Q2 2024 i3 Verticals Inc Earnings Call
Operator: Good day, and welcome to the i3 Verticals second quarter 2024 earnings conference call. Today, all participants will be in a listen-only mode.
Good day and welcome to D. I three verticals second quarter 2024 earnings conference call.
Speaker Change: Today, all participants will be in a listen only mode.
Operator: Today's call is being recorded, and a replay will be available starting today, May 17, or starting today through May 17. The number for the replay is 877-344-7529, and the code is 685-4757. The replay also may be accessed for 30 days on the company's website. At this time, I would like to turn the conference call over to Mr. Jeff Smith, SVP of Finance. Please go ahead, sir.
Speaker Change: Today's call is being recorded and a replay will be available starting today may 17 or so.
Speaker Change: Today through May 17th.
Number for the replay is 87734 475 to nine and the code is 68547573.
Speaker Change: A replay also may be accessed for 30 days at the company's website.
Speaker Change: Time, I would like to turn the conference call over to Mr. Jeff Smith SVP of finance.
Geoffrey C. Smith: Please go ahead Sir.
Geoffrey C. Smith: Good morning, and welcome to the second quarter 2024 conference call for i3 Verticals. Joining me on this call are Greg Daily, our Chairman and CEO, Clay Whitson, our CFO, Rick Stanford, our President, and Paul Christians, our COO.
Geoffrey C. Smith: Good morning, and welcome to the second quarter 'twenty 'twenty four conference calls for I three verticals.
Geoffrey C. Smith: Joining me on this call are Greg Daily, our chairman and CEO Clay Whitson, our CFO, Rick Stanford President and Paul Christian <unk>, our CFO.
Geoffrey C. Smith: To the extent any non-GAAP financial measure is discussed in today's call, you will also find a reconciliation to the most directly comparable GAAP financial measure reviewed in yesterday's earnings release. It is the company's intent to provide non-GAAP financial information to enhance understanding of its consolidated GAAP financial... This non-GAAP financial information should be considered by each individual in addition to, but not instead of, the GAAP financial statements. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Geoffrey C. Smith: Did you set any non-GAAP financial measure is discussed in today's call. You'll also find a reconciliation to the most directly comparable GAAP financial GAAP financial measure reviewing yesterday's earnings release.
Geoffrey C. Smith: Is the company's intent to provide non-GAAP financial information to enhance understanding of its consolidated GAAP financial information.
Geoffrey C. Smith: This non-GAAP financial information should be considered by each individual in addition to but not instead of the GAAP financial statements.
Geoffrey C. Smith: Including statements, among others, regarding the company's expected financial and operating performance. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. You are 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 furnished with the SEC. Consequently, actual operations and results may differ materially from those discussed in the forward-looking statement.
Geoffrey C. Smith: This conference call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act because 1995.
Geoffrey C. Smith: These statements among others regarding the company's expected financial and operating performance.
Geoffrey C. Smith: For this purpose any statements made during this call that are not statements of historical fact may be deemed to be forward looking statements.
Geoffrey C. Smith: You are 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 furnished with the S. E C.
Geoffrey C. Smith: Consequently, actual operations and results may differ materially from those discussed in the forward looking statements.
Geoffrey C. Smith: Finally, 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. I will now turn the call over to the company's Chairman and CEO, Greg Daly.
Geoffrey C. Smith: Finally, 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.
Geoffrey C. Smith: I will now turn the call over to the company's chairman and CEO Greg Daily.
Gregory S. Daily: Thanks, Jeff.
Gregory S. Daily: And good morning to everyone on the call. Before getting into the results of second quarter fiscal year 24, I'd like to provide a brief update on what we announced last quarter, namely the exploration of the sale of the merchant services business, as previously announced in February. The company's board of directors has directed i3 management to explore the sale of certain discrete assets related to our merchant services business. This process for considering the sale of this transaction is ongoing.
Gregory S. Daily: And good morning to everyone on the call.
Gregory S. Daily: Before getting into the results of second quarter of fiscal year 'twenty four I'd like to provide a brief update on what we announced last quarter, namely the exploration.
Gregory S. Daily: The sale of the merchant services business.
Gregory S. Daily: As previously announced in February.
Speaker Change: The company's board of directors have directed I three management.
Speaker Change: To explore the sale of certain discreet assets related to our merchant services business.
Speaker Change: This process for considering the process for considering this transaction is ongoing.
Gregory S. Daily: We would intend to use the proceeds from the sale of this business to pay down debt. Any decision by the board to engage in any transaction involving the merchant services business would be aligned with the board's objectives to maximize long-term shareholder value. I don't have any further updates on the process at this time.
Speaker Change: We would intend to use the proceeds from the sale of this business to pay down debt.
Speaker Change: Any decision by the board to engage in any transaction involving the merchant services business.
Speaker Change: It would be in line with the board's objective.
Speaker Change: To maximize long term shareholder value.
Speaker Change: I don't have any further updates on the process at this time.
Gregory S. Daily: With that said, I'm pleased to share with you some of our results from the second quarter of fiscal year 24. In a minute, Rick will elaborate on the realignment we began last year and how that has better positioned us for sustainable growth. Before he does, I'd like to reemphasize our commitment to highly recurring revenue streams. This quarter, several of our non-recurring lines are lower than last year. Specialty Professional Services and Software Licensing
Speaker Change: With that addressed I'm pleased to share with you some of our results from the second quarter of fiscal year 'twenty four.
In a minute Rick will elaborate on the realignment, we began last year and how that has better positioned us for sustainable growth.
Speaker Change: Before he does I'd like to reemphasize, our commitment to highly recurring revenue streams.
This quarter several of our nonrecurring wrench lines are lower than last year.
Speaker Change: Especially professional services and software licenses.
Gregory S. Daily: Some of our revenue here has been impacted by delayed projects in our backlog, such as the Manitoba Drivers License Project we've discussed with or the very large and exciting new utilities opportunity. The utilities opportunity has required us to build a complex new project. It is going great, however, we have not been able to recognize any revenue related to it.
Speaker Change: Some of our revenue here has been impacted by delayed projects in our backlog.
Speaker Change: Such as the Manitoba driver's license project, we've discussed with you.
Speaker Change: Or are the very large and exciting new utilities opportunity.
Speaker Change: And until these opportunity has required us to build a complex new project.
Speaker Change: It is going great.
However, we have not been able to recognize any revenue related to that.
Gregory S. Daily: That's fine with us because we believe that in the long term, this project is going to open up new markets and be highly accretive to our shareholders. In the interim, as we go through a period of lower professional services and license revenue, we benefit greatly from our excellent financial profile, where ARR is well north of 80%.
Speaker Change: That's fine with us because we believe that in the long term this project.
