What changed in this filing

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Item 1. Financial Statements

2025-02-07 compared with 2024-08-09 · 487 added, 487 removed, 681 unchanged (59% of the section changed)

3 unchanged sentences

(In thousands, except share amounts)

June 30, September 30,

December 31, September 30,

Current assets

3 unchanged sentences

Prepaid expenses and other current assets 15,006 10,232

Current assets held for sale 237,002 17,269

Total current assets 153,105 153,393

7 unchanged sentences

Other assets 9,167 6,696

Long-term assets held for sale — 219,354

Total assets $ 726,229 $ 730,675

7 unchanged sentences

Current portion of operating lease liabilities 3,345 3,505

Current liabilities held for sale 13,953 12,197

Total current liabilities 163,431 164,731

Long-term debt, less current portion and debt issuance costs, net 347,892 385,081

Long-term tax receivable agreement obligations 29,326 29,347

1 unchanged sentence

Other long-term liabilities 16,915 14,921

Long-term liabilities held for sale — 2,530

Total liabilities 215,095 215,316

2 unchanged sentences

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

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

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

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

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

23,437,250 and 23,882,035 shares issued and outstanding as of December 31, 2024 and September 30, 2024, respectively

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

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

10,015,099 and 10,032,676 shares issued and outstanding as of December 31, 2024 and September 30, 2024, respectively

Additional paid-in capital 272,532 279,335

Accumulated deficit ( 17,513 ) ( 12,944 )

Accumulated earnings 102,453 100,397

Total stockholders' equity 374,988 379,735

6 unchanged sentences

(In thousands, except share and per share amounts)

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

2024 2023 2024 2023

Three months ended December 31,

Revenue $ 61,691 $ 55,054

Operating expenses

Other costs of services 4,722 3,944 13,540 11,272

Other costs of services (excluding depreciation and amortization) (1)

21,031 19,577

Selling, general and administrative (1)

28,900 27,175

Depreciation and amortization 7,684 7,054

1 unchanged sentence

Total operating expenses 58,992 53,569

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

Other expenses (income)

Interest expense, net 7,906 6,725 22,307 18,414

Other income — ( 92 ) ( 2,150 ) ( 295 )

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

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

Income from operations 2,699 1,485

Other (income) expenses

Interest expense 680 6,687

Other (income) expense ( 1,826 ) 107

Total other (income) expenses ( 1,146 ) 6,794

Income (loss) before income taxes 3,845 ( 5,309 )

Provision for (benefit from) income taxes 523 ( 1,094 )

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

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

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

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

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

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

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

Net income (loss) from continuing operations 3,322 ( 4,215 )

Net (loss) income from discontinued operations, net of income taxes ( 214 ) 5,751

Net income 3,108 1,536

Net income (loss) from continuing operations attributable to non-controlling interest 1,128 ( 1,330 )

Net (loss) income from discontinued operations attributable to non-controlling interest ( 76 ) 1,768

Net income attributable to non-controlling interest 1,052 438

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

2,194 ( 2,885 )

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

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

( 138 ) 3,983

Net loss attributable to i3 Verticals, Inc.

Net income attributable to i3 Verticals, Inc.

$ 2,056 $ 1,098

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

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

Basic $ 0.09 $ ( 0.12 )

Diluted $ 0.09 $ ( 0.12 )

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

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

Basic $ ( 0.01 ) $ 0.17

Diluted $ ( 0.01 ) $ 0.16

Net loss per share attributable to Class A common stockholders:

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

Weighted average shares of Class A common stock outstanding:

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

Basic, for continuing operations 23,551,352 23,267,290

Diluted, for continuing operations 34,057,196 23,267,290

Basic, for discontinued operations 23,551,352 23,267,290

Diluted, for discontinued operations 23,551,352 33,828,461

_________________________________________

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

See Notes to the Interim Condensed Consolidated Financial Statements

7 unchanged sentences

Net income — — — — — 2,056 1,052 3,108

Exercise of equity-based awards 25,898 — — — ( 10 ) — — ( 10 )

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

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

Allocation of equity to non-controlling interests — — — — ( 2,450 ) — 2,450 —

Balance at December 31, 2023 23,279,170 2 10,093,394 1 254,562 ( 11,846 ) 94,437 337,156

Equity-based compensation — — — — 5,777 — — 5,777

Net income — — — — — 1,878 1,470 3,348

Redemption of common units in i3 Verticals, LLC 17,577 — ( 17,577 ) — 237 — ( 237 ) —

Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — 14 — — 14

Exercise or release of equity-based awards 96,630 — — — ( 223 ) — — ( 223 )

Allocation of equity to non-controlling interests — — — — ( 1,300 ) — 1,300 —

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

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

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

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

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

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

Exercise of equity-based awards 34,423 — — — 29 — — 29

Repurchases of Class A common stock ( 496,785 ) — — — ( 11,190 ) — — ( 11,190 )

Allocation of equity to non-controlling interests — — — — 293 — ( 293 ) —

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

See Notes to the Interim Condensed Consolidated Financial Statements

i3 Verticals, Inc.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (CONTINUED)

(In thousands, except share amounts)

Balance at December 31, 2024 23,437,250 $ 2 10,015,099 $ 1 $ 272,532 $ 102,453 $ 136,146 $ 511,134

Class A Common Stock Class B Common Stock Additional Paid-In Capital Retained Earnings (Deficit) Non-Controlling Interest Total Equity

1 unchanged sentence

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 — — — — 6,508 — — 6,508

Net (loss) income — — — — — ( 240 ) 409 169

Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — 685 — — 685

Net income — — — — — 1,098 438 1,536

Exercise of equity-based awards 25,898 — — — ( 10 ) — — ( 10 )

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

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

Allocation of equity to non-controlling interests — — — — ( 2,450 ) — 2,450 —

Balance at December 31, 2023 23,279,170 $ 2 10,093,394 $ 1 $ 254,562 $ ( 11,846 ) $ 94,437 $ 337,156

Equity-based compensation — — — — 6,802 — — 6,802

Net loss — — — — — 36 ( 228 ) ( 192 )

Redemption of common units in i3 Verticals, LLC 9,924 — ( 9,924 ) — 86 — ( 86 ) —

Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — 349 — — 349

Exercise of equity-based awards 64,443 — — — ( 606 ) — — ( 606 )

Allocation of equity to non-controlling interests — — — — ( 2,205 ) — 2,205 —

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

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

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

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

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

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

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

See Notes to the Interim Condensed Consolidated Financial Statements

2 unchanged sentences

(In thousands)

Nine months ended June 30,

Three months ended December 31,

Cash flows from operating activities:

