Agilysys, Inc.

Good day, ladies and gentlemen, and welcome to Agilisys Fiscal 2020 First Quarter Conference Call. As a reminder, today's conference may be recorded. I would now like to turn the conference over to Dave Wood, Vice President of Corporate Strategy and Investor Relations at Agilisys. You may begin.

Thank you, Catherine, and good afternoon, everybody. Thank you for joining the Agilisys Fiscal 2020 First Quarter Conference Call. We will get started in just a minute with management's comments, but before doing so, let me read the Safe Harbor language. Today's conference call contains forward-looking statements within the meaning of the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as anticipate, intend, plan, goal, believe, estimate, expect, future, likely, may, Should, Will, and other similar references to future periods. Examples of forward-looking statements include, among others, our guidance related to revenue, adjusted EBITDA and free cash flow, and statements we make regarding continued sales and business momentum. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, Projections, Anticipated Events and Trends, The Economy, and Other Future Conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in the circumstances that are difficult to predict, and many of which are outside of our control. Our actual results and financial conditions may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial conditions to differ materially from those indicated in the forward-looking statements today include, among others, our ability to maintain operational efficiencies and meet customer demand for products and solutions and the risks described in today's news announcements and in the company's filings with the Security and Exchange Commission, including the company's reports on Form 10-K and Form 10-Q. Any forward-looking statement made by us in today's conference call is based solely on information currently available to us and speak only as of the date on which it was made. We undertake no obligation to publicly update any forward-looking statement that may be made from time to time, whether as a result of new information, future developments, or otherwise. Today's call and webcast will include non-GAAP financial measures within the meaning of the SEC Regulation Chief. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in today's press release as well as on the company's website. With that, I'd now like to turn the call over to Mr. Ramesh Srinivasan, President and Chief Executive Officer of Agilisys. Ramesh, please go ahead.

