i3 Verticals Pivots to Public Sector After $439.5M Merchant Services Sale

TL;DR

**IIIV is shedding non-core assets to double down on government software, a risky but potentially rewarding focus play.**

AI Summary

i3 Verticals, Inc. (IIIV) reported significant strategic shifts for the fiscal year ended September 30, 2025, primarily driven by the divestiture of two key business segments. On September 20, 2024, the company completed the sale of its Merchant Services Business for approximately $439.5 million in cash. This was followed by the sale of its Healthcare RCM Business on May 5, 2025, though the specific financial details for this transaction are not provided in the excerpt. These divestitures mark a strategic pivot to focus on its mission-critical enterprise software solutions for public sector entities, which include courts, public safety, public administration, utilities, transportation, and schools across all 50 states and Canada. The company faces risks related to cybersecurity, competition in the enterprise software industry, and its ability to integrate future acquisitions. Despite these risks, the strategic outlook is centered on leveraging its leadership position in the public sector vertical.

Why It Matters

This strategic pivot by i3 Verticals significantly reshapes its business model, moving away from transactional merchant services and healthcare revenue cycle management to a more focused, recurring revenue-driven public sector software model. For investors, this could mean a more predictable revenue stream and potentially higher margins, but also a narrower market focus with its own competitive pressures. Employees in the divested segments have likely transitioned, while those in the public sector software division will see increased emphasis and investment. Customers of the public sector software will benefit from a more dedicated focus, while former merchant services and healthcare clients will now be served by new entities. This move positions IIIV more directly against specialized government software providers, intensifying competition in that niche.

Risk Assessment

Risk Level: medium — The risk level is medium due to the significant strategic divestitures and the inherent challenges of integrating future acquisitions. The company explicitly states, 'We may not be able to successfully execute our strategy of growth through acquisitions' and 'Revenues and profits generated via acquisition may be less than anticipated, the integration process could experience delays or difficulties.' Additionally, the company highlights 'liability and reputation damage from unauthorized disclosure, destruction or modification of data or disruption of our services' as a key cybersecurity risk, which is critical for a software provider.

Analyst Insight

Investors should closely monitor IIIV's execution of its public sector growth strategy and its ability to successfully integrate future acquisitions. Evaluate the financial performance of the remaining public sector software business in upcoming quarters to assess the impact of the divestitures and the effectiveness of the new focused strategy.

Key Numbers

• $439.5M — Cash proceeds from Merchant Services Business sale (Significantly impacts liquidity and strategic focus)
• 23,972,102 — Outstanding Class A common stock shares (As of November 20, 2025, relevant for market capitalization)
• 8,381,681 — Outstanding Class B common stock shares (As of November 20, 2025, indicates dual-class structure)
• $577.6M — Aggregate market value of Class A common stock held by non-affiliates (As of March 31, 2025, indicates public float)

Key Players & Entities

• i3 Verticals, Inc. (company) — Registrant and parent company
• i3 Verticals, LLC (company) — Primary operating subsidiary and seller in divestitures
• Payroc Buyer, LLC (company) — Buyer of the Merchant Services Business
• Nasdaq Global Select Market (regulator) — Exchange where Class A Common Stock is traded
• $439.5 million (dollar_amount) — Purchase price for the Merchant Services Business
• September 20, 2024 (date) — Completion date of Merchant Services Business sale
• May 5, 2025 (date) — Completion date of Healthcare RCM Business sale
• Sarbanes-Oxley Act (regulator) — Legislation requiring internal control over financial reporting

FAQ

Risk Factors

• Competition in Public Sector Software [medium — market]: The company operates in the public sector vertical, facing competition from other software providers. Success depends on maintaining its leadership position and effectively serving government entities across the US and Canada.
• Cybersecurity Threats [high — operational]: As a provider of mission-critical software solutions to public sector entities, i3 Verticals is exposed to cybersecurity risks. A breach could compromise sensitive data and disrupt essential government functions, leading to reputational damage and financial losses.
• Acquisition Integration Challenges [medium — operational]: The company's strategy involves leveraging its leadership position and potentially integrating future acquisitions. Failure to effectively integrate acquired businesses could hinder growth and operational efficiency.

Industry Context

i3 Verticals operates within the enterprise software market, specifically targeting the public sector. This niche requires solutions tailored to government functions like courts, public safety, and administration. The company aims to leverage its leadership position in this vertical, which spans across all 50 US states and Canada, by providing mission-critical, cloud-native software.

Regulatory Implications

As a provider of software to public sector entities, i3 Verticals must adhere to various government regulations, particularly concerning data privacy and cybersecurity. Compliance with these standards is crucial for maintaining trust and avoiding penalties, especially given the sensitive nature of data handled for government functions.

What Investors Should Do

1. Monitor integration of acquired businesses.
2. Assess cybersecurity posture and incident response.
3. Evaluate competitive landscape in public sector software.

Key Dates

• 2024-09-20: Sale of Merchant Services Business completed — Generated approximately $439.5 million in cash, significantly impacting liquidity and allowing a strategic pivot.
• 2025-05-05: Sale of Healthcare RCM Business completed — Further divestiture to sharpen focus on core public sector enterprise software solutions.

Glossary

Merchant Services Business

The company's former business segment involved in processing merchant transactions. (Its divestiture for $439.5 million in cash is a key strategic event for i3 Verticals.)

