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Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-09 · 186 added, 188 removed, 291 unchanged (56% of the section changed)

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You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the year ended September 30, 2024 (“Form 10-K”), filed with the SEC on November 25, 2024.

The terms “i3 Verticals,” “we,” “us” and “our” and similar references refer (1) before the completion of our IPO or the reorganization transactions entered into in connection therewith (the “Reorganization Transactions”), which are described in the notes to the condensed consolidated financial statements, to i3 Verticals, LLC and, where appropriate, its subsidiaries, and (2) after the Reorganization Transactions to i3 Verticals, Inc.

The terms “i3 Verticals,” “we,” “us” and “our” and similar references refer to i3 Verticals, Inc.

and, where appropriate, its subsidiaries.

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• technical, operational and regulatory risks related to our information technology systems and third-party providers’ systems;

• our ability to execute on our strategy and achieve our goals following the completion of the sale of our Merchant Services Business and the completion of the sale of our Healthcare RCM Business;

• risks related to ongoing and future economic and geopolitical conditions, including the impact of inflationary pressures, elevated interest rates, current geopolitical instability (including with respect to the current dispute between India and Pakistan), and tariff and trade-related developments;

• our ability to execute on our strategy and achieve our goals following the completion of the sale of our Merchant Services Business and our Healthcare RCM Business;

• risks related to ongoing and future economic and geopolitical conditions, including the impact of inflationary pressures, elevated interest rates, current geopolitical instability (including in connection with current tensions between India and Pakistan), and tariff and trade-related developments;

• our ability to successfully manage our intellectual property;

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• risk of chargeback liabilities if our customers refuse or cannot reimburse chargebacks resolved in favor of their customers;

• risks related to laws, regulations and industry standards, including our ability to comply with complex laws and regulations applicable to the healthcare industry or to adjust our operations in response to changing laws and regulations;

• the impact of recent decisions of the U.S.

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• the impact of government investigations, claims, and litigation;

• the effects of health reform initiatives;

• risks related to our international operations;

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Executive Overview

The Company delivers seamless enterprise software to customers in strategic vertical markets.

Building on its sophisticated and diverse platform of software and services solutions, the Company creates and acquires software products to serve the specific needs of public and private organizations in the Public Sector.

After giving effect to the sale of our Healthcare RCM Business (as defined below) on May 5, 2025, as described below, the Company provides mission-critical enterprise software solutions to its public sector customers.

These comprehensive cloud-native solutions address a broad range of government functions, including courts, transportation, utilities, revenue and schools.

The Company’s mission is to enable state and local governments and related agencies to serve their constituents in an effective and efficient manner.

With thousands of software installations across all 50 states and Canada, i3 Verticals is a leader in the public sector vertical.

Prior to the disposition of the Healthcare RCM Business, we had two operating segments and reportable segments, a Public Sector segment and a Healthcare Segment, as reflected in the Company’s consolidated financial statements for the three months ended March 31, 2025.

After giving effect to the disposition of the Healthcare RCM Business, the Company has updated its segment presentation, and has determined that it has one operating segment and reportable segment as of June 30, 2025.

See Note 16 to our condensed consolidated financial statements for additional information.

Recent Developments

Inflationary pressures, elevated interest rate levels, monetary policy, the current geopolitical situation (including the military conflicts in the Middle East and Ukraine as well as the current dispute between India and Pakistan), tariff and trade-related developments, and budgetary and political pressures to reduce government spending are causing broad economic uncertainty and could potentially cause new, or exacerbate existing, economic challenges that may impact us.

Inflationary pressures, elevated interest rate levels, monetary policy, the current geopolitical situation (including in connection with the military conflicts in the Middle East and Ukraine as well as the current tensions between India and Pakistan), tariff and trade-related developments, and budgetary and political pressures to reduce government spending are causing broad economic uncertainty and could potentially cause new, or exacerbate existing, economic challenges that may impact us.

For example, we have business operations in Canada, and the determination of Canadian governmental authorities or businesses to cancel or not renew contracts, or otherwise reduce business, with U.S.

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As the future magnitude, duration and effects of these conditions are difficult to predict at this time, we are unable to predict the extent of the potential effect on our financial results.

At March 31, 2025, we had $7.7 million of cash and cash equivalents and $438.0 million of available capacity under our 2023 Senior Secured Credit Facility subject to our financial covenants.

As of March 31, 2025, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio 92.5x, and 0.1x, respectively.

At June 30, 2025, we had $55.5 million of cash and cash equivalents and $400.0 million of available capacity under our 2023 Senior Secured Credit Facility subject to our financial covenants.

As of June 30, 2025, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio 87.1x, and 0.0x, respectively.

For additional information about our Exchangeable Notes and 2023 Senior Secured Credit Facility, see the section entitled “Liquidity and Capital Resources” below.

Sale of Healthcare RCM Business

On May 5, 2025, i3 Verticals, LLC, and i3 Healthcare Solutions, LLC, a wholly-owned subsidiary of i3 Verticals, LLC (“Seller,” and collectively with i3 Verticals LLC, the “Seller Parties”), completed the sale of the equity interests of certain wholly-owned subsidiaries of the Seller (the “Healthcare RCM Acquired Entities”) which owned and operated the Company's Healthcare RCM Business to Infinx, Inc.

(“Healthcare RCM Buyer”), a Texas corporation, pursuant to the terms of that certain Securities Purchase Agreement dated as of May 5, 2025, by and among Healthcare RCM Buyer and the Seller Parties (the “Healthcare RCM Purchase Agreement;” the transactions contemplated by the Healthcare RCM Purchase Agreement, the “Healthcare RCM Transactions”).

On May 5, 2025, i3 Verticals, LLC, and i3 Healthcare Solutions, LLC, a wholly-owned subsidiary of i3 Verticals, LLC (“Healthcare RCM Seller,” and collectively with i3 Verticals LLC, the “Healthcare RCM Seller Parties”), completed the sale of the equity interests of certain wholly-owned subsidiaries of the Healthcare RCM Seller (the “Healthcare RCM Acquired Entities”) which owned and operated the Company's healthcare revenue cycle management business, including its associated proprietary technology, to Infinx, Inc.

(“Healthcare RCM Buyer”), a Texas corporation, pursuant to the terms of that certain Securities Purchase Agreement dated as of May 5, 2025, by and among Healthcare RCM Buyer and the Healthcare RCM Seller Parties (the “Healthcare RCM Purchase Agreement;” the transactions contemplated by the Healthcare RCM Purchase Agreement, the “Healthcare RCM Transactions”).

In addition, immediately prior to the sale of the equity interests of the Healthcare RCM Acquired Entities pursuant to the Healthcare RCM Purchase Agreement, i3 Verticals, LLC and certain of its subsidiaries contributed and/or assigned certain assets and certain liabilities related to the Healthcare RCM Business to the Healthcare RCM Acquired Entities.

The purchase price payable by Healthcare RCM Buyer to Seller for the equity interests of the Healthcare RCM Acquired Entities was $96.0 million, paid in cash at closing, subject to post-closing net working capital and other purchase price adjustments as provided in the Healthcare RCM Purchase Agreement.

The Healthcare RCM Business contributed $9.1 million and $18.9 million of revenue for the three and six months ended March 31, 2025, respectively.

The Healthcare RCM Business was not classified as held for sale according to GAAP as of March 31, 2025.

Accordingly, the current period and historical results of the Healthcare RCM Business are presented within results from continuing operations in this Quarterly Report on Form 10-Q.

The purchase price payable by Healthcare RCM Buyer to Healthcare RCM Seller for the equity interests of the Healthcare RCM Acquired Entities was $96.4 million, paid in cash at closing.

The final purchase price is subject to post-closing net working capital and other purchase price adjustments as provided in the Healthcare RCM Purchase Agreement.

The Healthcare RCM Business contributed $3.6 million and $22.5 million of revenue for the three and nine months ended June 30, 2025, respectively.

As a result of the sale of the Healthcare RCM Business, the results of operations for the Healthcare RCM Business have been reclassified as discontinued operations in our condensed consolidated statements of operations for all periods presented.

Refer to Note 2 for additional information.