Speaker Change: It's going to open up new markets and be highly accretive to our shareholders.
Speaker Change: In the interim.
Speaker Change: As we go through a period of lower professional services and license revenue.
Speaker Change: We benefit greatly from our excellent financial profile.
Speaker Change: A R. R is well north of 80%.
Gregory S. Daily: Our margins grew over 100 basis points, despite lower higher margin license revenue. We think that's fantastic results, which we are proud of. Our future is very bright, and we are excited about the second half of our fiscal year. I'll now turn the call over to Clay, and he'll provide you with more details on our financial performance. When he's finished, Rick will add commentary on the business, and then we'll open up the call for questions.
Speaker Change: Our margins grew over 100 basis points.
Speaker Change: Despite lower higher margin license revenue.
Speaker Change: We think that's fantastic results, which we're proud of.
Speaker Change: Our future is very bright.
Speaker Change: And we are excited about.
Speaker Change: The second half of our fiscal our fiscal year.
Speaker Change: I'll now turn the call over to clay and he'll provide you more details our financial performance. When he is finished Rick will add commentary on the business and then we'll open up the call for questions.
Clay M. Whitson: Thanks, Greg. The following pertains to the second quarter of our fiscal year 2024, which is the quarter ending March 31, 2024. Please refer to the slide presentation titled Supplemental Information on our website for reference to this discussion. Revenues for the second quarter of fiscal 2024 increased 1% to $94.5 million from $93.9 million for Q2-23, reflecting organic growth from recurring sources, partially offset by declines in non-recurring sources. SAS and transaction-based software revenues each grew 10%, while recurring software services grew 6%.
Clay M. Whitson: Thanks, Greg the following pertains to the second quarter of our fiscal year 'twenty 'twenty four with just the quarter ended March 31, 'twenty 'twenty four.
Clay M. Whitson: I used to refer to the slide presentation titled supplemental information on our website for reference with this discussion.
Clay M. Whitson: Have a news for the second quarter of fiscal 2024 increased 1% to $94 5 million from $93 9 million for Q2, 'twenty three reflecting organic growth from recurring sources, partially offset by declines in nonrecurring sources.
Clay M. Whitson: SaaS and transaction based revenue software revenues each grew 10% while recurring software services grew 6%.
Clay M. Whitson: Payments revenues also grew 6%. Non-recurring sales of software licenses declined by over $2 million, as expected, reflecting the ongoing shift to SaaS. Professional services revenues declined by 1.3 million, principally as a result of the delay in Celtic's implementation with Manitoba caused by the public worker strike.
Clay M. Whitson: Payments revenues also grew 6%.
Clay M. Whitson: Non recurring sales of software licenses declined by over $2 million as expected, reflecting the ongoing shift to SaaS professor.
Clay M. Whitson: Professional services revenues declined by 1.3 million principally a result of the delay in Celtic's implementation with Manitoba.
Clay M. Whitson: Cause by the public workers strike.
Clay M. Whitson: We will discuss the outlook for both line items in our Outlook section. ARR increased 6% to $322.5 million for Q2-24, a new record, compared to $305.7 million for Q2-23. Over 80% of our revenues in the quarter continue to come from recurring sources. Software and related services represented 48% of total revenues for Q2, with payments 47% and other 5%. Payments revenues as a percentage of payments volume improved slightly to 71 basis points for Q2'24 from 70 basis points for Q2'23.
Clay M. Whitson: We will discuss the outlook for both line items in our outlook section.
Clay M. Whitson: A R. R increased 6% to $322 5 million for Q2, 'twenty for a new record.
Clay M. Whitson: <unk> to $305 7 million for Q2 'twenty three.
Clay M. Whitson: Over 80% of our revenues in the quarter continues to come from recurring sources.
Clay M. Whitson: Software and related services represented 48% of total revenues for Q2 with payments, 47% and other 5%.
Clay M. Whitson: Payments revenues as a percentage of payments volume improved slightly to 71 basis points for Q2, 'twenty four from 70 basis points for Q2 'twenty three.
Clay M. Whitson: Adjusted EBITDA increased 4% to $25.8 million for Q2'24 from $24.7 million for Q2'23. Adjusted EBITDA as a percentage of revenues improved to 27.3% from 26.3% for Q2'23, reflecting improvement in our merchant services margin along with lower corporate expenses. Both improvements resulted from the internal realignment discussed on previous quarterly calls.
Adjusted EBITDA increased 4% to $25 8 million for Q2, 'twenty four from $24 7 million for Q2, 'twenty three adjusted EBITDA as a percentage of revenues improved to 27, 3% from 26, 3% for Q2 'twenty.
Clay M. Whitson: Three reflecting an improvement in our merchant services margin along with lower corporate expenses.
Both improvements resulted from the internal realignment discussed on previous quarterly calls.
Clay M. Whitson: Proforma adjusted diluted earnings per share was $0.34 for Q2'24 compared to $0.38 for Q2'23. The decline was driven by higher interest expense following the repurchase of our exchangeable notes in January. Again, please refer to the press release for a full description and reconciliation of segment performance.
Clay M. Whitson: Pro forma adjusted diluted earnings per share was 34 cents for Q2 24 compared to <unk>.
Clay M. Whitson: 38 cents for Q2 'twenty three.
Clay M. Whitson: The decline was driven by higher interest expense following the repurchase of our exchangeable notes in January.
Clay M. Whitson: Again, please refer to the press release for a full description and reconciliation.
Clay M. Whitson: Revenues in our software and services segment declined 2% to $59.5 million for Q2'24 from $60.8 million for Q2'23, principally reflecting lower one-time sales of software licenses and professional services, as previously discussed. Payment revenues represented 25% of the software and services segment revenues. The segments adjusted EBITDA declined 5% to $20.9 million in Q2'24 from $22.1 million in Q2'23. Adjusted EBITDA as a percentage of revenues declined to 35.2% for Q2'24 from 36.3% for Q2'23. The biggest factor for the declines was lower one-time software license sales, which fall straight to the bottom line in the quarters they occur.
Clay M. Whitson: Segment performance revenues in our software and services segment declined 2% to $59 5 million for Q2 'twenty four from 60.8 million for Q2, 'twenty, three principally reflecting lower onetime sales of software licenses and professional services.
As previously discussed.
Clay M. Whitson: He meant revenues represented 25, 5% of the software and services segments revenues.
Clay M. Whitson: The segment's adjusted EBITDA declined 5% to $20 9 million for Q2, 'twenty four from 22.1 million for Q2 'twenty three.
Clay M. Whitson: Justice EBITDA as a percentage of revenues declined to 35.2% for Q2 'twenty four from 36, 3% for Q2 'twenty three.
