What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-11-25 compared with 2023-11-22 · 791 added, 472 removed, 992 unchanged (56% of the section changed)

12 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of i3 Verticals, Inc., and subsidiaries (the “Company”) as of September 30, 2023 and 2022, the related consolidated statements of operations, changes in equity, and cash flows, for each of the three years in the period ended September 30, 2023, and the related notes to the consolidated financial statements (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of i3 Verticals, Inc.

and subsidiaries (the “Company”) as of September 30, 2024 and 2023, the related consolidated statements of operations, changes in equity, and cash flows, for each of the three years in the period ended September 30, 2024, and the related notes to the consolidated financial statements (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2024, in conformity with accounting principles generally accepted in the United States of America .

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 25, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

2 unchanged sentences

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

2023 Business Combinations - Purchase of Celtic Cross Holdings, Inc.

and Celtic Systems Pvt.

-- Refer to Note 4 to the Financial Statements

Revenue Recognition for Software and Related Services Contracts – Refer to Note 3 to the Financial Statements

Critical Audit Matter Description

The Company completed the acquisition of Celtic Cross Holdings, Inc.

and Celtic Systems Pvt.

(collectively “Celtic”), for $85 million in cash consideration during the year ended September 30, 2023.

The Company allocated the purchase price between tangible and intangible assets acquired and liabilities assumed based on estimated fair values, with any residual of the purchase price recorded as goodwill.

The provisional fair values assigned to the customer relationships and capitalized software were $33.8 million and $12.6 million, respectively.

Management estimated the fair value of the customer relationships using the Income Approach and estimated the fair value of the capitalized software using the Relief from Royalty Method.

We identified the fair values of the customer relationships and capitalized software acquired as a critical audit matter because of the significant judgments, estimates and assumptions made by management to estimate their fair values.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of the estimates used to develop the fair values of these intangible assets.

The Company offers software and related services to customers, and arrangements related to such revenue may contain multiple performance obligations such as software as a service, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to the software offerings.

The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services.

The revenue recognition accounting conclusions for software and related services contracts require significant judgment in the areas of:

• For agreements that include multiple performance obligations, assessing whether performance obligations are distinct or should be combined.

• Evaluating whether performance obligations will be satisfied at a point-in-time versus over-time.

• Allocation of the transaction price at inception of the arrangement to multiple performance obligations.

We identified revenue recognition for significant software and related services contracts entered into during fiscal year 2024 as a critical audit matter because of these significant judgments applied by management.

This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate whether revenue was recognized to depict the transfer of promised goods or services to customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to testing the key valuation assumptions and business assumptions used to estimate the fair values of the acquired customer relationships and capitalized software included the following, among others:

• We tested the operating effectiveness of controls over management's purchase price allocation, including those over the determination of the fair values of the customer relationships and capitalized software.

• We evaluated the reasonableness of key business assumptions used in the valuation models by comparing these assumptions to historical results, current-year results, certain peer companies’ results, and industry data.

• With the assistance of our fair value specialists, we evaluated the valuation methodologies, the reasonableness of key valuation assumptions, and tested the mathematical accuracy of the calculations.

Our audit procedures related to the Company’s revenue recognition for significant software and related services contracts entered into during fiscal year 2024 include the following, among others:

• We tested the operating effectiveness of controls related to the identification of distinct performance obligations, determination of whether such performance obligations are satisfied over time or at a point in time, and allocation of the standalone selling prices.

• We evaluated management’s significant accounting policies related to revenue recognition for reasonableness.

• We selected a sample of contracts and performed the following procedures:

◦ Obtained and examined customer source documents and the contract for each selection, including master agreements and related amendments to evaluate if relevant contractual terms have been considered by management.

◦ Sent confirmations to customers regarding key contract terms that impact revenue recognition.

◦ Evaluated management’s application of their accounting policy and testing revenue recognition for specific performance obligations by comparing management’s conclusions to the underlying contract, master agreement, and any related amendments, if applicable.

◦ Evaluated management’s conclusions related to whether performance obligations are satisfied at a point in time or over time.

◦ Tested the mathematical accuracy of management’s calculations of revenue recognized in the financial statements.

◦ Evaluated the reasonableness of management’s estimate of standalone selling prices for products and services that are not sold separately by performing the following:

▪ Assessing the appropriateness of the Company’s methodology and mathematical accuracy of the determined standalone selling prices.

▪ Testing the completeness and accuracy of the source data utilized in management’s calculations.

/s/ Deloitte & Touche LLP

11 unchanged sentences

Prepaid expenses and other current assets 10,232 9,512

Current assets held for sale — 17,269

Total current assets 153,393 85,544

7 unchanged sentences

Other assets (1)

Long-term assets held for sale — 219,354

Total assets $ 730,675 $ 884,417

2 unchanged sentences

Accounts payable $ 5,370 $ 6,369

Current portion of long-term debt 26,223 —

Accrued expenses and other current liabilities 89,972 33,580

2 unchanged sentences

Current portion of operating lease liabilities 3,505 3,657

Current liabilities held for sale — 12,197

Total current liabilities 164,731 93,461

3 unchanged sentences

Other long-term liabilities 14,921 23,078

Long-term liabilities held for sale — 2,530

Total liabilities 215,316 556,121

8 unchanged sentences

Additional paid-in-capital 279,335 249,688

Accumulated deficit ( 12,944 ) ( 23,582 )

Accumulated earnings (deficit) 100,397 ( 12,944 )

Total stockholders' equity 379,735 236,747

2 unchanged sentences

Total liabilities and equity $ 730,675 $ 884,417

_________________________________________

Refer to Note 3 for discussion of the change in the current period presentation.

See Notes to the Consolidated Financial Statements

14 unchanged sentences

Interest expense, net 29,263 25,128 14,775

Other expense (income) 1,436 991 ( 2,595 )

Other (income) expense ( 3,395 ) ( 1,224 ) 991

Total other expenses 25,868 23,904 15,766

1 unchanged sentence

(Benefit from) provision for income taxes ( 5,668 ) ( 3,788 ) 152

Net loss ( 2,652 ) ( 23,217 ) ( 7,839 )

Net loss attributable to non-controlling interest ( 1,841 ) ( 6,115 ) ( 3,382 )

Net loss attributable to i3 Verticals, Inc.

Net loss from continuing operations ( 13,346 ) ( 23,685 ) ( 39,059 )

Net income from discontinued operations, net of income taxes 188,476 21,033 15,842

Net income (loss) 175,130 ( 2,652 ) ( 23,217 )

Net loss from continuing operations attributable to non-controlling interest ( 4,424 ) ( 7,863 ) ( 11,828 )

Net income from discontinued operations attributable to non-controlling interest 66,213 6,022 5,713

Net income (loss) attributable to non-controlling interest 61,789 ( 1,841 ) ( 6,115 )

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

( 8,922 ) ( 15,822 ) ( 27,231 )

Net loss per share attributable to Class A common stockholders:

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

122,263 15,011 10,129

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

$ 113,341 $ ( 811 ) $ ( 17,102 )

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

Basic $ ( 0.38 ) $ ( 0.68 ) $ ( 1.22 )

Diluted $ ( 0.38 ) $ ( 0.68 ) $ ( 1.22 )

Weighted average shares of Class A common stock outstanding:

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

Basic $ 5.22 $ 0.65 $ 0.46

Diluted $ 5.09 $ 0.58 $ 0.44

Weighted average shares of Class A common stock outstanding:

Basic for continuing operations 23,419,421 23,137,586 22,249,656

Diluted for continuing operations 23,419,421 23,137,586 22,249,656

Basic, for discontinued operations 23,419,421 23,137,586 22,249,656

Diluted, for discontinued operations 33,879,163 33,970,731 33,100,182

See Notes to the Consolidated Financial Statements

8 unchanged sentences

Redemption of common units in i3 Verticals, LLC 111,000 — ( 111,000 ) — 918 — ( 918 ) —

Sale of Class A common stock, net 722,000 — — — 17,869 — — 17,869

Capitalization of public offering costs — — — — ( 440 ) — — ( 440 )

Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — ( 2,554 ) — — ( 2,554 )

1 unchanged sentence

Allocation of equity to non-controlling interests — — — — ( 11,511 ) — 11,511 —

Issuance of Class A common stock under the 2020 Inducement Plan 1,202,914 — — — 35,245 — — 35,245

Balance at September 30, 2022 22,986,448 2 10,118,142 1 241,958 ( 23,582 ) 89,309 307,688

Adoption of ASU 2020-06 — — — — ( 23,382 ) 11,449 ( 11,933 )

Equity-based compensation — — — — 27,878 — — 27,878

1 unchanged sentence

Redemption of common units in i3 Verticals, LLC 24,748 — ( 24,748 ) — 224 — ( 224 ) —

Sale of Class A common stock, net 722,000 — — — 17,869 — — 17,869

Capitalization of public offering costs — — — — ( 440 ) — — ( 440 )

Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — 6,407 — — 6,407

Exercise of equity-based awards 127,350 — — — 209 — — 209

Exercise or release of equity-based awards 159,906 — — — ( 1,092 ) — — ( 1,092 )

Allocation of equity to non-controlling interests — — — — ( 4,305 ) — 4,305 —

Issuance of Class A common stock under the 2020 Inducement Plan 82,170 — — — 2,000 — — 2,000

Balance at September 30, 2023 23,253,272 $ 2 10,093,394 $ 1 $ 249,688 $ ( 12,944 ) $ 91,549 $ 328,296

6 unchanged sentences

Balance at September 30, 2023 23,253,272 $ 2 10,093,394 $ 1 $ 249,688 $ ( 12,944 ) $ 91,549 $ 328,296

Adoption of ASU 2020-06 — — — — ( 23,382 ) 11,449 ( 11,933 )

Equity-based compensation — — — — 26,338 — — 26,338

Net loss — — — — — ( 811 ) ( 1,841 ) ( 2,652 )

Net income — — — — — 113,341 61,789 175,130

Distributions to non-controlling interest holders — — — — — — ( 25,608 ) ( 25,608 )

Redemption of common units in i3 Verticals, LLC 60,718 — ( 60,718 ) — 576 — ( 576 ) —

Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — 3,543 — — 3,543

Exercise of equity-based awards 159,906 — — — ( 1,092 ) — — ( 1,092 )

Exercise or release of equity-based awards 256,411 — — — ( 683 ) — — ( 683 )

Sale of exchangeable note hedges — — — — 1,483 — — 1,483

Repurchases of warrants — — — — ( 657 ) — — ( 657 )

Allocation of equity to non-controlling interests — — — — ( 8,470 ) — 8,470 —

7 unchanged sentences

Cash flows from operating activities:

Net loss $ ( 2,652 ) $ ( 23,217 ) $ ( 7,839 )

Net income (loss) $ 175,130 $ ( 2,652 ) $ ( 23,217 )

Adjustments to reconcile net loss to net cash provided by operating activities:

2 unchanged sentences

Amortization of debt discount and issuance costs 1,175 1,514 5,795

Gain on repurchase of exchangeable notes ( 2,397 ) — —

Loss on sale of exchangeable senior note hedges 245 — —

Gain on repurchases of warrants ( 105 ) — —

Net gain on sale of investments — ( 295 ) —

Gain on sale of Merchant Services Business ( 205,576 ) — —

Write down of intangible asset — 2,660 —

(Benefit from) Provision for deferred income taxes ( 5,935 ) 2,588 ( 287 )

Provision for (Benefit from) deferred income taxes 434 ( 5,935 ) 2,588

Non-cash lease expense 4,471 4,683 4,922

Other non-cash adjustments to net income 1,346 1,546 1,131

Increase in non-cash contingent consideration expense from original estimate 10,781 23,725 7,140

(Decrease) Increase in non-cash contingent consideration expense from original estimate ( 690 ) 10,781 23,725

Changes in operating assets:

6 unchanged sentences

Acquisition escrow obligations ( 1,791 ) ( 8,319 ) 3,218

Settlement obligations ( 2,667 ) 2,087 ( 2,241 )

Deferred revenue 2,026 ( 1,319 ) 2,041

5 unchanged sentences

Expenditures for property and equipment ( 2,964 ) ( 4,204 ) ( 2,268 )

Proceeds from sale of property and equipment 618 — —

Expenditures for capitalized software ( 11,996 ) ( 12,171 ) ( 10,167 )

1 unchanged sentence

Acquisitions of businesses, net of cash acquired ( 19,100 ) ( 101,998 ) ( 100,715 )

Proceeds from sale of Merchant Services Business, net of cash sold 435,058 — —

Payments for other investing activities ( 94 ) ( 1,251 ) ( 443 )

Proceeds from investments — 295 600

Net cash used in investing activities ( 121,520 ) ( 113,045 ) ( 149,306 )

Net cash provided by (used in) investing activities 396,150 ( 121,520 ) ( 113,045 )

See Notes to the Consolidated Financial Statements

6 unchanged sentences

Payments on revolving credit facility ( 659,458 ) ( 281,534 ) ( 255,100 )

Payments for repurchase of exchangeable notes ( 87,840 ) — —

Proceeds from sale of exchangeable senior note hedges 1,238 — —

Payments for repurchases of warrants ( 552 ) — —

Payments of debt issuance costs ( 930 ) ( 694 ) —

Proceeds from issuance of Class A common stock, net of underwriting discounts and offering costs — — 17,692

Payments of equity issuance costs — — ( 253 )

Net payments for settlement obligations (1)

( 4,241 ) ( 2,667 ) 2,087

Cash paid for contingent consideration ( 760 ) ( 6,832 ) ( 25,330 )

Payments for required distributions to members for tax obligations ( 1,088 ) — —

Proceeds from stock option exercises 25 180 694

Payments for employee's tax withholdings from net settled stock option exercises ( 708 ) ( 490 ) ( 643 )

Net cash provided by financing activities 75,652 73,033 102,103

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 11,365 ) 5,834 ( 2,670 )

Net cash (used in) provided by financing activities ( 367,362 ) 72,985 75,120

Net increase (decrease) in cash, cash equivalents, and restricted cash 77,197 ( 11,365 ) 5,834

Cash, cash equivalents, and restricted cash at beginning of period 12,400 23,765 17,931

3 unchanged sentences

Cash paid for income taxes $ 7,330 $ 3,236 $ 1,079

_________________________________________

Refer to Note 3 for discussion of the change in the current period presentation.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets to that shown in the Consolidated Statements of Cash Flows:

19 unchanged sentences

The Company was formed for the purpose of completing an initial public offering (“IPO”) of its Class A common stock and other related transactions in order to carry on the business of i3 Verticals, LLC and its subsidiaries.

i3 Verticals, LLC was founded in 2012 and delivers seamlessly integrated software and payment solutions to customers in strategic vertical markets.

i3 Verticals, LLC was founded in 2012 and delivers seamlessly software solutions integrated with our proprietary payment facilitator platform to customers in strategic vertical markets.

