Core Insights - i3 Verticals, Inc. is a technology and integrated payments company serving small and medium-sized businesses across various sectors, including education, healthcare, and public sector [1] - The company faces competition in the payment processing and technology sectors [1] Financial Performance - i3 Verticals has a Return on Invested Capital (ROIC) of 0.26%, indicating minimal efficiency in generating returns from investments [2][6] - The company's Weighted Average Cost of Capital (WACC) is 8.55%, suggesting that it pays a high rate for its capital [2][6] - The ROIC to WACC ratio of 0.03 indicates that i3 Verticals struggles to generate returns that exceed its cost of capital [2] Peer Comparison - International Money Express, Inc. (IMXI) and OneSpan Inc. (OSPN) have a ROIC to WACC ratio of 2.06, demonstrating superior capital utilization compared to i3 Verticals [3][6] - nLIGHT, Inc. (LASR) and Repay Holdings Corporation (RPAY) exhibit negative ROIC to WACC ratios of -1.25 and -1.34, respectively, indicating challenges in covering their cost of capital [4][6] - PC Connection, Inc. (CNXN) has a ROIC to WACC ratio of 1.06, suggesting a moderate level of efficiency in generating returns above its cost of capital [5]

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Market Focus and Strategy - The company serves technologically underserved markets with a focus on large and growing total addressable markets, providing ample opportunity for transaction-based revenues[29] - The company has a cloud-first strategy, with the majority of its collocated assets already migrated to the cloud, enhancing efficiency and security[37] - The company has developed a proprietary payment facilitation platform that centralizes payment solutions, improving scale and margins by lowering expenses[39] - The company is committed to incorporating AI capabilities into its platforms to enhance automation and customer experience[35] - The company has a flexible approach to digital delivery, prioritizing rapid development and continuous improvement to meet evolving customer needs[34] Operations and Workforce - The company has approximately 1,202 employees across 49 states and two countries as of November 20, 2025, with no employees represented by unions[53] - The company’s operations team is structured to meet individual customer needs, with a focus on development, quality control, and support for enterprise software solutions[46] - The company has experienced seasonal fluctuations in revenues, particularly in the education sector, with peak transactional revenue in August, September, October, January, and February[55] Regulatory Compliance - The company operates in a complex regulatory environment, subject to various federal, state, and local laws impacting its electronic payment services[56] - The company is subject to extensive federal and state laws regarding the privacy and security of health information, which may increase operational costs and limit activities[64] - Compliance with the Health Insurance Portability and Accountability Act (HIPAA) is required, establishing privacy and security standards for health information[65] - The company is subject to U.S. federal anti-money laundering laws, including the Bank Secrecy Act, which mandates the development of risk-based anti-money laundering programs[67] - The company must comply with various payment network rules and standards, including the PCI DSS, which govern transaction processing and data security[74] - The company has invested significant resources to ensure compliance with the EMV mandate for chip-enabled cards, which was required by payment networks by October 2015[75] - The company is registered with payment networks like Visa and Mastercard through a sponsor bank, which has substantial discretion over business practices[76] - The company is subject to money transmitter regulations across various U.S. states, which require licensing and compliance with anti-money laundering laws[78] - The company must adhere to unclaimed property laws, requiring remittance of unclaimed property to government authorities after a specified period[79] - The regulatory framework governing the company's business is continuously changing, impacting operational and compliance strategies[80] Financial Position and Capital Structure - As of September 30, 2025, the company had no borrowings outstanding under the 2023 Senior Secured Credit Facility[193] - The company expects cash flow from operations, current cash and cash equivalents, and available borrowing capacity to be sufficient to fund operations and service debt obligations for at least the next twelve months[194] - The 2023 Senior Secured Credit Facility contains restrictive covenants that limit the company's ability to incur additional debt and engage in capital-raising activities[196] - The Continuing Equity Owners hold approximately 27% of the combined voting power of the company's common stock as of November 20, 2025[203] - The company may need to borrow funds to meet tax liabilities or operational needs if i3 Verticals, LLC is restricted from making distributions[202] - The 2025 LLC Tax Distribution resulted in the company holding cash in excess of its tax liabilities and obligations under the Tax Receivable Agreement[208] - The company's Board of Directors will determine the appropriate uses for excess cash following future tax distributions, which may include recapitalization transactions or cash dividends[209] Shareholder and Stockholder Matters - The company is subject to Section 404 of the Sarbanes-Oxley Act, requiring an annual review of internal control over financial reporting[210] - As of September 30, 2025, there are 126,016,875 shares of Class A common stock authorized but unissued, including 8,381,681 shares issuable upon redemption of common units[220] - The company may issue shares of preferred stock in the future, which could adversely affect the market price of Class A common stock[217] - Future issuances of Class A common stock or preferred stock could dilute existing stockholders and significantly impact the market price[222] - The company has provisions that may delay or prevent a change of control, potentially affecting stockholder interests[216] - The existence of anti-takeover provisions may discourage future takeover attempts and affect the market price of Class A common stock[216] - The company has opted out of Section 203 of the Delaware General Corporation Law, but similar provisions may still restrict business combinations with interested stockholders[214] - Sales of Class A common stock in connection with the Registration Rights Agreement could materially affect the market price and impair capital raising efforts[225] - The potential issuance of preferred stock with favorable economic terms could make Class A common stock less attractive to investors[224] - The company may incur costs to improve internal control systems, which could negatively affect financial condition and cash flows[211] - The company cannot predict the size of future issuances of Class A common stock, which may lead to a decline in market price[221]

