I3 Verticals Strategy and Business Model

Executive Overview

I3 Verticals is a U.S.-focused vertical market software and payments company headquartered in Nashville, Tennessee. Founded in 2012 by payments industry veteran Greg Daily and a management team with deep acquiring experience, the company built itself through acquisitions of niche software and payment businesses serving specialized end markets. Its core idea has been straightforward: own or control the workflow software that a customer uses every day, then embed payment acceptance and related transaction services inside that workflow.

Historically, I3 Verticals operated across a wider set of payment-oriented verticals, but its strategy has increasingly centered on public sector and healthcare software businesses, where customer workflows are complex, switching costs can be meaningful, and recurring revenue tends to be stronger. That portfolio shift is important because it changes the economics of the company from a more generic merchant-acquiring model toward a software-led model with deeper customer integration. In the latest full fiscal year available in public filings through mid-2024, I3 Verticals reported approximately $393 million of revenue for fiscal 2023. Geographically, the business is best understood as primarily domestic, serving customers across the United States through a mix of acquired platforms, direct sales teams, and embedded payment relationships.

I3 Verticals at a Glance

Logo
Common name	I3 Verticals
Full legal name	i3 Verticals, Inc.
Headquarters	Nashville, Tennessee, United States
Ownership	Public company with a dual-class share structure; Class A shares trade publicly
Ticker	IIIV
Exchange	NASDAQ
Market Cap	$555.28M
Revenue (FY2024)	#N/A
Founding / major historical milestones	Founded in 2012; completed initial public offering in 2018; accelerated portfolio reshaping in 2023-2024 to focus more tightly on software-led public sector and healthcare businesses
Industry or industries	Vertical market software, integrated payments, fintech, govtech, healthtech
Key products or services	Public sector software and payment solutions, healthcare software and payment-related solutions, transaction processing, implementation and support services
Geographic footprint	Primarily United States
Business segments as officially reported	FY2023 annual report: Software and Services; Merchant Services
Company website	https://www.i3verticals.com

1. What Is the Strategy of I3 Verticals?

I3 Verticals’ public filings and investor materials describe a company that has moved from being a broader payments roll-up toward being a more focused vertical software and payments platform. Using the Playing to Win framework, the strategy is easiest to understand as a set of choices about end markets, workflow ownership, and revenue quality.

1. 1a. What is the winning aspiration of I3 Verticals?

   I3 Verticals’ winning aspiration appears to be becoming a more focused, software-led company in specialized verticals where it can own mission-critical workflows and monetize both software and embedded payments. Management has increasingly emphasized public sector and healthcare as the right arenas for that model. Rather than maximizing sheer merchant count or generic payment volume, the company appears to define winning as improving revenue mix, increasing recurring and transaction-driven revenue tied to software, and building a business with stronger organic growth and better strategic positioning than a stand-alone merchant-acquiring model. Public materials available through mid-2024 did not foreground a single long-term market-share target, but the portfolio actions themselves made the aspiration clear.

2. 1b. Where does I3 Verticals play?

   I3 Verticals plays in narrow, workflow-heavy verticals, primarily in the United States. The current strategic center of gravity is public sector and healthcare. In public sector, that means software and payments embedded in government and citizen-facing processes such as billing, collections, permitting, case management, and other administrative transactions. In healthcare, it means software and payment-adjacent solutions tied to provider workflows and patient financial interactions. Historically, I3 also had broader merchant services and other vertical exposures, but the company has been narrowing its field of play toward categories where workflow ownership and payment attachment reinforce each other.

3. 1c. How does I3 Verticals plan to win?

   I3 Verticals’ formula for winning is differentiation through vertical specialization, not broad-based scale alone. The company seeks to win by combining three elements: niche software products with strong local or vertical fit, integrated electronic payments embedded inside those products, and acquisition-driven market entry into fragmented niches. That creates switching costs because customers are not simply buying payment acceptance; they are buying workflow software, compliance functionality, implementation know-how, and daily operational continuity. The more deeply payments are attached to software usage, the more economically attractive the customer becomes. Recent portfolio moves suggest management believes this model works best in software-rich niches and less well in generic merchant acquiring.

