|
|
|
Delaware
|
|
7389
|
|
82-4052852
|
(State or other jurisdiction of
incorporation or organization)
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
J. Page Davidson
Jay H. Knight
Bass, Berry & Sims PLC
150 3
rd
Avenue S., Suite 2800
Nashville, TN 37201
(615) 742-6200
|
Jonathan H. Talcott
Gary Brown
Nelson Mullins Riley & Scarborough LLP
101 Constitution Avenue, NW, Suite 900
Washington, DC 20001
(202) 689-2806
|
|
Large accelerated filer
|
o
|
|
Accelerated filer
|
o
|
Non-accelerated filer
|
x
|
|
Smaller reporting company
|
o
|
|
|
|
Emerging growth company
|
x
|
Title of Each Class of
Securities to be Registered
|
|
Amount
to be
Registered(1)
|
|
Proposed
Maximum
Offering Price
Per Share(2)
|
|
Proposed
Maximum
Aggregate
Offering Price(1)(2)
|
|
Amount of
Registration Fee |
Class A common stock, par value $0.0001 per share
|
|
5,165,528
|
|
$24.99
|
|
$129,086,545
|
|
$15,646
|
(1)
|
Includes shares of Class A common stock issuable upon the exercise of the underwriters’ option to purchase additional shares. See “Underwriting (Conflicts of Interest).”
|
(2)
|
Estimated solely for the purpose of calculating the registration fee. Pursuant to Rule 457(c) under the Securities Act of 1933, as amended, the price shown is the average of the high and low selling price of the Class A common stock on May 31, 2019, as reported on The Nasdaq Global Select Market.
|
|
PRELIMINARY PROSPECTUS
|
SUBJECT TO COMPLETION, DATED JUNE 3, 2019
|
|
|
Investing in our Class A common stock involves risk. See “Risk Factors” beginning on page 22.
|
|
Per Share
|
|
Total
|
Public offering price
|
$
|
|
$
|
Underwriting discounts and commissions
(1)
|
$
|
|
$
|
Proceeds to us, before expenses
|
$
|
|
$
|
(1) We refer you to the section titled “Underwriting (Conflicts of Interest)” beginning on page 99 for additional information regarding underwriting compensation.
|
Cowen
|
Raymond James
|
BofA Merrill Lynch
|
|
KeyBanc Capital Markets
|
|
|
D.A. Davidson & Co.
|
|
|
•
|
Education—We assist schools in completing payment processing functions such as accepting payments for school lunches (online, at school, or at the POS) and school activities; selling products from the online student store while managing inventory; ticket sales while tracking attendance at athletic and other events; enabling parents and students to complete forms electronically; and enabling parents to make installment payments on higher-priced items.
|
•
|
Public Sector—We assist public sector entities, including state governments, local municipalities and other publicly controlled enterprises, by efficiently collecting taxes, fines and certain fees; providing customer service responses to customer calls; and increasing the number of means available to make payments (online, in person or via mobile). We have products and solutions that create an efficient flow of information throughout government entities. We have a proprietary accounting platform that allows government entities to adhere to their fund accounting requirements. We also provide regulatory software and services for state licensing boards, such as pharmacy, nursing, medical examiners, and attorneys general, automating the processes for licensing applications, renewals, and payment processing.
|
•
|
Non-profit—We simplify the payment process for donations, charity auctions, church contributions and tickets to fundraising events, among others, empowering our clients to increase both their revenue and the time they devote to their core activities.
|
•
|
Property Management—We assist landlords and property managers in the rent collection process by providing centralized reporting for card and automated clearing house (“ACH”) payments, bank-level PCI DSS compliant security and solutions that integrate with third-party accounting software. Our property management solution is becoming a popular option in the fast-growing shared workspace industry in which we are differentiated from our competitors by enabling the acceptance of payments on an individual level.
|
•
|
Healthcare—We enable clients in our healthcare vertical to accept payments through mobile and POS solutions; to use consumer-facing payment devices that allow receptionists and clerical staff to focus their attention elsewhere; and to use revenue cycle management tools to help minimize the volume of accounts that they turn over to collection agencies.
|
•
|
enable superior data management by aggregating multiple small merchants under our “master” account, resulting in the collection and management of data not historically readily available;
|
•
|
streamline and simplify merchant onboarding, often resulting in client approval in minutes or hours rather than days or weeks; and
|
•
|
provide ease of reporting and reconciliation, allowing our clients to accept electronic payments in a faster, more convenient fashion.
|
Source: First Annapolis; 2010 estimates
|
•
|
Cross-sell Opportunities: We provide our distribution partners with the opportunity to market new products as they become available, making available new content that enhances the value of our distribution partners to their members.
|
•
|
Event Participation: We identify opportunities to engage with clients through event participation, including by sponsoring luncheons, attending tradeshows, and presenting at user conferences.
|
•
|
Electronic Marketing: Our marketing team utilizes a variety of marketing techniques to enhance the awareness of our offerings to the distribution partner network, which align with our outbound sales effort and are intended to monitor the level of client engagement.
|
•
|
Content Development: Our sales and marketing team partners with our distribution network to identify key topics of interest to their members, and we intend to continue work to craft new content covering popular topics related to the electronic payment industry.
|
•
|
Incentive Programs: Our sales and marketing team works directly with our distribution partners to launch incentive programs intended to increase new referral activity through a variety of competitions and programs implemented each year.
|
•
|
our ability to generate revenue sufficient to maintain profitability and positive cash flow;
|
•
|
competition in our industry and our ability to compete effectively;
|
•
|
our dependence on non-exclusive distribution partners to market our products and services;
|
•
|
our ability to keep pace with rapid developments and changes in our industry and provide new products and services;
|
•
|
liability and reputation damage from unauthorized disclosure, destruction or modification of data or disruption of our services;
|
•
|
technical, operational and regulatory risks related to our information technology systems and third-party providers’ systems;
|
•
|
reliance on third parties for significant services;
|
•
|
exposure to economic conditions and political risks affecting consumer and commercial spending, including the use of credit cards;
|
•
|
our ability to increase our existing vertical markets, expand into new vertical markets and execute our growth strategy;
|
•
|
our ability to successfully identify acquisition targets and thereafter, to complete and effectively integrate those acquisitions into our services;
|
•
|
potential degradation of the quality of our products, services and support;
|
•
|
our ability to retain clients, many of which are SMBs, which can be difficult and costly to retain;
|
•
|
our ability to successfully manage our intellectual property;
|
•
|
our ability to attract, recruit, retain and develop key personnel and qualified employees;
|
•
|
risks related to laws, regulations and industry standards;
|
•
|
our indebtedness and potential increases in our indebtedness; and
|
•
|
operating and financial restrictions imposed by our 2019 Senior Secured Credit Facility (as defined below).
|
•
|
We amended and restated the existing limited liability company agreement of i3 Verticals, LLC to, among other things, (1) convert all existing Class A units, common units (including common units issued upon the exercise of existing warrants held by the existing Warrant Holders) and Class P units (“profits interests”) of ownership interest in i3 Verticals, LLC into either Class A voting common units of i3 Verticals, LLC (such holders of Class A voting common units referred to herein as the “Continuing Equity Owners”) or Class B non-voting common units of i3 Verticals, LLC (such holders of Class B non-voting common units referred to herein as the “Former Equity Owners”) (collectively, the “Initial Recapitalization”), and (2) appoint i3 Verticals, Inc. as the sole managing member of i3 Verticals, LLC upon its acquisition of Common Units in connection with the IPO.
|
•
|
We amended and restated i3 Verticals, Inc.’s certificate of incorporation to provide for, among other things, Class A common stock and Class B common stock. Each share of Class A common stock and Class B common stock entitles its holder to one vote on all matters to be voted on by stockholders. Shares of our Class B common stock, however, may be held only by the Continuing Equity Owners and their permitted transferees in proportion to the number of outstanding Common Units of i3 Verticals, LLC they hold as described in “Description of Capital Stock—Class B Common Stock.” Class B common stock has no economic rights.
|
•
|
Immediately following the Initial Recapitalization, we consummated a merger by and among i3 Verticals, LLC, i3 Verticals, Inc. and a newly formed wholly-owned subsidiary of i3 Verticals, Inc. (“MergerSub”) whereby: (1) MergerSub merged with and into i3 Verticals, LLC, with i3 Verticals, LLC as the surviving entity; (2) Class A voting common units converted into newly issued Common Units in i3 Verticals, LLC together with an equal number of shares of Class B common stock of i3 Verticals, Inc., and (3) Class B non-voting common units converted into Class A common stock of i3 Verticals, Inc. based on a conversion ratio that provided an equitable adjustment to reflect the full value of the Class B non-voting common units.
|
•
|
We issued 619,542 shares of our Class A common stock pursuant to a voluntary private conversion of certain subordinated notes (the “Junior Subordinated Notes”) by certain related and unrelated creditors of i3 Verticals, LLC. In this conversion, certain eligible holders of Junior Subordinated Notes elected to convert approximately $8.1 million in aggregate indebtedness into Class A common stock.
|
•
|
We issued 7,647,500 shares of our Class A common stock to the purchasers in the IPO in exchange for net proceeds of approximately $92.5 million.
|
•
|
We used all of the net proceeds from the IPO to purchase (1) 7,264,083 newly issued Common Units directly from i3 Verticals, LLC, and (2) 383,417 Common Units directly from a Continuing Equity Owner, in each case at a price per Common Unit equal to the price per share paid by the underwriters for shares of our Class A common stock in the IPO.
|
•
|
i3 Verticals, LLC used the IPO net proceeds from the sale of Common Units to i3 Verticals, Inc., after deducting offering expenses, to repay a total of approximately $84.9 million in outstanding debt under (a) the Junior Subordinated Notes in the aggregate principal amount outstanding of $8.1 million, (b) notes payable in the aggregate principal amount of $10.5 million (the “Mezzanine Notes”) to three related creditors and (c) the existing senior secured credit facility of i3 Verticals, LLC (the “2017 Senior Secured Credit Facility”), which included a term loan and a revolving loan facility, in the aggregate principal amount of $66.3 million. i3 Verticals, LLC repaid the Junior Subordinated Notes and the Mezzanine Notes in full in connection with the IPO.
|
•
|
i3 Verticals, Inc. entered into (1) a tax receivable agreement, which we refer to as the Tax Receivable Agreement, with i3 Verticals, LLC and each of the Continuing Equity Owners and (2) a registration rights agreement, which we refer to as the Registration Rights Agreement, with certain Continuing Equity Owners. For a description of the terms of the Tax Receivable Agreement and the Registration Rights Agreement, see “Certain Relationships and Related Party Transactions.”
|
•
|
As of
March 31, 2019
, i3 Verticals, Inc. owned
34.9%
of the economic interest in i3 Verticals, LLC.
|
•
|
As of
March 31, 2019
, the Continuing Equity Owners owned Common Units in i3 Verticals, LLC representing approximately
65.1%
of the economic interest in i3 Verticals, LLC, shares of Class A common stock in the Company representing approximately
0.9%
of the economic interest and voting power in the Company, and shares of Class B common stock in i3 Verticals, Inc., representing approximately
65.1%
of the voting power in the Company.
|
•
|
The Continuing Equity Owners who own Common Units in i3 Verticals, LLC may redeem at each of their options (subject in certain circumstances to time-based vesting requirements) their Common Units for, at the election of i3 Verticals, LLC, cash or newly-issued shares of the Company's Class A common stock.
|
•
|
Combining the Class A common stock and Class B common stock, the Continuing Equity Owners hold approximately
66.0%
of the economic interest and voting power in i3 Verticals, Inc.
|
•
|
“Continuing Equity Owners” refers collectively to the Class A unit, common unit and Class P unit holders prior to the Reorganization Transactions, and each of their permitted transferees that own Common Units in i3 Verticals, LLC after the Reorganization Transactions and IPO and who may redeem at each of their options their Common Units for, at the election of i3 Verticals, LLC, cash or newly-issued shares of our Class A common stock as described in “Certain Relationships and Related Party Transactions—i3 Verticals LLC Agreement.”
|
•
|
“i3 Verticals LLC Agreement” refers to i3 Verticals, LLC’s Limited Liability Company Agreement, which became effective in connection with the IPO.
|
•
|
“Former Equity Owners” refers to the Original Equity Owners that are not Continuing Equity Owners and whose ownership interest converted into shares of our Class A common stock in connection with the consummation of the Reorganization Transactions.
|
•
|
“Original Equity Owners” refers to the owners of ownership interests in i3 Verticals, LLC, collectively, before the Reorganization Transactions, which included the holders of Class A units, common units, Class P units (vested and unvested) and Warrant Holders.
|
•
|
“Warrant Holders” refers to lenders under our existing Junior Subordinated Notes and Mezzanine Notes that held warrants to purchase Common Units in i3 Verticals, LLC that were exercised in full in connection with the IPO.
|
•
|
we are not required to engage an auditor to report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;
|
•
|
we are not required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board, or the PCAOB, regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
|
•
|
we are not required to submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay,” “say-on-frequency” and “say-on-golden parachutes”; and
|
•
|
we are not required to comply with certain disclosure requirements related to executive compensation, such as the requirement to disclose the correlation between executive compensation and performance and the requirement to present a comparison of our Chief Executive Officer’s compensation to our median employee compensation.
|
Ratio of shares of Class A common stock to Common Units
|
The i3 Verticals LLC Agreement requires that we at all times maintain (x) a one-to-one ratio between the number of shares of Class A common stock issued by us and the number of Common Units of i3 Verticals, LLC owned by us and (y) a one-to-one ratio between the number of shares of Class B common stock owned by the Continuing Equity Owners and the number of Common Units of i3 Verticals, LLC owned by the Continuing Equity Owners. This construct is intended to result in the Continuing Equity Owners having a voting interest in us that is identical to the Continuing Equity Owners’ percentage economic interest in i3 Verticals, LLC. The Continuing Equity Owners own all of our outstanding Class B common stock.
|
|
|
Exchange and redemption rights of holders of Common Units
|
Pursuant to the i3 Verticals LLC Agreement, the Continuing Equity Owners may require us to exchange or redeem all or a portion of their Common Units of i3 Verticals, LLC for newly issued shares of our Class A common stock on a one-for-one basis, or, at the discretion of i3 Verticals, LLC, cash. Shares of our Class B common stock will be canceled on a one-for-one basis if we, at the election of a Continuing Equity Owner, exchange or redeem Common Units of such Continuing Equity Owner pursuant to the terms of the i3 Verticals LLC Agreement. The decision whether to tender Common Units of i3 Verticals, LLC to us will be made solely at the discretion of the Continuing Equity Owners. i3 Verticals, LLC will exercise discretion regarding the form of consideration in an exchange or redemption.
