Business Context and Reporting Period
Company: i3 Verticals, Inc. (IIIV)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter ended June 30, 2025 (Q3 Fiscal 2025)
Business Overview: Following the sale of its Healthcare RCM Business in May 2025 and its Merchant Services Business in September 2024, the Company now operates as a single segment focused on providing mission-critical enterprise software solutions to public sector customers (courts, transportation, utilities, revenue, and schools). The Company is structured as an "Up-C" entity, with i3 Verticals, Inc. as the sole managing member of i3 Verticals, LLC.
Key Financial Metrics
| Metric (in thousands) | Q3 2025 | Q3 2024 | 9 Months 2025 | 9 Months 2024 |
|---|---|---|---|---|
| Revenue (Continuing Ops) | $51,901 | $46,183 | $158,257 | $139,909 |
| Operating Income (Loss) | $(4,813) | $(1,310) | $2,301 | $945 |
| Net Income (Continuing Ops) | $(996) | $(14,407) | $4,117 | $(22,365) |
| Net Income (Discontinued Ops) | $19,421 | $6,109 | $18,185 | $18,951 |
| Total Net Income | $18,425 | $(8,298) | $22,302 | $(3,414) |
| Net Income Attributable to i3 Verticals, Inc. | $12,882 | $(7,545) | $14,784 | $(4,569) |
| Cash and Cash Equivalents | $55,544 | $86,525 | As of June 30, 2025 | |
| Debt Outstanding | $0 | $26,223 | As of June 30, 2025 | |
| Available Credit Facility | $400,000 | Unutilized Revolver |
Material Changes vs. Prior Period
- Divestitures and Discontinued Operations: The Company completed the sale of its Healthcare RCM Business to Infinx, Inc. for $96.4 million in cash on May 5, 2025. Results for this business and the previously sold Merchant Services Business are now reported as discontinued operations. This resulted in a significant gain on sale of $26.0 million recognized in Q3 2025.
- Revenue Growth: Continuing operations revenue increased 12.4% year-over-year in Q3 2025 ($51.9M vs $46.2M) and 13.1% for the nine-month period ($158.3M vs $139.9M), driven by recurring revenue growth and acquisitions.
- Debt Reduction: The Company fully repaid its $26.2 million Exchangeable Senior Notes at maturity in February 2025. As of June 30, 2025, there is no outstanding debt, and the Company has $400 million available under its Senior Secured Credit Facility.
- Operating Expenses: Selling, general, and administrative (SG&A) expenses increased 26.8% in Q3 2025, primarily due to M&A-related expenses reimbursed through transition services agreements with buyers of the divested businesses.
- Share Repurchases: The Company repurchased 1.57 million shares of Class A common stock for approximately $38.0 million during the nine months ended June 30, 2025.
Guidance, Outlook, and Risks
- Outlook: Management focuses on Annualized Recurring Revenue (ARR), which grew 12% to $160.8 million for the quarter ended June 30, 2025. The Company expects cash flow from operations and its credit facility to fund future needs.
- Share Repurchase Program: A new $50 million share repurchase program was approved on August 7, 2025, replacing the prior program that terminated on August 8, 2025.
- Tax Receivable Agreement (TRA): The Company has a liability of $35.1 million under its TRA, representing 85% of tax benefits realized from unit exchanges. Payments are expected over the next 26 years.
- Risks:
- Geopolitical and Economic: Risks include trade tensions (specifically with Canada), potential government spending cuts affecting public sector customers, and geopolitical instability (India/Pakistan tensions impacting operations).
- Legal Proceedings: Pending class action litigation regarding PaySchools fees and a lawsuit regarding cybersecurity practices in Louisiana (S&S Litigation). Management does not currently believe these will have a material adverse effect.
- Concentration: Increased reliance on the Public Sector segment following the divestiture of Healthcare and Merchant Services businesses.
Investor Verification Checklist
- Discontinued Operations Impact: Verify the sustainability of earnings excluding the one-time $26.0 million gain from the Healthcare RCM sale and the impact of the transition services agreements on future revenue and expenses.
- Continuing Operations Profitability: Analyze the operating loss of $4.8 million in Q3 2025 for continuing operations and the trajectory toward profitability without the discontinued segments.
- Cash Flow Quality: Review the $8.3 million net cash used in operating activities for the nine months ended June 30, 2025, driven largely by $35.1 million in tax payments related to the prior year's Merchant Services sale.
- Debt Covenants: Confirm ongoing compliance with the 2023 Senior Secured Credit Facility covenants (Interest Coverage Ratio: 87.1x; Leverage Ratio: 0.0x).
- Legal Contingencies: Monitor the status of the PaySchools and S&S litigation for potential accruals or settlements.