i3 Verticals, Inc.

Second quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Today's call is being recorded and a replay will be available starting today through May 18th. The number for the replay is 412-317-0088 and the code is 101-558-0088. 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 Scott Merriweather, Chief Operating Officer. Please go ahead.

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Finally, the information shared on this call is valid as of today's date, and the company undertakes no obligations to update it, except this may be required under applicable law. I now turn the call over to the company's chairman and CEO, Greg Daly.

Thanks, Scott, and good morning to all of you. We are pleased to report our second quarter 2021 results as we set new record highs across the board. Our net revenue, adjusted EBITDA, software revenue, payment volume, and integrated volume were all at new highs. We exited the quarter with incredible momentum and are excited about what the future holds. Despite facing a more difficult year-over-year comparison as the pandemic did not affect our business until mid-March 2020, we demonstrated substantial growth in 2020. We could not be more pleased with what we delivered in the second quarter as our adjusted net revenue increased 26% to $49.4 million in the second quarter, and our adjusted EBITDA increased 25% to $12.4 million when compared to the second quarter of 2020. Year to date, our software-related revenue has increased 36% to 36% of our net revenue. and our recurring software revenue has more than doubled since the second quarter of 2020. Fifty-nine percent of our payment volume in the second quarter was integrated. Recurring revenues represent more than 80 percent of our net revenues. This is the first quarter that our adjusted EBITDA from proprietary software segment exceeded the adjusted EBITDA from our merchant services segment. We are delivering on our software-focused strategy, and this quarter is a major milestone in our company's development. Our long-term vision is to be a leader in software and payments, and we have been making major advancements in achieving our vision. In particular, public sector vertical delivered record growth. This vertical now represents around half of our company. I feel like we hit the nail on the head by betting big on this vertical. Our acquisitions in this space have been phenomenal, and I'm continually impressed by the talents we have on our team. The public sector vertical has tremendous opportunity for expansion, both in technological spending and in payments, and we're in the right place at the right time. We expect the federal stimulus under the American Rescue Plan Act will accelerate software advancements within the public sector vertical, and will provide significant opportunities for us to partner with our customers over the next few years. The $350 billion available under this plan is available for both state and local governments, and our software meets many of the needs the rescue plan was intended to help local governments address. We have a solid pipeline of projects that are delivered to our customers and we anticipate the pipeline will continue to grow as our customers access the funds available to them under the Rescue Plan. We've seen an increased cross-selling of products within public sector as our product teams and our sales teams begin to converge. For example, one of our Texas-based products has over 200 court customers in Texas. During 2021, this product has now been sold in Arkansas, Georgia, and Ohio. This momentum in new states opens up hundreds of new court opportunities for this product. Additionally, one of our core case management systems has a significant presence in Georgia. During the past quarter, this software expanded into Alabama and Mississippi and has opened up new markets for us in that territory. We have also significantly expanded our geographic footprint within public sector. We now have statewide agency or court agreements in California, Texas, Michigan, Florida, Delaware, Alaska, Minnesota, Wyoming, Arizona, Kansas, North Carolina, and Tennessee. Our public sector product teams have made great advancements in integrating many of our products such as law enforcement and paperless court products within our core platforms. We expect continued growth as we increase our distribution of these integrated products. We've been very busy on the M&A front this year as we pursue our vertical focus strategy. This quarter included two months of DIS, our largest acquisition to date, and a first full quarter of ImageSoft, In April, we announced two acquisitions in the healthcare software space. We have now made three healthcare acquisitions. We're confident in our current product suite, which we will continue to develop, and we are looking forward to expanding our presence in that vertical. We most recently completed an acquisition of software in the utility space. This company serves tier one size customers and will marry nicely with our existing utility billing platform. Rick will provide more details on the most recent acquisition in a moment. We're excited about what we can achieve in that market going forward. Across the rest of the company, we saw continued improvement and reason for optimism. Our nonprofit vertical continues to outperform expectations as it continues to find traction within text-to-give product. Our merchant services sector continues improvement sequentially quarter over quarter. Our education vertical saw an uptick as more schools began in-person scheduling, although this vertical remains suppressed. Within the hospitality sector, we are the number one reseller in the NCR channel and recently completed the largest Aloha Essentials installation in the history of that product. Overall, we saw a significant payment volume rebound in March, and it continued in April and the first part of May. The progress in vaccinations and reduction in government mandated restrictions had a direct effect on our customer base. As the restrictions continue to ease nationwide, we expect a continued recovery in our payments volume and revenue. We also anticipate software sales to accelerate from more in-person demos and trade shows. I cannot be more excited about the momentum that we carry into the close of our fiscal year. Now I'll turn the call over to Clay, and he'll provide some more details on our first quarter or our second quarter fiscal performance, and then Clay will turn the call over to Rick for M&A updates.

