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i3 Verticals(IIIV) - 2025 Q2 - Earnings Call Presentation
2025-05-09 11:16
Financial Performance Highlights - Total revenue for Q2 Fiscal Year 2025 reached $63059 thousand, a 9% year-over-year increase[4] - Software and related service revenue totaled $46223 thousand, with a 10% year-over-year growth[4] - Payments revenue amounted to $14141 thousand, reflecting a 4% year-over-year increase[4] - Total Annualized Recurring Revenue (ARR) reached $199052 thousand, a 7% increase compared to the previous year[4] Segment Performance - Public Sector revenue from continuing operations for the three months ended March 31, 2025, was $52405 thousand, an 11% increase[15] - Healthcare revenue from continuing operations for the same period was $10857 thousand, a decrease of 2%[15] - Adjusted EBITDA from continuing operations was $17142 thousand, a 13% increase[15] - Adjusted diluted earnings per share from continuing operations was $032[18] Strategic Business Changes - The company sold its healthcare revenue cycle management business (the "Healthcare RCM Business") on May 5, 2025[5] - Historical results of the Merchant Services Business have been reflected in discontinued operations following its sale on September 20, 2024[5] Non-GAAP Measures - Adjusted EBITDA from continuing operations equals net income (loss) from continuing operations attributable to i3 Verticals Inc, before interest, income taxes, depreciation and amortization, adjusted to add back net income (loss) from continuing operations attributable to non-controlling interest, and to exclude certain items which the Company believes do not fully reflect our underlying operating performance[14]
i3 Verticals(IIIV) - 2025 Q2 - Quarterly Results
2025-05-08 21:28
[i3 Verticals Q2 2025 Financial Report](index=1&type=section&id=i3%20VERTICALS%20REPORTS%20SECOND%20QUARTER%202025%20FINANCIAL%20RESULTS) [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Highlights%20from%20continuing%20operations) The company reported strong Q2 growth from continuing operations, driven by increased revenue and adjusted EBITDA Q2 & H1 2025 Financial Performance (from Continuing Operations) | Metric | Q2 2025 | Q2 2024 | % Change | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $63.1M | $58.0M | +8.8% | $124.8M | $113.0M | +10.4% | | **Net Income (Loss)** | $1.1M | ($2.3M) | n/m | $4.4M | ($6.5M) | n/m | | **Adjusted EBITDA** | $17.1M | $15.2M | +12.7% | $33.5M | $29.2M | +14.8% | | **Adjusted Diluted EPS** | $0.32 | $0.12 | +167% | $0.62 | $0.24 | +158% | - Adjusted EBITDA margin from continuing operations **improved to 27.2%** in Q2 2025, up from 26.2% in the prior year's second quarter[4](index=4&type=chunk) - Annualized Recurring Revenue (ARR) from continuing operations **grew by 6.5% to $199.1 million** for the three months ended March 31, 2025[4](index=4&type=chunk) [Corporate Developments](index=1&type=section&id=Corporate%20Developments) The company divested its Healthcare RCM business and acquired a utility billing software company to focus on the public sector - On May 5, 2025, the company **sold its Healthcare RCM Business for $96.0 million** in cash, which had contributed $9.1 million in revenue for Q2 2025[4](index=4&type=chunk)[6](index=6&type=chunk) - On April 1, 2025, the company **acquired a utility billing software company for $9.0 million** in cash, with up to an additional $5.0 million in contingent consideration[4](index=4&type=chunk)[9](index=9&type=chunk) [CEO Commentary and 2025 Outlook](index=3&type=section&id=CEO%20Commentary%20and%202025%20Outlook) The CEO highlighted a sharpened focus on the public sector market, supported by recent M&A and a revised 2025 outlook - The company will be completely focused on bringing enterprise software to its public sector clients, viewing this market as being in the **early stages of a long transformation cycle**[7](index=7&type=chunk)[9](index=9&type=chunk) - The divestiture of the RCM business primes the company for **additional M&A**, with a continued focus on acquiring great businesses in the public sector space[9](index=9&type=chunk) Revised Fiscal Year 2025 Outlook (RemainCo Operations) | Metric | Previous Outlook | Revised Outlook | | :--- | :--- | :--- | | **Revenue** | $243.0M - $263.0M | $207.0M - $217.0M | | **Adjusted EBITDA** | $63.0M - $71.5M | $55.0M - $61.0M | | **Adjusted Diluted EPS** | $1.05 - $1.25 | $0.96 - $1.06 | [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) The statements reflect improved operating income, lower liabilities, and cash flow impacted by a large tax payment [Consolidated Statements of Operations](index=5&type=section&id=i3%20Verticals%2C%20Inc.