Earnings Per Share

6 Months Ended

Mar. 31, 2020

EARNINGS PER SHAREBasic 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, 2020 and 2019:


	Three months ended March 31,						Six months ended March 31,
	2020		2019		2020		2019
Basic net income (loss) per share:
Numerator
Net income (loss)	$	1,919	$	(1,222)	$	3,853	$	1,129
Less: Net income (loss) attributable to non-controlling interests	1,182		(120)		3,265		2,053
Net income (loss) attributable to Class A common stockholders	$	737	$	(1,102)	$	588	$	(924)
Denominator
Weighted average shares of Class A common stock outstanding⁽¹⁾	14,456,970		8,887,050		14,344,768		8,849,431
Basic net income (loss) per share⁽²⁾	$	0.05	$	(0.12)	$	0.04	$	(0.10)

Dilutive net income per share⁽²⁾:
Numerator
Net income attributable to Class A common stockholders - diluted⁽³⁾	$	737			$	588

Denominator
Weighted average shares of Class A common stock outstanding⁽¹⁾	14,456,970				14,344,768
Weighted average effect of dilutive securities⁽³⁾	1,649,787				1,433,309
Weighted average shares of Class A common stock outstanding - diluted	16,106,757				15,778,077
Diluted net income per share	0.05				$	0.04

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1.Excludes 277,758 restricted Class A common stock units three and six months ended March 31, 2019, and 215,564 and 228,872 restricted Class A common stock units for the three and six months ended March 31, 2020, respectively.

2.For the three and six months ended March 31, 2019, 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.17,112,164 shares of weighted average Class B common stock for both the three and six months ended March 31, 2019, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive,

b.30,500 and 33,000 stock options for the three and six months ended March 31, 2019, respectively, 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.1,012,916 and 884,823 shares for the three and six months ended March 31, 2019, respectively, resulting from estimated stock option exercises as calculated by the treasury stock method, and 277,758 restricted Class A common units for both the three and six months ended March 31, 2019, were excluded because the effect of including them would have been anti-dilutive.

3.For the three and six months ended March 31, 2020, the following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted earnings per share of Class A common stock:

a.12,769,568 and 12,846,018 shares of weighted average Class B common stock for the three and six months ended March 31, 2020, 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.959,000 and 1,054,000 stock options for the three and six months ended March 31, 2020, respectively, 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.

Since the Company expects to settle the principal amount of its outstanding Exchangeable Notes in cash and any excess in cash or shares of the Company's Class A common stock, 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 5 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.