Business Context and Reporting Period
Company: i3 Verticals, Inc. (IIIV)
Filing Type: Form 10-K (Annual Report)
Period Ended: September 30, 2025
Business Overview: i3 Verticals provides mission-critical enterprise software solutions to public sector entities (courts, utilities, transportation, schools, and public administration). Following the sale of its Merchant Services Business in September 2024 and its Healthcare RCM Business in May 2025, the Company now operates as a single segment focused on public sector software. Approximately 76% of revenue from continuing operations is recurring.
Key Financial Metrics
| Metric | Year Ended Sept 30, 2025 | Year Ended Sept 30, 2024 |
|---|---|---|
| Revenue (Continuing Ops) | $213.2 million | $191.2 million |
| Net Income (Continuing Ops) | $5.6 million | ($16.0 million) loss |
| Net Income (Total, incl. Discontinued) | $26.5 million | $175.1 million |
| Net Income Attributable to i3 Verticals, Inc. | $17.9 million | $113.3 million |
| Operating Income (Continuing Ops) | $3.8 million | $4.4 million |
| Annualized Recurring Revenue (ARR) | $165.3 million | $151.4 million |
| Cash and Cash Equivalents | $66.7 million | $86.5 million |
| Debt Outstanding | $0 | $26.2 million (Exchangeable Notes) |
| Available Credit Facility | $400.0 million | $450.0 million |
Material Changes vs. Prior Period
- Divestitures: The Company sold its Healthcare RCM Business for $96.3 million in May 2025 and its Merchant Services Business for $439.5 million in September 2024. Results from these businesses are reported as discontinued operations. The 2024 net income was significantly boosted by a $205.6 million gain on the Merchant Services sale, whereas 2025 included a $26.0 million gain on the Healthcare RCM sale.
- Revenue Growth: Continuing operations revenue increased 11.5% to $213.2 million, driven by a $11.4 million increase in recurring revenues and $5.9 million from acquisitions.
- Profitability: Continuing operations shifted from a net loss of $16.0 million in 2024 to net income of $5.6 million in 2025. This improvement was aided by a 92.1% decrease in interest expense (from $29.3 million to $2.3 million) following the repayment of Exchangeable Notes in February 2025.
- Debt Reduction: The Company repaid all outstanding Exchangeable Notes in February 2025. As of September 30, 2025, there were no borrowings outstanding under the $400 million Senior Secured Credit Facility.
- Share Repurchases: The Company repurchased 1.57 million shares of Class A common stock for $38.0 million under a program that terminated in August 2025. A new $50 million repurchase program was authorized in August 2025.
Guidance, Outlook, Risks, and Unusual Items
- Outlook: Management expects cash flow from operations, current cash, and available borrowing capacity to be sufficient to fund operations for at least the next twelve months. The Company continues to pursue a disciplined acquisition strategy to drive growth.
- Unusual Items:
- Discontinued Operations: Significant gains from asset sales in both 2024 and 2025 distort year-over-year net income comparisons. Core continuing operations remain the primary focus.
- Expense Reclassification: In Q1 2025, the Company reclassified certain personnel and hosting costs from SG&A to "Other costs of services" to better align with its software-focused business model post-divestiture.
- Key Risks:
- Cybersecurity: Risks of data breaches, ransomware, and liability from third-party vendor failures.
- Regulatory: Exposure to evolving laws regarding data privacy (CCPA, state laws), payment network rules (Visa/Mastercard), and potential CFPB scrutiny on payment processing fees (specifically regarding school lunch services).
- Legal Proceedings: Pending class action litigation regarding PaySchools fees and a lawsuit regarding cybersecurity practices in Louisiana.
- Concentration: Reliance on a limited number of hardware suppliers and third-party payment processors.
Investor Verification Checklist
- Continuing Operations Profitability: Verify the sustainability of the $5.6 million net income from continuing operations excluding one-time gains from discontinued operations.
- Recurring Revenue Quality: Confirm the 11.5% revenue growth is driven by organic recurring revenue expansion rather than one-time transaction fees.
- Legal Exposure: Monitor the status of the PaySchools class action lawsuit and the Louisiana cybersecurity litigation for potential financial impact.
- Debt Covenants: Review compliance with the 2023 Senior Secured Credit Facility covenants (Interest Coverage Ratio and Total Leverage Ratio), though the Company currently reports strong compliance (96.8x and 0.0x respectively).
- Acquisition Integration: Assess the performance of recent acquisitions (Utility Billing Software, Eduloka) and the realization of contingent consideration liabilities ($3.6 million fair value).