IIIV - Earnings call transcript Q2 2022

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Operator

Good day, everyone, and welcome to the i3 Verticals Second Quarter 2022 Earnings Conference Call. Today's call is being recorded, and a replay will be available starting today through May 17. The number for the replay is (877) 344-7529 and the code is 3376015. The replay may also be accessed for 30 days at the company's website. At this time for opening remarks, I would like to turn the call over to Geoff Smith, VP of Finance. sir. ahead, go Please

Geoffrey Smith

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

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

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

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

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

Gregory Daily

of and morning good Thanks, all you. Geoff, to

in respectively with which and new year. year, now again and grew our quarter able We second fiscal in that first fantastic from for had payments have X largest revenue. revenue. revenue half. EBITDA, ending And the half records of of it services highlighted March are XX% XX% revenue than as to we months confident sources. comes we deliver XX. quarter, recurring related XX% We're set we of our of the be Greater This quarter, our represents our results will this surpassed source and and a Last XXXX had at happy second our XX% of as software

public few verticals related For our product X% and extremely revenue investments our context and XXXX far healthcare the ago. about both our We're year software services continue fiscal a stack. and how of to improve we come, short we've excited in sector before our represented make years in offerings IPO, technology to

our We sector momentum from are in form XX fruits results quarter Sector included of vertical. the in a the 'XX acquisitions. full sales this excellent quarter of of In second Public year investment the fiscal public seeing December

We offerings it integration are to and vertical. how adds well pleased has that our this gone the addition Sector state-level Public

start building we've unlock us leverage engagement that payments, this as a expertise directions. business under-monetizing we success which advantage. our know thanks The continues Our we've acquisition, suite, in had is lessons to expertise and strategic This will has vertical Health Healthcare There which patient Sector real platform that scale Record we and Public were in off scale, another are learned software the our When shape businesses helped vertical are Payments. Revenue The in and to software market, May to Healthcare. further out us help Cycle find included I'm great in perfect a value, can get we cross-sell announce X. our to Electronic happy results product in our adds to ample to patient and is complement opportunities both offerings. up engagement of which

more you call the turn provide second-quarter financial on details he Clay, will I'll Now our over performance. to and

Following the up call provide comments, questions. for will update Clay's open M&A we'll an then and Rick

Clay Whitson

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

for points to for percentage QX XX% for 'XX, Organic XX%. from growth for quarter was the 'XX. QX XX% 'XX improve our integrated to from points helped yield for XXX quarter Our which improved revenue QX this payments basis XXX basis

platform as 'XX our Over sources. XX% QX EBITDA momentum as 'XX. software overhead strength revenues helps related XX% Adjusted a of out, of from services in revenues showed of value across continued add representing for $XX.X QX recurring and rate XX% 'XX, in corporate that with the revenues QX continued our record million $XXX.X revenues. company be XX%. from in milestone and evolution. in revenue from expect here on we services. of a payments lower to Annual customers. quarter first increased percentage strong in board $XX.X quarter, XX% EBITDA $XXX.X From million compared important for service 'XX of a revenues QX 'XX to software 'XX, totaled with for for integrated recurring a the for growth Software a and us the growth percentage We merchant reflecting million our and complementary million Adjusted came proprietary increased XX.X% the QX an QX to for

strong our software million record forma by to new roughly The $XX school $XX.X consolidated half to record. The EBITDA a to 'XX proprietary continued than our QX and our improved the million reconciliation. adjusted estimated payments Healthcare. to EBITDA XX% was 'XX the from million Revenues an a Services 'XX. expanded $XX.X our and XX rebound more to basis QX for our largest 'XX. QX of for million broad-based is growth Revenues and of per increased XX% $XX.X for For BXB. QX QX million our QX a diluted thanks QX hospitality and principally 'XX, basis, to segment X Pro in for refer $X.X adjusted segment reflecting $XX.X and reflecting increasing million segment Healthcare. points. the run QX XX% margin adjusted sector existing from in the Services for sales new $X.XX in X from increased our Sector QX principally On Adjusted performance. increased Merchant growth verticals: Again, press Merchant for months, to 'XX X for million $X.X districts. a to full segment's public for for XX% please rate 'XX earnings for verticals: Public 'XX, share Healthcare release Segment 'XX Public in QX represents $X.XX from organic EBITDA reopening doubled quarterly to QX education and a largest customers for while Sector for growth driven million QX, from vertical XX%. business, $X.X Revenues description 'XX, for

revolver execute our acquisition facility. under to The $XXX continue has net On $XXX cash us value we to of $XXX are convertible million million XX, a million. March strong strategy. of had face Our balance our our notes allowed under sheet borrowed