Clay M. Whitson: Biggest factor for the declines were lower one time software license sales, which falls straight to the bottom line in the quarters they land.
Clay M. Whitson: Revenues for our Merchant Services segment increased 6% to $35.1 million for Q2-24 from $33.1 million for Q2-23, reflecting broad-based growth in our ISO, ISB, B2B, and POS channels. Adjusted EBITDA for our Merchant Services segment increased 18% to $10.1 million for Q2'24 from $8.6 million for Q2'23, outpacing revenues. Our revenue yield increased slightly with continued expense control. Balance Sheet. Our balance sheet remains strong and well-positioned for 24. Following our repurchase of convertible notes in January, we have $26.2 million remaining.
Clay M. Whitson: Revenues for our merchant services segment increased 6% to $35 1 million for Q2, 'twenty four from $33 1 million for Q2 'twenty three.
The broad based growth in our I S O I S. B b to B N P O S channels.
Clay M. Whitson: Adjusted EBITDA for our merchant services segment increased 18% to pinpoint 1 million for Q2, 'twenty four from $8 6 million for Q2 twenty-three outpacing revenues our revenue yield increased slightly with continued expense control.
Clay M. Whitson: Balance sheet.
Clay M. Whitson: Our balance sheet remains strong and well positioned for 24 following our repurchase of convertible notes in January we have $26 2 million remaining.
Clay M. Whitson: At quarter end, borrowings under the revolver net of cash approximated $343.1 million. Our total leverage ratio was three and a half times. The current constraint is five times under our 450 million revolving credit facility. The interest rate for the convertible notes is 1%, while the interest rate for the revolver is currently around 8.5%.
Clay M. Whitson: At quarter end borrowings under the revolver net of cash approximated $343 1 million. Our total leverage ratio was three and a half times. The current constraint is five times under our 450 million revolving credit.
Clay M. Whitson: The interest rate for the convertible notes is 1% while the interest rate for the revolver is currently around eight and a half per cent.
Clay M. Whitson: We have remained disciplined in our approach to growth and acquisitions. We have approximately $4 million in earn-out payments remaining from past acquisitions. In the event that we sell our merchant services business, we would have very little, if any, remaining debt.
Clay M. Whitson: We have remained disciplined in our approach to growth and acquisitions, we have approximately 4 million in earn out payments remaining from past acquisitions in the event, we sell our merchant services business, we would have very little if any remaining debt.
Clay M. Whitson: This would free up even more resources to deploy towards the public sector, education, and healthcare verticals. Outlook This is potentially a transitionary year, so I will first outline our revised outlook for fiscal year 24, assuming no divestitures or acquisitions. Then I will touch on the financial profile for what could be called Remainco in the event we sell the merchant services business. For fiscal year 24, our revised outlook follows. Revenues $380 to $394 million, Adjusted EBITDA $107 to $113 million, Depreciation and Internally Developed Software Amortization $11 to $13 million, Cash Interest Expense $27 to $29 million, and Proforma Adjusted Diluted EPS $1.49 to $1.57. From a seasonal standpoint, historically, we have not had large step-ups from Q2 to Q3 organically
Clay M. Whitson: This would free up even more resources to deploy towards the public sector education and health care verticals.
Clay M. Whitson: Yeah.
Clay M. Whitson: Outlook.
Frederick Stanford: Although actual results on the one-time software line can vary significantly, our current expectations for software license sales remain $1 million for Q3 and $3 million for Q4. The bulk of the Q4 amount is an implementation for a large utility customer we have discussed on previous calls. In the event that we sell our merchant services business, we currently expect Remainco to resume high single-digit revenue growth beginning in fiscal year 25. Some tailwinds that we have identified include the Manitoba project returning to a normal cadence.
Clay M. Whitson: This is potentially a transition every year. So I will first outline our revised outlook for fiscal year, 'twenty, four assuming no divestitures or acquisitions and I will touch on the financial profile for what could be called for main co in the event, we sell the merchant services business.
Clay M. Whitson: For fiscal year 'twenty for our revised outlook Apollo's revenues $380 million to $394 million adjusted EBITDA $107 million to $113 million depreciation and internally developed software amortization $11 million to $13 million.
Clay M. Whitson: Cash interest expense 27 to 29 million pro forma adjusted diluted EPS.
Clay M. Whitson: $1 49 to $1 57.
Clay M. Whitson: From a seasonal standpoint, historically, we have not had large step up from Q2 to Q2 Q3 organically.
Clay M. Whitson: Although actual results on the onetime software line and very significant currently our current expectations for software license sales remain 1 million for Q3 and 3 million for Q4.
Clay M. Whitson: The bulk of the Q4 amount is an implementation for a large utility customer we have discussed on previous calls.
Clay M. Whitson: In the event, we sell our merchant services business. We currently expect remain co would resume high single digit revenue growth beginning in fiscal year 'twenty five.
Clay M. Whitson: Some pay L wins that we have identified include the Manitoba project returning to a normal cadence.
Frederick Stanford: Continued momentum in the utilities market and the SAS transition becoming less of a short-term drag. The education business will also benefit from the introduction of certain state subsidies for lunch, which began during the back-to-school season in 23. We would expect adjusted EBITDA as a percentage of revenues for remain code to improve annually by 50 to 100 basis points per year. We would also expect to resume acquisitions in the public sector education and health care verticals after using the proceeds from the sale to pay down debt. I will now turn the call over to Rick for company updates and the M&A pipeline. Thank you.
Clay M. Whitson: And tenured momentum in the utilities market in the SaaS transition, becoming less of a short term drag.
Clay M. Whitson: The education business, we'll also lap the introduction of certain state subsidies for lunch, which began during the back to school season in 'twenty three.
Clay M. Whitson: We would expect adjusted EBITDA as a percentage of revenues for remain co to improve annually by 50 to 100 basis points per year.
Clay M. Whitson: We would also expect to resume acquisitions in the public sector education and health care verticals after using the proceeds from the sale to pay down debt.
Clay M. Whitson: I will now turn the call over to Rick for company updates and M&A pipeline.
Frederick Stanford: Thank you, Clay. Good morning, everyone. Over the past 18 months, we've transitioned from a group of products and multiple verticals into a coordinated, efficient organization developing and selling software solutions in strategic vertical markets. Throughout the transition, we've adjusted our organizational structure to drive i3. Initially, we capitalized on our expertise in the public sector by analyzing our products and processes to provide solutions across any government of any size with a single contract. Eventually, the initiative was called UPO, or Unified Product Offering.
Frederick Stanford: Thank you clay good morning, everyone.
Frederick Stanford: Over the past 18 months, we've transitioned from a group of products in multiple verticals into a coordinated efficient organization developing and selling software solutions in strategic vertical markets throughout the transition we've adjusted our organizational structure to drive three forward initially.