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

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

Net income $ 3,108 $ 1,536

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

Depreciation and amortization 7,684 9,739

1 unchanged sentence

Amortization of debt issuance costs 280 414

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

Loss on sale of exchangeable senior note hedges 245 —

Gain on repurchases of warrants ( 105 ) —

Provision for deferred income taxes 4,078 1,860

(Benefit from) provision for deferred income taxes ( 715 ) 182

Non-cash lease expense 864 1,184

27 unchanged sentences

(In thousands)

Nine months ended June 30,

Three months ended December 31,

Cash flows from financing activities:

1 unchanged sentence

Payments on revolving credit facility ( 1,743 ) ( 71,661 )

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

Proceeds from sale of exchangeable senior note hedges — 250

Payments for repurchases of warrants — ( 119 )

Payments of debt issuance costs ( 906 ) ( 694 )

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

Payments for repurchases of Class A common stock ( 11,190 ) —

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

573 ( 1,355 )

Cash paid for contingent consideration ( 760 ) ( 4,835 )

Payments for required distributions to members for tax obligations — ( 155 )

1 unchanged sentence

Payments for employee's tax withholdings from net settled stock option exercises and RSU releases — ( 204 )

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

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

Net cash used in financing activities ( 10,467 ) ( 8,550 )

Net decrease in cash, cash equivalents and restricted cash ( 390 ) ( 1,316 )

Cash, cash equivalents and restricted cash at beginning of period 89,597 12,400

4 unchanged sentences

_________________________________________

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

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

The following tables provide reconciliations of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to that shown in the condensed consolidated statements of cash flows:

18 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 software solutions seamlessly integrated with our proprietary payment facilitator platform to customers in strategic vertical markets.

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

12 unchanged sentences

DISCONTINUED OPERATIONS

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

In this regard, on June 26, 2024, i3 Verticals, Inc., i3 Verticals, LLC and i3 Holdings Sub, Inc., a wholly-owned subsidiary of i3 Verticals, LLC, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Payroc Buyer, LLC ("Payroc") and Payroc WorldAccess LLC.

Pursuant to the terms of the Purchase Agreement, Payroc would purchase the equity interests of certain direct and indirect wholly-owned subsidiaries of i3 Verticals, LLC and i3 Holdings Sub, Inc.

(such wholly-owned subsidiaries, the "Acquired Entities") comprising the Merchant Services segment as well as certain non-core assets within the Company's Software and Services segment related to the Non-profit and Property Management vertical markets, including its associated proprietary technology (collectively, the "Merchant Services Business"), after giving effect to the contribution of certain assets (the "Contribution") and the assignment of certain liabilities associated with the Merchant Services Business from i3 Verticals, LLC and certain affiliates thereof to the Acquired Entities pursuant to a contribution agreement to be entered into immediately prior to the closing of the transactions pursuant to the Purchase Agreement (such transactions, collectively, the "Transactions").

The purchase price payable by Payroc to the Company for the equity interests of the Merchant Services Business would be $ 440,000 (the “Purchase Price”), payable in cash upon the closing of the Transactions, subject to adjustments for closing net working capital and other purchase price adjustments provided in the Purchase Agreement.

The closing of the Transactions is subject to certain closing conditions set forth in the Purchase Agreement, including the expiration or termination of the waiting period applicable to the Transactions under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Waiting Period"), the absence of certain legal impediments, the accuracy of the representations of the other party (subject to certain materiality qualifiers specified in the Purchase Agreement), the compliance by the other party of its covenants under the Purchase Agreement in all material respects, and, in the case of Payroc's closing obligations, the delivery by the Company of certain consents associated with the Merchant Services Business and the absence of any material adverse effect with respect to the Merchant Services Business.

The HSR Waiting Period expired on August 5, 2024.

The consummation of the sale is expected to occur during the three months ending September 30, 2024.

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

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 Merchant Services Business from i3 Verticals, LLC and certain affiliates to the Acquired Entities pursuant to a contribution agreement which was entered into immediately prior to the Closing (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

i3 VERTICALS, Inc.

1 unchanged sentence

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

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

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

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

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

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

Aggregate costs incurred related to the Transactions during the nine months ended June 30, 2024 were approximately $ 2,626 and were expensed as incurred.

These costs include fees for third-party advisory, consulting, legal and professional services, as well as other items associated with the Transactions that are incremental in nature.

These costs were primarily incurred during the second and third fiscal quarters of the year ended September 30, 2024 and 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 condensed consolidated statements of operations.

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

June 30, September 30,

Current assets

Cash and cash equivalents $ — $ 7

Accounts receivable, net 16,158 14,325

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

Total current assets 18,668 17,269

Property and equipment, net 1,942 2,249

Restricted cash 200 200

Capitalized software, net 4,026 4,520

Goodwill 141,580 141,580

Intangible assets, net 62,276 63,803

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

Other assets 5,263 4,895

Total assets $ 237,002 $ 236,623

Liabilities and equity

Current liabilities

Accounts payable $ 4,712 $ 4,695

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

Deferred revenue 1,934 2,490

Current portion of operating lease liabilities 1,162 852

Total current liabilities 10,767 12,197

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

Other long-term liabilities 1,169 1,065

Total liabilities $ 13,953 $ 14,727

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

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

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

2024 2023 2024 2023

The following table presents financial results of Merchant Services Business for the three months ended December 31, 2024 and 2023:

Three months ended December 31,

Revenue $ — $ 36,936

3 unchanged sentences

Depreciation and amortization — 2,685

Change in fair value of contingent consideration — — — 14

Total operating expenses — 29,889

Income from operations — 7,047

Other expenses

Interest expense, net — 20

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

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

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

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

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

Other expense 253 —

Total other expenses 253 20

(Loss) income before income taxes from discontinued operations ( 253 ) 7,027

(Benefit from) provision for income taxes ( 39 ) 1,276

Net (loss) income from discontinued operations ( 214 ) 5,751

Net (loss) income from discontinued operations attributed to non-controlling interest ( 76 ) 1,768

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

$ ( 138 ) $ 3,983

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

The Company had no significant cash flow activity pertaining to discontinued operations in the three months ended December 31, 2024.

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

Nine months ended June 30,

Three months ended December 31, 2023

Depreciation and amortization $ 2,685

Equity-based compensation $ 1,150

Amortization of capitalized customer acquisition costs $ 211

Non-cash lease expense $ 261

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

Expenditures for property and equipment $ ( 189 )

1 unchanged sentence

Purchases of merchant portfolios and residual buyouts $ ( 2,883 )

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

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

Three months ended December 31, 2023

Consideration accrued for December 2023 residual buyout $ 476

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2 unchanged sentences

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

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

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

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

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

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

4 unchanged sentences

All intercompany accounts and transactions have been eliminated in consolidation.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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 the processing bank pursuant to agreements to cover potential merchant losses.

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

6 unchanged sentences

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

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

Settlement assets and settlement obligations were $ 1,205 as of December 31, 2024 and $ 632 as of September 30, 2024, respectively.

