i3 Verticals Reports Second Quarter 2020 Financial Results
NASHVILLE, Tenn. -- i3 Verticals, Inc. (Nasdaq: IIIV) (“i3 Verticals” or the “Company”) today reported its financial results for the fiscal second quarter ended March 31, 2020.
Highlights for the fiscal second quarter and six months ended March 31, 2020 vs. 2019
Second quarter revenue was $39.2 million, a decrease of 54% over the prior year's second quarter. Revenue for the six months ended March 31, 2020, was $80.3 million, a decrease of 53% over the prior year's first six months. Results for 2020 reflect the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.1
Second quarter adjusted net revenue2, which excludes acquisition revenue adjustments and interchange and network fees, was $39.3 million, an increase of 25% over the prior year's second quarter. Adjusted net revenue2 for the six months ended March 31, 2020, was $80.9 million, an increase of 33% over the prior year's first six months.
Second quarter net income was $1.9 million, compared to a net loss of $1.2 million in the prior year's second quarter. Net income for the six months ended March 31, 2020, was $3.9 million, an increase of 241.3% over the prior year's first six months.
Second quarter adjusted EBITDA2 was $10.0 million, an increase of 14% over the prior year's second quarter. Adjusted EBITDA2 for the six months ended March 31, 2020, was $21.8 million, an increase of 26% over the prior year's first six months.
Second quarter adjusted EBITDA2 as a percentage of adjusted net revenue2 was 25.3%, compared to 27.8% in the prior year's second quarter. For the six months ended March 31, 2020, adjusted EBITDA2 as a percentage of adjusted net revenue2 was 27.0%, compared to 28.4% for the prior year's first six months.
Second quarter diluted net income per share available to Class A common stock was $0.05, compared to diluted net loss per share available to Class A common stock of $0.12 in the prior year's second quarter. For the six months ended March 31, 2020, diluted net income per share available to Class A common stock was $0.04, compared to diluted net loss per share available to Class A common stock of $0.10 for the prior year's first six months.
For the three and six months ended March 31, 2020, pro forma adjusted diluted earnings per share1, which gives pro forma effect to the Company's going forward effective tax rate, was $0.20 and $0.44, respectively, compared to $0.20 and $0.40 for the three and six months ended March 31, 2019, respectively.
Integrated payments3 were 55% of payment volume for both the three and six months ended March 31, 2020.
At March 31, 2020, the ratio of consolidated interest coverage ratio was 6.11x, total leverage ratio was 3.41x and consolidated senior leverage ratio was 0.38x. These ratios are defined in the Company's Senior Secured Credit Facility.
Effective October 1, 2019, our revenues are presented net of interchange and network fees in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. This change in presentation affected our reported revenues and operating expenses for the three and six months ended March 31, 2020, by the same amount and had no effect on our income from operations.
Represents a non-GAAP financial measure. For additional information (including reconciliation information), see the attached schedules to this release.
Integrated payments represents payment transactions that are generated in situations where payment technology is embedded within the Company's own proprietary software, a client’s software or critical business process.
Greg Daily, Chairman and CEO of i3 Verticals, commented, “We delivered strong fiscal second quarter results. Our momentum from the fiscal first quarter continued through January and February, but we began to see the economic impact of the COVID‑19 pandemic in the second half of March with a decline in payment volume. I could not be prouder of our employees’ response to the crisis as they rallied to serve our customers. Our support teams utilized our advanced platforms to quickly shift to remote support and provided uninterrupted service to our customers.
“Due to the uncertainty of the economic environment, we have paused acquisition activity until there is greater clarity on the impact of the COVID-19 pandemic. We have several deals currently on hold. Despite the market downturn, our acquisition pipeline has continued to build. We believe our strong balance sheet, recent exchangeable notes offering and capacity under our senior credit facility position us well for acquisition activity, even in the current economic environment.”
Impact of COVID-19
Daily continued, “Our first priority is the health and safety of our employees and their families, so we implemented work-from-home policies for our employees in mid-March and limited all employee travel. Throughout this period, I have been inspired by the creativity, dedication and commitment of our team, which has allowed us to quickly adapt to the work-from-home structure and continue to service our customers in a prompt and efficient manner.
“We expect that the continuation of the COVID-19 pandemic will adversely impact our fiscal third quarter performance. The various strategies enacted by federal, state and local governments to combat the spread of COVID-19 have obviously slowed the pace of commerce. This has caused a decrease in our payment volume and adversely impacted our revenues. In particular, our Education vertical experienced a significant decline in payment volumes as K-12 schools closed for the remainder of the current school year. Our restaurant and hotel customers also experienced a significant decline in payment volume. Our Public Sector, B2B and other vertical customers experienced less of an impact in payment volume. We benefited from our strategy of diversifying our business across multiple verticals to reduce sector-specific downturns and safeguard against effects on our payment volume from any one market sector. This strategy should also serve us well in a recovery.
“We also expect the long-term impact of COVID-19 to lead to further digitization of payments, particularly within the Public Sector and Education verticals, which have been slower to adopt electronic payments. We believe that the Public Sector and Education markets will have increased budget pressures and their constituents will demand greater access to online services and payments. We believe that our SaaS solutions are designed to address many of these issues and that the ability of our nimble salesforce in each vertical to sell technology-enabled payments will help us drive growth as the economy begins to rebound. On the other side of this crisis, we believe that we are well-positioned to capture market share,” concluded Daily.
The COVID-19 pandemic has created significant uncertainty in the economy and the extent to which COVID-19 will impact the Company's future results is difficult to reasonably estimate at this time. Therefore, the Company is not providing a financial outlook for the fiscal year ending September 30, 2020.
The Company will host a conference call on Friday, May 8, 2020, at 8:30 a.m. ET, to discuss financial results and operations. To listen to the call live via telephone, participants should dial (646) 828-8193 approximately 10 minutes prior to the start of the call. A telephonic replay will be available from 11:30 a.m. ET on May 8, 2020, through May 15, 2020, by dialing (719) 457-0820 and entering Confirmation Code 8964705.
To listen to the call live via webcast, participants should visit the “Investors” section of the Company’s website, www.i3verticals.com, and go to the “Events & Presentations” page approximately 10 minutes prior to the start of the call. The online replay will be available on this page of the Company’s website beginning shortly after the conclusion of the call and will remain available for 30 days.
This press release contains information prepared in conformity with GAAP as well as non-GAAP information. It is management’s intent to provide non-GAAP financial information to enhance understanding of the Company's consolidated financial information as prepared in accordance with GAAP. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure and the most directly comparable GAAP financial measure are presented so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies.
Additional information about non-GAAP financial measures, including, but not limited to, adjusted net revenue, pro forma adjusted net income, adjusted EBITDA and pro forma adjusted diluted EPS, and a reconciliation of those measures to the most directly comparable GAAP measures is included on pages 10 through 13 in the financial schedules of this release.
About i3 Verticals
Helping drive the convergence of software and payments, i3 Verticals delivers seamlessly integrated payment and software solutions to small- and medium-sized businesses and other organizations in strategic vertical markets, such as education, non-profit, the public sector, property management, and healthcare and to the business-to-business payments market. With a broad suite of payment and software solutions that address the specific needs of its clients in each strategic vertical market, i3 Verticals processed approximately $14.7 billion in total payment volume for the 12 months ended March 31, 2020.