $ 1,051 and $ 3,309 for the three and nine months ended June 30, 2023, respectively, which are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Total operating lease costs from continuing operations include variable lease costs of approximately $ 138 and $ 185 , for the three and nine months ended June 30, 2024, respectively, and $ 10 and $ 28 for the three and nine months ended June 30, 2023, respectively, which are primarily comprised of costs of maintenance and utilities and changes in rates, and are determined based on the actual costs incurred during the period.

Variable payments are expensed in the period incurred and not included in the measurement of lease assets and liabilities.

Short-term rent expense was $ 41 and $ 86 for the three and six months ended March 31, 2024, respectively, and $ 75 and $ 110 for the three and six months ended March 31, 2023, respectively, and are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Short-term rent expense from continuing operations was $ 13 and $ 26 for the three and nine months ended June 30, 2024, respectively, and $ 0 and $ 6 for the three and nine months ended June 30, 2023, respectively, and are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

i3 VERTICALS, Inc.

1 unchanged sentence

(in thousands, except unit, share and per share amounts)

As of March 31, 2024, maturities of lease liabilities are as follows:

As of June 30, 2024, maturities of lease liabilities for continuing operations are as follows:

Fiscal Years ending September 30:

2024 (six months remaining) $ 2,598

2024 (three months remaining) $ 1,057

Thereafter 1,212

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Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets.

The carrying value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, settlement assets and obligations, accounts receivable, other assets, accounts payable, and accrued expenses, approximated their fair values as of March 31, 2024 and 2023, because of the relatively short maturity dates on these instruments.

The carrying amount of debt approximates fair value as of March 31, 2024 and 2023, because interest rates on these instruments approximate market interest rates.

The carrying value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, settlement assets and obligations, accounts receivable, other assets, accounts payable, and accrued expenses, approximated their fair values as of June 30, 2024 and 2023, because of the relatively short maturity dates on these instruments.

The carrying amount of debt approximates fair value as of June 30, 2024 and 2023, because interest rates on these instruments approximate market interest rates.

i3 VERTICALS, Inc.

8 unchanged sentences

Contingent consideration paid ( 7,326 )

Balance at March 31, 2024 $ 3,969

Balance at June 30, 2024 $ 538

Accrued Contingent Consideration (1)

3 unchanged sentences

Contingent consideration paid ( 12,431 )

Balance at March 31, 2023 $ 22,259

Balance at June 30, 2023 $ 17,856

__________________________

In connection with the anticipated sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement, $ 3,197 at September 30, 2022 of the Company's accrued contingent consideration was classified as "Assets held for sale" in the accompanying condensed consolidated balance sheets and was not included in these amounts.

The fair value of contingent consideration obligations includes inputs not observable in the market and thus represents a Level 3 measurement.

6 unchanged sentences

The Company develops the projected future financial results based on an analysis of historical results, market conditions, and the expected impact of anticipated changes in the Company's overall business and/or product strategies.

Approximately $ 3,868 and $ 6,825 of contingent consideration was recorded in accrued expenses and other current liabilities as of March 31, 2024 and September 30, 2023, respectively.

Approximately $ 101 and $ 1,414 of contingent consideration was recorded in other long-term liabilities as of March 31, 2024 and September 30, 2023, respectively.

Approximately $ 427 and $ 6,825 of contingent consideration was recorded in accrued expenses and other current liabilities as of June 30, 2024 and September 30, 2023, respectively.

Approximately $ 111 and $ 1,414 of contingent consideration was recorded in other long-term liabilities as of June 30, 2024 and September 30, 2023, respectively.

Disclosure of Fair Values

1 unchanged sentence

The Company estimates the fair value of the Exchangeable Notes through consideration of quoted market prices of similar instruments, classified as Level 2 as described above.

The estimated fair value of the Exchangeable Notes was $ 25,043 as of March 31, 2024.

The estimated fair value of the Exchangeable Notes was $ 25,227 as of June 30, 2024.

i3 VERTICALS, Inc.

