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I3 Verticals (IIIV)
NASDAQ:IIIV

I3 Verticals (IIIV) AI Stock Analysis

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I3 Verticals

(NASDAQ:IIIV)

Rating:73Outperform
Price Target:
$32.00
▲(10.34%Upside)
The overall stock score reflects strong technical momentum and attractive valuation. While solid profitability margins provide a foundation, concerns about declining revenue and cash flow need addressing. Recent strategic moves and guidance highlight potential for future growth.
Positive Factors
Acquisition Potential
Simplifying the business model increases the likelihood of i3 Verticals attracting a buyer, making the company a more appealing acquisition target.
Financial Performance
I3 Verticals transformed itself into a company focused on providing integrated software solutions to the Public Sector, resulting in a debt-free balance sheet and potential for new deals.
Growth Potential
The company's focus on the Public Sector vertical, which has higher growth potential, is expected to improve its financial performance.
Negative Factors
Investor Confidence
Investors might be less comfortable with what go-forward growth looks like ex-Merchant and ex-Healthcare, especially as the durability of Public Sector growth is still somewhat uncertain.
Revenue Expectations
Revenue and adjusted EBITDA came in below expectations due to US-Canada trade friction and delays of i3 Verticals' Manitoba contract.
Stock Performance
Despite consistent execution from i3 Verticals, the share price is unchanged over the last five years, indicating a lack of clear catalyst for a re-rating.

I3 Verticals (IIIV) vs. SPDR S&P 500 ETF (SPY)

I3 Verticals Business Overview & Revenue Model

Company Descriptioni3 Verticals, Inc. provides integrated payment and software solutions to small- and medium-sized businesses and organizations in education, non-profit, public sector, and healthcare markets in the United States. It operates in two segments, Merchant Services, and Proprietary Software and Payments. The company offers payment processing services that enables clients to accept electronic payments, facilitating the exchange of funds and transaction data between clients, financial institutions, and payment networks. The company also licenses software; and provides ongoing support, and other point of sale-related solutions. It offers its solutions to clients through direct sales force; distribution partners, including independent software vendors, value-added resellers, and independent sales organizations; and referral partners, such as financial institutions, trade associations, chambers of commerce, and card issuers. The company was founded in 2012 and is headquartered in Nashville, Tennessee.
How the Company Makes Moneyi3 Verticals makes money primarily through transaction fees generated from its payment processing services, which enable businesses to accept electronic payments from their customers. Additionally, the company earns revenue from the sale and licensing of its proprietary software solutions, which are designed to meet the specific needs of the sectors it serves. Key revenue streams include transaction-based revenue from payment processing, subscription fees from software-as-a-service (SaaS) offerings, and professional services fees for implementation and support. Strategic partnerships with financial institutions and technology providers also play a significant role in expanding its market reach and enhancing its product offerings.

I3 Verticals Earnings Call Summary

Earnings Call Date:May 08, 2025
(Q2-2025)
|
% Change Since: 7.81%|
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 Financial Statement Overview

Summary
The company exhibits strong profitability margins with a high gross profit margin and improved net profit margin. However, declining revenue and cash flow indicate challenges in growth and liquidity. The balance sheet shows low leverage and a strong equity base, although asset shrinkage is a concern.
Income Statement
72
Positive
The company shows a strong gross profit margin of 78.1% TTM, indicating efficient cost management relative to revenue. Net profit margin improved to 46.5% TTM, reflecting significant net income gains. However, revenue has declined from $370.2 million in 2023 to $241.7 million TTM, indicating a negative growth trajectory. EBIT and EBITDA margins of 3.9% and 17.9% respectively suggest moderate profitability.
Balance Sheet
65
Positive
The debt-to-equity ratio is 0.11 TTM, showing low leverage and financial stability. Return on equity (ROE) stands at 29.1% TTM, indicating effective use of equity to generate profits. The equity ratio of 59.6% TTM suggests a strong equity base. However, the reduction in total assets from $881.5 million in 2023 to $646.4 million TTM indicates potential asset shrinkage.
Cash Flow
60
Neutral
Operating cash flow has decreased from $34.5 million in 2023 to $7.6 million TTM, signaling declining operational efficiency. Free cash flow has also dropped significantly from $18.1 million in 2023 to $318,000 TTM, reflecting limited cash available after capital expenditures. The operating cash flow to net income ratio is 0.07 TTM, suggesting limited cash coverage of net income.
BreakdownTTMSep 2024Sep 2023Sep 2022Sep 2021Sep 2020
Income Statement
Total Revenue241.65M229.92M370.24M317.86M224.12M150.13M
Gross Profit188.68M211.35M289.69M244.50M166.42M102.90M
EBITDA43.32M47.69M57.73M30.91M30.20M23.37M
Net Income112.27M113.34M-811.00K-23.22M-7.84M-979.00K
Balance Sheet
Total Assets646.36M730.67M881.49M770.31M651.80M403.53M
Cash, Cash Equivalents and Short-Term Investments7.75M86.54M3.11M3.49M3.64M15.57M
Total Debt41.59M36.05M400.02M305.58M215.77M90.76M
Total Liabilities132.70M215.32M553.20M462.62M362.21M163.36M
Stockholders Equity385.17M379.74M236.75M218.38M204.76M155.58M
Cash Flow
Free Cash Flow318.00K48.41M18.13M33.40M38.57M17.77M
Operating Cash Flow7.63M48.41M34.50M45.85M46.77M23.72M
Investing Cash Flow404.84M396.15M-121.52M-113.05M-156.31M-35.43M
Financing Cash Flow-349.48M-367.36M75.65M73.03M102.10M29.11M

I3 Verticals Technical Analysis

Technical Analysis Sentiment
Positive
Last Price29.00
Price Trends
50DMA
25.49
Positive
100DMA
25.47
Positive
200DMA
24.50
Positive
Market Momentum
MACD
0.82
Negative
RSI
70.96
Negative
STOCH
93.36
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 29 is above the 20-day moving average (MA) of 25.56, above the 50-day MA of 25.49, and above the 200-day MA of 24.50, indicating a bullish trend. The MACD of 0.82 indicates Negative momentum. The RSI at 70.96 is Negative, neither overbought nor oversold. The STOCH value of 93.36 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 (49)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
74
Outperform
$1.29B27.695.32%-2.09%76.96%
73
Outperform
$963.29M6.230.63%-35.88%4611.09%
73
Outperform
$1.45B30.2524.36%1.19%4.90%9.91%
68
Neutral
$1.30B115.013.78%9.54%
68
Neutral
$1.34B-55.90%12.76%16.97%
66
Neutral
$914.99M39.722.85%7.58%-57.13%
49
Neutral
C$2.96B2.13-80.92%2.67%12.55%-24.47%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
IIIV
I3 Verticals
29.00
6.55
29.18%
RDWR
Radware
30.49
11.51
60.64%
VRNT
Verint Systems
21.51
-9.64
-30.95%
ATEN
A10 Networks
20.14
6.81
51.09%
DAVA
Endava
15.50
-14.05
-47.55%
BASE
Couchbase
24.42
6.24
34.32%

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.

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.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Jul 03, 2025