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i3 Verticals Inc (NASDAQ:IIIV)
Q2 2020 Earnings Call
May 9, 2020, 8:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the i3 Verticals Second Quarter 2020 Earnings Conference Call. Today's call is being recorded, and a replay will be available starting today through May 15. The number for the replay is 719-457-0820, and the code is 8694705. The replay may be also 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.

Scott Meriwether -- Chief Operating Officer

Good morning, and welcome to the second 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 measures 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 instead of, the financial statements prepared in accordance with GAAP.

This conference call may contain certain 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 facts 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 risks 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.

Greg Daily -- Chief Executive Officer

Thanks, Scott, and good morning to all of you. We delivered strong second fiscal quarter results, despite the impact of COVID-19. As we start this call, I want to first address our employees, many of whom are listening to this call. I'm extremely proud of our employees' response to this crisis. They've been flexible and focused, and I am inspired by their dedication in supporting our customers.

One highlight in the past quarter was a 25% increase in net revenue, as revenue -- net revenue increased to $39.3 million in Q2 of fiscal year 2020 from $31.4 million in Q2 of fiscal year 2019, primarily from the growth in Public Sector vertical. Pro forma adjusted EBITDA increased to $10 million in Q2 of 2020 from $8.7 million in Q2 of 2019. Our integrated payments volume continues to grow. 55% of our payment volume was integrated during Q2 of fiscal year 2020, up from 49% during Q2 of fiscal year 2019.

The Company had great momentum throughout the quarter, until the second half of March, when we began to see the economic impact of COVID-19. A common phrase to use to describe this current crisis is, in these unprecedented times, I do not think any of us imagine a time when there would be a government-mandated business closures, stay-at-home orders, or K-12 schools shutting down for the remainder of the school year. We anticipate a greater impact of COVID-19 in our financials of our third fiscal quarter.

Our education, hospitality customers have had the greatest impact. From April 2019 to April 2020, our total run rate of net revenue in Education was down 66%. The net revenue -- the run rate of net revenue and payments in Education, was down 90%. Our SaaS software model helped offset the sharp decline in payments-related revenue to blend to 66%. Our restaurant and hotel customers also saw significant decreases. Payment volume fell in restaurants were as they were not allowed to host customers.

The hotel traffic was slowed. Our net revenue from restaurants and hotels fell 32% in the month of March, as COVID-19 hit mid-month. We saw continued weakness in both payment volume and new POS system sales throughout April. Our Public Sector and B2B customers experienced less of an impact in payment volume. Our diversification in multiple verticals have reduced the impact of any one market sector on our overall performance. We anticipate this diversification will also serve us well in the recovery.

Going forward, i3 is focused on delivering solutions that provide contactless payments in our omnichannel platforms. Across all verticals, COVID-19 has enhanced our customers' awareness of their needs for our solutions. We have responded with an intense focus on providing solutions that will enable our customers' businesses in the current environment and the anticipated new normal. We believe COVID-19 will lead to further migration from checking cash to electronic payments. In particular, Public Sector and Education verticals will accelerate their acceptance of electronic payments integrated with software platforms. These two verticals have historically been slower to adopt electronic payments.

One lasting impact of COVID-19 will be a push from these two markets to upgrade their technology, and ability to meet constituents' needs. We also believe Public Sector and Education verticals will have budget pressures in the short term. Our SaaS solution and payment platforms will alleviate many of these issues. While our payment volume in these two verticals have been impacted, local governments and K-12 schools don't go out of business. We accept -- expect these two verticals to rebound to their historic activity and growth rates.

Rick will speak about M&A momentarily. I wanted to briefly touch on our strategy. Due to the uncertainty and economic environment, we paused all acquisition activity, until there is greater visibility into the impacts of COVID-19. We put several deals on hold. Despite the current economic environment, our acquisition pipeline continues to build over the last several weeks. We have a strong balance sheet. Our recent convertible notes offering provided us with plenty of ammunition for our acquisition activity. States are beginning to open. We exited April with stronger payment volume than we entered. As we see economic activity pick up, we anticipate our M&A activity heating up again.

We feel like we simply hit pause for a few months, but we are well-positioned to both weather the short-term crisis, and grow in the rebound. We have technology solutions that meet our customers' needs. As May begins, we see signs of continued improvement in the economy and our payment volume. We look forward to the economic recovery, and are confident in our ability to gain market share and deliver strong future performances.

