What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-09 compared with 2025-02-07 · 204 added, 117 removed, 275 unchanged (54% of the section changed)

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• technical, operational and regulatory risks related to our information technology systems and third-party providers’ systems;

• our ability to execute on our strategy and achieve our goals following the completion of the sale of our Merchant Services Business;

• our ability to execute on our strategy and achieve our goals following the completion of the sale of our Merchant Services Business and the completion of the sale of our Healthcare RCM Business;

• risks related to ongoing and future economic and geopolitical conditions, including the impact of inflationary pressures, elevated interest rates, current geopolitical instability (including with respect to the current dispute between India and Pakistan), and tariff and trade-related developments;

• our ability to successfully manage our intellectual property;

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• reliance on third parties for significant services;

• exposure to economic conditions and political risks affecting consumer, commercial and government spending, including any decline in the use of credit cards;

• exposure to economic conditions and political risks affecting consumer, commercial and government spending, including as a result of budgetary and political pressures to reduce government spending, as well as any decline in the use of credit cards;

• changes in the budgets or regulatory environments of our Public Sector customers, primarily local and state governments, that could negatively impact spending;

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• operating and financial restrictions imposed by our 2023 Senior Secured Credit Facility;

• risks related to the accounting method for i3 Verticals, LLC's 1.0% Exchangeable Notes due February 15, 2025 (the "Exchangeable Notes");

• our ability to raise the funds necessary to settle exchanges of the Exchangeable Notes or to repurchase the Exchangeable Notes upon a fundamental change;

• the "Risk Factors" included in our Form 10-K and included in Part II, Item 1A of this Quarterly Report on Form 10-Q, if any.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q.

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Executive Overview

The Company delivers seamless integrated software and services to customers in strategic vertical markets.

Building on its broad suite of software and services solutions, the Company creates and acquires software products to serve the specific needs of its customers.

The Company's primary strategic verticals are Public Sector and Healthcare.

Economic Trends

Inflationary pressures, elevated interest rate levels, monetary policy, and the current geopolitical situation (including the military conflicts in the Middle East and Ukraine), are causing broad economic uncertainty and could potentially cause new, or exacerbate existing, economic challenges that may impact us.

These conditions could worsen as a result of adverse economic developments impacting the U.S.

and/or global economies, including as a result of monetary policy designed to curb inflation.

The Company delivers seamless enterprise software to customers in strategic vertical markets.

Building on its sophisticated and diverse platform of software and services solutions, the Company creates and acquires software products to serve the specific needs of public and private organizations in the Public Sector.

Recent Developments

Inflationary pressures, elevated interest rate levels, monetary policy, the current geopolitical situation (including the military conflicts in the Middle East and Ukraine as well as the current dispute between India and Pakistan), tariff and trade-related developments, and budgetary and political pressures to reduce government spending are causing broad economic uncertainty and could potentially cause new, or exacerbate existing, economic challenges that may impact us.

For example, we have business operations in Canada, and the determination of Canadian governmental authorities or businesses to cancel or not renew contracts, or otherwise reduce business, with U.S.

companies as a result of current trade tensions with the United States, as has been advocated by certain Canadian governmental authorities, could adversely impact our financial results.

As the future magnitude, duration and effects of these conditions are difficult to predict at this time, we are unable to predict the extent of the potential effect on our financial results.

At December 31, 2024, we had $85.6 million of cash and cash equivalents and $450.0 million of available capacity under our 2023 Senior Secured Credit Facility subject to our financial covenants.

As of December 31, 2024, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio 3.7x, and 0.1x, respectively.

At March 31, 2025, we had $7.7 million of cash and cash equivalents and $438.0 million of available capacity under our 2023 Senior Secured Credit Facility subject to our financial covenants.

As of March 31, 2025, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio 92.5x, and 0.1x, respectively.

For additional information about our Exchangeable Notes and 2023 Senior Secured Credit Facility, see the section entitled “Liquidity and Capital Resources” below.

Sale of Healthcare RCM Business

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 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.

The Healthcare RCM Business contributed $9.1 million and $18.9 million of revenue for the three and six months ended March 31, 2025, respectively.

The Healthcare RCM Business was not classified as held for sale according to GAAP as of March 31, 2025.

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.

Sale of Merchant Services Business

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), the entry into which Purchase Agreement was previously disclosed in a Current Report on Form 8-K filed by the Company on June 26, 2024.

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.

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

The Merchant Services Business comprised our entire former Merchant Services segment and a small portion of our former Software and Services segment.

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), the entry into which Merchant Services Purchase Agreement was previously disclosed in a Current Report on Form 8-K filed by the Company on June 26, 2024.

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.

Pursuant to the terms of the Merchant Services Purchase Agreement, Merchant Services Buyer paid to Sellers an aggregate purchase price of approximately $437 million (after giving effect to post-closing net working capital, indebtedness and cash adjustments), payable in cash at the Closing.

As a result of the sale of the Merchant Services Business, the historical results of the Merchant Services segment and a small portion of the historical Software and Services segment which had been included in the Merchant Services Business have been reflected as discontinued operations in our consolidated financial statements.

A core component of our growth strategy includes a disciplined approach to acquisitions of companies and technology, evidenced by numerous platform acquisitions and tuck-in acquisitions since our inception in 2012.

Our acquisitions have increased the number of businesses and organizations to whom we provide solutions and augmented our existing proprietary payment facilitator platform and software solutions and capabilities.

Acquisitions during the three months ended December 31, 2024

During the three months ended December 31, 2024, we did not complete any acquisitions.

Acquisitions during the three months ended December 31, 2023

During the three months ended December 31, 2023, we completed the acquisition of one business to expand our software offerings.

Recent acquisitions

On April 1, 2025, we completed the acquisition of a business to expand our utility management software offerings in the Public Sector segment.

Total purchase consideration was $9.0 million in cash funded by the proceeds from our revolving credit facility and cash on hand as well as an amount of contingent consideration of up to $5.0 million, 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.

