Q1 2025 i3 Verticals Inc Earnings Call
Good day, everyone and welcome to the I three verticals first quarter 2025 earnings Conference call. Today's call is being recorded and a replay will be available starting today through February 14.
The number for the replay is 87734475 to nine and the code is 5368 to one zero. The replay may also be accessed for 30 days at the Companys website should you need assistance. Please signal a conference specialist by pressing the star key.
Clay Whitson: He followed by zero on your telephone keypad at this time for opening remarks, I would like to turn the call over to Clay Whitson Chief strategy Officer. Please go ahead Sir.
Good morning, and welcome to the first quarter 'twenty 'twenty five conference call for <unk> verticals. Joining me on this call are Greg daily.
Speaker Change: Chairman and CEO, Rick Stanford President, Jeff Smith, CFO, all Christians, our Chief revenue Officer.
Speaker Change: So 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 by reviewing yesterday's earnings release.
Speaker Change: It is the company's intent to provide non-GAAP financial information to enhance understanding of its consolidated GAAP financial information. This non-GAAP financial information should be considered by each individual in addition to but not instead of the GAAP financial statements.
Speaker Change: This conference call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Including statements among others regarding the Companys expected financial and operating performance.
Speaker Change: For this purpose any statements made during this call that are not statements of historical fact may be deemed to be forward looking statements.
Speaker Change: We're here by caution that these forward looking statements may be affected by important factors among others set forth in the company's earnings release and in reports that are filed or furnished to the SEC.
Speaker Change: Consequently, actual operations and results may differ materially from those discussed in the forward looking statements.
Speaker Change: Finally, the information shared on this call is valid as of today's date and the company undertakes no obligation to update it.
Speaker Change: Sept as may be required under applicable law I will now turn the call over to the company's chairman and CEO Greg Daily.
Speaker Change: Thanks, Clay and good morning to all of you on the call.
Speaker Change: We're excited with our start to fiscal year 2025.
Speaker Change: Allow me to share some highlights.
Speaker Change: Revenue was up 12% over prior years Q1.
Speaker Change: And adjusted EBITDA was up 17%.
Speaker Change: SaaS revenue grew at 16%.
Speaker Change: We are pleased to see the fruits of our emphasis on SaaS.
Speaker Change: We expect that to continue to drive a or our growth.
Speaker Change: Paul will share more details on what's driving revenue growth later.
Speaker Change: And then I wanted to highlight one of the most promising long term opportunities.
Speaker Change: We continue to uncover new opportunities to integrate payments within our vertical market software base.
Speaker Change: This has been a long standing strength and by retaining our proprietary payment facilitating platform.
We have ensured we are well positioned to capitalize on opportunities in key markets, such as utilities and permitting.
Jeff: I will now turn the call over to call it to Jeff and he will provide more detail on financial performance.
Speaker Change: When he is finished Rick will add commentary on M&A and finally, Paul will discuss revenue.
Speaker Change: And then we'll open up the call for questions.
Speaker Change: Thanks, Greg the following pertains to the first quarter of fiscal year 2025.
Quarter ended December 31, 2024.
Speaker Change: Please refer to the slide presentation titled supplemental information on our website for reference with this discussion.
Speaker Change: Oh in the sale of our merchant services business, we have changed our presentation of other cost of services to include an allocation for people costs.
Speaker Change: Previously been included in SG&A.
Speaker Change: We believe this presentation more closely aligns with our software peers and it gives a better view of variable costs, such as installation training data conversion customer support and other services provided directly to customers.
Speaker Change: We've also changed the presentation of certain hosting and related software costs for directly supporting our customers' page six of the supplemental information shows Q2 through Q4 of fiscal 2024 in this format.
Speaker Change: Trailing 12 month period.
Speaker Change: As a reminder, after the sale of the merchant services business all the numbers I will discuss our main co only and exclude discontinued operations.