|
|
|
Tax Receivable Agreement
|
Our acquisition of Common Units of i3 Verticals, LLC in connection with the IPO and this offering and future and certain concurrent redemptions and exchanges of Common Units for shares of our Class A common stock (or cash) are expected to produce favorable tax attributes for us. We are a party to a Tax Receivable Agreement with the Continuing Equity Owners that provides that we generally will be required to pay directly, or indirectly through i3 Verticals, LLC, to our Continuing Equity Owners 85% of the applicable cash savings, if any, in U.S. federal and state income tax that we are deemed to realize as a result of certain tax attributes of their Common Units sold to us (or exchanged in a taxable sale) and that are created as a result of (i) the redemption or exchange of their Common Units for shares of Class A common stock and (ii) tax benefits attributable to payments made under the Tax Receivable Agreement (including imputed interest).
|
|
|
Dividend policy
|
We do not expect to pay any dividends on our common stock in the foreseeable future. See “Dividend Policy.”
|
|
|
Risk factors
|
You should read the “Risk Factors” section of this prospectus beginning on page 22 and incorporated by reference herein for a discussion of factors to consider carefully before deciding to invest in shares of our Class A common stock.
|
|
|
Nasdaq Global Select Market symbol
|
IIIV.
|
•
|
excludes 4,552,873 shares of Class A common stock reserved for issuance under our 2018 Equity Incentive Plan, or “2018 Plan,” including 4,346,965 shares of Class A common stock issuable pursuant to 4,338,166 stock options and
8,799
restricted shares of Class A common stock granted to certain of our directors, consultants and employees;
|
•
|
excludes additional shares of Class A common stock that may be issuable upon exercise, redemption or exchange by the Continuing Equity Owners (or at our election, a direct exchange), other than the Class A common stock that we intend to issue in connection with this offering; and
|
•
|
assumes no exercise by the underwriters of their option
to purchase additional shares
.
|
|
Pro Forma i3 Verticals, Inc.
|
Six months ended March 31,
|
|
Year ended September 30,
|
|
Twelve months ended March 31,
|
|||||||||||||||||||||||||||||
|
Six months ended March 31, 2019
|
|
Year ended September 30, 2018
|
|
|||||||||||||||||||||||||||||||
(in thousands except for payment volume which is in millions)
|
|
2019
|
|
2018
|
|
2018
|
|
2017
|
|
2016
|
|
2019
|
|
2018
|
|||||||||||||||||||||
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
(unaudited)
|
|||||||||||||||||||||||||
Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Revenue
|
$
|
184,605
|
|
|
$
|
352,486
|
|
|
$
|
170,262
|
|
|
$
|
154,920
|
|
|
$
|
323,508
|
|
|
$
|
262,571
|
|
|
$
|
199,644
|
|
|
$
|
338,850
|
|
|
$
|
293,025
|
|
Interchange and network fees
|
110,514
|
|
|
214,543
|
|
|
110,514
|
|
|
102,872
|
|
|
214,543
|
|
|
189,112
|
|
|
140,998
|
|
|
222,185
|
|
|
202,868
|
|
|||||||||
Other costs of services
|
32,070
|
|
|
64,689
|
|
|
19,983
|
|
|
19,058
|
|
|
40,314
|
|
|
28,798
|
|
|
21,934
|
|
|
41,239
|
|
|
34,241
|
|
|||||||||
Selling, general and administrative
|
28,606
|
|
|
45,618
|
|
|
26,835
|
|
|
19,041
|
|
|
40,585
|
|
|
27,194
|
|
|
20,393
|
|
|
48,379
|
|
|
33,299
|
|
|||||||||
Depreciation and amortization
|
8,310
|
|
|
13,441
|
|
|
7,450
|
|
|
5,876
|
|
|
11,839
|
|
|
10,085
|
|
|
9,898
|
|
|
13,413
|
|
|
10,890
|
|
|||||||||
Change in fair value of contingent consideration
|
2,153
|
|
|
3,866
|
|
|
2,153
|
|
|
2,129
|
|
|
3,866
|
|
|
(218
|
)
|
|
2,458
|
|
|
3,890
|
|
|
988
|
|
|||||||||
Total other expenses
|
2,800
|
|
|
13,833
|
|
|
2,069
|
|
|
13,251
|
|
|
16,985
|
|
|
6,521
|
|
|
5,813
|
|
|
5,803
|
|
|
16,529
|
|
|||||||||
Provision for (benefit from) income taxes
|
36
|
|
|
(625
|
)
|
|
129
|
|
|
(139
|
)
|
|
337
|
|
|
177
|
|
|
243
|
|
|
605
|
|
|
108
|
|
|||||||||
Net income (loss)
|
$
|
116
|
|
|
$
|
(2,879
|
)
|
|
$
|
1,129
|
|
|
$
|
(7,168
|
)
|
|
$
|
(4,961
|
)
|
|
$
|
902
|
|
|
$
|
(2,093
|
)
|
|
$
|
3,336
|
|
|
$
|
(5,898
|
)
|
Other Financial Data (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Payment volume
(1)
|
$
|
5,887
|
|
|
$
|
11,555
|
|
|
$
|
5,887
|
|
|
$
|
5,586
|
|
|
$
|
11,555
|
|
|
$
|
10,269
|
|
|
$
|
8,143
|
|
|
$
|
11,855
|
|
|
$
|
10,984
|
|
Net revenue
(2)
|
$
|
75,361
|
|
|
$
|
137,943
|
|
|
$
|
61,018
|
|
|
$
|
52,048
|
|
|
$
|
108,965
|
|
|
$
|
73,459
|
|
|
$
|
58,646
|
|
|
$
|
117,935
|
|
|
$
|
90,157
|
|
Adjusted net income
(2)
|
$
|
10,509
|
|
|
$
|
18,376
|
|
|
$
|
10,786
|
|
|
$
|
6,579
|
|
|
$
|
15,350
|
|
|
$
|
7,774
|
|
|
$
|
7,708
|
|
|
$
|
19,557
|
|
|
$
|
10,716
|
|
Adjusted EBITDA
(2)
|
$
|
17,810
|
|
|
$
|
31,275
|
|
|
$
|
17,325
|
|
|
$
|
14,561
|
|
|
$
|
30,348
|
|
|
$
|
19,264
|
|
|
$
|
17,606
|
|
|
$
|
33,112
|
|
|
$
|
24,748
|
|
Selling, general and administrative
—
Corporate
(3)
|
$
|
7,856
|
|
|
$
|
11,049
|
|
|
$
|
7,856
|
|
|
$
|
4,402
|
|
|
$
|
9,692
|
|
|
$
|
6,142
|
|
|
$
|
4,991
|
|
|
$
|
13,146
|
|
|
$
|
7,637
|
|
|
Pro Forma i3 Verticals Inc.
|
|
|
|
|
|
|
||||||||
|
March 31,
|
|
March 31,
|
|
September 30,
|
||||||||||
|
2019
|
|
2019
|
|
2018
|
|
2017
|
||||||||
(in thousands)
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
||||||||
Balance Sheet Data (at end of period):
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
1,393
|
|
|
$
|
572
|
|
|
$
|
955
|
|
Total assets
|
303,192
|
|
|
218,499
|
|
|
175,142
|
|
|
139,991
|
|
||||
Long-term debt, including current portion, and debt issuance costs, net
|
105,172
|
|
|
75,241
|
|
|
36,776
|
|
|
110,836
|
|
||||
Total liabilities
|
175,702
|
|
|
103,764
|
|
|
62,944
|
|
|
129,122
|
|
||||
Total equity
|
127,490
|
|
|
114,735
|
|
|
112,198
|
|
|
3,146
|
|
(1)
|
Payment volume is the net dollar value of both 1) Visa, Mastercard and other payment network transactions processed by our clients and settled to clients by us and 2) ACH transactions processed by our clients and settled to clients by us.
|
(2)
|
Net revenue is calculated as revenue less certain network fees and other costs described below. Adjusted net income is calculated as net income before certain non-cash changes in the fair value of contingent consideration, non-cash changes in the fair value of warrant liabilities, other non-core cash items and the other items described below. Adjusted EBITDA is equal to adjusted net income before interest, income taxes, depreciation and amortization. Net revenue, adjusted net income and adjusted EBITDA eliminate the effects of items that we do not consider indicative of our core operating performance. As a result, we consider net revenue, adjusted net income and adjusted EBITDA to be important indicators of our operational strength and the performance of our business. Management believes the use of net revenue, adjusted net income and adjusted EBITDA is appropriate to provide investors with an additional tool to evaluate the Company's ongoing business platform. By providing these non-GAAP financial measures, together with a reconciliation to GAAP results, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our business strategies. We believe investors use net revenue, adjusted net income and adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies in our industry. The way
|
(3)
|
Selling, general and administrative — Corporate, is included in overall selling, general and administrative expenses above.
|
(a)
|
Under GAAP, companies must adjust, as necessary, beginning balances of acquired deferred revenue to fair value as part of acquisition accounting as defined by GAAP. Acquisition revenue adjustments remove the effect of these adjustments to acquisition date fair value from acquisitions that impact the respective periods.
|
|
Pro Forma i3 Verticals, Inc.
|
|
Six months ended March 31,
|
|
Year ended September 30,
|
|
Twelve months ended March 31,
|
||||||||||||||||||||||||||||
|
Six months ended March 31, 2019
|
|
Year ended September 30, 2018
|
|
|||||||||||||||||||||||||||||||
(in thousands)
|
|
|
2019
|
|
2018
|
|
2018
|
|
2017
|
|
2016
|
|
2019
|
|
2018
|
||||||||||||||||||||
Net income (loss) attributable to i3 Verticals, Inc.
|
$
|
40
|
|
|
$
|
(1,120
|
)
|
|
$
|
(924
|
)
|
|
$
|
(7,168
|
)
|
|
$
|
(6,898
|
)
|
|
$
|
902
|
|
|
$
|
(2,093
|
)
|
|
$
|
(654
|
)
|
|
$
|
(5,898
|
)
|
Net income (loss) attributable to non-controlling interest
|
76
|
|
|
(1,759
|
)
|
|
2,053
|
|
|
—
|
|
|
1,937
|
|
|
—
|
|
|
—
|
|
|
3,990
|
|
|
—
|
|
|||||||||
Non-GAAP Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Provision (benefit) for income taxes
|
36
|
|
|
(625
|
)
|
|
129
|
|
|
(139
|
)
|
|
337
|
|
|
177
|
|
|
243
|
|
|
605
|
|
|
108
|
|
|||||||||
Offering-related expenses
(a)
|
—
|
|
|
124
|
|
|
—
|
|
|
124
|
|
|
124
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
124
|
|
|||||||||
Non-cash change in fair value of contingent
consideration
(b)
|
2,153
|
|
|
3,866
|
|
|
2,153
|
|
|
2,129
|
|
|
3,866
|
|
|
(218
|
)
|
|
2,458
|
|
|
3,890
|
|
|
988
|
|
|||||||||
Non-cash change in fair value of warrant liability
(c)
|
—
|
|
|
8,487
|
|
|
—
|
|
|
8,245
|
|
|
8,487
|
|
|
(415
|
)
|
|
(28
|
)
|
|
242
|
|
|
7,830
|
|
|||||||||
Share-based compensation
(d)
|
2,314
|
|
|
2,924
|
|
|
2,314
|
|
|
—
|
|
|
1,567
|
|
|
—
|
|
|
—
|
|
|
3,881
|
|
|
—
|
|
|||||||||
Acquisition revenue adjustments
(e)
|
1,270
|
|
|
—
|
|
|
1,270
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,270
|
|
|
—
|
|
|||||||||
Acquisition-related expenses
(f)
|
621
|
|
|
531
|
|
|
621
|
|
|
447
|
|
|
531
|
|
|
766
|
|
|
1,217
|
|
|
705
|
|
|
937
|
|
|||||||||
Acquisition intangible amortization
(g)
|
6,847
|
|
|
10,857
|
|
|
6,110
|
|
|
4,630
|
|
|
9,384
|
|
|
7,669
|
|
|
8,027
|
|
|
10,864
|
|
|
8,433
|
|
|||||||||
Non-cash interest
(h)
|
465
|
|
|
1,156
|
|
|
465
|
|
|
465
|
|
|
1,072
|
|
|
453
|
|
|
443
|
|
|
1,072
|
|
|
698
|
|
|||||||||
Other taxes
(i)
|
190
|
|
|
60
|
|
|
190
|
|
|
41
|
|
|
60
|
|
|
36
|
|
|
11
|
|
|
209
|
|
|
75
|
|
|||||||||
Legal settlement
(j)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
995
|
|
|
—
|
|
|
—
|
|
|
995
|
|
|||||||||
Non-GAAP adjusted income before income taxes
|
$
|
14,012
|
|
|
$
|
24,501
|
|
|
$
|
14,381
|
|
|
$
|
8,774
|
|
|
$
|
20,467
|
|
|
$
|
10,365
|
|
|
$
|
10,278
|
|
|
$
|
26,074
|
|
|
$
|
14,290
|
|
Adjusted income taxes at effective rate
(k)
|
(3,503
|
)
|
|
(6,125
|
)
|
|
(3,595
|
)
|
|
(2,195
|
)
|
|
(5,117
|
)
|
|
(2,591
|
)
|
|
(2,570
|
)
|
|
(6,517
|
)
|
|
(3,574
|
)
|
|||||||||
Adjusted net income
|
$
|
10,509
|
|
|
$
|
18,376
|
|
|
$
|
10,786
|
|
|
$
|
6,579
|
|
|
$
|
15,350
|
|
|
$
|
7,774
|
|
|
$
|
7,708
|
|
|
$
|
19,557
|
|
|
$
|
10,716
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Cash interest expense, net
(l)
|
2,335
|
|
|
4,190
|
|
|
1,604
|
|
|
4,541
|
|
|
7,426
|
|
|
6,483
|
|
|
5,457
|
|
|
4,489
|
|
|
8,001
|
|
|||||||||
Adjusted income taxes at effective rate
(k)
|
3,503
|
|
|
6,125
|
|
|
3,595
|
|
|
2,195
|
|
|
5,117
|
|
|
2,591
|
|
|
2,570
|
|
|
6,517
|
|
|
3,574
|
|
|||||||||
Depreciation and internally developed software amortization
(m)
|
1,463
|
|
|
2,584
|
|
|
1,340
|
|
|
1,246
|
|
|
2,455
|
|
|
2,416
|
|
|
1,871
|
|
|
2,549
|
|
|
2,457
|
|
|||||||||
Adjusted EBITDA
|
$
|
17,810
|
|
|
$
|
31,275
|
|
|
$
|
17,325
|
|
|
$
|
14,561
|
|
|
$
|
30,348
|
|
|
$
|
19,264
|
|
|
$
|
17,606
|
|
|
$
|
33,112
|
|
|
$
|
24,748
|
|
(a)
|
Includes costs associated with forming i3 Verticals, Inc. and other expenses directly related to certain transactions as part of any offering.
|
(b)
|
Non-cash change in fair value of contingent consideration reflects the changes in management’s estimates of future cash consideration to be paid in connection with prior acquisitions from the amount estimated as of the later of the most recent balance sheet date forming the beginning of the income statement period or the original estimates made at the closing of the applicable acquisition.
