i3 Verticals, Inc. (IIIV) Tops Q2 EPS by 1c, Revenues Beat; Offers FY19 EPS/Revenue Gudauince

i3 Verticals, Inc. (NASDAQ: IIIV) reported Q2 EPS of $0.20, $0.01 better than the analyst estimate of $0.19. Revenue for the quarter came in at $85.4 million versus the consensus estimate of $30.26 million.

• Second quarter revenue was $85.4 million, an increase of 10% over the prior year's second quarter; Revenue was $170.3 million for the six months ended March 31, 2019, an increase of 10% over the prior year's first six months.
• Second quarter adjusted net revenue1, which excludes acquisition revenue adjustments and interchange and network fees, was $31.4 million, an increase of 16% over the prior year's second quarter; Adjusted net revenue1 was $61.0 million for the six months ended March 31, 2019, an increase of 17% over the prior year's first six months.
• Second quarter net loss was $1.2 million; Net income was $1.1 million for the six months ended March 31, 2019.
• Second quarter adjusted EBITDA1 was $8.7 million, an increase of 13% over the prior year's second quarter; Adjusted EBITDA1 was $17.3 million for the six months ended March 31, 2019, an increase of 19% over the prior year's first six months.
• Second quarter adjusted EBITDA1 as a percentage of adjusted net revenue1 was 28%, compared to 28% in the prior year's second quarter; Adjusted EBITDA1 as a percentage of adjusted net revenue1 was 28% for the six months ended March 31, 2019, compared to 28% in the prior year's first six months.
• Second quarter diluted net loss per share available to Class A common stock was $0.12; Diluted net loss per share available to Class A common stock was $0.10 for the six months ended March 31, 2019.
• For the three and six months ended March 31, 2019, 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 $0.40, respectively.
• Integrated payments2 were 49% and 47% of payment volume for the three and six months ended March 31, 2019, respectively.
• At March 31, 2019, the ratio of consolidated debt-to-EBITDA, as defined in the Company's Senior Secured Credit Facility, was 2.06x. Giving effect to the two acquisitions since March 31, 2019 discussed below, the Company's consolidated debt-to-EBITDA ratio is currently approximately 2.75x.
• Since the first quarter earnings release issued on February 13, 2019, and as previously announced in our press releases dated March 4, 2019 and April 8, 2019, the Company completed three acquisitions focused on its Public Sector vertical. Two of the acquisitions were completed during the second quarter, with the third acquisition, NET Data, completed subsequent to March 31, 2019.
• Effective May 1, 2019, the Company completed an acquisition in the Education vertical, which is the Company's first acquisition in this vertical since its initial public offering. This acquisition expands the Company's geographic reach within the Education vertical, primarily in large states such as Florida and Texas, and also enhances the software offered to this market. The up-front cash consideration for this acquisition was $10.0 million.
• On May 9, 2019, the Company closed an amended $300 million Senior Secured Credit Facility. The new credit facility is an all-revolver structure and was led by Bank of America, N.A., with Fifth Third Bank serving as joint bookrunner. The maximum senior debt-to-EBITDA ratio permitted under the credit facility is 3.75x, with a step-down to 3.50x. Reductions in interest rate spreads were also achieved in the amended facility.

Greg Daily, Chairman and CEO of i3 Verticals, commented, “We are proud of our second quarter performance. Our recent acquisitions have significantly expanded our presence within our Public Sector vertical. We have now completed six Public Sector acquisitions, and five of those were completed subsequent to our IPO. The Public Sector vertical will be a focus for our company going forward.

“We are also excited to complete an acquisition within our Education vertical. The Education vertical is a priority for i3 Verticals, and we believe in the long-term potential of this market. We believe the expanded national footprint within Education provided by our recent acquisition will enable greater growth potential for the Education market.

“We also are pleased to announce the completion of our new credit facility. Our acquisition pipeline remains strong, and our expanded borrowing capacity will help to enable us to continue to execute strategic acquisitions in our target vertical markets. We appreciate the support we received from our bank group.”

In conclusion, Daily added, “While acquisitions have driven much of our communication to the market, we are pleased with our core performance. We continue to focus on building our technology to fuel further organic growth. The progress of our existing team coupled with our recent acquisitions gives us great confidence in our future growth opportunities.”

GUIDANCE:

i3 Verticals, Inc. sees FY2019 EPS of $0.85-$0.90. i3 Verticals, Inc. sees FY2019 revenue of $127-133 million, versus the consensus of $128.26 million.

For earnings history and earnings-related data on i3 Verticals, Inc. (IIIV) click here.

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