Sale of Merchant Services Business

On September 20, 2024, i3 Verticals, LLC, and i3 Holdings Sub, Inc., a wholly-owned subsidiary of i3 Verticals, LLC (“Corporation Seller,” and collectively with i3 Verticals, LLC, the “Sellers”) completed the transactions (such closing, the “Closing”) contemplated by that certain Securities Purchase Agreement dated as of June 26, 2024 (the “Merchant Services Purchase Agreement”), by and among i3 Verticals, LLC, Corporation Seller, the Company (solely for the purpose of providing a guaranty of the obligations of Sellers as set forth in the Merchant Services Purchase Agreement), Payroc Buyer, LLC (“Merchant Services Buyer”), and Payroc WorldAccess, LLC (solely for the purpose of providing a guaranty of the obligations of Merchant Services Buyer as set forth in the Merchant Services Purchase Agreement), the entry into which Merchant Services Purchase Agreement was previously disclosed in a Current Report on Form 8-K filed by the Company on June 26, 2024.

Pursuant to the terms of the Merchant Services Purchase Agreement, the Sellers sold to Merchant Services Buyer the equity interests of certain direct and indirect wholly-owned subsidiaries of Sellers (the “Merchant Services Acquired Entities”) primarily comprising the Company's merchant services business, including its associated proprietary technology (the “Merchant Services Business”), after giving effect to the contribution of certain assets and the assignment of certain liabilities associated with the Merchant Services Business from i3 Verticals, LLC and certain affiliates to the Merchant Services Acquired Entities pursuant to a contribution agreement which was entered into immediately prior to the Closing.

Pursuant to the terms of the Merchant Services Purchase Agreement, Merchant Services Buyer paid to Sellers an aggregate purchase price of approximately $437 million (after giving effect to post-closing net working capital, indebtedness and cash adjustments), payable in cash at the Closing.

As a result of the sale of the Merchant Services Business, the historical results of the Merchant Services segment and a small portion of the historical Software and Services segment which had been included in the Merchant Services Business have been reflected as discontinued operations in our consolidated financial statements.

(“Merchant Services Buyer”), and Payroc WorldAccess, LLC (solely for the purpose of providing a guaranty of the obligations of Merchant Services Buyer as set forth in the Merchant Services Purchase Agreement).

Pursuant to the terms of the Merchant Services Purchase Agreement, the Merchant Services Sellers sold to Merchant Services Buyer the equity interests of certain direct and indirect wholly-owned subsidiaries of the Merchant Services Sellers (the “Merchant Services Acquired Entities”) primarily comprising the Company's merchant services business, including its associated proprietary technology (the “Merchant Services Business”), after giving effect to the contribution of certain assets and the assignment of certain liabilities associated with the Merchant Services Business from i3 Verticals, LLC and certain affiliates to the Merchant Services Acquired Entities pursuant to a contribution agreement which was entered into immediately prior to the Closing.

Pursuant to the terms of the Merchant Services Purchase Agreement, Merchant Services Buyer paid to the Merchant Services Sellers an aggregate purchase price of approximately $439.5 million paid in cash at closing, after giving effect to post-closing net working capital, indebtedness and cash adjustments.

As a result of the sale of the Merchant Services Business, the results of operations for the Merchant Services Business have been reflected as discontinued operations in our condensed consolidated statements of operations for all periods presented.

Refer to Note 2 to additional information.

A core component of our growth strategy includes a disciplined approach to acquisitions of companies and technology, evidenced by numerous platform acquisitions and tuck-in acquisitions since our inception in 2012.

Our acquisitions have increased the number of businesses and organizations to whom we provide solutions and augmented our existing proprietary payment facilitator platform and software solutions and capabilities.

Recent acquisitions

On April 1, 2025, we completed the acquisition of a business to expand our utility management software offerings in the Public Sector segment.

Total purchase consideration was $9.0 million in cash funded by the proceeds from our revolving credit facility and cash on hand as well as an amount of contingent consideration of up to $5.0 million, in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreement, through no later than September 2027.

The Company is in process of determining the acquisition date fair values of the liabilities for the contingent consideration based on discounted cash flow analyses.

Acquisitions during the six months ended March 31, 2025

During the six months ended March 31, 2025, we did not complete any acquisitions.

Acquisitions during the six months ended March 31, 2024

During the six months ended March 31, 2024, we completed the acquisition of one business to expand our software offerings.

Total purchase consideration was $1.3 million, including $1.1 million in cash funded by the proceeds from our revolving credit facility and $0.2 million in contingent consideration.

Acquisitions during the nine months ended June 30, 2025

On April 1, 2025, the Company completed the acquisition of a business to expand the Company’s Public Sector utility billing software offerings.

Total purchase consideration was $10.3 million, including $9.0 million in cash funded by proceeds from the Company's revolving credit facility and $1.3 million in the acquisition date estimated fair value of contingent cash consideration (the final amount of such contingent cash payment of up to $5.0 million is dependent upon achievement of specified financial performance targets, as defined in the purchase agreement).

During the nine months ended June 30, 2025, we also completed the acquisition of certain assets of a business to expand our customer footprint.

Total purchase consideration was $2.0 million in cash funded from cash on hand.

Acquisitions during the nine months ended June 30, 2024

During the nine months ended June 30, 2024, we completed the acquisition of one business to expand our software offerings.

Total purchase consideration was $1.3 million, including $1.1 million in cash funded by the proceeds from our revolving credit facility and $0.2 million in the acquisition date estimated fair value of contingent cash consideration (the final amount of such contingent cash payment of up to of up to $22.0 million is dependent upon achievement of specified financial performance targets, as defined in the purchase agreement).

Our Revenue and Expenses

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Other costs of services are recognized at the time the related revenue is recognized.

Following the disposal of our Merchant Services Business in the fourth quarter of fiscal year 2024, our core business is providing software solutions for key verticals.

Given the change in our business model following the sale of our Merchant Services Business, we have reclassified certain expenses to better align with the primary industry in which we now operate.

Following the disposal of our Merchant Services Business in the fourth quarter of fiscal year 2024, our core business has been providing software solutions.

Given the change in our business model following the sale of our Merchant Services Business, we reclassified certain expenses to better align with the primary industry in which we operate.

During the first quarter of fiscal year 2025, we revised our presentation of certain expenses in the Condensed Consolidated Statements of Operations from selling, general and administrative expenses to other costs of services.

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Salaries and other employment costs within selling, general and administrative include individuals associated with shared services, product development, sales and other functions.

Following the disposal of our Merchant Services Business in the fourth quarter of fiscal year 2024, our core business is providing software solutions for key verticals.

Given the change in our business model following the sale of our Merchant Services Business, we have reclassified certain expenses to better align with the primary industry in which we now operate.

Following the disposal of our Merchant Services Business in the fourth quarter of fiscal year 2024, our core business has been providing software solutions.

Given the change in our business model following the sale of our Merchant Services Business, we have reclassified certain expenses to better align with the primary industry in which we operate.

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How We Assess Our Business

After giving effect to these developments, the Company has two reportable segments, Public Sector and Healthcare, and an Other category.

In addition, as disclosed above, we completed the disposition of our Healthcare RCM Business on May 5, 2025.The Healthcare RCM Business contributed $9.1 million and $18.9 million of revenue for the three and six months ended March 31, 2025, respectively.

Public Sector

Our Public Sector segment has products and solutions that create an efficient flow of information throughout a variety of public sector entities.

We serve customers at both the state and local level and our geographic reach covers most of the United States and some of Canada.

Our solutions help our customers provide more responsive and efficient services to their citizens and stakeholders.

Our Healthcare segment is dedicated to delivering integrated solutions across the healthcare ecosystem, catering to providers and payers, with a strong emphasis on enhancing process efficiency and ensuring compliance.

The Other category includes corporate overhead expenses, technology resources shared across segments and inter-segment eliminations.

For additional information on our segments, see Note 16 to our condensed consolidated financial statements.

As a result of the sale of the Merchant Services Business in 2024, the results of operations for the Merchant Services Business have been reflected as discontinued operations in our condensed consolidated statements of operations for all periods presented.

Additionally, as a result of the sale of the Healthcare RCM Business on May 5, 2025, the results of operations for the Healthcare RCM Business have been reclassified as discontinued operations in our condensed consolidated statements of operations for all periods presented.

After giving effect to these developments, as further described above, the Company has one operating segment and reportable segment as of June 30, 2025.

After giving effect to the sale of the Healthcare RCM Business as noted above, the Company provides mission-critical enterprise software and services solutions to its public sector customers.

These comprehensive solutions cover a broad range of applications, including cloud native enterprise software, all of which enable state and local governments and related agencies to serve their constituents in an efficient and seamless manner.

