Operator: Good day, everyone, and welcome to the i3 Verticals Fourth Quarter 2024 Earnings Conference Call. Today's call is being recorded, and a replay will be available starting today through November 26. The number for the replay is (877) 344-7529 and the code is 1 -- is 48 -- excuse me, and the code is 4184020. The replay may also be accessed for 30 days at the company's website. At this time, for opening remarks, I would like to turn the call over to Clay Whitson, Chief Strategy Officer. Please go ahead, sir.

Clay Whitson: Good morning, and welcome to the fourth quarter 2024 conference call for i3 Verticals. Joining me on this call are Greg Daily, our Chairman and CEO; Rick Stanford, our President; Geoff Smith, our Chief Financial Officer; and Paul Christians, our Chief Revenue Officer. 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. It is the company's intent to provide non-GAAP financial information to enhance understanding of its consolidated GAAP financial performance. 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, 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 filed or furnished to the SEC. Consequently, actual operations and results may differ materially from those discussed in the forward-looking statements. 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 Daily.

Greg Daily: Thanks, Clay. Good morning to everyone on the call. Each year that goes by, we look back and are amazed at all that has changed. We've never been a company that stood still outside our 50 acquisitions as an example. However, I don't think we've ever had a year as transformational as fiscal year 2024. Our team worked exceptionally hard this year to advance our transition to a pure-play vertical market software business and set the table for our next stage of growth. We exit the year as a streamlined and scaled vertical market software provider. As we look ahead at our opportunities in front of us for fiscal year '25, we are excited about our position. We have great solutions that are mission-critical to our customers in underserved markets. We're building great new products, which Rick will discuss further. We have infrastructure to do it efficiently. We have the best-in-class payment facilitation platform that helps us maximize revenue opportunities, and we are de-levered, imposed to add more great businesses through M&A. We believe we have set the stage for a great fiscal year 2025 and beyond. Our visibility, our sales funnel and products we have coming to market give us confidence in our long-term guidance of high single-digit organic growth. We remain focused on growth and excellent investment choices. I'll now turn the call over to Clay -- I'm sorry, to Geoff, and he will provide you more detail on our financial performance. And when he's finished, Rick will add commentary on the business. And finally, Paul, will discuss revenue, and then we'll open up the call for questions.

