DEF: i3 Verticals Reports Strong FY25, Sets 2026 Annual Meeting

i3 Verticals, Inc. announced its 2026 Annual Meeting of Stockholders to vote on director elections, auditor ratification, and executive compensation, alongside reporting significant revenue and net income growth for fiscal year 2025.

Summary

• The Annual Meeting of Stockholders will be held on Tuesday, March 3, 2026, at 1:30 p.m. Central Time at the company's headquarters in Nashville, Tennessee.
• Stockholders will vote on the election of eight director nominees, the ratification of Deloitte & Touche LLP as the independent registered public accounting firm for fiscal year 2026, and a non-binding, advisory vote on executive compensation.
• Only record holders of Class A and Class B common stock as of January 2, 2026, are entitled to vote.
• Revenue from continuing operations for the fiscal year ended September 30, 2025, was $213.2 million, an increase of 11.5% compared to fiscal year 2024.
• Net income from continuing operations for fiscal year 2025 was $5.6 million, a significant improvement from a net loss of $16.0 million in fiscal year 2024.
• Adjusted EBITDA from continuing operations for fiscal year 2025 was $57.5 million, up from $50.5 million in fiscal year 2024.
• Diluted net income attributable to Class A common stock per share from continuing operations for fiscal year 2025 was $0.14, compared to a net loss per share of $0.46 in the prior year.
• Adjusted diluted earnings per share from continuing operations for fiscal year 2025 was $1.05, compared to $0.30 for fiscal year 2024.
• Annualized Recurring Revenue (ARR) from continuing operations for the fourth quarter of fiscal year 2025 was $165.3 million, representing a 9.2% growth rate from $151.4 million in the prior year's fourth quarter.
• The company completed the sale of its healthcare revenue cycle management business on May 5, 2025, for approximately $96.3 million.
• An acquisition of a utility billing software company was completed on April 1, 2025, for $9.0 million in cash consideration, with potential contingent consideration up to $5.0 million.
• Executive officers (excluding the CEO) were eligible for a target cash bonus payout of 10% of their 2025 base salary, but the Compensation Committee determined not to award cash bonuses for fiscal year 2025.
• Named executive officers (excluding the CEO) received 40,000 time-based vesting restricted stock units (RSUs) in February 2025, vesting ratably over four years.
• Performance Stock Units (PSUs) for fiscal years 2025, 2024, and 2023 vested due to the company exceeding adjusted diluted earnings per share targets, which were adjusted for the Healthcare RCM Business divestiture.

Sentiment

Score: 7

Explanation: The filing presents strong financial improvements for fiscal year 2025, including a significant turnaround in net income and robust growth in key metrics like revenue, Adjusted EBITDA, and ARR. Strategic actions like the divestiture and acquisition are positive. However, the lack of cash bonuses for executives (excluding the CEO) and the administrative errors leading to late Section 16(a) reports introduce minor concerns, preventing a higher score.

Positives

• Revenue from continuing operations increased by 11.5% to $213.2 million for fiscal year 2025, demonstrating strong top-line growth.
• The company achieved a significant turnaround in profitability, reporting net income from continuing operations of $5.6 million in fiscal year 2025, compared to a net loss of $16.0 million in fiscal year 2024.
• Adjusted EBITDA from continuing operations grew to $57.5 million in fiscal year 2025 from $50.5 million in fiscal year 2024, indicating improved operational efficiency.
• Diluted net income per share from continuing operations improved to $0.14 from a loss of $0.46 in the prior year, reflecting enhanced shareholder value.
• Adjusted diluted earnings per share from continuing operations saw a substantial increase to $1.05 in fiscal year 2025 from $0.30 in fiscal year 2024.
• Annualized Recurring Revenue (ARR) from continuing operations grew by 9.2% to $165.3 million in Q4 FY2025, highlighting a healthy recurring revenue stream.
• Successfully completed the sale of the Healthcare RCM Business for approximately $96.3 million, streamlining operations and generating capital.
• Strategically acquired a utility billing software company for $9.0 million cash, expanding product offerings and market reach.
• Performance Stock Units (PSUs) for fiscal years 2025, 2024, and 2023 vested, indicating successful achievement of adjusted diluted EPS targets over multiple periods.