%20Consolidated%20Statements%20of%20Operations) Revenue grew 9% in Q2, while a 94% drop in interest expense drove a significant turnaround in net income Q2 Statement of Operations Highlights (Continuing Operations) | Metric (in thousands) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | **Revenue** | $63,059 | $57,968 | 9% | | **Income from operations** | $3,964 | $2,486 | 59% | | **Interest expense** | $446 | $7,714 | (94)% | | **Net income (loss) from continuing operations** | $1,095 | ($2,302) | n/m | Six-Month Statement of Operations Highlights (Continuing Operations) | Metric (in thousands) | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | **Revenue** | $124,750 | $113,022 | 10% | | **Income from operations** | $6,663 | $3,971 | 68% | | **Interest expense** | $1,126 | $14,401 | (92)% | | **Net income (loss) from continuing operations** | $4,417 | ($6,517) | n/m | [Consolidated Balance Sheets](index=7&type=section&id=i3%20Verticals%2C%20Inc.%20Consolidated%20Balance%20Sheets) Total assets and liabilities decreased, primarily due to changes in cash and the repayment of long-term debt Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $7,749 | $86,541 | | **Total assets** | $646,359 | $730,675 | | **Long-term debt, less current portion** | $12,000 | $0 | | **Total liabilities** | $132,700 | $215,316 | | **Total equity** | $513,659 | $515,359 | [Consolidated Cash Flow Data](index=8&type=section&id=i3%20Verticals%2C%20Inc.%20Consolidated%20Cash%20Flow%20Data) Operating cash flow turned negative due to a large tax payment related to a prior divestiture Six-Month Cash Flow Summary (in thousands) | Activity | H1 2025 | H1 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) | - Cash used in operating activities for the six months ended March 31, 2025, included a significant **$34.2 million payment for income taxes**, mainly driven by the sale of the Merchant Services Business in fiscal 2024[26](index=26&type=chunk) [Reconciliation of GAAP to Non-GAAP Financial Measures](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) The company reconciles GAAP to non-GAAP measures by adjusting for items like amortization and equity-based compensation [Reconciliation to Adjusted EBITDA and Adjusted Net Income](index=10&type=section&id=i3%20Verticals%2C%20Inc.%20Reconciliation%20of%20GAAP%20Net%20Income%20(Loss)%20from%20Continuing%20Operations%20to%20Non-GAAP%20Adjusted%20Net%20Income%20from%20Continuing%20Operations%20and%20Non-GAAP%20Adjusted%20EBITDA%20from%20Continuing%20Operations) GAAP net income of $1.1M was reconciled to a non-GAAP Adjusted EBITDA of $17.1M through several key adjustments Q2 2025 Reconciliation to Adjusted EBITDA (in thousands) | Line Item | Q2 2025 | | :--- | :--- | | **Net income from continuing operations** | $1,095 | | Provision for income taxes | $3,054 | | Equity-based compensation | $3,932 | | Acquisition intangible amortization | $4,913 | | Cash interest (income) expense, net | $64 | | Depreciation and internally developed software amortization | $2,927 | | Other adjustments | $1,157 | | **Adjusted EBITDA from continuing operations** | **$17,142** | Q2 2025 Reconciliation to Adjusted Net Income (in thousands) | Line Item | Q2 2025 | | :--- | :--- | | **Net income (loss) from continuing operations** | $1,095 | | Total Non-GAAP adjustments (pre-tax) | $13,056 | | **Non-GAAP adjusted income before taxes** | **$14,151** | | Estimated taxes at 25% | ($3,537) | | **Adjusted net income from continuing operations** | **$10,614** | [Reconciliation of GAAP to Non-GAAP Diluted EPS](index=12&type=section&id=i3%20Verticals%2C%20Inc.%20GAAP%20Diluted%20EPS%20from%20Continuing%20Operations%20and%20Non-GAAP%20Adjusted%20Diluted%20EPS%20from%20Continuing%20Operations) GAAP diluted EPS of $0.00 was adjusted to a non-GAAP figure of $0.32, reflecting non-cash and non-recurring items EPS Comparison (from Continuing Operations) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **GAAP Diluted EPS** | $0.00 | ($0.07) | $0.09 | ($0.20) | | **Non-GAAP Adjusted Diluted EPS** | $0.32 | $0.12 | $0.62 | $0.24 |
i3 Verticals(IIIV) - 2025 Q1 - Quarterly Report
2025-02-07 21:17
Financial Position - As of December 31, 2024, the company had $85.6 million in cash and cash equivalents and $450.0 million available under its 2023 Senior Secured Credit Facility, maintaining compliance with financial covenants with a consolidated interest coverage ratio of 3.7x and total leverage ratio of 0.1x[248]. - Cash and cash equivalents as of December 31, 2024, were $85.6 million, with available borrowing capacity of $450.0 million under the 2023 Senior Secured Credit Facility[281]. - The company expects cash flow from operations and available borrowing capacity to be sufficient to fund cash needs for at least the next twelve months[282]. - As of December 31, 2024, total material cash requirements amount to $41.975 million, with $31.253 million due within one year[309]. - The 2023 Senior Secured Credit Facility provides for aggregate commitments of $450 million in the form of a senior secured revolving credit facility[292]. - The 2023 