Frederick Stanford: Initially we capitalize on our expertise in public sector analyzing our products and processes to provide solutions across any government of any size with a single contract.
Frederick Stanford: Eventually the initiative was called U P O a unified product offering as a result of trust in our three vendor for tea and our solutions and service we quickly saw volume from our government customers.
Frederick Stanford: As a result of trust in i3, vendor fatigue, and our solutions and service, we quickly saw buy-in from our government customers. Because of the success in the public sector, our leadership team rolled out the initiative across the organization. We worked through changes, realigned reporting structures, and captured market share. Now, our focus is on achieving sustainable growth with enterprise software as we scale our strategic markets, such as public, healthcare, and education. Now that our company is unified and configured for sustainable growth, we are focusing on quality revenue expansion through the sales of our enterprise software solution.
Frederick Stanford: Because of the success in public sector, our leadership team rolled out the initiative across the organization.
Frederick Stanford: We worked through changes realigned reporting structures and captured market share now our focus is on achieving sustainable growth with enterprise software as we scale, our strategic markets public health care and education.
Frederick Stanford: Now that our company is unified and configured for sustainable growth, we are focusing on quality revenue expansion through sales of our enterprise software solutions.
Frederick Stanford: In addition, we plan to make additional strategic hires in product to lead and expand our ongoing investment in web-native, configurable, next-generation applications. This past quarter, in the public sector, we secured long-term software contracts in California, Michigan, New Hampshire, and Tennessee. In education, we landed white space contracts in Georgia, North Carolina, South Carolina, and Texas, and in health care, we acquired a large health insurance carrier. Regarding M&A, we have looked at several opportunities over the last quarter.
Frederick Stanford: In addition, we plan to make additional strategic hires in product to lead and expand our ongoing investment in web native Configurable next generation applications.
Frederick Stanford: This past quarter in public sector, we secured long term software contracts in California, Michigan, New Hampshire, and Tennessee, and education, we landed white space contracts in Georgia, North Carolina, South Carolina, and Texas and in Health care, a large health insurance carrier.
Frederick Stanford: Regarding M&A, we have looked at several opportunities over the last quarter. Most of them are in public sector with a few in health care and education.
Frederick Stanford: Most of them are in the public sector, with a few in health care and education. Our dance card continues to be full of target companies, largely in the public sector and healthcare verticals. Some of the solutions include software solutions tailored toward mobile policing, utility management, and property tax collection, case management, and data intelligence solutions for justice and public safety industries, a school online enrollment solution, tax software for local government, specializing in areas such as business license and tax, lodging tax, property tax, sales and use tax, and utility tax, and an RCM solution that automates a portion of the back office process. We hope to be This concludes my comments, Chris. At this time, we'll open the call for Q&A, please.
Frederick Stanford: Dance card continues to be full of target companies largely in public sector and health care verticals.
Frederick Stanford: Some of the solutions include software solutions tailored toward mobile policing utility management and property tax collection case management and data intelligence solutions for Justice and public safety industries.
Frederick Stanford: School online enrollment solution.
Frederick Stanford: <unk> software and local government specializing in areas such as business license and tax lodging tax property tax sales and use tax and utility tax and the north Sea M solution that automates a portion of the back office process.
Frederick Stanford: We hope to be able to share more details on the M&A on the M&A front in the near future.
Speaker Change: This concludes my comments, Chris at this time, we'll open the call for Q&A. Please.
Speaker Change: Yeah.
Operator: Thank you, and we will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble our roster, and today's first question comes from John Davis with Raymond James. Please proceed.
Speaker Change: Thank you and we will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw it. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Yes.
Speaker Change: And today's first question comes from John Davis with Raymond James. Please proceed.
John Kimbrough Davis: Hey, good morning, guys. Sounds like the slightly softer revenue in the quarter was more or less kind of a push out some revenue. But you did lower the full-year guys by kind of a similar amount. So just curious if that's revenue that you're not expecting to get till next year, maybe because you don't know when that's going to come. There's any kind of comments on the lower outlook for the full year?
John Kimbrough Davis: Hey, good morning, guys it.
John Kimbrough Davis: It sounds like the slightly softer revenue in the quarter was more or less kind of a push out.
John Kimbrough Davis: Some revenue, but you did lower the full year guide.
John Kimbrough Davis: And have a similar amount. So just curious if that's revenue that youre not expecting to get till next year, maybe conservatism because you don't know when that's going to come or is there any kind of comments on the on the lowered outlook for the full year.
Clay M. Whitson: Well, revenue for the quarter, you know; we give guidance annually. So revenue of the quarter would pass through to the full year. The Manitoba Driver's License Project. We don't expect to see any meaningful revenue this year in fiscal year 24, which ends in September. We'll get it in 25, so that is pushed out.
John Kimbrough Davis: Well our revenue for the quarter.
John Kimbrough Davis: We gave guidance annually so revenue of the quarter would pass through to the full year.
John Kimbrough Davis: The Manitoba driver's license project.
John Kimbrough Davis: We don't expect to see any meaningful revenue this year in fiscal year 'twenty four which ends in September we'll get it in 25, so that is pushed out.
Clay M. Whitson: Okay, no, that's helpful, Clay. And then, you know, it's encouraging to see despite kind of the lowered Clay Whitson, Charles Nabhan, Peter Heckmann, James Faucette, Mark Palmer, Alexander Markgraff, Tyler DuPont, Unknown Executive, Rufus Hone, Frederick Stanford, Paul Christians, Michael Infante, Charles Nabhan, Peter Heckmann, James Faucette, Mark Palmer, Alexander Markgraff, Tyler DuPont, Unknown Executive, Rufus Hone, Frederick Stanford, Paul Christians, Michael
Speaker Change: Okay. No. That's helpful. Clay and then it was encouraging to see despite kind of the lower.
Speaker Change:
Speaker Change: Non recurring high margin revenue margins.
Speaker Change: Margin still expanded nicely and kind of where were in line with expectations. So quite.
Speaker Change: Quite well that better than you expected given though the nonrecurring headwinds just so any comments there I know you guys have some cost initiatives.
Speaker Change: Norway, but any thoughts on the margin as we kind of exit.
Speaker Change: <unk> had it in the back half of the year.
Clay M. Whitson: No, we came into the year projecting margin improvement and continue to expect it, and it results from the internal realignment that began in earnest in the fourth quarter, but we're getting a full year's effect this year.
Speaker Change: No we came into the year projecting margin improvement and continue to expect that and it rubs rollout results from the internal realignment that began in earnest in the fourth quarter, but we're getting a full year effect this year.
