10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 001-38532

i3 Verticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware	82-4052852
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
40 Burton Hills Blvd., Suite 415
Nashville, TN	37215
(Address of principal executive offices)	(Zip Code)
(615) 465-4487
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.0001 Par Value	IIIV	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  x  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No  x

As of May 9, 2024, there were 23,419,645 outstanding shares of Class A common stock, $0.0001 par value per share, and 10,052,676 outstanding shares of Class B common stock, $0.0001 par value per share.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements (Unaudited)	3
Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Operations	5
Condensed Consolidated Statement of Change in Equity	6
Condensed Consolidated Statements of Cash Flows	8
Notes to the Unaudited Condensed Consolidated Financial Statements	10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3. Quantitative and Qualitative Disclosures About Market Risk	55
Item 4. Controls and Procedures	56
PART II. OTHER INFORMATION	56
Item 1. Legal Proceedings	56
Item 1A. Risk Factors	57
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3. Defaults Upon Senior Securities	57
Item 4. Mine Safety Disclosures	57
Item 5. Other Information	57
Item 6. Exhibits	58
SIGNATURES	59

2

PART I. - FINANCIAL INFORMATION

Item 1.    Financial Statements

3

i3 Verticals, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

	March 31,		September 30,
	2024		2023
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	3,139	$	3,112
Accounts receivable, net	66,539		65,110
Settlement assets	1,586		4,873
Prepaid expenses and other current assets	15,802		12,449
Total current assets	87,066		85,544
Property and equipment, net	11,002		12,308
Restricted cash	2,568		4,415
Capitalized software, net	61,345		62,577
Goodwill	410,772		409,563
Intangible assets, net	221,145		226,952
Deferred tax asset	51,591		52,514
Operating lease right-of-use assets	12,806		13,922
Other assets	7,247		13,698
Total assets	$	865,542	$	881,493
Liabilities and equity
Liabilities
Current liabilities
Accounts payable	$	11,996	$	11,064
Current portion of long-term debt	26,223		—
Accrued expenses and other current liabilities	26,854		37,740
Settlement obligations	1,586		4,873
Deferred revenue	36,931		35,275
Current portion of operating lease liabilities	4,421		4,509
Total current liabilities	108,011		93,461
Long-term debt, less current portion and debt issuance costs, net	343,392		385,081
Long-term tax receivable agreement obligations	40,323		40,079
Operating lease liabilities, less current portion	9,362		10,433
Other long-term liabilities	18,354		24,143
Total liabilities	519,442		553,197
Commitments and contingencies (see Note 12)
Stockholders' equity
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized; 0 shares issued and outstanding as of March 31, 2024 and September 30, 2023	—		—
Class A common stock, par value $0.0001 per share, 150,000,000 shares authorized; 23,416,518 and 23,253,272 shares issued and outstanding as of March 31, 2024 and September 30, 2023, respectively	2		2
Class B common stock, par value $0.0001 per share, 40,000,000 shares authorized; 10,052,676 and 10,093,394 shares issued and outstanding as of March 31, 2024 and September 30, 2023, respectively	1		1
Additional paid-in capital	259,242		249,688
Accumulated deficit	(9,968)		(12,944)
Total stockholders' equity	249,277		236,747
Non-controlling interest	96,823		91,549
Total equity	346,100		328,296
Total liabilities and equity	$	865,542	$	881,493

See Notes to the Interim Condensed Consolidated Financial Statements

4

i3 Verticals, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share amounts)

	Three months ended March 31,				Six months ended March 31, 2024
	2024		2023		2024		2023
Revenue	$	94,542	$	93,872	$	186,532	$	179,901
Operating expenses
Other costs of services	21,180		19,930		41,604		38,999
Selling, general and administrative	54,162		57,204		107,694		108,207
Depreciation and amortization	10,069		9,015		19,808		17,691
Change in fair value of contingent consideration	(290)		2,279		(527)		3,722
Total operating expenses	85,121		88,428		168,579		168,619
Income from operations	9,421		5,444		17,953		11,282
Other expenses (income)
Interest expense, net	7,750		6,199		14,457		11,689
Other income	(2,257)		—		(2,150)		(203)
Total other expenses	5,493		6,199		12,307		11,486
Income (loss) before income taxes	3,928		(755)		5,646		(204)
Provision for (benefit from) income taxes	580		(563)		762		(181)
Net income (loss)	3,348		(192)		4,884		(23)
Net income (loss) attributable to non-controlling interest	1,470		(228)		1,908		181
Net income (loss) attributable to i3 Verticals, Inc.	$	1,878	$	36	$	2,976	$	(204)
Net income (loss) per share attributable to Class A common stockholders:
Basic	$	0.08	$	0.00	$	0.13	$	(0.01)
Diluted	$	0.08	$	0.00	$	0.13	$	(0.01)
Weighted average shares of Class A common stock outstanding:
Basic	23,331,239		23,135,898		23,299,214		23,066,499
Diluted	23,718,474		34,269,140		23,726,720		23,066,499

See Notes to the Interim Condensed Consolidated Financial Statements

5

i3 Verticals, Inc.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

(In thousands, except share amounts)

	Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Retained Earnings (Deficit)		Non-Controlling Interest		Total Equity
	Shares	Amount		Shares	Amount
Balance at September 30, 2023	23,253,272	$	2	10,093,394	$	1	$	249,688	$	(12,944)	$	91,549	$	328,296
Equity-based compensation	—	—		—	—		6,508		—		—		6,508
Net income	—	—		—	—		—		1,098		438		1,536
Exercise of equity-based awards	25,898	—		—	—		(10)		—		—		(10)
Sale of exchangeable note hedges	—	—		—	—		1,483		—		—		1,483
Repurchases of warrants	—	—		—	—		(657)		—		—		(657)
Allocation of equity to non-controlling interests	—	—		—	—		(2,450)		—		2,450		—
Balance at December 31, 2023	23,279,170	2		10,093,394	1		254,562		(11,846)		94,437		337,156
Equity-based compensation	—	—		—	—		5,777		—		—		5,777
Net income	—	—		—	—		—		1,878		1,470		3,348
Redemption of common units in i3 Verticals, LLC	40,718	—		(40,718)	—		384		—		(384)		—
Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis	—	—		—	—		42		—		—		42
Exercise or release of equity-based awards	96,630	—		—	—		(223)		—		—		(223)
Allocation of equity to non-controlling interests	—	—		—	—		(1,300)		—		1,300		—
Balance at March 31, 2024	23,416,518	$	2	10,052,676	$	1	$	259,242	$	(9,968)	$	96,823	$	346,100

See Notes to the Interim Condensed Consolidated Financial Statements

6

i3 Verticals, Inc.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (CONTINUED)

(In thousands, except share amounts)

	Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Retained Earnings (Deficit)		Non-Controlling Interest		Total Equity
	Shares	Amount		Shares	Amount
Balance at September 30, 2022	22,986,448	$	2	10,118,142	$	1	$	241,958	$	(23,582)	$	89,309	$	307,688
Adoption of ASU 2020-06	—	—		—	—		(23,382)		11,449		—		(11,933)
Equity-based compensation	—	—		—	—		6,846		—		—		6,846
Net (loss) income	—	—		—	—		—		(240)		409		169
Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis	—	—		—	—		685		—		—		685
Exercise of equity-based awards	24,745	—		—	—		3		—		—		3
Allocation of equity to non-controlling interests	—	—		—	—		1,906		—		(1,906)		—
Balance at December 31, 2022	23,011,193	2		10,118,142	1		228,016		(12,373)		87,812		303,458
Equity-based compensation	—	—		—	—		6,802		—		—		6,802
Net loss	—	—		—	—		—		36		(228)		(192)
Redemption of common units in i3 Verticals, LLC	9,924	—		(9,924)	—		86		—		(86)		—
Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis	—	—		—	—		349		—		—		349
Exercise of equity-based awards	64,443	—		—	—		(606)		—		—		(606)
Allocation of equity to non-controlling interests	—	—		—	—		(2,205)		—		2,205		—
Issuance of Class A common stock under the 2020 Inducement Plan	82,170	—		—	—		2,000		—		—		2,000
Balance at March 31, 2023	23,167,730	$	2	10,108,218	$	1	$	234,442	$	(12,337)	$	89,703	$	311,811

See Notes to the Interim Condensed Consolidated Financial Statements

7

i3 Verticals, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

	Six months ended March 31,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	4,884	$	(23)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	19,808		17,691
Equity-based compensation	12,285		13,648
Amortization of debt issuance costs	676		729
Gain on repurchase of exchangeable notes	(2,397)		—
Loss on sale of exchangeable senior note hedges	245		—
Gain on repurchases of warrants	(105)		—
Provision for (benefit from) income taxes	(1,238)		(208)
Non-cash lease expense	2,349		2,289
Changes in non-cash contingent consideration expense from original estimate	(527)		3,722
Other non-cash adjustments to net income	668		909
Changes in operating assets:
Accounts receivable	5,517		6,497
Prepaid expenses and other current assets	(3,385)		(1,860)
Other assets	(802)		(710)
Changes in operating liabilities:
Accounts payable	896		(1,484)
Accrued expenses and other current liabilities	(8,621)		(5,009)
Acquisition escrow obligations	(1,848)		(1,564)
Deferred revenue	2,257		(2,628)
Operating lease liabilities	(2,364)		(2,234)
Other long-term liabilities	2		—
Contingent consideration paid in excess of original estimates	(3,153)		(3,881)
Net cash provided by operating activities	25,147		25,884
Cash flows from investing activities:
Expenditures for property and equipment	(1,537)		(2,322)
Proceeds from sale of property and equipment	618		—
Expenditures for capitalized software	(6,106)		(5,381)
Purchases of merchant portfolios and residual buyouts	(4,214)		(387)
Acquisitions of businesses, net of cash and restricted cash acquired	(1,100)		(101,997)
Payments for other investing activities	(34)		(1,227)
Proceeds from other investing activities	4		184
Net cash used in investing activities	(12,369)		(111,130)

See Notes to the Interim Condensed Consolidated Financial Statements

8

i3 Verticals, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)

(In thousands)

	Six months ended March 31,
	2024		2023
Cash flows from financing activities:
Proceeds from revolving credit facility	206,419		265,811
Payments on revolving credit facility	(132,710)		(179,939)
Payments for repurchase of exchangeable notes	(87,840)		—
Proceeds from sale of exchangeable senior note hedges	1,238		—
Payments for repurchases of warrants	(552)		—
Payments of debt issuance costs	—		(87)
Net payments for settlement obligations(1)	(3,287)		(355)
Cash paid for contingent consideration	(760)		(1,175)
Payments for required distributions to members for tax obligations	(189)		—
Proceeds from stock option exercises	—		104
Payments for employee's tax withholdings from net settled stock option exercises and RSU releases	(204)		(545)
Net cash (used in) provided by financing activities	(17,885)		83,814
Net decrease in cash, cash equivalents and restricted cash	(5,107)		(1,432)
Cash, cash equivalents and restricted cash at beginning of period	12,400		23,765
Cash, cash equivalents and restricted cash at end of period	$	7,293	$	22,333
Supplemental disclosure of cash flow information:
Cash paid for interest	$	14,107	$	10,266
Cash paid for income taxes	$	5,376	$	1,419

_________________________________________

1.Refer to Note 2 for discussion of the change in the current period presentation.

The following tables provide reconciliations of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to that shown in the condensed consolidated statements of cash flows:

	September 30,
	2023		2022
Beginning balance
Cash and cash equivalents	$	3,112	$	3,490
Settlement assets	4,873		7,540
Restricted cash	4,415		12,735
Total cash, cash equivalents, and restricted cash	$	12,400	$	23,765
	March 31,
	2024		2023
Ending balance
Cash and cash equivalents	$	3,139	$	3,977
Settlement assets	1,586		7,185
Restricted cash	2,568		11,171
Total cash, cash equivalents, and restricted cash	$	7,293	$	22,333

See Notes to the Interim Condensed Consolidated Financial Statements

9

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

1. ORGANIZATION AND OPERATIONS

i3 Verticals, Inc. (the “Company”) was formed as a Delaware corporation on January 17, 2018. The Company was formed for the purpose of completing an initial public offering (“IPO”) of its Class A common stock and other related transactions in order to carry on the business of i3 Verticals, LLC and its subsidiaries. i3 Verticals, LLC was founded in 2012 and delivers seamlessly integrated software and payment solutions to customers in strategic vertical markets. The Company’s headquarters are located in Nashville, Tennessee, with operations throughout the United States. Unless the context otherwise requires, references to “we,” “us,” “our,” “i3 Verticals” and the “Company” refer to i3 Verticals, Inc. and its subsidiaries, including i3 Verticals, LLC.

In connection with the IPO, the Company completed certain reorganization transactions, which, among other things, resulted in i3 Verticals, Inc. being the sole managing member of i3 Verticals, LLC (the “Reorganization Transactions”). Following the completion of the IPO and Reorganization Transactions, the Company is a holding company and the principal asset that it owns are the common units of i3 Verticals, LLC. i3 Verticals, Inc. operates and controls all of i3 Verticals, LLC's operations and, through i3 Verticals, LLC and its subsidiaries, conducts i3 Verticals, LLC's business. i3 Verticals, Inc. has a majority economic interest in i3 Verticals, LLC. As the sole managing member of i3 Verticals, LLC, i3 Verticals, Inc. consolidates the financial results of i3 Verticals, LLC and reports a non-controlling interest representing the Common Units of i3 Verticals, LLC held by owners other than i3 Verticals, Inc. (the “Continuing Equity Owners”).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the reporting and disclosure rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the unaudited condensed consolidated financial statements of the Company and its subsidiaries as of March 31, 2024 and for the three and six months ended March 31, 2024 and 2023. The results of operations for the three and six months ended March 31, 2024 and 2023 are not necessarily indicative of the operating results for the full year.

As permitted by the rules and regulations of the SEC, certain information and disclosures otherwise included in the notes to the consolidated financial statements have been condensed or omitted from the summary of significant accounting policies. The Company believes the disclosures are adequate to make the information presented not misleading. It is recommended that these interim condensed consolidated financial statements be read in conjunction with the Company's consolidated financial statements and related footnotes for the years ended September 30, 2023 and 2022, included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2023 filed with the SEC on November 22, 2023.

Principles of Consolidation

These interim condensed consolidated financial statements include the accounts of the Company and its subsidiary companies. All significant intercompany accounts and transactions have been eliminated in consolidation.

10

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Restricted Cash

Restricted cash represents funds held in escrow related to acquisitions or held-on-deposit with processing banks pursuant to agreements to cover potential merchant losses. It is presented as long-term assets on the accompanying condensed consolidated balance sheets since the related agreements extend beyond the next twelve months. Following the adoption of Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230), the Company includes restricted cash along with the cash and cash equivalents balance for presentation in the consolidated statements of cash flows.

Settlement Assets and Obligations

Settlement assets and obligations result when funds are temporarily held or owed by the Company on behalf of merchants, consumers, schools, and other institutions. Timing differences, interchange expenses, merchant reserves and exceptional items cause differences between the amount received from the card networks and the amount funded to counterparties. These balances arising in the settlement process are reflected as settlement assets and obligations on the accompanying consolidated balance sheets. With the exception of merchant reserves, settlement assets or settlement obligations are generally collected and paid within one to four days. Settlement assets and settlement obligations were both $1,586 as of March 31, 2024 and $4,873 as of September 30, 2023, respectively.

Reclassifications

Certain prior period amounts have been reclassified in order to conform with the current period presentation. These reclassifications have no impact on the Company’s previously reported consolidated net income (loss).

Change in presentation

During the second quarter of 2024, the Company elected to change its presentation of cash flows associated with "Settlement obligations" from operating activities to financing actives within the Condensed Consolidated Statements of Cash Flows. Comparative amounts have been reclassified to conform to the current period presentation. This change has no impact on the Condensed Consolidated Balance Sheet, Condensed Consolidated Statements of Operations or Condensed Consolidated Statement of Changes in Equity.

The following tables present the effects of the change in presentation within the Condensed Consolidated Statements of Cash Flows:

	For the Six Months Ended March 31, 2024
	As Previously Reported	Adjustment	As Adjusted
Cash flows from operating activities:
Settlement obligations	(3,287)	3,287	—
Net cash provided by operating activities	21,860	3,287	25,147
Cash flows from financing activities:
Net payments for settlement obligations	—	(3,287)	(3,287)
Net cash used in financing activities	(14,598)	(3,287)	(17,885)

11

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

	For the Six Months Ended March 31, 2023
	As Previously Reported	Adjustment	As Adjusted
Cash flows from operating activities:
Settlement obligations	(355)	355	—
Net cash provided by operating activities	25,529	355	25,884
Cash flows from financing activities:
Net payments for settlement obligations	—	(355)	(355)
Net cash provided by (used in) financing activities	84,169	(355)	83,814

Inventories

Inventories consist of point-of-sale equipment to be sold to customers and are stated at the lower of cost, determined on a weighted average or specific basis, or net realizable value. Inventories were $3,978 and $4,138 at March 31, 2024 and September 30, 2023, respectively, and are included within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

Acquisitions

Business acquisitions have been recorded using the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), and, accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition. Where relevant, the fair value of contingent consideration included in an acquisition is calculated using a Monte Carlo simulation. The fair value of merchant relationships and non-compete assets acquired is identified using the Income Approach. The fair values of trade names and internally-developed software acquired are identified using the Relief from Royalty Method. After the purchase price has been allocated, goodwill is recorded to the extent the total consideration paid for the acquisition, including the acquisition date fair value of contingent consideration, if any, exceeds the sum of the fair values of the separately identifiable acquired assets and assumed liabilities. Acquisition costs for business combinations are expensed when incurred and recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Acquisitions not meeting the accounting criteria to be accounted for as a business combination are accounted for as an asset acquisition. An asset acquisition is recorded at its purchase price, inclusive of acquisition costs, which is allocated among the acquired assets and assumed liabilities based upon their relative fair values at the date of acquisition.

Leases

The Company adopted ASU 2016-02, Leases, on October 1, 2020, using the optional modified retrospective method under which the prior period financial statements were not restated for the new guidance. The Company elected the accounting policy practical expedients for all classes of underlying assets to (i) combine associated lease and non-lease components in a lease arrangement as a combined lease component and (ii) exclude recording short-term leases as right-of-use assets on the condensed consolidated balance sheets.

At contract inception the Company determines whether an arrangement is, or contains a lease, and for each identified lease, evaluates the classification as operating or financing. Leased assets and obligations are recognized at the lease commencement date based on the present value of fixed lease payments to be made over the term of the lease. Renewal and termination options are factored into determination of the lease term only if the option is reasonably certain to be exercised. The Company’s leases do not provide a readily determinable implicit interest rate and the Company uses its incremental borrowing rate to measure the lease liability and corresponding right-of-use asset. The incremental borrowing rate is a fully collateralized rate that considers the

12

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Company’s credit rating, market conditions and the term of the lease. The Company accounts for all components in a lease arrangement as a single combined lease component.

Operating lease cost is recognized on a straight-line basis over the lease term. Total lease costs include variable lease costs, which are primarily comprised of the consumer price index adjustments and other changes based on rates, such as costs of insurance and property taxes. Variable payments are expensed in the period incurred and not included in the measurement of lease assets and obligations.

Revenue Recognition and Deferred Revenue

Revenue is recognized as each performance obligation is satisfied, in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company accrues for rights of refund, processing errors or penalties, or other related allowances based on historical experience. The Company utilized the portfolio approach practical expedient within ASC 606-10-10-4 Revenue from Contracts with Customers—Objectives and the significant financing component practical expedient within ASC 606-10-32-18 Revenue from Contracts with Customers—The Existence of a Significant Financing Component in the Contract in performing the analysis.

The Company's revenue for the six months ended March 31, 2024 and 2023 is derived from the following sources:

•Software and related services — Includes sales of software as a service, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to our software offerings

•Payments — Includes volume-based payment processing fees (“discount fees”), gateway fees and other related fixed transaction or service fees

•Other — Includes sales of equipment, non-software related professional services and other revenues

Revenues from sales of the Company’s software are recognized when the related performance obligations are satisfied. Sales of software licenses are categorized into one of two categories of intellectual property in accordance with ASC 606, functional or symbolic. The key distinction is whether the license represents a right to use (functional) or a right to access (symbolic) intellectual property. The Company generates sales of one-time software licenses, which is functional intellectual property. Revenue from functional intellectual property is recognized at a point in time, when delivered to the customer. The Company also offers access to its software under software-as-a-service (“SaaS”) arrangements, which represent services arrangements. Revenue from SaaS arrangements is recognized over time, over the term of the agreement.

Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed or a specified per transaction amount, depending on the card type. The Company frequently enters into agreements with customers under which the customer engages the Company to provide both payment authorization services and transaction settlement services for all of the cardholder transactions of the customer, regardless of which issuing bank and card network to which the transaction relates. The Company’s core performance obligations are to stand ready to provide continuous access to the Company’s payment authorization services and transaction settlement services in order to be able to process as many transactions as its customers require on a daily basis over the contract term. These services are stand ready obligations, as the timing and quantity of transactions to be processed is not determinable. Under a stand-ready obligation, the Company’s performance obligation is defined by each time increment rather than by the underlying activities satisfied over time based on days elapsed. Because the service of standing ready is substantially the same each day and has the same pattern of transfer to the customer, the Company has determined that its stand-ready performance obligation comprises a series of distinct days of service. Discount fees are recognized each day based on the volume or transaction count at the time the merchants’ transactions are processed.

13

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The Company follows the requirements of ASC 606-10-55 Revenue from Contracts with Customers—Principal versus Agent Considerations, which states that the determination of whether a company should recognize revenue based on the gross amount billed to a customer or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement. The determination of gross versus net recognition of revenue requires judgment that depends on whether the Company controls the good or service before it is transferred to the merchant or whether the Company is acting as an agent of a third party. The assessment is provided separately for each performance obligation identified. Under its agreements, the Company incurs interchange and network pass-through charges from the third-party card issuers and card networks, respectively, related to the provision of payment authorization services. The Company has determined that it is acting as an agent with respect to these payment authorization services, based on the following factors: (1) the Company has no discretion over which card issuing bank will be used to process a transaction and is unable to direct the activity of the merchant to another card issuing bank, and (2) interchange and card network rates are pre-established by the card issuers or card networks, and the Company has no latitude in determining these fees. Therefore, revenue allocated to the payment authorization performance obligation is presented net of interchange and card network fees paid to the card issuing banks and card networks, respectively, for the six months ended March 31, 2024 and 2023.

With regards to the Company's discount fees, generally, where the Company has control over merchant pricing, merchant portability, credit risk and ultimate responsibility for the merchant relationship, revenues are reported at the time of sale equal to the full amount of the discount charged to the merchant, less interchange and network fees. Revenues generated from merchant portfolios where the Company does not have control over merchant pricing, liability for merchant losses or credit risk or rights of portability are reported net of interchange and network fees as well as third-party processing costs directly attributable to processing and bank sponsorship costs.

Revenues are also derived from a variety of transaction fees, which are charged for accessing our payment and software solutions, and fees for other miscellaneous services. Revenues derived from such fees are recognized at the time the transactions occur and when there are no further performance obligations. Revenue from the sale of equipment, is recognized upon transfer of ownership to the customer, after which there are no further performance obligations.

Arrangements may contain multiple performance obligations, such as payment authorization services, transaction settlement services, hardware, software products, maintenance, and professional installation and training services. Revenues are allocated to each performance obligation based on the standalone selling price of each good or service. The selling price for a deliverable is based on standalone selling price, if available, the adjusted market assessment approach, estimated cost plus margin approach, or residual approach. The Company establishes estimated selling price, based on the judgment of the Company's management, considering internal factors such as margin objectives, pricing practices and controls, customer segment pricing strategies and the product life cycle. In arrangements with multiple performance obligations, the Company determines allocation of the transaction price at inception of the arrangement and uses the standalone selling prices for the majority of the Company's revenue recognition.

Revenues from sales of the Company’s combined hardware and software element are recognized when each performance obligation has been satisfied which has been determined to be upon the delivery of the product. Revenues derived from service fees are recognized at the time the services are performed and there are no further performance obligations. The Company’s professional services, including training, installation, and repair services are recognized as revenue as these services are performed.

14

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The tables below present a disaggregation of the Company's revenue from contracts with customers by product by segment. Refer to Note 14 for discussion of the Company's segments. The Company's products are defined as follows:

•Software and related services — Includes SaaS, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to our software offerings

•Payments — Includes discount fees, gateway fees and other related fixed transaction or service fees

•Other — Includes sales of equipment, non-software related professional services and other revenues

	For the Three Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	42,130	$	3,537	$	(10)	$	45,657
Payments revenue	14,855		29,585		(6)		44,434
Other revenue	2,498		1,953		—		4,451
Total revenue	$	59,483	$	35,075	$	(16)	$	94,542

	For the Three Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	44,099	$	3,217	$	(9)	$	47,307
Payments revenue	14,285		27,634		(10)		41,909
Other revenue	2,413		2,243		—		4,656
Total revenue	$	60,797	$	33,094	$	(19)	$	93,872

	For the Six Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	82,462	$	6,839	$	(22)	$	89,279
Payments revenue	28,837		59,607		(15)		88,429
Other revenue	4,773		4,051		—		8,824
Total revenue	$	116,072	$	70,497	$	(37)	$	186,532

	For the Six Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	82,244	$	6,196	$	(19)	$	88,421
Payments revenue	27,038		55,243		(18)		82,263
Other revenue	4,728		4,489		—		9,217
Total revenue	$	114,010	$	65,928	$	(37)	$	179,901

15

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The tables below present a disaggregation of the Company's revenue from contracts with customers by timing of transfer of goods or services by segment. The Company's revenue included in each category are defined as follows:

•Revenue earned over time — Includes discount fees, gateway fees, sales of SaaS, ongoing support or other stand-ready obligations and professional services

•Revenue earned at a point in time — Includes point in time service fees that are not stand-ready obligations, software licenses sold as functional intellectual property and other equipment

	For the Three Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	55,361	$	30,095	$	(10)	$	85,446
Revenue earned at a point in time	4,122		4,980		(6)		9,096
Total revenue	$	59,483	$	35,075	$	(16)	$	94,542

	For the Three Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	54,568	$	27,984	$	(9)	$	82,543
Revenue earned at a point in time	6,229		5,110		(10)		11,329
Total revenue	$	60,797	$	33,094	$	(19)	$	93,872

	For the Six Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	109,715	$	60,176	$	(22)	$	169,869
Revenue earned at a point in time	6,357		10,321		(15)		16,663
Total revenue	$	116,072	$	70,497	$	(37)	$	186,532

	For the Six Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	105,009	$	55,581	$	(19)	$	160,571
Revenue earned at a point in time	9,001		10,347		(18)		19,330
Total revenue	$	114,010	$	65,928	$	(37)	$	179,901

Contract Assets

The Company bills for certain software and related services sales and fixed fee professional services upon pre-determined milestones in the contracts. Therefore, the Company may have contract assets other than trade accounts receivable for performance obligations that are partially completed, which would typically represent consulting services provided before a milestone is completed in a contract. Additionally, contract assets also include software licenses sold as a right to use license but paid for under a subscription model. Under this structure, the license revenue is recognized upfront while a portion of the revenue is unbilled. Unbilled amounts

16

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

associated with these services are presented as accounts receivable as the Company has an unconditional right to payment for services performed.

As of March 31, 2024 and September 30, 2023, the Company’s contract assets from contracts with customers was $11,478 and $15,131, respectively.

Contract Liabilities

Deferred revenue represents amounts billed to customers by the Company for services contracts. Payment is typically collected at the start of the contract term. The initial prepaid contract agreement balance is deferred. The balance is then recognized as the services are provided over the contract term. Deferred revenue that is expected to be recognized as revenue within one year is recorded as short-term deferred revenue and the remaining portion is recorded as other long-term liabilities in the condensed consolidated balance sheets. The terms for most of the Company's contracts with a deferred revenue component are one year. Substantially all of the Company's deferred revenue is anticipated to be recognized within the next year.

The following tables present the changes in deferred revenue as of and for the six months ended March 31, 2024 and 2023, respectively:

Balance at September 30, 2023	$	35,444
Deferral of revenue	19,793
Recognition of unearned revenue	(15,664)
Balance at December 31, 2023	39,573
Deferral of revenue	11,759
Recognition of unearned revenue	(13,596)
Balance at March 31, 2024	$	37,736

Balance at September 30, 2022	$	32,089
Deferral of revenue	19,334
Recognition of unearned revenue	(13,925)
Balance at December 31, 2022	37,498
Deferral of revenue	10,475
Recognition of unearned revenue	(14,286)
Balance at March 31, 2023	$	33,687

Costs to Obtain and Fulfill a Contract

The Company capitalizes incremental costs to obtain new contracts and contract renewals and amortizes these costs on a straight-line basis as an expense over the benefit period, which is generally the contract term, unless a commensurate payment is not expected at renewal. As of March 31, 2024 and September 30, 2023, the Company had $5,417 and $4,966, respectively, of capitalized contract costs, which relates to commissions paid to employees and agents as well as other incentives given to customers to obtain new sales, included within “Other assets" on the condensed consolidated balance sheets. The Company recorded expense related to these costs of $241 and $470 for the three and six months ended March 31, 2024, respectively and $193 and $376 for the three and six months ended March 31, 2023.

The Company expenses sales commissions as incurred for the Company's sales commission plans that are paid on recurring monthly revenues, portfolios of existing customers, or have a substantive stay requirement prior to payment.

17

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Other Cost of Services

Other costs of services include third-party processing costs directly attributable to processing and bank sponsorship costs, which may not be based on a percentage of volume. These costs also include related costs such as residual payments to sales groups, which are based on a percentage of the net revenues generated from merchant referrals. In certain merchant processing bank relationships the Company is liable for chargebacks against a merchant equal to the volume of the transaction. Losses resulting from chargebacks against a merchant are included in other cost of services on the accompanying condensed consolidated statement of operations. The Company evaluates its risk for such transactions and estimates its potential loss from chargebacks based primarily on historical experience and other relevant factors. The reserve for merchant losses is included within accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets. The cost of equipment and software sold is also included in other cost of services. Other costs of services are recognized at the time the associated revenue is earned.

The Company accounts for all governmental taxes associated with revenue transactions on a net basis.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, the value of purchase consideration paid and identifiable assets acquired and assumed in acquisitions, goodwill and intangible asset impairment review, determination of performance obligations for revenue recognition, loss reserves, assumptions used in the calculation of equity-based compensation and in the calculation of income taxes, and certain tax assets and liabilities as well as the related valuation allowances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 will provide improvements to the income tax disclosures primarily related to the income taxes paid and rate reconciliation, and how legislation changes may affect future capital allocation and cash flow forecasts. The amendment will improve the consistency in which companies provide tax information, and will further increase the transparency of related tax risks and operational opportunities. The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company will not be required to adopt ASU 2023-09 until October 1, 2025. The Company is currently evaluating the impact of the adoption of ASU 2023-09 on the Company’s financial statement disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 improves interim disclosure requirements for segment reporting, including clarifications regarding the measure of profit and loss used to asses segment performance and the allocation of resources. Further, it enhances the disclosures for reporting segment expenses and will require the Company to report significant expenses regularly provided by the chief operating decision maker. The amendment will require companies to disclose a more granular level of information with regards to segment reporting to further enhance the transparency of what specified amounts are included within each segment. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company will not be required to adopt ASU 2023-07 until October 1, 2024. The Company is currently evaluating the impact of the adoption of ASU 2023-07 on the Company’s financial statement disclosures.

18

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

3. ACQUISITIONS

During the six months ended March 31, 2024 and 2023, the Company acquired the following intangible assets and businesses:

Residual Buyouts

From time to time, the Company acquires future commission streams (or "residuals") from sales agents in exchange for an upfront cash payment. This results in an increase in overall gross processing volume to the Company. The residual buyouts are treated as asset acquisitions, resulting in recording a residual buyout intangible asset at cost on the date of acquisition. These assets are amortized using a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are expected to be utilized over their estimated useful lives.

During the six months ended March 31, 2024 and 2023, the Company purchased residuals for $4,466 and $387 of consideration, respectively. The purchases were funded with a combination of cash on hand and borrowings on the Company's revolving credit facility. The acquired residual buyout intangible asset has an estimated amortization period of eight years.

Referral Agreements

From time to time, the Company enters into referral agreements with agent banks (“Referral Partners”). Under these agreements, the Referral Partner refers its customers to the Company for credit card processing services. Total consideration paid for these agreements in the six months ended March 31, 2023 was $420, all of which was settled with cash on hand. Because the Company pays an up-front fee to compensate the Referral Partner, the amount is treated as an asset acquisition in which the Company has acquired an intangible stream of referrals. This asset is amortized over a straight-line period of five years.

Business Combinations during the six months ended March 31, 2024

During the six months ended March 31, 2024 the Company completed the acquisition of a business to expand the Company’s software offerings. Total purchase consideration was $1,270, including $1,100 in cash consideration, funded by proceeds from the Company's revolving credit facility, and $170 of contingent consideration.

In connection with this acquisition, the Company allocated approximately $5 to property and equipment, approximately $40 to capitalized software, approximately $220 to customer relationships and the remainder, approximately $1,005, to goodwill, all of which is deductible for tax purposes. Certain of the purchase price allocations assigned for this acquisition is considered preliminary as of March 31, 2024. The acquired customer relationships intangible assets have an estimated amortization periods of ten years. The acquired capitalized software have amortization periods of seven years.

Acquisition-related costs for this acquisition amounted to approximately $8 and were expensed as incurred.

Business Combinations during the year ended September 30, 2023

Purchase of Celtic Cross Holdings, Inc. and Celtic Systems Pvt. Ltd.

During the six months ended March 31, 2023, the Company completed the acquisition of Celtic Cross Holdings, Inc., in Scottsdale, Arizona and Celtic Systems Pvt. Ltd. in Vadodara, India (collectively "Celtic") to expand the Company’s software offerings in the Public Sector vertical. Celtic is within the Software and Services segment. Total purchase consideration consisted of $85,000 in cash consideration, funded by proceeds from the Company's revolving credit facility.

The goodwill associated with the Celtic acquisition is deductible for tax purposes. The acquired customer relationships intangible assets has an estimated amortization period of eighteen years. The trade name and non-compete agreements associated with the acquisition have amortization periods of five years and three years,

19

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

respectively. The weighted-average amortization period for all intangibles acquired is eighteen years. The acquired capitalized software has a weighted-average amortization period of ten years.

Acquisition-related costs for this acquisition amounted to approximately $1,782 and were expensed as incurred.

Summary of Celtic Cross Holdings, Inc. and Celtic Systems Pvt. Ltd.

The fair values assigned to certain assets and liabilities assumed, as of the acquisition date, were as follows:

Accounts receivable	$	7,660
Prepaid expenses and other current assets	103
Property and equipment	5,233
Capitalized software	12,600
Customer relationships	33,800
Non-compete agreements	200
Trade name	600
Goodwill	43,899
Total assets acquired	104,095
Accounts payable	9
Accrued expenses and other current liabilities	3,182
Deferred revenue, current	2,741
Other long-term liabilities	13,162
Net assets acquired	$	85,001

Other Business Combinations during the year ended September 30, 2023

The Company completed the acquisition of two other businesses to expand the Company's software offerings. The total purchase consideration was $19,757, including $16,997 in cash consideration, funded by proceeds from the Company's revolving credit facility, $2,000 of the Company's Class A Common Stock, and $760 contingent consideration.

In connection with this acquisition, the Company allocated approximately $159 of the consideration to net working capital, approximately $374 to property and equipment, approximately $670 to capitalized software, approximately $8,400 to customer relationships, approximately $100 to trade names, and the remainder, approximately $12,229, to goodwill, of which $2,864 is deductible for tax purposes, and approximately $2,178 to other long-term liabilities. Certain of the purchase price allocations assigned for one of these acquisitions is considered preliminary as of March 31, 2024. The acquired capital software and customer relationships intangible asset have estimated amortization periods of seven to eight years and ten to fifteen years, respectively.

