i3 Verticals Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 10, 2023

There are 11 speakers on the call.

Operator

Good day, everyone, and welcome to the i3 Verticals Second Quarter 2023 Earnings Conference Call. All participants will be in a listen only mode. Today's call is being recorded and a replay will be available starting today through May 17. The number for the replay is 8 7,000,000,344,000,529 and the code is 1-six seventeen,430. The replay may also be accessed for 30 days at the company's website.

Operator

At this time, for opening remarks, I would like to turn the call over to Jeff Smith, SVP of Finance. Please go ahead, sir.

Speaker 1

Good morning, and welcome to the Q2 2023 conference call for I3 Verticals. Joining me on this call are Greg Daily, our Chairman and CEO Clay Whitson, our CFO Rich Stanford, our President and Paul Christians, our COO. Since 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 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 Historical fact may be deemed to be forward looking statements.

Speaker 1

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'll now turn the call over to the company's Chairman and CEO, Greg Daley.

Speaker 2

Thanks, Jeff, and good morning to everyone on the call. We're excited to present our results for the Q2 of fiscal year 'twenty three. This quarter we set another record for revenue and adjusted EBITDA which were up 20% 27% over the same quarter last year, which reflected our improving margins. We've been highlighting our transformation to a vertical market software business that uses payments to optimize Services revenue overtook all other sources and accounted for more than 50% of total revenue. Annualized recurring revenue grew over 20% compared to the same period last year, driven by strong SaaS, Software maintenance and payments revenue growth.

Speaker 2

This quarter includes the first results of operation for AccuFund, their integration into the rest of our public sector has been seamless and we continue to be excited about the cross sell opportunities The last time when we refreshed our senior secured credit facility was 4 years ago in May of 2019. Since that time, we've grown tremendously and the quality of our credit has never been better. Thanks to that and the excellent service from our bank group that we are pleased to announce the closing of our new senior secured credit It has been interesting times in the credit markets to say the least, but against that backdrop, We were able to achieve a fantastic result. First, we upsized our revolving line of credit capacity to $450,000,000 which sets the table for future M and A over the next 5 years. Next, we added flexibility in our financial covenants, a vote of confidence on our credit and execution from our bank group and finally improved pricing in our interest rate spread by a quarter of a point.

Speaker 2

We are grateful to all of our banks who participated in the facilities including JPMorgan Chase, the 3rd Regions, TD Bank, KeyBanc, Pinnacle, First Bank, Raymond James, First Horizon and Bank of America. Now I'll turn the call over to Clay and he'll provide you more details Our Q2 financial performance following Clay's comments, Rick will provide an update on some business related items and address M and A, and then we'll open up the call for questions.

Speaker 3

Good morning. The following pertains to the Q2 of our fiscal year 2023, which is the quarter ended March 31, 2023. Please refer to the slide presentation titled Supplemental Information on our website for reference with this discussion. We had another great quarter with record revenues and adjusted EBITDA. Revenues for the 2nd quarter increased 20% to $93,900,000 from $78,100,000 for Q2 'twenty two, reflecting organic growth and acquisitions.

Speaker 3

Our revenue yield improved to 158 basis points for the quarter from 146 basis points for Q222. Organic growth for this quarter was approximately 12%, Benefiting from a strong quarter for sales of software licenses, which totaled 3,500,000 Although small in the scheme of things, we keep highlighting this line because it's an outlier from our otherwise highly predictable revenue and explains many of the variations between quarters. Annual recurring revenues totaled 305 point $7,000,000 for Q2 'twenty three compared to $254,500,000 for Q2 'twenty two, a growth rate of 20%. Organic ARR growth generally runs a few percentage points above our total organic revenue growth. Over 80% of our revenues in the quarter continued to come from recurring sources.