Geoff Smith: Thanks, Greg. The following pertains to the fourth quarter of our fiscal year 2024, which is the quarter ended September 30. Please refer to the slide presentation titled Supplemental Information on our website for reference with this discussion. Due to the sale of our Merchant Services business, we have classified that portion of our company's discontinued operations. The actual results and outlook section, which we will discuss, pertain to continuing operations only, which we also call RemainCo. This is a transitional reporting period as we completed the sale during September. Revenues for the fourth quarter of fiscal 2024 increased 4% to $60.9 million from $58.6 million for Q4 2023, reflecting organic growth of 2% and two months of revenue from our permitting and licensing acquisition in the public sector. Annualized recurring revenues increased 7.5% to $188.2 million as of Q4 2024 compared to $175.1 million as of Q4 2023. 77% of our revenues in the quarter came from recurring sources. SaaS and payments revenue grew 8%, transaction-based revenues grew 11%, while maintenance and recurring software services grew 6%. Non-recurring sales of software licenses declined 8%, reflecting the ongoing shift to SaaS. We did receive a $2 million license fee from our Midwest utility customer as expected. Professional services revenue declined 7%, principally as a result of the delay in our implementation with Manitoba caused by the public workers union strike. Software-related services represented 75% of total revenues for Q4, and payments 20%, and other 5%. We are introducing a new metric for RemainCo, net dollar retention, which we will disclose annually. This applies to all recurring revenue line items but with the exception of payments. Net dollar retention for fiscal year 2024 was 100%. Adjusted EBITDA increased 4%, in line with revenues to $16.2 million for Q4 2024 from $15.7 million for Q4 2023. Adjusted EBITDA as a percentage of revenues was 26.7%, a slight decline from 26.8% for Q4 2023, reflecting higher corporate expenses of $520,000 for RemainCo. Now as the divestiture is behind us, we anticipate lower corporate expenses in fiscal year 2025. Pro forma adjusted diluted earnings per share from continuing operations was $0.15 for Q4 2024. This number excludes discontinued operations, notably includes consolidated cash net interest expense which discounted for pro forma taxes of 25% would come to $0.15. Again, please refer to the press release for a full description and reconciliation. Segment performance. Following the sale of the Merchant Services business, we have segmented RemainCo by vertical, public sector, which includes education and healthcare. Other consists of corporate expenses and eliminations between segments. Revenues in our public sector vertical increased 6% to $49.6 million for Q4 2024 from $46.9 million for Q4 2023 and represented 81% of total revenues during the quarter. The increase was driven by recurring revenue streams such as SaaS, transaction-based revenue, maintenance and payments, which offset declines in sales of software licenses and professional services. The segment’s adjusted EBITDA increased 6% to $20.2 million for Q4 2024 from $19 million for Q4 2023. Adjusted EBITDA as a percentage of revenues increased to 40.7% for Q4 2024 from 40.6% for Q4 2023, reflecting growth in recurring revenue streams, which often have higher gross margins. Revenue from our healthcare segment declined 3% to $11.4 million for Q4 2024 from $11.7 million for Q4 2023. Consolidation is prevalent in healthcare, and sometimes we lose customers that have been acquired by other healthcare providers. For the fiscal year, health care grew 2%, and we currently expect low single-digit revenue growth for fiscal 2025. Adjusted EBITDA declined 5% in Q4 2024 compared to the prior year, reflecting fixed costs that did not decline in proportion of revenues. Importantly, adjusted EBITDA as a percentage of revenues declined to 18.9% for Q4 2024 from 19.4% for Q4 2023. Regarding the balance sheet. Following the sale of our Merchant Services business during September, our balance sheet is strong and well positioned for 2025. At quarter end, debt stood at $26.2 million which is the remainder of our convertible notes, which mature in February. We still have $450 million of borrowing capacity under our revolving credit facility with a 5x leverage constraint. Our cash balance was $86.5 million on September 30. As a result of the sale of the Merchant Services business, we will need to make tax and tax-related payments of approximately $65 million in the spring. We also have approximately $8 million of non-tax costs related to the deals that have not been paid as of September 30. These accruals are included in accrued expenses on the balance sheet. Outlook. The following reaffirms guidance for continuing operations for FY 2025, which we set forth in our fiscal Q3 press release dated August 8, 2024. As a reminder, fiscal 2024 being a transitionary year with the sale of the Merchant Services businesses, we released guidance for fiscal 2025, a quarter earlier than usual. The outlook does not include acquisitions, that have not been announced or transaction-related costs. Revenues, $243 million to $263 million, adjusted EBITDA of $63 million to $71.5 million, depreciation and internally developed software amortization, $12 million to $14 million; cash interest expense, $1 million to $2 million; pro forma adjusted diluted EPS of $1.05 to $1.25. We continue to expect high single-digit organic revenue growth with annual adjusted EBITDA margin improvement of 50 basis points to 100 basis points. Manitoba project should return to a normal cadence, and we expect continued momentum in the utilities market. The reduction in license sales in favor of SaaS deals will be less of a drag on revenues and the education business has lapped the introduction of certain state subsidies for launch. Acquisitions that have not yet closed are not included in the outlook, we do expect to resume acquisitions on a regular basis. From a seasonality standpoint, we expect -- we currently expect our revenue distribution to approximate the following. Q1 23.5%, Q2 26%, Q3 25%, Q4 25.5%. Although software license sales are less of a factor than last year, they will still represent the most variable line item in the forecast and can distort seasonality in any given quarter. I will now turn the call over to Rick for company updates and M&A pipeline.

