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I3 Verticals (IIIV)
NASDAQ:IIIV
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I3 Verticals
(NASDAQ:IIIV)
74Outperform
Positive Factors
Business Focus
The sale of the healthcare business allows i3 Verticals to focus on its faster-growing, higher-margin Public Sector vertical.
M&A Strategy
The company's solid M&A pipeline continues to offer upside to both guidance and consensus estimates, with the company expecting to complete three to five acquisitions in FY2025.
Revenue Growth
F1Q25 performance exceeded expectations, with both revenue and EBITDA beating estimates, reaffirming a positive outlook for FY25.
Negative Factors
Healthcare Business
The company is reducing its FY25 revenue and adjusted EBITDA estimates due to the impact of the healthcare business divestiture.
Market Challenges
Despite consistent execution from i3 Verticals, the share price is down slightly over the last five years.
Valuation Challenges
Valuations in the Public Sector M&A space remain somewhat elevated, requiring disciplined capital allocation.
I3 Verticals (IIIV) vs. S&P 500 (SPY)
Market Cap
$879.90M
Dividend YieldN/A
Average Volume (3M)209.19K
Price to Earnings (P/E)5.6
Beta (1Y)0.76
Revenue Growth-27.40%
EPS Growth21780.54%
CountryUS
Employees1,480
SectorTechnology
Sector Strength66
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)0.32
Shares Outstanding23,428,284
10 Day Avg. Volume120,532
30 Day Avg. Volume209,192
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap0.99
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit4.12
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$29.25Price Target Upside8.74% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering5
I3 Verticals Business Overview & Revenue Model
Company Descriptioni3 Verticals, Inc. (IIIV) is a technology and integrated payments provider headquartered in the United States. The company operates primarily in the payment processing industry, offering a range of software solutions and services to various sectors, including education, non-profit organizations, public sector, healthcare, and business-to-business (B2B) markets. Its core products and services include payment processing, merchant services, and proprietary software solutions designed to facilitate seamless transactions and improve operational efficiencies for its clients.
How the Company Makes Moneyi3 Verticals makes money through a diversified revenue model centered on transaction-based fees, subscription services, and software sales. The company earns revenue by processing electronic payments for merchants and charging a fee for each transaction. Additionally, i3 Verticals offers subscription-based services for its proprietary software solutions, which provide recurring revenue streams. The company also generates income through partnerships with financial institutions and other entities, enhancing its service offerings and expanding its customer base. These partnerships, along with strategic acquisitions, play a significant role in i3 Verticals' growth and revenue generation.
I3 Verticals Financial Statement Overview
Summary
I3 Verticals demonstrates strong profitability and efficient cost management with high net and gross profit margins. The balance sheet reflects low leverage and strong equity utilization, though revenue growth is a concern. Cash flow remains stable, but the company faces challenges in free cash flow growth. Overall, the financial health is sound with room for improvement in revenue generation.Income Statement
I3 Verticals shows strong profitability with a high net profit margin of 41.8% in TTM (Trailing-Twelve-Months), driven by significant net income growth. The gross profit margin is robust at 85.0%, reflecting efficient cost management. Revenue growth, however, is negative over the past year, indicating a decline in sales, which is a concern for future growth potential. The EBIT and EBITDA margins are solid at 5.4% and 17.9% respectively, indicating good operational efficiency.―
Balance Sheet
The balance sheet displays a stable equity position with an equity ratio of 51.6%, suggesting moderate reliance on equity financing. The debt-to-equity ratio is relatively low at 0.17, indicating low leverage risk. However, the return on equity is exceptionally high at 30.5% in TTM, indicating effective utilization of equity to generate profits. The overall stability is commendable, though the high ROE may be influenced by non-operational gains.65
