IIIV - Earnings call transcript Q1 2022

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Operator

Good day, everyone, and welcome to i3 Verticals First Quarter 2022 Earnings Conference Call. Today’s call is being recorded, and a replay will be available starting today through February 16. The number for the replay is 877-344-7529 and the code is 6617684. The replay may also be accessed for 30 days at the company’s website. At this time, for opening remarks, I’d like to turn the conference call over to Geoff Smith, VP of Finance. ahead. go Please

Geoff Smith

welcome for and first XXXX quarter Good Verticals. to call iX conference morning, the

meaning intent Joining is to the call Rick This GAAP the directly enhance on Reform measure also Litigation Clay yesterday’s addition be To company’s performance. me each find financial this reviewing This extent financial is statements regarding Whitson, the understanding and of our the XXXX, financial of of release. of among information its to operating Act to the others, may call, in earnings our measure financial GAAP consolidated expected considered CEO; the statements, discussed Chairman a in non-GAAP GAAP provide by information. call CFO; you non-GAAP reconciliation non-GAAP Private to, individual comparable and instead forward-looking conference should Securities and any Stanford, financial company’s today’s not financial President. including statements. but are information our It financial Greg contain will by within Daily, most the

statements during purpose, statements. any to forward-looking not may be made historical this this deemed be are call statements For of that fact

cautioned in the results release set that operations the results statements You statements. are the Consequently, are to among SEC. from reports affected forth may forward-looking materially discussed by actual filed and forward-looking hereby that be important in may and the these differ earnings others, factors, the company’s or furnished

be applicable I’ll CEO, call call the company undertakes the Daily. update Chairman Finally, the as it, to is over as and required law. Greg company’s shared date no the valid under information and turn to on may of now this obligation today’s except

Greg Daily

of growth in today in year. ability rest good our is and services And segments. payment the revenue proprietary in We're of the XXXX with confident produce results. We We Thanks, morning continued adjusted by with all and exited And software records to our strong this related set driven Geoff. great our for momentum, are we results year and pleased to first momentum quarterly quarter and EBITDA. you. a continued XXXX software fiscal revenue,

a are our revenue over increased XX%. adjusted To EBITDA quarter that and strategy. prior software we We led end, are first year on XX% that delivering and company increased

Our and first quarter in revenue first year of of the services software fiscal XXXX. year related increased the XXX% from quarter fiscal

up revenue time. software services Our and grew year from software in To revenue first $XXX our XX% related first of grew revenue want XXXX, the ARR for emphasize our quarter, the and in further our XX% recurring I payment annualized million. of our our surpassed revenue highlight federal fiscal continued quarter year-over-year, is the XX% and that to transformation,

acquisition. to the excited contracts team contribute quarter what operates our We look brings first or and in October cycle healthcare regions, sector additional from acquisitions It healthcare EBITDA cross deal adjusted and past sector and multiple and perspective. acquisition, Mid-Atlantic public XXXX level vertical. southeast full not acquisition and our this within this already our the acquisition a The X; included results forward X seen acquisition public from quarter of January the did excited announced fit We're new state fiscal is this future on revenue our revenue in about management. to strategy. to sell brought this about quarter a of the opportunities year the this We're business. the table We've

of of noticed teams. and level our are new customers. local -- public expansion this recent borders software opportunities municipality markets crossing the These sector state applications court and acquisition, in we our Beyond include capable open engagements, saw state Many acquisitions these several level state state like have in and On win later. describe that trend This we in Recall note, XXXX. positive continue. sector a a year seeing this expansion detail we within greater the RFP is our increase trend general an fiscal in rates. activity public and we're market

Our vertical to continue continues iX capabilities move the growth we forward. at public accelerate. to will as drive within And sector this market

turn will over call to for Now Clay’s call Clay then And the give performance. quarter our provide I'll first open on more up M&A then update you he and questions. and we'll following Rick will comments financial the an details us

