i3 Verticals Inc (IIIV) Q3 2025 Earnings Call Highlights: Strong Revenue Growth and Strategic ...
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
i3 Verticals Inc (NASDAQ:IIIV) reported a 12% revenue growth in the third quarter, with SaaS revenue growing at 24% compared to the prior year.
The company has a strong balance sheet with over $50 million in net cash and a revolving credit facility with a capacity of up to $400 million.
i3 Verticals Inc (NASDAQ:IIIV) successfully divested its healthcare revenue cycle management business, allowing it to focus on its public sector software business.
The company is investing in AI to enhance product features and streamline product development, which has resulted in significant user time savings and initial incremental revenue.
The company has a strong pipeline for potential acquisitions, focusing on the public sector vertical, and maintains a disciplined M&A process.
Negative Points
The company expects increased costs in the fourth quarter due to scaling up people costs in preparation for future revenue opportunities.
Non-recurring software license sales are less predictable and can distort seasonality, as seen with a high sales quarter in FY 2024 that is not expected to repeat.
The company is facing margin compression in the fourth quarter due to incremental investments in the justice tech sector.
There is a wide range of outcomes for the fourth quarter guidance, with potential deceleration in organic revenue growth due to strong license sales in the previous year.
The company is still in the process of integrating AI solutions across its product lines, which may require further investment and development time.
Q & A Highlights
Warning! GuruFocus has detected 10 Warning Signs with IIIV.
Q: Jeff, regarding the guidance, you didn't tighten the range. Is the midpoint the right way to think about the implied 4Q guide? A: Yes, that's exactly right. Just focus on the midpoint since we weren't trying to move it up or down; we just reiterated it. - Jeff Smith, CFO
Q: It seems like organic revenue growth will decelerate due to a strong license quarter last year. Is that the main reason for the deceleration? A: Yes, the deceleration is primarily due to the strong license sales last year, particularly related to our utilities deal. We don't expect a similar occurrence this Q4 unless something unexpected happens. - Jeff Smith, CFO
Q: Can you elaborate on the justice tech incremental investments and the revenue opportunities you see in 2026 and beyond? A: The justice tech space is performing well, and we're competing on larger deals. The investments are recent and responsive to opportunities that have arisen this year. We expect about $700,000 in incremental expenses in Q4. - Jeff Smith, CFO
Q: Greg, with the business now focused on public sector software, which areas are you most excited about for growth? A: All our sub-verticals are performing well, including education, utilities, and transportation. I believe 2026 will be spectacular, with none of our verticals lagging. - Greg Daly, CEO
Q: How often do you partner with other firms for deals, especially for statewide deals? A: We can handle most aspects of deals ourselves, but we partner with integration firms about 1 in 5 or 6 times, more often in the transportation sector. - Paul Christians, Chief Revenue Officer
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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