Acquisitions during the six months ended March 31, 2025

During the six months ended March 31, 2025, we did not complete any acquisitions.

Acquisitions during the six months ended March 31, 2024

During the six months ended March 31, 2024, we completed the acquisition of one business to expand our software offerings.

Total purchase consideration was $1.3 million, including $1.1 million in cash funded by the proceeds from our revolving credit facility and $0.2 million in contingent consideration.

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

Given the change in our business model, we have reclassified certain expenses to better align with the primary industry in which we now operate.

Given the change in our business model following the sale of our Merchant Services Business, we have reclassified certain expenses to better align with the primary industry in which we now operate.

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

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

Given the change in our business model, we have reclassified certain expenses to better align with the primary industry in which we now operate.

Given the change in our business model following the sale of our Merchant Services Business, we have reclassified certain expenses to better align with the primary industry in which we now operate.

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

Interest (income) expense, net.

Our interest expense consists of interest on our outstanding indebtedness under our 2023 Senior Secured Credit Facility, our Prior Senior Secured Credit Facility and Exchangeable Notes, and amortization of debt issuance costs.

Interest income is generated from cash and cash equivalents held at financial institutions.

Interest expense.

Our interest expense consists of interest on our outstanding indebtedness under our 2023 Senior Secured Credit Facility, and prior to their maturity, the Exchangeable Notes, and amortization of debt issuance costs.

How We Assess Our Business

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After giving effect to these developments, the Company has two reportable segments, Public Sector and Healthcare, and an Other category.

In addition, as disclosed above, we completed the disposition of our Healthcare RCM Business on May 5, 2025.The Healthcare RCM Business contributed $9.1 million and $18.9 million of revenue for the three and six months ended March 31, 2025, respectively.

Public Sector

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• Adjusted EBITDA margin

ARR is the annualized revenue derived from software-as-a-service (“SaaS”) arrangements, transaction-based software-revenue, software maintenance, recurring software-based services, payments revenue and other recurring revenue sources within the quarter.

This excludes contracts that are not recurring or are one-time in nature.

We focus on ARR because it helps us to assess the health and trajectory of our business.

ARR is the annualized revenue derived from recurring sources where we have an ongoing contract with our customers.

We believe revenue from recurring sources is a strategic priority.

ARR is comprised of software-as-a-service (“SaaS”) arrangements, transaction-based software-revenue, software maintenance, recurring software-based services, payments revenue and other recurring revenue sources within the quarter.

The sum of these revenue categories is multiplied by four to calculate ARR.

ARR excludes revenue that is not recurring or is one-time in nature.

We believe this metric provides useful information to investors by providing visibility regarding the ongoing revenue potential of our business model and providing a clearer picture of our sustainable revenue base.

Further, our management uses ARR as a metric because it helps us to assess the health and trajectory of our business.

We believe that focusing on ARR can orient our sales and operations management towards long-term, reliable revenue growth.

This focus on recurring revenue is particularly relevant for businesses operating under a subscription model, where customer retention and contract renewals play a significant role in long-term financial performance.

ARR does not have a standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies.

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The active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

ARR from continuing operations for the three months ended December 31, 2024 and 2023 was $193.3 million and $179.6 million, respectively, representing a period-to-period growth rate of 8%.

ARR from continuing operations for the three months ended March 31, 2025 and 2024 was $199.1 million and $186.8 million, respectively, representing a period-to-period growth rate of 7%.

Adjusted EBITDA margin is used by the Company to measure operating performance and for purposes of making decisions about allocating resources to our business segments.

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Adjusted EBITDA is calculated as earnings adjusted to exclude interest, tax, depreciation, amortization, stock-compensation expense, non-cash changes in the fair value of contingent consideration, M&A-related expenses, and certain other adjustments that management believes are not reflective of our underlying operations.

Adjusted EBITDA and Adjusted EBITDA margin are presented at a segment level in our financial statement footnotes in accordance with ASC 280 – “Segment Reporting.” Adjusted EBITDA margin for our public sector segment was 39% and 40% for the three months ended December 31, 2024 and 2023, respectively.

Further, Adjusted EBITDA margin for our healthcare segment was 28% and 24% for the three months ended December 31, 2024 and 2023, respectively.

Adjusted EBITDA and Adjusted EBITDA margin are presented at a segment level in our financial statement footnotes in accordance with ASC 280 – “Segment Reporting.” Adjusted EBITDA margin for our public sector segment was 41% for both the three months ended March 31, 2025 and 2024.

Further, Adjusted EBITDA margin for our healthcare segment was 16% for both the three months ended March 31, 2025 and 2024.

For additional information regarding Adjusted EBITDA and Adjusted EBITDA margin, see Note 16.

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Prior period results of operations and balance sheet information have been recast to reflect this presentation, and the discussion below relates to our continuing operations after giving effect to the reclassification for the Merchant Services Business as discontinued operations.

Three Months Ended December 31, 2024 Compared to Three Months Ended December 31, 2023

In addition, as noted above, since the Healthcare RCM Business was not classified as held for sale according to GAAP as of March 31, 2025, the current period and historical results of the Healthcare RCM Business are presented within results from continuing operations.

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

The following table presents our historical results of operations for the periods indicated:

Three Months Ended December 31, Change

Three Months Ended March 31, Change

(in thousands) 2025 2024 Amount %

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Interest expense 446 7,714 (7,268) (94.2) %

Other (income) expense (1,826) 107 (1,933) n/m

Other income (631) (2,257) 1,626 (72.0) %

Total other (income) expenses (185) 5,457 (5,642) n/m

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(227) 3,587 (3,814) n/m

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

$ (154) $ 1,878 $ (2,032) n/m

n/m = not meaningful

_________________________________________

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

Revenue increased $5.1 million, or 8.8%, to $63.1 million for the three months ended March 31, 2025 from $58.0 million for the three months ended March 31, 2024.

This increase included incremental revenue from an acquisition within the Public Sector vertical of $1.2 million, net of any intercompany eliminations.