The Company’s headquarters are in located Nashville, Tennessee, with operations throughout the United States.

13 unchanged sentences

As the Reorganization Transactions are considered transactions between entities under common control, the financial statements retroactively reflect the accounts of i3 Verticals, LLC for periods prior to the IPO and Reorganization Transactions.

The Continuing Equity Owners who own Common Units in i3 Verticals, LLC may redeem at each of their options (subject in certain circumstances to time-based vesting requirements) their Common Units for, at the election of i3 Verticals, LLC, cash or newly-issued shares of the Company's Class A common stock.

The Continuing Equity Owners who own Common Units in i3 Verticals, LLC may redeem at each of their options their Common Units for, at the election of i3 Verticals, LLC, cash or newly-issued shares of the Company's Class A common stock.

As of September 30, 2024, i3 Verticals, Inc.

3 unchanged sentences

At-the-Market Program

On August 20, 2021, the Company, together with i3 Verticals, LLC, entered into an at-the-market offering sales agreement with Raymond James & Associates, Inc., Morgan Stanley & Co.

LLC and BTIG, LLC (each a “Sales Agent”), under which the Company may issue and sell, from time to time and through the Sales Agents, shares of the Company's Class A common stock having an aggregate offering price of up to $ 125,000 (the “ATM Program”).

On August 20, 2021, the Company, together with i3 Verticals, LLC, entered into an at-the-market offering sales agreement (the "Sales Agreement") with Raymond James & Associates, Inc., Morgan Stanley & Co.

LLC and BTIG, LLC (each a “Sales Agent”), under which the Company could issue and sell, from time to time and through the Sales Agents, shares of the Company's Class A common stock having an aggregate offering price of up to $ 125,000 (the “ATM Program”).

During the quarter and year ended September 30, 2024, the Company did no t sell any Class A common stock under the ATM Program.

During the quarter and year ended September 30, 2023, the Company sold 722,000 shares of Class A common stock, raising $ 17,869 in net proceeds under the ATM Program.

The aggregate compensation paid by the Company to the Sales Agents with respect to such sales was $ 440 .

As of September 30, 2023, the Company had remaining capacity to sell up to $ 107,131 of our Class A common stock

The aggregate compensation paid by the Company to the Sales Agents with respect to such sales

i3 VERTICALS, Inc.

1 unchanged sentence

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

under the ATM Program.

During the three months ended September 30, 2024, the Company terminated the Sales Agreement pursuant to which the ATM Program had been operated.

DISCONTINUED OPERATIONS

During the year ended September 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 September 20, 2024, i3 Verticals, LLC, and i3 Holdings Sub, Inc., a wholly-owned subsidiary of i3 Verticals, LLC (“Corporation Seller,” and collectively with i3 Verticals, LLC, the “Sellers”) completed the transactions (such closing, the “Closing”) contemplated by that certain Securities Purchase Agreement dated as of June 26, 2024 (the “Purchase Agreement”), by and among i3 Verticals, LLC, Corporation Seller, the Company (solely for the purpose of providing a guaranty of the obligations of Sellers as set forth in the Purchase Agreement), Payroc Buyer, LLC (“Buyer”), and Payroc WorldAccess, LLC (solely for the purpose of providing a guaranty of the obligations of Buyer as set forth in the Purchase Agreement).

Pursuant to the terms of the Purchase Agreement, the Sellers sold to Buyer the equity interests of certain direct and indirect wholly-owned subsidiaries of Sellers (the “Acquired Entities”) primarily comprising the Company’s merchant services business, including its associated proprietary technology (the “Merchant Services Business”), after giving effect to the contribution of certain assets and the assignment of certain liabilities associated with the Business from i3 Verticals, LLC and certain affiliates to the Acquired Entities pursuant to a contribution agreement which was entered into immediately prior to the Closing (collectively, the "Transactions").

Pursuant to the terms of the Purchase Agreement, Buyer paid to Sellers an aggregate purchase price of approximately $ 438 million (after giving effect to estimated net working capital, indebtedness and cash adjustments), payable in cash at the Closing, subject to post-closing purchase price adjustments.

The Merchant Services Business comprised the Company's entire former Merchant Services segment and a small portion of the Company's former Software and Services segment.

In connection with the closing of the Transactions, the Company entered 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 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 year ended September 30, 2024 that were not considered incremental direct costs to transact the sale, 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.

The expenses are reflected within selling, general and administrative expenses within the Company's consolidated statements of operations.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

September 30,

Current assets

Cash and cash equivalents $ 7

Accounts receivable, net 14,325

Prepaid expenses and other current assets 2,937

Current assets held for sale 17,269

Property and equipment, net 2,249

Restricted cash 200

Capitalized software, net 4,520

Goodwill 141,580

Intangible assets, net 63,803

Operating lease right-of-use assets 2,107

Other assets 4,895

Long-term assets held for sale 219,354

Total assets $ 236,623

Liabilities and equity

Current liabilities

Accounts payable $ 4,695

Accrued expenses and other current liabilities 4,160

Deferred revenue 2,490

Current portion of operating lease liabilities 852

Current liabilities held for sale 12,197

Operating lease liabilities, less current portion 1,465

Other long-term liabilities 1,065

Long-term liabilities held for sale 2,530

Total liabilities $ 14,727

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 years ended September 30, 2024, 2023 and 2022:

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Year ended September 30,

2024 2023 2022

Revenue $ 145,907 $ 143,517 $ 130,110

Operating expenses

Other costs of services 67,122 65,197 60,533

Selling, general and administrative 45,880 42,005 37,124

Depreciation and amortization 8,649 10,023 10,094

Change in fair value of contingent consideration — 14 1,662

Total operating expenses 121,651 117,239 109,413

Income from operations 24,256 26,278 20,697

Other (income) expenses

Interest expense, net 43 — —

Other (income) expense (including gain on disposal of $ 205,576 in the year ended September 30, 2024)

( 205,576 ) 2,660 —

Total other (income) expenses ( 205,533 ) 2,660 —

Income become income taxes from discontinued operations 229,789 23,618 20,697

Provision for income taxes 41,313 2,585 4,855

Net income from discontinued operations 188,476 21,033 15,842

Net income from discontinued operations attributable to non-controlling interest 66,213 6,022 5,713

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

$ 122,263 $ 15,011 $ 10,129

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

Year ended September 30,

2024 2023 2022

Depreciation and amortization $ 8,649 $ 10,023 $ 10,094

Equity-based compensation 8,160 4,155 3,575

Provision for doubtful accounts 26 ( 19 ) 276

Amortization of capitalized customer acquisition costs 873 746 674

Write down of intangible asset

Provision for deferred income taxes 32 378 564

Non-cash lease expense 802 1,032 1,038

Contingent consideration paid in excess of original estimates — ( 3,211 ) ( 962 )

Expenditures for property and equipment ( 705 ) ( 1,540 ) ( 838 )

Expenditures for capitalized software ( 957 ) ( 1,612 ) ( 1,776 )

Purchases of merchant portfolios and residual buyouts ( 5,372 ) ( 2,191 ) ( 52 )

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

Acquisition of other intangibles ( 11 ) ( 420 ) —

Proceeds from sale of Merchant Services Business, net of cash sold 435,058 — —

Cash paid for contingent consideration — — ( 4,790 )

The following table presents significant non-cash investing and financing activities for major captions on the consolidated financial statements:

Year ended September 30,

2024 2023 2022

Residual buyouts financed through principal and interest forgiveness of a loan — 5,860 —

Right-of-use assets obtained in exchange for operating lease obligations 1,741 785 935

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 unchanged sentences

Certain prior period amounts have been reclassified to conform to the current period presentation within the consolidated statements of cash flows.

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 consolidated statements of operations.

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

Refer to Note 2 for additional information.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Change in presentation of cash flows associated with "Settlement obligations"

During the second quarter of 2024, the Company elected to change its presentation of cash flows associated with "Settlement obligations" from operating activities to financing actives within the Consolidated Statements of Cash Flows.

Comparative amounts have been reclassified to conform to the current period presentation.

This change has no impact on the Consolidated Balance Sheet, Consolidated Statements of Operations or Consolidated Statement of Changes in Equity.

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

For the year ended September 30, 2023

As Previously Reported Adjustment As Adjusted

Cash flows from operating activities:

Settlement obligations ( 2,667 ) 2,667 —

Net cash provided by operating activities 34,503 2,667 37,170

Cash flows from financing activities:

Net payments for settlement obligations — ( 2,667 ) ( 2,667 )

Net cash provided by financing activities 75,652 ( 2,667 ) 72,985

For the year ended September 30, 2022

As Previously Reported Adjustment As Adjusted

Cash flows from operating activities:

Settlement obligations 2,087 ( 2,087 ) —

Net cash provided by operating activities 45,846 ( 2,087 ) 43,759

Cash flows from financing activities:

Net proceeds from settlement obligations — 2,087 2,087

Net cash provided by financing activities 73,033 2,087 75,120

Change in presentation of debt issuance costs related to the 2023 Senior Secured Credit Facility

During the fourth quarter of 2024, the Company elected to change its presentation of debt issuance costs associated with the revolver pursuant to the 2023 Senior Secured Credit Facility to an asset rather than a reduction in the related liability as the previously drawn amounts on the 2023 Senior Secured Credit Facility were repaid upon the closing of the sale of the Merchant Services Business.

Comparative amounts have been reclassified to conform to the current period presentation.

This change has no impact on the Consolidated

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Statements of Operations, Consolidated Statement of Changes in Equity or Consolidated Statements of Cash Flows.

The following tables present the effects of the change in presentation within the Consolidated Balance Sheets:

September 30, 2023

As Previously Reported Adjustment As Adjusted

Other assets 8,803 2,924 11,727

Total assets 881,493 2,924 884,417

Long-term debt, less current portion and debt issuance costs, net 385,081 2,924 388,005

Total liabilities 553,197 2,924 556,121

Total liabilities and equity 881,493 2,924 884,417

Principles of Consolidation

6 unchanged sentences

Restricted Cash

Restricted cash represents funds held in escrow related to acquisitions or held-on-deposit with processing banks pursuant to agreements to cover potential merchant losses.

Restricted cash represents funds held in escrow related to acquisitions or held-on-deposit with our processing bank pursuant to agreements to cover potential merchant losses.

It is presented as long-term assets on the accompanying consolidated balance sheets since the related agreements extend beyond the next twelve months.

1 unchanged sentence

Restricted Cash (Topic 230), the Company includes restricted cash along with the cash and cash equivalents balance for presentation in the consolidated statements of cash flows.

Settlement Assets and Obligations

Settlement assets and obligations result when funds are temporarily held or owed by the Company on behalf of merchants, consumers, schools, and other institutions.

Timing differences, interchange expenses, merchant reserves and exceptional items cause differences between the amount received from the card networks and the amount funded to counterparties.

These balances arising in the settlement process are reflected as settlement assets and obligations on the accompanying consolidated balance sheets.

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 $ 632 as of September 30, 2024 and $ 4,873 as of September 30, 2023, respectively.

Accounts Receivable and Credit Policies

Accounts receivable consist primarily of uncollateralized credit card processing residual payments due from processing banks requiring payment within thirty days following the end of each month.

Accounts receivable also include amounts due from the sales of the Company’s technology solutions to its customers.

The carrying amount of accounts receivable is reduced by an allowance for doubtful accounts, if necessary, which reflects management’s best estimate of the amounts that will not be collected.

Accounts receivable include amounts due from the sales of the Company’s technology solutions to its customers.

The carrying amount of accounts receivable is reduced by an allowance for doubtful accounts, if

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

necessary, which reflects management’s best estimate of the amounts that will not be collected.

The allowance is estimated based on management’s knowledge of its customers, historical loss experience and existing economic conditions.

2 unchanged sentences

however, actual write-offs may exceed estimated amounts.

In connection with the sale of the Merchant Services Business, $ 200 at September 30, 2023 of the Company's allowance for doubtful were classified as "Current assets held for sale" in the accompanying consolidated balance sheets and were not included in these amounts.

Settlement Assets and Obligations

4 unchanged sentences

Settlement assets and settlement obligations were $ 632 as of September 30, 2024 and $ 4,873 as of September 30, 2023.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 $ 2,423 and $ 2,038 at September 30, 2024 and 2023, respectively, and are included within prepaid expenses and other current assets on the accompanying consolidated balance sheets.

In connection with the sale of the Merchant Services Business, $ 2,100 at September 30, 2023 of the Company's inventories were classified as "Current assets held for sale" in the accompanying consolidated balance sheets and were not included in these amounts.

Property and Equipment

5 unchanged sentences

The Company recognizes impairment when the sum of undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value of the asset.

There were no impairment charges during the years ended September 30, 2023, 2022 and 2021.

There were no impairment charges from continuing operations during the years ended September 30, 2024, 2023 and 2022.

Capitalized Software

4 unchanged sentences

Software development costs are amortized using the greater of the straight-line method or the usage method over its estimated useful life, which is generally estimated to be three years .

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Additionally, development costs for software to be used internally is capitalized under similar guidance as discussed above.

6 unchanged sentences

If estimated net realizable values are less than the carrying values, an impairment charge is recorded.