Clay Whitson

per quarter first XXXX. Following adjusted metrics Please from increased year presentation had a supplemental adjusted our forma record QX the EBITDA for with digit million XXXX, website the double Almost the slide great December ended December pertains $XX.X fiscal quarter in we of all and which our titled continued information refer the discussion. to reflecting for headed the direction. earnings pro with million growth diluted first ended quarter share. XX% to of right on XXXX, is Revenues are organic quarter revenues and acquisitions. in $XX.X We the track for to reference this XX,

percentage XX% XX% the payments QX contributed XXXX than for improved integrated million basis for quarter. XX exclusively software months quarter Acquisitions XXX improved QX to our the XXX revenue from for less $XX.X basis owned points proprietary from the in helped which of revenues XXXX. points Our segments during XXXX, to for yield QX

a strong acquisition quarter the quarter continued reflecting the fiscal XX% Software compared growth revenues of continued related of the strategy. first record XXXX, of year and for to services focus XX% revenue for representing our

services the For and payments related quarter exceeded software in revenues. first revenues history, our

record. revenues with improving and million more adjusted our have our XX% acquisition Adjusted public for XXX% for under board XX, was continued acquisition. the new principally to the growth services percentage the were on QX segment's December we The started to over two of data an sheet million annual streams on segment which XX% our to revenue effective net $XX.X QX QX largest continue supplemental as XXX% our to acquisition mark improved under driven increased proprietary sequentially of allowed adjusted The public for million Balance in for BXB, as $XX.X revenues. an included With million totaled services. and revenues $XXX.X XX% December proprietary increased for services our for XX% QX most for row in while adjusted by two revenues, the and to recent in execute the The metric, broad schools. for XXXX. compared existing cash $X.X share XXXX $XXX overhead XX%. to EBITDA XX.X% us education to software business merchant XXX Education sector up for million a million the Revenues we half margin of for XX%. merchant performance; XX% for basis, the acquisition software outpacing a million. per recurring largest and none our XX, XX% reopening our healthcare for quarter, QX of sector XXXX Adjusted XX. convertible to and percentage EBITDA our million XXXX, quarterly sector EBITDA our full customers revolver The for QX a million $X.XX in corporate represents revenue Pro our to a for sector verticals, page QX sales verticals, margin consolidated for from Segment reconciliation. and of notes EBITDA giving QX roughly momentum XXXX, for sector composition the QX from QX a public XX.X% face for segment in two for EBITDA QX organic diluted expanded was has of new to reflecting On higher for revenues margin software Accordingly, important strength Adjusted QX revenues record milestone XXXX, XXXX. growth QX, to earnings XXXX, including sector increased higher from $XXX.X of from to QX entire public related quarters to of XX presentation, QX $XX.X XXXX for from QX rate growth an December reflecting showed XXXX the and of XXXX crossed QX our and $XX.X for value reflecting XXXX million million granular margins. have Forma QX public $X.X Again, services to and healthcare $XX.X healthcare. to the had run segment We XX.X% evolution. XXXX XXXX we XXXX, $X.XX increased XXXX rate a growth payments QX three $XXX across a from based merchant is in estimated $X.X and EBITDA revenues. is balance for On refer press XX.X% and increased improvements strategy. release retail. a QX or please our facility. for XXXX lower reflecting from million description QX public -- recent software million $XX.X million QX in principally XXXX borrowed proprietary our strong hospitality quarter but sheet; healthcare. The a with $XX.X for increased of The XX.X% thanks

ratio times is XX, X.X December of As times. the was our total X.X leverage while constraint current

$XX X%, interest and our sector million rate adjusted we the be raises thirds rates public define EBITDA cash as flow flow, XX, we currently into flows revenues December by but To two the cash have revolver capitalized completed interest which the for rights earn-outs. beginning cash to we Over cash for mentioned free this Greg, cash in effective January EBITDA acquisition as or The a cash. X, As than repayment, bank is but below software, a year. and expect the X, QX We Xx internally XX, currently taxes. for less wired CapEx, convert actually March was time, Fed used while minus quarter. the January for cash remain is adjusted notes of expect interest roughly rate convertible for X%, not acquisitions, was the can to until because increase December the debt free holiday. to either will We clarify

registration. We not sold any our have under shelf stock Outlook.

current XXXX. sector confidence first that yet closed adjusted $X.XX. different our million fiscal have transaction standpoint, we mix EBITDA strong $XX forward, have $XXX seasonal costs. gives other to and to the From EPS Looking raising with million not with excludes counterbalance adjusted acquisition related million, of Revenues generally quarter million verticals pro a acquisitions $XX each coupled companies. which in $X.XX diluted our forma seasonal and for guidance $XXX patterns, us public different to year with It

quarters our more updates software the over Rick though more centric, to might become I'll streams. and perpetual for Company vary sales, activity. license upon toward M&A turn we based trend now call generally revenue is even As recurring

Rick Stanford

give I Thank on an discuss M&A. I'll then morning, and update Clay. things everyone. you, want few Good to a

markets. state software Our with results public solutions product success strong unified in sector and have to municipal, local offering continued county

quarter, reach our product last Louisiana, territory and sales and solution entity expanded the geographic South we've adding Over software Colorado, Massachusetts. and in new Carolina, by Texas,