Core Viewpoint - i3 Verticals, Inc. (IIIV) has faced challenges in stock performance due to a series of divestitures aimed at focusing on the public sector [1] Group 1: Company Strategy - The company is undergoing divestitures to narrow its end-market focus towards the public sector [1]

Core Insights - i3 Verticals' shares fell over 10% following a conservative growth forecast for the upcoming year [1] - The stock price had previously declined as much as 24% earlier in the day [1] Financial Performance - Revenue from continuing operations increased by 7% year over year to $54.9 million in the fiscal fourth quarter ending September 30 [3] - A significant contributor to revenue growth was a 23% increase in software-as-a-service (SaaS) revenue [4] - EBITDA from continuing operations decreased by 1.5% to $14.4 million due to a rise in lower-margin professional services sales [5] Growth Outlook - For fiscal 2026, management projects revenue between $217 million and $232 million, and adjusted EBITDA between $58.5 million and $65 million, indicating growth rates of 2%-9% and 2%-13% respectively [6] - Certain projects in utilities and transportation markets are expected to recognize revenue more slowly than previously anticipated, but management believes growth will eventually accelerate [6][7] Strategic Shift - The company is focusing on transitioning to a primarily SaaS business model, which is expected to generate recurring revenue [4][9]

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Financial Data and Key Metrics Changes - Revenue for Q4 2025 increased by 7% to $54.9 million from $51.3 million in Q4 2024, with organic growth of 4.5% and $1.3 million from acquisitions [8] - Annual recurring revenue (ARR) grew over 9% in Q4 2025, outpacing overall revenue growth [5] - Adjusted EBITDA for Q4 2025 slightly declined to $14.4 million from $14.6 million in Q4 2024, with adjusted EBITDA as a percentage of revenues at 26.2% for Q4 2025 compared to 28.5% for Q4 2024 [9][10] - Adjusted diluted earnings per share from continuing operations was $0.27 for Q4 2025 and $1.05 for the fiscal year [10] Business Line Data and Key Metrics Changes - Recurring revenues increased by 9% to $41.3 million in Q4 2025, accounting for 75% of total revenues [8] - SaaS revenues grew by 25%, offsetting an 8% decline in maintenance revenues [8] - Professional services revenue increased by $1.8 million, partially offsetting the decline in software and license sales [8] Market Data and Key Metrics Changes - Justice is the largest market, representing approximately 25% of revenues, with utilities, transportation, education, and public administration contributing roughly equally [12] - The company expects revenue distribution for FY 2026 to be approximately 23% in Q1, 25.5% in Q2, 24.5% in Q3, and 27% in Q4 [13] Company Strategy and Development Direction - The company has divested its merchant services and healthcare revenue cycle management businesses, focusing on providing software solutions for the public sector [4][7] - Investments in justice and utility markets are expected to accelerate in 2026, with a focus on long-term recurring revenue growth [5] - The company aims to enhance its public sector vertical through strategic acquisitions and internal development [14] Management's Comments on Operating Environment and Future Outlook - Management expects recurring revenues to grow at a rate similar to FY 2025, in the range of 8%-10%, but anticipates a decline in non-recurring professional services [11] - The long-term expectation for organic revenue growth remains in the high single digits [11] - The company is experiencing increased demand for technology-forward platform solutions across the public sector [16][17] Other Important Information - The company has $67 million in cash and no debt, with $400 million of borrowing capacity under a revolving credit facility [10] - The adjusted EBITDA improvement for the year was driven mainly by lower corporate expenses following the divestitures [10] Q&A Session Summary Question: Clarification on 2026 organic growth outlook - Management indicated that they are focusing on recurring revenue and expect professional services to decline in 2026 due to timing and cadence of projects [21][22] Question: Details on dollar retention and pricing - The company has been conservative on price increases historically but expects to achieve a consistent range of 3%-5% price increases going forward [24][25] Question: Justice tech investment and expectations for 2026 - The investment primarily consists of personnel to accelerate development and implementation, with costs expected to continue into the next fiscal year [26][27] Question: Thoughts on buyback versus M&A - The company has refreshed a $50 million buyback authorization and is focused on being opportunistic, while also indicating that meaningful M&A activity is expected in 2026 [29][31]

