What changed in this filing

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Item 1. Financial Statements

2025-05-09 compared with 2025-02-07 · 367 added, 275 removed, 893 unchanged (42% of the section changed)

3 unchanged sentences

(In thousands, except share amounts)

December 31, September 30,

March 31, September 30,

Current assets

22 unchanged sentences

Total current liabilities 67,688 164,731

Long-term debt, less current portion 12,000 —

Long-term tax receivable agreement obligations 33,526 29,347

5 unchanged sentences

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

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

0 shares issued and outstanding as of March 31, 2025 and September 30, 2024

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

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

24,386,990 and 23,882,035 shares issued and outstanding as of March 31, 2025 and September 30, 2024, respectively

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

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

8,832,061 and 10,032,676 shares issued and outstanding as of March 31, 2025 and September 30, 2024, respectively

Additional paid-in capital 282,872 279,335

8 unchanged sentences

(In thousands, except share and per share amounts)

Three months ended December 31,

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

2025 2024 2025 2024

Revenue $ 63,059 $ 57,968 $ 124,750 $ 113,022

10 unchanged sentences

Interest expense 446 7,714 1,126 14,401

Other (income) expense ( 1,826 ) 107

Other income ( 631 ) ( 2,257 ) ( 2,457 ) ( 2,150 )

Total other (income) expenses ( 185 ) 5,457 ( 1,331 ) 12,251

11 unchanged sentences

( 227 ) 3,587 ( 365 ) 7,570

Net income attributable to i3 Verticals, Inc.

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

$ ( 154 ) $ 1,878 $ 1,902 $ 2,976

27 unchanged sentences

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

Equity-based compensation — — — — 3,932 — — 3,932

Net (loss) income — — — — — ( 154 ) 923 769

Adjustments to accrued distributions to non-controlling interest holders

— — — — — — 283 283

Redemption of common units in i3 Verticals, LLC 813,782 — ( 813,782 ) — 11,493 — ( 11,493 ) —

Recapitalization from contribution to i3 Verticals, LLC — — ( 369,256 ) — ( 5,689 ) — 5,689 —

Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — 143 — — 143

Exercise or release of equity-based awards 149,328 — — — ( 2,179 ) — — ( 2,179 )

Repurchases of Class A common stock ( 13,370 ) — — — ( 423 ) — — ( 423 )

Allocation of equity to non-controlling interests — — — — 3,063 — ( 3,063 ) —

Balance at March 31, 2025 24,386,990 $ 2 8,832,061 $ 1 $ 282,872 $ 102,299 $ 128,485 $ 513,659

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)

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

8 unchanged sentences

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 40,718 — ( 40,718 ) — 384 — ( 384 ) —

Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — 42 — — 42

Exercise 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

See Notes to the Interim Condensed Consolidated Financial Statements

2 unchanged sentences

(In thousands)

Three months ended December 31,

Six months ended March 31,

Cash flows from operating activities:

4 unchanged sentences

Amortization of debt issuance costs 530 676

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

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 (benefit from) deferred income taxes 1,859 ( 1,238 )

Adjustments to loss (gain) on sale of Merchant Services Business 657 —

Non-cash lease expense 1,162 2,349

13 unchanged sentences

Contingent consideration paid in excess of original estimates ( 60 ) ( 3,153 )

Net cash provided by operating activities 11,495 14,405

Net cash (used in) provided by operating activities ( 15,627 ) 25,147

Cash flows from investing activities:

11 unchanged sentences

(In thousands)

Three months ended December 31,

Six months ended March 31,

Cash flows from financing activities:

1 unchanged sentence

Payments on revolving credit facility ( 24,052 ) ( 132,710 )

Payments to extinguish exchangeable notes ( 26,223 ) —

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

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

1 unchanged sentence

Payments for repurchases of Class A common stock ( 11,498 ) —

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

573 ( 1,355 )

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

Net payments for settlement obligations ( 565 ) ( 3,287 )

Cash paid for contingent consideration — ( 760 )

Payments for required distributions to members or on behalf of members for tax obligations ( 23,939 ) ( 189 )

Payments for required distributions to members under the Tax Receivable Agreement ( 9,954 ) —

Proceeds from stock option exercises 150 —

7 unchanged sentences

Cash paid for income taxes $ 34,157 $ 5,376

_________________________________________

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

i3 Verticals, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)

(In thousands)

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:

34 unchanged sentences

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.

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 “Merchant Services Purchase Agreement”), by and among i3 Verticals, LLC, Corporation Seller, the Company (solely for the purpose of providing a guaranty of the obligations of Sellers as set forth in the Merchant Services Purchase Agreement), Payroc Buyer, LLC (“Merchant Services Buyer”), and Payroc WorldAccess, LLC (solely for the purpose of providing a guaranty of the obligations of Merchant Services Buyer as set forth in the Merchant Services Purchase Agreement).

