Business Context and Reporting Period
This Form 8-K was filed by i3 Verticals, Inc. on September 9, 2020, to disclose material events in connection with a proposed underwritten public offering of 3,250,000 shares of Class A common stock. The filing provides updates on recent acquisition activity, payment volumes, and software revenue trends as of the third quarter of fiscal 2020.
Key Financial Metrics and Operational Data
- Acquisition Activity: Completed three acquisitions subsequent to June 30, 2020, with a total purchase consideration of $27.5 million funded by cash, revolving credit, and contingent consideration.
- Software Revenue: Preliminary estimates for software and related services revenue were $2.9 million for the month ended July 31, 2020, and $3.2 million for the month ended August 31, 2020.
- Payment Volumes: Average daily payment volume recovered 82% from the lows experienced during the week of March 28, 2020. This volume represents approximately 85% of the credit and debit volume reported in consolidated financial statements.
- Equity Plan: Adopted the 2020 Acquisition Equity Incentive Plan, reserving 1.5 million shares of Class A common stock for grants to employees of acquired companies.
Material Changes and Developments
The company reported a shift in acquisition strategy due to the COVID-19 pandemic. While no acquisitions were completed during the nine months ended June 30, 2020, three were completed shortly thereafter. Additionally, the company noted a decline and subsequent partial recovery in payment volumes and revenue beginning in late March 2020. The filing also discloses the adoption of a new equity incentive plan specifically designed to facilitate future acquisitions.
Outlook, Risks, and Contingencies
- Pipeline: The company has finalized non-binding term sheets for four additional acquisitions with an aggregate purchase price of approximately $50-60 million, expected to close in Q4 2020 or Q1 2021.
- Equity Grants: Approximately 100,000 stock options were granted for the three completed acquisitions. An additional 250,000-450,000 options are expected for the four pending acquisitions.
- Risks: The filing emphasizes that the impact of the COVID-19 pandemic is fluid and continues to evolve, creating uncertainty regarding future business results, financial condition, and liquidity. There is no assurance that pending acquisitions will be consummated.
- Data Reliability: Software revenue figures provided are preliminary estimates and have not been audited or reviewed.
Investor Verification Checklist
- Verify the final audited software and related services revenue for the quarter ended September 30, 2020, against the preliminary estimates of $2.9 million and $3.2 million.
- Confirm the execution of definitive agreements for the four pending acquisitions valued at $50-60 million.
- Monitor the impact of the $27.5 million in recent acquisition costs on the company's liquidity and revolving line of credit utilization.
- Review the full text of the 2020 Acquisition Equity Incentive Plan (Exhibit 10.1) to understand dilution risks associated with the reserved 1.5 million shares.