The remaining increase was primarily driven by an increase of $2.5 million in recurring revenues and an increase of $1.5 million in software license revenue, partially offset by a a decrease in professional services of $0.3 million

Revenue within Public Sector increased $5.3 million, or 11.3%, to $52.4 million for the three months ended March 31, 2025 from $47.1 million for the three months ended March 31, 2024.

This increase included incremental revenue from an acquisition of $1.2 million, net of any intercompany eliminations.

The remaining increase was primarily driven by an increase in recurring revenues of $2.9 million and an increase of $1.3 million in software license revenue, partially offset by a decrease in professional services of $0.3 million.

Revenue within Healthcare decreased $0.2 million, or 1.8%, to $10.9 million for the three months ended March 31, 2025 from $11.1 million for the three months ended March 31, 2024.

This decrease was mostly driven by a decrease in revenue cycle management revenues of $0.3 million driven by an unusually large snow storm on the Gulf Coast that reduced volumes of procedures within our customer base, partially offset by an increase of $0.2 million in software license revenue.

Other Costs of Services

Other costs of services increased $1.0 million, or 4.9%, to $22.2 million for the three months ended March 31, 2025 from $21.1 million for the three months ended March 31, 2024.

This increase included incremental other costs of services from an acquisition within the Public Sector vertical of $0.3 million.

The remaining increase was primarily driven by an increase in internal personnel costs of $0.3 million and an increase of $0.4 million in software costs, partially offset by a decrease of $0.5 million in stock compensation expense within other costs of services for the three months ended March 31, 2025 from the three months ended March 31, 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $1.3 million, or 4.6%, to $28.7 million for the three months ended March 31, 2025 from $27.4 million for the three months ended March 31, 2024.

This increase included incremental expenses from an acquisition within the Public Sector vertical of $1.0 million, net of any intercompany eliminations.

The remaining increase was primarily driven by an increase in internal and external personnel costs of $0.7 million, partially offset by a decrease in stock compensation expense within selling, general and administrative expenses of $0.6 million for the three months ended March 31, 2025 from the three months ended March 31, 2024.

Depreciation and Amortization

Depreciation and amortization increased $0.6 million, or 9.0%, to $7.8 million for the three months ended March 31, 2025 from $7.2 million for the three months ended March 31, 2024.

Amortization expense increased $0.6 million to $7.1 million for the three months ended March 31, 2025 from $6.5 million for the three months ended March 31, 2024 primarily due to an increase in capitalized software project releases, driving an increase in amortization expense.

Depreciation expense increased slightly by $57 thousand to $0.7 million for the three months ended March 31, 2025 from $0.7 million for the three months ended March 31, 2024.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration to be paid in connection with acquisitions was a charge of $0.4 million for the three months ended March 31, 2025 related to adjustments to the expected present value of consideration to be paid for earnouts.

The change in fair value of contingent consideration for the three months ended March 31, 2024 was a benefit of $0.3 million.

Interest Expense

Interest expense decreased $7.3 million, or 94.2%, to $0.4 million for the three months ended March 31, 2025 from $7.7 million for the three months ended March 31, 2024.

The decrease reflects a lower average outstanding debt balance for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024.

Other (Income) Expense

Other income was $0.6 million during the three months ended March 31, 2025, and other income was $2.3 million during the three months ended March 31, 2024.

Other income during the three months ended March 31, 2025 reflects income from the Transition Services Agreement and Processing Services Agreement related to the sale of the Merchant Services Business of $0.5 million and income generated from cash held at financial institutions of $0.1 million.

Other income during the three months ended March 31, 2024 reflects the gain on the Exchangeable Note Repurchases and gain on Warrant Unwinds, net of the loss on Note Hedge Unwinds.

Provision for (Benefit from) Income Taxes

The provision for income taxes increased to a provision for $3.1 million for the three months ended March 31, 2025 from a benefit of $0.7 million for three months ended March 31, 2024.

Our effective tax rate was 74% for the three months ended March 31, 2025.

Our effective tax rate differs from the federal statutory rate of 21% primarily due to the tax structure of the Company.

The income of majority-owned i3 Verticals, LLC is not taxed at the entity-level.

i3 Verticals, Inc.

is subject to federal, state and local income taxes with respect to its allocable share of any taxable income of i3 Verticals, LLC and is taxed at the prevailing corporate tax rates.

Net (Loss) Income from Discontinued Operations, Net of Income Taxes

We had $0.3 million in net loss from discontinued operations, net of income tax, for the three months ended March 31, 2025 compared to $5.7 million in net income from discontinued operations, net of income tax, for the three months ended March 31, 2024.

See Note 2 to our condensed consolidated financial statements for additional information and detail on the financial results of discontinued operations.

The net loss from discontinued operations, net of income tax, for the three months ended March 31, 2025 reflects adjustments to the gain on the sale of the Merchant Services Business.

The net income from discontinued operations, net of income tax, for the three months ended March 31, 2024 included a complete quarter of business activity, including revenue of $36.6 million, operating expenses of $29.6 million, and a provision for income taxes of $1.2 million.

Six Months Ended March 31, 2025 Compared to Six Months Ended March 31, 2024

The following table presents our historical results of operations for the periods indicated:

Six Months Ended March 31, Change

(in thousands) 2025 2024 Amount %

Revenue $ 124,750 $ 113,022 $ 11,728 10.4 %

Operating expenses

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

43,218 40,724 2,494 6.1 %

Selling, general and administrative (1)

57,587 54,607 2,980 5.5 %

Depreciation and amortization 15,524 14,247 1,277 9.0 %

Change in fair value of contingent consideration 1,758 (527) 2,285 n/m

Total operating expenses 118,087 109,051 9,036 8.3 %

Income from operations 6,663 3,971 2,692 67.8 %

Other (income) expenses

Interest expense 1,126 14,401 (13,275) (92.2) %

(2,457) (2,150) (307) 14.3 %

Total other (income) expenses (1,331) 12,251 (13,582) n/m

Income (loss) before income taxes 7,994 (8,280) 16,274 n/m

(Benefit from) provision for income taxes 3,577 (1,763) 5,340 n/m

Net income (loss) from continuing operations 4,417 (6,517) 10,934 n/m

Net (loss) income from discontinued operations, net of income taxes (540) 11,401 (11,941) n/m

Net income 3,877 4,884 (1,007) (20.6) %

Net income (loss) from continuing operations attributable to non-controlling interest 2,150 (1,923) 4,073 n/m

Net (loss) income from discontinued operations attributable to non-controlling interest (175) 3,831 (4,006) n/m

Net income attributable to non-controlling interest 1,975 1,908 67 3.5 %

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

2,267 (4,594) 6,861 n/m

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

(365) 7,570 (7,935) n/m

Net income attributable to i3 Verticals, Inc.