Speaker Change: Revenues for the first quarter of fiscal 2025 increased 12% to $61 7 million from $55 1 million for Q1 2024.
Speaker Change: Organic growth of 10% and approximately $1 million of revenue from our most recent acquisition of permitting and licensing acquisition and the public sector.
Speaker Change: Annual recurring revenues increased seven 6% to $193 3 million for Q1 2025 compared to $179 6 million for Q1 2024.
Speaker Change: 78% of our revenues in the quarter came from recurring sources, driven by SaaS revenue growth of 16%.
Speaker Change: Payments revenue increased 7%, we expect SaaS and payments revenues to outpace other forms of revenue for the remainder of the year.
Speaker Change: Recurring sales of software licenses increased to $2 7 million for Q1 2025 from just point 4 million for Q1 2024.
Speaker Change: The timing of these sales was earlier than expected, but does not change our expectation of software of sales of software licenses for fiscal 2025 to be similar in total to fiscal 2024.
Speaker Change: When we first introduced guidance for fiscal 2025, we expected more license revenue to land in Q2, some moved up to Q1.
Speaker Change: So I'll phone related services represented 74% of total revenues for Q1, 2025 with payments, 22% and other 4%.
Speaker Change: Adjusted EBITDA increased 17% outpacing revenues to $16 4 million for Q1 2025 from 14 million for Q1 2024.
Speaker Change: Adjusted EBITDA as a percentage of revenues was 26, 5% an increase from 25, 4% for Q1 2024.
Speaker Change: Quite the entire software sales, which carry high margins and lower corporate expenses as a percentage of revenues.
Speaker Change: Corporate expenses as a percentage of revenues improved 10, 7% Q1 2025 from 11, 2% for Q1 2024.
Speaker Change: Pro forma adjusted diluted earnings per share from continuing operations was 31 cents for Q1 2025 again, please refer to the press release for a full description and reconciliation.
Speaker Change: Following the sale of our merchant services business, we had segmented remain co by vertical public sector, which includes education and health care.
Speaker Change: Other consists of corporate expenses and eliminations between segments.
Speaker Change: Revenues in our public sector vertical increased 12% to $48 8 million for Q1 2025 from 43 point.
Speaker Change: 5 million for Q1 2024.
Speaker Change: It represented 79% of total revenues during the quarter.
Speaker Change: The increase was driven by recurring revenue streams, such as SaaS transaction based revenues and maintenance, which all grew double digits, along with a double digit increase in professional services.
Speaker Change: The segment's adjusted EBITDA increased 11% to $19 2 million for Q1 2025 from $17 4 million for Q1 2024.
Speaker Change: Adjusted EBITDA as a percentage of revenues declined slightly to 39, 4%.
For Q1, 2025% from 39, 9% for Q1 2020.
Speaker Change: As a result of higher professional services revenues, which carries lower margins.
Speaker Change: Revenues for our health care segment increased 14% to $13 2 million for Q1 2025 from $16 6 million for Q1, 2024, driven principally by recurring software services.
Speaker Change: And nonrecurring sales of software licenses.
Speaker Change: Adjusted EBITDA increased 34% in Q1 2025 compared to Q1 2024, it's benefiting from sale of high margin software licenses adjust.
Speaker Change: Adjusted EBITDA as a percentage of revenues improved to 28, 5% for Q1 2025 from 24, 1% for Q1 2024.
Speaker Change: Regarding the balance sheet following the sale of merchant services business during September balance sheet is strong and well positioned for the future.
Speaker Change: At quarter end debt stood at $26 2 million made up of the remainder of our convertible notes, which mature this month.
Speaker Change: We still have $450 million of borrowing capacity on our revolving credit for the five X leverage constrained our cash balance was $85 6 million on December 31, but we are subsequently made tax or tax related payments of approximately $60 million as a result of the sale on our merchant services business.
Speaker Change: The following reaffirms guidance for continuing operations for FY 2025 set forth in our fiscal 2024 press release dated November 25 2024.
