Company: IIIV
Filing Date: 2025-11-21
Form Type: 10-K
Source: 0001728688-25-000122
Chunk: 121

Company: i3 Verticals, Inc.
Filing Date: 2025-11-21
Form: 10-K
Item: Item 7
Chunk 121
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 determine whether the performance obligations in question will be satisfied at a point-in-time versus over time. 

The timing of revenue recognition for professional services revenue is determined by the structure of the contract, and whether it is billed based on time and materials or milestone. For contracts that involve significant software production, modification, or customization, we recognize revenue over time and in accordance to ASC 606, which may vary depending on the specific facts and circumstances of each contract. In instances in which 

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the contract is non-cancellable or we have a right to pay for work performed to date, we recognize revenue by measuring the estimated percent complete. This method best reflects the transfer of control to the customer as costs are incurred. These projects vary in duration but can be extended for long periods and may require revisions to revenue recognition. Any changes to estimated contract costs are recorded when determined. When performance obligations are distinct, the fee allocated to each obligation is analyzed separately. Revenue recognition for time and materials is determined by resources utilized at contracted rates.

Contingent Consideration in Acquisitions

On occasion, we may have acquisitions that include contingent consideration. Accounting for business combinations requires us to estimate the fair value of any contingent purchase consideration at the acquisition date. Where relevant, the fair value of material contingent consideration included in an acquisition is calculated using a Monte Carlo simulation as well as a discounted cash flow 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. For example, if management’s forecasted performance for an acquisition increased, we would have anticipated a higher probability of contingent consideration being paid on the acquisition and would have recorded additional losses from the change in fair value of contingent consideration. Conversely, if management’s forecasted performance for an acquisition decreased, we would have anticipated a higher probability of contingent consideration being paid on the acquisition and would have recorded a gain from change in fair value of contingent consideration. As of September 30, 2025, the fair value of contingent consideration recorded is $3.6 million, with maximum contingent consideration payout of $27.7 million dependent upon achievement of specified financial performance targets, as defined in the purchase agreements.

Goodwill

We test goodwill for impairment at