i3 Verticals, Inc. (IIIV) Tops Q2 EPS by 2c, Revenues Miss; Offers FY21 Revenues Views Above Consensus, FY21 EPS Mid-Point Guidance Above Consensus,

i3 Verticals, Inc. (NASDAQ: IIIV) reported Q2 EPS of $0.23, $0.02 better than the analyst estimate of $0.21. Revenue for the quarter came in at $47.9 million versus the consensus estimate of $48.07 million.

Highlights for the fiscal second quarter and six months ended March 31, 2021 vs. 2020

• Second quarter revenue was $47.9 million, an increase of 22% over the prior year's second quarter. Revenue for the six months ended March 31, 2021, was $91.2 million, an increase of 14% over the prior year's first six months.
• Second quarter adjusted net revenue1, which excludes acquisition revenue adjustments, was $49.4 million, a decrease of 26% over the prior year's second quarter. Adjusted net revenue1 for the six months ended March 31, 2021, was $94.3 million, an increase of 17% over the prior year's first six months.
• Second quarter net loss was $0.1 million, compared to net income of $1.9 million in the prior year's second quarter. Net loss for the six months ended March 31, 2021, was $4.2 million, compared to net income of $3.9 million in the prior year's first six months.
• Second quarter adjusted EBITDA1 was $12.4 million, an increase of 25% over the prior year's second quarter. Adjusted EBITDA1 for the six months ended March 31, 2021, was $23.3 million, an increase of 7% over the prior year's first six months.
• Second quarter adjusted EBITDA1 as a percentage of adjusted net revenue1 was 25.2%, compared to 25.3% in the prior year's second quarter. For the six months ended March 31, 2021, adjusted EBITDA1 as a percentage of adjusted net revenue1 was 24.7%, compared to 27.0% for the prior year's first six months.
• Second quarter diluted net income per share available to Class A common stock was $0.00, compared to diluted net income per share available to Class A common stock of $0.05 in the prior year's second quarter. For the six months ended March 31, 2021, diluted net loss per share available to Class A common stock was $0.12, compared to diluted net income per share available to Class A common stock of $0.04 for the prior year's first six months.
• For the three and six months ended March 31, 2021, pro forma adjusted diluted earnings per share1, which gives pro forma effect to the Company's going forward effective tax rate, was $0.23 and $0.45, respectively, compared to $0.20 and $0.44 for the three and six months ended March 31, 2020, respectively.
• Integrated payments2 were 59% and 57% of payment volume for the three and six months ended March 31, 2021, respectively.
• As of March 31, 2021, our consolidated interest coverage ratio was 6.19x, total leverage ratio was 3.80x and consolidated senior leverage ratio was 1.57x. These ratios are defined in our Senior Secured Credit Facility.
• Subsequent to March 31, 2021, the Company completed the acquisition of three businesses. Two of these businesses were previously announced in our press release dated April 5, 2021, and further strengthen the Company's focus in its Healthcare vertical. The third business expands the Company's software capabilities in the utilities market within the Public Sector vertical. The aggregate up-front cash purchase price for the three businesses was $37.4 million. These transactions also include contingent consideration, for which the fair value as of the respective acquisition dates is still being valued. The aggregate maximum contingent consideration payable for these acquisitions is up to $40.0 million, subject to the satisfaction of certain growth metrics over established time periods.
• For the third acquisition, which closed on May 4, 2021, in accordance with Nasdaq Listing Rule 5635(c)(4), the Company has granted equity awards under its 2020 Acquisition Equity Incentive Plan to the new employees who agreed to join the Company at closing. The Company granted options to purchase a total of 300,000 shares of the Company’s Class A common stock to 46 employees as a material inducement to enter into employment with the Company. These stock options will vest ratably over three years, subject to the employees’ continued service to the Company through each applicable vesting date. The stock options have an exercise price equal to $32.41, the closing price per share of the Company’s Class A common stock as reported by Nasdaq on the date of closing.

Greg Daily, Chairman and CEO of i3 Verticals, commented, “We are thrilled with our second quarter results as we posted new records in adjusted net revenue, adjusted EBITDA, software revenue, payment volume and integration mix. Software-related revenue is now 36% of our total adjusted net revenue, and our Public Sector vertical is leading the way.

“We anticipate that government technology spending will increase as the effects of the pandemic subside and state and local governments receive federal funds allocated under the American Rescue Plan Act. Our product lineup and integrations are perfectly suited to help our government clients continue to modernize. We will continue to invest in our Public Sector software and are enthusiastic about the opportunities ahead.

“We recently completed an acquisition of a software company that provides products and solutions in the utilities sector. This company focuses on large, Tier 1 customers. Its software and professional services will augment and expand our existing platform in this space. We are excited about our increased ability to deliver excellent products to this market going forward.

“We previously announced in April the closing of our latest two acquisitions in the Healthcare vertical. We have now built a strong foundation to address this market. We are optimistic about our opportunities to further build our product suite and grow our Healthcare vertical.

We exited the second quarter with positive momentum, and we believe we are well positioned to deliver strong financial results during the remainder of the year.”

GUIDANCE:

i3 Verticals, Inc. sees FY2021 EPS of $0.98-$1.08, versus the consensus of $1.01. i3 Verticals, Inc. sees FY2021 revenue of $204-220 million, versus the consensus of $203.61 million.

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

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