Executive Summary

Q3 2025 revenue from continuing operations was $51.9M (+12% YoY), with SaaS +24% and payments +11%; adjusted EBITDA was $12.7M and adjusted diluted EPS was $0.23, while GAAP diluted EPS from continuing ops was -$0.03 .
Results beat Wall Street consensus on revenue ($51.9M vs $49.4M*) and EPS ($0.23 vs $0.206*); the company reaffirmed FY25 RemainCo guidance: revenue $207–$217M, adjusted EBITDA $55–$61M, adjusted diluted EPS $0.96–$1.06 [*S&P Global].
Sequentially, margins compressed (adjusted EBITDA margin 24.5% vs 27.2% in Q2) due to seasonality and accelerated JusticeTech investments that begin to hit in Q4 (~$0.7M incremental OpEx) .
Strategic catalysts: a new $50M share repurchase authorization and single-segment reporting focused on public sector software; management highlighted strong ARR ($160.8M, +12% YoY) and ~77% recurring revenue mix in Q3 .

What Went Well and What Went Wrong

What Went Well

Strong top-line and mix: revenue +12% YoY with SaaS +24% and payments +11%, supporting higher-quality recurring streams (ARR $160.8M, +12% YoY) .
Non-GAAP profitability: adjusted EBITDA rose to $12.7M (+18% YoY) and adjusted EBITDA margin improved YoY to 24.5% (from 23.3%) .
Strategic focus and balance sheet: “We remain well capitalized, with over $50 million in cash on hand... [and] continue our investment in government technology” — Greg Daily, CEO . Management emphasized a single operating segment post divestitures, simplifying the story .

What Went Wrong

GAAP loss in continuing ops: net loss of $1.0M and diluted EPS of -$0.03 in Q3, reflecting operating expense growth and seasonality .
Sequential margin pressure: adjusted EBITDA margin fell to 24.5% from 27.2% in Q2, with Q4 guided to see ~$0.7M incremental JusticeTech personnel costs (Q4 compression) .
License revenue variability and seasonality: management flagged Q3/Q4 cadence shift (Q3 ~49%, Q4 ~51%) with nonrecurring software licenses pulling forward into Q3 and school-out effects lowering Q3 margins .

Financial Results

Core P&L vs Prior Periods and Estimates

Metric	Q1 2025 (Dec 31)	Q2 2025 (Mar 31)	Q3 2025 (Jun 30)
Revenue ($USD Millions)	$61.691	$63.059	$51.901
Diluted EPS - Continuing Ops ($)	$0.09	$0.00	$(0.03)
Adjusted Diluted EPS - Continuing Ops ($)	$0.31	$0.32	$0.23
Adjusted EBITDA ($USD Millions)	$16.372	$17.142	$12.724
Adjusted EBITDA Margin %	26.5%	27.2%	24.5%
Recurring Revenue ($USD Millions)	$48.314	$41.113 (RemainCo)	$40.201
Annualized Recurring Revenue ($USD Millions)	$193.256 (classification includes Healthcare in Q1)	$199.052 (consolidated)	$160.804

Notes: Q1 and Q2 classifications differ due to timing of Healthcare RCM divestiture; Q3 numbers reflect continuing operations post-disposals .

Q3 2025 Actual vs Wall Street Consensus (S&P Global)

Metric	Consensus	Actual	Surprise
Revenue ($USD Millions)	$49.428*	$51.901	+$2.473 (beat) [*S&P Global]
Primary EPS ($)	$0.206*	$0.23	+$0.024 (beat) [*S&P Global]
EBITDA ($USD Millions)	$12.069*	$12.724 (Adjusted EBITDA)	+$0.655 (compared to Adjusted EBITDA) [*S&P Global]

Disclaimer: Values marked with * are retrieved from S&P Global; company reports Adjusted EBITDA (non-GAAP), which may differ from consensus EBITDA definitions.

Revenue Composition (RemainCo where applicable)

Category ($USD Millions)	Q1 2025	Q2 2025	Q3 2025
SaaS	$10.182	$9.209 (RemainCo)	$9.299
Transaction-based	$3.836	$3.830 (RemainCo)	$4.052
Maintenance	$8.796	$8.115 (RemainCo)	$8.648
Recurring software services	$10.343	$4.584 (RemainCo)	$3.811
Professional services	$9.841	$9.136 (RemainCo)	$9.458
Software licenses	$2.677	$2.805 (RemainCo)	$0.977
Payments revenue	$13.511	$14.058 (RemainCo)	$13.100
Other revenue (Recurring)	$1.646	$1.317 (RemainCo)	$1.291
Other revenue (Other)	$0.859	$1.081 (RemainCo)	$1.265
Total Revenue	$61.691	$54.135 (RemainCo)	$51.901

KPIs

KPI	Q1 2025	Q2 2025	Q3 2025
Recurring revenue mix (%)	78%	76%	~77%
ARR ($USD Millions)	$193.256	$199.052 (consolidated)	$160.804
SaaS YoY growth (%)	+16%	+23%	+24%
Payments YoY growth (%)	+7%	+4%	+11%
Adjusted EBITDA Margin %	26.5%	27.2%	24.5%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Millions)	FY 2025	$207–$217 (introduced/updated in Q2 for RemainCo)	$207–$217 (reaffirmed Q3)	Maintained
Adjusted EBITDA ($USD Millions)	FY 2025	$55–$61	$55–$61	Maintained
Adjusted diluted EPS ($)	FY 2025	$0.96–$1.06	$0.96–$1.06	Maintained
Depreciation & internally developed software amort. ($USD Millions)	FY 2025	$11–$12	$11–$12	Maintained
Cash interest expense, net ($USD Millions)	FY 2025	$0–$0.75	$0–$0.75	Maintained