Reclassifications

3 unchanged sentences

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

Refer to Note 2 for additional information.

Change in presentation of certain costs to other costs of services

Following the disposal of the Company's Merchant Services Business in the fourth quarter of fiscal year 2024, the Company’s core business is providing software solutions for key verticals.

Given the change in the Company's business model, the Company has reclassified certain expenses to better align with the primary industry in which it now operates.

During the first quarter of fiscal year 2025, the Company revised its presentation of certain expenses in the Condensed Consolidated Statements of Operations from selling, general and administrative expenses to other costs of services.

The Company reclassified personnel costs related to installation of the Company's software, conversion of client data, training client personnel, customer support activities and various other services provided directly to customers from selling, general and administrative to other costs of services.

The Company also reclassified certain hosting and related software costs for directly supporting the Company's customers from selling, general and administrative to other costs of services.

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

This change has no impact on the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows or Condensed Consolidated Statement of Changes in Equity.

i3 VERTICALS, Inc.

1 unchanged sentence

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

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

Refer to Note 2 for additional information.

Change in presentation

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 Condensed Consolidated Statements of Cash Flows.

This change has no impact on the total operating expenses or earnings per share as illustrated below.

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

For the Three Months Ended December 31, 2023

As Previously Reported (1)

Adjustment As Adjusted

Operating expenses

Other costs of services 4,115 15,462 19,577

Selling, general and administrative 42,637 ( 15,462 ) 27,175

__________________________

This column is presented after giving effect to discontinued operations of the Merchant Services Business as discussed in Note 2.

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

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

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

1 unchanged sentence

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

For the Nine Months Ended June 30, 2024

For the Three Months Ended December 31, 2023

As Previously Reported Adjustment As Adjusted

5 unchanged sentences

Net cash used in financing activities ( 7,195 ) ( 1,355 ) ( 8,550 )

For the Nine Months Ended June 30, 2023

As Previously Reported Adjustment As Adjusted

Cash flows from operating activities:

Settlement obligations 3,253 ( 3,253 ) —

Net cash provided by operating activities 29,623 ( 3,253 ) 26,370

Cash flows from financing activities:

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

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

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

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

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

Inventories were $ 2,458 and $ 2,423 at December 31, 2024 and September 30, 2024, respectively, and are included within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

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 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.

The fair values of trade names and internally-developed software acquired are identified using the Relief from Royalty Method.

After the purchase price has been allocated, goodwill is recorded to the extent the total consideration paid for the acquisition, including the acquisition date fair value of

i3 VERTICALS, Inc.

1 unchanged sentence

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

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

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

The fair values of trade names and internally-developed software acquired are identified using the Relief from Royalty Method.

After the purchase price has been allocated, goodwill is recorded to the extent the total consideration paid for the acquisition, including the acquisition date fair value of contingent consideration, if any, exceeds the sum of the fair values of the separately identifiable acquired assets and assumed liabilities.

contingent consideration, if any, exceeds the sum of the fair values of the separately identifiable acquired assets and assumed liabilities.

Acquisition costs for business combinations are expensed when incurred and recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

1 unchanged sentence

An asset acquisition is recorded at its purchase price, inclusive of acquisition costs, which is allocated among the acquired assets and assumed liabilities based upon their relative fair values at the date of acquisition.

The Company adopted ASU 2016-02, Leases, on October 1, 2020, using the optional modified retrospective method under which the prior period financial statements were not restated for the new guidance.

Leases are recorded in accordance with ASC 842, Leases ("ASC 842).

The Company elected the accounting policy practical expedients for all classes of underlying assets to (i) combine associated lease and non-lease components in a lease arrangement as a combined lease component and (ii) exclude recording short-term leases as right-of-use assets on the condensed consolidated balance sheets.

15 unchanged sentences

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

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

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

• 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 three months ended December 31, 2024 and 2023 is derived from the following sources:

• 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.

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

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.

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

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 quantity 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.

1 unchanged sentence

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

4 unchanged sentences

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

Therefore, revenue allocated to the payment authorization performance obligation is presented net of interchange and card network fees paid to the card issuing banks and card networks, respectively, for the nine months ended June 30, 2024 and 2023.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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 three months ended December 31, 2024 and 2023.

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

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.

1 unchanged sentence

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 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 for continuing operations.

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

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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 SaaS, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to our software offerings;

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

• 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.

For the Three Months Ended June 30, 2024

For the Three Months Ended June 30, 2023

For the Three Months Ended December 31, 2024

Public Sector Healthcare Other Total

Software and related services revenue $ 33,203 $ 12,738 $ ( 266 ) $ 45,675

Payments revenue 11,867 10,895

Proprietary payments revenue 13,435 75 1 13,511

Other revenue 2,147 358 — 2,505

Total revenue $ 48,785 $ 13,171 $ ( 265 ) $ 61,691

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

For the Three Months Ended December 31, 2023

Public Sector Healthcare Other Total

Software and related services revenue $ 28,983 $ 11,135 $ ( 15 ) $ 40,103

Payments revenue 38,116 35,320

Proprietary payments revenue 12,630 56 ( 9 ) 12,677

Other revenue 1,885 389 — 2,274

Total revenue $ 43,498 $ 11,580 $ ( 24 ) $ 55,054

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

The 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, sales of SaaS, ongoing support or other stand-ready obligations and professional services

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

For the Three Months Ended June 30, 2024

For the Three Months Ended June 30, 2023

• 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 Three Months Ended December 31, 2024

Public Sector Healthcare Other Total

Revenue earned over time $ 45,665 $ 11,468 $ ( 266 ) $ 56,867

1 unchanged sentence

Total revenue $ 48,785 $ 13,171 $ ( 265 ) $ 61,691

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

For the Three Months Ended December 31, 2023

Public Sector Healthcare Other Total

Revenue earned over time $ 41,405 $ 11,440 $ ( 15 ) $ 52,830

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.

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

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 December 31, 2024 and September 30, 2024, the Company’s contract assets from contracts with customers was $ 8,723 and $ 8,680 , respectively.

Contract Liabilities

4 unchanged sentences

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

The terms for

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

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

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

Balance at September 30, 2024

2 unchanged sentences

Balance at December 31, 2024 $ 42,938

Deferral of revenue 11,005

Recognition of unearned revenue ( 12,820 )

Balance at March 31, 2024

Deferral of revenue 9,587

Recognition of unearned revenue ( 14,850 )

Balance at June 30, 2024

Balance at September 30, 2023

2 unchanged sentences

Balance at December 31, 2023

Deferral of revenue 9,418

Recognition of unearned revenue ( 13,206 )

Balance at March 31, 2023

Deferral of revenue 7,622

Recognition of unearned revenue ( 14,283 )

Balance at June 30, 2023

Costs to Obtain and Fulfill a Contract

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

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

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

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

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

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 December 31, 2024 and September 30, 2024, the Company had $ 936 and $ 857 , respectively, of capitalized contract costs, which relates to commissions paid to employees and agents as well as other incentives given to customers to obtain new sales,

i3 VERTICALS, Inc.

