Business Overview: i3 Verticals, Inc. (NASDAQ: IIIV)

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Executive Summary

i3 Verticals, Inc. sells mission-critical enterprise software to state and local governments and their agencies, embedding volume- and transaction-based payment processing fees directly into that software through its own payment facilitator platform. Over fiscal 2024 and 2025, the company completed a major strategic pivot: it divested its original Merchant Services business (sold to Payroc for ~$439.5 million in September 2024) and its Healthcare RCM business (sold to Infinx for $96.3 million in May 2025), transforming itself from a diversified payments company into a pure-play public-sector software vendor.

The company now reports one operating segment, generating roughly $213 million in fiscal 2025 continuing-operations revenue, about 76% of it recurring — a profile that matters because government software contracts, once won, tend to be extremely sticky and multi-year in nature.

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1. Core Business Model & How They Work

i3 Verticals' current model is "software-led, payments-embedded" — it sells workflow software to government customers and captures payment processing economics as a byproduct of that software usage.

[ Win Government Software Contract ] ➡️ [ Deploy Mission-Critical Workflow Software ] ➡️ [ Embed Proprietary Payment Facilitator Platform ] ➡️ [ Recurring Software + Transaction Fee Revenue ] ➡️ [ Multi-Year Renewal ]

Key Operational Drivers

1. Recurring Software Revenue: About 76% of continuing-operations revenue is recurring, driven by multi-year government software and services contracts rather than one-off project fees.
2. Embedded Payments: The company's proprietary payment facilitator platform captures volume- and transaction-based fees on payments flowing through its software, supplementing software license/subscription revenue.
3. Strategic Divestiture of Non-Core Businesses: Selling Merchant Services and Healthcare RCM concentrated the company on public-sector software, where it believes it has stronger competitive positioning and stickier revenue.
4. Acquisition-Driven Growth: Acquisitions completed in fiscal 2024 and 2025 contributed $5.9 million of fiscal 2025 revenue (2.7% of the total), reflecting a continued bolt-on M&A strategy within its chosen verticals.
5. Sponsor Bank Dependence: Like any payment facilitator, i3 Verticals depends on a sponsor bank for access to the Visa and Mastercard networks — a structural dependency rather than a direct relationship with the card networks.

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2. Business Segments

Following the Merchant Services and Healthcare RCM divestitures, i3 Verticals reports a single operating and reportable segment. Its software is organized instead around five public-sector verticals:

┌─────────────────────────────────────────┐
│           i3 Verticals, Inc.              │
│   (Public-Sector Enterprise Software)     │
└─────────────────────┬─────────────────────┘
                       │
   ┌──────────┬────────┼────────┬──────────┐
   ▼          ▼        ▼        ▼          ▼
┌─────────┐┌─────────┐┌─────────┐┌─────────┐┌───────────────┐
│Justice  ││Utilities││ Public  ││Education││ Transportation │
│Tech     ││         ││ Admin   ││         ││                │
└─────────┘└─────────┘└─────────┘└─────────┘└───────────────┘

Vertical Descriptions

• JusticeTech: Court case management, e-filing, and public safety systems — computer-aided dispatch, records management, and jail management.
• Utilities: Customer engagement platforms and billing/back-office software for municipal utilities.
• Public Administration: Government fund accounting, land records, mass appraisal, licensing/permitting, and tax/revenue collection software.
• Education: School lunch program management and school event ticketing/concessions software.
• Transportation: Vehicle title and registration, driver's license management, and motor carrier compliance systems.

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3. Product Portfolio / Key Offerings

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4. Competitive Landscape

i3 Verticals names a broad set of competitors directly in its SEC filings, spanning software platform consolidators and payments-focused rivals:

• Tyler Technologies — the dominant player in government software broadly, a much larger and more entrenched competitor across court, land records, and public administration software.
• Constellation Software and Roper Technologies — serial acquirers of vertical-market software businesses that could bid for the same niche public-sector software assets i3 Verticals targets.
• Verra Mobility and Axon Enterprise — overlap in public-safety-adjacent technology (tolling/photo enforcement and law enforcement technology, respectively).
• EverCommerce — competes in vertical SaaS more broadly, including some public-sector-adjacent niches.
• Paymentus Holdings and Flywire — compete directly on the bill-payment and payment-processing side of government and utility billing.
• Cellebrite — overlaps narrowly in public-safety/justice-adjacent technology.

i3 Verticals' filings note that competitors range from large, well-resourced incumbents to small, early-stage challengers, and that some rivals have materially greater financial, technological, and marketing resources.

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5. Strategic Strengths & Risks

Strengths

• High recurring revenue mix: ~76% recurring revenue from continuing operations gives visibility that one-off project-based businesses lack.
• Sticky, mission-critical software: Court, utility billing, and vehicle-title systems are deeply embedded in government operations and costly/disruptive to replace.
• Focused strategic pivot: Divesting Merchant Services and Healthcare RCM concentrated capital and management attention on the higher-margin, stickier public-sector software niche.
• Embedded payments upside: The proprietary payment facilitator platform captures transaction economics that pure software vendors like Tyler Technologies must partner for.

Risks

• Scale disadvantage versus Tyler Technologies: Tyler is a far larger, more entrenched incumbent across the same core government-software categories.
• History of losses: The company has a history of net losses and depends on continued revenue growth to sustain profitability and cash flow.
• Acquisition integration risk: Growth depends heavily on M&A, which carries integration, cultural, and goodwill-impairment risk.
• Sponsor bank/payment network dependence: Loss of sponsor bank relationships or card network registration would seriously impair the embedded-payments part of the model.
• Government budget cyclicality: Public-sector customers' software spending is tied to local tax revenue and budget cycles, introducing demand risk outside the company's control.
• Leverage: The 2023 Senior Secured Credit Facility carries covenants that could constrain flexibility, especially after large divestiture-related balance sheet changes.
• Litigation/cybersecurity: A pending Louisiana lawsuit tied to a 2021 data matter illustrates ongoing cybersecurity and data-liability exposure.

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6. Financial Overview

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7. Summary Conclusion

i3 Verticals has reshaped itself from a diversified payments company into a focused public-sector enterprise software vendor, trading divestiture proceeds for a narrower but stickier, higher-margin business built on JusticeTech, utility billing, and government administration software. Its moat rests chiefly on the high switching costs of mission-critical government workflow software and a growing recurring-revenue base, tempered by its smaller scale relative to the dominant incumbent, Tyler Technologies, and its continued reliance on acquisitions for growth. The key forward risk is whether the newly focused, higher-margin business can keep winning and retaining government contracts against both Tyler's scale and serial-acquirer competitors like Constellation Software and Roper, which could bid up the same niche software targets i3 Verticals needs for further M&A-led growth.