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i3 Verticals, Inc. (IIIV)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue from continuing operations rose 12.1% to $61.7M; adjusted EBITDA increased 17% to $16.4M with margin at 26.5%, and diluted EPS from continuing operations was $0.09 .
  • Management reiterated FY2025 guidance (revenue $243–$263M, adjusted EBITDA $63–$71.5M, pro forma EPS $1.05–$1.25), signaling confidence in SaaS and payments growth momentum .
  • SaaS revenue grew 16% YoY and payments revenue grew 7% YoY; ARR reached $193.3M (+7.6% YoY), underpinning higher recurring mix (78% of revenues) .
  • Strategic catalysts: utilities program ramp (payments live; project revenue stair-stepping from ~$3M to $5M in FY25), license timing pull-forward into Q1 ($1.8M), and disciplined M&A focused on Public Sector .
  • Wall Street consensus (S&P Global) for Q1 2025 was unavailable due to data limits; estimate comparison not possible (see Estimates Context).

What Went Well and What Went Wrong

  • What Went Well

    • “We expect to see significant improvements in our SaaS growth… began this quarter with a 16% increase over the prior year… payments revenue grew 7%... expect that revenue line to reaccelerate” — CEO Greg Daily .
    • Recurring revenue strength: 78% of Q1 revenues; ARR increased to $193.3M (+7.6% YoY), supporting visibility and margin resilience .
    • Public Sector performance: revenue +12% to $48.8M; adjusted EBITDA +11% to $19.2M, with broad-based recurring growth (SaaS, transaction, maintenance) .

  • What Went Wrong

    • License timing pulled forward (~$1.8M into Q1 from Q2), creating intra-quarter variability; CFO confirmed cadence shift .
    • Healthcare growth expected low single digits despite +14% in Q1, given one-time license sales concentration and ongoing consolidation headwinds .
    • Cost reclassification (SG&A to other costs of services) and merchant divestiture complicate comparability; margins slightly below Q4 (26.5% vs 26.7%) despite higher revenue .

Financial Results

  • Headline metrics vs prior quarters
MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$56.037 $60.864 $61.691
Diluted EPS - Continuing Ops ($)$(0.49) $0.23 $0.09
Adjusted EBITDA ($USD Millions)$12.875 $16.233 $16.372
Adjusted EBITDA Margin %23.0% 26.7% 26.5%
Annualized Recurring Revenue ($USD Millions)$181.272 $188.162 $193.256
  • Segment breakdown (Q1 2025 vs prior year)
Segment MetricQ1 2024Q1 2025
Public Sector Revenue ($USD Thousands)$43,498 $48,785
Public Sector Adjusted EBITDA ($USD Thousands)$17,359 $19,243
Public Sector Adjusted EBITDA Margin %40% 39%
Healthcare Revenue ($USD Thousands)$11,580 $13,171
Healthcare Adjusted EBITDA ($USD Thousands)$2,794 $3,748
Healthcare Adjusted EBITDA Margin %24% 28%
  • KPIs and mix
KPIQ4 2024Q1 2025
Recurring Revenue ($USD Thousands)$47,040 $48,314
Recurring Revenue (% of Total)77.3% (47,040/60,864) 78.3% (48,314/61,691)
SaaS Revenue ($USD Thousands)$9,677 $10,182
Payments Revenue ($USD Thousands)$12,225 $13,511
Professional Services ($USD Thousands)$10,062 $9,841
Software Licenses ($USD Thousands)$2,498 $2,677

Notes: Q1 2025 cost reclassification from SG&A to “other costs of services” improves alignment with software peers; prior periods recast accordingly . All figures reflect continuing operations due to merchant services divestiture .

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2024)Current Guidance (Q1 2025)Change
RevenueFY 2025$243,000–$263,000 (thousands) $243,000–$263,000 (thousands) Maintained
Adjusted EBITDA (non-GAAP)FY 2025$63,000–$71,500 (thousands) $63,000–$71,500 (thousands) Maintained
Depreciation & internally developed software amortizationFY 2025$12,000–$14,000 (thousands) $12,000–$14,000 (thousands) Maintained
Cash interest expense, netFY 2025$1,000–$2,000 (thousands) $1,000–$2,000 (thousands) Maintained
Pro forma adjusted diluted EPS (non-GAAP)FY 2025$1.05–$1.25 $1.05–$1.25 Maintained

Seasonality cadence (management): FY25 revenue distribution expected ~24.4% Q1, 25.3% Q2, 24.6% Q3, 25.7% Q4 .

