i3 Verticals(US:IIIV)2025-11-18 14:32Financial Data and Key Metrics Changes - Revenue for Q4 2025 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] - Annual recurring revenue (ARR) grew over 9% in Q4, outpacing overall revenue growth [5] - Adjusted EBITDA for Q4 2025 slightly declined to $14.4 million from $14.6 million in Q4 2024, with adjusted EBITDA as a percentage of revenues at 26.2% for Q4 2025 compared to 28.5% for 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 - Recurring revenues increased by 9% to $41.3 million in Q4 2025 compared to $37.8 million in Q4 2024, with 75% of revenues coming from recurring sources [9] - SaaS revenues grew by 25%, offsetting an 8% decline in maintenance revenues [9] - Professional services revenue increased by $1.8 million, partially offsetting the decline in software and license sales [9] Market Data and Key Metrics Changes - Justice is the largest market, representing approximately 25% of revenues, with utilities, transportation, education, and public administration being roughly equally weighted [13] - The company expects revenue distribution for FY 2026 to be approximately Q1: 23%, Q2: 25.5%, Q3: 24.5%, Q4: 27% [14] 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] - Investments in new products and markets are ongoing, particularly in justice and utility sectors, with expectations for accelerated growth 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, expecting durable recurring revenue growth over the long term [5] - Guidance for FY 2026 includes revenues of $217 million to $232 million and adjusted EBITDA of $58.5 million to $65 million, with recurring revenues expected to grow at 8%-10% [12] - The company anticipates a decline in non-recurring professional services in FY 2026, but expects a rebound in FY 2027 and beyond [12] Other Important Information - The company has $67 million in cash and no debt, with $400 million of borrowing capacity under a revolving credit facility [11] - The net dollar retention for fiscal 2025 was 104%, with expectations for modest price increases contributing to future growth [10][25] Q&A Session Summary Question: Clarification on 2026 organic growth outlook - Management indicated that they are focusing on recurring revenue and expect professional services to decline in 2026 due to timing and cadence of projects [22][24] Question: Inquiry about dollar retention and pricing - Management noted that historical price increases have been conservative, but they expect to achieve a consistent 3%-5% price increase range moving forward [25][26] Question: Discussion on justice tech investment - Management confirmed that investments in justice tech are in line with expectations and are aimed at accelerating development and implementation [27][28] Question: Thoughts on cash balance and buyback versus M&A - Management stated that they have refreshed a $50 million buyback authorization and are focused on being opportunistic, while also indicating ongoing M&A discussions [30][32] Question: Clarification on M&A strategy - Management clarified that they are looking for meaningful acquisitions, primarily in the $2 million-$5 million EBITDA range, but nothing transformative [34][35]