Pursuant to the terms of the Merchant Services Purchase Agreement, the Sellers sold to Merchant Services Buyer the equity interests of certain direct and indirect wholly-owned subsidiaries of Sellers (the “Merchant Services 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 Merchant Services Acquired Entities pursuant to a contribution agreement which was entered into immediately prior to the Closing (collectively, the "Merchant Services Transactions").

Pursuant to the terms of the Merchant Services Purchase Agreement, Merchant Services Buyer paid to Sellers an aggregate purchase price of approximately $ 437,343 (after giving effect to post-closing 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

In connection with the closing of the Merchant Services 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.

i3 VERTICALS, Inc.

1 unchanged sentence

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

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.

Aggregate costs incurred related to the Merchant Services Transactions during the year ended September 30, 2024 that were not considered incremental direct costs to transact the sale, were approximately $ 2,626 and were expensed as incurred.

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

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 months ended December 31, 2024 and 2023:

Three months ended December 31,

The following table presents financial results of Merchant Services Business for the three and six months ended March 31, 2025 and 2024:

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

2025 2024 2025 2024

Revenue $ — $ 36,574 $ — $ 73,510

19 unchanged sentences

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 Company had no significant cash flow activity pertaining to discontinued operations in the three and six months ended March 31, 2025.

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

Three months ended December 31, 2023

Six months ended March 31,

Depreciation and amortization $ — $ 5,561

1 unchanged sentence

Amortization of capitalized customer acquisition costs $ — $ 430

Adjustments to loss (gain) on sale of Merchant Services Business

Non-cash lease expense $ — $ 536

3 unchanged sentences

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

Six months ended March 31, 2024

Consideration accrued for December 2023 residual buyout $ 252

Right-of-use assets obtained in exchange for operating lease obligations $ 742

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 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.

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the unaudited condensed consolidated financial statements of the Company and its subsidiaries as of March 31, 2025 and for the three and six months ended March 31, 2025 and 2024.

The results of operations for the three and six months ended March 31, 2025 and 2024 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.

17 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 $ 1,205 as of December 31, 2024 and $ 632 as of September 30, 2024, respectively.

Settlement assets and settlement obligations were $ 67 as of March 31, 2025 and $ 632 as of September 30, 2024, respectively.

Reclassifications

6 unchanged sentences

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.

Given the change in the Company's business model following the sale of our Merchant Services Business, 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.

8 unchanged sentences

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

For the Three Months Ended March 31, 2024

As Previously Reported (1)

5 unchanged sentences

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.

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

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

For the Three Months Ended December 31, 2023

As Previously Reported Adjustment As Adjusted

Cash flows from operating activities:

Settlement obligations ( 1,355 ) 1,355 —

Net cash provided by operating activities 13,050 1,355 14,405

Cash flows from financing activities:

Net payments for settlement obligations — ( 1,355 ) ( 1,355 )

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

For the Six Months Ended March 31, 2024

As Previously Reported (1)

Adjustment As Adjusted

Operating expenses

Other costs of services 8,818 31,906 40,724

Selling, general and administrative 86,513 ( 31,906 ) 54,607

__________________________

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

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 $ 2,458 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.

Inventories were $ 2,220 and $ 2,423 at March 31, 2025 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.

2 unchanged sentences

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.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

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.

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.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Lease Expense

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

16 unchanged sentences

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

The Company's revenue from continuing operations for the three months ended December 31, 2024 and 2023 is derived from the following sources:

The Company's revenue from continuing operations for the three and six ended March 31, 2025 and 2024 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

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

• Other — Includes sales of equipment, non-software related professional services, bundled performance obligations for software sales and equipment leasing and other revenues.

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

23 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 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.

9 unchanged sentences

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.

Revenue from bundled performance obligations for software sales and equipment leasing is recognized over time as a single performance obligation.

Lease income is recognized in accordance with ASC 842, and the leased equipment is classified as fixed assets and depreciated over its useful life.The Company’s professional services, including training, installation, and repair services are recognized as revenue as these services are performed.

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

The Company also has additional contracts with an original expected

i3 VERTICALS, Inc.

1 unchanged sentence

(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.

duration of greater than one year for which revenue had not yet been recognized.

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

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

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

2 unchanged sentences

• 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 December 31, 2024

• Other — Includes sales of equipment, non-software related professional services, bundled performance obligations for software sales and equipment leasing and other revenues.

For the Three Months Ended March 31, 2025

Public Sector Healthcare Other Total

3 unchanged sentences

Total revenue $ 52,405 $ 10,857 $ ( 203 ) $ 63,059

For the Three Months Ended December 31, 2023

For the Three Months Ended March 31, 2024

Public Sector Healthcare Other Total

3 unchanged sentences

Total revenue $ 47,097 $ 11,053 $ ( 182 ) $ 57,968

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

For the Six Months Ended March 31, 2025

Public Sector Healthcare Other Total

Software and related services revenue $ 69,159 $ 23,207 $ ( 468 ) $ 91,898

Proprietary payments revenue 27,493 159 — 27,652

Other revenue 4,538 662 — 5,200

Total revenue $ 101,190 $ 24,028 $ ( 468 ) $ 124,750

For the Six Months Ended March 31, 2024

Public Sector Healthcare Other Total

Software and related services revenue $ 60,368 $ 21,791 $ ( 159 ) $ 82,000

Proprietary payments revenue 26,141 123 ( 15 ) 26,249

Other revenue 4,086 719 ( 32 ) 4,773

Total revenue $ 90,595 $ 22,633 $ ( 206 ) $ 113,022

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.