During the year ended September 30, 2023, the Company recorded a loss on impairment of $ 2,660 related to an internal use software project.

Impairment charges during the years ended September 30, 2022 and 2021 were nominal .

There were no impairment charges from continuing operations during the years ended September 30, 2024, 2023 and 2022.

Identifiable software technology intangible assets resulting from acquisitions are amortized using the straight-line method over periods not exceeding their remaining estimated useful lives.

1 unchanged sentence

Acquisition technology intangibles’ net book values are included in capitalized software, net in the accompanying consolidated balance sheets.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Notes Receivable

2 unchanged sentences

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.

Where relevant, the fair value of contingent consideration included in an acquisition is calculated using a Monte Carlo simulation.

Where relevant, the fair value of contingent consideration included in an acquisition is calculated using a Monte Carlo simulation as well as a discounted cash flows analysis.

The fair value of customer relationships and non-compete assets acquired is identified using the Income Approach.

5 unchanged sentences

The operating results of an acquisition are included in the consolidated statements of operations from the date of such acquisition.

Acquisitions completed during the year ended September 30, 2023 contributed $ 18,365 and $ 3,350 of revenue and net income, respectively, to the results in the Company's consolidated statements of operations for the year then ended.

Acquisitions completed during the year ended September 30, 2024 contributed $ 884 and $ 61 of revenue and net loss, respectively, to the results in the Company's consolidated statements of operations for the year then ended.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In accordance with ASC 350, Intangibles—Goodwill and Other, the Company tests goodwill for impairment for each reporting unit on an annual basis in the fourth quarter, or when events or circumstances indicate the fair value of a reporting unit is below its carrying value.

8 unchanged sentences

The fair value of each reporting unit is compared to the reporting unit’s carrying value, including goodwill.

If the fair value of a reporting unit is less than

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

its carrying value, the Company recognizes an impairment equal to the excess carrying value, not to exceed the total amount of goodwill allocated to that reporting unit.

If the fair value of a reporting unit is less than its carrying value, the Company recognizes an impairment equal to the excess carrying value, not to exceed the total amount of goodwill allocated to that reporting unit.

For a discussion of the estimation methodology, the qualitative factors considered when performing a qualitative assessment and the significance of various inputs, please see the subheading below titled “Use of Estimates.”

The Company has determined that it has five reporting units as of the date of the most recent annual goodwill impairment test.

For each of the years ended September 30, 2023, 2022 and 2021 the Company performed a quantitative assessment for each of its reporting units.

The Company determined that none of the reporting units were impaired.

The Company has determined that it has five reporting units as of the date of the most recent annual goodwill impairment test on July 1, 2024.

Two of these five reporting units were part of the Merchant Service Business, for which a definitive agreement to sell was signed on June 26, 2024.

For the two reporting units within the Merchant Services Business, the Company performed a qualitative assessment.

For the remaining three reporting units, the Company performed a quantitative assessment.

For each of the years ended September 30, 2024, 2023 and 2022 the Company determined that none of its reporting units were impaired.

Intangible Assets

Intangible assets include acquired customer relationships, residual buyouts, referral agreements, trademarks, trade names, website development costs and non-compete agreements.

Intangible assets include acquired customer relationships, referral agreements, trademarks, trade names, website development costs and non-compete agreements.

Customer relationships represent the fair value of customer relationships purchased by the Company.

Residual buyouts represent the right to not have to pay a residual to an independent sales agent related to certain future transactions with the agent’s referred merchants.

Referral agreements represent the right to exclusively obtain referrals from a partner for their customers' credit card processing services.

2 unchanged sentences

The useful lives of contract-based intangible assets are equal to the terms of the agreement.

Management evaluates the remaining useful lives and carrying values of long-lived assets, including definite lived intangible assets, at least annually, or when events and circumstances warrant such a review, to determine whether significant events or changes in circumstances indicate that a change in the useful life or impairment in value may have occurred.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

value may have occurred.

There were no impairment charges during the years ended September 30, 2024, 2023 and 2022.

11 unchanged sentences

See additional discussion in Note 12.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Valuation of Contingent Consideration

11 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 years ended September 30, 2023, 2022 and 2021 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

• Payments — Includes volume-based payment processing fees (“discount fees”), gateway fees and other related fixed transaction or service fees

The Company's revenue from continuing operations for the years ended September 30, 2024, 2023 and 2022 is derived from the following sources:

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

• Proprietary payments — Includes volume-based payment processing fees (“discount fees”) and other related fixed transaction or service fees

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

Revenues from sales of the Company’s software are recognized when the related performance obligations are satisfied.

Revenues from the Company’s software are recognized when the related performance obligations are satisfied.

Sales of software licenses are categorized into one of two categories of intellectual property in accordance with ASC 606, functional or symbolic.

1 unchanged sentence

The Company generates sales of one-time software licenses, which is functional intellectual property.

Revenue from functional intellectual property is recognized at a point in time, when delivered to the customer.

The Company also offers access to its software under software-as-a-service (“SaaS”) arrangements, which represent services arrangements.

Revenue from functional intellectual property is recognized at a point in time, when control of the software license transfers to the customer.

The Company also generates revenue from maintenance services related to these software licenses, which is recognized over the term of the agreement.The Company also offers access to its software under software-as-a-service (“SaaS”) arrangements, which represent services arrangements, and under which customers do not have the right to take possession of the software.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Contracts with professional services, such as training or installation, are evaluated to determine if the customer can benefit from these services independently, whether they can be provided by other available resources, or whether they are separately identifiable from other contract promises.

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.

1 unchanged sentence

The Company’s core performance obligations are to stand ready to provide continuous access to the Company’s payment authorization services and transaction settlement services in order to be able to process as many transactions as its customers require on a daily basis over the contract term.

These services are stand ready obligations, as the timing and quantity of transactions to be processed is not determinable.

These services are stand ready obligations, as the nature of the promise is to stand ready to process an undetermined quantiy of transactions.

Under a stand-ready obligation, the Company’s performance obligation is defined by each time increment rather than by the underlying activities satisfied over time based on days elapsed.

7 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 years ended September 30, 2023, 2022 and 2021.

Therefore, revenue allocated to the payment authorization performance obligation is presented net of interchange and card network fees paid to the card issuing bank and card network, respectively, for the years ended September 30, 2024, 2023 and 2022.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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.

Revenues generated from merchant portfolios where the Company does not have control over merchant pricing, liability for merchant losses or credit risk or rights of portability are reported net of interchange and network fees as well as third-party processing costs directly attributable to processing and bank sponsorship costs.

Revenues are also derived from a variety of transaction fees, which are charged for accessing our payment and software solutions, and fees for other miscellaneous services.

Revenues are also derived from a variety of transaction fees, which are charged for transacting on our proprietary payment facilitator platform and software solutions, and fees for other miscellaneous services.

Revenues derived from such fees are recognized in the time the transactions occur and when there are no further performance obligations.

Revenue from the sale of equipment, is recognized upon transfer of ownership to the customer, after which there are no further performance obligations.

Arrangements may contain multiple performance obligations, such as payment authorization services, transaction settlement services, hardware, software products, maintenance, and professional installation and training services.

Arrangements may contain multiple performance obligations, such as payment authorization services, transaction settlement services, hardware, software products, SaaS, maintenance, and professional installation and training services.

Revenues are allocated to each performance obligation based on the standalone selling price of each good or service.

The selling price for a deliverable is based on standalone selling price, if available, the adjusted market assessment approach, estimated cost plus margin approach, or residual approach.

The Company establishes estimated selling price, based on the judgment of the Company's management, considering internal factors such as margin objectives, pricing practices and controls, customer segment pricing strategies and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

the product life cycle.

In arrangements with multiple performance obligations, the Company determines allocation of the transaction price at inception of the arrangement and uses the standalone selling prices for the majority of the Company's revenue recognition.

Revenues from sales of the Company ’ s combined hardware and software element are recognized when each performance obligation has been satisfied which has been determined to be upon the delivery of the product.

Revenues derived from service fees are recognized at the time the services are performed and there are no further performance obligations.

In arrangements with multiple performance obligations, the Company applies significant judgement in determining the allocation of the transaction price at inception of the arrangement and uses the standalone selling prices for the majority of the Company's revenue recognition.

Revenues from sales of the Company ’ s hardware and software elements are recognized when each performance obligation has been satisfied which has been determined to be upon the delivery of the product.

Revenues derived from service fees are recognized over time in accordance with our satisfaction of our performance obligations.

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

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

Refer to Note 17 for discussion of the Company's segments.

ASC 606 provides various optional practical expedients.

The Company elected the use of the practical expedient relating to the disclosure of remaining performance obligations within a contract and will not disclose remaining performance obligations for contracts (i) with an original expected duration of one year or less or (ii) in which revenue from the satisfaction of the performance obligations is recognized in the amounts invoiced in accordance with ASC 606-10-55-18.

The Company also has additional contracts with an original expected duration of greater than one year for which revenue had not yet been recognized.

These contracts do not allow for termination for convenience, which reduces the risks related to future revenue recognition.

The transaction price allocated to the remaining performance obligations related to these contracts is not considered useful to the users of the financial statements due to the exclusion of certain revenue based on the aforementioned practical expedients.

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

The Company's products are defined as follows:

• Software and related services — Includes sales of 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.

• 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

• Proprietary 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

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

For the year ended September 30, 2024

Software and Services Merchant Services Other Total

Public Sector Healthcare Other Total

Software and related services revenue $ 125,592 $ 43,902 $ ( 436 ) $ 169,058

Payments revenue $ 51,834 $ 115,049 $ ( 29 ) $ 166,854

Proprietary payments revenue 50,089 267 ( 15 ) 50,341

Other revenue 9,160 1,397 ( 33 ) 10,524

1 unchanged sentence

For the year ended September 30, 2023

Software and Services Merchant Services Other Total

Public Sector Healthcare Other Total

Software and related services revenue $ 127,118 $ 42,795 $ ( 45 ) $ 169,868

Payments revenue $ 40,951 $ 103,509 $ ( 8 ) $ 144,452

Proprietary payments revenue 46,551 95 ( 30 ) 46,616

Other revenue 8,545 1,693 — 10,238

1 unchanged sentence

For the year ended September 30, 2022

Software and Services Merchant Services Other Total

Public Sector Healthcare Other Total

Software and related services revenue $ 99,281 $ 42,181 $ 14 $ 141,476

Payments revenue $ 29,451 $ 92,325 $ ( 2,095 ) $ 119,681

Proprietary payments revenue 36,027 35 ( 57 ) 36,005

Other revenue 8,643 1,607 21 10,271

Total revenue $ 143,951 $ 43,823 $ ( 22 ) $ 187,752

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

For the year ended September 30, 2021, $ 25,843 was included in revenue earned at a point in time related to professional services or other stand ready contract revenue for fixed

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

service fee arrangements.

These types of revenue are included in revenue earned over time for the years ended September 30, 2023 and 2022.

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 by segment.

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 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.

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

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

For the year ended September 30, 2024

Software and Services Merchant Services Other Total

Public Sector Healthcare Other Total

Revenue earned over time $ 170,522 $ 45,288 $ ( 436 ) $ 215,374

2 unchanged sentences

For the year ended September 30, 2023

Software and Services Merchant Services Other Total

Public Sector Healthcare Other Total

Revenue earned over time $ 163,331 $ 44,164 $ ( 46 ) $ 207,449

1 unchanged sentence

Total revenue $ 182,214 $ 44,583 $ ( 75 ) $ 226,722

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

For the year ended September 30, 2022

Software and Services Merchant Services Other Total

Public Sector Healthcare Other Total

Revenue earned over time $ 125,552 $ 42,273 $ ( 37 ) $ 167,788

6 unchanged sentences

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

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

Unbilled amounts associated with these professional services and software licenses sold under the subscription model are presented as accounts receivable as the Company has an unconditional right to payment for services performed.

As of September 30, 2024 and September 30, 2023, the Company’s contract assets from contracts with customers was $ 8,680 and $ 15,131 , respectively.

5 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 consolidated balance sheets.

The terms for most of the

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

The terms for 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 table presents the changes in deferred revenue as of and for the year ended September 30, 2023:

The following table presents the changes in deferred revenue as of and for the years ended September 30, 2024 and 2023:

Balance at September 30, 2022 $ 29,228

6 unchanged sentences

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.

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 expected customer life, unless a commensurate payment is not expected at renewal.

As of September 30, 2024, the Company had $ 857 of capitalized contract costs, compared to $ 632 of capitalized contract costs as of September 30, 2023.

The contract costs relate 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 consolidated balance sheets.

The Company recorded commissions expense related to these costs for the years ended September 30, 2023, 2022 and 2021 of $ 792 , $ 707 and $ 533 respectively.

In connection with the sale of the Merchant Services Business, $ 4,334 at September 30, 2023 of the Company's capitalized contract costs were classified as "Long-term assets held for sale" in the accompanying consolidated

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

balance sheets and were not included in these amounts.

The Company recorded commissions expense from continuing operations related to these costs for the years ended September 30, 2024, 2023 and 2022 of $ 92 , $ 46 and $ 33 respectively.

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.

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 from continuing operations 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.

Selling, General and Administrative

Selling general and administrative expenses include all personnel costs such as salaries, benefits, bonuses, stock based compensation and commissions, as well as marketing and advertising costs, contractor services, legal and other professional services fees, software and technological services, rental expenses and other general expenses.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Selling general and administrative expenses from continuing operations include all personnel costs such as salaries, benefits, bonuses, stock based compensation and commissions, as well as marketing and advertising costs, contractor services, legal and other professional services fees, software and technological services, rental expenses and other general expenses.

Advertising and promotion costs are expensed as incurred.

Advertising expense was $ 3,966 , $ 4,028 and $ 2,623 for the years ended September 30, 2023, 2022 and 2021, respectively, and is included in selling, general and administrative expenses in the Consolidated Statements of Operations.