Rick Stanford: Thank you, Geoff. Good morning, everyone. Over the past year, we have transitioned to a software-centric organization focused on our vertical markets. We've made significant advancements to achieve our vision long term. The divestiture of the Merchant Services business closed on September 20, and the process of transitioning that business is going smoothly. Running parallel with that, we are committed to refining operations to optimize internal processes and increase our effectiveness and efficiency in many areas. We're excited to announce progress in our technology transformation efforts as well, achieving operational efficiency, cost savings and enhanced customer service capabilities through consolidation of contracts and cloud migration. We have unified both customer-facing and internal support technologies including our service desk and contact center platforms into scalable, cost-effective cloud solutions. We are now delivering even more responsive and streamlined experience for our customers and employees alike. We are further centralizing cybersecurity measures using fully integrated Microsoft tools, including endpoint detection and response, mobile device management, and identity and access management solutions. Our AWS cloud consolidation initiative is nearing successful completion with [co-lake] (ph) located and on-premise data center successfully migrated to the cloud and unifying all subscriptions into an enterprise account, unlocking enterprise level support. To increase efficiency across departments, we have streamlined back-office technologies, including consolidating instant messaging, file sharing and telephony solutions. We have reduced dependency on multiple vendors while creating efficiency and reducing expenses. Together, these initiatives support our commitment to operational efficiency and exceptional service delivery. I mentioned last quarter the intention to hire an enterprise-level leader in product management. As Greg mentioned, we have hired Chad Fenner as our new Chief Product Officer. He will help us drive our ongoing investment in web native configurable next-generation applications. He will be responsible for designing and delivering our product vision, strategy and roadmap and for communicating this vision. The addition of Chad to our team underscores our evolution into a pure-play software company. We have begun to rewrite our CAMA, computer-assisted mass appraisal platform, and are looking forward to its release next year. We've also started work on our JusticeTech 3.0 platform, which will allow us to take our core management software across the US and no longer be restrained by state lines. Given high demand in the utility market, we are adding to our portal software suite and related billing distribution models. Last, we have added another seven products to our roadmap for SOC 2 Type II cybersecurity compliance framework. Regarding M&A in general, our acquisition pipeline continues to be strong with deals in public sector. We looked at several deals again this quarter and continue to have conversations with some of those targets. Many of these targets are tuck-ins of new products and services to complement our existing offerings or will help us expand geographically. I'll now turn the call over to Paul for final comments.

Paul Christians: Thank you, Rick. As Rick has shared, we've been transitioning into a cloud-first business model. This shift has involved thoughtful investment in human capital, organizational structure and technology. As a result, we are making tremendous strides in our goal to deliver a sophisticated and diverse platform of software and services tailored specifically to meet the needs of customers in our strategic verticals. To accelerate revenue growth, we have integrated our sales efforts into a unified domain structure, supported by dedicated resource group, including elements of marketing, product development and service delivery. As stated in previous calls, this alignment enables us to stay closer to our customers, ensuring that we are not only responsive to their needs, but also proactive in capturing additional share of wallet. I am happy to report that sales activity and contracting are trending positively across the board, especially in enterprise utility, JusticeTech, public safety, ERP and education subverticals. We continue to see increased solution bundling on both an intra and inter vertical basis. The addition of Chad Fenner as our CPO will accelerate cross vertical solution sales as we further integrate core enterprise solutions into our broader offering. Examples of this include increased adoption of our digital customer engagement suite and 12 new bundled contracts for law enforcement and core management software solutions in Georgia. In addition, we have fulfilled a significant software distribution solution for a multistate Tier 1 utility as well as payment facilitation as part of a multiyear project. Sales funnel activity and productivity in our new Unifi and sales force instance continue to trend positively. Given that, we anticipate rate of positive sales activity and contracting results to increase through 2025. This concludes my comments, Betsy. At this time, we will open the call for Q&A please.

Operator: [Operator Instructions] The first question today comes from John Davis with Raymond James. Please go ahead.

