Press release·08/07/2026 23:51:09

Executive Overview

i3 Verticals is a leading provider of mission-critical enterprise software solutions to public sector customers. The company’s comprehensive cloud-native solutions address a broad range of government functions, including courts, transportation, utilities, revenue, and schools. i3 Verticals’ mission is to enable state and local governments and related agencies to serve their constituents effectively and efficiently. With thousands of software installations across all 50 states and Canada, i3 Verticals is a leader in the public sector vertical.

Economic Trends

The company faces various economic challenges, including inflationary pressures, elevated interest rates, geopolitical tensions, and budgetary and political pressures to reduce government spending. These macroeconomic and geopolitical conditions could potentially impact the company’s financial results, though the full extent of the effects is difficult to predict.

Liquidity

As of June 30, 2026, i3 Verticals had $2.6 million in cash and cash equivalents and $285.7 million in available borrowing capacity under its 2023 Senior Secured Credit Facility, subject to financial covenants. The company was in compliance with these covenants as of the reporting date.

Divestitures

i3 Verticals has completed the sale of its healthcare revenue cycle management business and its merchant services business in recent years. The results of these divested operations have been reclassified as discontinued operations in the company’s financial statements.

Acquisitions

Acquisitions are a core component of i3 Verticals’ growth strategy. During the nine months ended June 30, 2026, the company completed the acquisition of a business that provides driver and motor vehicle insurance verification solutions in the transportation market. In the prior year period, the company also acquired businesses to expand its public sector utility billing software offerings and customer footprint.

Revenue and Expenses

i3 Verticals generates revenue from software and related services, including subscriptions, recurring services, licenses, and installation and implementation services. The company also earns volume-based payment processing fees. Expenses include costs of services, selling and administrative expenses, depreciation and amortization, and interest expense.

Key Performance Indicators

The company evaluates its performance using two key metrics:

1. Annualized Recurring Revenue (ARR): ARR is the annualized revenue derived from recurring sources, such as software-as-a-service, transaction-based software revenue, software maintenance, and other recurring revenue streams. ARR provides visibility into the company’s sustainable revenue base.

2. Adjusted EBITDA Margin: Adjusted EBITDA is earnings adjusted to exclude interest, taxes, depreciation, amortization, stock-based compensation, and other non-recurring items. Adjusted EBITDA margin is a measure of the company’s operating performance.

Results of Operations

For the three months ended June 30, 2026, i3 Verticals reported revenue of $53.1 million, an increase of 2.2% from the prior-year period. This was driven by an increase in recurring revenue, partially offset by a decrease in non-recurring revenue.

Costs of services decreased 2.5% to $16.3 million, primarily due to a decrease in people costs, partially offset by an increase in software costs. Selling, general, and administrative expenses decreased 12.6% to $28.9 million, mainly due to a decrease in M&A-related expenses, partially offset by increases in people costs and other expenses.

Depreciation and amortization increased 5.2% to $7.3 million, reflecting higher amortization of acquired intangible assets and capitalized software. The change in fair value of contingent consideration resulted in a charge of $1.4 million, compared to a benefit of $26 thousand in the prior-year period.

Interest expense increased 125.8% to $1.8 million, reflecting a higher average outstanding debt balance. Other income was $9.9 million, primarily due to an unrealized gain on an investment.

The provision for income taxes increased to $1.3 million, compared to a benefit of $22 thousand in the prior-year period. The company’s effective tax rate was 18%.

For the nine months ended June 30, 2026, i3 Verticals reported revenue of $163.3 million, an increase of 3.2% from the prior-year period. Costs of services increased 4.4% to $51.0 million, while selling, general, and administrative expenses decreased 1.0% to $84.9 million.

Depreciation and amortization increased 5.1% to $21.9 million, and the change in fair value of contingent consideration resulted in a charge of $0.9 million, compared to a charge of $0.4 million in the prior-year period.

Interest expense increased 73.0% to $3.3 million, and other income was $10.5 million, primarily due to an unrealized gain on an investment. The provision for income taxes decreased to $2.5 million, compared to $3.3 million in the prior-year period.

Liquidity and Capital Resources

i3 Verticals has historically financed its operations and working capital through net cash from operating activities. As of June 30, 2026, the company had $2.6 million in cash and cash equivalents and $285.7 million in available borrowing capacity under its 2023 Senior Secured Credit Facility, subject to financial covenants.

The company’s primary cash needs include funding working capital, making capital expenditures, investing in technology infrastructure, funding acquisitions and related contingent consideration, making scheduled debt payments, paying tax distributions to members, and repurchasing shares of Class A common stock.

i3 Verticals expects its cash flow from operations, current cash and cash equivalents, and available borrowing capacity to be sufficient to fund its cash needs for at least the next twelve months and the foreseeable future. The company plans to fund future acquisitions through a combination of cash, net cash from operations, borrowings, and the issuance of equity and debt securities.

The company’s 2023 Senior Secured Credit Facility requires it to maintain certain financial ratios, and as of June 30, 2026, i3 Verticals was in compliance with these covenants.

Share Repurchase Programs

i3 Verticals has implemented several share repurchase programs in recent years, authorizing the company to repurchase up to $100 million, $60 million, and $50 million of its Class A common stock. During the nine months ended June 30, 2026, the company repurchased a total of 6,056,132 shares of Class A common stock at an average price of $22.57 per share, for an aggregate repurchase amount of $137.3 million.

Tax Receivable Agreement

i3 Verticals is a party to a Tax Receivable Agreement with i3 Verticals, LLC and the Continuing Equity Owners. As of June 30, 2026, the total amount due under the Tax Receivable Agreement was $32.4 million, and future payments are expected to range from $0 to $5.4 million per year over the next 22 years.

Critical Accounting Estimates

The company’s critical accounting estimates include revenue recognition, goodwill and intangible assets, contingent consideration, and equity-based compensation. There have been no significant changes to these critical accounting estimates as of the reporting date.

Market Risk

i3 Verticals is exposed to interest rate risk through its 2023 Senior Secured Credit Facility, which had $114.3 million in borrowings outstanding as of June 30, 2026. A 1.0% increase or decrease in the interest rate would have a $1.1 million impact on the company’s results.

The company also faces some foreign currency exchange rate risk due to its international operations, but this risk is not currently material to its consolidated results.

Conclusion

i3 Verticals continues to execute on its growth strategy, leveraging its leadership position in the public sector software market. The company has navigated various economic challenges and completed strategic divestitures and acquisitions to strengthen its business. With a strong liquidity position, disciplined capital allocation, and focus on recurring revenue, i3 Verticals appears well-positioned to continue delivering value for its shareholders.