Summary of i3 Verticals FY Conference Call (March 02, 2026) Company Overview - **Company**: i3 Verticals (NasdaqGS:IIIV) - **Industry**: Public Sector Software Solutions - **Core Niches**: - JusticeTech: Software for courts, including Case Management Solutions - Utilities: Customer information systems for utilities - Public Administration: Government fund accounting and tax solutions - Transportation: Software for Department of Transportation and motor vehicle services - Education: School lunch point-of-sale solutions [2][3][4][5] Financial Performance - **Revenue Composition**: Approximately 25% of revenue comes from payment solutions integrated into their software [5] - **Growth Rates**: - Justice market: Largest and fastest-growing segment, over 25% of total revenue [34] - Education: Consistent growth at around 10% [34] - Public Administration: Mid-single digits growth [34] - Transportation: Variable growth, reliant on large contracts [34] - Utilities: Stable but lower growth due to reliance on professional services [34] Market Dynamics - **Technology Adoption**: The public sector is lagging in technology adoption, particularly in AI [6] - **Competitive Landscape**: Main competitor is Tyler Technologies, with other niche players in specific markets [6][40] - **Market Fragmentation**: The public sector software market is large and fragmented, with many small players [6] AI and Innovation - **AI Opportunities**: Currently, no significant AI-native competitors are emerging in the public sector; i3 Verticals is actively engaging customers to drive AI discussions [9][10] - **Strategic Positioning**: i3 is positioned as a system of record for customers, creating a strong lock-in with transactional revenue [11][12] - **Future Development**: The company is exploring new business models and leveraging AI tools to enhance service offerings [15][16] Acquisition Strategy - **Recent Acquisition**: Acquired a driver and motor vehicle software company for approximately $60 million, focusing on electronic insurance verification [25][26] - **Integration Benefits**: The acquisition provides a competitive advantage through established integrations with insurance carriers and legislative support [27][28] - **Growth Potential**: The acquired business is expected to grow durably at around 20% [30] Revenue Structure and Pricing - **Contract Structure**: i3 Verticals does not utilize seat-based pricing, aiming for deeper penetration within customer organizations [22][23] - **Recurring Revenue**: Approximately 80% of revenue is recurring, with a focus on SaaS [46] - **Professional Services**: Revenue from professional services is projected to decrease due to specific customer contracts but is not expected to erode long-term [52] Capital Allocation - **Debt Position**: Post-acquisition, the company has a modest debt position with a $400 million credit facility available [54] - **Share Buybacks**: The board approved a $60 million buyback plan, indicating a balanced approach to capital allocation between M&A and buybacks [54][55] - **M&A Pipeline**: i3 Verticals aims for 3-4 acquisitions per year, targeting around $100 million in M&A, with a focus on opportunistic deals [61][65] Closing Remarks - **Outlook**: i3 Verticals is optimistic about leveraging AI and new tools to enhance its market position and drive growth in the public sector [68][69]