Healthcare RCM Business

The company's former business segment focused on revenue cycle management for the healthcare industry. (Its sale on May 5, 2025, signifies a continued strategic shift away from diversified offerings.)

Public Sector Vertical

The market segment comprising government entities at state and local levels, including courts, public safety, administration, utilities, transportation, and schools. (This is the core focus of i3 Verticals' mission-critical enterprise software solutions.)

Cloud-Native Solutions

Software designed and built specifically to run in a cloud computing environment. (Indicates the modern, scalable nature of i3 Verticals' offerings for public sector clients.)

Year-Over-Year Comparison

The fiscal year ended September 30, 2025, is marked by significant strategic divestitures, including the sale of the Merchant Services Business for $439.5 million and the Healthcare RCM Business. These actions indicate a deliberate shift to concentrate on the public sector enterprise software vertical. While specific comparative financial metrics for revenue and margins are not detailed in this excerpt, the strategic repositioning suggests a focus on streamlining operations and enhancing the core business.

Key Financial Figures

• $0.0001 — which registered Class A Common Stock, $0.0001 Par Value IIIV Nasdaq Global Select Mar
• $439.5 million — gregate purchase price of approximately $439.5 million paid in cash at the Closing, after givi
• $96.3 m — he Healthcare RCM Acquired Entities was $96.3 million, paid in cash at closing, after g

Filing Documents

• iiiv-20250930.htm (10-K) — 2548KB
• i310k2025exhibit211.htm (EX-21.1) — 14KB
• i310k2025exhibit231.htm (EX-23.1) — 3KB
• i310k2025exhibit311.htm (EX-31.1) — 11KB
• i310k2025exhibit312.htm (EX-31.2) — 11KB
• i310k2025exhibit321.htm (EX-32.1) — 5KB
• i310k2025exhibit322.htm (EX-32.2) — 6KB
• iiiv-20250930_g1.jpg (GRAPHIC) — 120KB
• 0001728688-25-000122.txt ( ) — 15029KB
• iiiv-20250930.xsd (EX-101.SCH) — 88KB
• iiiv-20250930_cal.xml (EX-101.CAL) — 186KB
• iiiv-20250930_def.xml (EX-101.DEF) — 639KB
• iiiv-20250930_lab.xml (EX-101.LAB) — 1112KB
• iiiv-20250930_pre.xml (EX-101.PRE) — 900KB
• iiiv-20250930_htm.xml (XML) — 2331KB

Risk Factors

Item 1A. Risk Factors 19

Unresolved Staff Comments

Item 1B. Unresolved Staff Comments 45

Cybersecurity

Item 1C. Cybersecurity 45

Properties

Item 2. Properties 47

Legal Proceedings

Item 3. Legal Proceedings 47

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 47 PART II.

Market Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 5. Market Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 48

Reserved

Item 6. Reserved 50

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 50

Quantitative and Qualitative Disclosures About Market Risk

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 70

Financial Statements and Supplementary Data

Item 8. Financial Statements and Supplementary Data 71

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 136

Controls and Procedures

Item 9A. Controls and Procedures 136

Other Information

Item 9B. Other Information 138

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 138 PART III.

Directors, Executive Officers and Corporate Governance

Item 10. Directors, Executive Officers and Corporate Governance 139

Executive Compensation

Item 11. Executive Compensation 139

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 139

Certain Relationships and Related Transactions, and Director Independence

Item 13. Certain Relationships and Related Transactions, and Director Independence 139

Principal Accounting Fees and Services

Item 14. Principal Accounting Fees and Services 140 PART IV.

Exhibits and Financial Statement Schedules

Item 15. Exhibits and Financial Statement Schedules 141

Form 10-K Summary

Item 16. Form 10-K Summary 141

SIGNATURES

SIGNATURES 3 NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, "forward-looking statements" within the meaning of the federal securities laws. All statements other than statements of historical facts contained in this report may be forward-looking statements. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms "believes," "estimates," "pro forma," "continues," "anticipates," "expects," "seeks," "projects," "intends," "plans," "may," "will," "would" or "should" or, in each case, their negative or other variations or comparable terminology. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These factors include, but are not limited to, the following: our ability to protect our systems and data from continually evolving cybersecurity risks or other technological risks, including the impact of any cybersecurity incidents or security breaches; liability and reputation damage from unauthorized disclosure, destruction or modification of data or disruption of our services; 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 our Healthcare RCM Business; our ability to successfully manage our intellectual property; the impact of any potential impairment charges associated with our fair-valued assets, including goodwill and intangible assets, in the event of a decline in the price of our Class A common stock or otherwise; our ability to genera

Business

Item 1. Business Our Company i3 Verticals provides mission-critical enterprise software solutions to public sector entities. These comprehensive cloud-native solutions address a broad range of government functions, including courts and public safety, public administration, utilities, transportation and schools. The Company's mission is to enable state and local governments and related agencies to perform their functions and serve their constituents as effectively and efficiently as possible. With thousands of software installations across all 50 states and Canada, i3 Verticals is a leader in the public sector vertical. 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 Purchase Agreement), Payroc Buyer, LLC ("Buyer"), and Payroc WorldAccess, LLC (solely for the purpose of providing a guaranty of the obligations of 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 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 certai

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