8-K: i3 Verticals Reports Strong Q2 2025 Financial Results, Completes Acquisition and Divestiture

i3 Verticals announces positive Q2 2025 financial results, including revenue growth and increased adjusted EBITDA, alongside the completion of a utility billing software acquisition and the divestiture of its Healthcare RCM business.

Summary

• i3 Verticals reported its financial results for the fiscal second quarter ended March 31, 2025.
• Second quarter revenue was $63.1 million, an increase of 8.8% over the prior year's second quarter.
• Revenue for the six months ended March 31, 2025, was $124.8 million, an increase of 10.4% over the prior year's first six months.
• Second quarter net income from continuing operations was $1.1 million, compared to a net loss of $2.3 million in the prior year's second quarter.
• Net income for the six months ended March 31, 2025, was $4.4 million, compared to a net loss of $6.5 million in the prior year's first six months.
• Second quarter adjusted EBITDA from continuing operations was $17.1 million, an increase of 12.7% over the prior year's second quarter.
• Adjusted EBITDA from continuing operations for the six months ended March 31, 2025, was $33.5 million, an increase of 14.8% over the prior year's first six months.
• Annualized Recurring Revenue (ARR) from continuing operations for the three months ended March 31, 2025, was $199.1 million, representing a period-to-period growth rate of 6.5%.
• On April 1, 2025, the Company acquired a utility billing software company for $9.0 million in cash consideration, and an additional amount of contingent consideration (in an amount not to exceed $5.0 million).
• On May 5, 2025, the Company sold its Healthcare Revenue Cycle Management business (the Healthcare RCM Business) to Infinx for $96.0 million in cash, subject to post-closing net working capital and other purchase price adjustments.

Sentiment

Score: 7

Explanation: The sentiment is positive due to revenue growth, improved profitability, strategic acquisitions, and divestitures. However, the revised outlook and inherent risks temper the overall sentiment.

Positives

• Revenue increased by 8.8% in Q2 2025 compared to the prior year.
• Net income from continuing operations improved significantly compared to the previous year.
• Adjusted EBITDA increased by 12.7% in Q2 2025.
• ARR grew by 6.5%, indicating a healthy recurring revenue base.
• The acquisition of a utility billing software company expands the company's offerings in the public sector.
• The divestiture of the Healthcare RCM business provides a cash infusion of $96.0 million.

Negatives

• The company revised its revenue outlook for the fiscal year ending September 30, 2025, from $243 million $263 million to $207 million $217 million.
• The company revised its adjusted EBITDA outlook for the fiscal year ending September 30, 2025, from $63 million $71.5 million to $55 million $61 million.

Risks

• Ongoing and future economic and geopolitical conditions, including the impact of inflation, elevated interest rates, and tariff and trade-related developments, could impact results.
• Competition in the industry and the company's ability to compete effectively pose a risk.
• Successful integration of acquired businesses is crucial for future growth.
• The company's ability to execute on its strategy and achieve its goals following the completion of the sale of its Healthcare RCM and merchant services businesses is uncertain.
• Future decisions made by the company and its competitors could affect performance.

Future Outlook

The company provided revised guidance for the fiscal year ending September 30, 2025, excluding the Healthcare RCM Business: Revenue is expected to be in the range of $207 million to $217 million, and adjusted EBITDA is expected to be in the range of $55 million to $61 million.

Management Comments

• Greg Daily, Chairman and CEO of i3 Verticals, commented, 'We believe that the public sector is even earlier stages of a similar transformation cycle.'
• Greg Daily, Chairman and CEO of i3 Verticals, commented, 'The divestiture of the RCM business primes us for additional M&A.'

Industry Context

The company's focus on vertical market software, particularly in the public sector, aligns with the trend of technological transformation and increasing government efficiency. The divestiture of the Healthcare RCM business and acquisition of a utility billing software company indicate a strategic shift towards the public sector.

Comparison to Industry Standards

• It is difficult to compare i3 Verticals directly to industry standards without knowing the specific sub-sectors within public sector and payment processing that they operate.
• Companies like Tyler Technologies (TYL) and NIC Inc. (acquired by Tyler Technologies) are key players in the public sector software market, providing solutions for government operations and citizen engagement.
• In the payment processing space, companies like Global Payments (GPN) and Fiserv (FISV) are major competitors, offering a wide range of payment solutions across various industries.
• i3 Verticals' focus on specific verticals within the public sector and its integrated software and payment solutions differentiate it from broader players in these markets.
• The company's ARR growth of 6.5% indicates a solid recurring revenue base, which is a key metric for software-as-a-service (SaaS) companies.

Stakeholder Impact

• Shareholders will likely react positively to the improved financial performance and strategic moves.
• Employees in the Healthcare RCM Business will transition to Infinx.
• Customers in the public sector will benefit from the company's increased focus and expanded offerings.
• The divestiture provides i3 Verticals with additional capital to invest in its core business.

Next Steps

• The company will focus on bringing the best possible enterprise software to its public sector clients.
• The company will pursue additional M&A opportunities in the public sector software space.
• The company will work to integrate the newly acquired utility billing software company.
• The company will host a conference call on May 9, 2025, to discuss financial results and operations.

Key Dates

Keywords

i3 Verticals, Financial Results, Q2 2025, Acquisition, Divestiture, Software, ARR, EBITDA, Revenue, Healthcare RCM, Utility Billing, Public Sector