UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-38532 i3 Verticals, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organizati ...

Financial Data and Key Metrics Changes - In Q3 2025, RemainCo revenues increased by 12.4% to $51.9 million from $46.2 million in Q3 2024, reflecting organic growth of 8% and approximately $2 million of inorganic revenues from acquisitions [11] - Annual recurring revenues for RemainCo rose by 12% to $160.8 million for Q3 2025 compared to $143.6 million for Q3 2024, with 77% of revenues coming from recurring sources [11] - Adjusted EBITDA for RemainCo increased by 18% to $12.7 million for Q3 2025 from $10.8 million for Q3 2024, with adjusted EBITDA margin improving to 24.5% from 23.3% [12] Business Line Data and Key Metrics Changes - SaaS revenue grew by 24%, payments revenue by 11%, and transaction-based revenue by 9% in Q3 2025 [11] - Non-recurring sales of software licenses increased to $1 million in Q3 2025 from $400,000 in Q3 2024 [11] - RemainCo software and related services accounted for 70% of revenues, payments for 25%, and other for 5% in Q3 2025 [12] Market Data and Key Metrics Changes - The company is focusing on public sector software solutions, having divested its healthcare revenue cycle management and merchant services businesses [6][10] - The company is seeing strong sales activity across strategic markets including transportation, justice tech, public safety, public administration, ERP, education, and utilities [21] Company Strategy and Development Direction - The company aims to enable state and local governments to serve constituents effectively through a lineup of mission-critical enterprise software products [7] - Continued investment in government technology and strict discipline in M&A processes are planned, with a focus on new product development [8] - The company is implementing AI initiatives to enhance product features, improve service efficiency, and streamline product development [17][20] Management's Comments on Operating Environment and Future Outlook - Management expects high single-digit organic revenue growth for RemainCo over the next several years, with adjusted EBITDA margin improvement of 50 to 100 basis points per year [14] - The company anticipates that increased costs from talent investments will begin to impact Q4, with revenue effects expected in FY 2026 [15] - Management expressed confidence in all sub-verticals, highlighting strong performance in education, utilities, and transportation [37] Other Important Information - The company has a strong balance sheet with $55 million in cash and no debt, along with $400 million of borrowing capacity under its revolving credit facility [12][13] - The company plans to use cash and borrowings for future acquisitions and opportunistic stock repurchases [13] Q&A Session Summary Question: Guidance for Q4 and organic revenue growth - Management confirmed that the midpoint of the guidance should be the focus, with organic revenue growth expected to decelerate due to the prior strong license quarter [28][30] Question: Incremental investments in Justice Tech - Management indicated that the investments were not previously contemplated in the guidance and would compress margins slightly in Q4, but are expected to drive revenue growth in the long term [32][35] Question: Exciting growth areas for the company - Management expressed enthusiasm for all sub-verticals, particularly education, utilities, and transportation, anticipating significant growth in FY 2026 [37] Question: Partnerships for deals - The company typically handles most aspects of deals independently, with integration partners used in about 1 out of 5 cases, primarily for enterprise-level deals [41] Question: Role of procurement consultants - There has been no significant change in the role of procurement consultants, with steady relationships maintained in the utility space [42]

Revenue Performance - Total revenue for Q3 Fiscal Year 2025 was $51.901 million, reflecting a 12% year-over-year growth[4,11] - Payments revenue reached $13.100 million, showing an 11% year-over-year increase[4] - Recurring revenue totaled $40.201 million for the quarter[4] - Total Annualized Recurring Revenue (ARR) reached $160.804 million, a 12% increase year-over-year[4] Revenue Composition - Software and related service revenue amounted to $36.245 million[4] - SaaS revenue contributed $9.299 million to the total[4] - Transaction-based revenue was $4.052 million[4] - Maintenance revenue reached $8.648 million[4] - Professional services generated $9.458 million[4] Profitability Metrics - Adjusted EBITDA from continuing operations was $12.724 million, representing an Adjusted EBITDA margin of 25%[11] - Net loss from continuing operations attributable to i3 Verticals, Inc was $(410) thousand[12] - Non-GAAP adjusted income before taxes from continuing operations was $10.249 million[12] - Adjusted net income from continuing operations was $7.687 million[12] - Adjusted diluted earnings per share from continuing operations was $0.23[14]

i3 VERTICALS REPORTS THIRD QUARTER 2025 FINANCIAL RESULTS NASHVILLE, Tenn. (August 7, 2025) – i3 Verticals, Inc. (Nasdaq: IIIV) ("i3 Verticals" or the "Company") today reported its financial results for the fiscal third quarter ended June 30, 2025. Highlights from continuing operations for the three and nine months ended June 30, 2025 vs. 2024 1 See footnotes on the following page. • Third quarter revenue from continuing operations was $51.9 million, an increase of 12.4% over the prior year's third quarter. ...