2 unchanged sentences

EQUITY-BASED COMPENSATION

A summary of equity-based compensation expense recognized during the three and six months ended March 31, 2024 and 2023 is as follows:

Three Months Ended March 31, Six Months Ended March 31,

A summary of equity-based compensation expense for continuing operations recognized during the three and nine months ended June 30, 2024 and 2023 is as follows:

Three Months Ended June 30, Nine Months Ended June 30,

2024 2023 2024 2023

2 unchanged sentences

Equity-based compensation expense $ 4,432 $ 6,124 $ 14,811 $ 17,784

In connection with the anticipated sale of the Merchant Services Business, $ 670 and $ 2,576 of the Company's equity-based compensation expense was classified as "net income from discontinued operations" in the accompanying condensed consolidated statements of operations during the three and nine months ended June 30, 2024, respectively, and $ 1,074 and $ 3,062 during the three and nine months ended June 30, 2023, respectively.

Amounts are included in general and administrative expense on the condensed consolidated statements of operations.

Current and deferred income tax benefits of $ 927 and $ 2,005 were recognized during the three and six months ended March 31, 2024, respectively, and $ 1,215 and $ 2,404 during the three and six months ended March 31, 2023, respectively.

Current and deferred income tax benefits for continuing operations of $ 703 and $ 2,416 were recognized during the three and nine months ended June 30, 2024, respectively, and $ 1,227 and $ 3,294 during the three and nine months ended June 30, 2023, respectively.

In May 2018, the Company adopted the 2018 Equity Incentive Plan (the “2018 Plan”) under which the Company may grant up to 3,500,000 stock options and other equity-based awards to employees, directors and officers.

The number of shares of Class A common stock available for issuance under the 2018 Plan includes an annual increase on the first day of each calendar year equal to 4.0 % of the outstanding shares of all classes of the Company's common stock as of the last day of the immediately preceding calendar year, unless the Company’s board of directors determines prior to the last trading day of December of the immediately preceding calendar year that the increase shall be less than 4.0 %.

As of March 31, 2024, equity awards with respect to 1,259,827 shares of the Company's Class A common stock were available for grant under the 2018 Plan.

As of June 30, 2024, equity awards with respect to 1,414,294 shares of the Company's Class A common stock were available for grant under the 2018 Plan.

In September 2020, the Company adopted the 2020 Acquisition Equity Incentive Plan (the “2020 Inducement Plan”) under which the Company may grant up to 1,500,000 stock options and other equity-based awards to individuals that were not previously employees of the Company or its subsidiaries in connection with acquisitions, as a material inducement to the individual's entry into employment with the Company or its subsidiaries within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.

In May 2021, the Company amended the 2020 Inducement Plan to increase the number of shares of the Company's Class A common stock available for issuance from 1,500,000 to 3,000,000 shares.

As of March 31, 2024, equity awards with respect to 1,230,668 shares of the Company's Class A common stock were available for grant under the 2020 Inducement Plan.

As of June 30, 2024, equity awards with respect to 1,348,698 shares of the Company's Class A common stock were available for grant under the 2020 Inducement Plan.

Share-based compensation expense includes the estimated effects of forfeitures, which will be adjusted over the requisite service period to the extent actual forfeitures differ or are expected to differ from such estimates.

2 unchanged sentences

(in thousands, except unit, share and per share amounts)

Stock Options

The Company has issued stock option awards under the 2018 Plan and the 2020 Inducement Plan.

The fair value of the stock option awards during the six months ended March 31, 2024 and during the year ended September 30, 2023 was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:

March 31, 2024 September 30, 2023

Expected volatility (1)

52.1 % 54.9 %

Expected dividend yield (2)

Expected term (3)

6 years 6 years

Risk-free interest rate (4)

_________________

Expected volatility is based on the Company's own share price.

The Company has assumed a dividend yield of zero as management has no plans to declare dividends in the foreseeable future.

Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method as details of employee exercise behavior are limited due to limited historical data.

The risk-free rate is an interpolation of yields on U.S.

Treasury securities with maturities equivalent to the expected term.

A summary of stock option activity for the six months ended March 31, 2024 is as follows:

A summary of stock option activity for the nine months ended June 30, 2024 is as follows:

Stock Options Weighted Average Exercise Price

3 unchanged sentences

Forfeited ( 303,458 ) 27.61

Outstanding at March 31, 2024 9,258,529 $ 24.52

Exercisable at March 31, 2024 6,602,597 $ 25.08

The weighted-average grant date fair value of stock options granted during the six months ended March 31, 2024 was $ 10.54 .

As of March 31, 2024, total unrecognized compensation expense related to unvested stock options, including an estimate for pre-vesting forfeitures, was $ 22,046 , which is expected to be recognized over a weighted-average period of 2.68 years.

