i3 Verticals Fiscal Q3 2026 Earnings: Recurring Revenue Grew but Guidance Was Cut

i3 Verticals (Nasdaq: IIIV) reported fiscal Q3 2026 revenue from continuing operations of $53.1 million, up 2.2% year over year, while diluted EPS from continuing operations improved to $0.19 from a loss of $0.03. Adjusted EBITDA increased 4.6% and its margin expanded, but management said non-recurring revenue weakness and implementation delays left results below its expectations. The quarter ended June 30, 2026.

Core Financial Results

The modest revenue increase was accompanied by a 5% reduction in total operating expenses. That narrowed the GAAP operating loss to $0.9 million from $4.8 million, although continuing operations remained unprofitable at the operating level.

Net income from continuing operations turned positive, helped by $9.9 million of other income compared with $4.6 million a year earlier. Adjusted EBITDA grew slightly faster than revenue, lifting the adjusted EBITDA margin by 60 basis points.

The continuing-operations presentation excludes the divested Merchant Services and Healthcare RCM businesses, with prior periods recast accordingly. On a consolidated basis, net income fell to $5.7 million from $18.4 million because the prior-year quarter included $19.4 million of income from discontinued operations.

Recurring Revenue Growth Outpaced the Top Line, but Delays Weighed on the Outlook

ARR increased 8.3%, substantially faster than the 2.2% increase in quarterly revenue. Management attributed the weaker reported growth to continued pressure in certain non-recurring revenue streams and implementation delays, indicating that growth in the contracted recurring base had not yet translated into comparable total revenue growth.

Four material statewide services in the Transportation market went live during the period. Management believes these deployments can help accelerate recurring revenue growth, but the company did not quantify their expected revenue contribution or timing.

ARR is calculated by annualizing recurring revenue recognized within the quarter. It is not a forecast, does not account for seasonality, and assumes that active customer contracts continue even though they may not be renewed or extended.

Profitability, Cash Flow, and the Balance Sheet

Selling, general and administrative expense declined 13% to $28.9 million, while costs of services fell 3% to $16.3 million. These reductions helped the operating margin improve to approximately negative 1.7% from negative 9.3%, despite depreciation and amortization increasing 5% and the company recording a $1.4 million contingent-consideration charge.

The positive GAAP net income result still depended on items below operating income. Other income rose to $9.9 million, more than offsetting the operating loss and $1.8 million of interest expense. The source of that other income was not detailed in the release.

For the nine months ended June 30, operating cash flow improved to $38.4 million from an $8.3 million outflow a year earlier. Investing activities used $68.1 million, compared with $78.8 million provided in the prior-year period, while financing activities used $32.2 million.

Cash and cash equivalents declined to $2.6 million from $66.7 million at the September 2025 fiscal year-end, while long-term debt increased from zero to $114.3 million. Class A shares outstanding fell to 18.2 million from 24.0 million over the same period. Management said the company had repurchased more than 20% of its outstanding shares under repurchase programs since October 2024, but did not characterize those purchases as an assessment of valuation.

Fiscal 2026 Guidance

The company reduced all three major fiscal 2026 guidance ranges. The adjusted EBITDA reduction was proportionally larger than the changes to revenue and adjusted EPS, pointing to greater pressure on expected earnings than on the top line.

The outlook excludes future acquisitions and transaction-related costs. Adjusted diluted EPS guidance assumes a 25% effective tax rate.

Recent Insider Transactions

The supplied six-month insider summary reports 88,976 shares acquired across seven transactions and 6,122 shares sold in one transaction, resulting in net acquisitions of 82,854 shares. The latest reported transactions include an open-market CEO purchase, one executive sale, and six director stock awards; these transactions do not by themselves establish insiders’ views on the company’s prospects.

Individual share counts for the director awards were not included in the supplied transaction data.

Risks Investors Need to Watch

• Implementation and non-recurring revenue pressure: Delays and weakness in certain non-recurring streams held total revenue growth below ARR growth and contributed to the reduced annual outlook.
• Operating profitability remains negative: Cost reductions narrowed the operating loss, but continuing operations still did not produce GAAP operating income during the quarter.
• Reliance on other income: The return to GAAP net income was supported by $9.9 million of other income rather than operating profit, making the nature and persistence of that income relevant to future comparisons.
• Balance-sheet change: Cash declined sharply and long-term debt rose from zero, while quarterly interest expense increased 126% to $1.8 million.
• ARR is not guaranteed revenue: The metric annualizes one quarter of recurring sources and does not account for seasonality or the possibility that contracts may not be renewed.

Summary

i3 Verticals produced modest fiscal Q3 revenue growth, faster ARR growth, a narrower operating loss, and a higher adjusted EBITDA margin. However, implementation delays and weak non-recurring revenue prevented the recurring base from translating into stronger overall growth and led the company to lower its fiscal 2026 outlook. Future results will depend on the contribution from newly launched statewide Transportation services, conversion of ARR into reported revenue, sustained operating cost control, and management of the company’s changed cash and debt position.