|
(c)
|
Non-cash change in warrant liability reflects the fair value change in certain warrants for the Company's Common Units associated with the Company's mezzanine notes in the aggregate principal amount of $10.5 million. These warrants are accounted for as liabilities on the Company's consolidated balance sheets and were repaid with proceeds from its IPO.
|
(d)
|
Equity based compensation expense related to stock options issued under the Company’s 2018 Equity Incentive Plan. In addition, during the pro forma
year ended September 30, 2018
, the
year ended September 30, 2018
and the twelve months ended March 31, 2019, compensation expense included
$741,000
related to tax receivables agreement (TRA) non-participation compensatory shares.
|
(e)
|
Under GAAP, companies must adjust, as necessary, beginning balances of acquired deferred revenue to fair value as part of acquisition accounting as defined by GAAP. Acquisition revenue adjustments remove the effect of these adjustments to acquisition date fair value from acquisitions that have closed as of the date of this prospectus.
|
(f)
|
Acquisition-related expenses are the professional service and related costs directly related to the Company's acquisitions and are not part of its core performance.
|
(g)
|
Acquisition intangible amortization reflects amortization of intangible assets and software acquired through business combinations, acquired customer portfolios, acquired referral agreements and related asset acquisitions.
|
(h)
|
Non-cash interest expense reflects amortization of deferred financing costs.
|
(i)
|
Other taxes consist of franchise taxes, commercial activity taxes and other non-income-based taxes. Taxes related to salaries or employment are not included
.
|
(j)
|
Legal settlement is a charge from certain legal proceedings. For additional information, see “Business—Legal Proceedings” in our 2018 10-K incorporated by reference herein.
|
(k)
|
Adjusted corporate income tax expense is calculated considering the 2018 Tax Reform Act by applying a
25.0%
blended federal and state tax rate to Non-GAAP adjusted income before taxes. GAAP corporate income tax expense (benefit) as a percentage of pre-tax net income, i.e., the effective tax rate, was
23.7%
for the pro forma six months ended March 31, 2019;
17.8%
for the pro forma year ended September 30, 2018;
10.3%
and
1.9%
for the six months ended March 31, 2019 and 2018, respectively;
(7.3)%
,
16.4%
and
(13.1)%
for the years ended September 30, 2018, 2017 and 2016, respectively, and
15.4%
and
(1.9)%
for the twelve months ended March 31, 2019 and 2018, respectively.
|
(l)
|
Cash interest expense, net represents all interest expense recorded on the Company's statement of operations other than non-cash interest expense, which represents amortization of deferred financing costs.
|
(m)
|
Depreciation and internally developed software amortization reflects depreciation on the Company's property, plant and equipment, net, and amortization expense on its internally developed capitalized software.
|
•
|
make additional acquisitions;
|
•
|
market our products and services;
|
•
|
expand our client support and service operations;
|
•
|
hire additional marketing, client support and administrative personnel; and
|
•
|
implement new and upgraded operational and financial systems, procedures and controls.
|
•
|
loss of revenues;
|
•
|
loss of clients;
|
•
|
loss of client and cardholder data;
|
•
|
fines imposed by payment networks;
|
•
|
harm to our business or reputation resulting from negative publicity;
|
•
|
exposure to fraud losses or other liabilities;
|
•
|
additional operating and development costs; or
|
•
|
diversion of management, technical and other resources, among other consequences.
|
•
|
we may not be able to identify suitable acquisition candidates or acquire additional assets on favorable terms;
|
•
|
we may compete with others to acquire assets, which competition may increase, and any level of competition could result in decreased availability or increased prices for acquisition candidates;
|
•
|
we may compete with others for select acquisitions and our competition may consist of larger, better-funded organizations with more resources and easier access to capital;
|
•
|
we may experience difficulty in anticipating the timing and availability of acquisition candidates;
|
•
|
we may not be able to obtain the necessary financing, on favorable terms or at all, to finance any of our potential acquisitions; and
|
•
|
we may not be able to generate cash necessary to execute our acquisition strategy.
|
•
|
incur liens on property, assets or revenues;
|
•
|
incur or assume additional debt or amend our debt and other material agreements;
|
•
|
declare or make distributions and redeem or repurchase equity interests or issue preferred stock;
|
•
|
prepay, redeem or repurchase debt;
|
•
|
make investments;
|
•
|
enter into any sale-and-leaseback of property;
|
•
|
engage in certain business activities; and
|
•
|
engage in certain mergers and asset sales.
|
•
|
prohibiting the use of cumulative voting for the election of directors;
|
•
|
advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; and
|
•
|
certain limitations on convening special stockholder meetings.
|
•
|
prior to such time, our board of directors (the
“
Board of Directors
”)
approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
|
•
|
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the votes of our voting stock outstanding at the time the transaction commenced, excluding certain shares; or
|
•
|
at or subsequent to that time, the business combination is approved by our Board of Directors and by the affirmative vote of holders of at least 66 2/3% of the votes of our outstanding voting stock that is not owned by the interested stockholder.
|
•
|
our ability to generate revenue sufficient to attain and maintain profitability and positive cash flow;
|
•
|
competition in our industry and our ability to compete effectively;
|
•
|
our dependence on non-exclusive distribution partners to market our products and services;
|
•
|
our ability to keep pace with rapid developments and changes in our industry and provide new products and services;
|
•
|
liability and reputation damage from unauthorized disclosure, destruction or modification of data or disruption of our services;
|
•
|
technical, operational and regulatory risks related to our information technology systems and third-party providers’ systems;
|
•
|
reliance on third parties for significant services;
|
•
|
exposure to economic conditions and political risks affecting consumer and commercial spending, including the use of credit cards;
|
•
|
our ability to increase our existing vertical markets, expand into new vertical markets and execute our growth strategy;
|
•
|
our ability to successfully identify acquisition targets and, thereafter to complete and effectively integrate those acquisitions into our services;
|
•
|
potential degradation of the quality of our products, services and support;
|
•
|
our ability to retain clients, many of which are SMBs, which can be difficult and costly to retain;
|
•
|
our ability to successfully manage our intellectual property;
|
•
|
our ability to attract, recruit, retain and develop key personnel and qualified employees;
|
•
|
risks related to laws, regulations and industry standards;
|
•
|
our indebtedness and potential increases in our indebtedness;
|
•
|
operating and financial restrictions imposed by our 2019 Senior Secured Credit Facility; and
|
•
|
the other factors described in “Risk Factors.”
|
•
|
our ability to generate revenues sufficient to maintain profitability and positive cash flow;
|
•
|
competition in our industry and our ability to compete effectively;
|
•
|
our dependence on non-exclusive distribution partners to market our products and services;
|
•
|
our ability to keep pace with rapid developments and changes in our industry and provide new products and services;
|
•
|
liability and reputation damage from unauthorized disclosure, destruction or modification of data or disruption of our services;
|
•
|
technical, operational and regulatory risks related to our information technology systems and third-party providers’ systems;
|
•
|
reliance on third parties for significant services;
|
•
|
exposure to economic conditions and political risks affecting consumer and commercial spending, including the use of credit cards;
|
•
|
our ability to increase our existing vertical markets, expand into new vertical markets and execute our growth strategy;
|
•
|
our ability to successfully identify acquisition targets and thereafter to complete and effectively integrate those acquisitions into our services;
|
•
|
potential degradation of the quality of our products, services and support;
|
•
|
our ability to retain clients, many of which are SMBs, which can be difficult and costly to retain;
|
•
|
our ability to successfully manage our intellectual property;
|
•
|
our ability to attract, recruit, retain and develop key personnel and qualified employees;
|
•
|
risks related to laws, regulations and industry standards;
|
•
|
our indebtedness and potential increases in our indebtedness;
|
•
|
operating and financial restrictions imposed by our 2019 Senior Secured Credit Facility; and
|
•
|
the other factors described in “Risk Factors” contained elsewhere in and incorporated by reference into this prospectus for a further description of these and other factors.
|
•
|
i3 Verticals, Inc. and its subsidiaries on an actual basis; and
|
•
|
i3 Verticals, Inc. and its subsidiaries on a pro forma basis after giving effect to the sale of shares of Class A common stock in this offering at an assumed public offering price of
$25.57
(the last reported sale price of our Class A common stock on Nasdaq on May 31, 2019), with the net proceeds we receive used to purchase (1)
1,000,000
Common Units directly from i3 Verticals, LLC and (2)
3,491,763
Common Units and an equivalent number of Class B common stock (which shares will then be canceled) from certain of the Continuing Equity Owners.
|
|
As of March 31, 2019
|
||||||
|
Actual
|
|
Pro Forma
|
||||
(in thousands, except share data)
|
(unaudited)
|
||||||
Cash and cash equivalents
|
$
|
1,393
|
|
|
$
|
—
|
|
Debt, including current portion
|
|
|
|
||||
2017 Senior Secured Credit Facility
|
76,250
|
|
|
106,181
|
|
||
Debt issuance costs
|
(1,009
|
)
|
|
(1,009
|
)
|
||
Total long-term debt, including current portion
(1)
|
75,241
|
|
|
105,172
|
|
||
Total stockholders’ equity:
|
|
|
|
||||
Stockholders’ equity (deficit)
|
|
|
|
||||
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized; 0 shares issued and outstanding on an actual and as adjusted basis
|
—
|
|
|
—
|
|
||
Class A common stock, par value $0.0001 per share, 150,000,000 shares authorized; 9,192,030 shares issued and outstanding, actual, and 13,683,793 shares issued and outstanding, on a pro forma basis
|
1
|
|
|
1
|
|
||
Class B common stock, par value $0.0001 per share, 40,000,000 shares authorized; 17,112,164 shares issued and outstanding, actual, and 13,620,401 shares issued and outstanding, on a pro forma basis
|
2
|
|
|
2
|
|
||
Additional paid-in capital
|
41,284
|
|
|
68,744
|
|
||
Accumulated (deficit) earnings
|
(188
|
)
|
|
4,436
|
|
||
Total stockholders
’
equity
|
41,099
|
|
|
73,183
|
|
||
Non-controlling interest
(2)
|
73,636
|
|
|
54,307
|
|
||
Total capitalization
|
$
|
189,976
|
|
|
$
|
232,662
|
|
(1)
|
As of March 31, 2019, we had
$66.3 million
of availability under our 2017 Senior Secured Credit Facility. On May 9, 2019, the Company replaced its existing 2017 Senior Secured Credit Facility with the 2019 Senior Secured Credit Facility. The 2019 Senior Secured Credit Facility consists of a $300.0 million revolving line of credit, together with an option to increase the revolving line of credit and/or obtain incremental term loans in an additional principal amount of up to $50.0 million in the aggregate (subject to the receipt of additional commitments for any such incremental loan amounts). As of
May 31, 2019
, we owed
$165.5 million
under our 2019 Senior Secured Credit Facility.
|
(2)
|
Represents the portions of i3 Verticals, LLC not owned by us, which represents
65.1%
of i3 Verticals, LLC's outstanding Common Units prior to this offering and
49.9%
following this offering.
|
•
|
the Reorganization Transactions and IPO;
|
•
|
the Pace Acquisition;
|
•
|
this offering (based on an assumed public offering price of
$25.57
per share, which is the last reported sale price of our Class A common stock on Nasdaq on
May 31, 2019
) and our payment of fees and expenses related to this offering and the use of a portion of the proceeds by i3 Verticals, LLC (from the sale of Common Units to us using the proceeds of this offering) to repay approximately
$23.5 million
of the indebtedness outstanding under the 2019 Senior Secured Credit Facility as described under “Use of Proceeds” (for the purposes of the unaudited pro forma consolidated financial information we have assumed the proceeds of this offering repaid indebtedness outstanding under the 2017 Senior Secured Credit Facility which was in effect during the periods presented); and
|
•
|
the recording of a deferred tax asset as a result of the increase in tax basis that is expected to result from the purchase by us of an aggregate of
3,491,763
Common Units held by the Continuing Equity Owners and the liability that is expected to be incurred as a result under the Tax Receivable Agreement that requires us to pay 85% of such benefits to the Continuing Equity Owners selling in this offering.
|
|
Historical i3 Verticals, Inc.
|
|
Historical Pace Payment Systems, Inc. (a)
|
|
Business Combination Adjustments (b)
|
|
As Adjusted Before Offering
|
|
Offering Adjustments
|
|
Pro Forma i3 Verticals, Inc.
|
||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash equivalents
|
$
|
1,393
|
|
|
$
|
184
|
|
|
$
|
(1,577
|
)
|
(b1)
|
$
|
—
|
|
|
$
|
—
|
|
(f)(g)
|
$
|
—
|
|
Accounts receivable, net
|
11,703
|
|
|
526
|
|
|
—
|
|
|
12,229
|
|
|
—
|
|
|
12,229
|
|
||||||
Settlement assets
|
439
|
|
|
—
|
|
|
—
|
|
|
439
|
|
|
—
|
|
|
439
|
|
||||||
Prepaid expenses and other current assets
|
3,246
|
|
|
450
|
|
|
—
|
|
|
3,696
|
|
|
—
|
|
|
3,696
|
|
||||||
Total current assets
|
16,781
|
|
|
1,160
|
|
|
(1,577
|
)
|
|
16,364
|
|
|
—
|
|
|
16,364
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Property and equipment, net
|
3,055
|
|
|
157
|
|
|
—
|
|
|
3,212
|
|
|
—
|
|
|
3,212
|
|
||||||
Restricted cash
|
666
|
|
|
—
|
|
|
—
|
|
|
666
|
|
|
—
|
|
|
666
|
|
||||||
Capitalized software, net
|
7,041
|
|
|
330
|
|
|
—
|
|
|
7,371
|
|
|
—
|
|
|
7,371
|
|
||||||
Goodwill
|
104,651
|
|
|
15,675
|
|
|
25,209
|
|
(b2)
|
145,535
|
|
|
—
|
|
|
145,535
|
|
||||||
Intangible assets, net
|
82,661
|
|
|
—
|
|
|
18,700
|
|
(b3)
|
101,361
|
|
|
—
|
|
|
101,361
|
|
||||||
Deferred income taxes
|
1,932
|
|
|
—
|
|
|
—
|
|
|
1,932
|
|
|
25,039
|
|
(c)
|
26,971
|
|
||||||
Other assets
|
1,712
|
|
|
—
|
|
|
—
|
|
|
1,712
|
|
|
—
|
|
|
1,712
|
|
||||||
Total assets
|
$
|
218,499
|
|
|
$
|
17,322
|
|
|
$
|
42,332
|
|
|
$
|
278,153
|
|
|
$
|
25,039
|
|
|
$
|
303,192
|
|
|
Historical i3 Verticals, Inc.
|
|
Historical Pace Payment Systems, Inc. (a)
|
|
Business Combination Adjustments (b)
|
|
As Adjusted Before Offering
|
|
Offering Adjustments
|
|
Pro Forma i3 Verticals, Inc.