Outstanding at June 30, 2024 9,172,514 $ 24.50

Exercisable at June 30, 2024 6,789,792 $ 25.20

The weighted-average grant date fair value of stock options granted during the nine months ended June 30, 2024 was $ 10.54 .

As of June 30, 2024, total unrecognized compensation expense related to unvested stock options, including an estimate for pre-vesting forfeitures, was $ 18,692 , which is expected to be recognized over a weighted-average period of 2.64 years.

The Company's policy is to account for forfeitures of stock-based compensation awards as they occur.

The total fair value of stock options that vested during the three and six months ended March 31, 2024 was $ 10,853 and 17,248 , respectively.

The total fair value of stock options that vested during the three and nine months ended June 30, 2024 was $ 4,078 and 21,326 , respectively.

In connection with the anticipated sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement, it is expected that the Company will fully accelerate the vesting period for 198,482 options (to the extent not previously vested) held by employees of the Merchant Services Business immediately prior to the closing of the Transactions pursuant to the Purchase Agreement.

Restricted Stock Units

The Company has issued Class A common stock in the form of restricted stock units ("RSUs") under the 2018 Plan.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

A summary of activity related to restricted stock units for the six months ended March 31, 2024 is as follows:

A summary of activity related to restricted stock units for the nine months ended June 30, 2024 is as follows:

Restricted Stock Units Weighted Average Grant Date Fair Value

3 unchanged sentences

Forfeited ( 48,735 ) 24.47

Outstanding at March 31, 2024 928,465 $ 23.24

As of March 31, 2024, total unrecognized compensation expense related to unvested RSUs, including an estimate for pre-vesting forfeitures, was $ 14,329 , which is expected to be recognized over a weighted average period of 3.01 years.

The total fair value of RSUs that vested during the three and six months ended March 31, 2024 was $ 3,718 and $ 4,416 , respectively.

COMMITMENTS AND CONTINGENCIES

The Company utilizes office space and equipment under operating leases.

Rent expense under these leases amounted to $ 1,359 and $ 2,737 during the three and six months ended March 31, 2024, respectively, and $ 1,480 and $ 3,019 during the and three and six months ended March 31, 2023, respectively.

Refer to Note 9 for further discussion and a table of the future minimum payments under these leases.

Minimum Processing Commitments

The Company has non-exclusive agreements with several processors to provide the Company services related to transaction processing and transmittal, transaction authorization and data capture, and access to various reporting tools.

Certain of these agreements require the Company to submit a minimum monthly number of transactions for processing.

If the Company submits a number of transactions that is lower than the minimum, it is required to pay to the processor the fees the processor would have received if the Company had submitted the required minimum number of transactions.

As of March 31, 2024, such minimum fee commitments were as follows:

Fiscal Years ending September 30:

2024 (six months remaining) $ 2,177

Total $ 3,205

Outstanding at June 30, 2024 923,464 $ 23.15

As of June 30, 2024, total unrecognized compensation expense related to unvested RSUs, including an estimate for pre-vesting forfeitures, was $ 13,308 , which is expected to be recognized over a weighted average period of 2.81 years.

The total fair value of RSUs that vested during the three and nine months ended June 30, 2024 was $ 144 and $ 4,560 , respectively.

i3 VERTICALS, Inc.

1 unchanged sentence

(in thousands, except unit, share and per share amounts)

In connection with the anticipated sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement, it is expected that, the Company will fully accelerate the vesting period for 173,480 RSUs (to the extent not previously vested) held by employees of the Merchant Services Business immediately prior to the closing of the Transactions pursuant to the Purchase Agreement.

COMMITMENTS AND CONTINGENCIES

The Company utilizes office space and equipment under operating leases.

Rent expense from continuing operations under these leases amounted to $ 1,039 and $ 3,116 during the three and nine months ended June 30, 2024, respectively, and $ 1,051 and $ 3,315 during the and three and nine months ended June 30, 2023, respectively.

Refer to Note 10 for further discussion and a table of the future minimum payments under these leases.

With respect to all legal, regulatory and governmental proceedings, and in accordance with ASC 450-20, Contingencies—Loss Contingencies , the Company considers the likelihood of a negative outcome.

16 unchanged sentences

The Petition was amended on October 4, 2021 to amend and expand the putative class and subsequently removed to the United States District Court for the Middle District of Louisiana.

