10-Q · May 8, 2026
i3 Verticals, Inc. reported a Q2 FY2026 revenue of $57.5 million, a 6.2% increase from $54.1 million in the same quarter last year. The diluted EPS was $0.32, exceeding the estimate of $0.27. The company highlighted…
Earnings analysis · 10-Q
IIIV earnings analysis
Filed August 7, 2026 · Our reading of the company's report
The latest report
i3 Verticals delivered modest year-over-year growth, with revenue up 2.2% to $53.067 million and ARR up 8.3% to $174.1 million, while nine-month operating income nearly doubled to $4.460 million. However, quarterly…
Read full summary
i3 Verticals delivered modest year-over-year growth, with revenue up 2.2% to $53.067 million and ARR up 8.3% to $174.1 million, while nine-month operating income nearly doubled to $4.460 million. However, quarterly revenue fell approximately 8.5% sequentially and operating margin declined to approximately negative 1.7% from 6.5%, with profitability aided by a $9.9 million unrealized investment gain. Liquidity and covenant headroom remain solid, but the company has only $2.6 million of cash, $114.3 million of debt and substantial acquisition, buyback and contingent-consideration commitments.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $0.25
- Segment
- One operating and reportable segment: public sector enterprise software and services; revenue was $53.067 million for the three months ended June 30, 2026.
What stood out
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Recurring Revenue Supported Growth
Revenue increased 2.2% year over year to $53.067 million from $51.901 million, driven by a $3.3 million increase in recurring revenue that offset a $2.2 million decline in non-recurring revenue. Revenue declined approximately 8.5% sequentially from $58 million in Q2 FY2026.
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Gross Margin Remained Near 69%
Gross margin was approximately 69.3%, based on $53.067 million of revenue and $16.314 million of costs of services, down from 70.2% in the prior quarter but up from approximately 67.8% in the year-ago quarter.
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Operating Results Improved Year to Date
Nine-month income from operations increased 93.8% to $4.460 million from $2.301 million, while quarterly operating loss narrowed to $0.892 million from $4.813 million year over year. The improvement reflected a $4.160 million reduction in quarterly SG&A, including $5.2 million lower M&A-related expense.
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ARR Growth Continued
ARR from continuing operations increased 8.3% year over year to $174.1 million from $160.8 million, indicating continued expansion in recurring revenue despite quarterly revenue seasonality.
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Operating Cash Flow Rebounded
Operating cash flow was $38.414 million for the nine months ended June 30, 2026, compared with cash used of $8.276 million in the prior-year period. Management stated that operating cash flow, cash and available revolver capacity should fund cash needs for at least the next twelve months.
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Covenant Headroom Remained Strong
Liquidity included $2.6 million of cash and $285.7 million of available credit capacity at June 30, 2026. The company was compliant with its credit covenants, reporting a 13.5x interest coverage ratio and a 1.9x total leverage ratio versus required thresholds of 3.0x and 5.0x, respectively.
What to watch
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Operating Leverage Remains Volatile
Quarterly operating margin was approximately negative 1.7%, compared with 6.5% in the prior quarter, and the company recorded a $1.438 million contingent-consideration charge. Costs of services increased 4.4% year to date to $51.034 million, outpacing 3.2% revenue growth.
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Higher Debt and Interest Exposure
Borrowings under the 2023 Senior Secured Credit Facility were $114.3 million, and quarterly interest expense increased 125.8% to $1.820 million year over year. Management estimates that a 1.0% change in the applicable interest rate would affect results by $1.1 million.
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Acquisition Funding and Earnout Risk
The company used $68.120 million in investing cash flow during the nine months, including $60.0 million of cash consideration for an acquisition and up to $20.0 million of additional contingent consideration, with the acquisition-date fair value of that contingent amount estimated at $7.6 million.
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Limited Cash Buffer Amid Buybacks
Cash and cash equivalents were only $2.6 million at June 30, 2026, while the company repurchased $48.6 million of Class A common stock during the quarter and had $73.648 million remaining under the repurchase plans. These capital returns increase reliance on operating cash flow and revolving debt capacity.
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Nonrecurring Investment Gain
The company recognized $9.9 million of unrealized investment gain in other income for the quarter, while loss from continuing operations was $0.892 million. This indicates that reported pre-tax profitability was materially supported by a non-operating, fair-value gain that may not recur.
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No Formal Risk-Factor Change
Management disclosed no material changes to the risk factors in the FY2025 Form 10-K. The filing nevertheless cites economic uncertainty from elevated interest rates, geopolitical conditions and government-spending pressures, whose future effects the company states are difficult to predict.
Management's outlook
The 10-Q provides no new quantitative revenue or EPS guidance. The prior FY2026 revenue outlook of $229 million to $237 million was not updated in this filing; outlook was otherwise deferred to the earnings release/call.
Earlier filings 4
10-Q · February 6, 2026
i3 Verticals reported revenue of $52.671M for the quarter ended December 31, 2025, roughly flat year-over-year (+$0.45M) but with operating income and net income down. Gross margin remained healthy at ~66.6% while…
10-K · November 21, 2025
i3 Verticals completed two material divestitures — the Merchant Services Business for approximately $439.5 million (closed September 20, 2024) and the Healthcare RCM Business for $96.3 million (closed May 5, 2025) — and…
10-Q · August 8, 2025
i3 Verticals reported quarterly revenue of $51,901,000, up from $46,183,000 in the prior-year quarter, driven in part by transition services and divestiture activity. Operating loss widened to $(4,813,000) from…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.