i3 Verticals(US:IIIV)2025-05-09 21:05PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited financials for March 31, 2025, reflect the Merchant Services Business sale and subsequent operational shifts Condensed Consolidated Balance Sheets Total assets decreased to $646.4 million from $730.7 million, driven by reduced cash, with liabilities also down Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $7,749 | $86,541 | | Total current assets | $79,999 | $153,393 | | Goodwill | $280,678 | $280,678 | | Intangible assets, net | $156,331 | $162,816 | | Total assets | $646,359 | $730,675 | | Liabilities & Equity | | | | Total current liabilities | $67,688 | $164,731 | | Long-term debt, less current portion | $12,000 | $0 | | Total liabilities | $132,700 | $215,316 | | Total equity | $513,659 | $515,359 | Condensed Consolidated Statements of Operations Revenue from continuing operations grew 8.8% to $63.1 million, with income from operations up 59.5% Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $63,059 | $57,968 | $124,750 | $113,022 | | Income from operations | $3,964 | $2,486 | $6,663 | $3,971 | | Interest expense | $446 | $7,714 | $1,126 | $14,401 | | Net income (loss) from continuing operations | $1,095 | $(2,302) | $4,417 | $(6,517) | | Net (loss) income from discontinued operations | $(326) | $5,650 | $(540) | $11,401 | | Net income | $769 | $3,348 | $3,877 | $4,884 | | Diluted EPS from continuing operations | $0.00 | $(0.07) | $0.09 | $(0.20) | Condensed Consolidated Statement of Changes in Equity Total equity slightly decreased to $513.7 million, driven by net income, equity compensation, and stock repurchases - Key drivers of equity changes include net income, equity-based compensation, LLC common unit redemption, and stock repurchases19 - The company repurchased 510,155 shares of Class A Common Stock for $11.6 million19151 Condensed Consolidated Statements of Cash Flows Operating cash flow shifted to a $15.6 million use, primarily due to a $34.2 million tax payment from the Merchant Services sale Cash Flow Summary (in thousands) | Cash Flow Activity | Six months ended Mar 31, 2025 | Six months ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(15,627) | $25,147 | | Net cash used in investing activities | $(3,675) | $(12,369) | | Net cash used in financing activities | $(60,029) | $(17,885) | | Net decrease in cash | $(79,331) | $(5,107) | - Negative operating cash flow was primarily driven by a $34.2 million income tax payment, up from $5.4 million prior year28327 Notes to the Unaudited Condensed Consolidated Financial Statements Notes detail the Merchant Services Business sale, cost reclassifications, segment updates, and subsequent Healthcare RCM business sale - On September 20, 2024, the company sold its Merchant Services Business for approximately $437.3 million, now presented as discontinued operations36 - Post-Merchant Services sale, the company reclassified certain costs from SG&A to 'Other costs of services' to align with its software-centric model5152 - Reporting segments were updated to Public Sector and Healthcare after the Merchant Services Business sale207 - Subsequent to quarter-end, on May 5, 2025, the company sold its Healthcare RCM Business for $96.0 million in cash251 - On April 1, 2025, the company acquired a Public Sector utility billing software business for $9.0 million in cash246248 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic shift to a focused enterprise software provider, highlighting divestitures and strong liquidity Results of Operations Revenue increased 8.8% to $63.1 million, driven by Public Sector growth, with operating income up 59.5% Revenue by Segment - Three Months Ended March 31 (in millions) | Segment | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Public Sector | $52.4 | $47.1 | 11.3% | | Healthcare | $10.9 | $11.1 | (1.8)% | | Total Revenue | $63.1 | $58.0 | 8.8% | - Public Sector revenue growth was driven by $1.2 million from an acquisition, $2.9 million in recurring revenues, and $1.3 million in software license revenue293 - Interest expense decreased by $7.3 million (94.2%) due to lower debt balances after the Merchant Services sale299 Liquidity and Capital Resources The company maintains strong liquidity with $7.7 million cash and $438.0 million credit facility, bolstered by post-quarter divestiture proceeds - As of March 31, 2025, the company had $7.7 million in cash and $438.0 million available under its 2023 Senior Secured Credit Facility319331 - The company fully repaid its $26.4 million 1.0% Exchangeable Senior Notes upon maturity on February 15, 2025321 - The company repurchased 510,155 shares for $11.6 million under its $50 million share repurchase program151354 - The company has a Tax Receivable Agreement (TRA) liability of $33.5 million, with payments expected over 26 years356 Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate fluctuations on the 2023 Senior Secured Credit Facility, with a 1.0% rate increase impacting by $0.1 million - The main market risk is interest rate risk on the 2023 Senior Secured Credit Facility; a 1.0% rate change on $12.0 million outstanding would impact by $0.1 million363 Controls and Procedures CEO and CFO concluded disclosure controls were effective, with no material changes in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025365 - No material changes in internal control over financial reporting occurred during the quarter366 PART II. OTHER INFORMATION Legal Proceedings The company is involved in the S&S Litigation regarding a third-party software product, not expected to have a material adverse effect - The company is a defendant in the S&S Litigation by the State of Louisiana concerning a third-party remote access software product195197 - Management does not believe the S&S Litigation will have a material adverse effect on the business or financial condition199 Risk Factors Updated risk factors include volatile global conditions, risks from the Healthcare RCM Business sale, and non-comparable future financials - Risks include volatile global conditions, such as U.S.-Canada trade relations and the India-Pakistan dispute, impacting operations370371372 - Risks from the Healthcare RCM Business sale include strategy execution, potential liabilities, and increased Public Sector business dependence376 - Future financial statements will not be comparable due to the Healthcare RCM Business reclassification to discontinued operations377 Unregistered Sales of Equity Securities and Use of Proceeds The company issued 813,782 unregistered Class A common shares and repurchased 13,370 shares for $0.4 million - An aggregate of 813,782 shares of Class A common stock were issued in exchange for LLC units, exempt from registration378 Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | Jan 2025 | 13,370 | $22.99 | $38,519,000 | | Feb 2025 | 0 | N/A | $38,519,000 | | Mar 2025 | 0 | N/A | $38,519,000 | | Total | 13,370 | $22.99 | $38,519,000 | Defaults Upon Senior Securities No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported for the period382 Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company383 Other Information No other information was reported, and no director or officer adopted or terminated a Rule 10b5-1 trading arrangement - No other information was reported; no director or officer adopted or terminated a Rule 10b5-1 trading plan during the quarter384 Exhibits This section provides an index of exhibits filed, including agreements for recent transactions, debt amendments, and officer certifications