Clay M. Whitson: And then lastly, I think ARR was up about 6%. In the quarter, you talked about RemainCo, a kind of high single-digit growth profile going forward if you were to sell the personal services business. So just help me bridge that gap. Was there anything that kind of weighed on ARR this quarter? How do we think about that acceleration from six to the high single digits for RemainCo?
Speaker Change: Okay, and then lastly, I think they are was up about 6% in the quarter you talked about remain co kind of high single digit growth profile going forward. If you were to sell the parts and services business. So just help me bridge that gap or was there anything that kind of weighed on <unk>. This quarter. Just you know how do we have.
Speaker Change: Do we think about that acceleration from six to the high single digits for Mako.
Speaker Change: Well four things one is the Manitoba driver's license project will come online in 'twenty five.
Clay M. Whitson: Well, four things. One is the Manitoba Drivers License Project will come online in 2025. The big utility customer we have, we'll have a big 25, we actually expect. Most of the $3 million I mentioned for the fourth quarter in one time's license sales comes from that large utility customer, also, but then it kicks up, kicks into a bigger project in 2025. Education lapsed this August, September, September. I believe those were the major ones. Okay, I appreciate it. Thanks, guys.
Speaker Change: The big utility customer, we have will have a big 25.
Speaker Change: We actually expect.
Speaker Change: Hmm.
Speaker Change: Most of the 3 million I mentioned.
Speaker Change: For the fourth quarter and one time license sales comes from that large utility customer also but then it.
Speaker Change: Picks up picks into a bigger.
Speaker Change: Bigger project in 'twenty five.
Speaker Change: Education lapse this AGA.
Speaker Change: August September September.
Speaker Change: And.
Speaker Change: I believe those were them and then yeah those are the major ones.
Speaker Change: Okay I appreciate it thanks guys.
Speaker Change: Thanks.
Peter James Heckmann: The next question comes from Peter Heckmann with D. A. Davidson. Please proceed.
Speaker Change: The next question comes from Peter Heckmann with D. A Davidson. Please proceed.
Peter James Heckmann: Hey, good morning, everyone. I haven't seen the cash flow statement yet, but it looks as if cash flow was pretty good. It looked like to me that you had a working capital inflow. Is that correct? Is it generally correct? I'm trying to just kind of back into some numbers here, but actually, it looks like working capital is slightly negative, but it looks like pre-cash flow conversion was somewhere close to 50% for the quarter. Does that sound about right?
Peter James Heckmann: Hey, good morning, everyone.
Peter James Heckmann: I haven't seen the cash flow statement, yet, but it looked as if.
Peter James Heckmann: Cash flow was pretty good.
Speaker Change: Yeah and.
Peter James Heckmann: Looked like to me that you had a working capital inflow is that is that correct is that generally correct I'm trying to just kind of back into some numbers here, but actually it looks like we're getting slightly negative, but it looked like free cash flow conversion was somewhere close to 50% for the quarter or is that does that sound about right.
Clay M. Whitson: Yeah, I get 47%, Pete. CapEx was $1.5 million. Capitalized Software, $6.1 million; Cash Interest, much higher at $14.1 million. You know, when we paid off the convertible notes, we traded 1% of that for 8.5% of that. And then cash taxes were a pretty big number this quarter, at 5.4 million. So I get 47%, and we came into the year expecting 50%, so it's pretty close. Okay, okay, great. And then
Peter James Heckmann: Yeah.
Speaker Change: Got 47 per cent Pete.
Speaker Change:
Speaker Change: Capex was one and a half million.
Speaker Change: Capitalized software of $6 1 million cash interest.
Speaker Change: Higher at $14 1 million you know, we when we paid off the convertible notes, we traded 1% that rate in the 5% that.
Speaker Change: And then cash taxes, we're a pretty big number this quarter at $5 4 million. So.
Speaker Change: I get 47% then we came into the year expecting 50%, so it's pretty close.
Peter James Heckmann: Okay, okay, great. And then, can you just talk a little bit about the attach rates on some of the software businesses that you acquired in the last three years that, you know, some of them hadn't even started marketing payments, but you talk about where you've had some success there, either by vertical or even your sub-niche within the verticals.
Speaker Change: Okay great.
Speaker Change: And then can you just talk a little bit about the attach rates.
Speaker Change: And some of the software businesses that you've acquired over the last three years that some of them hadn't even started marketing payments.
Speaker Change: You talked about where you've had some success there either by vertical or even your secondary issues at the port calls.
Frederick Stanford: Well, health care is still in the infant stages. That's going to be a long, slow process.
Speaker Change: Well health care is still in the infant stages.
Speaker Change: That's going to be a long slow roll, we have thousands of billing customers, who currently use other providers.
Frederick Stanford: We have thousands of billing customers who currently use other providers, and they're all small customers; most of them are small customers. So we will be trying to attack those one by one. Education is obviously the best in an attach rate. And then the public sector would be second best. The other thing.
Speaker Change: And they're all small cost most of them are small customers. So we will be trying to attack those one by one.
Speaker Change: Education is obviously the best and then attach rate and then public sector would be second but the other thing is we've talked about the realignment and bringing services to the enterprise level. We've created this past quarter. A group that there are specific directive is to sell into our three strategic verticals.
Frederick Stanford: The other thing is we've talked about the realignment and bringing services to the enterprise level. We created this past quarter a group whose specific directive is to sell into our three strategic verticals, and there's a support team behind that. So we look forward to seeing some advances from that group with a specific directive to go after those three verticals.
And there is a support team behind that so we look forward to seeing some advances from that group with a specific directive to go after those three verticals.
Frederick Stanford: I see. Okay. And then, I'm sure you can't comment too much on the potential divestiture, but just in terms of timing, is it, to the extent that it did happen, would we expect to hear some news in the next 90 days?
Speaker Change: I see Okay, and then I'm sure you can't comment too much on the potential divestiture, but.
Just in terms of timing is it yet to the extent that it did happen would we expect to hear some news in the next 90 days.
Frederick Stanford: I don't think we're in a position to say, Pete, we'd like to say more, but we really can't really comment on it. I understand. Okay. I appreciate it.
Speaker Change: I don't think.
Speaker Change: We're in a position to say Pete.
Speaker Change: We'd like to say more but we really are.
Speaker Change: Until something is done where we can't really comment on it.
Frederick Stanford: I understand. Okay. I appreciate it. I'll get back in the queue.
Speaker Change: I understand okay I appreciate it I'll get back in the queue.
Okay.
James Eugene Faucette: Our next question comes from James Faucette with Morgan Stanley. Please proceed.
Speaker Change: Our next question comes from James Fawcett with Morgan Stanley. Please proceed.
Shefali Tamaskar: Hi, thank you for taking my question. This is Shefali Tamaskar asking a question on behalf of James. I was wondering if you could provide an update on what the timing might look like for the continued transition from non-recurring revenue sources like licenses to recurring revenue sources like SAS and what that might look like going forward.
