IIIV: Project Timing Shifts Will Support Recurring Revenue Resilience

Analysts have modestly reduced their price target on i3 Verticals, trimming fair value by roughly $0.50 per share to reflect slightly slower near term revenue growth and margin expectations amid timing related project delays and divestiture related noise.

Analyst Commentary

Street research reflects a more cautious stance on i3 Verticals, with reduced long term revenue expectations linked to project timing and a less visible growth algorithm following recent portfolio changes.

Bullish Takeaways

Bullish analysts view the recent revenue shortfall as largely timing related, pointing to project work in utilities and transportation that is expected to shift into FY27 rather than disappear.
The pushout of nonrecurring professional services revenue is seen as a transitory headwind, with the core payments and software franchises still viewed as intact and supportive of medium term growth.
Some see the current valuation as already discounting execution noise from divestitures and one time items, leaving room for upside as financials normalize and reporting becomes cleaner.
Over the longer term, the focus on vertical markets with complex workflows is still cited as a differentiator that can sustain above market growth once near term disruptions subside.

Bearish Takeaways

Bearish analysts highlight the decline in nonrecurring professional services and the shift of revenue into FY27 as evidence of weaker near term execution and less dependable growth visibility.
Noise from divestitures and one time items is seen as obscuring the underlying growth algorithm, which complicates valuation work and warrants more conservative assumptions on margins and free cash flow.
The reduced price target reflects concern that muted FY26 guidance could limit multiple expansion, as investors may require clearer signs of consistent, organic growth before re rating the stock.
There is also caution that repeated timing related explanations may signal deeper forecasting and project management challenges. If these challenges persist, they could pressure both credibility and medium term targets.

What's in the News

The company announced plans to actively pursue acquisitions that align with its strategic goals, with a particular focus on strengthening the public sector vertical and maintaining disciplined pricing and operational fit (Key Developments).
The company issued fiscal 2026 revenue guidance in the range of $217 million to $232 million, setting expectations for medium term topline performance (Key Developments).
The company signed a major new contract with the Supreme Court of Appeals of West Virginia to deliver the i3 CourtOne Case Management Solution across the state's courts, estimated at eight figures in revenue over six years and tied to broader modernization and data access initiatives (Key Developments).

Valuation Changes

Fair Value: Reduced modestly from $34.67 to $34.17 per share, reflecting slightly lower earnings power assumptions.
Discount Rate: Increased slightly from 8.41% to 8.48%, implying a marginally higher perceived risk profile or cost of capital.
Revenue Growth: Lowered from 8.84% to 7.41%, indicating more conservative expectations for the company’s medium term topline trajectory.
Net Profit Margin: Reduced more notably from 9.66% to 6.88%, signaling a meaningful reassessment of future profitability and operating leverage.
Future P/E: Raised significantly from 41.6x to 60.0x, suggesting a greater reliance on longer duration earnings growth despite softer near term fundamentals.

Strong demand for AI-powered public sector software and ongoing innovation drive revenue growth, customer retention, and improved margins through modernization and higher client wallet share.
Focus on high-barrier government verticals and disciplined acquisitions ensures stable, recurring revenues and scalable growth with operational and financial flexibility.
Growing focus on public sector software heightens exposure to revenue volatility, margin pressure, and competitive risks amid sector-specific uncertainties and evolving regulatory or technological landscapes.

Catalysts

About i3 Verticals

i3 Verticals, Inc. builds, acquires, and grows software solutions in the public sector and healthcare vertical markets in the United States and Canada.What are the underlying business or industry changes driving this perspective?

Increasing digitization initiatives among state and local governments are driving sustained demand for integrated public sector software solutions, as evidenced by double-digit revenue and SaaS growth for i3 Verticals, supporting continued organic revenue and ARR growth.
i3 Verticals' deepening integration of AI and automation into its software products to modernize public sector operations (e.g., document analysis, support automation, development efficiency) both increases customer retention via higher switching costs and improves gross margins by boosting operational efficiency.
A singular focus on high-barrier public sector verticals (education, utilities, transportation, justice/public safety) positions i3 Verticals to benefit from multi-year enterprise system upgrades and recurring, contractually escalated revenues, supporting both revenue visibility and expanding net margins.
Ongoing product innovation and cross-selling of new modules (Justice Tech, transportation kiosks, utility ePortals, education platforms), alongside market expansion in new states, directly increase wallet share per client and drive top-line growth.
A robust, debt-free balance sheet and large revolving credit facility enable disciplined pursuit of strategic "tuck-in" acquisitions-allowing for scalable, inorganic revenue and EBITDA growth while maintaining long-term earnings accretion.

i3 Verticals Earnings and Revenue Growth

i3 Verticals Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming i3 Verticals's revenue will decrease by 1.0% annually over the next 3 years.
Analysts assume that profit margins will increase from -22.2% today to 15.2% in 3 years time.
Analysts expect earnings to reach $36.6 million (and earnings per share of $0.91) by about September 2028, up from $-55.0 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 42.5x on those 2028 earnings, up from -12.8x today. This future PE is greater than the current PE for the US Software industry at 36.6x.
Analysts expect the number of shares outstanding to grow by 1.57% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.41%, as per the Simply Wall St company report.

i3 Verticals Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

i3 Verticals' increasing concentration in the public sector-especially government, utilities, and education-exposes the company to sector-specific budget cycles, procurement delays, and potential political or regulatory shifts, which could introduce long-term revenue volatility and dampen top-line growth.
The company's strategy to invest heavily in talent and product development ahead of anticipated revenue opportunities (particularly in Justice Tech) increases near-term cost structure; if projected growth does not materialize as expected, this could compress margins and negatively impact earnings.
Reliance on recurring but sometimes variable software license and professional services sales, which are subject to quarter-to-quarter swings, introduces unpredictability in revenue streams and makes long-term financial planning and forecasting challenging-potentially leading to investor skepticism and lower valuation multiples.
Rapid advancements in technology, ongoing commoditization of vertical SaaS markets, and increasing competition from larger tech firms or more agile fintechs could render i3 Verticals' solutions less competitive over time, risking customer attrition, slower ARR growth, and heightened pricing pressure that squeeze net margins.
The shift to a pure-play public sector software model, while creating focus, reduces diversification and increases exposure to changes in public sector IT spending priorities or regulatory actions, potentially amplifying risks to both revenue stability and earnings resilience over the long term.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $37.0 for i3 Verticals based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $40.0, and the most bearish reporting a price target of just $30.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $240.9 million, earnings will come to $36.6 million, and it would be trading on a PE ratio of 42.5x, assuming you use a discount rate of 8.4%.
Given the current share price of $29.42, the analyst price target of $37.0 is 20.5% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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