John Davis: Hey, good morning guys. If I look at fourth quarter revenue, it came in just a hair light of the midpoint of the guide. So just wondering, was there any kind of delayed implementation anything got pushed out? I heard you call it Manitoba, but I wasn't sure if there was an expectation of revenue in the fourth quarter that didn't happen or just any other comments on fourth quarter revenue performance?

Geoff Smith: Nothing in particular that pushed out. I mean we always are -- there's always a little bit of movement on the license line. We did get the big thing, $2 million that we were expected, which was good. We're back to school and kind of getting a sense of how that's going to shake out, but there was nothing we saw in Q4 that changed what we're expecting for fiscal 2025, so that's why.

John Davis: That's helpful and then appreciate the NRR, retention of 100% this year. Obviously, it was a transition year. So as we go into '25 and beyond, how should we think about kind of the growth algo at i3 to get to that high single-digit organic revenue growth number? Should we expect maybe 105-ish NRR plus new logo growth? Just how are you guys thinking about the longer-term NRR as it pertains to the growth algo at i3?

Clay Whitson: Well, JD, we do want to improve the 100%, but I think the growth algorithm with that 100%, our organic for '25 is about 7.5% implied at the midpoint. And so that would imply 7.5% coming from new logos during the year. But we do have a goal of improving that 100% net revenue retention from our existing book every year.

Geoff Smith: One of the points to make on this that I want to make sure it was noted that the payments revenue is not included in that number, two different data sets and different customer names. We'll see if we can get to that in the future. I think if you layer on the payments revenue, that's probably -- you pick up that growth you get from your existing customers growing in their volume. So it probably pushed the net dollar retention a little bit higher. And I think it also just reflects that we are not aggressive pursuer of price increases. But to Clay's point, as the cross-sell story improves, as we tactically make choices on price increases, we do think that, that number is going to go higher.

John Davis: Okay. That's helpful. And then -- just quickly on healthcare, understand consolidation there is what's driving the revenue declines. As you said, low single digit for '25. Longer term, how should we think about growth of that business? Is it mid-single-digits? Is it corporate average? And when do you lap the kind of something with customer losses as we think about modeling '25?

Clay Whitson: Our current expectation is for low single-digit for healthcare over the medium term, high single-digit for education and public sector high single-digit.

John Davis: Okay. Thanks guys.

Operator: The next question comes from Mark Palmer with The Benchmark Company. Please go ahead.

Mark Palmer: Yes. Thanks for taking my questions. Wanted to see if you could give us an update on your utility initiative. You made a reference to it in the prepared remarks. And when would the company be in a position to began to roll out the technology it derived from its initial project to various other utilities across the country.

Greg Daily: Good morning, Mark. On the initial -- on this initial project, we are in the process on the portal side of rolling that out today, and we see that accelerating. And on the distribution side of the business, we would anticipate the sales activities to begin in that as well, although that's a much more specific and measured particular module that is not as broadly used in the industry.

Mark Palmer: So are we then looking at that activity beginning in the first quarter of '25 and then accelerating through the year? How should we think about the cadence?

Greg Daily: Yes. That's a fair assumption.

Mark Palmer: Very good. And one other question with regard to the M&A environment. Rick, you had said on the last call that you were seeing more rationality in the market as it pertains to the kinds of multiples that sellers were demanding. Any update on that front in terms of what you're seeing in the market and how that would potentially contribute to M&A activity in the coming quarters?

Rick Stanford: Yeah. So obviously, there's still extremes on either end, but the people we're talking to seem to be more realistic as to their value and their future growth. I don't see that changing much this year. Our pipeline is very strong. We're still continuing to contact through initial conversations, a lot of public sector deals. We are looking at some education, but I think we're in a good place for '25 to generate somewhere between three to five acquisitions this year and we're excited about the conversations we're having with our current pipeline targets. It seems like timing is more important than -- it's very important than valuation. Valuation is important, but it comes down to timing.

Mark Palmer: Very good. Thank you.

Operator: The next question comes from James Faucette with Morgan Stanley. Please go ahead.