Speaker 3

Software and related services remained the largest portion of our revenues, representing 50% for Q2. Payments represented 45%, other 5%. Adjusted EBITDA increased $15,500,000 for Q222, reflecting continued momentum in our Software and Services segment. Adjusted EBITDA as a percentage of revenues increased to 26.3% for Q2 'twenty three from 25% for Q2 'twenty two, reflecting margin improvement in our Software and Services segment. Pro form a adjusted diluted earnings per share increased to $0.38 for Q2 'twenty three from $0.37 for Q2 'twenty two.

Speaker 3

Again, please refer to the press release for a full description and reconciliation. Segment performance. Revenues in our Software and Services segment increased 24 percent to $60,800,000 for Q2 'twenty three from $49,000,000 for Q222, principally reflecting growth in our flagship public sector vertical, which represents over half of our consolidated business. Public Sector includes the Education subvertical, which deserves special mention. Revenues in our education subvertical continued a strong rebound, thanks to organic sales to new school districts Benefiting from strong license sales, the segment's adjusted EBITDA improved 35% to $22,100,000 for Q2 'twenty three from $16,300,000 for Q2 'twenty two outpacing revenues.

Speaker 3

Adjusted EBITDA as a percentage of revenues improved to 36.3% for Q2 'twenty three from 33.4 percent for Q222, reflecting high margin software and services acquisitions such as Celtic over the past year and a return to traditional high margins in Education. The AccuFund acquisition effective January 1 was high margin as well. Revenues for our Merchant Services segment increased 13% to $33,100,000 for Q2 'twenty three from $29,200,000 for Q222, 'twenty two, principally reflecting growth in our ISO, ISV and B2B channels. Adjusted EBITDA for our Merchant Services segment increased 6% to $8,600,000 for Q2 'twenty three from $8,100,000 for Q2 'twenty two with higher revenues partially offset by higher residual expenses. In keeping with our strategy since the IPO, we have steadily redirected acquisition and internal resources from traditional Merchant Services into higher growth and higher margin software and services coupled with integrated payments.

Speaker 3

The balance sheet. Greg mentioned the completion of our new revolving credit facility. I just want to reiterate that we were able to improve several aspects of the agreement. First, we expanded to $450,000,000 from $375,000,000 added and upsized $100,000,000 on October 1 last year. 2nd, we achieved a 25 basis point improvement in our spread and we went from 2 leverage covenants to 1 Ivex covenant for total leverage, dropping the senior secured leverage covenant, which gives us greater On March 31, we had $267,100,000 borrowed under our revolver net of cash.

Speaker 3

The face value of our convertible notes are $117,000,000 As of March 31, our total leverage ratio remained The interest rate for the convertible notes is 1%, while the interest rate for the revolver is which can be used for debt repayment, acquisitions and earn outs. We define free cash flow as adjusted EBITDA minus CapEx, Outlook. Looking forward, the strong first half to our fiscal year gives us confidence in the following guidance for fiscal year 'twenty three, which excludes acquisitions that have not yet closed and transaction related costs. Revenues $360,000,000 to $380,000,000 no change there. Adjusted EBITDA $97,000,000 to 1 $3,000,000 that's a $1,000,000 increase at the midpoint.

Speaker 3

Depreciation and internally developed software amortization $8,000,000 to $9,000,000 We had not given specific previous guidance on that number. Cash interest expense net $22,000,000 to $23,000,000 This represents a $2,000,000 increase from the midpoint given last November. The main drivers include the AccuFund purchase, fees associated with the new revolving credit Pro form a adjusted diluted EPS $1.46 to 1 $0.56 that's Since of new acquisitions, we currently expect Q3 revenues and EBITDA to look pretty similar to Q2, With a customary step up in Q4 coinciding with back to school activity. Quarters might vary based upon software license sales even though our trend is generally toward more recurring revenue streams. I'll now turn the call over to Rick for company updates and pipeline.

Speaker 4

Thank you, Clay. Good morning, everyone. Before I discuss M and A, I want to comment on a few developments within the business.

