i3 Verticals (IIIV) risk factors, FY2024 10-K

Risks Related to Our Business and Industry

1. 01Unauthorized disclosure, destruction or modification of data or disruption of our services or other cybersecurity or technological risks, including as a result of a cybersecurity incident, could expose us to liability, protracted and costly litigation and damage our reputation
2. 02Our software and systems and our third-party providers’ software and systems may fail, or our third-party providers may discontinue providing their services or technology generally or to us specifically, which in either case could interrupt our business, cause us to lose business and increase our costs
3. 03Some of our solutions contain "open-source" software, and any failure to comply with the terms of one or more of applicable open-source licenses could negatively affect our business
4. 04We have a history of operating losses and will need to generate significant revenues to attain and maintain profitability and positive cash flow and continue our acquisition program
5. 05Other software providers of payment processing services have established a sizable market share in our vertical markets and service more customers than we do. Our growth will largely depend on our ability to increase our market share
6. 06If we cannot keep pace with rapid developments and changes in our industry, the use of our products and services could decline, causing a reduction in our revenues
7. 07If we fail to comply with the applicable requirements of the Visa and Mastercard payment networks, those payment networks could seek to fine us, suspend us or terminate our registrations through our bank sponsor
8. 08If our bank sponsorship is terminated and we are not able to secure or successfully migrate customer portfolios to a new bank sponsor, we will not be able to conduct our business
9. 09If our processing services agreement with Payroc is terminated and we are not able to enter into replacement processing relationship with another party, our ability to provide payment processing services to our affected software customers may be adversely impacted
10. 10Consolidation in the banking and financial services industry could adversely affect our business, results of operations and financial condition
11. 11We have faced, and may in the future face, chargeback liabilities if our customers refuse or cannot reimburse chargebacks resolved in favor of their customers, and we may not accurately anticipate these liabilities
12. 12On occasion, we experience increases in interchange and sponsorship fees; if we cannot pass these increases along to our customers, our profit margins will be reduced
13. 13Third-party hardware that we sell to our customers is generally procured from a limited number of suppliers. Thus, we are at risk of shortages, price increases, changes, delays or discontinuations of hardware, which could disrupt our business
14. 14We are subject to economic and political risk, the business cycles of our customers and changes in the overall level of consumer and commercial spending, which could negatively impact our business, financial condition and results of operations
15. 15Rapidly evolving domestic and global conditions are beyond our control and could materially adversely affect our business, operations, and results of operations
16. 16A decline in the use of cards and ACH as payment mechanisms for consumers and businesses or adverse developments in the electronic payment industry in general could adversely affect our business, financial condition and operating results
17. 17We may not be able to successfully execute our strategy of growth through acquisitions
18. 18The occurrence of any of these factors could adversely affect our growth strategy
19. 19There are certain risks associated with the sale of our Merchant Services Business which was completed in September 2024
20. 20Integrations that do not occur rapidly and smoothly could divert the attention of management away from other strategic matters, including, but not limited to, acquisitions or product development
21. 21We may not be able to successfully manage our intellectual property
22. 22We may be subject to infringement claims
23. 23If we lose key personnel, or if their reputations are damaged, our business, financial condition and results of operations may be adversely affected, and proprietary information of our company could be shared with our competitors
24. 24In a dynamic industry like ours, our success and growth depend on our ability to attract, recruit, retain and develop qualified employees
25. 25Our operating results and operating metrics are subject to seasonality and volatility, which could result in fluctuations in our quarterly revenues and operating results or in perceptions of our business prospects
26. 26We are the subject of various claims and legal proceedings and may become the subject of claims, litigation or investigations which could have a material adverse effect on our business, financial condition or results of operations
27. 27We are exposed to fluctuations in foreign currency exchange rates, which could negatively affect our financial condition and operating results
28. 28Our international operations subject us to additional risks which could have an adverse effect on our business, operating results, and financial condition