Senior Secured Credit Facility consists of a $450 million revolving credit facility, with no borrowings outstanding as of December 31, 2024[323]. - The company is in compliance with financial covenants, maintaining a minimum consolidated interest coverage ratio of 3.0 to 1.0 and a maximum total leverage ratio of 5.0 to 1.0[323]. Revenue and Growth - Annualized recurring revenue (ARR) from continuing operations for the three months ended December 31, 2024, was $193.3 million, an 8% increase from $179.6 million in the same period of 2023[264]. - Revenue increased by $6.6 million, or 12.1%, to $61.7 million for the three months ended December 31, 2024, compared to $55.1 million for the same period in 2023[268]. - Revenue within the Public Sector increased by $5.3 million, or 12.2%, to $48.8 million for the three months ended December 31, 2024[269]. - Revenue within Healthcare increased by $1.6 million, or 13.7%, to $13.2 million for the three months ended December 31, 2024[270]. Profitability - Net income attributable to i3 Verticals, Inc. was $2.1 million for the three months ended December 31, 2024, compared to $1.1 million for the same period in 2023, representing an increase of 87.2%[267]. - The company's net income increased from $1.5 million for the three months ended December 31, 2023, to $3.1 million for the same period in 2024[288]. - Adjusted EBITDA margin for the public sector segment was 39% for the three months ended December 31, 2024, compared to 40% for the same period in 2023[265]. - Adjusted EBITDA margin for the healthcare segment increased to 28% for the three months ended December 31, 2024, from 24% for the same period in 2023[265]. Expenses and Cash Flow - Interest expense decreased by $6.0 million, or 89.8%, to $0.7 million for the three months ended December 31, 2024, from $6.7 million for the same period in 2023[275]. - Other income was $1.8 million for the three months ended December 31, 2024, compared to other expense of $0.1 million for the same period in 2023[276]. - Net cash provided by operating activities decreased by $2.9 million to $11.5 million for the three months ended December 31, 2024, compared to $14.4 million for the same period in 2023[288]. - Net cash used in investing activities decreased by $5.8 million to $1.4 million for the three months ended December 31, 2024, from $7.2 million for the same period in 2023[289]. - Net cash used in financing activities increased by $1.9 million to $10.5 million for the three months ended December 31, 2024, compared to $8.6 million for the same period in 2023[290]. Strategic Initiatives - The company completed the sale of its Merchant Services Business for approximately $438 million on September 20, 2024, which included the equity interests of certain subsidiaries and associated proprietary technology[249]. - The company emphasizes a disciplined approach to acquisitions as a core component of its growth strategy, enhancing its proprietary payment facilitator platform and software solutions[250]. - The company has reclassified certain expenses to align with its new business model following the disposal of the Merchant Services Business, impacting the presentation of costs in its financial statements[255][256]. - The company anticipates using net proceeds from the sale of its Merchant Services Business for general corporate purposes, including share repurchases[284]. Risks and Challenges - Economic uncertainties, including inflation and elevated interest rates, may impact the company's financial results, although the extent of this impact is difficult to predict[247]. - The company faces various risks, including cybersecurity threats, competition, and regulatory challenges, which could affect its ability to achieve its strategic goals[242]. Share Repurchase and Debt - The company has a share repurchase program authorized for up to $50.0 million of Class A common stock, set to expire on August 8, 2025[313]. - During the three months ended December 31, 2024, the company repurchased 496,785 shares of Class A Common Stock at an average price of $22.49[315]. - The company paid $87.4 million to repurchase $90.8 million in aggregate principal amount of its Exchangeable Notes on January 18, 2024[307]. - As of December 31, 2024, $26.2 million of the original aggregate principal amount of $138.0 million of Exchangeable Notes was outstanding[306][308]. - The total amount due under the Tax Receivable Agreement as of December 31, 2024, is $39.2 million, with expected payments ranging from $0 to $9.9 million per year over the next 22 years[317]. Other Information - A 10% change in foreign currency exchange rates would not have had a material impact on the company's consolidated results for the three months ended December 31, 2024[324]. - The company utilizes a Monte Carlo simulation to assess the fair value of contingent consideration related to acquisitions[311].
