Good day, everyone, and welcome to the i3 Verticals second quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal our conference specialist by pressing star then zero. Today's call is being recorded and a replay will be available starting today through May 17. The number for the replay is 877-344-7529, and the code is 1617435. 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 Geoff Smith, SVP of Finance. Please go ahead, sir.
Good morning, and welcome to the second quarter 2023 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 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 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 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 now turn the call over to the company's Chairman and CEO, Greg Daily.
Thanks, Geoff, good morning to everyone on the call. We're excited to present our results for the second quarter of fiscal year 23. This quarter, we set another record for revenue and adjusted EBITDA, which were up 20% and 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 the great businesses we acquire, unlocking improved recurring revenue growth. This quarter, software and related 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. 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 they unlock. The last time we refreshed our senior secured credit facility was four years ago in May of 2019. Since that time, we've grown tremendously, and the quality of our credit has never been better. It's 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 facility. It has been interesting times in the credit markets to say the least. Against that backdrop, we were able to achieve a fantastic result. First, we upsized our revolving line of credit capacity to $450 million, which sets the table for future M&A over the next five years.
Next, we added flexibility in our financial covenants, a vote of confidence on our credit and execution from our bank group. Finally, improved pricing in our interest rate spread by a quarter of a point. We are grateful to all of our banks who participated in the facilities, including JPMorgan Chase, Fifth Third, Regions, TD Bank, KeyBank, Pinnacle, FirstBank, Raymond James, First Horizon, and Bank of America. I'll turn the call over to Clay, and he'll provide you more details on our second quarter financial performance. Following Clay's comments, Rick will provide an update on some business-related items and address M&A, then we'll open up the call for questions.
Good morning. The following pertains to the second quarter of our fiscal year 2023, which is the quarter ended March 31st, 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 second quarter increased 20% to $93.9 million from $78.1 million for Q2 2022, reflecting organic growth and acquisitions. Our revenue yield improved to 158 basis points for the quarter from 146 basis points for Q2 2022. Organic growth for this quarter was approximately 12%, benefiting from a strong quarter for sales of software licenses, which totaled $3.5 million.
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 $305.7 million for Q2 2023, compared to $254.5 million for Q2 2022, 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. Software and related services remain the largest portion of our revenues, representing 50% for Q2. Payments represented 45%, other 5%. Adjusted EBITDA increased 27%, outpacing revenues to $24.7 million for Q2 2023, from $19.5 million for Q2 2022, reflecting continued momentum in our software and services segment.
Adjusted EBITDA as a percentage of revenues increased to 26.3% for Q2 2023 from 25% for Q2 2022, reflecting margin improvement in our software and services segment. Pro forma adjusted diluted earnings per share increased to $0.38 for Q2 2023 from $0.37 for Q2 2022. Please refer to the press release for a full description and reconciliation. Segment performance - Revenues in our software and services segment increased 24% to $60.8 million for Q2 2023, from $49 million for Q2 2022, principally reflecting growth in our flagship public sector vertical, which represents over half of our consolidated business. Public sector includes the education sub-vertical, which deserves special mention. Revenues in our education sub-vertical continued a strong rebound, thanks to organic sales to new school districts and higher lunch and activity fees at existing districts.
Federal and state lunch subsidies have decreased significantly since the pandemic. Benefiting from strong license sales, the segment's adjusted EBITDA improved 35% to $22.1 million for Q2 2023, from $16.3 million for Q2 2022, outpacing revenues. Adjusted EBITDA as a percentage of revenues improved to 36.3% for Q2 2023 from 33.4% for Q2 2022, 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 first, was high margin as well. Revenues for our merchant services segment increased 13% to $33.1 million for Q2 2023 from $29.2 million for Q2 2022, principally reflecting growth in our ISO, ISV, and B2B channels.