|
||||||||||||
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Accounts payable
|
$
|
3,359
|
|
|
$
|
758
|
|
|
$
|
—
|
|
|
$
|
4,117
|
|
|
$
|
—
|
|
|
$
|
4,117
|
|
Current portion of long-term debt
|
5,000
|
|
|
600
|
|
|
(600
|
)
|
(b4)
|
5,000
|
|
|
—
|
|
|
5,000
|
|
||||||
Accrued expenses and other current liabilities
|
15,588
|
|
|
2,053
|
|
|
—
|
|
|
17,641
|
|
|
34
|
|
(c)
|
17,675
|
|
||||||
Settlement obligations
|
439
|
|
|
—
|
|
|
—
|
|
|
439
|
|
|
—
|
|
|
439
|
|
||||||
Deferred revenue
|
4,413
|
|
|
—
|
|
|
—
|
|
|
4,413
|
|
|
—
|
|
|
4,413
|
|
||||||
Total current liabilities
|
28,799
|
|
|
3,411
|
|
|
(600
|
)
|
|
31,610
|
|
|
34
|
|
|
31,644
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Long-term debt, less current portion and debt issuance costs, net
|
70,241
|
|
|
37,953
|
|
|
15,526
|
|
(b5)
|
123,720
|
|
|
(23,548
|
)
|
(g)
|
100,172
|
|
||||||
Tax receivable agreement obligations
|
1,420
|
|
|
—
|
|
|
—
|
|
|
1,420
|
|
|
21,318
|
|
(c)
|
22,738
|
|
||||||
Other long-term liabilities
|
3,304
|
|
|
—
|
|
|
17,844
|
|
(b6)
|
21,148
|
|
|
—
|
|
|
21,148
|
|
||||||
Total liabilities
|
103,764
|
|
|
41,364
|
|
|
32,770
|
|
|
177,898
|
|
|
(2,196
|
)
|
|
175,702
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Stockholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Redeemable preferred stock, Series A, $0.001 par value (including accrued dividends of $9,154,952), 1,228,500 shares authorized and issued; 1,213,435 shares outstanding
|
—
|
|
|
21,440
|
|
|
(21,440
|
)
|
(b7)
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Preferred stock, Series B, $0.001 par value, 300,000 shares authorized, issued and outstanding
|
—
|
|
|
2,000
|
|
|
(2,000
|
)
|
(b8)
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized; 0 shares issued and outstanding as of March 31, 2019
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Common stock, $0.001 par value, 2,000,000 shares authorized; 178,895 shares issued and outstanding; 198,507 restricted shares issued and 196,172 shares outstanding
|
—
|
|
|
—
|
|
|
—
|
|
(b9)
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Class A common stock, par value $0.0001 per share, 150,000,000 shares authorized; 9,192,030 shares issued and outstanding as of March 31, 2019, actual, and 13,692,592 shares issued and outstanding, pro forma
|
1
|
|
|
—
|
|
|
—
|
|
(b10)
|
1
|
|
|
—
|
|
(b)(d)
|
1
|
|
||||||
Class B common stock, par value $0.0001 per share, 40,000,000 shares authorized; 17,112,164 shares issued and outstanding as of March 31, 2019, actual, and 13,620,401 shares issued and outstanding, pro forma
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
(d)
|
2
|
|
||||||
Additional paid-in-capital
|
41,284
|
|
|
2
|
|
|
223
|
|
(b11)
|
41,509
|
|
|
27,235
|
|
(a)(d)
|
68,744
|
|
||||||
Accumulated (deficit) earnings
|
(188
|
)
|
|
(47,333
|
)
|
|
32,628
|
|
(b12)
|
(14,893
|
)
|
|
19,329
|
|
(e)
|
4,436
|
|
||||||
Treasury stock, 15,065 preferred shares, 2,335 common shares, at cost
|
—
|
|
|
(151
|
)
|
|
151
|
|
(b13)
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total Stockholders' equity (deficit)
|
41,099
|
|
|
(24,042
|
)
|
|
9,562
|
|
|
26,619
|
|
|
46,564
|
|
|
73,183
|
|
||||||
Non-controlling interest
|
73,636
|
|
|
—
|
|
|
—
|
|
|
73,636
|
|
|
(19,329
|
)
|
(e)
|
54,307
|
|
||||||
Total equity (deficit)
|
114,735
|
|
|
(24,042
|
)
|
|
9,562
|
|
|
100,255
|
|
|
27,235
|
|
|
127,490
|
|
||||||
Total liabilities and stockholders' equity (deficit)
|
$
|
218,499
|
|
|
$
|
17,322
|
|
|
$
|
42,332
|
|
|
$
|
278,153
|
|
|
$
|
25,039
|
|
|
$
|
303,192
|
|
(a)
|
On May 31, 2019, i3-SDCR, Inc., an indirect wholly owned subsidiary of the Company, acquired all of the stock of Pace. Total preliminary estimated purchase consideration included
$52.5 million
in cash consideration paid at closing, funded by revolving line of credit proceeds, and
$12.6 million
of contingent consideration as estimated on a preliminary basis and
$0.2 million
of restricted shares of Class A common stock in i3 Verticals.
|
(b)
|
In accordance with the rules of Article 11 of Regulation S-X, the following adjustments were made for the Pace Acquisition (amounts in thousands):
|
(b1)
|
Adjustments to cash and cash equivalents:
|
To reflect i3 Verticals' transaction costs, comprised of professional fees and expenses
|
$
|
(410
|
)
|
To reflect Pace's estimated transaction costs, comprised of professional fees and expenses of $1,911, and restructuring costs of $235, which includes severance payments
|
(2,146
|
)
|
|
To reflect proceeds from long term debt to cover transaction costs
|
979
|
|
|
|
$
|
(1,577
|
)
|
(b2)
|
Adjustments to goodwill:
|
To eliminate Pace's historical goodwill
|
$
|
(15,675
|
)
|
To reflect the preliminary goodwill for the amount of consideration paid in excess of fair value of assets received and liabilities assumed
|
40,884
|
|
|
|
$
|
25,209
|
|
(b3)
|
Adjustments to intangibles, net:
|
To record the preliminary estimated fair value of separately identified merchant relationships
|
$
|
17,100
|
|
To record the preliminary estimated fair value of separately identified non-compete
|
100
|
|
|
To record the preliminary estimated fair value of separately identified trade names
|
1,500
|
|
|
|
$
|
18,700
|
|
(b4)
|
Adjustments to current portion of long-term debt:
|
To reflect the pay down of Pace's current portion of long-term debt
|
$
|
(600
|
)
|
(b5)
|
Adjustments to long-term debt, less current portion and debt issuance costs, net:
|
To reflect the pay down of Pace's long-term debt, less current portion
|
$
|
(37,953
|
)
|
To record the proceeds from the Company's 2019 Senior Secured Credit Facility used to finance the cash consideration for the Pace Acquisition
|
52,500
|
|
|
|
$
|
14,547
|
|
(b6)
|
Adjustments to other long-term liabilities:
|
To reflect proceeds from long term debt to cover transaction costs
|
$
|
979
|
|
To record long-term contingent consideration as estimated on a preliminary basis
|
12,645
|
|
|
To record a deferred tax liability for the fair-market step-up of intangible assets
|
5,199
|
|
|
|
$
|
18,823
|
|
(b7)
|
Adjustments to redeemable preferred stock:
|
To eliminate Pace's redeemable preferred stock
|
$
|
(21,440
|
)
|
(b8)
|
Adjustments to preferred stock, Series B:
|
To eliminate Pace's preferred stock
|
$
|
(2,000
|
)
|
(b9)
|
Adjustments to common stock:
|
To eliminate Pace's common stock
|
$
|
—
|
|
(b10)
|
Adjustments to Class A common stock:
|
To record restricted shares of Class A common stock issued as purchase consideration
|
$
|
—
|
|
(b11)
|
Adjustments to additional paid-in-capital:
|
To eliminate Pace's additional paid-in-capital
|
$
|
(2
|
)
|
To record restricted shares of Class A common stock issued as purchase consideration
|
225
|
|
|
|
$
|
223
|
|
(b12)
|
Adjustments to accumulated deficit:
|
To eliminate Pace's accumulated deficit
|
$
|
34,490
|
|
To reflect i3 Verticals, Inc.'s estimated transaction costs, net of tax
|
(313
|
)
|
|
To reflect Pace's estimated transaction costs, net of tax
|
(1,549
|
)
|
|
|
$
|
32,628
|
|
(b13)
|
Adjustments to treasury stock:
|
To eliminate Pace's treasury stock
|
$
|
151
|
|
(c)
|
We expect to obtain an increase in the tax basis of our share of the assets of i3 Verticals, LLC when Common Units are exchanged by the Continuing Equity Owners. This increase in tax basis may have the effect of reducing the amounts that we would otherwise pay in the future to various tax authorities. The increase in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets. On June 25, 2018, we entered into a tax receivable agreement with the Continuing Equity Owners that provides for the payment by us to the Continuing Equity Owners of 85% of the amount of tax benefits, if any, that we actually realize or in some cases are deemed to realize as a result of (i) increases in the tax basis of the assets of i3 Verticals, LLC resulting from the purchase of Common Units in exchange for net cash proceeds in connection with the consummation of this offering and any future redemptions or exchanges of Common Units or any prior sales of interests in i3 Verticals, LLC and (ii) certain other tax benefits related to payments we make under the Tax Receivable Agreement. See “Certain Relationships and Related Party Transactions—Tax Receivable Agreement” in this prospectus
.
|
(d)
|
These adjustments reflect the issuance of Class A common stock in connection with this offering and concurrent exchange by the Continuing Equity Owners of
3,491,763
Common Units for net cash proceeds (and the cancellation of their shares of Class B common stock on a one-for-one basis upon such exchange). The adjustments assume no exercise by the underwriters of their option to purchase additional shares of Class A common stock.
|
(e)
|
Following this offering, assuming the underwriters do not exercise their option to purchase additional shares of Class A common stock, we will own
50.1%
of the economic interest of i3 Verticals, LLC and the Continuing Equity Owners will own the remaining
49.9%
of the economic interest of i3 Verticals, LLC. This pro forma adjustment represents the adjustment to the carrying value of the non-controlling interest to reflect our increased ownership in i3 Verticals, LLC. This amount has been determined based on the assumption that the underwriters' option to purchase
673,765
additional shares of our Class A common stock is not exercised. If
|
Total non-controlling interest owned by Continuing Equity Owners
|
$
|
73,636
|
|
Total Common Units in i3 Verticals, LLC owned by Continuing Equity Owners (in units)
|
17,112,164
|
|
|
Total non-controlling interest per Common Unit
|
4.30
|
|
|
Common Units acquired (in units)
|
4,491,763
|
|
|
Total adjustment to non-controlling interest
|
$
|
19,329
|
|
(f)
|
We estimate that the net proceeds to i3 Verticals, Inc. from this offering will be approximately
$109.1 million
. This amount has been determined based on the assumption that the underwriters’ option to purchase additional shares in our Class A common stock is not exercised. A reconciliation on the gross proceeds from this offering to the net proceeds is set forth below (dollars in thousands except per share amounts):
|
Assumed public offering price per share
|
$
|
25.57
|
|
Shares of Class A common stock issued in this offering
|
4,491,763
|
|
|
Gross proceeds
|
114,854
|
|
|
Less: underwriting discounts and commissions
|
5,743
|
|
|
Net cash proceeds to i3 Verticals, Inc.
|
109,111
|
|
|
Less: offering expenses
|
743
|
|
|
Less: Purchase of units from Continuing Equity Owners, net of underwriting discount
|
84,820
|
|
|
Net cash proceeds to i3 Verticals, LLC
|
$
|
23,548
|
|
(g)
|
i3 Verticals, LLC intends to use the
$23.5 million
in net proceeds it receives from the sale of Common Units to i3 Verticals, Inc. (after deducting estimated offering expenses of
$0.7 million
) to repay outstanding borrowings under the revolving loan of our 2019 Senior Secured Credit Facility.
|
|
Historical i3 Verticals, Inc.
|
|
Historical Pace Payment Systems, Inc.
|
|
Business Combination Adjustments
|
|
As Adjusted Before Offering
|
|
Offering Adjustments
|
|
Pro Forma i3 Verticals, Inc.
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenue
|
$
|
170,262
|
|
|
$
|
14,343
|
|
|
$
|
—
|
|
|
$
|
184,605
|
|
|
$
|
—
|
|
|
$
|
184,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interchange and network fees
|
110,514
|
|
|
—
|
|
|
—
|
|
|
110,514
|
|
|
—
|
|
|
110,514
|
|
||||||
Other costs of services
|
19,983
|
|
|
12,087
|
|
|
—
|
|
|
32,070
|
|
|
—
|
|
|
32,070
|
|
||||||
Selling general and administrative
|
26,835
|
|
|
1,771
|
|
|
—
|
|
|
28,606
|
|
|
—
|
|
|
28,606
|
|
||||||
Depreciation and amortization
|
7,450
|
|
|
123
|
|
|
737
|
|
(a1)
|
8,310
|
|
|
—
|
|
|
8,310
|
|
||||||
Change in fair value of contingent consideration
|
2,153
|
|
|
—
|
|
|
—
|
|
|
2,153
|
|
|
—
|
|
|
2,153
|
|
||||||
Total operating expenses
|
166,935
|
|
|
13,981
|
|
|
737
|
|
|
181,653
|
|
|
—
|
|
|
181,653
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income from operations
|
3,327
|
|
|
362
|
|
|
(737
|
)
|
|
2,952
|
|
|
—
|
|
|
2,952
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense, net
|
2,069
|
|
|
3,135
|
|
|
(1,809
|
)
|
(a2)
|
3,395
|
|
|
(595
|
)
|
(b)
|
2,800
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income (loss) before income taxes
|
1,258
|
|
|
(2,773
|
)
|
|
1,072
|
|
|
(443
|
)
|
|
595
|
|
|
152
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Provision for (benefit from) income taxes
|
129
|
|
|
—
|
|
|
556
|
|
(a3)
|
685
|
|
|
(649
|
)
|
(c)
|
36
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net income (loss)
|
1,129
|
|
|
(2,773
|
)
|
|
516
|
|
|
(1,128
|
)
|
|
1,244
|
|
|
116
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net income attributable to non-controlling interests
|
2,053
|
|
|
—
|
|
|
(1,540
|
)
|
(a4)
|
513
|
|
|
(437
|
)
|
(d)
|
76
|
|
||||||
Net (loss) income attributable to i3 Verticals, Inc.
