i3 Verticals(IIIV) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q1 2026 increased by 1% to $52.7 million from $52.2 million in Q1 2025, reflecting expectations [8] - Recurring revenue grew by 8% to $169.6 million compared to $156.4 million in Q1 2025, constituting 80% of total revenue [8] - SaaS revenue led with over 24% growth, marking four consecutive quarters of over 20% growth [4][8] - Adjusted EBITDA declined by $1 million to $13.6 million, with a margin of 25.8% compared to 27.9% in Q1 2025 [9] Business Line Data and Key Metrics Changes - Professional services and software license revenues declined by $3 million, impacting overall revenue growth [8] - Maintenance revenues decreased by 8%, attributed to a shift towards SaaS and new sales [8] Market Data and Key Metrics Changes - Transaction-based revenue grew by 12%, and payments revenue increased by 8% [8] - The company is well-positioned in the transportation market, with a focus on software solutions for public sector needs [5][12] Company Strategy and Development Direction - The company announced a new acquisition in the transportation market, enhancing its geographic reach and product offerings [10][12] - The focus remains on recurring revenue sources, with expectations for double-digit growth in FY 2026 [11] - The company is exploring opportunities in AI to enhance product offerings and improve operational efficiency [19][40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth potential, despite a modest revenue increase in Q1 2026 [4] - The company anticipates a rebound in non-recurring professional service revenues in FY 2027 and beyond [11] - There are expectations for continued strong demand in justice tech and transportation markets [17][18] Other Important Information - The company maintains a strong balance sheet with $37 million in cash and no debt, and a $400 million revolving credit facility available for acquisitions [10] - The acquisition was valued at $60 million, with a multiple of approximately 15x EBITDA, reflecting the target's strong growth and margins [10][50] Q&A Session Summary Question: Update on FY 2026 outlook and organic growth - Management confirmed a slight decline in organic growth, primarily due to professional services revenue adjustments [21][22] Question: Recurring revenue growth expectations - Management reiterated expectations for recurring revenue growth of 8%-10% for FY 2026, excluding the impact of acquisitions [23] Question: Capital allocation strategy regarding buybacks and M&A - Management indicated a significant buyback of shares in the last quarter and emphasized an opportunistic approach to buybacks while pursuing M&A [24][25] Question: Details on the new acquisition's market share and revenue model - The acquisition is expected to enhance market presence and is currently not transactional, with potential for future integration into existing services [28][29] Question: Drivers of SaaS revenue growth and sustainability - Management expects organic SaaS growth to remain above 20%, driven by various market segments [35][36] Question: AI adoption and its impact on GovTech - Management discussed the challenges and potential of AI adoption in GovTech, highlighting the need for frameworks and policies [39][40]