i3 Verticals(IIIV) - 2025 Q1 - Earnings Call Transcript
2025-02-07 16:46
Financial Data and Key Metrics Changes - Revenue increased by 12% year-over-year to $61.7 million from $55.1 million in Q1 2024, reflecting organic growth of 10% and approximately $1 million from a recent acquisition [14] - Adjusted EBITDA rose by 17% to $16.4 million for Q1 2025 from $14 million for Q1 2024, with adjusted EBITDA as a percentage of revenues increasing to 26.5% from 25.4% [17] - Annual recurring revenues (ARR) increased by 7.6% to $193.3 million for Q1 2025 compared to $179.6 million for Q1 2024 [14] Business Line Data and Key Metrics Changes - SaaS revenue grew by 16%, contributing significantly to the overall revenue growth [7] - Payments revenue increased by 7%, with expectations that SaaS and payments revenues will outpace other forms of revenue for the remainder of the year [15] - Non-recurring sales of software licenses increased to $2.7 million for Q1 2025 from $0.4 million for Q1 2024 [15] Market Data and Key Metrics Changes - Revenues in the public sector vertical increased by 12% to $48.8 million for Q1 2025 from $43.5 million for Q1 2024, representing 79% of total revenues [19] - Healthcare segment revenues increased by 14% to $13.2 million for Q1 2025 from $16.6 million for Q1 2024, driven by recurring software services and non-recurring sales of software licenses [20] Company Strategy and Development Direction - The company continues to focus on integrating payments within its vertical market software base, particularly in key markets such as utilities and permitting [9] - M&A remains a critical part of the company's strategy, with a strong pipeline focused on the public sector vertical [27] - The company is transitioning legacy contracts to a SaaS model and introducing new technology modules to meet current market demands [36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the fiscal year 2025, highlighting strong revenue growth and the potential for continued ARR growth driven by SaaS [7] - The company anticipates high single-digit organic revenue growth with adjusted EBITDA margin improvement of 50 to 100 basis points per year [23] - Management noted that the competitive landscape for larger utilities is positive, with increasing demand for upgraded software solutions [59] Other Important Information - The company has a strong balance sheet post-sale of the Merchant Services business, with a cash balance of $85.6 million and $450 million of borrowing capacity on its revolving credit [21][22] - The company reaffirmed its guidance for FY 2025, projecting revenues between $243 million and $263 million and adjusted EBITDA between $63 million and $71.5 million [23] Q&A Session Summary Question: Any lumpiness in healthcare growth? - Management expects low single-digit growth for healthcare this year despite recent improvements [48] Question: Update on large utility customer project? - The project is progressing well, with expected revenue growth from approximately $3 million to $5 million this year [54] Question: Competitive landscape for larger utilities? - The landscape is positive, driven by the need to upgrade legacy software, with increasing demand for new technologies [59] Question: Differences between larger and smaller M&A opportunities? - The company continues to focus on deals between $2 million and $5 million in EBITDA, with no significant changes in the competitive environment [72] Question: Outlook on spending trends at the state or city level? - No pullback has been observed, and the company is focused on providing flexible deployment options for government agencies [75] Question: Drivers of high single-digit organic growth? - The growth is driven by a combination of new logos and existing projects, with expectations for inflation to contribute slightly in the future [93]
i3 Verticals(IIIV) - 2025 Q1 - Earnings Call Transcript
2025-02-07 14:30
Financial Data and Key Metrics Changes - Revenue for Q1 FY 2025 increased by 12% to $61.7 million from $55.1 million in Q1 FY 2024, reflecting organic growth of 10% and approximately $1 million from a recent acquisition [9] - Adjusted EBITDA rose by 17% to $16.4 million, with an adjusted EBITDA margin of 26.5%, up from 25.4% in the prior year [11] - Annual recurring revenues increased by 7.6% to $193.3 million compared to $179.6 million in Q1 FY 2024 [10] Business Line Data and Key Metrics Changes - SaaS revenue grew by 16%, contributing significantly to overall revenue growth [5] - Payments revenue increased by 7%, with expectations for SaaS and payments revenues to outpace other revenue forms for the remainder of the year [10] - Non-recurring software license sales surged to $2.7 million in Q1 FY 2025 from $400,000 in Q1 FY 2024, although total software license sales for FY 2025 are expected to be similar to FY 2024 [10] Market Data and Key Metrics Changes - Public sector revenues increased by 12% to $48.8 million, representing 79% of total revenues, driven by recurring revenue streams [12] - Healthcare segment revenues rose by 14% to $13.2 million, primarily due to recurring software services and non-recurring software license sales [13] Company Strategy and Development Direction - The company emphasizes integrating payments within its vertical market software base, particularly in utilities and permitting [6] - M&A remains a crucial part of the company's strategy, focusing on acquisitions in the public sector vertical to enhance market penetration and product offerings [20][21] - The company is transitioning legacy contracts to a SaaS model and upgrading products to meet current market demands [25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's growth trajectory, expecting high