1 unchanged sentence

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

included within “Other assets" on the condensed consolidated balance sheets.

The Company recorded expense from continuing operations related to these costs of $ 31 for the three months ended December 31, 2024 and $ 18 for the three months ended December 31, 2023.

Other Cost of Services

Other costs of services include costs directly related to the Company's software and related services, such as hosting expenses.

Additionally, other costs of services include costs directly attributable related to payment processing services such as processing and bank sponsorships.

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

Additionally, other costs of services include costs directly attributable to payment processing services such as processing and bank sponsorship.

Losses resulting from chargebacks against a customer are included in other cost of services.

Residual payments to our distribution partners and the cost of equipment sold is also included in cost of services.

Residual payments to the Company's distribution partners and the cost of equipment sold is also included in cost of services.

Amortization arising from capitalized software development is not included in other cost of services.

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

Following the disposal of the Company's Merchant Services Business in the fourth quarter of fiscal year 2024, the Company’s core business is providing software solutions for key verticals.

Given the change in the Company's business model, the Company has reclassified certain expenses to better align with the primary industry in which it now operates.

The Company also reclassified certain hosting and related software costs for directly supporting the Company's customers from selling, general and administrative to other costs of services.

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

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

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of condensed consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Such estimates include, but are not limited to, the value of purchase consideration paid and identifiable assets acquired and assumed in acquisitions, goodwill and intangible asset impairment review, determination of performance obligations for revenue recognition, loss reserves, assumptions used in the calculation of equity-based compensation and in the calculation of income taxes, and certain tax assets and liabilities as well as the related valuation allowances.

9 unchanged sentences

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.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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.

4 unchanged sentences

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 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.

During the three months ended December 31, 2024, the Company did not acquire any businesses.

During the year ended September 30, 2024, the Company acquired the following businesses:

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

i3 VERTICALS, Inc.

1 unchanged sentence

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

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

Business Combinations during the nine months ended June 30, 2024

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

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

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

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

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

The acquired capitalized software have amortization periods of seven years .

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

Business Combinations during the year ended September 30, 2023

Purchase of Celtic Cross Holdings, Inc.

and Celtic Systems Pvt.

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

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

Celtic is within the Software and Services segment.

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

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

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

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

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

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

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

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 $ 294 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 12.

i3 VERTICALS, Inc.

1 unchanged sentence

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

Summary of Celtic Cross Holdings, Inc.

and Celtic Systems Pvt.

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

Summary of inLumon

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

Accounts receivable $ 3,060

Prepaid expenses and other current assets 103

Property and equipment 20

1 unchanged sentence

Customer relationships 11,800

Non-compete agreements 200

Trade name 100

1 unchanged sentence

Total assets acquired 29,466

Accounts payable 9

Accrued expenses and other current liabilities 1,692

Deferred revenue, current 297

Other long-term liabilities 13,162

Net assets acquired $ 27,477

Other Business Combinations during the year ended September 30, 2024

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

The total purchase consideration was $ 19,757 , including $ 16,997 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 this acquisition, the Company allocated approximately $ 159 of the consideration to net working capital, approximately $ 374 to property and equipment, approximately $ 670 to capitalized software, approximately $ 8,400 to customer relationships, approximately $ 100 to trade names, and the remainder, approximately $ 12,229 , to goodwill, of which $ 2,864 is deductible for tax purposes, and approximately $ 2,178 to other long-term liabilities.

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

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

During the three months ended December 31, 2023, 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.

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.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

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

June 30, September 30,

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

December 31, September 30,

Inventory $ 2,458 $ 2,423

5 unchanged sentences

$ 15,006 $ 10,232

__________________________

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill are as follows:

Public Sector Healthcare Other Total

Balance at September 30, 2024

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

Balance at June 30, 2024 (1)

$ 233,850 $ 46,828 $ — $ 280,678

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

Goodwill attributable to preliminary purchase price adjustments during the three months ended December 31, 2024 — — — —

Balance at December 31, 2024

$ 233,850 $ 46,828 $ — $ 280,678

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

Cost Accumulated

2 unchanged sentences

Customer relationships $ 199,720 $ ( 41,816 ) $ 157,904 9 to 25 years – accelerated or straight-line

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

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

Trade names 4,741 ( 3,233 ) 1,508 2 to 5 years – straight-line

Non-compete agreements and other intangible assets 359 ( 215 ) 144 3 to 8 years – straight-line

Total finite-lived intangible assets 204,820 ( 45,264 ) 159,556

3 unchanged sentences

$ 204,838 $ ( 45,264 ) $ 159,574

__________________________

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

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

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

2024 (three months remaining) $ 3,064

Amortization expense from continuing operations for intangible assets amounted to $ 3,243 for the three months ended December 31, 2024, and $ 3,146 and for the three months ended December 31, 2023.

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

2025 (nine months remaining) $ 9,720

Thereafter 101,454

3 unchanged sentences

ACCRUED EXPENSES AND OTHER LIABILITIES

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

June 30, September 30,

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

December 31, September 30,

Accrued wages, bonuses, commissions and vacation $ 7,362 $ 5,737

2 unchanged sentences

Escrow liabilities 2,200 2,174

Accrued tax distributions 22,185 24,276

Accrued income tax expense 31,670 30,520

Tax receivable agreement liability — current portion 9,897 9,850

Customer deposits 995 634

Employee health self-insurance liability 1,021 917

Accrued Hyland expenses 653 1,165

Accrued interchange 2,492 1,946

Other current liabilities 9,585 11,395

Other accrued liabilities related to the Sale of the Merchant Services Business 188 7,887

Accrued liabilities owed to sellers 228 355

Other accrued expenses 3,383 3,752

Accrued expenses and other current liabilities $ 82,997 $ 89,972

$ 22,827 $ 33,580

__________________________

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

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

June 30, September 30,

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

December 31, September 30,

Accrued contingent consideration — long-term portion $ 3,330 $ 1,636

2 unchanged sentences

Total other long-term liabilities $ 16,915 $ 14,921

$ 17,238 $ 23,078

__________________________

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

LONG-TERM DEBT, NET

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

June 30, September 30,

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

December 31, September 30,

Maturity 2024 2024

2 unchanged sentences

February 15, 2025 26,223 26,223

Debt issuance costs, net ( 3,508 ) ( 4,424 )

Total long-term debt, net of issuance costs 374,115 385,081

Total long-term debt 26,223 26,223

Less current portion of long-term debt ( 26,223 ) ( 26,223 )

Long-term debt, net of current portion $ — $ —

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

2020 Exchangeable Notes Offering

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

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

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

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

For a discussion of the terms of the Exchangeable Notes, refer to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

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

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

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

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 ending January 16, 2024.

