On Monday, KeyBanc Capital Markets maintained its Overweight rating on shares of i3 Verticals (NASDAQ:IIIV), with a steady price target of $27.00, following significant corporate developments. i3 Verticals completed the sale of its merchant services segment to Payroc for approximately $438 million in cash, a move aimed at honing the company's focus on its core vertical software markets, which include the public sector, education, and healthcare.
The sale's completion was disclosed in an 8-K filing on September 23, 2024, which also included a restatement of i3 Verticals' historical financials to reflect the divestiture. Concurrently, the company announced internal leadership changes, appointing Geoff Smith as the Chief Financial Officer (CFO), effective immediately.
Smith, who has been with i3 Verticals since 2017 and has held the role of Senior Vice President of Finance since November 2022, steps into the CFO role having previously served as the company's principal accounting officer.
The former CFO, Clay Whitson, transitions to the role of Chief Strategy Officer, a newly established position where he will concentrate on capital allocation, mergers and acquisitions, and investor relations. Whitson will also continue his duties as a member of the company's Board of Directors.
Smith's history with i3 Verticals and his previous management position at Ernst & Young, coupled with his academic credentials from Vanderbilt University, are expected to contribute to a positive reception of these changes by investors.
KeyBanc anticipates that the divestiture of the merchant services business and the executive transition, particularly with Whitson's strategic shift while maintaining board involvement, will be met with approval from the investment community. The firm's outlook suggests a smooth transition, bolstered by Smith's familiarity and past engagement with the investor community.
In other recent news, i3 Verticals has finalized the sale of its merchant services business to Payroc WorldAccess, LLC for approximately $438 million in cash, a move that aligns i3 Verticals more closely with its core sectors of Public Sector, Education, and Healthcare. This development comes alongside changes in i3 Verticals' executive team, with Geoff Smith stepping into the role of Chief Financial Officer. The transition is expected to enhance i3 Verticals' focus on its strategic vertical markets.
In their Q3 2024 results, i3 Verticals reported a decline in revenues and adjusted EBITDA, primarily due to lower one-time software license sales. Despite this, the company anticipates high-single-digit organic revenue growth and EBITDA margin improvement for fiscal years 2024 and 2025.
A significant recent development for i3 Verticals is its acquisition in the Public Sector vertical, projected to drive double-digit growth in fiscal year 2025. The company also highlighted its robust balance sheet and strategy to reduce debt through paying down its revolving credit facility.
InvestingPro Insights
Following the strategic moves by i3 Verticals, the company's future is under keen investor scrutiny. According to the latest data from InvestingPro, i3 Verticals has a market capitalization of $735.58 million, signaling the market's current valuation of the company. Despite a negative P/E ratio of -15.97 for the last twelve months as of Q3 2024, which often indicates a lack of profitability, the company's gross profit margin stands strong at 77.69%. This robust margin could be a sign of healthy underlying business operations and cost management.
InvestingPro Tips suggest a mixed outlook: while net income is expected to grow this year, analysts have revised their earnings downwards for the upcoming period, and a sales decline is anticipated in the current year. Nevertheless, the company's stock price movements show considerable volatility, which might appeal to certain investors looking for short-term opportunities. Additionally, liquid assets exceed short term obligations, which is a positive indicator of the company's ability to meet its immediate financial commitments. There are 8 additional InvestingPro Tips available that could further guide investment decisions regarding i3 Verticals.
It is also worth noting that the company does not pay dividends, which could influence the investment strategy for income-focused portfolios. With the next earnings date set for November 13, 2024, investors will be watching closely to see if the company's strategic changes will start to reflect positively in its financial performance. The InvestingPro Fair Value estimate of $22.68 suggests a potential undervaluation at the current price of $21.99, providing an additional layer of insight for those evaluating the company's stock.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.