The Petition seeks monetary damages for the cost of network remediation of $ 15,000 purportedly spent by the State and $ 7,000 purportedly spent by the Plaintiffs, return of purchase prices, potential additional expenses related to remediation and any obligation to notify parties of an alleged data breach as and if required by applicable law, and reasonable attorneys’ fees.

The Petition seeks monetary

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

damages for the cost of network remediation of $ 15,000 purportedly spent by the State and $ 7,000 purportedly spent by the Plaintiffs, return of purchase prices, potential additional expenses related to remediation and any obligation to notify parties of an alleged data breach as and if required by applicable law, and reasonable attorneys’ fees.

The claimed damages relate to a third-party remote access software product used in connection with services provided by S&S to certain Louisiana law enforcement districts and alleged inadequacies in the Company’s cybersecurity practices.

6 unchanged sentences

On September 29, 2023, all Defendants-Appellants filed a Petition for Rehearing En Banc, which the Plaintiffs-Appellees opposed on October 12, 2023.

As a result of Defendants’ petition, the Fifth Circuit held its mandate, effectively staying the effective date of its decision, but the Fifth Circuit

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

ultimately denied the petition for rehearing on February 22, 2024, sending the case back to the 19th Judicial District Court for the Parish of East Baton Rouge, where the case remains pending.

As a result of Defendants’ petition, the Fifth Circuit held its mandate, effectively staying the effective date of its decision, but the Fifth Circuit ultimately denied the petition for rehearing on February 22, 2024, sending the case back to the 19th Judicial District Court for the Parish of East Baton Rouge, where the case remains pending.

The assets of the S&S business were acquired from South Pointe by the Company in 2018 for $ 17,000 , including upfront cash consideration and contingent consideration, and provides software and payments services within the Company’s Public Sector vertical to local government agencies almost exclusively in Louisiana.

9 unchanged sentences

See Note 9 for further information.

As of March 31, 2024, the total amount due under the Tax Receivable Agreement was $ 40,323 .

The Company determines its operating segments based on ASC 280, Segment Reporting , in alignment with how the chief operating decision-making group monitors and manages the performance of the business as well as the level at which financial information is reviewed.

As of June 30, 2024, the total amount due under the Tax Receivable Agreement was $ 40,441 .

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

the level at which financial information is reviewed.

The Company’s operating segments are strategic business units that offer different products and services.

The Company's core business is delivering seamlessly integrated software and payment solutions customers in strategic vertical markets.

This is accomplished through the Merchant Services and Software and Services segments.

As noted above, the Company entered into the Purchase Agreement on June 26, 2024, which provides for the sale of the equity interests of the Acquired Entities comprising the Merchant Services Business, after giving effect to the Contribution.

As a result of the anticipated sale of the Merchant Services Business pursuant to the Purchase Agreement, certain assets and liabilities of the Merchant Services Business met the held for sale criteria and the disposal group also met the criteria for discontinued operations reporting as of June 30, 2024.

As such, 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 segment.

See Note 2 to our condensed consolidated financial statements for additional information.

After giving effect to these developments, the Company's core business for continuing operations is delivering seamlessly integrated software and payment solutions to customers in strategic vertical markets.

This is accomplished through the Software and Services segment.

The Software and Services segment delivers vertical market software solutions to customers across all of the Company's strategic vertical markets.

These solutions often include embedded payments or other recurring services.

The Merchant Services segment provides comprehensive payment solutions to businesses and organizations.

The Merchant Services segment includes third-party integrated payment solutions as well as traditional merchant processing services across the Company's strategic vertical markets.

The Other category includes corporate overhead expenses when presenting reportable segment information.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The Company primarily uses processing margin to measure operating performance.

Processing margin is equal to revenue less other cost of services plus residuals expense, which are a component of other cost of services.

The following is a summary of reportable segment operating performance for the three and six months ended March 31, 2024 and 2023.