Negatives

• Executive officers (excluding the CEO) did not receive cash bonuses for fiscal year 2025, as the Compensation Committee determined not to award them despite some performance guidelines being met.
• Some performance guidelines for the short-term cash incentive program (Adjusted EBITDA, Adjusted EBITDA Margin, and absolute stock price performance) were not met for fiscal year 2025.
• Several executive officers (Messrs. Whitson, Stanford, Maple, Laisure, Smith, and Christians) had late Form 4 filings related to share withholding in connection with PSU and RSU vesting, attributed to an administrative error.

Risks

• The company's compensation policies and programs could potentially encourage excessive risk-taking, although the company states its program is designed to mitigate this.
• Major financial risk exposures related to accounting, internal controls over financial reporting, and financial policies require continuous monitoring and control.
• Cybersecurity, privacy, data, and artificial intelligence risk exposures pose ongoing threats to the company's information systems and security, requiring robust mitigation strategies.
• Potential for substantial payments under the Tax Receivable Agreement, which could reduce the amount of overall cash flow available to the company or i3 Verticals, LLC.
• Nonpayment for a specified period under the Tax Receivable Agreement may constitute a material breach, potentially resulting in the acceleration of payments due.
• Decisions made in the course of running the business, such as mergers, asset sales, or other changes in control, may influence the timing and amount of payments under the Tax Receivable Agreement.
• The company relies on its ability to attract, retain, and motivate executives, and ineffective compensation policies could hinder this objective.

Future Outlook

The company's executive compensation policies are fundamentally aimed at attracting, retaining, and motivating executives to execute business strategy and deliver strong financial results and long-term stockholder value, with a heavier weighting towards long-term equity incentives. The Compensation Committee will continue to consider the advisory Say-on-Pay vote results from stockholders when making future compensation decisions, indicating a commitment to aligning with shareholder interests.

Management Comments

• "The Board believes that this leadership structure, coupled with strong independent director leadership, is the most effective and appropriate leadership model for the Company at this time."
• "The Board believes the combined Chairman and Chief Executive Officer structure promotes decisive leadership, ensures clear accountability and enhances our ability to communicate with a single and consistent voice to stockholders, employees and other stakeholders."
• "The Compensation Committee believes that discretionary bonuses are preferable to formulaic cash incentive awards because this compensation approach allows for greater flexibility and permits the Compensation Committee to consider and weigh all factors that it may deem relevant to an executives performance in a particular period, which factors and weighting may differ from period to period."
• "The Company made this determination to approve time-based vesting RSUs in lieu of stock options based on its view that RSUs are an effective form of equity award to focus our senior executives on our long-term performance, mitigate excessive risk taking, and enhance the retention value of our long-term equity-based compensation taking into account the fact that RSUs, unlike stock options, retain some value even if the market price of our Common Stock subsequently drops below the market price on the date of grant."

Industry Context

The company operates within the dynamic payment processing and software solutions industry, often referred to as fintech. Its strategic actions, such as the divestiture of the Healthcare RCM Business and the acquisition of a utility billing software company, demonstrate a focus on optimizing its portfolio and expanding into specialized software verticals. The emphasis on Adjusted EBITDA and Annualized Recurring Revenue (ARR) as key performance indicators aligns with common metrics used by growth-oriented technology and software companies. The shift in executive compensation towards time-based Restricted Stock Units (RSUs) from stock options reflects a broader industry trend to enhance executive retention and align long-term incentives while potentially mitigating excessive risk-taking, especially in a market environment where stock price volatility can impact option value.

Comparison to Industry Standards

• The company's compensation consultant, Frederic W. Cook & Co., Inc. (FW Cook), regularly assesses compensation programs for competitiveness relative to the industry and peers, ensuring that base salaries and long-term equity incentives are reasonably competitive.
• The company utilizes the S&P Information Technology index for Total Shareholder Return (TSR) comparison in its pay-versus-performance table, providing a benchmark against a relevant industry index.
• The CEO-to-median-employee pay ratio of 4.39 to 1 for fiscal year 2025 is relatively low compared to many larger public companies, which often report significantly higher ratios, potentially indicating a more balanced compensation structure or a smaller overall compensation base for the company.