2 unchanged sentences

• 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

For the Three Months Ended March 31, 2025

Public Sector Healthcare Other Total

2 unchanged sentences

Total revenue $ 52,405 $ 10,857 $ ( 203 ) $ 63,059

For the Three Months Ended March 31, 2024

Public Sector Healthcare Other Total

Revenue earned over time $ 42,961 $ 11,035 $ ( 144 ) $ 53,852

Revenue earned at a point in time 4,136 18 ( 38 ) 4,116

Total revenue $ 47,097 $ 11,053 $ ( 182 ) $ 57,968

For the Six Months Ended March 31, 2025

Public Sector Healthcare Other Total

Revenue earned over time $ 91,657 $ 22,116 $ ( 468 ) $ 113,305

Revenue earned at a point in time 9,533 1,912 — 11,445

Total revenue $ 101,190 $ 24,028 $ ( 468 ) $ 124,750

i3 VERTICALS, Inc.

1 unchanged sentence

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

For the Three Months Ended December 31, 2023

For the Six Months Ended March 31, 2024

Public Sector Healthcare Other Total

8 unchanged sentences

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.

As of March 31, 2025 and September 30, 2024, the Company’s contract assets from contracts with customers was $ 9,754 and $ 8,680 , respectively.

Contract Liabilities

6 unchanged sentences

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 three months ended December 31, 2024 and 2023, respectively:

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

The following tables present the changes in deferred revenue as of and for the six months ended March 31, 2025 and 2024, respectively:

Balance at September 30, 2024

2 unchanged sentences

Balance at December 31, 2024

Deferral of revenue 10,316

Recognition of unearned revenue ( 15,372 )

Balance at March 31, 2025

Balance at September 30, 2023

2 unchanged sentences

Balance at December 31, 2023

Deferral of revenue 11,005

Recognition of unearned revenue ( 12,820 )

Balance at March 31, 2024

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 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,

As of March 31, 2025 and September 30, 2024, the Company had $ 871 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, included within “Other assets" on the condensed consolidated balance sheets.

The Company recorded expense from continuing operations related to these costs of $ 181 and $ 212 for the three and six months ended March 31, 2025 and $ 22 and $ 40 for the three and six months ended March 31, 2024.

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.

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

6 unchanged sentences

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.

16 unchanged sentences

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

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.

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

In November 2023, the FASB issued ASU No.

1 unchanged sentence

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

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

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

9 unchanged sentences

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 three months ended March 31, 2025, the Company did not acquire any businesses.

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

2 unchanged sentences

("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.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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.

Total purchase consideration was $ 27,477 , including $ 18,000 in cash funded by proceeds from the Company's revolving credit facility, the issuance of 311,634 shares of the Company's Class A common stock (valued at $ 7,517 ) and $ 1,960 in contingent consideration.

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

30 unchanged sentences

PREPAID EXPENSES AND OTHER CURRENT ASSETS

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,

A summary of the Company's prepaid expenses and other current assets as of March 31, 2025 and September 30, 2024 is as follows:

March 31, September 30,

Inventory $ 2,220 $ 2,423

13 unchanged sentences

$ 233,850 $ 46,828 $ — $ 280,678

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

Balance at December 31, 2024

Goodwill attributable to preliminary purchase price adjustments during the six months ended March 31, 2025 — — — —

Balance at March 31, 2025

$ 233,850 $ 46,828 $ — $ 280,678

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

Intangible assets consisted of the following as of March 31, 2025:

Cost Accumulated

9 unchanged sentences

$ 204,838 $ ( 48,507 ) $ 156,331

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

Amortization expense from continuing operations for intangible assets amounted to $ 3,242 and $ 6,485 for the three and six months ended March 31, 2025, and $ 3,113 and $ 6,259 for the three and six months ended March 31, 2024.

