IIIV - Earnings call transcript Q2 2024

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Operator

Good day, and welcome to the i3 Verticals Second Quarter 2024 Earnings Conference Call. [Operator Instructions]. 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 6854757. The replay also may be accessed for 30 days at the company's website. At this time, I would like to turn the conference call over to Mr. Finance. of SVP Smith, Geoff Please go sir. ahead,

Geoffrey Smith

Good Call for And welcome to Conference XXXX Quarter Second iX the morning. Verticals.

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

non-GAAP financial reconciliation company's To a yesterday's discussed in also the understanding in provide non-GAAP earnings measures financial information. intent reviewing most not directly non-GAAP release. measure today's GAAP to the financial is its the considered This you individual enhance information to each of call, instead financial addition extent will be financial It's any should to GAAP find statements. financial comparable GAAP consolidated information but of by the to

of statements, Securities XXXX, operating conference Act of others, Reform among performance. the Private expected contain call the This may financial including Litigation the forward-looking regarding company's statements and meaning within

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

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

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

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

Gregory Daily

good morning , and on call. Thanks, everyone Geoff the to

sale Services namely the what to announced quarter, Before quarter of fiscal update provide the getting of like 'XX, a year the brief of we Business. into I'd on second Merchant results last the exploration of

transaction the in for shareholders' I on the involving the sale related will Board February, Business value. the of decision Board's Business. to be We use to iX's to have don't The considering the this Merchant the Services discrete to proceeds further assets Board this As time. transaction aligned process long-term debt. Any from any Services ongoing. certain any to business would pay maximize down this management with updates of is engage Directors previously at intend announced have by of sale directed Merchant to process our the company's in objective explore the

addressed, that on of the began year second results I'm we pleased will and you with With the Rick 'XX. positioned our realignment growth. elaborate some how of to a share us quarter minute, last sustainable from for has In better that year fiscal

like Before reemphasize our to he streams. commitment I'd recurring does, to revenue highly

than of lines year, our especially lower several and licenses. software professional revenue nonrecurring last are services quarter, This

Some of you our we've revenue opportunity impacted required here and the exciting Manitoba the drivers project very with going by new a to build It project. our us delayed opportunity. The complex in as such is or has large license has new great. utilities been projects utilities backlog, discussed

of lower period highly services excellent we greatly our a the However, not That's and up to benefit professional of is because related any go north term, us ARR from this our long is open accretive profile. In license we have as been shareholders. we we be and it. revenue new that, well fine able the believe interim, recognize to to XX%. through markets project in revenue, going to with financial

of. margins fantastic results Our grew basis we think revenue. which over higher-margin that's XXX We despite proud lower points license are

then on performance. questions. we'll call our the he the are half now second financial Our up year. I'll our business is more Clay, finished, on Rick details provide open and very fiscal over the call bright, excited will and When he'll for you about of future the has we add turn to commentary and

Clay Whitson

titled expected, XXXX. Manitoba Please declined reflecting the for implementation discussion. SaaS. from million, $XX.X nonrecurring grew million X% to to supplemental pertains year QX XX%, information transaction-based caused reflecting each and software workers' while which for website result ended as revenues slide quarter by $XX.X Payments Caltex presentation $X.X grew fiscal XXXX, recurring fiscal a second of 'XX, software is increased of Nonrecurring March the licenses second the million our to to the the Thanks, by quarter our the sources, XXXX services grew services Greg. on with by of in XX, for declines million from The with growth X%. reference the recurring also following ongoing in quarter $X Professional offset shift refer delay by public declined principally strike. revenues organic over this sales sources. SaaS X%. software Revenues of partially revenues

X% discuss quarter continued a to will come increased the in our $XXX.X in section. ARR record 'XX, million for QX million XX% revenues to 'XX. outlook items QX outlook Over recurring of We the for new for compared $XXX.X our line sources. to both from

the 'XX per to 'XX. a a QX XX% along and calls. repurchase for payments QX margin, revenues quarterly driven revenues Software notes improved of the X%. points payments improved services QX January. percentage full for the exchangeable lower Payments higher improvement to to revenues from previous to by EBITDA increased XX $XX.X resulted $X.XX following The improvements corporate XX% of total percentage was QX 'XX. for a adjusted expense QX Again, discussed description was XX.X% release forma to please reconciliation. refer for Adjusted 'XX $XX.X interest and Both and QX for slightly XX related in of XX.X% our basis reflecting compared share million from represented as Pro for in QX volume on from realignment other as X% $X.XX points EBITDA basis with 'XX diluted our internal 'XX, from with merchant expenses. of 'XX. Adjusted services earnings million for for decline press QX for

