IIIV

i3 Verticals has been reshaped by the sale of its Merchant Services Business — the MD&A confirms proceeds were used to pay down the revolver, leaving a fortress balance sheet: $0 long-term debt, $0 current debt, a 0.0x total net leverage ratio and a 96.8x interest coverage ratio as of 9/30/2025, plus $66.7M cash against $390M equity and only $121M total liabilities (0.31x liabilities/equity). That is genuinely de-risked, and revenue grew a respectable +11.5% to $213M as the remaining vertical-market software and healthcare-RCM segments carry the story. The FY2024 net income of $113M was a divestiture-driven artifact, so the -84% 'collapse' to $17.9M is optics, not deterioration — the more honest read is the underlying software business.

The problem is that underlying business looks only modestly profitable. Operating income was just $3.78M on $213M of revenue — a 1.8% operating margin — with $27.9M of D&A (largely amortization of acquired intangibles from years of roll-up M&A) weighing on GAAP. Reported net income of $17.9M (8.4% net margin) sits well above operating income, meaning the bulk of earnings comes from below-the-line items rather than operations. Most telling, operating cash flow cratered 88% to $5.69M, so the company barely out-earns its own capex and cannot organically fund the $37.6M it spent on buybacks. ROE is a soft 4.6%. (Ignore the 156% 'gross margin' — it's a data artifact pairing a stale FY2023 gross-profit figure against FY2025 revenue and is not meaningful.)