As of and for the Three Months Ended March 31, 2024

Software and Services Merchant Services Other Total

Revenue $ 59,483 $ 35,075 $ ( 16 ) $ 94,542

Other costs of services ( 4,908 ) ( 16,289 ) 17 ( 21,180 )

Residuals 735 10,587 ( 6 ) 11,316

Processing margin $ 55,310 $ 29,373 $ ( 5 ) $ 84,678

Residuals ( 11,316 )

Selling, general and administrative ( 54,162 )

Depreciation and amortization ( 10,069 )

Change in fair value of contingent consideration 290

Income from operations $ 9,421

Total assets $ 593,219 $ 212,082 $ 60,241 $ 865,542

Goodwill $ 288,822 $ 121,950 $ — $ 410,772

As of and for the Six Months Ended March 31, 2024

Software and Services Merchant Services Other Total

Revenue $ 116,072 $ 70,497 $ ( 37 ) $ 186,532

Other costs of services ( 9,217 ) ( 32,423 ) 36 ( 41,604 )

Residuals 1,353 20,987 ( 15 ) 22,325

Processing margin $ 108,208 $ 59,061 $ ( 16 ) $ 167,253

Residuals ( 22,325 )

Selling, general and administrative ( 107,694 )

Depreciation and amortization ( 19,808 )

Change in fair value of contingent consideration 527

Income from operations $ 17,953

Total assets $ 593,219 $ 212,082 $ 60,241 $ 865,542

Goodwill $ 288,822 $ 121,950 $ — $ 410,772

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

As of and for the Three Months Ended March 31, 2023

Software and Services Merchant Services Other Total

Revenue $ 60,797 $ 33,094 $ ( 19 ) $ 93,872

Other costs of services ( 4,229 ) ( 15,719 ) 18 ( 19,930 )

Residuals 799 10,039 ( 9 ) 10,829

Processing Margin $ 57,367 $ 27,414 $ ( 10 ) $ 84,771

Residuals ( 10,829 )

Selling, general and administrative ( 57,204 )

Depreciation and amortization ( 9,015 )

Change in fair value of contingent consideration ( 2,279 )

Income from operations $ 5,444

Total assets $ 620,126 $ 205,898 $ 57,002 $ 883,026

Goodwill $ 287,092 $ 121,950 $ — $ 409,042

As of and for the Six Months Ended March 31, 2023

Software and Services Merchant Services Other Total

Revenue $ 114,010 $ 65,928 $ ( 37 ) $ 179,901

Other costs of services ( 7,752 ) ( 31,286 ) 39 ( 38,999 )

Residuals 1,322 19,848 ( 20 ) 21,150

Processing margin $ 107,580 $ 54,490 $ ( 18 ) $ 162,052

Residuals ( 21,150 )

Selling, general and administrative ( 108,207 )

Depreciation and amortization ( 17,691 )

Change in fair value of contingent consideration ( 3,722 )

Income from operations $ 11,282

Total assets $ 620,126 $ 205,898 $ 57,002 $ 883,026

Goodwill $ 287,092 $ 121,950 $ — $ 409,042

The Company has not disclosed expenditures on long-lived assets as such expenditures are not reviewed by or provided to the chief operating decision maker.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The Company's merchant services business previously represented a reportable segment prior to being reclassified, along with certain non-core assets within the Software and Services segment, as discontinued operations.

As a result of these developments, the Company's continuing operations represent only one reportable segment.

Therefore, the Company has not disclosed results from continuing operations or from discontinued operations by segment.

NON-CONTROLLING INTEREST

4 unchanged sentences

As such, future redemptions or direct exchanges of Common Units of i3 Verticals, LLC by the Continuing Equity Owners will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in capital when i3 Verticals, LLC has positive or negative net assets, respectively.

As of March 31, 2024 and 2023, respectively, i3 Verticals, Inc.

As of June 30, 2024 and 2023, respectively, i3 Verticals, Inc.

owned 23,442,698 and 23,193,447 of i3 Verticals, LLC's Common Units, representing a 70.0 % and 69.6 % economic ownership interest in i3 Verticals, LLC.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The following table summarizes the impact on equity due to changes in the Company's ownership interest in i3 Verticals, LLC:

Six Months Ended March 31,

Net income attributable to non-controlling interest

Nine Months Ended June 30,

Net income (loss) attributable to non-controlling interest

$ 1,155 $ ( 742 )

Transfers (from) to non-controlling interests:

Distributions to non-controlling interest holders ( 839 ) —

Redemption of common units in i3 Verticals, LLC ( 576 ) ( 86 )

7 unchanged sentences

by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the three and six months ended March 31, 2024 and 2023:

Three Months Ended March 31, Six Months Ended March 31,

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock from continuing operations for the three and nine months ended June 30, 2024 and 2023:

Three Months Ended June 30, Nine Months Ended June 30,

2024 2023 2024 2023

Basic net income (loss) per share:

Net income (loss)

Basic and diluted net loss per share:

Net loss $ ( 13,846 ) $ ( 10,918 ) $ ( 20,364 ) $ ( 22,443 )

Net loss attributable to non-controlling interest

( 2,416 ) ( 2,392 ) ( 3,944 ) ( 5,702 )

Net income (loss) attributable to non-controlling interest

Net loss attributable to Class A common stockholders $ ( 11,430 ) $ ( 8,526 ) $ ( 16,420 ) $ ( 16,741 )

Weighted average shares of Class A common stock outstanding

23,420,811 23,179,638 23,339,598 23,104,212

Net income (loss) attributable to Class A common stockholders

Basic and diluted net loss per share (1)

$ ( 0.49 ) $ ( 0.37 ) $ ( 0.70 ) $ ( 0.72 )

Weighted average shares of Class A common stock outstanding

__________________________

Basic net income (loss) per share (1)

For the three and nine months ended June 30, 2024 and 2023, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share.

The following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net loss per share of Class A common stock:

10,052,017 and 10,079,057 weighted average shares of Class B common stock for the three and nine months ended June 30, 2024, respectively, and 10,108,218 and 10,112,471 weighted average shares of Class B common stock for the three and nine months ended June 30, 2023, respectively, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive.

7,764,984 and 7,981,615 stock options for the three and nine months ended June 30, 2024, respectively, and 5,729,321 and 5,673,655 stock options for the three and nine months ended June 30, 2023, respectively, were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive, and

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

234,503 and 363,171 shares for the three and nine months ended June 30, 2024, respectively, and 557,728 and 740,196 shares for the three and nine months ended June 30, 2023, respectively, resulting from estimated stock option exercises and restricted stock units vesting as calculated by the treasury stock method were excluded because of the effect of including them would have been anti-dilutive.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock from discontinued operations for the three and nine months ended June 30, 2024 and 2023:

Three Months Ended June 30, Nine Months Ended June 30,

2024 2023 2024 2023

Basic net income per share:

Net income $ 5,548 $ 4,840 $ 16,950 $ 16,342

Net income attributable to non-controlling interest 1,663 1,469 5,099 4,960

Net income attributable to Class A common stockholders $ 3,885 $ 3,371 $ 11,851 $ 11,382

Weighted average shares of Class A common stock outstanding

23,420,811 23,179,638 23,339,598 23,104,212

Basic net income per share $ 0.17 $ 0.15 $ 0.51 $ 0.49

Diluted net income per share:

Net income attributable to Class A common stockholders $ 3,885 $ 3,371 $ 11,851 $ 11,382

Reallocation of net loss assuming conversion of common units (2)(3)

Net income (loss) attributable to Class A common stockholders - diluted

Reallocation of net income assuming conversion of common units (1)

1,256 1,103 3,852 3,724

Net income attributable to Class A common stockholders - diluted 5,141 4,474 15,703 15,106

Weighted average shares of Class A common stock outstanding

4 unchanged sentences

33,707,331 33,845,584 33,781,826 33,956,879

Diluted net income (loss) per share $ 0.08 $ 0.00 $ 0.13

Diluted net income per share $ 0.15 $ 0.13 $ 0.46 $ 0.44

__________________________

For the six months ended March 31, 2023, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share.

The reallocation of net income assuming conversion of common units represents the tax effected net income attributable to non-controlling interest using the effective income tax rates described in Note 9 above and assuming all common units of i3 Verticals, LLC were exchanged for Class A common stock at the beginning of the period.

The common units of i3 Verticals, LLC held by the Continuing Equity Owners are potentially dilutive securities, and the computations of pro forma diluted net income per share assume that all common units of i3 Verticals, LLC were exchanged for shares of Class A common stock at the beginning of the period.

