i3 Verticals(US:IIIV)2025-11-18 14:30Financial Data and Key Metrics Changes - For Q4 2025, revenues increased by 7% to $54.9 million from $51.3 million in Q4 2024, with organic growth of 4.5% and $1.3 million from acquisitions [9] - Recurring revenues rose by 9% to $41.3 million in Q4 2025 compared to $37.8 million in Q4 2024, accounting for 75% of total revenues [9] - Adjusted EBITDA slightly declined to $14.4 million for Q4 2025 from $14.6 million for Q4 2024, with adjusted EBITDA as a percentage of revenues at 26.2% for Q4 2025, down from 28.5% in Q4 2024 [10][11] - Adjusted diluted earnings per share from continuing operations was $0.27 for Q4 2025 and $1.05 for the fiscal year [11] Business Line Data and Key Metrics Changes - SaaS revenues grew by 25%, offsetting an 8% decline in maintenance revenues [9] - Transactional-based revenues and recurring software services increased by 10%, while payments revenue grew by 11% [9] - Non-recurring sales of software licenses declined by $1.9 million, reflecting a shift to SaaS [9] Market Data and Key Metrics Changes - Justice is the largest market, representing approximately 25% of revenues, with utilities, transportation, education, and public administration contributing equally [13] - The company expects revenue distribution for FY 2026 to be approximately Q1: 23%, Q2: 25.5%, Q3: 24.5%, Q4: 27% [13] Company Strategy and Development Direction - The company has divested its merchant services and healthcare revenue cycle management businesses, focusing on providing software solutions for the public sector [4][8] - Investments in new products and markets are underway, particularly in justice and utility sectors, expected to accelerate in 2026 [5] - The company aims to enhance its public sector vertical through strategic acquisitions and internal development [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in revenue opportunities tied to investments, anticipating durable recurring revenue growth in the long term [5] - For FY 2026, the company expects revenues between $217 million and $232 million, with recurring revenues projected to grow at 8%-10% [12] - Despite a decline in non-recurring professional services, management believes these markets are well-positioned for recovery in FY 2027 and beyond [12] Other Important Information - The company has $85 million in cash on hand with no debt and a $400 million borrowing capacity under its revolving credit facility [11] - The net dollar retention rate for fiscal 2025 was 104%, with expectations for modest price increases contributing to future growth [10][24] Q&A Session Summary Question: Clarification on 2026 organic growth outlook - Management indicated a focus on recurring revenue and expects professional services to decline in 2026 due to timing and cadence of projects [21][22] Question: Details on dollar retention and pricing - Management noted that historical price increases have been conservative, with expectations for a gradual increase in the contribution from price increases moving forward [24][25] Question: Justice tech investment and expectations for 2026 - Management confirmed that investments in justice tech are in line with expectations and will continue into the next fiscal year [26][27] Question: M&A versus buyback strategy - Management refreshed the buyback authorization to $50 million, emphasizing a disciplined approach to both M&A and buybacks, with potential for meaningful acquisitions in 2026 [28][31]