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

expect interest quarter. Greg, capitalized June roughly below we acquisition, be interest will EBITDA of X.XX% in Fed The As Xx used the the cash the notes for small as free rate EBITDA but flow, cashed to internally is which mentioned for free acquisitions earn-outs. but cash adjusted a continues expect to for by We to rates. cash revolver the time, flow raise completed Over for taxes. have is convertible interest currently adjusted can repayment, increase QX while as minus and software, debt remain the subsequently the Outlook. CapEx, healthcare we define X%, X/X currently around and convert we rate

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

the one -- when exception is are our exception out. quarter Our lets business down slows school which Education June during

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

Frederick Stanford

Clay. you, Thank morning, Good everyone.

on update an give I'll M&A, discuss a items. I few Before

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

digital In adding our beginning been quarter, the from new processing, X where management our words, in Alabama, territorial software solution public software and sector entities. of certification, into by not utilized engagement last expanded with sales iX states contribution We additional Over products and had solutions. Kentucky. X we those to expanded Georgia, other before. customers our states payment includes bring by records and we've reach instances customer courts, public products entering are and reach Expansion tax, new digital product safety, Tennessee signature

e-filing. contract, implement This Clerks announced by LCRAA, is supported software well. to Authority which continue our on Louisiana We Access extremely recently statewide going effort Remote is

the under unified education with and sales, support. iX related have development offerings brand product education Our marketing

moving lunchroom education, support education to technology AWS, product allows Our schools by centrally sales continue software. a investments with and traditional focus installing to consolidations school are interactions COVID a This scaling, IX the that improved education businesses solution and responsive and are security protocols. to products has in into We've end, to cost hosting significant enterprise. successful driven change enhancements relaxed being us we line robust and K-XX From a the rapid and is focus redundancy oversight. to our in been by including given products, make on that geographic needs to been effort bring bringing our in manage full results and than and technology infrastructure continue will staff we environment more a shortages. expansions, lessens increased to our pleased to perspective, campaigns, leverages across which labor coordinated more which

training across launch to expanded access deploy in data new to we have speak Low-code addition where teams that the investing a are In platforms current platform organization on products can cross-divisional become more integrated. suite architecture. we we now to technologies to solutions need gaps modernize us rapidly full better as in solution. I'll offering will our will infrastructure, We've and or application are M&A. which allow low-code creating us give modernizing build to

we acquisition the mentioned, recently Greg closed tuck-in As vertical. healthcare the within

build healthcare of an compliance range program array sight offers note an point offer. in in years, business company unified The brings This the patient vast solution born existing us with business GAAP solutions nicely range The a For management, This patient this meaningful the existing to businesses personal Their were strategic portal on companies. Portal assistance. This offering. providers. system robust personal or health flagship product EHR that allowed opportunities within offering efficiencies product in vertical improve is to this fell the to in fit healthcare of combined do realized engagement with a do that our of solutions engagement there of backstory acquisition fits software house healthcare with that electronic complete is health solution portal, XX to to services wide experience products provided our a relative not healthcare and population has X and EHR a a their multiples. and had operational fills our first. 'XXs. our owner nearly of records, much-needed company revenue world. data of patient He healthcare side the healthcare this natural them wanted they a I to in in that has the business other was upgrade patient a already the electronic back-end is out cycle front-end and a antiquated our lose space. This Patient that including iX's healthcare with standard patient healthcare product our fact offering, analytics at

bringing current strains COVID support vertical businesses. a the required products complementary came Our way of that by healthcare in the we software pivot delivery is commensurate The re-imagining industry out provide services. of together

requirements the to our providers practices lab continue of systems response pandemic, invoicing ever-changing example, adapt delivery For telemedicine. clients. built staff mobile upon best and our in and for And the we've healthcare to to on we educate

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

Operator

come Raymond from Davis [Operator Instructions] will Our with John first question James.