|
$
|
(924
|
)
|
|
$
|
(2,773
|
)
|
|
$
|
2,056
|
|
|
$
|
(1,641
|
)
|
|
$
|
1,681
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net (loss) income per share data (a5) (e):
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net (loss) income available to Class A common stock per share:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic
|
$
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
||||||||
Diluted
|
$
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
||||||||
Weighted average shares of Class A common stock outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic
|
8,849,431
|
|
|
|
|
|
|
|
|
|
|
12,031,849
|
|
||||||||||
Diluted
|
8,849,431
|
|
|
|
|
|
|
|
|
|
|
13,203,229
|
|
(a)
|
In accordance with the rules of Article 11 of Regulation S-X, the following adjustments were made for the Pace Acquisition (tables in thousands):
|
(a1)
|
Adjustments to depreciation and amortization:
|
To reflect the preliminary estimated amortization of separately identified merchant relationships
|
$
|
570
|
|
To reflect the preliminary estimated amortization of separately identified non-compete
|
17
|
|
|
To reflect the preliminary estimated amortization of separately identified trade names
|
150
|
|
|
|
$
|
737
|
|
(a2)
|
Adjustments to interest expense, net:
|
To eliminate Pace's interest expense on debt paid down at closing
|
$
|
(3,135
|
)
|
To reflect the interest expense on proceeds from the 2019 Senior Secured Credit Facility used to finance cash consideration for the Pace Acquisition
|
1,326
|
|
|
|
$
|
(1,809
|
)
|
(a3)
|
Adjustments to (benefit from) provision for income taxes:
|
To reflect the income tax effect of pro forma adjustments
|
$
|
556
|
|
(a4)
|
Adjustments to net income (loss) attributable to non-controlling interest:
|
Contributed loss from Pace and associated pro forma adjustments
|
$
|
(1,041
|
)
|
Contributed loss from interest expense on proceeds from the 2019 Senior Secured Credit Facility used to finance the cash consideration for the Pace Acquisition
|
(1,326
|
)
|
|
Total contributed loss prior to non-controlling interest in i3 Verticals
|
(2,367
|
)
|
|
Non-controlling interest in i3 Verticals
|
65.1
|
%
|
|
|
$
|
(1,540
|
)
|
(a5)
|
Under the terms of the merger agreement, at the close of the Pace Acquisition, the Company issued
8,799
restricted shares of Class A common stock in i3 Verticals to certain former equity holders of Pace upon their service with the Company. The restricted shares of Class A common shares issued under the Company's 2018 Plan are included in our pro forma diluted earnings per share calculation.
|
(b)
|
As described in “Use of Proceeds,” we intend to use a portion of the net proceeds from this offering (assuming that the underwriters’ option to purchase additional shares of our Class A common stock is not exercised) to purchase Common Units directly from i3 Verticals, LLC at a price per unit equal to the public offering price per share of Class A common stock in this offering less the underwriting discounts and commissions. i3 Verticals, LLC intends to use the
$23.5 million
in net proceeds it receives from the sale of Common Units to i3 Verticals, Inc. to repay
$23.5 million
in outstanding borrowings under t
he revolving loan of
our 2019 Senior Secured Credit Facility. Accordingly, pro forma adjustments have been made to reflect a reduction in interest expense of
$0.6 million
for the six months ended March 31, 2019, computed at an interest rate of
5.1%
, as if the outstanding borrowings had been repaid on October 1, 2018.
|
(c)
|
Represents the additional current income tax expense for the period based on an effective income tax rate of
23.7%
for the six months ended March 31, 2019, which was calculated assuming the U.S. federal rates currently in effect and the highest statutory rates apportioned to each applicable state and local jurisdiction. After giving effect to the adjustments for the Pace Acquisition and this offering, the additional current income tax benefit on our
50.1%
interest in i3 Verticals, LLC was
$0.6 million
for the six months ended March 31, 2019.
|
(d)
|
The adjustment reflects the impact of the change of the portion of i3 Verticals, LLC owned by i3 Verticals, Inc. immediately following this offering, assuming the offering occurred on October 1, 2017, as a result of which i3 Verticals, Inc. owns
50.1%
of the economic interest of i3 Verticals, LLC and the ownership percentage of i3 Verticals, LLC held by the Continuing Equity Owners will be
49.9%
. The net income attributable to the Continuing Equity Owners accordingly will represent
49.9%
of the income attributable to i3 Verticals, LLC.
|
(e)
|
Pro forma basic net income per share is computed by dividing the net income available to Class A common stockholders by the weighted-average shares of Class A common stock outstanding during the period. Pro forma diluted net income per share is computed by adjusting the net income available to Class A common stockholders and the weighted-average shares of Class A common stock outstanding to give effect to potentially dilutive securities. Shares of our Class B common stock are not entitled to receive any distributions or dividends and have no rights to convert into Class A common stock. When a Common Unit is exchanged for, at our election, cash or Class A common stock by a Continuing Equity Owner who holds shares of our Class B common stock, such Continuing Equity Owner will be required to surrender a share of Class B common stock, which we will cancel for no consideration. Therefore, we do not include shares of our Class B common stock in the computation of pro forma basic net loss per share. The following table sets forth a reconciliation of the numerators and denominators used to compute pro forma basic and diluted net loss per share (in thousands, except share and per share data):
|
|
Pro Forma i3 Verticals, Inc.
Six months ended
March 31, 2019
|
||
Basic net income per share:
|
|
||
Numerator
|
|
||
Net income
|
$
|
116
|
|
Less: Net income attributable to non-controlling interests
|
76
|
|
|
Net income attributable to Class A common stockholders
|
$
|
40
|
|
Denominator
|
|
||
Weighted average shares of Class A common stock outstanding
(1)
|
12,031,849
|
|
|
|
|
||
Basic net income per share
|
$
|
0.00
|
|
|
|
||
Diluted net income per share:
|
|
||
Numerator
|
|
||
Net income attributable to Class A common stockholders
|
$
|
40
|
|
Reallocation of net income assuming conversion of Common Units
(2)
|
|
||
Net income attributable to Class A common stockholders - diluted
|
$
|
40
|
|
Denominator
|
|
||
Weighted average shares of Class A common stock outstanding
(1)
|
12,031,849
|
|
|
Weighted average effect of dilutive securities
(3)
|
1,171,380
|
|
|
Weighted average shares of Class A common stock outstanding - diluted
|
13,203,229
|
|
|
|
|
||
Diluted net income per share
|
$
|
0.00
|
|
(1)
|
We plan to use a portion of the net proceeds from this offering (assuming that the underwriters’ option to purchase additional shares of our Class A common stock is not exercised) to purchase Common Units directly from i3 Verticals, LLC at a price per unit equal to the offering price per share of Class A common stock in this offering less the underwriting discounts and commissions.
This weighted average calculation assumes that this offering occurred at the beginning of the fiscal year presented. Excludes
286,557
shares of restricted Class A common stock.
|
(2)
|
The reallocation of net income, assuming conversion of Common Units represents the tax effected net income attributable to non-controlling interest using the effective income tax rates described in footnote (c) above and assuming all Common Units of i3 Verticals, LLC were exchanged for Class A common stock at the beginning of the period. The Common Units of i3 Verticals, LLC held by the Continuing Equity Owners are potentially dilutive securities, and the computations of pro forma diluted net income (loss) per share assume that all Common Units of i3 Verticals, LLC were exchanged for shares of Class A common stock at the beginning of the period. This adjustment was made only for purposes of calculating pro forma diluted net income per share and does not necessarily reflect the amount of exchanges that may occur subsequent to this offering.
|
(3)
|
Includes
1,171,380
shares of unvested restricted Class A common stock and options. The following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted earnings per share of Class A common stock:
|
a.
|
13,620,401
shares of Class B common stock, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive, and
|
b.
|
33,000 stock options were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive.
|
|
Historical i3 Verticals, Inc.
|
|
Reorganization and IPO Transactions
|
|
Historical Pace Payment Systems, Inc.
|
|
Business Combination Adjustments
|
|
As Adjusted Before Offering
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
323,508
|
|
|
$
|
—
|
|
|
$
|
28,978
|
|
|
$
|
—
|
|
|
$
|
352,486
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
||||||||||
Interchange and network fees
|
214,543
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
214,543
|
|
|||||
Other costs of services
|
40,314
|
|
|
—
|
|
|
24,375
|
|
|
—
|
|
|
64,689
|
|
|||||
Selling general and administrative
|
40,585
|
|
|
1,357
|
|
(a)
|
3,676
|
|
|
—
|
|
|
45,618
|
|
|||||
Depreciation and amortization
|
11,839
|
|
|
—
|
|
|
129
|
|
|
1,473
|
|
(e1)
|
13,441
|
|
|||||
Change in fair value of contingent consideration
|
3,866
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,866
|
|
|||||
Total operating expenses
|
311,147
|
|
|
1,357
|
|
|
28,180
|
|
|
1,473
|
|
|
342,157
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from operations
|
12,361
|
|
|
(1,357
|
)
|
|
798
|
|
|
(1,473
|
)
|
|
10,329
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other expenses
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense, net
|
8,498
|
|
|
(4,817
|
)
|
(b)
|
5,801
|
|
|
(2,796
|
)
|
(e2)
|
6,686
|
|
|||||
Change in fair value of warrant liability
|
8,487
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,487
|
|
|||||
Total other expenses
|
16,985
|
|
|
(4,817
|
)
|
|
5,801
|
|
|
(2,796
|
)
|
|
15,173
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
(Loss) before income taxes
|
(4,624
|
)
|
|
3,460
|
|
|
(5,003
|
)
|
|
1,323
|
|
|
(4,844
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Provision for (benefit from) income taxes
|
337
|
|
|
(1,632
|
)
|
(c)
|
—
|
|
|
921
|
|
(e3)
|
(374
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Net (loss)
|
(4,961
|
)
|
|
5,092
|
|
|
(5,003
|
)
|
|
402
|
|
|
(4,470
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (loss) attributable to non-controlling interests
|
1,937
|
|
|
(5,107
|
)
|
(d)
|
—
|
|
|
(849
|
)
|
(e4)
|
(4,019
|
)
|
|||||
Net (loss) attributable to i3 Verticals, Inc.
|
$
|
(6,898
|
)
|
|
$
|
10,199
|
|
|
$
|
(5,003
|
)
|
|
$
|
1,251
|
|
|
$
|
(451
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income per share data
(1)
:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income available to Class A common stock per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares of Class A common stock outstanding:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
8,812,630
|
|
|
|
|
|
|
|
|
|
|||||||||
Diluted
|
26,873,878
|
|
|
|
|
|
|
|
|
|
(1)
|
Basic and diluted net income per Class A common stock for the historical i3 Verticals, Inc. statement of operations are presented only for the period after the Company’s Reorganization Transactions. As part of the pro forma adjustments we have recast the statement of operations as if the Reorganization Transactions occurred at the beginning of the fiscal year. As such, the basic and diluted income per share of Class A common stock for the pro forma i3 Verticals, Inc. statement of operations reflects the entire fiscal year.
|
|
As Adjusted Before Offering
|
|
Offering Adjustments
|
|
Pro Forma i3 Verticals, Inc.
|
||||||
|
|
|
|
|
|
||||||
Revenue
|
$
|
352,486
|
|
|
$
|
—
|
|
|
$
|
352,486
|
|
|
|
|
|
|
|
||||||
Operating expenses
|
|
|
|
|
|
||||||
Interchange and network fees
|
214,543
|
|
|
—
|
|
|
214,543
|
|
|||
Other costs of services
|
64,689
|
|
|
—
|
|
|
64,689
|
|
|||
Selling general and administrative
|
45,618
|
|
|
—
|
|
|
45,618
|
|
|||
Depreciation and amortization
|
13,441
|
|
|
—
|
|
|
13,441
|
|
|||
Change in fair value of contingent consideration
|
3,866
|
|
|
—
|
|
|
3,866
|
|
|||
Total operating expenses
|
342,157
|
|
|
—
|
|
|
342,157
|
|
|||
|
|
|
|
|
|
||||||
Income from operations
|
10,329
|
|
|
—
|
|
|
10,329
|
|
|||
|
|
|
|
|
|
||||||
Other expenses
|
|
|
|
|
|
||||||
Interest expense, net
|
6,686
|
|
|
(1,340
|
)
|
(f)
|
5,346
|
|
|||
Change in fair value of warrant liability
|
8,487
|
|
|
—
|
|
|
8,487
|
|
|||
Total other expenses
|
15,173
|
|
|
(1,340
|
)
|
|
13,833
|
|
|||
|
|
|
|
|
|
||||||
(Loss) before income taxes
|
(4,844
|
)
|
|
1,340
|
|
|
(3,504
|
)
|
|||
|
|
|
|
|
|
||||||
(Benefit from) income taxes
|
(374
|
)
|
|
(250
|
)
|
(g)
|
(625
|
)
|
|||
|
|
|
|
|
|
||||||
Net (loss) income
|
(4,470
|
)
|
|
1,590
|
|
|
(2,879
|
)
|
|||
|
|
|
|
|
|
||||||
Net (loss) attributable to non-controlling interests
|
(4,019
|
)
|
|
2,260
|
|
(h)
|
(1,759
|
)
|
|||
Net (loss) attributable to i3 Verticals, Inc.
|
$
|
(451
|
)
|
|
$
|
(670
|
)
|
|
$
|
(1,120
|
)
|
|
|
|
|
|
|
||||||
Net (loss) per share data
(1)
(e5) (i):
|
|
|
|
|
|
||||||
Net (loss) available to Class A common stock per share:
|
|
|
|
|
|
||||||
Basic
|
|
|
|
|
$
|
(0.08
|
)
|
||||
Diluted
|
|
|
|
|
$
|
(0.17
|
)
|
||||
Weighted average shares of Class A common stock outstanding:
|
|
|
|
|
|
||||||
Basic
|
|
|
|
|
13,612,604
|
|
|||||
Diluted
|
|
|
|
|
14,460,734
|
|
(1)
|
Basic and diluted net income per Class A common stock for the historical i3 Verticals, Inc. statement of operations are presented only for the period after the Company’s Reorganization Transactions. As part of the pro forma adjustments we have recast the statement of operations as if the Reorganization Transactions occurred at the beginning of the fiscal year. As such, the basic and diluted income per share of Class A common stock for the pro forma i3 Verticals, Inc. statement of operations reflects the entire fiscal year.
|
(a)
|
In connection with our IPO, we granted options to purchase
2,045,000
shares of our Class A common stock with an exercise price of $13.00 per share. This adjustment represents an increase in compensation expense we would have incurred during the year ended September 30, 2018, assuming the stock options were granted on October 1, 2017. The grant date fair values of the stock options were determined using the Black-Scholes valuation model using the following assumptions:
|
Expected volatility
|
26.2
|
%
|
Expected dividend yield
|
—
|
%
|
Expected term (in years)
|
6.0
|
|
Risk-free interest rate
|
2.9
|
%
|
(b)
|
In connection with the IPO, we used a portion of the net proceeds to purchase Common Units directly from i3 Verticals, LLC at a price per unit equal to the initial public offering price per share of Class A common stock less the underwriting discounts and commissions. i3 Verticals, LLC used the
$84.9 million
in net proceeds it received from the sale of Common Units to i3 Verticals, Inc. and the $2.8 million it received from the exercise of warrants to repay the Mezzanine Notes in full in the amount of
$10.6 million
, our outstanding Junior Subordinated Notes in full in the amount of
$8.1 million
(after taking into account the
$8.1 million
conversion of our Junior Subordinated Notes for Class A common stock) and
$66.3 million
of outstanding borrowings under t
he revolving loan of
our 2017 Senior Secured Credit Facility. Accordingly, pro forma adjustments have been made to reflect a reduction in interest expense of
$4.9 million
for the year ended September 30, 2018, computed at a weighted-average interest rate of
7.7%
, as if the outstanding borrowings had been repaid on October 1, 2017.