Speaker Change: No. It does not include acquisitions that have not been announced or transaction related costs.
Speaker Change: Revenue $243 million to $263 million.
Speaker Change: That EBITDA non-GAAP.
Speaker Change: Three to $71 5 million depreciation and internally developed software amortization 12 to 14 million cash interest expense net one to 2 million pro forma adjusted diluted earnings per share non-GAAP.
$1.05 to $1 25 sets.
Speaker Change: We continue to expect high single digit organic revenue growth with adjusted EBITDA margin improvement of 50 to 100 basis points per year.
Speaker Change: From a seasonality standpoint, we currently expect our revenue distribution for the remaining three quarters to approximate the following 24 four in Q1 'twenty five three in Q2 24 six in Q3 25.7 in Q4.
Speaker Change: Although software license sales are less of a factor than in years past. They still represent the most variable line item to forecast and can distort seasonality in any given quarter.
Speaker Change: I will now turn the call over to Rick for comments on M&A.
Rick: Thank you Jeff good morning, everyone.
Speaker Change: Get straight to your M&A, and then I will turn the call over to Paul for revenue and product updates.
Speaker Change: I'm happy to report that our most recent acquisition in the fourth quarter is exceeding our expectations and Paul will touch more on that in a few minutes historically, we've not given a lot of detail around our M&A process and we thought it might be helpful to give a little insight into that process M&A continues to be an important part of our DNA.
Speaker Change: We often have discussions around buying or building the long and short is building takes time and valuable resources. However, it does exists on a consistent basis within our engineering team.
Speaker Change: Buying on the other hand provides a valuable speed to market. In addition, we acquire external expertise talent and mitigate any execution risk last we gain immediate access to the established processes products distribution and an existing customer base for cross sell opportunities.
Speaker Change: Our acquisition pipeline continues to be strong with a primary focus on acquisitions in our public sector vertical.
Speaker Change: This past quarter, we saw several deals come in and go out of the pine.
Speaker Change: There has been no noticeable increase or decrease in the number of deals we look at quarter to quarter.
Speaker Change: We are constantly looking for targets that can complement our long term goals, obviously the opportunity to penetrate new markets with new or enhanced technologies is important to us we're looking for both market and product expansion in potential deals combined with cost savings and revenue enhancements.
Speaker Change: We continue to self source our deals as we've done historically, our sourcing is a combination of deep research cold calls and referrals that facilitate warm introductions.
Speaker Change: As I've said before we remain disciplined in our parameters of any acquisition, we've defined our strategic objectives, depending on the vertical and sub vertical we assess several things prior to making an offer first and foremost growth profitability and as the deal is strategic fit.
Speaker Change: We review market position product offerings, and customer base to determine compatibility and potential synergies.
Speaker Change: Next does the historical and forecasted financial performance, along with our goals that we.
Speaker Change: We then review management and the cultural aspects of the deal we want to eliminate early post close friction clear communication is key for us pre and post close.
Speaker Change: We also consider any operational complexities, we may need to deal with post close.
Speaker Change: We then look at key personnel, we wanted to ensure continuity of expertise.
Speaker Change: There is also an extensive review of technology integration required we focus on compatibility and security within our existing product suite.
Speaker Change: Lastly, we consider post close value recognition, we established metrics that align with our overall strategic objectives. We will continue to have detailed conversations with targets in hopes of creating a term sheet and ultimately closure I'll now turn the call over to Paul for final comments.
Paul: Thank you Rick the.
Paul: The SaaS evolution of our product portfolio combined with our focus on intra and inter vertical bundling continues to drive meaningful gains in productivity.
Paul: The systems needed to facilitate this growth are in place and sale synergies are evident.
Paul: Our ability to integrate solutions across multiple verticals has proven to be a significant differentiator.
Paul: And the product and pricing arena legacy contracts are being transitioned to a SaaS model.
Speaker Change: Object to client.
