[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis of i3 Verticals, Inc. for the periods ended June 30, 2025 and 2024 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents i3 Verticals, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity changes, and cash flows, with detailed notes for periods ended June 30, 2025 and 2024 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The Condensed Consolidated Balance Sheets show a decrease in total assets and liabilities from September 30, 2024, to June 30, 2025, primarily driven by changes in current assets and liabilities, and the reclassification of assets and liabilities held for sale | Metric | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :-------------------------------- | | Total Assets | $623,274 | $730,675 | | Total Liabilities | $112,153 | $215,316 | | Total Equity | $511,121 | $515,359 | | Cash and cash equivalents | $55,544 | $86,525 | | Current assets held for sale | $— | $5,484 | | Long-term assets held for sale | $— | $67,409 | | Current liabilities held for sale | $— | $4,072 | - Total assets decreased by **$107.4 million**, and total liabilities decreased by **$103.2 million** from September 30, 2024, to June 30, 2025[12](index=12&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The Condensed Consolidated Statements of Operations show a significant improvement in net income for the three and nine months ended June 30, 2025, compared to the prior year, largely due to net income from discontinued operations and a substantial decrease in interest expense | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Revenue | $51,901 | $46,183 | $158,257 | $139,909 | | Total operating expenses | $56,714 | $47,493 | $155,956 | $138,964 | | (Loss) income from operations | $(4,813) | $(1,310) | $2,301 | $945 | | Interest expense | $806 | $7,906 | $1,932 | $22,307 | | Net income from discontinued operations | $19,421 | $6,109 | $18,185 | $18,951 | | Net income (loss) | $18,425 | $(8,298) | $22,302 | $(3,414) | | Net (loss) income attributable to i3 Verticals, Inc. | $12,882 | $(7,545) | $14,784 | $(4,569) | | Basic EPS (continuing operations) | $(0.02) | $(0.50) | $0.10 | $(0.76) | | Diluted EPS (continuing operations) | $(0.03) | $(0.50) | $0.10 | $(0.76) | | Basic EPS (discontinued operations) | $0.55 | $0.18 | $0.52 | $0.56 | | Diluted EPS (discontinued operations) | $0.55 | $0.18 | $0.49 | $0.56 | - Revenue from continuing operations increased by **12.4%** for the three months and **13.1%** for the nine months ended June 30, 2025, compared to the same periods in 2024[15](index=15&type=chunk) - Interest expense significantly decreased by **89.8%** for the three months and **91.3%** for the nine months ended June 30, 2025, primarily due to a lower average outstanding debt balance[15](index=15&type=chunk) [Condensed Consolidated Statement of Change in Equity](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Change%20in%20Equity) The Condensed Consolidated Statement of Changes in Equity reflects various transactions impacting stockholders' equity and non-controlling interest, including equity-based compensation, net income/loss, redemptions of common units, and repurchases of Class A common stock | Metric (in thousands) | Balance at Sep 30, 2024 | Balance at Jun 30, 2025 | | :-------------------------------------- | :---------------------- | :---------------------- | | Total Equity | $515,359 | $511,121 | | Additional Paid-In Capital | $279,335 | $268,111 | | Accumulated Earnings | $100,397 | $115,181 | | Non-Controlling Interest | $135,624 | $127,826 | - Repurchases of Class A common stock amounted to **$11,190 thousand** by December 31, 2024, and an additional **$26,366 thousand** by June 30, 2025[19](index=19&type=chunk) - Equity-based compensation recognized was **$3,814 thousand** by December 31, 2024, and an additional **$11,328 thousand** by June 30, 2025[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The Condensed Consolidated Statements of Cash Flows show a shift from cash provided by operating activities in 2024 to cash used in 2025, primarily due to income tax payments related to the Merchant Services Business sale. Investing activities significantly increased cash due to the sale of the Healthcare RCM Business, while financing activities used more cash for debt repayment and share repurchases | Cash Flow Activity (in thousands) | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash (used in) provided by operating activities | $(8,276) | $33,266 | | Net cash provided by (used in) investing activities | $78,774 | $(16,755) | | Net cash used in financing activities | $(104,283) | $(15,215) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(33,785) | $1,296 | | Cash, cash equivalents and restricted cash at end of period | $55,812 | $13,696 | - Cash paid for income taxes increased significantly to **$35,112 thousand** for the nine months ended June 30, 2025, from **$6,984 thousand** in the prior year[28](index=28&type=chunk) - Proceeds from the sale of the Healthcare RCM Business, net of cash sold, amounted to **$96,102 thousand** in 2025[25](index=25&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the unaudited condensed consolidated financial statements, covering the Company's organization, significant accounting policies, discontinued operations, acquisitions, debt, equity, and other material financial information - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information[59](index=59&type=chunk) - Following the disposal of the Merchant Services Business, the Company reclassified certain personnel and hosting costs from 'selling, general and administrative' to 'other costs of services' to reflect its core software solutions business model[67](index=67&type=chunk) - The Company operates as a single reportable segment as of June 30, 2025, after the disposition of the Healthcare RCM Business[109](index=109&type=chunk) [1. ORGANIZATION AND OPERATIONS](index=11&type=section&id=1.%20ORGANIZATION%20AND%20OPERATIONS) i3 Verticals, Inc. was formed in 2018 as a Delaware corporation to conduct the business of i3 Verticals, LLC, which delivers software solutions integrated with a proprietary payment facilitator platform to strategic vertical markets. The Company operates as a holding company, consolidating i3 Verticals, LLC's financial results and reporting a non-controlling interest - i3 Verticals, Inc. was formed on January 17, 2018, for an IPO and to carry on the business of i3 Verticals, LLC[34](index=34&type=chunk) - i3 Verticals, LLC, founded in 2012, provides software solutions integrated with a proprietary payment facilitator platform[34](index=34&type=chunk) - The Company operates as a holding company, consolidating i3 Verticals, LLC's financial results and reporting a non-controlling interest for units held by other owners[35](index=35&type=chunk) [2. DISCONTINUED OPERATIONS](index=11&type=section&id=2.%20DISCONTINUED%20OPERATIONS) This section details the divestitures of the Healthcare RCM Business and the Merchant Services Business, reclassifying their financial results as discontinued operations. The Healthcare RCM Business was sold for $96.4 million in cash, while the Merchant Services Business was sold for approximately $439.5 million in cash [Healthcare RCM Business Divestiture](index=11&type=section&id=Healthcare%20RCM%20Business%20Divestiture) The Company completed the sale of its Healthcare Revenue Cycle Management (RCM) Business to Infinx, Inc. for $96.4 million in cash. The financial results of this business are now reported as discontinued operations, with associated transition services agreements generating additional income - The Healthcare RCM Business was sold to Infinx, Inc. for **$96,443 thousand** in cash on May 5, 2025[36](index=36&type=chunk) - Financial results of the Healthcare RCM Business are included in income from discontinued operations, net of income taxes[42](index=42&type=chunk) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Revenue | $3,601 | $9,993 | $22,463 | $29,426 | | Net income from discontinued operations | $19,425 | $561 | $18,729 | $2,001 | [Merchant Services Business Divestiture](index=15&type=section&id=Merchant%20Services%20Business%20Divestiture) The Company completed the sale of its Merchant Services Business to Payroc Buyer, LLC for approximately $439.5 million in cash on September 20, 2024. This business's financial results are also reclassified as discontinued operations, with ongoing transition and processing services agreements - The Merchant Services Business was sold to Payroc Buyer, LLC for approximately **$439,516 thousand** in cash on September 20, 2024[48](index=48&type=chunk) - The Merchant Services Business comprised the Company's entire former Merchant Services segment and a small portion of the Software and Services segment[48](index=48&type=chunk) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Revenue | $— | $38,383 | $— | $111,893 | | Net (loss) income from discontinued operations | $(4) | $5,548 | $(544) | $16,950 | [3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=18&type=section&id=3.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the significant accounting policies applied in preparing the condensed consolidated financial statements, including basis of presentation, principles of consolidation, revenue recognition, and recent accounting pronouncements. Notably, the Company reclassified certain expenses to 'other costs of services' following the Merchant Services Business divestiture to better align with its software solutions business model [Basis of Presentation](index=18&type=section&id=Basis%20of%20Presentation) The financial statements are unaudited and prepared in accordance with GAAP for interim financial information, including all necessary adjustments for fair presentation. They should be read in conjunction with the Company's Annual Report on Form 10-K - Statements are unaudited and prepared under GAAP for interim financial information, including normal recurring adjustments[59](index=59&type=chunk) - Recommended to be read with the Annual Report on Form 10-K for the year ended September 30, 2024[60](index=60&type=chunk) [Principles of Consolidation](index=18&type=section&id=Principles%20of%20Consolidation) The condensed consolidated financial statements include the accounts of the Company and its subsidiaries, with all intercompany accounts and transactions eliminated - Consolidated financial statements include the Company and its subsidiaries, with intercompany accounts and transactions eliminated[61](index=61&type=chunk) [Restricted Cash](index=19&type=section&id=Restricted%20Cash) Restricted cash, held in escrow or on deposit with processing banks, is presented as long-term assets and included with cash and cash equivalents in the consolidated statements of cash flows - Restricted cash represents funds held in escrow or on deposit with processing banks to cover potential merchant losses[63](index=63&type=chunk) - Presented as long-term assets and included with cash and cash equivalents in cash flow statements[63](index=63&type=chunk) [Settlement Assets and Obligations](index=19&type=section&id=Settlement%20Assets%20and%20Obligations) Settlement assets and obligations arise from temporary holding or owing of funds on behalf of counterparties due to timing differences and other items in the settlement process, generally collected and paid within one to four days - Settlement assets and obligations arise from funds temporarily held or owed on behalf of merchants, consumers, schools, and other institutions[64](index=64&type=chunk) - Balances are generally collected and paid within one to four days[64](index=64&type=chunk) | Metric (in thousands) | June 30, 2025 | September 30, 2024 | | :-------------------- | :------------ | :----------------- | | Settlement assets | $18 | $632 | | Settlement obligations | $18 | $632 | [Reclassifications](index=19&type=section&id=Reclassifications) Certain prior period amounts have been reclassified to conform with the current period presentation, with no impact on previously reported consolidated net income (loss) - Prior period amounts reclassified to conform with current period presentation, with no impact on consolidated net income (loss)[65](index=65&type=chunk) [Discontinued operations](index=19&type=section&id=Discontinued%20operations) The financial results of the Merchant Services Business and Healthcare RCM Business have been reclassified as discontinued operations for all periods presented in the condensed consolidated statements of operations - Results of Merchant Services Business and Healthcare RCM Business reclassified as discontinued operations for all periods presented[66](index=66&type=chunk) [Change in presentation of certain costs to other costs of services](index=19&type=section&id=Change%20in%20presentation%20of%20certain%20costs%20to%20other%20costs%20of%20services) Following the Merchant Services Business disposal, the Company reclassified personnel and hosting costs related to customer support and software services from 'selling, general and administrative' to 'other costs of