Key Performance Indicators

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The active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

ARR from continuing operations for the three months ended March 31, 2025 and 2024 was $199.1 million and $186.8 million, respectively, representing a period-to-period growth rate of 7%.

Adjusted EBITDA margin is used by the Company to measure operating performance and for purposes of making decisions about allocating resources to our business segments.

ARR from continuing operations for the three months ended June 30, 2025 and 2024 was $160.8 million and $143.6 million, respectively, representing a period-to-period growth rate of 12%.

Adjusted EBITDA margin is used by the Company to measure operating performance and for purposes of making decisions.

Adjusted EBITDA margin for any particular period is adjusted EBITDA as a percentage of revenue for such period.

Adjusted EBITDA is calculated as earnings adjusted to exclude interest, tax, depreciation, amortization, stock-compensation expense, non-cash changes in the fair value of contingent consideration, M&A-related expenses, and certain other adjustments that management believes are not reflective of our underlying operations.

Adjusted EBITDA and Adjusted EBITDA margin are presented at a segment level in our financial statement footnotes in accordance with ASC 280 – “Segment Reporting.” Adjusted EBITDA margin for our public sector segment was 41% for both the three months ended March 31, 2025 and 2024.

Further, Adjusted EBITDA margin for our healthcare segment was 16% for both the three months ended March 31, 2025 and 2024.

For additional information regarding Adjusted EBITDA and Adjusted EBITDA margin, see Note 16.

Adjusted EBITDA and Adjusted EBITDA margin, when presented on a consolidated basis in our other public disclosures, are non-GAAP financial measures.

Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures.

Results of Operations

As a result of the sale of the Merchant Services Business, the historical results of the Merchant Services Business have been reflected as discontinued operations in our condensed consolidated financial statements.

Prior period results of operations and balance sheet information have been recast to reflect this presentation, and the discussion below relates to our continuing operations after giving effect to the reclassification for the Merchant Services Business as discontinued operations.

In addition, as noted above, since the Healthcare RCM Business was not classified as held for sale according to GAAP as of March 31, 2025, the current period and historical results of the Healthcare RCM Business are presented within results from continuing operations.

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

As a result of the sale of the Merchant Services Business and the Healthcare RCM Business, the historical results of these two disposed businesses have been reflected as discontinued operations in our condensed consolidated financial statements.

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

The following table presents our historical results of operations for the periods indicated:

Three Months Ended March 31, Change

Three Months Ended June 30, Change

(in thousands) 2025 2024 Amount %

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Total operating expenses 56,714 47,493 9,221 19.4 %

Income from operations 3,964 2,486 1,478 59.5 %

Loss from operations

(4,813) (1,310) (3,503) 267.4 %

Other (income) expenses

Interest expense 806 7,906 (7,100) (89.8) %

Other income (631) (2,257) 1,626 (72.0) %

Other income (4,601) — (4,601) n/m

Total other (income) expenses (3,795) 7,906 (11,701) n/m

Income (loss) before income taxes 4,149 (2,971) 7,120 n/m

Provision for (benefit from) income taxes 3,054 (669) 3,723 n/m

Net income (loss) from continuing operations 1,095 (2,302) 3,397 n/m

Net (loss) income from discontinued operations, net of income taxes (326) 5,650 (5,976) n/m

Net income 769 3,348 (2,579) (77.0) %

Net income (loss) from continuing operations attributable to non-controlling interest 1,022 (593) 1,615 n/m

Net (loss) income from discontinued operations attributable to non-controlling interest (99) 2,063 (2,162) n/m

Net income attributable to non-controlling interest 923 1,470 (547) (37.2) %

Net income (loss) from continuing operations attributable to i3 Verticals, Inc.

Loss before income taxes (1,018) (9,216) 8,198 (89.0) %

(Benefit from) provision for income taxes (22) 5,191 (5,213) n/m

Net loss from continuing operations

(996) (14,407) 13,411 (93.1) %

Net income from discontinued operations, net of income taxes

19,421 6,109 13,312 n/m

Net (loss) income from discontinued operations attributable to i3 Verticals, Inc.

Net income (loss) 18,425 (8,298) 26,723 n/m

Net loss from continuing operations attributable to non-controlling interest

(586) (2,608) 2,022 (77.5) %

Net income from discontinued operations attributable to non-controlling interest

6,129 1,855 4,274 n/m

Net (loss) income attributable to i3 Verticals, Inc.

Net income (loss) attributable to non-controlling interest 5,543 (753) 6,296 n/m

Net loss from continuing operations attributable to i3 Verticals, Inc.

(410) (11,799) 11,389 (96.5) %

Net income from discontinued operations attributable to i3 Verticals, Inc.

13,292 4,254 9,038 n/m

Net income (loss) attributable to i3 Verticals, Inc.

$ 12,882 $ (7,545) $ 20,427 n/m

n/m = not meaningful

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Refer to Note 3 for discussion of the change in the current and prior period presentation.

Revenue increased $5.1 million, or 8.8%, to $63.1 million for the three months ended March 31, 2025 from $58.0 million for the three months ended March 31, 2024.

This increase included incremental revenue from an acquisition within the Public Sector vertical of $1.2 million, net of any intercompany eliminations.

The remaining increase was primarily driven by an increase of $2.5 million in recurring revenues and an increase of $1.5 million in software license revenue, partially offset by a a decrease in professional services of $0.3 million

Revenue within Public Sector increased $5.3 million, or 11.3%, to $52.4 million for the three months ended March 31, 2025 from $47.1 million for the three months ended March 31, 2024.

This increase included incremental revenue from an acquisition of $1.2 million, net of any intercompany eliminations.

The remaining increase was primarily driven by an increase in recurring revenues of $2.9 million and an increase of $1.3 million in software license revenue, partially offset by a decrease in professional services of $0.3 million.

Revenue within Healthcare decreased $0.2 million, or 1.8%, to $10.9 million for the three months ended March 31, 2025 from $11.1 million for the three months ended March 31, 2024.

This decrease was mostly driven by a decrease in revenue cycle management revenues of $0.3 million driven by an unusually large snow storm on the Gulf Coast that reduced volumes of procedures within our customer base, partially offset by an increase of $0.2 million in software license revenue.

Revenue increased $5.7 million, or 12.4%, to $51.9 million for the three months ended June 30, 2025 from $46.2 million for the three months ended June 30, 2024.

This increase included incremental revenue from current and prior year acquisitions of $2.2 million.

The remaining increase was primarily driven by an increase of $2.9 million in recurring revenues and an increase of $0.4 million software license revenue.

Other Costs of Services

Other costs of services increased $1.0 million, or 4.9%, to $22.2 million for the three months ended March 31, 2025 from $21.1 million for the three months ended March 31, 2024.

This increase included incremental other costs of services from an acquisition within the Public Sector vertical of $0.3 million.

The remaining increase was primarily driven by an increase in internal personnel costs of $0.3 million and an increase of $0.4 million in software costs, partially offset by a decrease of $0.5 million in stock compensation expense within other costs of services for the three months ended March 31, 2025 from the three months ended March 31, 2024.

Other costs of services increased $1.4 million, or 9.5%, to $16.7 million for the three months ended June 30, 2025 from $15.3 million for the three months ended June 30, 2024.

The increase was primarily driven by an increase in internal and external personnel costs of $0.9 million an increase in software costs of $0.7 million for the three months ended June 30, 2025 from the three months ended June 30, 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $1.3 million, or 4.6%, to $28.7 million for the three months ended March 31, 2025 from $27.4 million for the three months ended March 31, 2024.

This increase included incremental expenses from an acquisition within the Public Sector vertical of $1.0 million, net of any intercompany eliminations.

The remaining increase was primarily driven by an increase in internal and external personnel costs of $0.7 million, partially offset by a decrease in stock compensation expense within selling, general and administrative expenses of $0.6 million for the three months ended March 31, 2025 from the three months ended March 31, 2024.

Selling, general and administrative expenses increased $7.0 million, or 26.8%, to $33.0 million for the three months ended June 30, 2025 from $26.0 million for the three months ended June 30, 2024.

The increase was driven by an increase in M&A-related expenses of $3.4 million, which increased primarily due to activity that is for non-recurring expenses for which we are reimbursed through the transition services agreements, employee leasing arrangement, and processing services agreement with Infinx and Payroc, and for which revenue is recognized in other income.

