Last Update 22 Dec 25

IIIV: Project Timing Shifts Will Support FY27 Recurring Revenue Resilience

Analysts have trimmed their price target on i3 Verticals to $28 from $30, citing a more muted FY26 outlook as revenue recognition on certain utilities and transportation projects is pushed into FY27. They also noted that recent divestitures introduce timing-related noise into the growth profile.

Analyst Commentary

Bullish Takeaways

Bullish analysts view the lower price target as primarily reflecting timing shifts in revenue recognition rather than a structural deterioration in the business model, which limits downside to valuation multiples.
The push of utilities and transportation project revenue into FY27 is seen as extending the growth runway, supporting a more durable medium term revenue trajectory once these contracts ramp.
Noise from divestitures and one time items is characterized as largely transitory, suggesting that core operations and the longer term growth algorithm remain intact.
Maintaining a neutral rating despite trimming the target implies confidence that execution on the existing backlog can stabilize growth and underpin current share price levels.

Bearish Takeaways

Bearish analysts highlight the softer FY26 outlook, with declining nonrecurring professional services weighing on near term revenue and compressing estimates for earnings growth.
The shift of project revenue into FY27 raises concern about execution risk and potential further delays, which could pressure valuation if milestones are not met on schedule.
Recent divestitures and one time items complicate visibility into the underlying growth rate, making it harder for investors to underwrite a premium multiple to peers.
Uncertainty around the post divestiture growth algorithm may limit upside in the near term as investors wait for a clearer pattern of consistent, organic growth before re rating the shares.

What's in the News

Issued new fiscal 2026 guidance, targeting revenue between $217 million and $232 million, describing a moderated but still growing outlook relative to prior expectations (Corporate Guidance).
Announced a major contract with the Supreme Court of Appeals of West Virginia to deploy the i3 CourtOne Case Management Solution across the state judiciary, estimated at eight figures of revenue over six years and scheduled to be discussed on the upcoming fiscal 2025 Q4 earnings call (Client Announcement).
Highlighted expanded value added services for West Virginia, including enhancements to the WVPASS platform for public court data access and rollout of the Resolv 360 fund recovery solution to streamline financial processes and improve disposition rates (Client Announcement).
Reaffirmed an active acquisition strategy focused on disciplined pricing and integration fit, with a robust pipeline primarily aimed at strengthening the public sector vertical (Seeking Acquisitions/Investments).

Valuation Changes

Fair Value Estimate remained unchanged at approximately 34.17, suggesting no revision to the intrinsic value framework despite updated assumptions.
The discount rate edged down slightly from about 8.48 percent to 8.46 percent, reflecting a modestly lower perceived risk profile or cost of capital.
Revenue growth was reduced slightly from roughly 7.41 percent to 7.18 percent, indicating a modestly more conservative outlook on top line expansion.
Net profit margin increased moderately from about 6.88 percent to 7.26 percent, pointing to an improved long term profitability expectation.
The future P/E multiple decreased slightly from approximately 60.0x to 57.2x, implying a marginally lower valuation multiple applied to forward earnings.

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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