services' to better reflect its software solutions business model. This change has no impact on total operating expenses or earnings per share - Reclassified personnel costs for software installation, data conversion, training, and customer support from SG&A to other costs of services[67](index=67&type=chunk) - Reclassified certain hosting and related software costs for customer support from SG&A to other costs of services[67](index=67&type=chunk) - This change has no impact on total operating expenses or earnings per share[70](index=70&type=chunk)[71](index=71&type=chunk) [Inventories](index=20&type=section&id=Inventories) Inventories, consisting of point-of-sale equipment, are valued at the lower of cost or net realizable value and included in prepaid expenses and other current assets - Inventories consist of point-of-sale equipment for sale to customers[72](index=72&type=chunk) - Valued at the lower of cost (weighted average or specific basis) or net realizable value[72](index=72&type=chunk) | Metric (in thousands) | June 30, 2025 | September 30, 2024 | | :-------------------- | :------------ | :----------------- | | Inventories | $2,380 | $2,423 | [Acquisitions](index=20&type=section&id=Acquisitions) Business acquisitions are accounted for using the acquisition method, allocating purchase price to acquired assets and assumed liabilities at fair value, with goodwill recorded for any excess consideration. Acquisition costs are expensed as incurred - Business acquisitions are recorded using the acquisition method of accounting (ASC 805)[73](index=73&type=chunk) - Purchase price is allocated to assets acquired and liabilities assumed based on estimated fair value[73](index=73&type=chunk) - Goodwill is recorded when total consideration exceeds the fair values of separately identifiable assets and liabilities[73](index=73&type=chunk) [Lease Expense](index=21&type=section&id=Lease%20Expense) Leases are recorded under ASC 842, recognizing right-of-use assets and obligations at the present value of fixed lease payments. The Company combines lease and non-lease components and excludes short-term leases from balance sheet recognition - Leases are recorded in accordance with ASC 842, Leases[77](index=77&type=chunk) - Company combines associated lease and non-lease components and excludes short-term leases from balance sheet recognition[77](index=77&type=chunk) - Leased assets and obligations are recognized at the lease commencement date based on the present value of fixed lease payments[78](index=78&type=chunk) [Revenue Recognition and Deferred Revenue](index=21&type=section&id=Revenue%20Recognition%20and%20Deferred%20Revenue) Revenue is recognized as performance obligations are satisfied, categorized into software and related services, proprietary payments, and other sources. The Company acts as an agent for payment authorization services, presenting revenue net of interchange and network fees. Deferred revenue represents amounts billed in advance and recognized over the contract term - Revenue is recognized as each performance obligation is satisfied, in accordance with ASC 606[80](index=80&type=chunk) - Revenue from continuing operations is derived from software and related services, proprietary payments, and other sources[85](index=85&type=chunk) | Revenue Source (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Software and related services | $36,245 | $31,963 | $110,528 | $95,428 | | Proprietary payments | $13,100 | $11,797 | $40,594 | $37,923 | | Other revenue | $2,556 | $2,423 | $7,135 | $6,558 | | Total revenue | $51,901 | $46,183 | $158,257 | $139,909 | [Contract Assets](index=24&type=section&id=Contract%20Assets) Contract assets represent unbilled amounts for partially completed performance obligations, such as consulting services or software licenses sold under a non-cancellable subscription model where revenue is recognized upfront - Contract assets include unbilled amounts for partially completed performance obligations, like consulting services[96](index=96&type=chunk) - Also includes software licenses sold as a right-to-use license but paid for under a non-cancellable subscription model[96](index=96&type=chunk) | Metric (in thousands) | June 30, 2025 | September 30, 2024 | | :-------------------- | :------------ | :----------------- | | Contract assets | $9,417 | $8,680 | [Contract Liabilities](index=25&type=section&id=Contract%20Liabilities) Deferred revenue, a contract liability, represents amounts billed to customers for services contracts where payment is collected upfront and recognized over the contract term, typically one year - Deferred revenue represents amounts billed to customers for services contracts, with payment typically collected at the start of the contract term[101](index=101&type=chunk) - The balance is recognized as services are provided over the contract term, with most deferred revenue recognized within the next year[101](index=101&type=chunk) | Metric (in thousands) | Balance at Sep 30, 2024 | Balance at Jun 30, 2025 | | :-------------------- | :---------------------- | :---------------------- | | Deferred revenue | $39,156 | $30,577 | [Costs to Obtain and Fulfill a Contract](index=25&type=section&id=Costs%20to%20Obtain%20and%20Fulfill%20a%20Contract) Incremental costs to obtain new contracts and renewals, such as commissions and incentives, are capitalized and amortized over the expected customer life. Sales commissions for recurring revenues or existing customer portfolios are expensed as incurred - Incremental costs to obtain new contracts and renewals are capitalized and amortized over the expected customer life[103](index=103&type=chunk) - Capitalized contract costs were **$1,140 thousand** as of June 30, 2025, and **$857 thousand** as of September 30, 2024[103](index=103&type=chunk) - Sales commissions for recurring monthly revenues or existing customer portfolios are expensed as incurred[105](index=105&type=chunk) [Other Cost of Services](index=26&type=section&id=Other%20Cost%20of%20Services) Other costs of services include direct costs related to software and payment processing, such as personnel, processing fees, bank sponsorship, chargeback losses, and equipment costs. Following the Merchant Services Business divestiture, certain expenses were reclassified to this category - Other costs of services include direct costs for software and related services, payment processing, chargebacks, and equipment sold[106](index=106&type=chunk) - Personnel costs for software installation, client data conversion, training, and customer support were reclassified to this category[106](index=106&type=chunk) - Certain hosting and related software costs for customer support were also reclassified[106](index=106&type=chunk) [Use of Estimates](index=26&type=section&id=Use%20of%20Estimates) The preparation of financial statements requires management to make estimates and assumptions, including those for acquisitions, goodwill, intangible assets, revenue recognition, loss reserves, equity-based compensation, and income taxes. Actual results may differ from these estimates - Management makes estimates and assumptions for financial statement preparation, affecting reported amounts of assets, liabilities, revenues, and expenses[108](index=108&type=chunk) - Estimates include acquisition valuations, goodwill impairment, revenue recognition, loss reserves, equity-based compensation, and income taxes[108](index=108&type=chunk) [Segment Information](index=26&type=section&id=Segment%20Information) As of June 30, 2025, the Company operates as a single reportable segment, with the Chief Executive Officer reviewing discrete financial information on a consolidated basis for resource allocation and performance evaluation - The Company has determined it operates as a single reportable segment as of June 30, 2025[109](index=109&type=chunk) - The Chief Executive Officer, as CODM, reviews discrete financial information on a consolidated basis[109](index=109&type=chunk) [Recent Accounting Pronouncements](index=26&type=section&id=Recent%20Accounting%20Pronouncements) The Company is evaluating the impact of recently issued accounting pronouncements, including ASU 2023-09 (Income Tax Disclosures), ASU 2023-07 (Segment Reporting), and ASU 2024-03 (Expense Disaggregation Disclosures), which will become effective in future fiscal years - ASU 2023-09 (Income Taxes) improves income tax disclosures, effective for annual periods beginning after December 15, 2024[110](index=110&type=chunk)[112](index=112&type=chunk) - ASU 2023-07 (Segment Reporting) enhances interim disclosure requirements for segment reporting, effective for fiscal years beginning after December 15, 2023[113](index=113&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) requires disaggregation of certain expenses in financial statement notes, effective for fiscal years beginning after December 15, 2026[114](index=114&type=chunk) [4. ACQUISITIONS](index=27&type=section&id=4.%20ACQUISITIONS) During the nine months ended June 30, 2025, the Company completed two business acquisitions, including a Utility Billing Software Company for $10.3 million, expanding its public sector offerings. In the prior year, it acquired Eduloka, Ltd. for $27.5 million and another business for $1.3 million, all aimed at expanding software offerings and customer footprint [Business Combinations during nine months ended June 30, 2025](index=27&type=section&id=Business%20Combinations%20during%20nine%20months%20ended%20June%2030,%202025) On April 1, 2025, the Company acquired a Utility Billing Software Company for $10.26 million, comprising $9.0 million in cash and $1.26 million in contingent consideration, to expand its public sector utility billing software offerings - Acquired Utility Billing Software Company on April 1, 2025, for **$10,260 thousand**[115](index=115&type=chunk) - Purchase consideration included **$9,000 thousand** in cash and **$1,260 thousand** in estimated fair value of contingent cash consideration[115](index=115&type=chunk) - The acquisition expands the Company's public sector utility billing software offerings[115](index=115&type=chunk) [Other Business Combinations nine months ended June 30, 2025](index=28&type=section&id=Other%20Business%20Combinations%20nine%20months%20ended%20June%2030,%202025) During the nine months ended June 30, 2025, the Company purchased assets of another business for $2.0 million in cash to expand its customer footprint, allocating the purchase price to property, customer relationships, non-compete agreements, and goodwill - Purchased certain assets of a business for **$2,000 thousand** in cash to expand customer footprint[121](index=121&type=chunk) - Allocated **$1,700 thousand** to customer relationships and **$211 thousand** to goodwill[121](index=121&type=chunk) [Pro Forma Results of Operations for 2025 Business Combinations](index=29&type=section&id=Pro%20Forma%20Results%20of%20Operations%20for%202025%20Business%20Combinations) Unaudited pro forma results for 2025 acquisitions, assuming they occurred on October 1, 2023, show pro forma revenue of $1,437 thousand and net income of $131 thousand for the nine months ended June 30, 2025 | Metric (in thousands) | Nine Months Ended June 30, 2025 | | :-------------------- | :------------------------------ | | Revenue | $1,437 | | Net income (loss) | $131 | - Pro forma results assume acquisitions occurred on October 1, 2023, and include adjustments for depreciation, amortization, executive compensation, and debt[123](index=123&type=chunk) [Business Combinations during the year ended September 30, 2024](index=29&type=section&id=Business%20Combinations%20during%20the%20year%20ended%20September%2030,%202024) On August 1, 2024, the Company acquired Eduloka Ltd. ('inLumon') for $27.477 million, including cash, Class A common stock, and contingent consideration, to expand its permitting and licensing software offerings - Acquired Eduloka Ltd. ('inLumon') on August 1, 2024, for **$27,477 thousand**[125](index=125&type=chunk) - Consideration included **$18,000 thousand** in cash, **311,634 shares** of Class A common stock (**$7,517 thousand**), and **$1,960 thousand** in contingent cash consideration[125](index=125&type=chunk) - The acquisition expands the Company's permitting and licensing software offerings[125](index=125&type=chunk) [Other Business Combinations during the year ended September 30, 2024](index=31&type=section&id=Other%20Business%20Combinations%20during%20the%20year%20ended%20September%2030,%202024) During the three months ended December 31, 2023, the Company acquired assets of another business for $1.27 million, including cash and contingent consideration, to expand its software offerings - Acquired assets of a business for **$1,270 thousand** during the three months ended December 31, 2023[133](index=133&type=chunk) - Consideration included **$1,100 thousand** in cash and **$170 thousand** in estimated fair value of contingent cash consideration[133](index=133&type=chunk) - Allocated **$1,005 thousand** to goodwill, which is deductible for tax purposes[135](index=135&type=chunk) [5. PREPAID EXPENSES AND OTHER CURRENT ASSETS](index=31&type=section&id=5.