Rick Stanford: Thank you, Clay. Good morning, everyone. Over the past 18 months, we’ve transitioned from a group of products in multiple verticals into a coordinated, efficient organization, developing and selling software solutions in strategic vertical markets. Throughout the transition, we’ve adjusted our organizational structure to drive i3 forward. Initially, we capitalize on our expertise in public sector by analyzing our products and processes to provide solutions across any government of any size with a single contract. Eventually, the initiative was called UPO or Unified Product Offering. As a result of Trust and i3, vendor fatigue and our solutions and service, we quickly saw buy-in from our government customers. Because of the success in public sector, our leadership team rolled out the initiative across the organization.
We work through changes, realigned reporting structures and captured market share. Now our focus is on achieving sustainable growth with enterprise software as we scale our strategic markets, public, health care and education. Now that our company is unified and configured for sustainable growth, we are focusing on quality revenue expansion through sales of our enterprise software solutions. In addition, we plan to make additional strategic hires in product to lead and expand our ongoing investment in web-native configurable next-generation applications. This past quarter in public sector, we secured long-term software contracts in California, Michigan, New Hampshire and Tennessee. In education, we landed white space contracts in Georgia, North Carolina, South Carolina and Texas and in health care, a large health insurance carrier.
Regarding M&A, we have looked at several opportunities over the last quarter. Most of them are in public sector with a few in health care and education. Our [indiscernible] card continues to be full of target companies largely in public sector and health care verticals. Some of the solutions include software solutions tailored towards mobile policing, utility management and property tax collection, case management and data intelligence solutions for justice and public safety industries, a school online enrollment solution, tax software and local government, specializing in areas such as business license and tax, lodging tax, property tax, sales and use tax and utility tax and an RCM solution that automates a portion of the back office process.
We hope to be able to share more details on the M&A front in the near future. This concludes my comments, Chris, at this time, we’ll open the call for Q&A, please.
Q – John Davis: Hey, good morning, guys. It sounds like the slightly softer revenue in the quarter was more or less kind of a push out of some revenue, but you did lower the full year guide by kind of a similar amount. So just curious if that’s revenue that you’re not expecting to get until next year? Maybe conservatism because you don’t know when that’s going to come? Or just any kind of comments on the lower outlook for the full year?
Clay Whitson: Well, revenue for the quarter, we give guidance annually. So revenue of the quarter would pass through to the full year. The Manitoba drivers license project, we don’t expect to see any meaningful revenue this year in fiscal year ’24, which ends in September, we’ll get it in ’25. So that is pushed out.
John Davis: Okay. No, that’s helpful, Clay. And then it’s encouraging to see despite kind of the lower kind of nonrecurring, high-margin revenue, margins still expanded nicely and kind of we’re in line with expectations. So Clay was that better than you expected given the nonrecurring headwinds? Just any comments there? I know you guys have some cost initiatives underway, but any thoughts on the margin as we kind of exit 2Q headed in the back half of the year?
Clay Whitson: No. We came into the year projecting margin improvement and continue to expect it. It results from the internal realignment that began in earnest in the fourth quarter, but we’re getting a full year effect this year.
John Davis: Okay. And then lastly, I think ARR was up about 6% in the quarter. You talked about RemainCo [ph] kind of high single digit growth. The profile going forward if you were to sell the personal services business. So just help me bridge that gap? Was there anything that kind of weighed on ARR this quarter? Just how do we think about that acceleration from 6% to high single digits for RemainCo [ph]
Clay Whitson: Well, four things. One is the Manitoba driver’s license project will come online in ’25. The big utility customer we have – will have a big ’25. We actually expect most of the $3 million I mentioned for the fourth quarter and one times license sales comes from that large utility customer also, but then it picks up – kicks into a bigger project in ’25. Education laps this August, September. And I believe those were the – and then yes, those were the major ones.
John Davis: Okay. Appreciate it. Thanks, guys.
Clay Whitson: Thanks.
Operator: The next question comes from Peter Heckmann with D.A. Davidson. Please proceed.
Peter Heckmann: Hey, good morning, everyone. I haven’t seen the cash flow statement yet, but it looked as if cash flow was pretty good. And it looks like to me that you had a working capital inflow. Is that generally correct? I’m trying to just kind of back into some numbers here, but actually it looks like we’re giving up a slightly negative, but looked like free cash flow conversion was somewhere close to 50% for the quarter. Does that sound about right?
Clay Whitson: Yeah. I get 47%. Pete, CapEx was 1.5 million. Capitalized software is $6.1 million, cash interest much higher at $14.1 million. You know, when we paid off the convertible notes, we traded 1% debt for 8.5% debt and then cash taxes were a pretty big number this quarter at $5.4 million, so I get 47% and we came into the year expecting 50%, so it’s pretty close.