4. 1d. What capabilities must I3 Verticals have in place?

   To execute that strategy, I3 Verticals needs capabilities in five areas. First, it needs disciplined acquisition sourcing and integration because the business was assembled through many smaller deals rather than a single transformational combination. Second, it needs vertical product expertise in public sector and healthcare, where workflows are specialized and customers care about regulatory fit. Third, it needs payments infrastructure, risk management, and compliance capabilities, including data security and payment-card-related controls. Fourth, it needs implementation and customer support capabilities strong enough to handle public procurement complexity and healthcare interoperability demands. Fifth, it needs product modernization capabilities so acquired software assets do not stagnate.

5. 1e. What management systems does I3 Verticals require?

   The right management system for I3 Verticals is one that measures both software health and payment economics. In practice, that means tracking organic revenue growth by vertical, recurring revenue mix, payment attachment rates, customer retention, implementation backlog, product modernization progress, compliance and uptime metrics, and cash conversion. Because I3 has been reshaping its portfolio, management also needs a capital-allocation system that weighs tuck-in acquisitions against deleveraging and other uses of capital. For a company built through acquisitions, governance over integration milestones, subsidiary performance, and portfolio pruning is not a side issue; it is central to execution.

2. What Are the Current Strategic Initiatives of I3 Verticals?

Based on public filings and earnings materials available through mid-2024, I3 Verticals’ current strategic initiatives are unusually concrete because they involve portfolio change, not just rhetoric.

• Portfolio simplification toward software-led businesses.The most visible initiative has been to simplify the company away from lower-fit businesses and toward software-rich verticals. Public disclosures included the announced sale of the merchant services business to Payroc, a major step in reducing exposure to more generic acquiring economics. Management also disclosed steps to narrow parts of the healthcare portfolio, signaling a sharper definition of strategic fit.
• Doubling down on public sector software and payments.Public sector has become the clearest strategic focus area. The attraction is structural: government workflows can be complex, customer relationships can be long-lived, and digital payment adoption still has room to expand. I3’s goal appears to be owning more of the workflow, not just the transaction.
• Refining the healthcare portfolio around better-fit software and transaction solutions.Healthcare remains a target vertical, but management’s actions suggest selectivity. The company appears to prefer software and payment-linked healthcare offerings with repeatable revenue characteristics over labor-heavy or less differentiated services.
• Improving revenue quality through recurring and embedded revenue.I3 Verticals has long used a software-plus-payments model, but the strategic emphasis has shifted toward businesses where recurring software fees, support revenue, and transaction fees are attached to core workflows. This matters because recurring software revenue generally carries better retention and, in many cases, better valuation multiples.
• Modernizing and rationalizing acquired platforms.Because the company was built via acquisitions, one continuing initiative is making a collection of acquired businesses operate more like a coherent platform company. That typically means product roadmap prioritization, retiring overlap, improving integrations, and standardizing infrastructure where practical.
• Preserving capital-allocation flexibility.Recent divestitures and portfolio moves have also had a finance objective: improve strategic focus while strengthening balance-sheet flexibility. That leaves management with more room to invest in the core business and pursue selective future acquisitions rather than continuing broad-based roll-up activity.

3. What Is the Business Model of I3 Verticals?

What customers actually buy

Customers do not buy a generic payment terminal from I3 Verticals. They typically buy workflow software, implementation, support, and payment functionality tied to a specific vertical process. A government agency might buy software for citizen-facing transactions and collections. A healthcare customer might buy software and transaction capabilities tied to patient payments or administrative workflows. In that sense, I3 sells operational functionality first and payments monetization second.

Recurring versus one-time revenue

A large portion of the model appears repeat-driven. Recurring elements include software subscriptions, maintenance and support contracts, transaction-based payment fees, and other ongoing service fees tied to daily use. One-time revenue can come from implementation, conversion work, professional services, or certain license and setup activities. The strategic appeal of the model is that once software is embedded in a customer workflow, the related transaction revenue can become highly repeatable.