Summary of i3 Verticals (IIIV) 2025 Conference Call Company Overview - i3 Verticals was founded by Greg Daily, who has taken three companies public, with the current CFO being Jeff Smith [2] - The company went public in 2018, initially comprising 95% payments and 5% software [2] - The company has shifted focus towards software, now consisting of 26 software acquisitions primarily in the public sector, with payments now representing 26% of revenues [3] Financial Performance - i3 Verticals reported over $200 million in revenues with an adjusted EBITDA margin in the high 20s [4] - The company targets high single-digit revenue growth and aims for 50 to 100 basis points margin improvement annually [4] - The company is currently debt-free with approximately $64 million in cash and 75% of revenues being recurring, growing at 9% [5] Strategic Focus - The company divested its merchant services and healthcare RCM businesses to narrow its focus and improve leverage [3][11] - i3 Verticals aims to integrate payments capabilities into its vertical market software acquisitions, enhancing monetization opportunities [8][10] - The public sector is identified as a vast and fragmented market with significant transactional revenue opportunities [12][40] Competitive Landscape - Tyler Technologies is identified as a major competitor, but i3 Verticals believes the public sector is highly fragmented, with many niche players [13][46] - The company competes against founder-controlled and private equity-controlled businesses, which often have aggressive pricing strategies [46][47] Market Opportunities - The company sees significant growth potential in various public sector verticals, including Justice Tech, Transportation, Utilities, ERP, and Education [15][20][24][30][35] - i3 Verticals is focused on cloud-based solutions, with a majority of new sales being cloud solutions [51] - The company is exploring AI integration into its software solutions, enhancing efficiency and customer service [56][58] M&A Strategy - i3 Verticals plans to continue making acquisitions, primarily in the $10 million to $30 million range, focusing on founder-owned businesses [54][55] - The company has a $400 million untapped credit facility, providing flexibility for future acquisitions [41] Investor Perspective - The company believes it is undervalued compared to larger competitors like Tyler Technologies, despite having similar growth profiles and margins [60][61] - i3 Verticals is working to clarify its story to investors, moving away from its previous perception as primarily a payments company [62][64] Conclusion - i3 Verticals is positioned for growth in the public sector software market, leveraging its software acquisitions and payments integration strategy while maintaining a strong financial position and exploring new technologies like AI. The company is focused on disciplined capital allocation and strategic acquisitions to enhance its market presence and shareholder value.