Additional increases were driven by an increase in internal and external personnel costs of $2.9 million for the three months ended June 30, 2025 from the three months ended June 30, 2024.

Depreciation and Amortization

Depreciation and amortization increased $0.6 million, or 9.0%, to $7.8 million for the three months ended March 31, 2025 from $7.2 million for the three months ended March 31, 2024.

Amortization expense increased $0.6 million to $7.1 million for the three months ended March 31, 2025 from $6.5 million for the three months ended March 31, 2024 primarily due to an increase in capitalized software project releases, driving an increase in amortization expense.

Depreciation expense increased slightly by $57 thousand to $0.7 million for the three months ended March 31, 2025 from $0.7 million for the three months ended March 31, 2024.

Depreciation and amortization increased $0.8 million, or 13.5%, to $7.0 million for the three months ended June 30, 2025 from $6.2 million for the three months ended June 30, 2024.

Amortization expense increased $0.9 million to $6.4 million for the three months ended June 30, 2025 from $5.5 million for the three months ended June 30, 2024 primarily due to amortization expense recorded for intangible assets and capitalized software acquired from current year and prior year acquisitions as well as an increase in capitalized software project releases, driving an increase in amortization expense.

Depreciation expense decreased slightly by $0.1 million to $0.6 million for the three months ended June 30, 2025 from $0.7 million for the three months ended June 30, 2024.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration to be paid in connection with acquisitions was a charge of $0.4 million for the three months ended March 31, 2025 related to adjustments to the expected present value of consideration to be paid for earnouts.

The change in fair value of contingent consideration for the three months ended March 31, 2024 was a benefit of $0.3 million.

Change in fair value of contingent consideration to be paid in connection with acquisitions was a benefit of $26.0 thousand for the three months ended June 30, 2025 related to adjustments to the expected present value of consideration to be paid for earnouts.

The change in fair value of contingent consideration for the three months ended June 30, 2024 was a charge of $1 thousand.

Interest Expense

Interest expense decreased $7.3 million, or 94.2%, to $0.4 million for the three months ended March 31, 2025 from $7.7 million for the three months ended March 31, 2024.

The decrease reflects a lower average outstanding debt balance for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024.

Other (Income) Expense

Other income was $0.6 million during the three months ended March 31, 2025, and other income was $2.3 million during the three months ended March 31, 2024.

Other income during the three months ended March 31, 2025 reflects income from the Transition Services Agreement and Processing Services Agreement related to the sale of the Merchant Services Business of $0.5 million and income generated from cash held at financial institutions of $0.1 million.

Other income during the three months ended March 31, 2024 reflects the gain on the Exchangeable Note Repurchases and gain on Warrant Unwinds, net of the loss on Note Hedge Unwinds.

Provision for (Benefit from) Income Taxes

The provision for income taxes increased to a provision for $3.1 million for the three months ended March 31, 2025 from a benefit of $0.7 million for three months ended March 31, 2024.

Our effective tax rate was 74% for the three months ended March 31, 2025.

Interest expense decreased $7.1 million, or 89.8%, to $0.8 million for the three months ended June 30, 2025 from $7.9 million for the three months ended June 30, 2024.

The decrease reflects a lower average outstanding debt balance for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024.

Other income was $4.6 million during the three months ended June 30, 2025, and there was no other income during the three months ended June 30, 2024.

Other income during the three months ended June 30, 2025 reflects income from the transition services agreement and employee leasing arrangement entered into at the closing of the sale of the Healthcare RCM Business of $3.9 million, income from the transition services agreement and processing services agreement entered into at the closing of the sale of the Merchant Services Business of $0.3 million and interest income generated from cash held at financial institutions of $0.4 million.

(Benefit from) Provision for Income Taxes

The provision for income taxes decreased to a benefit of $22 thousand for the three months ended June 30, 2025 from a provision for $5.2 million for three months ended June 30, 2024.

Our effective tax rate was 2% for the three months ended June 30, 2025.

Our effective tax rate differs from the federal statutory rate of 21% primarily due to the tax structure of the Company.

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is subject to federal, state and local income taxes with respect to its allocable share of any taxable income of i3 Verticals, LLC and is taxed at the prevailing corporate tax rates.

Net (Loss) Income from Discontinued Operations, Net of Income Taxes

We had $0.3 million in net loss from discontinued operations, net of income tax, for the three months ended March 31, 2025 compared to $5.7 million in net income from discontinued operations, net of income tax, for the three months ended March 31, 2024.

Net Income from Discontinued Operations, Net of Income Taxes

We had $19.4 million in net income from discontinued operations, net of income tax, for the three months ended June 30, 2025 compared to $6.1 million in net income from discontinued operations, net of income tax, for the three months ended June 30, 2024.

See Note 2 to our condensed consolidated financial statements for additional information and detail on the financial results of discontinued operations.

The net loss from discontinued operations, net of income tax, for the three months ended March 31, 2025 reflects adjustments to the gain on the sale of the Merchant Services Business.

The net income from discontinued operations, net of income tax, for the three months ended March 31, 2024 included a complete quarter of business activity, including revenue of $36.6 million, operating expenses of $29.6 million, and a provision for income taxes of $1.2 million.

Six Months Ended March 31, 2025 Compared to Six Months Ended March 31, 2024

The net income from discontinued operations, net of income tax, for the three months ended June 30, 2025 reflects the gain on the sale of the Healthcare RCM Business of $26.0 million and a complete quarter of business activity for the Healthcare RCM Business, including revenue of $3.6 million, operating expenses of $5.8 million and a provision for income taxes of $4.3 million.

The net income from discontinued operations, net of income tax, for the three months ended June 30, 2024 included a complete quarter of business activity for both the Merchant Services Business and the Healthcare RCM Business, including revenue of $48.4 million, operating expenses of $40.9 million and a provision for income taxes of $1.4 million.

Nine Months Ended June 30, 2025 Compared to Nine Months Ended June 30, 2024

The following table presents our historical results of operations for the periods indicated:

Six Months Ended March 31, Change

Nine Months Ended June 30, Change

(in thousands) 2025 2024 Amount %

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Depreciation and amortization 20,848 18,794 2,054 10.9 %

Change in fair value of contingent consideration 1,758 (527) 2,285 n/m

Change in fair value of contingent consideration 440 171 269 157.3 %

Total operating expenses 155,956 138,964 16,992 12.2 %

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Income (loss) before income taxes 7,389 (19,212) 26,601 n/m

(Benefit from) provision for income taxes 3,577 (1,763) 5,340 n/m

Provision for income taxes

3,272 3,153 119 3.8 %

Net income (loss) from continuing operations 4,117 (22,365) 26,482 n/m

Net (loss) income from discontinued operations, net of income taxes (540) 11,401 (11,941) n/m

Net income 3,877 4,884 (1,007) (20.6) %

Net income from discontinued operations, net of income taxes

18,185 18,951 (766) n/m

Net income (loss)

22,302 (3,414) 25,716 n/m

Net income (loss) from continuing operations attributable to non-controlling interest 1,653 (4,654) 6,307 n/m

Net (loss) income from discontinued operations attributable to non-controlling interest (175) 3,831 (4,006) n/m

Net income from discontinued operations attributable to non-controlling interest

5,865 5,809 56 n/m

Net income attributable to non-controlling interest 7,518 1,155 6,363 550.9 %

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2,464 (17,711) 20,175 n/m

Net (loss) income from discontinued operations attributable to i3 Verticals, Inc.

Net income from discontinued operations attributable to i3 Verticals, Inc.

12,320 13,142 (822) n/m

Net income attributable to i3 Verticals, Inc.

$ 1,902 $ 2,976 $ (1,074) (36.1) %

Net income (loss) attributable to i3 Verticals, Inc.

$ 14,784 $ (4,569) $ 19,353 n/m

n/m = not meaningful

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Refer to Note 3 for discussion of the change in the current and prior period presentation.

Revenue increased $11.7 million, or 10.4%, to $124.8 million for the six months ended March 31, 2025 from $113.0 million for the six months ended March 31, 2024.

This increase included incremental revenue from an acquisition within the Public Sector vertical of $2.4 million, net of any intercompany eliminations.

Revenue increased $18.3 million, or 13.1%, to $158.3 million for the nine months ended June 30, 2025 from $139.9 million for the nine months ended June 30, 2024.

This increase included incremental revenue from current and prior year acquisitions of $4.6 million.

The remaining increase was primarily driven by an increase of $8.8 million in recurring revenues and an increase of $4.6 million in software license revenue.