How pricing power works

I3 Verticals’ pricing power is usually indirect rather than dramatic. It comes from being embedded in specialized workflows where switching risk is real, not from pure brand power. In public sector, regulatory requirements, procurement friction, and data migration issues can increase stickiness. In healthcare, interoperability, workflow disruption, and billing continuity matter. That said, public procurement and customer budgets can limit how aggressively prices move, so pricing power is meaningful but not unconstrained.

Why the business mix matters

The mix between software-led revenue and generic merchant-services revenue is central to understanding I3 Verticals. Software-led revenue tends to be stickier, more differentiated, and more valuable strategically. Merchant services may produce scale and cash flow, but it is usually more competitive and less differentiated. The company’s recent portfolio reshaping strongly suggests management wants a higher share of the first category and less of the second.

What drives margin and cash generation

Gross margin is shaped by revenue mix. Software and support revenue typically carries higher gross margins than labor-intensive services, while payment economics depend on the net spread after interchange, network, and processing costs. Operating margin depends on how much the company invests in product development, integration, customer support, and corporate overhead tied to acquisitions. Cash generation can be attractive because recurring software and transaction revenue often requires limited incremental capital expenditure, but acquisitions, integrations, and portfolio restructuring can consume cash.

Revenue model

I3 Verticals uses a blended revenue model that includes software subscriptions, maintenance and support, transaction-based payment fees, implementation and professional services, and historically merchant-services revenue. It is best described as a hybrid of software-as-a-service, maintenance-based recurring revenue, and usage-based transaction monetization.

4. What Products and/or Services Does I3 Verticals Sell?

Public sector solutions

Public sector appears to be the company’s most strategically important product family. Offerings include software and transaction solutions used by government agencies and adjacent public institutions for citizen-facing payments, administrative processing, collections, billing, and other workflow-heavy activities. The strategic value is not just the payment itself; it is the software layer that controls the transaction context.

Healthcare solutions

In healthcare, I3 Verticals has offered software and payment-related solutions supporting provider workflows, patient financial interactions, and related administrative activities. The exact mix has been changing as the company sharpens the portfolio, but the broad theme has been the same: sell workflow software and monetize recurring use plus transaction activity.

Implementation, support, and related services

Like most vertical software companies, I3 also sells implementation, training, support, maintenance, and other services required to deploy and maintain its platforms. These services may not always be the highest-margin component, but they are critical to adoption and retention.

Legacy and deemphasized offerings

Historically, merchant services was a major part of the company, reflecting its roots in payments. That business generated substantial revenue, but recent portfolio actions indicate it is no longer the strategic centerpiece. For that reason, the offerings with the highest strategic importance today appear to be public sector and healthcare software platforms with embedded transaction monetization.

5. What Are the Key Competitors or Peers of I3 Verticals?

I3 Verticals competes in fragmented niches, so there is no single perfect peer set. The most useful way to think about competition is by vertical and by business model.

The practical competitive test for I3 Verticals is usually not national advertising or lowest price. It is whether the company’s software is deeply embedded enough in a specific workflow to make the bundled solution hard to displace.

6. What Is the Marketing Strategy of I3 Verticals?

I3 Verticals does not appear to rely on broad consumer-style brand marketing. Its marketing approach is more targeted and vertical-specific, which fits the nature of the business. In public sector and healthcare, buying decisions are often made through formal procurement, specialized evaluation processes, or relationship-driven sales cycles rather than impulse demand generation.

• Vertical credibility over mass awareness. Domain expertise, reference customers, compliance knowledge, and implementation track record appear to matter more than national brand campaigns.
• Account-based and solution marketing. Marketing is likely aimed at defined buyer groups such as government administrators, finance officers, court or utility leaders, and healthcare revenue-cycle or practice-management teams.
• Conference and field marketing. Industry events, trade associations, user groups, and targeted field activity are likely more important than large-scale digital advertising.
• Cross-sell marketing into the installed base. Because the company owns workflow relationships, one of the most efficient marketing plays is introducing payment functionality, upgrades, or adjacent modules to existing customers.