James Eugene Faucette: Hi, Thank you for taking my question. This is Jeff I'll eat my Eschar asking a question on behalf of Jamie I was wondering if you could provide an update on what the timing might look like for the continued transition from nonrecurring nonrecurring revenue sources like licenses to recurring revenue sources like Sars and what that might look like going forward.
Clay M. Whitson: Well, our total software license sales for fiscal year 23 were $10.7 million, and we expect the total one-time sales this year to be $5 million. So, at the end of fiscal 24, it will already be fairly de minimis. We do have some utility customers where we will continue to have some one-time software sales. I'm viewing this year as the transition year and probably plateauing around the 5 million mark, although we could have some pleasant surprises in the future.
James Eugene Faucette: Well, our total software licenses sales for fiscal year 'twenty three were $10 7 million.
James Eugene Faucette: And we expect the total onetime sales this year to be $5 million.
James Eugene Faucette: So at the end of fiscal 'twenty four it will already be <unk>.
James Eugene Faucette: Fairly de Minimis.
James Eugene Faucette: We do have some utility customers, where we will continue to have some one time software sales so.
James Eugene Faucette: I'm viewing this year as the transition year, and probably plateauing at around the 5 million Mark Although we could have some pleasant surprises in the future.
Paul Christians: Okay, thank you. And just as a follow-up, could you provide an update on the current competitive environment you're seeing and if you've seen any changes in competitive intensity as it pertains to winning deals or keeping current customers? This is Paul Christians.
Speaker Change: Okay. Thank you and just as a follow up could you provide an update on the current competitive environment, you're seeing and if you've seen any changes in competitive intensity as it pretends to winning deals are keeping our current customers.
Speaker Change: Yeah.
Paul Christians: This is Paul Christians. That's been pretty steady state. We haven't seen that. Clay mentioned a couple of pushouts on projects, which are really tied to our customers having some personnel constraints of their own, which we're attempting to facilitate with additional support mechanisms to help them free up and get back on track. But the overall demand or competitive environment has been relatively constant.
Paul Christians: This is Paul Christians.
Paul Christians: <unk> been pretty steady state, we haven't seen that.
Paul Christians: Clay you mentioned a couple of push outs on projects, which are really tied to.
Paul Christians: Our customers having.
Paul Christians: Some personnel constraints of their own.
Paul Christians: We're attending we're attempting to do facilitate additional.
Paul Christians: Support mechanisms to help them free up and get back on track.
Paul Christians: But the overall demand or competitive environment has been relatively constant.
Speaker Change: Okay. Thank you.
Speaker Change: Yeah.
Mark Anthony Palmer: And the next question comes from Mark Palmer with Benchmark. Please proceed.
Speaker Change: And the next question comes from Mark Palmer with benchmark. Please proceed.
Mark Anthony Palmer: Yes, thank you for taking my question. Outside of the headwinds associated with the non-recurring revenue sources, how would you describe the demand environment in the public sector, in particular relative to the macroeconomic environment and other factors?
Speaker Change: Yes.
Mark Palmer: Thank you for taking my question.
Mark Palmer: Outside of the.
Mark Palmer: Headwinds associated with the non recurring revenue sources.
Mark Palmer: How would you describe the demand environment.
Mark Palmer: In the public sector in particular.
Relative to the macroeconomic environment and other factors.
Mark Palmer: Okay.
Frederick Stanford: It's been relatively constant. We haven't seen any kind of, you know, extraction of RFPs beyond the norm or anything of that nature that would indicate that we have more of a macro issue in that environment. I do think as we get to look at it and we switch to more and more of a SaaS delivery of the product, that eases the pain for our customers because there's less capital requirements and their dollars go further on a near-term basis. So I think that the SAS transition is a natural extension, will help mitigate that to a degree if that does surface, but we're not seeing any evidence of it.
Mark Palmer: We did it.
Mark Palmer: It's been relatively constant we haven't.
Mark Palmer: Seeing any kind of.
Mark Palmer: Extraction.
Rfps beyond the norm or anything of that nature that would call that more of a macro issue in that environment.
Mark Palmer: I do think as.
Mark Palmer: We get it.
Mark Palmer: We get to look at it and we switched to more and more to SaaS delivery of product that eases.
Mark Palmer: Eases the pain for our customers because theres less capital requirements and their dollars go further on a near term basis.
Mark Palmer: So I think the SaaS transition is a natural extension will help mitigate that to a degree.
Mark Palmer: Surface, but we're not seeing any evidence of it seemed like there could be some seasonality.
Frederick Stanford: Seems like there could be some seasonality.
Frederick Stanford: Certainly. Yes. Definitely. Yes. January and February were crazy busy. Right. Transcripts provided by Transcription Outsourcing, LLC.
Mark Palmer: Certainly, yes definitely yes January February Crazy Dizzy.
Mark Palmer: Slowed down now we think it's going to <unk>.
Mark Palmer: Pick up this summer.
Mark Palmer: Fresh budget is always impacted yeah.
Mark Palmer: And.
Frederick Stanford: One more. Should we assume that the company is going to hold off on acquisitions until the merchant services sales process has been completed?
Mark Palmer: One more.
Mark Palmer: Should we assume that the company is going to hold off on acquisitions until the merchant services.
Sales process has been completed.
Frederick Stanford: I hope not. We do have an active pipeline that we're negotiating with a handful of people, but The two are, you know, we're not holding off, we're still talking to people every day, and Merchant Services. It'll happen, but we have the capacity to do deals while we wait for that to close.
Speaker Change: I hope not.
Speaker Change: We do have an active pipeline.
Speaker Change: That we're negotiating with a handful of people but.
Speaker Change: The two are were not holding off.
Speaker Change: We're still talking to people every day.
Speaker Change: And.
Speaker Change: Merchant services.
Speaker Change: It'll happen, but we have the capacity to do deals while we wait for that to close.
Speaker Change: Very good thank you.
Speaker Change: Yeah.
Matthew David VanVliet: The next question is from Matt VanVliet with BTIG. Please proceed. Yeah, good morning.
Speaker Change: The next question is from Matt Van Vliet with D. T. I G. Please proceed.
Matthew David VanVliet: Yeah, good morning. Thanks for taking the question. I guess when you look at the cost controls that have been put in place over the last several quarters, how should we think about that cost basis relative to where we're headed? Maybe more specifically in potential Rumenco.
Speaker Change: Yeah. Good morning, Thanks for taking the question I guess when you look at the cost controls that have been put in place over the last several quarters, how should we think about that cost basis relative to where we're headed maybe more specifically in potential remain co.