|
(c)
|
i3 Verticals, LLC has been, and will continue to be, treated as a partnership for U.S. federal and state income tax purposes. As such, income generated by i3 Verticals, LLC will flow through to its members, including us, and is generally not subject to tax at the i3 Verticals, LLC level. Following the Reorganization Transactions and IPO, we became subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income of i3 Verticals, LLC. As a result, the unaudited pro forma consolidated statement of operations reflects adjustments to our income tax expense to reflect an effective income tax rate of
27.2%
for the year ended September 30, 2018, which was calculated assuming the U.S. federal rates currently in effect and the highest statutory rates apportioned to each applicable state and local jurisdiction.
|
(d)
|
As a result of the Reorganization Transactions and IPO, we became the sole managing member of i3 Verticals, LLC and owned
34.6%
of i3 Verticals, LLC. Although we have a minority economic interest in i3 Verticals, LLC, we have the sole voting power in, and control the management of, i3 Verticals, LLC. Accordingly, we consolidate the financial results of i3 Verticals, LLC and report a non-controlling interest in our consolidated financial statements. This adjustment reflects the recognition of the net loss attributable to non-controlling interests, which represent the remaining
65.4%
ownership interest of i3 Verticals, LLC held by the Continuing Equity Owners, assuming the IPO and Reorganization Transactions occurred on October 1, 2017.
|
(e)
|
In accordance with the rules of Article 11 of Regulation S-X, the following adjustments were made for the Pace Acquisition (tables in thousands):
|
(e1)
|
Adjustments to depreciation and amortization:
|
To reflect the preliminary estimated amortization of separately identified merchant relationships
|
$
|
1,140
|
|
To reflect the preliminary estimated amortization of separately identified non-compete
|
33
|
|
|
To reflect the preliminary estimated amortization of separately identified trade names
|
300
|
|
|
|
$
|
1,473
|
|
(e2)
|
Adjustments to interest expense, net:
|
To eliminate Pace's interest expense on debt paid down at closing
|
$
|
(5,801
|
)
|
To reflect the interest expense on proceeds from the 2019 Senior Secured Credit Facility used to finance cash consideration for the Pace Acquisition
|
3,005
|
|
|
|
$
|
(2,796
|
)
|
(e3)
|
Adjustments to (benefit from) provision for income taxes:
|
To reflect the income tax effect of pro forma adjustments
|
$
|
921
|
|
(e4)
|
Adjustments to net income (loss) attributable to non-controlling interest:
|
Contributed loss from Pace and associated pro forma adjustments
|
$
|
(499
|
)
|
Contributed loss from interest expense on proceeds from the 2019 Senior Secured Credit Facility used to finance the cash consideration for the Pace Acquisition
|
(799
|
)
|
|
Total contributed loss prior to non-controlling interest in i3 Verticals
|
(1,298
|
)
|
|
Non-controlling interest in i3 Verticals
|
65.4
|
%
|
|
|
$
|
(850
|
)
|
(e5)
|
Under the terms of the merger agreement, at the close of the Pace Acquisition, the Company issued
8,799
restricted shares of Class A common stock in i3 Verticals to certain former equity holders of Pace upon their service with the Company. The restricted shares of Class A common shares issued under the Company's 2018 Plan are included in our pro forma diluted earnings per share calculation.
|
(f)
|
As described in “Use of Proceeds,” we intend to use a portion of the net proceeds from this offering (assuming that the underwriters’ option to purchase additional shares of our Class A common stock is not exercised) to purchase Common Units directly from i3 Verticals, LLC at a price per unit equal to the public offering price per share of Class A common stock in this offering less the underwriting discounts and commissions. i3 Verticals, LLC intends to use the
$23.5 million
in net proceeds it receives from the sale of Common Units to i3 Verticals, Inc. to repay
$23.5 million
in outstanding borrowings under t
he revolving loan of
our 2019 Senior Secured Credit Facility. Accordingly, pro forma adjustments have been made to reflect a reduction in interest expense of
$1.3 million
for the year ended September 30, 2018, computed at an interest rate of
5.7%
, as if the outstanding borrowings had been repaid on October 1, 2017.
|
(g)
|
Represents the additional current income tax expense for the period based on an effective income tax rate of
27.2%
for the year ended September 30, 2018, which was calculated assuming the U.S. federal rates currently in effect and the highest statutory rates apportioned to each applicable state and local jurisdiction. After giving effect to the adjustments for the Reorganization Transactions, our IPO, the Pace Acquisition and this offering, the additional current income tax benefit on our
49.8%
interest in i3 Verticals, LLC was
$0.3 million
for the year ended September 30, 2018.
|
(h)
|
The adjustment reflects the impact of the change of the portion of i3 Verticals, LLC owned by i3 Verticals, Inc. immediately following this offering, assuming the offering occurred on October 1, 2017, as a result of which i3 Verticals, Inc. owns
49.8%
of the economic interest of i3 Verticals, LLC and the ownership percentage of i3
|
(i)
|
Pro forma basic net income per share is computed by dividing the net income available to Class A common stockholders by the weighted-average shares of Class A common stock outstanding during the period. Pro forma diluted net income per share is computed by adjusting the net income available to Class A common stockholders and the weighted-average shares of Class A common stock outstanding to give effect to potentially dilutive securities. Shares of our Class B common stock are not entitled to receive any distributions or dividends and have no rights to convert into Class A common stock. When a Common Unit is exchanged for, at our election, cash or Class A common stock by a Continuing Equity Owner who holds shares of our Class B common stock, such Continuing Equity Owner will be required to surrender a share of Class B common stock, which we will cancel for no consideration. Therefore, we do not include shares of our Class B common stock in the computation of pro forma basic net loss per share. The following table sets forth a reconciliation of the numerators and denominators used to compute pro forma basic and diluted net loss per share (in thousands, except per share data):
|
|
Pro Forma i3 Verticals, Inc.
Year ended
September 30, 2018
|
||
Basic net income per share:
|
|
||
Numerator
|
|
||
Net income
|
$
|
(2,879
|
)
|
Less: Net income attributable to non-controlling interests
|
(1,759
|
)
|
|
Net income attributable to Class A common stockholders
|
$
|
(1,120
|
)
|
Denominator
|
|
||
Weighted average shares of Class A common stock outstanding
(1)
|
13,612,604
|
|
|
|
|
||
Basic net income per share
|
$
|
(0.08
|
)
|
|
|
||
Diluted net income per share:
|
|
||
Numerator
|
|
||
Net income attributable to Class A common stockholders
|
$
|
(1,120
|
)
|
Reallocation of net income assuming conversion of Common Units
(2)
|
(1,337
|
)
|
|
Net income attributable to Class A common stockholders - diluted
|
$
|
(2,457
|
)
|
Denominator
|
|
||
Weighted average shares of Class A common stock outstanding
(1)
|
13,612,604
|
|
|
Weighted average effect of dilutive securities
(3)
|
848,130
|
|
|
Weighted average shares of Class A common stock outstanding - diluted
|
14,460,734
|
|
|
|
|
||
Diluted net income per share
|
$
|
(0.17
|
)
|
(1)
|
We plan to use a portion of the net proceeds from this offering (assuming that the underwriters’ option to purchase additional shares of our Class A common stock is not exercised) to purchase Common Units directly from i3 Verticals, LLC at a price per unit equal to the offering price per share of Class A common stock in this offering less the underwriting discounts and commissions.
This weighted average calculation assumes that this offering occurred at the beginning of the fiscal year presented. Excludes
308,211
restricted Class A common stock units.
|
(2)
|
The reallocation of net income, assuming conversion of Common Units represents the tax effected net income attributable to non-controlling interest using the effective income tax rates described in footnote (c) above and assuming all Common Units of i3 Verticals, LLC were exchanged for Class A common stock at the beginning of the period. The Common Units of i3 Verticals, LLC held by the Continuing Equity Owners are potentially dilutive securities, and the computations of pro forma diluted net income (loss)
|
(3)
|
Includes
13,722,040
outstanding shares of restricted Class A common stock issuable upon the exchange of Common Units to be held by the Continuing Equity Owners after this offering and
848,130
shares of unvested Class A common stock and options. 17,500 stock options were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive.
|
Name
|
|
Age
|
|
Position
|
Gregory Daily
|
|
60
|
|
Chief Executive Officer and Chairman
|
Clay Whitson
|
|
61
|
|
Chief Financial Officer and Director
|
Rick Stanford
|
|
58
|
|
President
|
Robert Bertke
|
|
50
|
|
Chief Technology Officer
|
Scott Meriwether
|
|
37
|
|
Senior Vice President — Finance
|
Paul Maple
|
|
45
|
|
General Counsel and Secretary
|
Elizabeth Seigenthaler Courtney
|
|
55
|
|
Director
|
John Harrison
|
|
62
|
|
Director
|
Burton Harvey
|
|
55
|
|
Director
|
Timothy McKenna
|
|
65
|
|
Director
|
David Morgan
|
|
67
|
|
Director
|
David Wilds
|
|
79
|
|
Lead Independent Director
|
Name
|
|
Number of Shares of
Class A Common Stock
|
|
Cash Proceeds
(in thousands)
|
|||
Gregory Daily
(1)
|
|
10,796
|
|
|
$
|
2,521
|
|
Clay Whitson
|
|
3,092
|
|
|
$
|
135
|
|
(1)
|
Class A Common Stock and Cash Proceeds related to Mr. Daily resulted from the repayment or conversion of Junior Subordinated Notes held by (a) Greg Daily and Collie Daily, Mr. Daily’s spouse, (b) Courtney Daily, Mr. Daily’s daughter and (c) Daily Family Investments, LLC, of which Mr. Daily serves as tax matters member. See Footnote 10 of “Principal Stockholders” for further information.
|
(1)
|
we at all times maintain a ratio of one Common Unit we own, directly or indirectly, for each share of Class A common stock we issue, and
|
(2)
|
i3 Verticals, LLC at all times maintains (a) a one-to-one ratio between the number of shares of Class A common stock we issue and the number of Common Units we own and (b) a one-to-one ratio between the number of shares of Class B common stock owned by the Continuing Equity Owners and the number of Common Units owned by the Continuing Equity Owners.
|
(1)
|
any registration statement pursuant to which the resale of the Class A common stock to be registered for such Continuing Equity Owner at or immediately following the consummation of the redemption shall have ceased to be effective pursuant to any action or inaction by the SEC or no such resale registration statement has yet become effective;
|
(2)
|
we failed to cause any related prospectus to be supplemented by any required prospectus supplement necessary to effect such redemption;
|
(3)
|
we exercised our right to defer, delay or suspend the filing or effectiveness of a registration statement and such deferral, delay or suspension shall affect the ability of such Continuing Equity Owner to have its Class A common stock registered at or immediately following the consummation of the redemption;
|
(4)
|
such Continuing Equity Owner is in possession of any material non-public information concerning us, the receipt of which results in such Continuing Equity Owner being prohibited or restricted from selling Class A common stock at or immediately following the redemption without disclosure of such information (and we do not permit disclosure);
|
(5)
|
any stop order relating to the registration statement pursuant to which the Class A common stock was to be registered by such Continuing Equity Owner at or immediately following the redemption shall have been issued by the SEC;
|
(6)
|
there shall have occurred a material disruption in the securities markets generally or in the market or markets in which the Class A common stock is then traded;
|
(7)
|
there shall be in effect an injunction, a restraining order or a decree of any nature of any governmental entity that restrains or prohibits the redemption;
|
(8)
|
we shall have failed to comply in all material respects with our obligations under the Registration Rights Agreement, and such failure shall have affected the ability of such Continuing Equity Owner to consummate the resale of the Class A common stock to be received upon such redemption pursuant to an effective registration statement, as applicable; or
|
(9)
|
the redemption date would occur three business days or less prior to, or during, a black-out period.
|
•
|
the timing of any future redemptions or exchanges—for instance, the increase in any tax deductions will vary depending on the fair value, which may fluctuate over time, of the depreciable or amortizable assets of i3 Verticals, LLC at the time of each redemption or exchange;
|
•
|
the price of shares of our Class A common stock when we purchased Common Units from the Continuing Equity Owners in connection with the IPO and when redemptions or exchanges of Common Units occur in the future—the Basis Adjustments, as well as any related increase in any tax deductions, are directly related to the price of shares of our Class A common stock at the time of such purchases or future redemptions or exchanges;
|
•
|
the extent to which such redemptions or exchanges are taxable—if a redemption or exchange is not taxable for any reason, increased tax deductions will not be available; and
|
•
|
the amount and timing of our income—the Tax Receivable Agreement generally requires us to pay 85% of the tax benefits as and when those benefits are treated as realized under the terms of the Tax Receivable Agreement. If i3 Verticals, Inc. does not have taxable income, we generally are not required (absent a change of control or other circumstances requiring an early termination payment and treating any outstanding Common Units held by members other than i3 Verticals, Inc. as having been exchanged for Class A common stock for purposes of determining such early termination payment) to make payments under the Tax Receivable Agreement for that taxable year because no tax benefits will have been actually realized. However, any tax benefits that do not result in realized tax benefits in a given taxable year will likely generate tax attributes that may be used to generate tax benefits in future taxable years. The use of any such tax attributes will result in payments under the Tax Receivable Agreement.
|
•
|
each person, or group of affiliated persons, who is known by us to own more than 5% of our Class A and Class B common stock;
|
•
|
each of the directors and named executive officers individually; and
|
•
|
all directors and executive officers as a group.
|
|
Class A Common Stock Beneficially Owned
(1)
|
|
Class B Common Stock Beneficially Owned
(1)
|
|
Combined Voting
Power
(1)(2)
|
||||||||||||||||||||||||
|
Prior to this
offering |
|
After giving effect to this offering (with
full exercise of option) |
|
Prior to this
offering |
|
After giving effect to this offering (with
full exercise of option) |
|
Prior to this
offering |
|
After giving effect to this
offering (with full exercise of option) |
||||||||||||||||||
Name of Beneficial Owner
(1)
|
Number
|
|
%
|
|
Number
|
|
%
|
|
Number
|
|
%
|
|
Number
|
|
%
|
|
%
|
|
%
|
||||||||||
5% Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
First Avenue Partners
(3)
|
3,103,388
|
|
|
11.8
|
%
|
|
1,234,091
|
|
|
4.5
|
%
|
|
3,103,388
|
|
|
18.2
|
%
|
|
1,234,091
|
|
|
9.6
|
%
|
|
11.8
|
%
|
|
4.5
|
%
|
Harbert Management
(4)
|
1,759,478
|
|
|
6.7
|
%
|
|
699,672
|
|
|
2.6
|
%
|
|
1,759,478
|
|
|
10.3
|
%
|
|
699,672
|
|
|
5.4
|
%
|
|
6.7
|
%
|
|
2.6
|
%
|
Capital Alignment Partners
(5)
|
1,720,663
|
|
|
6.5
|
%
|
|
684,238
|
|
|
2.5
|
%
|
|
1,720,663
|
|
|
10.1
|
%
|
|
684,238
|
|
|
5.3
|
%
|
|
6.5
|
%
|
|
2.5
|
%
|
T. Rowe Price Associates
(6)
|
1,585,103
|
|
|
6.0
|
%
|
|
1,585,103
|
|
|
5.8
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
6.0
|
%
|
|
5.8
|
%
|
T. Rowe Price Small-Cap Value Fund, Inc.
(7)
|
1,002,254
|
|
|
3.8
|
%
|
|
1,002,254
|
|
|
3.7
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
3.8
|
%
|
|
3.7
|
%
|
Blackrock, Inc.