Speaker 3

A couple

Speaker 4

of quarters ago, we announced promotions of Paul Christians to Chief Operating Officer And Chris Lascher, the President of Public Sector. They've been doing an amazing job in these new roles and are far exceeding our expectations. We now have another important promotion I'd like to share. Tom DeBoer, formerly the CEO of our B2B business, Infantec, Has been promoted to President of Merchant Solutions for I3. Tom is a veteran in the payment space and is highly respected by his peers.

Speaker 4

His long and successful history and his significant contributions to the success of i3 Merchant Solutions make him a natural fit for this job. The i3 Merchant Solutions division develops and implements enterprise payment technology for the i3 Verticals family of companies and the broader financial technology market. We are looking forward to seeing Tom's many successes across the enterprise with merchant solutions. As a result of the unified product offering success in public sector, we are replicating similar processes and structure across all Primary verticals at i3. One example of this structure is a unified enterprise level RFP team, which includes RFP management, technical writers, product personnel, finance and cloud team members.

Speaker 4

Benefits of the new team include improved response time, enhanced response quality, industry prowess The next generation of UPO discipline is being deployed in public, education And Healthcare sectors with enhanced infrastructure and development resources being pulled from within the vertical sub companies to strengthen sales, Product development, operations, implementations and deployment. These internal customer facing market services are being bolstered by our 3 teams focused on enterprise level infrastructure, security, cloud services, development and project management. JustusTech, utilities, ERP and transportation. JustusTech is modernizing online court systems with Fully integrated digital solutions including e filing, CMS, digital evidence management and attendant reporting for full scope state court systems. The utility subvertical serves large utility clients and local utilities with unmatched data delivery, IVR, Digital Customer Engagement and CIS Solutions.

Speaker 4

The transportation subvertical, both motor vehicle, motor carrier And driver service solutions and the ERP subvertical includes GFA, land records, permits, licensing and business tax solutions. As the education sector continues to expand, we deliver a fully integrated seamless user experience to our clients With school activities reaching a post pandemic high, our focus is on 3 primary sub verticals nutrition services, Taking in events and payments. The combination of BIS and Celtic into I3 Transportation delivers a needed solution to meet the demands of 2 new state contracts in transportation subvertical prove the market recognizes the depth and breadth of our solution suites. In addition, the application of AccuFund across the public sector and the i3 Verticals family has proved to be a very well received addition. As i3 Healthcare Solutions executes its UPO strategy with unified sales, marketing, product and software engineering teams, The sector is accelerating the strategy to monetize payments across the revenue spectrum.

Speaker 4

Throughout the portfolio, subsidiaries are advancing their technology platforms to connect with patients through in app payment, text to pay, e statements and payment portals. Additionally, i3 Healthcare Solutions Continues to see the results of the UPO disciplines through the synergies of our practice management and EHR platforms targeted geographic expansion. I3 Healthcare Solutions continues to being recognized as a market leader for delivering revenue cycle management services Evidenced by recent award of a state level contract to provide RCM technology and services at the agency, clinic and laboratory levels. Demonstrating the sector's breadth across the healthcare ecosystem, i3 Healthcare Solutions also secured a contract to deliver software and consulting services to one of the top 5 U. S.

Speaker 4

Healthcare payers. It goes without saying, but an additional result of many of these structural That I just mentioned will also allow us to prioritize our product investment opportunities. I'll now speak to M and A. While we didn't have a closing this past quarter, we continue to have discussions with multiple targets. The number of opportunities we look at each quarter has not changed.

Speaker 4

As you all know, acquisition timing can tend to be lumpy. This is driven by 3 dynamics. 1, We're reorienting our pipeline and are looking for larger deals than we have historically. 2, we're searching for targets in new states And looking to take out potential competition in those new geographies and are dealing with a very fragmented market. And 3, The trickle down of lower valuations in the current environment has not been realized by many prospects.

Speaker 4

We remain disciplined when it comes to multiples And as usual, we continue to self source our acquisition targets. We still believe we'll be able to continue to complete 4 to 5 deals per year and our pipeline remains healthy with opportunities for acquisitions in public sector and healthcare. This concludes my comments. Operator,

Operator

Our first question comes from John Davis with Raymond James, please go ahead.

