i3 Verticals(US:IIIV)2025-05-09 13:32Financial 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]