Our opened iX software entities. six five public new contribution solutions with states sector from

expanded we states. finance, certification, courts, records our share and in in additional utility breadth footprints multiple payment signature of processing, The market of our solutions. digital instances existing several software and expansion public safety, management kiosk Additionally, billing, includes

Lastly, recently Authority LCRAA, we significant Contract. adoption Remote are our announced Clerks Access Software of realizing Louisiana

the and of the products of sector and last couple the over done success UPO Our public in months over share years. pollination cross of last work validates we've six wins the both

be amongst extremely The offering is and We see true collaboration to now, a healthcare the in have namely used healthcare. nicely, pleased and the for verticals we're to other along template team. moving product unified tried

the soon the very the and signed of sales suites more first see around perspective, our we total vertical. product XX, the partner was the ISV of quarter combining hopeful with From are lifts specifically healthcare We end of integrated resources around and new designed integration. introduction an will at in of activity ISVs fiscal process and eight

imaging On as I'll announced continues speak sector. acquisition gears we operations the latest developer, our application electronic was data management, document This court in formed services focus and IVR completion on XXXX data provider, payment M&A. filing The joint systems, Our ISV systems, and of management management and a information and document court business shift diversified now business to and X, systems. public to system in expand. January comes and team. seasoned software online systems, with management specializing case electronic Their systems. transaction and an center experienced is

We the those grow to continue expect to business. individuals

management state additional public opportunities operates This within level domestic case from small to for our also excited filing acquisition cross files can between the text business to and state allows about integrated The documents. The system child the support. voluntary circuit civil and files provides relations and video is this public district selling second all The sector. courts, and wide cases, of to document We file, standard sector Company electronic vertical. that our handle audio and photographs images, others electronic system. filing and including type at claims, system are any

remain As standard in and fell relative range. to disciplined usual, this approach multiples acquisition within we our our

Our has my please. order. sharing the to we'll the that call future. emphasis in in and time, healthcare look concludes This comments the pipeline open sector for Anthony. acquisition M&A forward an on And public near this Q&A front more At we on

Operator

We will [Operator now first Davidson. comes begin from today the Heckmann with Instructions] question question-and-answer Peter session. Our D.A.

You now may ahead. go

Unidentified Analyst

on for Pete. How are doing guys? It’s John

quick approximate second growth rate rate? the quarter? Organic a one. What the Just was growth in

Greg Daily

XX%.

Unidentified Analyst

then rate it. guide? it. Got what's in organic And the Got year embedded full that

Greg Daily

what? Embedded in

Unidentified Analyst

guide. year full the In

Greg Daily

we we've organic for that release year Of Oh, guide. said quarter XXXX. expect the double digit said the on we when fiscal do we growth guidance that full last

Unidentified Analyst

one assume revenue. acquisition generates to XX public squeeze in, X one I’ll to fair as is sector in annual Perfect. just it January around last that

Greg Daily

So XXx it. use we does margin EBITDA. paid And XX if have a that give high multiple, an close million to idea will It XX%. you you quite for a of

Unidentified Analyst

Perfect, much. Appreciate it. thank you so

Greg Daily

Thank you.

Operator

Kupferberg Jason from Bank America. comes of with question next Our

You may now ahead. go

Jason Kupferberg

Thank guys. you

follow start just a question. last little on that bit up maybe of that on a So to

public rays the Just you if and fiscal rays or the more less guidance from at is the sector as that characterize we look recent year of XXXX, would some coming or organic? acquisition for the

Greg Daily

the to lion's and share is remainder passed of for acquisition, the through QX race expectation we've beat did but year. the we slightly that The so our

Jason Kupferberg

thank the slide then ARR. new helpful. That and the on you Understood Okay. for disclosures is

grew said quarter. year-over-year I XX% think in ARR you the

year coming So a full on I that in? was see you wondering basis where metric

Greg Daily

this report it I page, don't think we're we to but forecast quarter. will on every individual items line

Jason Kupferberg

okay. Okay, No. Understood. All right. Understood.

Greg Daily

are XX% Jason, our ARR if revenues or you use in an want this to quarter of estimate, recurring.

a that so year as use our guide could you proxy. full take And and, and

Jason Kupferberg

Make sense.

color. I Well, Okay. the appreciate guys. you, Thank

Greg Daily

Thank you.