%20PREPAID%20EXPENSES%20AND%20OTHER%20CURRENT%20ASSETS) Prepaid expenses and other current assets increased to $12.77 million as of June 30, 2025, from $9.973 million as of September 30, 2024, primarily due to increases in prepaid licenses and other current assets | Metric (in thousands) | June 30, 2025 | September 30, 2024 | | :-------------------- | :------------ | :----------------- | | Inventory | $2,380 | $2,423 | | Prepaid licenses | $6,714 | $5,013 | | Prepaid insurance | $517 | $129 | | Other current assets | $2,964 | $2,213 | | Total | $12,770 | $9,973 | - Prepaid licenses increased by **$1,701 thousand** from September 30, 2024, to June 30, 2025[137](index=137&type=chunk) [6. GOODWILL AND INTANGIBLE ASSETS](index=31&type=section&id=6.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) Goodwill increased to $248.195 million as of June 30, 2025, due to preliminary purchase price adjustments from acquisitions. Finite-lived intangible assets, primarily customer relationships, totaled $138.692 million, with an estimated future amortization expense of $138.692 million | Metric (in thousands) | June 30, 2025 | | :-------------------- | :------------ | | Goodwill | $248,195 | | Customer relationships | $137,746 | | Trade names | $831 | | Non-compete agreements and other intangible assets | $115 | | Trademarks | $16 | | Total identifiable intangible assets | $138,708 | - Goodwill increased by **$5,207 thousand** due to preliminary purchase price adjustments during the nine months ended June 30, 2025[138](index=138&type=chunk) - Amortization expense for intangible assets from continuing operations was **$2,882 thousand** for the three months and **$8,467 thousand** for the nine months ended June 30, 2025[141](index=141&type=chunk) [7. ACCRUED EXPENSES AND OTHER LIABILITIES](index=33&type=section&id=7.%20ACCRUED%20EXPENSES%20AND%20OTHER%20LIABILITIES) Accrued expenses and other current liabilities significantly decreased to $21.915 million as of June 30, 2025, from $88.252 million as of September 30, 2024, primarily due to reductions in accrued tax distributions, income tax expense, and tax receivable agreement liabilities. Long-term liabilities saw an increase in accrued contingent consideration | Metric (in thousands) | June 30, 2025 | September 30, 2024 | | :-------------------------------------- | :------------ | :----------------- | | Accrued wages, bonuses, commissions and vacation | $9,380 | $4,673 | | Accrued tax distributions | $— | $24,276 | | Accrued income tax expense | $2,004 | $30,528 | | Tax receivable agreement liability – current portion | $— | $9,850 | | Other accrued liabilities related to the Sale of the Merchant Services Business | $— | $7,887 | | Accrued expenses and other current liabilities | $21,915 | $88,252 | | Metric (in thousands) | June 30, 2025 | September 30, 2024 | | :-------------------------------------- | :------------ | :----------------- | | Accrued contingent consideration – long-term portion | $3,778 | $1,636 | | Deferred tax liability – long-term | $9,380 | $11,402 | | Other long-term liabilities | $2,300 | $1,883 | | Total other long-term liabilities | $15,458 | $14,921 | - Accrued tax distributions and accrued income tax expense significantly decreased to zero or minimal amounts by June 30, 2025[144](index=144&type=chunk) [8. LONG-TERM DEBT, NET](index=34&type=section&id=8.%20LONG-TERM%20DEBT,%20NET) The Company's long-term debt decreased to zero as of June 30, 2025, primarily due to the full repayment of the 1% Exchangeable Senior Notes due 2025. The 2023 Senior Secured Credit Facility, with a $400 million revolving credit facility, had no outstanding borrowings as of June 30, 2025 [2020 Exchangeable Notes Offering](index=34&type=section&id=2020%20Exchangeable%20Notes%20Offering) i3 Verticals, LLC issued $138 million of 1.0% Exchangeable Senior Notes due 2025 in February 2020. The remaining principal balance of $26.223 million was fully repaid upon maturity on February 15, 2025 - Issued **$138,000 thousand** aggregate principal amount of 1.0% Exchangeable Senior Notes due 2025 on February 18, 2020[149](index=149&type=chunk) - Repurchased **$90,777 thousand** in aggregate principal amount of Exchangeable Notes in January 2024[152](index=152&type=chunk) - The remaining principal balance of **$26,223 thousand** was repaid in full on February 15, 2025[151](index=151&type=chunk)[154](index=154&type=chunk) [Exchangeable Note Hedge Transactions](index=35&type=section&id=Exchangeable%20Note%20Hedge%20Transactions) The Company entered into Note Hedge Transactions concurrently with the Exchangeable Notes offering to reduce potential dilution. These transactions expired in February 2025 upon the maturity of the Exchangeable Notes - Note Hedge Transactions were entered into to reduce potential dilution to Class A common stock upon exchange of Exchangeable Notes[155](index=155&type=chunk) - The Note Hedge Transactions expired in February 2025 upon the maturity and payment in full of the Exchangeable Notes[158](index=158&type=chunk) [Warrant Transactions](index=35&type=section&id=Warrant%20Transactions) The Company sold Warrants to acquire Class A common stock, which expire over a ninety-trading-day period starting May 15, 2025. These warrants do not require separate derivative accounting - Sold Warrants to acquire up to **3,376,391 shares** of Class A common stock at an initial exercise price of **$62.88** per share[159](index=159&type=chunk) - The Warrants expire over a ninety trading day period that began on May 15, 2025[159](index=159&type=chunk) - The Warrants do not require separate accounting as a derivative[160](index=160&type=chunk) [2023 Senior Secured Credit Facility](index=36&type=section&id=2023%20Senior%20Secured%20Credit%20Facility) The 2023 Senior Secured Credit Facility provides a $400 million senior secured revolving credit facility, amended in May 2025 to permit the Healthcare RCM Transactions and reduce commitments. As of June 30, 2025, there were no outstanding borrowings, and the Company was in compliance with all financial covenants - The 2023 Senior Secured Credit Facility provides for aggregate commitments of **$400,000 thousand** in a senior secured revolving credit facility[163](index=163&type=chunk)[177](index=177&type=chunk) - The facility was amended on May 5, 2025, to permit Healthcare RCM Transactions and reduce commitments from **$450,000 thousand** to **$400,000 thousand**[177](index=177&type=chunk) - As of June 30, 2025, the Borrower's consolidated interest coverage ratio was **87.1x** and total leverage ratio was **0.0x**, indicating compliance with covenants[164](index=164&type=chunk) [Debt issuance costs](index=38&type=section&id=Debt%20issuance%20costs) Debt issuance costs of $249 thousand were incurred during the three and nine months ended June 30, 2025, and are amortized over the debt term. An additional $295 thousand was recorded for the write-off of debt issuance costs in connection with the Second Amendment to the Credit Agreement - Incurred **$249 thousand** in debt issuance costs during the three and nine months ended June 30, 2025[179](index=179&type=chunk) - Amortization of deferred debt issuance costs amounted to **$216 thousand** for three months and **$746 thousand** for nine months ended June 30, 2025[179](index=179&type=chunk) - Recorded **$295 thousand** for the write-off of debt issuance costs due to the Second Amendment to the Credit Agreement[179](index=179&type=chunk) [9. STOCKHOLDERS' EQUITY](index=38&type=section&id=9.%20STOCKHOLDERS'%20EQUITY) This section details changes in stockholders' equity, primarily focusing on the Company's share repurchase program. The Company repurchased 1,573,881 shares of Class A Common Stock for $37.979 million under the Prior Share Repurchase Program, which terminated on August 8, 2025 [Share Repurchase Program](index=38&type=section&id=Share%20Repurchase%20Program) The Company repurchased 1,573,881 shares of Class A Common Stock for $37.979 million under the Prior Share Repurchase Program during the nine months ended June 30, 2025. This program, which authorized up to $50 million in repurchases, terminated on August 8, 2025, and was replaced by a new program - Repurchased **1,573,881 shares** of Class A Common Stock for **$37,979 thousand** under the Prior Share Repurchase Program during the nine months ended June 30, 2025[181](index=181&type=chunk) - The Prior Share Repurchase Program, authorizing up to **$50,000 thousand**, terminated on August 8, 2025[180](index=180&type=chunk) - As of June 30, 2025, **$12,445 thousand** remained available under the Prior Share Repurchase Program[183](index=183&type=chunk) [10. INCOME TAXES](index=38&type=section&id=10.%20INCOME%20TAXES) The Company's income tax provision for continuing operations was a benefit of $22 thousand for the three months and a provision of $3,272 thousand for the nine months ended June 30, 2025. The effective tax rate differs from the federal statutory rate due to the Company's Up-C tax structure, where i3 Verticals, LLC is a pass-through entity - The Company's tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items[188](index=188&type=chunk) | Metric (in thousands) | Three months ended June 30, 2025 | Nine months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------ | :------------------------------- | :------------------------------ | | Income tax (benefit) provision | $(22) | $3,272 | $5,191 | $3,153 | - The effective tax rate differs from the federal statutory rate of **21%** primarily due to the Company's Up-C tax structure, where i3 Verticals, LLC is not taxed at the entity-level[188](index=188&type=chunk) [Tax Receivable Agreement](index=39&type=section&id=Tax%20Receivable%20Agreement) The Tax Receivable Agreement (TRA) obligates the Company to pay Continuing Equity Owners 85% of certain tax benefits realized from future redemptions or exchanges of Common Units. During the nine months ended June 30, 2025, the Company recognized an increase of $6,907 thousand in net deferred tax assets and a corresponding $5,871 thousand in TRA liabilities - The TRA provides for payments to Continuing Equity Owners of **85%** of certain tax benefits realized from future redemptions or exchanges of Common Units[189](index=189&type=chunk) - During the nine months ended June 30, 2025, the Company recognized a **$6,907 thousand** increase in net deferred tax assets and **$5,871 thousand** in TRA liabilities[190](index=190&type=chunk) - The total amount due under the TRA was **$35,117 thousand** as of June 30, 2025, with payments expected over the next **26 years**[191](index=191&type=chunk)[192](index=192&type=chunk) [11. LEASES](index=40&type=section&id=11.%20LEASES) The Company's leases, primarily for real estate, are classified as operating leases under ASC 842. The weighted-average remaining lease term was 2 years, and the weighted-average discount rate was 7.4% as of June 30, 2025. Operating lease costs from continuing operations were $640 thousand for the three months and $1,447 thousand for the nine months ended June 30, 2025 - The Company's leases consist primarily of real estate leases and are classified as operating leases[194](index=194&type=chunk) - Weighted-average remaining lease term was **2 years**, and the weighted-average discount rate was **7.4%** as of June 30, 2025[194](index=194&type=chunk)[195](index=195&type=chunk) | Metric (in thousands) | Three months ended June 30, 2025 | Nine months ended June 30, 2025 | | :-------------------- | :------------------------------- | :------------------------------ | | Operating lease costs | $640 | $1,447 | [12. FAIR VALUE MEASUREMENTS](index=41&type=section&id=12.%20FAIR%20VALUE%20MEASUREMENTS) The Company applies ASC 820 for fair value measurements, primarily for Level 3 financial instruments like accrued contingent consideration. The fair value of contingent consideration obligations, which includes unobservable inputs, is calculated using Monte Carlo simulations and discounted cash flow analyses, and is revalued each period - The Company applies ASC 820, Fair Value Measurement, using a three-tier hierarchy[201](index=201&type=chunk) - The Company has no Level 1 or Level 2 financial instruments measured at fair value on a recurring basis[204](index=204&type=chunk) - Fair value of contingent consideration obligations, a Level 3 measurement, is calculated using Monte Carlo simulations and discounted cash flow analyses[209](index=209&type=chunk) [13. EQUITY-BASED COMPENSATION](index=42&type=section&id=13.