During the i3 Verticals (ticker: IIIV) Second Quarter 2024 Earnings Conference Call, the company reported a slight increase in revenues and a strong balance sheet, while also announcing its plans to explore the sale of certain Merchant Services business assets. The proceeds from the potential sale are intended to pay down debt. i3 Verticals provided a revised fiscal year 2024 outlook, with expectations of revenue growth resuming in fiscal year 2025, particularly if the sale goes through. The company also highlighted its strategic focus on expanding software solutions in key vertical markets such as public sector, healthcare, and education.
Key Takeaways
- i3 Verticals is considering the sale of assets from its Merchant Services business to reduce debt.
- Q2 revenues increased 1% year-over-year to $94.5 million, with margins expanding over 100 basis points.
- The company's revised FY24 outlook projects revenues between $380 million and $394 million, and adjusted EBITDA between $107 million and $113 million.
- i3 Verticals plans to resume high single-digit revenue growth in FY25, contingent upon the sale of its Merchant Services business.
- Strategic hires and acquisitions are planned in the public sector, healthcare, and education verticals.
- The company is transitioning to a unified organization with a focus on selling software solutions and is investing in web-native applications.
Company Outlook
- i3 Verticals expects to complete its transition to recurring revenue sources, such as SaaS, by the end of FY24.
- The company is experiencing steady demand in the public sector and is actively negotiating acquisitions.
- Education sector growth is projected to be 5% in FY24, with expectations to return to 10% growth thereafter.
Bearish Highlights
- There was a decrease in nonrecurring lines of revenue, such as professional services and software licenses, due to delayed projects.
- Seasonality in one-time software sales and uncertainty regarding the timing of utility license sales may affect future revenue.
Bullish Highlights
- The company secured multiple software contracts across public sector, education, and healthcare verticals in various states.
- Margin improvement was noted, despite a decrease in higher-margin license revenue.
- The company's web-native development for a big utility customer promises scalability and cost efficiency.
Misses
- The Manitoba driver's license project revenue has been pushed out to FY25.
- Specific details on the headwind from subsidized lunches and improvements in product implementation timelines were not provided.
Q&A Highlights
- i3 Verticals believes it is well-staffed with approximately 1,700 employees, and there are no current plans to cut more jobs.
- The company is focusing on cost controls and has stated that ongoing investment in web-native applications will reduce customization and maintenance costs.
In summary, i3 Verticals is maneuvering through a period of transition with strategic decisions aimed at strengthening its financial position and focusing on growth in its core vertical markets. The company is optimistic about its future growth prospects, particularly in the education sector, and is taking steps to ensure efficiency and scalability in its software development processes.
InvestingPro Insights
As i3 Verticals (ticker: IIIV) navigates through its strategic transition, the latest financial metrics and analyst insights from InvestingPro provide a deeper understanding of the company's position. With a market capitalization of $701.49 million and a notable revenue growth of 14.02% over the last twelve months as of Q1 2024, the company's financial health appears robust. This growth is further underpinned by a solid gross profit margin of 78.23%, signaling efficient management of production costs and pricing strategies.
InvestingPro Tips suggest a mixed outlook for i3 Verticals. While analysts anticipate net income growth this year, indicating potential profitability, the company is trading at a high earnings multiple with a P/E ratio of 910.87. This could suggest that the market has high expectations for future earnings growth, which aligns with the company's optimistic projections for FY25. Moreover, the stock has experienced a strong return over the last three months, with a 19.32% price total return, reflecting investor confidence in the company's strategic direction.
However, four analysts have revised their earnings estimates downwards for the upcoming period, which may warrant caution for investors. Additionally, the company's short-term obligations exceeding its liquid assets could pose a liquidity risk, making the potential sale of its Merchant Services business assets a prudent move to strengthen its balance sheet.
For readers looking to delve deeper into i3 Verticals' financials and future prospects, InvestingPro offers a wealth of additional tips. There are currently 9 more InvestingPro Tips available, which can be accessed with the promo code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription. These tips could offer valuable insights, especially considering the company's strategic hires and acquisitions in key vertical markets and its transition to a focus on software solutions.
Full transcript - i3 Verticals (IIIV) Q2 2024:
Operator: Good day, and welcome to the i3 Verticals Second Quarter 2024 Earnings Conference Call. Today, all participants will be in a listen-only mode. Today's call is being recorded, and a replay will be available starting today, May 17 - or starting today through May 17. The number for the replay is (877) 344-7529, and the code is 685-4757. The replay also may be accessed for 30 days at the company's website. At this time, I would like to turn the conference call over to Mr. Geoff Smith, SVP of Finance. Please go ahead, sir.
Geoff Smith: Good morning, and welcome to the second quarter 2024 conference call for i3 Verticals. Joining me on this call are Greg Daily, our Chairman and CEO; Clay Whitson, our CFO; Rick Stanford, our President; and Paul Christians, our COO. 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 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 information. 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 furnished with 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, Geoff, and good morning to everyone on the call. Before getting in the results of second quarter of fiscal year '24, I'd like to provide a brief update on what we announced last quarter, namely the exploration of the sale of the Merchant Services business. As previously announced in February, the company's Board of Directors have directed i3s management to explore a sale of certain discrete assets related to our Merchant Services business. This process for considering - the process for considering this transaction is ongoing. We would intend to use the proceeds from the sale of this business to pay down debt. Any decision by the Board to engage in any transaction involving the Merchant Services business will be aligned with the Board's objective to maximize long-term shareholders' value. I don't have any further updates on the process at this time. With that addressed, I'm pleased to share with you some of our results from the second quarter of fiscal year '24. In a minute, Rick will elaborate on the realignment that we began last year and how that has better positioned us for sustainable growth. Before he does, I'd like to reemphasize our commitment to highly recurring revenue streams. This quarter, several of our nonrecurring lines are lower than last year, especially professional services and software licenses. Some of our revenue here has been impacted by delayed projects in our backlog, such as the Manitoba drivers license project we've discussed with you or the very large and exciting new utilities opportunity. The utilities opportunity has required us to build a complex new project. It is going great. However, we have not been able to recognize any revenue related to it. That's fine with us because we believe that in the long term, this project is going to open up new markets and be highly accretive to our shareholders. In the interim, as we go through a period of lower professional services and license revenue, we benefit greatly from our excellent financial profile. ARR is well north of 80%. Our margins grew over 100 basis points despite lower higher-margin license revenue. We think that's fantastic results which we are proud of. Our future is very bright, and we are excited about the second half of our fiscal year. I'll now turn the call over to Clay, and he'll provide you more details on our financial performance when he has finished Rick will add commentary on the business and then we'll open up the call for questions.
Clay Whitson: Thanks, Greg. The following pertains to the second quarter of our fiscal year 2024, which is the quarter ended March 31, 2024. Please refer to the slide presentation titled supplemental information on our website for reference with this discussion. Revenues for the second quarter of fiscal 2024 increased 1% to $94.5 million from $93.9 million for Q2 '23, reflecting organic growth from recurring sources, partially offset by declines in nonrecurring sources. SaaS and transaction-based revenue - software revenues each grew 10%, while recurring software services grew 6%. Payments revenues also grew 6%. Nonrecurring sales of software licenses declined by over $2 million as expected, reflecting the ongoing shift to SaaS. Professional services revenues declined by $1.3 million, principally a result of the delay in Celtics implementation with Manitoba caused by the public workers' strike. We will discuss the outlook for both line items in our outlook section. ARR increased 6% to $322.5 million for Q2 '24, a new record compared to $305.7 million for Q2 '23. Over 80% of our revenues in the quarter continued to come from recurring sources. Software and related services represented 48% of total revenues for Q2 with payments 47% and other 5%. Payments revenues as a percentage of payments volume improved slightly to 71 basis points for Q2 '24 from 70 basis points for Q2 '23. Adjusted EBITDA increased 4% to $25.8 million for Q2 '24 from $24.7 million for Q2 '23. Adjusted EBITDA as a percentage of revenues improved to 27.3% from 26.3% for Q2 '23, reflecting an improvement in our Merchant Services margin, along with lower corporate expenses. Both improvements resulted from the internal realignment discussed on previous quarterly calls. Pro forma adjusted diluted earnings per share was $0.34 for Q2 '24 compared to $0.38 for Q2 '23. The decline was driven by higher interest expense following the repurchase of our exchangeable notes in January. Again, please refer to the press release for a full description and reconciliation. Segment performance. Revenues in our Software & Services segment declined 2% to $59.5 million for Q2 '24 from $60.8 million for Q2 '23, principally reflecting lower onetime sales of software licenses and professional services, as previously discussed. Payment revenues represented 25% of the Software and Services segment's revenues. The segment's adjusted EBITDA declined 5% to $20.9 million for Q2 '24 from $22.1 million for Q2 '23. Adjusted EBITDA as a percentage of revenues declined to 35.2% for Q2 '24 from 36.3% for Q2 '23. The biggest factor for the declines were lower onetime software license sales, which fall straight to the bottom line in the quarters they land. Revenues for our Merchant Services segment increased 6% to $35.1 million for Q2 '24 from $33.1 million for Q2 '23, reflecting broad-based growth in our ISO ISV, B2B and POS channels. Adjusted EBITDA for our Merchant Services segment increased 18% to $10.1 million for Q2 '24 from $8.6 million for Q2 '23, outpacing revenues. Our revenue yield increased slightly with continued expense control. Balance sheet. Our balance sheet remains strong and well positioned for '24. Following our repurchase of convertible notes in January, we have $26.2 million remaining. At quarter end, borrowings under the revolver, net of cash approximated $343.1 million. Our total leverage ratio was 3.5 times. The current constraint is 5 times under our $450 million revolving credit. The interest rate for the convertible notes is 1%, while the interest rate for the revolver is currently around 8.5%. We have remained disciplined in our approach to growth and acquisitions. We have approximately $4 million in earn-out payments remaining from past acquisitions. In the event we sell our Merchant Services business, we would have very little, if any, remaining debt. This would free up even more resources to deploy towards the public sector, education and health care verticals. Outlook. This is potentially a transitionary year, so I will first outline our revised outlook for fiscal year '24, assuming no divestitures or acquisitions, then I will touch on the financial profile for what could be called RemainCo [ph] in the event we sell the Merchant Services business. For fiscal year '24, our revised outlook follows, revenues, $380 million to $394 million, adjusted EBITDA of $107 million to $113 million, depreciation and internally developed software amortization, $11 million to $13 million; cash interest expense, $27 million to $29 million; pro forma adjusted diluted EPS, $1.49 to $1.57. From a seasonal standpoint, historically, we have not had large step-ups from Q2 to Q3 organically. Although actual results on the onetime software line can vary significantly, our current expectations for software license sales remain $1 million for Q3 and $3 million for Q4. The bulk of the Q4 amount is an implementation for a large utility customer we have discussed on previous calls. In the event we sell our Merchant Services business, we currently expect RemainCo [ph] would resume high single-digit revenue growth beginning in fiscal year '25. Some tailwinds that we have identified include the Manitoba project returning to a normal cadence, continued momentum in the utilities market and the SaaS transition becoming less of a short-term drag. The education business will also lap the introduction of certain state subsidies for lunch [ph] which began during the back-to-school season in '23. We would expect adjusted EBITDA as a percentage of revenues for RemainCo [ph] to improve annually by 50 to 100 basis points per year. We would also expect to resume acquisitions in the public sector, education and health care verticals after using the proceeds from the sale to pay down debt. I will now turn the call over to Rick for company updates and M&A pipeline.
Rick Stanford: Thank you, Clay. Good morning, everyone. Over the past 18 months, we've transitioned from a group of products in multiple verticals into a coordinated, efficient organization, developing and selling software solutions in strategic vertical markets. Throughout the transition, we've adjusted our organizational structure to drive i3 forward. Initially, we capitalize on our expertise in public sector by analyzing our products and processes to provide solutions across any government of any size with a single contract. Eventually, the initiative was called UPO or Unified Product Offering. As a result of Trust and i3, vendor fatigue and our solutions and service, we quickly saw buy-in from our government customers. Because of the success in public sector, our leadership team rolled out the initiative across the organization. We work through changes, realigned reporting structures and captured market share. Now our focus is on achieving sustainable growth with enterprise software as we scale our strategic markets, public, health care and education. Now that our company is unified and configured for sustainable growth, we are focusing on quality revenue expansion through sales of our enterprise software solutions. In addition, we plan to make additional strategic hires in product to lead and expand our ongoing investment in web-native configurable next-generation applications. This past quarter in public sector, we secured long-term software contracts in California, Michigan, New Hampshire and Tennessee. In education, we landed white space contracts in Georgia, North Carolina, South Carolina and Texas and in health care, a large health insurance carrier. Regarding M&A, we have looked at several opportunities over the last quarter. Most of them are in public sector with a few in health care and education. Our [indiscernible] card continues to be full of target companies largely in public sector and health care verticals. Some of the solutions include software solutions tailored towards mobile policing, utility management and property tax collection, case management and data intelligence solutions for justice and public safety industries, a school online enrollment solution, tax software and local government, specializing in areas such as business license and tax, lodging tax, property tax, sales and use tax and utility tax and an RCM solution that automates a portion of the back office process. We hope to be able to share more details on the M&A front in the near future. This concludes my comments, Chris, at this time, we'll open the call for Q&A, please.
Q - John Davis: Hey, good morning, guys. It sounds like the slightly softer revenue in the quarter was more or less kind of a push out of some revenue, but you did lower the full year guide by kind of a similar amount. So just curious if that's revenue that you're not expecting to get until next year? Maybe conservatism because you don't know when that's going to come? Or just any kind of comments on the lower outlook for the full year?
Clay Whitson: Well, revenue for the quarter, we give guidance annually. So revenue of the quarter would pass through to the full year. The Manitoba drivers license project, we don't expect to see any meaningful revenue this year in fiscal year '24, which ends in September, we'll get it in '25. So that is pushed out.
John Davis: Okay. No, that's helpful, Clay. And then it's encouraging to see despite kind of the lower kind of nonrecurring, high-margin revenue, margins still expanded nicely and kind of we're in line with expectations. So Clay was that better than you expected given the nonrecurring headwinds? Just any comments there? I know you guys have some cost initiatives underway, but any thoughts on the margin as we kind of exit 2Q headed in the back half of the year?
Clay Whitson: No. We came into the year projecting margin improvement and continue to expect it. It results from the internal realignment that began in earnest in the fourth quarter, but we're getting a full year effect this year.
John Davis: Okay. And then lastly, I think ARR was up about 6% in the quarter. You talked about RemainCo [ph] kind of high single digit growth. The profile going forward if you were to sell the personal services business. So just help me bridge that gap? Was there anything that kind of weighed on ARR this quarter? Just how do we think about that acceleration from 6% to high single digits for RemainCo [ph]
Clay Whitson: Well, four things. One is the Manitoba driver's license project will come online in '25. The big utility customer we have - will have a big '25. We actually expect most of the $3 million I mentioned for the fourth quarter and one times license sales comes from that large utility customer also, but then it picks up - kicks into a bigger project in '25. Education laps this August, September. And I believe those were the - and then yes, those were the major ones.
John Davis: Okay. Appreciate it. Thanks, guys.
Clay Whitson: Thanks.
Operator: The next question comes from Peter Heckmann with D.A. Davidson. Please proceed.
Peter Heckmann: Hey, good morning, everyone. I haven't seen the cash flow statement yet, but it looked as if cash flow was pretty good. And it looks like to me that you had a working capital inflow. Is that generally correct? I'm trying to just kind of back into some numbers here, but actually it looks like we're giving up a slightly negative, but looked like free cash flow conversion was somewhere close to 50% for the quarter. Does that sound about right?
Clay Whitson: Yeah. I get 47%. Pete, CapEx was 1.5 million. Capitalized software is $6.1 million, cash interest much higher at $14.1 million. You know, when we paid off the convertible notes, we traded 1% debt for 8.5% debt and then cash taxes were a pretty big number this quarter at $5.4 million, so I get 47% and we came into the year expecting 50%, so it's pretty close.
Peter Heckmann: Okay. Okay, great. And then can you just talk a little bit about the attach rates on some of the software businesses that you had acquired over the last three years? That some of them hadn't even started marketing payments, but you talk about where you've had some success there, either by vertical or even your sub niche within the verticals?
Clay Whitson: Well, health care is still in the infant stages. That's going to be a long, slow roll. We have thousands of billing customers who currently use other providers, and they're all small customers. Most of them are small customers, so we will be trying to attack those one by one. Education is obviously the best in an attach rate and then public sector would be second best.
Greg Daily: The other thing is we've talked about the realignment and bringing services to the enterprise level we've created this past quarter, a group that their specific directive is to sell into our three strategic verticals, and there's a support team behind that. So we look forward to seeing some advances from that group with a specific directive to go after those three verticals.
Peter Heckmann: I see, okay. And then I'm sure you can't comment too much on the potential divestiture, but just in terms of timing, is it to the extent that it did happen, would we expect to hear some news in the next 90 days?
Clay Whitson: I don't think we're in a position to say, Pete, we'd like to say more, but we really, until something is done, we can't really comment on it.
Peter Heckmann: I understand. Okay, I appreciate it. I'll get back in the queue.
Operator: Our next question comes from James Faucette with Morgan Stanley. Please proceed.
Shefali Tamaskar: Hi, thank you for taking my question. This is Shefali Tamaskar asking a question on behalf of James. I was wondering if you could provide an update on what the timing might look like for the continued transition from non recovery - non recurring revenue sources like licenses, to recurring revenue sources like SaaS, and what that might look like going forward.
Clay Whitson: Well, our total software licenses sales for fiscal year '23 were 10.7 million and we expect the total one time sales this year to be $5 million. So at the end of fiscal '24 it will already be fairly de minimis. We do have some utility customers where we will continue to have some one time software sales. So I'm viewing this year as the transition year and probably plateauing around the $5 million mark. Although we could have some pleasant surprises in the future.
Shefali Tamaskar: Okay, thank you. And just as a follow up, could you provide an update on the current competitive environment you're seeing and if you've seen any changes in competitive intensity as it pertains to winning deals or keeping current customers?
Paul Christians: This is Paul Christians. That's been pretty steady state. We haven't seen that. Clay mentioned a couple of push outs on project which are really tied to our customers having some personnel constraints of their own, which we're attempting to facilitate with additional support mechanisms to help them free up and get back on track. But the overall demand or competitive environment has been relatively constant.
Shefali Tamaskar: Okay, thank you.
Operator: And the next question comes from Mark Palmer with Benchmark. Please proceed.
Mark Palmer: Yes, thank you for taking my question. Outside of the headwinds associated with the nonrecurring revenue sources, how would you describe the demand environment in the public sector in particular, relative to the macroeconomic environment and other factors?
Greg Daily: It's been relatively constant. We haven't seen any kind of extraction of RFPs beyond the norm or anything of that nature that would tell that we have more of a macro issue in that environment. I do think as we get to look at it and we switch more and more to SaaS delivery of product, that eases the pain for our customers because there's less capital requirements and their dollars go further on a near term basis. So I think the SaaS transition is a natural extension. We'll help mitigate that to a degree if that does surface. But we're not seeing any evidence of it.
Clay Whitson: Seems like there could be some seasonality.
Greg Daily: Certainly, yes...
Clay Whitson: Definitely. January, February was crazy busy, it slowed down. Now we think it's going to pick up this summer.
Greg Daily: And fresh budgets always impacted.
Mark Palmer: And one more should we assume that the company is going to hold off on acquisitions until the merchant services sales process has been completed?
Greg Daily: I hope not. We do have an active pipeline that we're negotiating with a handful of people, but the two are, we're not holding off. We're still talking to people every day. And Merchant Services, it'll happen, but we have the capacity to do deals while we wait for that to close.
Mark Palmer: Very good. Thank you.
Operator: The next question is from Matt VanVliet with BTIG. Please proceed.
Matt VanVliet: Yeah, good morning. Thanks for taking the question. I guess when you look at the cost controls that have been put in place over the last several quarters, how should we think about that cost basis relative to where we're headed? Maybe more specifically in potential RemainCo? How do you feel like you're staffed? And overall, what would headcount projections look like for the software side of the business for the next several quarters?
Greg Daily: Well, I think there are 350 - do you know the exact number?
Clay Whitson: Just a little over 300...
Greg Daily: Okay. 300 people roughly associated with the Merchant Services business and the total company is some 1700. So we are well staffed and we do believe we've been through the realignment on the RemainCo side, which will suit us well over the next few years. We're not feeling the need to cut more right now.
Matt VanVliet: Okay, helpful. And then you talked about additional internal development needed for the big utility customer. How much of that is sort of purely custom for their environment, their infrastructure versus development that can be leveraged for additional customers, especially if you can grow more in a similar types of businesses?
Greg Daily: One of the things that we're so excited about with this particular opportunity in all of our web native development is that everything's being built in a highly scalable, configurable native applications. So it really reduces the amount of customization we do for projects and it enhances speed to market and it also reduces ongoing maintenance costs. So, you know, historically, if you'd look at that number, it will - the new products custom code that would be required is far less than the historic products.
Matt VanVliet: Very great. Thank you.
Greg Daily: And then Clay has made a note of, you know, that holds true in with some iterations of slight differences in water, gas, electric. It's all the same fundamental model, just some different data attributes that have to be picked up.
Clay Whitson: It looks like the commercial off the chef [ph] application, the customized piece to it is vendor integrations by utility. Yes, that's the difference.
Greg Daily: And then that gets augmented because we have standard methods of entry on our APIs that ease that process as well.
Matt VanVliet: Okay, very helpful.
Operator: And our next question is from Charles Nabhan with Stephens. Please proceed.
Charles Nabhan: Hey, guys, good morning and thank you for taking my question. I appreciate the color on the RemainCo outlook for '25, but just wanted to get a little more color around the linearity of revenue as we think about the quarterly cadence. So you had mentioned high single digit growth. It sounds like there's some license revenue that's going to come through in the front half of the fiscal year. So that being said, I guess first is that high single digit, I assume that's an average for the year. And secondly, are there any weightings towards any particular quarters that we should consider as we think about our model?
Greg Daily: There will be seasonality, particularly on the one time software line. I do believe. Manitoba, we believe is going to be more second half as opposed to first half because of the - we haven't received the requirements yet. When it comes to utility license sales, which are the big ones that we see for '25, it's hard at this stage to predict which quarter that falls into. I think that line item is just going to be a variable going forward.
Charles Nabhan: Got it. Okay. Appreciate the color. Thank you.
Operator: The next question is from Rufus Hone with BMO Capital Markets. Please proceed.
Rufus Hone: Hey, guys, thanks. Good morning. Maybe I'll ask about Merchant Services from another angle. I guess hard to not notice that you're seeing decent revenue growth in that business. You're now at $42 million of adjusted EBITDA over the last 12 months. That seems to be growing mid to high teens. Do you think prospective buyers are seeing the value of these assets? And I'm curious if you've adjusted your view of the valuation [ph] through this process. Thanks.
Greg Daily: It's a good business, and we've never thought it was not a good business. And it's been really steady eddy, for us ever since going public and even before that. Do you want to comment?
Clay Whitson: It's an amazing team. Nice pipeline. They constantly executed. Can't really comment about pricing on the transaction, but it's a great opportunity for the buyer. It cleans up our story, makes us a software business, pays off our debt.
Rufus Hone: Okay, fair enough. And then I was wondering if you could help us quantify the size of the headwind you're facing from the subsidized lunches? Thanks.
Greg Daily: We would, in a normal year, we would expect education to grow 10%. And coming into this year, on our Q4 call, which was our September call, we adjusted that down to 5% for fiscal year '24. And I think once that anniversaries, we would expect to resume 10% growth in education.
Rufus Hone: Got it. Thanks very much.
Operator: [Operator Instructions] The next question comes from Alex Markgraff with KeyBank Capital Markets. Please proceed.
Alex Markgraff: Hey, everyone, thanks for taking my questions. A couple, maybe one first, I think for Paul, just on some of the product level improvements, I think I heard you mentioned earlier, speed to market implementation timeline. Just curious if you could quantify some of those changes and some of the improvements as you work through some of these product initiatives?
Paul Christians: Sure. You know, when you're doing - in the public sector in particular, there's significant pent up demand, or it's such a large, diverse market for a variety of enterprise solutions across the spectrum. And historically, when people have done that, it's been a very long, elongated project where they're basically trying to customize existing internal processes that they've done over decades. Those are pretty well set in place and pretty well configured, and there's commonality amongst those. So as we - and we have deep domain expertise in particular areas. So as we are working to develop product, we are doing it, you know, with that domain expertise and in many times, concert [ph] with core customers to give us the capability to meet that as a, you know, more of a commercial, off the shelf component and also standardize integrations into the systems, which can be significant in large enterprise arrangements. It's really a domain by domain expertise. And we're organized in a fashion that's domain specific around ERP products or enterprise utilities or code [ph] as an example, and tax considerations. We have, in many cases, 30 or 40 years worth of history and people who have been developing those over time. And so we find it easier to work with customers to show them something that's tangible and their optionality because they're able to do things in these systems that they didn't imagine they'd be able to do because of historic hard coded constraints.
Alex Markgraff: Okay, great. Thank you. And then just one quick one, Clay. Just the sort of confidence level on that license revenue in the fiscal fourth quarter?
Clay Whitson: It is in there. It has been delayed once from Q3 to Q4, but we still believe it will happen in Q4. If it doesn't, it would be our Q1, but we currently expect it in Q4.
Alex Markgraff: Okay, thank you.
Operator: And at this time, we are showing no further questioners in the queue. And this does conclude our question-and-answer session. I would now like to turn the conference back over to Greg Daily for any closing remarks.
Greg Daily: Thank you. I'd like to thank my team, our team that are out there every day, Celent [ph] thank you. And thanks, everybody on this call for your continued interest and call us if you need anything else. Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.+
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