Speaker Change: Funding practices and contractual commitments.
Speaker Change: New contracts are presented in a SaaS model format also subject to funding practices and contractual contractual commitments.
Speaker Change: The other three verticals development and product teams are upgrading our product to meet current market demands as.
Speaker Change: As we sunset products and sell our upgraded products <unk> brings additional value to each customer.
Speaker Change: To that end, we have introduced new technology models modules for public safety and jewelry management and our justice stop vertical.
Speaker Change: And government fund accounting and licensing and our ERP sub vertical.
Speaker Change: Each updated module replaces a legacy system and a reasoned and orderly fashion skus or transitioned to a two way SaaS model with attendant services support pricing in integrated payments.
Speaker Change: I have three verticals is breaking into new geographic markets and expanding share in markets, where we already have a strong presence there.
Speaker Change: The Justice Tac tax up vertical is a great example of the strength of our reputation and solutions in a given market.
Speaker Change: Michigan 18, new quartz went live this quarter for a total of 81 courts online with my file.
Speaker Change: <unk> filed its statewide E filing.
Speaker Change: That farm powered by for Michigan empowered by ice re verticals true filing and <unk> integrated payments.
Speaker Change: True file with integrated payments has also been received well received in Georgia as a state prepares for its E filing mandate.
Speaker Change: <unk> 44, a probate courts have adopted this innovative technology, including Clayton County, which is the fifth largest in the state.
Speaker Change: Leveraging our current customer base is also a key to our success.
Speaker Change: The impact of our intra vertical sales strategies as exemplified in Okaloosa, Louisiana, where the city is optimizing its municipal operations to R.
Speaker Change: ERP solutions.
Speaker Change: Lucy is deploying <unk> fund accounting municipal licensing and utility building solutions with <unk> integrated payments in licensing and utility billing.
Speaker Change: Rick Steve as he mentioned an acquisition that we recently closed that we're very excited about this this firm is focused on the state board level and permitting and licensing space.
Speaker Change: It should be noted that they have been highly effective in California, which is notable given the size of the regulatory environment.
Speaker Change: The team has created a cloud native highly configurable customer responsive offering.
Speaker Change: It sits in our ERP sub vertical and is enjoying the benefits of.
Speaker Change: Expanding sales.
Speaker Change: I'll support RFP integrated payment resources, evidenced by the creation of the <unk>.
Speaker Change: Highly significant pipeline.
Speaker Change: We are seeing notable success as well with our <unk> customer engagement portal.
Speaker Change: <unk> portal is an as an end user.
Speaker Change: Our customer engagement technology, which spans all market areas.
Speaker Change: Apprised utility use case application for the ice re portal was recognized by J D power industry recent rankings, we secured the number one spot in the west for large utilities with Seattle and the number two spot in the northeast for large utilities with Aqua.
Speaker Change: We have recently been awarded contracts for five new portal customers that we won through competitive Rfps successfully displacing historic tier one portal providers our internal systems.
Speaker Change: Three proprietary payment technology opportunities are also possible downstream.
Speaker Change: Our product and marketing teams are leveraging the success, we've had in enterprise utility subsegment to configure the technology for a domain specific U K use cases across the remainder of our markets with a heavier focus in the public sector.
Speaker Change: It should also be noted that the ICT portal and all <unk> proprietary software are seamlessly integrated with our proprietary payment technology is the use case requires.
Speaker Change: This concludes my comments drew at this time, we will open the call for Q&A. Please.
Speaker Change: Thank you.
We'll now begin the question and answer session.
Speaker Change: I ask a question you May press Star then one on your telephone keypad.
Speaker Change: If you are using a speaker phone.
Speaker Change: Please pickup your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please.
Speaker Change: Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from John Davis with Raymond James. Please go ahead.
John Davis: Hey, good morning, guys.
Speaker Change: Nice to see the improvement healthcare accelerated 14% legal down 3% last quarter, so anything to call out the lumpiness, yes, how should we think about that for the rest of year.
