Business Context and Reporting Period
Company: i3 Verticals, Inc. (IIIV)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three months ended December 31, 2025
Business Overview: i3 Verticals provides mission-critical enterprise software solutions to public sector customers (courts, transportation, utilities, schools). Following the divestiture of its Healthcare RCM and Merchant Services businesses, the Company now operates as a single reportable segment focused on public sector software and proprietary payment facilitation.
Key Financial Metrics
| Metric (in thousands) | Q1 2026 (Ended Dec 31, 2025) | Q1 2025 (Ended Dec 31, 2024) |
|---|---|---|
| Revenue | $52,671 | $52,221 |
| Operating Income | $1,609 | $2,053 |
| Net Income (Continuing Ops) | $1,085 | $2,790 |
| Net Income Attributable to i3 Verticals, Inc. | $484 | $2,056 |
| Diluted EPS (Continuing Ops) | $0.02 | $0.08 |
| Operating Cash Flow | $14,123 | $11,495 |
| Cash and Cash Equivalents (Ending) | $37,523 | $85,552 |
| Total Debt Outstanding | $0 | $0 |
| Available Credit Facility | $400,000 | $400,000 |
Margins: Operating margin for continuing operations was approximately 3.1% ($1.6M / $52.7M). The effective tax rate was 39%.
Material Changes vs. Prior Period
- Revenue: Increased 0.9% ($0.5M) driven by a $3.3M increase in recurring revenues, partially offset by a $2.9M decrease in non-recurring revenues.
- Profitability: Net income attributable to i3 Verticals, Inc. decreased 76.5% ($1.6M) primarily due to lower net income from continuing operations and a loss from discontinued operations.
- Operating Expenses: Other costs of services increased 12.9% ($2.0M) due to higher software costs. SG&A increased 1.9% ($0.5M) driven by personnel costs.
- Contingent Consideration: The Company recorded a benefit of $0.4M in Q1 2026 compared to a charge of $1.3M in Q1 2025, reflecting adjustments to earnout valuations.
- Cash Position: Cash and cash equivalents decreased by approximately $28.2M, primarily due to significant share repurchases ($38.3M) and tax withholdings on equity awards.
Guidance, Outlook, and Risks
Management Commentary & Outlook:
- ARR Growth: Annualized Recurring Revenue (ARR) grew 8.4% to $169.6M.
- Acquisition Strategy: The Company completed a $60M acquisition of a transportation market business effective January 1, 2026, with up to $20M in contingent consideration.
- Share Repurchases: The August 2025 repurchase program ($50M authorization) was fully expended. A new $60M program was authorized on February 5, 2026.
Risks and Contingencies:
- Litigation: Pending class action lawsuits regarding PaySchools fees (New York) and cybersecurity/data breach claims against S&S (Louisiana). Management does not currently believe these will have a material adverse effect, but outcomes are uncertain.
- Tax Receivable Agreement (TRA): A liability of $34.9M exists for future payments to Continuing Equity Owners representing 85% of tax benefits realized from unit exchanges.
- Discontinued Operations: Results from Healthcare RCM and Merchant Services are now classified as discontinued operations, impacting year-over-year comparability.
Investor Verification Checklist
- Discontinued Operations Impact: Verify the extent to which Q1 2024 results included revenue/profit from the Healthcare RCM business (sold May 2025) and Merchant Services (sold Sept 2024) to ensure accurate trend analysis.
- Share Repurchase Execution: Confirm the timing and volume of the $38.3M in share repurchases executed in Q1 2026 and the status of the new $60M program.
- Acquisition Integration: Monitor the integration and financial contribution of the $60M transportation market acquisition closed in January 2026.
- Litigation Exposure: Review updates on the PaySchools and S&S litigation to assess potential future accruals or cash outflows.
- TRA Liability: Track the $34.9M Tax Receivable Agreement liability and potential future cash outflows as units are exchanged.