IIIV — i3 Verticals, Inc.

i3 Verticals Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Revenue: Q1 2026 revenue increased by 1% to $52.7 million, compared to $52.2 million in Q1 2025.
• Recurring Revenue: Grew by 8% to $169.6 million, constituting 80% of total revenue.
• SaaS Revenue: Increased by over 24%, marking the fourth consecutive quarter of growth above 20%.
• Adjusted EBITDA: Declined by $1 million to $13.6 million, with a margin of 25.8%, down from 27.9% in Q1 2025.
• Adjusted Diluted EPS: Reported at $0.26.
• Balance Sheet: Strong position with $37 million in cash and no debt.

2. Strategic Updates and Business Highlights

• Acquisition: Closed a $60 million acquisition of a software provider for driver and motor vehicle insurance verification, expected to enhance growth in the transportation market.
• Market Focus: Continued emphasis on SaaS and recurring revenue sources, with strategic investments in justice and utility markets.
• Product Development: Introduction of new offerings in JusticeTech, including the CourtOne case management system, and enhancements in AI capabilities across various markets.
• Customer Engagement: Strong partnerships and contracts secured with state agencies, including the West Virginia Supreme Court and Arizona Department of Real Estate.

3. Forward Guidance and Outlook

• Revenue Guidance: FY 2026 revenue expected between $223 million and $234 million, with recurring revenues projected to grow at a double-digit rate.
• Adjusted EBITDA Guidance: Forecasted between $61 million and $66.5 million for FY 2026.
• Long-term Growth: Anticipated organic revenue growth remains in the high single-digit range, with expectations for adjusted EBITDA margin improvement.

4. Bad News, Challenges, or Points of Concern

• Professional Services Decline: Nonrecurring professional services revenue is expected to decline more than previously anticipated, from $33 million to $31 million for FY 2026.
• Adjusted EBITDA Decline: The decrease in adjusted EBITDA reflects increased investments and higher hosting costs, which may impact margins in the short term.
• Market Risks: Potential headwinds from slower adoption of AI technologies in GovTech due to regulatory and operational challenges.

5. Notable Q&A Insights

• Organic Growth Concerns: Analysts noted a slight decline in organic growth expectations, primarily driven by professional services.
• Capital Allocation Strategy: Management confirmed ongoing opportunistic stock buybacks alongside M&A activities, with a focus on leveraging a strong balance sheet.
• AI Adoption: There are mixed sentiments regarding AI's impact on GovTech, with expectations for slow adoption due to regulatory complexities, despite internal advancements in AI capabilities.
• Future M&A Opportunities: The company remains open to pursuing additional acquisitions, particularly those that align with their strategic goals and exhibit strong growth potential.

Overall, i3 Verticals demonstrated stable revenue growth with a strong focus on recurring revenue streams, while facing challenges in professional services and navigating the complexities of AI adoption in the public sector.