Earnings Per Share

12 Months Ended

Sep. 30, 2019

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.

Prior to the IPO, the i3 Verticals, LLC membership structure included Class A units, common units and Class P units. The Company analyzed the calculation of earnings per unit for periods prior to the IPO using the two-class method and determined that it resulted in values that would not be meaningful to the users of these consolidated financial statements. Therefore, earnings per share information for the year ended September 30, 2018 represents only the period from June 25, 2018 through September 30, 2018.

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:


	Year ended September 30,
	2019		2018
Basic net (loss) income per share:
Numerator
Net income⁽¹⁾	$	563	$	2,673
Less: Net income attributable to non-controlling interests	3,608		1,937
Net (loss) income attributable to Class A common stockholders	$	(3,045)	$	736
Denominator
Weighted average shares of Class A common stock outstanding⁽²⁾	10,490,981		8,812,630
Basic net (loss) income per share⁽³⁾	$	(0.29)	$	0.08

Dilutive net (loss) income per share⁽³⁾:
Numerator
Net (loss) income attributable to Class A common stockholders			$	736
Reallocation of net income assuming conversion of common units⁽⁴⁾			1,464
Net income attributable to Class A common stockholders - diluted			$	2,200
Denominator
Weighted average shares of Class A common stock outstanding⁽²⁾			8,812,630
Weighted average effect of dilutive securities			18,061,248
Weighted average shares of Class A common stock outstanding - diluted			26,873,878
Diluted net income per share			$	0.08

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1.Basic and diluted earnings per Class A common stock is presented only for the period after the Company’s Reorganization Transactions. As such, net income used in the calculation for the year ended September 30, 2018 represents the net income attributable to Class A common stockholders for the period from June 25, 2018 through September 30, 2018.

2.Excludes 282,801 and 299,412 restricted Class A common stock units for the years ended September 30, 2019 and 2018, respectively.

3.For the year ended September 30, 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 earnings per share of Class A common stock:

a.15,856,855 shares of weighted average Class B common stock for the year ended September 30, 2019, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive,

b.626,500 stock options for the year ended September 30, 2019, 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.1,009,858 shares for the year ended September 30, 2019, resulting from estimated stock option exercises as calculated by the treasury stock method, and 282,801 restricted Class A common units for the year ended September 30, 2019 were excluded because the effect of including them would have been anti-dilutive.

4.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 10 above and assuming all common units of i3 Verticals, LLC were exchanged for Class A common stock at the beginning of the year. 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 year.

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.