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.

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

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

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

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

The fair value is classified as Level 2, as defined in Note 11.

Exchangeable Note Hedge Transactions

On February 12, 2020, concurrently with the pricing of the Exchangeable Notes, and on February 13, 2020, concurrently with the exercise by the initial purchasers of their right to purchase additional Exchangeable Notes, i3 Verticals, LLC entered into exchangeable note hedge transactions with respect to Class A common stock (the

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

The estimated fair value of the Exchangeable Notes was $ 26,053 as of December 31, 2024.

i3 VERTICALS, Inc.

1 unchanged sentence

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

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

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

The fair value is classified as Level 2, as defined in Note 12.

Exchangeable Note Hedge Transactions

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

20 unchanged sentences

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 Revolving Credit Facility

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

On January 18, 2024, in connection with the

i3 VERTICALS, Inc.

1 unchanged sentence

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

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

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

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

The 2023 Senior Secured Credit Facility provides for aggregate commitments of $ 450 million in the form of a senior secured revolving credit facility (the “Revolver”).

In addition, on June 26, 2024, the Borrower entered into the first amendment to the 2023 Senior Secured Credit Facility (the “Amendment”).

Among other things, the Amendment permitted the execution of the Purchase Agreement and the consummation of the sale of the Merchant Services Business.

Certain provisions of the Amendment were effective as of the date of the Amendment, and certain other provisions are to be effective upon the closing of the sale of the Merchant Services Business pursuant to the terms of the Purchase Agreement.

The 2023 Senior Secured Credit Facility provides that the Borrower has the right to seek additional commitments to provide additional term loan facilities or additional revolving credit commitments in an aggregate principal amount up to, as of any date of determination, the sum of (i) the greater of $ 100 million and 100 % of the Borrower’s consolidated EBITDA (as defined in the 2023 Senior Secured Credit Facility) for the most recently completed four quarter period, plus (ii) the amount of certain prepayments of certain indebtedness, so long as, among other things, after giving pro forma effect to the incurrence of such additional borrowings and any related transactions, the Borrower’s consolidated interest coverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not be less than 3.0 to 1.0 and the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not exceed 5.0 to 1.0.

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

The 2023 Senior Secured Credit Facility provides for aggregate commitments of $ 450,000 in the form of a senior secured revolving credit facility (the “Revolver”).

The 2023 Senior Secured Credit Facility provides that the Borrower has the right to seek additional commitments to provide additional term loan facilities or additional revolving credit commitments in an aggregate principal amount up to, as of any date of determination, the sum of (i) the greater of $ 100,000 and 100 % of the Borrower’s consolidated EBITDA (as defined in the 2023 Senior Secured Credit Facility) for the most recently completed four quarter period, plus (ii) the amount of certain prepayments of certain indebtedness, so long as, among other things, after giving pro forma effect to the incurrence of such additional borrowings and any related transactions, the Borrower’s consolidated interest coverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not be less than 3.0 to 1.0 and the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not exceed 5.0 to 1.0.

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

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

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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.

The Adjusted Term SOFR rate will be the rate of interest per annum equal to the Term SOFR rate (based upon an interest period of one, three or six months), plus 0.10 %, plus an applicable margin of 2.00 % to 3.00 % ( 3.00 % at June 30, 2024).

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

The base rate is a fluctuating rate of interest per annum equal to the highest of (a) the greater of the federal funds rate or the overnight bank funding rate, plus ½ of 1%, (b) Wall Street Journal prime rate and (c) the Adjusted Term SOFR rate for an interest period of one month, plus 1 %, plus an applicable margin of 1.00 % to 2.00 % ( 2.00 % at June 30, 2024).

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

10 unchanged sentences

0.15 % 2.00 % 2.00 % 1.00 %

In addition to paying interest on outstanding principal under the Revolver, the Borrower will be required to pay a commitment fee equal to the product of between 0.15 % and 0.30 % (the applicable percentage depending on the Borrower’s consolidated total net leverage ratio as reflected in the schedule above, 0.30 % at June 30, 2024) times the actual daily amount by which $ 450 million exceeds the total amount outstanding under the Revolver and available to be drawn under all outstanding letters of credit.

In addition to paying interest on outstanding principal under the Revolver, the Borrower will be required to pay a commitment fee equal to the product of between 0.15 % and 0.30 % (the applicable percentage depending on the Borrower’s consolidated total net leverage ratio as reflected in the schedule above, 0.15 % at December 31, 2024) times the actual daily amount by which $ 450,000 exceeds the total amount outstanding under the Revolver and available to be drawn under all outstanding letters of credit.

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

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

In addition, if the total amount borrowed under the Revolver exceeds $ 450,000 at any time, the 2023 Senior Secured Credit Facility requires the Borrower to prepay such excess outstanding amounts.

All obligations under the 2023 Senior Secured Credit Facility are unconditionally guaranteed by the Company, and each of the Company’s existing and future direct and indirect material, wholly owned domestic subsidiaries, subject to certain exceptions.

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Debt issuance costs

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

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

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

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

The Company did not incur any debt issuance costs during the three months ended December 31, 2024 and 2023.

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 within other assets in the condensed consolidated balance sheets.

The amortization of deferred debt issuance costs is included in interest expense and amounted to approximately $ 280 during the three months ended December 31, 2024 and $ 414 during the three months ended December 31, 2023 .

i3 VERTICALS, Inc.

1 unchanged sentence

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

STOCKHOLDERS' EQUITY

Share Repurchase Program

On August 8, 2024, the Company entered into a share repurchase program for the Company's Class A common stock, under which the Company is authorized to repurchase up to $ 50,000 of outstanding shares of our Class A common stock (exclusive of fees, commissions or other expenses related to such repurchases) (the "Share Repurchase Program").

The Share Repurchase Program will terminate on the earlier of August 8, 2025, or when the maximum dollar amount under the Share Repurchase Program has been expended.

Pursuant to the Share Repurchase Program, the Company is authorized to make repurchases of our Class A Common Stock in the open market, through privately negotiated transactions, or otherwise, including under Rule 10b5-1 plans.

During the three months ended December 31, 2024 the Company repurchased 496,785 shares of Class A Common Stock under the Share Repurchase Program at an average price of $ 22.49 per share for a total cost of $ 11,190 .

The repurchased shares were cancelled and retired, resulting in a permanent reduction in both the number of shares outstanding and the Company's total stockholders' equity.

When the Company repurchases shares of Common Stock, the amount paid to repurchase the shares in excess of the par or stated value is allocated to additional paid-in-capital unless subject to limitation or the balance in additional paid-in-capital is exhausted.

Remaining amounts are recognized as a reduction in retained earnings.