Operator

next comes Our with question Cowen. from George Mihalos

ahead. go now may You

George Mihalos

that's taking my nice, at that morning, nice way and here. high Hey And results of good for as sort sort Wanted we just and a off through inflation, look guys, its to the start making markets. thanks questions. of question. And is with level

inflation And how but top from sort of about rates? you're fair and an into how the line talked that, convenience about fees, a it bit little and you rising top managing a I You mostly mean, thinking bottom it? perspective? expense And, number do both think of line now, about you is itself We're from software line? are standpoint.

Greg Daily

processors line, top raises standpoint, in from payment higher were for X%. generally And go X% to did that an know expense have X. From Well in you'll that with all tickets they we processors. payment January or that the good are going

did last we period. While year, the COVID raises not during have

And so our that a an on is expense impact structure.

are. feeling certain have some of we all offices, offices, like but so compensation, one Nashville in companies we And them are XX being on pressure

George Mihalos

nature have talking on Are across really public or sector, fees state, you to Okay, that's I that you're the helpful. embedded what about beat Appreciate I'm RFPs. board, a of if record logos, think more municipal, to move skewed competitor will, it If as you're to you're if or these upstream? the one is And of more that's you RFPs? seeing different some wondering seeing if category? change, now, starting in that's if Wanted that guys obviously, and you ask seeing guidance. in commentary also the you've that again, you the

Greg Daily

the pent Yes, up George board, It is is part question. demand. a across good of it

part confidence. other The is

don't XXXX. succinctly to question. today. its the by the a our year. available the RFPs a is money of think And that they rescue We're I to using change customers are there's teams the to for half of to able that's on if use marketing available the I and only know dollars our municipalities been that And all believe we With need continue them. end many available. that guess money your haven't in are to American plan answered year that half I available. the But tie this packages and I what's technology the of teams confidence. increase next sales I in and Again, educate demand

George Mihalos

that's no, Appreciate Yes, perfect. that's, it.

if January, went sort impact one, last and one can Just December of through early Omicron notable days and again, thanks maybe sneak Any of you of guys. as in. sort the I

Greg Daily

change that, to supply From kind There's I sand in shortages of to just way Omicron. It is We it, any said notice feel XX% headwind we environment. I from a the don't COVID. staffing. like. everything really like from some there's of prior the didn't like in were economy. the seems from gears of still short Having the economy Omicron all Delta back from feel come a

George Mihalos

you. Thank

Operator

next James. comes with Raymond from Our question Matt Schwarz

You may now go ahead.

Matt Schwarz

this JD. and for Thanks on another taking for is on my guys, Matt congrats Hey, questions deal.

color growth. question higher XX% revenue reason of as So organic that becomes software a is appreciate on there larger Quick be COVID the part can't post any mix. your

even teens a low is So possibility COVID? post

Greg Daily

it a and or is our possibility our It goal. is target

for guidance is XXXX double Our digit.

I XXXX, the definitely we'll But guidance. there. not it's term better hill goal and think long visibility. It's we to over address our our come have when that For get yet

Matt Schwarz

Okay, to can different going great. But XX [Indiscernible] year that's EBITDA expansion to And one the at Thanks on get at an there's more XX margin points like basis, XX%, M&A. margin. what be XX% possible ballpark? margin I there? are And organic come normalized know you basis And a Merchant looking back is On just level profiles. guys. we of margin going to Services to Like, then is it

Greg Daily

expense top corporate at long line, points where margins much on to to at guidance points rate, And current get a expect basis higher rate. basis growing grow our of is which that expand as should our mix while with an a line, leverage the see XXX you the target inflationary we year. term Our is company’s XX with is to

I time get XXs. think some possible it's over period, So into to do the

Matt Schwarz

Thanks, great. the That's end guys. going Okay, to quarter.

Greg Daily

Thanks, Matt.

Operator

Faucette next from Morgan with comes question Stanley. Our James

You may now go ahead.