Shefali Tamaskar: Hi, thank you for taking my question. This is Shefali Tamaskar on for James. Wanted to touch on the macro a bit. Just how you're thinking about it in '25, the general health that you're getting from customers? I know you touched upon what's going on in Healthcare. And just anything to note in certain verticals in the public sector that kind of informs your outlook?

Greg Daily: We are seeing in the public sector very, very consistent increased demand to get to configurable web native applications. It's really driven by their need to get to that technology set, but also people constraints in the public sector arena, and the evolution of the software that we've developed over the last several years to support that is being very well received and we now have enough examples in the market that is providing additional comfort of certainty of execution.

Shefali Tamaskar: Okay. That's great to hear. And then just one on organic growth. What's your confidence in that high single-digit organic number? And is there any visibility you might have in terms of like those new logos that you're anticipating?

Clay Whitson: Well, I think we -- on previous calls, we spoke to some of the headwinds that we faced in fiscal year '24. Manitoba was a big one, about $3 million, we should have seen in '24 and resume now. The SaaS transition was a $5 million headwind. And that, we believe -- this coming year, our software license sales will be about the same as they were in '24. And then education, certain states stepped in this last year, but education actually grew 9% in the fourth quarter as we anniversaried those states stepping in. The last one is our large Midwestern utility customer, who we've talked a lot about, we anticipate that growing as well this year.

Shefali Tamaskar: Okay. Thank you.

Operator: The next question comes from Alex Markgraff with KeyBanc Capital Markets. Please go ahead.

Alex Markgraff: Hey, everyone. Thanks for taking my question. Maybe just to quickly touch on margin expansion. I think in the press release, it was noted 100 basis points or more. Geoff, I thought I heard you say 50 to 100. I apologize if I misheard you. Just a clarification there. And then maybe just walk through some of the sources of that 100-plus basis points for '25.

Geoff Smith: Sure. So yeah, correct, we've said 50 to 100. And this next year, I think we have a pretty easy lift to get to that point. A lot of our margin expansion, we've always kind of cited the fact that our corporate overhead growth and inflationary rates and revenue should outpace that. So we should naturally get some margin expansion as that goes. With that in mind, we do see like long-term margin expansion, not just kind of a one-year thing. But this year, in particular, as we turn the page after the sales and Merchant Services business, we've got kind of -- because the corporate overhead has come down some, but not pro rata. The increase of revenue just makes a bigger impact on margins than it would have previously. We're still transitioning out some costs, and we're confident in that 50 to 100. It should be a pretty fair target for us to hit. And long run, still feel good about progression on that as well.

Clay Whitson: I might add that our deal didn't close until September 20. So we had a full complement of staff all the way through the quarter.

Alex Markgraff: Okay. Understood. Thank you both. And then just maybe one quick margin follow-up at the segment level, just around healthcare margins. If you could just add some color on the nature of the delta versus public sector and what sort of margin upside there might be in the Healthcare segment over time?

Geoff Smith: Yeah. So the healthcare segment, we have a couple of different services there. A piece of that is outsourced RCM services which can be an arms and legs business. So there's a disproportionately high number of bodies in the healthcare segment compared to public sector. And as a result, the profile on that revenue is just a lower margin profile. It's a big chunk of revenue. We love it because it is recurring. It's very stable and consistent, but it is a lower margin piece of the business. The growth in healthcare is coming from more of the software pieces. And so over time, hopeful that we can upsize that margin profile in healthcare. We also have some -- the RCM business is a space where there's a few things that are in our plans to work on the cost side of that. Technology, outsourcing, things like that, those are some things that will kind of come further into the focus on healthcare over the next couple of years. So we would expect margin expansion over time.

Alex Markgraff: Okay. Thanks, Geoff.

Operator: The next question comes from Peter Heckmann with D.A. Davidson. Please go ahead.

Peter Heckmann: Hey, good morning. Most of my questions have been asked. One thing I wanted to follow up on. In terms of the seasonality commentary you provided, I appreciate that. But anything you would call out there in terms of the timing of relatively larger software payments or milestone payments that we should be thinking about as we map out 2025.