20

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

4. PREPAID EXPENSES AND OTHER CURRENT ASSETS

A summary of the Company's prepaid expenses and other current assets as of March 31, 2024 and September 30, 2023 is as follows:

	March 31,		September 30,
	2024		2023
Inventory	$	3,978	$	4,138
Prepaid licenses	3,613		3,115
Prepaid insurance	929		697
Notes receivable — current portion	—		4
Other current assets	7,282		4,495
Prepaid expenses and other current assets	$	15,802	$	12,449

5. GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill are as follows:

	Software and Services		Merchant Services		Other		Total
Balance at September 30, 2023	$	287,613	$	121,950	$	—	$	409,563
Goodwill attributable to preliminary purchase price adjustments and acquisitions during the six months ended March 31, 2024	1,209		—		—		1,209
Balance at March 31, 2024	$	288,822	$	121,950	$	—	$	410,772

Intangible assets consisted of the following as of March 31, 2024:

	Cost		Accumulated Amortization		Carrying Value		Amortization Life and Method
Finite-lived intangible assets:
Merchant relationships	$	310,721	$	(106,892)	$	203,829	9 to 25 years – accelerated or straight-line
Non-compete agreements	418		(267)		151		3 to 6 years – straight-line
Website and brand development costs	103		(71)		32		3 to 4 years – straight-line
Trade names	6,131		(3,908)		2,223		3 to 7 years – straight-line
Residual buyouts	18,686		(4,134)		14,552		8 years – straight-line
Referral and exclusivity agreements	420		(105)		315		5 years – straight-line
Total finite-lived intangible assets	336,479		(115,377)		221,102
Indefinite-lived intangible assets:
Trademarks	43		—		43
Total identifiable intangible assets	$	336,522	$	(115,377)	$	221,145

Amortization expense for intangible assets amounted to $5,270 and $10,505 for the three and six months ended March 31, 2024, respectively, and $5,157 and $10,216 for the three and six months ended March 31, 2023, respectively.

21

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Based on net carrying amounts at March 31, 2024, the Company's estimate of future amortization expense for intangible assets are presented in the table below for fiscal years ending September 30:

2024 (six months remaining)	$	10,435
2025	20,798
2026	20,326
2027	19,706
2028	19,121
Thereafter	130,716
	$	221,102

6. ACCRUED EXPENSES AND OTHER LIABILITIES

A summary of the Company's accrued expenses and other current liabilities as of March 31, 2024 and September 30, 2023 is as follows is as follows:

	March 31,		September 30,
	2024		2023
Accrued wages, bonuses, commissions and vacation	$	6,290	$	8,713
Accrued interest	1,004		1,313
Accrued contingent consideration — current portion	3,868		6,825
Escrow liabilities	2,118		3,965
Customer deposits	1,061		1,258
Employee health self-insurance liability	1,058		1,014
Accrued interchange	2,066		2,191
Other current liabilities	9,389		12,461
Accrued expenses and other current liabilities	$	26,854	$	37,740

A summary of the Company's long-term liabilities as of March 31, 2024 and September 30, 2023 is as follows:

	March 31,		September 30,
	2024		2023
Accrued contingent consideration — long-term portion	$	101	$	1,414
Deferred tax liability — long-term	17,125		19,646
Other long-term liabilities	1,128		3,083
Total other long-term liabilities	$	18,354	$	24,143

22

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

7. LONG-TERM DEBT, NET

A summary of long-term debt, net as of March 31, 2024 and September 30, 2023 is as follows:

		March 31,		September 30,
	Maturity	2024		2023
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility	May 8, 2028	$	346,214	$	272,505
1% Exchangeable Senior Notes due 2025	February 15, 2025	26,223		117,000
Debt issuance costs, net		(2,822)		(4,424)
Total long-term debt, net of issuance costs		369,615		385,081
Less current portion of long-term debt		(26,223)		—
Long-term debt, net of current portion		$	343,392	$	385,081

2020 Exchangeable Notes Offering

On February 18, 2020, i3 Verticals, LLC issued $138,000 aggregate principal amount of 1.0% Exchangeable Senior Notes due 2025 (the “Exchangeable Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Company received approximately $132,762 in net proceeds from the sale of the Exchangeable Notes, as determined by deducting estimated offering expenses paid to third-parties from the aggregate principal amount.

The Exchangeable Notes bear interest at a fixed rate of 1.00% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020. The Exchangeable Notes will mature on February 15, 2025, unless converted or repurchased at an earlier date.

i3 Verticals, LLC issued the Exchangeable Notes pursuant to an Indenture, dated as of February 18, 2020, among i3 Verticals, LLC, the Company and U.S. Bank National Association, as trustee.

For a discussion of the terms of the Exchangeable Notes, refer to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

Non-cash interest expense, including amortization of debt issuance costs, related to the Exchangeable Notes for the three and six months ended March 31, 2024 was $104 and $359, respectively and $233 and $460 for the three and six months ended March 31, 2023. Total unamortized debt issuance costs related to the Exchangeable Notes were $216 and $1,501 as of March 31, 2024 and September 30, 2023, respectively.

During fiscal year 2020, we repurchased $21,000 in aggregate principal amount of Exchangeable Notes in open market purchases. In addition, on December 21, 2023, i3 Verticals, LLC entered into agreements to repurchase an additional portion of its Exchangeable Notes pursuant to privately negotiated transactions with a limited number of holders of the Exchangeable Notes (the "Exchangeable Note Repurchases"). The repurchase payments were determined by the Company’s average stock price over the 15 trading-day measurement period ending January 16, 2024. The closing of the Exchangeable Note Purchases occurred on January 18, 2024, and the Company paid $87,391 to repurchase $90,777 in aggregate principal amount of its Exchangeable Notes and to repay approximately $386 in accrued interest on the repurchased portion of the Exchangeable Notes. The Company wrote off $926 of debt issuance costs in connection with the repurchase transactions. These repurchases resulted in a decrease in the Company's total leverage ratio, and following the completion of the repurchases of these Exchangeable Notes, approximately $26,223 in aggregate principal amount of the Exchangeable Notes remained outstanding, with terms unchanged. The Company recorded a gain on retirement of debt of $2,397 due to the estimated acquisition price exceeding the net carrying amount of the repurchased

23

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

portion of the Exchangeable Notes, adjusted for unamortized debt issuance costs and costs and third-party fees related to the transaction.

As of March 31, 2024, the aggregate principal amount outstanding of the Exchangeable Notes was $26,223.

The estimated fair value of the Exchangeable Notes was $25,043 as of March 31, 2024. The estimated fair value of the Exchangeable Notes was determined through consideration of quoted market prices for similar instruments. The fair value is classified as Level 2, as defined in Note 10.

Exchangeable Note Hedge Transactions

On February 12, 2020, concurrently with the pricing of the Exchangeable Notes, and on February 13, 2020, concurrently with the exercise by the initial purchasers of their right to purchase additional Exchangeable Notes, i3 Verticals, LLC entered into exchangeable note hedge transactions with respect to Class A common stock (the “Note Hedge Transactions”) with certain financial institutions (collectively, the “Counterparties”). The Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Exchangeable Notes, the same number of shares of Class A common stock that initially underlie the Exchangeable Notes in the aggregate and are exercisable upon exchange of the Exchangeable Notes. The Note Hedge Transactions are intended to reduce potential dilution to the Class A common stock upon any exchange of the Exchangeable Notes. The Note Hedge Transactions will expire upon the maturity of the Exchangeable Notes, if not earlier exercised. The Note Hedge Transactions are separate transactions, entered into by i3 Verticals, LLC with the Counterparties, and are not part of the terms of the Exchangeable Notes. Holders of the Exchangeable Notes will not have any rights with respect to the Note Hedge Transactions. i3 Verticals, LLC used approximately $28,676 of the net proceeds from the offering of the Exchangeable Notes (net of the premiums received for the warrant transactions described below) to pay the cost of the Note Hedge Transactions.

The Note Hedge Transactions do not require separate accounting as a derivative as they meet a scope exception for certain contracts involving an entity's own equity. The premiums paid for the Note Hedge Transactions have been included as a net reduction to additional paid-in capital within stockholders' equity.

In December 2023, i3 Verticals, LLC received $250 from the Counterparties to terminate the portion of the Note Hedge Transactions corresponding to the Exchangeable Notes that were repurchased in fiscal year 2020. Also in December 2023, i3 Verticals, LLC entered into agreements with the Counterparties to terminate the portion of the Note Hedge Transactions corresponding to the Exchangeable Note Repurchases. On January 18, 2024, in connection with the Exchangeable Note Repurchases, the Company and i3 Verticals, LLC terminated the corresponding portions of the Note Hedge Transactions ("Note Hedge Unwinds"), and i3 Verticals, LLC received $987 for the sale of the Note Hedge Unwinds and recorded a loss on the sale of the Note Hedge Unwinds of $245.

Warrant Transactions

On February 12, 2020, concurrently with the pricing of the Exchangeable Notes, and on February 13, 2020, concurrently with the exercise by the initial purchasers of their right to purchase additional Exchangeable Notes, the Company entered into warrant transactions to sell to the Counterparties warrants (the “Warrants”) to acquire, subject to customary adjustments, up to initially 3,376,391 shares of Class A common stock in the aggregate at an initial exercise price of $62.88 per share. The Company offered and sold the Warrants in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act. The Warrants will expire over a period beginning on May 15, 2025.

The Warrants are separate transactions, entered into by the Company with the Counterparties, and are not part of the terms of the Exchangeable Notes. Holders of the Exchangeable Notes will not have any rights with respect to the Warrants. The Company received approximately $14,669 from the offering and sale of the Warrants. The Warrants do not require separate accounting as a derivative as they meet a scope exception for

24

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

certain contracts involving an entity's own equity. The premiums paid for the Warrants have been included as a net increase to additional paid-in capital within stockholders' equity.

In December 2023, the Company paid $119 to the Counterparties to terminate the portion of the Warrants corresponding to the Exchangeable Notes that were repurchased in fiscal year 2020. Also in December 2023, i3 Verticals, LLC entered into agreements with the Counterparties to terminate the portion of the Warrants corresponding to the Exchangeable Note Repurchases. On January 18, 2024, in connection with the Exchangeable Note Repurchases, the Company and i3 Verticals, LLC terminated the corresponding portions of the and Warrants ("Warrant Unwinds"), and the Company paid $433 for the repurchase of the Warrant Unwinds and recorded a gain on the repurchase of the Warrant Unwinds of $105.

2023 Senior Secured Revolving Credit Facility

On May 8, 2023, i3 Verticals, LLC (the “Borrower”), entered into that certain Credit Agreement (the “2023 Senior Secured Credit Facility”) with the guarantors and lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (“JPMorgan”). The 2023 Senior Secured Credit Facility replaced the prior senior secured credit facility of the Company which was entered into on May 9, 2019 (the "Prior Senior Secured Credit Facility"). The 2023 Senior Secured Credit Facility provides for aggregate commitments of $450 million in the form of a senior secured revolving credit facility (the “Revolver”).

The 2023 Senior Secured Credit Facility provides that the Borrower has the right to seek additional commitments to provide additional term loan facilities or additional revolving credit commitments in an aggregate principal amount up to, as of any date of determination, the sum of (i) the greater of $100 million and 100% of the Borrower’s consolidated EBITDA (as defined in the 2023 Senior Secured Credit Facility) for the most recently completed four quarter period, plus (ii) the amount of certain prepayments of certain indebtedness, so long as, among other things, after giving pro forma effect to the incurrence of such additional borrowings and any related transactions, the Borrower’s consolidated interest coverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not be less than 3.0 to 1.0 and the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not exceed 5.0 to 1.0. As of March 31, 2024, the Borrower's consolidated interest coverage ratio was 4.1x and total leverage ratio was 3.5x.

The provision of any such additional amounts under the additional term loan facilities or additional revolving credit commitments are subject to certain additional conditions and the receipt of certain additional commitments by existing or additional lenders. The lenders under the 2023 Senior Secured Credit Facility are not under any obligation to provide any such additional term loan facilities or revolving credit commitments.

The proceeds of the Revolver, together with proceeds from any additional amounts under the additional term loan facilities or additional revolving credit commitments, may only be used by the Borrower to (i) finance working capital, capital expenditures and other lawful corporate purposes, (ii) finance permitted acquisitions (as defined in the 2023 Senior Secured Credit Facility) and (iii) to refinance certain existing indebtedness.

Borrowings under the Revolver will be made, at the Borrower’s option, at the Adjusted Term SOFR rate or the base rate, plus, in each case, an applicable margin.

The Adjusted Term SOFR rate will be the rate of interest per annum equal to the Term SOFR rate (based upon an interest period of one, three or six months), plus 0.10%, plus an applicable margin of 2.00% to 3.00% (3.00% at March 31, 2024). The Adjusted Term SOFR rate shall not be less than 0% in any event.

The base rate is a fluctuating rate of interest per annum equal to the highest of (a) the greater of the federal funds rate or the overnight bank funding rate, plus ½ of 1%, (b) Wall Street Journal prime rate and (c) the Adjusted Term SOFR rate for an interest period of one month, plus 1%, plus an applicable margin of 1.00% to 2.00% (2.00% at March 31, 2024). The base rate shall not be less than 1% in any event.

25

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The applicable margin is based upon the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility), as reflected in the schedule below:

Consolidated Total Net Leverage Ratio	Commitment Fee		Letter of Credit Fee		Term Benchmark Loans		Base Rate Loans
> 3.0 to 1.0	0.30	%	3.00	%	3.00	%	2.00	%
> 2.5 to 1.0 but < 3.00 to 1.0	0.25	%	2.50	%	2.50	%	1.50	%
> 2.0 to 1.0 but < 2.50 to 1.0	0.20	%	2.25	%	2.25	%	1.25	%
< 2.0 to 1.0	0.15	%	2.00	%	2.00	%	1.00	%

In addition to paying interest on outstanding principal under the Revolver, the Borrower will be required to pay a commitment fee equal to the product of between 0.15% and 0.30% (the applicable percentage depending on the Borrower’s consolidated total net leverage ratio as reflected in the schedule above, 0.30% at March 31, 2024) times the actual daily amount by which $450 million exceeds the total amount outstanding under the Revolver and available to be drawn under all outstanding letters of credit.

The Borrower will be permitted to voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans under the 2023 Senior Secured Credit Facility, whether such amounts are issued under the Revolver or under the additional term loan facilities or additional revolving credit facilities, at any time without premium or penalty.

In addition, if the total amount borrowed under the Revolver exceeds $450 million at any time, the 2023 Senior Secured Credit Facility requires the Borrower to prepay such excess outstanding amounts.

All obligations under the 2023 Senior Secured Credit Facility are unconditionally guaranteed by the Company, and each of the Company’s existing and future direct and indirect material, wholly owned domestic subsidiaries, subject to certain exceptions. The obligations are secured by first-priority security interests in substantially all tangible and intangible assets of the Borrower, the Company and each subsidiary guarantor, in each case whether owned on the date of the initial borrowings or thereafter acquired.

The 2023 Senior Secured Credit Facility places certain restrictions on the ability of the Borrower, the Company and their subsidiaries to, among other things, incur debt and liens; merge, consolidate or liquidate; dispose of assets; enter into hedging arrangements; make certain restricted payments; undertake transactions with affiliates; enter into sale-leaseback transactions; make certain investments; prepay or modify the terms of certain indebtedness; and modify the terms of certain organizational agreements.

The 2023 Senior Secured Credit Facility contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain events with respect to employee benefit plans, invalidity of loan documents and certain changes in control.

Debt issuance costs

The Company did not incur any debt issuance costs during the three and six months ended March 31, 2024, and incurred $265 in debt issuance costs during the six months ended March 31, 2023. During the three and six months ended March 31, 2024. the Company wrote off $926 of debt issuance costs in connection with the Exchangeable Note Repurchases. The Company's debt issuance costs are being amortized over the related term of the debt using the straight-line method, which is not materially different than the effective interest rate method, and are presented net against long-term debt in the condensed consolidated balance sheets. The amortization of deferred debt issuance costs is included in interest expense and amounted to approximately $262 and $676

26

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

during the three and six months ended March 31, 2024, respectively, and $368 and $729 during the three and six months ended March 31, 2023, respectively.

8. INCOME TAXES

i3 Verticals, Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from i3 Verticals, LLC based on i3 Verticals, Inc.’s economic interest in i3 Verticals, LLC. i3 Verticals, LLC's members, including the Company, are liable for federal, state and local income taxes based on their share of i3 Verticals, LLC's pass-through taxable income. i3 Verticals, LLC is not a taxable entity for federal income tax purposes but is subject to and reports entity level tax in both Tennessee and Texas. In addition, certain subsidiaries of i3 Verticals, LLC are corporations that are subject to state and federal income taxes.

The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. When the estimate of the annual effective tax rate is unreliable, the Company records its income tax expense or benefit based up on a period to date effective tax rate. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the Company’s estimated tax rate changes, it makes a cumulative adjustment in that period. The Company’s provision for income taxes was a provision of $580 and $762 for the three and six months ended March 31, 2024, respectively and a benefit of $563 and $181 during the three and six months ended March 31, 2023, respectively.

Tax Receivable Agreement

On June 25, 2018, the Company entered into a Tax Receivable Agreement with i3 Verticals, LLC and each of the Continuing Equity Owners (the “Tax Receivable Agreement”) that provides for the payment by the Company to the Continuing Equity Owners of 85% of the amount of certain tax benefits, if any, that it actually realizes, or in some circumstances, is deemed to realize in its tax reporting, as a result of (i) future redemptions funded by the Company or exchanges, or deemed exchanges in certain circumstances, of Common Units of i3 Verticals, LLC for Class A common stock of i3 Verticals, Inc. or cash, and (ii) certain additional tax benefits attributable to payments made under the Tax Receivable Agreement. These tax benefit payments are not conditioned upon one or more of the Continuing Equity Owners maintaining a continued ownership interest in i3 Verticals, LLC. If a Continuing Equity Owner transfers Common Units but does not assign to the transferee of such units its rights under the Tax Receivable Agreement, such Continuing Equity Owner generally will continue to be entitled to receive payments under the Tax Receivable Agreement arising in respect of a subsequent exchange of such Common Units. In general, the Continuing Equity Owners’ rights under the Tax Receivable Agreement may not be assigned, sold, pledged or otherwise alienated to any person, other than certain permitted transferees, without (a) the Company's prior written consent, which should not be unreasonably withheld, conditioned or delayed, and (b) such persons becoming a party to the Tax Receivable Agreement and agreeing to succeed to the applicable Continuing Equity Owner’s interest therein. The Company expects to benefit from the remaining 15% of the tax benefits, if any, that the Company may realize.

During the six months ended March 31, 2024, the Company acquired an aggregate of 40,718 Common Units in i3 Verticals, LLC in connection with the redemption of Common Units from the Continuing Equity Owners. which resulted in an increase in the tax basis of our investment in i3 Verticals, LLC subject to the provisions of the Tax Receivable Agreement. As a result of the exchange, during the six months ended March 31, 2024, the Company recognized an increase to its net deferred tax assets in the amount of $286, and corresponding Tax Receivable Agreement liabilities of $243, representing 85% of the tax benefits due to Continuing Equity Owners.

The deferred tax asset and corresponding Tax Receivable Agreement liability balances were $38,009 and $40,323, respectively, as of March 31, 2024.

27

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Payments to the Continuing Equity Owners related to exchanges through March 31, 2024 will range from $0 to $3,256 per year and are expected to be paid over the next 24 years. The amounts recorded as of March 31, 2024, approximate the current estimate of expected tax savings and are subject to change after the filing of the Company’s U.S. federal and state income tax returns. Future payments under the Tax Receivable Agreement with respect to subsequent exchanges would be in addition to these amounts.

9. LEASES

The Company’s leases consist primarily of real estate leases throughout the markets in which the Company operates. At contract inception, the Company determines whether an arrangement is or contains a lease, and for each identified lease, evaluates the classification as operating or financing. The Company had no finance leases as of March 31, 2024. Leased assets and obligations are recognized at the lease commencement date based on the present value of fixed lease payments to be made over the term of the lease. Renewal and termination options are factored into determination of the lease term only if the option is reasonably certain to be exercised. The weighted-average remaining lease term at March 31, 2024 and 2023 was two years and four years, respectively. The Company had no significant short-term leases during the three and six months ended March 31, 2024 and 2023.

The Company’s leases do not provide a readily determinable implicit interest rate and the Company uses its incremental borrowing rate to measure the lease liability and corresponding right-of-use asset. The incremental borrowing rates were determined based on a portfolio approach considering the Company’s current secured borrowing rate adjusted for market conditions and the length of the lease term. The weighted-average discount rate used in the measurement of our lease liabilities was 7.4% and 7.3% as of March 31, 2024 and 2023, respectively.

Operating lease cost is recognized on a straight-line basis over the lease term. Operating lease costs were $1,318 and $2,651 for the three and six months ended March 31, 2024, respectively, and $1,405 and $2,909 for the three and six months ended March 31, 2023, respectively, which are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Total operating lease costs include variable lease costs of approximately $39 and $49, for the three and six months ended March 31, 2024, respectively, and $9 and $20 for the three and six months ended March 31, 2023, respectively, which are primarily comprised of costs of maintenance and utilities and changes in rates, and are determined based on the actual costs incurred during the period. Variable payments are expensed in the period incurred and not included in the measurement of lease assets and liabilities.

Short-term rent expense was $41 and $86 for the three and six months ended March 31, 2024, respectively, and $75 and $110 for the three and six months ended March 31, 2023, respectively, and are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

28

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

As of March 31, 2024, maturities of lease liabilities are as follows:

Fiscal Years ending September 30:
2024 (six months remaining)	$	2,598
2025	4,984
2026	3,874
2027	1,668
2028	755
Thereafter	1,261
Total future minimum lease payments (undiscounted)(1)	15,140
Less: present value discount	(1,357)
Present value of lease liability	$	13,783

__________________________

1.Total future minimum lease payments excludes payments of $39 for leases designated as short-term leases, which are excluded from the Company's right-of-use assets. These payments will be made within the next twelve months.

10. FAIR VALUE MEASUREMENTS

The Company applies the provisions of ASC 820, Fair Value Measurement, which defines fair value, establishes a framework for its measurement and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or the price paid to transfer a liability as of the measurement date. A three-tier, fair-value reporting hierarchy exists for disclosure of fair value measurements based on the observability of the inputs to the valuation of financial assets and liabilities. The three levels are:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets.

The carrying value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, settlement assets and obligations, accounts receivable, other assets, accounts payable, and accrued expenses, approximated their fair values as of March 31, 2024 and 2023, because of the relatively short maturity dates on these instruments. The carrying amount of debt approximates fair value as of March 31, 2024 and 2023, because interest rates on these instruments approximate market interest rates.

29

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The Company has no Level 1 or Level 2 financial instruments measured at fair value on a recurring basis. The following tables present the changes in the Company's Level 3 financial instruments that are measured at fair value on a recurring basis.

	Accrued Contingent Consideration
Balance at September 30, 2023	$	8,239
Contingent consideration accrued at time of business combination	170
Change in fair value of contingent consideration included in Operating expenses	(527)
Contingent consideration paid	(3,913)
Balance at March 31, 2024	$	3,969

	Accrued Contingent Consideration
Balance at September 30, 2022	$	22,833
Contingent consideration accrued at time of business combination	760
Change in fair value of contingent consideration included in Operating expenses	3,722
Contingent consideration paid	(5,056)
Balance at March 31, 2023	$	22,259

The fair value of contingent consideration obligations includes inputs not observable in the market and thus represents a Level 3 measurement. The amount to be paid under these obligations is contingent upon the achievement of certain growth metrics related to the financial performance of the entities subsequent to acquisition. The fair value of material contingent consideration included in an acquisition is calculated using a Monte Carlo simulation. The contingent consideration is revalued each period until it is settled. Management reviews the historical and projected performance of each acquisition with contingent consideration and uses an income probability method to revalue the contingent consideration. The revaluation requires management to make certain assumptions and represent management's best estimate at the valuation date. The probabilities are determined based on a management review of the expected likelihood of triggering events that would cause a change in the contingent consideration paid. The Company develops the projected future financial results based on an analysis of historical results, market conditions, and the expected impact of anticipated changes in the Company's overall business and/or product strategies.

Approximately $3,868 and $6,825 of contingent consideration was recorded in accrued expenses and other current liabilities as of March 31, 2024 and September 30, 2023, respectively. Approximately $101 and $1,414 of contingent consideration was recorded in other long-term liabilities as of March 31, 2024 and September 30, 2023, respectively.

Disclosure of Fair Values

The Company's financial instruments that are not remeasured at fair value include the Exchangeable Notes (see Note 7). The Company estimates the fair value of the Exchangeable Notes through consideration of quoted market prices of similar instruments, classified as Level 2 as described above. The estimated fair value of the Exchangeable Notes was $25,043 as of March 31, 2024.

30

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

11. EQUITY-BASED COMPENSATION

A summary of equity-based compensation expense recognized during the three and six months ended March 31, 2024 and 2023 is as follows:

	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Stock options	$	4,554	$	5,992	$	9,523	$	12,280
Restricted stock units	1,223		810		2,762		1,368
Equity-based compensation expense	$	5,777	$	6,802	$	12,285	$	13,648

Amounts are included in general and administrative expense on the condensed consolidated statements of operations. Current and deferred income tax benefits of $927 and $2,005 were recognized during the three and six months ended March 31, 2024, respectively, and $1,215 and $2,404 during the three and six months ended March 31, 2023, respectively.

In May 2018, the Company adopted the 2018 Equity Incentive Plan (the “2018 Plan”) under which the Company may grant up to 3,500,000 stock options and other equity-based awards to employees, directors and officers. The number of shares of Class A common stock available for issuance under the 2018 Plan includes an annual increase on the first day of each calendar year equal to 4.0% of the outstanding shares of all classes of the Company's common stock as of the last day of the immediately preceding calendar year, unless the Company’s board of directors determines prior to the last trading day of December of the immediately preceding calendar year that the increase shall be less than 4.0%. As of March 31, 2024, equity awards with respect to 1,259,827 shares of the Company's Class A common stock were available for grant under the 2018 Plan.

In September 2020, the Company adopted the 2020 Acquisition Equity Incentive Plan (the “2020 Inducement Plan”) under which the Company may grant up to 1,500,000 stock options and other equity-based awards to individuals that were not previously employees of the Company or its subsidiaries in connection with acquisitions, as a material inducement to the individual's entry into employment with the Company or its subsidiaries within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. In May 2021, the Company amended the 2020 Inducement Plan to increase the number of shares of the Company's Class A common stock available for issuance from 1,500,000 to 3,000,000 shares. As of March 31, 2024, equity awards with respect to 1,230,668 shares of the Company's Class A common stock were available for grant under the 2020 Inducement Plan.

Share-based compensation expense includes the estimated effects of forfeitures, which will be adjusted over the requisite service period to the extent actual forfeitures differ or are expected to differ from such estimates.

31

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Stock Options

The Company has issued stock option awards under the 2018 Plan and the 2020 Inducement Plan. The fair value of the stock option awards during the six months ended March 31, 2024 and during the year ended September 30, 2023 was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:

	March 31, 2024		September 30, 2023
Expected volatility(1)	52.1	%	54.9	%
Expected dividend yield(2)	—	%	—	%
Expected term(3)	6 years		6 years
Risk-free interest rate(4)	4.1	%	3.9	%

_________________

1.Expected volatility is based on the Company's own share price.

2.The Company has assumed a dividend yield of zero as management has no plans to declare dividends in the foreseeable future.

3.Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method as details of employee exercise behavior are limited due to limited historical data.

4.The risk-free rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term.

A summary of stock option activity for the six months ended March 31, 2024 is as follows:

	Stock Options	Weighted Average Exercise Price
Outstanding at September 30, 2023	8,576,670	$	25.16
Granted	944,556	19.23
Exercised	(32,517)	18.14
Forfeited	(230,180)	27.57
Outstanding at March 31, 2024	9,258,529	$	24.52
Exercisable at March 31, 2024	6,602,597	$	25.08

The weighted-average grant date fair value of stock options granted during the six months ended March 31, 2024 was $10.54.

As of March 31, 2024, total unrecognized compensation expense related to unvested stock options, including an estimate for pre-vesting forfeitures, was $22,046, which is expected to be recognized over a weighted-average period of 2.68 years. The Company's policy is to account for forfeitures of stock-based compensation awards as they occur.

The total fair value of stock options that vested during the three and six months ended March 31, 2024 was $10,853 and 17,248, respectively.

Restricted Stock Units

The Company has issued Class A common stock in the form of restricted stock units ("RSUs") under the 2018 Plan.

32

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

A summary of activity related to restricted stock units for the six months ended March 31, 2024 is as follows:

	Restricted Stock Units	Weighted Average Grant Date Fair Value
Outstanding at September 30, 2023	874,024	$	24.95
Granted	258,684	19.26
Vested	(172,159)	25.65
Forfeited	(32,084)	24.86
Outstanding at March 31, 2024	928,465	$	23.24

As of March 31, 2024, total unrecognized compensation expense related to unvested RSUs, including an estimate for pre-vesting forfeitures, was $14,329, which is expected to be recognized over a weighted average period of 3.01 years.

The total fair value of RSUs that vested during the three and six months ended March 31, 2024 was $3,718 and $4,416, respectively.

12. COMMITMENTS AND CONTINGENCIES

Leases

The Company utilizes office space and equipment under operating leases. Rent expense under these leases amounted to $1,359 and $2,737 during the three and six months ended March 31, 2024, respectively, and $1,480 and $3,019 during the and three and six months ended March 31, 2023, respectively. Refer to Note 9 for further discussion and a table of the future minimum payments under these leases.

Minimum Processing Commitments

The Company has non-exclusive agreements with several processors to provide the Company services related to transaction processing and transmittal, transaction authorization and data capture, and access to various reporting tools. Certain of these agreements require the Company to submit a minimum monthly number of transactions for processing. If the Company submits a number of transactions that is lower than the minimum, it is required to pay to the processor the fees the processor would have received if the Company had submitted the required minimum number of transactions. As of March 31, 2024, such minimum fee commitments were as follows:

Fiscal Years ending September 30:
2024 (six months remaining)	$	2,177
2025	728
2026	240
2027	60
2028	—
Thereafter	—
Total	$	3,205

33

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Litigation

With respect to all legal, regulatory and governmental proceedings, and in accordance with ASC 450-20, Contingencies—Loss Contingencies, the Company considers the likelihood of a negative outcome. If the Company determines the likelihood of a negative outcome with respect to any such matter is probable and the amount of the loss can be reasonably estimated, the Company records an accrual for the estimated amount of loss for the expected outcome of the matter. If the likelihood of a negative outcome with respect to material matters is reasonably possible and the Company is able to determine an estimate of the amount of possible loss or a range of loss, whether in excess of a related accrued liability or where there is no accrued liability, the Company discloses the estimate of the amount of possible loss or range of loss. However, the Company in some instances may be unable to estimate an amount of possible loss or range of loss based on the significant uncertainties involved in, or the preliminary nature of, any such material matter, and in these instances the Company will disclose the nature of the contingency and describe why the Company is unable to determine an estimate of possible loss or range of loss.

The Company is involved in ordinary course legal proceedings, which include all claims, lawsuits, investigations and proceedings, including unasserted claims, which are probable of being asserted, arising in the ordinary course of business. The Company has considered all such ordinary course legal proceedings in formulating its disclosures and assessments. After taking into consideration the evaluation of such legal matters by the Company's legal counsel, the Company's management believes at this time such matters will not have a material impact on the Company's consolidated balance sheet, results of operations or cash flows.

S&S Litigation

On June 2, 2021, the State of Louisiana, Division of Administration (the “State”) and a putative class of Louisiana sheriffs and law enforcement districts (collectively "Plaintiffs") filed a Petition (as amended on October 4, 2021, the “Petition”), in the 19th Judicial District Court for the Parish of East Baton Rouge against i3-Software & Services, LLC (“S&S”), a subsidiary of the Company located in Shreveport, Louisiana, the Company, i3 Verticals, LLC, the current leader of the S&S business, the former leader of the S&S business, and 1120 South Pointe Properties, LLC (“South Pointe”), the former owner of the assets of the S&S business (collectively "Defendants"). See State of Louisiana, by and through its Division of Administration, East Baton Rouge Parish Law Enforcement District, by and through the duly elected East Baton Rouge Parish Sheriff, Sid J. Gautreaux, III, et. al., individually and as class representatives vs. i3-Software & Services, LLC; 1120 South Pointe Properties, LLC, formerly known as Software and Services of Louisiana, L.L.C.; i3 Verticals, Inc.; i3 Verticals, LLC; Gregory R. Teeters; and Scott Carrington.

The Petition was amended on October 4, 2021 to amend and expand the putative class and subsequently removed to the United States District Court for the Middle District of Louisiana. The Petition seeks monetary damages for the cost of network remediation of $15,000 purportedly spent by the State and $7,000 purportedly spent by the Plaintiffs, return of purchase prices, potential additional expenses related to remediation and any obligation to notify parties of an alleged data breach as and if required by applicable law, and reasonable attorneys’ fees. The claimed damages relate to a third-party remote access software product used in connection with services provided by S&S to certain Louisiana law enforcement districts and alleged inadequacies in the Company’s cybersecurity practices. Plaintiffs moved to remand the action to state court on November 5, 2021, and the motion was referred to a magistrate to make a report and recommendation to the district court judge. On July 5, 2022, the magistrate recommended that the matter be remanded to state court. On July 19, 2022, the Company and all other defendants filed objections to the recommendation. On August 3, 2022, the Plaintiffs filed a response to those objections. On August 16, 2022, the district court granted the Plaintiffs’ motion to remand, and all Defendants appealed. Oral argument on this motion in front of the United States Fifth Circuit Court of Appeals took place on April 4, 2023, and on September 1, 2023, the Fifth Circuit panel affirmed the District Court order to remand the case back to state court. On September 29, 2023, all Defendants-Appellants filed a Petition for Rehearing En Banc, which the Plaintiffs-Appellees opposed on October 12, 2023. As a result of Defendants’ petition, the Fifth Circuit held its mandate, effectively staying the effective date of its decision, but the Fifth Circuit

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i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

ultimately denied the petition for rehearing on February 22, 2024, sending the case back to the 19th Judicial District Court for the Parish of East Baton Rouge, where the case remains pending.

The assets of the S&S business were acquired from South Pointe by the Company in 2018 for $17,000, including upfront cash consideration and contingent consideration, and provides software and payments services within the Company’s Public Sector vertical to local government agencies almost exclusively in Louisiana.

The Company is unable to predict the outcome of this litigation. While we do not believe that this matter will have a material adverse effect on our business or financial condition, we cannot give assurance that this matter will not have a material effect on our results of operations or cash flows for the period in which it is resolved.

Other

The Company's subsidiary CP-PS, LLC has certain indemnification obligations in favor of FDS Holdings, Inc. related to the acquisition of certain assets of Merchant Processing Solutions, LLC in February 2014. The Company has incurred expenses related to these indemnification obligations in prior periods and may have additional expenses in the future. However, after taking into consideration the evaluation of such matters by the Company’s legal counsel, the Company’s management believes at this time that the anticipated outcome of any existing or potential indemnification liabilities related to this matter will not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

13. RELATED PARTY TRANSACTIONS

In connection with the Company’s IPO, the Company and i3 Verticals, LLC entered into a Tax Receivable Agreement with the Continuing Equity Owners that provides for the payment by the Company to the Continuing Equity Owners of 85% of the amount of certain tax benefits, if any, that it actually realizes, or in some circumstances, is deemed to realize in its tax reporting, as a result of (i) future redemptions funded by the Company or exchanges, or deemed exchanges in certain circumstances, of Common Units of i3 Verticals, LLC for Class A common stock of i3 Verticals, Inc. or cash, and (ii) certain additional tax benefits attributable to payments made under the Tax Receivable Agreement. See Note 8 for further information. As of March 31, 2024, the total amount due under the Tax Receivable Agreement was $40,323.