Marketing appears to be a supporting capability rather than the main differentiator. The real differentiators are workflow fit, implementation success, and embedded payments economics.

7. What Are the Key Customer Segments of I3 Verticals?

• State and local government entities.This is likely the most strategically important customer segment. Agencies and departments need software for citizen services, payments, billing, administration, and compliance-heavy workflows.
• Healthcare providers and provider-adjacent organizations.Customers include organizations involved in patient financial interactions, clinical administration, or provider-office workflows. The precise subsegments vary by product line.
• Institutional and vertical organizations acquired through legacy platforms.Historically, I3 Verticals also served other specialized institutional niches, including some education and administrative markets, though the strategic emphasis has narrowed.
• Legacy merchant-services customers.These were historically important to revenue, but the company has been deemphasizing that exposure as it shifts toward software-led verticals.

Relative to many enterprise software companies, I3 Verticals appears reasonably diversified across many customers rather than dependent on one or two megaclients. However, public-sector awards can still be meaningful because contracts can be larger, longer, and more referenceable than a typical small-business merchant account.

8. What Is the Sales Model of I3 Verticals?

I3 Verticals uses a direct and vertically specialized sales model. The route to market depends on the end customer and product, but several patterns are clear.

• Direct vertical sales teams. Sales is typically led by teams that understand the end market, especially public sector and healthcare workflows.
• Procurement- and RFP-driven selling. In public sector, formal requests for proposals, contract vehicles, implementation plans, and references can be central to closing business.
• Installed-base expansion. A key growth lever is cross-selling additional modules or payment functionality into existing software relationships.
• Solution-led selling rather than pure payments selling. The company is usually selling business process improvement, compliance, and workflow continuity, with payments as part of the value proposition.
• Implementation-backed renewals. Because the products are operationally embedded, post-sale implementation and support meaningfully affect renewal rates and future expansion.

The channel structure matters. A software-led direct model generally creates better customer intimacy and better attachment economics than a more commoditized reseller or ISO-style merchant-acquiring model. It also creates clear consultant opportunities in sales-force design, pricing, post-merger sales integration, and cross-sell execution.

9. In What Geographies Does I3 Verticals Operate?

I3 Verticals is primarily a U.S. company in both operations and revenue exposure. Its headquarters are in Nashville, Tennessee, and its operating footprint has been built through acquired businesses located around the country. The company serves customers across multiple U.S. states and municipalities, especially in public sector use cases, as well as healthcare organizations in the domestic market.

What matters strategically is not international breadth but domestic vertical density. I3 Verticals appears concentrated in the United States, where local government fragmentation and healthcare workflow complexity create room for specialized software providers. Any international exposure appears limited relative to the overall business.

10. Who Are the Owners of I3 Verticals?

I3 Verticals is publicly traded, with Class A shares listed under the ticker IIIV. As of the company’s 2024 proxy-era ownership structure, it had a dual-class share setup, which gave insiders enhanced voting influence relative to pure economic ownership. Founder and Chief Executive Officer Greg Daily has been one of the most important insider shareholders. As with many small- and mid-cap public companies, institutional investors such as BlackRock and Vanguard have appeared among reported Class A holders in public filings, although those positions can change over time.

11. How Is I3 Verticals Organized?

Practically, I3 Verticals is organized as a holding company with a portfolio of operating businesses and product lines built through acquisitions. That legal and organizational history matters because the company has not been built as a single greenfield software platform.

In its FY2023 annual report, the company officially reported two segments: Software and Services and Merchant Services. That reporting view captured the legacy shape of the business. Operationally, however, management’s strategic focus increasingly centered on public sector and healthcare software businesses, especially as the company reshaped the portfolio in 2023-2024.