Revenue within Public Sector increased $10.6 million, or 11.7%, to $101.2 million for the six months ended March 31, 2025 from $90.6 million for the six months ended March 31, 2024.

This increase included incremental revenue from an acquisition of $5.4 million, net of any intercompany eliminations.

The remaining increase was primarily driven by an increase in recurring revenues of $5.9 million and an increase of $2.0 million in software license revenue.

Revenue within Healthcare increased $1.4 million, or 6.2%, to $24.0 million for the six months ended March 31, 2025 from $22.6 million for the six months ended March 31, 2024.

This increase was mostly driven by an increase in software license revenue of $1.8 million, partially offset by a decrease in revenue cycle management revenues of $0.3 million, driven by an unusually large snow storm on the Gulf Coast that reduced volumes of procedures within our customer base, and a decrease in professional services revenue of $0.1 million.

Other Costs of Services

Other costs of services increased $2.5 million, or 6.1%, to $43.2 million for the six months ended March 31, 2025 from $40.7 million for the six months ended March 31, 2024.

This increase included incremental other costs of services from an acquisition within the Public Sector vertical of $0.6 million, net of any intercompany eliminations.

The remaining increase was primarily driven by an increase in internal personnel costs of $1.6 million, partially offset by a decrease of $0.9 million in stock compensation expense within other costs of services for the six months ended March 31, 2025 from the six months ended March 31, 2024.

Other costs of services increased $4.5 million, or 10.1%, to $48.9 million for the nine months ended June 30, 2025 from $44.4 million for the nine months ended June 30, 2024.

The increase was primarily driven by an increase in internal and external personnel costs of $2.9 million and an increase in software costs of $1.5 million for the nine months ended June 30, 2025 from the nine months ended June 30, 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $3.0 million, or 5.5%, to $57.6 million for the six months ended March 31, 2025 from from $54.6 million for the six months ended March 31, 2024.

This increase included incremental expenses from an acquisition within the Public Sector vertical of $1.9 million, net of any intercompany eliminations.

The remaining increase was primarily driven by an increase in internal and external personnel costs of $1.9 million and internal technology costs $1.0 million for the six months ended March 31, 2025 from the six months ended March 31, 2024, partially offset by a decrease in stock compensation expense within selling, general and administrative expenses of $1.7 million and a decrease in professional services expense of $0.2 million for the six months ended March 31, 2025 from the six months ended March 31, 2024.

Selling, general and administrative expenses increased $10.2 million, or 13.5%, to $85.8 million for the nine months ended June 30, 2025 from $75.6 million for the nine months ended June 30, 2024.

The increase was primarily driven by an increase in M&A-related expenses of $3.6 million, which primarily increased due to activity that is for non-recurring expenses for which we are reimbursed through the transition services agreements, employee leasing arrangement, and processing services agreement with Infinx and Payroc, and for which revenue is recognized in other income.

Additional increases were driven by an increase in internal and external personnel costs of $5.0 million and software costs of $1.4 million for the nine months ended June 30, 2025 from the nine months ended June 30, 2024.

Depreciation and Amortization

Depreciation and amortization increased $1.3 million, or 9.0%, to $15.5 million for the six months ended March 31, 2025 from $14.2 million for the six months ended March 31, 2024.

Amortization expense increased $1.2 million to $14.1 million for the six months ended March 31, 2025 from $12.9 million for the six months ended March 31, 2024 primarily due to an increase in capitalized software project releases, driving an increase in amortization expense.

Depreciation expense increased by $0.1 million to $1.4 million for the six months ended March 31, 2025 from $1.3 million for the six months ended March 31, 2024.

Depreciation and amortization increased $2.1 million, or 10.9%, to $20.8 million for the nine months ended June 30, 2025 from $18.8 million for the nine months ended June 30, 2024.

Amortization expense increased $2.1 million to $19.0 million for the nine months ended June 30, 2025 from $16.9 million for the nine months ended June 30, 2024 primarily due to an increase in capitalized software project releases, driving an increase in amortization expense, as well as amortization expense recorded for intangible assets and capitalized software acquired from current year and prior year acquisitions.

Depreciation expense was $1.9 million for both the nine months ended June 30, 2025 and 2024.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration to be paid in connection with acquisitions was a charge of $1.8 million for the six months ended March 31, 2025 related to adjustments to the expected present value of consideration to be paid for earnouts.

The change in fair value of contingent consideration for the six months ended March 31, 2024 was a benefit of $0.5 million.

Change in fair value of contingent consideration to be paid in connection with acquisitions was a charge of $0.4 million for the nine months ended June 30, 2025 related to adjustments to the expected present value of consideration to be paid for earnouts.

The change in fair value of contingent consideration for the nine months ended June 30, 2024 was a charge of $0.2 million.

Interest Expense

Interest expense decreased $13.3 million, or 92.2%, to $1.1 million for the six months ended March 31, 2025 from $14.4 million for the three months ended March 31, 2024.

The decrease reflects a lower average outstanding debt balance for the six months ended March 31, 2025, as compared to the six months ended March 31, 2024.

Other income was $2.5 million during the six months ended March 31, 2025, and other income was $2.2 million during the six months ended March 31, 2024.

Other income during the the six months ended March 31, 2025 reflects income from the Transition Services Agreement and Processing Services Agreement related to the sale of the Merchant Services Business of $1.0 million, income generated from cash held at financial institutions of $0.9 million, and a gain on disposal of property and equipment of $0.6 million related to the sale of a building purchased through previous acquisitions.

Other income during the six months ended March 31, 2024 reflects the gain on the Exchangeable Note Repurchases and gain on Warrant Unwinds, net of the loss on Note Hedge Unwinds and loss on the sale of a building purchased through acquisition.

Provision for (Benefit from) Income Taxes

The provision for income taxes increased to a provision for $3.6 million for the six months ended March 31, 2025 from a benefit of $1.8 million for six months ended March 31, 2024.

Our effective tax rate was 45% for the six months ended March 31, 2025.

Interest expense decreased $20.4 million, or 91.3%, to $1.9 million for the nine months ended June 30, 2025 from $22.3 million for the three months ended June 30, 2024.

The decrease reflects a lower average outstanding debt balance for the nine months ended June 30, 2025, as compared to the nine months ended June 30, 2024.

Other income was $7.0 million during the nine months ended June 30, 2025, and other income was $2.2 million during the nine months ended June 30, 2024.

Other income during the the nine months ended June 30, 2025 reflects income generated from the transition services agreement and employee leasing arrangement entered into at the closing of the sale of the Healthcare RCM Business of $3.9 million, income from the transition services agreement and processing services agreement entered into at the closing of the sale of the Merchant Services Business of $1.3 million, interest income generated from cash held at financial institutions of $1.2 million, and a gain on disposal of property and equipment of $0.6 million related to the sale of a building purchased through previous acquisitions.

Other income during the nine months ended June 30, 2024 reflects the gain on the Exchangeable Note Repurchases and gain on Warrant Unwinds, net of the loss on Note Hedge Unwinds and loss on the sale of a building purchased through acquisition.

Provision for Income Taxes

The provision for income taxes increased to a provision for $3.3 million for the nine months ended June 30, 2025 from a provision of $3.2 million for nine months ended June 30, 2024.

Our effective tax rate was 44% for the nine months ended June 30, 2025.

Our effective tax rate differs from the federal statutory rate of 21% primarily due to the tax structure of the Company.

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is subject to federal, state and local income taxes with respect to its allocable share of any taxable income of i3 Verticals, LLC and is taxed at the prevailing corporate tax rates.

Net (Loss) Income from Discontinued Operations, Net of Income Taxes

We had $0.5 million in net loss from discontinued operations, net of income tax, for the six months ended March 31, 2025 compared to $11.4 million in net income from discontinued operations, net of income tax, for the six months ended March 31, 2024.

Net Income from Discontinued Operations, Net of Income Taxes

We had $18.2 million in net income from discontinued operations, net of income tax, for the nine months ended June 30, 2025 compared to $19.0 million in net income from discontinued operations, net of income tax, for the nine months ended June 30, 2024.

See Note 2 to our condensed consolidated financial statements for additional information and detail on the financial results of discontinued operations.

The net loss from discontinued operations, net of income tax, for the six months ended March 31, 2025 reflects adjustments to the gain on the sale of the Merchant Services Business.