QX Payment onetime performance. XX% sales licenses of to lower adjusted segment's and $XX.X from fall percentage and The services discussed. reflecting of to $XX.X $XX.X Adjusted for X% onetime and segment land. million as revenues of X% 'XX Services for for XX.X% were QX million Segment in 'XX. EBITDA represented 'XX, 'XX Services for for XX.X% straight the Software from our revenues for the software revenues. from the software professional factor license Software sales, biggest to the declined QX a declines which to principally Revenues segment's declined they as million previously quarters The EBITDA QX line declined for million lower $XX.X 'XX. QX 'XX bottom QX in

EBITDA X% Merchant increased for POS XX% and 'XX to for segment Services our Merchant Services million our ISO, our segment for broad-based outpacing in from Adjusted million $XX.X Revenues BXB QX revenues. $XX.X 'XX QX growth million $XX.X QX to reflecting from QX ISV, 'XX, million for for increased $X.X for channels. 'XX

expense continued control. Balance Our revenue increased yield slightly sheet. with

remains strong positioned sheet balance for and 'XX. Our well

our Following cash notes revolver, convertible million, approximated rate the credit. repurchase notes our $XXX.X was currently is under current net million we convertible for leverage our the around for the under X.Xx. January, revolver rate have in the while $XXX is $XX.X of borrowings Xx interest The X.X%. constraint The of end, ratio remaining. million quarter total revolving interest At is X%,

approach to have disciplined growth acquisitions. We in and remained our

would event we education resources and to million earn-out first even public payments will I event any, acquisitions. could debt. transitionary outlook assuming RemainCo revised This the or if would 'XX I called we in towards verticals. Outlook. in sector, profile acquisitions. have we Merchant Business. This year, is remaining have fiscal remaining Services so deploy the no very the $X more what potentially our Business, on healthcare the We sell In little, year a past Services free our will Merchant approximately from be sell financial outline divestitures for And touch for up the

adjusted 'XX, $XXX million; software $XXX million to pro $XXX interest cash amortization, depreciation follows; to outlook revised had to $XX million $XXX we million; For $X.XX. From fiscal not and $XX diluted million $XX and internally adjusted a step-ups year standpoint, have to million to $XX large our QX forma historically, QX to Revenues, organically. $X.XX seasonal million; expense, EBITDA, from million; EPS, developed

the remain implementation current and million software Although line vary $X $X of the actual our QX an a QX bulk for currently million QX. on software RemainCo results is significantly, for fiscal license single-digit onetime year The expectations our expect sales sell calls. 'XX. amount customer in can for beginning on we growth utility for discussed In high revenue large Services we we Business, previous resume would Merchant have event

business we tailwinds after utilities the began 'XX. expect the also debt. I would Some have the that subsidies Manitoba by pipeline. annually to and market basis sector, lap revenues down becoming healthcare certain updates expect the We education RemainCo education the will XXX pay state of over for also M&A introduction would turn a for in to EBITDA less identified which the to project year. transition for improve back-to-school will momentum We continued percentage call points proceeds a short-term in using resume from season as and returning verticals and adjusted the The lunch, during include to now XX normal Rick company drag. SaaS public per the to in of a of acquisitions the to cadence, sale

Rick Stanford

Thank you, Clay. Good morning, everyone.

in size in to products strategic sector across forward. expertise efficient adjusted XX into group drive provide initiative software organizational in Initially, of a organization government we've by any any offering. we've contract. called multiple our solutions and Over the we public the product with iX a a or unified verticals vertical structure Throughout single processes capitalized UPO on our months, and the transitioned coordinated, products to Eventually, was from our developing of solutions past selling transition, markets. analyzing