(8)
|
692,845
|
|
|
2.6
|
%
|
|
692,845
|
|
|
2.5
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
2.6
|
%
|
|
2.5
|
%
|
Driehaus Capital Management LLC
(9)
|
483,279
|
|
|
1.8
|
%
|
|
483,279
|
|
|
1.8
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
1.8
|
%
|
|
1.8
|
%
|
Named executive officers and directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gregory Daily
(10)
|
7,232,688
|
|
|
27.5
|
%
|
|
7,232,688
|
|
|
26.5
|
%
|
|
7,221,892
|
|
|
42.3
|
%
|
|
7,221,892
|
|
|
55.9
|
%
|
|
27.5
|
%
|
|
26.5
|
%
|
Clay Whitson
(11)
|
335,288
|
|
|
1.3
|
%
|
|
335,288
|
|
|
1.2
|
%
|
|
298,862
|
|
|
1.7
|
%
|
|
298,862
|
|
|
2.3
|
%
|
|
1.3
|
%
|
|
1.2
|
%
|
Rick Stanford
(12)
|
210,911
|
|
|
*
|
|
|
210,911
|
|
|
*
|
|
|
177,577
|
|
|
1.0
|
%
|
|
177,577
|
|
|
*
|
|
|
*
|
|
|
*
|
|
Elizabeth Seigenthaler Courtney
(13)
|
13,334
|
|
|
*
|
|
|
13,334
|
|
|
*
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
*
|
|
|
*
|
|
John Harrison
(4)(14)
|
1,762,812
|
|
|
6.7
|
%
|
|
703,006
|
|
|
2.6
|
%
|
|
1,759,478
|
|
|
10.3
|
%
|
|
699,672
|
|
|
5.4
|
%
|
|
6.7
|
%
|
|
2.6
|
%
|
Burton Harvey
(5)(15)
|
1,735,713
|
|
|
6.6
|
%
|
|
699,288
|
|
|
2.6
|
%
|
|
1,732,379
|
|
|
10.1
|
%
|
|
695,954
|
|
|
5.4
|
%
|
|
6.6
|
%
|
|
2.6
|
%
|
Timothy McKenna
(16)
|
41,921
|
|
|
*
|
|
|
41,921
|
|
|
*
|
|
|
38,587
|
|
|
*
|
|
|
38,587
|
|
|
*
|
|
|
*
|
|
|
*
|
|
David Morgan
(17)
|
15,334
|
|
|
*
|
|
|
15,334
|
|
|
*
|
|
|
—
|
|
|
*
|
|
|
—
|
|
|
*
|
|
|
*
|
|
|
*
|
|
David Wilds
(3)(18)
|
3,385,197
|
|
|
12.9
|
%
|
|
1,515,900
|
|
|
5.5
|
%
|
|
3,381,863
|
|
|
19.8
|
%
|
|
1,512,566
|
|
|
11.7
|
%
|
|
12.9
|
%
|
|
5.5
|
%
|
All directors and executive officers as a group (12 people)
|
14,972,306
|
|
|
56.5
|
%
|
|
11,006,778
|
|
|
40.0
|
%
|
|
14,742,919
|
|
|
86.3
|
%
|
|
10,777,391
|
|
|
83.4
|
%
|
|
56.5
|
%
|
|
40.0
|
%
|
(1)
|
For the reasons described above, in this table, beneficial ownership of Common Units has been reflected as beneficial ownership of our Class A common stock for which such Common Units may be exchanged. When a Common Unit is exchanged by a Continuing Equity Owner who holds our Class B common stock, a corresponding share of Class B common stock will be canceled. Except as otherwise noted, all shares of Class A common stock shown as beneficially owned represent shares of Class A common stock that may be acquired upon the exchange of Common Units of i3 Verticals, LLC for shares of Class A common stock on a one-for-one basis.
|
(2)
|
Represents the percentage of voting power of our Class A common stock and Class B common stock voting as a single class. Each share of Class A common stock and each share of Class B common stock entitles the registered holder thereof to one vote per share on all matters presented to stockholders for a vote generally, including the election of directors. The Class A common stock and Class B common stock will vote as a single class on all matters except as required by law or the amended and restated certificate of incorporation.
|
(3)
|
Includes (a)
2,618,260
shares of Class A common stock held by First Avenue Partners II, L.P., (b)
468,383
shares of Class A common stock held by First Avenue-ETC Partners, L.P., (c)
16,745
shares of Class A common stock held by Front Street Equities, LLC (together with First Avenue Partners II, L.P. and First Avenue-ETC Partners, L.P., “First Avenue Partners”). Front Street Equities, LLC is the General Partner of First Avenue Partners II, L.P. and First Avenue-ETC Partners, L.P. Mr. Wilds serves as a limited partner and the managing member of First Avenue Partners II, L.P., as the managing member of First Avenue-ETC Partners, L.P., and as the sole member of Front Street Equities, LLC. Decisions regarding the voting or disposition of the shares held by First Avenue Partners are made by Mr. Wilds. The address of First Avenue Partners is 30 Burton Hills Blvd, Ste 550, Nashville, Tennessee.
|
(4)
|
Includes (a)
1,759,478
shares of Class A common stock held by HMP III Equity Holdings, LLC. Decisions regarding the voting or disposition of the shares held by the foregoing are made by an investment committee or committees (or authorized sub-committees or designees thereof). The current voting members of these committees are: John Harrison, Rob Bourquin, John Scott, Mike Luce, Sonja Keeton and Trey Ferguson. Each of Mr. Harrison, Mr. Bourquin, Mr. Scott, Mr. Luce, Ms. Keeton and Mr. Ferguson disclaims beneficial ownership of the Class A common stock held by HMP III Equity Holdings, LLC. The address of HMP III Equity Holdings, LLC is 2100 3rd Ave N, Ste 600, Birmingham, Alabama.
|
(5)
|
Includes (a)
951,854
shares of Class A common stock held by CCSD II, L.P., (b)
651,719
shares of Class A common stock held by Claritas Capital Specialty Debt Fund, L.P., and (c)
117,090
shares of Class A common stock held by CF i3 Corporation. CCSD GP II, LLC is the general partner of CCSD II, L.P. and CCSD GP LLC is the general partner of Claritas Capital Specialty Debt Fund, L.P. Decisions regarding the voting or disposition of the shares held by the CCSD II, L.P. and Claritas Capital Specialty Debt Fund, L.P. are made by an investment committee or committees (or authorized sub-committees or designees thereof). The current voting members of these committees are: Burton Harvey, Lee Ballew and Mark McManigal. Decisions regarding the voting or disposition of the shares held by the CF i3 Corporation are made by its officers, Mr. Harvey and Mr. Ballew. Each of Mr. Harvey, Mr. Ballew and Mr. McManigal disclaims beneficial ownership of the Class A common stock held by CCSD II, L.P., Claritas Capital Specialty Debt Fund, L.P. and CF i3
|
(6)
|
Based on information obtained from a Schedule 13G/A filed on February 14, 2019, T. Rowe Price Associates, Inc. has sole voting power over 416,649 shares of Class A common stock and sole dispositive power over 1,585,103 shares of Class A common stock. The address of T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, MD 21202.
|
(7)
|
Based on information obtained from a Schedule 13G/A filed on February 14, 2019, T. Rowe Price Small-cap Value Fund, Inc. has sole voting power over 1,002,254 shares of Class A common stock. The address of T. Rowe Price Small-cap Value Fund, Inc. is 100 E. Pratt Street, Baltimore, MD 21202.
|
(8)
|
Based on information obtained from a Schedule 13G filed on February 8, 2019, Blackrock, Inc. has sole voting power over 676,023 shares of Class A common stock and sole dispositive power over 692,845 shares of Class A common stock. The address of Blackrock, Inc. is 55 East 52nd Street, New York, NY 10055.
|
(9)
|
Based on information obtained from a Schedule 13G filed on February 14, 2019, Driehaus Capital Management LLC shared voting and dispositive power over 483,279 shares of Class A Common Stock. The address of Driehaus Capital Management LLC is 25 East Erie Street Chicago, IL 60611.
|
(10)
|
Includes (a)
1,259,388
Class A common stock held by Gregory Daily, (b)
3,419,293
shares of Class A common stock held by Gregory Daily and Collie Daily, as joint tenants by the entirety, (c)
10,796
shares of Class A common stock held of record by Courtney Daily, Mr. Daily’s daughter and (d)
2,543,211
shares of Class A common stock held by Daily Family Investments, LLC, of which Mr. Daily serves as tax matters member. Decisions regarding the voting or disposition of the shares held by the Daily Family Investments, LLC are made by its sole manager, Jeffrey Gould. Each of Mr. Daily and Mr. Gould disclaims beneficial ownership of the Class A common stock held by Daily Family Investments, LLC. The address of Daily Family Investments, LLC is 5353 Hillsboro Pike, Nashville, Tennessee.
|
(11)
|
Includes (a)
253,622
shares of Class A common stock held by Clay Whitson directly, (b)
48,332
shares of Class A common stock held
by the Clay M. Whitson 2018 Grantor Retained Annuity Trust, of which Mr. Whitson is trustee and beneficiary and (c)
options to purchase
33,334
shares of Class A common stock that are exercisable within 60 days of May 31, 2019
held by Mr. Whitson directly
.
|
(12)
|
Includes (a)
177,577
Class A common stock held by Rick Stanford and Stephanie Stanford, as joint tenants by the entirety, and (b) options to pur
chase
33,334
shares of Class A common stock that are exercisable within 60 days of May 31, 2019
held by Mr. Stanford directly.
|
(13)
|
Includes options to purchase
13,334
shares of Class A common stock that are exercisable within 60 days of May 31, 2019.
|
(14)
|
Includes options to purchase
3,334
shares of Class A common stock that are exercisable within 60 days of May 31, 2019.
|
(15)
|
Includes (a) 11,716 shares of Class A common stock and (b) options to purchase
3,334
shares of Class A common stock that are exercisable within 60 days of May 31, 2019
.
|
(16)
|
Includ
es (a)
38,587
shares of Class A common stock and (b) options to purchase
3,334
shares of Class A common stock that are exercisable within 60 days of May 31, 2019
.
|
(17)
|
Includes
(a)
2,000
shares of Class A common stock and (b) options to purchase
13,334
shares of Class A common stock that are exercisable within 60 days of May 31, 2019
.
|
(18)
|
Include
s (a) 270,636 shares of Class A common stock held by David Wilds directly, (b)
7,839
shares of Class A common stock held by Lucinda Beveridge, Mr. Wilds’ spouse and (c) options to purchase
3,334
shares of Class A common stock that are exercisable within 60 days of May 31, 2019
held by David Wilds directly.
|
•
|
prior to such time, our Board of Directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
|
•
|
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the votes of our voting stock outstanding at the time the transaction commenced, excluding certain shares; or
|
•
|
at or subsequent to that time, the business combination is approved by our Board of Directors and by the affirmative vote of holders of at least 66 2/3% of the votes of our outstanding voting stock that is not owned by the interested stockholder.
|
•
|
in the case of an annual meeting of stockholders, not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which we first make a public announcement of the date of such meeting; and
|
•
|
in the case of a special meeting of stockholders called for the purpose of electing directors, not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the date on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs.
|
•
|
1% of the number of shares of our Class A common stock then outstanding; or
|
•
|
the average weekly trading volume of our Class A common stock on the Nasdaq Global Select Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;
|
•
|
a non-resident alien individual, other than certain former citizens and residents of the United States subject to tax as expatriates;
|
•
|
a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of a jurisdiction other than the United States or any state or political subdivision thereof or the District of Columbia;
|
•
|
a trust if it (1) is not subject to the primary supervision of a court within the United States, or no United States persons have the authority to control all substantial decisions of the trust, and (2) does not have a valid election in effect under applicable United States Treasury regulations to be treated as a United States person; or
|
•
|
an estate, other than an estate the income of which is subject to U.S. federal income taxation regardless of its source.
|
•
|
the gain is effectively connected with a trade or business of the non-U.S. holder in the United States, (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment of the non-U.S. holder);
|
•
|
the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or
|
•
|
we are or have been a U.S. real property holding corporation, as defined in the Code, and the non-U.S. holder held, directly or indirectly, more than 5% of our common stock at any time within the shorter of the five-year period ending on the date of the disposition and the non-U.S. holder’s holding period, and certain other conditions are met.
|
Underwriter
|
Number of Shares
|
|
Cowen and Company, LLC
|
|
|
Raymond James & Associates, Inc.
|
|
|
BofA Securities, Inc.
|
|
|
KeyBanc Capital Markets Inc.
|
|
|
D.A. Davidson & Co.
|
|
|
Total
|
4,491,763
|
|
|
Total Per Share
|
|
Without Option Exercise
|
|
With Option Exercise
|
Public offering price
|
$
|
|
$
|
|
$
|
Underwriting discount
|
$
|
|
$
|
|
$
|
Proceeds, before expenses, to us
|
$
|
|
$
|
|
$
|
•
|
Stabilizing transactions permit bids to purchase shares of Class A common stock so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or retarding a decline in the market price of the Class A common stock while the offering is in progress.
|
•
|
Short sales involve sales by the underwriters of shares of Class A common stock in excess of the number of shares the underwriters are obligated to purchase. This creates a syndicate short position which may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in the option to purchase additional shares. The underwriters may close out any short position by exercising their option to purchase additional shares and/or purchasing shares in the open market.
|
•
|
Syndicate covering transactions involve purchases of Class A common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase shares through exercise of the option to purchase additional shares. If the underwriters sell more shares than could be covered by exercise of the option to purchase additional shares and, therefore, have a naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors who purchase in the offering.
|
•
|
Penalty bids permit the Representatives to reclaim a selling concession from a syndicate member when the Class A common stock originally sold by that syndicate member is purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.
|
(a)
|
to any legal entity which is a qualified investor as defined in the Prospectus Directive;
|
(b)
|
to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the Representatives for any such offer; or
|
(c)
|
in any other circumstances falling within Article 3(2) of the Prospectus Directive,
|
(a)
|
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
|
(b)
|
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
|
(a)
|
to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
|
(b)
|
where no consideration is or will be given for the transfer;
|
(c)
|
where the transfer is by operation of law; or
|
(d)
|
as specified in Section 276(7) of the SFA.