As of December 31, 2024 the remaining total available authorization was under the Share Repurchase Program was $ 38,825 .

i3 Verticals, Inc.

6 unchanged sentences

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

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

The Company’s provision for income taxes for continuing operations was a provision of $ 523 for the three months ended December 31, 2024 and a benefit of $ 1,094 during the three months ended December 31, 2023.

Tax Receivable Agreement

2 unchanged sentences

These tax benefit payments are not conditioned upon one or more of the Continuing Equity Owners maintaining a continued ownership interest in i3 Verticals, LLC.

If a Continuing Equity Owner transfers Common Units but does not assign to the transferee of such units its rights under the Tax Receivable Agreement, such Continuing Equity Owner generally will continue to be entitled to receive payments under the Tax Receivable Agreement arising in respect of a subsequent exchange of such Common Units.

In general, the Continuing Equity Owners’ rights under the Tax Receivable Agreement may not be assigned, sold, pledged or otherwise alienated to any person, other than certain permitted transferees, without (a) the Company's prior written consent, which should not be unreasonably withheld, conditioned or delayed, and (b) such persons becoming a party to the Tax Receivable Agreement and agreeing to succeed to the applicable Continuing Equity Owner’s interest therein.

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

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

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

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

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

Payments to the Continuing Equity Owners related to exchanges through June 30, 2024 will range from $ 0 to $ 3,263 per year and are expected to be paid over the next 24 years.

The amounts recorded as of June 30, 2024, approximate the current estimate of expected tax savings and are subject to change after the filing of the

i3 VERTICALS, Inc.

1 unchanged sentence

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

Company’s U.S.

under the Tax Receivable Agreement arising in respect of a subsequent exchange of such Common Units.

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

During the three months ended December 31, 2024, the Company acquired an aggregate of 17,577 Common Units in i3 Verticals, LLC in connection with the redemption of Common Units from the Continuing Equity Owners.

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

As a result of the exchange, during the three months ended December 31, 2024, the Company recognized an increase to its net deferred tax assets in the amount of $ 96 , and corresponding Tax Receivable Agreement liabilities of $ 82 , representing 85 % of the tax benefits due to Continuing Equity Owners.

The deferred tax asset and corresponding Tax Receivable Agreement liability balances were $ 34,560 and $ 39,223 , respectively, as of December 31, 2024.

Payments to the Continuing Equity Owners related to exchanges through December 31, 2024 will range from $ 0 to $ 9,897 per year and are expected to be paid over the next 22 years.

The amounts recorded as of December 31, 2024, approximate the current estimate of expected tax savings and are subject to change after the filing of the Company’s U.S.

federal and state income tax returns.

2 unchanged sentences

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

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

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

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

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

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

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

The weighted-average remaining lease term at December 31, 2024 and 2023 were both 2 years.

The Company had no significant short-term leases during the three months ended December 31, 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 7.6 % and 7.7 % as of June 30, 2024 and 2023, respectively.

The weighted-average discount rate used in the measurement of our lease liabilities was 7.9 % and 7.6 % as of December 31, 2024 and 2023, respectively.

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

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

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

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

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

Operating lease costs from continuing operations were $ 972 for the three months ended December 31, 2024 and $ 1,036 for the three months ended December 31, 2023, which are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Total operating lease costs from continuing operations include variable lease costs of approximately $ 26 for the three months ended December 31, 2024, and $ 10 for the three months ended December 31, 2023, which are primarily comprised of costs of maintenance and utilities and changes in rates, and are determined based on the

i3 VERTICALS, Inc.

1 unchanged sentence

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

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

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 was $ 24 for the three months ended December 31, 2024, and $ 6 for the three months ended December 31, 2023, and are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

As of December 31, 2024, maturities of lease liabilities for continuing operations are as follows:

Fiscal Years ending September 30:

2024 (three months remaining) $ 1,057

2025 (nine months remaining) $ 2,997

Thereafter 620

15 unchanged sentences

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

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

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

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

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

i3 VERTICALS, Inc.

8 unchanged sentences

Contingent consideration paid ( 60 )

Balance at June 30, 2024 $ 538

Balance at December 31, 2024 $ 3,669

Accrued Contingent Consideration

3 unchanged sentences

Contingent consideration paid ( 1,918 )

Balance at June 30, 2023 $ 17,856

__________________________

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

Balance at December 31, 2023 $ 6,254

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.

3 unchanged sentences

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

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

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

Approximately $ 339 and $ 716 of contingent consideration was recorded in accrued expenses and other current liabilities as of December 31, 2024 and September 30, 2024, respectively.

Approximately $ 3,330 and $ 1,636 of contingent consideration was recorded in other long-term liabilities as of December 31, 2024 and September 30, 2024, respectively.

Disclosure of Fair Values

1 unchanged sentence

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

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

The estimated fair value of the Exchangeable Notes was $ 26,053 as of December 31, 2024.

i3 VERTICALS, Inc.

2 unchanged sentences

EQUITY-BASED COMPENSATION

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

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

2024 2023 2024 2023

A summary of equity-based compensation expense for continuing operations recognized during the three months ended December 31, 2024 and 2023 is as follows:

Three Months Ended December 31,

Stock options $ 2,416 $ 4,236

1 unchanged sentence

Equity-based compensation expense $ 3,814 $ 5,358

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

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

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

In connection with the sale of the Merchant Services Business, $ 1,150 of the Company's equity-based compensation expense was classified as "net income from discontinued operations" in the accompanying condensed consolidated statements of operations during three months ended December 31, 2023.

Amounts are included in other costs of services and in selling, general and administrative expense on the condensed consolidated statements of operations.

Current and deferred income tax benefits for continuing operations of $ 611 were recognized during the three months ended December 31, 2024, and $ 897 during the three months ended December 31, 2023.

Stock Options

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

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

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

As of December 31, 2024, equity awards with respect to 2,314,177 shares of the Company's Class A common stock were available for grant under the 2018 Plan.

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

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

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

As of December 31, 2024, equity awards with respect to 1,408,363 shares of the Company's Class A common stock were available for grant under the 2020 Inducement Plan.

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

2 unchanged sentences

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

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

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

Stock Options Weighted Average Exercise Price

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Forfeited ( 26,631 ) 30.76

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

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

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

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

Outstanding at December 31, 2024 9,045,341 $ 24.52

Exercisable at December 31, 2024 7,144,049 $ 25.19

The weighted-average grant date fair value of stock options granted during the three months ended December 31, 2024 was $ 13.07 .

As of December 31, 2024, total unrecognized compensation expense related to unvested stock options, including an estimate for pre-vesting forfeitures, was $ 13,706 , which is expected to be recognized over a weighted-average period of 2.6 years.

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

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

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

The total fair value of stock options that vested during the three months ended December 31, 2024 was $ 3,209 .