single-digit organic revenue growth and adjusted EBITDA margin improvement [16] - The company anticipates a strong pipeline for M&A opportunities, particularly in the public sector, with no significant changes in the competitive landscape [20][60] Other Important Information - The company has a strong balance sheet with a cash balance of $85.6 million and $450 million of borrowing capacity on its revolving credit [15] - Guidance for FY 2025 includes revenue expectations of $243 million to $263 million and adjusted EBITDA of $63 million to $71.5 million [16] Q&A Session Summary Question: Improvement in healthcare segment growth - Management noted that most one-time software license sales were in the healthcare segment, expecting low single-digit growth for healthcare this year [35] Question: Revenue cadence and license pull forward - Management confirmed that approximately $1.8 million was the license pull forward from Q2 to Q1 [36] Question: Margin expansion expectations - Management indicated that Q3 has historically been the low point for margins, with expectations for similar trends this year [39] Question: Update on large utility customer project - Management reported that the project is progressing well, with revenue expected to stair-step up from approximately $3 million to $5 million this year [39] Question: Long-term opportunities with larger utilities - Management highlighted a positive competitive landscape driven by the need to upgrade legacy software, with increasing demand for their products and services [44] Question: Differences in M&A opportunities - Management stated that their sweet spot for acquisitions remains between $2 million and $5 million in EBITDA, with no significant changes in the competitive environment [58] Question: Organic growth drivers - Management provided insights into the high single-digit organic growth, attributing it to new logos and existing projects, with a net dollar retention rate of 100% [73]
i3 Verticals(IIIV) - 2025 Q1 - Quarterly Results
2025-02-06 21:51
Financial Performance - Revenue from continuing operations for Q1 2025 was $61.7 million, a 12.1% increase compared to $55.1 million in Q1 2024[4] - Net income from continuing operations was $3.3 million, a significant improvement from a net loss of $4.2 million in the prior year's first quarter[4] - Adjusted EBITDA from continuing operations was $16.4 million, reflecting a 17.0% increase year-over-year[4] - Annualized Recurring Revenue (ARR) for Q1 2025 was $193.3 million, up 7.6% from $179.6 million in Q1 2024[4] - Total revenue for the three months ended December 31, 2024, was $61,691,000, an increase of 12% compared to $55,054,000 for the same period in 2023[22] - Adjusted EBITDA for the same period was $16,372,000, representing a 17% increase from $13,988,000 year-over-year[22] - The adjusted EBITDA margin for the total segment was 27%, compared to 25% in the prior year[22] - Net income from continuing operations attributable to i3 Verticals, Inc. was $2,194,000, a significant improvement from a loss of $2,885,000 in the same quarter of 2023[38] - Pro forma adjusted net income from continuing operations was $10,460,000, up from $4,138,000 in the prior year, reflecting a 153% increase[42] Earnings Projections - The company expects fiscal year 2025 revenue to be between $243 million and $263 million[7] - Pro forma adjusted diluted earnings per share for fiscal year 2025 is projected to be between $1.05 and $1.25[7] - The company reported a diluted net income per share of $0.09 from continuing operations, compared to a diluted net loss per share of $0.12 in the prior year[4] - Pro forma adjusted diluted earnings per share from continuing operations increased to $0.31 from $0.12 year-over-year[42] Revenue Growth - Payments revenue grew by 7% in Q1 2025, with expectations for continued growth alongside SaaS[6] - SaaS revenue growth was reported at 16% year-over-year, indicating strong momentum moving forward[5] Financial Ratios and Cash Flow - The consolidated interest coverage ratio as of December 31, 2024, was 3.7x, and the total leverage ratio was 0.1x[4] - Cash and cash equivalents as of December 31, 2024, were $85,552,000, slightly down from $86,541,000 at the end of September 2024[24] - Total assets decreased to $726,229,000 from $730,675,000 in the previous quarter[24] - Total liabilities remained relatively stable at $215,095,000 compared to $215,316,000 in the prior quarter[24] - The company reported net cash provided by operating activities of $11,495,000, down from $14,405,000 in the same quarter last year[27]
i3 Verticals(IIIV) - 2024 Q4 - Annual Report
2024-11-25 21:45
Business Segments - The company has two reportable segments: Public Sector and Healthcare, with an Other category after the sale of the Merchant Services Business[28] - The Public Sector segment serves state and local customers across the U.S. and parts of Canada, focusing on efficient information flow and responsive services[29] - The Public Sector segment includes five sub-verticals: JusticeTech and Public Safety, Transportation, Utilities, Enterprise Resource Planning (ERP), and Education[30] - The Healthcare segment focuses on integrated solutions for providers and payers, emphasizing process efficiency and compliance[33] - The Healthcare segment includes two sub-verticals: Provider Software Solutions and Payer Software Solutions[34][35] Payment Technology and Platforms - The company’s proprietary payment facilitator platform integrates payments across various products, enabling efficient processing of court, tax, registration, utility, and school payments[31] - The company’s payment technology platform supports ACH, EMV, PayPal, and Venmo payments, with unified APIs