Earnings call transcript Q1 2023

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Operator

Good day everyone and welcome to the i3 Verticals First Quarter 2023 Earnings Conference Call. Today's call is being recorded, and a replay will be available starting today through February 16th. The number for the replay is 877-344-7529 and the code is 3132661. 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, SVP of Finance. sir. ahead, go Please

Geoff Smith

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

on call Rick me Clay Joining this Whitson, and our our CEO; Chairman CFO; and Stanford, President. are our Greg Daily,

of to extent to earnings you also consolidated directly release. the call, its comparable It the in the measure enhance financial intent reconciliation will any is is find measure To information. discussed provide financial financial by information today's GAAP to understanding a non-GAAP financial most non-GAAP GAAP reviewing company's yesterday's

XXXX, This non-GAAP forward-looking individual the regarding statements. not the financial meaning Reform information considered financial including expected contain performance. by company's of Private financial within statements should instead statements, operating in each be the among This GAAP may Litigation of but others, addition call and the conference to Securities of Act

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

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

law. is Finally, to company applicable today's undertakes be the update may valid no it this information shared date, on under call required obligation of as and the except as

turn to and over the Greg call I'll Daily. the Chairman now company's CEO,

Greg Daily

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

present year to our excited first fiscal 'XX. are We of for to you results the quarter

results EBITDA focus recurring new revenue with you records be and our in adjusted To on our and kick will adjusted things margin. we EBITDA, pleased revenue and set off, and

above multiple pushed The that, lighter heard fiscal XX% from year deliveries which quarter as notice year software of to quarter has XX%. recurring into revenue, you me we projects have It Year-to-date, was been had this quarters will of and fiscal several XX% license 'XX adjusted you EBITDA last QX QX. discuss QX grew 'XX. a

fluctuate. quarter of which sales this SaaS, a recurring model earnings. the achieve In revenue, other quality one, deeper, never license payments and reinforced. recur has software our backlog been helped in to like consistent us is revenue, transaction-based software of The and does not revenue power

results could market This wait includes level. best-of-class come. footprint of transportation acquisition, but with our ever operation XXXX first more and robust Canada. of. to has avail can't our complementary, what United for to have is sales pleased of excited States DIS our Celtic. And products we already our the expand already quarter a Celtic state results, We're about to and the going at function Celtic DIS, than the more significant even Celtic is much itself who departments with across

and Earlier an can sales a sector. We an verticals. example. When this we Nashville talk education sold sector targets about this our the the conference recurring Celtic acquisition team in with revenue how opportunities, be a untapped about hosted AccuFund, product internal was week quarter, strategic fantastic we of announced cross and is acquisition this ecstatic in product for public public sales

Our teams start. a are off great to

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

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

Clay Whitson

which discussion. with presentation XXXX, website XXXX, slide the first this Please refer XXXX December to for the following Thanks, sorry. Greg. quarter Supplemental is Information XX, our ended the pertains -- quarter reference of on The fiscal titled year our to

call, gave seasonality growth reflecting QX from the XXXX, revenues quarter line on We had for another with organic great last $XX in adjusted and Revenues the comments increased for EBITDA. and the quarter $XX.X XX% record acquisitions. million first we million with

basis generally points revenues organic growth runs XXXX. million Organic points totaled our XXXX, XXX XXX to to a QX improved quarter Organic approximately above quarter Annual for for this growth. growth basis QX for for a yield XX%. compared for was few XXXX, recurring revenue ARR of total revenue percentage QX Our $XXX.Xmillion rate points $XXX.X from X%. the growth

our quarter sources. from Over revenues continued XX% in of come the to recurring

continued Software representing to and other largest XXXX and the $XX.X from in our portion services QX Adjusted represented for EBITDA segment. million momentum related increased XX% with X%. remained $XX.X for for of software XXXX services million Payments expectations XX% QX QX. revenues our XX% and reflecting in line

Adjusted segment. our XX.X% principally in reflecting of EBITDA QX XXXX, and XX.X% as QX increased revenues to percentage for services software a improvement margin for XXXX from

to Proforma full adjusted the for description share Again, from and QX please XXXX. for earnings $X.XX per to XXXX release reconciliation. press increased diluted $X.XX QX for refer

in organic districts. performance, to million continued revenues and principally strong services sector new our existing school and $XX.X rebound, software $XX.X QX increase segment in at and XX% districts a flagship our XXXX vertical QX from includes our sales education. million Segment, reflecting Education fees Revenues thanks higher which in public for to XXXX, to lunch growth vertical, activity for

subsidies decreased since the for significantly lunch Federal and state pandemic. have

quarter a to in were big from on down sector. our of particularly license for item moving the a is can Installations $X.X Software revenues public target, line schedules, QX variable light for forecast. difficult at the be $X.X customer's us which million. and most first million, This depend