Earnings Call Themes & Trends

TopicQ3 2024Q4 2024Q1 2025Trend
SaaS transition & recurring mixHeadwinds from license shift; ARR +4% YoY Recurring growth; ARR +7.5% YoY SaaS +16% YoY; recurring ~78% Improving recurring trajectory
Utilities program rampImplementation delays (Manitoba, PS); pipeline building Payments & portal rollout starting Q1’25 Payments live; revenue stair-step ~$3M→$5M FY25; larger acceleration in FY26–27 Accelerating
Payments integrationStrategic PF remains; integration across government verticals Attach rates growing; less drag vs prior Robust payment capabilities post divestiture; growth +7% Momentum building
M&A pipeline (Public Sector focus)Acquisition closed Aug 1 (permitting & licensing); double-digit growth target Rational multiples; 3–5 deals expected in FY25 Disciplined parameters: 10% growth, margins high-20s/low-30s, ≤10x EBITDA Active, disciplined
Cost structure & marginCorp overhead realignment; FY25 margin +50–100 bps target Corp costs to decline post divestiture Q1 margin 26.5%; seasonal low in Q3; FY guide margin expansion maintained Multi-year expansion

Management Commentary

  • Strategic message: “Even after divesting our merchant services business, we retained robust payment capabilities… integrate these services with our proprietary vertical market software… Payments revenue grew 7%… reaccelerate alongside SaaS” — CEO .
  • Growth focus: “We expect to see significant improvements in our SaaS growth… 16% increase over prior year… anticipate positive momentum” — CEO .
  • Public Sector emphasis and pipeline discipline: “We expect 3–5 acquisitions this year… prefer margins in low 30s… generally not pay more than 10x EBITDA” — Management .
  • Seasonality and cadence: “Q3 historically our low margin quarter (schools out)… FY margins expansion guided 50–100 bps” — CFO .
  • Balance sheet: “Debt stood at $26.2M (convertible notes maturing); cash $85.6M; subsequent ~$60M tax-related payments post sale” — CFO .

Q&A Highlights

  • License timing pull-forward: Analysts estimated ~$1.8M shifted from Q2 to Q1; management agreed “yes that’s pretty close” .
  • Margin cadence: Full-year margin expansion maintained; Q3 typically lowest due to education seasonality .
  • Utilities customer: Payments live; FY25 revenue stair-step ~$3M to ~$5M, with larger software acceleration in FY26–27 .
  • Healthcare trajectory: Q1 +14% YoY partly from one-time licenses; full-year low single-digit growth outlook .
  • M&A thresholds: Targets with ~10% growth, margins ≥high-20s/low-30s; generally ≤10x EBITDA; fix dilutive deals within two years .

Estimates Context

  • S&P Global consensus for Q1 2025 EPS and revenue was not retrievable due to data limits; as a result, we cannot provide a beats/misses comparison for this quarter. If desired, we can refresh and add comparisons once access resumes.
  • Values that would be used for estimate comparisons are typically retrieved from S&P Global; in this case, they were unavailable.

Key Takeaways for Investors

  • Recurring engine strengthening: SaaS +16% YoY and payments +7% YoY, pushing ARR to $193.3M and ~78% recurring revenue mix; supports margin stability and cash generation .
  • Utilities is the swing factor: payments already live and revenue stepping higher in FY25, with larger software contributions expected FY26–27; watch subsequent quarters for confirmation .
  • License variability manageable: ~$1.8M pull-forward into Q1 clarifies Q2 cadence; management reconfirmed FY revenue seasonality and guidance ranges .
  • Margin path intact: Despite cost reclassification and seasonality, adjusted EBITDA up 17% and margins near Q4 levels; multi-year expansion target (50–100 bps/year) reaffirmed .
  • Public Sector-led M&A: Expect disciplined 3–5 tuck-ins with payment attach opportunities; focus on double-digit growth targets and accretive margin profiles .
  • Balance sheet flexibility: Minimal leverage (total leverage ratio 0.1x post-divestiture in Q1 PR context); cash supports organic investments and M&A execution .
  • Monitoring items: Healthcare normalization post one-time license; execution in education seasonality; continued ARR growth and segment margins .

Additional context and disclosures:

  • Continuing operations reflect post-sale footprint; historical periods recast to exclude discontinued merchant services; expense reclassification from SG&A to other costs of services implemented in Q1 2025 .
  • Non-GAAP metrics (Adjusted EBITDA, pro forma EPS) reconciliations provided in release; forward-looking reconciliations not available due to inherent uncertainty .