Advertising expense from continuing operations was $ 2,537 , $ 3,242 and $ 3,328 for the years ended September 30, 2024, 2023 and 2022, respectively, and is included in selling, general and administrative expenses in the Consolidated Statements of Operations.

Equity-based Compensation

1 unchanged sentence

This standard requires compensation expense to be measured based on the estimated fair value of the share-based awards on the date of grant and recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period.

Equity-based compensation was $ 27,878 , $ 26,230 and $ 20,860 for the years ended September 30, 2023, 2022 and 2021, respectively.

Equity-based compensation from continuing operations was $ 18,178 , $ 23,723 and $ 22,655 for the years ended September 30, 2024, 2023 and 2022, respectively.

Use of Estimates

3 unchanged sentences

Actual results could differ from those estimates.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting For Convertible Instruments and Contracts in an Entity's Own Equity (“ASU 2020-06”).

ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features.

ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it.

ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas.

The amendments in ASU 2020-06 are effective for public business entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

Effective October 1, 2022, the adoption of ASU 2020-06 resulted in an increase in long-term debt, less current portion and debt issuance costs, net of $ 11,933 , a decrease in additional paid-in-capital of $ 23,382 and a decrease in accumulated deficit of $ 11,449 .

The adoption of ASU 2020-06 had no impact on net income.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 will provide improvements to the income tax disclosures primarily related to the income taxes paid and rate reconciliation, and how legislation changes may affect future capital allocation and cash flow forecasts.

The amendment will improve the consistency in which companies provide tax information, and will further increase the transparency of related tax risks and operational opportunities.

The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company will not be required to adopt ASU 2023-09 until October 1, 2025.

The Company is currently evaluating the impact of the adoption of ASU 2023-09 on the Company’s financial statement disclosures.

In November 2023, the FASB issued ASU No.

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 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.

The amendment will require companies to disclose a more granular level of information with regards to segment reporting to further enhance the transparency of what specified amounts are included within each segment.

The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company will not be required to adopt ASU 2023-07 until October 1, 2024.

The Company is currently evaluating the impact of the adoption of ASU 2023-07 on the Company’s financial statement disclosures.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03").

ASU 2024-03 will require companies to disaggregate, within the notes to the financial statements, certain expenses presented on the face of the financial statements to enhance transparency and help investors better understand an entity's performance.

The amendment will specifically require that an entity disclose the amounts related to purchases of inventory, employee compensation, depreciation and intangible asset amortization.

Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses.

The amendments in ASU 2024-03 are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

The Company will not be required to adopt ASU 2024-03 until October 1, 2027.

The Company is currently evaluating the impact of the adoption of ASU 2024-03 on the Company’s financial statement disclosures.

CREDIT RISK AND OTHER CONCENTRATIONS

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The Company performs periodic evaluations of the relative credit standing of these institutions and does not expect any losses related to such concentrations.

The Company’s revenues are earned by processing transactions for merchant businesses and other institutions under contract with the Company.

The Company utilizes the funds settlement services of primarily six processing banks, from which most accounts receivable are remitted monthly.

No single customer accounted for more than 10% of the Company's revenue from continuing operations during the years ended September 30, 2024, 2023 and 2022.

The Company believes that the loss of any single customer would not have a material adverse effect on the Company's financial condition or results of operations.

The Company uses a third party payment processor, which facilitates substantially all of our proprietary payments revenues from continuing operations for the years ended September 30, 2024, 2023, and 2022.

i3 VERTICALS, Inc.

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

No single customer accounted for more than 10% of the Company's revenue during the years ended September 30, 2023, 2022 and 2021.

The Company believes that the loss of any single customer would not have a material adverse effect on the Company's financial condition or results of operations.

The Company uses third party payment processors, three of which facilitate more than 10% of our processing revenues for the years ended September 30, 2023, 2022, and 2021.

During the years ended September 30, 2024, 2023 and 2022 the Company acquired the following intangible assets and businesses:

Residual Buyouts

From time to time, the Company acquires future commission streams 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 years ended September 30, 2023, 2022 and 2021, the Company purchased $ 8,051 , $ 52 and $ 1,819 , respectively, in residual buyouts using a combination of cash on hand, loan forgiveness and borrowings on the Company's revolving credit facility.

The acquired residual buyout intangible assets weighted average estimated amortization period of eight years .

Referral Agreements

From time to time, the Company enters into referral agreements with agent banks or other organizations (“referral partner”).

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 year ended September 30, 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 .

2024 Business Combinations

Purchase of Eduloka, Ltd.

On August 1, 2024, the Company completed the acquisition of substantially all of the assets of Eduloka Ltd.

("inLumon") to expand the Company's permitting and licensing software offerings in the Public Sector segment.

Total purchase consideration was $ 27,477 , including $ 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 (valued at $ 7,517 ) and $ 1,960 in contingent consideration.

The goodwill associated with the inLumon acquisition is deductible for tax purposes.

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

The acquired trade name has an amortization period of two years .

The acquired capitalized software has an amortization period of seven years .

Acquisition-related costs for this acquisition amounted to approximately $ 258 and were included in selling, general and administrative on our consolidated statement of operations and were expensed as incurred.

Certain provisions in the purchase agreement provides 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 determined the acquisition date fair value of the liability for the contingent consideration using a Monte Carlo simulation as well as a discounted cash flow analysis.

In each 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.

See additional disclosures in Note 14.

Summary of inLumon

The preliminary fair values assigned to certain assets and liabilities assumed, as of the acquisition date, were as follows:

Accounts receivable $ 2,936

Prepaid expenses and other current assets 5

Property and equipment 20

Capitalized software 3,000

Acquired customer relationships 11,800

Trade name 100

Goodwill 11,486

Total assets acquired 29,347

Accrued expenses and other current liabilities 1,573

Deferred revenue, current 297

Net assets acquired $ 27,477

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Other Business Combinations during the year ended September 30, 2024

During the year ended September 30, 2024 the Company completed the acquisition of substantially all of the assets of a business to expand the Company’s software offerings within the Public Sector segment.

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 September 30, 2024.

The acquired customer relationships intangible asset has an estimated amortization period of ten years .

The acquired capitalized software has an amortization period of seven years .

Acquisition-related costs for this acquisition amounted to approximately $ 8 and were expensed as incurred.

Pro Forma Results of Operations for 2024 Business Combinations

The following unaudited supplemental pro forma results of operations have been prepared as though each of the acquired businesses in the year ended September 30, 2024 had occurred on October 1, 2023.

Pro forma adjustments were made to reflect the impact of depreciation and amortization, changes to executive compensation and the revised debt load, all in accordance with ASC 805.

This supplemental pro forma information does not purport to be indicative of the results of operations that would have been attained had the acquisitions been made on these dates, or of results of operations that may occur in the future.

Year ended September 30,

Revenue $ 235,875 $ 232,750

Net loss $ ( 13,382 ) $ ( 24,680 )

2023 Business Combinations

Purchase of Celtic Cross Holdings, Inc.

and Celtic Systems Pvt.

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

On October 1, 2022, the Company completed the acquisition of substantially all of the assets 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.

Celtic is within the Software and Services segment.

Celtic is within the Public Sector segment.

Total purchase consideration consisted of $ 85,000 in cash consideration, funded by proceeds from the Company's revolving credit facility.

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Other Business Combinations during the year ended September 30, 2023

The Company completed the acquisition of two other businesses to expand the Company's software offerings.

The Company completed the acquisition of substantially all of the assets of one other businesses within continuing operations to expand the Company's software offerings.

The total purchase consideration was $ 15,260 , including $ 12,500 in cash consideration, funded by proceeds from the Company's revolving credit facility, $ 2,000 of the Company's Class A Common Stock, and $ 760 contingent consideration.

In connection with these acquisitions, 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 these acquisitions is considered preliminary as of September 30, 2023.

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

Acquisition-related costs for these businesses amounted to approximately $ 317 and were expensed as incurred.

Pro Forma Results of Operations for 2023 Business Combinations

The following unaudited supplemental pro forma results of operations have been prepared as though each of the acquired businesses in the year ended September 30, 2023 had occurred on October 1, 2021.

Pro forma adjustments were made to reflect the impact of depreciation and amortization, changes to executive compensation and the revised debt load, all in accordance with ASC 805.

This supplemental pro forma

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

information does not purport to be indicative of the results of operations that would have been attained had the acquisitions been made on these dates, or of results of operations that may occur in the future.

Year ended September 30,

Revenue $ 371,613 $ 340,051

Net loss $ ( 2,696 ) $ ( 22,565 )

In connection with this acquisition, the Company allocated approximately $ 159 of the consideration to net working capital, approximately $ 335 to property and equipment, approximately $ 640 to capitalized software, approximately $ 6,920 to customer relationships, approximately $ 100 to trade names, and the remainder, approximately $ 9,365 , 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 this acquisition is considered preliminary as of September 30, 2023.

The acquired capital software and customer relationships intangible assets have an estimated amortization period of seven and fifteen years , respectively.

Acquisition-related costs for this business amounted to approximately $ 199 and were included in selling, general and administrative on our consolidated statement of operations and were expensed as incurred.

2022 Business Combinations

During the year ended September 30, 2022, the Company completed the acquisitions of three businesses to expand the Company’s software offerings in the Public Sector and Healthcare vertical markets.

During the year ended September 30, 2022, the Company completed the acquisitions of substantially all of the assets of three businesses to expand the Company’s software offerings in the Public Sector and Healthcare segments.

Total purchase consideration was $ 107,681 , including $ 101,400 in cash consideration, funded by proceeds from the Company's revolving credit facility, and $ 6,281 of contingent consideration.

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The trade names have estimated weighted-average amortization periods of four years .

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

The weighted-average

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

amortization period for all intangibles acquired is fifteen years .

The acquired capitalized software have amortization periods of seven years .

Acquisition-related costs for these businesses amounted to approximately $ 773 and were expensed as incurred.

Acquisition-related costs for these businesses amounted to approximately $ 773 and were included in selling, general and administrative on our consolidated statement of operations and were expensed as incurred.

Certain provisions in the purchase agreements provide for additional consideration of up to $ 23,000 , in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreements, through no later than September 2024.

The Company determined the acquisition date fair values of the liabilities for the contingent consideration based on probability forecasts and discounted cash flow analyses.

The Company determined the acquisition date fair values of the liabilities for the contingent consideration using a Monte Carlo simulation as well as discounted cash flow analyses.

See additional disclosures in Note 14.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Summary of 2022 Business Combinations

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Net assets acquired $ 107,681

2021 Business Combinations

During the year ended September 30, 2021, the Company completed the acquisitions of eight unrelated businesses, including Business Information Systems, Inc., ImageSoft Inc., and six other collectively material businesses.

Purchase of Business Information Systems, Inc.

On February 1, 2021, the Company completed the acquisition of substantially all of the assets of Business Information Systems, GP, a Tennessee general partnership and Business Information Systems, Inc., a Tennessee corporation (collectively “BIS”) to expand its software offerings, primarily in the Public Sector vertical.

BIS is within the Software and Services segment.

Total purchase consideration was $ 95,495 , including $ 52,500 in cash on hand and proceeds from the Company's revolving credit facility, 1,202,914 shares of the Company's Class A Common Stock (valued at $ 35,245 ), and $ 7,750 in contingent consideration.

The goodwill associated with the acquisition is deductible for tax purposes.

The acquired customer relationships intangible asset has an estimated amortization period of nineteen years .

The non-compete agreement and trade name have estimated amortization periods of three and five years , respectively.

The weighted-average estimated amortization period of all intangibles acquired is nineteen years .

The acquired capitalized software has an estimated amortization period of ten years .

Acquisition-related costs for BIS amounted to approximately $ 374 and were expensed as incurred.

Certain provisions in the purchase agreement provide for additional consideration of up to $ 16,000 in the aggregate, to be paid based upon achievement of specified financial performance targets, as defined in the

i3 VERTICALS, Inc.

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

purchase agreement, in the 24 months from February 1, 2021 through January 31, 2023.

The Company determined the acquisition date fair value of the liability for the contingent consideration based on a probability forecast and discounted cash flow analysis.

In each subsequent reporting period, the Company will reassess the current estimates of performance relative to the targets and adjust the contingent liability to its fair value through earnings.

See additional disclosures in Note 13.

Purchase of ImageSoft, Inc.

On November 17, 2020, the Company completed the acquisition of substantially all of the assets of ImageSoft, Inc.

(“ImageSoft”) to expand its software offerings, primarily in the Public Sector vertical.

ImageSoft, is within the Software and Services segment.

Total purchase consideration was $ 46,300 , including $ 40,000 in cash consideration, funded by proceeds from the Company's revolving credit facility, and $ 6,300 in contingent consideration.

The goodwill associated with the acquisition is deductible for tax purposes.

The acquired customer relationships intangible asset has an estimated amortization period of twenty years .

The non-compete agreement and trade name have estimated amortization periods of three and five years , respectively.

The weighted-average estimated amortization period of all intangibles acquired is nineteen years .

The acquired capitalized software has an estimated amortization period of seven years .

Acquisition-related costs for ImageSoft amounted to approximately $ 403 and were expensed as incurred.

Certain provisions in the purchase agreement provide for additional consideration of up to $ 20,000 in the aggregate, to be paid based upon achievement of specified financial performance targets, as defined in the purchase agreement, in the 24 months from May 1, 2021 through April 30, 2023.

The Company determined the acquisition date fair value of the liability for the contingent consideration based on a probability forecast and discounted cash flow analysis.

In each subsequent reporting period, the Company will reassess the current estimates of performance relative to the targets and adjust the contingent liability to its fair value through earnings.

See additional disclosures in Note 13.

Other Business Combinations

From October 1, 2020 to September 30, 2021, the Company completed the acquisitions of six other businesses to expand the Company’s software offerings in the Public Sector and Healthcare vertical markets and to add proprietary technology that will augment the Company’s existing platform across several verticals.

Five of these businesses are within the Software and Services segment and one is within the Merchant Services segment.

Total purchase consideration was $ 65,527 , including $ 57,000 in cash consideration, funded by proceeds from the Company's revolving credit facility, and $ 8,527 of contingent consideration.

