IIIV - Earnings call transcript Q4 2024

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Operator

Good day, everyone, and welcome to the i3 Verticals Fourth Quarter 2024 Earnings Conference Call. Today's call is being recorded, and a replay will be available starting today through November 26. The number for the replay is (877) 344-7529 and the code is 1 -- is excuse me, and the code is (418) 400. The repayments 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 Clay Whitson, Chief Strategy Officer. sir. ahead, go Please

Clay Whitson

welcome Verticals. Fourth and Call XXXX for iX to morning, Quarter the Conference Good

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

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

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

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

Gregory Daily

acquisitions still that as call. been XX stood the goes company a Thanks, amazed all that we an at and year on that Good morning to outside changed. by, has We've look everyone back Each our are Clay. example. never

don't year I had ever as as think year transformational fiscal a we've However, XXXX.

to advance and set to the Our vertical software team this a transition worked pure-play year exceptionally of market growth. vertical software the stage market year and scaled our provider. our streamlined a table next for We exit as hard business

ahead fiscal our 'XX, we we opportunities in position. us our front As excited of about at look year for are

We have great new mission-critical great our will markets. products, discuss building to solutions further. which Rick that in customers are We're underserved

We have it do infrastructure to efficiently.

have stage we the XXXX great to maximize We delevered, for payment and the imposed revenue more best-in-class we have great us add set a fiscal helps believe M&A. We through platform are facilitation beyond. year and opportunities, businesses and

visibility, our Geoff, I'm discuss for you up Rick and on on when provide commentary will And and open sorry, he our sales now Paul, will the questions. he's finished, remain focused the more guidance confidence over turn -- call market Our in have on us excellent long-term we funnel investment products single-digit organic will growth. give high and finally, to detail Clay the business; to we'll and to performance. of call our then choices. I'll We coming growth and revenue, financial add

Geoffrey Smith

months revenue have our reference of year titled presentation Thanks, classified the Greg. Information the result X%. Nonrecurring fiscal September The delay of from company's fourth of of our licenses million X%, and X% XXXX, million services transitional operations. The fiscal Supplemental This is organic million sale XXXX. caused ended our sales by X% XXXX did portion discuss our XXXX we services increased Midwest and million and [indiscernible] Services call the from grew the a recurring expected. of implementation our XX%, from in sector. Professional public customer ongoing payments on is sources. Merchant [ X.X% as to of reflecting operations of section, slide business, the Please following to that in compared union quarter Transaction-based with declined workers website actual of strike. a X%, quarter pertains discontinued fee recurring revenue refer QX revenue this software SaaS. the SaaS revenues XX. to X%, the our reflecting principally for reporting discussion. Due our to from permitting results while we the revenues recurring ] which came utility for licensing with sale $X we to pertain QX receive as in which We of $XX.X we as software quarter a and outlook revenues maintenance as X only, XXXX, XX% completed of growth which Annualized the the $XX.X quarter acquisition to to and our fourth shift as public [ period for of grew RemainCo]. to increased the during $XXX.X continuing also [indiscernible] QX declined September. Revenues million license will grew

revenues other of XX% represented Software-related total X%. QX XX% for payments services and and

a are net Net XXXX for as revenue line from Adjusted to introducing exception recurring This a line of XX.X%, XXXX. retention million for for of was $XX.X higher in dollar a fiscal EBITDA metric of XXX%. Adjusted We for RemainCo], all XX.X% for corporate retention, disclose was but to we X%, million items reflecting from which [ [indiscernible]. revenues QX applies EBITDA payments. increased will XXXX, year with new the percentage [ XXXX $XX.X dollar ManCo]. expenses decline with revenue $XXX,XXX QX slight for QX

earnings from divestiture of excludes we and expense to net come XXXX. refer for This XX% a anticipate the interest QX number would Again, was adjusted operations share $X.XX. which behind full please includes consolidated us, for as pro $X.XX to is cash discontinued press for expenses year notably reconciliation. Segment forma discounted fiscal corporate lower continuing release operations, in the performance. taxes diluted description forma Now XXXX. Pro per