Cash Flow
Cash flow analysis reveals healthy operating cash flow with an operating cash flow to net income ratio of 0.41, indicating good cash generation relative to net income. The free cash flow growth rate is negative, pointing to potential challenges in maintaining free cash flow levels. The free cash flow to net income ratio of 0.30 suggests reasonable cash flow from operations, though there is room for improvement.―
| Breakdown | ||||
| Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 | Sep 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 229.92M | 370.24M | 317.86M | 224.12M | 150.13M | Gross Profit |
| 211.35M | 289.69M | 244.50M | 166.42M | 102.90M | EBIT |
| 6.85M | 22.71M | 20.29M | 9.72M | 3.74M | EBITDA |
| 39.05M | 57.73M | 30.91M | 30.20M | 23.37M | Net Income Common Stockholders |
| 113.34M | -811.00K | -23.22M | -7.84M | -979.00K |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 86.54M | 3.11M | 3.49M | 3.64M | 15.57M | Total Assets |
| 730.67M | 881.49M | 770.31M | 651.80M | 403.53M | Total Debt |
| 36.05M | 400.02M | 305.58M | 215.77M | 90.76M | Net Debt |
| -50.50M | 396.91M | 302.09M | 212.13M | 75.19M | Total Liabilities |
| 215.32M | 553.20M | 462.62M | 362.21M | 163.36M | Stockholders Equity |
| 379.74M | 236.75M | 218.38M | 204.76M | 155.58M |
| Cash Flow | Free Cash Flow | |||
| 48.41M | 18.13M | 33.40M | 38.57M | 17.77M | Operating Cash Flow |
| 48.41M | 34.50M | 45.85M | 46.77M | 23.72M | Investing Cash Flow |
| 396.15M | -121.52M | -113.05M | -156.31M | -35.43M | Financing Cash Flow |
| -367.36M | 75.65M | 73.03M | 102.10M | 29.11M |
I3 Verticals Technical Analysis
Positive
26.90
Price Trends
24.83
Positive
24.94
Positive
23.94
Positive
Market Momentum
0.43
Negative
67.06
Neutral
87.90
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For IIIV, the sentiment is Positive. The current price of 26.9 is above the 20-day moving average (MA) of 25.26, above the 50-day MA of 24.83, and above the 200-day MA of 23.94, indicating a bullish trend. The MACD of 0.43 indicates Negative momentum. The RSI at 67.06 is Neutral, neither overbought nor oversold. The STOCH value of 87.90 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for IIIV.
I3 Verticals Risk Analysis
I3 Verticals disclosed 55 risk factors in its most recent earnings report. I3 Verticals reported the most risks in the “Legal & Regulatory” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
I3 Verticals Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $879.90M | 5.56 | 1.23% | ― | -27.40% | 21780.54% | |
73 Outperform | $1.26B | 24.89 | 24.36% | 1.42% | 4.90% | 9.91% | |
67 Neutral | $971.55M | 165.53 | 3.78% | ― | 9.54% | ― | |
67 Neutral | $1.08B | 17.76 | 6.35% | ― | -0.13% | 263.78% | |
65 Neutral | $930.10M | ― | -57.86% | ― | 16.35% | 14.27% | |
60 Neutral | $10.83B | 10.47 | -6.71% | 2.99% | 7.73% | -12.97% | |
59 Neutral | $1.11B | 157.07 | 0.89% | ― | 2.06% | -91.82% |
* Technology Sector Average
Performance Comparison
IIIV
I3 Verticals
26.90
6.85
34.16%
RDWR
Radware
22.03
2.70
13.97%
VRNT
Verint Systems
18.03
-12.84
-41.59%
ATEN
A10 Networks
16.91
1.62
10.60%
DAVA
Endava
19.94
-10.55
-34.60%
BASE
Couchbase
18.05
-8.01
-30.74%
I3 Verticals Earnings Call Summary
Earnings Call Date:May 08, 2025
(Q2-2025)
| % Change Since: 0.00%|
Next Earnings Date:Aug 07, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong growth in the public sector, successful divestitures, and a strong balance sheet. However, there were concerns about trade friction impacting revenue and seasonal declines affecting Q3. The company is well-positioned for future growth with a focus on public sector and strategic acquisitions.Q2-2025 Updates
Positive Updates
Public Sector Revenue Growth
Second quarter revenue growth for the public sector business was 12%, and SaaS revenue grew by 23%, indicating strong performance and focus in this area.
Strong Adjusted EBITDA Growth
Adjusted EBITDA for RemainCo increased 17% to $15.8 million, with margins improving to 29.3% from 27.9%, reflecting higher software sales with high margins.