Restricted Stock Units

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

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

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

Restricted Stock Units Weighted Average Grant Date Fair Value

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Forfeited ( 5,000 ) 21.41

Outstanding at June 30, 2024 923,464 $ 23.15

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

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

Outstanding at December 31, 2024 1,170,711 $ 23.18

As of December 31, 2024, total unrecognized compensation expense related to unvested RSUs, including an estimate for pre-vesting forfeitures, was $ 16,862 , which is expected to be recognized over a weighted average period of 3.1 years.

The total fair value of RSUs that vested during the three months ended December 31, 2024 was $ 408 .

COMMITMENTS AND CONTINGENCIES

The Company utilizes office space and equipment under operating leases.

Rent expense from continuing operations under these leases amounted to $ 996 during the three months ended December 31, 2024, and $ 1,042

i3 VERTICALS, Inc.

1 unchanged sentence

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

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

COMMITMENTS AND CONTINGENCIES

The Company utilizes office space and equipment under operating leases.

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

during the three months ended December 31, 2023.

Refer to Note 11 for further discussion and a table of the future minimum payments under these leases.

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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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

The 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.

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Oral argument on this motion in front of the United States Fifth Circuit Court of Appeals took place on April 4, 2023, and on September 1, 2023, the Fifth Circuit panel affirmed the District Court order to remand the case back to state court.

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

On September 29, 2023, all Defendants-Appellants filed a Petition for

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Rehearing En Banc, which the Plaintiffs-Appellees opposed on October 12, 2023.

As a result of Defendants’ petition, the Fifth Circuit held its mandate, effectively staying the effective date of its decision, but the Fifth Circuit 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 allowed 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 Division of Administration chose not to re-plead their claims, which leaves some of their claims now dismissed with prejudice.

The Sheriffs re-plead their claims, and certain Defendants have filed renewed pleading-stage motions to dismiss, which remain pending.

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

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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.

RELATED PARTY TRANSACTIONS

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See Note 10 for further information.

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

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

As of December 31, 2024, the total amount due under the Tax Receivable Agreement was $ 39,223 .

See Note 20 for information regarding certain recapitalization actions involving the Continuing Equity Owners that the Company and i3 Verticals, LLC effected subsequent to December 31, 2024 in order to reduce excess cash held at the Company as a result of its “Up-C” structure.

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.

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 condensed consolidated financial statements for additional information.

i3 VERTICALS, Inc.

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

the level at which financial information is reviewed.

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

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

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

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

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

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

This is accomplished through the Software and Services segment.

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

These solutions often include embedded payments or other recurring services.

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

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

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

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

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.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

The Company primarily uses adjusted EBITDA margin to measure operating performance and for purposes of making decisions about allocating resources to the Company's business segments.

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

As of and for the Three Months Ended December 31,

Public Sector adjusted EBITDA margin (1)

Healthcare adjusted EBITDA margin (1)

Public Sector revenue

$ 48,785 $ 43,498

Healthcare revenue

13,171 11,580

Other revenue

( 265 ) ( 24 )

Total revenue

$ 61,691 $ 55,054

Public sector adjusted EBITDA

19,243 17,359

Healthcare adjusted EBITDA

Corporate, eliminations and other

( 6,619 ) ( 6,165 )

Stock compensation expense

( 3,814 ) ( 5,358 )

M&A-related expenses

( 546 ) ( 244 )

Other taxes and one-time expenses ( 252 ) ( 84 )

Depreciation and amortization ( 7,684 ) ( 7,054 )

Change in fair value of contingent consideration ( 1,377 ) 237

Income from operations 2,699 1,485

Interest expense

Other income ( 1,826 ) 107

Total other income ( 1,146 ) 6,794

Income before income taxes $ 3,845 $ ( 5,309 )

Public Sector total assets

$ 482,659 $ 475,548

Healthcare total assets

94,904 94,903

Other total assets

148,666 67,683

Total assets $ 726,229 $ 638,134

Public Sector goodwill

$ 233,850 $ 222,364

Healthcare goodwill

46,828 46,828

Total goodwill

$ 280,678 $ 269,192

n/m = not meaningful

____________________

Adjusted EBITDA Margin represents adjusted EBITDA as a percentage of revenue.

The chief operating decision maker primarily uses adjusted EBITDA margin to measure operating performance and for purposes of making decisions about allocating resources to the Company's business segments.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

NON-CONTROLLING INTEREST

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

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

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

owned 23,437,250 and 23,279,170 of i3 Verticals, LLC's Common Units, representing a 70.1 % and 69.8 % economic ownership interest in i3 Verticals, LLC.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

Nine Months Ended June 30,

Net income (loss) attributable to non-controlling interest

Three Months Ended December 31,

Net income attributable to non-controlling interest

$ 1,052 $ 438

Transfers (from) to non-controlling interests:

Distributions to non-controlling interest holders ( 839 ) —

Redemption of common units in i3 Verticals, LLC ( 237 ) —

Allocation of equity to non-controlling interests 4,960 2,033

Net transfers to non-controlling interests 3,545 1,947

Allocation of equity (from) to non-controlling interests ( 293 ) 2,450

Net transfers (from) to non-controlling interests ( 530 ) 2,450

Change from net income attributable to non-controlling interests and net transfers to non-controlling interests $ 522 $ 2,888

See Note 20 for information regarding certain recapitalization actions the Company and i3 Verticals, LLC effected subsequent to December 31, 2024 in order to reduce excess cash held at the Company as a result of its “Up-C” structure, which adjusted the Company’s and the Continuing Equity Holders’ respective ownership interests in i3 Verticals, LLC.

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.

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

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

2024 2023 2024 2023

Basic and diluted net loss per share:

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

Net loss attributable to non-controlling interest

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Three Months Ended December 31,

Basic net income (loss) per share:

Net income (loss) $ 3,322 $ ( 4,215 )

Net income (loss) attributable to non-controlling interest

1,128 ( 1,330 )

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

Net income (loss) attributable to Class A common stockholders $ 2,194 $ ( 2,885 )

Weighted average shares of Class A common stock outstanding

23,551,352 23,267,290

Basic and diluted net loss per share (1)

Basic net income (loss) per share (1)

$ 0.09 $ ( 0.12 )

Diluted net income per share:

Net income attributable to Class A common stockholders $ 2,194

Reallocation of net income assuming conversion of common units (2)

Net income attributable to Class A common stockholders - diluted $ 3,052

Weighted average shares of Class A common stock outstanding

Weighted average effect of dilutive securities (3)

Weighted average shares of Class A common stock outstanding - diluted

Diluted net income per share $ 0.09

__________________________

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

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

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

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

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

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

10,093,394 weighted average shares of Class B common stock for the three months ended December 31, 2023, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive.

7,496,394 stock options for the three months ended December 31, 2023, were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive, and

467,777 shares for the three months ended December 31, 2023, resulting from estimated stock option exercises and restricted stock units vesting as calculated by the treasury stock method were excluded because of the effect of including them would have been anti-dilutive.