Group 1 - The article discusses the services provided by IPO Edge, which includes actionable information on growth stocks, first-look IPO filings, previews on upcoming IPOs, an IPO calendar, a database of U.S. IPOs, and a comprehensive guide to IPO investing [1]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Unaudited financials for March 31, 2025, reflect the Merchant Services Business sale and subsequent operational shifts [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$646.4 million** from **$730.7 million**, driven by reduced cash, with liabilities also down Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $7,749 | $86,541 | | Total current assets | $79,999 | $153,393 | | Goodwill | $280,678 | $280,678 | | Intangible assets, net | $156,331 | $162,816 | | **Total assets** | **$646,359** | **$730,675** | | **Liabilities & Equity** | | | | Total current liabilities | $67,688 | $164,731 | | Long-term debt, less current portion | $12,000 | $0 | | **Total liabilities** | **$132,700** | **$215,316** | | **Total equity** | **$513,659** | **$515,359** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Revenue from continuing operations grew **8.8%** to **$63.1 million**, with income from operations up **59.5%** Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $63,059 | $57,968 | $124,750 | $113,022 | | Income from operations | $3,964 | $2,486 | $6,663 | $3,971 | | Interest expense | $446 | $7,714 | $1,126 | $14,401 | | Net income (loss) from continuing operations | $1,095 | $(2,302) | $4,417 | $(6,517) | | Net (loss) income from discontinued operations | $(326) | $5,650 | $(540) | $11,401 | | **Net income** | **$769** | **$3,348** | **$3,877** | **$4,884** | | Diluted EPS from continuing operations | $0.00 | $(0.07) | $0.09 | $(0.20) | [Condensed Consolidated Statement of Changes in Equity](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) Total equity slightly decreased to **$513.7 million**, driven by net income, equity compensation, and stock repurchases - Key drivers of equity changes include **net income**, **equity-based compensation**, **LLC common unit redemption**, and **stock repurchases**[19](index=19&type=chunk) - The company repurchased **510,155 shares** of Class A Common Stock for **$11.6 million**[19](index=19&type=chunk)[151](index=151&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow shifted to a **$15.6 million** use, primarily due to a **$34.2 million** tax payment from the Merchant Services sale Cash Flow Summary (in thousands) | Cash Flow Activity | Six months ended Mar 31, 2025 | Six months ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(15,627) | $25,147 | | Net cash used in investing activities | $(3,675) | $(12,369) | | Net cash used in financing activities | $(60,029) | $(17,885) | | **Net decrease in cash** | **$(79,331)** | **$(5,107)** | - Negative operating cash flow was primarily driven by a **$34.2 million** income tax payment, up from **$5.4 million** prior year[28](index=28&type=chunk)[327](index=327&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the **Merchant Services Business sale**, cost reclassifications, segment updates, and subsequent **Healthcare RCM business sale** - On September 20, 2024, the company sold its Merchant Services Business for approximately **$437.3 million**, now presented as discontinued operations[36](index=36&type=chunk) - Post-Merchant Services sale, the company reclassified certain costs from SG&A to 'Other costs of services' to align with its software-centric model[51](index=51&type=chunk)[52](index=52&type=chunk) - Reporting segments were updated to **Public Sector** and **Healthcare** after the Merchant Services Business sale[207](index=207&type=chunk) - Subsequent to quarter-end, on May 5, 2025, the company sold its Healthcare RCM Business for **$96.0 million** in cash[251](index=251&type=chunk) - On April 1, 2025, the company acquired a Public Sector utility billing software business for **$9.0 million** in cash[246](index=246&type=chunk)[248](index=248&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strategic shift to a focused enterprise software provider, highlighting divestitures and strong liquidity [Results of Operations](index=57&type=section&id=Results%20of%20Operations) Revenue increased **8.8%** to **$63.1 million**, driven by **Public Sector** growth, with operating income up **59.5%** Revenue by Segment - Three Months Ended March 31 (in millions) | Segment | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Public Sector | $52.4 | $47.1 | 11.3% | | Healthcare | $10.9 | $11.1 | (1.8)% | | **Total Revenue** | **$63.1** | **$58.0** | **8.8%** | - Public Sector revenue growth was driven by **$1.2 million** from an acquisition, **$2.9 million** in recurring revenues, and **$1.3 million** in software license revenue[293](index=293&type=chunk) - Interest expense decreased by **$7.3 million (94.2%)** due to lower debt balances after the Merchant Services sale[299](index=299&type=chunk) [Liquidity and Capital Resources](index=62&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$7.7 million** cash and **$438.0 million** credit facility, bolstered by post-quarter divestiture proceeds - As of March 31, 2025, the company had **$7.7 million** in cash and **$438.0 million** available under its 2023 Senior Secured Credit Facility[319](index=319&type=chunk)[331](index=331&type=chunk) - The company fully repaid its **$26.4 million** 1.0% Exchangeable Senior Notes upon maturity on February 15, 2025[321](index=321&type=chunk) - The company repurchased **510,155 shares** for **$11.6 million** under its **$50 million** share repurchase program[151](index=151&type=chunk)[354](index=354&type=chunk) - The company has a Tax Receivable Agreement (TRA) liability of **$33.5 million**, with payments expected over 26 years[356](index=356&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate fluctuations on the **2023 Senior Secured Credit Facility**, with a **1.0%** rate increase impacting by **$0.1 million** - The main market risk is interest rate risk on the 2023 Senior Secured Credit Facility; a **1.0%** rate change on **$12.0 million** outstanding would impact by **$0.1 million**[363](index=363&type=chunk) [Controls and Procedures](index=69&type=section&id=Item%204.%20Controls%20and%20Procedures) CEO and CFO concluded disclosure controls were effective, with no material changes in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025[365](index=365&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter[366](index=366&type=chunk) [PART II. OTHER INFORMATION](index=70&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=70&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in the S&S Litigation regarding a third-party software product, not expected to have a material adverse effect - The company is a defendant in the S&S Litigation by the State of Louisiana concerning a third-party remote access software product[195](index=195&type=chunk)[197](index=197&type=chunk) - Management does not believe the S&S Litigation will have a material adverse effect on the business or financial condition[199](index=199&type=chunk) [Risk Factors](index=70&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors include volatile global conditions, risks from the Healthcare RCM Business sale, and non-comparable future financials - Risks include volatile global conditions, such as U.S.-Canada trade relations and the India-Pakistan dispute, impacting operations[370](index=370&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk) - Risks from the Healthcare RCM Business sale include strategy execution, potential liabilities, and increased Public Sector business dependence[376](index=376&type=chunk) - Future financial statements will not be comparable due to the Healthcare RCM Business reclassification to discontinued operations[377](index=377&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued **813,782** unregistered Class A common shares and repurchased **13,370** shares for **$0.4 million** - An aggregate of **813,782 shares** of Class A common stock were issued in exchange for LLC units, exempt from registration[378](index=378&type=chunk) Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | Jan 2025 | 13,370 | $22.99 | $38,519,000 | | Feb 2025 | 0 | N/A | $38,519,000 | | Mar 2025 | 0 | N/A | $38,519,000 | | **Total** | **13,370** | **$22.99** | **$38,519,000** | [Defaults Upon Senior Securities](index=72&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported for the period[382](index=382&type=chunk) [Mine Safety Disclosures](index=72&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[383](index=383&type=chunk) [Other Information](index=72&type=section&id=Item%205.%20Other%20Information) No other information was reported, and no director or officer adopted or terminated a Rule 10b5-1 trading arrangement - No other information was reported; no director or officer adopted or terminated a Rule 10b5-1 trading plan during the quarter[384](index=384&type=chunk) [Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed, including agreements for recent transactions, debt amendments, and officer certifications

Financial Data and Key Metrics Changes - The company reported RemainCo revenues for Q2 fiscal 2025 increased 11.6% to $54.1 million from $48.5 million in Q2 fiscal 2024, reflecting $4.4 million of organic growth or 9% and $1.2 million from an acquisition in the public sector [11] - Annual recurring revenues for RemainCo increased 9.2% to $164.5 million for Q2 fiscal 2025 compared to $150.6 million for Q2 fiscal 2024 [12] - Adjusted EBITDA for RemainCo increased 17% to $15.8 million for Q2 fiscal 2025 from $13.5 million for Q2 fiscal 2024, with adjusted EBITDA as a percentage of revenues rising to 29.3% from 27.9% [13] Business Line Data and Key Metrics Changes - The public sector vertical market experienced a revenue growth of 12% in Q2 fiscal 2025, with SaaS revenue growth at 23% [6] - Non-recurring sales of software licenses for RemainCo increased to $2.8 million for Q2 fiscal 2025 from $1 million for Q2 fiscal 2024 [12] Market Data and Key Metrics Changes - The company anticipates high single-digit organic revenue growth for RemainCo, excluding the healthcare RCM business [16] - The revenue distribution for the remaining two quarters is expected to be approximately 40.8% for Q3 and 50.2% for Q4, with Q3 expected to be the low point for revenue and margins [17] Company Strategy