John Davis

with Clay, it maybe a I both want longer-term growth. for to the quarter, if organic but talk give about start you little also growth, bit

revenue, software XX% now have XX%. AR You

So comments going over it would helpful. we're on long to seems growth any like be -- sustainable be low-double and digits into before the just basis. organic But on an tipping

Clay Whitson

the for was XX% Well, XX% last the it follows previous That quarter quarter quarter. XX%. and

first in less the altogether. think so. of double-digit year. it, to some year, quarter, But the And had we The half June committed December rebound quarter then this growth much although it's quarter this I COVID for gone

various the our economy annually verticals. that we what come on turn have around expect into better to and the as guidance from visibility and give we'll think I

John Davis

enough. new leverage size assume Rick see that based to if then said $XX multiples kind I Okay. historical of And the to Clay, deal, is I million missed off your range? on and this, million apologize fair No, fair then its comments, $XX

Clay Whitson

that's and be we'll upfront including less high. pay, deal. earn-outs and than to we the No, XX-Q all the price it the today It's We'll statement $XX in make purchase small million. too will the a publish expect that

John Davis

else that I'm Okay. the then on has about business but the me. margins, implied on I the margins be anything the are the curious done, in No, just I'm all last XX assuming do should one from super margin helpful. of? going we aware points. for that down to basis think And with make acquisitions guide you've Based

Clay Whitson

in composition the The midpoints adjusted EBITDA. same revenues. percentage guidance are quarter. quarter the say for last year. our a this be our revenues stronger the there gave could We But of than number reflects with fact line with of of imply we ranges the certainty revenues guidance Well, in experience or both and the can't revenues we the that half the reach lower EBITDA lower that will higher top what back

composition X in quarter our was look that to But months, of XX or revenues higher basis the at you pretty If annualized services points. on for was strong sheet EBITDA year it of our this ahead see by which the revenues. revenue recurring addendum, leads the you previous sheet adjusted

John Davis

No, Okay. no, that's helpful.

anything not investing business in half business So mix, if Basically, anything. changes, like just basically the underlying just no back it's mix? more you're or that, it's

Clay Whitson

Right. Yes.

Operator

will question from Peter come Davidson. next Heckmann with Our

Peter Heckmann

sector see to little could those wanted a too any Any on the if software little with early cases? payments the healthcare? Just pure about bit companies, you early both success a talk and success early public cross-selling or more of the side in on in

Clay Whitson

into So, Peter, businesses. we those successes having payments cross-selling are

competition. organization one multiple now think very our expected. so go more I what from as able is as The payments our even is got with in right we're as to sub companies and focus compete going winning X deals well and

Peter Heckmann

just IT Plan, bit noted a in the Stimulus the just to that great. may called bit you it's little And word get think stimulate that spend, as American That's funds the that. to that of have that by little was Federal Any have going seeing Program been those Are procurement starting -- potentially a of regards are That's great. I municipalities then funded available? update regard? activity the Rescue

Clay Whitson

Yes.

couple in governments. be local discussing to our spent. those demand the We to of we uptick hard a that see starting determine something implementations that we speak, like seeing we state customers during still and to we money that is link will are It's as going the would over lot I saw years. heat implement relative are $XXX of we that directly tailwind whether had funds is expect a of next billion to RFPs. roll as a but We how and there those stuff those funds. available to So out to know probably pent-up new of can an the pandemic,

Operator

from with Our will next come George question Cowen. Mihalos

Allison Jordan

George. of start expectations XQ that contribution well? flow-through on a wanted guidance XH over embedded on that the or there full on tuck-in, better small This strong Is raised just the as there for from year. results. is in or I healthcare is the for results, Congrats to any really understanding Allison the the it's

Clay Whitson

X but revenues. also Well, through acquisition the it in we months And we'll about flow acquisition yes, X made. does million or months, in just the $X it this -- adds beat, the at have adds the for the year, yes, the

Allison Jordan

then, And That's super great. helpful. Okay, Clay.

follow-up year? remind full outlook a that, embedded to can As us expense for the the expectations you your for within interest

Clay Whitson

points a already X.X Yes. between July in the is We've interest then June cash point happened, X.X million current X.X $X come which year. is assumption. in in increase should for entire another our That May, added X.X to point third and and

Allison Jordan

segment. one heard on year-over-year. and a from in expectations last driver there below then I the And came Margins me Merchant revenue BXB our there. were was down

Just is that segment anything think again. about should performance? over And there we out XH? driving else margins there how call to curious, Thanks

Clay Whitson

Merchant of expense. Yes. hospitality rebound carries was margin, particularly the sort on The It out residual higher our also and last that's our within margin. of vertical generally the COVID West Coast. vertical to And

the a So well. for volumes. rest in surge sectors remained that's California country we shut in of the had of In surge payment Hawaii saw -- saw certain XXX% that. much kind and we longer down as than

you the as pointed to biggest BXB, thin thing. see out, that's resurgence but a well. happy in And very margin, that So is then rightly we're

Operator

James next will come Stanley. from Faucette Our question with Morgan

Jeffrey Goldstein

was color James. some for M&A more on Goldstein I Jeff hoping is on market. the This for

pipeline still that's on the in by markets said but targets hasn't curious case? track public your And don't the that now? past the really valuations, going impacted your right if been if in still just You what's public

