i3 Verticals(IIIV)2024-08-11 00:03Financial Data and Key Metrics Changes - Revenues for Q3 2024 declined 2% to 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 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 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 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 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]