Financial Data and Key Metrics Changes - Revenue for Q4 2025 increased by 7% to $54.9 million from $51.3 million in Q4 2024, with organic growth of 4.5% and $1.3 million from acquisitions [9] - Annual recurring revenue (ARR) grew over 9% in Q4, outpacing overall revenue growth [5] - Adjusted EBITDA for Q4 2025 slightly declined to $14.4 million from $14.6 million in Q4 2024, with adjusted EBITDA as a percentage of revenues at 26.2% for Q4 2025 compared to 28.5% for Q4 2024 [10][11] - Adjusted diluted earnings per share from continuing operations was $0.27 for Q4 2025 and $1.05 for the fiscal year [11] Business Line Data and Key Metrics Changes - Recurring revenues increased by 9% to $41.3 million in Q4 2025 compared to $37.8 million in Q4 2024, with 75% of revenues coming from recurring sources [9] - SaaS revenues grew by 25%, offsetting an 8% decline in maintenance revenues [9] - Professional services revenue increased by $1.8 million, partially offsetting the decline in software and license sales [9] Market Data and Key Metrics Changes - Justice is the largest market, representing approximately 25% of revenues, with utilities, transportation, education, and public administration being roughly equally weighted [13] - The company expects revenue distribution for FY 2026 to be approximately Q1: 23%, Q2: 25.5%, Q3: 24.5%, Q4: 27% [14] Company Strategy and Development Direction - The company has divested its merchant services and healthcare revenue cycle management businesses, focusing on providing software solutions for the public sector [4] - Investments in new products and markets are ongoing, particularly in justice and utility sectors, with expectations for accelerated growth in 2026 [5] - The company aims to enhance its public sector vertical through strategic acquisitions and internal development [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in revenue opportunities tied to investments, expecting durable recurring revenue growth over the long term [5] - Guidance for FY 2026 includes revenues of $217 million to $232 million and adjusted EBITDA of $58.5 million to $65 million, with recurring revenues expected to grow at 8%-10% [12] - The company anticipates a decline in non-recurring professional services in FY 2026, but expects a rebound in FY 2027 and beyond [12] Other Important Information - The company has $67 million in cash and no debt, with $400 million of borrowing capacity under a revolving credit facility [11] - The net dollar retention for fiscal 2025 was 104%, with expectations for modest price increases contributing to future growth [10][25] Q&A Session Summary Question: Clarification on 2026 organic growth outlook - Management indicated that they are focusing on recurring revenue and expect professional services to decline in 2026 due to timing and cadence of projects [22][24] Question: Inquiry about dollar retention and pricing - Management noted that historical price increases have been conservative, but they expect to achieve a consistent 3%-5% price increase range moving forward [25][26] Question: Discussion on justice tech investment - Management confirmed that investments in justice tech are in line with expectations and are aimed at accelerating development and implementation [27][28] Question: Thoughts on cash balance and buyback versus M&A - Management stated that they have refreshed a $50 million buyback authorization and are focused on being opportunistic, while also indicating ongoing M&A discussions [30][32] Question: Clarification on M&A strategy - Management clarified that they are looking for meaningful acquisitions, primarily in the $2 million-$5 million EBITDA range, but nothing transformative [34][35]