and Development Direction - The company is focused on the public sector vertical market following the divestiture of its Healthcare RCM business, aiming to enhance efficiency and service delivery through better software solutions [6][7] - The recent acquisition in the utility billing space is expected to expand the company's market presence and enhance its offerings in the utilities market [18][20] - The company is committed to a domain-specific approach across targeted markets, which is expected to drive organic growth over time [25] Management's Comments on Operating Environment and Future Outlook - Management noted that the geopolitical landscape presents opportunities at the state and local levels, particularly tied to evolving efficiency requirements [24] - The company has removed approximately $2.5 million of revenues from its fiscal 2025 outlook due to trade friction and delays with a Manitoba contract, indicating a conservative approach based on customer discussions [16][49] Other Important Information - The company has a strong balance sheet with a net debt of $4 million and a cash position of approximately $64 million, with plans to use cash and borrowings for acquisitions and potential stock repurchases [14] - The company expects adjusted EBITDA margin improvement of 50 to 100 basis points per year [16] Q&A Session Summary Question: What is the size of the remaining healthcare business after the divestiture? - The remaining healthcare business is focused on workflow software for providers, with expected revenue of approximately $8 million for the fiscal year [32] Question: What is the margin profile of the remaining healthcare business? - The margin profile is expected to be consistent with the public sector, in the low-forty percent range [34] Question: What is the expected free cash flow conversion for RemainCo? - The free cash flow conversion is expected to be well in excess of two-thirds of EBITDA, driven by a strong balance sheet and reduced interest expenses [36] Question: What is the revenue and margin cadence expected for Q3 and Q4? - Q3 revenue is expected to be about 48% of remaining revenue, with margins dipping into the mid-20s, while Q4 should see revenue at about 52% and margins recovering into the high 20s [37] Question: Is the small utility billing acquisition included in the updated guidance? - Yes, the small utility billing acquisition is included in the updated guidance [42] Question: What is the status of the Manitoba contract and its impact on guidance? - The removal of $2.5 million from guidance is based on conservatism due to delays and sequencing issues with the customer [49]

Financial Data and Key Metrics Changes - The company reported a revenue increase of 11.6% for RemainCo, reaching $54.1 million in Q2 2025 compared to $48.5 million in Q2 2024, driven by $4.4 million of organic growth and $1.2 million from an acquisition [12] - Annual recurring revenues for RemainCo increased by 9.2% to $164.5 million for Q2 2025, compared to $150.6 million for Q2 2024, with 76% of revenues coming from recurring sources [13] - Adjusted EBITDA for RemainCo increased by 17% to $15.8 million for Q2 2025, with an adjusted EBITDA margin of 29.3%, up from 27.9% in Q2 2024 [14] Business Line Data and Key Metrics Changes - The public sector vertical market experienced a revenue growth of 12%, with SaaS revenue growing at 23% [7] - Non-recurring sales of software licenses for RemainCo increased to $2.8 million for Q2 2025, compared to $1 million for Q2 2024 [13] Market Data and Key Metrics Changes - The company anticipates high single-digit organic revenue growth for RemainCo, excluding the healthcare RCM business, and expects adjusted EBITDA margin improvement of 50 to 100 basis points per year [16] - The revenue distribution for the remaining two quarters is expected to be approximately 48% for Q3 and 52% for Q4, with Q3 anticipated to be the low point for revenue and margins [37] Company Strategy and Development Direction - The company is focused on the public sector vertical market following the divestiture of its Healthcare RCM business, aiming to enhance efficiency and service delivery through better software solutions [7][8] - The recent acquisition in the utility billing space is expected to expand the company's market presence and enhance its offerings in the utilities market [18][20] - The company is committed to a domain-specific approach, creating tailored solutions that foster long-term relationships with customers [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the opportunities emerging at the state and local levels, particularly in response to evolving efficiency requirements [24] - The company is monitoring the geopolitical landscape and sees potential for growth despite current challenges, such as trade friction and project delays [16][50] Other Important Information - The company has a strong balance sheet with a net debt of $4 million and a cash position of approximately $64 million, with plans for acquisitions and potential stock repurchases [15] - The company has removed about $2.5 million of revenues from its outlook due to ongoing delays with a Manitoba contract, reflecting a conservative approach based