14. SEGMENTS

The Company determines its operating segments based on ASC 280, Segment Reporting, in alignment with how the chief operating decision-making group monitors and manages the performance of the business as well as the level at which financial information is reviewed. The Company’s operating segments are strategic business units that offer different products and services.

The Company's core business is delivering seamlessly integrated software and payment solutions customers in strategic vertical markets. This is accomplished through the Merchant Services and Software and Services segments.

The Software and Services segment delivers vertical market software solutions to customers across all of the Company's strategic vertical markets. These solutions often include embedded payments or other recurring services.

The Merchant Services segment provides comprehensive payment solutions to businesses and organizations. The Merchant Services segment includes third-party integrated payment solutions as well as traditional merchant processing services across the Company's strategic vertical markets.

The Other category includes corporate overhead expenses when presenting reportable segment information.

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i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The Company primarily uses processing margin to measure operating performance. Processing margin is equal to revenue less other cost of services plus residuals expense, which are a component of other cost of services. The following is a summary of reportable segment operating performance for the three and six months ended March 31, 2024 and 2023.

	As of and for the Three Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue	$	59,483	$	35,075	$	(16)	$	94,542
Other costs of services	(4,908)		(16,289)		17		(21,180)
Residuals	735		10,587		(6)		11,316
Processing margin	$	55,310	$	29,373	$	(5)	$	84,678
Residuals							(11,316)
Selling, general and administrative							(54,162)
Depreciation and amortization							(10,069)
Change in fair value of contingent consideration							290
Income from operations							$	9,421
Total assets	$	593,219	$	212,082	$	60,241	$	865,542
Goodwill	$	288,822	$	121,950	$	—	$	410,772

	As of and for the Six Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue	$	116,072	$	70,497	$	(37)	$	186,532
Other costs of services	(9,217)		(32,423)		36		(41,604)
Residuals	1,353		20,987		(15)		22,325
Processing margin	$	108,208	$	59,061	$	(16)	$	167,253
Residuals							(22,325)
Selling, general and administrative							(107,694)
Depreciation and amortization							(19,808)
Change in fair value of contingent consideration							527
Income from operations							$	17,953
Total assets	$	593,219	$	212,082	$	60,241	$	865,542
Goodwill	$	288,822	$	121,950	$	—	$	410,772

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i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

	As of and for the Three Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue	$	60,797	$	33,094	$	(19)	$	93,872
Other costs of services	(4,229)		(15,719)		18		(19,930)
Residuals	799		10,039		(9)		10,829
Processing Margin	$	57,367	$	27,414	$	(10)	$	84,771
Residuals							(10,829)
Selling, general and administrative							(57,204)
Depreciation and amortization							(9,015)
Change in fair value of contingent consideration							(2,279)
Income from operations							$	5,444
Total assets	$	620,126	$	205,898	$	57,002	$	883,026
Goodwill	$	287,092	$	121,950	$	—	$	409,042

	As of and for the Six Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue	$	114,010	$	65,928	$	(37)	$	179,901
Other costs of services	(7,752)		(31,286)		39		(38,999)
Residuals	1,322		19,848		(20)		21,150
Processing margin	$	107,580	$	54,490	$	(18)	$	162,052
Residuals							(21,150)
Selling, general and administrative							(108,207)
Depreciation and amortization							(17,691)
Change in fair value of contingent consideration							(3,722)
Income from operations							$	11,282
Total assets	$	620,126	$	205,898	$	57,002	$	883,026
Goodwill	$	287,092	$	121,950	$	—	$	409,042

The Company has not disclosed expenditures on long-lived assets as such expenditures are not reviewed by or provided to the chief operating decision maker.

37

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

15. NON-CONTROLLING INTEREST

i3 Verticals, Inc. is the sole managing member of i3 Verticals, LLC, and as a result, consolidates the financial results of i3 Verticals, LLC and reports a non-controlling interest representing the Common Units of i3 Verticals, LLC held by the Continuing Equity Owners. Changes in i3 Verticals, Inc.’s ownership interest in i3 Verticals, LLC while i3 Verticals, Inc. retains its controlling interest in i3 Verticals, LLC will be accounted for as equity transactions. As such, future redemptions or direct exchanges of Common Units of i3 Verticals, LLC by the Continuing Equity Owners will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in capital when i3 Verticals, LLC has positive or negative net assets, respectively.

As of March 31, 2024 and 2023, respectively, i3 Verticals, Inc. owned 23,416,518 and 23,167,730 of i3 Verticals, LLC's Common Units, representing a 70.0% and 69.6% economic ownership interest in i3 Verticals, LLC.

The following table summarizes the impact on equity due to changes in the Company's ownership interest in i3 Verticals, LLC:

	Six Months Ended March 31,
	2024		2023
Net income attributable to non-controlling interest	$	1,908	$	181
Transfers (from) to non-controlling interests:
Redemption of common units in i3 Verticals, LLC	(384)		(86)
Allocation of equity to non-controlling interests	3,750		299
Net transfers to non-controlling interests	3,366		213
Change from net income attributable to non-controlling interests and net transfers to non-controlling interests	$	5,274	$	394

16. EARNINGS PER SHARE

Basic earnings per share of Class A common stock is computed by dividing net income available to i3 Verticals, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income available to i3 Verticals, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

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i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the three and six months ended March 31, 2024 and 2023:

	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Basic net income (loss) per share:
Numerator
Net income (loss)	$	3,348	$	(192)	$	4,884	$	(23)
Less: Net income (loss) attributable to non-controlling interest	1,470		(228)		1,908		181
Net income (loss) attributable to Class A common stockholders	$	1,878	$	36	$	2,976	$	(204)
Denominator
Weighted average shares of Class A common stock outstanding	23,331,239		23,135,898		23,299,214		23,066,499
Basic net income (loss) per share(1)	$	0.08	$	0.00	$	0.13	$	(0.01)
Diluted net income per share:
Numerator
Net income attributable to Class A common stockholders	$	1,878	$	36	$	2,976
Reallocation of net loss assuming conversion of common units(2)(3)	—		(171)		—
Net income (loss) attributable to Class A common stockholders - diluted	1,878		(135)		2,976
Denominator
Weighted average shares of Class A common stock outstanding	23,331,239		23,135,898		23,299,214
Weighted average effect of dilutive securities(2)	387,235		11,133,242		427,506
Weighted average shares of Class A common stock outstanding - diluted	23,718,474		34,269,140		23,726,720
Diluted net income (loss) per share	$	0.08	$	0.00	$	0.13

__________________________

1.For the six months ended March 31, 2023, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share. The following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net loss per share of Class A common stock:

a.10,114,598 weighted average shares of Class B common stock for the six months ended March 31, 2023, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive.

b.5,165,478 stock options for the six months ended March 31, 2023, 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, and

c.633,453 shares for the six months ended March 31, 2023, resulting from estimated stock option exercises and restricted stock units vesting as calculated by the treasury stock method were excluded because of the effect of including them would have been anti-dilutive.

39

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

2.For the three and six months ended March 31, 2024 and the three months ended March 31, 2023, the following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net income per share of Class A common stock:

a.10,091,604 and 10,092,504 weighted average shares of Class B common stock for the three and six months ended March 31, 2024, respectively, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive, and

b.7,852,595 and 8,246,542 stock options for the three and six months ended March 31, 2024, respectively, and 4,018,042 stock options for the three months ended March 31, 2023, 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.

3.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 Note 8 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 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.

In September 2022 the Company made the irrevocable election to settle the principal portion of its Exchangeable Notes only in cash, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread will have a dilutive impact on diluted net income per share of common stock when the average market price of the Company's Class A common stock for a given period exceeds the exchange price of $40.87 per share for the Exchangeable Notes.

The Warrants sold in connection with the issuance of the Exchangeable Notes are considered to be dilutive when the average price of the Company's Class A common stock during the period exceeds the Warrants' stock price of $62.88 per share. The effect of the additional shares that may be issued upon exercise of the Warrants will be included in the weighted average shares of Class A common stock outstanding—diluted using the treasury stock method. The Note Hedge Transactions purchased in connection with the issuance of the Exchangeable Notes are considered to be anti-dilutive and therefore do not impact our calculation of diluted net income per share. Refer to Note 7 for further discussion regarding the Exchangeable Notes.

Shares of the Company's Class B common stock do not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented.

17. SIGNIFICANT NON-CASH TRANSACTIONS

The Company engaged in the following significant non-cash investing and financing activities during the six months ended March 31, 2024 and 2023:

	Six months ended March 31,
	2024		2023
Acquisition date fair value of contingent consideration in connection with business combinations	$	170	$	760
Debt issuance costs financed with proceeds from the 2023 Senior Secured Credit Facility	$	—	$	178
Consideration accrued for residual buyouts	$	252	$	—
Right-of-use assets obtained in exchange for operating lease obligations	$	1,279	$	1,098

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the year ended September 30, 2023 (“Form 10-K”), filed with the SEC on November 22, 2023. The terms “i3 Verticals,” “we,” “us” and “our” and similar references refer (1) before the completion of our IPO or the reorganization transactions entered into in connection therewith (the “Reorganization Transactions”), which are described in the notes to the condensed consolidated financial statements, to i3 Verticals, LLC and, where appropriate, its subsidiaries, and (2) after the Reorganization Transactions to i3 Verticals, Inc. and, where appropriate, its subsidiaries.

Note Regarding Forward-looking Statements

This Quarterly Report on Form 10-Q includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical facts contained in this report may be forward-looking statements. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “pro forma,” “continues,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will,” “would” or “should” or, in each case, their negative or other variations or comparable terminology.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These factors include, but are not limited to, the following:

•our indebtedness and our ability to maintain compliance with the financial covenants in our 2023 Senior Secured Credit Facility (as defined below);

•our ability to meet our liquidity needs;

•our ability to raise additional funds on terms acceptable to us, if at all, whether through debt, equity or a combination thereof;

•our ability to protect our systems and data from continually evolving cybersecurity risks or other technological risks, including the impact of any cybersecurity incidents or security breaches;

•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;

•our ability to successfully manage our intellectual property;

•the triggering of impairment testing of our fair-valued assets, including goodwill and intangible assets, in the event of a decline in the price of our Class A common stock or otherwise;

•our ability to generate revenues sufficient to maintain profitability and positive cash flow;

•competition in our industry and our ability to compete effectively;

•consolidation in the banking and financial services industry;

•risk of shortages, price increases, changes, delays or discontinuations of hardware due to supply chain disruptions with respect to our limited number of suppliers;

•impact of inflation and fluctuations in interest rates (including current elevated interest rate levels) and the potential effect of such fluctuations on revenues, expenses and resulting margins;

•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;

•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;

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•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, complete those acquisitions and effectively integrate those acquisitions into our services;

•potential degradation of the quality of our products, services and support;

•our ability to retain customers;

•our ability to attract, recruit, retain and develop key personnel and qualified employees;

•risk of significant chargeback liability if our customers refuse or cannot reimburse chargebacks resolved in favor of their customers;

•risks related to laws, regulations and industry standards, including our ability to comply with complex laws and regulations applicable to the healthcare industry or to adjust our operations in response to changing laws and regulations;

•the impact of government investigations, claims, and litigation;

•the effects of health reform initiatives;

•risks related to our international operations;

•operating and financial restrictions imposed by our 2023 Senior Secured Credit Facility;

•risks related to the accounting method for i3 Verticals, LLC's 1.0% Exchangeable Notes due February 15, 2025 (the "Exchangeable Notes");

•our ability to raise the funds necessary to settle exchanges of the Exchangeable Notes or to repurchase the Exchangeable Notes upon a fundamental change;

•risks related to the conditional exchange feature of the Exchangeable Notes;

•risks related to the potential sale of certain assets related to our Merchant Services business;

•the "Risk Factors" included in our Form 10-K and included in Part II, Item 1A of this Quarterly Report on Form 10-Q, if any.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q. The matters summarized in “Risk Factors” in our Form 10-K, and in subsequent filings could cause our actual results to differ significantly from those contained in our forward-looking statements. In addition, even if our results of operations, financial condition and liquidity, and industry developments are consistent with the forward-looking statements contained in this filing, those results or developments may not be indicative of results or developments in subsequent periods.

In light of these risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this filing speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments, except as required by applicable law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.

Executive Overview

The Company delivers seamless integrated software and services to customers in strategic vertical markets. Building on its broad suite of software and services solutions, the Company creates and acquires software products to serve the specific needs of its customers. The Company's primary strategic verticals are Public Sector (including Education) and Healthcare.

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On February 8, 2024, we announced that our Board of Directors had initiated a process to explore a potential sale of certain assets related to our Merchant Services business. This process is ongoing. There is no assurance that the process to explore a sale of the Merchant Services business will result in any transaction, or if the transaction is completed, the timing or terms of any such transaction. Our Board of Directors may determine to suspend or terminate the exploration of a potential sale of our Merchant Services business at any time due to various factors. Any potential transaction is also dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, regulatory limitations and the interest of third parties in our business. We do not intend to make any further disclosure concerning these matters unless and until any definitive transaction agreement is reached or we otherwise deem further disclosure is appropriate.

Economic Trends

Inflationary pressures, elevated interest rate levels, monetary policy, and the current geopolitical situation (including the military conflicts in Ukraine and in the Middle East), are causing broad economic uncertainty and could potentially cause new, or exacerbate existing, economic challenges that may impact us. These conditions could worsen as a result of adverse economic developments impacting the U.S. and/or global economies, including as a result of monetary policy designed to curb inflation. As the future magnitude, duration and effects of these conditions are difficult to predict at this time, we are unable to predict the extent of the potential effect on our financial results.

Liquidity

At March 31, 2024, we had $3.1 million of cash and cash equivalents and $103.8 million of available capacity under our 2023 Senior Secured Credit Facility subject to our financial covenants. As of March 31, 2024, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio 4.1x, and 3.5x, respectively. For additional information about our Exchangeable Notes and 2023 Senior Secured Credit Facility, see the section entitled “Liquidity and Capital Resources” below.

Acquisitions

Acquisitions during the six months ended March 31, 2024

During the six months ended March 31, 2024, we completed the acquisition of one business to expand our software offerings. Total purchase consideration was $1.3 million, including $1.1 million in cash funded by the proceeds from our revolving credit facility and $0.2 million in contingent consideration.

Acquisitions during the six months ended March 31, 2023

On October 1, 2022, we completed the acquisition of Celtic Cross Holdings, Inc., in Scottsdale, Arizona and Celtic Systems Pvt. Ltd. in Vadodara, India (collectively "Celtic") to expand the Company’s software offerings in the Public Sector vertical. Total purchase consideration was $85.0 million in cash consideration, funded by the proceeds from our revolving credit facility.

During the six months ended March 31, 2023, we completed the acquisition of two other businesses to expand our software offerings. Total purchase consideration was $19.8 million, including $17.0 million in cash funded by the proceeds from our revolving credit facility, $2.0 million of our Class A Common Stock, and $0.8 million in contingent consideration.

Our Revenue and Expenses

Revenues

We generate revenue from software and related services revenue, including the sale of subscriptions, recurring services, ongoing support, licenses, and installation and implementation services specific to software. We also generate revenue from volume-based payment processing fees (“discount fees”) and POS-related solutions that we provide to our customers directly and through our distribution partners. Volume-based fees represent a percentage of the dollar amount of each credit or debit transaction processed. Revenues are also derived from a variety of fixed transaction or service fees, including authorization fees, convenience fees, statement fees, annual fees and fees for other miscellaneous services, such as handling chargebacks.

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Interchange and network fees. Interchange and network fees consist primarily of pass-through fees that make up a portion of discount fee revenue. These include assessment fees payable to card associations, which are a percentage of the processing volume we generate from Visa and Mastercard. These fees are presented net of revenue.

Expenses

Other costs of services. Other costs of services include costs directly attributable to processing and bank sponsorship costs. These also include related costs such as residual payments to our distribution partners, which are based on a percentage of the net revenues (revenue less interchange and network fees) generated from customer referrals. Losses resulting from excessive chargebacks against a customer are included in other cost of services. The cost of equipment sold is also included in cost of services. Other costs of services are recognized at the time the customer’s transactions are processed.

Selling, general and administrative. Selling, general and administrative expenses include salaries and other employment costs, professional services, rent and utilities and other operating costs.

Depreciation and amortization. Depreciation expense consists of depreciation on our investments in property, equipment and computer hardware and software. Depreciation expense is recognized on a straight-line basis over the estimated useful life of the asset. Amortization expense for acquired intangible assets and internally developed software is recognized using a proportional cash flow method. Amortization expense for internally developed software is recognized over the estimated useful life of the asset. The useful lives of contract-based intangible assets are equal to the terms of the agreement.

Interest expense, net. Our interest expense consists of interest on our outstanding indebtedness under our 2023 Senior Secured Credit Facility, our Prior Senior Secured Credit Facility and Exchangeable Notes, and amortization of debt issuance costs.

How We Assess Our Business

Software and Services

Our Software and Services segment delivers vertical market software solutions to customers across all of our strategic vertical markets. These solutions often include embedded payments or other recurring services.

Merchant Services

Our Merchant Services segment provides comprehensive payment solutions to businesses and organizations. Our Merchant Services segment includes third-party integrated payment solutions as well as traditional merchant processing services across our strategic vertical markets.

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Other

Our Other category includes corporate overhead expenses, when presenting reportable segment information.

For additional information on our segments, see Note 14 to our condensed consolidated financial statements.

Key Performance Indicators

We evaluate our performance through key performance indicators, including:

•annualized recurring revenue ("ARR");

•software and related services as a percentage of total revenue;

•the dollar volume of payments our customers process through us (“payment volume”); and

•processing margin.

ARR is the annualized revenue derived from software-as-a-service (“SaaS”) arrangements, transaction-based software-revenue, software maintenance, recurring software-based services, payments revenue and other recurring revenue sources within the quarter. This excludes contracts that are not recurring or are one-time in nature. We focus on ARR because it helps us to assess the health and trajectory of our business. ARR does not have a standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies. It should be reviewed independently of revenue and it is not a forecast. Additionally, ARR does not take into account seasonality. The active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers. ARR for the three months ended March 31, 2024 and 2023 was $322.5 million and $305.7 million, respectively, representing a period-to-period growth rate of 5.5%.

Software and related services revenue includes the sale of subscriptions, recurring services, ongoing support, licenses, and installation and implementation services specific to software. We focus on software and related services revenue as a percentage of total revenue because it is a strategic goal to expand the software services we provide our customers. Software and related services typically result in long-term partnerships with strong recurring revenues. Software and related services revenue as a percentage of total revenue for the three months ended March 31, 2024 and 2023 was 48.3% and 50.4%.

Our payment volume for the three months ended March 31, 2024 and 2023 was $6.3 billion and $6.0 billion, respectively, representing a period-to-period growth rate of 5.5%. Our payment volume for the six months ended March 31, 2024 and 2023 was $12.5 billion and $11.9 billion, respectively, representing a period-to-period growth rate of 5.5%. We focus on payment volume because it is a reflection of the scale and economic activity of our customer base and because a significant part of our revenue is derived as a percentage of our customers’ dollar volume receipts. Payment volume reflects the addition of new customers and same store payment volume growth of existing customers, partially offset by customer attrition during the period.

Processing margin is equal to revenue less other cost of services plus residuals expense, which is a component of other cost of services. We focus on processing margin because it represents the profitability of the operating segments, exclusive of sales efforts and overhead. Processing margin is a measure reported to our management for purposes of assessing the operating performance of our business segments, and is presented in our financial statement footnotes in accordance with ASC 280. For additional information regarding processing margin, including the amount of our processing margin for our business segments for the three months ended March 31, 2024 and 2023, see Note 15 to our condensed consolidated financial statements.

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Results of Operations

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

The following table presents our historical results of operations for the periods indicated:

	Three Months Ended March 31,				Change
(in thousands)	2024		2023		Amount		%
Revenue	$	94,542	$	93,872	$	670	0.7	%
Operating expenses
Other costs of services	21,180		19,930		1,250		6.3	%
Selling, general and administrative	54,162		57,204		(3,042)		(5.3)	%
Depreciation and amortization	10,069		9,015		1,054		11.7	%
Change in fair value of contingent consideration	(290)		2,279		(2,569)		n/m
Total operating expenses	85,121		88,428		(3,307)		(3.7)	%
Income from operations	9,421		5,444		3,977		73.1	%
Other expenses (income)
Interest expense, net	7,750		6,199		1,551		25.0	%
Other income	(2,257)		—		(2,257)		n/m
Total other expenses (income)	5,493		6,199		(706)		(11.4)	%
Income (loss) before income taxes	3,928		(755)		4,683		n/m
Provision for (benefit from) income taxes	580		(563)		1,143		n/m
Net income (loss)	3,348		(192)		3,540		n/m
Net income (loss) attributable to non-controlling interest	1,470		(228)		1,698		n/m
Net income attributable to i3 Verticals, Inc.	$	1,878	$	36	$	1,842	5116.7	%

n/m = not meaningful

Revenue

Revenue increased $0.7 million, or 0.7%, to $94.5 million for the three months ended March 31, 2024 from $93.9 million for the three months ended March 31, 2023. This increase was primarily driven by an increase in payment volume as well as higher recurring software revenue, partially offset by a decrease in non-recurring revenues.

Revenue within Software and Services decreased $1.3 million, or 2.2%, to $59.5 million for the three months ended March 31, 2024 from $60.8 million for the three months ended March 31, 2023. The decrease was primarily driven by a decrease in software license revenue and professional services revenue, partially offset by an increase in recurring revenues in our Public Sector and Healthcare verticals.

Revenue within Merchant Services increased $2.0 million, or 6.0%, to $35.1 million for the three months ended March 31, 2024 from $33.1 million for the three months ended March 31, 2023. Payment volume from new and existing customers increased $0.2 billion, or 3.7%, to $5.4 billion for the three months ended March 31, 2024 from $5.2 billion for the three months ended March 31, 2023.

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Other Costs of Services

Other costs of services increased $1.3 million, or 6.3%, to $21.2 million for the three months ended March 31, 2024 from $19.9 million for the three months ended March 31, 2023. This increase was primarily driven by an increase in software cost of services within the Software and Services segment driven by the increase in payment volume.

Other costs of services within Software and Services increased $0.7 million, or 16.1%, to $4.9 million for the three months ended March 31, 2024 from $4.2 million for the three months ended March 31, 2023, driven primarily by the increase in software cost of services.

Other costs of services within Merchant Services increased $0.6 million, or 3.6%, to $16.3 million for the three months ended March 31, 2024 from $15.7 million for the three months ended March 31, 2023, driven primarily by the growth in payment volume.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $3.0 million, or 5.3%, to $54.2 million for the three months ended March 31, 2024 from $57.2 million for the three months ended March 31, 2023. This decrease was primarily driven by a decrease in employment expenses, advertising and promotion expenses, non-income tax expense, partially offset by an increase in technology services.

Depreciation and Amortization

Depreciation and amortization increased $1.1 million, or 11.7%, to $10.1 million for the three months ended March 31, 2024 from $9.0 million for the three months ended March 31, 2023. Amortization expense increased $0.9 million to $9.1 million for the three months ended March 31, 2024 from $8.2 million for the three months ended March 31, 2023 primarily due to an increase in capitalized software project releases. Depreciation expense increased $0.1 million to $1.0 million for the three months ended March 31, 2024 from $0.8 million for the three months ended March 31, 2023.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration to be paid in connection with acquisitions was a benefit of $0.3 million for the three months ended March 31, 2024 related to adjustments to the expected present value of consideration to be paid for earnouts. The change in fair value of contingent consideration for the three months ended March 31, 2023 was a charge of $2.3 million.

Interest Expense, net

Interest expense, net, increased $1.6 million, or 25.0%, to $7.8 million for the three months ended March 31, 2024 from $6.2 million for the three months ended March 31, 2023. The increase reflects a higher average interest rate and a higher average outstanding debt balance for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

Other income

Other income of $2.3 million during the three months ended March 31, 2024, reflects the gain on the Exchangeable Note Repurchases and gain on Warrant Unwinds, net of the loss on Note Hedge Unwinds. There was no other income during the three months ended March 31, 2023.

Provision for Income Taxes

The provision for income taxes increased to a provision for $0.6 million for the three months ended March 31, 2024 from a benefit of $0.6 million for three months ended March 31, 2023. Our effective tax rate was 14.8% for the three months ended March 31, 2024. Our effective tax rate differs from the federal statutory rate of 21% primarily due to the tax structure of the Company. The income of majority owned i3 Verticals, LLC is not taxed and the separate loss of the Company has minimal tax effect due to the allocations from i3 Verticals, LLC. i3 Verticals, Inc. is subject to federal, state and local income taxes with respect to its allocable share of any taxable income of i3 Verticals, LLC and is taxed at the prevailing corporate tax rates.

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Six Months Ended March 31, 2024 Compared to Six Months Ended March 31, 2023

The following table presents our historical results of operations for the periods indicated:

	Six Months Ended March 31,				Change
(in thousands)	2024		2023		Amount		%
Revenue	$	186,532	$	179,901	$	6,631	3.7	%
Operating expenses
Other costs of services	41,604		38,999		2,605		6.7	%
Selling, general and administrative	107,694		108,207		(513)		(0.5)	%
Depreciation and amortization	19,808		17,691		2,117		12.0	%
Change in fair value of contingent consideration	(527)		3,722		(4,249)		n/m
Total operating expenses	168,579		168,619		(40)		—	%
Income from operations	17,953		11,282		6,671		59.1	%
Other expenses (income)
Interest expense, net	14,457		11,689		2,768		23.7	%
Other income	(2,150)		(203)		(1,947)		959.1	%
Total other expenses (income)	12,307		11,486		821		7.1	%
Income (loss) before income taxes	5,646		(204)		5,850		n/m
Provision for (benefit from) income taxes	762		(181)		943		n/m
Net income (loss)	4,884		(23)		4,907		n/m
Net income attributable to non-controlling interest	1,908		181		1,727		954.1	%
Net income (loss) attributable to i3 Verticals, Inc.	$	2,976	$	(204)	$	3,180	n/m

n/m = not meaningful

Revenue

Revenue increased $6.6 million, or 3.7%, to $186.5 million for the six months ended March 31, 2024 from $179.9 million for the six months ended March 31, 2023. This increase was partially driven by incremental revenue from an acquisition of $1.5 million, net of intercompany eliminations, which was within the Software and Services segment. In addition to our growth through an acquisition, payment volume from new and existing customers and revenue from existing businesses grew, resulting from growth in recurring revenue, partially offset by a decrease in non-recurring revenues.

Revenue within Software and Services increased $2.1 million, or 1.8%, to $116.1 million for the six months ended March 31, 2024 from $114.0 million for the six months ended March 31, 2023. The increase was primarily driven by an increase in recurring revenues, partially offset by a decrease in software license revenue and professional services revenue in our Public Sector and Healthcare verticals.

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Revenue within Merchant Services increased $4.6 million, or 6.9%, to $70.5 million for the six months ended March 31, 2024 from $65.9 million for the six months ended March 31, 2023. Payment volume from new and existing customers increased $0.4 billion, or 3.6%, to $10.9 billion for the six months ended March 31, 2024 from $10.5 billion for the six months ended March 31, 2023.

Other Costs of Services

Other costs of services increased $2.6 million, or 6.7%, to $41.6 million for the six months ended March 31, 2024 from $39.0 million for the six months ended March 31, 2023. This increase was primarily driven by an increase in software cost of services within the Software and Services.

Other costs of services within Software and Services increased $1.5 million, or 18.9%, to $9.2 million for the six months ended March 31, 2024 from $7.8 million for the six months ended March 31, 2023, driven primarily by the increase in software cost of services and an increase in payment volume.

Other costs of services within Merchant Services increased $1.1 million, or 3.6%, to $32.4 million for the six months ended March 31, 2024 from $31.3 million for the six months ended March 31, 2023, driven primarily by the growth in payment volume.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $0.5 million, or 0.5%, to $107.7 million for the six months ended March 31, 2024 from $108.2 million for the six months ended March 31, 2023. This decrease was primarily driven by a decrease in advertising and promotion expenses, employment costs, bad debt expenses, and travel expenses, partially offset by an increase in technology services.

Depreciation and Amortization

Depreciation and amortization increased $2.1 million, or 12.0%, to $19.8 million for the six months ended March 31, 2024 from $17.7 million for the six months ended March 31, 2023. Amortization expense increased $1.8 million to $17.9 million for the six months ended March 31, 2024 from $16.1 million for the six months ended March 31, 2023 primarily due to an increase in capitalized software project releases and acquisitions completed during the 2023 fiscal year. Depreciation expense increased $0.3 million to $1.9 million for the six months ended March 31, 2024 from $1.6 million for the six months ended March 31, 2023.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration to be paid in connection with acquisitions was a benefit of $0.5 million for the six months ended March 31, 2024 related to adjustments to the expected present value of consideration to be paid for earnouts. The change in fair value of contingent consideration for the six months ended March 31, 2023 was a charge of $3.7 million.

Interest Expense, net

Interest expense, net, increased $2.8 million, or 23.7%, to $14.5 million for the six months ended March 31, 2024 from $11.7 million for the six months ended March 31, 2023. The increase reflects a higher average interest rate and a higher average outstanding debt balance for the six months ended March 31, 2024, as compared to the six months ended March 31, 2023.

Other income

Other income increased $1.9 million to $2.2 million expense for the six months ended March 31, 2024 from other income of $0.2 million for the six months ended March 31, 2023. Other income during the six months ended March 31, 2024, reflects the gain on the Exchangeable Note Repurchases and gain on Warrant Unwinds, net of the loss on Note Hedge Unwinds and loss on the sale of a building purchased through acquisition. Other income during the six months ended March 31, 2023, reflects continent consideration received for an investment that was sold in a prior year.

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Provision for Income Taxes

The provision for income taxes increased to a provision of $0.8 million for the six months ended March 31, 2024 from a benefit of $0.2 million for six months ended March 31, 2023. Our effective tax rate was 13% for the six months ended March 31, 2024. Our effective tax rate differs from the federal statutory rate of 21% primarily due to the tax structure of the Company. The income of majority owned i3 Verticals, LLC is not taxed and the separate loss of the Company has minimal tax effect due to the allocations from i3 Verticals, LLC. i3 Verticals, Inc. is subject to federal, state and local income taxes with respect to its allocable share of any taxable income of i3 Verticals, LLC and is taxed at the prevailing corporate tax rates.

Seasonality

We have experienced in the past, and may continue to experience, seasonal fluctuations in our revenues as a result of consumer and business spending patterns. Revenues during the first quarter of the calendar year, which is our second fiscal quarter, tend to decrease in comparison to the remaining three quarters of the calendar year on a same store basis. This decrease is due to the relatively higher number and amount of electronic payment transactions related to seasonal retail events, such as holiday and vacation spending in their second, third and fourth quarters of the calendar year. The number of business days in a month or quarter also may affect seasonal fluctuations. Revenue in our Education vertical fluctuates with the school calendar. Revenue for our Education customers is strongest in August, September, October, January and February, at the start of each semester, and generally weakens throughout the semester, with little revenue in the summer months of June and July. Operating expenses show less seasonal fluctuation, with the result that net income is subject to the same seasonal factors as our revenues. The growth in our business may have partially overshadowed seasonal trends to date, and seasonal impacts on our business may be more pronounced in the future.

Liquidity and Capital Resources

We have historically financed our operations and working capital through net cash from operating activities. As of March 31, 2024, we had $3.1 million of cash and cash equivalents and available borrowing capacity of $103.8 million under our 2023 Senior Secured Credit Facility, subject to the financial covenants. We usually minimize cash balances by making payments on our revolving line of credit to minimize borrowings and interest expense. As of March 31, 2024, we had borrowings outstanding of $346.2 million under the 2023 Senior Secured Credit Facility. For additional information about our 2023 Senior Secured Credit Facility, see the section entitled "— 2023 Senior Secured Credit Facility" below.

Our primary cash needs are to fund working capital requirements, invest in our technology infrastructure, fund acquisitions and related contingent consideration, make scheduled principal and interest payments on our outstanding indebtedness and pay tax distributions to members. We consistently have positive cash flow provided by operations and expect that our cash flow from operations, current cash and cash equivalents and available borrowing capacity under the 2023 Senior Secured Credit Facility will be sufficient to fund our operations and planned capital expenditures and to service our debt obligations for at least the next twelve months and foreseeable future. Our growth strategy includes acquisitions. We expect to fund acquisitions through a combination of net cash from operating activities, borrowings under our 2023 Senior Secured Credit Facility and through the issuance of equity and debt securities. As a holding company, we depend on distributions or loans from i3 Verticals, LLC to access funds earned by our operations. The covenants contained in the 2023 Senior Secured Credit Facility may restrict i3 Verticals, LLC’s ability to provide funds to i3 Verticals, Inc.

Our liquidity profile reflects our completed offering in February 2020 of an aggregate principal amount of $138.0 million in 1.0% Exchangeable Senior Notes due 2025, with substantially all the proceeds being used to pay down outstanding borrowings under our Prior Senior Secured Credit Facility. After giving effect to the repurchase of $90.8 million in aggregate principal amount of the 1.0% Exchangeable Senior Notes on January 18, 2024 as described below as well as the repurchase of $21.0 million in aggregate principal amount of Exchangeable Senior Notes in open market purchases in 2020, the aggregate principal amount of the Exchangeable Notes that is currently outstanding is $26.2 million. We may elect from time to time to purchase our outstanding debt in open market purchases, privately negotiated transactions or otherwise. Any such debt repurchases will depend upon prevailing market conditions, our liquidity requirements, contractual restrictions, applicable securities law and other factors.

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Our 2023 Senior Secured Credit Facility, as amended, requires us to maintain a consolidated interest coverage ratio not less than 3.0 to 1.0 and total leverage ratio not exceeding 5.0 to 1.0. As of March 31, 2024, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio of 4.1x and 3.5x, respectively. Although we believe our liquidity position remains strong, there can be no assurance that we will be able to raise additional funds, in the form of debt or equity, or to amend our 2023 Senior Secured Credit Facility on terms acceptable to us, if at all, even if we determined such actions were necessary in the future.

Cash Flows

The following table presents a summary of cash flows from operating, investing and financing activities for the following comparative periods.

Six Months Ended March 31, 2024 and 2023

	Six months ended March 31,
	2024		2023
	(in thousands)
Net cash provided by operating activities	$	25,147	$	25,884
Net cash used in investing activities	$	(12,369)	$	(111,130)
Net cash (used in) provided by financing activities	$	(17,885)	$	83,814

Cash Flow from Operating Activities

Net cash provided by operating activities decreased $0.7 million to $25.1 million for the six months ended March 31, 2024 from $25.9 million for the six months ended March 31, 2023. Our net income increased from a net loss of $23 thousand for the six months ended March 31, 2023 to net income of $4.9 million for the six months ended March 31, 2024. Some of this increase in net income was driven by non-cash income and reductions in non-cash expenses that do not impact cash flows from operating activities. The primary drivers of the decrease in cash provided by operating activities, despite the increase in net income, were a decrease in non-cash contingent consideration of $4.2 million for the six months ended March 31, 2024 compared to the six months ended March 31, 2023; an increase in changes in net operating assets and liabilities of $1.4 million, which are impacted by the timing of collections and payments, for the six months ended March 31, 2024 compared to the six months ended March 31, 2023; a gain on the repurchase of exchangeable notes of $2.4 million in the six months ended March 31, 2024; and a decrease in equity-based compensation expense of $1.4 million for the six months ended March 31, 2024 compared to the six months ended March 31, 2023. These changes were partially offset by an increase in depreciation and amortization of $2.1 million for the six months ended March 31, 2024 compared to the six months ended March 31, 2023.