For each of these businesses acquired, the goodwill associated with the acquisition is deductible for tax purposes.

The acquired customer relationships intangible assets have estimated amortization periods of between ten and twenty-five years .

The non-compete agreement and trade names have weighted average estimated amortization periods of four years .

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

The acquired capitalized software has a weighted-average amortization period of seven years .

Acquisition-related costs for these businesses amounted to approximately $ 1,110 and were expensed as incurred.

Certain provisions in the purchase agreements provide for additional consideration of up to $ 50,200 , in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreements, through no later than June 2023.

The Company determined the acquisition date fair values of the liabilities for the contingent consideration based on probability forecasts and discounted cash flow analyses.

In each subsequent reporting period, the Company will reassess its current estimates of performance relative to

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

the targets and adjust the contingent liabilities to their fair values through earnings.

See additional disclosures in Note 13.

Summary of 2021 Business Combinations

The fair values assigned to certain assets and liabilities assumed, as of the acquisition dates, during the year ended September 30, 2021 were as follows:

BIS ImageSoft, Inc.

Accounts receivable $ 1,567 $ 4,997 $ 3,141 $ 9,705

Settlement assets 6,889 120 — 7,009

Inventories 458 — 161 619

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Property and equipment 206 433 312 951

Capitalized software 15,200 5,200 4,100 24,500

Acquired customer relationships 32,300 16,300 24,040 72,640

Non-compete agreements 100 610 390 1,100

Trade name 700 1,100 840 2,640

Goodwill 46,660 22,408 35,955 105,023

Operating lease right-of-use assets — 332 484 816

Other assets — 6 32 38

Total assets acquired 104,090 54,403 71,498 229,991

Accrued expenses and other current liabilities 138 910 1 1,049

Settlement obligations 6,889 120 — 7,009

Deferred revenue, current 1,568 6,748 5,498 13,814

Current portion of operating lease liabilities — 75 221 296

Operating lease liabilities, less current portion — 250 251 501

Net assets acquired $ 95,495 $ 46,300 $ 65,527 $ 207,322

PREPAID EXPENSES AND OTHER CURRENT ASSETS

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

2024 2023 (1)

Inventory $ 2,423 $ 2,038

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Prepaid expenses and other current assets $ 10,232 $ 9,512

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

__________________________

In connection with the sale of the Merchant Services Business, $ 2,937 of the Company's prepaid expenses and other current assets (as of September 30, 2023) were classified as "Current assets held for sale" in the accompanying consolidated balance sheets and were not included in these amounts.

PROPERTY AND EQUIPMENT, NET

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____________________

In connection with the sale of the Merchant Services Business, $ 2,249 of the Company's property and equipment, net (as of September 30, 2023) were classified as "Long-term assets held for sale" in the accompanying consolidated balance sheets and were not included in these amounts.

Includes computer software of $ 330 and $ 256 as of September 30, 2024 and 2023, respectively.

Depreciation expense for the years ended September 30, 2023, 2022 and 2021 amounted to $ 3,377 , $ 2,545 and $ 2,312 , respectively.

Depreciation expense for continuing operations for the years ended September 30, 2024, 2023 and 2022 amounted to $ 2,737 , $ 2,353 and $ 1,609 , respectively.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

CAPITALIZED SOFTWARE, NET

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Capitalized software, net $ 58,592 $ 58,057

The Company capitalized software development costs (including acquisitions) totaling $ 25,441 and $ 19,957 during the years ended September 30, 2023 and 2022, respectively.

Amortization expense for capitalized software development costs amounted to $ 12,545 , $ 8,987 and $ 6,276 during the years ended September 30, 2023, 2022 and 2021, respectively.

During the year ended September 30, 2023, the Company wrote down $ 2,660 related to an internal use software project.

There were no amounts written down to net realizable value during the years ended September 30, 2022 and 2021, respectively.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

__________________________

In connection with the sale of the Merchant Services Business, $ 4,520 of the Company's capitalized software, net (as of September 30, 2023) were classified as "Long-term assets held for sale" in the accompanying consolidated balance sheets and were not included in these amounts.

The Company capitalized software development costs (including acquisitions) for continuing operations totaling $ 14,079 and $ 23,799 during the years ended September 30, 2024 and 2023, respectively.

Amortization expense for continuing operations for capitalized software development costs amounted to $ 13,545 , $ 11,155 and $ 7,854 during the years ended September 30, 2024, 2023 and 2022, respectively.

There were no amounts written down to net realizable value for continuing operations during the years ended September 30, 2024, 2023 and 2022, respectively.

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, 2021 (net of accumulated impairment losses of $ 11,458 , $ 0 and $ 0 , respectively)

Public Sector Healthcare Other Total

Balance at September 30, 2022 (1)

$ 168,095 $ 46,828 $ — $ 214,923

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Balance at September 30, 2023 (1)

221,155 46,828 — 267,983

Goodwill attributable to preliminary purchase price adjustments and acquisition activity during the year ended September 30, 2024 12,695 — — 12,695

Balance at September 30, 2024 $ 233,850 $ 46,828 $ — $ 280,678

Intangible assets consisted of the following as of September 30, 2023:

__________________________

In connection with the sale of the Merchant Services Business, $ 141,580 and $ 138,716 at September 30, 2023 and 2022, respectively, of the Company's goodwill were classified as "Long-term assets held for sale" in the accompanying consolidated balance sheets and were not included in these amounts.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Intangible assets, net consisted of the following as of September 30, 2024:

Cost Accumulated

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Finite-lived intangible assets:

Customer relationships $ 310,501 $ ( 98,182 ) $ 212,319 9 to 25 years – accelerated or straight-line

Customer relationships $ 199,720 $ ( 38,843 ) $ 160,877 9 to 25 years – straight-line

Non-compete agreements 358 ( 192 ) 166 3 to 8 years – straight-line

Website and brand development costs 44 ( 37 ) 7 3 to 4 years – straight-line

Website and brand development costs 6 ( 5 ) 1 3 years – straight-line

Trade names 4,741 ( 2,987 ) 1,754 2 to 5 years – straight-line

Residual buyouts 14,220 ( 3,111 ) 11,109 8 years – straight-line

Referral and exclusivity agreements 609 ( 217 ) 392 5 years – straight-line

Total finite-lived intangible assets 204,825 ( 42,026 ) 162,799

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Total identifiable intangible assets $ 204,843 $ ( 42,026 ) $ 162,816

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Intangible assets consisted of the following as of September 30, 2022:

Intangible assets, net consisted of the following as of September 30, 2023 (1) :

Cost Accumulated Amortization Carrying Value Amortization Life and Method

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Trade names 5,631 ( 2,950 ) 2,681 3 to 7 years – straight-line

Residual buyouts 6,169 ( 2,141 ) 4,028 8 years – straight-line

Referral and exclusivity agreements 609 ( 217 ) 392 5 years – straight-line

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Total identifiable intangible assets $ 194,734 $ ( 31,585 ) $ 163,149

Amortization expense for intangible assets amounted to $ 20,539 , $ 17,892 and $ 15,830 during the years ended September 30, 2023, 2022 and 2021, respectively.

Based on gross carrying amounts at September 30, 2023, the Company's estimate of future amortization expense for intangible assets are presented in this table as follows for each fiscal year ending September 30:

__________________________

Thereafter 128,782

In connection with the sale of the Merchant Services Business, $ 63,803 of the Company's intangible assets, net (as of September 30, 2023) were classified as "Long-term assets held for sale" in the accompanying consolidated balance sheets and were not included in these amounts.

Amortization expense for intangible assets for continuing operations amounted to $ 12,514 , $ 12,930 and $ 9,867 during the years ended September 30, 2024, 2023 and 2022, respectively.

i3 VERTICALS, Inc.

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

Based on gross carrying amounts at September 30, 2024, the Company's estimate of future amortization expense for intangible assets are presented in this table as follows for each fiscal year ending September 30:

2025 $ 12,962

Thereafter 101,455

ACCRUED EXPENSES AND OTHER LIABILITIES

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

2024 2023 (1)

Accrued wages, bonuses, commissions and vacation $ 5,737 $ 6,888

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Escrow liabilities 2,174 3,965

Accrued tax distributions 24,276 —

Accrued income tax expense 30,520 3,148

Tax receivable agreement liability — current portion 9,850 —

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Employee health self-insurance liability 917 823

Accrued Hyland expenses 1,165 2,369

Accrued interchange 1,946 1,991

Other current liabilities 12,461 10,981

Other accrued liabilities related to the Sale of the Merchant Services Business 7,887 —

Accrued liabilities owed to sellers 355 1,239

Other accrued expenses 3,752 4,639

Accrued expenses and other current liabilities $ 89,972 $ 33,580

__________________________

In connection with the sale of the Merchant Services Business, $ 4,160 of the Company's accrued expenses and other current liabilities (as of September 30, 2023) were classified as "Current liabilities held for sale" in the accompanying consolidated balance sheets and were not included in these amounts.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

2024 2023 (1)

Accrued contingent consideration — long-term portion $ 1,636 $ 1,414

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Total other long-term liabilities $ 14,921 $ 23,078

__________________________

In connection with the sale of the Merchant Services Business, $ 1,065 of the Company's other long-term liabilities (as of September 30, 2023) were classified as "Long-term liabilities held for sale" in the accompanying consolidated balance sheets and were not included in these amounts.

LONG-TERM DEBT, NET

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Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility May 8, 2028 $ — $ 272,505

Revolving lines of credit to banks under the Prior Senior Secured Credit Facility May 9, 2024 — 185,017

1.0 % Exchangeable Senior Notes due 2025

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Total long-term debt, net of issuance costs $ 26,223 $ 388,005

____________________

Refer to Note 3 for discussion of the change in the current period presentation.

2020 Exchangeable Notes Offering

On February 18, 2020, i3 Verticals, LLC issued $ 138,000 aggregate principal amount of 1.00 % Exchangeable Senior Notes due 2025 (the “Exchangeable Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”).

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

On October 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method, which resulted in the Exchangeable Notes being presented as a single liability instrument with no separate accounting for embedded conversion features.

Refer to Note 2 for further discussion.

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 1.0 % per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020.

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Bank National Association, as trustee.

Prior to August 15, 2024, the Exchangeable Notes are exchangeable only upon satisfaction of certain conditions and during certain periods described in the Indenture, and thereafter, the Exchangeable Notes are exchangeable at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

The Exchangeable Notes are exchangeable on the terms set forth in the Indenture into cash, shares of Class A common stock, or a combination thereof, at i3 Verticals, LLC’s election.

As of August 15, 2024, the Exchangeable Notes became exchangeable at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

The Exchangeable Notes are exchangeable on the terms set forth in the Indenture into cash, shares of Class A common stock, or a combination thereof, at i3 Verticals, LLC’s election, provided that in September 2022, the Company made the irrevocable election to settle the principal portion of its Exchangeable Notes only in cash.

The exchange rate is initially 24.4666 shares of Class A common stock per $1,000 principal amount of Exchangeable Notes (equivalent to an initial exchange price of approximately $ 40.87 per share of Class A common stock).

The exchange rate is subject to adjustment in certain circumstances.

In addition, following certain corporate events that occur prior to the maturity date or i3 Verticals, LLC’s delivery of a notice of redemption, i3 Verticals, LLC will increase, in certain circumstances, the exchange rate for a holder who elects to exchange its Exchangeable Notes in connection with such a corporate event or notice of redemption, as the case may be.

If the Company or i3 Verticals, LLC undergoes a fundamental change, holders may require i3 Verticals, LLC to repurchase all or part of their Exchangeable Notes at a repurchase price equal to 100 % of the principal amount of the Exchangeable Notes to be repurchased, plus accrued and unpaid interest to, but not including, the fundamental change repurchase date.

As of September 30, 2023, none of the conditions permitting the holders of the Exchangeable Notes to early convert have been met.

In addition, following certain corporate events that occur prior to the maturity date or i3 Verticals, LLC’s delivery of a notice of redemption, i3 Verticals, LLC will increase, in certain

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

circumstances, the exchange rate for a holder who elects to exchange its Exchangeable Notes in connection with such a corporate event or notice of redemption, as the case may be.

Prior to the 47th scheduled trading day immediately preceding the maturity date, if the last reported sale price per share of Class A common stock has been at least 130 % of the exchange price for the Exchangeable Notes for at least 20 trading days (whether or not consecutive), i3 Verticals, LLC may redeem all or any portion of the Exchangeable Notes at a cash redemption price equal to 100 % of the principal amount of the Exchangeable Notes to be redeemed plus accrued and unpaid interest on such note to, but not including, the redemption date.

3 unchanged sentences

The Exchangeable Notes and the guarantee will be structurally subordinated to all indebtedness and other liabilities and obligations (including the debt and trade payables) of the Company’s subsidiaries, other than i3 Verticals, LLC.

In accounting for the issuance of the Exchangeable Notes, the Company separated the Exchangeable Notes into liability and equity components.

The carrying amount of the liability component before the allocation of any transaction costs was calculated by measuring the fair value of a similar liability that does not have an associated

During the fiscal year ended September 30, 2020, we repurchased $ 21,000 in aggregate principal amount of Exchangeable Notes in open market purchases.

In addition, on December 21, 2023, i3 Verticals, LLC entered into agreements to repurchase an additional portion of its Exchangeable Notes pursuant to privately negotiated transactions with a limited number of holders of the Exchangeable Notes (the "Exchangeable Note Repurchases").

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

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

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

In accounting for the issuance of the Exchangeable Notes, transaction costs were recorded as debt issuance costs in the consolidated balance sheet and are amortized to interest expense using the effective interest method over the term of the Exchangeable Notes.

Non-cash interest expense for amortization of debt issuance costs related to the Exchangeable Notes for the years ended September 30, 2024 and 2023 was $ 482 and $ 949 , respectively.

The Company also wrote off a portion of the debt issuance costs in connection with the repurchase

i3 VERTICALS, Inc.

1 unchanged sentence

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

exchangeable feature.

