IIIV · i3 Verticals, Inc.

i3 Verticals’ Q2 FY2026 results reflect continued strength in recurring revenue—evidenced by 11.6% YoY ARR growth to $183.5 million—but increasing pressure on profitability and margins. Revenue grew 6.2% YoY to $57.5 million, supported by SaaS, transaction-based, and maintenance revenue streams, yet net income from continuing operations declined 4.3% YoY to $2.2 million, and six-month net income fell sharply to $3.3 million from $5.1 million a year ago—driven largely by lower income attributable to i3 Verticals, Inc. ($2.0M vs. $2.9M YTD). Adjusted EBITDA rose modestly (+4.7% YoY), but its margin contracted to 28.8% in Q2 and 27.4% YTD, signaling cost or pricing headwinds. Management attributed the outlook revision to these dynamics, lowering full-year revenue and adjusted EBITDA guidance ranges—marking the first downward revision this fiscal year. The commentary emphasizes ongoing investments in public sector products and process improvements aimed at future margin expansion, though near-term execution has not yet translated into earnings leverage. With discontinued operations fully exited (Merchant Services sold Sept 2024, Healthcare RCM sold May 2025), the results represent the pure-play public sector software business—and the revised guidance suggests slower-than-expected monetization of the growing ARR base. Investors should monitor whether the 12% YoY recurring revenue growth sustains and whether efficiency initiatives begin reversing margin erosion in H2.