Cash Flow from Investing Activities

Net cash used in investing activities decreased $98.8 million to $12.4 million for the six months ended March 31, 2024 from $111.1 million for the six months ended March 31, 2023. The largest driver of the decrease in cash used in investing activities was a decrease of $100.9 million in cash used in acquisitions, net of cash acquired, during the six months ended March 31, 2024 compared to the six months ended March 31, 2023. This change was partially offset by an increase of $3.8 million in purchases of merchant portfolios and residual buyouts during the six months ended March 31, 2024 compared to the six months ended March 31, 2023.

Cash Flow from Financing Activities

Net cash flow from financing activities changed $101.7 million to $17.9 million net cash used in financing activities for the six months ended March 31, 2024 from $83.8 million net cash provided by financing activities for the six months ended March 31, 2023. The change in net cash flow from financing activities was primarily related to the $87.2 million payments for the repurchases of exchangeable notes and warrants, offset by the proceeds from the sale of the exchangeable senior note hedges. The remaining factors were the result of a decrease in proceeds from the revolving credit facility of $59.4 million, partially offset by a decrease in payments on the revolving credit facility of $47.2 million during the six months ended March 31, 2024 compared to the six months ended March 31, 2023.

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2023 Senior Secured Revolving Credit Facility

On May 8, 2023, i3 Verticals, LLC (the “Borrower”), entered into that certain Credit Agreement (the “2023 Senior Secured Credit Facility”) with the guarantors and lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (“JPMorgan”). The 2023 Senior Secured Credit Facility replaces the Prior Senior Secured Credit Facility. The 2023 Senior Secured Credit Facility provides for aggregate commitments of $450 million in the form of a senior secured revolving credit facility (the “Revolver”).

The 2023 Senior Secured Credit Facility provides that the Borrower has the right to seek additional commitments to provide additional term loan facilities or additional revolving credit commitments in an aggregate principal amount up to, as of any date of determination, the sum of (i) the greater of $100 million and 100% of the Borrower’s consolidated EBITDA (as defined in the 2023 Senior Secured Credit Facility) for the most recently completed four quarter period, plus (ii) the amount of certain prepayments of certain indebtedness, so long as, among other things, after giving pro forma effect to the incurrence of such additional borrowings and any related transactions, the Borrower’s consolidated interest coverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not be less than 3.0 to 1.0 and the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not exceed 5.0 to 1.0. As of March 31, 2024, the Borrower's consolidated interest coverage ratio was 4.1x and total leverage ratio was 3.5x.

The provision of any such additional amounts under the additional term loan facilities or additional revolving credit commitments are subject to certain additional conditions and the receipt of certain additional commitments by existing or additional lenders. The lenders under the 2023 Senior Secured Credit Facility are not under any obligation to provide any such additional term loan facilities or revolving credit commitments.

The proceeds of the Revolver, together with proceeds from any additional amounts under the additional term loan facilities or additional revolving credit commitments, may only be used by the Borrower to (i) finance working capital, capital expenditures and other lawful corporate purposes, (ii) finance permitted acquisitions (as defined in the 2023 Senior Secured Credit Facility) and (iii) to refinance certain existing indebtedness.

Borrowings under the Revolver will be made, at the Borrower’s option, at the Adjusted Term SOFR rate or the base rate, plus, in each case, an applicable margin.

The Adjusted Term SOFR rate will be the rate of interest per annum equal to the Term SOFR rate (based upon an interest period of one, three or six months), plus 0.10%; plus an applicable margin of 2.00% to 3.00% (3.00% at March 31, 2024). The Adjusted Term SOFR rate shall not be less than 0% in any event.

The base rate is a fluctuating rate of interest per annum equal to the highest of (a) the greater of the federal funds rate or the overnight bank funding rate, plus ½ of 1%, (b) Wall Street Journal prime rate and (c) the Adjusted Term SOFR rate for an interest period of one month, plus 1%; plus an applicable margin of 1.00% to 2.00% (2.00% at March 31, 2024). The base rate shall not be less than 1% in any event.

The applicable margin is based upon the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility), as reflected in the schedule below:

Consolidated Total Net Leverage Ratio	Commitment Fee		Letter of Credit Fee		Term Benchmark Loans		Base Rate Loans
> 3.0 to 1.0	0.30	%	3.00	%	3.00	%	2.00	%
> 2.5 to 1.0 but < 3.0 to 1.0	0.25	%	2.50	%	2.50	%	1.50	%
> 2.0 to 1.0 but < 2.5 to 1.0	0.20	%	2.25	%	2.25	%	1.25	%
< 2.0 to 1.0	0.15	%	2.00	%	2.00	%	1.00	%

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In addition to paying interest on outstanding principal under the Revolver, the Borrower will be required to pay a commitment fee equal to the product of between 0.15% and 0.30% (the applicable percentage depending on the Borrower’s consolidated total net leverage ratio as reflected in the schedule above, 0.30% at March 31, 2024) times the actual daily amount by which $450 million exceeds the total amount outstanding under the Revolver and available to be drawn under all outstanding letters of credit.

The Borrower will be permitted to voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans under the 2023 Senior Secured Credit Facility, whether such amounts are issued under the Revolver or under the additional term loan facilities or additional revolving credit facilities, at any time without premium or penalty.

In addition, if the total amount borrowed under the Revolver exceeds $450 million at any time, the 2023 Senior Secured Credit Facility requires the Borrower to prepay such excess outstanding amounts.

All obligations under the 2023 Senior Secured Credit Facility are unconditionally guaranteed by the Company, and each of the Company’s existing and future direct and indirect material, wholly owned domestic subsidiaries, subject to certain exceptions. The obligations are secured by first-priority security interests in substantially all tangible and intangible assets of the Borrower, the Company and each subsidiary guarantor, in each case whether owned on the date of the initial borrowings or thereafter acquired.

The 2023 Senior Secured Credit Facility places certain restrictions on the ability of the Borrower, the Company and their subsidiaries to, among other things, incur debt and liens; merge, consolidate or liquidate; dispose of assets; enter into hedging arrangements; make certain restricted payments; undertake transactions with affiliates; enter into sale-leaseback transactions; make certain investments; prepay or modify the terms of certain indebtedness; and modify the terms of certain organizational agreements.

The 2023 Senior Secured Credit Facility contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain events with respect to employee benefit plans, invalidity of loan documents and certain changes in control.

Exchangeable Notes

On February 18, 2020, i3 Verticals, LLC issued $138.0 million aggregate principal amount of its 1.0% Exchangeable Notes due February 15, 2025. The Exchangeable Notes bear interest at a fixed rate of 1.0% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020. The Exchangeable Notes are exchangeable into cash, shares of the Company's Class A common stock, or a combination thereof, at i3 Verticals, LLC's election. The Exchangeable Notes mature on February 15, 2025, unless earlier exchanged, redeemed or repurchased. The net proceeds from the sale of the Exchangeable Notes were approximately $132.8 million, after deducting discounts and commissions to the certain initial purchasers and other estimated fees and expenses. i3 Verticals, LLC used a portion of the net proceeds of the Exchangeable Notes offering to pay down outstanding borrowings under the Prior Senior Secured Credit Facility in connection with the effectiveness of the operative provisions of the amendment to the Prior Senior Secured Credit Facility and to pay the cost of the Note Hedge Transactions. As of March 31, 2024, $26.2 million of the original aggregate principal amount of $138.0 million was outstanding.

On December 21, 2023, i3 Verticals, LLC entered into agreements to repurchase a portion of its Exchangeable Notes pursuant to privately negotiated transactions with a limited number of holders of the Exchangeable Notes (the "Exchangeable Note Repurchases"). The Exchangeable Note Repurchases were completed on January 18, 2024, and the Company paid $87.4 million to repurchase $90.8 million in aggregate principal amount of its Exchangeable Notes and to repay approximately $0.4 million in accrued interest on the repurchased portion of the Exchangeable Notes. Following the closing of the Exchangeable Note Repurchases, approximately $26.2 million in aggregate principal amount of the Exchangeable Notes remained outstanding, with terms unchanged. For additional information, see Note 7 to our condensed consolidated financial statements.

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At-the-Market Program

On August 20, 2021, we, together with i3 Verticals, LLC, entered into an at-the-market offering sales agreement with Raymond James & Associates, Inc., Morgan Stanley & Co. LLC and BTIG, LLC (each a “Sales Agent”), under which we may issue and sell, from time to time and through the Sales Agents, shares of our Class A common stock having an aggregate offering price of up to $125.0 million (the “ATM Program”). During the quarter ended March 31, 2024, we did not sell any Class A common stock under the ATM Program. As of March 31, 2024, we had a remaining capacity to sell up to $107.1 million of our Class A common stock under the ATM Program.

Material Cash Requirements

The following table summarizes our material cash requirements as of March 31, 2024 related to leases and borrowings:

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
(in thousands)
Processing minimums(1)	$	3,205	$	2,785	$	420	$	—	$	—
Facility leases	15,140		5,144		7,327		1,752		917
2023 Senior Secured Credit Facility and related interest(2)	470,698		29,290		58,581		382,827		—
Exchangeable Notes and related interest(3)	26,452		26,452		—		—		—
Contingent consideration(4)	3,969		3,868		101		—		—
Total	$	519,464	$	67,539	$	66,429	$	384,579	$	917

__________________________

1.We have non-exclusive agreements with several processors to provide us services related to transaction processing and transmittal, transaction authorization and data capture, and access to various reporting tools. Certain of these agreements require us to submit a minimum monthly number of transactions for processing. If we submit a number of transactions that is lower than the minimum, we are required to pay to the processor the fees it would have received if we had submitted the required minimum number of transactions.

2.We estimated interest payments through the maturity of our 2023 Senior Secured Credit Facility by applying the interest rate of 8.55% in effect on the outstanding balance as of March 31, 2024, plus the unused fee rate of 0.30% in effect as of March 31, 2024.

3.The chart set forth above calculates interest payments through the maturity of our Exchangeable Notes by applying the coupon interest rate of 1.0% on the principal balance as of March 31, 2024 of $26.2 million.

4.In connection with certain of our acquisitions, we may be obligated to pay the seller of the acquired entity certain amounts of contingent consideration as set forth in the relevant purchasing documents, whereby additional consideration may be due upon the achievement of certain specified financial performance targets. i3 Verticals, Inc. accounts for the fair values of such contingent payments in accordance with the Level 3 financial instrument fair value hierarchy at the close of each subsequent reporting period. The acquisition-date fair value of contingent consideration is valued using a Monte Carlo simulation. i3 Verticals, Inc. subsequently reassesses such fair value based on probability estimates with respect to the acquired entity’s likelihood of achieving the respective financial performance targets.

Potential payments under the Tax Receivable Agreement are not reflected in this table. See “—Tax Receivable Agreement” below.

54

Tax Receivable Agreement

We are a party to a Tax Receivable Agreement with i3 Verticals, LLC and each of the Continuing Equity Owners, as described in Note 8 of our condensed consolidated financial statements. As a result of the Tax Receivable Agreement, we have been required to establish a liability in our condensed consolidated financial statements. That liability, which will increase upon the redemptions or exchanges of Common Units for our Class A common stock, generally represents 85% of the estimated future tax benefits, if any, relating to the increase in tax basis associated with the Common Units we received as a result of the Reorganization Transactions and other redemptions or exchanges by holders of Common Units. If this election is made, the accelerated payment will be based on the present value of 100% of the estimated future tax benefits and, as a result, the associated liability reported on our condensed consolidated financial statements may be increased. We expect that the payments required under the Tax Receivable Agreement will be substantial. The actual increase in tax basis, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of redemptions or exchanges by the holders of Common Units, the price of our Class A common stock at the time of the redemption or exchange, whether such redemptions or exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable as well as the portion of our payments under the Tax Receivable Agreement constituting imputed interest. We intend to fund the payment of the amounts due under the Tax Receivable Agreement out of the cash savings that we actually realize in respect of the attributes to which Tax Receivable Agreement relates.

As of March 31, 2024, the total amount due under the Tax Receivable Agreement was $40.3 million, and payments to the Continuing Equity Owners related to exchanges through March 31, 2024 will range from $0 to $3.3 million per year and are expected to be paid over the next 24 years. The amounts recorded as of March 31, 2024, approximate the current estimate of expected tax savings and are subject to change after the filing of the Company’s U.S. federal and state income tax returns. Future payments under the Tax Receivable Agreement with respect to subsequent exchanges would be in addition to these amounts.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, goodwill and intangible assets, contingent consideration, and equity-based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are those that we consider the most critical to understanding our financial condition and results of operations.

As of March 31, 2024, there have been no significant changes to our critical accounting estimates disclosed in the Form 10-K filed with the SEC on November 22, 2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

As of March 31, 2024, the 2023 Senior Secured Credit Facility, as amended, consisted of a $450 million revolving credit facility, together with an option to increase the revolving credit facility and/or obtain incremental term loans in an additional principal amount of up, as of any date of determination, the greater of $100 million and 100% of consolidated EBITDA (as defined in the 2023 Senior Secured Credit Facility) for the most recently completed four quarter period (subject to the receipt of additional commitments for any such incremental loan amounts).

As of March 31, 2024, the 2023 Senior Secured Credit Facility accrued interest at Term SOFR (based upon an interest period of one, three or six months), plus 0.10%, plus an applicable margin of 2.00% to 3.00% (3.00% at March 31, 2024), or the base rate (defined as the highest of (a) the greater of the federal funds rate or the overnight bank funding rate, plus ½ of 1%, (b) Wall Street Journal prime rate and (c) the Adjusted Term SOFR rate

55

for an interest period of one month, plus 1%, plus an applicable margin of 1.00% to 2.00%) (2.00% at March 31, 2024), in each case depending upon the consolidated total leverage ratio, as defined in the agreement. Interest is payable at the end of the selected interest period, but no less frequently than quarterly. Additionally, the 2023 Senior Secured Credit Facility requires us to pay unused commitment fees of 0.15% to 0.30% (0.30% as of March 31, 2024) on any undrawn amounts under the revolving credit facility and letter of credit fees of up to 3.00% on the maximum amount available to be drawn under each letter of credit issued under the agreement. The 2023 Senior Secured Credit Facility requires maintenance of certain financial ratios on a quarterly basis as follows: (i) a minimum consolidated interest coverage ratio of 3.0 to 1.0 (ii) a maximum total leverage ratio of 5.0 to 1.0.

As of March 31, 2024, we were in compliance with these covenants, and there was $103.8 million available for borrowing under the revolving credit facility, subject to the financial covenants.

As of March 31, 2024, we had borrowings outstanding of $346.2 million outstanding under the 2023 Senior Secured Credit Facility. A 1.0% increase or decrease in the interest rate applicable to such borrowing (which was the Term SOFR rate) would have had a $3.5 million dollar impact on the results of the business.

Foreign Currency Exchange Rate Risk

As a result of our international operations, we are also exposed to foreign currency exchange rate risks. Because our international operations are not yet material to our consolidated results of operations, a 10% change in foreign currency exchange rates would not have had a material impact on our consolidated results of operations, financial position, or cash flows for the three months ended March 31, 2024.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, with the participation of other members of management, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on such evaluations, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective (at the reasonable assurance level) to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act has been recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that the information required to be included in this report was accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2024 that materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting.

PART II. - OTHER INFORMATION

Item 1. Legal Proceedings

The information required with respect to this item can be found in Note 12 to the accompanying unaudited condensed consolidated financial statements contained in this report and is incorporated by reference into this Part II, Item 1.

56

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed under the heading “Risk Factors” in our Form 10-K for the fiscal year ended September 30, 2023 filed with the SEC on November 22, 2023, except as described below.

We are exploring a potential sale of certain assets related to our Merchant Services business, and there can be no assurance that we will be successful in completing any potential sale, that a potential sale will yield additional value for our stockholders, or that exploration of a potential sale will not adversely impact the Company.

On February 8, 2024, we announced that our Board of Directors had initiated a process to explore a potential sale of certain assets related to our Merchant Services business. This process is ongoing. There is no assurance that the process to explore the sale of the Merchant Services business will result in any definitive agreement or any transaction, or if the transaction is completed, the timing or terms of any such transaction. Moreover, there can be no assurance that any potential transaction, if identified, evaluated and consummated, will provide additional value to our stockholders and will not adversely impact the market price of our Class A common stock.

Speculation regarding any developments related to the review of a potential sale of our Merchant Services business and perceived uncertainties related to the future of the Company could cause the market price of our Class A common stock to fluctuate significantly or to decline. In addition, there can be no assurance that exploring a potential sale of our Merchant Services business will not cause the diversion of management’s attention, interfere with our ability to retain or attract key personnel, adversely impact important business relationships, adversely impact our financial results, or expose us to potential litigation. In addition, we have incurred, and may continue to incur, significant transaction expenses in connection with this process. If we are unable to mitigate these or other potential risks related to the exploration of a potential sale, our business and financial results may be adversely affected.

Further, our Board of Directors may determine to suspend or terminate the exploration of a potential sale of our Merchant Services business at any time due to various factors. Any potential transaction is also dependent upon a number of factors that may be beyond our control, including among other factors, market conditions, industry trends, regulatory limitations and the interest of third parties in our business.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None. Without limiting the generality of the foregoing, during the six months ended March 31, 2024, no director or officer of the Company adopted or terminated any “Rule 10b5-1 trading arrangement,” or any “non-Rule 10b-5 trading arrangement,” as such terms are defined in Item 408(a) of Regulation S-K.

57

Item 6.    Exhibit Index

Exhibit Number	Exhibit Description
3.1	Amended and Restated Certificate of Incorporation of i3 Verticals, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 25, 2018) (File No. 001-38532).
3.2	Amended and Restated Bylaws of i3 Verticals, Inc., as amended and restated on November 16, 2022 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 16, 2022) (File No. 001-38532)
31.1*	Certification of Chief Executive Officer pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended.
31.2*	Certification of Chief Financial Officer pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended.
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Label Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.
104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL and contained in Exhibit 101.

____________________

*    Filed herewith.

**    Furnished herewith.

58

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		i3 Verticals, Inc.
		By:	/s/ Clay Whitson
			Clay Whitson
			Chief Financial Officer
Date:	May 10, 2024

59

EX-31.1

Exhibit 31.1

Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

I, Gregory S. Daily, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of i3 Verticals, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2024

By:	/s/ Gregory S. Daily
	Gregory S. Daily
	Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

I, Clay Whitson, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of i3 Verticals, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2024

By:	/s/ Clay Whitson
	Clay Whitson
	Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification of Principal Executive Officer

Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of i3 Verticals, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2024

By:	/s/ Gregory S. Daily
	Gregory S. Daily
	Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

Certification of Principal Financial Officer

Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of i3 Verticals, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2024

By:	/s/ Clay Whitson
	Clay Whitson
	Chief Financial Officer (Principal Financial Officer)

XML

COVER - shares	6 Months Ended
	Mar. 31, 2024	May 09, 2024
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2024
Document Transition Report	false
Entity File Number	001-38532
Entity Registrant Name	i3 Verticals, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	82-4052852
Entity Address, Address Line One	40 Burton Hills Blvd.
Entity Address, Address Line Two	Suite 415
Entity Address, City or Town	Nashville
Entity Address, State or Province	TN
Entity Address, Postal Zip Code	37215
City Area Code	615
Local Phone Number	465-4487
Title of 12(b) Security	Class A Common Stock, $0.0001 Par Value
Trading Symbol	IIIV
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Central Index Key	0001728688
Current Fiscal Year End Date	--09-30
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q2
Amendment Flag	false
Class A Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		23,419,645
Class B Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		10,052,676

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2024	Sep. 30, 2023
Current assets
Cash and cash equivalents	$ 3,139	$ 3,112
Accounts receivable, net	66,539	65,110
Settlement assets	1,586	4,873
Prepaid expenses and other current assets	15,802	12,449
Total current assets	87,066	85,544
Property and equipment, net	11,002	12,308
Restricted cash	2,568	4,415
Capitalized software, net	61,345	62,577
Goodwill	410,772	409,563
Intangible assets, net	221,145	226,952
Deferred tax asset	51,591	52,514
Operating lease right-of-use assets	12,806	13,922
Other assets	7,247	13,698
Total assets	865,542	881,493
Current liabilities
Accounts payable	11,996	11,064
Current portion of long-term debt	26,223	0
Accrued expenses and other current liabilities	26,854	37,740
Settlement obligations	1,586	4,873
Deferred revenue	36,931	35,275
Current portion of operating lease liabilities	4,421	4,509
Total current liabilities	108,011	93,461
Long-term debt, less current portion and debt issuance costs, net	343,392	385,081
Long-term tax receivable agreement obligations	40,323	40,079
Operating lease liabilities, less current portion	9,362	10,433
Other long-term liabilities	18,354	24,143
Total liabilities	519,442	553,197
Commitments and contingencies (see Note 12)
Stockholders' equity
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized; 0 shares issued and outstanding as of March 31, 2024 and September 30, 2023	0	0
Additional paid-in capital	259,242	249,688
Accumulated deficit	(9,968)	(12,944)
Total stockholders' equity	249,277	236,747
Non-controlling interest	96,823	91,549
Total equity	346,100	328,296
Total liabilities and equity	865,542	881,493
Class A Common Stock
Stockholders' equity
Common stock	2	2
Class B Common Stock
Stockholders' equity
Common stock	$ 1	$ 1

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2024	Sep. 30, 2023
Preferred Stock, par value (in USD per share)	$ 0.0001	$ 0.0001
Preferred Stock authorized (in shares)	10,000,000	10,000,000
Preferred Stock issued (in shares)	0	0
Preferred Stock outstanding (in shares)	0	0
Class A Common Stock
Common Stock, par value (in USD per share)	$ 0.0001	$ 0.0001
Common Stock authorized (in shares)	150,000,000	150,000,000
Common Stock issued (in shares)	23,416,518	23,253,272
Common Stock, outstanding (in shares)	23,416,518	23,253,272
Class B Common Stock
Common Stock, par value (in USD per share)	$ 0.0001	$ 0.0001
Common Stock authorized (in shares)	40,000,000	40,000,000
Common Stock issued (in shares)	10,052,676	10,093,394
Common Stock, outstanding (in shares)	10,052,676	10,093,394

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2024	Mar. 31, 2023
Income Statement [Abstract]
Revenue	$ 94,542	$ 93,872	$ 186,532	$ 179,901
Operating expenses
Other costs of services	21,180	19,930	41,604	38,999
Selling, general and administrative	54,162	57,204	107,694	108,207
Depreciation and amortization	10,069	9,015	19,808	17,691
Change in fair value of contingent consideration	(290)	2,279	(527)	3,722
Total operating expenses	85,121	88,428	168,579	168,619
Income from operations	9,421	5,444	17,953	11,282
Other expenses (income)
Interest expense, net	7,750	6,199	14,457	11,689
Other income	(2,257)	0	(2,150)	(203)
Total other expenses	5,493	6,199	12,307	11,486
Income (loss) before income taxes	3,928	(755)	5,646	(204)
Provision for (benefit from) income taxes	580	(563)	762	(181)
Net income (loss)	3,348	(192)	4,884	(23)
Net income (loss) attributable to non-controlling interest	1,470	(228)	1,908	181
Net income (loss) attributable to i3 Verticals, Inc.	$ 1,878	$ 36	$ 2,976	$ (204)
Net income (loss) per share attributable to Class A common stockholders:
Basic (in USD per share)	$ 0.08	$ 0.00	$ 0.13	$ (0.01)
Diluted (in USD per share)	$ 0.08	$ (0.00)	$ 0.13	$ (0.01)
Weighted average shares of Class A common stock outstanding:
Basic (in shares)	23,331,239	23,135,898	23,299,214	23,066,499
Diluted (in shares)	23,718,474	34,269,140	23,726,720	23,066,499

XML

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Class A Common Stock	Class B Common Stock	Common Stock Class A Common Stock	Common Stock Class B Common Stock	Additional Paid-In Capital	Additional Paid-In Capital Cumulative Effect, Period of Adoption, Adjustment	Retained Earnings (Deficit)	Retained Earnings (Deficit) Cumulative Effect, Period of Adoption, Adjustment	Non-Controlling Interest
Beginning balance (in shares) at Sep. 30, 2022					22,986,448	10,118,142
Stockholders' equity, beginning at Sep. 30, 2022	$ 307,688	$ (11,933)			$ 2	$ 1	$ 241,958	$ (23,382)	$ (23,582)	$ 11,449	$ 89,309
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity-based compensation	6,846						6,846
Net (loss) income	169								(240)		409
Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis	685						685
Exercise or release of equity-based awards (in shares)					24,745
Exercise or release of equity-based awards	3						3
Allocation of equity to non-controlling interests	0						1,906				(1,906)
Ending balance (in shares) at Dec. 31, 2022					23,011,193	10,118,142
Stockholders' equity, ending at Dec. 31, 2022	303,458				$ 2	$ 1	228,016		(12,373)		87,812
Beginning balance (in shares) at Sep. 30, 2022					22,986,448	10,118,142
Stockholders' equity, beginning at Sep. 30, 2022	307,688	$ (11,933)			$ 2	$ 1	241,958	$ (23,382)	(23,582)	$ 11,449	89,309
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	(23)		$ (23)
Ending balance (in shares) at Mar. 31, 2023					23,167,730	10,108,218
Stockholders' equity, ending at Mar. 31, 2023	311,811				$ 2	$ 1	234,442		(12,337)		89,703
Beginning balance (in shares) at Dec. 31, 2022					23,011,193	10,118,142
Stockholders' equity, beginning at Dec. 31, 2022	303,458				$ 2	$ 1	228,016		(12,373)		87,812
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity-based compensation	6,802						6,802
Net (loss) income	(192)		$ (192)						36		(228)
Redemption of common units in i3 Verticals, LLC (in shares)					9,924	(9,924)
Redemption of common units in i3 Verticals, LLC	0						86				(86)
Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis	349						349
Exercise or release of equity-based awards (in shares)					64,443
Exercise or release of equity-based awards	(606)						(606)
Allocation of equity to non-controlling interests	0						(2,205)				2,205
Issuance of Class A common stock under the 2020 Inducement Plan ( in shares)					82,170
Issuance of Class A common stock under the 2020 Inducement Plan	2,000						2,000
Ending balance (in shares) at Mar. 31, 2023					23,167,730	10,108,218
Stockholders' equity, ending at Mar. 31, 2023	311,811				$ 2	$ 1	234,442		(12,337)		89,703
Beginning balance (in shares) at Sep. 30, 2023			23,253,272	10,093,394	23,253,272	10,093,394
Stockholders' equity, beginning at Sep. 30, 2023	328,296				$ 2	$ 1	249,688		(12,944)		91,549
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity-based compensation	6,508						6,508
Net (loss) income	1,536								1,098		438
Exercise or release of equity-based awards (in shares)					25,898
Exercise or release of equity-based awards	(10)						(10)
Sale of exchangeable note hedges	1,483						1,483
Repurchases of warrants	(657)						(657)
Allocation of equity to non-controlling interests	0						(2,450)				2,450
Ending balance (in shares) at Dec. 31, 2023					23,279,170	10,093,394
Stockholders' equity, ending at Dec. 31, 2023	337,156				$ 2	$ 1	254,562		(11,846)		94,437
Beginning balance (in shares) at Sep. 30, 2023			23,253,272	10,093,394	23,253,272	10,093,394
Stockholders' equity, beginning at Sep. 30, 2023	328,296				$ 2	$ 1	249,688		(12,944)		91,549
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	$ 4,884		$ 4,884
Redemption of common units in i3 Verticals, LLC (in shares)					40,718
Exercise or release of equity-based awards (in shares)	32,517
Ending balance (in shares) at Mar. 31, 2024			23,416,518	10,052,676	23,416,518	10,052,676
Stockholders' equity, ending at Mar. 31, 2024	$ 346,100				$ 2	$ 1	259,242		(9,968)		96,823
Beginning balance (in shares) at Dec. 31, 2023					23,279,170	10,093,394
Stockholders' equity, beginning at Dec. 31, 2023	337,156				$ 2	$ 1	254,562		(11,846)		94,437
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity-based compensation	5,777						5,777
Net (loss) income	3,348		$ 3,348						1,878		1,470
Redemption of common units in i3 Verticals, LLC (in shares)					40,718	(40,718)
Redemption of common units in i3 Verticals, LLC	0						384				(384)
Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis	42						42
Exercise or release of equity-based awards (in shares)					96,630
Exercise or release of equity-based awards	(223)						(223)
Allocation of equity to non-controlling interests	0						(1,300)				1,300
Ending balance (in shares) at Mar. 31, 2024			23,416,518	10,052,676	23,416,518	10,052,676
Stockholders' equity, ending at Mar. 31, 2024	$ 346,100				$ 2	$ 1	$ 259,242		$ (9,968)		$ 96,823

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands		6 Months Ended
		Mar. 31, 2024	Mar. 31, 2023
Cash flows from operating activities:
Net income (loss)		$ 4,884	$ (23)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		19,808	17,691
Equity-based compensation		12,285	13,648
Amortization of debt issuance costs		676	729
Gain on repurchase of exchangeable notes		(2,397)	0
Loss on sale of exchangeable senior note hedges		245	0
Gain on repurchases of warrants		(105)	0
Provision for (benefit from) income taxes		(1,238)	(208)
Non-cash lease expense		2,349	2,289
Changes in non-cash contingent consideration expense from original estimate		(527)	3,722
Other non-cash adjustments to net income		668	909
Changes in operating assets:
Accounts receivable		5,517	6,497
Prepaid expenses and other current assets		(3,385)	(1,860)
Other assets		(802)	(710)
Changes in operating liabilities:
Accounts payable		896	(1,484)
Accrued expenses and other current liabilities		(8,621)	(5,009)
Acquisition escrow obligations		(1,848)	(1,564)
Deferred revenue		2,257	(2,628)
Operating lease liabilities		(2,364)	(2,234)
Other long-term liabilities		2	0
Contingent consideration paid in excess of original estimates		(3,153)	(3,881)
Net cash provided by operating activities		25,147	25,884
Cash flows from investing activities:
Expenditures for property and equipment		(1,537)	(2,322)
Proceeds from sale of property and equipment		618	0
Expenditures for capitalized software		(6,106)	(5,381)
Purchases of merchant portfolios and residual buyouts		(4,214)	(387)
Acquisitions of businesses, net of cash and restricted cash acquired		(1,100)	(101,997)
Payments for other investing activities		(34)	(1,227)
Proceeds from other investing activities		4	184
Net cash used in investing activities		(12,369)	(111,130)
Cash flows from financing activities:
Proceeds from revolving credit facility		206,419	265,811
Payments on revolving credit facility		(132,710)	(179,939)
Payments for repurchase of exchangeable notes		(87,840)	0
Proceeds from sale of exchangeable senior note hedges		1,238	0
Payments for repurchases of warrants		(552)	0
Payments of debt issuance costs		0	(87)
Net payments for settlement obligations	[1]	(3,287)	(355)
Cash paid for contingent consideration		(760)	(1,175)
Payments for required distributions to members for tax obligations		(189)	0
Proceeds from stock option exercises		0	104
Payments for employee's tax withholdings from net settled stock option exercises and RSU releases		(204)	(545)
Net cash (used in) provided by financing activities		(17,885)	83,814
Net decrease in cash, cash equivalents and restricted cash		(5,107)	(1,432)
Cash, cash equivalents and restricted cash at beginning of period		12,400	23,765
Cash, cash equivalents and restricted cash at end of period		7,293	22,333
Supplemental disclosure of cash flow information:
Cash paid for interest		14,107	10,266
Cash paid for income taxes		$ 5,376	$ 1,419

[1] Refer to Note 2 for discussion of the change in the current period presentation.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2024	Sep. 30, 2023	Mar. 31, 2023	Sep. 30, 2022
Statement of Cash Flows [Abstract]
Cash and cash equivalents	$ 3,139	$ 3,112	$ 3,977	$ 3,490
Settlement assets	1,586	4,873	7,185	7,540
Restricted cash	2,568	4,415	11,171	12,735
Total cash, cash equivalents, and restricted cash	$ 7,293	$ 12,400	$ 22,333	$ 23,765

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ORGANIZATION AND OPERATIONS

6 Months Ended

Mar. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND OPERATIONS

ORGANIZATION AND OPERATIONS

i3 Verticals, Inc. (the “Company”) was formed as a Delaware corporation on January 17, 2018. The Company was formed for the purpose of completing an initial public offering (“IPO”) of its Class A common stock and other related transactions in order to carry on the business of i3 Verticals, LLC and its subsidiaries. i3 Verticals, LLC was founded in 2012 and delivers seamlessly integrated software and payment solutions to customers in strategic vertical markets. The Company’s headquarters are located in Nashville, Tennessee, with operations throughout the United States. Unless the context otherwise requires, references to “we,” “us,” “our,” “i3 Verticals” and the “Company” refer to i3 Verticals, Inc. and its subsidiaries, including i3 Verticals, LLC.

In connection with the IPO, the Company completed certain reorganization transactions, which, among other things, resulted in i3 Verticals, Inc. being the sole managing member of i3 Verticals, LLC (the “Reorganization Transactions”). Following the completion of the IPO and Reorganization Transactions, the Company is a holding company and the principal asset that it owns are the common units of i3 Verticals, LLC. i3 Verticals, Inc. operates and controls all of i3 Verticals, LLC's operations and, through i3 Verticals, LLC and its subsidiaries, conducts i3 Verticals, LLC's business. i3 Verticals, Inc. has a majority economic interest in i3 Verticals, LLC. As the sole managing member of i3 Verticals, LLC, i3 Verticals, Inc. consolidates the financial results of i3 Verticals, LLC and reports a non-controlling interest representing the Common Units of i3 Verticals, LLC held by owners other than i3 Verticals, Inc. (the “Continuing Equity Owners”).

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the reporting and disclosure rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the unaudited condensed consolidated financial statements of the Company and its subsidiaries as of March 31, 2024 and for the three and six months ended March 31, 2024 and 2023. The results of operations for the three and six months ended March 31, 2024 and 2023 are not necessarily indicative of the operating results for the full year.

As permitted by the rules and regulations of the SEC, certain information and disclosures otherwise included in the notes to the consolidated financial statements have been condensed or omitted from the summary of significant accounting policies. The Company believes the disclosures are adequate to make the information presented not misleading. It is recommended that these interim condensed consolidated financial statements be read in conjunction with the Company's consolidated financial statements and related footnotes for the years ended September 30, 2023 and 2022, included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2023 filed with the SEC on November 22, 2023.

Principles of Consolidation

These interim condensed consolidated financial statements include the accounts of the Company and its subsidiary companies. All significant intercompany accounts and transactions have been eliminated in consolidation.

Restricted Cash

Restricted cash represents funds held in escrow related to acquisitions or held-on-deposit with processing banks pursuant to agreements to cover potential merchant losses. It is presented as long-term assets on the accompanying condensed consolidated balance sheets since the related agreements extend beyond the next twelve months. Following the adoption of Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230), the Company includes restricted cash along with the cash and cash equivalents balance for presentation in the consolidated statements of cash flows.

Settlement Assets and Obligations

Settlement assets and obligations result when funds are temporarily held or owed by the Company on behalf of merchants, consumers, schools, and other institutions. Timing differences, interchange expenses, merchant reserves and exceptional items cause differences between the amount received from the card networks and the amount funded to counterparties. These balances arising in the settlement process are reflected as settlement assets and obligations on the accompanying consolidated balance sheets. With the exception of merchant reserves, settlement assets or settlement obligations are generally collected and paid within one to four days. Settlement assets and settlement obligations were both $1,586 as of March 31, 2024 and $4,873 as of September 30, 2023, respectively.