High Cash Position and Strong Balance Sheet
Following the sale of the RCM Healthcare Business, the company has a cash position of approximately $64 million and $400 million of borrowing capacity under its revolving credit facility.
Successful Divestiture and Focus on Public Sector
The company successfully sold its Healthcare RCM Business for $96 million, allowing it to streamline focus on the public sector vertical market.
Acquisition of Utility Billing Software Company
The acquisition expands business in various states, enhancing offerings in the utilities market with high-margin business at a cost of $9 million.
Negative Updates
Revenue Impact from Trade Friction
Due to trade friction between the U.S. and Canada and delays with the Manitoba contract, $2.5 million of revenue was removed from the fiscal 2025 outlook.
Seasonal Decline in Q3 Revenue and Margins
Q3 revenue is expected to be the low point at 48% of the remaining revenue, with margins dipping into the mid-20s due to seasonal declines.
Payments Revenue Growth Lag
Payments revenue growth was only 4% year-over-year this quarter, below the broader company growth rate.
Company Guidance
In the i3 Verticals Second Quarter 2025 Earnings Conference Call, the company provided updated guidance following the sale of its Healthcare Revenue Cycle Management (RCM) business. For fiscal year 2025, the company projects revenues of $207 million to $217 million and adjusted EBITDA of $56 million to $61 million, with annual recurring revenues increasing 9.2% to $164.5 million. The company anticipates high single-digit organic revenue growth for its remaining operations, dubbed "RemainCo," and expects adjusted EBITDA margin improvement of 50 to 100 basis points per year. The guidance reflects a strategic focus on public sector vertical markets, particularly in utilities, with a recent acquisition expected to contribute high-margin revenue. Despite some conservative adjustments due to trade friction with Canada, the company remains optimistic about its growth trajectory and financial positioning, underscored by a strong balance sheet with $64 million in cash and significant borrowing capacity.I3 Verticals Corporate Events
M&A TransactionsBusiness Operations and StrategyFinancial Disclosures
I3 Verticals Reports Q2 Revenue Growth and Acquisition
Positive
May 8, 2025
i3 Verticals reported an 8.8% increase in second-quarter revenue for 2025, reaching $63.1 million, and a net income of $1.1 million, reversing a loss from the previous year. The company completed the acquisition of a utility billing software company and divested its Healthcare Revenue Cycle Management business, aiming to focus on expanding its enterprise software offerings in the public sector.
Spark’s Take on IIIV Stock
According to Spark, TipRanks’ AI Analyst, IIIV is a Outperform.
I3 Verticals’ overall stock score reflects strong financial performance, particularly in profitability and cost management, coupled with a robust earnings call that highlights revenue and EBITDA growth. The technical indicators point to moderate upward momentum, though potential overbought conditions warrant caution. The low P/E ratio suggests the stock might be undervalued, offering a compelling investment opportunity. Overall, while revenue growth challenges and overbought technical conditions present risks, the company’s strategic focus and financial health position it well for future growth.
To see Spark’s full report on IIIV stock, click here.
M&A TransactionsBusiness Operations and Strategy
i3 Verticals Sells Healthcare Division to Infinx
Neutral
May 6, 2025
On May 5, 2025, i3 Verticals, LLC, a subsidiary of i3 Verticals, Inc., completed the sale of its healthcare revenue cycle management business to Infinx, Inc. for $96 million in cash. This divestiture allows i3 Verticals to focus on its core operations in the Public Sector, particularly in the K-12 education market, while Infinx enhances its AI-driven solutions with the acquired expertise and technology.
Spark’s Take on IIIV Stock
According to Spark, TipRanks’ AI Analyst, IIIV is a Outperform.
I3 Verticals’ overall stock score reflects strong financial performance, particularly in profitability and cost management, coupled with a robust earnings call that highlights revenue and EBITDA growth. The technical indicators point to moderate upward momentum, though potential overbought conditions warrant caution. The low P/E ratio suggests the stock might be undervalued, offering a compelling investment opportunity. Overall, while revenue growth challenges and overbought technical conditions present risks, the company’s strategic focus and financial health position it well for future growth.
To see Spark’s full report on IIIV stock, click here.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.