Corporate functions such as finance, compliance, capital allocation, and strategic oversight are centralized, while customer-facing operations and product expertise remain tied to specific acquired platforms and vertical teams. That structure is common in serial acquirers, but it creates a constant need to balance local autonomy with portfolio-wide discipline.

12. How Does I3 Verticals Operate?

Day to day, I3 Verticals operates as a software-and-transactions business. Its work includes maintaining vertical software applications, onboarding new customers, processing electronic payments, supporting users, delivering upgrades, protecting customer data, and managing regulatory and payment-network compliance.

• Product operations. Teams maintain specialized applications that support customer workflows in public sector and healthcare environments.
• Implementation and conversion. New customers require onboarding, data conversion, training, workflow configuration, and often integration with existing systems.
• Transaction operations. The company enables and monetizes payment acceptance inside the workflow, which requires processor relationships, reconciliation, security controls, and uptime management.
• Customer support and retention. Because products are operationally embedded, customer support is part of value creation, not just a cost center.
• Portfolio integration. A less visible but important operating activity is integrating acquired businesses, standardizing practices where sensible, and deciding which platforms to keep investing in.

The main operational challenge is complexity. Public sector customers have long buying cycles and specialized configuration needs. Healthcare customers demand interoperability and continuity. A company built through acquisitions must deliver reliability today while still modernizing the portfolio for tomorrow.

13. What Are the Growth Opportunities for I3 Verticals?

The most plausible growth opportunities for I3 Verticals are those that build on the company’s software-plus-payments model in focused verticals.

• Deeper public sector penetration.Government digitization remains uneven, especially across smaller agencies and municipalities. That creates room for software vendors that can combine workflow tools with modern payment acceptance.
• Greater payment attachment inside the installed base.One of the clearest opportunities is monetizing existing software customers more fully by adding or expanding electronic payment functionality.
• Cloud and product modernization.Modernizing acquired platforms can support better retention, cleaner upsell, and stronger new-customer win rates.
• Healthcare workflow expansion in attractive niches.If I3 remains selective, it can still grow in healthcare where transaction software and administrative tools are sticky and repeat-driven.
• Selective tuck-in acquisitions.Historically, acquisition has been a core growth tool. After portfolio simplification and balance-sheet reset, targeted tuck-ins in public sector or healthcare software could remain attractive.
• Cross-sell and module expansion.Customers that already trust a platform may be open to adjacent modules, analytics, reporting, or workflow enhancements.

The main constraints are also clear: long public-sector sales cycles, integration risk, product fragmentation from past acquisitions, regulatory complexity, and the need to keep modernizing legacy code bases without disrupting customers.

14. What Is the History of I3 Verticals?

• 2012: I3 Verticals was founded in Nashville, Tennessee, by Greg Daily and a management team with deep payments experience.
• 2012-2018: The company expanded through acquisitions of software and payments businesses serving specialized verticals.
• 2018: I3 Verticals completed its initial public offering, giving it public-market capital and a visible acquisition currency.
• Post-IPO years: The company continued building a portfolio across software, services, and payments, with public sector and healthcare becoming increasingly important strategic verticals.
• 2023-2024: The company entered a new phase marked by portfolio simplification, including major divestiture activity intended to sharpen focus on software-led public sector and healthcare operations.

The most important historical shift is not merely that I3 grew by acquisition. It is that management later decided some of the earlier portfolio breadth reduced strategic clarity. The current company is best understood as a refined version of the original roll-up model.

15. What Is the Technology Strategy of I3 Verticals?

Technology is central to I3 Verticals because the product is software and the monetization engine is often transaction processing inside that software. The company’s technology strategy appears to have three layers.

• Maintain and improve vertical workflow software. The first requirement is to keep mission-critical applications reliable, compliant, and relevant for public sector and healthcare users.
• Embed payments and integrations. The second is to make payment functionality feel native inside the workflow through integrations, user-interface design, and secure transaction handling.
• Modernize an acquired portfolio. The third, and arguably hardest, is upgrading legacy platforms acquired over time so the portfolio becomes easier to sell, support, and scale.