Reclassifications

Certain prior period amounts have been reclassified in order to conform with the current period presentation. These reclassifications have no impact on the Company’s previously reported consolidated net income (loss).

Change in presentation

During the second quarter of 2024, the Company elected to change its presentation of cash flows associated with "Settlement obligations" from operating activities to financing actives within the Condensed Consolidated Statements of Cash Flows. Comparative amounts have been reclassified to conform to the current period presentation. This change has no impact on the Condensed Consolidated Balance Sheet, Condensed Consolidated Statements of Operations or Condensed Consolidated Statement of Changes in Equity.

The following tables present the effects of the change in presentation within the Condensed Consolidated Statements of Cash Flows:

	For the Six Months Ended March 31, 2024
	As Previously Reported	Adjustment	As Adjusted
Cash flows from operating activities:
Settlement obligations	(3,287)	3,287	—
Net cash provided by operating activities	21,860	3,287	25,147
Cash flows from financing activities:
Net payments for settlement obligations	—	(3,287)	(3,287)
Net cash used in financing activities	(14,598)	(3,287)	(17,885)

	For the Six Months Ended March 31, 2023
	As Previously Reported	Adjustment	As Adjusted
Cash flows from operating activities:
Settlement obligations	(355)	355	—
Net cash provided by operating activities	25,529	355	25,884
Cash flows from financing activities:
Net payments for settlement obligations	—	(355)	(355)
Net cash provided by (used in) financing activities	84,169	(355)	83,814

Inventories

Inventories consist of point-of-sale equipment to be sold to customers and are stated at the lower of cost, determined on a weighted average or specific basis, or net realizable value. Inventories were $3,978 and $4,138 at March 31, 2024 and September 30, 2023, respectively, and are included within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

Acquisitions

Business acquisitions have been recorded using the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), and, accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition. Where relevant, the fair value of contingent consideration included in an acquisition is calculated using a Monte Carlo simulation. The fair value of merchant relationships and non-compete assets acquired is identified using the Income Approach. The fair values of trade names and internally-developed software acquired are identified using the Relief from Royalty Method. After the purchase price has been allocated, goodwill is recorded to the extent the total consideration paid for the acquisition, including the acquisition date fair value of contingent consideration, if any, exceeds the sum of the fair values of the separately identifiable acquired assets and assumed liabilities. Acquisition costs for business combinations are expensed when incurred and recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Acquisitions not meeting the accounting criteria to be accounted for as a business combination are accounted for as an asset acquisition. An asset acquisition is recorded at its purchase price, inclusive of acquisition costs, which is allocated among the acquired assets and assumed liabilities based upon their relative fair values at the date of acquisition.

Leases

The Company adopted ASU 2016-02, Leases, on October 1, 2020, using the optional modified retrospective method under which the prior period financial statements were not restated for the new guidance. The Company elected the accounting policy practical expedients for all classes of underlying assets to (i) combine associated lease and non-lease components in a lease arrangement as a combined lease component and (ii) exclude recording short-term leases as right-of-use assets on the condensed consolidated balance sheets.

At contract inception the Company determines whether an arrangement is, or contains a lease, and for each identified lease, evaluates the classification as operating or financing. Leased assets and obligations are recognized at the lease commencement date based on the present value of fixed lease payments to be made over the term of the lease. Renewal and termination options are factored into determination of the lease term only if the option is reasonably certain to be exercised. The Company’s leases do not provide a readily determinable implicit interest rate and the Company uses its incremental borrowing rate to measure the lease liability and corresponding right-of-use asset. The incremental borrowing rate is a fully collateralized rate that considers the

Company’s credit rating, market conditions and the term of the lease. The Company accounts for all components in a lease arrangement as a single combined lease component.

Operating lease cost is recognized on a straight-line basis over the lease term. Total lease costs include variable lease costs, which are primarily comprised of the consumer price index adjustments and other changes based on rates, such as costs of insurance and property taxes. Variable payments are expensed in the period incurred and not included in the measurement of lease assets and obligations.

Revenue Recognition and Deferred Revenue

Revenue is recognized as each performance obligation is satisfied, in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company accrues for rights of refund, processing errors or penalties, or other related allowances based on historical experience. The Company utilized the portfolio approach practical expedient within ASC 606-10-10-4 Revenue from Contracts with Customers—Objectives and the significant financing component practical expedient within ASC 606-10-32-18 Revenue from Contracts with Customers—The Existence of a Significant Financing Component in the Contract in performing the analysis.

The Company's revenue for the six months ended March 31, 2024 and 2023 is derived from the following sources:

•Software and related services — Includes sales of software as a service, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to our software offerings

•Payments — Includes volume-based payment processing fees (“discount fees”), gateway fees and other related fixed transaction or service fees

•Other — Includes sales of equipment, non-software related professional services and other revenues

Revenues from sales of the Company’s software are recognized when the related performance obligations are satisfied. Sales of software licenses are categorized into one of two categories of intellectual property in accordance with ASC 606, functional or symbolic. The key distinction is whether the license represents a right to use (functional) or a right to access (symbolic) intellectual property. The Company generates sales of one-time software licenses, which is functional intellectual property. Revenue from functional intellectual property is recognized at a point in time, when delivered to the customer. The Company also offers access to its software under software-as-a-service (“SaaS”) arrangements, which represent services arrangements. Revenue from SaaS arrangements is recognized over time, over the term of the agreement.

Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed or a specified per transaction amount, depending on the card type. The Company frequently enters into agreements with customers under which the customer engages the Company to provide both payment authorization services and transaction settlement services for all of the cardholder transactions of the customer, regardless of which issuing bank and card network to which the transaction relates. The Company’s core performance obligations are to stand ready to provide continuous access to the Company’s payment authorization services and transaction settlement services in order to be able to process as many transactions as its customers require on a daily basis over the contract term. These services are stand ready obligations, as the timing and quantity of transactions to be processed is not determinable. Under a stand-ready obligation, the Company’s performance obligation is defined by each time increment rather than by the underlying activities satisfied over time based on days elapsed. Because the service of standing ready is substantially the same each day and has the same pattern of transfer to the customer, the Company has determined that its stand-ready performance obligation comprises a series of distinct days of service. Discount fees are recognized each day based on the volume or transaction count at the time the merchants’ transactions are processed.

The Company follows the requirements of ASC 606-10-55 Revenue from Contracts with Customers—Principal versus Agent Considerations, which states that the determination of whether a company should recognize revenue based on the gross amount billed to a customer or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement. The determination of gross versus net recognition of revenue requires judgment that depends on whether the Company controls the good or service before it is transferred to the merchant or whether the Company is acting as an agent of a third party. The assessment is provided separately for each performance obligation identified. Under its agreements, the Company incurs interchange and network pass-through charges from the third-party card issuers and card networks, respectively, related to the provision of payment authorization services. The Company has determined that it is acting as an agent with respect to these payment authorization services, based on the following factors: (1) the Company has no discretion over which card issuing bank will be used to process a transaction and is unable to direct the activity of the merchant to another card issuing bank, and (2) interchange and card network rates are pre-established by the card issuers or card networks, and the Company has no latitude in determining these fees. Therefore, revenue allocated to the payment authorization performance obligation is presented net of interchange and card network fees paid to the card issuing banks and card networks, respectively, for the six months ended March 31, 2024 and 2023.

With regards to the Company's discount fees, generally, where the Company has control over merchant pricing, merchant portability, credit risk and ultimate responsibility for the merchant relationship, revenues are reported at the time of sale equal to the full amount of the discount charged to the merchant, less interchange and network fees. Revenues generated from merchant portfolios where the Company does not have control over merchant pricing, liability for merchant losses or credit risk or rights of portability are reported net of interchange and network fees as well as third-party processing costs directly attributable to processing and bank sponsorship costs.

Revenues are also derived from a variety of transaction fees, which are charged for accessing our payment and software solutions, and fees for other miscellaneous services. Revenues derived from such fees are recognized at the time the transactions occur and when there are no further performance obligations. Revenue from the sale of equipment, is recognized upon transfer of ownership to the customer, after which there are no further performance obligations.

Arrangements may contain multiple performance obligations, such as payment authorization services, transaction settlement services, hardware, software products, maintenance, and professional installation and training services. Revenues are allocated to each performance obligation based on the standalone selling price of each good or service. The selling price for a deliverable is based on standalone selling price, if available, the adjusted market assessment approach, estimated cost plus margin approach, or residual approach. The Company establishes estimated selling price, based on the judgment of the Company's management, considering internal factors such as margin objectives, pricing practices and controls, customer segment pricing strategies and the product life cycle. In arrangements with multiple performance obligations, the Company determines allocation of the transaction price at inception of the arrangement and uses the standalone selling prices for the majority of the Company's revenue recognition.

Revenues from sales of the Company’s combined hardware and software element are recognized when each performance obligation has been satisfied which has been determined to be upon the delivery of the product. Revenues derived from service fees are recognized at the time the services are performed and there are no further performance obligations. The Company’s professional services, including training, installation, and repair services are recognized as revenue as these services are performed.

The tables below present a disaggregation of the Company's revenue from contracts with customers by product by segment. Refer to Note 14 for discussion of the Company's segments. The Company's products are defined as follows:

•Software and related services — Includes SaaS, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to our software offerings

•Payments — Includes discount fees, gateway fees and other related fixed transaction or service fees

•Other — Includes sales of equipment, non-software related professional services and other revenues

	For the Three Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	42,130	$	3,537	$	(10)	$	45,657
Payments revenue	14,855		29,585		(6)		44,434
Other revenue	2,498		1,953		—		4,451
Total revenue	$	59,483	$	35,075	$	(16)	$	94,542

	For the Three Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	44,099	$	3,217	$	(9)	$	47,307
Payments revenue	14,285		27,634		(10)		41,909
Other revenue	2,413		2,243		—		4,656
Total revenue	$	60,797	$	33,094	$	(19)	$	93,872

	For the Six Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	82,462	$	6,839	$	(22)	$	89,279
Payments revenue	28,837		59,607		(15)		88,429
Other revenue	4,773		4,051		—		8,824
Total revenue	$	116,072	$	70,497	$	(37)	$	186,532

	For the Six Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	82,244	$	6,196	$	(19)	$	88,421
Payments revenue	27,038		55,243		(18)		82,263
Other revenue	4,728		4,489		—		9,217
Total revenue	$	114,010	$	65,928	$	(37)	$	179,901

The tables below present a disaggregation of the Company's revenue from contracts with customers by timing of transfer of goods or services by segment. The Company's revenue included in each category are defined as follows:

•Revenue earned over time — Includes discount fees, gateway fees, sales of SaaS, ongoing support or other stand-ready obligations and professional services

•Revenue earned at a point in time — Includes point in time service fees that are not stand-ready obligations, software licenses sold as functional intellectual property and other equipment

	For the Three Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	55,361	$	30,095	$	(10)	$	85,446
Revenue earned at a point in time	4,122		4,980		(6)		9,096
Total revenue	$	59,483	$	35,075	$	(16)	$	94,542

	For the Three Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	54,568	$	27,984	$	(9)	$	82,543
Revenue earned at a point in time	6,229		5,110		(10)		11,329
Total revenue	$	60,797	$	33,094	$	(19)	$	93,872

	For the Six Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	109,715	$	60,176	$	(22)	$	169,869
Revenue earned at a point in time	6,357		10,321		(15)		16,663
Total revenue	$	116,072	$	70,497	$	(37)	$	186,532

	For the Six Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	105,009	$	55,581	$	(19)	$	160,571
Revenue earned at a point in time	9,001		10,347		(18)		19,330
Total revenue	$	114,010	$	65,928	$	(37)	$	179,901

Contract Assets

The Company bills for certain software and related services sales and fixed fee professional services upon pre-determined milestones in the contracts. Therefore, the Company may have contract assets other than trade accounts receivable for performance obligations that are partially completed, which would typically represent consulting services provided before a milestone is completed in a contract. Additionally, contract assets also include software licenses sold as a right to use license but paid for under a subscription model. Under this structure, the license revenue is recognized upfront while a portion of the revenue is unbilled. Unbilled amounts

associated with these services are presented as accounts receivable as the Company has an unconditional right to payment for services performed.

As of March 31, 2024 and September 30, 2023, the Company’s contract assets from contracts with customers was $11,478 and $15,131, respectively.

Contract Liabilities

Deferred revenue represents amounts billed to customers by the Company for services contracts. Payment is typically collected at the start of the contract term. The initial prepaid contract agreement balance is deferred. The balance is then recognized as the services are provided over the contract term. Deferred revenue that is expected to be recognized as revenue within one year is recorded as short-term deferred revenue and the remaining portion is recorded as other long-term liabilities in the condensed consolidated balance sheets. The terms for most of the Company's contracts with a deferred revenue component are one year. Substantially all of the Company's deferred revenue is anticipated to be recognized within the next year.

The following tables present the changes in deferred revenue as of and for the six months ended March 31, 2024 and 2023, respectively:

Balance at September 30, 2023	$	35,444
Deferral of revenue	19,793
Recognition of unearned revenue	(15,664)
Balance at December 31, 2023	39,573
Deferral of revenue	11,759
Recognition of unearned revenue	(13,596)
Balance at March 31, 2024	$	37,736

Balance at September 30, 2022	$	32,089
Deferral of revenue	19,334
Recognition of unearned revenue	(13,925)
Balance at December 31, 2022	37,498
Deferral of revenue	10,475
Recognition of unearned revenue	(14,286)
Balance at March 31, 2023	$	33,687

Costs to Obtain and Fulfill a Contract

The Company capitalizes incremental costs to obtain new contracts and contract renewals and amortizes these costs on a straight-line basis as an expense over the benefit period, which is generally the contract term, unless a commensurate payment is not expected at renewal. As of March 31, 2024 and September 30, 2023, the Company had $5,417 and $4,966, respectively, of capitalized contract costs, which relates to commissions paid to employees and agents as well as other incentives given to customers to obtain new sales, included within “Other assets" on the condensed consolidated balance sheets. The Company recorded expense related to these costs of $241 and $470 for the three and six months ended March 31, 2024, respectively and $193 and $376 for the three and six months ended March 31, 2023.

The Company expenses sales commissions as incurred for the Company's sales commission plans that are paid on recurring monthly revenues, portfolios of existing customers, or have a substantive stay requirement prior to payment.

Other Cost of Services

Other costs of services include third-party processing costs directly attributable to processing and bank sponsorship costs, which may not be based on a percentage of volume. These costs also include related costs such as residual payments to sales groups, which are based on a percentage of the net revenues generated from merchant referrals. In certain merchant processing bank relationships the Company is liable for chargebacks against a merchant equal to the volume of the transaction. Losses resulting from chargebacks against a merchant are included in other cost of services on the accompanying condensed consolidated statement of operations. The Company evaluates its risk for such transactions and estimates its potential loss from chargebacks based primarily on historical experience and other relevant factors. The reserve for merchant losses is included within accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets. The cost of equipment and software sold is also included in other cost of services. Other costs of services are recognized at the time the associated revenue is earned.

The Company accounts for all governmental taxes associated with revenue transactions on a net basis.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, the value of purchase consideration paid and identifiable assets acquired and assumed in acquisitions, goodwill and intangible asset impairment review, determination of performance obligations for revenue recognition, loss reserves, assumptions used in the calculation of equity-based compensation and in the calculation of income taxes, and certain tax assets and liabilities as well as the related valuation allowances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 will provide improvements to the income tax disclosures primarily related to the income taxes paid and rate reconciliation, and how legislation changes may affect future capital allocation and cash flow forecasts. The amendment will improve the consistency in which companies provide tax information, and will further increase the transparency of related tax risks and operational opportunities. The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company will not be required to adopt ASU 2023-09 until October 1, 2025. The Company is currently evaluating the impact of the adoption of ASU 2023-09 on the Company’s financial statement disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 improves interim disclosure requirements for segment reporting, including clarifications regarding the measure of profit and loss used to asses segment performance and the allocation of resources. Further, it enhances the disclosures for reporting segment expenses and will require the Company to report significant expenses regularly provided by the chief operating decision maker. The amendment will require companies to disclose a more granular level of information with regards to segment reporting to further enhance the transparency of what specified amounts are included within each segment. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company will not be required to adopt ASU 2023-07 until October 1, 2024. The Company is currently evaluating the impact of the adoption of ASU 2023-07 on the Company’s financial statement disclosures.

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ACQUISITIONS

6 Months Ended

Mar. 31, 2024

Business Combination and Asset Acquisition [Abstract]

ACQUISITIONS

ACQUISITIONS

During the six months ended March 31, 2024 and 2023, the Company acquired the following intangible assets and businesses:

Residual Buyouts

From time to time, the Company acquires future commission streams (or "residuals") from sales agents in exchange for an upfront cash payment. This results in an increase in overall gross processing volume to the Company. The residual buyouts are treated as asset acquisitions, resulting in recording a residual buyout intangible asset at cost on the date of acquisition. These assets are amortized using a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are expected to be utilized over their estimated useful lives.

During the six months ended March 31, 2024 and 2023, the Company purchased residuals for $4,466 and $387 of consideration, respectively. The purchases were funded with a combination of cash on hand and borrowings on the Company's revolving credit facility. The acquired residual buyout intangible asset has an estimated amortization period of eight years.

Referral Agreements

From time to time, the Company enters into referral agreements with agent banks (“Referral Partners”). Under these agreements, the Referral Partner refers its customers to the Company for credit card processing services. Total consideration paid for these agreements in the six months ended March 31, 2023 was $420, all of which was settled with cash on hand. Because the Company pays an up-front fee to compensate the Referral Partner, the amount is treated as an asset acquisition in which the Company has acquired an intangible stream of referrals. This asset is amortized over a straight-line period of five years.

Business Combinations during the six months ended March 31, 2024

During the six months ended March 31, 2024 the Company completed the acquisition of a business to expand the Company’s software offerings. Total purchase consideration was $1,270, including $1,100 in cash consideration, funded by proceeds from the Company's revolving credit facility, and $170 of contingent consideration.

In connection with this acquisition, the Company allocated approximately $5 to property and equipment, approximately $40 to capitalized software, approximately $220 to customer relationships and the remainder, approximately $1,005, to goodwill, all of which is deductible for tax purposes. Certain of the purchase price allocations assigned for this acquisition is considered preliminary as of March 31, 2024. The acquired customer relationships intangible assets have an estimated amortization periods of ten years. The acquired capitalized software have amortization periods of seven years.

Acquisition-related costs for this acquisition amounted to approximately $8 and were expensed as incurred.

Business Combinations during the year ended September 30, 2023

Purchase of Celtic Cross Holdings, Inc. and Celtic Systems Pvt. Ltd.

During the six months ended March 31, 2023, the Company completed the acquisition of Celtic Cross Holdings, Inc., in Scottsdale, Arizona and Celtic Systems Pvt. Ltd. in Vadodara, India (collectively "Celtic") to expand the Company’s software offerings in the Public Sector vertical. Celtic is within the Software and Services segment. Total purchase consideration consisted of $85,000 in cash consideration, funded by proceeds from the Company's revolving credit facility.

The goodwill associated with the Celtic acquisition is deductible for tax purposes. The acquired customer relationships intangible assets has an estimated amortization period of eighteen years. The trade name and non-compete agreements associated with the acquisition have amortization periods of five years and three years,

respectively. The weighted-average amortization period for all intangibles acquired is eighteen years. The acquired capitalized software has a weighted-average amortization period of ten years.

Acquisition-related costs for this acquisition amounted to approximately $1,782 and were expensed as incurred.

Summary of Celtic Cross Holdings, Inc. and Celtic Systems Pvt. Ltd.

The fair values assigned to certain assets and liabilities assumed, as of the acquisition date, were as follows:

Accounts receivable	$	7,660
Prepaid expenses and other current assets	103
Property and equipment	5,233
Capitalized software	12,600
Customer relationships	33,800
Non-compete agreements	200
Trade name	600
Goodwill	43,899
Total assets acquired	104,095
Accounts payable	9
Accrued expenses and other current liabilities	3,182
Deferred revenue, current	2,741
Other long-term liabilities	13,162
Net assets acquired	$	85,001

Other Business Combinations during the year ended September 30, 2023

The Company completed the acquisition of two other businesses to expand the Company's software offerings. The total purchase consideration was $19,757, including $16,997 in cash consideration, funded by proceeds from the Company's revolving credit facility, $2,000 of the Company's Class A Common Stock, and $760 contingent consideration.

In connection with this acquisition, the Company allocated approximately $159 of the consideration to net working capital, approximately $374 to property and equipment, approximately $670 to capitalized software, approximately $8,400 to customer relationships, approximately $100 to trade names, and the remainder, approximately $12,229, to goodwill, of which $2,864 is deductible for tax purposes, and approximately $2,178 to other long-term liabilities. Certain of the purchase price allocations assigned for one of these acquisitions is considered preliminary as of March 31, 2024. The acquired capital software and customer relationships intangible asset have estimated amortization periods of seven to eight years and ten to fifteen years, respectively.

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PREPAID EXPENSES AND OTHER CURRENT ASSETS

6 Months Ended

Mar. 31, 2024

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

PREPAID EXPENSES AND OTHER CURRENT ASSETS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

A summary of the Company's prepaid expenses and other current assets as of March 31, 2024 and September 30, 2023 is as follows:

	March 31,		September 30,
	2024		2023
Inventory	$	3,978	$	4,138
Prepaid licenses	3,613		3,115
Prepaid insurance	929		697
Notes receivable — current portion	—		4
Other current assets	7,282		4,495
Prepaid expenses and other current assets	$	15,802	$	12,449

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GOODWILL AND INTANGIBLE ASSETS

6 Months Ended

Mar. 31, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill are as follows:

	Software and Services		Merchant Services		Other		Total
Balance at September 30, 2023	$	287,613	$	121,950	$	—	$	409,563
Goodwill attributable to preliminary purchase price adjustments and acquisitions during the six months ended March 31, 2024	1,209		—		—		1,209
Balance at March 31, 2024	$	288,822	$	121,950	$	—	$	410,772

Intangible assets consisted of the following as of March 31, 2024:

	Cost		Accumulated Amortization		Carrying Value		Amortization Life and Method
Finite-lived intangible assets:
Merchant relationships	$	310,721	$	(106,892)	$	203,829	9 to 25 years – accelerated or straight-line
Non-compete agreements	418		(267)		151		3 to 6 years – straight-line
Website and brand development costs	103		(71)		32		3 to 4 years – straight-line
Trade names	6,131		(3,908)		2,223		3 to 7 years – straight-line
Residual buyouts	18,686		(4,134)		14,552		8 years – straight-line
Referral and exclusivity agreements	420		(105)		315		5 years – straight-line
Total finite-lived intangible assets	336,479		(115,377)		221,102
Indefinite-lived intangible assets:
Trademarks	43		—		43
Total identifiable intangible assets	$	336,522	$	(115,377)	$	221,145

Amortization expense for intangible assets amounted to $5,270 and $10,505 for the three and six months ended March 31, 2024, respectively, and $5,157 and $10,216 for the three and six months ended March 31, 2023, respectively.

Based on net carrying amounts at March 31, 2024, the Company's estimate of future amortization expense for intangible assets are presented in the table below for fiscal years ending September 30:

2024 (six months remaining)	$	10,435
2025	20,798
2026	20,326
2027	19,706
2028	19,121
Thereafter	130,716
	$	221,102

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ACCRUED EXPENSES AND OTHER LIABILITIES

6 Months Ended

Mar. 31, 2024

Payables and Accruals [Abstract]

ACCRUED EXPENSES AND OTHER LIABILITIES

ACCRUED EXPENSES AND OTHER LIABILITIES

A summary of the Company's accrued expenses and other current liabilities as of March 31, 2024 and September 30, 2023 is as follows is as follows:

	March 31,		September 30,
	2024		2023
Accrued wages, bonuses, commissions and vacation	$	6,290	$	8,713
Accrued interest	1,004		1,313
Accrued contingent consideration — current portion	3,868		6,825
Escrow liabilities	2,118		3,965
Customer deposits	1,061		1,258
Employee health self-insurance liability	1,058		1,014
Accrued interchange	2,066		2,191
Other current liabilities	9,389		12,461
Accrued expenses and other current liabilities	$	26,854	$	37,740

A summary of the Company's long-term liabilities as of March 31, 2024 and September 30, 2023 is as follows:

	March 31,		September 30,
	2024		2023
Accrued contingent consideration — long-term portion	$	101	$	1,414
Deferred tax liability — long-term	17,125		19,646
Other long-term liabilities	1,128		3,083
Total other long-term liabilities	$	18,354	$	24,143

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LONG-TERM DEBT, NET

6 Months Ended

Mar. 31, 2024

Debt Disclosure [Abstract]

LONG-TERM DEBT, NET

LONG-TERM DEBT, NET

A summary of long-term debt, net as of March 31, 2024 and September 30, 2023 is as follows:

		March 31,		September 30,
	Maturity	2024		2023
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility	May 8, 2028	$	346,214	$	272,505
1% Exchangeable Senior Notes due 2025	February 15, 2025	26,223		117,000
Debt issuance costs, net		(2,822)		(4,424)
Total long-term debt, net of issuance costs		369,615		385,081
Less current portion of long-term debt		(26,223)		—
Long-term debt, net of current portion		$	343,392	$	385,081

2020 Exchangeable Notes Offering

On February 18, 2020, i3 Verticals, LLC issued $138,000 aggregate principal amount of 1.0% Exchangeable Senior Notes due 2025 (the “Exchangeable Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Company received approximately $132,762 in net proceeds from the sale of the Exchangeable Notes, as determined by deducting estimated offering expenses paid to third-parties from the aggregate principal amount.

The Exchangeable Notes bear interest at a fixed rate of 1.00% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020. The Exchangeable Notes will mature on February 15, 2025, unless converted or repurchased at an earlier date.

i3 Verticals, LLC issued the Exchangeable Notes pursuant to an Indenture, dated as of February 18, 2020, among i3 Verticals, LLC, the Company and U.S. Bank National Association, as trustee.

For a discussion of the terms of the Exchangeable Notes, refer to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

Non-cash interest expense, including amortization of debt issuance costs, related to the Exchangeable Notes for the three and six months ended March 31, 2024 was $104 and $359, respectively and $233 and $460 for the three and six months ended March 31, 2023. Total unamortized debt issuance costs related to the Exchangeable Notes were $216 and $1,501 as of March 31, 2024 and September 30, 2023, respectively.

During fiscal year 2020, we repurchased $21,000 in aggregate principal amount of Exchangeable Notes in open market purchases. In addition, on December 21, 2023, i3 Verticals, LLC entered into agreements to repurchase an additional portion of its Exchangeable Notes pursuant to privately negotiated transactions with a limited number of holders of the Exchangeable Notes (the "Exchangeable Note Repurchases"). The repurchase payments were determined by the Company’s average stock price over the 15 trading-day measurement period ending January 16, 2024. The closing of the Exchangeable Note Purchases occurred on January 18, 2024, and the Company paid $87,391 to repurchase $90,777 in aggregate principal amount of its Exchangeable Notes and to repay approximately $386 in accrued interest on the repurchased portion of the Exchangeable Notes. The Company wrote off $926 of debt issuance costs in connection with the repurchase transactions. These repurchases resulted in a decrease in the Company's total leverage ratio, and following the completion of the repurchases of these Exchangeable Notes, approximately $26,223 in aggregate principal amount of the Exchangeable Notes remained outstanding, with terms unchanged. The Company recorded a gain on retirement of debt of $2,397 due to the estimated acquisition price exceeding the net carrying amount of the repurchased

portion of the Exchangeable Notes, adjusted for unamortized debt issuance costs and costs and third-party fees related to the transaction.

As of March 31, 2024, the aggregate principal amount outstanding of the Exchangeable Notes was $26,223.

The estimated fair value of the Exchangeable Notes was $25,043 as of March 31, 2024. The estimated fair value of the Exchangeable Notes was determined through consideration of quoted market prices for similar instruments. The fair value is classified as Level 2, as defined in Note 10.

Exchangeable Note Hedge Transactions

On February 12, 2020, concurrently with the pricing of the Exchangeable Notes, and on February 13, 2020, concurrently with the exercise by the initial purchasers of their right to purchase additional Exchangeable Notes, i3 Verticals, LLC entered into exchangeable note hedge transactions with respect to Class A common stock (the “Note Hedge Transactions”) with certain financial institutions (collectively, the “Counterparties”). The Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Exchangeable Notes, the same number of shares of Class A common stock that initially underlie the Exchangeable Notes in the aggregate and are exercisable upon exchange of the Exchangeable Notes. The Note Hedge Transactions are intended to reduce potential dilution to the Class A common stock upon any exchange of the Exchangeable Notes. The Note Hedge Transactions will expire upon the maturity of the Exchangeable Notes, if not earlier exercised. The Note Hedge Transactions are separate transactions, entered into by i3 Verticals, LLC with the Counterparties, and are not part of the terms of the Exchangeable Notes. Holders of the Exchangeable Notes will not have any rights with respect to the Note Hedge Transactions. i3 Verticals, LLC used approximately $28,676 of the net proceeds from the offering of the Exchangeable Notes (net of the premiums received for the warrant transactions described below) to pay the cost of the Note Hedge Transactions.

The Note Hedge Transactions do not require separate accounting as a derivative as they meet a scope exception for certain contracts involving an entity's own equity. The premiums paid for the Note Hedge Transactions have been included as a net reduction to additional paid-in capital within stockholders' equity.

In December 2023, i3 Verticals, LLC received $250 from the Counterparties to terminate the portion of the Note Hedge Transactions corresponding to the Exchangeable Notes that were repurchased in fiscal year 2020. Also in December 2023, i3 Verticals, LLC entered into agreements with the Counterparties to terminate the portion of the Note Hedge Transactions corresponding to the Exchangeable Note Repurchases. On January 18, 2024, in connection with the Exchangeable Note Repurchases, the Company and i3 Verticals, LLC terminated the corresponding portions of the Note Hedge Transactions ("Note Hedge Unwinds"), and i3 Verticals, LLC received $987 for the sale of the Note Hedge Unwinds and recorded a loss on the sale of the Note Hedge Unwinds of $245.

Warrant Transactions

On February 12, 2020, concurrently with the pricing of the Exchangeable Notes, and on February 13, 2020, concurrently with the exercise by the initial purchasers of their right to purchase additional Exchangeable Notes, the Company entered into warrant transactions to sell to the Counterparties warrants (the “Warrants”) to acquire, subject to customary adjustments, up to initially 3,376,391 shares of Class A common stock in the aggregate at an initial exercise price of $62.88 per share. The Company offered and sold the Warrants in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act. The Warrants will expire over a period beginning on May 15, 2025.

The Warrants are separate transactions, entered into by the Company with the Counterparties, and are not part of the terms of the Exchangeable Notes. Holders of the Exchangeable Notes will not have any rights with respect to the Warrants. The Company received approximately $14,669 from the offering and sale of the Warrants. The Warrants do not require separate accounting as a derivative as they meet a scope exception for

certain contracts involving an entity's own equity. The premiums paid for the Warrants have been included as a net increase to additional paid-in capital within stockholders' equity.

In December 2023, the Company paid $119 to the Counterparties to terminate the portion of the Warrants corresponding to the Exchangeable Notes that were repurchased in fiscal year 2020. Also in December 2023, i3 Verticals, LLC entered into agreements with the Counterparties to terminate the portion of the Warrants corresponding to the Exchangeable Note Repurchases. On January 18, 2024, in connection with the Exchangeable Note Repurchases, the Company and i3 Verticals, LLC terminated the corresponding portions of the and Warrants ("Warrant Unwinds"), and the Company paid $433 for the repurchase of the Warrant Unwinds and recorded a gain on the repurchase of the Warrant Unwinds of $105.

2023 Senior Secured Revolving Credit Facility

On May 8, 2023, i3 Verticals, LLC (the “Borrower”), entered into that certain Credit Agreement (the “2023 Senior Secured Credit Facility”) with the guarantors and lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (“JPMorgan”). The 2023 Senior Secured Credit Facility replaced the prior senior secured credit facility of the Company which was entered into on May 9, 2019 (the "Prior Senior Secured Credit Facility"). The 2023 Senior Secured Credit Facility provides for aggregate commitments of $450 million in the form of a senior secured revolving credit facility (the “Revolver”).

The 2023 Senior Secured Credit Facility provides that the Borrower has the right to seek additional commitments to provide additional term loan facilities or additional revolving credit commitments in an aggregate principal amount up to, as of any date of determination, the sum of (i) the greater of $100 million and 100% of the Borrower’s consolidated EBITDA (as defined in the 2023 Senior Secured Credit Facility) for the most recently completed four quarter period, plus (ii) the amount of certain prepayments of certain indebtedness, so long as, among other things, after giving pro forma effect to the incurrence of such additional borrowings and any related transactions, the Borrower’s consolidated interest coverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not be less than 3.0 to 1.0 and the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not exceed 5.0 to 1.0. As of March 31, 2024, the Borrower's consolidated interest coverage ratio was 4.1x and total leverage ratio was 3.5x.

The provision of any such additional amounts under the additional term loan facilities or additional revolving credit commitments are subject to certain additional conditions and the receipt of certain additional commitments by existing or additional lenders. The lenders under the 2023 Senior Secured Credit Facility are not under any obligation to provide any such additional term loan facilities or revolving credit commitments.

The proceeds of the Revolver, together with proceeds from any additional amounts under the additional term loan facilities or additional revolving credit commitments, may only be used by the Borrower to (i) finance working capital, capital expenditures and other lawful corporate purposes, (ii) finance permitted acquisitions (as defined in the 2023 Senior Secured Credit Facility) and (iii) to refinance certain existing indebtedness.

Borrowings under the Revolver will be made, at the Borrower’s option, at the Adjusted Term SOFR rate or the base rate, plus, in each case, an applicable margin.

The Adjusted Term SOFR rate will be the rate of interest per annum equal to the Term SOFR rate (based upon an interest period of one, three or six months), plus 0.10%, plus an applicable margin of 2.00% to 3.00% (3.00% at March 31, 2024). The Adjusted Term SOFR rate shall not be less than 0% in any event.

The base rate is a fluctuating rate of interest per annum equal to the highest of (a) the greater of the federal funds rate or the overnight bank funding rate, plus ½ of 1%, (b) Wall Street Journal prime rate and (c) the Adjusted Term SOFR rate for an interest period of one month, plus 1%, plus an applicable margin of 1.00% to 2.00% (2.00% at March 31, 2024). The base rate shall not be less than 1% in any event.

The applicable margin is based upon the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility), as reflected in the schedule below:

Consolidated Total Net Leverage Ratio	Commitment Fee		Letter of Credit Fee		Term Benchmark Loans		Base Rate Loans
> 3.0 to 1.0	0.30	%	3.00	%	3.00	%	2.00	%
> 2.5 to 1.0 but < 3.00 to 1.0	0.25	%	2.50	%	2.50	%	1.50	%
> 2.0 to 1.0 but < 2.50 to 1.0	0.20	%	2.25	%	2.25	%	1.25	%
< 2.0 to 1.0	0.15	%	2.00	%	2.00	%	1.00	%

In addition to paying interest on outstanding principal under the Revolver, the Borrower will be required to pay a commitment fee equal to the product of between 0.15% and 0.30% (the applicable percentage depending on the Borrower’s consolidated total net leverage ratio as reflected in the schedule above, 0.30% at March 31, 2024) times the actual daily amount by which $450 million exceeds the total amount outstanding under the Revolver and available to be drawn under all outstanding letters of credit.

