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01/10 16:41
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlighted strong financial metrics and optimistic guidance, with significant growth in subscription and SaaS revenue. Despite some declines in professional services and license revenue, the overall outlook is positive, supported by strategic investments in AI and new product growth. The Q&A session reinforced optimism with strategic expansions and partnerships, although some uncertainties remain. Given these factors, a positive stock price movement is anticipated.
Total Revenues $595.9 million, up 9.7% year-over-year. The increase was driven by growth in SaaS revenues and transaction revenues.
SaaS Revenues $199.8 million, up 20% year-over-year. Growth attributed to new SaaS deals, flips of on-premises clients, expansions, and renewals.
Transaction Revenues $201.3 million, up 11.5% year-over-year. Growth driven by higher transaction volumes, increased adoption of new transaction-based services, and higher revenues from third-party payment processing partners.
Total Bookings Up 2.6% year-over-year. Growth driven by higher flips, expansions, and renewals from the installed base.
Total Annualized Recurring Revenue (ARR) Approximately $2.05 billion, up 10.7% year-over-year. Growth reflects increased SaaS and transaction revenues.
Non-GAAP Operating Margin 26.6%, up 120 basis points year-over-year. Improvement due to a positive shift in revenue mix towards higher-margin SaaS and transaction revenues and efficiency gains in cloud operations.
Cash Flows from Operations $255.2 million, slightly down year-over-year due to timing of working capital changes.
Free Cash Flow $247.6 million, slightly down year-over-year, also due to timing of working capital changes.
AI-driven solutions: Significant deals include a contract with Hillsborough County, Florida, for document automation ($953,000 in ARR), a contract with the State of Arizona for priority-based budgeting, and a contract with the South Carolina Department of Administration for an AI-powered resident engagement solution.
Public safety market: Contracts include Coweta County, Georgia, for a full enterprise public safety suite, and a cross-sell win with the City of Columbia, Missouri. Additionally, the first statewide win for the National Emergency Response Information System with Pennsylvania was achieved.
Inmate Services Financial suite: Signed a statewide contract with the Colorado Department of Corrections, expected to generate approximately $2 million in transaction-based ARR.
Cloud strategy: Advancing a cloud-first strategy to lead the public sector's digital transformation, with SaaS revenues growing 20% and total revenues increasing by 9.7%.
AI innovation: Purpose-built AI innovations are amplifying the power of the cloud, creating seamless client experiences and expanding cross-sell and upsell opportunities.
Revenue growth: Total revenues grew by 9.7%, with SaaS revenues up 20% and transaction revenues up 11.5%. Total ARR reached approximately $2.05 billion, up 10.7%.
Operational efficiency: Non-GAAP operating margin expanded to 26.6%, reflecting a shift towards higher-margin SaaS and transaction revenues.
M&A activity: Closed two acquisitions this year (MyGov and Emergency Networking) and completed 11 transactions since the NIC acquisition, totaling nearly $400 million. M&A pipeline remains active.
AI-driven transformation: AI is being leveraged for internal efficiencies, competitive differentiation, and new product development. Early AI deployments have shown 10%-30% productivity gains and 2-3x ROI on targeted processes.
Public Sector Demand: No fundamental change in public sector demand observed, but potential risks from federal government shutdowns and related initiatives could impact future demand.
SaaS Revenue Growth: SaaS revenue growth and bookings may fluctuate due to timing of new deals, renewals, and price increases, creating potential revenue unpredictability.
Economic Environment: Resilient budget environment currently supports technology investments, but economic uncertainties could impact future allocations.
M&A Strategy: Higher bar for M&A due to management bandwidth and valuation considerations, which could limit growth opportunities if not executed effectively.
AI Integration: AI-driven solutions show promise, but market noise and hype around AI could create unrealistic expectations or competitive pressures.
Convertible Debt: $600 million convertible debt maturing in March 2026 could pose financial risks if not managed effectively.
Texas Payments Contract: Wind down of the Texas payments contract will impact recurring revenue growth in 2026.
Free Cash Flow Utilization: Significant free cash flow is available, but its allocation towards M&A or share repurchases must be disciplined to avoid financial strain.
Annual Revenue Guidance for 2025: Total revenues are expected to be between $2.335 billion and $2.360 billion, implying approximately 10% growth at the midpoint.
GAAP and Non-GAAP EPS Guidance for 2025: GAAP diluted EPS is expected to be between $7.28 and $7.48. Non-GAAP diluted EPS is expected to be between $11.30 and $11.50.
Free Cash Flow Margin for 2025: Expected to be between 25% and 27%.
Research and Development Expense for 2025: Expected to range between $202 million and $205 million.
2026 Revenue Outlook: SaaS revenues are expected to grow approximately 20%, and total recurring revenue growth is anticipated to be within the long-term target range of 10% to 12%, excluding the impact of the wind down of the Texas payments contract.
2030 Goals: The company remains on track to achieve its 2030 targets, with potential upside from M&A and AI-driven growth opportunities.
AI Opportunities: AI-driven solutions are expected to deliver 10% to 30% productivity gains and 2 to 3x ROI on targeted processes. The company plans to monetize AI through predictable annual SaaS fees tied to measurable outcomes.
Share Repurchase: We repurchased approximately 300,000 shares in Q3 in part to offset potential dilution from our convertible debt. Following our repurchases, the stock saw further weakness to levels we believe represent an attractive long-term value proposition, but most of the decline took place after our blackout period commenced.
The earnings call highlighted strong financial metrics and optimistic guidance, with significant growth in subscription and SaaS revenue. Despite some declines in professional services and license revenue, the overall outlook is positive, supported by strategic investments in AI and new product growth. The Q&A session reinforced optimism with strategic expansions and partnerships, although some uncertainties remain. Given these factors, a positive stock price movement is anticipated.
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