Greg pushed quarter, XXXX QX million. to which this of number software license XXXX approximated had QX If QX QX. our from those $X.X mentioned in deliveries, would've some landed

QX. sources saw focused carry are recurring SaaS as of impact sales so other we gross revenue, While XX% license margins, and we favorably results they on in quarterly

EBITDA improved sales, outpacing education. driven sector including revenues. license consolidated from adjusted XXXX our public by represents XXXX QX business. our half sector the vertical, for The XX% over growth $XX.X QX for million million principally was Public of Despite to $XX.X segments

a past XXXX percentage improved such to margin over in QX XXXX, and for revenues XX.X% margins acquisitions Adjusted of EBITDA year, high XX.X% return to a QX Celtic high and reflecting traditional as for services software education. as from the

million for growth in high Revenues our by XXXX segment In from higher integrated coupled acquisition XX% EBITDA well. redirected for is QX services internal XXXX segment $XX.X and from and higher residual our increased effective XXXX reflecting principally from The X.X for for our and partially Adjusted as to million $X.X services for resources payments. merchant the software margin merchant QX ISO, million revenues higher to have with services, our higher million with for ISV into $XX.X XXXX, BXB expenses. X% January we steadily with offset channels. increased keeping services QX margin QX merchant AccuFund since growth IPO, acquisition X strategy and traditional

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

times. stock offering. integral in at unified total roughly high December million current of total times X.XX constraint leverage is paid to was AccuFund effective four $XX.X was of XXth, We XX strategic the AccuFund ratio, is approximately range plus for January leverage for ratio while As or cash public X closing. our $XX.X million end the a our asset times consideration purchase because XX, December our The total our million $X it of

into flow, to and is can rate flow The for repayment, convert free taxes. EBITDA debt used and software, revolver thirds earnouts. cash two internally capitalized minus define adjusted which as cash We of be EBITDA cash for free adjusted interest expect CapEx acquisitions interest interest raise is Over convertible cash roughly will rate but while for to the we increase around rates. the X%, currently Fed the notes as time X%, continues the

guidance for Looking Adjusted forward, to costs. no the $XX excludes gives AccuFund start strong million. in change. acquisitions year the fiscal acquisition. increased and XXXX, to it our EBITDA $XXX that million not fiscal closed have transaction year related $XXX the for We to to $X us account yet million $XXX million million, following Revenues confidence

a to Proforma to to pattern activity standpoint we XXXX. adjusted diluted of a this XXXX still quarters prove From year year the seasonal change. could a of acquisition EPS, fiscal $X.XX, those follow but no similar a fiscal year, different expect $X.XX

license even software vary our revenue As we is might upon recurring toward though trend generally perpetual streams. sales, quarters more more become based centric,

updates turn now Rick and call activity. to I'll for company M&A the over

Rick Stanford

Thank everyone. you, Clay. Good morning,

developments M&A, growth existing and sector products as the vertical comment ground and exponential to few our develop both I new add up business. further via I show our we The want continues to public Before on from a discuss acquisition. within products

well a for serves public enhanced as as into all received carrier, The result, licensing been have motor the by levels levels transportation now well technology of courts safety As seen we of as The a offering our span court offerings market. drivers of justice adoption. effectively iX title has state. the sector iX and combination offerings registration

sector. online lead general January, In GFA the with AccuFund especially well, product accounting performing are acquired solutions company accounting our addition general our the fund ERP to we to of fund online suite. Financial early

will technology, family architecture result of nations. a As we and counties, to deploy the and the nature the AccuFund tribal of special configurable select districts municipalities, solutions of

In solutions support education, addition, organizations. non-profits social including and of range a endowments our services, faith-based modular

vertical enterprise our solution. pollination; offer education public will healthcare We AccuFund our cross expand continue to the verticals

the continue pandemic. of school post iX As education activities see future, looks we to to normalization the

inclusive is there an student broad-based in to club addition of ticket In sales spending, increase launch activities. and athletics,

provide multiple to customer a is base software seamless objective core our departments. across experience Our with

increased a revenue as result of levels are experiencing high We of adoption.