%20EQUITY-BASED%20COMPENSATION) Equity-based compensation expense for continuing operations was $4,879 thousand for the three months and $12,030 thousand for the nine months ended June 30, 2025. The Company grants stock options under the 2018 Equity Incentive Plan and the 2020 Acquisition Equity Incentive Plan, and Restricted Stock Units (RSUs) under the 2018 Plan | Metric (in thousands) | Three Months Ended June 30, 2025 | Nine Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------ | :------------------------------- | :------------------------------ | | Stock options | $1,610 | $5,435 | $2,819 | $9,953 | | Restricted stock units | $3,269 | $6,595 | $951 | $2,724 | | Total | $4,879 | $12,030 | $3,770 | $12,677 | - The 2018 Equity Incentive Plan allows for grants of up to **3,500,000** stock options and other equity-based awards[213](index=213&type=chunk) - The 2020 Acquisition Equity Incentive Plan allows for grants of up to **3,000,000** stock options and other equity-based awards for new employees from acquisitions[215](index=215&type=chunk) [Stock Options](index=42&type=section&id=Stock%20Options) As of June 30, 2025, 8,512,121 stock options were outstanding with a weighted-average exercise price of $24.55. Total unrecognized compensation expense for unvested options was $11,154 thousand, expected to be recognized over 2.4 years | Metric | Stock Options | Weighted Average Exercise Price | | :-------------------------- | :------------ | :------------------------------ | | Outstanding at Sep 30, 2024 | 9,120,944 | $24.48 | | Granted | 120,000 | $24.54 | | Exercised | (556,458) | $22.22 | | Forfeited | (172,365) | $28.06 | | Outstanding at Jun 30, 2025 | 8,512,121 | $24.55 | - Total unrecognized compensation expense for unvested stock options was **$11,154 thousand**, expected to be recognized over a weighted-average period of **2.4 years**[218](index=218&type=chunk) - The Company fully accelerated vesting for **40,853 options** held by Healthcare RCM Business employees prior to divestiture[219](index=219&type=chunk) [Restricted Stock Units](index=43&type=section&id=Restricted%20Stock%20Units) As of June 30, 2025, 1,163,209 Restricted Stock Units (RSUs) were outstanding with a weighted-average grant date fair value of $24.61. Total unrecognized compensation expense for unvested RSUs was $18,812 thousand, expected to be recognized over 2.9 years | Metric | Restricted Stock Units | Weighted Average Grant Date Fair Value | | :-------------------------- | :--------------------- | :------------------------------------- | | Outstanding at Sep 30, 2024 | 771,214 | $22.71 | | Granted | 722,649 | $26.33 | | Vested | (284,257) | $23.65 | | Forfeited | (46,397) | $23.08 | | Outstanding at Jun 30, 2025 | 1,163,209 | $24.61 | - Total unrecognized compensation expense for unvested RSUs was **$18,812 thousand**, expected to be recognized over a weighted average period of **2.9 years**[222](index=222&type=chunk) - The Company fully accelerated vesting for **96,613 RSUs** held by Healthcare RCM Business employees prior to divestiture[223](index=223&type=chunk) [14. COMMITMENTS AND CONTINGENCIES](index=44&type=section&id=14.%20COMMITMENTS%20AND%20CONTINGENCIES) This section details the Company's commitments, primarily operating leases, and ongoing litigation, including the PaySchools Litigation regarding alleged unlawful fees and the S&S Litigation concerning alleged cybersecurity inadequacies. The Company believes these matters will not have a material adverse effect on its financial condition [Leases](index=44&type=section&id=Leases) Rent expense from continuing operations under operating leases for office space and equipment amounted to $700 thousand for the three months and $1,557 thousand for the nine months ended June 30, 2025 - Rent expense from continuing operations was **$700 thousand** for the three months and **$1,557 thousand** for the nine months ended June 30, 2025[224](index=224&type=chunk) [Litigation](index=44&type=section&id=Litigation) The Company is involved in ordinary course legal proceedings, including the PaySchools and S&S litigations. While outcomes are unpredictable, management believes these matters will not have a material adverse effect on the Company's consolidated financial statements - The Company is involved in ordinary course legal proceedings, including claims, lawsuits, investigations, and unasserted claims[226](index=226&type=chunk) - Management believes these matters will not have a material impact on the Company's consolidated balance sheet, results of operations, or cash flows[226](index=226&type=chunk) [PaySchools Litigation](index=45&type=section&id=PaySchools%20Litigation) A class action complaint was filed against PaySchools, a subsidiary, alleging unlawful fees for school lunch services in New York. The plaintiff seeks unspecified monetary damages and injunctive relief. The case is pending in federal court - Class action complaint filed against PaySchools on May 16, 2025, alleging unlawful fees for school lunch services[228](index=228&type=chunk) - Plaintiff seeks unspecified monetary damages, restitution, disgorgement, attorneys' fees, and injunctive relief[228](index=228&type=chunk) - The matter was removed to the United States District Court for the Eastern District of New York and remains pending[229](index=229&type=chunk) [S&S Litigation](index=45&type=section&id=S%26S%20Litigation) A petition was filed against S&S, a subsidiary, and others, seeking monetary damages for network remediation and other expenses related to alleged cybersecurity inadequacies. The case was remanded to state court and is in the discovery phase - Petition filed on June 2, 2021, against S&S and others, seeking monetary damages for network remediation (**$15,000 thousand** for the State, **$7,000 thousand** for Sheriffs/Districts)[230](index=230&type=chunk) - Claims relate to a third-party remote access software product and alleged inadequacies in cybersecurity practices[230](index=230&type=chunk) - The case was remanded to the 19th Judicial District Court for the Parish of East Baton Rouge and is in the discovery phase[230](index=230&type=chunk)[231](index=231&type=chunk) [15. RELATED PARTY TRANSACTIONS](index=46&type=section&id=15.%20RELATED%20PARTY%20TRANSACTIONS) Related party transactions primarily involve the Tax Receivable Agreement (TRA) with Continuing Equity Owners, totaling $35.117 million as of June 30, 2025. Additionally, recapitalization actions were effected in January 2025 to reduce excess cash held by the Company, resulting in an increase in the Company's ownership interest in i3 Verticals, LLC to 70.83% - The Tax Receivable Agreement (TRA) with Continuing Equity Owners requires payments of **85%** of certain tax benefits[235](index=235&type=chunk) - Total amount due under the TRA was **$35,117 thousand** as of June 30, 2025[235](index=235&type=chunk) - Recapitalization actions in January 2025, including a **$21,396 thousand** cash contribution, increased the Company's ownership in i3 Verticals, LLC to **70.83%**[235](index=235&type=chunk)[236](index=236&type=chunk) [16. SEGMENTS](index=47&type=section&id=16.%20SEGMENTS) Following the divestitures of the Merchant Services Business and the Healthcare RCM Business, the Company now operates as a single operating and reportable segment as of June 30, 2025, focusing on mission-critical enterprise software solutions for public sector customers - After the sale of the Merchant Services Business and Healthcare RCM Business, the Company has one operating and reportable segment as of June 30, 2025[241](index=241&type=chunk) - The core business for continuing operations is providing mission-critical enterprise software solutions to public sector customers[241](index=241&type=chunk) - Consolidated net income is the measure of segment profit or loss used by the CODM to allocate resources and assess performance[243](index=243&type=chunk) [17. NON-CONTROLLING INTEREST](index=48&type=section&id=17.%20NON-CONTROLLING%20INTEREST) i3 Verticals, Inc. consolidates i3 Verticals, LLC's financial results and reports a non-controlling interest for Common Units held by Continuing Equity Owners. As of June 30, 2025, i3 Verticals, Inc. owned a 73.8% economic interest in i3 Verticals, LLC, an increase from 70.0% in the prior year - i3 Verticals, Inc. consolidates i3 Verticals, LLC's financial results and reports a non-controlling interest[245](index=245&type=chunk) - As of June 30, 2025, i3 Verticals, Inc. owned a **73.8%** economic ownership interest in i3 Verticals, LLC, up from **70.0%** in 2024[246](index=246&type=chunk) | Metric (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------ | :------------------------------ | | Net income attributable to non-controlling interest | $7,518 | $1,155 | | Net transfers (from) to non-controlling interests | $(15,316) | $3,545 | [18. EARNINGS PER SHARE](index=48&type=section&id=18.%20EARNINGS%20PER%20SHARE) This section provides reconciliations for basic and diluted earnings per share (EPS) for both continuing and discontinued operations. For continuing operations, basic EPS was $(0.02) for the three months and $0.10 for the nine months ended June 30, 2025. For discontinued operations, basic EPS was $0.55 for the three months and $0.52 for the nine months ended June 30, 2025 - Basic EPS for continuing operations was **$(0.02)** for the three months and **$0.10** for the nine months ended June 30, 2025[249](index=249&type=chunk) - Basic EPS for discontinued operations was **$0.55** for the three months and **$0.52** for the nine months ended June 30, 2025[254](index=254&type=chunk) - Diluted EPS for consolidated operations was **$0.50** for the three months and **$0.60** for the nine months ended June 30, 2025[261](index=261&type=chunk) [19. SIGNIFICANT NON-CASH TRANSACTIONS](index=54&type=section&id=19.%20SIGNIFICANT%20NON-CASH%20TRANSACTIONS) Significant non-cash investing activities for continuing operations during the nine months ended June 30, 2025, included $1,260 thousand in acquisition date fair value of contingent consideration and $22 thousand in right-of-use assets obtained for operating lease obligations | Non-Cash Transaction (in thousands) | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :---------------------------------- | :------------------------------ | :------------------------------ | | Acquisition date fair value of contingent consideration | $1,260 | $170 | | Right-of-use assets obtained in exchange for operating lease obligations | $22 | $538 | [20. SUBSEQUENT EVENTS](index=54&type=section&id=20.%20SUBSEQUENT%20EVENTS) On August 7, 2025, the Company's Board of Directors approved a new share repurchase program for up to $50 million of Class A common stock, replacing the prior program that terminated on August 8, 2025. The new program will terminate on September 30, 2026, or when the maximum amount is expended [New Share Repurchase Program](index=54&type=section&id=New%20Share%20Repurchase%20Program) A new share repurchase program for up to $50 million of Class A common stock was approved on August 7, 2025, replacing the prior program. It will terminate on September 30, 2026, or upon full expenditure, and allows repurchases in the open market or privately - New share repurchase program approved on August 7, 2025, for up to **$50,000 thousand** of Class A common stock[269](index=269&type=chunk) - Replaced the Prior Share Repurchase Program, which terminated on August 8, 2025[271](index=271&type=chunk) - The new program terminates on the earlier of September 30, 2026, or when the maximum dollar amount is expended[272](index=272&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, highlighting the strategic shift to a public sector software solutions focus following divestitures, recent acquisitions, and key financial performance indicators. It also discusses liquidity, cash flows, debt, and critical accounting estimates [Note Regarding Forward-looking Statements](index=56&type=section&id=Note%20Regarding%20Forward-looking%20Statements) This section contains forward-looking statements about future events and results, which involve risks and uncertainties. Readers are cautioned not to place undue reliance on these statements, as actual results may differ materially due to various factors, including cybersecurity risks, economic conditions, and the ability to execute growth strategies - The report includes forward-looking statements about future events or results, identifiable by terms like 'believes,' 'estimates,' 'anticipates,' 'expects,' etc[275](index=275&type=chunk) - Forward-looking statements involve risks and uncertainties, including cybersecurity, economic conditions, and the ability to execute strategy post-divestitures[276](index=276&type=chunk) - Readers are cautioned not to place undue reliance on these statements, as actual results may differ materially[277](index=277&type=chunk)[278](index=278&type=chunk) [Executive Overview](index=57&type=section&id=Executive%20Overview) Following the sale of its Healthcare RCM Business, i3 Verticals now focuses on providing mission-critical enterprise software solutions to public sector customers across all 50 states and Canada. The Company has transitioned to a single operating segment - After the sale of the Healthcare RCM Business, i3 Verticals provides mission-critical enterprise software solutions to public sector customers[279](index=279&type=chunk) - The Company's solutions address government functions including courts, transportation, utilities, revenue, and schools[279](index=279&type=chunk) - The Company has updated its segment presentation and now operates as a single operating