Adjusted EBITDA for our merchant services segment increased 6% to $8.6 million for Q2 2023 from $8.1 million for Q2 2022, 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. The balance sheet. Greg mentioned the completion of our new revolving credit facility. I just wanna reiterate that we were able to improve several aspects of the agreement. First, we expanded to $450 million from $375 million. That had been upsized $100 million on October 1st of last year.
Second, we achieved a 25 basis point improvement in our spread, and we went from two leverage covenants to 1 5x, covenant for total leverage, dropping the senior secured leverage covenant, which gives us greater flexibility as we think about our capital structure over the next five years. Our strong balance sheet has allowed us to continue to execute our acquisition strategy. On March 31st, we had $267.1 million borrowed under our revolver, net of cash. The face value of our convertible notes are $117 million. As of March 31st, our total leverage ratio remained approximately four times.
The interest rate for the convertible notes is 1%, while the interest rate for the revolver is currently around 8.1%. Over time, we expect to convert roughly 2/3 of adjusted EBITDA into free cash flow, which can be used for debt repayment, acquisitions, and earn-outs. We define free cash flow as adjusted EBITDA minus CapEx, internally capitalized software, cash interest, and cash taxes. Outlook. Looking forward, the strong first half to our fiscal year gives us confidence in the following guidance for fiscal year 2023, which excludes acquisitions that have not yet closed and transaction-related costs. Revenues, $360 million-$380 million; n o change there, adjusted EBITDA, $97 million-$103 million. That's a $1 million increase at the midpoint. Depreciation and internally developed software amortization, $8 million-$9 million.
We had not given specific previous guidance on that number. Cash interest expense net, $22 million-$23 million. This represents a $2 million increase from the midpoint given last November. The main drivers include the AccuFund purchase, fees associated with the new revolving credit facility, and higher unused fees with the larger $450 million credit limit. Pro - forma adjusted diluted EPS, $1.46-$1.56. That's $0.05 lower due to the higher interest expense. From a seasonal standpoint, in the absence 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.
Thank you, Clay. Good morning, everyone. Before I discuss M&A, I wanna comment on a few developments within the business. A couple of quarters ago, we announced the promotions of Paul Christians to Chief Operating Officer and Chris Laisure to 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 that I'd like to share. Tom DeBord, formerly the CEO of our B2B business, Infintech, has been promoted to President of Merchant Solutions for i3 Verticals. Tom is a veteran in the payment space, and is highly respected by his peers. 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're 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. Benefits of the new team include improved response time, enhanced response quality, industry prowess, and command of the RFP technology and process. These teams are comprised of individuals across the organization to maintain market sensitivity and domain expertise.
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 i3 teams, focused on enterprise-level infrastructure, security, cloud services, development, and project management. The next evolution of public sector focuses on four primary sub-verticals, including justice technology or justice tech, utilities, ERP, and transportation. Justice tech 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 sub-vertical serves large utility clients and local utilities with unmatched data delivery, IVR, digital customer engagement, and CIS solutions. The transportation sub-vertical boasts motor vehicle, motor carrier, and driver service solutions.
The ERP sub-vertical 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 three primary sub-verticals: nutrition services, ticketing and events, and payments. The combination of BIS and Celtic into i3 Transportation delivers a needed solution to meet the demands of the transportation market. Two new state contracts and transportation sub-vertical 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 its strategy to monetize payments across the revenue spectrum.
Throughout the portfolio, subsidiaries are advancing their technology platforms to connect with patients through in-app payment, text-to-pay, eStatements, and payment portals. i3 Healthcare Solutions continues to see the results of the UPO disciplines through the synergies of our practice management, and the EHR platforms targeted geographic expansion. i3 Healthcare Solutions continues to be recognized as a market leader for delivering revenue cycle management services, evidenced by a 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 five U.S. healthcare payers. It goes without saying, an additional result of many of these structural changes that I just mentioned will also allow us to prioritize our product investment opportunities.
I'll now speak to M&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. As you all know, acquisition timing can tend to be lumpy. This is driven by three dynamics. One, we're reorienting our pipeline and are looking for larger deals than we have historically. Two, we are 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. Three, the trickle down of lower valuations in the current environment has not been realized by many prospects. We remain disciplined when it comes to multiples, and as usual, we continue to self-source our acquisition target.
We still believe we'll be able to continue to complete four-five deals per year. Our pipeline remains healthy with opportunities for acquisitions in public sector and healthcare. This concludes my comments, operator. At this time, we'll open the call for Q&A, please.
Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from John Davis with Raymond James. Please go ahead.
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 second quarter?
Yes, it was 12%, and the $3.5 million of software license sales contributed to that. That's sort of the X factor every quarter, you know, whether we're above or below the 10% mark.
Okay. That's great to hear. Rick, just wanted to follow up on your last comment about pursuing larger deals. I mean, historically, you guys have kind of been, you know, under $5 million of EBITDA, paying eight to 10 times. Just curious, you know, what you guys would define as larger deals and, you know, could we see a, you know, $100-plus million deal? Just curious kind of what you're thinking there?
Yeah. Historically, JD, we've been, you know, between $2 million and $3 million, maybe a $4 million or $5 million here and there, but we're looking at deals as high as $10 million or $12 million in EBITDA. I think that's possible. Whether we get there this year or this quarter, I don't know yet. The pipeline's 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.
Okay. Two quick follows for Clay. One is just the revenue yield improvement, you know, up 12 basis points year-over-year. Anything specific to call out there? One last clarification, Clay, w hen you said 3Q revs and EBITDA similar to 2Q, I'm assuming you meant on a dollar basis, but just wanted to confirm.
Yeah, on a dollar basis, both revenues and EBITDA look very similar to Q2 right now. On the revenue yield, you know, payments have come back, particularly in the education area, and so that's helped a lot with the yield. Just the greater share of software and services, you know, going above 50%, that gradually improves our yield every quarter.
Okay. Appreciate all the [color]. Thanks, guys.
Thanks, J.D.
The next question comes from James Faucette with Morgan Stanley, p lease go ahead.
Great. Thank you very much. I just wanna follow up on that the question around acquisitions, et cetera. I mean, I know that your targets typically aren't in the same kind of realm or domain as VC-funded privates, but wondering what you're seeing from a valuation perspective. It sounds like you're pretty optimistic about being able to do larger deals. How's the changing interest rate environment impacting, you know, how you think about where valuation should be and kind of funding mix or if there needs to be a bigger equity component, et cetera?
Well, on the higher interest rates, it obviously makes us more sensitive to acquisition multiples.
During COVID, we were generally paying 10 times for businesses. We're now trying to pay closer to eight times for businesses. Rick, do you want to handle the other part?
Yeah. As far as valuations, you know, 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 have had valuations done, and the third 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. You know, these smaller guys under $10 million in EBITDA, they don't recognize that the value has changed in the market, and the trickle-down takes a lot longer to affect. Again, we're gonna be disciplined. We're gonna not pay over 10, hopefully pay closer to eight and do a fair deal for us and the seller.
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. We self-source it and tell them our story about what we're building, and they agree to join the company. They like that story, t iming is everything. We've had some deals fall in our lap over the last five years that we're, you know M&A is part of our DNA, so you'll see a lot more 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've put in over the last 30 years. That's not what we're paying for. We're paying for the strategic potential value being combined into our enterprise going forward. There's that dichotomy we have to address all the time.
Sure!
That's great [ color]. I wanted to follow up on the software portion of the business. You know, we've kind of been through this extended period of normalization on the payment side, and you mentioned just this quarter that you're starting to see the education come back as things like subsidized lunch from during COVID, et cetera, expire in different states. How should we be thinking about that software piece of the business? Is it growing faster or at least more durably than the payments portion? I guess, you know, outside of M&A, how should we think about the pace of software transition, perhaps on a more organic basis?
Well, our ARR grows a few percentage points above our organic growth rate. That is, we do expect more of that to come from software and services than from payments. Payments has been through a normalization now, 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. 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.
Got it. That's really helpful. Thank you.
The next question comes from Charles Nabhan with Stephens, please go ahead.
Good morning. Thank you for taking my question. I had a follow-up on Rick's comments around some of the internal initiatives you guys have pertaining to the RFP process, a s 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?
No, not meaningfully. We're mainly reshuffling internal resources into a uniform team, so that all of our responses are tailor-made and consistent. You know, we do make some efficiencies from time to time, but we're also always investing, so I wouldn't expect so, no.
Yeah. 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 that will assist all companies enterprise-wide.
Got it. Just as a quick follow-up, I know, you know, the post-COVID rebound and the post-COVID rebound in education has provided a bit of a tailwind and should continue to do so over the next few quarters, it sounds like. 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? Is it fair to think that, you know, some of the new business wins could provide an offset going forward on that in that business?
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. We are always adding software and services products. You know, 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. No, I don't expect a slowdown, but I do expect it to shift, less from payments and more from software and services.
I feel like we've got seven or eight months, that we'll sell some of our existing customers of $15 million or 15,000 schools...
Yeah.
Another product this year or next year.
Yeah. Greg makes a good point. When we studied, you know, our first customers in their first year, generally buy one product, that's historically for us been the lunch product. Then on average, every year, they add one more software module, s o there is a lot of cross-selling to expense.
Got it. If I could sneak one more in. If I caught your comments correctly, the increase to the EBITDA guide, which is roughly $2 million at the bottom end. If I heard you correctly, you said that was attributable to AccuFund. Is that correct? Largely attributable to AccuFund.
We've added $2 million this year. $1 million we added last quarter, and that was attributable to AccuFund. We added another $1 million this quarter, and that is more attributable to the general demand environment we're seeing mainly in public sector. Paul, I don't know if you wanna elaborate on that a little bit.
Sure, Clay. As Clay indicated, generally we're seeing increased demand in public sector. 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. Given that, we're seeing activity as a result that is positive across the board with RFIs, RFPs, product upgrades, and to Greg's point, product line module expansions.
Got it. Thank you for the [color]. Appreciate it.
As a reminder, if you have a question, please press star, then one to be joined into the queue. Our next question comes from Matt VanVliet with BTIG. Please go ahead. Matt, is your line on mute? Matt, as a reminder, is your line on mute? We're not able to hear you. Can I move on to the next question? I can't hear him.
Yes.
All right. Our next question comes from Peter Heckmann with D.A. Davidson, p lease go ahead.
Hey, good morning, everybody?
Good morning.
Morning. In terms of revenue cycle management, you know, can you talk a little bit about that sub-niche? You know, it appears that it's a fairly fragmented industry, kind of what type of companies you're competing with there?. You know, in terms of winning a consulting and software deal with a top five healthcare payer, I mean, that has to have a significant amount of due diligence on the part of the customer. You know, how do you go about winning something like that? Are there other of those type of relationships? Or is that something that, you know, periodically you win one of those and it cycles through?
Is this representing maybe a move up in terms of capabilities and size of contract?
I don't know if you.
Sure. I can touch on it.
Okay.
We are seeing increased demand on RCM, and it's, you know, it's the primary point of monetization for our clients. 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 a, it's outpacing all the trends of adoption by our client base. Given that, we have a exceptional team in our Louisiana facility with ACS, who has fabulous expertise in Medicare and Medicaid and the ability to process those on scale. It allows us to focus our activities, invest in technology, and invest in the team there to do that. That brings additional acceptance in the market.
We see that as a bright spot for us going forward.
On the diligence, you had Part of your question was diligence, I do think it helps to have a bigger balance sheet, to be a public company they can readily look up on the Internet. I think that's one reason they were amenable in selling to us, was to have a bigger balance sheet going into RFPs.
We're gradually going away from sub-company names and forming, formal names. In healthcare, for example, is i3 Healthcare Solutions. We're looking and feeling and acting like a bigger organization than we are based on our parts. Did that answer what you were looking for on healthcare?
Yes. I'm sorry, t hat is helpful. I'll look at the website. I wanna dig in a little bit more there and look at some of the capabilities. I'd also had one little housekeeping question for you, Clay, and just as regards the, I don't see that you mentioned it, but pro forma tax rate seemed like it was a little higher the last two quarters. Maybe talk a little bit about that and maybe your expectations for the full year.
Well, in our pro forma 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's different this quarter. Geoff, do you have a comment on?
We would expect we're still gonna have a very efficient low cash tax situation for the next couple of years, a s 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, you know, over the coming five years will become more and more maybe a talking point, but that's all.
Okay. I'll have to refresh then and look at how I'm modeling it. The change in the non-GAAP EPS guidance would then almost entirely be attributable to higher levels of interest expense due to the little bit higher costs on the unused facility and other fees.
That's right. It's about $2 million at the midpoint.
Okay. That's helpful. Thanks.
The next question comes from Matt VanVliet with BTIG. Please go ahead.
All right. Hopefully, I've figured out the technical issues. Can you hear me all right?
Yes. Yes, we can.
All right. Sorry about that. Yeah, thanks for taking the question. 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? Maybe more importantly too, you know, how important is the integrated software and payment solutions that you've now put together in a number of sub- verticals there, helping win deals over competitors that maybe only offer one or the other?
I'll take the first part, and then I'll let Paul chime in on the second part. You know, 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. You know, the American Rescue Plan dollars, I think they run out at the end of 2024, or they have to be used by then. It's kind of a false positive. We may see an influx because of those resources, but then after that, it's... Who knows? We're definitely seeing an upbeat in local governments striving for more technology to get the jobs done versus arms and legs. Paul, you wanna talk?
Yeah, I think that's... I agree with all that. The other thing which I see on a regular basis is the demand component is up universally across all departments. There's a need with all of government to upgrade and expand. In certain sectors like transportation and the court systems, there's more of a movement to augment that with statewide activities, which we're qualified to do and do today, and that's actively part of our business. You know, e-filing always becomes a component 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.
You know, when we did the BIS acquisition, that was a good deal for us. The contact that they have at the state level is the same contact that Celtic has. Having those two companies under one umbrella has allowed us to offer a more complete solution at the state level. 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.
There is a distinct appreciation for seamless payment interface, where that's, you know, embedded into the software systems, and that delivery is seamless, and it facilitates their efforts to recognize revenue and reconcile.
Matt, this vertical is so far behind the times. You know, as our original story, we wanted to get into verticals that were under-penetrated behind, as everyone on the call knows, if you're dealing with your local government, you see it every day. I feel like we're maybe in the bottom of the second inning, is just how much more there is to be done. It's, to me, it gets bigger, every day.
Yes.
Very helpful there. Just to follow up on the new unified RFP team that you're putting in there and bringing a more structural maybe workflow inside the company, how quickly do you expect that to maybe translate into new bookings wins or even into revenue? 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? I guess not only how soon can the opportunity come, but maybe how big is the opportunity sort of immediately?
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, it's a much tougher question because the time and the nature of the RFP is so divergent. You know, a statewide motor carrier program could be, you know, an eight-12 month process and then a longer delivery time, and an ERP program could be a three-six month process.
I think it's one of the most powerful decisions we've made.
Agreed.
It's gonna create the most value. I think it's very powerful.
There's work to be done. you know, 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'll now represent i3 at the enterprise level. 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. We want technical writers to do that work going forward. We think our response time, the way we respond will be appreciated, and, you know, these are resources that we can use across many verticals, not just one vertical.
The demand from the company since we started this has been high. Everybody's trying to understand it, and we've been able to respond, and it'll take a little more time to build out, but it's having impact already.
All right. Sounds like a good development. Thanks for taking the question.
Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Greg Daily for any closing remarks.
Well, it's nice to have another quarter, behind us. We're excited about the second half of 2023 and into 2024, so, appreciate everybody, being on the call this morning. Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may all now disconnect.