I3 Verticals: A Strategic Pivot Amidst Mixed Quarterly Results

I3 Verticals US46571Y1073

The commencement of I3 Verticals' fiscal 2026 presents a nuanced financial portrait. The company's strategic evolution into a software specialist, marked by robust growth in its SaaS division, is progressing. However, this transition is occurring alongside a slight contraction in operational profitability, raising questions about the near-term margin trajectory.

Alongside its quarterly report, I3 Verticals announced two significant capital allocation moves that underscore its strategic direction. The Board of Directors has authorized a new share repurchase program, permitting the buyback of up to $60 million worth of its Class A common stock. This initiative, effective until February 2027, signals management's confidence in the firm's long-term value.

Furthermore, the company completed an acquisition on January 1, 2026, to bolster its vertical market expertise. It purchased a provider of insurance audit software for the transportation sector for $60 million in cash. The agreement includes potential performance-based earn-out payments of up to an additional $20 million. This acquisition is designed to strengthen I3 Verticals' foothold in the transportation industry and expand its product suite.

Quarterly Financial Performance Snapshot

• Total Quarterly Revenue: $52.7 million (a 0.9% year-over-year increase)
• SaaS Revenue: $10.96 million (a significant 24.4% year-over-year increase)
• Adjusted EBITDA: $13.6 million (compared to $14.6 million in the prior year)
• Adjusted Earnings Per Share (EPS): $0.26 (compared to $0.27 a year ago)

The Shift to Recurring Revenue Streams

While overall top-line growth was modest, the metrics for recurring revenue tell a more compelling story. The company's Annualized Recurring Revenue (ARR) climbed 8.4% to reach $169.6 million. The standout performer was the Software-as-a-Service (SaaS) segment, which expanded by over 24%.

The marginal declines in both adjusted EBITDA and EPS can be partially attributed to deliberate investments aimed at scaling the company's technology platforms. Management's strategy focuses on deploying higher-margin software solutions within targeted vertical markets, a move intended to reduce reliance on traditional payment processing services alone.

Fiscal 2026 Guidance

For the full fiscal year ending September 30, 2026, I3 Verticals' leadership provided detailed financial targets. The company anticipates total revenue in the range of $223.0 million to $234.0 million. It expects to generate adjusted EBITDA between $61.0 million and $66.5 million.

The forecast for adjusted earnings per share is set between $1.08 and $1.16. A central pillar of the outlook is the anticipation of continued double-digit growth in recurring revenue, which is expected to establish a more stable foundation for future profitability.