The carrying amount of the equity component (before the allocation of any transaction costs), representing the conversion option, which does not require separate accounting as a derivative as it meets a scope exception for certain contracts involving an entity's own equity, was determined by deducting the fair value of the liability component from the par value of the Exchangeable Notes.

The difference between the principal amount of the Exchangeable Notes and the liability component represented the debt discount, which was recorded as a direct deduction from the related debt liability in the consolidated balance sheet and accreted over the period from the date of issuance to the contractual maturity date, resulting in the recognition of non-cash interest expense.

The equity component of the Exchangeable Notes of approximately $ 28,662 was included in additional paid-in capital in the consolidated balance sheet and was not remeasured as longs as continued to meet the conditions for equity classification.

Transaction costs were allocated to the liability and equity components in the same proportion as the allocation of the proceeds.

Transaction costs attributable to the liability component were recorded as debt issuance costs in the consolidated balance sheet and are amortized to interest expense using the effective interest method over the term of the Exchangeable Notes, and transaction costs attributable to the equity component were netted with the equity component in stockholders' equity.

Effective October 1, 2022, the Company adopted ASU 2020-06, which simplified the accounting for the Exchangeable Notes and they are now reported as a single liability instrument with no separate accounting for embedded conversion features.

The adoption of ASU 2020-06 resulted an increase in long-term debt, less current portion and debt issuance costs, net of $ 11,933 , a decrease in additional paid-in-capital of $ 23,382 and a decrease in accumulated deficit of $ 11,449 .

As of September 30, 2023, the aggregate principal amount outstanding of the Exchangeable Notes was $ 117,000 .

Non-cash interest expense for amortization of debt issuance costs related to the Exchangeable Notes for the years ended September 30, 2023 and 2022 was $ 949 and $ 666 , respectively.

The Company also wrote off a portion of the debt issuance costs in connection with the repurchase transactions in April and September 2020, as described below.

transactions in April and September 2020.

Total unamortized debt issuance costs related to the Exchangeable Notes were $ 93 as of September 30, 2024.

2 unchanged sentences

The fair value is classified as Level 2, as defined in Note 14.

The Company can choose to purchase its Exchangeable Notes on the open market.

In April and September 2020, the Company paid $ 17,414 in aggregate to repurchase $ 21,000 in aggregate principal amount of the Exchangeable Notes and to repay approximately $ 24 in accrued interest on the repurchased portion of the Exchangeable Notes.

Exchangeable Note Hedge Transactions

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i3 Verticals, LLC used approximately $ 28,676 of the net proceeds from the offering of the Exchangeable Notes (net of the premiums received for the warrant transactions described below) to pay the cost of the Note Hedge Transactions.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Note Hedge Transactions 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 Note Hedge Transactions have been included as a net reduction to additional paid-in capital within stockholders' equity.

In December 2023, i3 Verticals, LLC received $ 250 from the Counterparties to terminate the portion of the Note Hedge Transactions corresponding to the Exchangeable Notes that were repurchased in fiscal year 2020.

Also in December 2023, i3 Verticals, LLC entered into agreements with the Counterparties to terminate the portion of the Note Hedge Transactions 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 Note Hedge Transactions ("Note Hedge Unwinds"), and i3 Verticals, LLC received $ 987 for the sale of the Note Hedge Unwinds and recorded a loss on the sale of the Note Hedge Unwinds of $ 245 .

Warrant Transactions

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

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In December 2023, the Company paid $ 119 to the Counterparties to terminate the portion of the Warrants corresponding to the Exchangeable Notes that were repurchased in fiscal year 2020.

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

The 2023 Senior Secured Credit Facility replaces the Prior Senior Secured Credit Facility (as defined below).

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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.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 % ( 2.00 % at September 30, 2024).

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The applicable margin is based upon the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility), as reflected in the schedule below:

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Consolidated Total Net Leverage Ratio Commitment Fee Letter of Credit Fee Term Benchmark Loans Base Rate Loans

21 unchanged sentences

The 2023 Senior Secured Credit Facility contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain events with respect to employee benefit plans, invalidity of loan documents and certain changes in control.

Debt issuance costs

The Company incurred $ 930 and $ 3,079 in debt issuance costs during the year ended September 30, 2024 and 2023, respectively, and did no t incur any debt issuance costs during the year ended September 30, 2022.

The Company's debt issuance costs related to the 2023 Senior Secured Credit Facility 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 within other assets in the consolidated balance sheets.

The amortization of deferred debt issuance costs is included in interest expense and amounted to approximately $ 1,175 , $ 1,514 and $ 1,046 during the years ended September 30, 2024, 2023 and 2022, respectively.

In connection with the replacement of our prior Senior Secured Credit Facility (which was replaced by the 2023 Senior Secured Credit Facility), the Company recorded a debt extinguishment charge of $ 203 during the year ended September 30, 2023 for the write-off of deferred financing costs, which was recorded in interest expense in the consolidated statements of operations.

i3 VERTICALS, Inc.

1 unchanged sentence

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

Prior Senior Secured Credit Facility

On May 9, 2019, the Company replaced its then existing credit facility with a new credit agreement (the "Prior Senior Secured Credit Facility") (as noted above, the Prior Senior Secured Credit Facility was replaced by the 2023 Senior Secured Credit Facility in May 2023).

Effective October 3, 2022, the Prior Senior Secured Credit Facility, as amended, consisted of a $ 375,000 revolving credit facility, together with an option to increase the revolving credit facility and/or obtain incremental term loans in an additional principal amount of up to $ 50,000 in the aggregate (subject to the receipt of additional commitments for any such incremental loan amounts).

The Prior Senior Secured Credit Facility accrued interest at Term SOFR (based upon an interest period of one, three or six months), plus an adjustment of 0.10 %, plus an applicable margin of 2.25 % to 3.25 %, or the base rate (defined as the highest of (x) the Bank of America prime rate, (y) the federal funds rate plus 0.50 % and (z) Term SOFR, plus an adjustment of 0.10 %, plus 1.00 %), plus an applicable margin of 0.25 % to 1.25 %, in each case depending upon the consolidated total leverage ratio, as defined in the agreement.

Interest was payable at the end of the selected interest period, but no less frequently than quarterly.

Additionally, the Prior Senior Secured Credit Facility required the Company to pay unused commitment fees of 0.15 % to 0.30 % on any undrawn amounts under the revolving credit facility and letter of credit fees of up to 3.25 % on the maximum amount available to be drawn under each letter of credit issued under the agreement.

Debt issuance costs

The Company incurred $ 3,079 in debt issuance costs during the year ended September 30, 2023 and did no t incur any debt issuance costs during the years ended September 30, 2022 and 2021.

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 $ 1,514 , $ 1,046 and $ 968 during the years ended September 30, 2023, 2022 and 2021, respectively.

In connection with the replacement of the Prior Senior Secured Credit Facility, the Company recorded a debt extinguishment charge of $ 203 for the write-off of deferred financing costs, which was recorded in interest expense in the consolidated statements of operations.

i3 Verticals, Inc.

3 unchanged sentences

In addition, certain subsidiaries of i3 Verticals, LLC are corporations that are subject to state and federal income taxes.

The Company's income tax (benefit) expense for continuing operations during the years ended September 30, 2024, 2023 and 2022 were the following:

Year ended September 30,

2024 2023 2022

Federal tax expense (benefit) $ 3,076 $ 1,098 $ ( 35 )

Federal tax expense $ 2,383 $ 2,363 $ 649

State tax expense 739 1,172 636

Federal tax benefit ( 7,296 ) ( 4,151 ) ( 285 )

State tax expense (benefit) 1,361 6,739 ( 2 )

Federal tax expense (benefit) 626 ( 8,255 ) ( 7,460 )

State tax (benefit) expense ( 9,416 ) 932 6,327

Income tax (benefit) expense $ ( 5,668 ) $ ( 3,788 ) $ 152

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

A reconciliation of income tax expense (benefit) from operations computed at the U.S.

A reconciliation of income tax expense (benefit) from continuing operations computed at the U.S.

federal statutory income tax rate to the Company’s effective income tax rate is as follows:

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September 30,

2024 2023 (1)

Deferred tax assets:

1 unchanged sentence

Stock-based compensation 15,241 13,144

Deferred revenue 318 448

Accrued expenses 59 247

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Net deferred tax asset $ 37,043 $ 33,903

Federal net operating loss carryforwards as of September 30, 2023 and 2022 were $ 44,098 and $ 43,233 , respectively.

Federal tax credits were $ 698 , resulting in a deferred tax asset of $ 9,959 as of September 30, 2023 compared to $ 359 of federal tax credits, resulting in a deferred tax asset of $ 9,438 as of September 30, 2022.

The federal net operating loss carryforwards will begin to expire in 2037 and the federal tax credits will begin to expire in 2039.

__________________________

In connection with the sale of the Merchant Services Business, $ 1,035 of the Company's net deferred tax liability (as of September 30, 2023) were classified as "Long-term liabilities held for sale" in the accompanying consolidated balance sheets and were not included in these amounts as the amount related to the Merchant Services Business was a deferred tax liability.

Federal net operating loss carryforwards for continuing operations as of September 30, 2024 and 2023 were $ 188 and $ 42,137 , respectively.

Federal tax credits were $ 0 for continuing operations, resulting in a deferred tax asset of $ 39 as of September 30, 2024 compared to $ 698 of federal tax credits for continuing operations, resulting in a deferred tax asset of $ 9,547 as of September 30, 2023.

The federal net operating loss carryforwards will begin to expire in 2035.

The use of federal net operating losses and credits are limited to the future taxable income of separate legal entities.

As a result, a valuation allowance of $ 387 has been provided for certain federal deferred tax assets, a decrease of $ 421 during the year ended September 30, 2023.

State net operating loss carryforwards as of September 30, 2023 totaled $ 124,656 , resulting in a deferred tax asset of $ 7,871 .

As a result, a valuation allowance of $ 40 for continuing operations has been provided for certain federal deferred tax assets, a increase of $ 7 during the year ended September 30, 2024.

State net operating loss carryforwards as of September 30, 2024 for continuing operations totaled $ 5,450 , resulting in a deferred tax asset of $ 328 .

The state net operating loss carryforwards will begin to expire in 2027.

The use of certain state net operating losses are limited to future taxable earnings of separate legal entities.

As a result, a valuation allowance of $ 8,511 has been provided for state loss carryforwards and other state tax attributes, an increase of $ 3,602 during the year ended September 30, 2023.

As a result, a valuation allowance for continuing operations of $ 17 has been provided for state loss carryforwards and other state tax attributes, a decrease of $ 8,137 during the year ended September 30, 2024.

The Company also considered a valuation allowance on its $ 52,039 outside basis of investment in i3 Verticals, LLC deferred tax asset as of September 30, 2024.

29 unchanged sentences

As a result of these exchanges, during the year ended September 30, 2022, the Company recognized an increase to its net deferred tax assets in the amount of $ 876 , and corresponding Tax Receivable Agreement liabilities of $ 745 , representing 85 % of the tax benefits due to the Continuing Equity Owners.

During the year ended September 30, 2022, the Company acquired an aggregate of 111,000 common units of i3 Verticals, LLC in connection with the redemption of common units, 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 these exchanges, during the year ended September 30, 2022, the Company recognized an increase to its net

The Company also recognized a increase to its net deferred tax assets of $ 1,038 across all exchanges as a result of a tax rate change during the year ended September 30, 2022.

During the year ended September 30, 2023, the Company acquired an aggregate of 24,748 common units of i3 Verticals, LLC in connection with the redemption of common units, which resulted in an increase in the tax basis

i3 VERTICALS, Inc.

1 unchanged sentence

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

deferred tax assets in the amount of $ 898 , and corresponding Tax Receivable Agreement liabilities of $ 763 , representing 85 % of the tax benefits due to the Continuing Equity Owners.

of our investment in i3 Verticals, LLC subject to the provisions of the Tax Receivable Agreement.

As a result of these exchanges, during the year ended September 30, 2023, the Company recognized an increase to its net deferred tax assets in the amount of $ 208 , and corresponding Tax Receivable Agreement liabilities of $ 177 , representing 85 % of the tax benefits due to the Continuing Equity Owners.

The Company also recognized a decrease to its net deferred tax assets of $ 932 across all exchanges as a result of a tax rate change during the year ended September 30, 2023.

During the year ended September 30, 2024, the Company acquired an aggregate of 60,718 common units of i3 Verticals, LLC in connection with the redemption of common units, 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 these exchanges, during the year ended September 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 the Continuing Equity Owners.

The deferred tax asset and corresponding Tax Receivable Agreement liability balances were $ 37,723 and $ 40,079 , respectively, as of September 30, 2023.

The Company also recognized a decrease to its net deferred tax assets of $ 1,187 across all exchanges as a result of a tax rate change during the year ended September 30, 2024.

The deferred tax asset balance was $ 34,464 as of September 30, 2024.

The Company also has a corresponding Tax Receivable Agreement liability of $ 39,197 , of which $ 9,850 was recorded in accrued expenses and other current liabilities and $ 29,347 was recorded in long-term tax receivable agreement obligations as of September 30, 2024.

Payments to the Continuing Equity Owners related to exchanges through September 30, 2024 will range from $ 0 to $ 9,850 per year and are expected to be paid over the next 24 years.

7 unchanged sentences

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 September 30, 2023 was two years .

The Company had no significant short-term leases during the year ended September 30, 2023.

The weighted-average remaining lease term both at September 30, 2024 and 2023 was two years .

The Company had no significant short-term leases during the years ended September 30, 2024 and 2023.

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 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 7.7 % as of September 30, 2023.

The weighted-average discount rate used in the measurement of our lease liabilities was 7.7 % and 7.9 % as of September 30, 2024 and 2023, respectively.