Speaker Change: Uh huh.
Speaker Change: Most of the one time software license sales were in the health care segment J D. We still expect low single digit growth for health care this year.
Speaker Change: Okay, perfect well that leads me to the next question.
Speaker Change: Based off of the change in kind of a revenue cadence for the year that Jeff laid out it looks like maybe about $1 $8 million was the licensed full board.
Speaker Change: From <unk> to one's view left there.
Speaker Change: Yeah. That's yeah, that's that's that's pretty close.
Speaker Change: Okay, Great and then Jeff maybe I appreciate the help on the revenue cadence throughout the year good to see margins up about 110 basis points year over year in the first quarter anything to call out as far as margin expansion in the balance of the year or any particular quarters that should be stronger or weaker full year calls for about 120 basis points.
Speaker Change: Great.
Speaker Change: Yeah the.
Speaker Change: Full year guidance kind of holds on our margin as youre looking at like cadence within that Q.
Speaker Change: Q3 has historically kind of been our low point for margins I think you'd see that last year and I would anticipate similar this year barring any onetime revenue kind of tweaking that.
Speaker Change: A primary reason for that is schools being out of session and that hit us hardest in that quarter.
Speaker Change: And then last one for me any update on the large utility costs were and how that project.
Speaker Change: Progressing.
Speaker Change: Our utility customer that's progressing well you know we kind of guided the revenue on that would stair step up from approximately 3 million to five ish million. This year and that would continue to track in terms of kind of what's going on under the hood there.
Speaker Change: Gone live on the payments, but that customer so that's a big piece of the payments growth. We're really excited about and it's a great kind of proof of concept and what kind of we can do or what size scale.
Speaker Change: The revenues from the.
Speaker Change: Rest of the implementation of the software will be steady, but they'll accelerate significantly in 2026 and 2027. So it is helpful. This year, it's on track.
Speaker Change: But it gets a lot more exciting as you go further out.
Scott: Okay. Thanks, Scott.
Speaker Change: The next question comes from Peter Heckmann with D. A Davidson. Please go ahead.
Peter Heckmann: Hey, good morning, Thanks for taking the question I just wanted to follow on on the last deal can you talk a little bit about what you see in terms of the longer term opportunity.
Speaker Change: With with larger utilities.
Yes.
Speaker Change: The competitive landscape look like.
Speaker Change: And in terms of like.
Speaker Change: When you think you'll be in a good position to start participating in some rfps for for work there.
Speaker Change: Uh huh.
Speaker Change: The landscape.
Speaker Change: Is generally quite positive there, it's really driven by software, but need to continue to evolve and upgrade legacy software that's been in place and in some cases for 10 or 20 years.
Speaker Change: We see that accelerating.
Speaker Change: And we touched upon that with a number of products and services.
Speaker Change: Okay.
Speaker Change: Particularly like as I mentioned on the portal component.
Speaker Change: We're very actively involved in that today, we see the demand continuing to get higher.
Speaker Change: It's a.
Speaker Change: Very new responsive technology, and we see that improving.
Speaker Change: How that manifests itself down through other technologies that we can bring to bear.
Speaker Change: The utility to aid in our customer service and billing components also it was gaining a high degree of interest. So I think you'll see a steady ramp up in that.
Speaker Change: Arena.
Speaker Change: And we're actively engaged into a chip in it today and really not constrained at this point.
Speaker Change: I agree I mean, I think the momentum is still building, yes, yes, we are getting inbound calls from people.
Speaker Change:
Speaker Change: In our pipeline, but obviously now they are correct.
Speaker Change: It's definitely the most exciting thing that we've got.
Speaker Change: You probably have a handful of great spaces, but.
Utilities is either number one and number two yes.
Speaker Change: It's been very consistent and improving and continue.
How would you characterize the tier one.
Speaker Change: Universe, there are we talking about.
