i3 Verticals, Inc.

What they do

i3 Verticals provides mission-critical enterprise software solutions to public sector entities, including courts, public safety, public administration, utilities, transportation, and schools. The company operates as a single reportable segment after divesting its healthcare RCM business in May 2025. Revenue is generated from software and related services, with approximately 76% of continuing revenue recurring, plus volume and transaction-based fees from integrated payment processing.

Revenue drivers

• Public Sector Software Subscriptions — Core recurring software and cloud-based solutions for government functions; approximately 76% of continuing revenue is recurring, with ARR of $174.1 million as of June 30, 2026.
• Payment Processing Fees — Volume and transaction-based fees from integrated payment services within software, though the merchant services business was sold in 2024; remaining payment volumes are tied to software integrations.
• Legacy Healthcare RCM (Discontinued) — Historical healthcare revenue cycle management business sold in May 2025 for $96.3 million; contributed $22.5 million revenue in FY2025 before reclassification to discontinued operations.

Recent performance

For Q3 2026 (quarter ended June 30, 2026), revenue from continuing operations was $53.1 million, up 2.2% year-over-year, and net income from continuing operations was $5.9 million versus a $1.0 million loss in the prior-year quarter. Adjusted EBITDA from continuing operations rose 4.6% to $13.3 million. For the nine months ended June 30, 2026, revenue increased 3.2% to $163.3 million, and adjusted EBITDA margin was 26.7%, down from 27.3% a year earlier. Annualized recurring revenue (ARR) grew 8.3% year-over-year to $174.1 million.

Strategy

After selling its merchant services and healthcare RCM businesses, management is focused on organic growth in the Public Sector, targeting technologically underserved markets with fragmented competition and recurring revenue. The company emphasizes expanding recurring revenue streams, strategic market selection, and continued product investment, including its proprietary payment facilitator platform integrated into software. Priorities include increasing market share in existing public sector verticals and pursuing acquisitions that fit the new pure-play public sector focus.

Risks

• Cybersecurity and Data Breach — Handling sensitive government and cardholder data (e.g., social security numbers, driver's license numbers) could expose the company to liability, fines, and reputational damage if systems are compromised.
• Dependence on Government Budgets — State and local government spending is subject to budgetary pressures, which could lead to contract cancellations or reduced spending, impacting revenue.
• Post-Divestiture Execution — Success depends on executing strategy and achieving goals after selling the merchant services and healthcare RCM businesses; integration risks remain for any future acquisitions.
• Economic and Geopolitical Uncertainty — Inflation, elevated interest rates, tariffs, and trade disputes (including tensions affecting Canadian operations) could adversely affect financial results.

Outlook

Management cites broad economic uncertainty from inflation, interest rates, and geopolitical tensions, including potential Canadian contract cancellations. The company claims compliance with its credit facility covenants as of September 30, 2025, with an interest coverage ratio of 96.8x and total leverage ratio of 0.0x. The outlook is not quantified, but management emphasizes organic growth in public sector recurring revenue.