Risks Related to Regulation

1. 29We are subject to extensive laws and government regulation, the costs of compliance with which can be significant, and our actual or perceived failure to comply with such obligations may subject us to penalties and otherwise have an unfavorable impact on our business, financial condition and results of operations
2. 30Compliance with the Dodd-Frank Act and other federal and state regulations applicable to our business may increase our compliance costs, limit our revenues and otherwise negatively affect our business
3. 31compliance with emerging sector-specific regulations may negatively impact our business, financial condition and results of operations by requiring us to alter our fee structure or payment processing practices
4. 32Rules implementing the Dodd-Frank Act also contain certain prohibitions on payment network exclusivity and merchant routing restrictions. These restrictions could negatively affect the number of debit transactions processed, and prices charged per transaction, which would negatively affect our business
5. 33supplemented, or for other reasons beyond our control, customers may postpone or cancel their decisions to purchase or implement such solutions
6. 34A material portion of our revenue is derived from the healthcare industry, which is highly regulated and subject to changing political, legislative, regulatory and other influences
7. 35We may be a party to regulatory and other proceedings that could result in unexpected adverse outcomes
8. 36We must comply with laws and regulations prohibiting unfair or deceptive acts or practices, and any failure to do so could materially and adversely affect our business
9. 37We could be adversely affected by violations of the FCPA and similar anti-bribery laws of other countries in which we provide services or have employees
10. 38Numerous other federal laws affect our business, and any failure to comply with those laws could harm our business
11. 39Changes in tax laws or their interpretations, or becoming subject to additional U.S., state or local taxes that cannot be passed through to our customers, could negatively affect our business, financial condition and results of operations
12. 40We no longer qualify as an “emerging growth company”, and as a result, we have been subject to increased disclosure and compliance requirements
13. 41The heightened focus on environmental, social and governance (“ESG”) practices could increase our costs, harm our reputation and adversely impact our financial results

Risks Related to Our Indebtedness

1. 42Our indebtedness could adversely affect our financial health and competitive position
2. 43We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs
3. 44We may not have the 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 Our Organizational Structure and Our Company

1. 45We are a holding company with no operations of our own, and our principal asset is our controlling membership interest in i3 Verticals, LLC. Accordingly, we depend on distributions from i3 Verticals, LLC to pay our taxes and other expenses
2. 46The interests of the other Continuing Equity Owners in our business may conflict with the interests of holders of shares of our Class A common stock
3. 47We may not be able to realize all or a portion of the tax benefits that are expected to result from future redemptions or exchanges of common units by holders
4. 48In certain cases, payments under the Tax Receivable Agreement to the Continuing Equity Owners may be accelerated or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement
5. 49In certain circumstances, i3 Verticals, LLC will be required to make distributions to us and the Continuing Equity Owners, and the distributions that i3 Verticals, LLC will be required to make may be substantial
6. 50Our failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a significant and adverse effect on our business, financial condition, results of operations and reputation
7. 51Certain provisions of Delaware law and anti-takeover provisions in our organizational documents could delay or prevent a change of control
8. 52We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our Class A common stock, which could depress the price of our Class A common stock

Risks Related to Ownership of Our Class A Common Stock

1. 53The Continuing Equity Owners own common units in i3 Verticals, LLC, and the Continuing Equity Owners have the right to redeem their common units in i3 Verticals, LLC pursuant to the terms of the limited liability company agreement of i3 Verticals, LLC (the "LLC Agreement") for shares of Class A common stock or cash
2. 54stock if the preferred stock votes together with the common stock as a single class, or by giving the holders of any such preferred stock the right to block an action on which they have a separate class vote, even if the action were approved by the holders of our shares of our Class A common stock
3. 55Sales of shares of our Class A common stock in connection with the Registration Rights Agreement, or the prospect of any such sales, could materially affect the market price of our Class A common stock and could impair our ability to raise capital through future sales of equity securities