Clay Whitson: Well, that is the -- software license sales are by far the biggest variable. We currently have a disproportionate amount slated for Q2, the March quarter and that's why we have 26% in that quarter. That could come early. It could come late. So you'll just have to be patient with us when that happens, we'll tell you it came early or it came late or it came on time.

Peter Heckmann: Okay. Okay. And then I'm out of the office today, so I don't have access to my notes. But just can you refresh us on that -- on the project for the Tier 1 utility in terms of -- I'm not sure I heard Rick's comment correctly in terms of the stage of development and rollout of that, but could you refresh us on that? And then how do you expect -- how would you characterize the revenue that you expect to get in 2025 in terms of milestone payments, software versus more recurring revenue streams?

Clay Whitson: Do you want to speak to revenue -- type of revenues?

Geoff Smith: Sure. Yes. So that project is going to have a little bit of everything in terms of types of revenue. We have -- we obviously recognize a $2 million license amount this quarter. That is not the full amount of license. There will be more to come, although probably early in -- fiscal year 2026, not 2025. So there's nothing modeled in there, traditional license this year with bigger amounts will come in 2026. We're in the implementation mode right now for the first phase of the project, and that's part of why we have a good line of sight towards more revenue in 2025. There's a very healthy amount of professional services revenue attached to this project, and that is ticking up this coming year. It will tick up even further than next year. And then payments is a big piece of the story in the utilities market. It's just a great space for attachment of our payment solutions. And that's relevant here. So we'll have recurring revenue from payments. We'll have recurring revenue from for maintenance as well once that turns on and we're -- the professional services, while not necessarily explicitly recurring, is going to be extremely consistent for years to come. So you're kind of touching all things there. As it relates to 2025, basically expect the payments to turn on and expect a really healthy dose of professional services and then expect all of that to just increase the next year plus license revenue.

Peter Heckmann: Got it. That’s helpful and good to hear. Appreciate it.

Operator: [Operator Instructions] The next question comes from Rufus Hone with BMO Capital Markets. Please go ahead.

Rufus Hone: Hey, guys. Good morning. Thanks for the question. I wanted to come back on the organic growth. So you mentioned 7.5% organic growth implied for 2025. You just did 2% organic growth this quarter. Is most of that acceleration you're expecting in 2025, just the headwinds you mentioned reversing? Or is there some fundamental acceleration you're expecting? Thanks.

Clay Whitson: Well, our large Midwestern utility customer, that is just a customer that's growing. So that didn't have anything to do with '24. It's just an acceleration going forward. Education, I mentioned went back to what we consider a normal growth rate, 9% in Q4. It was temporarily, it had a onetime setback in '24. The SaaS transition levels out. So it's not that it's neither a headwind or a tailwind in '25. It's just it will stop shrinking in '25. And then Manitoba is the resumption of, again, kind of a onetime setback.

Rufus Hone: Okay. Thanks. And I wanted to ask on Healthcare as well. You mentioned low single-digit revenue growth in healthcare in '25. Is that mostly from the consolidation you referenced? Or is there anything else weighing on that segment? Thanks.

Clay Whitson: That's -- the headwind is consolidation. It's been an ongoing thing in healthcare. We don't see it going away anytime soon.

Rufus Hone: Thank you.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Greg Daily for any closing remarks.

Greg Daily: Thank you, everyone. It's nice to have 2024 over. It was a dramatic transformational year, essentially a shout out to the Merchant Services team led by Tom DeBord. You guys were awesome. You did what was best for the company. I thank you for that. We miss you and I'm sure you're going to thrive with our good friends at PayRock. But I've been impressed with the conversion. It seems to have gone well and anybody else on the call has anything of interest, I appreciate you dialing in today. So, call us if you need us. Thank you.

Operator: Thank you. The number for the replay is (877) 344-7529 and the code is 4184020. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.