Good day, everyone, and welcome to i3 Verticals Third Quarter 2020 Earnings Conference Call. Today's call is being recorded, and a replay will be available starting today through August 18. The number for the replay of (719) 457-0820, and the code is 4401933. 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 Meriwether, Chief Operating Officer. Please go ahead, sir..

Good morning, and welcome to the third quarter 2020 conference call for i3 Verticals. Joining me on this call are Greg Daily, our Chairman and CEO; Clay Whitson, our CFO; and Rick Stanford, our President.

To the extent, any non-GAAP financial measure is discussed in today's call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP by reviewing yesterday's earnings release.

It is the company's intent to provide non-GAAP financial information to enhance understanding of its consolidated financial information as prepared in accordance with GAAP. This non-GAAP information should be considered by each individual in addition to, but not in set up, the financial statements prepared in accordance with GAAP.

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 and the expected and potential impact of the COVID-19 pandemic.

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 including risk and uncertainties associated with the COVID-19 pandemic.

Consequently, actual operations and results may differ materially from the results 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'll now turn the call over to the company's Chairman and CEO, Greg Daily..

Thanks, Scott. And good morning to all of you. We are pleased with our third quarter performance despite the impact of COVID-19. We thank all of our team members who rapidly transitioned to new working arrangements during the quarter and supported each other and our customers in an admirable way. As the U.S.

market begins to reopen throughout the quarter, we are encouraged by improving trends in our payment volume, and as a result, our financial results. The government-mandated shutdowns in mid-March had an immediate downward impact on our payment volume.

Our payment volume hit a low in – its lowest point in April, and began to steady recovery throughout the remainder of the quarter. Payment volume in July, which is the first quarter – the first month of our fourth quarter continued to improve. And August payment volume continues to improve throughout the beginning of the month.

Our education sector was the hardest hit. As schools shutdown for the most of the quarter, we're working with our K-12 customers as they transition their reopening plans. We expect our fourth quarter will be impacted by lighter payment volumes in our Education vertical.

Despite these challenges, one positive trend for us is school districts are engaging with parents and students in more software-based and online formats. I'm very proud of our team, and how they realized social distancing would impact school lunch preparation.

The product leadership teams quickly rallied and developed a new preorder lunch product and have launched this product for this school year. We've already had around 100 customers ask for product quotes, and many of these districts have already installed this new product.

Our ability to be nimble and quickly to respond to customers’ needs as one of our biggest strengths. I commend our team for this product launch. Despite most school districts being shutdown, our education team had a great success in closing sales to new districts for the upcoming school year.

One other highlight in – within education, is that we signed our first significant higher education customer during the quarter. This customer is already installed and live, and we expect significant payment volume from this relationship. Outside of education, sales was impacted across the board during the third quarter as you would expect.

Within Public Sector vertical, many local education – or many local government offices were closed. Case filings were reduced due to court closures and new traffic tickets fell significantly substantially as people reduced their travel as they quarantined at home.

We've seen case study or case filings in July and early August recover, and our payment volume continues to improve as a result. As it relates to software sales, we were able to install some SaaS-based Public Sector customers during the third quarter, but other scheduled installations were delayed.

We've seen an increased demand in Public Sector vertical as more local governments seek modern solutions to serve their constituents in online contactless formats. We believe the pandemic will accelerate the call for local governments to modernize and remain positive about the future of Public Sector vertical.

Within our Merchant Services segment, we experienced the same volume impact seen by the entire industry. In particular, our point-of-sale hospitality business was hard hit during the third quarter due to mandated shutdowns.

Our integrated ISV business fared better during the third quarter, particularly within nonprofit and healthcare, which outperformed our expectations. We're also encouraged by new business trends in Merchant Services, June was a record month for new accounts signed for us, and the momentum carried into July.

Rick will speak to M&A momentarily, but I wanted to briefly touch on our acquisition strategy. On our last call, we noted we had paused all acquisition activity until there was greater visibility in the impact of COVID-19.

We subsequently restarted our acquisition processes and closed two new acquisitions at the beginning of July, one within Public Sector vertical, the other one as a new software play within Nonprofit vertical. We'll continue to monitor the macroeconomic environment and our leverage as we continue our M&A activity.

We look forward to continued economic recovery during the fourth quarter and into our 2021 fiscal year. We're confident in our product offering, and I know that they solve day-to-day issues for our customers. We're very well positioned for future growth in the coming years.