We and fatigue of public As our rolled reporting saw and buy-in organization. solutions captured structures the through initiative vendor and market the the a worked share. service, of changes, our trust in result success iX, leadership out team across in the we government sector, our customers. Because realigned from quickly

our our enterprise scale growth markets, we achieving Now public, is and on software strategic education. focus sustainable as with healthcare

sustainable Now sales unified and quality through is company we our configured on of focusing are for enterprise growth, expansion solutions. software our revenue that

lead in New investment landed our software in in and South Hampshire contracts next-generation large we addition, healthcare, long-term white plan space and and we to education, and Tennessee. carrier. ongoing In public we health sector, quarter in to North applications. This Carolina web-native California, strategic configurable In in secured Carolina, additional expand Texas a hires insurance Georgia, Michigan, in make product contracts past

of a the them looked have over education. M&A, sector in in opportunities quarter. Most with Regarding we healthcare few are several and last public at

public continues verticals. be target companies healthcare Our dance card and of largely full to in sector

process. and areas specializing tax, the solutions such lodging solution; management Public school as industries; tax, and office We to management sales case and a to policing; for solutions tax use we'll comments, near solutions that the online enrollment towards solution tax M&A an tax collection; in the be mobile Chris. and At utility local a government software intelligence able property and hope on and and for back software details this in tax, front tailored Q&A, RCM my of license please. tax; more Justice and call time, proportion concludes Safety automates share the of open Some utility future. This the include business property data

Operator

comes Raymond today's John from Davis question Instructions]. [Operator first with And James.

John Davis

the year guide a by kind Sounds slightly softer or but like some a of out lower the revenue, in kind quarter of of less amount. was full you did similar push more revenue the

just So maybe for kind going get full don't revenue comments just the that's lower the year, Or you expecting conservatism, year? until that you're that's if any to to outlook know curious come? on next of when not because

Clay Whitson

Well, we annually. for guidance quarter revenue the -- give

Manitoba to through any drivers in pass 'XX, in 'XX. to would the this full fiscal it quarter get the license year, year The in project, revenue expect year. see September. we ends which of We'll meaningful revenue don't So

out. is pushed that So

John Davis

kind with helpful, of Clay. high-margin nonrecurring, despite of kind still And was and encouraging expectations. lowered it then expanded Okay. in to line nicely revenue, That's margin we're -- see,

know that year. some than to are have headwinds? the was Just initiatives any thoughts but back going cost of XQ, headed given I comments you there. on the underway, margin the expected Clay, exit you So, nonrecurring the we half any as guys better into

Clay Whitson

fourth in full effect began margin improvement the a this and to year And into in from projecting it but the it. We results getting we're quarter, internal year realignment No. year. expect earnest came that continue the

John Davis

single-digit then Business. growth X% in And I the was you you going Personal Okay. the talked to think about forward sell quarter, Services lastly, if RemainCo, of high ARR profile were up kind

single Was Just that X% we bridge digits quarter? this So acceleration just kind high weighed there me gap. on think of RemainCo? anything that ARR how about from do that for to help

Clay Whitson

onetime the the fourth project Well, X license 'XX. September. $X sales the is we the I utility for were yes, laps million One in license drivers this of customer things. bigger those it have have And 'XX. I We and ones. -- comes actually then quarter mentioned in come a kicks from Education that also, but believe a online will August, The the then large customer most were will project utility 'XX. big Manitoba and expect big major those into

Operator

comes The next from Heckmann with Peter D.A. question Davidson.

Peter Heckmann

some I looked statement a that just kind of good like pretty it yet, sound that as about I'm if to it flow you correct? capital somewhere like looks all was working Is close haven't numbers back is inflow. but flow Does conversion XX% to trying slightly generally was free that right? but quarter. Is seen working the capital the into here, cash and had me for to cash but looks it that like negative, actually cash flow looked correct?

Clay Whitson

Cash much $X.X Pete. software off debt $X.X convertible the for at at million. CapEx then notes, higher is cash we paid million. interest X.X% And we were big When $X.X XX%, taxes a get traded number pretty Yes. million. I debt. quarter X% this Capitalized million. $XX.X was

get into I XX%. So XX%, so expecting close. And it's we the year pretty came

Peter Heckmann

Okay.

Okay. had on had some niche talk last that even over the of some rates And X you verticals. of about that, you've the businesses then there, even or acquired hadn't sub talk the marketing either some where by success you a within years the started can just But them vertical little attach about your Great. payments. can bit you software

Clay Whitson

a going is long, healthcare in stages. the Well, still be role. That's slow infant to

providers. billing currently customers customers. are And use most small thousands all they're -- small other who them of of have We

one So we those an attack in Education best. will trying then the best rate and be one. is sector public by to be obviously attach would second

Rick Stanford

talked we've the X to the bringing a is our thing past support is group directive that. their there's level. that behind a We've and created services about to and into other strategic the quarter realignment sell Pete, team verticals, specific this enterprise

we to group a X with that forward verticals. So advances directive look from to those seeing after specific some go