Frederick Stanford: How are you? How do you feel like you're staffed? And overall, what would head count projections look like for the software side of the business for the next
Speaker Change: How do you feel like you're staffed and overall, what what would head count projections look like for the software side of the business for the next several quarters.
Speaker Change: Well.
Frederick Stanford: I think there are 300, and you know the exact number, a little over. Okay, 300 people roughly associated with the people services business, and the total company is some 1700. So we are well-staffed, and we do believe we've been through the realignment on the Remain Coast side, which will suit us well over the next few years. We're not feeling the need to cut more.
Speaker Change: I think there are 300 and then.
Speaker Change: Exact number.
Speaker Change: A little over 300, 300 people roughly associated with the merchant services business and the total company is some 1700.
Speaker Change: So we are well staffed and we do believe we've been through the realignment.
Iron man on the remain co side.
Speaker Change: Which will suit us well over the next few years.
Speaker Change: We're not feeling the need to cut more.
Right now.
Frederick Stanford: Okay, helpful. And then you talked about additional internal development needed for the big utility customer, how much of that is sort of purely custom for their environment, their infrastructure versus development that can be leveraged for additional customers, especially if you can grow more in a similar type of business.
Speaker Change: Okay helpful. And then you talked about additional internal development needed for the big utility customer how much of that is sort of purely custom for their their environment their infrastructure versus a development that can be leveraged for additional customers, especially if you can grow more and in a similar types of busy.
Frederick Stanford: It's one of the things that we're so excited about with this particular opportunity and all of our web-native development is that everything's being built in highly scalable, configurable native applications. So it really reduces the amount of customization we do for projects, and it enhances speed to market. And it also reduces ongoing maintenance costs. So, you know, historically, if you'd look at that number, it would show that the new product, custom code that would be required, is far less than the historic product.
Speaker Change: Yes.
Speaker Change: Hi.
Speaker Change: One of the things that we're so excited about with this particular opportunity in all of our web native development is that everything is being built in a.
Speaker Change: Highly highly scalable configurable.
Native applications.
Speaker Change: So it really reduces the amount of customization, we do for projects and it enhances speed.
Speaker Change: The market and it also reduces ongoing maintenance cost.
Speaker Change: So.
Speaker Change: Historically, if you look at that number it will.
Speaker Change: The new products.
Speaker Change: Customer custom code.
Speaker Change: Code that would be required.
Speaker Change: Far less.
Speaker Change: The historic products.
Frederick Stanford: And Clay just made a note of, you know, that holds true, and with some iterations of slight differences in water, gas, electric, it's all the same fundamental model, just some different data attributes that have to be picked up.
Speaker Change: Alright, great. Thanks.
Speaker Change: Then.
Speaker Change: Great has made a note of it.
Speaker Change: That holds true.
Speaker Change: With some iterations of slight differences in water gas electric.
Speaker Change: It's all the same fundamental model.
Speaker Change: Just some different data attributes that have to be picked up and it looks like the commercial off the shelf application.
Frederick Stanford: It looks like a commercial off-the-shelf application, but the customized piece to it is vendor integrations by utility. That's the difference. And then that gets augmented because we have standard...
Speaker Change: Customized piece to it is.
Speaker Change: Vendor integrations by utility, yes, that's the difference and then that gets augmented because we have standard.
Frederick Stanford: And then that gets augmented because we have standard methods of entry on our APIs that ease that process as well.
Speaker Change: Methods of entry on our API.
Speaker Change: Is that process as well.
Speaker Change: Okay very helpful.
Speaker Change: Yeah.
Speaker Change: Okay.
Charles Joseph Nabhan: And our next question is from Charles Nabhan with Stevens. Please proceed.
Speaker Change: And our next question is from Charles <unk> with Stephens. Please proceed.
Charles Joseph Nabhan: Hey guys, good morning, and thank you for taking my question. I appreciate the color on the Romainco Outlook for 25, but I just wanted to get a little more color around the linearity of revenue as we think about, you know, the quarterly cadence. So you mentioned high single-digit growth. It sounds like there's some licensed revenue that's going to come through in the front half of the fiscal year. So, you know, that being said, I guess first, is that high single-digit number; I assume that's an average for the year? And secondly, are there any weightings towards any particular quarters that we should consider as we think about our model?
Charles: Hey, guys. Good morning, and thank you for taking my question I appreciate the color on the remain co outlook for 'twenty five, but just wanted to get a little more color around the linearity of.
Charles: Of revenue as we think about the quarterly cadence. So you had mentioned high single digit growth. It sounds like Theres. Some license revenue that's going to come through in the in the front half of the fiscal year. So you know that.
Charles: That being said I guess first is that high single digit I assume that's an average for the year and secondly are there any weightings towards any particular quarters.
Charles: That we should consider as we think about our model.
Clay M. Whitson: It's that there will be seasonality, particularly on the one-time software line. I do believe Manitoba is going to be more of a second half as opposed to first half because of the We haven't received a requirement yet. [inaudible] When it comes to utility license sales, which are the big ones that we see for 25, it's hard at this stage to predict which quarter a MET falls into. I think that line item is just going to be a variable going forward. Got it.
Charles: Yes.
There will be seasonality, particularly on the onetime software line.
Charles: I do believe Manitoba, we believe is going to be more second half as opposed to the first half.
Charles: Because of the.
Speaker Change: We haven't received the requirements yet.
Charles:
Charles: When it comes to utility license sales.
Charles: You are the big ones that we see for 25.
Charles: It's hard at this stage to predict which quarter and that falls into.
Charles: I think that line item is just going to be a variable going forward.
Speaker Change: Got it.
Charles Joseph Nabhan: Got it. Okay. I appreciate the caller.
Okay I appreciate the color. Thank you.
Rufus Hone: The next question is from Rufus Hone with BMO Capital Markets. Please proceed.
Speaker Change: The next question is from a ruthless home with BMO capital markets. Please proceed.
Rufus Hone: Hey, guys. Thanks. Good morning.
Speaker Change: Sure.
Speaker Change: Hey, guys. Thanks, Good morning, maybe I'll ask about merchant services from another angle.
Rufus Hone: Maybe I'll ask about motion services from another angle. I guess it's hard not to notice that you're seeing decent revenue growth in that business. You're now at $42 million of adjusted EBITDA over the last 12 months. That seems to be growing in the mid to high teens. He said prospective buyers are seeing the value of these assets. And it's curious if you have adjusted your view of the valuation through this process. Thanks.
Ruthless Home: I guess hard to not notice that you're seeing decent revenue growth.
Speaker Change: And that business, you're now at 42 million of adjusted EBITDA over the last 12 months that seems to be growing mid to high teens.
Speaker Change: Prospective buyers are seeing the value of these assets and I'm just curious if you've.