and PCI-compliant security[46] - The company has invested significant resources to ensure compliance with the EMV mandate, which requires chip-enabled card processing and sets new data security standards[105] - The company must be registered with payment networks through a sponsor bank and is subject to network operating rules and guidelines, including those from NACHA[106] Cloud and Technology Strategy - The company’s cloud-first strategy leverages AWS and Azure, with AWS cloud consolidation nearing completion, enhancing scalability and flexibility[40][41] Workforce Demographics - As of September 30, 2024, the company’s workforce is 54% female and 46% male, with 62% White, 22% Asian, 8% Black or African American, 4% Hispanic or Latino, and 4% Other[59] Regulatory Compliance - The company operates in a complex regulatory environment, including compliance with the Dodd-Frank Act and privacy laws such as the Gramm-Leach-Bliley Act[60][63] - All 50 states, Puerto Rico, and the U.S. Virgin Islands have enacted data breach notification laws requiring businesses to notify affected individuals, consumer reporting agencies, and governmental agencies in case of a security breach[66] - Many states have implemented comprehensive data privacy and security laws, including restrictions on collecting personal information like Social Security and driver's license numbers[66] - The California Consumer Privacy Act of 2018 (CCPA), amended by the California Privacy Rights Act of 2020 (CPRA), creates a private right of action for data breaches[66] - HIPAA regulations require covered entities and business associates to implement safeguards to protect protected health information (PHI), with a Notice of Proposed Rulemaking to strengthen HIPAA security rules expected by the end of 2024[73] - Business associates handling PHI on behalf of covered entities are subject to direct liability for HIPAA violations, with potential civil monetary penalties and criminal penalties[74] - The 21st Century Cures Act and Information Blocking Rule prohibit information blocking by healthcare providers, health information exchanges (HIEs), and developers of Certified Health Information Technology, with civil penalties up to $1 million per violation[79][80] - The Centers for Medicare & Medicaid Services (CMS) Interoperability and Patient Access Final Rule requires hospitals with certain EHR capabilities to send admission, discharge, and transfer notifications to other providers[82] - The Trusted Exchange Framework, Common Agreement - Version 1 (TEFCA) aims to establish a universal floor for interoperability across the country, with seven Qualified Health Information Networks (QHINs) currently live[83] - The Health Data, Technology, and Interoperability: Certification Program Updates, Algorithm Transparency, and Information Sharing (HTI-1) Final Rule became effective on February 8, 2024, advancing health IT interoperability and establishing transparency requirements for AI algorithms[86] - The federal Anti-Kickback Statute (AKS) prohibits offering, paying, soliciting, or receiving anything of value to generate referrals for Medicare, Medicaid, or other federal healthcare programs, with severe penalties including imprisonment and exclusion from federal healthcare programs[87] - The company may face significant consequences if it employs or contracts with an excluded individual or entity, including civil penalties, exclusion from federal healthcare programs, and treble damages[94] - The company is subject to U.S. federal anti-money laundering laws, including the Bank Secrecy Act, and must comply with risk-based anti-money laundering programs, suspicious activity reporting, and transaction record maintenance[95] - The company could be subject to enforcement actions, fines, and disgorgement of funds if deemed to have facilitated illegal or improper activities of customers through its services[96] - The company may need to register with FinCEN as a "money services business-provider of prepaid access" if it expands its prepaid card products and services[101] - The company is subject to payment network rules and standards, including PCI DSS, which govern transaction processing, data security, and liability allocation[103] - The company is subject to money transmitter licensing requirements in all U.S. states except Montana, which regulate funds transmission and payment instrument issuance[108] - The company is subject to U.S. federal and state unclaimed property laws, requiring remittance of unclaimed customer balances to government authorities[110] Intellectual Property - The company relies on intellectual property protections, including copyrights, trademarks, and trade secrets, to maintain its proprietary software and payment systems[112] Financial and Credit Facilities - The company entered into a $450 million senior secured revolving credit facility (Revolver) with JPMorgan Chase Bank, N.A., replacing the prior credit facility[286] - The Exchangeable Notes issued by the company have an outstanding principal amount of $26.2 million as of September 30, 2024, down from the original $138.0 million[287] - The company's ability to generate cash is dependent on successful execution of its business strategy, including acquisition activity, and external economic factors[289] - The 2023 Senior Secured Credit Facility contains restrictive covenants that limit the company's ability to engage in certain activities, such as incurring additional debt or making distributions[290] - The company must maintain specified financial ratios under the 2023 Senior Secured Credit Facility, and failure to comply could result in an event of default[291] - The company may face challenges in securing additional financing