Healthcare education by for eliminations segments. The which maintenance quarter. increase health from percentage in often in services. The million declines XXXX QX offset for increased Other in represented million sale increased XX.X% the EBITDA payments, a revenues and was X% Consolidation health software XXXX, is our corporate to and QX that [ during vertical streams health XX.X% sector, been have from segmented sometimes we and to revenue, care, $XX.X we X% ] XXXX. have prevalent Sector EBITDA consists for from X% revenues lose adjusted million acquired from Following have the care. our [indiscernible] vertical, Adjusted [indiscernible] to which growth and Public for includes XXX from to Merchant XXXX and margins. Revenue of by care for in QX QX Revenues higher $XX.X $XX.X segment for ] million sales between of declined RemainCo gross the professional other as public streams, business, for $XX.X QX Services QX [ QX licenses recurring as customers transaction-based million increased driven XX% XXXX. of which such XXXX revenue SaaS, by total and providers. QX XXXX of expenses reflecting for of revenue recurring $XX

decline to revenue year, currently Adjusted grew in X% fiscal declined the fixed costs did revenues. For not for XXXX single-digit health that QX reflecting we in EBITDA care prior proportion of growth year, the compared X%, expect XXXX. fiscal and low

XX.X% revenues XX.X% XXXX as QX XXXX. Importantly, declined adjusted for percentage of from a to QX for EBITDA

Regarding the balance sheet.

stood a for We September, with sheet revolving Following capacity services of our $XX.X notes, in facility convertible XXXX. the is is credit $XXX have mature sale end, positioned of debt million quarter of Xx and million which the our February. under well our during At at balance our constraint. strong business merchant remainder which borrowing leverage still

Our on cash September balance $XX.X was million XX.

Merchant the tax-related business, the As we payments approximately of in tax a spring. result to the of make will $XX need Services sale million of and

guidance have the been XX. related paid in of These FY as fiscal XXXX, X, which of the nontax continuing QX for for we balance forth operations are accrued We sheet. Outlook. that expenses $X release also not in press dated XXXX. have deals approximately accruals following set million The our on included August costs to September reaffirms

a internally $XX.X expense, quarter in million $XX EBITDA year pro million; interest usual. $X released not forma to earlier million reminder, Merchant fiscal transaction-related $X.XX. that $XX sale $XXX with acquisitions, costs. Revenues, million or does amortization, a cash appreciation announced than million adjusted we for of [indiscernible] transitionary not being XXXX $XXX fiscal As been million, guidance to a Services have $XX $X to the to of million, to businesses, adjusted XXXX include software developed $X.XX diluted million, of EPS the

and annual have lapped QX, basis points. education XX% are We acquisitions certain continue business a reduction the be we license EBITDA Acquisitions currently we the regular state momentum cadence, revenue not expect of of expect SaaS on to improvement sales project to revenues XX closed a seasonality for favor resume basis. From we less [ has expect will revenue to outlook, of on not following: XX%; single-digit in QX XXX normal margin [indiscernible]. we XX.X%. approximate included XX.X%, our to distribution a in standpoint, to Manitoba the introduction market. The yet a utilities QX, do in should the subsidies expect QX, -- the growth expect organic that of return drag and in high deals with continued adjusted

company the quarter. year, now forecast any Although M&A and updates seasonality software to line factor license pipeline. call the between of sales Rick they storage most less still the will given than last the for item are a over will in represent variable turn in I

Rick Stanford

Thank you, Geoff. morning, Good everyone.

we past made year, on organization vertical to to software-centric markets. long our our transitioned term. We've significant the advancements Over have vision a focused achieve

increase business transformation and progress in our smoothly. We're are Running and to and consolidation XX, customer cost savings areas. and refining of closed divestiture service enhanced cloud business and in the on operations capabilities technology The excited Merchant well. Achieving migration. optimize our as that to that, through going of efficiency September processes announce many efforts of operational parallel is efficiency, the contracts effectiveness committed process to with transitioning Services internal we

service have support and scalable, desk unified cost-effective both center and customer-facing internal solutions. into technologies platforms contact our cloud including We

and delivering and alike. now We employees are responsive for streamlined our experience customers more even

response, management endpoint management measures device solutions. further centralizing and are tools, detection integrated Microsoft mobile identity We and access cybersecurity using fully including and

subscriptions we consolidating back-office cloud unlocking increase data AWS consolidation initiative and enterprise cloud [indiscernible] level on-premise account departments, instant center nearing enterprise support. To all including the to sharing located file Our unifying technologies, with an telephony across solutions. into and completion streamlined and have messaging, efficiency migrated is successfully successful

initiatives our management. vendors on We service the exceptional product intention commitment to an efficiency and dependency operational last quarter mentioned I expenses. Together, and efficiency delivery. creating enterprise-level have reducing hire reduced in while multiple leader these support to

of we our He applications. next-generation ongoing will as our Officer. He Greg [ hired us Product addition designing mentioned, to help road map native investment pure-play Chad be have will The and Fenner into configurable responsible Chief for for web vision, evolution delivering underscores this and strategy new As Chad company. communicating a product drive ] in software our our team and vision. our

and We management computer-assisted software have CAMA], X.X to mass to our year. no core next begun started take lines. work allow rewrite the and release platform to Tech be on forward restrained will its Justice our longer are looking We've U.S. by our which appraisal across us also platform, [ state