Based on net carrying amounts at March 31, 2025, 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 (six months remaining) $ 6,477

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 December 31, 2024 and September 30, 2024 is as follows is as follows:

December 31, September 30,

A summary of the Company's accrued expenses and other current liabilities as of March 31, 2025 and September 30, 2024 is as follows is as follows:

March 31, September 30,

Accrued wages, bonuses, commissions and vacation $ 6,309 $ 5,737

13 unchanged sentences

Accrued expenses and other current liabilities $ 22,733 $ 89,972

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,

A summary of the Company's long-term liabilities as of March 31, 2025 and September 30, 2024 is as follows:

March 31, September 30,

Accrued contingent consideration — long-term portion $ 2,544 $ 1,636

2 unchanged sentences

Total other long-term liabilities $ 14,765 $ 14,921

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 December 31, 2024 and September 30, 2024 is as follows:

December 31, September 30,

A summary of long-term debt, net as of March 31, 2025 and September 30, 2024 is as follows:

March 31, September 30,

Maturity 2025 2024

5 unchanged sentences

Long-term debt, net of current portion $ 12,000 $ —

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

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

The Exchangeable Notes bore 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, 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.

The Exchangeable Notes matured and the remaining principal balance was repaid in full on February 15, 2025, as further described below.

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

5 unchanged sentences

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 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.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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.

Upon maturity of the Exchangeable Notes in February 2025, we paid $ 26,223 for the remaining principal balance and $ 131 in accrued interest.

Exchangeable Note Hedge Transactions

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

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.

The Note Hedge Transactions are intended to reduce potential dilution to the Class A common stock upon any exchange of the Exchangeable Notes.

The Note Hedge Transactions will expire upon the maturity of the Exchangeable Notes, if not earlier exercised.

The Note Hedge Transactions are separate transactions, entered into by i3 Verticals, LLC with the Counterparties, and are not part of the terms of the Exchangeable Notes.

Holders of the Exchangeable Notes will not have any rights with respect to the Note Hedge Transactions.

The Note Hedge Transactions covered, 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 underlied the Exchangeable Notes in the aggregate and were exercisable upon exchange of the Exchangeable Notes.

The Note Hedge Transactions were intended to reduce potential dilution to the Class A common stock upon any exchange of the Exchangeable Notes.

The Note Hedge Transactions expired upon the maturity of the Exchangeable Notes.

The Note Hedge Transactions were separate transactions, entered into by i3 Verticals, LLC with the Counterparties, and were not part of the terms of the Exchangeable Notes.

Holders of the Exchangeable Notes did not have any rights with respect to the Note Hedge Transactions.

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

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

The Note Hedge Transactions did not require separate accounting as a derivative as they meet a scope exception for certain contracts involving an entity's own equity.

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

2 unchanged sentences

On January 18, 2024, in connection with the Exchangeable Note Repurchases, the Company and i3 Verticals, LLC terminated the corresponding portions of the Note Hedge Transactions ("Note Hedge Unwinds"), and i3 Verticals, LLC received $ 987 for the sale of the Note Hedge Unwinds and recorded a loss on the sale of the Note Hedge Unwinds of $ 245 .

The Note Hedge Transactions expired in February 2025 upon the maturity and payment in full of the Exchangeable Notes.

Warrant Transactions

3 unchanged sentences

The Warrants are separate transactions, entered into by the Company with the Counterparties, and are not part of the terms of the Exchangeable Notes.

Holders of the Exchangeable Notes will not have any rights with respect to the Warrants.

Holders of the Exchangeable Notes did not have any rights with respect to the Warrants.

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

3 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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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 .

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

2023 Senior Secured Credit Facility

2 unchanged sentences

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.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

among other things, after giving pro forma effect to the incurrence of such additional borrowings and any related transactions, the Borrower’s consolidated interest coverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not be less than 3.0 to 1.0 and the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not exceed 5.0 to 1.0.

As of March 31, 2025, the Borrower's consolidated interest coverage ratio was 92.5 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.

2 unchanged sentences

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

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

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

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

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

6 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, 0.15 % 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.

In addition to paying interest on outstanding principal under the Revolver, the Borrower will be required to pay a commitment fee equal to the product of between 0.15 % and 0.30 % (the applicable percentage depending on the Borrower’s consolidated total net leverage ratio as reflected in the schedule above, 0.15 % at March 31, 2025) times the actual daily amount by which $ 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 $ 450,000 at any time, the 2023 Senior Secured Credit Facility requires the Borrower to prepay such excess outstanding amounts.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share 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.

11 unchanged sentences

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

See Note 20 for information regarding the Second Amendment to the 2023 Senior Secured Credit Facility which was entered into subsequent to March 31, 2025.

Debt issuance costs

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

The Company did not incur any debt issuance costs during the three and six months ended March 31, 2025 and 2024.

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.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

The amortization of deferred debt issuance costs is included in interest expense and amounted to approximately $ 250 and $ 530 during the three and six months ended March 31, 2025 and $ 262 and $ 676 during the three and six months ended March 31, 2024 .

STOCKHOLDERS' EQUITY

3 unchanged sentences

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 .

During the six months ended March 31, 2025 the Company repurchased 510,155 shares of Class A Common Stock under the Share Repurchase Program at an average price of $ 22.51 per share for a total cost inclusive of excise taxes of $ 11,613 .

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.

1 unchanged sentence

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 .

As of March 31, 2025 the remaining total available authorization under the Share Repurchase Program was $ 38,519 .