Financial Data and Key Metrics Changes - For Q4 2025, revenues increased by 7% to $54.9 million from $51.3 million in Q4 2024, with organic growth of 4.5% and $1.3 million from acquisitions [9] - Recurring revenues rose by 9% to $41.3 million in Q4 2025 compared to $37.8 million in Q4 2024, accounting for 75% of total revenues [9] - Adjusted EBITDA slightly declined to $14.4 million for Q4 2025 from $14.6 million for Q4 2024, with adjusted EBITDA as a percentage of revenues at 26.2% for Q4 2025, down from 28.5% in Q4 2024 [10][11] - Adjusted diluted earnings per share from continuing operations was $0.27 for Q4 2025 and $1.05 for the fiscal year [11] Business Line Data and Key Metrics Changes - SaaS revenues grew by 25%, offsetting an 8% decline in maintenance revenues [9] - Transactional-based revenues and recurring software services increased by 10%, while payments revenue grew by 11% [9] - Non-recurring sales of software licenses declined by $1.9 million, reflecting a shift to SaaS [9] Market Data and Key Metrics Changes - Justice is the largest market, representing approximately 25% of revenues, with utilities, transportation, education, and public administration contributing equally [13] - The company expects revenue distribution for FY 2026 to be approximately Q1: 23%, Q2: 25.5%, Q3: 24.5%, Q4: 27% [13] Company Strategy and Development Direction - The company has divested its merchant services and healthcare revenue cycle management businesses, focusing on providing software solutions for the public sector [4][8] - Investments in new products and markets are underway, particularly in justice and utility sectors, expected to accelerate in 2026 [5] - The company aims to enhance its public sector vertical through strategic acquisitions and internal development [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in revenue opportunities tied to investments, anticipating durable recurring revenue growth in the long term [5] - For FY 2026, the company expects revenues between $217 million and $232 million, with recurring revenues projected to grow at 8%-10% [12] - Despite a decline in non-recurring professional services, management believes these markets are well-positioned for recovery in FY 2027 and beyond [12] Other Important Information - The company has $85 million in cash on hand with no debt and a $400 million borrowing capacity under its revolving credit facility [11] - The net dollar retention rate for fiscal 2025 was 104%, with expectations for modest price increases contributing to future growth [10][24] Q&A Session Summary Question: Clarification on 2026 organic growth outlook - Management indicated a focus on recurring revenue and expects professional services to decline in 2026 due to timing and cadence of projects [21][22] Question: Details on dollar retention and pricing - Management noted that historical price increases have been conservative, with expectations for a gradual increase in the contribution from price increases moving forward [24][25] Question: Justice tech investment and expectations for 2026 - Management confirmed that investments in justice tech are in line with expectations and will continue into the next fiscal year [26][27] Question: M&A versus buyback strategy - Management refreshed the buyback authorization to $50 million, emphasizing a disciplined approach to both M&A and buybacks, with potential for meaningful acquisitions in 2026 [28][31]

Core Insights - i3 Verticals, Inc. is focusing on modernization and solution bundling across its five primary markets: Justice tech, transportation, public administration, education, and utilities, aiming to enhance customer engagement and revenue growth [1][5][6] - The company is actively pursuing acquisition opportunities that align with its strategic goals, particularly in the public sector, which is seen as a significant area for growth and innovation [2][4] - The revenue distribution for the upcoming quarters is projected to be approximately 23% in Q1, 25.5% in Q2, 24.5% in Q3, and 27% in Q4, indicating a seasonal pattern in revenue recognition [3] Market Position and Strategy - i3 Verticals, Inc. is well-positioned to address the modernization needs of state and local government agencies, offering scalable solutions from single agencies to entire state systems [5][7] - The company is experiencing increased demand for technology-forward platform solutions, which are designed to streamline processes and improve efficiency in public sector operations [6][8] - A shift towards SaaS models is changing budgeting paradigms for government clients, allowing i3 Verticals, Inc. to bundle services and reduce upfront costs while delivering integrated solutions [7] Financial Outlook - The long-term expectation for organic revenue growth remains in the high single digits, with utilities, transportation, education, and public administration contributing roughly equally to revenues [4] - The company anticipates a slight decline in professional services revenue in 2026 due to timing and cadence of project fulfillment, but remains optimistic about future growth opportunities [10][12] - i3 Verticals, Inc. has a cash balance of $85 million and has refreshed its buyback authorization to $50 million, indicating a balanced approach between buybacks and M&A activities [15][17]