i3 Verticals Inc (IIIV) (Q2 2024) Earnings Call Transcript Highlights: Steady Growth Amidst ...

GuruFocus Research
4 min read

In This Article:

  • Revenue: Increased 1% to $94.5 million in Q2 FY24 from $93.9 million in Q2 FY23.

  • Net ARR: Grew 6% to $322.5 million in Q2 FY24 from $305.7 million in Q2 FY23.

  • Adjusted EBITDA: Rose 4% to $25.8 million in Q2 FY24 from $24.7 million in Q2 FY23.

  • Adjusted EBITDA Margin: Improved to 27.3% in Q2 FY24 from 26.3% in Q2 FY23.

  • Pro Forma Adjusted Diluted EPS: Decreased to $0.34 in Q2 FY24 from $0.38 in Q2 FY23.

  • Software and Related Services Revenue: Represented 48% of total revenues.

  • Payments Revenue: Represented 47% of total revenues, with a slight improvement in yield to 71 basis points in Q2 FY24 from 70 basis points in Q2 FY23.

  • Merchant Services Segment Revenue: Increased 6% to $35.1 million in Q2 FY24 from $33.1 million in Q2 FY23.

  • Merchant Services Segment Adjusted EBITDA: Increased 18% to $10.1 million in Q2 FY24 from $8.6 million in Q2 FY23.

  • Total Leverage Ratio: Was 3.5 times, with a constraint of 5 times under a $450 million revolving credit facility.

  • Outlook for FY24: Revised revenue forecast to $380 million to $394 million, with adjusted EBITDA of $107 million to $113 million.

Release Date: May 10, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Revenues for Q2 2024 increased by 1% to $94.5 million from $93.9 million in Q2 2023, reflecting organic growth from recurring sources.

  • Adjusted EBITDA increased by 4% to $25.8 million for Q2 2024 from $24.7 million for Q2 2023, with improvements in Merchant Services margin and lower corporate expenses.

  • Over 80% of i3 Verticals Inc's revenues in Q2 2024 came from recurring sources, demonstrating a strong and stable revenue base.

  • The company is exploring the sale of the merchant services business, which could significantly reduce debt and free up resources for growth in strategic verticals like public sector, education, and healthcare.

  • i3 Verticals Inc has made significant progress in internal realignment, positioning the company for sustainable growth and improved operational efficiency.

Negative Points

  • Nonrecurring sales of software licenses declined by over $2 million, reflecting the ongoing shift to SaaS and impacting immediate revenue.

  • Professional services revenues declined by $1.3 million due to delays in project implementations, notably the Manitoba driver's license project.

  • Pro forma adjusted diluted earnings per share decreased to $0.34 for Q2 2024 from $0.38 for Q2 2023, driven by higher interest expenses following the repurchase of exchangeable notes.

  • The company lowered its full-year guidance, reflecting delays and uncertainties in project timelines and revenue recognition.

  • Despite the strategic focus on recurring revenues, the transition has led to short-term revenue declines in nonrecurring high-margin areas, which could impact profitability if not managed effectively.

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