Last Update 07 Jan 26

IIIV: Project Timing Shifts Will Support FY27 Services Revenue Visibility

Analysts have trimmed their price target on i3 Verticals to US$28 from US$30, citing a more muted FY26 outlook. Some nonrecurring professional services revenue is now expected to be recognized in FY27, and recent divestitures and one-time items have made the growth profile harder to read in the near term.

Analyst Commentary

Bullish Takeaways

Bullish analysts view the lower US$28 price target as reflecting timing of revenue recognition rather than a shift in the underlying business model, framing current valuation as tied to project phasing instead of a structural reset.
The push of certain utilities and transportation projects into FY27 is seen as extending the nonrecurring professional services opportunity, which could support growth visibility once that revenue is recognized.
The characterization of the recent shortfall as "largely timing-related" suggests to bullish analysts that execution issues are limited, rather than pointing to broad weakness in demand for the company’s solutions.
Despite a more muted FY26 outlook, maintaining an Equal Weight stance signals that some analysts still see the risk and reward profile as relatively balanced at current levels.

Bearish Takeaways

Bearish analysts focus on the more muted FY26 outlook, which they see as a headwind for near term growth expectations and a reason to be cautious on execution over the next few quarters.
The decline in nonrecurring professional services revenue for FY26 introduces additional volatility into the revenue mix, which may complicate forecasting and valuation work for investors.
Recent divestitures and one time items add noise to the company’s reported results, making the growth profile harder to interpret and raising questions about how quickly investors can gain confidence in the go forward earnings base.
Delays in revenue recognition on certain projects highlight dependence on specific contracts, which bearish analysts see as a potential source of lumpiness in both growth and cash generation.

What's in the News

i3 Verticals plans to pursue acquisitions that fit its existing operations, with a focus on deals that support its public sector vertical and adhere to disciplined pricing, according to President Frederick Stanford (Key Developments).
The company issued earnings guidance for the fiscal year ending September 30, 2026, expecting revenue in the range of US$217,000,000 to US$232,000,000 (Key Developments).
i3 Verticals announced a new contract with the Supreme Court of Appeals of West Virginia to deliver its i3 CourtOne Case Management Solution to the state's Circuit, Family and Magistrate Courts, with an estimated eight figure revenue contribution over six years (Key Developments).
The West Virginia contract also includes value added services such as an expanded WVPASS platform for public court data access and the Resolv 360 fund recovery solution to streamline financial processes and improve courts' disposition rates (Key Developments).

Valuation Changes

Fair Value: Model fair value estimate is unchanged at 34.17.
Discount Rate: The discount rate moved slightly from 8.46% to 8.45%, indicating only a minimal adjustment to the required return used in the model.
Revenue Growth: The revenue growth assumption remains essentially the same at about 7.18%, suggesting no change in the top line growth outlook used in the valuation framework.
Net Profit Margin: The net profit margin input declined from about 7.26% to about 6.31%, reflecting a more conservative view on future profitability in the model.
Future P/E: The future P/E multiple increased from about 57.22x to about 65.81x, implying a higher valuation multiple applied to projected 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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