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

i3 Verticals, Inc.

is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from i3 Verticals, LLC based on i3 Verticals, Inc.’s economic interest in i3 Verticals, LLC.

3 unchanged sentences

The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period.

When the estimate of the annual effective tax rate is unreliable, the Company records its income tax expense or benefit based up on a period to date effective tax rate.

When the estimate of the annual effective tax rate is unreliable, the Company records its income tax expense or benefit based upon a period to date effective tax rate.

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 $ 523 for the three months ended December 31, 2024 and a benefit of $ 1,094 during the three months ended December 31, 2023.

The Company’s provision for income taxes for continuing operations was a provision of $ 3,054 and $ 3,577 for the three and six months ended March 31, 2025 and a benefit of $ 669 and $ 1,763 during the three and six months ended March 31, 2024.

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

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 six months ended March 31, 2025, the Company acquired an aggregate of 831,359 Common Units in i3 Verticals, LLC in connection with the redemption of Common Units from the Continuing Equity Owners, which resulted in an increase in the tax basis of our investment in i3 Verticals, LLC subject to the provisions of the Tax Receivable Agreement.

As a result of the exchange, during the six months ended March 31, 2025, the Company recognized an increase to its net deferred tax assets in the amount of $ 5,035 , and corresponding Tax Receivable Agreement liabilities of $ 4,280 , representing 85 % of the tax benefits due to Continuing Equity Owners.

The Company made payments of $ 9,954 during the six months ended March 31, 2025 under the Tax Receivable Agreement.

The deferred tax asset and corresponding Tax Receivable Agreement liability balances were $ 38,119 and $ 33,526 , respectively, as of March 31, 2025.

Payments to the Continuing Equity Owners related to exchanges through March 31, 2025 will range from $ 0 to $ 3,413 per year and are expected to be paid over the next 26 years.

The amounts recorded as of March 31,

i3 VERTICALS, Inc.

1 unchanged sentence

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

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.

2025, 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 December 31, 2024.

The Company had no finance leases as of March 31, 2025.

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 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 weighted-average remaining lease term at March 31, 2025 and 2024 were both 2 years.

The Company had no significant short-term leases during the three and six months ended March 31, 2025 and 2024.

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 7.9 % and 7.6 % as of December 31, 2024 and 2023, respectively.

The weighted-average discount rate used in the measurement of our lease liabilities was 7.3 % and 7.6 % as of March 31, 2025 and 2024, respectively.

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

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

Operating lease costs from continuing operations were $ 399 and $ 1,371 for the three and six months ended March 31, 2025 and $ 1,026 and $ 2,062 for the three and six months ended March 31, 2024, 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 $ 278 and $ 304 for the three and six months ended March 31, 2025, and $ 37 and $ 47 for the three and six months ended March 31, 2024, 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 $ 26 and $ 50 for the three and six months ended March 31, 2025, and $ 9 and $ 15 for the three and six months ended March 31, 2024, and are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

i3 VERTICALS, Inc.

1 unchanged sentence

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

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:

As of March 31, 2025, maturities of lease liabilities for continuing operations are as follows:

Fiscal Years ending September 30:

2025 (nine months remaining) $ 2,997

2025 (six months remaining) $ 1,993

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 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.

The carrying value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, settlement assets and obligations, accounts receivable, other assets, accounts payable, and accrued expenses, approximated their fair values as of March 31, 2025 and 2024, because of the relatively short maturity dates on these instruments.

The carrying amount of debt approximates fair value as of March 31, 2025 and 2024, because interest rates on these instruments approximate market interest rates.

i3 VERTICALS, Inc.

8 unchanged sentences

Contingent consideration paid ( 60 )

Balance at December 31, 2024 $ 3,669

Balance at March 31, 2025 $ 4,050

Accrued Contingent Consideration

3 unchanged sentences

Contingent consideration paid ( 3,913 )

Balance at December 31, 2023 $ 6,254

Balance at March 31, 2024 $ 3,969

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

6 unchanged sentences

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

Approximately $ 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

The Company's financial instruments that are not remeasured at fair value include the Exchangeable Notes (see Note 8).

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 $ 26,053 as of December 31, 2024.

Approximately $ 1,506 and $ 716 of contingent consideration was recorded in accrued expenses and other current liabilities as of March 31, 2025 and September 30, 2024, respectively.

Approximately $ 2,544 and $ 1,636 of contingent consideration was recorded in other long-term liabilities as of March 31, 2025 and September 30, 2024, respectively.

i3 VERTICALS, Inc.

2 unchanged sentences

EQUITY-BASED COMPENSATION

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,

A summary of equity-based compensation expense for continuing operations recognized during the three and six months ended March 31, 2025 and 2024 is as follows:

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

2025 2024 2025 2024

Stock options $ 1,572 $ 4,078 $ 3,988 $ 8,314

1 unchanged sentence

Equity-based compensation expense $ 3,932 $ 5,022 $ 7,746 $ 10,380

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.

