i3 Verticals (IIIV) Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Revenue: Increased 6% year-over-year to $57.5 million, up from $54.1 million in Q2 2025, primarily due to two acquisitions.

Organic Revenue: Flat, with a $2.2 million decline in professional services, particularly in the utilities market.

Annual Recurring Revenue (ARR): Grew 12% to $183.5 million compared to $164.5 million in Q2 2025.

SaaS Revenue: Increased 37%, while transaction-based revenue grew 7%.

Adjusted EBITDA: Rose 5% to $16.6 million, with an adjusted EBITDA margin of 28.8%, down from 29.3% due to investments in Justice Tech and higher hosting costs.

Adjusted Diluted EPS: Increased 10% to $0.32 from $0.29 in Q2 2025.

Balance Sheet: Debt stood at $81 million with a cash balance of $7.1 million; $319 million available under the revolving credit facility.

2Strategic Updates and Business Highlights

Focus on investing in the Justice Tech market to modernize court systems and enhance revenue opportunities.

Continued development of AI-powered capabilities to improve operational efficiency and customer experience.

New tools released for data analysis and document management, enhancing client engagement and operational insights.

Strong demand across core markets, particularly in Justice Tech, transportation, and education, with increased multi-module evaluations from clients.

Expansion of AI capabilities is expected to enhance product development and customer relationships.

3Forward Guidance and Outlook

Revenue Guidance for FY 2026: Expected to be between $221 million and $229 million, reflecting a downward adjustment due to professional services headwinds.

Adjusted EBITDA Guidance: Projected between $61 million and $65 million.

Adjusted Diluted EPS Guidance: Expected to be between $1.09 and $1.15.

Anticipated continued double-digit growth in recurring revenues for the remainder of FY 2026.

Long-term organic revenue growth expected to remain in the high single digits, with improved growth anticipated in 2027.

4Bad News, Challenges, or Points of Concern

Professional Services Decline: Ongoing weakness in professional services, particularly in the utilities market, has led to a downward revision in revenue expectations.

Organic Revenue Flatness: Organic revenue growth was flat, indicating challenges in certain segments.

Margin Pressure: Adjusted EBITDA margin decreased slightly, attributed to investments and higher costs.

Market Risks: Professional services are expected to remain volatile, impacting overall revenue stability.

5Notable Q&A Insights

Management expressed confidence in the long-term growth trajectory, particularly in the Justice Tech and transportation markets, which are expected to drive ARR growth.

The recent acquisition in auto insurance verification is anticipated to provide significant organic growth opportunities, with 100% market share in states won.

AI capabilities are expected to enhance revenue through improved operational efficiency and customer engagement, with early signs of increased maintenance fees and pricing related to AI deployments.

Approximately 50% of new sales in the education sector are from new customers, indicating a strong pipeline and market interest compared to historical averages. Overall, i3 Verticals reported solid growth in recurring revenue but faced challenges in professional services, prompting a cautious outlook for the remainder of FY 2026. The company remains focused on strategic investments and leveraging AI to drive future growth.