Speaker 5

Hey, good morning guys. Clay, I just wanted to start off, I Apologies if I missed it, but did you disclose organic growth in the 2nd quarter?

Speaker 3

Yes, it was 12% and The $3,500,000 of software license sales contributed to that. That's sort of the X factor every quarter, Whether we're above or below the 10% mark.

Speaker 5

Okay. That's great to hear. And then Rick, just wanted to follow-up on your last comment about larger deals. I mean, historically, you guys have kind of been under $5,000,000 of EBITDA paying 8 to 10 times. So just curious what you guys would define as larger deals and could we see $100 plus 1,000,000 deal, just curious kind of what you're thinking there?

Speaker 4

Yes. So historically, J. D, we've Between the $2,000,000 $3,000,000 maybe $4,000,000 or $5,000,000 here and there, but we're looking at deals as high as $10,000,000 or $12,000,000 in EBITDA. So I think that's possible. Whether we get there this year or this quarter, I don't know yet.

Speaker 4

But the pipeline is healthy. We've got a lot of businesses that we're Talking to, it's just getting them to that place where we can generate a term sheet and have a deal.

Speaker 5

Okay. Then Two quick follow ups for Clay. One is just the revenue yield improvement of 12 basis points Year over year, anything specific to call out there? And then one last clarification, Clay. When you said 3Q res and EBITDA similar to 2Q, I'm assuming you meant on a dollar basis, but just wanted to confirm.

Speaker 3

Yes. On a dollar basis both revenues and EBITDA Look very similar to Q2 right now. But on the revenue yield, Payments have come back particularly in the education area and so that's Helped a lot with the yield and then just the greater share of software and services going above 50% that Gradually improves our yields every quarter.

Speaker 5

Okay. Appreciate all the color. Thanks guys.

Speaker 1

Thanks, Jamie.

Operator

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

Speaker 6

Great. Thank you very much. I just want to follow-up on the question around acquisitions, etcetera. I mean, I know that your targets typically aren't in the same kind of realm or domain as VC funded on privates, but Wondering what you're seeing from a valuation perspective. And it sounds like you're pretty optimistic about being able to do larger deals, but How is the changing interest rate environment impacting how you think about where valuation should be and kind of funding mix So if there needs to be a bigger equity component etcetera.

Speaker 3

Well, on the higher interest rates, It obviously makes us more sensitive to acquisition multiples. And so during COVID, We were generally paying 10 times for businesses. We're now trying to pay closer to 8 times for businesses. Rick, do you want to handle the other part?

Speaker 4

Yes. As far as valuations, we're self sourcing our deals. So There's not somebody in these companies' ears telling them how valuable they are. At the same time, we're running into some prospects that I've had valuations done and the 3rd party that did the valuations done exactly what they were paid to do, make them happy and tell them how valuable they are. That's we hate to run into those kind of deals, but we haven't seen any change.

Speaker 4

These smaller guys under $10,000,000 in EBITDA, They don't recognize that the value has changed in the market and the trickle down takes a lot longer to effect, but again we're going to be disciplined. We're going to Not pay over 10, hopefully pay closer to 8 and do a fair deal for us and the seller.

Speaker 2

We walk a fine line. These guys have worked 30 years. They built this baby. They're 60 years old. They never thought they would sell their business.

Speaker 2

We self sourced it And tell them our story about what we're building and they agree to join the company. And so They like that story. Timing is everything. So We've had some deals fall in our lap over the last 5 years that we're M and A It's part of our DNA. So you'll see a lot more

Speaker 4

of it. The last thing I'll add to that is these guys, they all want you to pay them for all of the hard Work they put in over the last 30 years and that's not what we are paying for. We are paying for the strategic potential value being combined into our enterprise go forward. So there's that dichotomy we have to address all the time.