In connection with the sale of the Merchant Services Business, $ 755 and $ 1,905 of the Company's equity-based compensation expense was classified within "net income from discontinued operations" in the accompanying condensed consolidated statements of operations during three and six months ended March 31, 2024.

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.

Current and deferred income tax expense for continuing operations of $ 1,378 and $ 767 was recognized during the three and six months ended March 31, 2025, respectively, and current and deferred income tax benefit of $ 816 and $ 1,713 during the three and six months ended March 31, 2024, respectively.

Stock Options

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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 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.

As of March 31, 2025, equity awards with respect to 2,233,833 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 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.

As of March 31, 2025, equity awards with respect to 1,567,739 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.

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

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

A summary of stock option activity for the six months ended March 31, 2025 is as follows:

Stock Options Weighted Average Exercise Price

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Forfeited ( 78,343 ) 26.89

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.

Outstanding at March 31, 2025 8,691,636 $ 24.58

Exercisable at March 31, 2025 7,370,339 $ 25.11

The weighted-average grant date fair value of stock options granted during the six months ended March 31, 2025 was $ 13.07 .

As of March 31, 2025, total unrecognized compensation expense related to unvested stock options, including an estimate for pre-vesting forfeitures, was $ 12,072 , which is expected to be recognized over a weighted-average period of 2.5 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 months ended December 31, 2024 was $ 3,209 .

The total fair value of stock options that vested during the three and six months ended March 31, 2025 was $ 6,822 and $ 10,031 , respectively.

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 three months ended December 31, 2024 is as follows:

A summary of activity related to restricted stock units for the six months ended March 31, 2025 is as follows:

Restricted Stock Units Weighted Average Grant Date Fair Value

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Forfeited ( 36,022 ) 23.07

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 .

Outstanding at March 31, 2025 1,255,698 $ 24.45

As of March 31, 2025, total unrecognized compensation expense related to unvested RSUs, including an estimate for pre-vesting forfeitures, was $ 21,428 , which is expected to be recognized over a weighted average period of 3.0 years.

The total fair value of RSUs that vested during the three and six months ended March 31, 2025 was $ 3,658 and $ 4,066 , respectively .

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

Rent expense from continuing operations under these leases amounted to $ 425 and $ 1,421 during the three and six months ended March 31,

i3 VERTICALS, Inc.

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

during the three months ended December 31, 2023.

2025, and $ 1,035 and $ 2,077 during the three and six months ended March 31, 2024.

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

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S&S Litigation

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

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

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

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and Scott Carrington .

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

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

The Petition was amended on October 4, 2021 to amend and expand the putative class and subsequently removed to federal court.

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

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

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

On July 5, 2022, the magistrate recommended that the matter be remanded to state court.

On July 19, 2022, the Company and all other defendants filed objections to the recommendation.

On August 3, 2022, the Plaintiffs filed a response to those objections.

On August 16, 2022, the district court granted the Plaintiffs’ motion to remand, and all Defendants appealed.

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

On February 22, 2024, the case was remanded to the 19th Judicial District Court for the Parish of East Baton Rouge, where the case remains pending.

i3 VERTICALS, Inc.

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(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.

All Defendants 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 State chose not to re-plead their claims, which leaves some of their claims now dismissed with prejudice.

The Sheriffs and Districts re-plead their claims.

Certain Defendants filed renewed pleading-stage motions to dismiss that the Court denied on April 14, 2025.

The case is now in the discovery phase of litigation.

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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See Note 10 for further information.

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.

As of March 31, 2025, the total amount due under the Tax Receivable Agreement was $ 33,526 .

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 was anticipated to be recognized for 2024 federal income tax purposes by members of the Company.

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

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 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.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

After giving effect to these recapitalization actions, as of January 23, 2025, the Company held 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).

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.

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

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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.

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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,

The following is a summary of reportable segment operating performance for continuing operations for the three and six months ended March 31, 2025 and 2024.

For the Three Months Ended March 31,

For the Six Months Ended March 31,

2025 2024 2025 2024

Public Sector adjusted EBITDA margin (1)

41 % 41 % 40 % 40 %

Healthcare adjusted EBITDA margin (1)

Public Sector revenue

16 % 16 % 23 % 20 %

Public Sector revenue $ 52,405 $ 47,097 $ 101,190 $ 90,595

Healthcare revenue 10,857 11,053 24,028 22,633

13,171 11,580

Other revenue ( 203 ) ( 182 ) ( 468 ) ( 206 )

( 265 ) ( 24 )

Total revenue $ 63,059 $ 57,968 $ 124,750 $ 113,022

$ 61,691 $ 55,054

Public sector adjusted EBITDA 21,576 19,233 40,819 36,592

19,243 17,359

Healthcare adjusted EBITDA 1,722 1,775 5,470 4,569

Corporate, eliminations and other ( 6,156 ) ( 5,794 ) ( 12,775 ) ( 11,959 )

