Q3 2020 i3 Verticals Inc Earnings Call
Good day, everyone and welcome to ice free verticals third quarter 2020 earnings conference call.
Today's call is being recorded and a replay will be available starting today through August 18th.
A replay of seven one night or 570 820, and the code is for 401933.
The replay may also be accessed for 30 days at the company's website.
At this time for opening remarks, I would like to turn the call over to Scott Mary Weather Chief Operating Officer. Please go ahead Sir.
Good morning, and welcome to the third quarter 2020 conference calls Rocky verticals joining me on this call our great Daley, our chairman and CEO Clay Watson Rcs enriched entered our president.
To the extent any non-GAAP financial measure as discussed on todays call. You'll also find a reconciliation of that might start to the most directly comparable financial measures calculated according to GAAP or do you in yesterday's earnings release. It it's a companies and chat to provide non-GAAP financial information to enhance understanding this consolidated financial information has prepared in accordance with gap.
This non-GAAP information should be considered by each individual in addition to but not in set up the financial statements prepared in accordance with gap.
This conference call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, including statements among others regarding the company's expected financial and operating performance and the expected the potential impact of the Kevin Knight seen pandemic.
For this purpose any statements made during this call that are not statements of historical fact, maybe deemed to be forward. Looking statements. You were hereby cautioned that these forward looking statements may be affected by the important factors among others set forth in the company's earnings release, and then reports that are filed or furnished to the FCC, including risk and uncertainties, especially associated with it.
But not seen pandemic consequence, consequently, actual operations and results may differ materially from the results discussed and forward looking statements.
Finally, the information shared on this call is not as of today's date and the company undertakes no obligation to update it except as may be required under applicable law.
Now I'll turn the call efforts the company's tremendous he sense, yeah, Greg daily.
Thanks, Scott and good morning to all of you.
We're pleased with our third quarter performance, despite the impact of Cobot 19.
We thank all of our team members to rapidly transition to new working arrangements during the quarter and supported each other and our customers in an admirable way.
As the U.S. market begins to reopen throughout the quarter, we're encouraged by improving trends in our payments volume and as a result, our financial results.
The government mandated shut downs in mid March had an immediate downward impact on or payment volume.
Our payment volume hit low in its lowest point in April and began to steady recovery throughout the remainder of the quarter.
[noise] payment volume in July which is the first quarter. The first month of our fourth quarter continued to improve.
In August payment volume continues to improve throughout.
The beginning of the month.
Our education sector was the hardest hit.
Schools shut down for the most of the quarter, we're working with our K 12 customers as they transition the reopening plans, we expect our fourth quarter will be impacted by lighter payment volumes and our.
Education vertical despite these challenges one positive trend for US It's school districts are engaging with parents and students and more software based and online formats.
Very proud of our team and how they realize social distancing would impact school lunch preparation.
The product leadership teams quickly rally and developed a new pre order lunch product and have launch this product for this school year, we've already had around 100 customers ask for product quotes and many of these districts have already installed this new products.
Our ability to be nimble and quickly to respond to customers needs. It's one of our biggest strengths I commend our team for this product launch. Despite most school districts being shut down or education team had great success in closing sales to new districts for the S County School year.
One other highlights and within education is that we signed our first significant higher education customers during the quarter.
This customer is already installed and lives and we expect significance payment volume from this relationship.
Outside of education.
Sales was impacted across the board during the third quarter as you would expect.
It's in public sector vertical many local education or live many local government offices were closed.
These filings were reduced due to court closures and new traffic tickets fell significantly substantially as people reduce their travel.
As they corn changed at home. We've seen case studies are case filings in July and <unk> in early August recover and our payment volume continues to improve as a result.
As it relates to software sales, we were able to install some SAS based public sector customers during the third quarter, but other schedule installations were delayed and.
We've seen an increased demand in public sector vertical as more local governments seek modern.
Solutions to serve their constituents in online contact list formats.
We believe the pandemic will accelerate the call for local governments to modernize and remain positive about the future a public sector vertical.
Within our merchant services segment, we experienced the same volume impact seen by the entire industry in particular, a point of sale hospitality business was hard here during the third quarter due to mandated shutdowns.
Our integrated is the business fared better during the third quarter, particularly within nonprofit and health care, which outperformed our expectations.
We're also encouraged by new business trends in.
Merchant services June was a record month for a new account sign for us and the momentum can carried into July.
Rick will speak to M&A momentarily, but I wanted to briefly touch on our acquisition strategy on her last call. We noted we had pause all acquisition activity until there was greater visibility into the impact of cobot 19.
We subsequently restarted or acquisition processes and closed to new acquisitions at the beginning of July.
One within public sector vertical the other one as a new software play within nonprofit vertical.
We'll continue to monitor the Matt macro economic environment, and our leverage as we continue our M&A activity.
We look forward to continued economic recovery.
During the fourth quarter and into our 2021 fiscal year, we're confident in our product offering and I know that they saw they did they issues for our customers, we're very well positioned for future growth in the coming years.
Clay would you provide financial overview.
Sure.
The following pertains to the third quarter of fiscal year, 2020, which has a three month period ended June Thirtyth 2020.
Please refer to the slide presentation titled supplemental performance on our website for reference but this discussion.
We have added some payment volume and software revenue trends to go along with the segment presentation.
Despite the challenging environment, we had a solid quarter with net revenues of 31 point Sixmillion and adjusted EBITDA of 7.1 million.
I will start with sequential numbers, because a significant month to month changes since switch so year over year comparisons later in the discussion.
When we reported last quarter, we had seen a 30% sequential decline in payment for the month of April.
But that proved to be the floor with may increasing 29% and June another 19%.
July then increased another 4% and the first week of August is up 5% over the first week of July.
We have an entrepreneurial results oriented organization and our business leaders all rose city occasion, pivoted to products and services best suited to the environment.
We quickly implemented cost cutting measures, which are evident and our Q3 results and as Greg mentioned, we had a record sales month in June.
We believe we have the necessary morale and <unk> momentum to thrive in these times.
We're glad that we focused on the software revenue streams since the IPO forget it because it has been more resilient than famous and the Cove at 19 environment.
Cushion in our revenue decline.
Software and related services revenues declined 15% from Q2 to Q3 as government closures delayed installations, but we still expect <unk> recognize these revenues went installations are complete.
Elsewhere and services revenues accounted for 26% of total revenues for Q3.
Pre IPO fiscal year 17, it was only 5%.
When compared to the prior year.
Net revenues declined 12% to 31.6 million for Q3 2020.
36.0 million for Q3's 19.
Reflecting government mandated business closures school closures and stay at home orders.
Acquisitions contributed an increase of 3.7 million in the quarter.
[noise] IPO asked declined 1.4 million, reflecting not only the covered impact in California, but also our successful transition to a SaaS offering which we're very pleased with.
Our net revenue yield defined as net revenues divided by payment volume held steady at 106 basis points.
Adjusted EBITDA declined 27% to 7.1 million for Q3, 20, Sweeney from 9.7 million for Q3 19.
Please see the press release for a reconciliation between net income adjusted EBITDA.
Adjusted EBITDA as a percentage of net revenues was 22.3% for Q3 2020 down from 26.9% for Q3, 19, reflecting fixed cost spread over a lower net revenues due to the covert 19 impacts.
In the absence of the cover at 19 impact we expect it to approve our EBITDA margin this quarter.
Effective April 1st we instituted previously disclose cost savings, which includes determinations and furloughs.
These cost savings together with lower TNT expenses saved almost 3 million this quarter, which allowed our corporate expenses as a percentage of net revenues remained steady at 7.2%.
For both Q3, 2020 and Q3 19.
Despite lower revenues net revenues.
We assess recalled roughly half of the furloughed employees as business has rebounded, but expect to retain about 1 million in savings quarterly on an ongoing basis.
Pro forma diluted.
Skews a pro forma adjusted diluted EPS diluted earnings per share were 13 cents for the quarter.
Again, please refer to the press release for a full description and reconciliation.
[noise] [noise] a segment performance.
And our proprietary software and payments segment net revenues were 10.5 million for Q3 2020 flat from Q3 19, but benefited from three acquisitions completed during fiscal year 19.
Adjusted EBITDA declined 24% to 2.7 million for Q3 2020 from 3.5 million for Q3, 19, principally reflecting school closures and the associated absence of payment revenues.
[noise] EBITDA as a percentage of net revenues was 26% for Q3 2020 versus 34% for Q3, 19, reflecting fixed cost spread over a lower revenue base like at the consolidated level.
I want to pause on education for a minute because I know, it's currently top of mind for a lot of people schools began shutting down in mid March. So this quarter, we last April and May from a payments perspective.
In June as always low anyway.
We've gotten so that we can sort of break even in the summer months, because our recurring software revenues cover our operating expenses, which is an accomplishment.
This year, we have pivoted to a number of software offerings, such as lunch preorder and quick apps and digital ideas, which enable contact plus interactions for the current environment.
So we're optimistic we can continue to grow our software revenues in education, even in an environment, where remote learning might persist for many decades districts across the U.S.
From a sizing perspective [noise].
Our processing margin from payments revenues and education.
Represented a little less than $10 million for the four quarters ended March so pre cobot.
Including school pay for a full 12 months.
The September quarter represented about 25% of that.
Even if all districts decided on remote learning for the entire year, our payment revenues would not go to zero.
Our current best guesses that we might see 50% of normal payments for the fall semester.
But there's clearly extra variability to this number both up and down.
As of the news keeps changing on a daily basis.
Regardless of how this semester in the school year unfold, we love the vertical and believe it will perform very well over the medium and long term.
Given the state of education in the June quarter, our public sector vertical represented over three quarters of the net revenues in the segment and virtually all of the profit for the segment.
Well courts that close traffic tickets were down and some software installations were pushed we remain confident and the verticals performance over the near term and long term.
Net revenues for our merchant services segment declined 16% to 21.5 million for Q3 2020 from 25.5 million for Q3 19.
Our hospitality vertical was hardest hit with the exposure to California, and the transition to assess model, but we benefited from three months of the pace acquisition versus just June in the prior year period.
Pace works, mainly with public sector software vendors with good exposure to utilities, which have held up well and the covered 19 environment.
The purchase portfolios declined 38% to 855000 for Q3 2020 from 1.4 million for Q3 19.
Adjusted EBITDA for our merchant services segment declined 24% to 6.6 million for Q3 2020 from 8.8 million for Q3 19.
[laughter].
The EBITDA margin was 31% for Q3 2020 versus 34% for Q3 19.
Again, reflecting fixed cost spread over a smaller revenue base.
[music].
The balance sheet.
Remains strong during the quarter, we took the opportunity to repurchase approximately 9 million of our convertible notes at roughly 80 cents on the dollar.
Which produced a positive I R and actually helped our leverage because of the net reduction than our debt balance.
As of June Thirtyth, we only had 35 million borrowed under our revolver, which is a 275 million facility.
Our total leverage ratio, which includes the convertible notes was 3.7 times, while the current constraint is 5.0 times.
But the two acquisitions closed on July 1st for 16.3 million, our pro forma total leverage ratio was 3.9 times.
The multiple pay for these two acquisitions was consistent with our historical range of eight to 10 times EBITDA.
The interest rate for the convertible notes or 1%, while the interest rate for the revolver is currently less than 4%.
Overtime, we expect to convert roughly two thirds of our EBITDA into free cash flow, which they need to reuse for acquisitions or debt repayment [noise].
[noise] outlook the Pope at 19 pandemic has created significant uncertainty in the economy and the extent of which covered 19 will impact the company's future results is difficult to reasonably estimate at this time.
Therefore, the company is not providing a financial outlook for the fiscal year ending September Thirtyth 2020.
Well, we currently expect Q4 ending in September will Mark an improvement over Q3, we do not anticipate it will approach the levels of net revenues EBITDA or EBITDA percentage margin. We saw in Q4 2019.
The state of the pandemic and economic recovery, particularly in the education vertical will govern our progress.
To give a better understanding of our business mix. We gave the following estimates last quarter, which represent pre cobot run rates. We do not currently planned to update these on an ongoing basis.
Public sector, 25% hospitality, 15% education, 10%.
The 10% health care, 10% retail, 10% nonprofit 5%.
And other 15%.
We liked this diversification hospital hospitality and retail, which we consider the toughest verticals over the next few years only represent 25% of our book.
Our largest vertical as public sector, and we feel increasingly well position there.
Lighten governments schools do not go out of business.
Health care is an essential service and B to B will grow over time.
We just acquired a software platform in a nonprofit nish that has grown during the pandemic.
Digitization of payments away from cash and check will continue and we'd have differentiated payment solutions to offer our customers integrated through our software and other leading software providers.
I'll now turn over to Rick for the company updates and M&A activity.
Thank you CLYC good morning, everyone before I talk about our M&A status I want to highlight recent progress on a few operational matters, including a couple of updates on items I've discussed in prior calls first an update on our unified product offering or you'd be though in our public sector vertical a topic that I've discussed before given the.
Growth of our public sector vertical since our IPO and the number of products that we've added in that vertical. Our yukio efforts are is especially important our goal is to make a comprehensive suite of products available to each county and city, we want to become a one stop shop for these customers the offering consist of utility billing with.
The billing and payments case management systems for criminal civil and small claims courts, funniest, specifically government fund accounting or G.F. a day.
Property tax collections, permitting and licensing and payment processing and reporting reconciliation.
I would also like to point out that we would like to add law enforcement to this list and our current plan is to acquire these products through a strategic acquisition. This includes public safety jail in prison management and mobile eat ticketing to name a few.
We are encouraged with early successes cross selling is gaining momentum at our current pipeline for U.P.O. opportunities is over 125 strong.
Second on the eyes to be fraud.
Total number of signed an integrated icees at the end of our third fiscal quarter is 59 with three more in price in the process of integration.
We are in close contact with a number of ice season, we expect to sign and integrate a good portion of those ideas to the opportunities over the coming months.
Third while we often acquire mature products via acquisition. We also have an in house team that develops our own original software to fill particular needs and select verticals. We have just released an original and proprietary product called <unk> three donate for use within many of our partner channels. This product was requested.
By one of our bank partners, who wanted to offer its nonprofit D.A. customers a product that is outside of their standard banking services. This bank white label product allows them to assist their customers with another avenue for generating revenue in a quick and efficient branded tool for online given.
We're very proud of our development team and their steady heads down work towards getting this product built and released in a timely fashion, it's an exciting new product to add to our solution suite.
Lastly, a few comments about our M&A efforts. Despite the cobot downturn, we've continued to identify interested sellers and our pipeline is very healthy our pipeline as populated with an emphasis on public sector with some education nonprofit and health care mixed in.
We are in regular discussions with these targets.
We mentioned several signed term sheets on the last call, but we explained that our acquisition activity had been temporarily suspended in reaction to the cobot downturn since that time, we have restarted those activities and recently closed two of those deals. The first was in our active public sector space and gives us a good footprint geographically.
Where we have not been before.
This 42 year old company sells a combined product solution, consisting of case management systems for criminal civil and small claims courts ordinance, such as permitting and licensing traffic violations and other and fractions and parking all with web enabled data access.
Second acquisition is in the nonprofit sector. Many of you know we've been trying to own software in this vertical for several years and it looked at many deals this acquisition fits our M&A strategy of acquiring high growth businesses with attractive margins in large vertical markets.
This organization began offering several products on the church space in 2006 some of their products include tie things set up for recurring donations the ability to give different <unk> two different funds all via text mission trip updates call for volunteers event, reminders, giving appeals and connectivity with potential new.
Parishioners.
We also strongly believe the software can be used in many of our other verticals within the near future.
The solution already delivers mobile payment and communication solutions to targeted vertical market segments.
These two acquisitions further our goals of adding extremely talented people to our team enhancing our overall product suite and positioning us to lead in the shift from legacy payment methodologies to cutting edge software and with embedded payment capabilities as clay mentioned before we continue to be disciplined in our approach in both.
As acquisitions were completed within our standard standard multiple range.
We look forward to sharing more on the acquisition front in the near future.
This concludes my comments Audra at this time, we'll open the call for you and I.
Thank you if you would like to ask a question. Please press star one on your telephone keypad <unk>.
Please make sure.
Hello.
<unk>.
Again.
<unk>.
We'll go first John Davis at Raymond James.
Hey, good morning, guys.
So clay and Greg I appreciate the disclosure I'm on the quarter date volumes, but any sense on does that tracking revenue relatively close I think in the quarter revenue is down I think 12% volumes were down 13%. So any reason that's changed and that you could just kinda give us what volume is all year over year basis.
Quarter to date that'd be helpful.
Uh huh.
Well ours.
Our margin on on the volume the net revenue yields did remain constant during the quarter at 106 basis points.
Schools do help that so in the in Q4, depending on what schools do.
You know that.
I would have a small negative impact on the net revenue yields, but I guess, we'll wait and see.
Year over year, our volume is down still.
I don't have the exact percentage but.
We're still in a recovery mode, where we're gaining back altitude we lost in April.
But I mean, I think schools were headwind so maybe maybe revenue.
There's a couple points off of a volume growth. There's no reason that should be it should do you need materially.
That's helpful and then Greg I wanted to talk a little bit about the you mentioned you've seen increased demands or interest in public sector. Maybe cove. It is hardly woken up some government agencies and two digitalizing more and offer a payments perspective, but also software perspective. If you have any examples are just guessing.
That was a very interesting Tom it anymore color there would be helpful.
Rick you want to something yes, John that's great question, we are seeing people moving more to assess model.
Online.
I think clay mentioned that some of our installations push and that's giving people the opportunity to think about the type of level implementation that they desire.
And and we're seeing everybody moving to online at this point to the extent that outside of the courts, even attorneys are being able to pass court documents online to each other.
Income to agreements with our products, so we see that going forward and not changing.
Okay, and then last one for me a play any quantification on what some of the delayed implementations where from a revenue perspective, obviously delay doesn't mean, it's going away. So just trying to take about what that headwind was in the quarter, even just to arrange be helpful. Thanks guys.
Oh I know at one particular company, we had one 250000 dollar job push.
So it'd be north of that if we were to look companywide I don't have an exact number.
No that's helpful. Alright, thanks, guys.
Thank you.
Okay.
Well move next to Jason Kupferberg at Bank of America.
Yep.
So just wanted to ask about the revenue.
You mentioned from the most recent acquisition, but you guys side.
Ah Cafe, we've we've our practice has been to give the purchase multiple.
And that's.
The 10 times, so you can surmise from that.
One to 1.5 million of of EBITDA between the two.
And maybe you could use our.
Standard margin and software to estimate revenues off of that.
Got it that's helpful and secondly.
Yes.
I'm, sorry card not present transactions and how much a total volumes they represent sort of how fast it this growing Brazil card.
Thanks.
Card not present is over 50% of our transactions that declined a little bit and this quarter or with the absence of school you know school revenues are 95% online.
Ends.
Over time that is increasing and its corresponded pretty closely to the integration percent we give.
But we expect it to increase overtime schools of area going in the short term.
Got it thanks.
For taking my question.
You're welcome thank you.
Well go next to Peter Heckmann D.A. Davidson.
Okay, there's just a follow up.
Yeah.
For July.
4% sequentially.
Yeah, you had said.
Year over year basis.
Can you pull that together just to give us an idea.
Standing in the.
So I guess as well.
I believe July was down.
You have the exact number 5% yeah.
And August for the first week.
It is also 5%.
Down from previous year.
Got it okay, that's helpful and that.
Really within the.
The non profit.
That.
That is pretty cold or just about 5% I guess, when you think about that vertical.
Are there other large players that they play in that vertical or would you characterize it as.
Primarily pretty fragmented.
Oh, well, it's both Peter there's there's some large players and then there's a lot of smaller players.
We were excited I'm just acquisition that I mentioned earlier, you know churches weren't allowed to gather and people were used to putting checks and cash in the offering plate and they've gone to online sermons and they're actually posting ads at the bottom the screen throughout the sermon where people can text to donate.
And they're donations are actually up year over year. So we're excited about that vertical.
If I answered your question.
No that that's helpful. Then how would you characterize it.
The the education, you kind of giving some thoughts around that I just.
Seen any aggregate numbers, but you're kind of assuming it's about 50% Oh the.
<unk> population is first of all that with the common.
Vicki.
Sure.
Ah, we did say, 50%, but not that's not the number of students remote versus end person.
We still collect a number of fees for registration for all types of things whether schools are in person or remote.
So it's probably a lower percentage that are in person then 50%, but we're estimating will garner about 50% of our normal revenues.
Given what we know today.
Got it right that that that's helpful.
Thanks much.
Well go next to Josh <unk>.
I think you for taking the question. So yeah, I wouldn't talk little bit well John's question earlier about maybe some of the changes.
Courage and yeah, maybe leading indicators you're seeing within.
The public sector. It certainly sounds like there was some elements of that.
As well in the education sector about maybe people realizing the importance of.
Digitizing you know some of these these processes. So I'm just wondering when you look at.
Some of those types of changes that have happened in the last a month's does it change the high levels strategy, where those are sectors you want to focus on more obviously, you're already quite focused on that but I'm. Just wondering if because of everything that's happened in the last months if its shifted your strategic focus.
In any notable way.
Well, we clearly like software revenues and the fact that we believe we can increase our software revenues even in this environment.
Speaks to why we like it so much.
We have a pretty.
Our team is pretty quick to pivot I would say they've been in the business for a long long time, they know the customers.
Our customers once things sometimes for years before they actually pull the trigger and this environment has been a catalysts for they they need to pull the trigger on some of these things. So we were ready to go.
With products that they should have been using for years anyway, but this is just a good environment to get them to make the take the plunge.
Okay. That's helpful and you know who's kind of interesting to hear.
Yeah, Greg and maybe Rick both commented on the record new sales so that that's pretty.
Across the we'd given lots of your folks are probably [noise].
Working from home than virtually such so just would be curious maybe what drove that if it was just a lot more.
Maybe inbound activity or maybe like you just mentioned clay about.
People, just yeah, maybe being a bit more yeah kinda rapid to adopt some new thing they tended to do you would love to hear what what some of the drivers there were.
Well there's.
Multiple reasons.
I think our marketing department has a lot larger and.
Very effective very active compared to where we have been and.
They have taken a us to new level when it when it came to that so we've given our salespeople a lot more leads.
When we go out for a webinars, where normally having 50 people at best case.
Show up in a 10 now we're having hundreds of people do it online.
Education public sector you know.
ER crushing it when it comes a new sales.
You know the merchant of record.
Uh huh.
Are you know, it's having a unbelievable month production goals production contest.
And then you know we started this whole.
Journey, seven eight years ago thinking that.
The convergence of payments and software and technology.
This pandemic may be one of the best things that ever happened to our company looking a couple of years from now so.
People just you know.
Getting modern technology contact was a updating.
There's an incredible amount of people that are still working you know every day and a navy payments and technology in software was not quite there priority.
That went into this pandemic and now they've had time to work on it and.
That's what I, that's where I think.
The increase a new businesses coming from.
Okay, Oh really helpful. And then just last question I just.
Kind of quarter to date trend. So just to clarify so I believe clay you said basically down about 5% quarter to date on a year over year basis.
And then you certainly talk through you know education, a bit and you know what could happen in the fall, but certainly there's.
Very likely you know more material headwind as we go through there. So you know as we build out or models.
Other factors you may be.
You know seasonality of certain businesses that we should be thinking about the could maybe be different when you think about the second half of August and September versus the quarter. It's the performance.
I can't really.
Think of anything.
Other than that.
Anyway.
Yes.
Well I mean, well I've got that they mentioned that [laughter] some costs are coming back.
You know weve recall, a buffer laws. So you can build that into your model I think.
Okay that a that makes sense. Thanks, everyone really appreciate it thanks, Josh yes.
And as a reminder, if he would like to ask a question. Please press star one well go next to George Mihalos Cowen.
Hey, guys congrats congrats on the quarter and.
So the sales momentum.
Wanted to want to start off on the on the on the education side and I I think.
Talked about winning your first ever sort of higher education.
I'm unclear so guys anything.
As.
A one off is that an opportunity for you we need the or competitive landscape I put that deal was that different than what used to see.
Yes. It is very different it is a a huge opportunity. It's a major university that it's a household name.
You know.
Maybe we have five or six.
In the coming year, a new ones that we add it's not hundreds it's not you know we're we're not thinking that it is on.
Something that we pivoted from K through 12, but it was a a large RFP and we do plan to.
Take our success and try to duplicate it a in other large university and higher Ed but Oh.
You know, it's it's a big win is something new exciting.
But you know the magnitude.
Well, let you know next quarter, but you know we just brought this went up in the last.
Two weeks or we're not accustomed to seeing this kind of volume because our K through 12 schools you know they may do.
10, or $20000, a month or it's small volume smaller average ticket, whereas higher education as a whole different animal.
Yeah.
Okay. That's that's that's helpful and then clay Youre your comment around.
Well good volumes being down right about five person here at the beginning of the mom is it.
Fair to assume that there'll be some degradation in that number as we go to the latter part of August just assuming that school start to play a bigger part later in August and then obviously in September.
Oh I guess, that's that's fair.
But school volume as small it's very high margin, but it's it's small volume. So I don't think it'll tell the volume much about it'll.
If.
Going to 50% of revenues from 100% we feel that.
Okay, and just just last one for me on on the on the M&A pipeline and it's good to see you guys are converting some of these deals with the the pro forma leverage now right about four times 3.9 times, what will that caused you know a bit of a pause in you are.
Activity over the near term, thanks, guys and congrats again.
Thank you.
Well I guess, what I would say that georgeson most of our deals are small as you say, we did two for 16 million that moved to the leverage ratio.
Two tenths of a turn.
And so we're not going to pause, we'll find a way to do our deals.
We do want to manage our leverage ratio close to four so.
We'll find a way to do that that's acceptable to.
Our board and and we think is the best way to do it but we're going to continue to do deals.
[music].
And at this time, we have no further questions I'll turn the conference back over to Greg Daily for closing remarks.
Well, thanks again, everybody for attending a we are.
Very optimistic a very bullish or the trends that we're seeing literally on a daily basis and on a.
Once we figure out the next 30 days about schools, a which you know I think we'll give you a positive reports soon on that.
But.
The team is taken advantage of this time and opportunity to get out there and improves our relationships and our products and software. So anyway. Thank you.
And that does conclude today's conference again, thank you for your participation.
[music].