Speaker 6

That's great color. And then I wanted to follow-up on the software Portion of the business. We've kind of been through this extended period of normalization on the payment side. And you mentioned just this quarter You're starting to see the education come back as things like subsidized lunch from during COVID, etcetera, expire in different states. So how should we be thinking about that software piece of the business?

Speaker 6

Is it growing faster or at least more durably than the payments portion? I guess Outside of M and A, how should we think about the pace of software transition perhaps on a more organic basis?

Speaker 3

Well, our ARR grows a few percentage points above our organic growth rates. And that is we do expect more of that to come from software and services than from payments. Payments has been through a normalization now and so it'll be pretty steady. However, we haven't started adding payments to our healthcare vertical in a meaningful way yet And we'll continue to penetrate more of the public sector. But over time, we do expect the software and services percentage to grow from 50 To 60 and maybe 65 over the next couple of years.

Speaker 6

Got it. Got it. That's really helpful. Thank you.

Operator

The next question comes from Charles Nabhan with Stephens. Please go ahead.

Speaker 7

Good morning and thank you for taking my question. I wanted to get I had a follow-up on Rick's Comments around some of the internal initiatives you guys have pertaining to the RFP process. As we think about that going forward, Should we anticipate any sort of impact on either OpEx or CapEx as a result of Some of those projects you have ongoing?

Speaker 3

No, not meaningfully. We're mainly reshuffling internal resources into a uniform team so that all of our responses are Tailor made and consistent. We do make some efficiencies From time to time, but we're also always investing. So I wouldn't expect so, no.

Speaker 4

Yes, the biggest point is sharing the wealth. We're going from a decentralized System to more centralized, so we're plucking people out of our sub companies to form enterprise level teams It will assist all companies enterprise wide.

Speaker 7

Got it. And just as a quick follow-up, I The post COVID rebound and education has provided a bit of a tailwind and should continue to do so over the next few quarters, it sounds But as we think about 2024 and the lapping of some of those rebounds, Should we anticipate any sort of a step down in growth as a result of lapping those comps? Or is it fair to think that Some of the new business wins could provide an offset going forward on that in that business.

Speaker 3

Well, I do think the payments piece will level out Because we've sort of had a return to what we consider fully normal in the Education Group, But we are always adding software and services products, so that Education, we're always planning the year ahead as opposed to the year we're in. That's how the selling cycle works. We've got An old experienced hand in that business who's always full of ideas and understands the product Really well. And so no, I don't expect a slowdown, but I do expect it to shift Less from payments and more from software and services.

Speaker 2

I feel like we got 7 or 8 months. We'll sell some of our existing customers, so 15,000 schools. Yes.

Speaker 3

Another product next year. Greg makes a good point. When we've studied our first customers in their 1st year generally by one product and that's historically for us In the lunch product. And then on average, every year, they add 1 more software module. And so There is a lot of cross selling to expense.

Speaker 7

Got it. And if I could sneak one more in. If I caught your comments Correctly, the increase to the EBITDA guide, which is roughly $2,000,000 at the bottom end. If I heard you correctly, you said that was attributable to AccuFond. Is that correct?

Speaker 7

Largely attributable to AccuFund?

Speaker 3

So we've added $2,000,000 this year, dollars 1,000,000 we added Last quarter and that was attributable to AccuFund. We added another $1,000,000 this quarter And that is more attributable to the general demand environment we're seeing mainly in public sector. And Paul, I don't know if you want Elaborate on that a little bit.

Speaker 8

Sure, Clay. As Clay indicated, generally, we're seeing increased demand in public sector. And as we look at that, We believe it's really tied to positive budget levels and trends with property Tax revenue for our clients, sales tax revenue and still some American Rescue Plan funds deployment that had been delayed a bit. In addition to those drivers, we're also seeing like in the healthcare industry, public sector is also struggling with staffing And staffing shortages and increased awareness on aging infrastructure and security. So given that, we're seeing as a result that are all that is positive across the board with RFIs, RFPs, product upgrades and to Greg's point, Product line module expansions.