Peter Heckmann

I see.

terms days? And then sure next you potential expect on the that divestiture. can't timing, it some it I'm the the happen, would is XX of in to in did news we just Okay. hear too comment much -- to extent But

Clay Whitson

Pete. think it. is We'd don't say something I in a we're until we comment but on say, to position that really like -- really done, to we more, can't

Operator

Morgan Our comes James Stanley. from with question next Faucette

Shefali Tamaskar

could SaaS I Tamaskar, This revenue might behalf the is timing a wondering like on provide what on nonrecurring was licenses what like update going asking an recurring Shefali for look sources the question continued James. of from that might like to if look and you forward? transition sources like revenue

Clay Whitson

year software be fiscal sales sales were we 'XX expect onetime year million. total our Well, total million, $XX.X the for this to licenses and $X

onetime do of 'XX, utility the continue fairly fiscal end minimis. some we where customers have it at already We have will will to some So be sales. de software

in the year and surprises pleasant could the we So some I'm mark, plateauing viewing future. year the transition as probably although around million have $X this

Shefali Tamaskar

you changes And seeing? to you've could current And the intensity if in competitive an keeping or it you're as customers. on deals seen environment update pertains Okay. just follow-up, any winning as provide competitive current a

Paul Christians

Christians. steady This That's state. is pretty Paul been

up with and haven't couple demand been or to own, really on We facilitate get constraints having that. attempting the Clay pushouts which seen free support has which of projects, environment track. to relatively constant. our mechanisms tied them some mentioned their But to on are help personnel additional overall of a we're back competitive customers

Operator

comes with Palmer The from next question Benchmark. Mark

Mark Palmer

you environment factors. and the describe the particular, public headwinds macroeconomic revenue in sector, the with associated to demand how nonrecurring in would of other Outside environment sources, relative the the

Clay Whitson

constant. been It's relatively

anything I further near-term at SaaS that issue any switch look more of have pain a nature dollars tell think of eases would our requirements it We that of because get their and we beyond to on the of environment. to kind capital more there's of that RFPs go norm we macro customers that for in we a more that haven't or and product, and delivery extraction basis. seen as do the less

that a SaaS it. degree that not surface, will So evidence I natural seeing any mitigate but help if extension think transition to does the of a as we're

Gregory Daily

some Seems could there be seasonality. like

Clay Whitson

Certainly.

Gregory Daily

pick slowed Definitely. it's year, crazy going February, was summer. down to January, this up think We this now.

Clay Whitson

budget fresh And always Yes. impacted. is

Mark Palmer

should And is off we company the the to assume Services until on that Merchant more, sales been hold process one completed. going acquisitions has

Gregory Daily

every holding for wait the I hope the do we're people We close. off. talking to to of to pipeline a Merchant day not. have happen, negotiating that do and but -- we we're an still have active deals not handful while Services, but with we that it capacity will are X people, we're

Operator

next with The question Matt VanVliet from is BTIG.

Matthew VanVliet

you cost more we're staffed? maybe look place head have that you should been the last side like what headed, the controls feel several the to you're guess the potential in for do where RemainCo, relative quarters? about I specifically think we for that how like put how look basis over And of quarters, when cost overall, the business at next in count software several projections

Clay Whitson

there think -- number little I the and Well, over... just exact are a XXX

Unknown Executive

of XXX. south Just

Clay Whitson

Okay. associated the Services with some and XXX roughly Merchant X,XXX. the people company Business total is

will the we more through So been believe to well not years. and staffed, We're we do cut side, realignment over next feeling need us the the are on few suit right RemainCo's which now. well we've

Matthew VanVliet

versus types about grow for talked for Okay. custom Helpful. if for purely development additional environment, much can especially internal leveraged customers, that of that big the of a similar sort And infrastructure How can businesses? utility development more in additional of then you be their needed is customer. their you

Paul Christians

in is development that native the all that highly with everything our particular about is this so we're of excited configurable things built being scalable, web-native of a One applications. in opportunity

to enhances reduces for the reduces and it we customization also do maintenance cost. ongoing of So projects and amount speed it market, really it

So historically, look products, a required of new you code less note true be it the that products. And historic just I is custom the number, will at if made would far -- that than have in that to be -- the it's holds some water, same that all picked and iterations attributes different model, just slight fundamental with differences of up. gas and some electric, data

Rick Stanford

the vendor application, the That's it utility. It looks customized is the piece by difference. to commercial integrations like off-the-shelf

Paul Christians

because augmented that that gets methods of standard that our entry then use And APIs have process well. as on we

Operator

Charles next is Nabhan from question our with And Stephens.

