i3 Verticals(IIIV) - 2025 Q2 - Quarterly Results

i3 Verticals Q2 2025 Financial Report Second Quarter 2025 Financial Highlights The company reported strong Q2 growth from continuing operations, driven by increased revenue and adjusted EBITDA Q2 & H1 2025 Financial Performance (from Continuing Operations) | Metric | Q2 2025 | Q2 2024 | % Change | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $63.1M | $58.0M | +8.8% | $124.8M | $113.0M | +10.4% | | Net Income (Loss) | $1.1M | ($2.3M) | n/m | $4.4M | ($6.5M) | n/m | | Adjusted EBITDA | $17.1M | $15.2M | +12.7% | $33.5M | $29.2M | +14.8% | | Adjusted Diluted EPS | $0.32 | $0.12 | +167% | $0.62 | $0.24 | +158% | - Adjusted EBITDA margin from continuing operations improved to 27.2% in Q2 2025, up from 26.2% in the prior year's second quarter[4] - Annualized Recurring Revenue (ARR) from continuing operations grew by 6.5% to $199.1 million for the three months ended March 31, 2025[4] Corporate Developments The company divested its Healthcare RCM business and acquired a utility billing software company to focus on the public sector - On May 5, 2025, the company sold its Healthcare RCM Business for $96.0 million in cash, which had contributed $9.1 million in revenue for Q2 2025[4][6] - On April 1, 2025, the company acquired a utility billing software company for $9.0 million in cash, with up to an additional $5.0 million in contingent consideration[4][9] CEO Commentary and 2025 Outlook The CEO highlighted a sharpened focus on the public sector market, supported by recent M&A and a revised 2025 outlook - The company will be completely focused on bringing enterprise software to its public sector clients, viewing this market as being in the early stages of a long transformation cycle[7][9] - The divestiture of the RCM business primes the company for additional M&A, with a continued focus on acquiring great businesses in the public sector space[9] Revised Fiscal Year 2025 Outlook (RemainCo Operations) | Metric | Previous Outlook | Revised Outlook | | :--- | :--- | :--- | | Revenue | $243.0M - $263.0M | $207.0M - $217.0M | | Adjusted EBITDA | $63.0M - $71.5M | $55.0M - $61.0M | | Adjusted Diluted EPS | $1.05 - $1.25 | $0.96 - $1.06 | Consolidated Financial Statements The statements reflect improved operating income, lower liabilities, and cash flow impacted by a large tax payment Consolidated Statements of Operations Revenue grew 9% in Q2, while a 94% drop in interest expense drove a significant turnaround in net income Q2 Statement of Operations Highlights (Continuing Operations) | Metric (in thousands) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $63,059 | $57,968 | 9% | | Income from operations | $3,964 | $2,486 | 59% | | Interest expense | $446 | $7,714 | (94)% | | Net income (loss) from continuing operations | $1,095 | ($2,302) | n/m | Six-Month Statement of Operations Highlights (Continuing Operations) | Metric (in thousands) | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $124,750 | $113,022 | 10% | | Income from operations | $6,663 | $3,971 | 68% | | Interest expense | $1,126 | $14,401 | (92)% | | Net income (loss) from continuing operations | $4,417 | ($6,517) | n/m | Consolidated Balance Sheets Total assets and liabilities decreased, primarily due to changes in cash and the repayment of long-term debt Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $7,749 | $86,541 | | Total assets | $646,359 | $730,675 | | Long-term debt, less current portion | $12,000 | $0 | | Total liabilities | $132,700 | $215,316 | | Total equity | $513,659 | $515,359 | Consolidated Cash Flow Data Operating cash flow turned negative due to a large tax payment related to a prior divestiture Six-Month Cash Flow Summary (in thousands) | Activity | H1 2025 | H1 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) | - Cash used in operating activities for the six months ended March 31, 2025, included a significant $34.2 million payment for income taxes, mainly driven by the sale of the Merchant Services Business in fiscal 2024[26] Reconciliation of GAAP to Non-GAAP Financial Measures The company reconciles GAAP to non-GAAP measures by adjusting for items like amortization and equity-based compensation Reconciliation to Adjusted EBITDA and Adjusted Net Income GAAP net income of $1.1M was reconciled to a non-GAAP Adjusted EBITDA of $17.1M through several key adjustments Q2 2025 Reconciliation to Adjusted EBITDA (in thousands) | Line Item | Q2 2025 | | :--- | :--- | | Net income from continuing operations | $1,095 | | Provision for income taxes | $3,054 | | Equity-based compensation | $3,932 | | Acquisition intangible amortization | $4,913 | | Cash interest (income) expense, net | $64 | | Depreciation and internally developed software amortization | $2,927 | | Other adjustments | $1,157 | | Adjusted EBITDA from continuing operations | $17,142 | Q2 2025 Reconciliation to Adjusted Net Income (in thousands) | Line Item | Q2 2025 | | :--- | :--- | | Net income (loss) from continuing operations | $1,095 | | Total Non-GAAP adjustments (pre-tax) | $13,056 | | Non-GAAP adjusted income before taxes | $14,151 | | Estimated taxes at 25% | ($3,537) | | Adjusted net income from continuing operations | $10,614 | Reconciliation of GAAP to Non-GAAP Diluted EPS GAAP diluted EPS of $0.00 was adjusted to a non-GAAP figure of $0.32, reflecting non-cash and non-recurring items EPS Comparison (from Continuing Operations) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | GAAP Diluted EPS | $0.00 | ($0.07) | $0.09 | ($0.20) | | Non-GAAP Adjusted Diluted EPS | $0.32 | $0.12 | $0.62 | $0.24 |