Management Changes

Corporate Governance

Related Party Transactions

• The company is party to a Tax Receivable Agreement with i3 Verticals, LLC and its Continuing Equity Owners, providing for payments of 85% of certain tax benefits realized by the company. Since October 1, 2024, approximately $10.0 million in cash disbursements have been made under this agreement.
• Specific payments under the Tax Receivable Agreement include $131,000 to Rick Stanford (executive officer), $3.5 million to entities affiliated with David Wilds (director), $2.2 million to entities affiliated with John Harrison (director), and $2.1 million to entities affiliated with Burton Harvey (former director).
• The i3 Verticals LLC Agreement governs the relationship between i3 Verticals, Inc. (as sole manager) and i3 Verticals, LLC, detailing provisions for compensation, fees, expenses, tax and cash distributions, transfer restrictions, maintenance of one-to-one share/unit ratios, dissolution, and indemnification.
• The i3 Verticals LLC Agreement also provides a redemption right for Continuing Equity Owners to exchange their common units for Class A common stock or cash.
• A Registration Rights Agreement is in place with certain Continuing Equity Owners (including Gregory Daily and affiliates, entities affiliated with First Avenue Partners, Harbert Management Corporation, Capital Alignment Partners, and Clay Whitson), granting them demand and piggyback registration rights for Class A common stock.

Stakeholder Impact

• **Shareholders**: Directly impacted by the proposals to be voted on at the Annual Meeting (director elections, auditor ratification, executive compensation). Benefit from improved financial performance (revenue, net income, EPS, EBITDA, ARR growth) and strategic M&A activities. Potential for long-term value creation. Subject to potential dilution from equity awards and cash flow reduction due to Tax Receivable Agreement payments.
• **Executive Officers**: Directly impacted by changes in compensation structure (shift to RSUs, no cash bonuses for FY2025 for some) and the vesting of performance-based equity awards. Potential for significant payments upon change of control or termination as detailed in their agreements.
• **Employees**: Benefit from broad-based employee benefit programs (medical, dental, 401(k) with matching contributions). Cybersecurity training and awareness programs are in place.
• **Customers/Suppliers**: Impacted by strategic business changes, such as the divestiture of the Healthcare RCM Business and the acquisition of a utility billing software company, which may alter service offerings or business relationships.
• **Creditors**: Tax Receivable Agreement payments could reduce the company's overall cash flow, potentially affecting its ability to service debt, although the company plans to fund these payments from operations or existing/future credit facilities.

Next Steps

• Stockholders are requested to vote on the election of directors, ratification of the independent auditor, and the advisory vote on executive compensation at the Annual Meeting on March 3, 2026.
• The Board of Directors will reconsider the selection of the independent registered public accounting firm if stockholders do not ratify the appointment of Deloitte & Touche LLP.
• The Compensation Committee will review the voting results of the Say-on-Pay proposal at this and future annual meetings in connection with its ongoing evaluation of compensation philosophy and decisions.
• The company anticipates funding ordinary course payments under the Tax Receivable Agreement from cash flow from operations, available cash, or available borrowings under its senior secured credit facility or future debt agreements.

Key Dates

Recommendation

The company demonstrated a strong financial rebound in fiscal year 2025, with significant increases in revenue, a return to net income profitability, and robust growth in Adjusted EBITDA and Annualized Recurring Revenue. Strategic moves like the divestiture of the Healthcare RCM business and the acquisition of a utility billing software company indicate active portfolio management and a focus on core growth areas. The vesting of performance-based equity awards further validates management's execution against targets. While the lack of cash bonuses for some executives and minor administrative errors are noted, the overall trajectory and operational achievements suggest a positive outlook for long-term value creation, making it an attractive investment.

Keywords

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