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

Revenue increased $6.6 million, or 12.1%, to $61.7 million for the three months ended December 31, 2024 from $55.1 million for the three months ended December 31, 2023.

This increase included incremental revenue from an acquisition within the Public Sector vertical of $1.2 million, net of intercompany eliminations.

The remaining increase was primarily driven by an increase of $2.9 million in recurring revenues, an increase of $2.3 million in software license revenue.

Revenue within Public Sector increased $5.3 million, or 12.2%, to $48.8 million for the three months ended December 31, 2024 from $43.5 million for the three months ended December 31, 2023.

This increase included incremental revenue from an acquisition of $1.2 million, net of intercompany eliminations.

Revenue increased $11.7 million, or 10.4%, to $124.8 million for the six months ended March 31, 2025 from $113.0 million for the six months ended March 31, 2024.

This increase included incremental revenue from an acquisition within the Public Sector vertical of $2.4 million, net of any intercompany eliminations.

The remaining increase was primarily driven by an increase of $5.4 million in recurring revenues and an increase of $3.7 million in software license revenue.

Revenue within Public Sector increased $10.6 million, or 11.7%, to $101.2 million for the six months ended March 31, 2025 from $90.6 million for the six months ended March 31, 2024.

This increase included incremental revenue from an acquisition of $5.4 million, net of any intercompany eliminations.

The remaining increase was primarily driven by an increase in recurring revenues of $5.9 million and an increase of $2.0 million in software license revenue.

Revenue within Healthcare increased $1.6 million, or 13.7%, to $13.2 million for the three months ended December 31, 2024 from $11.6 million for the three months ended December 31, 2023.

This increase was mostly driven by an increase in software license revenue of $1.6 million.

Revenue within Healthcare increased $1.4 million, or 6.2%, to $24.0 million for the six months ended March 31, 2025 from $22.6 million for the six months ended March 31, 2024.

This increase was mostly driven by an increase in software license revenue of $1.8 million, partially offset by a decrease in revenue cycle management revenues of $0.3 million, driven by an unusually large snow storm on the Gulf Coast that reduced volumes of procedures within our customer base, and a decrease in professional services revenue of $0.1 million.

Other Costs of Services

Other costs of services increased $1.5 million, or 7.4%, to $21.0 million for the three months ended December 31, 2024 from $19.6 million for the three months ended December 31, 2023.

This increase included incremental other costs of services from an acquisition within the Public Sector vertical of $0.3 million, net of intercompany eliminations.

The remaining increase was primarily driven by an increase in internal personnel costs of $1.4 million partially offset by a decrease of $0.5 million in stock compensation expense within other costs of services for the three months ended December 31, 2024 from the three months ended December 31, 2023.

Other costs of services increased $2.5 million, or 6.1%, to $43.2 million for the six months ended March 31, 2025 from $40.7 million for the six months ended March 31, 2024.

This increase included incremental other costs of services from an acquisition within the Public Sector vertical of $0.6 million, net of any intercompany eliminations.

The remaining increase was primarily driven by an increase in internal personnel costs of $1.6 million, partially offset by a decrease of $0.9 million in stock compensation expense within other costs of services for the six months ended March 31, 2025 from the six months ended March 31, 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $1.7 million to $28.9 million for the three months ended December 31, 2024 from from $27.2 million for the three months ended December 31, 2023.

This increase included incremental SG&A expenses from an acquisition within the Public Sector vertical of $0.9 million, net of intercompany eliminations The remaining increase was primarily driven by an increase in internal personnel costs of $1.6 million and internal technology costs $0.5 million for the three months ended December 31, 2024 from the three months ended December 31, 2023, partially offset by a decrease in stock compensation expense within selling, general and administrative expenses of $1.0 million and a decrease in professional services expense of $0.3 million for the three months ended December 31, 2024 from the three months ended December 31, 2023.

Selling, general and administrative expenses increased $3.0 million, or 5.5%, to $57.6 million for the six months ended March 31, 2025 from from $54.6 million for the six months ended March 31, 2024.

This increase included incremental expenses from an acquisition within the Public Sector vertical of $1.9 million, net of any intercompany eliminations.

The remaining increase was primarily driven by an increase in internal and external personnel costs of $1.9 million and internal technology costs $1.0 million for the six months ended March 31, 2025 from the six months ended March 31, 2024, partially offset by a decrease in stock compensation expense within selling, general and administrative expenses of $1.7 million and a decrease in professional services expense of $0.2 million for the six months ended March 31, 2025 from the six months ended March 31, 2024.

Depreciation and Amortization

Depreciation and amortization increased $0.6 million, or 8.9%, to $7.7 million for the three months ended December 31, 2024 from $7.1 million for the three months ended December 31, 2023.

Amortization expense increased $0.6 million to $7.0 million for the three months ended December 31, 2024 from $6.4 million for the three months ended December 31, 2023 primarily due to an increase in capitalized software project releases, driving an increase in amortization expense.

Depreciation expense increased slightly by $48 thousand to $0.7 million for the three months ended December 31, 2024 from $0.6 million for the three months ended December 31, 2023.

Depreciation and amortization increased $1.3 million, or 9.0%, to $15.5 million for the six months ended March 31, 2025 from $14.2 million for the six months ended March 31, 2024.