The Borrower will be permitted to voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans under the 2023 Senior Secured Credit Facility, whether such amounts are issued under the Revolver or under the additional term loan facilities or additional revolving credit facilities, at any time without premium or penalty.

In addition, if the total amount borrowed under the Revolver exceeds $450 million at any time, the 2023 Senior Secured Credit Facility requires the Borrower to prepay such excess outstanding amounts.

All obligations under the 2023 Senior Secured Credit Facility are unconditionally guaranteed by the Company, and each of the Company’s existing and future direct and indirect material, wholly owned domestic subsidiaries, subject to certain exceptions. The obligations are secured by first-priority security interests in substantially all tangible and intangible assets of the Borrower, the Company and each subsidiary guarantor, in each case whether owned on the date of the initial borrowings or thereafter acquired.

The 2023 Senior Secured Credit Facility places certain restrictions on the ability of the Borrower, the Company and their subsidiaries to, among other things, incur debt and liens; merge, consolidate or liquidate; dispose of assets; enter into hedging arrangements; make certain restricted payments; undertake transactions with affiliates; enter into sale-leaseback transactions; make certain investments; prepay or modify the terms of certain indebtedness; and modify the terms of certain organizational agreements.

The 2023 Senior Secured Credit Facility contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain events with respect to employee benefit plans, invalidity of loan documents and certain changes in control.

Debt issuance costs

The Company did not incur any debt issuance costs during the three and six months ended March 31, 2024, and incurred $265 in debt issuance costs during the six months ended March 31, 2023. During the three and six months ended March 31, 2024. the Company wrote off $926 of debt issuance costs in connection with the Exchangeable Note Repurchases. The Company's debt issuance costs are being amortized over the related term of the debt using the straight-line method, which is not materially different than the effective interest rate method, and are presented net against long-term debt in the condensed consolidated balance sheets. The amortization of deferred debt issuance costs is included in interest expense and amounted to approximately $262 and $676

during the three and six months ended March 31, 2024, respectively, and $368 and $729 during the three and six months ended March 31, 2023, respectively.

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INCOME TAXES

6 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

i3 Verticals, Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from i3 Verticals, LLC based on i3 Verticals, Inc.’s economic interest in i3 Verticals, LLC. i3 Verticals, LLC's members, including the Company, are liable for federal, state and local income taxes based on their share of i3 Verticals, LLC's pass-through taxable income. i3 Verticals, LLC is not a taxable entity for federal income tax purposes but is subject to and reports entity level tax in both Tennessee and Texas. In addition, certain subsidiaries of i3 Verticals, LLC are corporations that are subject to state and federal income taxes.

The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. When the estimate of the annual effective tax rate is unreliable, the Company records its income tax expense or benefit based up on a period to date effective tax rate. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the Company’s estimated tax rate changes, it makes a cumulative adjustment in that period. The Company’s provision for income taxes was a provision of $580 and $762 for the three and six months ended March 31, 2024, respectively and a benefit of $563 and $181 during the three and six months ended March 31, 2023, respectively.

Tax Receivable Agreement

On June 25, 2018, the Company entered into a Tax Receivable Agreement with i3 Verticals, LLC and each of the Continuing Equity Owners (the “Tax Receivable Agreement”) that provides for the payment by the Company to the Continuing Equity Owners of 85% of the amount of certain tax benefits, if any, that it actually realizes, or in some circumstances, is deemed to realize in its tax reporting, as a result of (i) future redemptions funded by the Company or exchanges, or deemed exchanges in certain circumstances, of Common Units of i3 Verticals, LLC for Class A common stock of i3 Verticals, Inc. or cash, and (ii) certain additional tax benefits attributable to payments made under the Tax Receivable Agreement. These tax benefit payments are not conditioned upon one or more of the Continuing Equity Owners maintaining a continued ownership interest in i3 Verticals, LLC. If a Continuing Equity Owner transfers Common Units but does not assign to the transferee of such units its rights under the Tax Receivable Agreement, such Continuing Equity Owner generally will continue to be entitled to receive payments under the Tax Receivable Agreement arising in respect of a subsequent exchange of such Common Units. In general, the Continuing Equity Owners’ rights under the Tax Receivable Agreement may not be assigned, sold, pledged or otherwise alienated to any person, other than certain permitted transferees, without (a) the Company's prior written consent, which should not be unreasonably withheld, conditioned or delayed, and (b) such persons becoming a party to the Tax Receivable Agreement and agreeing to succeed to the applicable Continuing Equity Owner’s interest therein. The Company expects to benefit from the remaining 15% of the tax benefits, if any, that the Company may realize.

During the six months ended March 31, 2024, the Company acquired an aggregate of 40,718 Common Units in i3 Verticals, LLC in connection with the redemption of Common Units from the Continuing Equity Owners. which resulted in an increase in the tax basis of our investment in i3 Verticals, LLC subject to the provisions of the Tax Receivable Agreement. As a result of the exchange, during the six months ended March 31, 2024, the Company recognized an increase to its net deferred tax assets in the amount of $286, and corresponding Tax Receivable Agreement liabilities of $243, representing 85% of the tax benefits due to Continuing Equity Owners.

The deferred tax asset and corresponding Tax Receivable Agreement liability balances were $38,009 and $40,323, respectively, as of March 31, 2024.

Payments to the Continuing Equity Owners related to exchanges through March 31, 2024 will range from $0 to $3,256 per year and are expected to be paid over the next 24 years. The amounts recorded as of March 31, 2024, approximate the current estimate of expected tax savings and are subject to change after the filing of the Company’s U.S. federal and state income tax returns. Future payments under the Tax Receivable Agreement with respect to subsequent exchanges would be in addition to these amounts.

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LEASES

6 Months Ended

Mar. 31, 2024

Leases [Abstract]

LEASES

LEASES

The Company’s leases consist primarily of real estate leases throughout the markets in which the Company operates. At contract inception, the Company determines whether an arrangement is or contains a lease, and for each identified lease, evaluates the classification as operating or financing. The Company had no finance leases as of March 31, 2024. Leased assets and obligations are recognized at the lease commencement date based on the present value of fixed lease payments to be made over the term of the lease. Renewal and termination options are factored into determination of the lease term only if the option is reasonably certain to be exercised. The weighted-average remaining lease term at March 31, 2024 and 2023 was two years and four years, respectively. The Company had no significant short-term leases during the three and six months ended March 31, 2024 and 2023.

The Company’s leases do not provide a readily determinable implicit interest rate and the Company uses its incremental borrowing rate to measure the lease liability and corresponding right-of-use asset. The incremental borrowing rates were determined based on a portfolio approach considering the Company’s current secured borrowing rate adjusted for market conditions and the length of the lease term. The weighted-average discount rate used in the measurement of our lease liabilities was 7.4% and 7.3% as of March 31, 2024 and 2023, respectively.

Operating lease cost is recognized on a straight-line basis over the lease term. Operating lease costs were $1,318 and $2,651 for the three and six months ended March 31, 2024, respectively, and $1,405 and $2,909 for the three and six months ended March 31, 2023, respectively, which are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Total operating lease costs include variable lease costs of approximately $39 and $49, for the three and six months ended March 31, 2024, respectively, and $9 and $20 for the three and six months ended March 31, 2023, respectively, which are primarily comprised of costs of maintenance and utilities and changes in rates, and are determined based on the actual costs incurred during the period. Variable payments are expensed in the period incurred and not included in the measurement of lease assets and liabilities.

Short-term rent expense was $41 and $86 for the three and six months ended March 31, 2024, respectively, and $75 and $110 for the three and six months ended March 31, 2023, respectively, and are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

As of March 31, 2024, maturities of lease liabilities are as follows:

Fiscal Years ending September 30:
2024 (six months remaining)	$	2,598
2025	4,984
2026	3,874
2027	1,668
2028	755
Thereafter	1,261
Total future minimum lease payments (undiscounted)(1)	15,140
Less: present value discount	(1,357)
Present value of lease liability	$	13,783

__________________________

1.Total future minimum lease payments excludes payments of $39 for leases designated as short-term leases, which are excluded from the Company's right-of-use assets. These payments will be made within the next twelve months.

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FAIR VALUE MEASUREMENTS

6 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

The Company applies the provisions of ASC 820, Fair Value Measurement, which defines fair value, establishes a framework for its measurement and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or the price paid to transfer a liability as of the measurement date. A three-tier, fair-value reporting hierarchy exists for disclosure of fair value measurements based on the observability of the inputs to the valuation of financial assets and liabilities. The three levels are:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets.

The carrying value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, settlement assets and obligations, accounts receivable, other assets, accounts payable, and accrued expenses, approximated their fair values as of March 31, 2024 and 2023, because of the relatively short maturity dates on these instruments. The carrying amount of debt approximates fair value as of March 31, 2024 and 2023, because interest rates on these instruments approximate market interest rates.

The Company has no Level 1 or Level 2 financial instruments measured at fair value on a recurring basis. The following tables present the changes in the Company's Level 3 financial instruments that are measured at fair value on a recurring basis.

	Accrued Contingent Consideration
Balance at September 30, 2023	$	8,239
Contingent consideration accrued at time of business combination	170
Change in fair value of contingent consideration included in Operating expenses	(527)
Contingent consideration paid	(3,913)
Balance at March 31, 2024	$	3,969

	Accrued Contingent Consideration
Balance at September 30, 2022	$	22,833
Contingent consideration accrued at time of business combination	760
Change in fair value of contingent consideration included in Operating expenses	3,722
Contingent consideration paid	(5,056)
Balance at March 31, 2023	$	22,259

The fair value of contingent consideration obligations includes inputs not observable in the market and thus represents a Level 3 measurement. The amount to be paid under these obligations is contingent upon the achievement of certain growth metrics related to the financial performance of the entities subsequent to acquisition. The fair value of material contingent consideration included in an acquisition is calculated using a Monte Carlo simulation. The contingent consideration is revalued each period until it is settled. Management reviews the historical and projected performance of each acquisition with contingent consideration and uses an income probability method to revalue the contingent consideration. The revaluation requires management to make certain assumptions and represent management's best estimate at the valuation date. The probabilities are determined based on a management review of the expected likelihood of triggering events that would cause a change in the contingent consideration paid. The Company develops the projected future financial results based on an analysis of historical results, market conditions, and the expected impact of anticipated changes in the Company's overall business and/or product strategies.

Approximately $3,868 and $6,825 of contingent consideration was recorded in accrued expenses and other current liabilities as of March 31, 2024 and September 30, 2023, respectively. Approximately $101 and $1,414 of contingent consideration was recorded in other long-term liabilities as of March 31, 2024 and September 30, 2023, respectively.

Disclosure of Fair Values

The Company's financial instruments that are not remeasured at fair value include the Exchangeable Notes (see Note 7). The Company estimates the fair value of the Exchangeable Notes through consideration of quoted market prices of similar instruments, classified as Level 2 as described above. The estimated fair value of the Exchangeable Notes was $25,043 as of March 31, 2024.

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EQUITY-BASED COMPENSATION

6 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

EQUITY-BASED COMPENSATION

EQUITY-BASED COMPENSATION

A summary of equity-based compensation expense recognized during the three and six months ended March 31, 2024 and 2023 is as follows:

	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Stock options	$	4,554	$	5,992	$	9,523	$	12,280
Restricted stock units	1,223		810		2,762		1,368
Equity-based compensation expense	$	5,777	$	6,802	$	12,285	$	13,648

Amounts are included in general and administrative expense on the condensed consolidated statements of operations. Current and deferred income tax benefits of $927 and $2,005 were recognized during the three and six months ended March 31, 2024, respectively, and $1,215 and $2,404 during the three and six months ended March 31, 2023, respectively.

In May 2018, the Company adopted the 2018 Equity Incentive Plan (the “2018 Plan”) under which the Company may grant up to 3,500,000 stock options and other equity-based awards to employees, directors and officers. The number of shares of Class A common stock available for issuance under the 2018 Plan includes an annual increase on the first day of each calendar year equal to 4.0% of the outstanding shares of all classes of the Company's common stock as of the last day of the immediately preceding calendar year, unless the Company’s board of directors determines prior to the last trading day of December of the immediately preceding calendar year that the increase shall be less than 4.0%. As of March 31, 2024, equity awards with respect to 1,259,827 shares of the Company's Class A common stock were available for grant under the 2018 Plan.

In September 2020, the Company adopted the 2020 Acquisition Equity Incentive Plan (the “2020 Inducement Plan”) under which the Company may grant up to 1,500,000 stock options and other equity-based awards to individuals that were not previously employees of the Company or its subsidiaries in connection with acquisitions, as a material inducement to the individual's entry into employment with the Company or its subsidiaries within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. In May 2021, the Company amended the 2020 Inducement Plan to increase the number of shares of the Company's Class A common stock available for issuance from 1,500,000 to 3,000,000 shares. As of March 31, 2024, equity awards with respect to 1,230,668 shares of the Company's Class A common stock were available for grant under the 2020 Inducement Plan.

Share-based compensation expense includes the estimated effects of forfeitures, which will be adjusted over the requisite service period to the extent actual forfeitures differ or are expected to differ from such estimates.

Stock Options

The Company has issued stock option awards under the 2018 Plan and the 2020 Inducement Plan. The fair value of the stock option awards during the six months ended March 31, 2024 and during the year ended September 30, 2023 was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:

	March 31, 2024		September 30, 2023
Expected volatility(1)	52.1	%	54.9	%
Expected dividend yield(2)	—	%	—	%
Expected term(3)	6 years		6 years
Risk-free interest rate(4)	4.1	%	3.9	%

_________________

1.Expected volatility is based on the Company's own share price.

2.The Company has assumed a dividend yield of zero as management has no plans to declare dividends in the foreseeable future.

3.Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method as details of employee exercise behavior are limited due to limited historical data.

4.The risk-free rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term.

A summary of stock option activity for the six months ended March 31, 2024 is as follows:

	Stock Options	Weighted Average Exercise Price
Outstanding at September 30, 2023	8,576,670	$	25.16
Granted	944,556	19.23
Exercised	(32,517)	18.14
Forfeited	(230,180)	27.57
Outstanding at March 31, 2024	9,258,529	$	24.52
Exercisable at March 31, 2024	6,602,597	$	25.08

The weighted-average grant date fair value of stock options granted during the six months ended March 31, 2024 was $10.54.

As of March 31, 2024, total unrecognized compensation expense related to unvested stock options, including an estimate for pre-vesting forfeitures, was $22,046, which is expected to be recognized over a weighted-average period of 2.68 years. The Company's policy is to account for forfeitures of stock-based compensation awards as they occur.

The total fair value of stock options that vested during the three and six months ended March 31, 2024 was $10,853 and 17,248, respectively.

Restricted Stock Units

The Company has issued Class A common stock in the form of restricted stock units ("RSUs") under the 2018 Plan.

A summary of activity related to restricted stock units for the six months ended March 31, 2024 is as follows:

	Restricted Stock Units	Weighted Average Grant Date Fair Value
Outstanding at September 30, 2023	874,024	$	24.95
Granted	258,684	19.26
Vested	(172,159)	25.65
Forfeited	(32,084)	24.86
Outstanding at March 31, 2024	928,465	$	23.24

As of March 31, 2024, total unrecognized compensation expense related to unvested RSUs, including an estimate for pre-vesting forfeitures, was $14,329, which is expected to be recognized over a weighted average period of 3.01 years.

The total fair value of RSUs that vested during the three and six months ended March 31, 2024 was $3,718 and $4,416, respectively.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Mar. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Leases

The Company utilizes office space and equipment under operating leases. Rent expense under these leases amounted to $1,359 and $2,737 during the three and six months ended March 31, 2024, respectively, and $1,480 and $3,019 during the and three and six months ended March 31, 2023, respectively. Refer to Note 9 for further discussion and a table of the future minimum payments under these leases.

Minimum Processing Commitments

The Company has non-exclusive agreements with several processors to provide the Company services related to transaction processing and transmittal, transaction authorization and data capture, and access to various reporting tools. Certain of these agreements require the Company to submit a minimum monthly number of transactions for processing. If the Company submits a number of transactions that is lower than the minimum, it is required to pay to the processor the fees the processor would have received if the Company had submitted the required minimum number of transactions. As of March 31, 2024, such minimum fee commitments were as follows:

Fiscal Years ending September 30:
2024 (six months remaining)	$	2,177
2025	728
2026	240
2027	60
2028	—
Thereafter	—
Total	$	3,205

Litigation

With respect to all legal, regulatory and governmental proceedings, and in accordance with ASC 450-20, Contingencies—Loss Contingencies, the Company considers the likelihood of a negative outcome. If the Company determines the likelihood of a negative outcome with respect to any such matter is probable and the amount of the loss can be reasonably estimated, the Company records an accrual for the estimated amount of loss for the expected outcome of the matter. If the likelihood of a negative outcome with respect to material matters is reasonably possible and the Company is able to determine an estimate of the amount of possible loss or a range of loss, whether in excess of a related accrued liability or where there is no accrued liability, the Company discloses the estimate of the amount of possible loss or range of loss. However, the Company in some instances may be unable to estimate an amount of possible loss or range of loss based on the significant uncertainties involved in, or the preliminary nature of, any such material matter, and in these instances the Company will disclose the nature of the contingency and describe why the Company is unable to determine an estimate of possible loss or range of loss.

The Company is involved in ordinary course legal proceedings, which include all claims, lawsuits, investigations and proceedings, including unasserted claims, which are probable of being asserted, arising in the ordinary course of business. The Company has considered all such ordinary course legal proceedings in formulating its disclosures and assessments. After taking into consideration the evaluation of such legal matters by the Company's legal counsel, the Company's management believes at this time such matters will not have a material impact on the Company's consolidated balance sheet, results of operations or cash flows.

S&S Litigation

On June 2, 2021, the State of Louisiana, Division of Administration (the “State”) and a putative class of Louisiana sheriffs and law enforcement districts (collectively "Plaintiffs") filed a Petition (as amended on October 4, 2021, the “Petition”), in the 19th Judicial District Court for the Parish of East Baton Rouge against i3-Software & Services, LLC (“S&S”), a subsidiary of the Company located in Shreveport, Louisiana, the Company, i3 Verticals, LLC, the current leader of the S&S business, the former leader of the S&S business, and 1120 South Pointe Properties, LLC (“South Pointe”), the former owner of the assets of the S&S business (collectively "Defendants"). See State of Louisiana, by and through its Division of Administration, East Baton Rouge Parish Law Enforcement District, by and through the duly elected East Baton Rouge Parish Sheriff, Sid J. Gautreaux, III, et. al., individually and as class representatives vs. i3-Software & Services, LLC; 1120 South Pointe Properties, LLC, formerly known as Software and Services of Louisiana, L.L.C.; i3 Verticals, Inc.; i3 Verticals, LLC; Gregory R. Teeters; and Scott Carrington.

The Petition was amended on October 4, 2021 to amend and expand the putative class and subsequently removed to the United States District Court for the Middle District of Louisiana. The Petition seeks monetary damages for the cost of network remediation of $15,000 purportedly spent by the State and $7,000 purportedly spent by the Plaintiffs, return of purchase prices, potential additional expenses related to remediation and any obligation to notify parties of an alleged data breach as and if required by applicable law, and reasonable attorneys’ fees. The claimed damages relate to a third-party remote access software product used in connection with services provided by S&S to certain Louisiana law enforcement districts and alleged inadequacies in the Company’s cybersecurity practices. Plaintiffs moved to remand the action to state court on November 5, 2021, and the motion was referred to a magistrate to make a report and recommendation to the district court judge. On July 5, 2022, the magistrate recommended that the matter be remanded to state court. On July 19, 2022, the Company and all other defendants filed objections to the recommendation. On August 3, 2022, the Plaintiffs filed a response to those objections. On August 16, 2022, the district court granted the Plaintiffs’ motion to remand, and all Defendants appealed. Oral argument on this motion in front of the United States Fifth Circuit Court of Appeals took place on April 4, 2023, and on September 1, 2023, the Fifth Circuit panel affirmed the District Court order to remand the case back to state court. On September 29, 2023, all Defendants-Appellants filed a Petition for Rehearing En Banc, which the Plaintiffs-Appellees opposed on October 12, 2023. As a result of Defendants’ petition, the Fifth Circuit held its mandate, effectively staying the effective date of its decision, but the Fifth Circuit

ultimately denied the petition for rehearing on February 22, 2024, sending the case back to the 19th Judicial District Court for the Parish of East Baton Rouge, where the case remains pending.

The assets of the S&S business were acquired from South Pointe by the Company in 2018 for $17,000, including upfront cash consideration and contingent consideration, and provides software and payments services within the Company’s Public Sector vertical to local government agencies almost exclusively in Louisiana.

The Company is unable to predict the outcome of this litigation. While we do not believe that this matter will have a material adverse effect on our business or financial condition, we cannot give assurance that this matter will not have a material effect on our results of operations or cash flows for the period in which it is resolved.

Other

The Company's subsidiary CP-PS, LLC has certain indemnification obligations in favor of FDS Holdings, Inc. related to the acquisition of certain assets of Merchant Processing Solutions, LLC in February 2014. The Company has incurred expenses related to these indemnification obligations in prior periods and may have additional expenses in the future. However, after taking into consideration the evaluation of such matters by the Company’s legal counsel, the Company’s management believes at this time that the anticipated outcome of any existing or potential indemnification liabilities related to this matter will not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

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RELATED PARTY TRANSACTIONS

6 Months Ended

Mar. 31, 2024

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

In connection with the Company’s IPO, the Company and i3 Verticals, LLC entered into a Tax Receivable Agreement with the Continuing Equity Owners that provides for the payment by the Company to the Continuing Equity Owners of 85% of the amount of certain tax benefits, if any, that it actually realizes, or in some circumstances, is deemed to realize in its tax reporting, as a result of (i) future redemptions funded by the Company or exchanges, or deemed exchanges in certain circumstances, of Common Units of i3 Verticals, LLC for Class A common stock of i3 Verticals, Inc. or cash, and (ii) certain additional tax benefits attributable to payments made under the Tax Receivable Agreement. See Note 8 for further information. As of March 31, 2024, the total amount due under the Tax Receivable Agreement was $40,323.

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SEGMENTS

6 Months Ended

Mar. 31, 2024

Segment Reporting [Abstract]

SEGMENTS

SEGMENTS

The Company determines its operating segments based on ASC 280, Segment Reporting, in alignment with how the chief operating decision-making group monitors and manages the performance of the business as well as the level at which financial information is reviewed. The Company’s operating segments are strategic business units that offer different products and services.

The Company's core business is delivering seamlessly integrated software and payment solutions customers in strategic vertical markets. This is accomplished through the Merchant Services and Software and Services segments.

The Software and Services segment delivers vertical market software solutions to customers across all of the Company's strategic vertical markets. These solutions often include embedded payments or other recurring services.

The Merchant Services segment provides comprehensive payment solutions to businesses and organizations. The Merchant Services segment includes third-party integrated payment solutions as well as traditional merchant processing services across the Company's strategic vertical markets.

The Other category includes corporate overhead expenses when presenting reportable segment information.

The Company primarily uses processing margin to measure operating performance. Processing margin is equal to revenue less other cost of services plus residuals expense, which are a component of other cost of services. The following is a summary of reportable segment operating performance for the three and six months ended March 31, 2024 and 2023.

	As of and for the Three Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue	$	59,483	$	35,075	$	(16)	$	94,542
Other costs of services	(4,908)		(16,289)		17		(21,180)
Residuals	735		10,587		(6)		11,316
Processing margin	$	55,310	$	29,373	$	(5)	$	84,678
Residuals							(11,316)
Selling, general and administrative							(54,162)
Depreciation and amortization							(10,069)
Change in fair value of contingent consideration							290
Income from operations							$	9,421
Total assets	$	593,219	$	212,082	$	60,241	$	865,542
Goodwill	$	288,822	$	121,950	$	—	$	410,772

	As of and for the Six Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue	$	116,072	$	70,497	$	(37)	$	186,532
Other costs of services	(9,217)		(32,423)		36		(41,604)
Residuals	1,353		20,987		(15)		22,325
Processing margin	$	108,208	$	59,061	$	(16)	$	167,253
Residuals							(22,325)
Selling, general and administrative							(107,694)
Depreciation and amortization							(19,808)
Change in fair value of contingent consideration							527
Income from operations							$	17,953
Total assets	$	593,219	$	212,082	$	60,241	$	865,542
Goodwill	$	288,822	$	121,950	$	—	$	410,772

	As of and for the Three Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue	$	60,797	$	33,094	$	(19)	$	93,872
Other costs of services	(4,229)		(15,719)		18		(19,930)
Residuals	799		10,039		(9)		10,829
Processing Margin	$	57,367	$	27,414	$	(10)	$	84,771
Residuals							(10,829)
Selling, general and administrative							(57,204)
Depreciation and amortization							(9,015)
Change in fair value of contingent consideration							(2,279)
Income from operations							$	5,444
Total assets	$	620,126	$	205,898	$	57,002	$	883,026
Goodwill	$	287,092	$	121,950	$	—	$	409,042

	As of and for the Six Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue	$	114,010	$	65,928	$	(37)	$	179,901
Other costs of services	(7,752)		(31,286)		39		(38,999)
Residuals	1,322		19,848		(20)		21,150
Processing margin	$	107,580	$	54,490	$	(18)	$	162,052
Residuals							(21,150)
Selling, general and administrative							(108,207)
Depreciation and amortization							(17,691)
Change in fair value of contingent consideration							(3,722)
Income from operations							$	11,282
Total assets	$	620,126	$	205,898	$	57,002	$	883,026
Goodwill	$	287,092	$	121,950	$	—	$	409,042

The Company has not disclosed expenditures on long-lived assets as such expenditures are not reviewed by or provided to the chief operating decision maker.

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NON-CONTROLLING INTEREST

6 Months Ended

Mar. 31, 2024

Noncontrolling Interest [Abstract]

NON-CONTROLLING INTEREST

NON-CONTROLLING INTEREST

i3 Verticals, Inc. is the sole managing member of i3 Verticals, LLC, and as a result, consolidates the financial results of i3 Verticals, LLC and reports a non-controlling interest representing the Common Units of i3 Verticals, LLC held by the Continuing Equity Owners. Changes in i3 Verticals, Inc.’s ownership interest in i3 Verticals, LLC while i3 Verticals, Inc. retains its controlling interest in i3 Verticals, LLC will be accounted for as equity transactions. As such, future redemptions or direct exchanges of Common Units of i3 Verticals, LLC by the Continuing Equity Owners will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in capital when i3 Verticals, LLC has positive or negative net assets, respectively.

As of March 31, 2024 and 2023, respectively, i3 Verticals, Inc. owned 23,416,518 and 23,167,730 of i3 Verticals, LLC's Common Units, representing a 70.0% and 69.6% economic ownership interest in i3 Verticals, LLC.

The following table summarizes the impact on equity due to changes in the Company's ownership interest in i3 Verticals, LLC:

	Six Months Ended March 31,
	2024		2023
Net income attributable to non-controlling interest	$	1,908	$	181
Transfers (from) to non-controlling interests:
Redemption of common units in i3 Verticals, LLC	(384)		(86)
Allocation of equity to non-controlling interests	3,750		299
Net transfers to non-controlling interests	3,366		213
Change from net income attributable to non-controlling interests and net transfers to non-controlling interests	$	5,274	$	394

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EARNINGS PER SHARE

6 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

Basic earnings per share of Class A common stock is computed by dividing net income available to i3 Verticals, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income available to i3 Verticals, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the three and six months ended March 31, 2024 and 2023:

	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Basic net income (loss) per share:
Numerator
Net income (loss)	$	3,348	$	(192)	$	4,884	$	(23)
Less: Net income (loss) attributable to non-controlling interest	1,470		(228)		1,908		181
Net income (loss) attributable to Class A common stockholders	$	1,878	$	36	$	2,976	$	(204)
Denominator
Weighted average shares of Class A common stock outstanding	23,331,239		23,135,898		23,299,214		23,066,499
Basic net income (loss) per share(1)	$	0.08	$	0.00	$	0.13	$	(0.01)
Diluted net income per share:
Numerator
Net income attributable to Class A common stockholders	$	1,878	$	36	$	2,976
Reallocation of net loss assuming conversion of common units(2)(3)	—		(171)		—
Net income (loss) attributable to Class A common stockholders - diluted	1,878		(135)		2,976
Denominator
Weighted average shares of Class A common stock outstanding	23,331,239		23,135,898		23,299,214
Weighted average effect of dilutive securities(2)	387,235		11,133,242		427,506
Weighted average shares of Class A common stock outstanding - diluted	23,718,474		34,269,140		23,726,720
Diluted net income (loss) per share	$	0.08	$	0.00	$	0.13

__________________________

1.For the six months ended March 31, 2023, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share. The following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net loss per share of Class A common stock:

a.10,114,598 weighted average shares of Class B common stock for the six months ended March 31, 2023, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive.

b.5,165,478 stock options for the six months ended March 31, 2023, 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, and

c.633,453 shares for the six months ended March 31, 2023, resulting from estimated stock option exercises and restricted stock units vesting as calculated by the treasury stock method were excluded because of the effect of including them would have been anti-dilutive.

2.For the three and six months ended March 31, 2024 and the three months ended March 31, 2023, the following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net income per share of Class A common stock:

a.10,091,604 and 10,092,504 weighted average shares of Class B common stock for the three and six months ended March 31, 2024, respectively, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive, and

b.7,852,595 and 8,246,542 stock options for the three and six months ended March 31, 2024, respectively, and 4,018,042 stock options for the three months ended March 31, 2023, 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.

3.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 Note 8 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 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.

In September 2022 the Company made the irrevocable election to settle the principal portion of its Exchangeable Notes only in cash, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread will have a dilutive impact on diluted net income per share of common stock when the average market price of the Company's Class A common stock for a given period exceeds the exchange price of $40.87 per share for the Exchangeable Notes.

The Warrants sold in connection with the issuance of the Exchangeable Notes are considered to be dilutive when the average price of the Company's Class A common stock during the period exceeds the Warrants' stock price of $62.88 per share. The effect of the additional shares that may be issued upon exercise of the Warrants will be included in the weighted average shares of Class A common stock outstanding—diluted using the treasury stock method. The Note Hedge Transactions purchased in connection with the issuance of the Exchangeable Notes are considered to be anti-dilutive and therefore do not impact our calculation of diluted net income per share. Refer to Note 7 for further discussion regarding the Exchangeable Notes.

Shares of the Company's Class B common stock do not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented.

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SIGNIFICANT NON-CASH TRANSACTIONS

6 Months Ended

Mar. 31, 2024

Cash Flow, Noncash Investing and Financing Activities Disclosure [Abstract]

SIGNIFICANT NON-CASH TRANSACTIONS

SIGNIFICANT NON-CASH TRANSACTIONS

The Company engaged in the following significant non-cash investing and financing activities during the six months ended March 31, 2024 and 2023:

	Six months ended March 31,
	2024		2023
Acquisition date fair value of contingent consideration in connection with business combinations	$	170	$	760
Debt issuance costs financed with proceeds from the 2023 Senior Secured Credit Facility	$	—	$	178
Consideration accrued for residual buyouts	$	252	$	—
Right-of-use assets obtained in exchange for operating lease obligations	$	1,279	$	1,098

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SUBSEQUENT EVENTS

6 Months Ended

Mar. 31, 2024

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

[PENDING]

XML

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2024	Mar. 31, 2023
Pay vs Performance Disclosure
Net income attributable to Class A common stockholders	$ 1,878	$ 36	$ 2,976	$ (204)

XML

Insider Trading Arrangements	3 Months Ended
	Mar. 31, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the reporting and disclosure rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the unaudited condensed consolidated financial statements of the Company and its subsidiaries as of March 31, 2024 and for the three and six months ended March 31, 2024 and 2023. The results of operations for the three and six months ended March 31, 2024 and 2023 are not necessarily indicative of the operating results for the full year.

As permitted by the rules and regulations of the SEC, certain information and disclosures otherwise included in the notes to the consolidated financial statements have been condensed or omitted from the summary of significant accounting policies. The Company believes the disclosures are adequate to make the information presented not misleading. It is recommended that these interim condensed consolidated financial statements be read in conjunction with the Company's consolidated financial statements and related footnotes for the years ended September 30, 2023 and 2022, included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2023 filed with the SEC on November 22, 2023.

Principles of Consolidation

Principles of Consolidation

These interim condensed consolidated financial statements include the accounts of the Company and its subsidiary companies. All significant intercompany accounts and transactions have been eliminated in consolidation.

Restricted Cash

Restricted Cash

Restricted cash represents funds held in escrow related to acquisitions or held-on-deposit with processing banks pursuant to agreements to cover potential merchant losses. It is presented as long-term assets on the accompanying condensed consolidated balance sheets since the related agreements extend beyond the next twelve months. Following the adoption of Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230), the Company includes restricted cash along with the cash and cash equivalents balance for presentation in the consolidated statements of cash flows.

Settlement Assets and Obligations

Settlement Assets and Obligations

Settlement assets and obligations result when funds are temporarily held or owed by the Company on behalf of merchants, consumers, schools, and other institutions. Timing differences, interchange expenses, merchant reserves and exceptional items cause differences between the amount received from the card networks and the amount funded to counterparties. These balances arising in the settlement process are reflected as settlement assets and obligations on the accompanying consolidated balance sheets. With the exception of merchant reserves, settlement assets or settlement obligations are generally collected and paid within one to four days.

Reclassifications

Reclassifications

Certain prior period amounts have been reclassified in order to conform with the current period presentation. These reclassifications have no impact on the Company’s previously reported consolidated net income (loss).

Inventories

Inventories

Inventories consist of point-of-sale equipment to be sold to customers and are stated at the lower of cost, determined on a weighted average or specific basis, or net realizable value.

Acquisitions

Acquisitions

Business acquisitions have been recorded using the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), and, accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition. Where relevant, the fair value of contingent consideration included in an acquisition is calculated using a Monte Carlo simulation. The fair value of merchant relationships and non-compete assets acquired is identified using the Income Approach. The fair values of trade names and internally-developed software acquired are identified using the Relief from Royalty Method. After the purchase price has been allocated, goodwill is recorded to the extent the total consideration paid for the acquisition, including the acquisition date fair value of contingent consideration, if any, exceeds the sum of the fair values of the separately identifiable acquired assets and assumed liabilities. Acquisition costs for business combinations are expensed when incurred and recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Acquisitions not meeting the accounting criteria to be accounted for as a business combination are accounted for as an asset acquisition. An asset acquisition is recorded at its purchase price, inclusive of acquisition costs, which is allocated among the acquired assets and assumed liabilities based upon their relative fair values at the date of acquisition.

Leases

Leases

The Company adopted ASU 2016-02, Leases, on October 1, 2020, using the optional modified retrospective method under which the prior period financial statements were not restated for the new guidance. The Company elected the accounting policy practical expedients for all classes of underlying assets to (i) combine associated lease and non-lease components in a lease arrangement as a combined lease component and (ii) exclude recording short-term leases as right-of-use assets on the condensed consolidated balance sheets.

At contract inception the Company determines whether an arrangement is, or contains a lease, and for each identified lease, evaluates the classification as operating or financing. Leased assets and obligations are recognized at the lease commencement date based on the present value of fixed lease payments to be made over the term of the lease. Renewal and termination options are factored into determination of the lease term only if the option is reasonably certain to be exercised. The Company’s leases do not provide a readily determinable implicit interest rate and the Company uses its incremental borrowing rate to measure the lease liability and corresponding right-of-use asset. The incremental borrowing rate is a fully collateralized rate that considers the

Company’s credit rating, market conditions and the term of the lease. The Company accounts for all components in a lease arrangement as a single combined lease component.

Operating lease cost is recognized on a straight-line basis over the lease term. Total lease costs include variable lease costs, which are primarily comprised of the consumer price index adjustments and other changes based on rates, such as costs of insurance and property taxes. Variable payments are expensed in the period incurred and not included in the measurement of lease assets and obligations.