Speaker 7

Got it. Thank you for the color. Appreciate it.

Operator

Our next question comes from Matt Van Leit with BTIG. Please go ahead. Matt, is your line on mute? Can I move on to the next question? I can't hear him.

Speaker 2

Yes.

Operator

All right. Our next question comes from Peter Heckmann with D. A. Davidson. Please go ahead.

Speaker 9

Hey, good morning everybody.

Speaker 3

Good morning.

Speaker 9

Good morning. In terms of revenue cycle management, can you talk a little bit about that sub niche? It appears that it's a fairly fragmented industry, kind of what type of companies you're competing with there And in terms of winning a consulting and software deal with the top 5 healthcare payer, I That has to have a significant amount of due diligence on the part of the customer. How do you go about winning something like that? And are there other of those type of relationships?

Speaker 9

Or is that something that Periodically, you win one of those and it cycles through or does this represent maybe a move up in terms of capabilities and size of contract?

Speaker 3

Well, I don't know if you want

Speaker 8

to Sure. We are seeing increased demand on RCM And it's the primary point of monetization for our clients. And the more we can do to augment that, the better. Now we are Finding that in our software companies that are in the healthcare space who had RCM operations, It's outpacing all the trends of adoption by our client base. And given that, we have exceptional So it allows us to focus our activities, invest in technology and invest in the team there to do that and bring Net brings additional acceptance in the market.

Speaker 8

So we see that as a bright spot for us going forward.

Speaker 3

On the diligence, you had a Part of your question was diligence. I do think it helps to be to have a bigger balance sheet, to be a public company. They can readily look up on the Internet. And I think that's one reason they were amenable in selling to us was to have a bigger balance sheet going into RFPs.

Speaker 4

We're gradually going away from sub company names and forming formal names in healthcare for example, Xi3 Healthcare So we're looking and feeling and acting like a bigger organization than we are based on our parts.

Speaker 3

Did that answer what you were looking for on healthcare?

Speaker 9

Yes, I'm sorry. That is helpful. I'll look at the website. I want to dig in a little bit more there and look at some of the But I also had one little housekeeping question for you Clay and just as regards to I don't see that you mentioned it, but pro form a tax rate seemed like it was a little higher the last 2 quarters and maybe talk a little bit about that and maybe your expectations for the full year?

Speaker 3

Well, in our pro form a diluted EPS calculation, we have always used a 25% tax rate And that's since the IPO and we continue to use that. If you're talking about taxes paid, We've paid very little taxes since going public and I don't believe Anything different this quarter, Jeff, do you have a comment on?

Speaker 1

We would expect we're still going to have a very efficient low cash tax situation for the next couple of years. As the company moves to more pretax income that will change slightly over time, but We have a really efficient tax structure. We have a lot of deferred tax assets. The FC structure over the coming 5 years will become more and more maybe a talking That's all.

Speaker 9

Okay. I'll have to refresh then and look at how I'm modeling it. But then so the change in the non GAAP EPS guidance would then almost entirely be attributable to the higher level of interest expense due to the little bit higher costs on the unused facility and other fees.

Speaker 3

That's right. It's about $2,000,000 at the midpoint.

Speaker 9

Okay. That's helpful. Thanks.

Operator

The next question comes from Matt Van Leek with BTIG. Please go ahead.

Speaker 10

All right. Hopefully, I've figured out the technical issues. Can you hear me all right?

Speaker 3

Yes, we can.

Speaker 10

All right. Sorry about that. Yes, thanks for taking the question. I wanted to follow-up on the answer around stronger public sector budgets. Obviously, a few factors there, but one, I guess, first part is, how sustainable do you feel like that is going forward?

Speaker 10

And maybe more importantly How important is the integrated software and payment solutions that you've now put together in a number of sub verticals there, Hoping win deals over competitors that maybe only offer 1 or the other.