For the three and nine months ended June 30, 2024 and 2023, the following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net income per share of Class A common stock:

7,764,984 and 7,981,615 stock options for the three and nine months ended June 30, 2024, respectively, and 5,729,321 and 5,673,655 stock options for the three and nine months ended June 30, 2023, were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock from the consolidated operations for three and nine months ended June 30, 2024 and 2023:

Three Months Ended June 30, Nine Months Ended June 30,

2024 2023 2024 2023

Basic and diluted net loss per share:

Net loss $ ( 8,298 ) $ ( 6,078 ) $ ( 3,414 ) $ ( 6,101 )

Net loss attributable to non-controlling interest

( 753 ) ( 923 ) 1,155 ( 742 )

Net loss attributable to Class A common stockholders $ ( 7,545 ) $ ( 5,155 ) $ ( 4,569 ) $ ( 5,359 )

Weighted average shares of Class A common stock outstanding

23,420,811 23,179,638 23,339,598 23,104,212

Basic and diluted net loss per share (1)

$ ( 0.32 ) $ ( 0.22 ) $ ( 0.20 ) $ ( 0.23 )

__________________________

For the three and nine months ended June 30, 2024 and 2023, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share.

The following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net loss per share of Class A common stock:

10,114,598 weighted average shares of Class B common stock for the six months ended March 31, 2023, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive.

5,165,478 stock options for the six months ended March 31, 2023, were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive, and

633,453 shares for the six months ended March 31, 2023, resulting from estimated stock option exercises and restricted stock units vesting as calculated by the treasury stock method were excluded because of the effect of including them would have been anti-dilutive.

i3 VERTICALS, Inc.

1 unchanged sentence

(in thousands, except unit, share and per share amounts)

For the three and six months ended March 31, 2024 and the three months ended March 31, 2023, the following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net income per share of Class A common stock:

10,091,604 and 10,092,504 weighted average shares of Class B common stock for the three and six months ended March 31, 2024, respectively, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive, and

7,852,595 and 8,246,542 stock options for the three and six months ended March 31, 2024, respectively, and 4,018,042 stock options for the three months ended March 31, 2023, were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive.

The reallocation of net income assuming conversion of common units represents the tax effected net income attributable to non-controlling interest using the effective income tax rates described in Note 8 above and assuming all common units of i3 Verticals, LLC were exchanged for Class A common stock at the beginning of the period.

In September 2022 the Company made the irrevocable election to settle the principal portion of its Exchangeable Notes only in cash, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable.

The conversion spread will have a dilutive impact on diluted net income per share of common stock when the average market price of the Company's Class A common stock for a given period exceeds the exchange price of $ 40.87 per share for the Exchangeable Notes.

The conversion spread will have a dilutive impact on diluted net loss per share of common stock when the average market price of the Company's Class A common stock for a given period exceeds the exchange price of $ 40.87 per share for the Exchangeable Notes.

The Warrants sold in connection with the issuance of the Exchangeable Notes are considered to be dilutive when the average price of the Company's Class A common stock during the period exceeds the Warrants' stock price of $ 62.88 per share.

5 unchanged sentences

SIGNIFICANT NON-CASH TRANSACTIONS

The Company engaged in the following significant non-cash investing and financing activities during the six months ended March 31, 2024 and 2023:

Six months ended March 31,

The Company engaged in the following significant non-cash investing and financing activities related to continuing operations during the nine months ended June 30, 2024 and 2023:

Nine months ended June 30,

Acquisition date fair value of contingent consideration in connection with business combinations $ 170 $ 760

Replacement of the Prior Senior Secured Credit Facility with the 2023 Senior Secured Credit Facility $ — $ 284,000

Debt issuance costs financed with proceeds from the 2023 Senior Secured Credit Facility $ — $ 2,386

Consideration accrued for residual buyouts $ 252 $ —

Accrued interest financed with proceeds from the 2023 Senior Secured Credit Facility $ — $ 1,617

Right-of-use assets obtained in exchange for operating lease obligations $ 538 $ 917

SUBSEQUENT EVENTS

Acquisition of a Business

On August 1, 2024, the Company completed an acquisition of a business that will expand the Company's permitting and licensing software offerings in the Public Sector vertical within the Software and Services segment.

Purchase consideration for the business included $ 18,000 in cash funded by proceeds from the Company's revolving credit facility, the issuance of 311,634 shares of the Company's Class A common stock in a private placement, and an amount of contingent consideration as more specifically described below.

Certain provisions in the purchase agreement provide for additional consideration of up to $ 22,000 , 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.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

subsequent reporting period, the Company will reassess its current estimates of performance relative to the targets and adjust the contingent liabilities to their fair values through earnings.

The effect of the acquisition will be included in the condensed consolidated statements of operations beginning August 1, 2024.

The Company is still evaluating the allocations of the preliminary purchase consideration and pro forma results of operations.

Share Repurchase Program

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.

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 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements