i3 Verticals Inc (NASDAQ:IIIV) Q4 2019 Earnings Conference Call - Final Transcript

Nov 22, 2019 • 08:00 am ET

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i3 Verticals Inc (NASDAQ:IIIV) Q4 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Greg Daily

made this past year will drive revenue going forward.

Turning to the fourth quarter, we had a strong finish to the fiscal year. This is demonstrated by our 44% increase in net revenues, as net revenue increased to $40.6 million in Q4 of '19 from $28.1 million in Q4 of '18, fueled by growth in our Public Sector vertical and strong back-to-school revenue within our Education vertical.

Adjusted EBITDA increased to $11.7 million in Q4 '19 from $7.8 million in Q4 '18. Clay will cover these numbers in more detail in his section. We continue to achieve above market growth rates by delivering seamless integrated payments and software solutions to SMBs and organizations in strategic verticals markets. We continue to focus on Public Sector and Education verticals. Going forward, and we will also target acquisitions and other verticals that have attractive margin profiles and opportunities to provide software-driven payments.

Our integrated payments volume continues to grow. 54% of our payment volume was integrated during Q4, up from 45% during Q4 of '18. Integrated payments results in lower attrition, higher margins and greater market growth potential. The increase in proportion of our business coming from integrated payments give us confidence in achieving long-term margin improvement.

Finally, as mentioned in our earnings release, we have promoted Scott Meriwether into the new role of Chief Operating Officer. He has served the Company well in his previous role as Senior VP of Finance, and I have no doubt that Scott will flourish in his new role.

Now I'll turn the call over to Clay. He will provide more detail on our Q4 financial performance and comments on 2020 outlook. And following Clay's comments, Rick will provide us an M&A update and then we will take questions.

Executive
Clay Whitson

Thanks, Greg. The following pertains to the fourth quarter of fiscal 2019, which is a three-month period ended September 30, 2019. We finished the year with a strong quarter. Net revenues increased 44% to $40.6 million for Q4 2019 from $28.1 million for Q4 '18, driven by $11.7 million from acquisitions, principally in our Public Sector and Education verticals. The Pace acquisition led the Group with double digit growth, and we had it for a full quarter. Excluding the Purchased Portfolios and our IPOS business, net revenues grew 7% organically. If post IPO acquisitions were included in both periods, organic growth would have been even higher.

Adjusted EBITDA grew 49% outpacing net revenues to $11.7 million for Q4 '19 from $7.8 million for Q4 '18. Please see the press release for a reconciliation between net income and adjusted EBITDA. Adjusted EBITDA as a percentage of net revenues was 29% for Q4 '19 up from 28% for Q4 '18. Despite a 61% increase in corporate expenses. The increase in corporate expenses was principally driven by public company costs. As a reminder, we've expected a onetime step-up in corporate expenses for fiscal '19 with inflationary level growth in future years. The AVR acquisition did not contribute a material amount of