Speaker 4

So I'll take the first part and then I'll let Paul chime in on the second part. We're continuing to see local governments Strive for more modernization and digitization of products. Staffing is an issue, so they're looking for better technology ways to serve their constituents. The American Rescue Plan Dollars, I think they run out the end of 2024 or they have to be used by then. So it's kind of a false positive.

Speaker 4

We may see an influx Because of those resources, but then after that it's who knows, but we're definitely seeing an upbeat And local government striving for more technology to get the jobs done versus arms and legs. Paul, you want to talk about

Speaker 6

that?

Speaker 8

Yes, I think that's I agree with all that. And the other thing which I see on a regular basis is the demand component is up universally across all departments. So there's a need for all of government to upgrade and expand. And in certain sectors like transportation and the court systems, There's more of a movement to move to augment that with statewide activities, which we're qualified And do today and that's actively part of our business.

Speaker 9

And

Speaker 8

e filing always becomes There that we speak to, but there are elements of that with remote access for permits and licensing and GFA for customers and remote workers That are augmenting the demand component of what we do.

Speaker 4

When we did the DIS acquisition that was a good deal for us. The contact that they have at the state level is the same contact at Celticabs. So Having those 2 companies under one umbrella has allowed us to offer a more complete solution at the state level. So as we combine these products or pluck them out of the Individual subs, we're always coming up with a more full suite of solutions for RFPs and can respond better.

Speaker 8

And there is a distinct appreciation for seamless payment interface, where that's working into their Embedded into the software systems and that delivery is seamless and it facilitates their efforts to recognize revenue and reconcile.

Speaker 2

Matt, this vertical is So far behind the times. As our original story, we wanted to get into verticals that were under penetrated behind As everyone on the call knows, dealing with your local government, you see it every day. I feel like we're maybe in the bottom of the second inning. It's just how much more there is to be done. To me, it gets bigger every day.

Speaker 10

Very helpful there. And then just a follow-up on the new unified RFP team that you're putting in there And bringing more structural maybe workflow inside the company, how quickly do you expect that to maybe translate into new bookings wins or even into revenue? And then maybe secondarily, how often are you kind of Finding out about an RFP after the fact that maybe your team kind of missed that you feel like You very easily could have won given your product set or maybe overlap in a local jurisdiction. So, I guess not only what how soon can the opportunity come, but Maybe how big is the opportunity sort of immediately?

Speaker 8

We have had occasions in the past where an RFP has surprised us And that's always a disappointing day. We do use sources to surface RFPs and we also use sources to Facilitate budgets being approved and the potential of an RFP coming with that to get ahead of those curves. We like to be ahead of them as much as possible to craft what software solutions make sense for that. In terms of the timing related to that, that's a much tougher question because the time and the nature of the RFP is so divergent. A statewide motor carrier program could be an 8 to 12 month process and then a longer delivery time And an ERP program could be a 3 to 6 month process.

Speaker 8

So I think it's

Speaker 2

one of the most powerful decisions we've made. Agree. And it's got the most chance or it's going to create the most value. I think it's very powerful.

Speaker 4

There's work to be done. Everybody had their own template for responding to an RFP and we're taking that and let's just say the About Us section, It will now represent I3 at the enterprise level. So there is work to be done. We had technical writers in some of our sub companies and not in others. So The CEO was responding to RFPs.

Speaker 4

We want technical writers to do that work going forward. So we think our response time, The way we respond will be appreciated. And these are resources that we can use across many verticals, not just one vertical.

Speaker 8

And the demand from the company since we started this has been high. Everybody is trying to understand it And we've been able to respond and it will take a little more time to build out, but it's having impact already.

Speaker 10

All right. Sounds like a good development. Thanks for taking the questions.

Speaker 4

Thank you.

Operator

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

Speaker 2

Well, it's nice to have another quarter behind us. We're excited about the second half of 'twenty three and into 'twenty four. So I appreciate everybody being on the call this morning. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may all now disconnect.

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