James Faucette

Wanted about thank valuations one about guys terms seeing contributing What you obviously, to go how last it's obviously the and think acquisitions through like the see we of success quickly are XXXX very to as a have in or given acquisitions, current and what cadence should lot good people growth. of in had on Great, strategy you the Especially thinking than a years? they're environment? to much. would ask and two the to of compared you and or acquisition different volatility you we

Greg Daily

part well the valuations. your least look private somewhat question, we at to been answer first it's company disconnected public XX from the where We've maybe of for or valuations, at years. it's generally, owned It's years, XX for population, owned, found

don't impact and into public world I a work volatility anticipate So from crossing large we in. over valuations the

luck as of how to pace As acquisition or differently per four little opportunity. works But each to generally sometimes a one a far planning. that, five guided And, just generally quarter. than year, year acquisitions, into it out we've we go that's

And M&A a so you a it's it. And into that as hard of by go lot to know, of predict. to nature there's is hard factors kind

James Faucette

from it valuations, perspective, haven't in subjected the the but to that with to massive companies been of overall etcetera. that at moves conversations like types the your and is and they sounds Sure, having etcetera, looking you're that

conversations from that historically then. that, pretty are it And similar you're to guess negotiations those what like have and saying been they I so sounds is what

Greg Daily

of part now care for taking they're key and taking out larger, the care looking a them of dollar. go And, of autonomy We always our given are. becoming top of not and lot of story customers. They tell something employees,

want years. something XX to part built people something X and of, of are or they another stick for proud that looking be for We and around they're have years

James Faucette

margin ask, growth, understand numbers, and growth these the as that little Got the passage leverage with period, of bit, And because we mean, Or what's integration in kind to think think just of on top increasing I of of I and time? we the when there software, the margin place. like and then through should etcetera. but go acquisitions? kind address becomes and I re But incremental to be should growth maybe But, putting should about the about, didn't you margin expansion time, first organic think kind it answer I using you're of line how contribution our up obviously, be the we think what's over inorganic we of the wanted as a your the it. integration good, about framework the impact? this we

Greg Daily

I do.

I think so.

The companies everything generally those attached post payments thing, one we've time related. those non-integrated carry companies And also For IPO, purchased get margins. software payments. have been than has margins higher over that higher to

I of yes, as a over a to the shift probably on XX% purchase. so. But about depend margins. that's think companies we time we there's it will improving time, do good company gets. I so So as An just general it bought mix example of margins, think But over

James Faucette

Got it, this makes Appreciate your morning. time sense.

Greg Daily

Thank you, Jim.

Operator

Our Instructions] [Operator Chris with Donat from comes Sandler. question next Piper

ahead. go now may You

Chris Donat

to business I morning, far Good affect guidance if embedded education that you one just within gentlemen. the And of event there a revisit seeing the change? is a then this more also guidance. are wanted outlook? then it Is changes your as can XXXX And as changed at XXXX anything's any in point, barriers. goes, if element anything of what's

Greg Daily

education. less gave thing. quarter. We than of revenues the down only December X and It million EBITDA in X.X that's we And the seasonal a from little for Well, on slightly around rough numbers for I a that think and were last EBITDA was some normal call, million. revenues,

run gives you forward. going rate an that the of idea So

know probably goes, not budgets, right But far We lunch privy of at that. point have depend higher will think it's it'll catalyst someday, feel EBITDA. and As on it's very on in as the district for like there timetable because lunch some revenues don't to I I we're future. I knowledge politics that be a, jurisdictions. happen for a have and local a on everybody. would But don't I which now. free setting don't yet. hard That just, We

Chris Donat

supplemental of changed months, has. in couple and it was then just doesn't just disclosure. I okay, sound digging into So but the if sort wondering this And last like anything so

look software around we business services, increase Clay, to the, quarter-on-quarter kind that's As XX.X from acquisition two at the the million or and X.X the is of there the top recurring related quarter the at is of there? other page some that all in million bouncing

Clay Whitson

on lion's event. That X, the share is as did the we mainly October health care acquisition

Chris Donat

And it's the just went been within seen steady didn't thinking of just but and state the heard but think in for like hadn't about Omicron things you really we're that other double other Omicron. couple to but I any check. to correctly, change -- there Okay. in I Greg, double the Delta check wanted you specifically change from to just to hearing related any, any some last you places because sound because hospitality quarters hospitality one I that just was businesses

Greg Daily

In a slight West large especially presence, a dip. seen hospitality, we the thinner margin have have business. that on We it's Coast,

So volume measurable. be it restaurants not opening. ones EBITDA, the bit really are hasn't, it little its Their a there's but didn't to may open, affect down of our new that, it's, speak

Chris Donat

that Okay, additional thanks for detail.

Operator

any our question turn answer remarks. for and concludes This Greg would to conference back the to Daily like session. over closing I

Greg Daily

stay attendance thank well. got to their awesome. we've things want everybody team's I doing are Thank really The -- rolling interest. for and along And you. tuned,

Operator

attending is concluded. conference for presentation. The today's you now Thank

You may now disconnect.

i3 Verticals (IIIV) 9 Feb 222022 Q1 Earnings call transcript