Speaker Change: A couple of hundred tier one utilities in the U S or I'm, just trying to think about like how many potential prospects there.
Speaker Change: Yeah.
Speaker Change: I wouldn't say that would be quite that high it becomes much more robust when you get to tears low two three and four.
Speaker Change: I think if you look down through tiers 124.
Speaker Change: Adjusting in gas and water that's in the 500 range.
Speaker Change: And we have offerings that serve that area and we also have offerings that serve below and the tier five six and seven area. So.
Speaker Change: The total exposure in that space. If you looked at all of it measures in a couple of thousand but.
Speaker Change: And like in many markets it's.
Speaker Change: Relatively heavily weighted to tier four and up.
Speaker Change: Okay and then just lastly, you mentioned some recognition by J D powers was that for them.
Speaker Change: Specific <unk> portal product or is that for the municipal customer.
Speaker Change: It's it was for the part.
Speaker Change: Both of those examples where for the portable.
Speaker Change: Portal product.
Speaker Change: Okay, great. Thank you.
Speaker Change: The next question comes from Charles <unk> with Stephens. Please go ahead.
Speaker Change: Good morning, appreciate all the color around the M&A environment and your strategy, there, but curious if you're seeing any differences between larger and smaller opportunities.
Speaker Change: Within your pipeline and if you could touch on your willingness to do maybe more smaller deals versus larger deals. If you have any preference or just generally what you're seeing what you're seeing in the market.
Speaker Change: No.
Speaker Change: Yeah.
Let me define small and large historically, we've looked our sweet spot has been between two and $5 million in EBITDA.
Speaker Change: We do look at deals a little larger than Fob.
Speaker Change: We tend to not look at deals or pass on deals below $1 million in EBITDA.
Speaker Change:
Speaker Change: That really hasnt changed that dynamic were seeing both our sweet spot and a little larger.
Speaker Change: Theres been no uptick in a competitive environment and were looking at the same number of deals every quarter that we were year ago.
Speaker Change: Got it okay, and just as a quick follow up I know.
Speaker Change: Lot of moving pieces and uncertainty with the change in administration, but.
Speaker Change: From the conversations you've had and if you think about the outlook for the next few years.
Speaker Change: I'm interested in your thoughts on any changes or potential changes in spending trends on you know the state or city level.
Speaker Change: From the change in administration over the next few years.
Speaker Change: Yeah. This is a hot topic right now.
Speaker Change: It's early days and we're all trying to figure that out but we.
Speaker Change: We haven't seen any.
Speaker Change: Any kind of any kind of pull back in that arena.
Speaker Change: One of the things that we do particularly well in the public sector is monetize the cost of software with.
Speaker Change: Transaction revenue that he has.
Speaker Change: User base.
Speaker Change: And so in some cases.
Speaker Change: Cost to the government entity to deploy that is nothing.
Speaker Change: So we would see that continuing to increase if there are constraints, we don't do we havent historically done.
Speaker Change: Ton of business with ARPA or federal grants of many types.
Speaker Change: No we don't really see a threat in that arena because it has not been our focus in terms of where we are and what's going on.
Speaker Change: At this point, we don't see it we do think there'll be some noise around it and we are trying to be creative.
Speaker Change: In terms of forgiving.
Speaker Change: [noise] government agencies Optionality in terms of how they can deploy systems and what the what the.
Speaker Change: But the cash flow requirements for them to cover that are transitioning some of those costs to a constituent base for use fees.
Speaker Change: Got it I appreciate all the color guys. Thank you.
Speaker Change: The next question comes from Alex Mark Graf with Keybanc capital markets.
Speaker Change: Please go ahead.
Speaker Change: Hi, everyone. Thanks for taking my questions first maybe for Greg or Paul just that Greg I think at the outset of the call you made some comments on.
Speaker Change: Opportunities to further integrated payments product can you just sort of expand on that and what that's in reference to if it's more around the existing customer base or just as you look at the pipeline.