Amortization expense increased $1.2 million to $14.1 million for the six months ended March 31, 2025 from $12.9 million for the six months ended March 31, 2024 primarily due to an increase in capitalized software project releases, driving an increase in amortization expense.

Depreciation expense increased by $0.1 million to $1.4 million for the six months ended March 31, 2025 from $1.3 million for the six months ended March 31, 2024.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration to be paid in connection with acquisitions was a charge of $1.4 million for the three months ended December 31, 2024 related to adjustments to the expected present value of consideration to be paid for earnouts.

The change in fair value of contingent consideration for the three months ended December 31, 2023 was a benefit of $0.2 million.

Change in fair value of contingent consideration to be paid in connection with acquisitions was a charge of $1.8 million for the six months ended March 31, 2025 related to adjustments to the expected present value of consideration to be paid for earnouts.

The change in fair value of contingent consideration for the six months ended March 31, 2024 was a benefit of $0.5 million.

Interest Expense

Interest expense decreased $6.0 million, or 89.8%, to $0.7 million for the three months ended December 31, 2024 from $6.7 million for the three months ended December 31, 2023.

The decrease reflects a lower average outstanding debt balance for the three months ended December 31, 2024, as compared to the three months ended December 31, 2023.

Other (Income) Expense

Other income was $1.8 million during the three months ended December 31, 2024, and other expense was $0.1 million during the three months ended December 31, 2023.

Other income during the the three months ended December 31, 2024 reflects income generated from cash held at financial institutions of $0.7 million, a gain on disposal of property and equipment of $0.6 million related to the sale of a building and automobiles purchased through previous acquisitions and income from the Transition Services Agreement and Processing Services Agreement related to the sale of the Merchant Services Business of $0.5 million.

Other expense during the three months ended December 31, 2023 reflects a loss on disposal of property and equipment related to the sale of a building purchased through an acquisition.

Interest expense decreased $13.3 million, or 92.2%, to $1.1 million for the six months ended March 31, 2025 from $14.4 million for the three months ended March 31, 2024.

The decrease reflects a lower average outstanding debt balance for the six months ended March 31, 2025, as compared to the six months ended March 31, 2024.

Other income was $2.5 million during the six months ended March 31, 2025, and other income was $2.2 million during the six months ended March 31, 2024.

Other income during the the six months ended March 31, 2025 reflects income from the Transition Services Agreement and Processing Services Agreement related to the sale of the Merchant Services Business of $1.0 million, income generated from cash held at financial institutions of $0.9 million, and a gain on disposal of property and equipment of $0.6 million related to the sale of a building purchased through previous acquisitions.

Other income during the six months ended March 31, 2024 reflects the gain on the Exchangeable Note Repurchases and gain on Warrant Unwinds, net of the loss on Note Hedge Unwinds and loss on the sale of a building purchased through acquisition.

Provision for (Benefit from) Income Taxes

The provision for income taxes increased to a provision for $0.5 million for the three months ended December 31, 2024 from a benefit of $1.1 million for three months ended December 31, 2023.

Our effective tax rate was 14% for the three months ended December 31, 2024.

The provision for income taxes increased to a provision for $3.6 million for the six months ended March 31, 2025 from a benefit of $1.8 million for six months ended March 31, 2024.

Our effective tax rate was 45% for the six months ended March 31, 2025.

Our effective tax rate differs from the federal statutory rate of 21% primarily due to the tax structure of the Company.

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Net (Loss) Income from Discontinued Operations, Net of Income Taxes

We had $0.2 million in net loss from discontinued operations, net of income tax, for the three months ended December 31, 2024 compared to $5.8 million in net income from discontinued operations, net of income tax, for the three months ended December 31, 2023.

We had $0.5 million in net loss from discontinued operations, net of income tax, for the six months ended March 31, 2025 compared to $11.4 million in net income from discontinued operations, net of income tax, for the six months ended March 31, 2024.

See Note 2 to our condensed consolidated financial statements for additional information and detail on the financial results of discontinued operations.

The net loss from discontinued operations, net of income tax, for the three months ended December 31, 2024 reflects adjustments to the gain on the sale of the Merchant Services Business.

The net income from discontinued operations, net of income tax, for the three months ended December 31, 2023 included a complete quarter of business activity, including revenue of $36.9 million, operating expenses of $29.9 million, and a provision for income taxes of $1.3 million.

The net loss from discontinued operations, net of income tax, for the six months ended March 31, 2025 reflects adjustments to the gain on the sale of the Merchant Services Business.

The net income from discontinued operations, net of income tax, for the six months ended March 31, 2024 included a complete six months of business activity, including revenue of $73.5 million, operating expenses of $59.5 million, and a provision for income taxes of $2.5 million.

We have experienced in the past, and may continue to experience, seasonal fluctuations in our revenues as a result of consumer and business spending patterns.

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We have historically financed our operations and working capital through net cash from operating activities.

As of December 31, 2024, we had $85.6 million of cash and cash equivalents and available borrowing capacity of $450.0 million under our 2023 Senior Secured Credit Facility, subject to the financial covenants.

As of March 31, 2025, we had $7.7 million of cash and cash equivalents and available borrowing capacity of $438.0 million under our 2023 Senior Secured Credit Facility (which was subsequently reduced in connection with the Second Amendment, as described below), subject to the financial covenants.

We usually minimize cash balances by making payments on our revolving line of credit to minimize borrowings and interest expense.

As of December 31, 2024, we had no borrowings outstanding under the 2023 Senior Secured Credit Facility.

As of March 31, 2025, we had borrowings outstanding of $12.0 million under the 2023 Senior Secured Credit Facility.

For additional information about our 2023 Senior Secured Credit Facility, see the section entitled "— 2023 Senior Secured Credit Facility" below.

In addition, as noted above, on May 5, 2025, we sold our Healthcare RCM Business pursuant to the terms of the Healthcare RCM Purchase Agreement, for a purchase price of approximately $96 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.