Clay, would you please provide the financial overview?

Clay Whitson -- Chief Financial Officer

Sure. The following pertains to the second quarter of fiscal year 2020, which is the three-month period ended March 31, 2020.

Despite the COVID-19 downturn, we had a solid quarter with net revenues of $39.3 million, and adjusted EBITDA of $10 million. Net revenues increased 25% for Q2 2020 from $31.4 million for Q2 2019, driven principally by acquisitions in our Public Sector and Education verticals. Acquisitions contributed approximately $9 million in the quarter. Our net revenue yield, defined as net revenues divided by payment volume, improved to 110 basis points for Q2 2020 from 107 basis points for Q2 '19, reflecting increasing software revenues.

As discussed on the call last quarter, the face of the income statement shows a decline in revenue as a result of adopting ASC 606. Q2 2019 presents gross revenues -- presents revenues gross of interchange and network fees, while Q2 2020 presents revenues net of interchange and network fees. For an apples to apples comparison, please refer to the supplemental segment presentation contained in yesterday's 8-K filing.

Excluding the Purchased Portfolios and our IPOS business, organic growth was flat for the quarter. We entered March on a 9% pace for organic growth. But government-mandated business closures, school closures, and stay-at-home orders took a toll on our organic growth, particularly during the last two weeks of March, and continued through April. We exited April with payment volumes for the same set of companies, down approximately 30% on a year-over-year consolidated basis. The first week of May has predictably improved as economic activity has begun to resume in several areas, and we expect further improvement as more and more sectors of the economy open up.

Adjusted EBITDA grew 14% to $10 million for Q2 2020 from $8.7 million for Q2 2019. Please see the press release for a reconciliation between net income and adjusted EBITDA. Adjusted EBITDA, as a percentage of net revenues, was 25.3% for Q2 2020, down from 27.8% for Q2 '19, reflecting fixed cost spread over lower net revenues than anticipated, due to the COVID-19 impact. In the absence of the COVID-19 impact, we would have expected to improve our EBITDA margin this quarter. Effective April 1, we instituted previously disclosed cost savings that save approximately $1 million per quarter. Adjusted diluted earnings per share were $0.20 for the quarter. Again, please refer to the press release for a full description and reconciliation.

Segment performance. Please refer to the supplemental slides titled Segment Performance on our website, and as an exhibit to yesterday's 8-K filing for reference with this discussion.

In our Proprietary Software and Payments segment, net revenues grew 93% to $14.8 million for Q2 2020, from $7.7 million for Q2 '19, reflecting acquisitions in our Public Sector and Education verticals. Adjusted EBITDA increased 66% to $5.9 million from $3.6 million, principally reflecting recent acquisitions in our Public Sector vertical. EBITDA, as a percentage of net revenues, was 40% for Q2 2020 versus 46% for Q2 '19, principally reflecting school closures and the associated absence of payment revenues.

Net revenues for our Merchant Services segment, excluding the Purchased Portfolios, increased 5% to $25 million for Q2 2020 from $23.8 million for Q2 '19, principally reflecting growth that our Pace Payments business, which 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 33% to $1 million, in line with expectations. Adjusted EBITDA for our Merchant Services segment declined 7% to $7.3 million for Q2 2020, from $7.8 million for Q2 '19. The EBITDA margin was 29% for Q2 2020 versus 33% for Q2 '19, reflecting the decline in the Purchased Portfolios, which carry higher margins.

Balance sheet. We have a strong balance sheet. The convertible notes offering we executed in February, brought in $138 million, which was used to repay borrowings under our revolving credit facility. As of March 31, we had only $19 million borrowed under our revolver, which is a $275 million facility. Consequently, our senior leverage ratio was low 0.4 times. Our total leverage ratio, which includes the convertible notes was 3.4 times, while the current constraint is 5.0 times. The interest rate for the convertible notes are 1%, while the interest rate for the revolver is currently around 4%. Over time, we expect to convert roughly two-thirds of 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. However, to give a better understanding of our business mix, we have estimated representative net revenues by vertical on a run rate basis prior to COVID-19. We do not currently plan to update this in the future.

