Introduces 2023 Outlook

i3 Verticals, Inc. (Nasdaq: IIIV) (“i3 Verticals” or the “Company”) today reported its financial results for the fiscal fourth quarter and year ended September 30, 2022.

Highlights for the fiscal fourth quarter and full fiscal year of 2022 vs. 2021

• Fourth quarter revenue was $85.3 million, an increase of 26.9% over the prior year's fourth quarter; full year revenue was $317.9 million, an increase of 41.8% over the prior year.
• Fourth quarter net loss was $4.4 million, compared to a net loss of $1.9 million in the prior year's fourth quarter. Net loss for the year ended September 30, 2022, was $23.2 million, compared to a net loss of $7.8 million for the year ended September 30, 2021.
• Fourth quarter net loss attributable to i3 Verticals, Inc. was $3.5 million; full year net loss attributable to i3 Verticals, Inc. was $17.1 million.
• Fourth quarter adjusted EBITDA¹ was $21.7 million, an increase of 27.4% over the prior year's fourth quarter. Adjusted EBITDA¹ for the year ended September 30, 2022, was $79.5 million, an increase of 43.6% over the prior year.
• Adjusted EBITDA¹ as a percentage of revenue was 25.0% for the year ended September 30, 2022, compared to 24.7% for the year ended September 30, 2021.
• Fourth quarter diluted net loss per share available to Class A common stock was $0.15, compared to a net loss per share of $0.05 in the prior year's fourth quarter; full year diluted net loss per share available to Class A common stock was $0.77, compared to a net loss per share of $0.22 in the prior year.
• For the fourth quarter and year ended September 30, 2022, pro forma adjusted diluted earnings per share¹, which gives pro forma effect to the Company's tax rate, was $0.39 and $1.48, respectively, compared to $0.33 and $1.05 for the fourth quarter and year ended September 30, 2021, respectively.
• Annualized Recurring Revenue ("ARR")² for the fourth quarter of 2022 and 2021 was $281.2 million and $210.8 million, respectively, representing a period-to-period growth rate of 33.4%.
• Software and related services revenue³ as a percentage of total revenue was 49% and 39% for the years ended September 30, 2022 and 2021, respectively. Payments revenue as a percentage of total revenue was 45% and 53% for the years ended September 30, 2022 and 2021, respectively.
• As of September 30, 2022, our consolidated interest coverage ratio was 8.17x, total leverage ratio was 3.68x and consolidated senior leverage ratio was 2.24x. These ratios are defined in our Senior Secured Credit Facility.
• As previously announced in our press release dated October 4, 2022, the Company completed the acquisition of a business within the Company’s Public Sector vertical which is a leading provider of enterprise software solutions for the motor carrier and motor vehicle markets in the U.S. and Canada. The aggregate purchase price was approximately $85.0 million in cash.

Greg Daily, Chairman and CEO of i3 Verticals, commented, “We are pleased to report a great quarter and an excellent finish to fiscal 2022. Revenue and adjusted EBITDA set records every single quarter this year. Year-over-year growth in revenue and adjusted EBITDA exceeded 25% every quarter, and recurring sources of revenue grew more than 30%. We are pleased with our performance in fiscal 2022 which we believe will carry over into fiscal 2023.

"We previously announced an $85 million acquisition effective October 1. We anticipate that this business will be the next exciting growth engine in the Public Sector, particularly given the synergies it offers with our existing BIS business. These two companies give us a comprehensive set of solutions serving transportation departments in the United States and Canada and have already begun to see the benefits of this expanded platform as we reply to RFPs. Led by our Public Sector vertical, we expect strong recurring revenue growth will continue to compound with additional strategic acquisition activity in fiscal 2023.

"Finally, I want to congratulate Paul Christians and Chris Laisure on their promotions to Chief Operating Officer and President – Public Sector, respectively. We look forward to their continued leadership and positive impact on our business results and company culture.”

2023 Outlook

The Company's practice is to provide annual guidance, excluding future acquisitions and transaction-related costs. The Company is providing the following outlook for the fiscal year ending September 30, 2023:

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With respect to the “2023 Outlook” above, adjusted EBITDA and pro forma adjusted diluted earnings per share guidance to the closest corresponding GAAP measure on a forward-looking basis is not available without unreasonable efforts. This inability results from the inherent difficulty in forecasting generally and quantifying certain projected amounts that are necessary for such reconciliations. In particular, sufficient information is not available to calculate certain adjustments required for such reconciliations, including changes in the fair value of contingent consideration, income tax expense of i3 Verticals, Inc. and equity-based compensation expense. The Company expects these adjustments may have a potentially significant impact on future GAAP financial results.