Our primary cash needs are to fund working capital requirements, make capital expenditures and otherwise invest in our technology infrastructure, fund acquisitions and related contingent consideration, make scheduled principal and interest payments on our outstanding indebtedness, pay tax distributions to members of i3 Verticals, LLC as discussed below, and make repurchases of shares of Class A common stock under our share repurchase program as discussed below.

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Our growth strategy includes acquisitions.

We expect to fund acquisitions through a combination of net cash from operating activities, borrowings under our 2023 Senior Secured Credit Facility and through the issuance of equity and debt securities.

We expect to fund acquisitions through a combination of cash on hand, net cash from operating activities, borrowings under our 2023 Senior Secured Credit Facility and through the issuance of equity and debt securities.

As a holding company, we depend on distributions or loans from i3 Verticals, LLC to access funds earned by our operations.

The covenants contained in the 2023 Senior Secured Credit Facility may restrict i3 Verticals, LLC’s ability to provide funds to i3 Verticals, Inc.

Our liquidity profile reflects our completed offering in February 2020 of an aggregate principal amount of $138.0 million in 1.0% Exchangeable Senior Notes due 2025, with substantially all the proceeds being used to pay down outstanding borrowings under our Prior Senior Secured Credit Facility.

After giving effect to the repurchase of $90.8 million in aggregate principal amount of the 1.0% Exchangeable Senior Notes on January 18, 2024 as described below as well as the repurchase of $21.0 million in aggregate principal amount of Exchangeable Senior Notes in open market purchases in 2020, the aggregate principal amount of the Exchangeable Notes that is currently outstanding is $26.2 million.

The Exchangeable Notes mature on February 15, 2025, unless earlier exchanged, redeemed or repurchased.

We may elect from time to time to purchase our outstanding debt in open market purchases, privately negotiated transactions or otherwise.

Any such debt repurchases will depend upon prevailing market conditions, our liquidity requirements, contractual restrictions, applicable securities law and other factors.

Our liquidity profile has reflected our completed offering in February 2020 of an aggregate principal amount of $138.0 million in 1.0% Exchangeable Senior Notes due 2025, with substantially all the proceeds being used to pay down outstanding borrowings under our Prior Senior Secured Credit Facility.

We repurchased $90.8 million in aggregate principal amount of the 1.0% Exchangeable Senior Notes on January 18, 2024 as described below, and also repurchased of $21.0 million in aggregate principal amount of Exchangeable Senior Notes in open market purchases in 2020.

The Exchangeable Notes matured on February 15, 2025, and we paid $26.4 million in satisfaction of the outstanding principal and accrued interest in connection therewith.

Our 2023 Senior Secured Credit Facility, as amended, requires us to maintain a consolidated interest coverage ratio not less than 3.0 to 1.0 and total leverage ratio not exceeding 5.0 to 1.0.

As of December 31, 2024, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio of 3.7x and 0.1x, respectively.

As of March 31, 2025, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio of 92.5x and 0.1x, respectively.

Although we believe our liquidity position remains strong, there can be no assurance that we will be able to raise additional funds, in the form of debt or equity, or to amend our 2023 Senior Secured Credit Facility on terms acceptable to us, if at all, even if we determined such actions were necessary in the future.

Upon the completion of the sale of our Merchant Services Business, we used the net proceeds from such transactions to fully satisfy the then outstanding amount of the Revolver under the 2023 Senior Secured Credit Facility, and have used and expect to continue to use the remaining net proceeds for general corporate purposes, including repurchases under our share repurchase authorization as described below.

In January 2025, i3 Verticals, LLC, a pass-through entity in which the Company holds a majority ownership interest, made a tax distribution (the “LLC Tax Distribution”) to the Company and the other members of i3 Verticals, LLC (the “Continuing Equity Owners”) 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.

In January 2025, i3 Verticals, LLC, a pass-through entity in which the Company holds a majority ownership interest, made a tax distribution (the “LLC Tax Distribution”) to the Company and the other members of i3 Verticals, LLC (the “Continuing Equity Owners”) 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.

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The following table presents a summary of cash flows from operating, investing and financing activities for the following comparative periods.

Three Months Ended December 31, 2024 and 2023

Three months ended December 31,

Six Months Ended March 31, 2025 and 2024

Six months ended March 31,

(in thousands)

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

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

Net cash used in investing activities $ (3,675) $ (12,369)

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Cash Flow from Operating Activities

Net cash provided by operating activities decreased $2.9 million to $11.5 million for the three months ended December 31, 2024 from $14.4 million for the three months ended December 31, 2023.

Our net income increased from $1.5 million for the three months ended December 31, 2023 to $3.1 million for the three months ended December 31, 2024.

The primary driver of the decrease in cash provided by operating activities despite the increase in net income was reductions in non-cash expenses that increase net income but do not impact cash flows from operating activities.

These changes in non-cash income and expenses included a decrease in equity-based compensation expense of $2.7 million, a decrease in depreciation and amortization of $2.1 million, a decrease in the provision for deferred income taxes of $0.9 million and a decrease in other non-cash adjustments to net income of $0.8 million, which includes gains on sales of property and equipment as well as other non-cash adjustments to net income.

These reductions in non-cash expenses were partially offset by an increase in changes in non-cash contingent consideration of $1.6 million and an increase in changes in net operating assets and liabilities of $0.8 million, which are impacted by the timing of collections and payments, for the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

Net cash provided by operating activities decreased $40.8 million to net cash used in operating activities of $15.6 million for the six months ended March 31, 2025 from net cash provided by operating activities of $25.1 million for the six months ended March 31, 2024.

Our net income decreased from $4.9 million for the six months ended March 31, 2024 to $3.9 million for the six months ended March 31, 2025.

The primary driver of the decrease in cash provided by operating activities was cash paid for income taxes of $34.2 million during the six months ended March 31, 2025, primarily consisting of income taxes related to the sale of the Merchant Services Business, which were accrued in fiscal year 2024, but paid in the six months ended March 31, 2025.

The decrease in cash provided by operating activities was also driven by reductions in net operating assets and liabilities, excluding the impact of income taxes, of $11.2 million, which are impacted by the timing of collections and payments, for the six months ended March 31, 2025 compared to the six months ended March 31, 2024.

