i3 Verticals, Inc.IIIV
i3 Verticals, Inc. Fair Value Disclosure
FAIR VALUE MEASUREMENTS
The Company applies the provisions of ASC 820, Fair Value Measurement, which defines fair value, establishes a framework for its measurement and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or the price paid to transfer a liability as of the measurement date. A three-tier, fair-value reporting hierarchy exists for disclosure of fair value measurements based on the observability of the inputs to the valuation of financial assets and liabilities. The three levels are:
Level 1 — Quoted prices for identical instruments in active markets.
Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets.
The carrying value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, settlement assets and obligations, accounts receivable, other assets, accounts payable, and accrued expenses, approximated their fair values as of September 30, 2025 and 2024, because of the relatively short maturity dates on these instruments. The carrying amount of debt approximates fair value as of September 30, 2025 and 2024, because interest rates on these instruments approximate market interest rates.
The Company has no Level 1 or Level 2 financial instruments measured at fair value on a recurring basis. The following tables present the changes in the Company's Level 3 financial instruments that are measured at fair value on a recurring basis.
| Accrued Contingent Consideration | |||||
Balance at September 30, 2023(1) | $ | 7,329 | |||
| Contingent consideration accrued at time of business combination | 2,130 | ||||
| Change in fair value of contingent consideration included in Operating expenses | 22 | ||||
| Contingent consideration paid | (7,327) | ||||
Balance at September 30, 2024(2) | 2,154 | ||||
| Contingent consideration accrued at time of business combination | 1,260 | ||||
| 234 | |||||
| Contingent consideration paid | (77) | ||||
| Balance at September 30, 2025 | $ | 3,571 | |||
__________________________
1.In connection with the sale of the Healthcare RCM Business, $19 and $891 of the Company's accrued contingent consideration (as of September 30, 2023) were classified as "Current liabilities held for sale" and "Long-term liabilities held for sale", respectively, in the accompanying consolidated balance sheets and were not included in these amounts.
2.In connection with the sale of the Healthcare RCM Business, $198 of the Company's accrued contingent consideration (as of September 30, 2024) were classified as "Current liabilities held for sale" in the accompanying consolidated balance sheets and were not included in these amounts.
The fair value of contingent consideration obligations includes inputs not observable in the market and thus represents a Level 3 measurement. The amount to be paid under these obligations is contingent upon the achievement of certain growth metrics related to the financial performance of the entities subsequent to acquisition. The fair value of material contingent consideration included in an acquisition is calculated using a Monte Carlo simulation as well as a discounted cash flows analysis. The contingent consideration is revalued each period until it is settled. Management reviews the historical and projected performance of each acquisition with contingent consideration and uses an income probability method to revalue the contingent consideration. The revaluation requires management to make certain assumptions and represent management's best estimate at the
valuation date. The probabilities are determined based on a management review of the expected likelihood of triggering events that would cause a change in the contingent consideration paid. The Company develops the projected future financial results based on an analysis of historical results, market conditions, and the expected impact of anticipated changes in the Company's overall business and/or product strategies.
Approximately $82 and $518 of contingent consideration was recorded in accrued expenses and other current liabilities as of September 30, 2025 and 2024, respectively. Approximately $3,489 and $1,636 of contingent consideration was recorded in other long-term liabilities as of September 30, 2025 and 2024, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Nov 21, 2025 | Showing above |
| 2020 | Nov 23, 2020 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.