Our Public Sector vertical represented 25%; hospitality, 15%, that's both restaurant and hotel; Education, 10%; B2B 10%; healthcare, 10%; retail, 10%; nonprofit 5%; and other 15%. As Greg mentioned, we have seen the greatest impact from the pandemic in our education and hospitality verticals. During April Education payment net revenues were down 90%. We have SaaS software revenues, which cushions the decline. So the total run rate for Education net revenues were down 66% in April. Our current expectation is for K-12 schools to reopen after Labor Day.

Greg discussed the decline in hospitality. Our other verticals have seen lower impacts and we believe that our diversification positions us well for recovery. Governments and schools, do not go out of business. Healthcare is an essential service. And B2B will grow over time. Digitization of payments away from cash and check will continue, and we have differentiated payment solutions to offer our customers integrated through our software and other leading software providers.

I'll now turn the call over to Rick for an update on M&A activity.

Rick Stanford -- President

Thank you, Clay. Good morning, everyone. Before I talk about our M&A status, I want to first give -- quickly give you a few updates regarding information provided on the last call, and some additional new information.

First, we are continuing to pursue a unified product offering in our Public Sector vertical. We intend on offering our customers in this vertical, a more robust and comprehensive suite of products that work together seamlessly. Second, relative to the Pace conversion, we set a goal for ourselves to have the non-integrated piece completed by the end of summer. It now looks, as if we will be completed mid-summer, the one caveat is that businesses start opening as planned. Third, on the ISV front, our total number of signed and integrated ISVs at the end of our second fiscal quarter is 53 with three more in process of integration. Fourth, we have been discussing and implementing many new educational communications around products that are likely to be methods of choice with consumers like contactless, in-app payments and online payments with our existing verticals. COVID-19 has changed customer expectations in these areas, and we intend to meet those expectations. We are pleased with the products and methodologies that our business leaders are deploying on this front.

Lastly, regarding M&A, we have continued to add to the pipeline during Q2, and are still preparing new-term sheets for those deals that we are interested in having as part of the team. The pipeline is still very full at this time, and the recent downturn has not affected our pipeline. In fact, new opportunities have arisen over the past couple of months. Strong organic growth has always been a key driver in our decision-making process about acquiring a business. We have now added an extra level of diligence and understanding around how the potential acquisition partner was affected by COVID-19, and whether when or if the business is likely to grow in the new normal.

We mentioned on the Q1 call, we have four executed term sheets in process of full diligence. Seeing the potential impact of the pandemic and the industry trends, mid-March, we made the decision to go pencils down with all diligence and closing preparations for those deals. Without exception, each of these sellers understood the circumstances and stand ready to restart their acquisition process. Although, there are no guarantees in a COVD-19 world, we hope to start ramping up toward completing these four acquisitions in an effort to accelerate our vertical strategy in the near future, particularly in the Education and Public Sector. Our general pipeline is populated with an emphasis on Public Sector and Education, with some nonprofit and healthcare mixed in. We believe that we will remain successful in executing our M&A strategy, once we start closing deals again.

This concludes my comments, Lauren. And at this time, we'll open the call up for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We'll take our first question from George Mihalos with Cowen.

Allison Jordan -- Cowen -- Analyst

Good morning. This is Allison on for George. Thank you for taking my questions, and really glad to hear from everyone. My first question is, given i3's unique strategy to diversify the business across key verticals, which we heard about, and your commentary around Public Sector, and B2B, for example, being more insulated, what percentage of your revenue do you think will ultimately be impacted by COVID-19?

Clay Whitson -- Chief Financial Officer

Well, I think all of it is impacted currently. And I -- we've seen different declines in different verticals. Long term, we expect government and education to bounce back 100% because those customers don't go out of business. Hospitality, we'll see some attrition there. But we think, we're well positioned on the other side to gain market share with our technologies.

Allison Jordan -- Cowen -- Analyst

Okay, great. Thank you. That's helpful. And then, I'm curious if you can talk a little bit about the cadence of the volumes you are seeing. Clay, I heard you mention that payment volume exited April down 30%, and improved in the first week in May. I think I got that right. I'm just curious how that volume trended throughout the month of April? And if you experienced peak declines in mid-April similar to commentary from some of your payments peers?