In addition, there was a decrease in contingent consideration paid in excess of original estimates of $3.1 million and an increase in changes in non-cash contingent consideration of $2.3 million, for the six months ended March 31, 2025 compared to the six months ended March 31, 2024.

Cash Flow from Investing Activities

Net cash used in investing activities decreased $5.8 million to $1.4 million for the three months ended December 31, 2024 from $7.2 million for the three months ended December 31, 2023.

The largest drivers of the decrease in cash used in investing activities were a decrease of $2.9 million in purchases of merchant portfolios and residual buyouts, a decrease of $1.1 million in cash used in acquisitions, net of cash acquired, an increase of $0.8 million in proceeds from the sale of property and equipment and a decrease of $0.7 million in expenditures for capitalized software during the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

Net cash used in investing activities decreased $8.7 million to $3.7 million for the six months ended March 31, 2025 from $12.4 million for the six months ended March 31, 2024.

The largest drivers of the decrease in cash used in investing activities were a decrease of $4.2 million in purchases of merchant portfolios and residual buyouts, a decrease of $1.9 million in expenditures for capitalized software, a decrease of $1.1 million in cash used in acquisitions (net of cash acquired) and an increase of $0.9 million in proceeds from the sale of property and equipment during the six months ended March 31, 2025 compared to the six months ended March 31, 2024.

Cash Flow from Financing Activities

Net cash used in financing activities increased $1.9 million to $10.5 million net cash used in financing activities for the three months ended December 31, 2024 from $8.6 million net cash provided by financing activities for the three months ended December 31, 2023.

The largest driver of the increase in cash used in financing activities was $11.2 million cash paid for repurchases of class A common stock during the three months ended December 31, 2024.

This increase in cash used in financing activities was partially offset by no net activity in the revolving credit facility during the three months ended December 31, 2024, compared to a net $7.0 million in payments on the revolving credit facility in excess of proceeds from the revolving credit facilities during the three months ended December 31, 2023, and a decrease in net payments for settlement obligations of $1.9 million during the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

Net cash used in financing activities increased $42.1 million to $60.0 million net cash used in financing activities for the six months ended March 31, 2025 from $17.9 million net cash used by financing activities for the six months ended March 31, 2024.

The increase in net cash used in financing activities was driven by net borrowings from in excess of payments on the revolving credit facility decreased $61.7 million during the six months ended March 31, 2025 from the six months ended March 31, 2024, as well as $26.2 million in payments to extinguish the Exchangeable Notes, $23.8 million in payments for required distributions on behalf of members for tax obligations and $10.0 million in payments for required distributions to members under the Tax Receivable Agreement during the six months ended March 31, 2025, which did not occur during the six months ended March 31, 2024.

These uses of cash for financing activities were partially offset by $87.8 million in payments for repurchases of Exchangeable Notes during the six months ended March 31, 2024, which did not recur during the six months ended March 31, 2025, and a decrease in net payments for settlement obligations of $2.7 million during the six months ended March 31, 2025 compared to the six months ended March 31, 2024.

2023 Senior Secured Revolving Credit Facility

On May 8, 2023, i3 Verticals, LLC (the “Borrower”), entered into that certain Credit Agreement (as amended, the “2023 Senior Secured Credit Facility”) with the guarantors and lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (“JPMorgan”).

The 2023 Senior Secured Credit Facility replaces the Prior

Senior Secured Credit Facility.

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

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

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

Certain provisions of the Amendment were effective as of the date of the Amendment, and certain other provisions became effective upon the closing of the sale of the Merchant Services Business.

On May 8, 2023, i3 Verticals, LLC (the “Borrower”), entered into that certain Credit Agreement (as amended by the first amendment dated June 26, 2024, the “2023 Senior Secured Credit Facility”) with the guarantors and

lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (“JPMorgan”).

The 2023 Senior Secured Credit Facility replaces the Prior Senior Secured Credit Facility.

As amended by the Second Amendment described below, the 2023 Senior Secured Credit Facility provides for aggregate commitments of $400 million in the form of a senior secured revolving credit facility (the “Revolver”).

In addition, on February 11, 2025, the Borrower entered into a letter agreement with the administrative agent and the lenders under the 2023 Senior Secured Credit Facility providing the Borrower with a one-time consent to an earlier reduction in the pricing of the revolving loans than what is otherwise permitted by the terms of the 2023 Senior Secured Credit Facility.

Such reduction became effective as of September 27, 2024, which is the date that the Borrower paid down the outstanding balance of the revolving loans with proceeds of the sale of the Merchant Services Business and achieved a consolidated total net leverage ratio of less than 2.0 to 1.0, instead of November 26, 2024, which is the date that the Borrower delivered its compliance certificate for the fiscal quarter ending September 30, 2024.

Further, on May 5, 2025, the Borrower entered into a second amendment (the “Second Amendment”) to the 2023 Senior Secured Credit Facility to permit the Healthcare RCM Transactions.

The Second Amendment also permanently reduces the aggregate lender commitments under the Revolver from $450 million to $400 million.

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

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

As of March 31, 2025, the Borrower's consolidated interest coverage ratio was 92.5x and total leverage ratio was 0.1x.

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

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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).

plus an applicable margin of 2.00% to 3.00% (2.00% at March 31, 2025).

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).

plus an applicable margin of 1.00% to 2.00% (1.00% at March 31, 2025).

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

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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 million exceeds the total amount outstanding under the Revolver and available to be drawn under all outstanding letters of credit.

In addition to paying interest on outstanding principal under the Revolver, the Borrower will be required to pay a commitment fee equal to the product of between 0.15% and 0.30% (the applicable percentage depending on the Borrower’s consolidated total net leverage ratio as reflected in the schedule above, 0.15% at March 31, 2025) times the actual daily amount by which $400 million (as of the effectiveness of the Second Amendment) exceeds the total amount outstanding under the Revolver and available to be drawn under all outstanding letters of credit.