The the is iX's our expand contracts. breadth and needs offering multiple unified to responsiveness of depth healthcare coupled application healthcare in subsidiaries, continues UPO product and in participating product offering the refine with resulting or customer healthcare our disciplines. to iX the iX through new of our solutions

Texas. of healthcare, with the of large scale friction, and education reduction signed and vertical just cross synergies seeing three with We three is providers Louisiana, increase public All collaboration. a in Mississippi and agreements growth verticals

M&A. speak now I'll to

of Healthcare acquisition. and acquisitions we acquired provider our a accounting in nonprofits business on announced entities, government education to our of in States. fund On pursue for by The Sector our solutions continue Verticals. strategy latest growth emphasis We Public companies as and United AccuFund with including an performing January the companies with X,

many fuel The team of addition in verticals. of will our this talented growth

things note product to and with that, the and AccuFund like done range We within this deal fell multiples. forward exciting team. of normal deal have are our to look come to very would I proud to this

with are to of many today. Our and size acquisitions sector similar our that pipeline remains healthcare in in healthy for acquisitions public opportunities

comments, This please. the concludes this Jamie. Q&A time, open my will we call At

Operator

Instructions]. [Operator

Davis your James. with from John question Raymond from first Please today question. ahead go comes Our

John Davis

morning, Good guys.

I just to on in make It right. about got wanted Clay comments I difference. $XXX,XXX about First, it your the was sure license push-out just touch to want revenue,

just think I X.X clarify said of closer been X.X. that. to versus sort to I wanted you was it would've it

Clay Whitson

That's correct.

John Davis

the despite software the of you mix better margins in the for And some Okay. queue. those were year think than raised margins, then one obviously expected. And on I full

it? offset business So, taken any better? is maybe that things have actions it and cost planned help just three you performing months to Or weren't guys ago mix

Clay Whitson

it's It's just mix to back mainly margin. its brought it education rebound and business -- has the and education historical

John Davis

big versus quarter. And comment then of trends Maybe macro three Greg, your were ago. picture we where months versus in maybe first on kind changes January,

You know, a any changes verticals? your full for year in the macro view from for your perspective

Greg Daily

three Last -- we're talking obviously nine recession no and months. government seeing months, seems been our It question. protected our really verticals. in It it is for of not changes. in a But, Good like we've a we're We're kind verticals. in about for landing. soft

of finish the a sweet and kind think is good. in kind like Just feel we'll year strong. I of timing our We're strong, the spot

John Davis

your year know January. ago, Okay. a And Omicron January? have how so January, seen peers I some some on then acceleration commentary we're Thanks. from of any some lapping

quarter? Just looked curious, January December to your the relative how

Greg Daily

never You matter. months January we They're for weakest February or that read two into the of know, much year. the

seen returns anything a spending. January from of You that or far. notable lot we've I don't Christmas February get in so know

Operator

ahead Instructions] Our Faucette comes Stanley. from go question. Please James question with next your [Operator Morgan from

Sandy Beatty

Sandy for is Beatty James. This

the on increase has horizon or pretty your interest balance here. or question it cadence closures been team? a or rates slow slowdown team would that feels your anything there Is challenge the consistent in deal of the stop Just execute like continues growth generally that a sheet. pace in First, with? to potential even the of mindful M&A, for team your on would What

Greg Daily

down. us I slowing don't see

latest pickier We we this have of are This involved, got excited. we've in verticals. think to him AccuFund but a needed team, -- products like join deals. one defined -- We've was what got hundreds because we gotten bullseye the done guy exactly we've talk, I of XX very by

needed probably this we'd But and we had we too capital. we're do here a deal, sweet five million worry about it. I'd don't comfortably. was large If good But say, out $X we we EBITDA. -- four a the reason them offering I to large it our year, be larger, digest million deal or an a to is doing true think, it's of is to be not guys, spot. It's year I $X can but kind just still of because what like

Sandy Beatty

anything Got any license growth, it. That's with there mind sales, regards the little up, bit on correlation follow keep to it year-on-year organic looking at it's sequential piece? like then if that ARR numbers, looks piece XQ And profile, anything comments just to was and should ask a just with growth one on helpful. seasonality, to given wanted I ARR but in just also the so basis, the and a growth we slowed within versus that out ARR

Clay Whitson

is X.X% sales, organic but organic Yeah, from each an dollars sales of million growth. well include ARR the license of standpoint does not license

QX X.X% would've been instead we X%. of last if like year, organic this So, year at QX been had

then up that to we because had of So on is line. a, that we jumped and million course in XX% $X.X QX

a good small in if So looking organic line variations look to that you're is at pretty at growth.

That's quarter been difference the really that quarters, line. this the and reason is and X% in XX% the, it's QX know, it from the jumped reason was you to last and in that XX% the line several

variable that So the for seems big be to us.

Sandy Beatty

it. for the Got Thank you questions.