For I3 Verticals, technology is both the customer offering and an internal enabler. Product architecture, cybersecurity, data integrity, and integration standards all affect growth. Inference from the company’s strategic moves suggests that modernization is not optional: it is necessary if I3 wants its portfolio to function more like a focused software company and less like a loose federation of acquired assets.

16. What Is the Finance Strategy of I3 Verticals?

I3 Verticals’ finance strategy has to support a business transitioning from acquisition-led expansion to portfolio concentration. That makes capital allocation unusually important. Public disclosures in 2023-2024 suggest three financial priorities.

• Improve revenue quality. Portfolio moves imply a preference for recurring software and embedded-payment revenue over lower-multiple generic merchant-services revenue.
• Strengthen flexibility. Divestitures can reduce complexity and improve the balance sheet, leaving more room for reinvestment in the core business.
• Stay disciplined on M&A. Acquisition remains part of the company’s DNA, but the strategic tone has shifted toward selective, higher-fit deals rather than breadth for its own sake.

From a finance perspective, I3 Verticals is a mix-shift story. Software-led recurring revenue, if executed well, can support stronger margins, better visibility, and potentially better market valuation. But the company still has to prove that portfolio simplification translates into consistently better organic performance and cleaner operating leverage.

17. What Major Acquisitions Has I3 Verticals Made?

I3 Verticals is best understood as a serial acquirer rather than a company defined by one or two blockbuster deals. Since its founding in 2012, it has assembled its platform through numerous acquisitions of niche software, payments, and service businesses across targeted verticals. Many of those deals were tuck-ins, meaning they were strategically important without necessarily being large enough to dominate the corporate narrative on their own.

The acquisition pattern has generally served four purposes: entering a vertical, deepening workflow ownership, attaching payments to software, and adding customer bases with high retention potential. That approach helped I3 build presence in public sector, healthcare, and other specialized markets faster than a purely organic strategy would have allowed.

What is notable more recently is the reversal of part of that process. In 2023-2024, the more consequential portfolio actions were divestitures rather than new headline acquisitions, including the announced sale of the merchant services business to Payroc and the narrowing of certain healthcare-related assets. Strategically, that suggests I3 has moved from accumulation to curation: less focused on buying more businesses everywhere, and more focused on owning the right businesses in a smaller number of verticals.

18. How Companies Like I3 Verticals Leverage Independent Consultants through Umbrex

Umbrex has built a global community of more than 8,000 independent management consultants based in over 50 countries. These consultants are alumni of McKinsey, Bain, BCG, and other top firms. Companies like I3 Verticals use Umbrex when they need top-tier strategic or functional expertise without hiring a full consulting team and all the associated overhead. For a company pursuing portfolio simplification, software-led growth, and operating focus, that model can be especially useful. Umbrex consultants cover strategy, operations, organization, marketing, sales, finance, technology, enterprise resource planning, and artificial intelligence.

• Portfolio strategy review to help management evaluate which product lines and verticals best fit a software-led public sector and healthcare focus.
• Separation planning and carve-out support for divestitures, including transition-service design, cost disentanglement, and Day 1 readiness.
• Post-merger integration design for tuck-in acquisitions, including operating model, KPI dashboard, and synergy tracking.
• Pricing and packaging work for software-plus-payments offerings, especially where payment attachment economics vary by customer type.
• Public sector go-to-market redesign, including bid strategy, account segmentation, and win-loss analysis for RFP-driven sales.
• Healthcare product and customer-segmentation strategy to identify the most attractive niches after portfolio narrowing.
• Technology roadmap prioritization for modernizing acquired software platforms, APIs, and customer migration paths.
• Sales-force effectiveness projects focused on cross-selling payment capabilities into the installed software base.
• Finance transformation work such as margin bridge analysis, recurring-revenue KPI design, and capital-allocation frameworks.
• AI and automation diagnostics for customer support, implementation workflows, payment exception handling, and internal reporting.