Notes: The company transitioned to single-segment reporting in Q3; a new $50M share repurchase program was authorized post-Q3 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
AI/technology initiatives	Q1: Introduced domain-specific applied AI (portal, indexing, JusticeTech modules) and integrated payments strategy . Q2: Detailed AI service agent in transportation; land records automated indexing; building secure AI knowledge layer and generative bots .	Q3: AgenTek AI (RAG) automates document analysis; AI chatbots in Education/HeliClark; dev stack (Copilot, builder.io, Cursor) and QA/testing (CodeRabbit, Zephyr) driving 30–50% efficiency; expanding to transportation, JusticeTech, ERP .	Accelerating adoption and productivity gains .
Seasonality and license variability	Q1: Seasonality noted; Q1 margin typical low point if no one-time revenues . Q2: Cadence guide Q3 48%/Q4 52%; education seasonality; licenses variable .	Q3: Updated cadence to 49%/51% as some nonrecurring licenses pulled forward; margins pressured in Q3 .	Persistent/managed .
JusticeTech investments	Q2: Strong pipeline including statewide court systems; investments planned .	Q3: Accelerated investments; ~$0.7M incremental Q4 costs; margins to compress modestly; revenue benefit expected FY26+ .	Investment ramp near term; revenue tail over medium term .
Utilities opportunity	Q1: Enterprise utility portal wins and scale; payments go-live with large utility; tiered utility market opportunity . Q2: Utility billing acquisition; cross-sell into portal/eIVR; ARR leadership expected .	Q3: Payments +11% YoY; continued wins and expansion; highlighted kiosk rollout and ePortal wins (Honolulu) .	Broadening footprint .
Macro/trade & regional	Q2: Removed ~$2.5M Manitoba revenue from FY25 outlook due to US/Canada trade friction and sequencing delays .	Q3: Focused on US state/local; opening Ohio JusticeTech territory; statewide negotiations progressing .	Regional traction despite prior macro delays .
M&A strategy	Q1/Q2: Pipeline “strong”, focus on tuck-ins ($2–$5M EBITDA), disciplined multiples; utility billing acquisition closed .	Q3: Continue selective public sector tuck-ins; balance sheet strength; opportunistic repurchases .	Steady, accretive .

Management Commentary

“Our overall revenue growth of 12% compared to the prior year quarter has been fueled by recurring contracts. SaaS growth led the way and grew 24%... payments increased by 11%” — Greg Daily, CEO .
“RemainCo revenues for the 2025 increased 12.4... reflecting organic growth of 8%... 77% of our revenues in the quarter came from recurring sources” — Geoff Smith, CFO .
“AgenTek AI... uses natural language processing and generative AI to automatically analyze and extract data from documents... implemented in our land records products” — Rick Stanford, President .
“We are now in the final contract negotiations for [a] statewide court system... Education continues to show strong growth... opening this school year in four new states” — Paul Christians, CRO .
“We remain well capitalized, with over $50 million in cash on hand... We plan to continue our investment in government technology” — Greg Daily, CEO .

Q&A Highlights

Guidance cadence and midpoint: Management reaffirmed FY25 guidance; the implied Q4 view should be anchored to the midpoint .
Organic growth and license comps: Sequential deceleration driven largely by lapping strong license sales (e.g., ~$2.0M utility-related slug in prior periods); ARR growth remains >10% .
JusticeTech investments: ~$0.7M incremental Q4 people costs; near-term margin compression but investments are tied to revenue opportunities in FY26+ .
Vertical opportunities: Utilities “could be a home run”; education “incredible”; transportation “could be huge”; confidence in FY26 trajectory across sub-verticals .
Seasonality update: Q3/Q4 split adjusted to ~49%/51%, with nonrecurring revenue pulled forward into Q3; margins dip in Q3, recover in Q4 .

Estimates Context

Q3 2025 vs Wall Street: Revenue beat ($51.9M vs $49.4M*), EPS beat ($0.23 vs $0.206*); Adjusted EBITDA came in at $12.7M and compares favorably to consensus EBITDA of ~$12.1M*, noting definitional differences [*S&P Global].
Implications: Given beats and reaffirmed annual guide, estimates for FY25 revenue/EPS likely stable to slightly upward within the range; watch for FY26 upward revisions contingent on JusticeTech/statewide court wins and utilities implementation ramp .

Key Takeaways for Investors

Quality of revenue improving: Recurring mix ~77% and ARR +12% YoY reinforce durability; SaaS +24% and payments +11% support mix upgrade .
Near-term margin dip is strategic: Q3 margin compression and ~$0.7M Q4 OpEx reflect JusticeTech investment ahead of FY26 revenue opportunities .
Public sector focus de-risks execution: Single-segment reporting and divestitures simplify the story; pipeline spans courts, utilities, transportation, and ERP .
Capital allocation optionality: $50M buyback authorization plus net cash (~$55M) and revolver capacity ($400M) enable tuck-ins and repurchases; watch for disciplined M&A at 10x or less EBITDA multiples .
Seasonality and licenses remain variables: Expect Q4 margin recovery; nonrecurring license timing can skew quarterly cadence, but ARR trends guide the underlying trajectory .
Estimate trajectory: Q3 beat on revenue/EPS with full-year guide reaffirmed; consensus may adjust minimally upward and focus shifts to FY26 catalysts (statewide courts, utility implementations) [*S&P Global].
Trading setup: Reaffirmed guidance, recurring strength, and buyback authorization provide a supportive backdrop; monitor Q4 JusticeTech OpEx impact and any large-contract announcements that could move sentiment .

S&P Global disclaimer: All values marked with * are retrieved from S&P Global and may reflect different metric definitions than company-reported non-GAAP measures.

i3 Verticals, Inc. (IIIV)·Q3 2025 Earnings Summary