and reportable segment as of June 30, 2025[281](index=281&type=chunk) [Recent Developments](index=58&type=section&id=Recent%20Developments) Recent developments include ongoing economic uncertainty due to inflationary pressures, elevated interest rates, and geopolitical situations. These conditions could impact the Company's financial results, particularly given its operations in Canada and reliance on government spending - Ongoing economic uncertainty from inflation, elevated interest rates, and geopolitical situations (Middle East, Ukraine, India-Pakistan tensions) could impact the Company[282](index=282&type=chunk) - Canadian governmental actions to reduce business with U.S. companies due to trade tensions could adversely affect financial results[282](index=282&type=chunk) [Liquidity](index=58&type=section&id=Liquidity) As of June 30, 2025, the Company had $55.5 million in cash and cash equivalents and $400.0 million in available capacity under its 2023 Senior Secured Credit Facility, with compliance in financial covenants (interest coverage ratio of 87.1x and total leverage ratio of 0.0x) - As of June 30, 2025, cash and cash equivalents were **$55.5 million**[283](index=283&type=chunk) - Available capacity under the 2023 Senior Secured Credit Facility was **$400.0 million**[283](index=283&type=chunk) - The Company was in compliance with financial covenants, with a consolidated interest coverage ratio of **87.1x** and total leverage ratio of **0.0x**[283](index=283&type=chunk) [Sale of Healthcare RCM Business](index=58&type=section&id=Sale%20of%20Healthcare%20RCM%20Business) On May 5, 2025, the Company completed the sale of its Healthcare RCM Business to Infinx, Inc. for $96.4 million in cash. The financial results of this business have been reclassified as discontinued operations - Sale of Healthcare RCM Business completed on May 5, 2025, for **$96.4 million** in cash[284](index=284&type=chunk) - The Healthcare RCM Business contributed **$3.6 million** and **$22.5 million** of revenue for the three and nine months ended June 30, 2025, respectively[284](index=284&type=chunk) - Results of operations for the Healthcare RCM Business have been reclassified as discontinued operations[285](index=285&type=chunk) [Sale of Merchant Services Business](index=58&type=section&id=Sale%20of%20Merchant%20Services%20Business) On September 20, 2024, the Company sold its Merchant Services Business to Payroc Buyer, LLC for approximately $439.5 million in cash. The financial results of this business have been reclassified as discontinued operations - Sale of Merchant Services Business completed on September 20, 2024, for approximately **$439.5 million** in cash[287](index=287&type=chunk) - The Merchant Services Business comprised the Company's entire former Merchant Services segment and a small portion of the Software and Services segment[287](index=287&type=chunk) - Results of operations for the Merchant Services Business have been reclassified as discontinued operations[288](index=288&type=chunk) [Acquisitions](index=59&type=section&id=Acquisitions) Acquisitions are a core growth strategy, with the Company completing two acquisitions during the nine months ended June 30, 2025, totaling $12.3 million, and two acquisitions during the nine months ended June 30, 2024, totaling $28.77 million, to expand software offerings and customer footprint - Acquisitions are a core component of the Company's growth strategy[289](index=289&type=chunk) [Acquisitions during the nine months ended June 30, 2025](index=59&type=section&id=Acquisitions%20during%20the%20nine%20months%20ended%20June%2030,%202025) The Company acquired a Utility Billing Software Company for $10.3 million (cash and contingent consideration) and assets of another business for $2.0 million in cash, both aimed at expanding public sector software offerings and customer footprint - Acquired a Utility Billing Software Company for **$10.3 million** (including **$9.0 million** cash and **$1.3 million** contingent consideration) on April 1, 2025[290](index=290&type=chunk) - Acquired certain assets of another business for **$2.0 million** in cash to expand customer footprint[291](index=291&type=chunk) [Acquisitions during the nine months ended June 30, 2024](index=59&type=section&id=Acquisitions%20during%20the%20nine%20months%20ended%20June%2030,%202024) During the nine months ended June 30, 2024, the Company acquired one business for $1.3 million (cash and contingent consideration) to expand its software offerings - Acquired one business for **$1.3 million** (including **$1.1 million** cash and **$0.2 million** contingent consideration) during the nine months ended June 30, 2024[292](index=292&type=chunk) [Our Revenue and Expenses](index=59&type=section&id=Our%20Revenue%20and%20Expenses) The Company generates revenue from software and related services, proprietary payments (volume-based and fixed fees), and other sources. Expenses include other costs of services (reclassified to align with the software business model), selling, general and administrative, depreciation and amortization, and interest expense [Revenues](index=59&type=section&id=Revenues) Revenue is generated from software and related services (subscriptions, support, licenses), volume-based payment processing fees (discount fees), and other fixed transaction or service fees. Interchange and network fees are presented net of revenue - Revenue sources include software and related services (subscriptions, recurring services, support, licenses, installation)[293](index=293&type=chunk) - Also generates revenue from volume-based payment processing fees ('discount fees') and fixed transaction/service fees[293](index=293&type=chunk) - Interchange and network fees are presented net of revenue[294](index=294&type=chunk) [Expenses](index=60&type=section&id=Expenses) Expenses include other costs of services (direct software/payment processing costs, reclassified personnel/hosting costs), selling, general and administrative (salaries, professional services, internal technology), depreciation and amortization (property, equipment, software, intangibles), and interest expense (debt, amortization of issuance costs) - Other costs of services include direct software and payment processing costs, reclassified personnel costs for software services, and hosting costs[295](index=295&type=chunk) - Selling, general and administrative expenses include salaries, professional services, internal technology, rent, and utilities[296](index=296&type=chunk) - Depreciation and amortization cover property, equipment, computer hardware/software, acquired intangible assets, and internally developed software[297](index=297&type=chunk) [How We Assess Our Business](index=61&type=section&id=How%20We%20Assess%20Our%20Business) Following the divestitures of the Merchant Services and Healthcare RCM Businesses, the Company now operates as a single segment focused on public sector software and services. Key performance indicators include Annualized Recurring Revenue (ARR) and Adjusted EBITDA margin - After divestitures, the Company has one operating and reportable segment focused on public sector software and services[301](index=301&type=chunk)[302](index=302&type=chunk) - Key performance indicators are Annualized Recurring Revenue (ARR) and Adjusted EBITDA margin[303](index=303&type=chunk)[307](index=307&type=chunk) - ARR from continuing operations for the three months ended June 30, 2025, was **$160.8 million**, representing a **12%** growth rate year-over-year[305](index=305&type=chunk) [Key Performance Indicators](index=61&type=section&id=Key%20Performance%20Indicators) The Company uses Annualized Recurring Revenue (ARR) to measure ongoing revenue potential and Adjusted EBITDA margin to assess operating performance. ARR for continuing operations grew 12% to $160.8 million for the three months ended June 30, 2025 - Annualized Recurring Revenue (ARR) is annualized revenue from recurring sources with ongoing contracts, including SaaS, transaction-based software, maintenance, and payments[303](index=303&type=chunk) - ARR from continuing operations for the three months ended June 30, 2025, was **$160.8 million**, a **12%** growth rate from **$143.6 million** in 2024[305](index=305&type=chunk) - Adjusted EBITDA margin is a non-GAAP measure used to assess operating performance, excluding interest, tax, depreciation, amortization, stock-compensation, and M&A-related expenses[306](index=306&type=chunk) [Results of Operations](index=62&type=section&id=Results%20of%20Operations) The Company's results of operations for continuing operations show increased revenue and improved net income for the three and nine months ended June 30, 2025, compared to the prior year, driven by organic growth, acquisitions, and significantly lower interest expense. Discontinued operations also contributed positively to net income - Revenue increased by

Financial Data and Key Metrics Changes - In Q3 2025, RemainCo revenues increased by 12.4% to $51.9 million from $46.2 million in Q3 2024, reflecting organic growth of 8% and approximately $2 million of inorganic revenues from acquisitions [11] - Annual recurring revenues for RemainCo rose by 12% to $160.8 million for Q3 2025 compared to $143.6 million for Q3 2024, with 77% of revenues coming from recurring sources [11] - Adjusted EBITDA for RemainCo increased by 18% to $12.7 million for Q3 2025 from $10.8 million for Q3 2024, with adjusted EBITDA margin improving to 24.5% from 23.3% [12] Business Line Data and Key Metrics Changes - SaaS revenue grew by 24%, payments revenue by 11%, and transaction-based revenue by 9% in Q3 2025 [11] - Non-recurring sales of software licenses increased to $1 million in Q3 2025 from $400,000 in Q3 2024 [11] - RemainCo software and related services accounted for 70% of revenues, payments for 25%, and other for 5% in Q3 2025 [12] Market Data and Key Metrics Changes - The company is focusing on public sector software solutions, having divested its healthcare revenue cycle management and merchant services businesses [6][10] - The company is seeing strong sales activity across strategic markets including transportation, justice tech, public safety, public administration, ERP, education, and utilities [21] Company Strategy and Development Direction - The company aims to enable state and local governments to serve constituents effectively through a lineup of mission-critical enterprise software products [7] - Continued investment in government technology and strict discipline in M&A processes are planned, with a focus on new product development [8] - The company is implementing AI initiatives to enhance product features, improve service efficiency, and streamline product development [17][20] Management's Comments on Operating Environment and Future Outlook - Management expects high single-digit organic revenue growth for RemainCo over the next several years, with adjusted EBITDA margin improvement of 50 to 100 basis points per year [14] - The company anticipates that increased costs from talent investments will begin to impact Q4, with revenue effects expected in FY 2026 [15] - Management expressed confidence in all sub-verticals, highlighting strong performance in education, utilities, and transportation [37] Other Important Information - The company has a strong balance sheet with $55 million in cash and no debt, along with $400 million of borrowing capacity under its revolving credit facility [12][13] - The company plans to use cash and borrowings for future acquisitions and opportunistic stock repurchases [13] Q&A Session Summary Question: Guidance for Q4 and organic revenue growth - Management confirmed that the midpoint of the guidance should be the focus, with organic revenue growth expected to decelerate due to the prior strong license quarter [28][30] Question: Incremental investments in Justice Tech - Management indicated that the investments were not previously contemplated in the guidance and would compress margins slightly in Q4, but are expected to drive revenue growth in the long term [32][35] Question: Exciting growth areas for the company - Management expressed enthusiasm for all sub-verticals, particularly education, utilities, and transportation, anticipating significant growth in FY 2026 [37] Question: Partnerships for deals - The company typically handles most aspects of deals independently, with integration partners used in about 1 out of 5 cases, primarily for enterprise-level deals [41] Question: Role of procurement consultants - There has been no significant change in the role of procurement consultants, with steady relationships maintained in the utility space [42]