|
•
|
our Annual Report on
Form 10-K
for the year ended September 30, 2018 (including information specifically incorporated by reference from i3 Verticals, Inc.’s Definitive Proxy Statement on
Schedule 14A
filed with the SEC on January 25, 2019, as supplemented by i3 Verticals, Inc.’s Definitive Additional Materials on
Schedule 14A
filed with the SEC on February 22, 2019) (SEC File No. 001- 38532) filed with the SEC on December 7, 2018;
|
•
|
our Quarterly Report on
Form 10-Q
for the period ended December 31, 2018 (SEC File No. 001-38532) filed with the SEC on February 14, 2019;
|
•
|
our Quarterly Report on
Form 10-Q
for the period ended March 31, 2019 (SEC File No. 001-38532) filed with the SEC on May 14, 2019;
|
•
|
our Current Reports on Form 8-K, filed on
March 1, 2019
,
April 8, 2019
(as amended on
May 13, 2019
),
May 13, 2019
(other than information furnished pursuant to Item 2.02, Item 7.01 or Item 9.01, except that information included in Exhibit 99.2 in such report shall be expressly incorporated by reference herein) and
June 3, 2019
(other than information furnished pursuant to Item 7.01);
|
•
|
the financial statements of Fairway Payments, Inc. for the seven months ended July 31, 2017 and the year ended December 31, 2016, filed as part of the Company’s registration statement on
Form S-1/A
(File No. 333–225214) filed with the SEC on June 14, 2018; and
|
•
|
the description of our Class A common stock as set forth in our registration statement on
Form 8-A
(File No. 001-38532), filed with the SEC on June 15, 2018, pursuant to Section 12(b) of the Exchange Act, including any subsequent amendments or reports filed for the purpose of updating such description.
|
|
Amount Paid
or to be Paid
|
||
SEC registration fee
|
$
|
15,646
|
|
FINRA filing fee
|
20,274
|
|
|
Printing and engraving expenses
|
90,000
|
|
|
Legal fees and expenses
|
375,000
|
|
|
Accounting fees and expenses
|
217,000
|
|
|
Transfer agent and registrar fees and expenses
|
3,000
|
|
|
Miscellaneous fees and expenses
|
22,000
|
|
|
Total
|
$
|
742,920
|
|
10.5+
|
|
|
10.6+
|
|
|
10.7+
|
|
|
10.8+
|
|
|
10.9+
|
|
|
10.10+
|
|
|
10.11+
|
|
|
10.12+
|
|
|
10.13+
|
|
|
10.14#
|
|
|
10.15#
|
|
|
21.1
|
|
|
23.1
|
|
|
23.2
|
|
|
23.3
|
|
|
23.4
|
|
|
24.1
|
|
#
|
Schedules and exhibits have been omitted pursuant to Item 601 of Regulation S-K. i3 Verticals, Inc. hereby undertakes to furnish supplementally copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.
|
*
|
Certain portions of this exhibit have been omitted.
|
+
|
Denotes a management contract or compensatory plan or arrangement.
|
1.
|
For the purpose of determining liability under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
i.
|
Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424;
|
ii.
|
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant;
|
iii.
|
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and
|
iv.
|
Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
|
2.
|
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.
|
3.
|
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
|
i3 VERTICALS, INC.
|
|
|
|
By:
|
/s/ Gregory Daily
|
|
Gregory Daily
|
|
Chief Executive Officer
|
SIGNATURE
|
|
TITLE
|
|
DATE
|
/s/ Gregory Daily
|
|
Chief Executive Officer and Director
(principal executive officer)
|
|
June 3, 2019
|
Gregory Daily
|
|
|
||
/s/ Clay Whitson
|
|
Chief Financial Officer and Director
(principal financial officer)
|
|
June 3, 2019
|
Clay Whitson
|
|
|
||
/s/ Scott Meriwether
|
|
Senior Vice President — Finance
(principal accounting officer)
|
|
June 3, 2019
|
Scott Meriwether
|
|
|
||
/s/ Elizabeth Seigenthaler Courtney
|
|
Director
|
|
June 3, 2019
|
Elizabeth Seigenthaler Courtney
|
|
|
||
/s/ John Harrison
|
|
Director
|
|
June 3, 2019
|
John Harrison
|
|
|
||
/s/ Burton Harvey
|
|
Director
|
|
June 3, 2019
|
Burton Harvey
|
|
|
||
/s/ Timothy McKenna
|
|
Director
|
|
June 3, 2019
|
Timothy McKenna
|
|
|
||
/s/ David Morgan
|
|
Director
|
|
June 3, 2019
|
David Morgan
|
|
|
||
/s/ David Wilds
|
|
Director
|
|
June 3, 2019
|
David Wilds
|
|
|
2.
|
REPRESENTATIONS AND WARRANTIES OF THE i3 VERTICALS PARTIES.
|
3.
|
PURCHASE, SALE AND DELIVERY OF OFFERED SECURITIES.
|
4.
|
FURTHER AGREEMENTS OF THE i3 VERTICALS PARTIES.
|
5.
|
PAYMENT OF EXPENSES.
|
6.
|
CONDITIONS OF UNDERWRITERS’ OBLIGATIONS.
|
7.
|
INDEMNIFICATION AND CONTRIBUTION.
|
8.
|
TERMINATION.
|
9.
|
REIMBURSEMENT OF UNDERWRITERS’ EXPENSES.
|
10.
|
SUBSTITUTION OF UNDERWRITERS.
|
11.
|
ABSENCE OF FIDUCIARY RELATIONSHIP.
|
12.
|
SUCCESSORS; PERSONS ENTITLED TO BENEFIT OF AGREEMENT.
|
13.
|
SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC.
|
14.
|
NOTICES.
|
15.
|
RECOGNITION OF THE U.S. SPECIAL RESOLUTION REGIMES.
|
16.
|
DEFINITION OF CERTAIN TERMS.
|
17.
|
GOVERNING LAW, SUBMISSION TO JURISDICTION.
|
18.
|
UNDERWRITERS’ INFORMATION.
|
19.
|
AUTHORITY OF THE REPRESENTATIVES.
|
20.
|
PARTIAL UNENFORCEABILITY.
|
21.
|
GENERAL.
|
22.
|
COUNTERPARTS.
|
Very truly yours,
|
|
|
|
i3 VERTICALS, INC.
|
|
|
|
By:
|
|
|
Name:
|
|
Title:
|
|
|
i3 VERTICALS, LLC
|
|
|
|
By:
|
|
|
Name:
|
|
Title:
|
Accepted as of
|
|
the date first above written:
|
|
|
|
COWEN AND COMPANY, LLC
|
|
RAYMOND JAMES & ASSOCIATES, INC.
|
|
BOFA SECURITIES, INC.
|
|
|
|
Acting on their own behalf as
|
|
|
Representatives of several Underwriters
|
|
listed on
Schedule A
to this Agreement.
|
|
|
By: COWEN AND COMPANY, LLC
|
|
|
|
By:
|
|
|
Name:
|
|
Title:
|
|
|
By: RAYMOND JAMES & ASSOCIATES, INC.
|
|
|
|
By:
|
|
|
Name:
|
|
Title:
|
|
|
By: BOFA SECURITIES, INC.
|
|
|
|
By:
|
|
|
Name:
|
|
Title:
|
Name
|
|
Number of Shares of Firm Stock to be Purchased
|
|
Number of Shares of Optional Stock to be Purchased
|
|
|
|
|
|
Cowen and Company, LLC
|
|
|
|
|
|
|
|
|
|
Raymond James & Associates, Inc.
|
|
|
|
|
|
|
|
|
|
BofA Securities, Inc.
|
|
|
|
|
|
|
|
|
|
KeyBanc Capital Markets Inc.
|
|
|
|
|
|
|
|
|
|
D.A. Davidson & Co.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
(1)
|
if the undersigned is a natural person, any transfers made by the undersigned (a) as a bona fide gift to any member of the immediate family (as defined below) of the undersigned or to a trust the beneficiaries of which are exclusively the undersigned or members of the undersigned’s immediate family, (b) by will or intestate succession upon the death of the undersigned or (c) as a bona fide gift to a charity or educational institution;
|
(2)
|
if the undersigned is a corporation, partnership, limited liability company or other business entity, any transfers to any stockholder, partner or member of, or owner of a similar equity interest in, the undersigned, as the case may be, if, in any such case, such transfer is not for value;
|
(3)
|
if the undersigned is a corporation, partnership, limited liability company or other business entity, any transfer made by the undersigned (a) in connection with the sale or other bona fide transfer in a single transaction of all or substantially all of the undersigned’s capital stock, partnership interests, membership interests or other similar equity interests, as the case may be, or all or substantially all of the undersigned’s assets, in any such case not undertaken for the purpose of avoiding the restrictions imposed by this agreement or (b) to another corporation, partnership, limited liability company or other business entity so long as the transferee is an affiliate (as defined below) of the undersigned and such transfer is not for value;
|
(4)
|
if the undersigned is a trust, distributions of shares of Common Stock or any security directly or indirectly convertible into Common Stock to a beneficiary in a transaction not involving a disposition of value, provided that no such transaction is required to be, or is, publicly announced (whether on Form 4, Form 5 or otherwise) during the Lock-Up Period;
|
(5)
|
transactions relating to Common Stock or other securities convertible into or exercisable or exchangeable for Common Stock acquired in open market transactions after completion of the Offering, provided that no such transaction is required to be, or is, publicly announced (whether on Form 4, Form 5 or otherwise) during the Lock-Up Period;
|
(6)
|
the establishment, by the undersigned, at any time on or after the date of the Underwriting Agreement, of any trading plan providing for the sale of Common Stock by the undersigned, which trading plan meets the requirements of Rule 10b5-1(c) under the Exchange Act,
provided, however
, that such plan does not provide for, or permit, the sale of any Common Stock during the Lock-up Period and no public announcement or filing is voluntarily made or required regarding such plan during the Lock-Up Period;
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(7)
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sales of Common Stock made pursuant to and in accordance with a trading plan pursuant to Rule 10b5-1 under the Exchange Act existing on the date hereof and the corresponding exchange of limited liability company units of i3 Verticals, LLC (together with a corresponding number of Class B Common Stock);
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(8)
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any transfers made by the undersigned to the Company to satisfy tax withholding obligations pursuant to the Company’s equity incentive plans or arrangements disclosed in the Prospectus (as defined in the Underwriting Agreement);
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(9)
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any transfer of the undersigned’s Beneficially Owned Shares as a result of the redemption by the Company, i3 Verticals, LLC or their affiliates of Common Stock held by or on behalf of an employee in connection with the termination of such employee’s employment;
provided, however
, that if the undersigned is required to file a report under Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the undersigned shall include a statement in such report regarding the reason for such transfer and that such transfer was solely to the Company;
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(10)
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any transfer of the undersigned’s Beneficially Owned Shares as part of the repurchase of Common Stock by the Company, not at the option of the undersigned, pursuant to an employee benefit plan described in the preliminary prospectus included in the Registration Statement at the time of its effectiveness or pursuant to the agreements pursuant to which such Common Stock was issued;
provided, however
, that if the undersigned is required to file a report under Section 16 of the Exchange Act, the undersigned shall include a statement in such report regarding the reason for such transfer and that such transfer was solely to the Company;
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(11)
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pursuant to an order of a court or regulatory agency or to comply with any regulations related to the undersigned’s ownership of Beneficially Owned Shares, provided, that in the case of any transfer or distribution pursuant this clause, any filing under Section 16(a) of the Exchange Act, reporting a reduction in beneficial ownership of Beneficially Owned Shares, shall state that such transfer is pursuant to an order of a court or regulatory agency or to comply with any regulations related to the ownership of the Beneficially Owned Shares unless such a statement would be prohibited by any applicable law, regulation or order of a court or regulatory authority; and provided, further, provided that the undersigned requests the transferee to be bound in writing by the restrictions set forth herein (it being understood and agreed that the undersigned will be deemed to have complied with the requirements of this proviso regardless of whether the transferee agrees to be bound by such restrictions);
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(12)
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any transfer to the Company or its affiliates upon death or disability of the undersigned;
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(13)
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any transfer with the prior written consent of the Representatives on behalf of the Underwriters; and
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(14)
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any transfer of the undersigned’s Beneficially Owned Shares to the Company or any of its subsidiaries in connection with any purchase of membership interests in i3 Verticals, LLC from the undersigned for cash, by the Company or any of its subsidiaries with the net proceeds of the Offering;
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Very truly yours,
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(Name of Stockholder - Please Print)
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(Signature)
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(Name of Signatory if Stockholder is an entity - Please Print)
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(Title of Signatory if Stockholder is an entity - Please Print)
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Address:
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150 Third Avenue South, Suite 2800
Nashville, TN 37201
(615) 742-6200
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Very truly yours,
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/s/ Bass, Berry & Sims PLC
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Name of Subsidiary
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Jurisdiction of Incorporation
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Doing Business As Name
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(Including d/b/a name, if applicable)
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CP-DBS, LLC
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Delaware
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PaySchools
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CP-PS, LLC
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Delaware
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Fairway Payments, LLC
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Virginia
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Fairway Payments
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i3-Aero, LLC
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Delaware
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i3-Axia, LLC
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Delaware
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Axia Payments
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i3-BP, LLC
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Delaware
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Bill & Pay
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i3-CS, LLC
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Delaware
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Court Solutions
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i3-CSC, LLC
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Delaware
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i3-EMS, LLC
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Delaware
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EMS
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i3-EZCP, LLC
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Delaware
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EZCourtPay
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i3-EZPay, LLC
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Delaware
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EZPay
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i3-Infin, LLC
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Delaware
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Infintech
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i3-MPN, LLC
|
Delaware
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SchoolPay
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i3-LL, LLC
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Delaware
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Local Level
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Monetra Technologies, LLC
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Delaware
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Monetra
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i3-PBS, LLC
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Delaware
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Practical Business Solutions; RU Practical
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i3-Randall, LLC
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Delaware
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Randall Data Systems
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i3-RS, LLC
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Delaware
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PlacePay
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i3-Sequel, LLC
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Delaware
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CJT
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i3-Software & Services, LLC
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Delaware
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Software & Services
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i3-Splash, LLC
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Delaware
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iGov Solutions
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i3-TS, LLC
|
Delaware
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i3 Verticals, LLC
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Delaware
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i3 Verticals Management Services, Inc.
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Delaware
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i3-Bearcat, LLC
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Delaware
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NETData;
GHS
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Northeast Texas Data, LLC
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Texas
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NETData
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Graves Humphries Stahl, LLC
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Texas
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GHS
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Pace Payment Systems, Inc.
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Delaware
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Pace
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Pace Payments, Inc.
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Delaware
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Pace
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i3-SDCR, Inc.
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Delaware
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San Diego Cash Register Company, Inc.
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California
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SDCR
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