i3 Verticals(IIIV) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue increased by 12% year-over-year to $61.7 million from$ 55.1 million in Q1 2024, reflecting organic growth of 10% and approximately $1 million from a recent acquisition [14] - Adjusted EBITDA rose by 17% to$ 16.4 million for Q1 2025 from $14 million for Q1 2024, with adjusted EBITDA as a percentage of revenues increasing to 26.5% from 25.4% [17] - Annual recurring revenues (ARR) increased by 7.6% to$ 193.3 million for Q1 2025 compared to $179.6 million for Q1 2024 [14] Business Line Data and Key Metrics Changes - SaaS revenue grew by 16%, contributing significantly to the overall revenue growth [7] - Payments revenue increased by 7%, with expectations that SaaS and payments revenues will outpace other forms of revenue for the remainder of the year [15] - Non-recurring sales of software licenses increased to$ 2.7 million for Q1 2025 from $0.4 million for Q1 2024 [15] Market Data and Key Metrics Changes - Revenues in the public sector vertical increased by 12% to$ 48.8 million for Q1 2025 from $43.5 million for Q1 2024, representing 79% of total revenues [19] - Healthcare segment revenues increased by 14% to$ 13.2 million for Q1 2025 from $16.6 million for Q1 2024, driven by recurring software services and non-recurring sales of software licenses [20] Company Strategy and Development Direction - The company continues to focus on integrating payments within its vertical market software base, particularly in key markets such as utilities and permitting [9] - M&A remains a critical part of the company's strategy, with a strong pipeline focused on the public sector vertical [27] - The company is transitioning legacy contracts to a SaaS model and introducing new technology modules to meet current market demands [36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the fiscal year 2025, highlighting strong revenue growth and the potential for continued ARR growth driven by SaaS [7] - The company anticipates high single-digit organic revenue growth with adjusted EBITDA margin improvement of 50 to 100 basis points per year [23] - Management noted that the competitive landscape for larger utilities is positive, with increasing demand for upgraded software solutions [59] Other Important Information - The company has a strong balance sheet post-sale of the Merchant Services business, with a cash balance of$ 85.6 million and $450 million of borrowing capacity on its revolving credit [21][22] - The company reaffirmed its guidance for FY 2025, projecting revenues between$ 243 million and $263 million and adjusted EBITDA between$ 63 million and $71.5 million [23] Q&A Session Summary Question: Any lumpiness in healthcare growth? - Management expects low single-digit growth for healthcare this year despite recent improvements [48] Question: Update on large utility customer project? - The project is progressing well, with expected revenue growth from approximately$ 3 million to $5 million this year [54] Question: Competitive landscape for larger utilities? - The landscape is positive, driven by the need to upgrade legacy software, with increasing demand for new technologies [59] Question: Differences between larger and smaller M&A opportunities? - The company continues to focus on deals between$ 2 million and $5 million in EBITDA, with no significant changes in the competitive environment [72] Question: Outlook on spending trends at the state or city level? - No pullback has been observed, and the company is focused on providing flexible deployment options for government agencies [75] Question: Drivers of high single-digit organic growth? - The growth is driven by a combination of new logos and existing projects, with expectations for inflation to contribute slightly in the future [93]