Conference Call

The Company will host a conference call on Thursday, November 17, 2022, at 8:30 a.m. ET, to discuss financial results and operations. To listen to the call live via telephone, participants should dial (844) 887-9399 approximately 10 minutes prior to the start of the call. A telephonic replay will be available from 11:30 a.m. ET on November 17, 2022, through November 28, 2022, by dialing (877) 344-7529 and entering Confirmation Code 9785901.

To listen to the call live via webcast, participants should visit the “Investors” section of the Company’s website, www.i3verticals.com, and go to the “Events” page approximately 10 minutes prior to the start of the call. The online replay will be available on this page of the Company’s website beginning shortly after the conclusion of the call and will remain available for 30 days.

Non-GAAP Measures

This press release contains information prepared in conformity with GAAP as well as non-GAAP information. It is management’s intent to provide non-GAAP financial information to enhance understanding of the Company's consolidated financial information as prepared in accordance with GAAP. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure and the most directly comparable GAAP financial measure are presented so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies.

Additional information about non-GAAP financial measures, including, but not limited to, pro forma adjusted net income, adjusted EBITDA and pro forma adjusted diluted EPS, and a reconciliation of those measures to the most directly comparable GAAP measures is included in the financial schedules of this release.

About i3 Verticals

The Company delivers seamless integrated software and services 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 its strategic verticals, including its Public Sector (including Education) and Healthcare verticals.

Forward-Looking Statements

This release contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact or relating to present facts or current conditions included in this release are forward-looking statements, including any statements regarding the Company's fiscal 2023 financial outlook and statements of a general economic or industry specific nature. Forward-looking statements give the Company's current expectations and projections relating to its financial condition, results of operations, guidance, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “could have,” “exceed,” “significantly,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

The forward-looking statements contained in this release are based on assumptions that we have made in light of the Company's industry experience and its perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you review and consider information presented herein, you should understand that these statements are not guarantees of future performance or results. They depend upon future events and are subject to risks, uncertainties (many of which are beyond the Company's control) and assumptions. Factors that could cause actual results to differ from those expressed or implied by our forward-looking statements include, among other things: future economic conditions, including the impact of inflation and rising interest rates, competition in our industry and our ability to compete effectively, and regulatory developments, the COVID-19 pandemic, the successful integration of acquired businesses, and future decisions made by us and our competitors. All of these factors are difficult or impossible to predict accurately and many of them are beyond our control. For a further list and description of these and other important risks and uncertainties that may affect our future operations, see Part I, Item 1A - Risk Factors in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, which we may update in Part II, Item 1A - Risk Factors in Quarterly Reports on Form 10-Q we have filed or will file hereafter.

Any forward-looking statement made by us in this release speaks only as of the date of this release and we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

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Reconciliation of GAAP to Non-GAAP Financial Measures

The Company believes that non-GAAP financial measures are important to enable investors to understand and evaluate its ongoing operating results. Accordingly, the Company includes non-GAAP financial measures when reporting its financial results to shareholders and potential investors in order to provide them with an additional tool to evaluate the Company’s ongoing business operations. The Company believes that the non-GAAP financial measures are representative of comparative financial performance that reflects the economic substance of the Company’s current and ongoing business operations.

Although non-GAAP financial measures are often used to measure the Company's operating results and assess its financial performance, they are not necessarily comparable to similarly titled measures of other companies due to potential inconsistencies in the method of calculation. The Company believes that its provision of non-GAAP financial measures provides investors with important key financial performance indicators that are utilized by management to assess the Company's operating results, evaluate the business and make operational decisions on a prospective, going-forward basis. Hence, management provides disclosure of non-GAAP financial measures to give shareholders and potential investors an opportunity to see the Company as viewed by management, to assess the Company with some of the same tools that management utilizes internally and to be able to compare such information with prior periods. The Company believes that inclusion of non-GAAP financial measures provides investors with additional information to help them better understand its financial statements just as management utilizes these non-GAAP financial measures to better understand the business, manage budgets and allocate resources.

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