Clay, would you provide a financial overview?.

Sure. The following pertains to the third quarter of fiscal year 2020, which is the three-month period ended June 30, 2020. Please refer to the slide presentation titled Supplemental Performance on our website for reference for this discussion. We have added some payment volume and software revenue trends to go along with the segment presentation.

Despite the challenging environment, we had a solid quarter with net revenue of $31.6 million and adjusted EBITDA of $7.1 million. I will start with sequential numbers because of significant month-to-month changes, then switch to year-over-year comparisons later in the discussion.

When we reported last quarter, we had seen a 30% sequential decline in payment volume for the month of April. But that proved to be the floor with May increasing 29% and June, another 19%. July then increased another 4%, and the first week of August is up 5% over the first week of July.

We have an entrepreneurial results-oriented organization, and our business leaders all rose to the occasion and pivoted to products and services best suited to the environment. We quickly implemented cost-cutting measures, which are evident in our Q3 results. And as Greg mentioned, we had a record sales month in June.

We believe we have the necessary morale and momentum to thrive in these times. We're glad that we focused on the software revenue stream since the IPO because it has been more resilient than payments in the COVID-19 environment, cushioning our revenue decline.

Software and related services revenues did decline 15% from Q2 to Q3 as government closures delayed installations, but we still expect to recognize these revenues when installations are complete. Software and services revenues accounted for 26% of total revenues for Q3. Pre-IPO, fiscal year 2017, it was only 5%.

When compared to the prior year, net revenues declined 12% to $31.6 million for Q3 2020 or $36.0 million for Q3 2019, reflecting government-mandated business closures, school closures and stay at home orders. Acquisitions contributed an increase of $3.7 million in the quarter.

IPOS declined $1.4 million, reflecting not only COVID impact in California, but also our successful transition to a SaaS offering, which we're very pleased with. Our net revenue yield, defined as net revenues divided by payment volume, held steady at 106 basis points.

Adjusted EBITDA declined 27% to $7.1 million for Q3 2020 from $9.7 million for Q3 2019. Please see the press release for a reconciliation between net income and adjusted EBITDA.

Adjusted EBITDA as a percentage of net revenues was 22.3% for Q3 2020, down from 26.9% for Q3 2019, reflecting fixed cost spread over lower net revenues due to the COVID-19 impact. In the absence of the COVID-19 impact, we expected to improve our EBITDA margin this quarter.

Effective April 1, we instituted previously disclosed cost savings, which included terminations and furloughs.

These cost savings, together with lower T&E expenses saved almost $3 million this quarter, which allowed our corporate expenses as a percentage of net revenues to remain steady at 7.2% for both Q3 2020 and Q3 2019, despite low revenues – net revenues.

We have since recalled roughly half of the furloughed employees as business has rebounded, but expect to retain about $1 million in savings quarterly on an ongoing basis. Pro forma diluted – pro forma adjusted diluted earnings per share were $0.13 for the quarter. Again, please refer to the press release for a full description and reconciliation.

Segment performance. In our Proprietary Software and Payments segment, net revenues were $10.5 million for Q3 2020, flat from Q3 2019, but benefited from three acquisitions completed during fiscal year 2019.

Adjusted EBITDA declined 24% to $2.7 million for Q3 2020 from $3.5 million for Q3 2019, principally reflecting school closures and the associated absence of payment revenues. EBITDA as a percentage of net revenues was 26% for Q3 2020 versus 34% for Q3 2019, reflecting fixed costs spread over a lower revenue base, like at the consolidated level.

I want to pause on Education for a minute because I know it's currently top of mind for a lot of people. Schools began shutting down in mid-March. So this quarter, we lost April and May from a payments perspective. June is always low anyway.

We've gotten so that we can sort of break even in the summer months because our recurring software revenues cover our operating expenses, which is an accomplishment. This year, we have pivoted to a number of software offerings such as lunch preorder and quick apps and digital IDs, which enable contactless interactions for the current environment.

So we're optimistic we can continue to grow our software revenues in education, even in an environment where remote learning might persist for many districts across the U.S.

From a sizing perspective, our processing margin from payments' revenues in education represented a little less than $10 million for the four quarters ended March, so pre-COVID, including SchoolPay for a full 12 months. The September quarter represented about 25% of that.