Paul: It's we we typically are this is Paul we typically present.
Paul: Payments, where they use case demands it where there is some type of a transaction that has to facilitate it with some type of a fee R. R.
Paul: Some mechanism that they need to complete that cycle, that's integrated into virtually all of our software where that that is the case, we do find that.
Paul: Government agencies in particular are.
Paul: Happy to take a look at that because it provides a very high level of certainty of execution and continuity and if theyre doing it in conjunction with our software then the reconciliation processes are superior versus exterior programs that they have to find so we are we are we are if it's applicable we are <unk>.
Paul: Those opportunities in our presentations and we are we do have an active effort to go back and assess our existing product portfolio, where we do not software portfolio. What would you not have payments, yes covered and approach customers to see if they would like to.
Paul: Pursue a deeper integration of that.
Paul: Okay. So then just to clarify where there is opportunity.
Paul: Opportunity to go back, but that's mostly in the government vertical is that did I hear that correctly.
Paul: Yes, that's correct.
Speaker Change: Okay. Thank you, Okay, and then maybe one for Rick just on the M&A process I. Appreciate the comments there can you maybe just remind us on some of the growth and profitability sort of thresholds that you look at for looking for at the time of signing and then.
Speaker Change: In the event that there's sort of dilutive to the company average at the time of signing the timeline at which you would expect to bring those up to.
Speaker Change: Upper above three verticals average.
Speaker Change: Well, we typically look at.
We expect a 10% revenue growth rate.
Speaker Change: We like margins to not all down our corporate average so we'd prefer margins be in the low thirty's certainly high twenties.
Speaker Change:
Speaker Change: We've generally not paying more than 10 times.
Speaker Change: EBITDA and then we can blend that lower with a combination of earn outs with lower multiples assigned to them.
Speaker Change: By adding payments as Paul I'll spend some time on this morning.
Speaker Change:
Speaker Change: So they're generally not dilutive effect.
Speaker Change: If they were we would want to correct that within the first two years.
Speaker Change: Okay understood. Thank you all.
Speaker Change: Again, if you have a question. Please press Star then one.
Speaker Change: The next question comes from James Faucette with Morgan Stanley. Please go ahead.
Speaker Change: Hi, This is Scott on for James.
Speaker Change: My question.
Speaker Change: So just a quick one on that high single digit organic growth.
Speaker Change: Just wondering if you could provide a little bit more of a detailed picture of the driver.
Speaker Change: Hum.
Speaker Change: Organic growth this year, how much is new versus existing projects and for the new lines, how much visibility do you have into those new projects in that pipeline.
Speaker Change: Sure.
Speaker Change: We published a net dollar retention number last quarter, and we will do that annually, but it was 100%.
Speaker Change: This does not include payments when we are able to include.
Speaker Change: He mentioned that number we think it'll be two or 3% higher.
Speaker Change: Inflation has not historically contributed to that 100% in other words pricing increases, but in the future. We expect it might contribute a point or two.
Speaker Change: And then that would leave the remainder for new logos.
Speaker Change: So that's kind of a general algorithm, but.
Speaker Change: Big Elephant customers can swing that one way or the other and we've seen that in the last couple of years.
Speaker Change: Okay got it that's helpful and then on M&A, we generally continue to expect about three to five assets.
Speaker Change: Yeah.
Speaker Change: Yeah, that's about right.
Speaker Change: We digest them well it would be perfect that we can do it one quarter, but.
Speaker Change: It is lumpy very opportunistic.
Speaker Change: Opportunistic.
But.
Speaker Change: We didn't do that many last year that we're optimistic about this year.
Speaker Change: Got it thank you.
Speaker Change: Again, if you have a question. Please press Star then one.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Greg Daily for any closing remarks.
Speaker Change: Again, thank you to our investors.
Speaker Change: Really appreciate the team and the job they're doing.
Speaker Change: And we're very excited.
Speaker Change: As a company about the next two or three years. Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].