( 6,619 ) ( 6,165 )

Stock compensation expense ( 3,932 ) ( 5,022 ) ( 7,746 ) ( 10,380 )

( 3,814 ) ( 5,358 )

M&A-related expenses ( 570 ) ( 714 ) ( 1,116 ) ( 958 )

( 546 ) ( 244 )

Other taxes and one-time expenses ( 455 ) ( 89 ) ( 707 ) ( 173 )

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Income from operations 3,964 2,486 6,663 3,971

Other (income) expense

Interest expense 446 7,714 1,126 14,401

Other income ( 631 ) ( 2,257 ) ( 2,457 ) ( 2,150 )

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

Total other (income) expense ( 185 ) 5,457 ( 1,331 ) 12,251

Income (loss) before income taxes $ 4,149 $ ( 2,971 ) $ 7,994 $ ( 8,280 )

n/m = not meaningful

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

March 31, March 31,

Public Sector total assets $ 479,354 $ 467,465

Healthcare total assets 90,823 92,848

Other total assets 76,182 65,526

Total assets $ 646,359 $ 625,839

Public Sector goodwill $ 233,850 $ 222,364

Healthcare goodwill 46,828 46,828

Total goodwill $ 280,678 $ 269,192

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.

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

As of March 31, 2025 and 2024, respectively, i3 Verticals, Inc.

owned 24,386,990 and 23,416,518 of i3 Verticals, LLC's Common Units, representing a 73.4 % and 70.0 % 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:

Three Months Ended December 31,

Six Months Ended March 31,

Net income attributable to non-controlling interest

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Transfers (from) to non-controlling interests:

Distributions to non-controlling interest holders 283 —

Redemption of common units in i3 Verticals, LLC ( 11,730 ) ( 384 )

Recapitalization from contribution to i3 Verticals, LLC 5,689 —

Allocation of equity (from) to non-controlling interests ( 3,356 ) 3,750

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Change from net income attributable to non-controlling interests and net transfers to non-controlling interests $ ( 7,139 ) $ 5,274

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.

See Note 15 for information regarding certain recapitalization actions the Company and i3 Verticals, LLC effected during the three months ended March 31, 2025 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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(in thousands, except unit, share and per share amounts)

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

Three Months Ended December 31,

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

2025 2024 2025 2024

Basic net income (loss) per share:

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Weighted average shares of Class A common stock outstanding

23,834,233 23,691,648

Weighted average effect of dilutive securities (3)

299,505 389,584

Weighted average shares of Class A common stock outstanding - diluted

24,133,738 24,081,232

Diluted net income per share $ 0.00 $ 0.09

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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.

For the three and six months ended March 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 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.

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

7,852,595 and 8,246,542 stock options for the three and six months ended March 31, 2024, 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

387,235 and 427,506 shares for the three and six months ended March 31, 2024, 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.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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.

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

For the three and six months ended March 31, 2025, 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:

9,408,427 and 9,720,698 weighted average shares of Class B common stock for the three and six months ended March 31, 2025, respectively, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive, and

4,227,718 and 4,660,034 stock options for the three and six months ended March 31, 2025, respective, 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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(in thousands, except unit, share and per share amounts)

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

Three Months Ended December 31,

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

Basic net (loss) income per share:

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Weighted average shares of Class A common stock outstanding

23,331,239 23,299,214

Weighted average effect of dilutive securities (3)

387,235 10,520,010

Weighted average shares of Class A common stock outstanding - diluted

23,718,474 33,819,224

Diluted net income per share $ 0.15 $ 0.31

__________________________

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.

For the three and six months ended March 31, 2025, 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.

4,227,718 and 4,660,034 stock options for the three and six months ended March 31, 2025, 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.

299,505 and 389,584 shares for the three and six months ended March 31, 2025, 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.

i3 VERTICALS, Inc.

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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,

For the three and six months ended March 31, 2024, 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:

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

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

Basic net income per share:

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Net income attributable to non-controlling interest

Net income attributable to Class A common stockholders $ 2,056 $ 1,098

923 1,470 1,975 1,908

Net (loss) income attributable to Class A common stockholders

$ ( 154 ) $ 1,878 $ 1,902 $ 2,976

Weighted average shares of Class A common stock outstanding

23,834,233 23,331,239 23,691,648 23,299,214

Basic net income per share

Basic net (loss) income per share (1)

$ ( 0.01 ) $ 0.08 $ 0.08 $ 0.13

Diluted net income per share:

Net income attributable to Class A common stockholders $ 2,056 $ 1,098

Net (loss) income attributable to Class A common stockholders

$ 1,878 $ 1,902 $ 2,976

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

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

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

$ 1,878 $ 1,902 $ 2,976

Weighted average shares of Class A common stock outstanding

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__________________________

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.

For the three months ended March 31, 2025, 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:

9,408,427 weighted average shares of Class B common stock for the three months ended March 31, 2025, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive.