The net income from discontinued operations, net of income tax, for the six months ended March 31, 2024 included a complete six months of business activity, including revenue of $73.5 million, operating expenses of $59.5 million, and a provision for income taxes of $2.5 million.

The net income from discontinued operations, net of income tax, for the nine months ended June 30, 2025 reflects the gain on the sale of the Healthcare RCM Business of $26.0 million and a complete nine months of business activity for the Healthcare RCM Business, including revenue of $22.5 million, operating expenses of $25.1 million and a provision for income taxes of $4.6 million.

The net income from discontinued operations, net of income tax, for the nine months ended June 30, 2024 included a complete nine months of business activity for both the Merchant Services Business and the Healthcare RCM Business, including revenue of $141.3 million, operating expenses of $118.1 million, and a provision for income taxes of $4.2 million.

We have experienced in the past, and may continue to experience, seasonal fluctuations in our revenues as a result of consumer and business spending patterns.

The number of business days in a month or quarter also may affect seasonal fluctuations.

Certain revenues in our Public Sector segment fluctuate with the fiscal calendars of our customers.

Transactional revenue for our Education customers is strongest in August, September, October, January and February, at the start of each semester, and generally weakens throughout the semester, with little revenue in the summer months of June and July.

Certain revenues fluctuate with the fiscal calendars of our customers.

Transactional revenue for certain education customers is strongest in August, September, October, January and February, at the start of each semester, and generally weakens throughout the semester, with little revenue in the summer months of June and July.

Operating expenses show less seasonal fluctuation, with the result that net income is subject to the same seasonal factors as our revenues.

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We have historically financed our operations and working capital through net cash from operating activities.

As of March 31, 2025, we had $7.7 million of cash and cash equivalents and available borrowing capacity of $438.0 million under our 2023 Senior Secured Credit Facility (which was subsequently reduced in connection with the Second Amendment, as described below), subject to the financial covenants.

As of June 30, 2025, we had $55.5 million of cash and cash equivalents and available borrowing capacity of $400.0 million under our 2023 Senior Secured Credit Facility, subject to the financial covenants.

We usually minimize cash balances by making payments on our revolving line of credit to minimize borrowings and interest expense.

As of March 31, 2025, we had borrowings outstanding of $12.0 million under the 2023 Senior Secured Credit Facility.

As of June 30, 2025, we had no borrowings outstanding under the 2023 Senior Secured Credit Facility.

For additional information about our 2023 Senior Secured Credit Facility, see the section entitled "— 2023 Senior Secured Credit Facility" below.

In addition, as noted above, on May 5, 2025, we sold our Healthcare RCM Business pursuant to the terms of the Healthcare RCM Purchase Agreement, for a purchase price of approximately $96 million, paid in cash at closing, subject to post-closing net working capital and other purchase price adjustments as provided in the Healthcare RCM Purchase Agreement.

Our primary cash needs are to fund working capital requirements, make capital expenditures and otherwise invest in our technology infrastructure, fund acquisitions and related contingent consideration, make scheduled principal and interest payments on our outstanding indebtedness, pay tax distributions to members of i3 Verticals, LLC as discussed below, and make repurchases of shares of Class A common stock under our share repurchase program as discussed below.

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The covenants contained in the 2023 Senior Secured Credit Facility may restrict i3 Verticals, LLC’s ability to provide funds to i3 Verticals, Inc.

Our liquidity profile has reflected our completed offering in February 2020 of an aggregate principal amount of $138.0 million in 1.0% Exchangeable Senior Notes due 2025, with substantially all the proceeds being used to pay down outstanding borrowings under our Prior Senior Secured Credit Facility.

We repurchased $90.8 million in aggregate principal amount of the 1.0% Exchangeable Senior Notes on January 18, 2024 as described below, and also repurchased of $21.0 million in aggregate principal amount of Exchangeable Senior Notes in open market purchases in 2020.

The Exchangeable Notes matured on February 15, 2025, and we paid $26.4 million in satisfaction of the outstanding principal and accrued interest in connection therewith.

Our 2023 Senior Secured Credit Facility, as amended, requires us to maintain a consolidated interest coverage ratio not less than 3.0 to 1.0 and total leverage ratio not exceeding 5.0 to 1.0.

As of March 31, 2025, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio of 92.5x and 0.1x, respectively.

Although we believe our liquidity position remains strong, there can be no assurance that we will be able to raise additional funds, in the form of debt or equity, or to amend our 2023 Senior Secured Credit Facility on terms acceptable to us, if at all, even if we determined such actions were necessary in the future.

As of June 30, 2025, we were in compliance with these covenants with a consolidated interest coverage ratio and total leverage ratio of 87.1x and 0.0x, respectively.

Although we believe our liquidity position remains strong, there can be no assurance that we will be able to

raise additional funds, in the form of debt or equity, or to amend our 2023 Senior Secured Credit Facility on terms acceptable to us, if at all, even if we determined such actions were necessary in the future.

In January 2025, i3 Verticals, LLC, a pass-through entity in which the Company holds a majority ownership interest, made a tax distribution (the “LLC Tax Distribution”) to the Company and the other members of i3 Verticals, LLC (the “Continuing Equity Owners”) related to the taxable income associated with the gain on the sale of the Merchant Services Business completed in September 2024 that was anticipated to be recognized for 2024 federal income tax purposes by members of the Company.

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The following table presents a summary of cash flows from operating, investing and financing activities for the following comparative periods.

Six Months Ended March 31, 2025 and 2024

Six months ended March 31,

Nine Months Ended June 30, 2025 and 2024

Nine months ended June 30,

(in thousands)

Net cash (used in) provided by operating activities $ (8,276) $ 33,266

Net cash used in investing activities $ (3,675) $ (12,369)

Net cash provided by (used in) investing activities $ 78,774 $ (16,755)

Net cash used in financing activities $ (104,283) $ (15,215)

Cash Flow from Operating Activities

Net cash provided by operating activities decreased $40.8 million to net cash used in operating activities of $15.6 million for the six months ended March 31, 2025 from net cash provided by operating activities of $25.1 million for the six months ended March 31, 2024.

Our net income decreased from $4.9 million for the six months ended March 31, 2024 to $3.9 million for the six months ended March 31, 2025.

The primary driver of the decrease in cash provided by operating activities was cash paid for income taxes of $34.2 million during the six months ended March 31, 2025, primarily consisting of income taxes related to the sale of the Merchant Services Business, which were accrued in fiscal year 2024, but paid in the six months ended March 31, 2025.

The decrease in cash provided by operating activities was also driven by reductions in net operating assets and liabilities, excluding the impact of income taxes, of $11.2 million, which are impacted by the timing of collections and payments, for the six months ended March 31, 2025 compared to the six months ended March 31, 2024.

In addition, there was a decrease in contingent consideration paid in excess of original estimates of $3.1 million and an increase in changes in non-cash contingent consideration of $2.3 million, for the six months ended March 31, 2025 compared to the six months ended March 31, 2024.

Net cash provided by operating activities decreased $41.5 million to net cash used in operating activities of $8.3 million for the nine months ended June 30, 2025 from net cash provided by operating activities of $33.3 million for the nine months ended June 30, 2024.

Our net loss changed from $3.4 million for the nine months ended June 30, 2024 to net income of $22.3 million for the nine months ended June 30, 2025, primarily driven by the gain on the sale of the Healthcare RCM Business of $26.0 million during the nine months ended June 30, 2025.

The primary driver of the decrease in cash provided by operating activities was cash paid for income taxes of $35.1 million during the nine months ended June 30, 2025, primarily consisting of income taxes related to the sale of the Merchant Services Business, which were accrued in fiscal year 2024, but paid in the nine months ended June 30, 2025.

The decrease in cash provided by operating activities was also driven by reductions in net operating assets and liabilities, excluding the impact of income taxes, of $11.9 million, which are impacted by the timing of collections and payments, for the nine months ended June 30, 2025 compared to the nine months ended June 30, 2024.

In addition, this was partially offset by a decrease in contingent consideration paid in excess of original estimates of $5.8 million, for the nine months ended June 30, 2025 compared to the nine months ended June 30, 2024.

Cash Flow from Investing Activities

Net cash used in investing activities decreased $8.7 million to $3.7 million for the six months ended March 31, 2025 from $12.4 million for the six months ended March 31, 2024.