on favorable terms due to restrictive covenants in the 2023 Senior Secured Credit Facility[292] - The company's ability to repurchase Exchangeable Notes or pay cash upon exchanges is limited by existing indebtedness agreements, including the 2023 Senior Secured Credit Facility[296] - The company is a holding company with no operations of its own and relies on distributions from i3 Verticals, LLC to pay taxes and other expenses[298] - The Continuing Equity Owners hold approximately 31% of the combined voting power of the company's common stock as of November 22, 2024[303] - The company may not realize all expected tax benefits from future redemptions or exchanges of common units, which could negatively impact cash flows and stockholders' equity[305] - i3 Verticals, LLC is expected to make a substantial tax distribution in the first half of 2025 due to the taxable income from the sale of the Merchant Services Business in September 2024, with the company holding a 70.4% ownership interest as of September 30, 2024[311] - The company may receive distributions significantly in excess of its tax liabilities, with potential uses for excess cash including reinvestment in the business, recapitalization, or payment of a cash dividend on Class A common stock[312] - The company has 126,117,965 shares of Class A common stock authorized but unissued as of September 30, 2024, with 10,032,676 shares issuable upon redemption of common units held by Continuing Equity Owners[329] - Future issuances of Class A common stock or preferred stock could dilute existing stockholders and adversely affect the market price of Class A common stock[332][334] - Sales of Class A common stock under the Registration Rights Agreement could materially impact the market price and impair the company's ability to raise capital through future equity sales[337]
i3 Verticals(IIIV) - 2024 Q4 - Earnings Call Transcript
2024-11-19 21:03
Financial Data and Key Metrics Changes - Revenues for Q4 2024 increased 4% to $60.9 million from $58.6 million for Q4 2023, reflecting organic growth of 2% and two months of revenue from a recent acquisition [13][12] - Annualized recurring revenues increased 7.5% to $188.2 million as of Q4 2024 compared to $175.1 million as of Q4 2023, with 77% of revenues coming from recurring sources [13] - Adjusted EBITDA increased 4% to $16.2 million for Q4 2024, with adjusted EBITDA as a percentage of revenues slightly declining to 26.7% from 26.8% in Q4 2023 [16][12] - Pro forma adjusted diluted earnings per share from continuing operations was $0.15 for Q4 2024 [17] Business Line Data and Key Metrics Changes - SaaS and payments revenue grew 8%, transaction-based revenues grew 11%, while maintenance and recurring software services grew 6% [13] - Non-recurring sales of software licenses declined 8%, and professional services revenue declined 7% due to implementation delays [14] - Revenues in the public sector vertical increased 6% to $49.6 million for Q4 2024, representing 81% of total revenues [18] - Revenue from the healthcare segment declined 3% to $11.4 million for Q4 2024, with expectations of low single-digit growth for fiscal 2025 [19] Market Data and Key Metrics Changes - The company anticipates high single-digit organic growth for fiscal 2025, with a guidance range for revenues set at $243 million to $263 million [21] - The company expects to resume acquisitions regularly, with a strong acquisition pipeline focused on public sector deals [29] Company Strategy and Development Direction - The company is transitioning to a pure-play vertical market software business, focusing on operational efficiency and technology transformation [8][25] - New product development is underway, including a rewrite of the CAMA platform and the JusticeTech 3.0 platform [28] - The company aims to enhance its cybersecurity measures and streamline back-office technologies to improve efficiency [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term guidance of high single-digit organic growth, supported by a strong sales funnel and product pipeline [10][21] - The company noted that the healthcare segment faces challenges due to consolidation, impacting revenue growth expectations [19][70] - Management highlighted consistent demand in the public sector for configurable web-native applications, indicating a positive outlook for that market [49] Other Important Information - Following the sale of the Merchant Services business, the company has a strong balance sheet with $26.2 million in debt and $86.5 million in cash [20] - The company will incur approximately $65 million in tax-related payments due to the sale of the Merchant Services business [20] Q&A Session Summary Question: Was there any delayed implementation affecting Q4 revenue? - Management indicated no significant delays impacted Q4 revenue, noting a $2 million license fee received as expected [36][37] Question: How should growth be modeled for 2025? - Management expects a combination of new logo growth and improved net revenue retention to achieve high single-digit organic growth [38][39] Question: Update on the utility initiative and rollout timeline? - The company is currently rolling out the initial project and anticipates sales activities to begin in Q1 2025 [44][45] Question: Insights on the M&A environment? - Management noted a strong acquisition pipeline with more realistic valuations from sellers, expecting to complete 3 to 5 acquisitions in 2025 [46][47] Question: General health of customers and macro outlook? - Management reported consistent demand in the public sector and positive trends in sales activity across various verticals [49][50] Question: Clarification on margin expansion expectations? - Management confirmed expectations of 50 to 100 basis points margin expansion for 2025, driven by revenue growth outpacing corporate overhead [55][56] Question: Seasonality and timing of software payments? - Management indicated that software license sales are the most variable line item, with a disproportionate amount expected in Q2 [61] Question: Revenue expectations from the Tier 1 utility project? - The project will generate a mix of revenue types, including professional services and recurring payments, with significant revenue expected in 2025 [63]