Given compliance distribution high billing related to we framework. we utility X adding another Type and added portal the are market, X [ ] in our road SOC products cybersecurity map have models. to demand for our Last, X software suite

of Many Paul geographically. our help I'll targets and with strong us Regarding conversations again are some M&A call turn now this public sector. existing looked new to be those continues pipeline quarter expand targets. acquisition final the complement our services tuck-ins or to We these offerings deals for comments. in deals several will of of products and in to continue over at general, have to with

Paul Christians

Rick. you, Thank

As investment technology. shared, cloud-first This Rick involved business been in a human organizational has has structure into thoughtful model. capital, we've transitioning shift and

including our sophisticated have into As structure, customers needs product efforts unified service elements goal revenue our specifically integrated and by tremendous and resource diverse software of dedicated domain of sales growth, a to result, we are platform and delivery. a of in strategic meet our we development the in supported strides group, services deliver marketing, tailored making a accelerate to verticals. To

also this that subverticals. previous board, activity especially ERP stay capturing to but stated happy wallet. I enables enterprise needs, the utility, calls, alignment in across public to ensuring safety, only contracting education trending of and proactive are in to that we am to report share in positively are As closer our and sales JusticeTech, us additional not customers, responsive their

We of continue adoption vertical in solutions this cross on we include addition CPO offering. Examples enterprise bundling our core an into for of solutions to law digital and see and Fenner ] sales customer bundled management and increased increased further both [ The software enforcement of Georgia. inter solution our vertical suite basis. solution as core Jad new will as intra our integrate XX accelerate broader engagement contracts

significant a multiyear sales software part in funnel facilitation solution new our and addition, utility In payment continue fulfilled productivity we ] as X for distribution well a have [ trend project. Sales multistate of as activity as to Tier a instance, force and positively. Unifi

we contracting This my results Betsy. activity Given XXXX. comments, the concludes and that, rate anticipate we positive through increase time, At sales please. of call for Q&A this will open to

Operator

[Operator Instructions].

The first James. Raymond comes with from today question John Davis

John Davis

it If light just of of in came I hair look the the revenue, guide. a at fourth quarter midpoint

or in fourth but happen fourth pushed the wasn't heard on kind implementation sure revenue anything So just just I an call of the out? was revenue delayed any performance? wondering, got quarter was that there comments of quarter it there if didn't I [indiscernible], other you expectation

Geoffrey Smith

mean that little big million good. but expecting was there for in of did was We We're -- the thing, there's of QX bit nothing a $X were back fiscal pushed Nothing in we getting always particular we movement how sense out. that license a school what always of why. and get shake we expected, on XXXX, are changed which that that's to line. that's kind we're I going out, saw the to

John Davis

appreciate this then helpful the transition of retention That's XXX% a it and was year. the NRR, Obviously, year.

number? get the we into go expect how kind as logo are that organic of growth single-digit we XXX-ish Should beyond, pertains we Just outgo iX think at revenue algo? as high about growth NRR NRR you new and to So maybe the plus the about should growth how thinking guys growth? 'XX it to longer-term to

Clay Whitson

at the do think want our improve but the implied JD, XXX%, organic the about algorithm I X.X% is XXX%, midpoint. Well, 'XX we for with growth to that

existing But the revenue a year. retention would coming year. during from so improving imply book do X.X% we from And of that new have goal logos our net XXX% that every

Geoffrey Smith

revenue points the noted customer different want that of see X was and get data We'll is names. it to not if in in sets we I included the to is make can payments make the on One sure future. number, that to that different that

revenue, I think their growth you existing if -- you probably payments layer on that pick your customers the get you volume. that's from up in growing

bit that, think pursuer just we point, higher. And the we it's Clay's dollar retention increases, pushed improves, cross-sell are net But price that number we probably a it So going is little as increases. the to aggressive price to tactically on also go story do I of that reflects not think as make choices higher.