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

Operating lease costs for the years ended September 30, 2023, 2022 and 2021, were $ 5,671 , $ 5,815 and $ 4,096 , respectively, which are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Total operating lease costs for the years ended September 30, 2023, 2022 and 2021, include variable lease costs of approximately $ 78 , $ 59 and $ 6 , 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 for the years ended September 30, 2023, 2022 and 2021, was $ 210 , $ 177 and $ 304 , respectively, and are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Operating lease costs from continuing operations for the years ended September 30, 2024, 2023 and 2022, were $ 4,160 , $ 4,388 and $ 4,607 , respectively, which are included in selling, general and administrative expenses in the consolidated statements of operations.

Total operating lease costs from continuing operations for the years ended September 30, 2024, 2023 and 2022, include variable lease costs of approximately $ 44 , $ 39 and $ 55 , respectively, which are primarily comprised

i3 VERTICALS, Inc.

1 unchanged sentence

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

As of September 30, 2023, maturities of lease liabilities are as follows:

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 from continuing operations for the years ended September 30, 2024, 2023 and 2022, was $ 31 , $ 8 and $ 65 , respectively, and are included in selling, general and administrative expenses in the consolidated statements of operations.

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

Years ending September 30:

33 unchanged sentences

Balance at September 30, 2024 $ 2,352

__________________________

In connection with the sale of the Merchant Services Business, $ 3,197 of the Company's accrued contingent consideration (as of September 30, 2022) were classified as "Current liabilities held for sale" in the accompanying consolidated balance sheets and were 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.

The amount to be paid under these obligations is contingent upon the achievement of certain growth metrics related to the financial performance of the entities subsequent to acquisition.

The fair value of material contingent consideration included in an acquisition is calculated using a Monte Carlo simulation.

The fair value of material contingent consideration included in an acquisition is calculated using a Monte Carlo simulation as well as a discounted cash flows analysis.

The contingent consideration is revalued each period until it is settled.

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EQUITY-BASED COMPENSATION

A summary of equity-based compensation expense recognized during the years ended September 30, 2023, 2022 and 2021 is as follows:

A summary of equity-based compensation expense for continuing operations recognized during the years ended September 30, 2024, 2023 and 2022 is as follows:

Year ended September 30,

3 unchanged sentences

Equity-based compensation expense $ 18,178 $ 23,723 $ 22,655

In connection with the sale of the Merchant Services Business, $ 8,160 , $ 4,155 and $ 3,575 of the Company's equity-based compensation expense was classified as "net income from discontinued operations" in the accompanying consolidated statements of operations during the years ended September 30, 2024, 2023, and 2022, respectively.

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

Income tax benefits of $ 785 , $ 468 and $ 1,083 were recognized related to equity-based compensation during the years ended September 30, 2023, 2022, and 2021, respectively.

Current and deferred income tax benefits for continuing operations of $ 3,114 , $ 4,260 and $ 4,029 were recognized related to equity-based compensation during the years ended September 30, 2024, 2023, and 2022, respectively.

Stock Options

7 unchanged sentences

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 years ended September 30, 2023 and 2022 was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:

The fair value of the stock option awards during the years ended September 30, 2024 and 2023 was determined on the

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:

September 30, 2024 September 30, 2023

12 unchanged sentences

Treasury securities with maturities equivalent to the expected term.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

A summary of stock option activity for the year ended September 30, 2024 is as follows:

11 unchanged sentences

The total fair value of stock options that vested during the year ended September 30, 2024 was $ 25,404 .

In connection with the sale of the Merchant Services Business, the Company fully accelerated the vesting period for 188,482 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 CONSOLIDATED FINANCIAL STATEMENTS

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

A summary of activity related to restricted stock units as of September 30, 2024 is as follows:

7 unchanged sentences

As of September 30, 2024, total unrecognized compensation expense related to unvested RSUs, including an estimate for pre-vesting forfeitures, was $ 9,898 , which is expected to be recognized over a weighted average period of 2.8 years.

The total fair value of RSUs that vested during the year ended September 30, 2024 was $ 8,989 .

In connection with the sale of the Merchant Services Business, the Company fully accelerated the vesting period for 173,230 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 under these leases amounted to $ 5,881 , $ 5,992 and $ 4,400 during the years ended September 30, 2023, 2022 and 2021,

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

respectively.

Rent expense from continuing operations under these leases amounted to $ 4,190 , $ 4,396 and $ 4,665 during the years ended September 30, 2024, 2023 and 2022, respectively.

Refer to Note 13 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 it would have received if the Company had submitted the required minimum number of transactions.

As of September 30, 2023, such minimum fee commitments were as follows:

Years ending September 30:

Total $ 5,070

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.

2 unchanged sentences

However, the Company in some instances may be unable to estimate an amount of possible loss or range of loss based on the significant uncertainties involved in, or the preliminary nature of, any such material matter, and in these instances the Company will disclose the nature of the contingency and describe why the Company is unable to determine an estimate of possible loss or range of loss.

The Company is involved in ordinary course legal proceedings, which include all claims, lawsuits, investigations and proceedings, including unasserted claims, which are probable of being asserted, arising in the ordinary course of business.

The Company has considered all such ordinary course legal proceedings in formulating its disclosures and assessments.

After taking into consideration the evaluation of such legal matters by the Company's legal counsel, the Company's management believes at this time such matters will not have a material impact on the Company's consolidated balance sheet, results of operations or cash flows.

i3 VERTICALS, Inc.

1 unchanged sentence

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

The Company has considered all such ordinary course legal proceedings in formulating its disclosures and assessments.

S&S Litigation

On June 2, 2021, the State of Louisiana, Division of Administration (the “State”) and a putative class of Louisiana law enforcement districts (collectively "Plaintiffs") filed a Petition (as amended on October 4, 2021, the “Petition”), in the 19 th Judicial District Court for the Parish of East Baton Rouge against i3-Software & Services, LLC (“S&S”), a subsidiary of the Company located in Shreveport, Louisiana, the Company, i3 Verticals, LLC, the current leader of the S&S business, the former leader of the S&S business, and 1120 South Pointe Properties, LLC (“South Pointe”), the former owner of the assets of the S&S business (collectively "Defendants") .

On June 2, 2021, the State of Louisiana, Division of Administration (the “State”) and a putative class of Louisiana sheriffs and law enforcement districts (collectively "Plaintiffs") filed a Petition (as amended on October 4, 2021, the “Petition”), in the 19 th Judicial District Court for the Parish of East Baton Rouge against i3-Software & Services, LLC (“S&S”), a subsidiary of the Company located in Shreveport, Louisiana, the Company, i3 Verticals, LLC, the current leader of the S&S business, the former leader of the S&S business, and 1120 South Pointe Properties, LLC (“South Pointe”), the former owner of the assets of the S&S business (collectively "Defendants") .

See State of Louisiana, by and through its Division of Administration, East Baton Rouge Parish Law Enforcement District, by and through the duly elected East Baton Rouge Parish Sheriff, Sid J.

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and Scott Carrington .

The Petition was amended on October 4, 2021 to add a putative class of Louisiana sheriffs (the “Sheriffs”) 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 Sheriffs, 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 Parish law enforcement districts and alleged inadequacies in the Company’s cybersecurity practices.

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 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.

Plaintiffs moved to remand the action to state court on November 5, 2021, and the motion was referred to a magistrate to make a report and recommendation to the district court judge.

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

The parties await a decision on that motion.

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.

All Defendants have filed pleading-stage motions to dismiss, some of which were granted.

The Court is allowing plaintiffs to re-plead certain claims and has severed the claims brought by the Division of Administration from the claims brought by the parish Sheriffs and Districts.

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.

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While we do not believe that this matter will have a material adverse effect on our business or financial condition, we cannot give assurance that this matter will not have a material effect on our results of operations or cash flows for the period in which it is resolved.

The Company's subsidiary CP-PS, LLC has certain indemnification obligations in favor of FDS Holdings, Inc.

related to the acquisition of certain assets of Merchant Processing Solutions, LLC in February 2014.

The Company has incurred expenses related to these indemnification obligations in prior periods and may have additional expenses in the future.

However, after taking into consideration the evaluation of such matters by the Company’s legal counsel, the Company’s management believes at this time that the anticipated outcome of any existing or potential indemnification liabilities related to this matter will not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

i3 VERTICALS, Inc.

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As of September 30, 2024, the total amount due under the Tax Receivable Agreement was $ 39,197 .

In April 2016, the Company entered into a purchase agreement to purchase certain assets of Axia, LLC.

On April 29, 2016, the Company entered into a Processing Services Agreement (the “AxiaMed Agreement”) with Axia Technologies, LLC (which has since been incorporated as Axia Technologies, Inc., doing business as AxiaMed (“AxiaMed”)), an entity controlled by the previous owner of Axia, LLC.

Under the AxiaMed Agreement, the Company agreed to provide processing services for certain merchants as designated by AxiaMed from time to time.

In accordance with ASC 606-10-55, revenue from the processing services is recognized net of interchange, residual expense and other fees.

In March 2021, the Company became aware of an observable price change in the AxiaMed equity investment, due to a planned third party acquisition of AxiaMed.

This resulted in an increase of $ 2,353 to the fair value of the AxiaMed investment at March 31, 2021, which the Company recognized in other income.

On April 1, 2021, AxiaMed was sold to a third party and the Company received $ 2,453 for its investment in AxiaMed.

Greg Daily, the Company’s chief executive officer;

Clay Whitson, the Company’s chief financial officer;

and the Company no longer have ownership interest in AxiaMed following the sale.

The Company earned net revenues related to the AxiaMed Agreement of $ 117 during the year ended September 30, 2021.

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.

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

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

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

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.

As noted above, on September 20, 2024, the Company completed the transactions contemplated by the Purchase Agreement dated June 26, 2024, and sold the equity interests of the Acquired Entities comprising the Merchant Services Business.

The Merchant Services Business comprised the Company's entire former Merchant Services segment and a small portion of the Company's former Software and Services segment.

As a result of the sale of the Merchant Services Business, the historical results of the Merchant Services Business have been reflected as discontinued operations in our consolidated financial statements, and the Company no longer presents a Merchant Services segment.

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

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

The Company has since updated its segmentation, and the core business consists of two new operating segments and reportable segments, Public Sector and Healthcare.

The Public Sector has products and solutions that create an efficient flow of information throughout a variety of public sector entities.

We serve customers at both the state and local level and our geographic reach covers most of the United States and some of Canada.

Our solutions help our customers provide more responsive and efficient services to their citizens and stakeholders.

The Healthcare segment is dedicated to delivering integrated solutions across the healthcare ecosystem, catering to providers and payers, with a strong emphasis on enhancing process efficiency and ensuring compliance.

The Other category includes corporate overhead expenses, technology resources shared across segments and inter-segment eliminations.

The Company has since updated its intercompany transactions and allocations to adhere to the updated segment structure, which includes Public Sector intercompany, Healthcare intercompany, and intercompany locations within its business.

As described above, these transactions include, but are not limited to, resources shared across segments and also exist to eliminate revenue and cost between components that should not be included on a consolidated basis.

Although our intercompany structure and allocations have changed due to our updated segments, this reporting is consistent with our accounting policies from prior periods.

i3 VERTICALS, Inc.

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(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 is a component of other cost of services.

The following is a summary of reportable segment operating performance for the years ended September 30, 2023, 2022 and 2021.

The Company primarily uses adjusted EBITDA margin to measure operating performance and for purposes of making decisions about allocating resources to our business segments.

The following is a summary of reportable segment operating performance for continuing operations for the years ended September 30, 2024, 2023 and 2022.

As of and for the Year ended September 30, 2024

Software and Services Merchant Services Other Total

Public Sector Healthcare Other Total

Revenue $ 184,841 $ 45,566 $ ( 484 ) $ 229,923

Other costs of services 16,125 2,932 ( 484 ) 18,573

Residuals 2,214 41,460 ( 32 ) 43,642

Processing margin $ 219,079 $ 114,281 $ ( 31 ) $ 333,329

Residuals 43,642

Selling general and administrative 219,736

Recurring cash SG&A expenses (1)

95,500 33,622 23,920 153,042

Total adjusted EBITDA $ 73,216 $ 9,012 $ ( 23,920 ) $ 58,308

Adjusted EBITDA Margin (2)

40 % 20 % n/m

Non-recurring or non-cash SG&A expenses

Stock compensation expense $ 18,178

M&A-related expenses 3,161

Other taxes and one-time expenses 2,009

Depreciation and amortization 28,796

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Income from operations 6,854

Other expenses

Interest expense, net 29,263

Other income ( 3,395 )

Total other expenses 25,868

Loss before income taxes $ ( 19,014 )

Total assets $ 490,328 $ 90,801 $ 149,546 $ 730,675

Goodwill $ 233,850 $ 46,828 $ — $ 280,678

n/m = not meaningful

____________________

Recurring cash SG&A expenses represents recurring operating costs such as people, technology, facilities, sales and marketing.

Adjusted EBITDA Margin represents adjusted EBITDA as a percentage of revenue.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

As of and for the Year ended September 30, 2023

Software and Services Merchant Services Other Total

Public Sector Healthcare Other Total

Revenue $ 182,214 $ 44,583 $ ( 75 ) $ 226,722

Other costs of services 13,326 2,103 ( 74 ) 15,355

Residuals 1,602 36,666 ( 33 ) 38,235

Processing margin $ 181,226 $ 101,500 $ 4 $ 282,730

Residuals 38,235

Selling general and administrative 193,790

Recurring cash SG&A expenses (1)

95,397 33,242 23,329 151,968

Total adjusted EBITDA $ 73,491 $ 9,238 $ ( 23,330 ) $ 59,399

Adjusted EBITDA Margin (2)

40 % 21 % n/m

Non-recurring or non-cash SG&A expenses

Stock compensation expense $ 23,723

M&A-related expenses 1,140

Other taxes and one-time expenses 900

Depreciation and amortization 26,438

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Loss from operations ( 3,569 )

Other expenses

Interest expense, net 25,128

Other income ( 1,224 )

Total other expenses 23,904

Loss before income taxes $ ( 27,473 )

Total assets $ 482,602 $ 96,918 $ 68,274 $ 647,794

Goodwill $ 221,155 $ 46,828 $ — $ 267,983

n/m = not meaningful

____________________

Recurring cash SG&A expenses represents recurring operating costs such as people, technology, facilities, sales and marketing.

