i3 Verticals (NASDAQ:IIIV) reported first-quarter fiscal 2026 results that management said were consistent with prior expectations, highlighting continued strength in recurring and SaaS revenue while non-recurring revenue declined. The company also discussed a new transportation-market acquisition that closed at the start of calendar 2026, as well as its approach to buybacks, product investment, and the pace of AI adoption in government technology markets.
First-quarter results: recurring revenue growth offsets non-recurring declines
For the quarter ended December 31, 2025, i3 Verticals posted revenue of $52.7 million, up 1% from $52.2 million in the prior-year period. CFO Geoff Smith said the modest growth reflected 8% growth in recurring revenues, partially offset by a $3 million decline in non-recurring professional services and software license revenues.
- SaaS revenue growth of 24%
- Transaction-based revenue growth of 12%
- Payments revenue growth of 8%
Maintenance revenue declined 8%, which Smith attributed to the company’s emphasis on SaaS and new sales.
Profitability: EBITDA down as i3 invests and hosting costs rise
Adjusted EBITDA was $13.6 million, down from $14.6 million a year earlier. Adjusted EBITDA margin was 25.8%, compared with 27.9% in the prior-year quarter. Management attributed the decline to investments in the company’s justice and utility markets, higher hosting costs, and $2.6 million lower professional services revenue. Smith noted that professional services costs can lag revenue fluctuations.
Adjusted diluted earnings per share from continuing operations was $0.26 for the quarter.
Smith said the company expects adjusted EBITDA margin to improve over the remainder of fiscal 2026, while reiterating a long-term expectation for margin expansion of 50 to 100 basis points per year.
Acquisition: $60 million cash deal expands transportation footprint
Management highlighted an acquisition that closed on January 1: a provider of software for driver and motor vehicle insurance verification. Smith said i3 paid $60 million in cash, equating to approximately 15x EBITDA. He added that the acquired business is growing above 20% with an EBITDA margin above 50%.
CEO Greg Daily described the target as a “perfect fit” within i3’s transportation market, emphasizing the “durable, sticky, niche software solutions” found in the public sector. Daily pointed to the company’s existing integrations with insurance carriers as a key part of its defensive positioning and said the team that built the business is staying on.
President Rick Stanford said the acquired insurance verification product includes real-time verification, continuous insurance lapse updates, direct connections with insurers, and integration with state motor vehicle systems. Stanford said the technology can integrate with every motor vehicle system in use by states today, including i3’s, and that the transaction meaningfully expands i3’s geographic reach in transportation.
Stanford also noted i3’s adjacent motor carrier software offerings (including IRP and IFTA tax software and truck routing software) and said that some portion of i3’s transportation platform is live in 30 states and four Canadian provinces.
On the revenue model, management said the acquired business is “not transactional today,” and suggested there may be opportunities over time to add payments capabilities as some customers have requested a consolidated vendor relationship for payments and software.
During Q&A, the company acknowledged the purchase multiple was above its typical “sweet spot” but described the deal as unique given its higher organic growth rate and margin profile. Management said its current pipeline is back in the company’s usual valuation range.
Guidance updated; professional services expected to be the main headwind
Smith provided fiscal 2026 guidance for continuing operations (excluding acquisitions not yet closed and transaction-related costs):
- Revenue: $223 million to $234 million
- Adjusted EBITDA: $61 million to $66.5 million
- Adjusted diluted EPS: $1.08 to $1.16
Management said it expects recurring revenues to grow at a double-digit rate for fiscal 2026 when including the acquisition, while organic recurring growth remains in the 8% to 10% range. However, the company anticipates a decline in non-recurring professional services revenue due to the cadence of revenue recognition on certain projects in its utilities and transportation markets.
In response to an analyst question on a modest organic growth headwind relative to prior outlook, management said the change was driven by professional services expectations, now seen at roughly $31 million for the year. Smith said utilities and transportation are well-positioned to rebound in fiscal 2027 and beyond, and reiterated a long-term expectation for organic revenue growth in the high-single-digit range.
Smith also shared an expected quarterly revenue distribution for fiscal 2026 of approximately Q1 23%, Q2 25%, Q3 25%, and Q4 27%, noting that software license sales and professional services can be variable and distort seasonality.
Capital allocation, market activity, and AI adoption
Smith said i3 ended the quarter with $37 million in cash and no debt. The company also has a $400 million revolving credit facility with a 5x leverage constraint, which management said it intends to use for acquisitions and opportunistic stock repurchases.
On buybacks, management confirmed it repurchased a “significant number of shares” during the quarter, calling the approach opportunistic and citing confidence in the balance sheet and valuation. The company said more detail would be available in its upcoming Form 10-Q.
Operationally, management described demand trends that include expanded solution scope within RFPs, an increased focus on unified data structures for analytics, and expectations for continuous innovation. The company pointed to an uptick in justice tech opportunities as it rolls out its CourtOne offering, and noted ongoing work on a recently won contract with the West Virginia Supreme Court of Appeals. Management also said the Arizona Department of Real Estate selected i3 to provide licensing and regulatory software.
On AI, the company said adoption varies by use case and customer readiness. Management described internal efforts to use AI in development and product features, but said government agencies will need to establish frameworks, policies, and security protocols, which could slow near-term adoption. Management characterized AI’s broader proliferation in GovTech as likely to take time given regulatory and interjurisdictional complexity.
About i3 Verticals (NASDAQ:IIIV)
i3 Verticals, Inc is a provider of integrated software and merchant payment processing solutions tailored for specific vertical markets across the United States. Since its founding in 2001 and headquartered in Columbia, South Carolina, the company has focused on delivering SaaS-based applications and payment services to streamline revenue collection and management workflows for its clients.
The company’s product portfolio includes electronic payment processing for credit and debit card transactions, automated clearing house (ACH) transfers, online and mobile payment portals, and related risk management and compliance tools.
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