Clay Whitson -- Chief Financial Officer

It improved sequentially all across April, and continue to improve the first week of May. And the first week of May had a market improvement as the economy was opening back up in certain areas.

Allison Jordan -- Cowen -- Analyst

Okay, great. That's good to hear. And then just last one -- sorry, go ahead.

Clay Whitson -- Chief Financial Officer

Well, the end of March was probably the worst, and then April improved and May has improved again.

Allison Jordan -- Cowen -- Analyst

Okay, great. Thank you. And then just last one from me. With respect to the M&A pipeline, do you think it would be feasible to close the transaction by the end of this fiscal year? And then also, lastly, given the environment we are in, how have you seen multiples trending?

Rick Stanford -- President

Yeah. I definitely think that we'll be able to close some deals by year end. As far as multiples, we're very tuned into the market and we will respond appropriately.

Allison Jordan -- Cowen -- Analyst

Great. Thanks for taking my questions.

Operator

Our next question comes from John Davis with Raymond James.

John Davis -- Raymond James -- Analyst

Hey, good morning, guys. Glad to hear your voices and hope all is well. So just maybe, Rick, I appreciate the comments on M&A, but maybe just a follow-up on the last question. What sort of capacity do you have? And how should we think about leverage in the COVID world. Kind of, where would you be willing to take leverage on the other side of this or maybe to close deals later this fiscal year?

Clay Whitson -- Chief Financial Officer

Well, first of all, most of our deals are small and those would probably be the ones we would address first. And then those that are trending well in April, in the current environment, we have a lot of capacity under our credit line, only $19 million borrowed out of $275 million. And then we have strong cash flow. And so between those things, we'll see how it goes, but we currently believe we have the ability to make some strategic acquisitions that are smaller size. [Speech Overlap] Our leverage covenant is 5.0 times, and we're currently at 3.4 times.

John Davis -- Raymond James -- Analyst

Okay. I would assume, in this environment, you're not going to push the upper limits of that. Is that fair?

Clay Whitson -- Chief Financial Officer

That's fair.

John Davis -- Raymond James -- Analyst

Okay. And then maybe, Clay or Greg, maybe just talk a little bit about the geographic mix of the school education business. Where -- what states are the biggest? And as we kind of think about reopenings and whom it was likely going back to school in the fall?

Greg Daily -- Chief Executive Officer

Ohio, Colorado, California are three. We do have a nice group of businesses in New Jersey. I think they may be impacted a little bit more than Ohio and California, but -- I mean, Colorado. We are in tune with what's going on in each of the states, and we believe they will open on time in the fall.

John Davis -- Raymond James -- Analyst

Okay. And then remind me that I think, Clay, you had mentioned that the 2Q is seasonally the weakest. So as we think about the education mix for the full year, maybe just help us think about the cadence, which quarter is strongest in education, as we kind of think about the model going forward and going back to school in the fall?

Clay Whitson -- Chief Financial Officer

Well, they are a little different for PaySchools and SchoolPay. PaySchools has their strongest quarter in the September quarter. SchoolPay has their strongest quarter in the March quarter. Both fall off in the June quarter, because you get about 0.5 month in May and then zero in June. And so if I had to pick a quarter for this to happen, this would be the quarter, but it's still very painful.

John Davis -- Raymond James -- Analyst

Okay. And then maybe last one for me. I really appreciate the breakout on the different verticals, the percentage of revenue there. But maybe just comment on healthcare. Have you guys seen significant negative impacts there? I think we've heard some not horror stories, but some pretty bad healthcare numbers elsewhere. Just curious kind of what you're seeing in your healthcare vertical.

Greg Daily -- Chief Executive Officer

No. Our healthcare has held up very nicely.

John Davis -- Raymond James -- Analyst

Okay. Thanks. That's it from me. Thanks guys.

Greg Daily -- Chief Executive Officer

Thanks, John.

Operator

Our next question comes from Jason Kupferberg with Bank of America.

Cathy Tennyson -- Bank of America -- Analyst

Hi, this is Cathy [Phonetic] on for Jason. Thanks for taking my question. My first, I want to just ask about sort of an update on trends may be in states where you've already seen stay-at-home orders being lifted versus state they versus states that haven't seen restrictions lifted. Have you seen sort of an increase in payment volume trends as people are switching more to online or mobile transactions? Thank you.

