i3 Verticals(US:IIIV)2022-02-09 18:54Financial Data and Key Metrics Changes - The company reported a 66% increase in revenue for Q1 2022, reaching $73.9 million compared to $44.6 million in Q1 2021 [14] - Adjusted EBITDA increased by 72% to $18.3 million from $10.6 million in Q1 2021 [18] - Pro forma adjusted diluted earnings per share rose 67% to $0.35 for Q1 2022 from $0.21 in Q1 2021 [19] Business Line Data and Key Metrics Changes - Software and related services revenue grew 116% year-over-year, representing 49% of total revenue in Q1 2022, up from 38% in Q1 2021 [9][16] - Revenue from the proprietary software and payments segment increased 124% to $44.8 million for Q1 2022 from $20.0 million in Q1 2021 [20] - Merchant services segment revenue increased 16% to $29.2 million for Q1 2022 from $25.1 million in Q1 2021 [22] Market Data and Key Metrics Changes - The company noted an increase in RFP activity within the public sector, indicating a positive trend and strong win rates [12] - The public sector represents roughly half of the consolidated business, while healthcare accounts for an estimated 20% [21] Company Strategy and Development Direction - The company is focused on a software-led strategy, emphasizing growth in proprietary software and payment segments [8] - Recent acquisitions, including a public sector deal, are expected to enhance the company's capabilities and market reach [10][34] - The company aims to maintain a disciplined approach to acquisitions, targeting four to five per year, primarily in public sector and healthcare [36][69] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to produce strong results for the remainder of the year, supported by momentum from previous fiscal year [8] - The company anticipates continued organic growth, with guidance for fiscal year 2022 indicating revenues between $288 million and $304 million [26] - Management acknowledged inflationary pressures on expenses but noted that higher ticket sizes are beneficial for payment processing [55] Other Important Information - The company reported an annualized recurring revenue (ARR) of $240 million, growing 53% year-over-year [10][17] - The balance sheet remains strong, with a total leverage ratio of 3.8 times as of December 31, 2021 [23] Q&A Session Summary Question: What was the approximate growth rate in the second quarter? - Management indicated an organic growth rate of 16% [39] Question: Is the growth in guidance for fiscal year 2022 primarily from the recent public sector acquisition? - Management stated that the majority of the growth is from the acquisition, but there was also a slight beat in Q1 expectations [47] Question: How does the company view inflation's impact on top and bottom lines? - Management noted that higher ticket sizes are generally good for payment processors, while they are experiencing pressure on compensation due to inflation [55] Question: What is the expected margin expansion in Merchant Services? - Management targets a margin expansion of 50 to 100 basis points per year, with expectations to reach the 30% EBITDA margin range over time [64] Question: How does the company view the current acquisition environment? - Management believes that private company valuations remain stable and anticipates continuing their acquisition strategy at a pace of four to five per year [69]