Revenue Recognition and Deferred Revenue

Revenue Recognition and Deferred Revenue

Revenue is recognized as each performance obligation is satisfied, in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company accrues for rights of refund, processing errors or penalties, or other related allowances based on historical experience. The Company utilized the portfolio approach practical expedient within ASC 606-10-10-4 Revenue from Contracts with Customers—Objectives and the significant financing component practical expedient within ASC 606-10-32-18 Revenue from Contracts with Customers—The Existence of a Significant Financing Component in the Contract in performing the analysis.

The Company's revenue for the six months ended March 31, 2024 and 2023 is derived from the following sources:

•Software and related services — Includes sales of software as a service, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to our software offerings

•Payments — Includes volume-based payment processing fees (“discount fees”), gateway fees and other related fixed transaction or service fees

•Other — Includes sales of equipment, non-software related professional services and other revenues

Revenues from sales of the Company’s software are recognized when the related performance obligations are satisfied. Sales of software licenses are categorized into one of two categories of intellectual property in accordance with ASC 606, functional or symbolic. The key distinction is whether the license represents a right to use (functional) or a right to access (symbolic) intellectual property. The Company generates sales of one-time software licenses, which is functional intellectual property. Revenue from functional intellectual property is recognized at a point in time, when delivered to the customer. The Company also offers access to its software under software-as-a-service (“SaaS”) arrangements, which represent services arrangements. Revenue from SaaS arrangements is recognized over time, over the term of the agreement.

Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed or a specified per transaction amount, depending on the card type. The Company frequently enters into agreements with customers under which the customer engages the Company to provide both payment authorization services and transaction settlement services for all of the cardholder transactions of the customer, regardless of which issuing bank and card network to which the transaction relates. The Company’s core performance obligations are to stand ready to provide continuous access to the Company’s payment authorization services and transaction settlement services in order to be able to process as many transactions as its customers require on a daily basis over the contract term. These services are stand ready obligations, as the timing and quantity of transactions to be processed is not determinable. Under a stand-ready obligation, the Company’s performance obligation is defined by each time increment rather than by the underlying activities satisfied over time based on days elapsed. Because the service of standing ready is substantially the same each day and has the same pattern of transfer to the customer, the Company has determined that its stand-ready performance obligation comprises a series of distinct days of service. Discount fees are recognized each day based on the volume or transaction count at the time the merchants’ transactions are processed.

The Company follows the requirements of ASC 606-10-55 Revenue from Contracts with Customers—Principal versus Agent Considerations, which states that the determination of whether a company should recognize revenue based on the gross amount billed to a customer or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement. The determination of gross versus net recognition of revenue requires judgment that depends on whether the Company controls the good or service before it is transferred to the merchant or whether the Company is acting as an agent of a third party. The assessment is provided separately for each performance obligation identified. Under its agreements, the Company incurs interchange and network pass-through charges from the third-party card issuers and card networks, respectively, related to the provision of payment authorization services. The Company has determined that it is acting as an agent with respect to these payment authorization services, based on the following factors: (1) the Company has no discretion over which card issuing bank will be used to process a transaction and is unable to direct the activity of the merchant to another card issuing bank, and (2) interchange and card network rates are pre-established by the card issuers or card networks, and the Company has no latitude in determining these fees. Therefore, revenue allocated to the payment authorization performance obligation is presented net of interchange and card network fees paid to the card issuing banks and card networks, respectively, for the six months ended March 31, 2024 and 2023.

With regards to the Company's discount fees, generally, where the Company has control over merchant pricing, merchant portability, credit risk and ultimate responsibility for the merchant relationship, revenues are reported at the time of sale equal to the full amount of the discount charged to the merchant, less interchange and network fees. Revenues generated from merchant portfolios where the Company does not have control over merchant pricing, liability for merchant losses or credit risk or rights of portability are reported net of interchange and network fees as well as third-party processing costs directly attributable to processing and bank sponsorship costs.

Revenues are also derived from a variety of transaction fees, which are charged for accessing our payment and software solutions, and fees for other miscellaneous services. Revenues derived from such fees are recognized at the time the transactions occur and when there are no further performance obligations. Revenue from the sale of equipment, is recognized upon transfer of ownership to the customer, after which there are no further performance obligations.

Arrangements may contain multiple performance obligations, such as payment authorization services, transaction settlement services, hardware, software products, maintenance, and professional installation and training services. Revenues are allocated to each performance obligation based on the standalone selling price of each good or service. The selling price for a deliverable is based on standalone selling price, if available, the adjusted market assessment approach, estimated cost plus margin approach, or residual approach. The Company establishes estimated selling price, based on the judgment of the Company's management, considering internal factors such as margin objectives, pricing practices and controls, customer segment pricing strategies and the product life cycle. In arrangements with multiple performance obligations, the Company determines allocation of the transaction price at inception of the arrangement and uses the standalone selling prices for the majority of the Company's revenue recognition.

Revenues from sales of the Company’s combined hardware and software element are recognized when each performance obligation has been satisfied which has been determined to be upon the delivery of the product. Revenues derived from service fees are recognized at the time the services are performed and there are no further performance obligations. The Company’s professional services, including training, installation, and repair services are recognized as revenue as these services are performed.

The tables below present a disaggregation of the Company's revenue from contracts with customers by product by segment. Refer to Note 14 for discussion of the Company's segments. The Company's products are defined as follows:

•Software and related services — Includes SaaS, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to our software offerings

•Payments — Includes discount fees, gateway fees and other related fixed transaction or service fees

•Other — Includes sales of equipment, non-software related professional services and other revenues

	For the Three Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	42,130	$	3,537	$	(10)	$	45,657
Payments revenue	14,855		29,585		(6)		44,434
Other revenue	2,498		1,953		—		4,451
Total revenue	$	59,483	$	35,075	$	(16)	$	94,542

	For the Three Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	44,099	$	3,217	$	(9)	$	47,307
Payments revenue	14,285		27,634		(10)		41,909
Other revenue	2,413		2,243		—		4,656
Total revenue	$	60,797	$	33,094	$	(19)	$	93,872

	For the Six Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	82,462	$	6,839	$	(22)	$	89,279
Payments revenue	28,837		59,607		(15)		88,429
Other revenue	4,773		4,051		—		8,824
Total revenue	$	116,072	$	70,497	$	(37)	$	186,532

	For the Six Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	82,244	$	6,196	$	(19)	$	88,421
Payments revenue	27,038		55,243		(18)		82,263
Other revenue	4,728		4,489		—		9,217
Total revenue	$	114,010	$	65,928	$	(37)	$	179,901

The tables below present a disaggregation of the Company's revenue from contracts with customers by timing of transfer of goods or services by segment. The Company's revenue included in each category are defined as follows:

•Revenue earned over time — Includes discount fees, gateway fees, sales of SaaS, ongoing support or other stand-ready obligations and professional services

•Revenue earned at a point in time — Includes point in time service fees that are not stand-ready obligations, software licenses sold as functional intellectual property and other equipment

	For the Three Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	55,361	$	30,095	$	(10)	$	85,446
Revenue earned at a point in time	4,122		4,980		(6)		9,096
Total revenue	$	59,483	$	35,075	$	(16)	$	94,542

	For the Three Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	54,568	$	27,984	$	(9)	$	82,543
Revenue earned at a point in time	6,229		5,110		(10)		11,329
Total revenue	$	60,797	$	33,094	$	(19)	$	93,872

	For the Six Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	109,715	$	60,176	$	(22)	$	169,869
Revenue earned at a point in time	6,357		10,321		(15)		16,663
Total revenue	$	116,072	$	70,497	$	(37)	$	186,532

	For the Six Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	105,009	$	55,581	$	(19)	$	160,571
Revenue earned at a point in time	9,001		10,347		(18)		19,330
Total revenue	$	114,010	$	65,928	$	(37)	$	179,901

Contract Assets

The Company bills for certain software and related services sales and fixed fee professional services upon pre-determined milestones in the contracts. Therefore, the Company may have contract assets other than trade accounts receivable for performance obligations that are partially completed, which would typically represent consulting services provided before a milestone is completed in a contract. Additionally, contract assets also include software licenses sold as a right to use license but paid for under a subscription model. Under this structure, the license revenue is recognized upfront while a portion of the revenue is unbilled. Unbilled amounts

associated with these services are presented as accounts receivable as the Company has an unconditional right to payment for services performed.

As of March 31, 2024 and September 30, 2023, the Company’s contract assets from contracts with customers was $11,478 and $15,131, respectively.

Contract Liabilities

Deferred revenue represents amounts billed to customers by the Company for services contracts. Payment is typically collected at the start of the contract term. The initial prepaid contract agreement balance is deferred. The balance is then recognized as the services are provided over the contract term. Deferred revenue that is expected to be recognized as revenue within one year is recorded as short-term deferred revenue and the remaining portion is recorded as other long-term liabilities in the condensed consolidated balance sheets. The terms for most of the Company's contracts with a deferred revenue component are one year. Substantially all of the Company's deferred revenue is anticipated to be recognized within the next year.

The following tables present the changes in deferred revenue as of and for the six months ended March 31, 2024 and 2023, respectively:

Balance at September 30, 2023	$	35,444
Deferral of revenue	19,793
Recognition of unearned revenue	(15,664)
Balance at December 31, 2023	39,573
Deferral of revenue	11,759
Recognition of unearned revenue	(13,596)
Balance at March 31, 2024	$	37,736

Balance at September 30, 2022	$	32,089
Deferral of revenue	19,334
Recognition of unearned revenue	(13,925)
Balance at December 31, 2022	37,498
Deferral of revenue	10,475
Recognition of unearned revenue	(14,286)
Balance at March 31, 2023	$	33,687

Costs to Obtain and Fulfill a Contract

The Company capitalizes incremental costs to obtain new contracts and contract renewals and amortizes these costs on a straight-line basis as an expense over the benefit period, which is generally the contract term, unless a commensurate payment is not expected at renewal. As of March 31, 2024 and September 30, 2023, the Company had $5,417 and $4,966, respectively, of capitalized contract costs, which relates to commissions paid to employees and agents as well as other incentives given to customers to obtain new sales, included within “Other assets" on the condensed consolidated balance sheets. The Company recorded expense related to these costs of $241 and $470 for the three and six months ended March 31, 2024, respectively and $193 and $376 for the three and six months ended March 31, 2023.

The Company expenses sales commissions as incurred for the Company's sales commission plans that are paid on recurring monthly revenues, portfolios of existing customers, or have a substantive stay requirement prior to payment.

Other Cost of Services

Other costs of services include third-party processing costs directly attributable to processing and bank sponsorship costs, which may not be based on a percentage of volume. These costs also include related costs such as residual payments to sales groups, which are based on a percentage of the net revenues generated from merchant referrals. In certain merchant processing bank relationships the Company is liable for chargebacks against a merchant equal to the volume of the transaction. Losses resulting from chargebacks against a merchant are included in other cost of services on the accompanying condensed consolidated statement of operations. The Company evaluates its risk for such transactions and estimates its potential loss from chargebacks based primarily on historical experience and other relevant factors. The reserve for merchant losses is included within accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets. The cost of equipment and software sold is also included in other cost of services. Other costs of services are recognized at the time the associated revenue is earned.

The Company accounts for all governmental taxes associated with revenue transactions on a net basis.

Use of Estimates

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, the value of purchase consideration paid and identifiable assets acquired and assumed in acquisitions, goodwill and intangible asset impairment review, determination of performance obligations for revenue recognition, loss reserves, assumptions used in the calculation of equity-based compensation and in the calculation of income taxes, and certain tax assets and liabilities as well as the related valuation allowances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 will provide improvements to the income tax disclosures primarily related to the income taxes paid and rate reconciliation, and how legislation changes may affect future capital allocation and cash flow forecasts. The amendment will improve the consistency in which companies provide tax information, and will further increase the transparency of related tax risks and operational opportunities. The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company will not be required to adopt ASU 2023-09 until October 1, 2025. The Company is currently evaluating the impact of the adoption of ASU 2023-09 on the Company’s financial statement disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 improves interim disclosure requirements for segment reporting, including clarifications regarding the measure of profit and loss used to asses segment performance and the allocation of resources. Further, it enhances the disclosures for reporting segment expenses and will require the Company to report significant expenses regularly provided by the chief operating decision maker. The amendment will require companies to disclose a more granular level of information with regards to segment reporting to further enhance the transparency of what specified amounts are included within each segment. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company will not be required to adopt ASU 2023-07 until October 1, 2024. The Company is currently evaluating the impact of the adoption of ASU 2023-07 on the Company’s financial statement disclosures.

Fair Value Measurement

The Company applies the provisions of ASC 820, Fair Value Measurement, which defines fair value, establishes a framework for its measurement and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or the price paid to transfer a liability as of the measurement date. A three-tier, fair-value reporting hierarchy exists for disclosure of fair value measurements based on the observability of the inputs to the valuation of financial assets and liabilities. The three levels are:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

The following tables present the effects of the change in presentation within the Condensed Consolidated Statements of Cash Flows:

	For the Six Months Ended March 31, 2024
	As Previously Reported	Adjustment	As Adjusted
Cash flows from operating activities:
Settlement obligations	(3,287)	3,287	—
Net cash provided by operating activities	21,860	3,287	25,147
Cash flows from financing activities:
Net payments for settlement obligations	—	(3,287)	(3,287)
Net cash used in financing activities	(14,598)	(3,287)	(17,885)

	For the Six Months Ended March 31, 2023
	As Previously Reported	Adjustment	As Adjusted
Cash flows from operating activities:
Settlement obligations	(355)	355	—
Net cash provided by operating activities	25,529	355	25,884
Cash flows from financing activities:
Net payments for settlement obligations	—	(355)	(355)
Net cash provided by (used in) financing activities	84,169	(355)	83,814

Schedule of Disaggregation of Revenue

The tables below present a disaggregation of the Company's revenue from contracts with customers by product by segment. Refer to Note 14 for discussion of the Company's segments. The Company's products are defined as follows:

•Software and related services — Includes SaaS, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to our software offerings

•Payments — Includes discount fees, gateway fees and other related fixed transaction or service fees

•Other — Includes sales of equipment, non-software related professional services and other revenues

	For the Three Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	42,130	$	3,537	$	(10)	$	45,657
Payments revenue	14,855		29,585		(6)		44,434
Other revenue	2,498		1,953		—		4,451
Total revenue	$	59,483	$	35,075	$	(16)	$	94,542

	For the Three Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	44,099	$	3,217	$	(9)	$	47,307
Payments revenue	14,285		27,634		(10)		41,909
Other revenue	2,413		2,243		—		4,656
Total revenue	$	60,797	$	33,094	$	(19)	$	93,872

	For the Six Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	82,462	$	6,839	$	(22)	$	89,279
Payments revenue	28,837		59,607		(15)		88,429
Other revenue	4,773		4,051		—		8,824
Total revenue	$	116,072	$	70,497	$	(37)	$	186,532

	For the Six Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Software and related services revenue	$	82,244	$	6,196	$	(19)	$	88,421
Payments revenue	27,038		55,243		(18)		82,263
Other revenue	4,728		4,489		—		9,217
Total revenue	$	114,010	$	65,928	$	(37)	$	179,901

The tables below present a disaggregation of the Company's revenue from contracts with customers by timing of transfer of goods or services by segment. The Company's revenue included in each category are defined as follows:

•Revenue earned over time — Includes discount fees, gateway fees, sales of SaaS, ongoing support or other stand-ready obligations and professional services

•Revenue earned at a point in time — Includes point in time service fees that are not stand-ready obligations, software licenses sold as functional intellectual property and other equipment

	For the Three Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	55,361	$	30,095	$	(10)	$	85,446
Revenue earned at a point in time	4,122		4,980		(6)		9,096
Total revenue	$	59,483	$	35,075	$	(16)	$	94,542

	For the Three Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	54,568	$	27,984	$	(9)	$	82,543
Revenue earned at a point in time	6,229		5,110		(10)		11,329
Total revenue	$	60,797	$	33,094	$	(19)	$	93,872

	For the Six Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	109,715	$	60,176	$	(22)	$	169,869
Revenue earned at a point in time	6,357		10,321		(15)		16,663
Total revenue	$	116,072	$	70,497	$	(37)	$	186,532

	For the Six Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue earned over time	$	105,009	$	55,581	$	(19)	$	160,571
Revenue earned at a point in time	9,001		10,347		(18)		19,330
Total revenue	$	114,010	$	65,928	$	(37)	$	179,901

Schedule of Contract with Customer, Asset and Liability

The following tables present the changes in deferred revenue as of and for the six months ended March 31, 2024 and 2023, respectively:

Balance at September 30, 2023	$	35,444
Deferral of revenue	19,793
Recognition of unearned revenue	(15,664)
Balance at December 31, 2023	39,573
Deferral of revenue	11,759
Recognition of unearned revenue	(13,596)
Balance at March 31, 2024	$	37,736

Balance at September 30, 2022	$	32,089
Deferral of revenue	19,334
Recognition of unearned revenue	(13,925)
Balance at December 31, 2022	37,498
Deferral of revenue	10,475
Recognition of unearned revenue	(14,286)
Balance at March 31, 2023	$	33,687

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ACQUISITIONS (Tables)

6 Months Ended

Mar. 31, 2024

Business Combination and Asset Acquisition [Abstract]

Schedule of Preliminary Purchase Consideration of the Acquired Assets and Assumed Liabilities

The fair values assigned to certain assets and liabilities assumed, as of the acquisition date, were as follows:

Accounts receivable	$	7,660
Prepaid expenses and other current assets	103
Property and equipment	5,233
Capitalized software	12,600
Customer relationships	33,800
Non-compete agreements	200
Trade name	600
Goodwill	43,899
Total assets acquired	104,095
Accounts payable	9
Accrued expenses and other current liabilities	3,182
Deferred revenue, current	2,741
Other long-term liabilities	13,162
Net assets acquired	$	85,001

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PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)

6 Months Ended

Mar. 31, 2024

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Prepaid Expenses and Other Current Assets

A summary of the Company's prepaid expenses and other current assets as of March 31, 2024 and September 30, 2023 is as follows:

	March 31,		September 30,
	2024		2023
Inventory	$	3,978	$	4,138
Prepaid licenses	3,613		3,115
Prepaid insurance	929		697
Notes receivable — current portion	—		4
Other current assets	7,282		4,495
Prepaid expenses and other current assets	$	15,802	$	12,449

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GOODWILL AND INTANGIBLE ASSETS (Tables)

6 Months Ended

Mar. 31, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Changes in Carrying Amount of Goodwill

Changes in the carrying amount of goodwill are as follows:

	Software and Services		Merchant Services		Other		Total
Balance at September 30, 2023	$	287,613	$	121,950	$	—	$	409,563
Goodwill attributable to preliminary purchase price adjustments and acquisitions during the six months ended March 31, 2024	1,209		—		—		1,209
Balance at March 31, 2024	$	288,822	$	121,950	$	—	$	410,772

Schedule of Finite-Lived Intangible Assets

Intangible assets consisted of the following as of March 31, 2024:

	Cost		Accumulated Amortization		Carrying Value		Amortization Life and Method
Finite-lived intangible assets:
Merchant relationships	$	310,721	$	(106,892)	$	203,829	9 to 25 years – accelerated or straight-line
Non-compete agreements	418		(267)		151		3 to 6 years – straight-line
Website and brand development costs	103		(71)		32		3 to 4 years – straight-line
Trade names	6,131		(3,908)		2,223		3 to 7 years – straight-line
Residual buyouts	18,686		(4,134)		14,552		8 years – straight-line
Referral and exclusivity agreements	420		(105)		315		5 years – straight-line
Total finite-lived intangible assets	336,479		(115,377)		221,102
Indefinite-lived intangible assets:
Trademarks	43		—		43
Total identifiable intangible assets	$	336,522	$	(115,377)	$	221,145

Schedule of Indefinite-Lived Intangible Assets

Intangible assets consisted of the following as of March 31, 2024:

	Cost		Accumulated Amortization		Carrying Value		Amortization Life and Method
Finite-lived intangible assets:
Merchant relationships	$	310,721	$	(106,892)	$	203,829	9 to 25 years – accelerated or straight-line
Non-compete agreements	418		(267)		151		3 to 6 years – straight-line
Website and brand development costs	103		(71)		32		3 to 4 years – straight-line
Trade names	6,131		(3,908)		2,223		3 to 7 years – straight-line
Residual buyouts	18,686		(4,134)		14,552		8 years – straight-line
Referral and exclusivity agreements	420		(105)		315		5 years – straight-line
Total finite-lived intangible assets	336,479		(115,377)		221,102
Indefinite-lived intangible assets:
Trademarks	43		—		43
Total identifiable intangible assets	$	336,522	$	(115,377)	$	221,145

Schedule of Future Amortization Expense for Intangible Assets

Based on net carrying amounts at March 31, 2024, the Company's estimate of future amortization expense for intangible assets are presented in the table below for fiscal years ending September 30:

2024 (six months remaining)	$	10,435
2025	20,798
2026	20,326
2027	19,706
2028	19,121
Thereafter	130,716
	$	221,102

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ACCRUED EXPENSES AND OTHER LIABILITIES (Tables)

6 Months Ended

Mar. 31, 2024

Payables and Accruals [Abstract]

Schedule of Accrued Expenses and Other Current Liabilities

A summary of the Company's accrued expenses and other current liabilities as of March 31, 2024 and September 30, 2023 is as follows is as follows:

	March 31,		September 30,
	2024		2023
Accrued wages, bonuses, commissions and vacation	$	6,290	$	8,713
Accrued interest	1,004		1,313
Accrued contingent consideration — current portion	3,868		6,825
Escrow liabilities	2,118		3,965
Customer deposits	1,061		1,258
Employee health self-insurance liability	1,058		1,014
Accrued interchange	2,066		2,191
Other current liabilities	9,389		12,461
Accrued expenses and other current liabilities	$	26,854	$	37,740

Schedule of Long-term Liabilities

A summary of the Company's long-term liabilities as of March 31, 2024 and September 30, 2023 is as follows:

	March 31,		September 30,
	2024		2023
Accrued contingent consideration — long-term portion	$	101	$	1,414
Deferred tax liability — long-term	17,125		19,646
Other long-term liabilities	1,128		3,083
Total other long-term liabilities	$	18,354	$	24,143

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LONG-TERM DEBT, NET (Tables)

6 Months Ended

Mar. 31, 2024

Debt Disclosure [Abstract]

Schedule of Long-term Debt

A summary of long-term debt, net as of March 31, 2024 and September 30, 2023 is as follows:

		March 31,		September 30,
	Maturity	2024		2023
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility	May 8, 2028	$	346,214	$	272,505
1% Exchangeable Senior Notes due 2025	February 15, 2025	26,223		117,000
Debt issuance costs, net		(2,822)		(4,424)
Total long-term debt, net of issuance costs		369,615		385,081
Less current portion of long-term debt		(26,223)		—
Long-term debt, net of current portion		$	343,392	$	385,081

Schedule of Consolidated Total Net Leverage Ratio

The applicable margin is based upon the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility), as reflected in the schedule below:

Consolidated Total Net Leverage Ratio	Commitment Fee		Letter of Credit Fee		Term Benchmark Loans		Base Rate Loans
> 3.0 to 1.0	0.30	%	3.00	%	3.00	%	2.00	%
> 2.5 to 1.0 but < 3.00 to 1.0	0.25	%	2.50	%	2.50	%	1.50	%
> 2.0 to 1.0 but < 2.50 to 1.0	0.20	%	2.25	%	2.25	%	1.25	%
< 2.0 to 1.0	0.15	%	2.00	%	2.00	%	1.00	%

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LEASES (Tables)

6 Months Ended

Mar. 31, 2024

Leases [Abstract]

Schedule of Maturities of Lease Liabilities

As of March 31, 2024, maturities of lease liabilities are as follows:

Fiscal Years ending September 30:
2024 (six months remaining)	$	2,598
2025	4,984
2026	3,874
2027	1,668
2028	755
Thereafter	1,261
Total future minimum lease payments (undiscounted)(1)	15,140
Less: present value discount	(1,357)
Present value of lease liability	$	13,783

__________________________

1.Total future minimum lease payments excludes payments of $39 for leases designated as short-term leases, which are excluded from the Company's right-of-use assets. These payments will be made within the next twelve months.

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

Schedule of Changes in Level 3 Financial Instruments Measured on a Recurring Basis

The following tables present the changes in the Company's Level 3 financial instruments that are measured at fair value on a recurring basis.

	Accrued Contingent Consideration
Balance at September 30, 2023	$	8,239
Contingent consideration accrued at time of business combination	170
Change in fair value of contingent consideration included in Operating expenses	(527)
Contingent consideration paid	(3,913)
Balance at March 31, 2024	$	3,969

	Accrued Contingent Consideration
Balance at September 30, 2022	$	22,833
Contingent consideration accrued at time of business combination	760
Change in fair value of contingent consideration included in Operating expenses	3,722
Contingent consideration paid	(5,056)
Balance at March 31, 2023	$	22,259

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EQUITY-BASED COMPENSATION (Tables)

6 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

Schedule of Equity-Based Compensation Expense

A summary of equity-based compensation expense recognized during the three and six months ended March 31, 2024 and 2023 is as follows:

	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Stock options	$	4,554	$	5,992	$	9,523	$	12,280
Restricted stock units	1,223		810		2,762		1,368
Equity-based compensation expense	$	5,777	$	6,802	$	12,285	$	13,648

Schedule of Fair Value of Stock Option Awards

The fair value of the stock option awards during the six months ended March 31, 2024 and during the year ended September 30, 2023 was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:

	March 31, 2024		September 30, 2023
Expected volatility(1)	52.1	%	54.9	%
Expected dividend yield(2)	—	%	—	%
Expected term(3)	6 years		6 years
Risk-free interest rate(4)	4.1	%	3.9	%

_________________

1.Expected volatility is based on the Company's own share price.

2.The Company has assumed a dividend yield of zero as management has no plans to declare dividends in the foreseeable future.

3.Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method as details of employee exercise behavior are limited due to limited historical data.

4.The risk-free rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term.

Schedule of Stock Option Activity

A summary of stock option activity for the six months ended March 31, 2024 is as follows:

	Stock Options	Weighted Average Exercise Price
Outstanding at September 30, 2023	8,576,670	$	25.16
Granted	944,556	19.23
Exercised	(32,517)	18.14
Forfeited	(230,180)	27.57
Outstanding at March 31, 2024	9,258,529	$	24.52
Exercisable at March 31, 2024	6,602,597	$	25.08

Schedule of Activity Related to Restricted Stock Unit

A summary of activity related to restricted stock units for the six months ended March 31, 2024 is as follows:

	Restricted Stock Units	Weighted Average Grant Date Fair Value
Outstanding at September 30, 2023	874,024	$	24.95
Granted	258,684	19.26
Vested	(172,159)	25.65
Forfeited	(32,084)	24.86
Outstanding at March 31, 2024	928,465	$	23.24

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COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Mar. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Schedule of Minimum Fee Commitments

As of March 31, 2024, such minimum fee commitments were as follows:

Fiscal Years ending September 30:
2024 (six months remaining)	$	2,177
2025	728
2026	240
2027	60
2028	—
Thereafter	—
Total	$	3,205

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SEGMENTS (Tables)

6 Months Ended

Mar. 31, 2024

Segment Reporting [Abstract]

Schedule of Reportable Segment Performance

The following is a summary of reportable segment operating performance for the three and six months ended March 31, 2024 and 2023.

	As of and for the Three Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue	$	59,483	$	35,075	$	(16)	$	94,542
Other costs of services	(4,908)		(16,289)		17		(21,180)
Residuals	735		10,587		(6)		11,316
Processing margin	$	55,310	$	29,373	$	(5)	$	84,678
Residuals							(11,316)
Selling, general and administrative							(54,162)
Depreciation and amortization							(10,069)
Change in fair value of contingent consideration							290
Income from operations							$	9,421
Total assets	$	593,219	$	212,082	$	60,241	$	865,542
Goodwill	$	288,822	$	121,950	$	—	$	410,772

	As of and for the Six Months Ended March 31, 2024
	Software and Services		Merchant Services		Other		Total
Revenue	$	116,072	$	70,497	$	(37)	$	186,532
Other costs of services	(9,217)		(32,423)		36		(41,604)
Residuals	1,353		20,987		(15)		22,325
Processing margin	$	108,208	$	59,061	$	(16)	$	167,253
Residuals							(22,325)
Selling, general and administrative							(107,694)
Depreciation and amortization							(19,808)
Change in fair value of contingent consideration							527
Income from operations							$	17,953
Total assets	$	593,219	$	212,082	$	60,241	$	865,542
Goodwill	$	288,822	$	121,950	$	—	$	410,772

	As of and for the Three Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue	$	60,797	$	33,094	$	(19)	$	93,872
Other costs of services	(4,229)		(15,719)		18		(19,930)
Residuals	799		10,039		(9)		10,829
Processing Margin	$	57,367	$	27,414	$	(10)	$	84,771
Residuals							(10,829)
Selling, general and administrative							(57,204)
Depreciation and amortization							(9,015)
Change in fair value of contingent consideration							(2,279)
Income from operations							$	5,444
Total assets	$	620,126	$	205,898	$	57,002	$	883,026
Goodwill	$	287,092	$	121,950	$	—	$	409,042

	As of and for the Six Months Ended March 31, 2023
	Software and Services		Merchant Services		Other		Total
Revenue	$	114,010	$	65,928	$	(37)	$	179,901
Other costs of services	(7,752)		(31,286)		39		(38,999)
Residuals	1,322		19,848		(20)		21,150
Processing margin	$	107,580	$	54,490	$	(18)	$	162,052
Residuals							(21,150)
Selling, general and administrative							(108,207)
Depreciation and amortization							(17,691)
Change in fair value of contingent consideration							(3,722)
Income from operations							$	11,282
Total assets	$	620,126	$	205,898	$	57,002	$	883,026
Goodwill	$	287,092	$	121,950	$	—	$	409,042

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NON-CONTROLLING INTEREST (Tables)

6 Months Ended

Mar. 31, 2024

Noncontrolling Interest [Abstract]

Schedule of Ownership Interest

The following table summarizes the impact on equity due to changes in the Company's ownership interest in i3 Verticals, LLC:

	Six Months Ended March 31,
	2024		2023
Net income attributable to non-controlling interest	$	1,908	$	181
Transfers (from) to non-controlling interests:
Redemption of common units in i3 Verticals, LLC	(384)		(86)
Allocation of equity to non-controlling interests	3,750		299
Net transfers to non-controlling interests	3,366		213
Change from net income attributable to non-controlling interests and net transfers to non-controlling interests	$	5,274	$	394

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EARNINGS PER SHARE (Tables)

6 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

Schedule of Reconciliations of the Numerators and Denominators Used to Compute Basic and Diluted Earnings Per Share

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the three and six months ended March 31, 2024 and 2023:

	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Basic net income (loss) per share:
Numerator
Net income (loss)	$	3,348	$	(192)	$	4,884	$	(23)
Less: Net income (loss) attributable to non-controlling interest	1,470		(228)		1,908		181
Net income (loss) attributable to Class A common stockholders	$	1,878	$	36	$	2,976	$	(204)
Denominator
Weighted average shares of Class A common stock outstanding	23,331,239		23,135,898		23,299,214		23,066,499
Basic net income (loss) per share(1)	$	0.08	$	0.00	$	0.13	$	(0.01)
Diluted net income per share:
Numerator
Net income attributable to Class A common stockholders	$	1,878	$	36	$	2,976
Reallocation of net loss assuming conversion of common units(2)(3)	—		(171)		—
Net income (loss) attributable to Class A common stockholders - diluted	1,878		(135)		2,976
Denominator
Weighted average shares of Class A common stock outstanding	23,331,239		23,135,898		23,299,214
Weighted average effect of dilutive securities(2)	387,235		11,133,242		427,506
Weighted average shares of Class A common stock outstanding - diluted	23,718,474		34,269,140		23,726,720
Diluted net income (loss) per share	$	0.08	$	0.00	$	0.13

__________________________

1.For the six months ended March 31, 2023, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share. The following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net loss per share of Class A common stock:

a.10,114,598 weighted average shares of Class B common stock for the six months ended March 31, 2023, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive.

b.5,165,478 stock options for the six months ended March 31, 2023, 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, and

c.633,453 shares for the six months ended March 31, 2023, resulting from estimated stock option exercises and restricted stock units vesting as calculated by the treasury stock method were excluded because of the effect of including them would have been anti-dilutive.

2.For the three and six months ended March 31, 2024 and the three months ended March 31, 2023, the following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net income per share of Class A common stock:

a.10,091,604 and 10,092,504 weighted average shares of Class B common stock for the three and six months ended March 31, 2024, respectively, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive, and

b.7,852,595 and 8,246,542 stock options for the three and six months ended March 31, 2024, respectively, and 4,018,042 stock options for the three months ended March 31, 2023, 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.

3.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 Note 8 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 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.