Clay Whitson

you. Thank

Operator

next from question. with ahead Nabhan Instructions] question Stephens. go [Operator from Please your Charles Our comes

Charles Nabhan

morning good question. you my Hi, thank for taking and

at your in for Just of for low, follow were different at that and the just now. the I commented of get to a anything end wanted on you're seeing range the lower wanted to terms past valuations expectations you quick target the were seeing the on a up valuation? M&A, you've valuations sense know seller get right environment in if sense

Rick Stanford

may changes a kind We not takes now. on in most there. we're deals. of that we're end If any and get range, a our lower question. right We smaller it's while fit the trickle range a the activity of we're the kind to great spot high at pay of in it's changes negotiate our of end at seeing growth great feel right We're in Yeah, a mind company any sweet Keep not now. our seeing down the of position higher suite. like of our to that but a good product

Greg Daily

I thing do think you your is the self-source key you deals.

week. existing ones called a So companies. that four them five yeah, one We're times our and only to typically from these getting the and guys are referral a aren't are talking these of

We out So, lay some different price a the that. and position to staff we're with they going in acquisition a justify in our the and of off good model's drastically than expect to, of cash. there like half the lot don't post guys

Charles Nabhan

on whether past, just touched tailwind to in Got commented public spend. that environment wanted little know providing But follow being from general and quick areas sector it. as a sense standpoint are you have get helpful And you I strength, might I strength And comments I public And seeing drill of that spending, you on spend And of a areas the a have sector weakness? up, or bit particular in a sector the as favorable. would further. into well. geographic federal a any think be of funding a on any just to you for standpoint

Clay Whitson

funds. and strengths a through government So, and believe spending can I ARP to the was talk entities have chime lot spent don't those maybe of in any $X.X trillion We use the The XXXX weaknesses. funds. governments on or think fully to I'll Greg having

have and it. are use money the of on they where available in that still the them them to process they We educating could

I pushed gradually the people during of those order in. taking And lot a first But any of There there. are then are see that sales time. see their business pandemic. projects new were I just and don't weakness coming

in We are those our RFPs, RFPs. that lot RFPs combining on on fact are uptick we responding the of pleased multiple level We have to us -- giving a subsidiaries success And with the efforts one

fire. which on are utilities but more. limited, if and can exciting education technology, education are things investing as in they like feel I is It's get, cost

a milestone has has utilities, that's we that helped particular us. insane. internally company have So, inflation one pipeline this And in

We are that pretty of next confident the years. couple over about

Greg Daily

but in think Geographically, we our strong Midwest. Southeast, acquisitions, I follows Texas, the are it the

a smattering that's out got geographic but our strength. west, have current We

Sandy Beatty

Got it, thank you.

Operator

Peter Davidson. our with D. from from next go comes your question A. Heckmann ahead And Please question.

Peter Heckmann

everyone. Good morning,

on a in healthcare? bit on niche kind wanted little talk think do of set it, solutions you solution And in about to market and bundling how Just which in where and individual healthcare, terms with with are lead you focused where within you solutions of of healthcare? are strongest got you you'd niches terms

Greg Daily

a our bit RCM. is do coding We product strongest of quite our So, work.

-- a have today. portal We patient portal

enhancing of are will better. portal. that our the strong going Obviously, in We capabilities the fill in product to works, AccuFund, the addition of suite some and think are features are be future. lot We out that products the a

I promoted that will announced had tell we guess, you that, to last quarter, COO. Paul I Christians been

One his quarter. offering it initiatives been some we of we extremely did in exciting next that's we short amount to within to public about of healthcare in three the how talk are will the sector. think healthcare. more I healthcare product in for is And in done with unified similar period create to of have work things And time pleased

first in the years to in yet. think We’ve care really on And payments. health is surface the haven't icing -- that. few just put base quarters we're even cake haven't it but we on scratched I takes place the that few --

payments. excited I'm So, about

Peter Heckmann

as could but have ability, between statewide the number that get grow deals to it quarter to dozen a just could basis? dozen maybe a continue statewide you we sizes a think to back states of quite to on and quarter close two then your sector you public some on see And notable deal deal, deals, a on more that expect easily that bit get a larger you be business reference do and I

Clay Whitson

as in be is Yeah, of higher in of Celtic a are the provinces XX end they for to is deals land that different Canada. We of and the Celtic, strong couple know, all going the combination think us. those market. you and BIS states deals

Greg Daily

We're optimistic. yet. But don't put in model your

Operator

that, remarks. gentlemen, call over I'd ladies question and And Greg answer any like turn conclude for and to the closing with to conference today's we’ll session. Daily back

Greg Daily

Again, thank morning. us this us. you us your for Thanks if you joining for need interest. Call

Operator

today's conference that ladies conclude and we'll presentation. And gentlemen, call and with

disconnect now You may your lines.

i3 Verticals (IIIV) 9 Feb 232023 Q1 Earnings call transcript