10-Q: i3 Verticals Q2 2026 Financial Results

i3 Verticals reports Q2 2026 revenue of $57.5 million, driven by growth in recurring software and services revenue.

Summary

• Revenue for the three months ended March 31, 2026, was $57.5 million, up 6.2% from $54.1 million in the prior-year period.
• Net income attributable to i3 Verticals, Inc. was $1.5 million for the quarter, compared to a net loss of $0.2 million in the same period last year.
• Annualized recurring revenue (ARR) reached $183.5 million, an 11.6% increase year-over-year.
• The company completed a $60 million acquisition of a transportation market business on January 1, 2026.
• The company repurchased 2,220,736 shares of Class A common stock during the quarter for $51.0 million.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a stable report reflecting a company successfully executing its strategic pivot, though profitability remains pressured by integration and acquisition costs.

Positives

• Revenue growth of 6.2% for the quarter and 3.6% for the six-month period.
• Strong ARR growth of 11.6% year-over-year, indicating a healthy recurring revenue base.
• Successful acquisition of a transportation market business, expanding the company's public sector footprint.
• Strong liquidity position with $319.0 million in available borrowing capacity under the credit facility.
• Maintained compliance with financial covenants, with a total leverage ratio of 1.2x.

Negatives

• Income from operations decreased 26.0% to $3.7 million for the quarter.
• Operating expenses increased 9.6% to $53.8 million, driven by higher SG&A and depreciation/amortization.
• Interest expense rose significantly by 155.8% due to higher average outstanding debt.
• Net cash used in investing activities increased to $64.7 million, primarily due to the $60 million acquisition.

Risks

• Ongoing litigation, including the PaySchools class action and the S&S data breach litigation in Louisiana.
• Cybersecurity risks and potential for data breaches that could lead to reputational damage and financial liability.
• Reliance on a limited number of hardware suppliers, making the company vulnerable to supply chain disruptions.
• Economic uncertainty, including inflationary pressures and potential reductions in government spending.
• Potential impairment charges for goodwill and intangible assets if the company's stock price declines.

Future Outlook

The company expects that cash flow from operations, current cash, and available borrowing capacity will be sufficient to fund cash needs for at least the next twelve months. The company continues to pursue a growth strategy focused on acquisitions.

Management Comments

• Management emphasizes the strategic priority of recurring revenue sources.
• Management notes that the company is in compliance with all financial covenants under its credit facility.

Industry Context

StockSavvy.ai notes that i3 Verticals is successfully transitioning toward a pure-play public sector software model following the divestiture of its merchant services and healthcare RCM businesses. This shift aligns with broader industry trends favoring specialized, high-margin SaaS solutions for government entities.

Comparison to Industry Standards

• The company's focus on public sector vertical software is consistent with peers like Tyler Technologies, though at a smaller scale.
• The company's leverage ratio of 1.2x is conservative compared to many high-growth SaaS peers, providing flexibility for future M&A.

Corporate Governance

Legal Proceedings

• PaySchools class action regarding school lunch transaction fees.
• S&S litigation in Louisiana regarding a data breach and cybersecurity practices.

Related Party Transactions

• Tax Receivable Agreement payments to Continuing Equity Owners.

Stakeholder Impact

• Shareholders benefit from the share repurchase program.
• Customers in the public sector continue to receive software services.
• Continuing Equity Owners maintain their interest in i3 Verticals, LLC.

Next Steps

• Continue integration of the recently acquired transportation market business.
• Monitor ongoing litigation, specifically the S&S class certification hearing scheduled for June 8, 2026.

Key Dates

Recommendation

The company is in a transition phase with a clear strategy, but the ongoing litigation and integration of recent acquisitions warrant a cautious hold until further progress is demonstrated.

Keywords

i3 Verticals, public sector software, SaaS, payment facilitator, financial results, 10-Q, IIIV