Revenue Performance - Total revenue for Q3 Fiscal Year 2025 was $51.901 million, reflecting a 12% year-over-year growth[4,11] - Payments revenue reached $13.100 million, showing an 11% year-over-year increase[4] - Recurring revenue totaled $40.201 million for the quarter[4] - Total Annualized Recurring Revenue (ARR) reached $160.804 million, a 12% increase year-over-year[4] Revenue Composition - Software and related service revenue amounted to $36.245 million[4] - SaaS revenue contributed $9.299 million to the total[4] - Transaction-based revenue was $4.052 million[4] - Maintenance revenue reached $8.648 million[4] - Professional services generated $9.458 million[4] Profitability Metrics - Adjusted EBITDA from continuing operations was $12.724 million, representing an Adjusted EBITDA margin of 25%[11] - Net loss from continuing operations attributable to i3 Verticals, Inc was $(410) thousand[12] - Non-GAAP adjusted income before taxes from continuing operations was $10.249 million[12] - Adjusted net income from continuing operations was $7.687 million[12] - Adjusted diluted earnings per share from continuing operations was $0.23[14]

[Executive Summary & Financial Highlights](index=1&type=section&id=1.%20Executive%20Summary%20%26%20Financial%20Highlights) [Third Quarter & Nine Months Financial Highlights (Continuing Operations)](index=1&type=section&id=1.1%20Third%20Quarter%20%26%20Nine%20Months%20Financial%20Highlights%20(Continuing%20Operations)) i3 Verticals reported strong revenue growth and significant improvements in profitability from continuing operations for both the third quarter and the first nine months of fiscal year 2025, driven by recurring contracts, particularly SaaS and payments revenue. The company also saw a substantial reduction in net loss and an increase in adjusted EBITDA | Metric (Continuing Operations) | Q3 2025 | Q3 2024 | YoY Change | 9M 2025 | 9M 2024 | YoY Change | | :----------------------------- | :------ | :------ | :--------- | :------ | :------ | :--------- | | Revenue ($M) | 51.9 | 46.2 | 12.4% | 158.3 | 139.9 | 13.1% | | Net Loss ($M) | (1.0) | (14.4) | (93.1)% | 4.1 | (22.4) | N/A | | Net Loss Attributable to i3 Verticals, Inc. ($M) | (0.4) | (11.8) | (96.6)% | 2.5 | (17.7) | N/A | | Adjusted EBITDA ($M) | 12.7 | 10.8 | 18.0% | 43.1 | 35.9 | 20.3% | | Adjusted EBITDA as % of Revenue| 24.5% | 23.3% | 1.2 pp | 27.3% | 25.6% | 1.7 pp | | Diluted Net Loss Per Share ($) | (0.03) | (0.50) | (94.0)% | 0.10 | (0.76) | N/A | | Non-GAAP Adjusted Diluted EPS ($) | 0.23 | 0.02 | 1050.0% | 0.78 | 0.18 | 333.3% | | Annualized Recurring Revenue (ARR) ($M) | 160.8 | 143.6 | 12.0% | N/A | N/A | N/A | - The company's historical results have been recast to reflect the sale of the Merchant Services Business (completed September 20, 2024) and the Healthcare RCM Business (completed May 5, 2025) as discontinued operations[6](index=6&type=chunk) [Management Commentary](index=4&type=section&id=1.2%20Management%20Commentary) CEO Greg Daily expressed satisfaction with Q3 fiscal 2025 revenue growth, attributing it to recurring contracts, particularly strong SaaS and payments growth. He also noted the smooth divestiture of the Healthcare RCM Business and reaffirmed the company's focus on investing in government technology - Overall revenue growth of **12% in Q3 2025** was fueled by recurring contracts[7](index=7&type=chunk) - SaaS growth led the way, increasing **24%** over the prior year period[7](index=7&type=chunk) - Revenue from payments increased by **11%** compared to the prior year quarter[7](index=7&type=chunk) - The divestiture of the Healthcare Revenue Cycle Management Business was smooth[8](index=8&type=chunk) - The company remains well capitalized with over **$50 million in cash on hand** and plans to continue investment in government technology[9](index=9&type=chunk) [2025 Outlook](index=4&type=section&id=1.3%202025%20Outlook) i3 Verticals reaffirmed its previously issued annual guidance for the fiscal year ending September 30, 2025, for revenue, adjusted EBITDA, and adjusted diluted earnings per share, excluding future acquisitions and transaction-related costs | Metric | Fiscal Year Ending September 30, 2025 Outlook Range | | :----------------------------- | :-------------------------------------------------- | | Revenue | $207,000 - $217,000 (in thousands) | | Adjusted EBITDA (non-GAAP) | $55,000 - $61,000 (in thousands) | | Adjusted diluted earnings per share (non-GAAP) | $0.96 - $1.06 | - Reconciliations of adjusted EBITDA and adjusted diluted EPS guidance to GAAP measures are not available without unreasonable efforts due to difficulties in forecasting certain adjustments[11](index=11&type=chunk) [Business Updates & Corporate Information](index=4&type=section&id=2.%20Business%20Updates%20%26%20Corporate%20Information) [Change in Segment Presentation](index=4&type=section&id=2.1%20Change%20in%20Segment%20Presentation) Following the disposition of the Healthcare RCM Business, i3 Verticals has transitioned from two operating segments (Public Sector and Healthcare) to a single operating and reportable segment as of June 30, 2025 - The company previously had two operating segments: Public Sector and Healthcare Segment[12](index=12&type=chunk) - After the disposition of the Healthcare RCM Business, the company now has **one operating and reportable segment**[12](index=12&type=chunk) [About i3 Verticals](index=5&type=section&id=2.2%20About%20i3%20Verticals) i3 Verticals specializes in providing mission-critical, cloud-native enterprise software solutions to public sector customers across all 50 states and Canada, aiming to enhance the efficiency and effectiveness of state and local governments - The company provides mission-critical enterprise software solutions to public sector customers[17](index=17&type=chunk) - Solutions are cloud-native and address various government functions including courts, transportation, utilities, revenue, and schools[17](index=17&type=chunk) - i3 Verticals is a leader in the public sector vertical with thousands of software installations across all **50 states and Canada**[17](index=17&type=chunk) [Conference Call Details](index=4&type=section&id=2.3%20Conference%20Call%20Details) i3 Verticals will host a conference call on August 8, 2025, to discuss its financial results and operations, with both live telephone and webcast options available, along with replays - A conference call will be held on **Friday, August 8, 2025, at 8:30 a.m. EDT**[13](index=13&type=chunk) - Participants can listen live via telephone or webcast through the company's website[13](index=13&type=chunk)[14](index=14&type=chunk) - A telephonic replay will be available until **August 15, 2025**, and an online replay for **30 days**[13](index=13&type=chunk)[14](index=14&type=chunk) [Forward-Looking Statements](index=5&type=section&id=2.4%20Forward-Looking%20Statements) The release contains forward-looking statements regarding future financial performance and business plans, which are subject to various risks and uncertainties, including economic conditions, competition, regulatory developments, and integration of acquired businesses. The company does not undertake to update these statements publicly - Statements regarding fiscal 2025 financial outlook and future performance are forward-looking and subject to risks and uncertainties[18](index=18&type=chunk) - Factors that could cause actual results to differ include economic and geopolitical conditions, competition, regulatory developments, successful integration of acquired businesses, and the ability to execute strategy post-divestitures[19](index=19&type=chunk) - The company does not undertake to publicly update any forward-looking statements, except as required by law[20](index=20&type=chunk) [Consolidated Financial Statements](index=7&type=section&id=3.%20Consolidated%20Financial%20Statements) [Consolidated Statements of Operations](index=7&type=section&id=3.1%20Consolidated%20Statements%20of%20Operations) The Consolidated Statements of Operations show a significant increase in revenue from continuing operations for both the three and nine months ended June 30, 2025, alongside a substantial reduction in net loss from continuing operations. The company also reported considerable net income from discontinued operations | Metric (Continuing Operations) | Three Months Ended June 30, 2025 ($M) | Three Months Ended June 30, 2024 ($M) | % Change | Nine Months Ended June 30, 2025 ($M) | Nine Months Ended June 30, 2024 ($M) | % Change | | :----------------------------- | :------------------------------------ | :------------------------------------ | :------- | :----------------------------------- | :----------------------------------- | :------- | | Revenue | 51,901 | 46,183 | 12% | 158,257 | 139,909 | 13% | | Total operating expenses | 56,714 | 47,493 | 19% | 155,956 | 138,964 | 12% | | (Loss) income from operations | (4,813) | (1,310) | 267% | 2,301 | 945 | 143% | | Net (loss) income from continuing operations | (996) | (14,407) | N/A | 4,117 | (22,365) | N/A | | Net income from discontinued operations, net of income taxes | 19,421 | 6,109 | N/A | 18,185 | 18,951 | N/A | | Net income (loss) | 18,425 | (8,298) | N/A | 22,302 | (3,414) | N/A | | Net (loss) income attributable to i3 Verticals, Inc. | 12,882 | (7,545) | N/A | 14,784 | (4,569) | N/A | - Certain personnel costs and hosting/software costs were reclassified from selling, general and administrative expenses to other costs of services in fiscal year 2025 to align with the company's core software solutions business model[24](index=24&type=chunk) [Consolidated Balance Sheets](index=9&type=section&id=3.2%20Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets show a decrease in total assets and liabilities from September 30, 2024, to June 30, 2025, primarily due to the divestiture of businesses, while total stockholders' equity saw a slight increase | Metric | June 30, 2025 ($M) | September 30, 2024 ($M) | | :----------------------------- | :----------------- | :---------------------- | | Cash and cash equivalents | 55,544 | 86,525 | | Total current assets | 117,777 | 153,393 | | Total assets | 623,274 | 730,675 | | Total current liabilities | 58,211 | 164,731 | | Total liabilities | 112,153 | 215,316 | | Total stockholders' equity | 383,295 | 379,735 | | Total equity | 511,121 | 515,359 | | Total liabilities and equity | 623,274 | 730,675 | [Consolidated Cash Flow Data](index=10&type=section&id=3.3%20Consolidated%20Cash%20Flow%20Data) For the nine months ended June 30, 2025, i3 Verticals reported net cash used in operating activities, a significant increase in net cash provided by investing activities, and continued net cash used in financing activities | Metric | Nine Months Ended June 30, 2025 ($M) | Nine Months Ended June 30, 2024 ($M) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Net cash (used in) provided by operating activities | (8,276) | 33,266 | | Net cash provided by (used in) investing activities | 78,774 | (16,755) | | Net cash used in financing activities | (104,283) | (15,215) | - Cash used in operating activities for the nine months ended June 30, 2025, included **$35.1 million in cash paid for income taxes**, primarily from the sale of the Merchant Services Business[28](index=28&type=chunk) [Non-GAAP Financial Measures & Reconciliations](index=10&type=section&id=4.%20Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) [Explanation of Non-GAAP Measures](index=10&type=section&id=4.1%20Explanation%20of%20Non-GAAP%20Measures) i3 Verticals provides several non-GAAP financial measures, including Adjusted Income Before Taxes, Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA, and Adjusted EBITDA Margin, to offer investors and management a clearer view of the company's underlying operational performance, excluding certain non-recurring or non-cash items - Non-GAAP measures are provided to enhance understanding of the company's financial results and are used by management for assessment, evaluation, budgeting, resource allocation, and operational decisions[29](index=29&type=chunk) - Adjusted Income Before Taxes from Continuing Operations adjusts net income (loss) from continuing operations for non-controlling interest and certain pre-tax items not reflective of underlying performance[30](index=30&type=chunk) - Adjusted Net Income and Adjusted Diluted Earnings per Share from Continuing Operations apply an estimated long-term effective tax rate of **25%** to adjusted income before taxes[30](index=30&type=chunk) - Adjusted EBITDA from Continuing Operations excludes interest, income taxes, depreciation, amortization, non-controlling interest, and other items not reflective of underlying operating performance[30](index=30&type=chunk) [Reconciliation of GAAP Net Income (Loss) from Continuing Operations to Non-GAAP Adjusted Net Income and Adjusted EBITDA](index=12&type=section&id=4.2%20Reconciliation%20of%20GAAP%20Net%20Income%20(Loss)%20from%20Continuing%20Operations%20to%20Non-GAAP%20Adjusted%20Net%20Income%20and%20Adjusted%20EBITDA) The reconciliation tables detail the adjustments made to GAAP net income (loss) from continuing operations to arrive at non-GAAP adjusted income before taxes, adjusted net income, and adjusted EBITDA, highlighting the impact of items such as equity-based compensation, M&A-related activity, and acquisition intangible amortization | Metric (Continuing Operations) | Three Months Ended June 30, 2025 ($M) | Three Months Ended June 30, 2024 ($M) | Nine Months Ended June 30, 2025 ($M) | Nine Months Ended June 30, 2024 ($M) | | :----------------------------- | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Net (loss) income from continuing operations | (996) | (14,407) | 4,117 | (22,365) | | Non-GAAP adjusted income before taxes from continuing operations | 10,249 | 1,038 | 35,537 | 8,049 | | Adjusted net income from continuing operations | 7,687 | 778 | 26,652 | 6,037 | | Adjusted EBITDA from continuing operations | 12,724 | 10,779 | 43,136 | 35,851 | - Key adjustments include equity-based compensation, M&A-related activity (net impact of professional services and revenue from post-sale non-recurring activities), acquisition intangible amortization, and non-cash interest expense[30](index=30&type=chunk)[34](index=34&type=chunk)[37](index=37&type=chunk) - Estimated taxes for non-GAAP adjusted income are calculated using a **25.0% effective tax rate** for both periods[38](index=38&type=chunk) [GAAP Diluted EPS from Continuing Operations and Non-GAAP Adjusted Diluted EPS from Continuing Operations](index=14&type=section&id=4.3%20GAAP%20Diluted%20EPS%20from%20Continuing%20Operations%20and%20Non-GAAP%20Adjusted%20Diluted%20EPS%20from%20Continuing%20Operations) This section presents both GAAP diluted EPS and non-GAAP adjusted diluted EPS from continuing operations, with the non-GAAP measure reflecting adjustments for non-controlling interest, an assumed 25% tax rate, and the hypothetical exchange of all Common Units and Class B common stock into Class A common stock | Metric (Continuing Operations) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Diluted net (loss) income per share attributable to Class A common stockholders | (0.03) | (0.50) | 0.10 | (0.76) | | Adjusted diluted earnings per share | 0.23 | 0.02 | 0.78 | 0.18 | | Adjusted net income | 7,687 | 778 | 26,652 | 6,037 | | Adjusted weighted average shares of adjusted diluted Class A common stock outstanding | 33,936,121 | 33,707,331 | 34,183,267 | 33,781,826 | - Adjusted diluted EPS assumes all net income from continuing operations is available to Class A common stockholders and that all Common Units and Class B common stock are exchanged for Class A common stock on a one-for-one basis[42](index=42&type=chunk) - Adjusted weighted average shares include shares issuable upon exchange of Common Units in i3 Verticals, LLC and shares from estimated stock option exercises and restricted stock units vesting[43](index=43&type=chunk)

Summary of i3 Verticals (IIIV) 2025 Conference Call Company Overview - i3 Verticals was founded by Greg Daily, who has taken three companies public, with the current CFO being Jeff Smith [2] - The company went public in 2018, initially comprising 95% payments and 5% software [2] - The company has shifted focus towards software, now consisting of 26 software acquisitions primarily in the public sector, with payments now representing 26% of revenues [3] Financial Performance - i3 Verticals reported over $200 million in revenues with an adjusted EBITDA margin in the high 20s [4] - The company targets high single-digit revenue growth and aims for 50 to 100 basis points margin improvement annually [4] - The company is currently debt-free with approximately $64 million in cash and 75% of revenues being recurring, growing at 9% [5] Strategic Focus - The company divested its merchant services and healthcare RCM businesses to narrow its focus and improve leverage [3][11] - i3 Verticals aims to integrate payments capabilities into its vertical market software acquisitions, enhancing monetization opportunities [8][10] - The public sector is identified as a vast and fragmented market with significant transactional revenue opportunities [12][40] Competitive Landscape - Tyler Technologies is identified as a major competitor, but i3 Verticals believes the public sector is highly fragmented, with many niche players [13][46] - The company competes against founder-controlled and private equity-controlled businesses, which often have aggressive pricing strategies [46][47] Market Opportunities - The company sees significant growth potential in various public sector verticals, including Justice Tech, Transportation, Utilities, ERP, and Education [15][20][24][30][35] - i3 Verticals is focused on cloud-based solutions, with a majority of new sales being cloud solutions [51] - The company is exploring AI integration into its software solutions, enhancing efficiency and customer service [56][58] M&A Strategy - i3 Verticals plans to continue making acquisitions, primarily in the $10 million to $30 million range, focusing on founder-owned businesses [54][55] - The company has a $400 million untapped credit facility, providing flexibility for future acquisitions [41] Investor Perspective - The company believes it is undervalued compared to larger competitors like Tyler Technologies, despite having similar growth profiles and margins [60][61] - i3 Verticals is working to clarify its story to investors, moving away from its previous perception as primarily a payments company [62][64] Conclusion - i3 Verticals is positioned for growth in the public sector software market, leveraging its software acquisitions and payments integration strategy while maintaining a strong financial position and exploring new technologies like AI. The company is focused on disciplined capital allocation and strategic acquisitions to enhance its market presence and shareholder value.

Group 1 - The article discusses the services provided by IPO Edge, which includes actionable information on growth stocks, first-look IPO filings, previews on upcoming IPOs, an IPO calendar, a database of U.S. IPOs, and a comprehensive guide to IPO investing [1]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Unaudited financials for March 31, 2025, reflect the Merchant Services Business sale and subsequent operational shifts [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$646.4 million** from **$730.7 million**, driven by reduced cash, with liabilities also down Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $7,749 | $86,541 | | Total current assets | $79,999 | $153,393 | | Goodwill | $280,678 | $280,678 | | Intangible assets, net | $156,331 | $162,816 | | **Total assets** | **$646,359** | **$730,675** | | **Liabilities & Equity** | | | | Total current liabilities | $67,688 | $164,731 | | Long-term debt, less current portion | $12,000 | $0 | | **Total liabilities** | **$132,700** | **$215,316** | | **Total equity** | **$513,659** | **$515,359** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Revenue from continuing operations grew **8.8%** to **$63.1 million**, with income from operations up **59.5%** Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $63,059 | $57,968 | $124,750 | $113,022 | | Income from operations | $3,964 | $2,486 | $6,663 | $3,971 | | Interest expense | $446 | $7,714 | $1,126 | $14,401 | | Net income (loss) from continuing operations | $1,095 | $(2,302) | $4,417 | $(6,517) | | Net (loss) income from discontinued operations | $(326) | $5,650 | $(540) | $11,401 | | **Net income** | **$769** | **$3,348** | **$3,877** | **$4,884** | | Diluted EPS from continuing operations | $0.00 | $(0.07) | $0.09 | $(0.20) | [Condensed Consolidated Statement of Changes in Equity](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) Total equity slightly decreased to **$513.7 million**, driven by net income, equity compensation, and stock repurchases - Key drivers of equity changes include **net income**, **equity-based compensation**, **LLC common unit redemption**, and **stock repurchases**[19](index=19&type=chunk) - The company repurchased **510,155 shares** of Class A Common Stock for **$11.6 million**[19](index=19&type=chunk)[151](index=151&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow shifted to a **$15.6 million** use, primarily due to a **$34.2 million** tax payment from the Merchant Services sale Cash Flow Summary (in thousands) | Cash Flow Activity | Six months ended Mar 31, 2025 | Six months ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(15,627) | $25,147 | | Net cash used in investing activities | $(3,675) | $(12,369) | | Net cash used in financing activities | $(60,029) | $(17,885) | | **Net decrease in cash** | **$(79,331)** | **$(5,107)** | - Negative operating cash flow was primarily driven by a **$34.2 million** income tax payment, up from **$5.4 million** prior year[28](index=28&type=chunk)[327](index=327&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the **Merchant Services Business sale**, cost reclassifications, segment updates, and subsequent **Healthcare RCM business sale** - On September 20, 2024, the company sold its Merchant Services Business for approximately **$437.3 million**, now presented as discontinued operations[36](index=36&type=chunk) - Post-Merchant Services sale, the company reclassified certain costs from SG&A to 'Other costs of services' to align with its software-centric model[51](index=51&type=chunk)[52](index=52&type=chunk) - Reporting segments were updated to **Public Sector** and **Healthcare** after the Merchant Services Business sale[207](index=207&type=chunk) - Subsequent to quarter-end, on May 5, 2025, the company sold its Healthcare RCM Business for **$96.0 million** in cash[251](index=251&type=chunk) - On April 1, 2025, the company acquired a Public Sector utility billing software business for **$9.0 million** in cash[246](index=246&type=chunk)[248](index=248&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strategic shift to a focused enterprise software provider, highlighting divestitures and strong liquidity [Results of Operations](index=57&type=section&id=Results%20of%20Operations) Revenue increased **8.8%** to **$63.1 million**, driven by **Public Sector** growth, with operating income up **59.5%** Revenue by Segment - Three Months Ended March 31 (in millions) | Segment | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Public Sector | $52.4 | $47.1 | 11.3% | | Healthcare | $10.9 | $11.1 | (1.8)% | | **Total Revenue** | **$63.1** | **$58.0** | **8.8%** | - Public Sector revenue growth was driven by **$1.2 million** from an acquisition, **$2.9 million** in recurring revenues, and **$1.3 million** in software license revenue[293](index=293&type=chunk) - Interest expense decreased by **$7.3 million (94.2%)** due to lower debt balances after the Merchant Services sale[299](index=299&type=chunk) [Liquidity and Capital Resources](index=62&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$7.7 million** cash and **$438.0 million** credit facility, bolstered by post-quarter divestiture proceeds - As of March 31, 2025, the company had **$7.7 million** in cash and **$438.0 million** available under its 2023 Senior Secured Credit Facility[319](index=319&type=chunk)[331](index=331&type=chunk) - The company fully repaid its **$26.4 million** 1.0% Exchangeable Senior Notes upon maturity on February 15, 2025[321](index=321&type=chunk) - The company repurchased **510,155 shares** for **$11.6 million** under its **$50 million** share repurchase program[151](index=151&type=chunk)[354](index=354&type=chunk) - The company has a Tax Receivable Agreement (TRA) liability of **$33.5 million**, with payments expected over 26 years[356](index=356&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate fluctuations on the **2023 Senior Secured Credit Facility**, with a **1.0%** rate increase impacting by **$0.1 million** - The main market risk is interest rate risk on the 2023 Senior Secured Credit Facility; a **1.0%** rate change on **$12.0 million** outstanding would impact by **$0.1 million**[363](index=363&type=chunk) [Controls and Procedures](index=69&type=section&id=Item%204.%20Controls%20and%20Procedures) CEO and CFO concluded disclosure controls were effective, with no material changes in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025[365](index=365&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter[366](index=366&type=chunk) [PART II. OTHER INFORMATION](index=70&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=70&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in the S&S Litigation regarding a third-party software product, not expected to have a material adverse effect - The company is a defendant in the S&S Litigation by the State of Louisiana concerning a third-party remote access software product[195](index=195&type=chunk)[197](index=197&type=chunk) - Management does not believe the S&S Litigation will have a material adverse effect on the business or financial condition[199](index=199&type=chunk) [Risk Factors](index=70&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors include volatile global conditions, risks from the Healthcare RCM Business sale, and non-comparable future financials - Risks include volatile global conditions, such as U.S.-Canada trade relations and the India-Pakistan dispute, impacting operations[370](index=370&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk) - Risks from the Healthcare RCM Business sale include strategy execution, potential liabilities, and increased Public Sector business dependence[376](index=376&type=chunk) - Future financial statements will not be comparable due to the Healthcare RCM Business reclassification to discontinued operations[377](index=377&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued **813,782** unregistered Class A common shares and repurchased **13,370** shares for **$0.4 million** - An aggregate of **813,782 shares** of Class A common stock were issued in exchange for LLC units, exempt from registration[378](index=378&type=chunk) Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | Jan 2025 | 13,370 | $22.99 | $38,519,000 | | Feb 2025 | 0 | N/A | $38,519,000 | | Mar 2025 | 0 | N/A | $38,519,000 | | **Total** | **13,370** | **$22.99** | **$38,519,000** | [Defaults Upon Senior Securities](index=72&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported for the period[382](index=382&type=chunk) [Mine Safety Disclosures](index=72&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[383](index=383&type=chunk) [Other Information](index=72&type=section&id=Item%205.%20Other%20Information) No other information was reported, and no director or officer adopted or terminated a Rule 10b5-1 trading arrangement - No other information was reported; no director or officer adopted or terminated a Rule 10b5-1 trading plan during the quarter[384](index=384&type=chunk) [Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed, including agreements for recent transactions, debt amendments, and officer certifications