Even if all districts decided on remote learning for the entire year, our payment revenues would not go to zero. Our current best guess is that we might see 50% of normal payments for the fall semester, but there's clearly extra variability to this number, both up and down, as the news keeps changing on a daily basis.

Regardless of how this semester and the school year unfold, we love the vertical and believe it will perform very well over the medium and long-term. Given the state of education in the June quarter, our Public Sector vertical represented over three quarters of the net revenues in the segment and virtually all of the profit for the segment.

While courts did close, traffic tickets were down and some software installations were pushed, we remain confident in the vertical's performance over the near-term and long-term. Net revenues for our Merchant Services segment declined 16% to $21.5 million for Q3 2020 from $25.5 million for Q3 2019.

Our Hospitality vertical was hardest hit with the exposure to California and the transition to a SaaS model, but we benefited from three months of the Pace acquisition versus just June in the prior year period. Pace works mainly with public sector software vendors with good exposure to utilities, which have held up well in the COVID-19 environment.

The purchased portfolios declined 38% to $855,000 for Q3 2020 from $1.4 million for Q3 2019. Adjusted EBITDA for our Merchant Services segment declined 24% to $6.6 million for Q3 2020 from $8.8 million for Q3 2019. The EBITDA margin was 31% for Q3 2020 versus 34% for Q3 2019, again, reflecting fixed cost spread over a smaller revenue base.

The balance sheet remains strong. During the quarter, we took the opportunity to repurchase approximately $9 million of our convertible notes at roughly $0.80 on the dollar, which produced a positive IRR and actually helped our leverage because of the net reduction in our debt balance.

As of June 30, we only had $35 million borrowed under our revolver, which is a $275 million facility. Our total leverage ratio, which includes the convertible notes, was 3.7x, while the current constraint is 5.0x. With the two acquisitions closed on July 1 for $16.3 million, our pro forma total leverage ratio was 3.9x.

The multiple pay for these two acquisitions was consistent with our historical range of 8x to 10x EBITDA. 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 our EBITDA into free cash flow, which can either be used for acquisitions or debt repayment. Outlook. The COVID-19 pandemic has created significant uncertainty in the economy and the extent to which COVID-19 will impact the company's future results is difficult to reasonably estimate at this time.

Therefore, the company is not providing a financial outlook for the fiscal year ending September 30, 2020. While we currently expect Q4 ending in September will mark an improvement over Q3, we do not anticipate it will approach the levels of net revenues, EBITDA or EBITDA percentage margin we saw in Q4 2019.

The state of the pandemic and economic recovery, particularly in the Education vertical, will govern our progress. To give a better understanding of our business mix, we gave the following estimates last quarter, which represent pre-COVID run rates, we do not currently plan to update these on an ongoing basis.

Public Sector, 25%; Hospitality, 15%; Education, 10%; B2B, 10%; Healthcare, 10%; Retail, 10%; Nonprofit, 5%; and Other 15%. We like this diversification, Hospitality and Retail, which we consider the toughest verticals over the next few years, only represent 25% of our book.

Our largest vertical is Public Sector, and we feel increasingly well positioned there. Like governments, schools do not go out of business. Healthcare is an essential service and B2B will grow over time. We just acquired a software platform in a nonprofit niche that has grown during the pandemic.

Digitization of payments away from cash and cheque will continue, and we have differentiated payment solutions to offer our customers, integrated to our software and other leading software providers. I will now turn over to Rick for the company updates and M&A activity..

Thank you, Clay. Good morning, everyone. Before I talk about our M&A status, I want to highlight recent progress on a few operational matters, including a couple of updates on items I've discussed in prior calls. First, an update on our unified product offering, or UPO, in our Public Sector vertical, a topic that I've discussed before.

Given the growth of our Public Sector verticals since our IPO and the number of products that we've added in that vertical, our UPO efforts are especially important. Our goal is to make a comprehensive suite of products available to each county and city. We want to become a one-stop shop for these customers.

The offering consists of utility billing with e-billing and payments, case management systems for criminal, civil and small claims courts, finance, specifically government fund accounting or GFA, property tax, collections, permitting and licensing and payment processing and reporting reconciliation.

I would also like to point out that we would like to add law enforcement to this list, and our current plan is to acquire these products through a strategic acquisition. This includes public safety, jail and prison management and mobile e-ticketing, to name a few. We are encouraged with early UPO successes.

Cross-selling is gaining momentum and our current pipeline for UPO opportunities is over 125 strong. Second, on the ISV front. Our total number of signed and integrated ISVs at the end of our third fiscal quarter is 59, with three more in the process of integration.

We are in close contact with a number of ISVs, and we expect to sign and integrate a good portion of those ISV opportunities over the coming months. Third, while we often acquire mature products via acquisition, we also have an in-house team that develops our own original software to fill particular needs in select verticals.

We have just released an original and proprietary product called i3 Donate for use within many of our partner channels. This product was requested by one of our bank partners who wanted to offer its nonprofit DDA customers, a product that is outside of their standard banking services.

This bank, white-label product allows them to assist their customers with another avenue for generating revenue in a quick and efficient branded tool for online giving. We're very proud of our development team and their steady heads down work towards getting this product built and released in a timely fashion.

It's an exciting new product to add to our solutions suite. Lastly, a few comments about our M&A efforts. Despite the COVID downturn, we have continued to identify interested sellers, and our pipeline is very healthy. Our pipeline is populated with an emphasis on public sector with some education, nonprofit and health care mixed in.

We are in regular discussions with these targets. We mentioned several signed term sheets on the last call, but we explained that our acquisition activity have been temporarily suspended in reaction to the COVID downturn. Since that time, we have restarted those activities, and recently closed two of those deals.

The first was in our active Public Sector space and gives us a good footprint geographically where we had not been before.

This 42 year-old company sells a combined product solution, consisting of case management systems for criminal, civil and small claims courts, ordinance, such as permitting and licensing, traffic violations and other infractions and parking, all with web-enabled data access. The second acquisition is in the Nonprofit sector.

Many of you know, we've been trying to own software in this vertical for several years and have looked at many deals. This acquisition fits our M&A strategy of acquiring high-growth businesses with attractive margins in large vertical markets.

This organization began offering several products in the church space in 2006, some of their products include tiding setup for recurring donations, the ability to give different – to different funds all via tax, mission trip updates, call for event reminders, giving appeals and connectivity with potential new parishioners.

We also strongly believe this software can be used in many of our other verticals within the near future. This solution already delivers mobile payment and communication solutions to targeted vertical market segments.

These two acquisitions further our goals of adding extremely talented people to our team, enhancing our overall product suite and positioning us to lead in the shift from legacy payment methodologies to cutting-edge software with embedded payment capabilities.

As Clay mentioned before, we continue to be disciplined in our approach and both acquisitions were completed within our standard multiple range. We look forward to sharing more on the acquisition front in the near future. This concludes my comments, Audra. At this time, we'll open the call for Q&A..

Thank you. [Operator Instructions] We'll go first to John Davis of Raymond James..

Hey, good morning guys. So Clay and Greg, appreciate the disclosure on the quarter-to-date volumes. But any sense on – is that tracking revenue relatively close? I think in the quarter, revenue was down, I think 12%, volumes are down 13%.

So any reason that's changed? And then if you can just kind of give us what volume is on a year-over-year basis quarter-to-date, I think that would be helpful..

Well, our margin on the volume, the net revenue yield did remain constant during the quarter at 106 basis points. Schools do help that. So in Q4, depending on what schools do, that could have a small negative impact on the net revenue yield, but I guess we'll wait and see. Year-over-year, our volume is down still. I don't have the exact percentage.

But we're still in a recovery mode where we're gaining back altitude we lost in April..

Okay. But I mean, I think schools were a headwind. So maybe revenue is a couple of points off of volume growth. There's no reason it should be – it should deviate materially, I think that would be help – that's helpful.

And then, Greg, I wanted to talk a little bit about the – you mentioned you've seen an increase in demand or interest in Public Sector, maybe COVID has finally woken up some government entities into digitalizing more and – from a payments perspective, but also software perspective.

I don't know if you have any examples, or just – I think that was a very interesting comment. Any more color there would be helpful..

Rick, you want to jump in?.

Yes, John, that's a great question. We are seeing people moving more to a SaaS model online. I think Clay mentioned that some of our installations pushed and that's given people the opportunity to think about the type of implementation that they desire, and we're seeing everybody moving to online at this point.

To the extent that outside of the courts even attorneys are being able to pass court documents online to each other and come to agreements with our products. So we see that going forward and not changing..

Okay. And then a last one for me. Clay, any type of quantification on what some of the delayed implementations were from a revenue perspective. I mean, obviously, delay doesn't mean it's going away. So just trying to think about what that headwind was in the quarter, even just a range would be helpful. Thank you..

I know at one particular company, we had one $250,000 job push, so it'd be north of that if we were to look company-wide, I don't have an exact number, but….

Okay. That’s helpful. All right, thanks guys..

Thank you..

We'll move next to Jason Kupferberg at Bank of America..

You have Kathy and Jason on. So first just wanted to ask about the revenue and EBITDA contribution from the most two recent acquisitions that you guys signed..

Kathy, we've – our practice has been to give the purchase multiple and that's 8 times to 10 times. So you can surmise from that $1 million to $1.5 million of EBITDA between the two. And maybe you could use our standard margin in software to estimate revenues off of that..

All right. Got it, that’s helpful. And secondly, I just wanted to ask, can you guys give us an update on sort of card-not-present transactions? And how much of total volumes they represent? And sort of how fast is this growing versus card present? Thanks..

Card-not-present is over 50% of our transactions, that declined a little bit in this quarter with the absence of school. School revenues are 95% online. And over time, that is increasing, and it's corresponded pretty closely to the integration percent we give. But we expect it to increase over time, schools a variable in the short term..

Got it. Thanks for the – thanks for taking my questions..

You’re welcome. Thank you..

We'll go next to Peter Heckmann at D.A. Davidson..

Okay. Just a follow-up. Clay, you had said, for July, the volumes were up about 4% sequentially, but I didn't hear if you had said the planned volumes on a year-over-year basis.

Can you pull that together, just to give us a good – an idea of where we're standing and maybe the first weeks of August as well?.

I believe July was down – do you have the exact number? 5%, yes. And August for the first week is also 5%, down from previous year..

Got it. Okay, that’s helpful. And then really within the Nonprofit, besides that is as pre COVID just about 5%.

I guess when you think about that vertical, are there other large players that play in that vertical? Or would you characterize it as primarily pretty fragmented?.

Well, it's both, Peter. There's some large players and then there's a lot of smaller players. We were excited – this acquisition that I mentioned earlier. Churches weren't allowed to gather and people were used to putting cheques and cash in the offering plate.

And they've gone to online sermons, and they're actually posting ads at the bottom of the screen throughout the sermon where people can text a donate, and their donations are actually up year-over-year. So we're excited about that vertical. I don't know if I answered your question..

That’s helpful. And then how would you characterize, I guess the education, you've kind of given some thoughts around that.

I just – at this point, I haven't seen any aggregated numbers, but you're kind of assuming it's about 50% of the K-12 population is virtual, is that was the comment that you had made in terms of thinking about the fourth quarter?.

We did say 50%, but not – that's not the number of students, remote versus in-person. We still collect a number of fees for registration, for all types of things, whether schools are in-person or remote. So it's probably a lower percentage that are in person than 50%.

But we're estimating we'll garner about 50% of our normal revenues given what we know today..

Got it. All right. That’s helpful, I’m glad you clarified. Thanks much..

We'll go next to Josh Beck at KeyBanc..

Yes, thank you for taking the question. So yes, I wanted to follow-up a little bit on John's question earlier about maybe some of the changes and encouraging maybe leading indicators you're seeing within the Public Sector.

It certainly sounds like there is some elements of that as well in the Education sector, about maybe people realizing the importance of digitizing some of these processes.

So I'm just wondering, when you look at some of those types of changes that have happened in the last months, does it change the high-level strategy where those are sectors you want to focus on more? Obviously, you're already quite focused on them.

But I'm just wondering if because of everything that's happened in the last months, if it's shifted your strategic focus in any notable way..

Well, we clearly like software revenues. And the fact that we believe we can increase our software revenues even in this environment speaks to why we like it so much. We have a pretty – our team is pretty quick to pivot, I would say, they've been in the business for a long, long time. They know the customers.

Our customers want things sometimes for years before they actually pull the trigger. And this environment has been a catalyst for – they need to pull the trigger on some of these things.

So we were ready to go with products that they should have been using for years anyway, but this is just a good environment to get them to make the – take the plunge..

Okay, that’s helpful. And it was kind of interesting to hear, I think Greg and maybe Rick both commented on the record new sales. So that – I mean it's pretty impressive, particularly given lots of your folks are probably working from home and virtually and such.

So just would be curious maybe what drove that, if it was just a lot more maybe inbound activity or maybe like you just mentioned, Clay, about people just maybe being a bit more kind of rapid to adopt some of these things that they had intended to. Just would love to hear what some of the drivers there were..

Well, there's multiple reasons. I think our marketing department is a lot larger and very effective, very active compared to where we have been and they have taken us to a new level when it came to that. So we've given our salespeople a lot more leads.

When we go out for a webinar, we're normally having 50 people at best case show up and attend, now we're having hundreds of people do it online. Education, Public Sector are crushing it when it comes to new sales, the Merchant of record are – it's having unbelievable month production goals, production contest.

And then we started this whole journey seven or eight years ago, thinking that the convergence of payments and software and technology – this pandemic may be one of the best things that ever happened to our company, looking a couple of years from now.

So people just getting modern technology, contactless, updating, there's an incredible amount of people that are still working every day, and maybe payments and technology and software was not quite their priority. We went into this pandemic, and now they've had time to work on it.

And that's what – that's where I think the increase of new business is coming from..

Okay. Really helpful. And then just last question, just on kind of quarter-to-date trend. So just to clarify, so I believe, Clay, you said, basically down about 5% quarter-to-date on a year-over-year basis. And then you certainly talk through Education a bit and what could happen in the fall.

But certainly, there's a very likely – a more material headwind as we go through there.

So as we build out our models, any other factors, maybe seasonality of certain businesses that we should be thinking about that could maybe be different when you think about the second half of August and September versus the quarter-to-date performance?.

I can't really think of anything other than that..

Well, I mean, I think….

I did mention that some costs are coming back. We've recalled off a furlough. So you could build that into your model, I think..

Okay. That makes sense. Thanks everyone. Really appreciate it..

Thanks, Josh..

[Operator Instructions] We'll go next to George Mihalos at Cowen..

Hey guys, congrats on the quarter and nice pick on the sales momentum. Wanted to start off on the Education side.

And I think, Greg, you talked about winning your first ever sort of higher education being – I'm curious, are you guys thinking about [Technical Difficulty] as move for one-off? Is that an opportunity for you? And is the competitive landscape for that deal, was that different than what you're used to seeing?.

Yes. It's very different. It is a huge opportunity. It's a major university that is a household name, maybe we have five or six in the coming year. New ones that we add, it's not 100s, it's not – we're not thinking that it is something that we pivot from K-12, but it was a large RFP.

And we do plan to take our success and try to duplicate it in other large university and higher ed. But it's a big win. It's something new, exciting, but the magnitude, we'll let you know next quarter. But we just brought this one up in the last two weeks.

We're not accustomed to seeing this kind of volume because our K-12 schools – they may do $10,000 or $20,000 a month. It's small volume, smaller average ticket, whereas higher education, it's a whole different animal..

Okay. That’s helpful. And then, Clay, your comment around August volumes being down right about 5% here at the beginning of the month.

Is it fair to assume that there'll be some degradation in that number as we go to the latter part of August? Just assuming that schools start to play a bigger part later in August than obviously in September?.

I guess that's fair. But school volume is small. It's very high margin, but it's small volume. So I don't think it will tilt the volume much, but it will – going to 50% of revenues from 100%, we feel that..

Okay. And just last one for me on the M&A pipeline, and it's good to see you guys are converting some of these deals. With the pro forma leverage now right about 4 times, 3.9 times, will that cause a bit of a pause in your activity over the near-term? Thanks guys and congrats again..

Thank you. Well, I guess what I would say to that, George, is most of our deals are small, as you see, we did two for $16 million. That moved the leverage ratio 2/10 of a turn. And so we're not going to pause. We'll find a way to do our deals. We do want to manage our leverage ratio close to 4 times.

So we'll find a way to do that, that's acceptable to our Board and we think is the best way to do it. But we're going to continue to do deals..

And at this time, we have no further questions. I'll turn the conference back over to Greg Daily for closing remarks..

Well, thanks again, everybody, for attending. We are very optimistic, very bullish of the trends that we're seeing literally on a daily basis. And once we figure out the next 30 days about schools, which I think we will give you a positive report soon on that.

But the team is taking advantage of this time and opportunity to get out there and improve our relationships and our products and software. So anyway, thank you..

And that does conclude today's conference. Again, thank you for your participation..