The largest drivers of the decrease in cash used in investing activities were a decrease of $4.2 million in purchases of merchant portfolios and residual buyouts, a decrease of $1.9 million in expenditures for capitalized software, a decrease of $1.1 million in cash used in acquisitions (net of cash acquired) and an increase of $0.9 million in proceeds from the sale of property and equipment during the six months ended March 31, 2025 compared to the six months ended March 31, 2024.

Net cash used in investing activities decreased $95.5 million to net cash provided by investing activities of $78.8 million for the nine months ended June 30, 2025 from net cash used in investing activities of $16.8 million for the nine months ended June 30, 2024.

The largest driver of the change to cash provided by investing activities was $96.1 million in proceeds from the sale of the Healthcare RCM Business during the nine months ended June 30, 2025.

Additional contributions to the decrease in net cash used in investing activities were a decrease of $4.6 million in purchases of merchant portfolios and residual buyouts, a decrease of $2.9 million in expenditures for capitalized software, a decrease of $0.9 million in expenditures for property and equipment, and an increase of $0.9 million in proceeds from the sale of property and equipment during the nine months ended June 30, 2025 compared to the nine months ended June 30, 2024.

These increases to net cash provided by investing activities are partially offset by an increase of $9.9 million in cash used in acquisitions (net of cash acquired) during the nine months ended June 30, 2025 compared to the nine months ended June 30, 2024.

Cash Flow from Financing Activities

Net cash used in financing activities increased $42.1 million to $60.0 million net cash used in financing activities for the six months ended March 31, 2025 from $17.9 million net cash used by financing activities for the six months ended March 31, 2024.

The increase in net cash used in financing activities was driven by net borrowings from in excess of payments on the revolving credit facility decreased $61.7 million during the six months ended March 31, 2025 from the six months ended March 31, 2024, as well as $26.2 million in payments to extinguish the Exchangeable Notes, $23.8 million in payments for required distributions on behalf of members for tax obligations and $10.0 million in payments for required distributions to members under the Tax Receivable Agreement during the six months ended March 31, 2025, which did not occur during the six months ended March 31, 2024.

These uses of cash for financing activities were partially offset by $87.8 million in payments for repurchases of Exchangeable Notes during the six months ended March 31, 2024, which did not recur during the six months ended March 31, 2025, and a decrease in net payments for settlement obligations of $2.7 million during the six months ended March 31, 2025 compared to the six months ended March 31, 2024.

Net cash used in financing activities increased $89.1 million to $104.3 million net cash used in financing activities for the nine months ended June 30, 2025 from $15.2 million net cash used by financing activities for the nine months ended June 30, 2024.

The increase in net cash used in financing activities was driven by a decrease in net borrowings from in excess of payments on the revolving credit facility of $78.9 million during the nine months ended June 30, 2025 from the nine months ended June 30, 2024, as well as an increase of $23.7 million in payments for required distributions on behalf of members for tax obligations and an increase in payments for employees' tax withholdings from net settled stock option exercises and RSU releases of $3.5 million.

Additionally, during the nine months ended June 30, 2025, we used cash from financing activities for multiple purposes for which we did not use cash from financing activities during the nine months ended June 30, 2024, including $37.6 million in payments for repurchases of Class A common stock, $26.2 million in payments to extinguish the Exchangeable Notes and $10.0 million in payments for required distributions to members under the Tax Receivable Agreement.

These increases in uses of cash for financing activities for the nine months ended June 30, 2025 from the nine months ended June 30, 2024 were partially offset by $87.8 million in payments for repurchases of Exchangeable Notes during the nine months ended June 30, 2024, which did not recur during the nine months ended June 30, 2025, and a decrease in net payments for settlement obligations of $2.9 million during the nine months ended June 30, 2025 compared to the nine months ended June 30, 2024.

2023 Senior Secured Revolving Credit Facility

On May 8, 2023, i3 Verticals, LLC (the “Borrower”), entered into that certain Credit Agreement (as amended by the first amendment dated June 26, 2024, the “2023 Senior Secured Credit Facility”) with the guarantors and

lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (“JPMorgan”).

The 2023 Senior Secured Credit Facility replaces the Prior Senior Secured Credit Facility.

The 2023 Senior Secured Credit Facility replaced the prior senior secured credit facility of the Company which was entered into on May 9, 2019 (the "Prior Senior Secured Credit Facility").

As amended by the Second Amendment described below, the 2023 Senior Secured Credit Facility provides for aggregate commitments of $400 million in the form of a senior secured revolving credit facility (the “Revolver”).

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Further, on May 5, 2025, the Borrower entered into a second amendment (the “Second Amendment”) to the 2023 Senior Secured Credit Facility to permit the Healthcare RCM Transactions.

The Second Amendment also permanently reduces the aggregate lender commitments under the Revolver from $450 million to $400 million.

The 2023 Senior Secured Credit Facility provides that the Borrower has the right to seek additional commitments to provide additional term loan facilities or additional revolving credit commitments in an aggregate principal amount up to, as of any date of determination, the sum of (i) the greater of $100 million and 100% of the Borrower’s consolidated EBITDA (as defined in the 2023 Senior Secured Credit Facility) for the most recently completed four quarter period, plus (ii) the amount of certain prepayments of certain indebtedness, so long as, among other things, after giving pro forma effect to the incurrence of such additional borrowings and any related transactions, the Borrower’s consolidated interest coverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not be less than 3.0 to 1.0 and the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not exceed 5.0 to 1.0.

As of March 31, 2025, the Borrower's consolidated interest coverage ratio was 92.5x and total leverage ratio was 0.1x.

The Second Amendment also permanently reduced the aggregate lender commitments under the Revolver from $450 million to $400 million.

transactions, the Borrower’s consolidated interest coverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not be less than 3.0 to 1.0 and the Borrower’s consolidated total net leverage ratio (as defined in the 2023 Senior Secured Credit Facility) would not exceed 5.0 to 1.0.

As of June 30, 2025, the Borrower's consolidated interest coverage ratio was 87.1x and total leverage ratio was 0.0x.

The provision of any such additional amounts under the additional term loan facilities or additional revolving credit commitments are subject to certain additional conditions and the receipt of certain additional commitments by existing or additional lenders.

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The Adjusted Term SOFR rate will be the rate of interest per annum equal to the Term SOFR rate (based upon an interest period of one, three or six months), plus 0.10%;

plus an applicable margin of 2.00% to 3.00% (2.00% at March 31, 2025).

plus an applicable margin of 2.00% to 3.00% (2.00% at June 30, 2025).

The Adjusted Term SOFR rate shall not be less than 0% in any event.

The base rate is a fluctuating rate of interest per annum equal to the highest of (a) the greater of the federal funds rate or the overnight bank funding rate, plus ½ of 1%, (b) Wall Street Journal prime rate and (c) the Adjusted Term SOFR rate for an interest period of one month, plus 1%;

plus an applicable margin of 1.00% to 2.00% (1.00% at March 31, 2025).

plus an applicable margin of 1.00% to 2.00% (1.00% at June 30, 2025).

The base rate shall not be less than 1% in any event.

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0.15 % 2.00 % 2.00 % 1.00 %

In addition to paying interest on outstanding principal under the Revolver, the Borrower will be required to pay a commitment fee equal to the product of between 0.15% and 0.30% (the applicable percentage depending on the Borrower’s consolidated total net leverage ratio as reflected in the schedule above, 0.15% at March 31, 2025) times the actual daily amount by which $400 million (as of the effectiveness of the Second Amendment) exceeds the total amount outstanding under the Revolver and available to be drawn under all outstanding letters of credit.

In addition to paying interest on outstanding principal under the Revolver, the Borrower will be required to pay a commitment fee equal to the product of between 0.15% and 0.30% (the applicable percentage depending on the Borrower’s consolidated total net leverage ratio as reflected in the schedule above, 0.15% at June 30, 2025) times the actual daily amount by which $400 million (as of the effectiveness of the Second Amendment) exceeds the total amount outstanding under the Revolver and available to be drawn under all outstanding letters of credit.

The Borrower will be permitted to voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans under the 2023 Senior Secured Credit Facility, whether such amounts are issued under the Revolver or under the additional term loan facilities or additional revolving credit facilities, at any time without premium or penalty.

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All obligations under the 2023 Senior Secured Credit Facility are unconditionally guaranteed by the Company, and each of the Company’s existing and future direct and indirect material, wholly owned domestic subsidiaries, subject to certain exceptions.

The obligations are secured by first-priority security interests in substantially all tangible and intangible assets of the Borrower, the Company and each subsidiary guarantor, in each case whether owned on the date of the initial borrowings or thereafter acquired.