on customer discussions [16][50] Q&A Session Summary Question: What is the size of the remaining healthcare business? - The remaining healthcare business is focused on workflow software for providers, with expected revenue of approximately $8 million for the fiscal year [33] Question: What is the margin profile of the remaining healthcare business? - The margin profile is expected to be consistent with the public sector, in the low-forty percent range [34] Question: What is the expected free cash flow conversion for RemainCo? - The free cash flow conversion is expected to be well in excess of two-thirds of EBITDA, driven by a strong balance sheet and reduced interest expenses [35][36] Question: What is the revenue and margin cadence for Q3 and Q4? - Q3 is expected to account for about 48% of remaining revenue, with margins dipping into the mid-20s, while Q4 should see a recovery into the high 20s [37] Question: Is the utility billing acquisition included in the updated guidance? - Yes, the utility billing acquisition is included in the updated guidance [42] Question: What is the status of the Manitoba contract? - The revenue removal from guidance is based on conservative discussions with the customer, reflecting delays in their project timelines [50]

Financial Data and Key Metrics Changes - The company reported RemainCo revenues for Q2 2025 increased 11.6% to $54.1 million from $48.5 million in Q2 2024, reflecting $4.4 million of organic growth or 9% and $1.2 million from an acquisition in the public sector [13] - Annual recurring revenues for RemainCo increased 9.2% to $164.5 million for Q2 2025 compared to $150.6 million for Q2 2024, with 76% of revenues coming from recurring sources [14] - Adjusted EBITDA for RemainCo increased 17% to $15.8 million for Q2 2025 from $13.5 million for Q2 2024, with adjusted EBITDA as a percentage of revenues rising to 29.3% from 27.9% [15] Business Line Data and Key Metrics Changes - The public sector vertical market experienced a revenue growth of 12% and SaaS revenue growth of 23% [7] - Non-recurring sales of software licenses for RemainCo increased to $2.8 million for Q2 2025 from $1 million for Q2 2024, although software license sales are expected to be lower in the second half of the fiscal year [14] Market Data and Key Metrics Changes - The company anticipates high single-digit organic revenue growth for RemainCo, excluding the healthcare RCM business, and expects adjusted EBITDA margin improvement of 50 to 100 basis points per year [17] - The revenue distribution for the remaining two quarters is expected to be approximately 40.8% for Q3 and 50.2% for Q4, with public sector payments and software services revenues declining seasonally during Q3 [18] Company Strategy and Development Direction - The company is focused on the public sector vertical market following the divestiture of its RCM business, aiming to enhance efficiency and service delivery through better software solutions [7][8] - The recent acquisition in the utility billing space is expected to expand the company's market presence and enhance its offerings in the utilities market [20][22] - The company is committed to a domain-specific approach, leveraging tailored solutions and deep expertise to foster long-term relationships with customers [25] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are opportunities emerging at the state and local levels, it is too early to determine if these represent a trend [26] - The company is optimistic about its ability to monetize software systems through various pricing models, which lowers barriers to entry and accelerates implementation timelines [27] - Management expressed confidence in the strong acquisition pipeline, focusing on smaller tuck-in deals within the public sector [48] Other Important Information - The company has a strong balance sheet with a net debt of $4 million and a cash position of approximately $64 million, with $400 million of borrowing capacity under its revolving credit facility [16] - The company expects to use cash and borrowings for acquisitions and potential stock repurchases [16] Q&A Session Summary Question: What is the size of the remaining healthcare business? - The remaining healthcare business is focused on workflow software for providers, with revenue approximately $8 million for the fiscal year [34] Question: What is the expected free cash flow conversion for RemainCo? - The free cash flow conversion is expected to be well in excess of two-thirds of EBITDA, driven by the absence of interest expense and increased investment in software development [37][38] Question: What is the revenue and margin cadence for Q3 and Q4? - Q3 revenue is expected to be about 48% of remaining revenue, with margins dipping into the mid-20s, while Q4 should see revenue at about 52% and margins recovering into the high 20s [39] Question: Is the utility billing acquisition included in the updated guidance? - Yes, the utility billing acquisition is included in the updated guidance [43] Question: What is the status of the Manitoba contract? - The revenue from the Manitoba contract has been conservatively removed from guidance due to delays and sequencing issues with the customer [49][51]