John Davis

Okay. And there understand revenue driving consolidation care, the -- helpful. just on declines. what's then health quickly That's is

average? kind digits? about losses for do think As corporate think low customer said, ] Is term, should lap 'XX? digit about Is it growth Longer single that as [ of modeling we some 'XX. you it mid-single how And we business? the when you of

Clay Whitson

over single-digit for and medium for for the is single term, expectation health digit. sector high education single public care digit current Our low high

Operator

Palmer comes Company. with The Mark the Benchmark from next question

Mark Palmer

you your us Wanted could on utility give if to update an initiative. see

a the prepared company be You across various the to began in roll to technology a out when And reference it derived its the it position utilities country. made the from remarks. in initial project other to to would

Unknown Executive

is particular that that's broadly used the well, measured we in on that rolling much project, see module business, initial specific the side a distribution this initial the as anticipate the accelerating. industry. activities on the although -- process that the of out the begin on to of portal Mark, we would and sales more in we are not on that in and as side today, And

Mark Palmer

the we activity 'XX the beginning How of accelerating in then through So the cadence? first quarter then about we looking should and think that are year? at

Gregory Daily

Yes. That's a fair assumption.

Mark Palmer

on activity update and you're of the [indiscernible]. Very in M&A potentially regard were you in quarters? one market coming pertains the sellers multiples in would the rationality good. Rick, that the the in call contribute And to how that as more you environment. other front on question M&A of in kinds with the said that it market terms Any were seeing that had to seeing what last to

Rick Stanford

Yes.

on So to seem year. I obviously, that this still their people end, value growth. the to talking realistic changing don't see we're as there's but extremes either more and their to be much future

Our initial still is to pipeline through contact conversations, We're continuing sector very strong. lot of public a deals.

excited to We valuation. 'XX are I important, conversations to down but about we're the timing -- X pipeline year important timing. a Action and it comes looking good at education, we're but seems it's is some between somewhere this think X our more in very for generate current we're targets. It like to important having with is than place acquisitions

Operator

with The next Stanley. James Faucette question Morgan comes from

Shefali Tamaskar

This a is on touch to Shefali bit. macro Tamaskar on for the James. Wanted

Just the you're customers? just that in certain what's you're note how of general I know verticals public kind informs from anything to getting health you And the your on upon sector 'XX, in about thinking that in touched it in outlook. care. going health

Unknown Executive

the is the to very in in by arena, and public the demand software It's last well and have we We to very support evolution get driven enough of developed to web now certainty is people of consistent need of really being very, received the their sector set, are get that several years in technology providing we've the that execution. that applications. additional the public over to seeing to market comfort sector that but increased constraints also examples native configurable

Shefali Tamaskar

anticipating? you're growth. organic might that logos number? terms hear. there you just of in is single-digit And on new like in then one Okay. any those And that great have visibility What's to organic high That's your confidence

Clay Whitson

$X about fourth then to headwinds Manitoba The last we 'XX in quarter software utility we customer was and million a large Well, a And this that lot that as year I was about seen be in education, but year, our year. a grew will they the the anticipate our The of in now. we believe faced were this we in in we've fiscal growing in actually states is should SaaS transition resume license Midwestern we 'XX. the sales about, -- education -- big that, 'XX. And calls, who we have same one, think this well we year, anniversaried headwind. $X in. million on spoke last certain one as coming states some as stepped those stepping [indiscernible] talked previous

Operator

Markgraff KeyBanc Markets. Capital from question The next with comes Alex

Alexander Markgraff

Maybe just quickly on touch to margin expansion.

in I it basis I was XXX points heard I you Geoff, to think the release, say XX thought noted you. misheard press I or apologize XXX. I more. if

-- Just just a sources then some maybe walk basis the that 'XX. of for XXX-plus clarification there. through And points of

Geoffrey Smith

Sure.

kind So XXX. should lift pretty to to think we've margin a yes, our overhead next that always outpace cited we that have of I get and inflationary growth year, the and that. expansion, said XX to A we've of correct, easy our rates corporate lot fact point. this And revenue

should costs, run, previously. about but pro expansion we confident down just in of hit. target Sales as kind feel on turn some overhead goes. With the Services So Merchant be mind, pretty increase out good come in for we margin fair We're that this bigger business, on us as kind transitioning it we page got as after well. -- some we've XX like It rata. thing. of margins to would particular, of get and do we're long XXX. corporate just not a makes have production But because has some, a should than the not see X-year long-term that that that a expansion, the still The And margin to revenue naturally in year, still impact and

Clay Whitson

close add XX. until September didn't might deal that I our

quarter. of So the the a staff we all full way had complement through

Alexander Markgraff

Understood. at care just health maybe one level, Okay. margins. quick then the follow-up margin segment And around just

be If the versus there of just the time? add what over in on could some upside segment sort delta color and Healthcare nature you margin sector might the of public

Geoffrey Smith

Yes.