4,227,718 stock options for the three months ended March 31, 2025, 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.

299,505 shares for the three months ended March 31, 2025, 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.

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

For the three months ended March 31, 2024 and the six months ended March 31, 2025 and 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 from consolidated operations:

10,091,604 , 9,720,698 and 10,092,504 weighted average shares of Class B common stock for the three months ended March 31, 2024 and the six months ended March 31, 2025 and 2024, respectively, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive, and

7,852,595 , 4,660,034 and 8,246,542 stock options for the three months ended March 31, 2024 and the six months ended March 31, 2025 and 2024, 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.

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

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

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

The Exchangeable Notes matured in February 2025 and we paid the entire remaining principal balance.

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

The effect of the additional shares that may be issued upon exercise of the Warrants will be included in the weighted average shares of Class A common stock outstanding—diluted using the treasury stock method.

The Warrants expire in May 2025.

The Note Hedge Transactions purchased in connection with the issuance of the Exchangeable Notes are considered to be anti-dilutive and therefore do not impact our calculation of diluted net income per share.

The Note Hedge Transactions expired in February 2025 upon the maturity and payment in full of the Exchangeable Notes.

Refer to Note 8 for further discussion regarding the Exchangeable Notes.

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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 three months ended December 31, 2024 and 2023:

Three months ended December 31,

The Company engaged in the following significant non-cash investing and financing activities related to continuing operations during the six months ended March 31, 2025 and 2024:

Six months ended March 31,

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

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SUBSEQUENT EVENTS

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.

Recent Acquisitions

On April 1, 2025, the Company completed the acquisition of a business to expand the Company’s Public Sector utility billing software offerings within the Public Sector segment.

Purchase consideration for the business

i3 VERTICALS, Inc.

1 unchanged sentence

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

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.

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).

included $ 9,000 in cash funded by proceeds from the Company's revolving credit facility and cash on hand as well as an amount of contingent consideration which is still being valued.

Certain provisions in the purchase agreement provide for additional consideration of up to $ 5,000 , 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 September 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.

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.

The effect of the acquisition will be included in the consolidated statements of operations beginning April 1, 2025.

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

Recent Divestitures

On May 5, 2025, i3 Verticals, LLC and i3 Healthcare Solutions, LLC, a wholly-owned subsidiary of i3 Verticals, LLC (“Seller,” and collectively with i3 Verticals, LLC, the “Seller Parties”), completed the sale of the equity interests of certain wholly-owned subsidiaries of the Seller (the “Healthcare RCM Acquired Entities”) which owned and operated the Company's healthcare revenue cycle management business, including its associated proprietary technology (the “Healthcare RCM Business”), to Infinx, Inc.

(“Healthcare RCM Buyer”), a Texas corporation, pursuant to the terms of that certain Securities Purchase Agreement dated as of May 5, 2025, by and among Healthcare RCM Buyer and the Seller Parties (the “Healthcare RCM Purchase Agreement;” the transactions contemplated by the Healthcare RCM Purchase Agreement, the “Healthcare RCM Transactions”).

In addition, immediately prior to the sale of the equity interests of the Healthcare RCM Acquired Entities pursuant to the Healthcare RCM Purchase Agreement, i3 Verticals, LLC and certain of its subsidiaries contributed and/or assigned certain assets and certain liabilities related to the Healthcare RCM Business to the Healthcare RCM Acquired Entities.

The purchase price payable by Healthcare RCM Buyer to Seller for the equity interests of the Healthcare RCM Acquired Entities was $ 96.0 million, paid in cash at closing, subject to post-closing net working capital and other purchase price adjustments as provided in the Healthcare RCM Purchase Agreement.

As of March 31, 2025, the Company's Healthcare RCM Business was not classified as held for sale according to GAAP due to the lack of identification of a final buyer, preliminary stage of buyer's diligence and lack of Board approval for the sale.

Accordingly, the current period and historical results of the Healthcare RCM Business are presented within results from continuing operations in this Quarterly Report on Form 10-Q.

In connection with the sale of the Healthcare RCM Business, the Company fully accelerated the vesting period for the options and RSUs (to the extent not previously vested) held by employees of the Healthcare RCM Business immediately prior to the closing of the Healthcare RCM Transactions pursuant to the Healthcare RCM Purchase Agreement.

Amendment to Credit Agreement

On May 5, 2025, i3 LLC entered into that certain Second Amendment to Credit Agreement (the “Amendment”), which amends that certain Credit Agreement dated as of May 8, 2023, as amended (the “Existing Credit Agreement”), with the guarantors and the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.

The Amendment provides for certain amendments to the Existing Credit Agreement, including amendments that permitted and accommodated the execution of the Healthcare RCM Purchase Agreement and the consummation of the Healthcare RCM Transactions.

The Amendment also permanently reduced the aggregate lender commitments under the Company’s revolving line of credit from $ 450,000 to $ 400,000 .

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