Thanks, Greg. The following pertains to the second quarter of fiscal 2021, which is the three-month period ended March 31st, 21. Please refer to the press release and slide presentation titled Supplemental Information on our website for reference with this discussion. We had a great quarter with record adjusted net revenues and adjusted EBITDA. For the second quarter ended in March, adjusted net revenues increased 26%. to 49.4 million from 39.3 million for Q2 2020, reflecting organic growth and acquisitions. It feels great to cite a number like 26% again and to return to somewhat normal economic activity. Like most of our peers, we experienced a weak January and February, but strong March and April. Almost all of our metrics we track are headed in the right direction. For companies we've owned for at least two years, we have recently been comparing our monthly payment volumes to 2019 periods because 2020 comparisons have distortions stemming from the pandemic. For March and April, these companies increased volumes in the mid-20%. Our integrated payments percentage hit a new high of 59%. helping our adjusted net revenue yield improve to 116 basis points for the quarter from 110 basis points for Q2 2020. Adjusted net revenue yield is defined as adjusted net revenues divided by payment volume. Software and related services continued strong growth, representing 36% of adjusted net revenues for the first half, compared to 23% for the first half of fiscal 2020 reflecting the heavy software weighting of recent acquisitions. This percentage gained despite the beginnings of a rebound in payments. Acquisitions, almost exclusively in the proprietary software segment, contributed $11 million to growth and adjusted net revenues for the second quarter. IPOS declined $1 million, reflecting not only the COVID impact of California, but also our ongoing transition to a SAS offering. The purchase portfolios declined 0.3 million. Adjusted EBITDA increased 25% in line with adjusted net revenues to 12.4 million for Q2 2021 from 10 million for Q2 2020. The March quarter marked a milestone in our history when the adjusted EBITDA from our proprietary software segment surpassed the contribution from the merchant services segment. Our proprietary segment continues to be the growth engine for the future. Corporate expenses increased about $500,000 in Q2 2021 compared to Q2 2020, reflecting higher compensation costs, but increased at a slower pace than adjusted net revenues, leading to a decline in the expense ratio from 8.2% for Q2 2020 to 7.5% for Q2 2021. We had a one-time gain of $2.4 million we recognized in Q2 from a minority investment in a company named Axiomed. We invested $100,000 in 2016 and received cash from the sale of $2.5 million in early April. We have excluded this gain from adjusted revenues, adjusted EBITDA, and pro forma adjusted diluted EPS. Pro forma adjusted diluted earnings per share increased to 23 cents for Q2 2021 from 20 cents for Q2 2020. Again, please refer to the press release and supplemental slide presentation for a full description and reconciliation. Segment performance. In our proprietary software and payment segment, adjusted net revenues increased 70% to $24 million for Q2 2021 from $14.1 million for Q2 2020, principally reflecting growth in our flagship public sector vertical. The results included ImageSoft for a full quarter and VIS, our largest acquisition to date, for two months. Our nonprofit vertical continued to outperform expectations with its text-to-give technology, and healthcare turned in a solid performance. Adjusted EBITDA increased 47% to $8.6 million for Q2 2021 from $5.8 million for Q2 2020, reflecting mainly public sector growth, but also the nonprofit and healthcare acquisitions. For Q2, public sector represented over 90% of adjusted EBITDA in the segment. The adjusted EBITDA margin fell to 36% for Q2 21, from 41% for Q2 2020, reflecting a drop in education profitability and the inclusion of ImageSoft, which carries a margin below 20%. As expected, the margin did improve sequentially from 30% in Q1. with the inclusion of BIS, which carries a margin close to 50%. The one laggard in the segment remains education. Although schools are beginning to return to the classroom, the USDA has extended its free lunch program for all students through next year. Going forward, we will need to rely more on software revenues and non-lunch fee payments, but we believe education will return as a high growth vertical. Fortunately, public sector is by far our largest vertical and is overperforming sufficiently to overshadow any weakness in education. With the resumption of trade shows and in-person demos, we think every vertical in our proprietary segment has room to run. Net revenues for our merchant services segment increased 1% to $26.1 million for Q2 2021, from 25.7 million for Q2 2020. The numbers for merchant services were muted for the quarter, but they masked an underlying trend. January and February were weak, while March and April have been strong. Vaccination progress and less government mandated restrictions have favorably impacted our customer base. Beginning in March, California resumed permitting indoor dining with a phased occupancy approach. and our SAS transition and hospitality is progressing more successfully than expected. We think the transition will ultimately lead to a better business model with more favorable competitive positioning and better profit margins. Our B2B vertical has been resilient during the pandemic, but has benefited in March and April from higher activity in its customer base. Adjusted EBITDA for our merchant services segment increased 3% to $7.6 million for Q2 2021 from $7.3 million for Q2 2020. The adjusted EBITDA margin was 29% for Q2 2021 versus 28.5% for Q2 2020, reflecting higher revenues in relation to fixed costs. Balance sheet. Our strong balance sheet has allowed us to continue to execute our acquisition strategy. On March 31st, we had $83 million net of cash borrowed under our revolver, which is a $275 million facility. The face value of our convertible notes are $117 million. Our total leverage ratio at quarter end, which includes the convertible notes, was 3.8 times, while the current constraint is 5 times. After quarter end, we have paid approximately $37 million for three acquisitions. The multiple paid on the three acquisitions conform to less than 10 times adjusted EBITDA. We expect our total leverage ratio to remain below 4x for fiscal Q3, our June quarter. The interest rate for the convertible notes are 1%, while the interest rate for the revolver is currently less than 4%. Over time, we expect to convert roughly two-thirds of adjusted EBITDA into free cash flow, which can either be used for more acquisitions or debt repayment. Outlook. Looking forward, we have increased our outlook for fiscal 2021. It excludes future acquisitions and transaction-related costs and adjusts for write-downs of deferred software revenues in connection with purchase accounting. Adjusted net revenues, $204 million to $220 million. Adjusted EBITDA, $52 million to $58 million. Depreciation and internally developed software amortization, $4.25 million to $4.5 million. Cash interest expense, $4.75 million to $5.25 million. Performa adjusted diluted shares, $33 million to $34 million. pro forma adjusted diluted EPS, 98 cents to $1.08. From a vertical standpoint, we have not updated our percentages this quarter, but want to highlight that our public sector vertical remains the clear leader, representing roughly half of our current business and over half of our acquisition pipeline. Healthcare has become our second largest vertical, resulting from three acquisitions during the past year that all lead with software. changes to our presentation. In response to the pandemic and discontinuing guidance last spring, our supplemental presentations included monthly charts of payment volume and software revenues. We've now resumed guidance and feel like the economy is more stable and predictable now, so we have discontinued the monthly data. We have one more change that will commence next quarter, our fiscal Q3 ending in June. We have historically always included in our reported adjusted net revenue, adjusted EBITDA, and pro forma adjusted diluted EPS, and add back to reverse the effect of purchase accounting write downs of deferred revenue in connection with software acquisitions. We have also always included an estimate of this same adjustment, excluding future acquisitions. and our guidance for adjusted net revenue, adjusted EBITDA, and pro forma adjusted diluted EPS. The earnings release we issued last night, which includes the guidance I just mentioned, includes this adjustment to these metrics consistent with our historical approach. Our historical practice has been based on a belief that such an adjustment was necessary for investors to understand an acquisition performance in the first year and its true growth in the second year. The adjustment is consistent with the treatment and the financial covenants of our senior secured credit facility, as well as adjustments made by some of our peer companies in their disclosures. However, as part of the ordinary course SEC comment process, we have agreed with the SEC to discontinue adjusting net revenue, EBITDA, and pro forma diluted EPS to remove the effect of purchase accounting write-downs of deferred revenue, beginning with our third fiscal quarter ending June 30th. As a result of this change, in the third quarter earnings release, we will present adjusted net revenue, adjusted EBITDA, and pro forma adjusted diluted EPS without the impact of this add-back for the three months and the nine months and end it. As we believe the adjustment continues to represent material information to investors, we will continue to provide separately, as part of our earnings release, the non-GAAP revenue omitted as a result of the purchase accounting write-down of deferred revenue. We will also continue to provide an estimate of this amount for the remainder of the fiscal year along with our outlook. Please refer to the final slide in the presentation titled Supplemental Information on our website for an illustration of how the presentation will change in the third quarter. I'll now turn the call over to Rick for an update on the company and M&A activity.

Thank you, Clay. Good morning, everyone. I'll start this morning with an update on a few operational items, including updates on things I've addressed on previous calls. We continue to make steady progress on our unified product offering, our UPO, and our public sector verticals. We have recently designed a cohesive product category marketing package for use across all public sector entities. This marketing package will assist with client education and cross-selling efforts. There are three levels of cross-selling. One, our direct sales team, marketing to and coordinating solution sales across entities. Two, key product category additions by unit, ensuring new product categories are embraced at the unit level and are supported across all multiple entities. For example, kiosks that came with the BIS acquisition are being deployed across multiple product categories by multiple entities. And three, embedded proprietary software. We are embedding i3Vertical's proprietary software into core offerings and seamlessly bundling them as part of city, county, and state solutions. We can already see this working. The past quarter, we secured contracts in five new states. Contracts in three of the five new states were driven by UPO activity. We are motivated and excited by these early UPO wins, and our cross-selling continues to pick up steam. On the ISV front, our total number of signed and integrated ISVs at the end of the second fiscal quarter was 78, with three more in the process of integration. Our pipeline for ISVs continues to grow quarter over quarter, and we're actively pursuing additional integrations. I'll now speak relative to our M&A efforts. On Monday, April 5th, we announced two additional acquisitions in our healthcare vertical. The first acquisition is of a business based in the Upper Midwest that provides software and services in multiple states to healthcare customers. The software improves operational efficiencies so customers can securely access patient information and streamline the process from admittance to discharge. Their solution accelerators are designed to optimize business processes and drive digital transformation. Their products include accounts payable, accounts receivable, contract management, and human resources. The second acquisition is of a business that offers medical practice management software and other related solutions to its customers. This 30-year-old business is headquartered in the southeast and serves customers across the country. Their products include practice management system revenue cycle management a patient payment portal inventory management and appointment reminders as you know many of our recent acquisitions have been in the public sector vertical however these two April acquisitions with a combined 51 individuals will help us build momentum in our existing healthcare vertical which is an extremely large market that we would like to develop further as we move forward yesterday we announced our latest acquisition This business is located on the East Coast and has customers across the country. This is a public sector deal with a focus on utilities, specifically gas, power, and water. Notably, they have some of the largest utility companies, Tier 1 companies, across the country in major metropolitan areas. This deal brings with it several additional products to cross-sell into our existing utility line of business. The company is 18 years old and comes with 45 employees and 53 contractors. Their product and services include a deep customer portal for improved customer experience. They specialize in cutting-edge digital engagement. A CSR product that allows for optimization and life extension for utilities' existing CIS, or customer information system. Mobile application development that is device agnostic. CIS data integration between multiple meter vendors, back-end systems, and portals. financial balancing and rate case analysis, and mobile service order dispatching. We continue to be disciplined in our approach, and all three deals were completed within our standard multiple range. Finally, our M&A pipeline is still very healthy and has an emphasis on public sector, healthcare, nonprofit, and education, and we look forward to sharing more on the acquisition front in the near term. This concludes my comments, Andrea. At this time, we'll open the call for Q&A, please.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.

And our first question will come from John Davis of Raven James.

Please go ahead.

Hey, Lauren, guys. I think first I wanted to start on March and April trends versus 2019. I think if I heard you right, Clay, you said mid-20s growth on a two-year stack basis. So that would kind of imply a meaningful acceleration from what you guys have historically grown organically in the in the high single digits and just wondering where the strength is, how much of you think it's stimulus driven and do you expect maybe 10% type growth on the other side of this or just any kind of commentary on current trends would be great.

Well, it's hard to know how much stimulus had to do with this. This year for the, you know, during when we're comparing the COVID periods, I think It won't be difficult to have double-digit growth. The question is when we lap these current periods a year from now, what will growth be? And our target is double-digit. We've continued to guide on a long-term basis to high single-digit, but that could change as those time periods come into view.

Okay, that's helpful. And then just on the net revenue yield, obviously you guys are shifting more towards software. I think if I look back at 2020, it was about 105 basis points. It came in at 116 this quarter. I think some volume comes back. Maybe that normalizes. But is it right to think that that net revenue yield should be higher or potentially creep higher over time, maybe not at $116, but maybe $110 to $115 on a normalized basis, given all the addition of software revenue?

Yeah, I don't see any reason for it not to. In fact, this quarter we had a fair amount of ACH associated with back at the school at our university. without which we would have had a little bit better yield this quarter.

Okay. And then, Greg, you talked a lot about the American Rescue Plan Act and all this money sitting out there. How long do you think it will be before those governments actually get the money and, more importantly, start implementing the upgrades where you could see the revenue? Is it something that's like six to 12 months out, 12 to 24? Just curious how quickly you think you'll start seeing some revenue from it.

I think we'll see some by the end of the year. We contacted all of our customers when it first came out and they didn't even know about it. That's been seven or eight weeks ago. It's been dramatic, the increase in activity in the last three weeks. you know, I think the end of the year will be very busy for us. And then there'll be a second tranche, you know, probably as early as next spring.

Okay. And then last one for me, guys. Clay, just reminds, I think when you updated education, I think it was 5% of EBITDA last quarter. And I think historically you've said launches were maybe 50% of revenue. in that sector. So just curious, A, just to double-check those numbers, and also to clarify, the free lunch program has been extended through next school year or just through the end of this calendar year?

Through the next school year. And to give you an idea of size, this quarter our education group had about $2.5 million of net revenues and about little over 600,000 of EBITDA so it's become a pretty small part of our company now it'd be even less than 5% today with government going up a little in health care going up but it is that levels about the trend we expect for the next several quarters well opposite lunch which absent lunch which is a I mean, absent the summer months, which, you know, schools are empty, but we don't really see that changing meaningfully for the fourth quarter, for example.

Okay. All right.

Thanks, guys. The next question comes from Peter Heckman of DA Davidson. Please go ahead.

Hey, good morning. I just wanted to get a little bit more color, if you could, on signing up new independent software vendors. How does the increase in I3's proprietary software play? Does that increase the attractiveness of integrating for some vendors? And conversely, for some vendors, is it a negative point in that they view you as partially competition?

Yeah, Peter, we haven't seen any disruption in our ability to sign up ISVs. They don't see us as a competitor. As a matter of fact, our technology infrastructure is seen as a positive, the things that we can bring to the table for them. So we're not getting any pushback, if that's what you're meaning to say.

Yeah, I was trying to figure out if there were some that viewed it as a bit of a conflict or – Conversely, do others view it as an advantage and maybe a better reason to integrate with I3 versus maybe another vendor?

Again, it's all about the technology. Our verticals are so large. I'm not on the ground every day, but I haven't heard any pushback from our ISV partners to date.

Great, great. And then, Clay, just on the deferred revenue write-down figure, does that include the three deals that have been announced so far in the fiscal third quarter?

The guidance we gave does include, if you look at the last page of the supplemental information, we gave an estimate for the entire year, and it does include the three deals we just announced.

Got it. Okay, that's helpful.

The next question comes from George Mahalos of Cowen.

Please go ahead.

Hey, guys. Good morning, and congrats on the solid results. Clay, you touched on this, and I think you answered it, but just as a point of clarification, if we just look at the payment volume within proprietary software, that, you know, we increased you know, more than two times sequentially. I understand there's probably some BIS volume in there, but it also sounds like maybe you had a big contribution on the education side from higher education. I'm just curious, can you kind of break that out for us, give us a sense of what drove that increase? And it also sounds like sequentially the revenue yield should go up in the segment as we go into the third quarter. Is that a fair assessment?

Yeah, so... Last quarter, or the second quarter of 2020, we only had 44 million of ACH volume in that segment. And this quarter, 2021, we had 196 million in that segment. And that's the back-to-school activity for the university, which happens twice a year. So yeah, I think it is fair revenue yield could go up this coming quarter.

Okay, thank you. Thank you for that. And just another follow-up, just sort of sticking to the education vertical. I know, Rick, you mentioned having education was sort of third in line as you were talking about prospects within the pipeline. I'm just curious, do you guys want to do an education acquisition given the uncertainty or pressure next year? on school lunches, or are you guys looking to potentially go after something catering more to, you know, private schools or more higher education? I guess are you looking at something beyond kind of the core market that you've serviced in the past?

Yeah, that's a good question, George. As I think about the pipeline and the prospects that are in it, There's no lunch today. Most of it is what I would call marketplace, which is other payments that take place in the school, whether it's K-12, private. And then there's ancillary products that we've wanted to have for several years now, like nutritional software and that sort of thing. So I can't think of one that has lunch today. That doesn't mean we won't talk to them, but... I don't see that being an issue with what we've got in our pipe today.

Okay, that's helpful. And just one last one, Clay. If you can break out for us the percent of revenue today that is non-payments related, so, you know, license fee or SAS, thank you, and I'll hop off that.

Okay. For the, well, I think we gave, yes, we gave 36%. As a six-month number for software revenues, 57% were payment revenues for the six months, and 7% were in the other category, you know, equipment or things of that nature.

Is that what you were looking for, George? Yes, thank you.

The next question comes from Chris Donat of Piper Sandler. Please go ahead.

Good morning, gentlemen. Thanks for taking my questions. Just one, as we think about the ACH volume from education going forward, is it safe to use that $196 million number from the quarter and just kind of like a ballpark, with a reasonable ballpark assumption to be that you'll get sort of the incremental $200 million bump every other quarter because of tuition-related payments. Is that a safe way to think about it, or am I thinking about it wrong?

No, that's exactly right. One of them happens in January, and one of them happens a little bit July, but mainly August, so in our fiscal fourth quarter.

Okay. And then with sort of the economic recovery and getting back to in-person sales and trade shows, do you expect sort of a step function in sales here, or is this going to be more of a gradual thing as you're calling on customers who might not have been willing to take meetings, or is it really a dramatic change in what's going on with your customers there?

I feel like the last 30 days have been like a rock concert, and I think that will continue for six more months. So obviously a little pent-up demand, but we have increased our offering through acquisitions and different, the work that we've done internally, added salespeople. So, you know, I don't, it's been crazy the last 30 days and I don't see it slowing down until Thanksgiving.

Okay. Sorry, I'm just trying to convert rock concert into my model, but I'll figure that one out. It's huge. Yes, it sounds good and it's good to hear. And then just last question for me from a modeling perspective is we looked at the GAAP income statement. In the quarter, you had a downtick from the fiscal first quarter in other costs of revenues, but an uptick, a pretty meaningful one in SG&A. Just anything to call out there? Is that more the time and acquisitions and where they're landing on different expense lines or anything else?

Yeah, so BIS... more payment oriented less software oriented and so that will impact some of those numbers and we'll get three months in the next quarter not two months on the corporate line you mentioned we did resume bonus accruals this quarter and have begun reinvesting in with some selective hires our you know, some of our companies are getting concerned that they can't keep up with installations if things continue at this pace. And so, you know, we definitely want to enable any revenue we can. And so, you know, we went through a year during COVID of being very tight with compensation and hires, and we're beginning to reinvest now.

Okay. And those hirings are dealing more with implementations, not so much on the sales side, because it sounds like, if you will, that's where the rock concert is.

Yeah, it's a little bit across the board. You know, we did lay off 12% of our staff last spring, and Some of that was muscle, and so we've been putting people off for a year, and we're just finally letting them make the hires they wanted to make.

Okay. Okay. That's helpful. Thank you.

Once again, if you would like to ask a question, please press star, then 1. And the next question will come from Josh Beck of KBCM. Please go ahead.

Hey, this is Maddie Schrag on for Josh. First, I was wondering if you guys could talk about the timeline that you expect the American Rescue Plan Act to provide, you know, a tailwind on your government modernization projects. And secondly, I was wondering if you could provide an update on how you expect the vertical mix to evolve this coming year. Thanks.

So on the stimulus money, you know, we're thinking toward the end of the year, the December quarter, hard to really predict exact, but we are seeing more RFPs, more demos, more closed sales that usually takes us three to six months to install. And so I think you'll see that quarter pick up and it should continue for the whole year of 2022. Our software package is very well received with our existing customers, new customers. So we're optimistic I think we'll know a lot more by the end of our June quarter.

On the second part of your question, I think next year you'll see more public sector deals. Over 50% of our pipeline is public sector. You know, we did, I think, eight deals in the last eight months, and six of those were public sector, too, and health care. So I'm looking for that momentum in public sector to continue.

Yeah, I think public sector will be at least 60%, especially until education bounces back. And so that'll change a little bit. It's all good.

Super helpful. Thanks, guys. This concludes our question and answer session. I would like to turn the conference back over to Greg Daly for any closing remarks.

Thank you guys for joining us this morning. We do feel as if the pandemic is over. We're seeing momentum in all of our verticals except education, but thank you for your interest and stay tuned. Thank you.

The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.