A of and Healthcare piece So an can the of couple which services is business. we services arms segment, outsourced likes RCM there. have that a be different

in public sector. that profile and it the more piece It's high is recurring. love of because on It's disproportionately And it Healthcare is just ] health the coming as We bodies it but margin a a software from result, segment pieces. a revenue. of stable of a of number in the profile. business. The a there's compared growth very So consistent lower lower big care the margin to revenue chunk is is [

And so margin over hopeful profile care. that can upsize we that time, in health

RCM outsourcing, come a the the are Technology, things -- space plans business some will of on health like that our some further cost to care things on have those few of where in work side that, next also are focus the the of that. into a is We things years. that kind couple there's over

expansion over time. So we would expect margin

Operator

comes Peter question Heckmann next with The from Davidson.

Peter Heckmann

my questions I One Most on. up have follow thing been to of wanted asked.

out you the payments as provided out In map thinking of timing should you terms there call in would XXXX. that of about I larger or appreciate milestone be that. seasonality relatively commentary payments anything we the of But software terms we

Clay Whitson

Well, variable. that quarter. biggest late. currently a license far could the and for we It slated in could is XX% by sales have that come QX, disproportionate software have early. why quarter March come the are That that's amount We the

happens, tell it early or time. we'll to came be with it when it that just on us came came you'll you patient So have or late

Peter Heckmann

Okay.

Tier I the of that you of in revenue today, that? -- streams? X of I'm correctly can and Okay. you you but characterize us XXXX then more But the terms refresh terms sure software payments, -- the in versus to my And in -- refresh development on of could office to expect don't And get utility in project stage would you that, do on us comment have out milestone heard for notes. of access terms the the I'm of on then I how just so you how revenue not that expect rollout recurring Rick's

Clay Whitson

speak to type revenues? revenue to want you -- Do of

Geoffrey Smith

Yes. Sure.

in to terms of types revenue. everything So of have that project that going of a little bit is --

license. early XXXX $X we That of will this quarter. fiscal full -- have license now probably more recognize although million amount the is not be amount a obviously XXXX, to We XXXX. in come, There -- year

project, modeled in year have for more of implementation there, sight So the then professional good attached market. in solutions. in relevant a this of that XXXX. We're further a right year. for tick of with revenue ticking this payments up towards XXXX. that's healthy part year. And amounts project, It our traditional a attachment the will mode just payment we than big and revenue There's license bigger there's in services space of first that's line up nothing come is phase this great is next utilities the to why very and even amount And coming will piece of a now story the of here. the It's

we'll as from revenue turns well come. while be recurring not for to from extremely maintenance and We'll we're to necessarily recurring for -- that the have revenue consistent payments. professional recurring have services, is years once on So going explicitly

all touching there. of kind you're things So

expect year the healthy relates of revenue. basically of to it to services expect expect increase that and to a turn next all professional the XXXX, and plus payments license dose to As on just then

Operator

Hone next Capital question [Operator BMO Instructions] The from comes Rufus Markets. with

Rufus Hone

to wanted on organic growth. come back the I

X.X% implied growth for organic mentioned you XXXX. So

some growth Or mentioned you're organic expecting? the of in X% did reversing? you acceleration this there quarter. is expecting that just you're XXXX, most Is You just acceleration fundamental headwinds

Clay Whitson

customer, our a just Midwestern Well, that is growing. customer large utility that's

what growth had 'XX. QX. consider acceleration just out. in mentioned in setback normal It's an So back have with The onetime do a rate, X% to went was a forward. that transition It I going temporarily, didn't Education, we it levels to SaaS 'XX. anything

'XX. 'XX. then of, a kind So it's it's it onetime resumption headwind shrinking setback. of or just stop is tailwind in Manitoba the will that not a And neither again, It's in a

Rufus Hone

I wanted care And health as well. ask to on

single-digit from else You is on revenue anything there in low segment? consolidation you care Or mentioned that the referenced? growth that 'XX. weighing mostly health in Is

Clay Whitson

ongoing been soon. in health That's is going the away it see headwind consolidation. thing an care. don't We It's anytime

Operator

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

Gregory Daily

shout the everyone. Tom Thank a [ merchant essentially team XXXX have over. transformational by dramatic you, It It's to a DeBord]. led to nice year services was out

were awesome. You guys

missed PayRock]. for It has I've the friends for at was been and and did impressed with have I We I'm call to of going But in thrive what today. You seems that. gone good with interest. to best Anybody anything dialing you you thank you appreciate sure on our [ else I you're the company. the well conversion.

need Thank us if you call us. So you.

Operator

you. number The replay code The XXX-XXXX. Thank the now XXX-XXXX and presentation. for for has (XXX) conference you today's is Thank is concluded. attending the

disconnect. now may You

i3 Verticals (IIIV) 19 Nov 242024 Q4 Earnings call transcript