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SIGNIFICANT NON-CASH TRANSACTIONS (Tables)

6 Months Ended

Mar. 31, 2024

Cash Flow, Noncash Investing and Financing Activities Disclosure [Abstract]

Schedule of Significant Noncash Transactions

The Company engaged in the following significant non-cash investing and financing activities during the six months ended March 31, 2024 and 2023:

	Six months ended March 31,
	2024		2023
Acquisition date fair value of contingent consideration in connection with business combinations	$	170	$	760
Debt issuance costs financed with proceeds from the 2023 Senior Secured Credit Facility	$	—	$	178
Consideration accrued for residual buyouts	$	252	$	—
Right-of-use assets obtained in exchange for operating lease obligations	$	1,279	$	1,098

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2024	Mar. 31, 2023	Sep. 30, 2023	Sep. 30, 2022
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Settlement assets	$ 1,586	$ 7,185	$ 1,586	$ 7,185	$ 4,873	$ 7,540
Settlement obligations	1,586		1,586		4,873
Inventories	3,978		3,978		4,138
Contract assets from contracts with customer	11,478		11,478		15,131
Capitalized contract costs	5,417		5,417		$ 4,966
Commissions related to capitalized contract costs	$ 241	$ 193	$ 470	$ 376
Minimum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Maturity period of settlement assets and obligations (in years)			1 day
Maximum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Maturity period of settlement assets and obligations (in years)			4 days

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - New Accounting Pronouncements and Changes in Accounting Principles (Details) - USD ($) $ in Thousands		6 Months Ended
		Mar. 31, 2024	Mar. 31, 2023
Cash flows from operating activities:
Settlement obligations		$ 0	$ 0
Net cash provided by operating activities		25,147	25,884
Cash flows from financing activities:
Net payments for settlement obligations	[1]	(3,287)	(355)
Net cash (used in) provided by financing activities		(17,885)	83,814
As Previously Reported
Cash flows from operating activities:
Settlement obligations		(3,287)	(355)
Net cash provided by operating activities		21,860	25,529
Cash flows from financing activities:
Net payments for settlement obligations		0	0
Net cash (used in) provided by financing activities		(14,598)	84,169
Adjustment
Cash flows from operating activities:
Settlement obligations		3,287	355
Net cash provided by operating activities		3,287	355
Cash flows from financing activities:
Net payments for settlement obligations		(3,287)	(355)
Net cash (used in) provided by financing activities		$ (3,287)	$ (355)

[1] Refer to Note 2 for discussion of the change in the current period presentation.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Disaggregated Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2024	Mar. 31, 2023
Concentration Risk [Line Items]
Total revenue	$ 94,542	$ 93,872	$ 186,532	$ 179,901
Revenue earned over time
Concentration Risk [Line Items]
Total revenue	85,446	82,543	169,869	160,571
Revenue earned at a point in time
Concentration Risk [Line Items]
Total revenue	9,096	11,329	16,663	19,330
Software and Services
Concentration Risk [Line Items]
Total revenue	59,483	60,797	116,072	114,010
Software and Services | Revenue earned over time
Concentration Risk [Line Items]
Total revenue	55,361	54,568	109,715	105,009
Software and Services | Revenue earned at a point in time
Concentration Risk [Line Items]
Total revenue	4,122	6,229	6,357	9,001
Merchant Services
Concentration Risk [Line Items]
Total revenue	35,075	33,094	70,497	65,928
Merchant Services | Revenue earned over time
Concentration Risk [Line Items]
Total revenue	30,095	27,984	60,176	55,581
Merchant Services | Revenue earned at a point in time
Concentration Risk [Line Items]
Total revenue	4,980	5,110	10,321	10,347
Other
Concentration Risk [Line Items]
Total revenue	(16)	(19)	(37)	(37)
Other | Revenue earned over time
Concentration Risk [Line Items]
Total revenue	(10)	(9)	(22)	(19)
Other | Revenue earned at a point in time
Concentration Risk [Line Items]
Total revenue	(6)	(10)	(15)	(18)
Software and related services revenue
Concentration Risk [Line Items]
Total revenue	45,657	47,307	89,279	88,421
Software and related services revenue | Software and Services
Concentration Risk [Line Items]
Total revenue	42,130	44,099	82,462	82,244
Software and related services revenue | Merchant Services
Concentration Risk [Line Items]
Total revenue	3,537	3,217	6,839	6,196
Software and related services revenue | Other
Concentration Risk [Line Items]
Total revenue	(10)	(9)	(22)	(19)
Payments revenue
Concentration Risk [Line Items]
Total revenue	44,434	41,909	88,429	82,263
Payments revenue | Software and Services
Concentration Risk [Line Items]
Total revenue	14,855	14,285	28,837	27,038
Payments revenue | Merchant Services
Concentration Risk [Line Items]
Total revenue	29,585	27,634	59,607	55,243
Payments revenue | Other
Concentration Risk [Line Items]
Total revenue	(6)	(10)	(15)	(18)
Other revenue
Concentration Risk [Line Items]
Total revenue	4,451	4,656	8,824	9,217
Other revenue | Software and Services
Concentration Risk [Line Items]
Total revenue	2,498	2,413	4,773	4,728
Other revenue | Merchant Services
Concentration Risk [Line Items]
Total revenue	1,953	2,243	4,051	4,489
Other revenue | Other
Concentration Risk [Line Items]
Total revenue	$ 0	$ 0	$ 0	$ 0

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Contract with Customer, Asset and Liability (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Dec. 31, 2023	Mar. 31, 2023	Dec. 31, 2022
Contract with customer, Liability [Roll Forward]
Deferred revenue, beginning	$ 39,573	$ 35,444	$ 37,498	$ 32,089
Deferral of revenue	11,759	19,793	10,475	19,334
Recognition of unearned revenue	(13,596)	(15,664)	(14,286)	(13,925)
Deferred revenue, ending	$ 37,736	$ 39,573	$ 33,687	$ 37,498

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ACQUISITIONS - Additional Information (Details) $ in Thousands	6 Months Ended		12 Months Ended
	Mar. 31, 2024 USD ($)	Mar. 31, 2023 USD ($)	Sep. 30, 2023 USD ($) business
Finite-Lived Intangible Assets [Line Items]
Goodwill	$ 410,772	$ 409,042	$ 409,563
Residual buyouts
Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired	$ 4,466	$ 387
Estimated amortization period	8 years
Referral agreements
Finite-Lived Intangible Assets [Line Items]
Intangible assets acquired	$ 420
Estimated amortization period	5 years
Software Business Acquisition
Finite-Lived Intangible Assets [Line Items]
Total purchase consideration	$ 1,270
Payment to acquire business	1,100
Contingent consideration	170
Property and equipment	5
Goodwill	1,005
Acquisition-related costs	$ 8
Software Business Acquisition | Customer relationships
Finite-Lived Intangible Assets [Line Items]
Estimated amortization period	10 years
Intangible assets	$ 220
Software Business Acquisition | Capitalized software
Finite-Lived Intangible Assets [Line Items]
Estimated amortization period	7 years
Intangible assets	$ 40
Celtic
Finite-Lived Intangible Assets [Line Items]
Estimated amortization period		18 years
Payment to acquire business		$ 85,000
Property and equipment		5,233
Goodwill		43,899
Acquisition-related costs		1,782
Other long-term liabilities		$ 13,162
Celtic | Customer relationships
Finite-Lived Intangible Assets [Line Items]
Estimated amortization period		18 years
Intangible assets		$ 33,800
Celtic | Capitalized software
Finite-Lived Intangible Assets [Line Items]
Estimated amortization period		10 years
Intangible assets		$ 12,600
Celtic | Trade names
Finite-Lived Intangible Assets [Line Items]
Estimated amortization period		5 years
Intangible assets		$ 600
Celtic | Non-compete agreements
Finite-Lived Intangible Assets [Line Items]
Estimated amortization period		3 years
Intangible assets		$ 200
Other Business Combinations
Finite-Lived Intangible Assets [Line Items]
Total purchase consideration			19,757
Payment to acquire business			16,997
Contingent consideration			760
Property and equipment			374
Goodwill			$ 12,229
Number of businesses acquired | business			2
Net working capital			$ 159
Business acquisition, goodwill, expected tax deductible amount			2,864
Other long-term liabilities			2,178
Other Business Combinations | Class A Common Stock
Finite-Lived Intangible Assets [Line Items]
Common units issued to seller			2,000
Other Business Combinations | Customer relationships
Finite-Lived Intangible Assets [Line Items]
Intangible assets			$ 8,400
Other Business Combinations | Customer relationships | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated amortization period			10 years
Other Business Combinations | Customer relationships | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated amortization period			15 years
Other Business Combinations | Capitalized software
Finite-Lived Intangible Assets [Line Items]
Intangible assets			$ 670
Other Business Combinations | Capitalized software | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated amortization period			7 years
Other Business Combinations | Capitalized software | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated amortization period			8 years
Other Business Combinations | Trade names
Finite-Lived Intangible Assets [Line Items]
Intangible assets			$ 100

XML

ACQUISITIONS - Preliminary Purchase Consideration of the Acquired Assets and Assumed Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Sep. 30, 2023	Mar. 31, 2023
Business Acquisition [Line Items]
Goodwill	$ 410,772	$ 409,563	$ 409,042
Celtic
Business Acquisition [Line Items]
Accounts receivable			7,660
Prepaid expenses and other current assets			103
Property and equipment			5,233
Goodwill			43,899
Total assets acquired			104,095
Accounts payable			9
Accrued expenses and other current liabilities			3,182
Deferred revenue, current			2,741
Other long-term liabilities			13,162
Net assets acquired			85,001
Celtic | Capitalized software
Business Acquisition [Line Items]
Intangible assets			12,600
Celtic | Customer relationships
Business Acquisition [Line Items]
Intangible assets			33,800
Celtic | Non-compete agreements
Business Acquisition [Line Items]
Intangible assets			200
Celtic | Trade names
Business Acquisition [Line Items]
Intangible assets			$ 600

XML

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Sep. 30, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Inventory	$ 3,978	$ 4,138
Prepaid licenses	3,613	3,115
Prepaid insurance	929	697
Notes receivable — current portion	0	4
Other current assets	7,282	4,495
Prepaid expenses and other current assets	$ 15,802	$ 12,449

XML

GOODWILL AND INTANGIBLE ASSETS - Changes in Goodwill (Details) $ in Thousands	6 Months Ended
	Mar. 31, 2024 USD ($)
Goodwill [Roll Forward]
Goodwill, beginning	$ 409,563
Goodwill attributable to preliminary purchase price adjustments and acquisitions during the six months ended March 31, 2024	1,209
Goodwill, ending	410,772
Software and Services
Goodwill [Roll Forward]
Goodwill, beginning	287,613
Goodwill attributable to preliminary purchase price adjustments and acquisitions during the six months ended March 31, 2024	1,209
Goodwill, ending	288,822
Merchant Services
Goodwill [Roll Forward]
Goodwill, beginning	121,950
Goodwill attributable to preliminary purchase price adjustments and acquisitions during the six months ended March 31, 2024	0
Goodwill, ending	121,950
Other
Goodwill [Roll Forward]
Goodwill, beginning	0
Goodwill attributable to preliminary purchase price adjustments and acquisitions during the six months ended March 31, 2024	0
Goodwill, ending	$ 0

XML

GOODWILL AND INTANGIBLE ASSETS - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2024	Mar. 31, 2023	Sep. 30, 2023
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 336,479		$ 336,479
Finite-lived intangible assets, accumulated amortization	(115,377)		(115,377)
Finite-lived intangible assets, carrying value	221,102		221,102
Total identifiable intangible assets, cost	336,522		336,522
Total identifiable intangible assets, carrying value	221,145		221,145		$ 226,952
Amortization expense of intangible assets	5,270	$ 5,157	10,505	$ 10,216
Trademarks
Finite-Lived Intangible Assets [Line Items]
Indefinite-lived intangible assets	43		43
Merchant relationships
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	310,721		310,721
Finite-lived intangible assets, accumulated amortization	(106,892)		(106,892)
Finite-lived intangible assets, carrying value	$ 203,829		$ 203,829
Merchant relationships | Minimum
Finite-Lived Intangible Assets [Line Items]
Amortization life	9 years		9 years
Merchant relationships | Maximum
Finite-Lived Intangible Assets [Line Items]
Amortization life	25 years		25 years
Non-compete agreements
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 418		$ 418
Finite-lived intangible assets, accumulated amortization	(267)		(267)
Finite-lived intangible assets, carrying value	$ 151		$ 151
Non-compete agreements | Minimum
Finite-Lived Intangible Assets [Line Items]
Amortization life	3 years		3 years
Non-compete agreements | Maximum
Finite-Lived Intangible Assets [Line Items]
Amortization life	6 years		6 years
Website and brand development costs
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 103		$ 103
Finite-lived intangible assets, accumulated amortization	(71)		(71)
Finite-lived intangible assets, carrying value	$ 32		$ 32
Website and brand development costs | Minimum
Finite-Lived Intangible Assets [Line Items]
Amortization life	3 years		3 years
Website and brand development costs | Maximum
Finite-Lived Intangible Assets [Line Items]
Amortization life	4 years		4 years
Trade names
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 6,131		$ 6,131
Finite-lived intangible assets, accumulated amortization	(3,908)		(3,908)
Finite-lived intangible assets, carrying value	$ 2,223		$ 2,223
Trade names | Minimum
Finite-Lived Intangible Assets [Line Items]
Amortization life	3 years		3 years
Trade names | Maximum
Finite-Lived Intangible Assets [Line Items]
Amortization life	7 years		7 years
Residual buyouts
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 18,686		$ 18,686
Finite-lived intangible assets, accumulated amortization	(4,134)		(4,134)
Finite-lived intangible assets, carrying value	$ 14,552		$ 14,552
Amortization life	8 years		8 years
Referral and exclusivity agreements
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 420		$ 420
Finite-lived intangible assets, accumulated amortization	(105)		(105)
Finite-lived intangible assets, carrying value	$ 315		$ 315
Amortization life	5 years		5 years

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GOODWILL AND INTANGIBLE ASSETS - Future Amortization Expense (Details) $ in Thousands	Mar. 31, 2024 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2024 (six months remaining)	$ 10,435
2025	20,798
2026	20,326
2027	19,706
2028	19,121
Thereafter	130,716
Finite-lived intangible assets, carrying value	$ 221,102

XML

ACCRUED EXPENSES AND OTHER LIABILITIES (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Sep. 30, 2023
Accrued expenses and other current liabilities:
Accrued wages, bonuses, commissions and vacation	$ 6,290	$ 8,713
Accrued interest	1,004	1,313
Accrued contingent consideration — current portion	3,868	6,825
Escrow liabilities	2,118	3,965
Customer deposits	1,061	1,258
Employee health self-insurance liability	1,058	1,014
Accrued interchange	2,066	2,191
Other current liabilities	9,389	12,461
Accrued expenses and other current liabilities	26,854	37,740
Long-term Liabilities
Accrued contingent consideration — long-term portion	101	1,414
Deferred tax liability — long-term	17,125	19,646
Other long-term liabilities	1,128	3,083
Total other long-term liabilities	$ 18,354	$ 24,143

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LONG-TERM DEBT, NET - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Sep. 30, 2023	Feb. 18, 2020
Debt Instrument [Line Items]
Debt issuance costs, net	$ (2,822)	$ (4,424)
Total long-term debt, net of issuance costs	369,615	385,081
Less current portion of long-term debt	(26,223)	0
Long-term debt, net of current portion	343,392	385,081
Line of Credit | Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility
Debt Instrument [Line Items]
Long-term debt	346,214	272,505
Exchangeable Notes | 1% Exchangeable Senior Notes due 2025
Debt Instrument [Line Items]
Long-term debt	26,223	117,000
Debt issuance costs, net	$ (216)	$ (1,501)
Stated interest rate (percent)	1.00%		1.00%

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LONG-TERM DEBT, NET - Additional Information (Details)					1 Months Ended	3 Months Ended		6 Months Ended
	Jan. 18, 2024 USD ($)	May 08, 2023 USD ($)	Feb. 18, 2020 USD ($)	Feb. 13, 2020 USD ($) $ / shares shares	Dec. 31, 2023 USD ($)	Mar. 31, 2024 USD ($)	Mar. 31, 2023 USD ($)	Mar. 31, 2024 USD ($)	Mar. 31, 2023 USD ($)	Sep. 30, 2023 USD ($)	Sep. 30, 2020 USD ($)
Debt Instrument [Line Items]
Proceeds from sale of exchangeable senior note hedges								$ 1,238,000	$ 0
Amortization of debt issuance costs						$ 262,000	$ 368,000	676,000	729,000
Unamortized debt issuance costs						2,822,000		2,822,000		$ 4,424,000
Repayments of convertible debt								87,840,000	0
Exchangeable notes, fair value						25,043,000		25,043,000
Payments for note hedge transactions	$ 433,000			$ 28,676,000
Sale of note hedge warrants	987,000				$ 250,000
Loss on sale of exchangeable senior note hedges	245,000							245,000	0
Payments for repurchases of warrants								552,000	0
Gain on repurchases of warrants	105,000							105,000	0
Debt issuance costs incurred						0		0	265,000
Class A Common Stock
Debt Instrument [Line Items]
Warrants outstanding ( in shares) | shares				3,376,391
Warrants sold in connection with the issuance of the exchangeable notes (in USD per share) | $ / shares				$ 62.88
Proceeds from issuance of warrants				$ 14,669,000
1% Exchangeable Senior Notes due 2025 | Exchangeable Notes
Debt Instrument [Line Items]
Original principal amount			$ 138,000,000			$ 26,223,000		$ 26,223,000
Stated interest rate (percent)			1.00%			1.00%		1.00%
Proceeds from sale of exchangeable senior note hedges			$ 132,762,000
Amortization of debt issuance costs						$ 104,000	$ 233,000	$ 359,000	$ 460,000
Unamortized debt issuance costs						216,000		216,000		1,501,000
Debt aggregate repurchase amount	90,777,000										$ 21,000,000
Repayments of convertible debt	87,391,000
Debt interest, repurchase amount	386,000
Debt issuance costs written off	926,000
Gain on retirement of debt	$ 2,397,000
Long-term debt						26,223,000		26,223,000		117,000,000
Payments for repurchases of warrants					$ 119,000
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit
Debt Instrument [Line Items]
Long-term debt						$ 346,214,000		$ 346,214,000		$ 272,505,000
Commitment Fee								0.30%
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | One, Two, Three or Six-month SOFR
Debt Instrument [Line Items]
Basis spread on variable rate (percent)								3.00%
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | SOFR plus 1%
Debt Instrument [Line Items]
Basis spread on variable rate (percent)								2.00%
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | Minimum | One, Two, Three or Six-month SOFR
Debt Instrument [Line Items]
Basis spread on variable rate (percent)		2.00%
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | Minimum | SOFR plus 1%
Debt Instrument [Line Items]
Basis spread on variable rate (percent)		1.00%
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | Maximum | One, Two, Three or Six-month SOFR
Debt Instrument [Line Items]
Basis spread on variable rate (percent)		3.00%
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | Maximum | SOFR plus 1%
Debt Instrument [Line Items]
Basis spread on variable rate (percent)		2.00%
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Revolving line of credit borrowing capacity		$ 450,000,000
Optional addition to borrowing capacity		$ 100,000,000
Consolidation basis		1
Debt covenant, minimum consolidated interest coverage ratio		3.0				4.1		4.1
Debt covenant, maximum total leverage ratio		5.0				3.5		3.5
Commitment fee multiplier		$ 450,000,000
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | Revolving Credit Facility | One, Two, Three or Six-month SOFR
Debt Instrument [Line Items]
Basis spread on variable rate (percent)		0.10%
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | Revolving Credit Facility | Federal Funds Rate
Debt Instrument [Line Items]
Basis spread on variable rate (percent)		0.50%
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | Revolving Credit Facility | Secured Overnight Financing Rate (SOFR)
Debt Instrument [Line Items]
Basis spread on variable rate (percent)		1.00%
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | Revolving Credit Facility | Adjusted Term SOFR
Debt Instrument [Line Items]
Basis spread on variable rate (percent)		0.00%
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | Revolving Credit Facility | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate (percent)		1.00%
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | Revolving Credit Facility | Minimum
Debt Instrument [Line Items]
Commitment Fee		0.15%
Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility | Line of Credit | Revolving Credit Facility | Maximum
Debt Instrument [Line Items]
Commitment Fee		0.30%

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LONG-TERM DEBT, NET - Consolidated Total Net Leverage Ratio (Details) - Revolving lines of credit to banks under the 2023 Senior Secured Credit Facility		6 Months Ended
	May 08, 2023	Mar. 31, 2024
Line of Credit
Debt Instrument [Line Items]
Commitment Fee		0.30%
Revolving Credit Facility | Line of Credit | Minimum
Debt Instrument [Line Items]
Commitment Fee	0.15%
Revolving Credit Facility | Line of Credit | Maximum
Debt Instrument [Line Items]
Commitment Fee	0.30%
Revolving Credit Facility | Line of Credit | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate (percent)	1.00%
Greater than 3.00 to 1.0 | Revolving Credit Facility | Line of Credit
Debt Instrument [Line Items]
Net leverage ratio	3.0
Commitment Fee	0.30%
Greater than 3.00 to 1.0 | Revolving Credit Facility | Line of Credit | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate (percent)	2.00%
Greater than 3.00 to 1.0 | Revolving Credit Facility | Letter of Credit
Debt Instrument [Line Items]
Letter of Credit Fee	3.00%
Greater than 3.00 to 1.0 | Revolving Credit Facility | Secured Debt
Debt Instrument [Line Items]
Basis spread on variable rate (percent)	3.00%
Greater than 2.50 to 1.0 but less than 3.00 to 1.00 | Revolving Credit Facility | Line of Credit
Debt Instrument [Line Items]
Commitment Fee	0.25%
Greater than 2.50 to 1.0 but less than 3.00 to 1.00 | Revolving Credit Facility | Line of Credit | Minimum
Debt Instrument [Line Items]
Net leverage ratio	2.5
Greater than 2.50 to 1.0 but less than 3.00 to 1.00 | Revolving Credit Facility | Line of Credit | Maximum
Debt Instrument [Line Items]
Net leverage ratio	3.00
Greater than 2.50 to 1.0 but less than 3.00 to 1.00 | Revolving Credit Facility | Line of Credit | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate (percent)	1.50%
Greater than 2.50 to 1.0 but less than 3.00 to 1.00 | Revolving Credit Facility | Letter of Credit
Debt Instrument [Line Items]
Letter of Credit Fee	2.50%
Greater than 2.50 to 1.0 but less than 3.00 to 1.00 | Revolving Credit Facility | Secured Debt
Debt Instrument [Line Items]
Basis spread on variable rate (percent)	2.50%
Greater than 2.00 to 1.00 but less than 2.50 to 1.0 | Revolving Credit Facility | Line of Credit
Debt Instrument [Line Items]
Commitment Fee	0.20%
Greater than 2.00 to 1.00 but less than 2.50 to 1.0 | Revolving Credit Facility | Line of Credit | Minimum
Debt Instrument [Line Items]
Net leverage ratio	2.0
Greater than 2.00 to 1.00 but less than 2.50 to 1.0 | Revolving Credit Facility | Line of Credit | Maximum
Debt Instrument [Line Items]
Net leverage ratio	2.50
Greater than 2.00 to 1.00 but less than 2.50 to 1.0 | Revolving Credit Facility | Line of Credit | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate (percent)	1.25%
Greater than 2.00 to 1.00 but less than 2.50 to 1.0 | Revolving Credit Facility | Letter of Credit
Debt Instrument [Line Items]
Letter of Credit Fee	2.25%
Greater than 2.00 to 1.00 but less than 2.50 to 1.0 | Revolving Credit Facility | Secured Debt
Debt Instrument [Line Items]
Basis spread on variable rate (percent)	2.25%
Greater than 2.00 to 1.00 | Revolving Credit Facility | Line of Credit
Debt Instrument [Line Items]
Net leverage ratio	2.0
Commitment Fee	0.15%
Greater than 2.00 to 1.00 | Revolving Credit Facility | Line of Credit | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate (percent)	1.00%
Greater than 2.00 to 1.00 | Revolving Credit Facility | Letter of Credit
Debt Instrument [Line Items]
Letter of Credit Fee	2.00%
Greater than 2.00 to 1.00 | Revolving Credit Facility | Secured Debt
Debt Instrument [Line Items]
Basis spread on variable rate (percent)	2.00%

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INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2024	Mar. 31, 2023	Jun. 25, 2018
Class of Stock [Line Items]
Provision for (benefit from) income taxes	$ 580	$ (563)	$ 762	$ (181)
Percent of tax benefits payable to continuing equity owners	85.00%		85.00%		85.00%
Tax benefits retained (percent)					15.00%
Period of payment to continuing equity owners			24 years
Minimum
Class of Stock [Line Items]
Expected payments for repurchase of redeemable noncontrolling interest	$ 0		$ 0
Maximum
Class of Stock [Line Items]
Expected payments for repurchase of redeemable noncontrolling interest	3,256		3,256
Class B Common Stock | Continuing Equity Owner
Class of Stock [Line Items]
Increase in net deferred tax assets			286
Tax benefit			243
Deferred tax asset recognized	38,009		38,009
Tax benefits due to continuing equity owners	$ 40,323		$ 40,323
Common Stock | Class A Common Stock
Class of Stock [Line Items]
Redemption of common units in i3 Verticals, LLC (in shares)	40,718	9,924	40,718
Common Stock | Class B Common Stock
Class of Stock [Line Items]
Redemption of common units in i3 Verticals, LLC (in shares)	(40,718)	(9,924)

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LEASES - Additional Information (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2024 USD ($) lease	Mar. 31, 2023 USD ($)	Mar. 31, 2024 USD ($) lease	Mar. 31, 2023 USD ($)
Leases [Abstract]
Number of finance leases | lease	0		0
Weighted-average remaining lease term	2 years	4 years	2 years	4 years
Weighted-average discount rate of operating leases	7.40%	7.30%	7.40%	7.30%
Operating lease costs	$ 1,318	$ 1,405	$ 2,651	$ 2,909
Variable lease costs	39	9	49	20
Short-term rent expense	$ 41	$ 75	$ 86	$ 110

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LEASES - Maturities of Lease Liabilities (Details) $ in Thousands	Mar. 31, 2024 USD ($)
Leases [Abstract]
2024 (six months remaining)	$ 2,598
2025	4,984
2026	3,874
2027	1,668
2028	755
Thereafter	1,261
Total future minimum lease payments (undiscounted)	15,140
Less: present value discount	(1,357)
Present value of lease liability	13,783
Short-term leases	$ 39

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FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Sep. 30, 2023
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Exchangeable notes, fair value	$ 25,043
Accrued Contingent Consideration
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance, beginning	8,239	$ 22,833
Contingent consideration accrued at time of business combination	170	760
Change in fair value of contingent consideration included in Operating expenses	(527)	3,722
Contingent consideration paid	(3,913)	(5,056)
Balance, ending	3,969	$ 22,259
Accrued Expenses and Other Current Liabilities
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Contingent consideration	3,868		$ 6,825
Other Long-term Liabilities
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Contingent consideration	$ 101		$ 1,414

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EQUITY-BASED COMPENSATION - Share-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2024	Mar. 31, 2023
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	$ 5,777	$ 6,802	$ 12,285	$ 13,648
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	4,554	5,992	9,523	12,280
Restricted stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation expense	$ 1,223	$ 810	$ 2,762	$ 1,368

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EQUITY-BASED COMPENSATION - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2024	Mar. 31, 2023	May 31, 2021	Sep. 30, 2020	May 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Income tax benefits related to equity-based compensation	$ 927	$ 1,215	$ 2,005	$ 2,404
Granted, weighted average grant date fair value (in USD per share)			$ 10.54
Unrecognized compensation expense related to unvested options at end of period	22,046		$ 22,046
Period for recognition of unrecognized compensation cost			2 years 8 months 4 days
Fair value of stock options that vested	10,853		$ 17,248
Restricted stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Period for recognition of unrecognized compensation cost			3 years 3 days
Cost not yet recognized, amount	14,329		$ 14,329
Vested in period, fair value	$ 3,718		$ 4,416
2018 Equity Incentive Award Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for grant under the plan (in shares)	1,259,827		1,259,827				3,500,000
Additional Class A common shares added at the beginning of calendar year as percentage of common stock outstanding at end of previous year (percent)							4.00%
2020 Equity Incentive Award Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for grant under the plan (in shares)	1,230,668		1,230,668		3,000,000	1,500,000

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EQUITY-BASED COMPENSATION - Fair Value of Stock Option Awards (Details) - Stock options	6 Months Ended	12 Months Ended
	Mar. 31, 2024	Sep. 30, 2023
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility (percent)	52.10%	54.90%
Expected dividend yield (percent)	0.00%	0.00%
Expected term (years)	6 years	6 years
Risk-free interest rate (percent)	4.10%	3.90%

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EQUITY-BASED COMPENSATION - Stock Option Activity (Details) - $ / shares	6 Months Ended
	Mar. 31, 2024
Stock Options
Outstanding at beginning of period (in shares)	8,576,670
Granted (in shares)	944,556
Exercised (in shares)	(32,517)
Forfeited (in shares)	(230,180)
Outstanding at end of period (in shares)	9,258,529
Options exercisable at end of period (in shares)	6,602,597
Weighted Average Exercise Price
Outstanding at beginning of period (in USD per share)	$ 25.16
Granted (in USD per share)	19.23
Exercised (in USD per share)	18.14
Forfeited (in USD per share)	27.57
Outstanding at end of period (in USD per share)	24.52
Exercisable, weighted average exercise price (in USD per share)	$ 25.08

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EQUITY-BASED COMPENSATION - RSU Activity (Details) - Restricted stock units	6 Months Ended
	Mar. 31, 2024 $ / shares shares
Restricted Stock Units
Outstanding at beginning of period (in shares) | shares	874,024
Granted (in shares) | shares	258,684
Vested (in shares) | shares	(172,159)
Forfeited (in shares) | shares	(32,084)
Outstanding at end of period (in shares) | shares	928,465
Weighted Average Grant Date Fair Value
Outstanding at beginning of period (in USD per share) | $ / shares	$ 24.95
Granted (in USD per share) | $ / shares	19.26
Vested (in USD per share) | $ / shares	25.65
Forfeited (in USD per share) | $ / shares	24.86
Outstanding at end of period (in USD per share) | $ / shares	$ 23.24

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COMMITMENTS AND CONTINGENCIES- Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2024	Mar. 31, 2023
Commitments and Contingencies Disclosure [Abstract]
Rent expense	$ 1,359	$ 1,480	$ 2,737	$ 3,019

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COMMITMENTS AND CONTINGENCIES - Minimum Fee Commitments (Details) $ in Thousands	Mar. 31, 2024 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2024 (six months remaining)	$ 2,177
2025	728
2026	240
2027	60
2028	0
Thereafter	0
Total	$ 3,205

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COMMITMENTS AND CONTINGENCIES - S&S Litigation (Details) - USD ($) $ in Thousands		12 Months Ended
	Oct. 04, 2021	Sep. 30, 2018
Software & Services, LLC ("S&S")
Loss Contingencies [Line Items]
Total purchase consideration		$ 17,000
S & S Vs. State
Loss Contingencies [Line Items]
Loss contingency, damages sought, value	$ 15,000
S & S Vs. Sheriffs
Loss Contingencies [Line Items]
Loss contingency, damages sought, value	$ 7,000

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RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Jun. 25, 2018
Related Party Transaction [Line Items]
Percent of tax benefits payable to continuing equity owners	85.00%	85.00%
Class B Common Stock | Continuing Equity Owner
Related Party Transaction [Line Items]
Tax benefits due to continuing equity owners	$ 40,323

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SEGMENTS (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2024	Mar. 31, 2023	Sep. 30, 2023
Segment Reporting Information [Line Items]
Revenue	$ 94,542	$ 93,872	$ 186,532	$ 179,901
Other costs of services	(21,180)	(19,930)	(41,604)	(38,999)
Residuals	11,316	10,829	22,325	21,150
Processing margin	84,678	84,771	167,253	162,052
Residuals	(11,316)	(10,829)	(22,325)	(21,150)
Selling, general and administrative	(54,162)	(57,204)	(107,694)	(108,207)
Depreciation and amortization	(10,069)	(9,015)	(19,808)	(17,691)
Change in fair value of contingent consideration	290	(2,279)	527	(3,722)
Income from operations	9,421	5,444	17,953	11,282
Total assets	865,542	883,026	865,542	883,026	$ 881,493
Goodwill	410,772	409,042	410,772	409,042	409,563
Software and Services
Segment Reporting Information [Line Items]
Revenue	59,483	60,797	116,072	114,010
Other costs of services	(4,908)	(4,229)	(9,217)	(7,752)
Residuals	735	799	1,353	1,322
Processing margin	55,310	57,367	108,208	107,580
Residuals	(735)	(799)	(1,353)	(1,322)
Total assets	593,219	620,126	593,219	620,126
Goodwill	288,822	287,092	288,822	287,092	287,613
Merchant Services
Segment Reporting Information [Line Items]
Revenue	35,075	33,094	70,497	65,928
Other costs of services	(16,289)	(15,719)	(32,423)	(31,286)
Residuals	10,587	10,039	20,987	19,848
Processing margin	29,373	27,414	59,061	54,490
Residuals	(10,587)	(10,039)	(20,987)	(19,848)
Total assets	212,082	205,898	212,082	205,898
Goodwill	121,950	121,950	121,950	121,950	121,950
Other
Segment Reporting Information [Line Items]
Revenue	(16)	(19)	(37)	(37)
Other costs of services	17	18	36	39
Residuals	(6)	(9)	(15)	(20)
Processing margin	(5)	(10)	(16)	(18)
Residuals	6	9	15	20
Total assets	60,241	57,002	60,241	57,002
Goodwill	$ 0	$ 0	$ 0	$ 0	$ 0

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NON-CONTROLLING INTEREST - Additional Information (Details) - i3Verticals, LLC - shares	Mar. 31, 2024	Mar. 31, 2023
Noncontrolling Interest [Line Items]
Non-controlling interest, common units (in shares)	23,416,518	23,167,730
Non-controlling interest, ownership interest (percent)	70.00%	69.60%

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NON-CONTROLLING INTEREST - Ownership Interest (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2024	Mar. 31, 2023
Noncontrolling Interest [Abstract]
Net income attributable to non-controlling interest	$ 1,470	$ (228)	$ 1,908	$ 181
Redemption of common units in i3 Verticals, LLC			(384)	(86)
Allocation of equity to non-controlling interests			3,750	299
Net transfers to non-controlling interests			3,366	213
Change from net income attributable to non-controlling interests and net transfers to non-controlling interests			$ 5,274	$ 394

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EARNINGS PER SHARE - Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Mar. 31, 2024	Dec. 31, 2023	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2024	Mar. 31, 2023
Numerator
Net income (loss)	$ 3,348	$ 1,536	$ (192)	$ 169	$ 4,884	$ (23)
Less: Net income (loss) attributable to non-controlling interest	1,470		(228)		1,908	181
Net income (loss) attributable to i3 Verticals, Inc.	$ 1,878		$ 36		$ 2,976	$ (204)
Denominator
Weighted average shares of Class A common stock outstanding - basic (in shares)	23,331,239		23,135,898		23,299,214	23,066,499
Basic net income (loss) per share (in USD per share)	$ 0.08		$ 0.00		$ 0.13	$ (0.01)
Class A Common Stock
Numerator
Net income (loss)	$ 3,348		$ (192)		$ 4,884	$ (23)
Less: Net income (loss) attributable to non-controlling interest	1,470		(228)		1,908	181
Net income (loss) attributable to i3 Verticals, Inc.	$ 1,878		$ 36		$ 2,976	$ (204)
Denominator
Weighted average shares of Class A common stock outstanding - basic (in shares)	23,331,239		23,135,898		23,299,214	23,066,499

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EARNINGS PER SHARE - Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2024	Mar. 31, 2023
Numerator
Net income attributable to Class A common stockholders	$ 1,878	$ 36	$ 2,976	$ (204)
Denominator
Weighted average shares of Class A common stock outstanding - basic (in shares)	23,331,239	23,135,898	23,299,214	23,066,499
Weighted average shares of Class A common stock outstanding - diluted (in shares)	23,718,474	34,269,140	23,726,720	23,066,499
Diluted net income (loss) per share (in USD per share)	$ 0.08	$ (0.00)	$ 0.13	$ (0.01)
Class A Common Stock
Numerator
Net income attributable to Class A common stockholders	$ 1,878	$ 36	$ 2,976	$ (204)
Reallocation of net loss assuming conversion of common units	0	(171)	0
Net income (loss) attributable to Class A common stockholders - diluted	$ 1,878	$ (135)	$ 2,976
Denominator
Weighted average shares of Class A common stock outstanding - basic (in shares)	23,331,239	23,135,898	23,299,214	23,066,499
Weighted average effect of dilutive securities (in shares)	387,235	11,133,242	427,506
Weighted average shares of Class A common stock outstanding - diluted (in shares)	23,718,474	34,269,140	23,726,720
Diluted net income (loss) per share (in USD per share)	$ 0.08	$ (0.00)	$ 0.13

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EARNINGS PER SHARE - Antidilutive Securities (Details) - $ / shares	3 Months Ended		6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2024	Mar. 31, 2023	Feb. 13, 2020
Class A Common Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Exchangeable notes, exchange price per share (in USD per share)	$ 40.87		$ 40.87
Warrants sold in connection with the issuance of the exchangeable notes (in USD per share)					$ 62.88
Class B Common Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	10,091,604		10,092,504
Class B Common Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)				10,114,598
Out-of-the-money Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	7,852,595	4,018,042	8,246,542	5,165,478
Employee Stock Options and Restricted Stock Units (RSUs)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)				633,453

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SIGNIFICANT NON-CASH TRANSACTIONS (Details) - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Cash Flow, Noncash Investing and Financing Activities Disclosure [Abstract]
Acquisition date fair value of contingent consideration in connection with business combinations	$ 170	$ 760
Debt issuance costs financed with proceeds from the 2023 Senior Secured Credit Facility	0	178
Consideration accrued for residual buyouts	252	0
Right-of-use assets obtained in exchange for operating lease obligations	$ 1,279	$ 1,098

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Label	Element	Value
Accounting Standards Update [Extensible Enumeration]	us-gaap_AccountingStandardsUpdateExtensibleList	Accounting Standards Update 2020-06 [Member]