Charles Nabhan

to about wanted color But revenue appreciate we outlook more color a cadence. quarterly the RemainCo the think for the I as the linearity on little just 'XX. of get around

mentioned growth. in single-digit like fiscal come the going through you there's high year. license had sounds It So front some that's revenue of to half the

So And said, as year? that's guess, any consider first, I particular weightings our average about single model? that that we assume secondly, digit, any an that being is high we there are think the should for I towards quarters

Clay Whitson

the There to software line. particularly be more because do Manitoba, 'XX, this believe which is yet. it the hard believe, stage sales, that into. on requirements to at to that it's license quarter we ones opposed the be comes first utility half see going onetime haven't will When I we -- predict falls received the which of for second big as half seasonality, are to we

line that think a be I variable to going going is just item forward.

Operator

BMO The from Hone Rufus question is Capital next Markets. with

Rufus Hone

not ask hard decent notice angle. I'll growth Merchant that I Services another you're about that to in revenue seeing Maybe business. from guess,

high to through And assets? Do You're prospective you've of process? That buyers you be growing $XX adjusted of if are your XX to now just adjusted these curious over months. the think valuation teens. value seeing mid- seems million of last this the view the EBITDA at

Clay Whitson

and that. ever before it's for on... thought and it comment you public good a us a even to business, going been want business, Do not we've good Eddie since It's steady really was never and

Gregory Daily

really but for about executed It's team, cleans constantly us comment the a business, an transaction, pays nice off opportunity story, great the amazing can't it's our -- pricing a buyer. software debt. It up our makes on I pipeline,

Rufus Hone

the the launches? And you're size could enough. subsidized then, Okay. facing from headwind wondering us the quantify if Fair you help of I was

Clay Whitson

grow for call, I -- we was call, education. down fiscal that in would education to coming resume a our We think and that XX% would September we in And on year, adjusted this year our we year, which would anniversaries, expect to into 'XX. X% to normal expect QX XX% once growth

Operator

with from comes [Operator next Instructions]. The Markets. Markgraff Alex Capital KeyBanc question

Alexander Markgraff

A couple, maybe one first.

some think for think of speed level product mention the market, I I line. just I heard Paul, earlier improvements, implementation on to you time

the these quantify of you those if curious some product of as Just work you of through some and changes could improvements initiatives. some

Paul Christians

or variety Sure. such When you're people historically, pretty very a to public decade. long, a trying in market have project amongst sector, they're when across done elongated And a the it's that, place well Those a particular, the and there's over doing diverse large, there's enterprise pretty in customize existing they've commonality demand -- solutions been of processes significant in or spectrum. and set that basically those. where internal configured are done well pent-up

have particular domain expertise deep in We areas.

significant the be large It's into by or expertise, doing capability that organized we component is expertise domain commercial fashion are domain arrangements. ERP the times systems, really utilities products domain tax example off-the-shelf which to enterprise around with as products, a and as it a customers develop working [indiscernible] we're So courts give or and are domain-specific considerations. standardized that's can us more and enterprise to we in core to with meet integrations of an also many in that a in and

worth something customers constraints. We and who to with XX have, easier have cases, those to historic that's didn't the people find they of because of years -- able and systems hard be over it's many them imagine it's their to and or so developing time in optionality coated they'd history in because to these work able been they're things show XX tangible do that we do

Alexander Markgraff

then And one, Okay. just quick Clay. Great. one

of sort fourth the confidence level fiscal that revenue quarter. license on the in Just

Clay Whitson

expect QX, from but would in It it QX. it It doesn't, once there. in we it QX we is in believe will currently still it but our has delayed If be happen been QX. to QX,

Operator

the does further and any conclude back now question-and-answer to for this over I turn questioners like our would time, closing this conference Greg we no Daily are session. at the in remarks. queue, to And showing

Gregory Daily

are every day, Thank you. it, your thanks, you. like thank everybody call this Thank our there on if that call killing team, need you I'd team us And you. to continued my else. out anything interest thank and for

Operator

has you presentation, today's conference now Thank now attending and concluded. you The for may disconnect.

i3 Verticals (IIIV) 10 May 242024 Q2 Earnings call transcript