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 10 above and assuming all common units of i3 Verticals, LLC were exchanged for Class A common stock at the beginning of the period.

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

For the three months ended December 31, 2024, 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 for continuing operations:

6,236,721 stock options for the three months ended December 31, 2024, were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive.

i3 VERTICALS, Inc.

1 unchanged sentence

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

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

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

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

Three Months Ended December 31,

Basic net (loss) income per share:

Net (loss) income $ ( 214 ) $ 5,751

Net (loss) income attributable to non-controlling interest ( 76 ) 1,768

Net (loss) income attributable to Class A common stockholders $ ( 138 ) $ 3,983

Weighted average shares of Class A common stock outstanding

23,551,352 23,267,290

Basic net (loss) income per share (1)

$ ( 0.01 ) $ 0.17

Diluted net income per share:

Net income attributable to Class A common stockholders $ 3,983

Reallocation of net income assuming conversion of common units (2)

Net income attributable to Class A common stockholders - diluted $ 5,319

Weighted average shares of Class A common stock outstanding

Weighted average effect of dilutive securities (3)

Weighted average shares of Class A common stock outstanding - diluted

Diluted net income per share $ 0.16

__________________________

For the three months ended December 31, 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 net loss per share of Class A common stock for discontinued operations:

10,026,180 weighted average shares of Class B common stock for the three months ended December 31, 2024, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive.

6,236,721 stock options for the three months ended December 31, 2024 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.

479,664 shares for the three months ended December 31, 2024, resulting from estimated stock option exercises and restricted stock units vesting as calculated by the treasury stock method were excluded because of the effect of including them would have been anti-dilutive.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

For the three months ended 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 for discontinued operations:

7,496,394 stock options for the three months ended December 31, 2023 were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive.

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

Three Months Ended December 31,

Basic net income per share:

5 unchanged sentences

Basic net income per share

$ 0.09 $ 0.05

Diluted net income per share:

1 unchanged sentence

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

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

Net income attributable to Class A common stockholders - diluted $ 2,856 $ 1,429

9 unchanged sentences

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

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

2024 2023 2024 2023

Basic and diluted net loss per share:

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

Net loss attributable to non-controlling interest

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

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

Weighted average shares of Class A common stock outstanding

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

Basic and diluted net loss per share (1)

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

__________________________

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

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

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

6,236,721 and 7,496,394 stock options for the three months ended December 31, 2024 and 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.

i3 VERTICALS, Inc.

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SIGNIFICANT NON-CASH TRANSACTIONS

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

Nine months ended June 30,

The Company engaged in the following significant non-cash investing and financing activities related to continuing operations during the three months ended December 31, 2024 and 2023:

Three months ended December 31,

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

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

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

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

Right-of-use assets obtained in exchange for operating lease obligations $ 288 $ 18

SUBSEQUENT EVENTS

Acquisition of a Business

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

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

Certain provisions in the purchase agreement provide for additional consideration of up to $ 22,000 , in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreement, through no later than July 2027.

The Company is in process of determining the acquisition date fair values of the liabilities for the contingent consideration based on discounted cash flow analyses.

On January 23, 2025, the Company and i3 Verticals, LLC effected certain recapitalization actions in order to reduce excess cash held at the Company as a result of its “Up-C” structure following a tax distribution received by the Company and the Continuing Equity Owners earlier in January 2025 (the “LLC Tax Distribution”) related to the taxable income associated with the gain on the sale of the Merchant Services Business completed in September 2024 that is anticipated to be recognized for 2024 federal income tax purposes by members of the Company.

As a result of differences in the amount of net taxable income allocable to the Company and to the Continuing Equity Owners and the higher assumed tax rate of the Continuing Equity Owners than the tax rate of the Company, this LLC Tax Distribution resulted in the Company holding cash in excess of the Company’s tax liabilities, its obligation to make payments under its tax receivables agreement, and any other expected liabilities of the Company.

Accordingly, in order to make such cash held by the Company accessible in connection with our operations, on January 23, 2025, the Company contributed approximately $ 21,396 in cash (the “Capital Contribution”) held by the Company to i3 LLC in exchange for 896,763 newly-issued common units of i3 Verticals, LLC (“Common Units”) at a price per Common Unit of $ 23.86 , such price being equal to the to the 50 -day volume-weighted average price of the Company’s Class A common stock for the period ended January 22, 2025.

Immediately following the Capital Contribution, the Common Units were recapitalized through a reverse unit split of the Common Units at a ratio of approximately 0.9631 to 1 (the “Reverse Unit Split”) which caused the number of Common Units held by the Company immediately following the Reverse Unit Split to equal to the number of

i3 VERTICALS, Inc.

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

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

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

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

Share Repurchase Program

On August 8, 2024, the Company announced that its Board of Directors had approved a new share repurchase program for the Company’s Class A common stock, under which the Company may repurchase up to $ 50 million of outstanding shares of Class A common stock.

This share repurchase program will terminate on the earlier of August 8, 2025, or when the maximum dollar amount under the authorization has been expended.

Pursuant to this authorization, repurchases may be made from time to time in the open market, through privately negotiated transactions, or otherwise.

In addition, any repurchases under the authorization will be subject to prevailing market conditions, liquidity and cash flow considerations, applicable securities laws requirements (including under Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934, as applicable), and other factors.

Taking into account restrictions under the 2023 Senior Secured Credit Facility, the Company does not anticipate making any repurchases under this authorization until the closing of the transactions under the Purchase Agreement.

This share repurchase program does not require the Company to acquire any amount of shares of Class A common stock, and may be extended, modified, suspended or discontinued at any time.

Common Units held by the Company immediately prior to the Contribution, thereby maintaining a one -to-one ratio between the number of Common Units owned by the Company and the number of outstanding shares of Class A Common Stock.

Upon the effectiveness of the Reverse Unit Split, 369,256 outstanding shares of Class B common stock of the Company were retired without consideration, thereby maintaining a one -to-one ratio between the number of Common Units owned by the Continuing Equity Owners after giving to the Reverse Unit Split and the number of outstanding shares of Class B Common Stock.

After giving effect to these recapitalization actions, as of January 23, 2025, the Company holds approximately 70.83 % of the outstanding Common Units (an increase of approximately 0.78 % compared to the Company’s ownership of approximately 70.05 % of the outstanding Common Units immediately prior to giving effect to these recapitalization actions) and the Continuing Equity Owners hold approximately 29.17 % of the outstanding Common Units (a decrease of approximately 0.78 % compared to the Continuing Equity Owners’ ownership of approximately 29.95 % of the outstanding Common Units immediately prior to giving effect to these recapitalization actions).

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

What changed 10-Q

Item 1. Financial Statements