Adjusted your view of the valuation through this this process. Thanks.
Gregory S. Daily: It's a good business, and we never thought it was not a good business, and it's been really steady Eddie for us ever since, going public and even before that. Do you want to comment?
Speaker Change: It's a good business and we've never.
Speaker Change: Thought it was not a good business and it's been really steady Eddie for us ever since.
Public and even before that.
Speaker Change: Okay.
Speaker Change: Do you want to comment.
Gregory S. Daily: Amazing team. Nice pipeline. They constantly executed.
Speaker Change: [laughter].
Amazing team.
Speaker Change: Nice pipeline.
Okay.
Speaker Change: It constantly executed.
Gregory S. Daily: You know, can't really comment about pricing and the transaction, but It's a great opportunity for the buyer, it cleans up our story, makes us a software business, and pays off our debt.
Speaker Change: Can't really comment about <unk>.
Speaker Change: Pricing.
Speaker Change: On the transaction, but.
Speaker Change: Yes.
It's a great opportunity for.
Speaker Change: The buyer it cleans up our story makes us a software business is off our debt.
Gregory S. Daily: Okay, fair enough. And then I was wondering if you could help us quantify the size of the headwind you're facing from the subsidized launches. Thanks.
Speaker Change: Okay Fair enough and then.
Speaker Change: Was wondering if you could help us help us quantify the size of the headwind you're facing from the subsidized lunches. Thanks.
Clay M. Whitson: We would, in a normal year, we would
Clay M. Whitson: We would, in a normal year, we would expect education to grow 10%, and coming into this year on our Q4 call, which was our September call, we adjusted that down to 5% for fiscal year 24. And I think once that anniversary passes, we would expect to resume 10% growth in education.
Speaker Change: Yeah.
Speaker Change: We would in a normal year, we would expect education education to grow 10%.
Speaker Change: Coming into this year.
Speaker Change: On our Q4 call, which was our September call.
Speaker Change: We adjusted that down to 5% for fiscal year 'twenty four.
Speaker Change: And I think once that anniversaries.
Speaker Change: We would expect to resume 10% growth in education.
Speaker Change: Got it thanks very much.
Alexander Wexler Markgraff: As a reminder, if you do have a question, please press star, then 1. The next question comes from Alex Markgraff with KeyBank Capital Markets. Please proceed.
As a reminder, if you do have a question. Please press Star then one.
Speaker Change: The next question comes from Alex Mark Graf with Keybanc capital markets. Please proceed.
Hi, everyone. Thanks for taking my questions. A couple maybe one first I think for Paul just on some of the product level of improvements that I think I heard you mentioned earlier speed to market implementation timeline, just curious if you could quantify some of those changes.
Some of the improvements.
Speaker Change: As you work through some of these product initiatives.
Frederick Stanford: Sure. You know, when you're dealing in the public sector, in particular, there's, you know, significant pent-up demand, or, you know, it's such a large, diverse market for a variety of enterprise solutions across the spectrum. And historically, when people have done that, it's been a very long, elongated project where they're basically trying to customize existing internal processes that they've done over decades. Those are pretty well set in place and pretty well configured, and there's commonality amongst those.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: And Youre doing.
Speaker Change: And the public sector in particular, there is significant pent up demand or.
Speaker Change: Such a large diverse market for a variety of enterprise solutions across the spectrum and historically when people have done that it's been a very long elongated project, where they are basically trying to customize existing internal processes that they have done over a decade.
Speaker Change: Those are pretty well set in place and pretty well configured and there's commonality amongst those so as we have.
Frederick Stanford: So, as we, and we have deep domain expertise in particular areas, so as we are working to develop products, we are doing it, you know, with that domain expertise and, many times, in concert with core customers, to give us the capability to meet that as a, you know, more of a commercial off-the-shelf component and also standardized integrations into the systems, which can be significant in large enterprise arrangements. It's really domain-by-domain expertise, and we're organized in a fashion that's domain-specific around ERP products or enterprise utilities or courts, as an example, and tax considerations.
Speaker Change: Deep domain expertise in particular areas. So as we are working to develop products. We are doing with that domain expertise and in many times concert with core customers.
Speaker Change: Two.
Speaker Change: Give us the capability to meet.
Speaker Change: More of a commercial.
Speaker Change: <unk> off the shelf component.
Speaker Change: And also standardized integrations into the systems, which can be significant and large enterprise.
Speaker Change: Arrangement.
Speaker Change: It's really a domain by domain expertise and we're organized in a fashion thats domain that's domain specific.
Speaker Change: Around ERP products or enterprise utilities.
Speaker Change: As an example and tax considerations.
Frederick Stanford: You know, we have, in many cases, 30 or 40 years' worth of history and people who've been developing them over time. And so we find it easier to work with customers to show them something that's tangible and their optionality, because they're able to do things in these systems that they didn't imagine they'd be able to do because of historic hard coded constraints. Okay, great. Thank you.
Speaker Change: We are in many cases 30, or 40 years worth of history and people who have been developing those over time and so we.
Speaker Change: We find it easier to work with customers to show them something that is tangible and their optionality because they are able to do things in the systems that they didn't imagine they would be able to do because of historic hardcoded constraint.
Speaker Change: Okay, great. Thank you and then just one quick one clay.
Speaker Change: Just to sort of confidence level on that that license revenue in the fiscal fourth quarter.
Clay M. Whitson: It is in there, it has been delayed once from Q3 to Q4, but we still believe it will happen in Q4. If it doesn't, it would be our Q1, but we currently expect it in Q4.
Speaker Change: Okay.
Speaker Change: It is in there it has been delayed once from Q3 to Q4.
Speaker Change: But we still believe it'll happen in Q4.
Speaker Change: If it doesn't it would be our Q1, but we.
Speaker Change: We currently expected in Q4.
Speaker Change: Okay. Thank you.
Speaker Change: Yes.
Operator: And at this time, we are showing no further questioners in the queue, and this does conclude our question-and-answer session. I would now like to turn the conference back over to Greg Daily for any closing remarks.
Speaker Change: And at this time, we're showing no further questioners in the queue and this does conclude our question and answer session I would now like to turn the conference back over to Greg Daily for any closing remarks.
Gregory S. Daily: Thank you. I'd like to thank my team, our team, who are out there every day.
Gregory S. Daily: Thank you.
Gregory S. Daily: I'd like to thank my team our team.
Speaker Change: Got it.
Gregory S. Daily: We're out there every day.
Gregory S. Daily: Kelling it, thank you. And thank everybody on this call for your continued interest, and call us if you need anything else. Thank you.
Gregory S. Daily: Thank you and thanks to everybody on this call for your continued interest.
Speaker Change: Call Us if you need anything else. Thank you.
Operator: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
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Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].