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

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

In addition, if the total amount borrowed under the Revolver exceeds $400 million (as of the effectiveness of the Second Amendment) at any time, the 2023 Senior Secured Credit Facility requires the Borrower to prepay such excess outstanding amounts.

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

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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.

As of December 31, 2024, we were in compliance with these covenants, with a consolidated interest coverage ratio and total leverage ratio of 3.71x and 0.07x, respectively.

As of March 31, 2025, we were in compliance with these covenants, with a consolidated interest coverage ratio and total leverage ratio of 92.5x and 0.1x, respectively.

Exchangeable Notes

On February 18, 2020, i3 Verticals, LLC issued $138.0 million aggregate principal amount of its 1.0% Exchangeable Notes due February 15, 2025.

The Exchangeable Notes bear interest at a fixed rate of 1.0% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020.

The Exchangeable Notes are exchangeable into cash, shares of the Company's Class A common stock, or a combination thereof, at i3 Verticals, LLC's election.

Prior to their maturity, the Exchangeable Notes bore interest at a fixed rate of 1.0% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020.

The Exchangeable Notes were exchangeable into cash, shares of the Company's Class A common stock, or a combination thereof, at i3 Verticals, LLC's election.

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

The Exchangeable Notes mature on February 15, 2025, unless earlier exchanged, redeemed or repurchased.

The net proceeds from the sale of the Exchangeable Notes were approximately $132.8 million, after deducting discounts and commissions to the certain initial purchasers and other estimated fees and expenses.

i3 Verticals, LLC used a portion of the net proceeds of the Exchangeable Notes offering to pay down outstanding borrowings under the Prior Senior Secured Credit Facility in connection with the effectiveness of the operative provisions of the amendment to the Prior Senior Secured Credit Facility and to pay the cost of the Note Hedge Transactions.

As of December 31, 2024, $26.2 million of the original aggregate principal amount of $138.0 million was outstanding.

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

The Exchangeable Note Repurchases were completed on January 18, 2024, and the Company paid $87.4 million to repurchase $90.8 million in aggregate principal amount of its Exchangeable Notes and to repay approximately $0.4 million in accrued interest on the repurchased portion of the Exchangeable Notes.

Following the closing of the Exchangeable Note Repurchases,

approximately $26.2 million in aggregate principal amount of the Exchangeable Notes remained outstanding, with terms unchanged.

The Exchangeable Notes matured and were repaid in full on February 15, 2025, and we paid $26.4 million in satisfaction of the outstanding principal and accrued interest in connection therewith.

For additional information, see Note 8 to our condensed consolidated financial statements.

Material Cash Requirements

The following table summarizes our material cash requirements as of December 31, 2024, including those related to leases and borrowings:

The following table summarizes our material cash requirements as of March 31, 2025, including those related to leases and borrowings:

Payments Due by Period

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16,449 1,427 2,855 12,167 —

Exchangeable Notes and related interest (3)

26,256 26,256 — — —

Contingent consideration (3)

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These payments will be made within the next twelve months.

We estimated interest payments through the maturity of our 2023 Senior Secured Credit Facility by the unused fee rate of 0.15% in effect as of December 31, 2024.

The chart set forth above calculates interest payments through the maturity of our Exchangeable Notes by applying the coupon interest rate of 1.0% on the principal balance as of December 31, 2024 of $26.2 million.

We estimated interest payments through the maturity of our 2023 Senior Secured Credit Facility by applying the interest rate of 6.42% in effect on the outstanding balance as of March 31, 2025, plus unused fee rate of 0.15% in effect as of March 31, 2025.

In connection with certain of our acquisitions, we may be obligated to pay the seller of the acquired entity certain amounts of contingent consideration as set forth in the relevant purchasing documents, whereby additional consideration may be due upon the achievement of certain specified financial performance targets.

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The Share Repurchase Program does not obligate us to acquire any particular amount of Class A Common Stock, and the Share Repurchase Program may be suspended or discontinued at any time at our discretion.

The Company repurchased 496,785 shares of Class A Common Stock at an average price of $22.49 under the Share Repurchase Program during the three months ended December 31, 2024.

The Company repurchased 510,155 shares of Class A Common Stock at an average price of $22.51 and an aggregate repurchase amount of $11.6 million under the Share Repurchase Program during the six months ended March 31, 2025.

The shares of Class A Common Stock purchased during this six-month period represent the total number of shares of Class A Common Stock purchased under the Share Repurchase Program since its adoption.

Tax Receivable Agreement

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The actual increase in tax basis, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of redemptions or exchanges by the holders of Common Units, the price of our Class A common stock at the time of the redemption or exchange, whether such redemptions or exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable as well as the portion of our payments under the Tax Receivable Agreement constituting imputed interest.

We intend to fund the payment of the amounts due under the Tax Receivable Agreement out of the cash savings that we actually realize in respect of the attributes to which Tax Receivable Agreement relates.

As of December 31, 2024, the total amount due under the Tax Receivable Agreement was $39.2 million, and payments to the Continuing Equity Owners related to exchanges through December 31, 2024 will range from $0 to $9.9 million 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.

We intend to fund the payment of the amounts due under the Tax Receivable Agreement out of the cash savings that we actually realize in respect of the attributes to which the Tax Receivable Agreement relates.

As of March 31, 2025, the total amount due under the Tax Receivable Agreement was $33.5 million, and payments to the Continuing Equity Owners related to exchanges through March 31, 2025 will range from $0 to $3.4 million per year and are expected to be paid over the next 26 years.

The amounts recorded as of March 31, 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.

7 unchanged sentences

Critical accounting policies are those that we consider the most critical to understanding our financial condition and results of operations.

As of December 31, 2024, there have been no significant changes to our critical accounting estimates disclosed in the Form 10-K filed with the SEC on November 25, 2024.

As of March 31, 2025, there have been no significant changes to our critical accounting estimates disclosed in the Form 10-K filed with the SEC on November 25, 2024.

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 2. Management’s Discussion and Analysis