i3 Verticals(IIIV) - 2024 Q3 - Earnings Call Transcript
2024-08-11 00:03
Financial Data and Key Metrics Changes - Revenues for Q3 2024 declined 2% to $56 million from $57.3 million for Q3 2023, reflecting organic growth from recurring sources, offset by declines in non-recurring sources [7] - Adjusted EBITDA declined 11% to $12.9 million for Q3 2024 from $14.5 million for Q3 2023, with adjusted EBITDA as a percentage of revenues declining to 23% from 25.3% [9] - Annual Recurring Revenue (ARR) increased 4% to $181.3 million for Q3 2024 compared to $174.5 million for Q3 2023, with over 80% of revenues coming from recurring sources [8] Business Line Data and Key Metrics Changes - SaaS and transaction-based software revenues grew 8%, while payments revenues grew 9% [8] - Non-recurring sales of software licenses declined by approximately $2 million, reflecting the ongoing shift to SaaS [8] - Professional services revenues declined by $1.1 million, primarily due to delays in implementation caused by a public workers strike [8] Market Data and Key Metrics Changes - The company operates in the Public Sector and healthcare markets, with significant growth opportunities identified in these sectors [20] - The utility segment is experiencing broad adoption of the utility customer engagement software, with over 7 million utility customers under management [22] - The education business is expanding its client footprint in existing geographical markets, with new territories opened in North Carolina and Texas [21] Company Strategy and Development Direction - The company is focused on becoming a pure-play vertical software and services company following the anticipated sale of its Merchant Services business [11] - The recent acquisition of a permitting and licensing company is expected to enhance growth opportunities and cross-sell potential within the Public Sector [11][17] - The company aims for high-single-digit organic growth and annual EBITDA margin improvement of 50 to 100 basis points starting in fiscal year 2025 [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that 2024 has been a challenging year due to realignment and divestiture, but expressed confidence in a stronger fiscal year 2025 [5][6] - The company anticipates tailwinds from the Manitoba project returning to normal cadence and continued momentum in the utilities market [13] - Management highlighted the importance of internal growth execution and the visibility of the sales funnel for future performance [6] Other Important Information - The company’s balance sheet remains strong, with borrowings under the revolver net of cash at $341.7 million and a consolidated leverage ratio of 3.6x [10] - The company plans to pay down all of its revolving credit facility following the anticipated sale of the Merchant Services business, leaving capacity for expansion [11] Q&A Session Summary Question: Can you elaborate on the EBITDA outlook for this year and next year? - Management identified $12 million in headwinds for 2024, including $3 million from Manitoba, $5 million from the SaaS transition, and $4 million from the education sector [27][28] Question: What is the growth profile of the recent acquisition? - The company expects double-digit growth from the recent acquisition in fiscal year 2025, with the potential for larger contracts to boost growth rates [30] Question: What are the underlying tailwinds driving demand? - Management noted that utility bills are stable, leading to consistent demand, and RFP activities are increasing, indicating a robust demand environment [40] Question: How does the competitive environment look now that the company is solely software-focused? - The competitive landscape remains consistent, with a focus on software and integrated payments, and the company emphasizes execution and delivery as key differentiators [42] Question: What are the cross-sell opportunities and their potential impact on growth? - Management indicated that cross-sell opportunities are significant, although specific annual growth contributions have yet to be quantified [44]
I3 Verticals (IIIV) Misses Q3 Earnings and Revenue Estimates
ZACKS· 2024-08-09 01:06
Core Viewpoint - I3 Verticals (IIIV) reported quarterly earnings of $0.07 per share, significantly missing the Zacks Consensus Estimate of $0.35 per share, representing an earnings surprise of -80% [1]. Financial Performance - The company posted revenues of $56.04 million for the quarter ended June 2024, missing the Zacks Consensus Estimate by 41.89%, compared to $93.93 million in the same quarter last year [2]. - Over the last four quarters, I3 Verticals has not surpassed consensus EPS or revenue estimates [2]. Stock Performance - I3 Verticals shares have increased approximately 11.7% since the beginning of the year, outperforming the S&P 500's gain of 9% [3]. - The current consensus EPS estimate for the upcoming quarter is $0.47 on revenues of $103.24 million, and for the current fiscal year, it is $1.51 on revenues of $386.19 million [7]. Industry Outlook - The Internet - Software industry, to which I3 Verticals belongs, is currently ranked in the top 38% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8].