The obligations are secured by first-priority security interests in substantially all

tangible and intangible assets of the Borrower, the Company and each subsidiary guarantor, in each case whether owned on the date of the initial borrowings or thereafter acquired.

The 2023 Senior Secured Credit Facility places certain restrictions on the ability of the Borrower, the Company and their subsidiaries to, among other things, incur debt and liens;

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The 2023 Senior Secured Credit Facility contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain events with respect to employee benefit plans, invalidity of loan documents and certain changes in control.

As of March 31, 2025, we were in compliance with these covenants, with a consolidated interest coverage ratio and total leverage ratio of 92.5x and 0.1x, respectively.

As of June 30, 2025, we were in compliance with these covenants, with a consolidated interest coverage ratio and total leverage ratio of 87.1x and 0.0x, respectively.

Exchangeable Notes

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Material Cash Requirements

The following table summarizes our material cash requirements as of March 31, 2025, including those related to leases and borrowings:

The following table summarizes our material cash requirements as of June 30, 2025, including those related to leases and borrowings:

Payments Due by Period

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These payments will be made within the next twelve months.

We estimated interest payments through the maturity of our 2023 Senior Secured Credit Facility by applying the interest rate of 6.42% in effect on the outstanding balance as of March 31, 2025, plus unused fee rate of 0.15% in effect as of March 31, 2025.

We estimated interest payments through the maturity of our 2023 Senior Secured Credit Facility by the unused fee rate of 0.15% in effect as of June 30, 2025.

In connection with certain of our acquisitions, we may be obligated to pay the seller of the acquired entity certain amounts of contingent consideration as set forth in the relevant purchasing documents, whereby additional consideration may be due upon the achievement of certain specified financial performance targets.

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See “—Tax Receivable Agreement” below.

Share Repurchase Program

On August 8, 2024, the Company announced that our Board of Directors had approved a share repurchase program for the Company's Class A common stock, under which the Company is authorized to repurchase up to $50.0 million of outstanding shares of our Class A common stock (exclusive of fees, commissions or other expenses related to such repurchases) (the "Share Repurchase Program").

The Share Repurchase Program will terminate on the earlier of August 8, 2025, or when the maximum dollar amount under the Share Repurchase Program has been expended.

Pursuant to the Share Repurchase Program, the Company is authorized to make repurchases of our Class A Common Stock in the open market, through privately negotiated transactions, or otherwise, including under Rule 10b5-1 plans.

Repurchases under the Share Repurchase Program are subject to prevailing market conditions, liquidity and cash flow considerations, applicable securities laws requirements (including under Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934, as applicable), compliance with contractual restrictions under the 2023 Senior Secured Credit Facility, and other factors.

In addition, the terms of the Share Repurchase Program provide that, immediately prior to repurchases of Class A common stock under the Share Repurchase Program, i3 Verticals, LLC redeems for cash an equal number of units held by the Company in i3 Verticals, LLC in order to fund such repurchases and maintain a 1-1 ratio between the number of outstanding shares of Class A common stock and the units held by the Company in i3 Verticals, LLC.

The Share Repurchase Program does not obligate us to acquire any particular amount of Class A Common Stock, and the Share Repurchase Program may be suspended or discontinued at any time at our discretion.

The Company repurchased 510,155 shares of Class A Common Stock at an average price of $22.51 and an aggregate repurchase amount of $11.6 million under the Share Repurchase Program during the six months ended March 31, 2025.

The shares of Class A Common Stock purchased during this six-month period represent the total number of shares of Class A Common Stock purchased under the Share Repurchase Program since its adoption.

Share Repurchase Programs

Pursuant to the Prior Share Repurchase Program, the Company was authorized to make repurchases of our Class A Common Stock in the open market, through privately negotiated transactions, or otherwise, including under Rule 10b5-1 plans.

The terms of the Prior Share Repurchase Program provided that, immediately prior to repurchases of Class A common stock under the Prior Share Repurchase Program, i3 Verticals, LLC redeemed for cash an equal number of units held by the Company in i3 Verticals, LLC in order to fund such repurchases and maintain a 1-1 ratio between the number of outstanding shares of Class A common stock and the units held by the Company in i3 Verticals, LLC.

The Prior Share Repurchase Program terminated on August 8, 2025.

On August 7, 2025, the Company announced that our Board of Directors had approved a new share repurchase program (the “New Share Repurchase Program”) for the Company’s Class A common stock, under which the Company may repurchase up to $50 million of outstanding shares of Class A common stock (exclusive of fees, commissions or other expenses related to such repurchases).

This New Share Purchase Program replaced the Prior Share Repurchase Program which terminated on August 8, 2025, as described above.

The New Share Repurchase Program will terminate on the earlier of September 30, 2026, or when the maximum dollar amount under the authorization has been expended.

Pursuant to the New Share Repurchase Program, repurchases may be made from time to time in the open market, through privately negotiated transactions, or otherwise, including under Rule 10b5-1 plans.

In addition, any repurchases under the New Share Repurchase Program will be subject to prevailing market conditions, liquidity and cash flow considerations, applicable securities laws requirements (including under Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934, as applicable), compliance with contractual restrictions under the 2023 Senior Secured Credit Facility, and other factors.

The New Share Repurchase Program provides that, immediately prior to repurchases of Class A common stock under the New Share Repurchase Program, i3 Verticals, LLC will redeem for cash an equal number of units held by the Company in i3 Verticals, LLC in order to fund such repurchases and maintain a 1-1 ratio between the number of outstanding shares of Class A common stock and the units held by the Company

in i3 Verticals, LLC.

The New Share Repurchase Program does not require the Company to acquire any particular amount of shares of Class A common stock, and may be extended, modified, suspended or discontinued at any time at our discretion.

The Company repurchased 1,573,881 shares of Class A Common Stock under the Prior Share Repurchase Program at an average price of $23.86 and an aggregate repurchase amount inclusive of commissions and excise taxes of $38.0 million under the Prior Share Repurchase Program during the nine months ended June 30, 2025.

The shares of Class A Common Stock purchased during this nine-month period represent the total number of shares of Class A Common Stock purchased under the Prior Share Repurchase Program since its adoption.

Tax Receivable Agreement

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As a result of the Tax Receivable Agreement, we have been required to establish a liability in our condensed consolidated financial statements.

That liability, which will increase upon the redemptions or exchanges of Common Units for our Class A common stock, generally represents 85% of the estimated future tax benefits, if any, relating to the increase in tax basis associated with the Common Units we received as a result of the Reorganization Transactions and other redemptions or exchanges by holders of Common Units.

That liability, which will increase upon the redemptions or exchanges of Common Units for our Class A common stock, generally represents 85% of the estimated future tax benefits, if any, relating to the increase in tax basis associated with the Common Units we received as a result of the reorganization transactions entered into in connection with our IPO and other redemptions or exchanges by holders of Common Units.

If this election is made, the accelerated payment will be based on the present value of 100% of the estimated future tax benefits and, as a result, the associated liability reported on our condensed consolidated financial statements may be increased.

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We intend to fund the payment of the amounts due under the Tax Receivable Agreement out of the cash savings that we actually realize in respect of the attributes to which the Tax Receivable Agreement relates.

As of March 31, 2025, the total amount due under the Tax Receivable Agreement was $33.5 million, and payments to the Continuing Equity Owners related to exchanges through March 31, 2025 will range from $0 to $3.4 million per year and are expected to be paid over the next 26 years.

The amounts recorded as of March 31, 2025, approximate the current estimate of expected tax savings and are subject to change after the filing of the Company’s U.S.

As of June 30, 2025, the total amount due under the Tax Receivable Agreement was $35.1 million, and payments to the Continuing Equity Owners related to exchanges through June 30, 2025 will range from $0 to $3.5 million per year and are expected to be paid over the next 26 years.

The amounts recorded as of June 30, 2025, approximate the current estimate of expected tax savings and are subject to change after the filing of the Company’s U.S.

federal and state income tax returns.

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Critical accounting policies are those that we consider the most critical to understanding our financial condition and results of operations.

As of March 31, 2025, there have been no significant changes to our critical accounting estimates disclosed in the Form 10-K filed with the SEC on November 25, 2024.

As of June 30, 2025, there have been no significant changes to our critical accounting estimates disclosed in the Form 10-K filed with the SEC on November 25, 2024.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis