Q2 2021 I3 Verticals Inc Earnings Call
Good day, everyone and welcome to the ice free vertical of the second quarter 2021 earnings conference call.
All participants will be in listen only mode.
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Today's call is being recorded and a replay will be available starting today through may 18 the.
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317.
Zero zero H eight and the.
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The replay may also be accessed for 30 days of the company's web site at the.
This time for opening remarks, I would like to turn the call over to Scott Meriwether Chief Operating Officer. Please go ahead.
Good morning, and welcome to the second quarter 2021 conference call for I think verticals.
Joining me on this call I, Greg Daily, our chairman and CEO Clay Whitson, our CFO and Rick Stanford our president.
The extent any non-GAAP financial measures discussed in today's call. You will also find the reconciliation of GAAP measure to the most directly comparable financial measure calculated according to GAAP by reviewing yesterday's earnings release it was the.
The next intent to provide non-GAAP financial information to enhance understanding of its consolidated financial information I was prepared in accordance with GAAP. This non-GAAP information should be considered by each individual in addition to but not instead of the financial statements prepared in accordance with GAAP.
This conference call May contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, including statements among the others regarding the company's expected financial and operating performance and the expected and potential impact from the COVID-19 pandemic, but that's the purpose of any statements made during this call that are not statements of historical fact may be deemed to be forward looking.
Statements.
I 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 in reports that are filed or furnished to the SEC, including risks and uncertainties.
Uncertainties associated with the COVID-19 pandemic. Consequently, actual operations and results may differ materially from the results discussed in the forward looking statements.
The information shared on this call is valid as of today's date and the company undertakes no obligation to update it except as may be required under applicable law.
And now I'll turn the call over to the company's chairman and CEO Greg Daily.
Thanks, Scott and good morning to all of you.
We were pleased to report our second quarter 2021 results as we set new record highs across the board.
Our net revenue.
Adjusted EBITDA.
Software revenue.
I mean volume and integrate the volume where all of the new highs.
We exited the quarter with incredible momentum and are excited about what the future holds.
Despite facing a more difficult year over year comparison as the pandemic did not affect our business until mid March 2020.
We demonstrated substantial growth in 2020.
We could not be more pleased with the what we delivered in the second quarter as our adjusted net revenue increased 26%.
The 49, six to $49 4 million in the second quarter and our adjusted EBITDA increased 25% the $12.4 million.
When compared to the second quarter of 2020.
Okay.
Year to date, our software revenue or software related revenue has increased 36% to sort of 236% of our net revenue.
And our recurring software revenue is more than doubled since the second quarter of 2020.
59% of our payment of volume in the second quarter was integrated.
Recurring revenues represent more than 80 per cent of our net revenues. This is the first quarter.
That our adjusted EBITDA from proprietary software segment exceeded the adjusted EBITDA from our merchant services segment.
We are delivering on our software sales focused strategy and this quarter is a major milestone in our company's development.
Our long term vision is to the leader in software and payments.
And we have been making major advancements in achieving our vision.
In particular public sector vertical delivered record growth.
This vertical now represents around half of our company.
I feel like we hit the nail on the head of the betting big on this vertical our acquisitions in the space had been phenomenal.
And I I'm continually impressed by the talent, we have on our team.
The public sector vertical has tremendous opportunity for expansion.
Both of the technologically spending and in payments.
And we're in the right place at the right time.
We expect the federal stimulus under the American Rescue Plan Act will accelerate software at <unk>.
Advancements within the public sector vertical and will provide significant opportunities for us to partner with our customers over the next few years.
The 350 of the 350 billion available under this plan.
Is available for both state and local governments and our software meets many of the needs of the rescue plan was intended to help local governments address.
We have a solid pipeline of projects to deliver to our customers and.
And we anticipate the pipeline will continue to grow as our customers access the funds available to them under the rescue plan.
We've seen an increased cross selling of products within public sector as our product teams and our sales teams begin to converge.
For example.
One of our Texas based products has over 200 CT customers in Texas. During 2021. This product has now been sold in Arkansas, Georgia and Ohio.
This momentum in new states opens up hundreds of new court opportunities for this product.
Additionally, one of our core case management systems as the significant presence in Georgia.
During the past quarter this software expanded into Alabama, Mississippi.
And has opened up new markets for us in that territory.
We have also significantly expanded our geographic footprint within public sector. We now have statewide agency or court agreements in California.
Texas, Michigan, Florida the.
Delaware, Alaska, Minnesota, Wyoming, Arizona, Kansas, North Carolina, and Tennessee.
Our public sector product teams have made great advancements in integrating many of our products.
Such as law enforcement and Paperless court products within our core platforms. We expect continued growth as we increase our distribution of these integrated products.
Okay.
We've been very busy on the M&A front this year as we pursue our vertical focus strategy.
This quarter included two months of D. I S. Our largest acquisition to date.
And the first full quarter of the image source.
In April we announced two acquisitions in the health care software space.
We have now made three health care acquisitions.
We're confident in our current product suite, which we will continue to develop and we are looking forward to expanding our presence in that vertical.
We most recently completed the acquisition of software in the utility space.
This company serves tier one size customers and will marry nicely with our existing utility billing platform.
I will provide more details on the most recent acquisition in a moment.
We're excited about what we can achieve in that market going forward.
Across the rest of the company, we saw continued improvement and reason for optimism.
Our nonprofit vertical continues to outperform expectations as it continues to find traction within the text to give product.
Our merchant services sector continues improvement sequentially quarter over quarter.
Our education vertical saw an uptick as more schools began in person scheduling.
Although this product remains the all of the this vertical remains suppressed.
Within the hospitality sector, we are the number one reseller and the NCR channel.
And recently the completed the largest aloha essentials installation in the history of that product.
Overall, we saw a significant payment of volume.
Are we a saw significant payment volume rebound in March.
And it continued in April and the first part of May.
The product the progress and vaccinations and reduction in government mandate of restrictions EDA.
Direct effect on our customer base as the restrictions continue to ease nationwide. We expect the continued recovery in our payments volume and revenue the all.
Also anticipate software sales to accelerate from more in person demos and tradeshows.
I cannot be more excited about the momentum we carry into the close of our fiscal year.
Now I'll turn the call over to clay and he'll provide some more details on our first quarter or second quarter of this.
Oh.
Performance and then clay will turn the call over to Rick for M&A update.
Thanks, Greg the following pertains to the second quarter of fiscal 2021, which is the three month period ended March 31, 'twenty one please.
Please refer to the press release and slide presentation titled supplemental information on our website of <unk>.
<unk> with this discussion.
We had a great quarter with record adjusted net revenues and adjusted EBITDA for.
For the second quarter ended in March adjusted net revenues increased 26% the $49 4 million from $39 3 million for Q2, 2020, reflecting organic growth and acquisitions.
It feels great to cite a number like 26% again and to return to somewhat normal economic activity.
Like most of our peers, we experienced a weak January and February the strong March and April.
Almost all of our metrics, we track are headed in the right direction.
Per companies, we've owned for at least two years, we have recently been comparing our monthly payment volumes to 2019 periods.
I was 2020 comparisons have distortions stemming from the pandemic.
For March and April of these companies increased volumes in the mid 20 percents.
Our integrated payments percentage hit a new high of 59%, helping our adjusted net revenue yield improved to 116 basis points for the quarter from 110 basis points for Q2 2020.
Yeah.
Adjusted net revenue yield as defined as adjusted net revenues divided by payment volume.
Software and related services continued strong growth representing.
36% of adjusted net revenues for the first half compared to 23% for the first half of fiscal 2020.
Reflecting the heavy software weighting of recent acquisitions.
As a percentage of gains despite the beginnings of a rebound in payments.
Yeah.
Acquisitions almost exclusively in the proprietary software segment contributed 11 million to growth in adjusted net revenues for the second quarter.
I three our Pos declined $1 million, reflecting not only the COVID-19 impact of of California, but also our ongoing transition to a SaaS offering.
The purchase portfolios declined <unk> 3 million.
Adjusted EBITDA increased 25% in line with adjusted net revenue to $12 4 million for Q2, 'twenty, one from $10 million for Q2 2020.
The March quarter marked a milestone in our history when the adjusted EBITDA from out of proprietary software segment surpassed the contribution from the merchant services segment.
Our proprietary segment continues to be the growth engine for the future.
Corporate expenses increased about 500000 in Q2 2021, compared to Q2, 2020, reflecting higher compensation costs, but increased at a slower pace than adjusted net revenues leading to a decline in the expense ratio from eight 2% per.
Q2 2020.
The seven five per cent for Q2 2021.
We had a onetime gain of $2 4 million, we recognized in Q2 from a minority investment in a company named <unk> Z of med.
We invested 100000 in 2016 and received cash from the sale of two and a half million in early April.
We have excluded this gain from adjusted revenues adjusted EBITDA and pro forma adjusted diluted EPS.
Pro forma adjusted diluting diluted earnings per share increased to 23 for Q2 2021 from 'twenty.
For Q2 2020.
Again, please refer to the press release and supplemental slide presentation for a full description and reconciliation.
Hum.
Segment performance.
And our proprietary software and payments segment adjusted net revenues increased 70% to $24 million per Q2, 'twenty one from $14 1 million for Q2, 2020, principally reflecting growth in our flagship public sector vertical.
The results included image soft for a full quarter and V. I S. Our largest acquisition to date for two months.
Our nonprofit vertical continued to outperform expectations with its text to give technology.
And health care turned in a solid performance.
Adjusted EBITDA increased 47% to $8 6 million for Q2 'twenty one.
From $5 8 million for Q2, 2020, reflecting mainly public sector growth, but also of the nonprofit and health care acquisitions.
For Q2 public sector represented over 90% of adjusted EBITDA in the segment.
The adjusted EBITDA margin fell to 36% for Q2 'twenty one from 41% for Q2 2020, reflecting a drop in education profitability and the inclusion of image soft which carries a margin below 20%.
As expected the margin did improve sequentially from 30% of Q1.
With the inclusion of V I S, which carries a margin of close to 50%.
The one laggard in the segment remains education all of those schools are beginning to return to the classroom. The USDA has extended its free lunch program for all students through next year.
Going forward, we will need to rely more on software revenues and non much fee payments.
But we believe education will return as the high growth vertical.
Fortunately public sector is by far our largest vertical and is over performing sufficiently.
Shadow any weakness in education.
With the resumption of trade shows and in person demos, we think every vertical and our proprietary segment has room to run.
Net revenues for our merchant services segment increased 1% to 26 million $26 1 million for Q2 2021 from $25 7 million for Q2 2020.
The numbers from merchant services were muted for the quarter, but the masks an underlying trend.
January and February were weak while March and April have been strong.
Explanation progress unless the government mandated restrictions have favorably impacted our customer base.
Beginning in March, California resumed permitting indoor dining with the phase of occupancy approach.
And our SaaS transition in hospitality is progressing more successes more successfully than expected.
We think the transition will ultimately lead to a better business model with more favorable competitive positioning and better profit margins.
Our beat of be vertical has been resilient during the pandemic that has benefited the end March and April from higher activity in its customer base.
Adjusted EBITDA for our merchant services segment increased 3% to $7 6 million for Q2 'twenty one.
From $7 3 million for Q2 2020.
The adjusted EBITDA margin was 29% for Q2 'twenty one.
$28 five per cent per Q2, 2020, reflecting higher revenues in relation to fixed costs.
Balance sheet.
Our strong balance sheet has allowed us to continue to execute our acquisition strategy on March 31, we had $83 million net of cash.
I would under our revolver.
Which is the $275 million facility.
The face value of our convertible notes are $117 million.
Our total leverage ratio at quarter end, which includes the convertible notes was three eight times.
While the current constraint is five times.
After quarter end, we have paid approximately $37 million for three acquisitions of multiple pay in on the three acquisitions conform to less than 10 times adjusted EBITDA.
We expect our total leverage ratio to remain below four apps for fiscal Q3, our June quarter.
The interest rate from the convertible notes of 1%, while the interest rate for the revolver is currently less than 4%.
Over time, we expect I can work convert roughly two thirds of adjusted EBITDA into free cash flow, which can either be used for more acquisitions or debt repayment.
Outlook.
Looking forward, we have increased our outlook for fiscal 2021 index.
It excludes future acquisitions and transaction related costs and adjust for write downs of deferred software revenues in connection with purchase accounting.
Adjusted net revenues $204 million to $220 million adjusted.
Adjusted EBITDA of 52 million to $58 million.
Depreciation and internally developed software amortization.
For the quarter million to four and a half million dollars.
Cash interest expense of four and three quarters of millions of five and a quarter million.
Pro forma adjusted diluted shares $33 million to $34 million.
Pro forma adjusted diluted EPS, <unk> 98 to $1 eight.
From a vertical standpoint, we have not updated our percentages this quarter I want to highlight that our public sector vertical remains the clear leader representing roughly half of our current business and over half of our acquisition pipeline.
Health care has become our second largest vertical resulting from three acquisitions during the past year that all lead with software.
Hum.
Changes to our presentation in response to the pandemic and discontinuing guidance last spring our supplemental presentations included monthly charts of payment volume in software revenues.
We've now resumed the guidance and feel like the economy is more stable and predictable now so we have discontinued the monthly data.
We have one more change that will come in next quarter.
Our fiscal Q3 ending in June.
We have historically always included in our reported adjusted net revenue adjusted EBITDA and pro forma adjusted diluted EPS.
An add back to reverse the effect of purchase accounting write downs of deferred revenue in connection of software acquisitions.
We have also always included an estimate of the same adjustment excluding future acquisitions in our guidance for adjusted net revenue adjusted EBITDA and pro forma adjusted diluted EPS.
The earnings release, we issued last night, which includes the guidance I. Just mentioned includes this adjustment to these metrics consistent with our historical approach.
Our historical practice has been based on the belief that such an adjustment was necessary for investors to understand and acquisition performance in the first year and it's true growth in the second year.
The adjustment is consistent with the treatment and the financial covenants of our senior secured credit facility as well as adjustments made by some of our peer companies and their disclosures.
However, as part of the ordinary course of SEC comment process. We have agreed with the SEC to discontinue adjusting net revenue EBITDA and pro forma diluted EPS to remove the effect of purchase accounting write downs of deferred revenue beginning with our third fiscal quarter ending June 30.
As a result of this change in the third quarter earnings release, we will present adjusted net revenue adjusted EBITDA and pro forma diluted pro forma adjusted diluted EPS.
Without the impact of this add back for the three months and the nine months ended.
As we believe the adjustment continues to represent material information to investors, we will continue to provide separately as.
As part of our earnings release, the non-GAAP revenue of mid and as a result of the purchase accounting write down of deferred revenue.
We will also continue to provide an estimate of this amount for the remainder of the fiscal year along with our outlook.
Please refer to the final slide in the presentation titled supplemental information on our website for an illustration of how the presentation will change in the third quarter.
I'll now turn the call over to Rick for an update on the company and M&A activity.
Thank you clay good morning, everyone I will start this morning with an update on the few operational items, including updates on things of addressed in previous calls.
We continue to make steady progress on our unified product offering or the <unk> in the public sector vertical we have recently designed the cohesive product category marketing package for use across all of public sector entities. This marketing package will assist with client education and cross selling efforts.
There are three levels of cross selling one of our direct sales team marketing too I am coordinating solution sales across the entities.
Key product category additions by unit, ensuring new product categories are embraced at the unit level and are supported across all of multiple entities for the.
Example, kiosks that came with the <unk> acquisition are being deployed across multiple product categories by multiple entities and three embedded proprietary software. We are embedding our three verticals proprietary software in the core offerings and seamlessly bundling them as part of city County and state solutions.
We can already see this working the past quarter, we secured contracts in part of new states contracts and three of the five new states were driven by the <unk> activity.
We are motivated and excited by these early wins and our cross selling continues to pick up steam.
On the ISP front, our total number of signed and the integrated Ics at the end of the second fiscal quarter was <unk> 78, with three more in the process of integration.
Our pipeline for Isps continues to grow quarter over quarter, and we're actively pursuing additional integrations.
I will now speak relative to our M&A efforts on Monday April 5th we announced two additional acquisitions in our healthcare vertical. The first acquisition is of the business based in the upper Midwest that provides software and services in multiple states to healthcare customers the <unk>.
Software improves operational efficiencies, so customers can securely access patient information and streamline the process from admittance to discharge the.
The solution accelerators are designed to optimize business processes and drive digital transformation.
The products include accounts payable accounts receivable contract management and human resources the.
The second acquisition is of the business that offers medical practice management software and other related solutions to its customers the.
30 year old business is headquartered in the southeast and serves customers across the country.
Their products include the practice management system revenue cycle management, the patient payment portal inventory management and appointment reminders as you know many of our recent acquisitions have been in the public sector vertical however leased to April acquisitions.
With the combined 51 individuals will help us build momentum in our existing health care vertical which is an extremely large market that we would like to develop further as we move forward.
Yesterday, we announced our latest acquisition. This business is located on the east coast and has customers across the country. This is the public sector deal with the focus on utilities, specifically gas power and water.
Notably they have some of the largest utility companies tier one companies across the country in major metropolitan areas. The steel brings with it several additional products to cross sell into our existing utility line of business.
The company is 18 years old and comes with 45 employees and 53 contractors.
The product and services to include a deep customer portal for improved customer experience.
Realized and cutting edge digital engagement.
<unk> product that allows for optimization and life extension for the utilities existing Cif or customer information system.
Mobile application development that is device agnostic.
See I guess data integration between multiple meter vendors backend systems and portals.
The financial balancing and rate case analysis, and mobile service order dispatching.
We continue to be disciplined in our approach and all three deals were completed within our standard multiple range.
Finally, our M&A pipeline is still very healthy and has an emphasis on public sector health care nonprofit and education and we look forward of sharing more on the acquisition front in the near term.
This concludes my comments Andrea at this time, we will open the call for Q&A. Please.
I will now begin the question and answer session.
You asked the question you May Press Star then one of your telephone from that.
Speaker phone please pickup your handset before pressing thank you.
To withdraw your question. Please press Star then two.
At this time I will pause momentarily to assemble our roster.
And our first question will come from John Davis.
Please go ahead.
Hey, good morning, guys.
I think the first.
I wanted to start on April March and April trends versus 19, I think if I heard you right. You said mid twenty's growth on a two year stack basis, so that would kind of imply.
The imply a meaningful acceleration from what you guys have historically grown organically in the.
In the high single digits I'm, just wondering where the strength is how much of that you think its stimulus drove then and do you expect the mood.
The 10% type growth on the other side of this or just any kind of commentary on current trends would be great.
Well I guess.
It's hard to know how much stimulus had to do with this.
This year for the <unk>.
During when we're comparing the COVID-19 periods I think.
It wont be difficult to have double digit.
The growth the question is when we.
Lap.
These current periods a year from now.
What would growth be and.
Our target is double digit we've continued to guide to.
On a long term basis to high single digit but that.
Of that could change as well as that those time periods come into view.
Okay. That's helpful. And then just on the net revenue yield. Obviously you guys are shifting more towards software I think if I look back at 2020 I was about 105 basis points I can comment came in at the 116 this quarter.
I think some volume comes back maybe that normalizes the right to think that that net revenue yield should be higher of course.
Potentially creep higher over time, maybe not at 116, but maybe 110 of the $1 15 on a normalized basis given all of the addition of software revenue.
Yes.
I don't see any reason for it not to impact this quarter, we had a fair amount of ACTH associated with back at the school at our University.
Without the which we would have had a little bit better yield this quarter.
Okay and then.
Can you talk a lot about the American rescue plan Act and all of those all of this money sitting out there when how long do you think it will be before those governments actually get the money and more importantly start implementing the upgrades where you could see the revenue is of something like six to 12 months out 12 months to 24 just curious.
I'll quickly you think youll start seeing some revenue from it.
I think we'll see some by the end of the year.
<unk>.
It's.
Sure.
We contacted all of our customers when it first came out and they literally I didn't even know about it.
We've that's been seven or eight weeks ago.
It's been dramatic the increase in activity in the last three weeks.
So yes.
I I.
I I think the end of the year will be.
Very busy for us.
And then there'll be a second tranche.
Probably as early as the next spring.
Okay.
One from me guys play just from minus I think when you updated education I think it was 5% EBITDA last quarter and I think historically, you've said launches, where maybe 50% of revenue in that sector.
So just curious as the cause of the double check those numbers and also whether the clarify the prelaunch program has been extended through next school year or just through the end of this calendar year.
Through the next school year.
So I gave you an idea of size this quarter, our education group at about $2 5 million of net revenues and of.
About a little over 600000 of EBITDA. So.
It's become a pretty small part of.
Of our company now.
It would be even less than 5% today with government going up a little in the health care going up.
But it is.
That level is about the trend we expect for the next several quarters.
Well, the opposite lunch, which absent launched which is.
Absent the summer months, which schools are empty.
We don't really see that changing meaningfully for the fourth quarter for example.
Okay, Alright, thanks, guys.
The next question comes from Peter Heckmann of D. A.
Please go ahead.
Hey, good morning, I, just wanted to get a little bit more color. If you can.
Good on signing up new independent software vendors.
How does the increase of 90 threes proprietary software play does that incur.
The increase the attractiveness of integrating for some vendors and Conversely for some vendors is that of negative point in that they view you as partially competition.
Yes, Peter.
We haven't seen any disruption in our ability to sign up Isps I don't see us as a competitor. It's a matter of fact, our technology infrastructure is seen as a positive the things that we can bring to the table for them. So we're not getting any pushback.
If thats, what youre, meaning the Si.
I understand I was trying to figure out if there were some the viewed it as a bit of of conflict or.
Conversely, do others view it as an advantage and maybe I better reason to integrate.
With with I three versus maybe another another vendor.
Yes again it's.
All of about the technology.
Our verticals are so large.
I don't think that.
I am not on the ground every day, but I don't I haven't heard any push back from our ISP partners today.
Great Great and then just on the on the deferred revenue write down figure does that include the the three deals that have been announced so far in the fiscal third quarter.
The guidance we gave does include the.
If you look at the last page of the supplemental information.
We gave an estimate.
For the entire year and it does include the three deals we just announced.
Got it okay. That's helpful.
The next question comes from George from a Hallmark of Cowen. Please go ahead.
Hey, guys good morning, and congrats on the on the solid results.
Clay.
Suddenly said I think you answered it but just just as the point of clarification. If we just look at the payment volume within proprietary software that increase.
More than two times sequentially I'm, just doing this public from DIY volume in there, but it also sounds like maybe you had a big contribution.
On the education side from <unk>.
Higher education I'm, just curious can you kind of break that out for us give us a sense of what drove that increase and it also sounds like sequentially. The.
The revenue yield should go up in the segment as we go into the third quarter or is that a fair assessment.
Yeah. So.
Last quarter.
The second quarter of 2020, we only had $44 million of Aci's volume in that segment in this quarter of 2021, we had $196 million in that segment and that's.
The back to school activity for the University of which happens twice a year.
So yes, I think it is fair.
Our revenue yield could go up this coming quarter.
Okay. Thank you. Thank you for that and then just another follow up just the sort of sticking to the.
The education.
Vertical I know Rick you mentioned.
I think of education of sort of third in line as we're talking about prospects within within the pipeline I'm just curious.
Are you guys do you guys want to do I need.
Cash and acquisition given the I guess.
Uncertainty of pressure next year.
The launches where are you guys looking to potentially go after something catering more too.
I, but schools of more higher education, I guess are you looking at something.
Beyond kind of the core.
The market that <unk> serviced in the past.
Yes, it's a good question George as I think about the pipeline and the prospects that are in it.
There is no lunch today most of it is what I would call marketplace was use of other payments that take place in the school, whether it's the K through 12 profit.
And then there is there is the ancillary products that.
We wanted to have for several years now like nutritional software.
And that sort of thing so I can't think of the one that has launched today that doesn't mean, we won't talk to them but.
I don't see that being an issue with what we've got in our pipe today.
Okay. That's helpful and just one last one clay if you can break out for us the percentage of revenue today that is is non payments related. So you know license fee of SaaS. Thank you and I'll hop off.
Okay.
For the.
Well.
I think we got it yes.
36% as of six months number four software revenues.
57% or payment revenues for the six months.
7% were in the other category.
Equipment or.
Things of that nature.
Is that what you were looking forward to work.
Yes.
Okay.
The next question comes from Chris the Vanilla.
Of Piper Sandler. Please go ahead.
Hi, good morning, gentlemen, thanks for taking my questions.
One as we think about the ACTH volume from.
Education going forward is it safe to use that.
$196 million number from the quarter and just kind of like.
A ballpark with the.
The reasonable ballpark assumption to be that youll get sort of the incremental $200 million.
The bump every other quarter because of of tuition related payments is that of Safeway to think about it or am I thinking about it wrong.
No that's exactly right.
One of them happens in January and one of them happens.
A little bit July, but mainly August so in the our fiscal fourth quarter.
Okay.
And then.
What's sort of the economic recovery and getting back to in person sales and trade shows.
Do you expect sort of the step function in.
In sales here or is this going to be more of a gradual thing as as youre, calling on customers, who might not have been willing to take meetings or or is it really a dramatic change in what's going on with your customers there.
I feel like for the last 30 days of other than like a rock concert and I think that will continue for <unk>.
Six more months so.
Obviously, the little pent up demand.
But we have increased our offerings through acquisitions and.
Different the work that we've done internally.
<unk> added salespeople.
So.
I I don't it's been Crazy the last 30 days and I don't see it slowing down until Thanksgiving.
Okay.
I am just trying to convert rock concert into my model.
I figured that.
It's huge.
Yeah, It sounds good and its good day here.
And then just last question from me on a from a modeling perspective as we looked at I think.
GAAP income statement.
In the quarter, you had a downtick from the fiscal first quarter in other cost of revenues, but an uptick.
Pretty meaningful one in SG&A, just anything to call out there is that.
More of the timing of acquisitions and where they are landing on different expense lines are.
Well I think else.
Yeah. So.
Yes.
<unk>.
Is more of payment oriented less software oriented.
So that will impact some of those numbers and we'll get three months in the next quarter not two months.
On the corporate line you mentioned, we did resume.
Bonus accruals this quarter.
And if began reinvesting in with some selective hires are.
Some of our companies are getting concerned of I can't keep up with installations, if things continue at this pace and so.
We definitely want to enable any revenue we can and so.
We went through a year during COVID-19 of being very tight with compensation and hires.
We're beginning to reinvest now.
Okay.
This hiring Jerry.
Dealing more with the with implementations.
Not so much on the sales side because it sounds like.
Okay, well Thats, where the rock concert is.
Yes, it's a little bit of across the board.
We did lay off twin 12% of our stash the last spring.
And.
A lot of some of that was muscle and.
So.
We've been putting people off for year end.
Finally, letting them.
I make the hires but I wanted to make.
Okay. Okay. That's helpful. Thank you.
Once again I would like to ask a question. Please press Star then line.
And the next question will come from Josh Beck of KBC.
Please go ahead.
Hey, this is matti schrag on for Josh first I was wondering if you guys could talk about about the timeline that you expect the American rescue plan Act to provide.
A lot of tailwind on your government modernization project.
And secondly, I was wondering if you could provide.
Update on how you expect the vertical mixture of all of this coming year. Thanks.
So on the stimulus money.
<unk>.
We're thinking toward the end of the year.
The December quarter.
It's hard to really predict the exact.
The.
But we are seeing more rfps more demos.
More closed sales.
That usually takes us.
Three to six months two.
Install.
And so I think youll see.
That quarter pick up and it should continue for.
The whole year of 2022.
I.
Okay.
Our software package is very well received and with our existing customers new customers.
So we're.
Optimistic I.
I think we'll know a lot more.
By the end of our June quarter.
From the second part of your question.
I think next year, you'll see more public sector deals over 50% of our pipeline is public sector.
We did I think eight deals in eight months in the last eight months and six of those were public sector too in the health care.
So.
Looking for that momentum in public sector to continue.
I think public sector will be at least 60%.
So the especially until education bounces back.
And so.
That will change a little of that.
It's all good.
Super helpful. Thanks, guys.
This concludes our question and answer session I would like to turn the conference back over to Greg Daily for any closing remarks.
Thank you guys for joining us this morning, we do feel as if.
The pandemic is over.
Seeing momentum in all of our verticals.
Except education, but.
Thank you for your interest and stay tuned thank you.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Okay.
Okay.
[music].
I know.
Correct.
[music].
Alright.