Clay Whitson

and larger Again, is M&A after necessarily still be seen people as goes, go steady as good. of it pipeline deals we pipeline. for a but we looking impact. they any It's sell, our team, Yes. we our want to haven't self-source that to us very weren't in part far as The

Gregory Daily

If a the is We're more sympathetic each software deal seeing We're about is lot growing each these understand valuations. It they're we've we've reputation, argue seems nicely, than is is different. like But a to references over. lower now that so companies, lots they're deal market, conferences got old for kind LOI. of down, a owners call. FinTech different. to COVID our Other they more of and the getting

It's as who The business picky to with been usual. the of good. kind we it's normal. So add is kind we've because We've back got to today. together team pipeline very like of what of kind we

Jeffrey Goldstein

just helpful And That's public little touched but the Got I maybe you seeing very to competitive think and sector anything change notable us you it. on you're then this in to color. of healthcare quarters? it can RFPs, when that out there within in update a comes recent on environment call verticals, kind your earlier, what

Gregory Daily

We I hasn't that probably little compared we the vertical. that of to person are with we in that is but we of don't larger public like competition with than with think there team is still kind still changed. go most put together notable sector, it's very sector that's public it's the really XXX There early In And we like against. guys, the though, really sector our where public offering people lots Tyler see much in it's and no, healthcare, up we feel so changed. fragmented. --

Operator

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

Christopher Donat

and resilient, economic and economic very with sector in resilient? in is And public to your break the last the any are perform weeks. environment. it, into initiatives. But might right imagine, they healthcare, there non-discretionary, but businesses, sector you on trying ask can have answer likely government few any understand I'm I'm a of much some how that been healthcare way healthcare way or and about in more healthcare to to this I challenging be way way down the trying to get would to rising public to with particularly discretionary concerns think a how

Clay Whitson

have any I I I versus the Gosh, statistics if know discretionary can, don't on nondiscretionary. don't

kept was postpone generally few COVID long. people Our experience might postpone resilient but provides more that with Healthcare able healthcare to it's I was of something something be one verticals. a months, need that is insurance our not for with, up for. to very be mean it an can during they

very So I of do a vertical. defensive think it as

Christopher Donat

solid Okay. And -- it clear so of Right? to some challenging period. already the remaining environment resilient to in be example was had pandemic, that continuing during we've sort people just that in your revenues

Clay Whitson

with during that's conference what on call said Yes, and that consistent we period. the

Christopher Donat

And how that's likely drove or to looking think the think businesses, composition software anything Yes, at the of might should you've been trajectory? is that that Is forward how quarters still Okay. revenue there on of play last with it on about that the then supplemental recurring out. we growing, and trying services unique? to in was some recently, that the grow added the X really revenue,

Clay Whitson

Well, big reflects quarter acquisition the the was October that December step I you made and think see the we up first. in healthcare

level. so a new that's of kind And

step it and then was million the see quarter million $X.X You last it $XX.X this to $XX.X million. way from all

we're on of that's particular item. So a that line a that acquisition new at result of as kind level

Christopher Donat

XXst. quarter, And Right? but quarters, full a quarter mean December March quarter XXst it the Okay. for X I full for full was

Clay Whitson

October was Correct, the Xst acquisition.

Christopher Donat

okay. Right,

on in recovery are vertical of that you, for just more vertical? I we education, one Okay. a And then but know smaller it's a where

Clay Whitson

meantime, figured staffing is a the Well, districts is drag. still of to which lot there's more supplement And bottom to and was One an year. think return away, if software it's their it basis. revenue factor. free expectations alleviate to a But right our it outperformed it I definitely a over away to that we've out now, have school, help $X.X goes add this streams of there. ways on will lot fro sold million $X goes to which million annual if lunch, but The our We shortages. the our that biggest line to through in and

works on the our to of about excited excited We on because got like feel a everybody. in want free and lunch lead We call regard. been don't very we things in competitors we're that it's amazingly this we resilient say we've vertical, face But the of in have a for are number about. Education

Christopher Donat

Okay. Got it.

where improve I -- got there's okay. areas could you improve, So that if definitely and areas momentum some potential mean to

Operator

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

Gregory Daily

right. that All an the we've next verticals the we message they're look Thanks, all everyone. also company our updating hope that forward effort to you across doing well. I all thank like And XXXX parts, employees got are I'd of very quarter. day. what every incredible we doing to have,

So for you again thank your interest.

Operator

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

You may now disconnect.

i3 Verticals (IIIV) 14 May 222022 Q2 Earnings call transcript