Adjusted EBITDA Margin represents adjusted EBITDA as a percentage of revenue.

i3 VERTICALS, Inc.

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As of and for the Year ended September 30, 2022

Software and Services Merchant Services Other Total

Public Sector Healthcare Other Total

Revenue $ 143,951 $ 43,823 $ ( 22 ) $ 187,752

Other costs of services 11,162 1,729 ( 57 ) 12,834

Residuals 1,147 29,842 ( 2,071 ) 28,918

Processing margin $ 106,970 $ 90,478 $ ( 2,112 ) $ 195,336

Residuals 28,918

Selling general and administrative 134,872

Recurring cash SG&A expenses (1)

78,280 32,948 20,202 131,430

Total adjusted EBITDA $ 54,509 $ 9,146 $ ( 20,167 ) $ 43,488

Adjusted EBITDA Margin (2)

38 % 21 % n/m

Non-recurring or non-cash SG&A expenses

Stock compensation expense $ 22,655

M&A-related expenses 2,101

Other taxes and one-time expenses 480

Depreciation and amortization 19,330

Change in fair value of contingent consideration 22,063

Loss from operations $ ( 12 )

Income from operations ( 23,141 )

Other expenses

Interest expense, net 14,775

Other expense 991

Total other expenses 15,766

Loss before income taxes $ ( 38,907 )

Total assets $ 373,353 $ 108,950 $ 56,699 $ 539,002

Goodwill $ 168,095 $ 46,828 $ — $ 214,923

n/m = not meaningful

____________________

Recurring cash SG&A expenses represents recurring operating costs such as people, technology, facilities, sales and marketing.

Adjusted EBITDA Margin represents adjusted EBITDA as a percentage of revenue.

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 CONSOLIDATED FINANCIAL STATEMENTS

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

NON-CONTROLLING INTEREST

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owned 23,882,035 and 23,253,272 of i3 Verticals, LLC's Common Units, representing a 70.4 % and 69.7 % economic ownership interest in i3 Verticals, LLC.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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:

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2024 2023 2022

Net loss attributable to non-controlling interest $ ( 1,841 ) $ ( 6,115 ) $ ( 3,382 )

Net income (loss) attributable to non-controlling interest $ 61,789 $ ( 1,841 ) $ ( 6,115 )

Transfers to (from) non-controlling interests:

Distributions to non-controlling interest holders ( 25,608 ) — —

Redemption of common units in i3 Verticals, LLC ( 576 ) ( 224 ) ( 918 )

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Change from net income attributable to non-controlling interests and transfers to non-controlling interests $ 44,075 $ 2,240 $ 4,478

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

EARNINGS PER SHARE

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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 CONSOLIDATED FINANCIAL STATEMENTS

(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:

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:

Year ended September 30,

2024 2023 2022

Basic net loss per share:

Basic and diluted net loss per share:

$ ( 13,346 ) $ ( 23,685 ) $ ( 39,059 )

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23,419,421 23,137,586 22,249,656

Basic net loss per share (2)

Basic and diluted net loss per share (1)(2)(3)

$ ( 0.38 ) $ ( 0.68 ) $ ( 1.22 )

Dilutive net loss per share (4) :

Net loss attributable to Class A common stockholders

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Reallocation of net loss assuming conversion of common units (5)

For the year ended September 30, 2024, 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 earnings per share of Class A common stock:

10,067,399 shares of weighted average Class A common stock, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive,

7,701,564 options to purchase shares of Class A common stock, were excluded because the exercise price of these 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

392,343 shares of Class A common stock, resulting from estimated stock option exercises as calculated by the treasury stock method were excluded because the effect of including them would have been anti-dilutive.

For the year ended September 30, 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 earnings per share of Class A common stock:

10,109,247 shares of weighted average Class A common stock, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive,

5,580,144 options to purchase shares of Class A common stock, were excluded because the exercise price of these 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

723,898 shares of Class A common stock, resulting from estimated stock option exercises as calculated by the treasury stock method were excluded because the effect of including them would have been anti-dilutive.

For the year ended September 30, 2022, 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 earnings per share of Class A common stock:

10,170,668 shares of weighted average Class A common stock, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive,

4,580,844 options to purchase shares of Class A common stock, were excluded because the exercise price of these 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

679,858 shares of Class A common stock, resulting from estimated stock option exercises as calculated by the treasury stock method were excluded because the effect of including them would have been anti-dilutive.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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 discontinued operations:

Year ended September 30,

2024 2023 2022

Net loss attributable to Class A common stockholders - diluted

Basic net income per share:

$ 188,476 $ 21,033 $ 15,842

Net income attributable to non-controlling interests 66,213 6,022 5,713

Net income attributable to Class A common stockholders $ 122,263 $ 15,011 $ 10,129

Weighted average shares of Class A common stock outstanding

23,419,421 23,137,586 22,249,656

Basic net income per share $ 5.22 $ 0.65 $ 0.46

Dilutive net loss per share:

Net income attributable to Class A common stockholders $ 122,263 $ 15,011 $ 10,129

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

50,342 4,549 4,290

Net income attributable to Class A common stockholders - diluted $ 172,605 $ 19,560 $ 14,419

Weighted average shares of Class A common stock outstanding

23,419,421 23,137,586 22,249,656

Weighted average effect of dilutive securities (2)

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33,879,163 33,970,731 33,100,182

Diluted net loss per share

$ ( 0.07 ) $ ( 0.22 )

Diluted net income per share $ 5.09 $ 0.58 $ 0.44

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Excludes 6,706 shares of restricted Class A common stock for the year ended September 30, 2021.

For the year ended September 30, 2021, the following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted earnings per share of Class A common stock:

2,495,922 options to purchase shares of Class A common stock for the year ended September 30, 2021, were excluded because the exercise price of these 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

1,471,027 shares of Class A common stock for the year ended September 30, 2021, resulting from estimated stock option exercises as calculated by the treasury stock method, and 6,706 shares of restricted Class A common stock for the year ended September 30, 2021 were excluded because the effect of including them would have been anti-dilutive.

For the year ended September 30, 2022, 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 earnings per share of Class A common stock:

10,170,668 shares of weighted average Class A common stock for the year ended September 30, 2022, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive,

4,580,844 options to purchase shares of Class A common stock for the year ended September 30, 2022, were excluded because the exercise price of these 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

679,858 shares of Class A common stock for the year ended September 30, 2022, resulting from estimated stock option exercises as calculated by the treasury stock method were excluded because the effect of including them would have been anti-dilutive.

For the year ended September 30, 2023, the following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted earnings per share of Class A common stock:

5,580,144 options to purchase shares of Class A common stock for the year ended September 30, 2023, were excluded because the exercise price of these 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 CONSOLIDATED FINANCIAL STATEMENTS

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

723,898 shares of Class A common stock for the year ended September 30, 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.

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 11 above and assuming all common units of i3 Verticals, LLC were exchanged for Class A common stock at the beginning of the year.

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 year.

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 12 above and assuming all common units of i3 Verticals, LLC were exchanged for Class A common stock at the beginning of the period.

For the years ended September 30, 2024, 2023 and 2022 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:

7,701,564 , 5,580,144 and 4,580,844 stock options for years ended September 30, 2024, 2023 and 2022, 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.

Since 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.

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Refer to Note 11 for further discussion regarding the Exchangeable Notes.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Shares of the Company's Class B common stock do not participate in the earnings or losses of the Company and are therefore not participating securities.

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SIGNIFICANT NON-CASH TRANSACTIONS

The Company engaged in the following significant non-cash investing and financing activities during the years ended September 30, 2023, 2022, and 2021:

The Company engaged in the following significant non-cash investing and financing activities during the years ended September 30, 2024, 2023, and 2022, which are reported on a consolidated basis.

See Note 2 for significant non-cash investing and financing activities from discontinued operations for major captions on the consolidated financial statements.

Year ended September 30,

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Right-of-use assets obtained in exchange for operating lease obligations $ 2,605 $ 927 $ 7,846

SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing of this Annual Report on Form 10-K, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements.

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

QUARTERLY INFORMATION (UNAUDITED)

The tables below present summarized unaudited quarterly results of operations for the years ended September 30, 2024 and 2023.

Management believes that all necessary adjustments have been included in the amounts stated below for a fair presentation of the results of operations for the periods presented when read in conjunction with the consolidated financial statements for the years ended September 30, 2024 and 2023.

Results of operations for a particular quarter are not necessarily indicative of results of operations for an annual period and are not predictive of future periods.

Three Months Ended

September 30, June 30, March 31, December 31,

Fiscal Year 2024:

Revenue $ 60,864 $ 56,037 $ 57,968 $ 55,054

Other costs of services

5,033 4,722 4,703 4,115

Income (loss) from operations 3,554 ( 669 ) 2,486 1,485

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

6,329 ( 10,656 ) ( 1,709 ) ( 2,885 )

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

111,581 3,111 3,587 3,983

Net income attributable to i3 Verticals, Inc.

$ 117,910 $ ( 7,545 ) $ 1,878 $ 1,098

Basic earnings (loss) per share from continuing operations attributable to i3 Verticals, Inc $ 0.27 $ ( 0.45 ) $ ( 0.07 ) $ ( 0.12 )

Diluted earnings (loss) per share from continuing operations attributable to i3 Verticals, Inc.

$ 0.20 $ ( 0.45 ) $ ( 0.07 ) $ ( 0.12 )

Basic earnings per share from discontinued operations attributable to i3 Verticals, Inc $ 4.72 $ 0.13 $ 0.15 $ 0.17

Diluted earnings per share from discontinued operations attributable to i3 Verticals, Inc.

$ 4.60 $ 0.13 $ 0.15 $ 0.16

Fiscal Year 2023:

Revenue $ 58,584 $ 57,260 $ 59,167 $ 51,712

Other costs of services

4,083 3,944 3,990 3,338

Income (loss) from operations 1,255 ( 4,577 ) 313 ( 558 )

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

569 ( 8,040 ) ( 4,071 ) ( 4,280 )

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

3,979 2,885 4,107 4,040

Net income attributable to i3 Verticals, Inc.

$ 4,548 $ ( 5,155 ) $ 36 $ ( 240 )

Basic earnings (loss) per share from continuing operations attributable to i3 Verticals, Inc.

$ 0.02 $ ( 0.35 ) $ ( 0.18 ) $ ( 0.19 )

Diluted loss per share from continuing operations attributable to i3 Verticals, Inc.

$ ( 0.02 ) $ ( 0.35 ) $ ( 0.18 ) $ ( 0.19 )

Basic earnings per share from discontinued operations attributable to i3 Verticals, Inc $ 0.17 $ 0.12 $ 0.18 $ 0.18

Diluted earnings per share from discontinued operations attributable to i3 Verticals, Inc.

$ 0.13 $ 0.12 $ 0.15 $ 0.16

i3 VERTICALS, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

For the three months ended September 30, 2024;

June 30, 2024;

March 31, 2024;

and December 31, 2023 the following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net earnings per share of Class A common stock from continuing operations:

10,032,676 , 10,052,017 , 10,091,604 and 10,093,394 shares of weighted average Class A common stock, along with the reallocation of net income assuming conversion of these shares, for the three months ended September 30, 2024;

June 30, 2024;

March 31, 2024;

and December 31, 2023, respectively, were excluded because the effect would have been anti-dilutive,

6,679,386 , 7,764,984 , 7,852,595 and 7,496,394 stock options for the three months ended September 30, 2024;

June 30, 2024;

March 31, 2024;

and December 31, 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

479,859 , 234,503 , 387,235 and 467,777 shares of Class A common stock, resulting from estimated stock option exercises as calculated by the treasury stock method for the three months ended September 30, 2024;

June 30, 2024;

March 31, 2024;

and December 31, 2023, respectively, were excluded because the effect of including them would have been anti-dilutive.

For the three months ended September 30, 2023;

June 30, 2023;

March 31, 2023;

and December 31, 2022 the following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net earnings per share of Class A common stock from continuing operations:

10,099,678 , 10,108,218 , 10,110,975 and 10,118,142 shares of weighted average Class A common stock, along with the reallocation of net income assuming conversion of these shares, for the three months ended September 30, 2023;

June 30, 2023;

March 31, 2023;

and December 31, 2022, respectively, were excluded because the effect would have been anti-dilutive,

5,672,144 , 5,729,321 , 4,018,042 and 5,652,711 stock options for the three months ended September 30, 2023;

June 30, 2023;

March 31, 2023;

and December 31, 2022, 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

675,004 , 557,728 , 1,022,267 and 696,427 shares of Class A common stock, resulting from estimated stock option exercises as calculated by the treasury stock method for the three months ended September 30, 2023;

June 30, 2023;

March 31, 2023;

and December 31, 2022, respectively, were excluded because the effect of including them would have been anti-dilutive.

For the three months ended September 30, 2024;

June 30, 2024;

March 31, 2024;

and December 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 from discontinued operations:

10,052,017 and 10,091,604 shares of weighted average Class A common stock, along with the reallocation of net income assuming conversion of these shares, for the three months ended June 30, 2024 and March 31, 2024, respectively, were excluded because the effect would have been anti-dilutive,

6,679,386 , 7,764,984 , 7,852,595 and 7,496,394 stock options for the three months ended September 30, 2024;

June 30, 2024;

March 31, 2024;

For the three months ended September 30, 2023;

June 30, 2023;

March 31, 2023;

and December 31, 2022 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 from discontinued operations:

10,108,218 shares of weighted average Class A common stock, along with the reallocation of net income assuming conversion of these shares, for the three months ended June 30, 2023, were excluded because the effect would have been anti-dilutive,

5,672,144 , 5,729,321 , 4,018,042 and 5,652,711 stock options for the three months ended September 30, 2023;

June 30, 2023;

March 31, 2023;

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.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

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-K

Item 8. Financial Statements and Supplementary Data