By Milt Capps
Published Monday, September 23, 2024 1:00 pm

i3 VERTICALS INC (IIIV), based in Burton Hills, Nashville, today announced the Sept. 20 closing of the sale of its previously announced merchant services business -- deemed "non-core" -- and proprietary technology to Payroc WorldAccess LLC, via a transaction that paid i3 Verticals roughly $438MM, subject to post-closing adjustments.

That done, acquisitive, software-focused i3 Verticals seems prepared to further sharpen its already well-honed gaze on both M&A and organic growth of EBITDA and sales.

► i3 Verticals' market cap on Nasdaq hovered at about $739MM earlier today. Its SEC filing history is here. Its 3Q 2024 report on results here.

Greg Daily

In an i3 Verticals press release this morning, Chairman and CEO Greg Daily, 65, reiterated his previous guidance with respect to the deal, which leaves the company focused on Public Sector, Education and Healthcare verticals."

During its most recent analysts call, Daily said he was "excited" that his company's FY24 was ending, with the company's transition and operational realignment away from merchant services moving along and i3 Verticals' prospects for investing in mergers and acquisitions promising.

Add: i3 Verticals' typically seeks to acquire companies with $2MM-$5MM EBITDA.

These days, it seems, the company is free to focus on building or buying highly scalable, configurable web-native applications that reduce need for custom coding, resulting in faster speed-to-market. Consistent with that, the company has, among other moves, recently opened North Carolina and Texas territories.

In a recent analysts call, the company said its M&A pipeline remains strong and its most recent acquisition was an undisclosed company based in the southwest and providing permitting and licensing solutions for state and local boards, commissions and agencies.

During the company's latest analyst call, the management team expressed confidence in projecting results in FY2025, which begins Oct. 1.

Clay Whitson

On Sept. 20, i3 Verticals reported that its board of directors appointed the company's former chief financial officer, Clay Whitson, 66, to the newly created position of chief strategy officer, with portfolio including M&A.

Geoff Smith

On the same date, the i3 board appointed Geoff Smith -- a 37-year-old non-practicing CPA and Vanderbilt University alumnus with a master's in accountancy --to the CFO post, from his previous internal role as SVP-Finance.

In addition to growing revenue and EBITDA, acquisitive i3 Verticals also relies on the substantial balance remaining within the $450MM senior secured revolving credit facility it negotiated in May 2023, a transaction in which JPMorgan Chase Bank was agent.

i3 Verticals announced last spring it had entered a definitive agreement to sell to Payroc via an all-cash deal worth about $440MM, proceeds of which were projected as being adequate to strengthen i3 liquidity, reduce its then-current $343.4MM in long-term debt and increase its cash on-hand and equivalents.

In today's release, Daily added that he believes employees who had served in i3's now-former merchant services line of business "have found a wonderful home at Payroc."

During an earnings call in May this year, the company told analysts that about 300 people had been associated with the merchant services business, out of i3's then-total 1,700 team members.

i3 Verticals IPO'd in June 2019. VNC research suggests i3 Verticals has completed an estimated 30 investments and acquisitions since its founding as i3 Verticals Management Services Inc. in 2014.

Though i3 Verticals has sometimes been referred to simply as a software as a services (SaaS) business, today's release explains i3 Verticals "delivers seamless integrated software to customers in strategic vertical markets" and aims to continue building-out its "sophisticated and diverse platform of software and services solutions" by creating and-or buying software products to meet the needs of public and private organizations operating in the aforementioned public-sector verticals.

Jim Oberman

Today, Tinley Park, Ill.-based Payroc is led by CEO Jim Oberman and President Adam Oberman. The company was founded by 2003 by Nicholas Oberman and Adam Oberman.

The Payroc business was recapitalized in 2019 by PE Parthenon Capital Partners, according to company's history timeline. Acquisitive Payroc today represents consolidation of about 20 businesses, according to that history.

Payroc said in its own blogpost today that it supports more than $115BN of annual processing volume for approximately 190,000 merchant customers in the United States, Canada, the Caribbean, the United Kingdom, and the European Community. VNC research indicates Payroc had at least 850 team members prior to the i3 deal.

The Payroc website says the company's technology serves ISVs/SaaS providers, Payments-as-a-Service (PaaS) operators, Unattended transactions, sales partners, and merchants.

As of this morning, the Payroc website cited $52BN annual volume, and a global operations team of at least 850 persons. Payroc history.

Payroc said in its deal-related release that buying i3 Verticals's merchant services business allows the privately held company to provide payment solutions to a broader range of partners and merchants.

VNC's previous Greg Daily coverage here. His previous successful startups included iPayment Inc. (Nasdaq:IPMT) and PMT Services Inc.. (PMTS). VNC

. last edited 1411 23 September 2024