Greg Daily -- Chief Executive Officer

So, I think as everybody has mentioned, we have seen nice uptick in the end of April. That has continued in May. I believe the states started opening around May 1, and we definitely saw the increase. But it's hard -- I don't think I can tell you by state how we've seen. But a lot of our business is online. So it's not like that mix has changed. But it's improving on a daily basis.

Clay Whitson -- Chief Financial Officer

Our card-not-present number tracks pretty closely with our integrated number that we report. So 55% of our traffic is card-not-present. That has been increasing over time, as you know, and we think that will continue industrywide to improve over time. So we're well positioned there.

Cathy Tennyson -- Bank of America -- Analyst

Got it. And as a follow-up to that, which have you seen bounce back the fastest sort of incrementally throughout April and into May now?

Clay Whitson -- Chief Financial Officer

Not schools. Schools have been completely closed, probably retail restaurant as states have opened up.

Cathy Tennyson -- Bank of America -- Analyst

Thanks. And just one more question from me. I just wanted to get a little bit more detail about which areas of cost you're sort of focused on reducing. And obviously the payroll expenses will come back later as things ramp up again. But sort of how sustainable are maybe some of the other areas of long-run cost cutting? Thank you.

Clay Whitson -- Chief Financial Officer

Okay. Well, most of our -- we have about a 70% gross margin, not quite, a little less than that. But if whatever you're modeling for revenues, you could apply percentage like that. And everything else is our operating expense, which ran about a little over $17 million this quarter. The cuts we've made will reduce that to $16 million of operating expenses. That's a relatively fixed number and that it's mainly headcount, rent, insurance, etc., employee-related costs. And so, until we, if we ever reduce again, it will change that number. And if our revenues pick back up, that number could increase over time. But current run rate is about -- is a little over $16 million a quarter. Does that help, Cathy?

Cathy Tennyson -- Bank of America -- Analyst

Yeah, yeah. That's helpful. Thanks for taking my questions.

Clay Whitson -- Chief Financial Officer

Thank you.

Operator

[Operator Instructions] Our next question comes from Josh Beck with KeyBanc.

Josh Beck -- KeyBanc -- Analyst

Thanks, everyone, for doing the call. A lot of helpful color. Glad to hear everyone is staying well. I wanted to ask a little bit of a broader question. And it might be a little tough to discern, but I thought I would ask just given you have a decent number of small businesses within your portfolio, have you seen any impact or relief as some of these PPP loans have been made over the last month? I know, it might be tough to discern, but just thought I'd ask.

Clay Whitson -- Chief Financial Officer

We haven't seen a spike in merchant attrition. We anticipate there will be some, but we don't see -- we didn't see it at the end of -- in our data at the end of March. I don't know that I have granular enough information to comment on the PPP impact. But we've definitely seen a rebound in May of volume.

Josh Beck -- KeyBanc -- Analyst

Okay. That's really helpful. And I'm not sure you've cut the business this way, but I think you mentioned the card-not-present mix is a good proxy for integrated mix. If you were just to look at the card-not-present mix, is it -- have a pretty substantially different growth rate? Any way to quantify that? I'm not sure you've really cut it that way.

Clay Whitson -- Chief Financial Officer

Well, we've reported that number over every quarter, and it's been increasing as we have made more software acquisitions. But I don't know that we've seen a spike just because of the environment. It's been more as a result of business mix, I would say.

Josh Beck -- KeyBanc -- Analyst

Okay. And I think it has been asked a couple of different ways. But if you look across your verticals, are there any ones that actually had positive year-over-year growth in the last couple of weeks? I was thinking about some of the ones that you were highlighting as more defensive or even close to flat, I guess, in terms of the year-over-year trends. Are we still just not there maybe within, say, Public Sector or some of the more resilient ones?

Clay Whitson -- Chief Financial Officer

Public sector had a good March. The warrant round-up happens in March, and it was very good. It was a solid year up until the last two weeks. But I don't know that I can comment on any -- our rent share bounced a little bit, but it's so small.

Greg Daily -- Chief Executive Officer

B2B was pretty good. I thought healthcare and nonprofit was above what we expected.

Clay Whitson -- Chief Financial Officer

Yeah.

Greg Daily -- Chief Executive Officer

It's just the thing that's dragging us down is hospitality and education. And we know Education is coming back.

Josh Beck -- KeyBanc -- Analyst

Right. Yeah. So it seems like the visibility on the other side is quite reasonable for your book of business. And then just lastly, just to clarify, so Clay I think you'd mentioned $16 million. Is that a good -- is that a number that you get to over time over the next couple of quarters? Or is that a good run rate as we think about April? Just want to make sure I model that right.

Clay Whitson -- Chief Financial Officer

Well, so the March quarter was $17.4 million. And then effective April 1, we cut $1 million. And so that would go to $16.4 million. So it's not something that happens over time. We got it done on April 1.

Josh Beck -- KeyBanc -- Analyst

Okay. That's really helpful. Well, thanks everyone.

Clay Whitson -- Chief Financial Officer

Okay.

Operator

Our next question comes from Peter Heckmann with Davidson.

Peter Heckmann -- Davidson -- Analyst

Hey, good morning, everyone. Thanks for taking the question. As regards to Public Sector space, it seems as if some of the pressure that we'll probably see on state and local budgets, municipal budgets really should play pretty well for an integrated payment solution that includes convenience fees that's effectively self-funded. Is -- have you seen an uptick in interest there? Or is it still a little early? And if it's early, do you agree with that thesis?

Clay Whitson -- Chief Financial Officer

Well, there are a lot of pushes to get more automated, digitized in the exchange of money. And we've seen that in -- and we're willing to see more of that in schools and in government. We have a different business mix in Education and government. Government, we're 60%, only 40% of revenues are payments. And so that's helped cushion this downturn. Education on the other hand is, 70% payments. And so they have a little bit different dynamics there. Our software revenues have increased over time. This quarter software represented 24% and payments represented 67%. So that number continues to go up, and software is generally more insulated than payments as you know. So yeah, we think we're very well positioned. Both schools and governments are probably not the leaders. Technology wise, they're slow to adopt until they really need to, but now they really need to. And so we think that will help us.

Peter Heckmann -- Davidson -- Analyst

Got you. Got you. And then another question, just in regard to the ISVs, any change there in terms of kind of the terms, relative number of partners that some of these ISVs are getting? And is there any thoughts about revenue share or any other terms that are notable in terms of changing?

Rick Stanford -- President

Yeah. We haven't seen any changes. We're continuing to sign ISVs. Revenue shares range anywhere from 20% to 35%. They're looking for technology solutions. Ease is important to them. But we haven't seen any movement in revenue share or the number of ISVs that we're able to secure that are looking for payment integration.

Peter Heckmann -- Davidson -- Analyst

Okay. As regards to that, do you see more ISVs? I mean what would be the average number of partners that an ISV might have? Might they have two or three? Or are there some champion-challenger type relationships?

Rick Stanford -- President

Yeah. I can't speak to the numbers. But I can tell you that we are seeing an increased number of ISV opportunities with the Pace acquisition. When that went down, we combined our internal ISV team with Pace, and they've proven to be a market force. We've expanded our reach to all of our subsidiaries, and we've got salespeople across the country that are referring ISVs into the Pace organization now. So we're seeing an uptick there. I think most of it was Education. But we brought on some really talented people with Pace that know the ISV space, and that's helped as well.

Peter Heckmann -- Davidson -- Analyst

Got it. All right, that's helpful. Thank you.

Operator

And at this time, there are no further questions. I'd like to turn the conference back to Greg Daily for any additional or closing remarks.

Greg Daily -- Chief Executive Officer

Thank you, everyone. So this is an interesting time. I think you'll see us talk more about the increase from checking cash to electronic payments in our future calls, because it is coming. We're prepared for the rebound. I think it's already started. The numbers that we're seeing from May are very positive. And so anyway, thanks, everybody for being on our call. Thank you.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Scott Meriwether -- Chief Operating Officer

Greg Daily -- Chief Executive Officer

Clay Whitson -- Chief Financial Officer

Rick Stanford -- President

Allison Jordan -- Cowen -- Analyst

John Davis -- Raymond James -- Analyst

Cathy Tennyson -- Bank of America -- Analyst

Josh Beck -- KeyBanc -- Analyst

Peter Heckmann -- Davidson -- Analyst

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