Financial Data and Key Metrics Changes - The company reported RemainCo revenues for Q2 fiscal 2025 increased 11.6% to $54.1 million from $48.5 million in Q2 fiscal 2024, reflecting $4.4 million of organic growth or 9% and $1.2 million from an acquisition in the public sector [11] - Annual recurring revenues for RemainCo increased 9.2% to $164.5 million for Q2 fiscal 2025 compared to $150.6 million for Q2 fiscal 2024 [12] - Adjusted EBITDA for RemainCo increased 17% to $15.8 million for Q2 fiscal 2025 from $13.5 million for Q2 fiscal 2024, with adjusted EBITDA as a percentage of revenues rising to 29.3% from 27.9% [13] Business Line Data and Key Metrics Changes - The public sector vertical market experienced a revenue growth of 12% in Q2 fiscal 2025, with SaaS revenue growth at 23% [6] - Non-recurring sales of software licenses for RemainCo increased to $2.8 million for Q2 fiscal 2025 from $1 million for Q2 fiscal 2024 [12] Market Data and Key Metrics Changes - The company anticipates high single-digit organic revenue growth for RemainCo, excluding the healthcare RCM business [16] - The revenue distribution for the remaining two quarters is expected to be approximately 40.8% for Q3 and 50.2% for Q4, with Q3 expected to be the low point for revenue and margins [17] Company Strategy and Development Direction - The company is focused on the public sector vertical market following the divestiture of its Healthcare RCM business, aiming to enhance efficiency and service delivery through better software solutions [6][7] - The recent acquisition in the utility billing space is expected to expand the company's market presence and enhance its offerings in the utilities market [18][20] - The company is committed to a domain-specific approach across targeted markets, which is expected to drive organic growth over time [25] Management's Comments on Operating Environment and Future Outlook - Management noted that the geopolitical landscape presents opportunities at the state and local levels, particularly tied to evolving efficiency requirements [24] - The company has removed approximately $2.5 million of revenues from its fiscal 2025 outlook due to trade friction and delays with a Manitoba contract, indicating a conservative approach based on customer discussions [16][49] Other Important Information - The company has a strong balance sheet with a net debt of $4 million and a cash position of approximately $64 million, with plans to use cash and borrowings for acquisitions and potential stock repurchases [14] - The company expects adjusted EBITDA margin improvement of 50 to 100 basis points per year [16] Q&A Session Summary Question: What is the size of the remaining healthcare business after the divestiture? - The remaining healthcare business is focused on workflow software for providers, with expected revenue of approximately $8 million for the fiscal year [32] Question: What is the margin profile of the remaining healthcare business? - The margin profile is expected to be consistent with the public sector, in the low-forty percent range [34] Question: What is the expected free cash flow conversion for RemainCo? - The free cash flow conversion is expected to be well in excess of two-thirds of EBITDA, driven by a strong balance sheet and reduced interest expenses [36] Question: What is the revenue and margin cadence expected for Q3 and Q4? - Q3 revenue is expected to be about 48% of remaining revenue, with margins dipping into the mid-20s, while Q4 should see revenue at about 52% and margins recovering into the high 20s [37] Question: Is the small utility billing acquisition included in the updated guidance? - Yes, the small utility billing acquisition is included in the updated guidance [42] Question: What is the status of the Manitoba contract and its impact on guidance? - The removal of $2.5 million from guidance is based on conservatism due to delays and sequencing issues with the customer [49]

Financial Data and Key Metrics Changes - The company reported a revenue increase of 11.6% for RemainCo, reaching $54.1 million in Q2 2025 compared to $48.5 million in Q2 2024, driven by $4.4 million of organic growth and $1.2 million from an acquisition [12] - Annual recurring revenues for RemainCo increased by 9.2% to $164.5 million for Q2 2025, compared to $150.6 million for Q2 2024, with 76% of revenues coming from recurring sources [13] - Adjusted EBITDA for RemainCo increased by 17% to $15.8 million for Q2 2025, with an adjusted EBITDA margin of 29.3%, up from 27.9% in Q2 2024 [14] Business Line Data and Key Metrics Changes - The public sector vertical market experienced a revenue growth of 12%, with SaaS revenue growing at 23% [7] - Non-recurring sales of software licenses for RemainCo increased to $2.8 million for Q2 2025, compared to $1 million for Q2 2024 [13] Market Data and Key Metrics Changes - The company anticipates high single-digit organic revenue growth for RemainCo, excluding the healthcare RCM business, and expects adjusted EBITDA margin improvement of 50 to 100 basis points per year [16] - The revenue distribution for the remaining two quarters is expected to be approximately 48% for Q3 and 52% for Q4, with Q3 anticipated to be the low point for revenue and margins [37] Company Strategy and Development Direction - The company is focused on the public sector vertical market following the divestiture of its Healthcare RCM business, aiming to enhance efficiency and service delivery through better software solutions [7][8] - The recent acquisition in the utility billing space is expected to expand the company's market presence and enhance its offerings in the utilities market [18][20] - The company is committed to a domain-specific approach, creating tailored solutions that foster long-term relationships with customers [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the opportunities emerging at the state and local levels, particularly in response to evolving efficiency requirements [24] - The company is monitoring the geopolitical landscape and sees potential for growth despite current challenges, such as trade friction and project delays [16][50] Other Important Information - The company has a strong balance sheet with a net debt of $4 million and a cash position of approximately $64 million, with plans for acquisitions and potential stock repurchases [15] - The company has removed about $2.5 million of revenues from its outlook due to ongoing delays with a Manitoba contract, reflecting a conservative approach based on customer discussions [16][50] Q&A Session Summary Question: What is the size of the remaining healthcare business? - The remaining healthcare business is focused on workflow software for providers, with expected revenue of approximately $8 million for the fiscal year [33] Question: What is the margin profile of the remaining healthcare business? - The margin profile is expected to be consistent with the public sector, in the low-forty percent range [34] Question: What is the expected free cash flow conversion for RemainCo? - The free cash flow conversion is expected to be well in excess of two-thirds of EBITDA, driven by a strong balance sheet and reduced interest expenses [35][36] Question: What is the revenue and margin cadence for Q3 and Q4? - Q3 is expected to account for about 48% of remaining revenue, with margins dipping into the mid-20s, while Q4 should see a recovery into the high 20s [37] Question: Is the utility billing acquisition included in the updated guidance? - Yes, the utility billing acquisition is included in the updated guidance [42] Question: What is the status of the Manitoba contract? - The revenue removal from guidance is based on conservative discussions with the customer, reflecting delays in their project timelines [50]

Financial Data and Key Metrics Changes - The company reported RemainCo revenues for Q2 2025 increased 11.6% to $54.1 million from $48.5 million in Q2 2024, reflecting $4.4 million of organic growth or 9% and $1.2 million from an acquisition in the public sector [13] - Annual recurring revenues for RemainCo increased 9.2% to $164.5 million for Q2 2025 compared to $150.6 million for Q2 2024, with 76% of revenues coming from recurring sources [14] - Adjusted EBITDA for RemainCo increased 17% to $15.8 million for Q2 2025 from $13.5 million for Q2 2024, with adjusted EBITDA as a percentage of revenues rising to 29.3% from 27.9% [15] Business Line Data and Key Metrics Changes - The public sector vertical market experienced a revenue growth of 12% and SaaS revenue growth of 23% [7] - Non-recurring sales of software licenses for RemainCo increased to $2.8 million for Q2 2025 from $1 million for Q2 2024, although software license sales are expected to be lower in the second half of the fiscal year [14] Market Data and Key Metrics Changes - The company anticipates high single-digit organic revenue growth for RemainCo, excluding the healthcare RCM business, and expects adjusted EBITDA margin improvement of 50 to 100 basis points per year [17] - The revenue distribution for the remaining two quarters is expected to be approximately 40.8% for Q3 and 50.2% for Q4, with public sector payments and software services revenues declining seasonally during Q3 [18] Company Strategy and Development Direction - The company is focused on the public sector vertical market following the divestiture of its RCM business, aiming to enhance efficiency and service delivery through better software solutions [7][8] - The recent acquisition in the utility billing space is expected to expand the company's market presence and enhance its offerings in the utilities market [20][22] - The company is committed to a domain-specific approach, leveraging tailored solutions and deep expertise to foster long-term relationships with customers [25] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are opportunities emerging at the state and local levels, it is too early to determine if these represent a trend [26] - The company is optimistic about its ability to monetize software systems through various pricing models, which lowers barriers to entry and accelerates implementation timelines [27] - Management expressed confidence in the strong acquisition pipeline, focusing on smaller tuck-in deals within the public sector [48] Other Important Information - The company has a strong balance sheet with a net debt of $4 million and a cash position of approximately $64 million, with $400 million of borrowing capacity under its revolving credit facility [16] - The company expects to use cash and borrowings for acquisitions and potential stock repurchases [16] Q&A Session Summary Question: What is the size of the remaining healthcare business? - The remaining healthcare business is focused on workflow software for providers, with revenue approximately $8 million for the fiscal year [34] Question: What is the expected free cash flow conversion for RemainCo? - The free cash flow conversion is expected to be well in excess of two-thirds of EBITDA, driven by the absence of interest expense and increased investment in software development [37][38] Question: What is the revenue and margin cadence for Q3 and Q4? - Q3 revenue is expected to be about 48% of remaining revenue, with margins dipping into the mid-20s, while Q4 should see revenue at about 52% and margins recovering into the high 20s [39] Question: Is the utility billing acquisition included in the updated guidance? - Yes, the utility billing acquisition is included in the updated guidance [43] Question: What is the status of the Manitoba contract? - The revenue from the Manitoba contract has been conservatively removed from guidance due to delays and sequencing issues with the customer [49][51]