Thank you, Dave. Good afternoon, everyone. Thank you for joining our fiscal year 2020 first quarter earnings call. Joining Dave and me on the call today is Tony Pritchett, our Chief Financial Officer. We completed another strong quarter, highlighted by revenue of $38.4 million, a 12.9% increase over Q1 of last year, with increases in all three of our revenue lines, recurring revenue, product revenue, and professional services. Driven by sales growth across our verticals. This was our seventh consecutive sequential revenue increase, fifth consecutive record revenue, and fourth consecutive double-digit year-over-year revenue increase quarter. Recurring revenue was a record $20.1 million for the quarter, driven by a 24% year-over-year increase in subscription revenues. Our cash balance decreased by 3.5 million during Q1 fiscal 2020, which is typical for us. While our revenue is not cyclical, our cash collections tend to be cyclical, Q1 being the most pronounced of them, with each subsequent quarter thereafter improving during the fiscal year. We continue to expect fiscal year 2020 to be overall a significantly better free cash flow year compared to fiscal 2019. As I get more deeply into my comments, I wanna make it clear that when we refer to sales, that encompasses everything we have sold during a period, which we normally measure internally in terms of annual contract value. Revenue, on the other hand, is driven by product shift or in the case of recurring revenue, what has already been implemented and refers to the amounts we have recognized as revenue during a period. Sales during a period contributes towards both current and future revenue. That said, our strong sales momentum continues to drive good revenue growth. The last three quarters have been among our best ever in terms of sales. The year-over-year increase in sales this quarter was a higher percentage than the corresponding revenue increase which augurs well for continued future revenue growth. We are particularly encouraged by the continued increases in sales across Asia, Europe, and the domestic hotel resorts cruises vertical and especially in the food service management vertical. During the past few months, we have made substantial sales progress with a second major food service provider. Within food service management, we are also seeing good traction in healthcare, senior living, stadium arenas and higher education sub-verticals. These sub-verticals have contributed minimally to our revenue profile in the past In spite of their business requirements aligning quite well with our products and services, these verticals represent good new sales and revenue growth opportunities for us. We recently had good success implementing POS and kitchen video system automation in a major cruise ship. We were successful in automating dining operations in the ship. which were practically all pen and paper based before. This ship became our first customer to have 100% flexible mobile tablets with no fixed terminals across its numerous revenue centers. As a result of this implementation, their staff became significantly more mobile and could fill orders even while remaining at the guest table, resulting in a significant increase in the speed of guest service. The success of this recent ship implementation is beginning to open new doors for us across the cruise industry. Given our normally strong presence in gaming casinos, this sales momentum in other verticals is making our growth increasingly more broad-based. A significant portion of our current success is due to our continued focus, accountability, and strategy within our sales efforts across all verticals and regions. Our go-to-market strategies and execution has become a lot more effective and are continuing to yield improved results. We recently formed the product strategy team consisting of Agilis' hospitality industry veterans that is helping guide the development and rollout of our integrated product sets in a thoughtful and coordinated way directed by our medium and long-term strategies. We also increased our global quota-carrying sales team by approximately 10% during the quarter. As an overall organization, culturally, it is more prevalent with us now than ever before that all of us work to support our sales teams and our customer-facing personnel, including in services and support. That is true for me as well. Sales services and customer support do not work for me. I work for sales, services, and support and through them for our customers. From a product set standpoint, while point of sale POS solutions consisting of Infogenesis POS, Infogenesis Flex, Argus by Kiosk, and Argus by OnDemand continue to be the main drivers of our current success, we are also making good progress with our property management systems PMS-related product development initiatives, both with respect to core products and with respect to innovations in software modules surrounding the core product features. We are making good progress with the recently launched ancillary PMS modules like, one, Argus Book, a booking engine which integrates directly with major property management systems and can enable full package booking including spa and golf appointments along with room bookings and upsell features based on the profile of each guest. 2. Argus Express Mobile a fully integrated check-in check-out solution with digital ID verification and digital key delivery. 3. Argus Express Kiosk a self-service check-in check-out kiosk and 4. Argus Service A resort-wide customer service and task management module also offering a staff communication platform designed to mobilize all internal tasks and workflows utilizing wearable technology. All these modules have been implemented in multiple locations and offer good value and return on investment for our customers. About 40 new sales agreements have been signed for these new emerging software modules during the past 12 months. The increasing sales pipeline we are beginning to see in property management systems, PMS, gives us good reason to believe that our future growth will be driven in a more balanced manner across both POS and PMS solutions. PMS solutions were implemented in nearly 2,400 additional rooms during Q1 fiscal 2020, and we believe we can do much better in the future with this metric. With respect to our continuing momentum with POS solutions, the Argus by guest-facing kiosk solution has been a star performer for us during the past year. With Argus by kiosk installations more than doubling during the past 12 months from 266 to 676 endpoints. The Argus product suite now represents 11% of total revenue in Q1 of fiscal 2020 compared to 8% during Q1 last fiscal year. We continue to increase our R&D strength without impacting profitability. The adjusted EBITDA for the quarter was a record $3.2 million. in spite of not having the benefit of capitalizing software development costs as was the case prior to Q2 of last year. Our R&D strength, including personnel in technical services across the U.S. and the India Development Center was 540 as of June 30th compared to around 230 two and a half years ago. We are improving our core products now at a faster rate than ever before and simultaneously increasing innovation within both our core products and complementary modules. The hospitality industry currently has a big need for modular and well integrated POS and PMS software solutions and even the biggest providers in the space are unable to deliver The kind of end-to-end solutions customers increasingly demand at the level we currently are able to provide. That gives us a significant competitive advantage in the hospitality industry, the only industry we are focused on. That will continue to drive top-line revenue growth for us and we remain confident we can do so while also simultaneously growing profitability. On the international front, I recently returned from a two-week trip to Singapore and to our 400-plus strong India Development Centre. We also held a successful MER Customer Summit in London during the quarter. It is exciting to see the extent of international revenue growth opportunities in front of us. Our revenue from international regions during Q1 of fiscal 2020 was an all-time record. This quarter also marked five consecutive quarters of increasing international revenue. Some of our recent international wins include the St. George's Hotel in London and the Umsana Teluk Bahang Hotel in Penang, Malaysia. During the past few quarters, we have made significant improvements in expanding SAS development operations infrastructures, partnerships, In summary, we continue to see multiple avenues for sustainable growth that we can, and I expect we will, execute well on. We operate in the growing hospitality industry that is massive compared to our current modest annual revenue size. And it's an industry with an increasing need for a world-class technology solutions provider who can provide end-to-end modular and well-integrated POS and PMS software solutions and a partner who continues to invest in people, products, and customer service. I firmly believe that our future success continues to be entirely within our own control and as such, we are about as well insulated as is reasonable to expect from the ups and downs of the daily macro headlines, economic projections, trade wars, interest rate fluctuations, and virtually everything else we read and hear about every day. Given these characteristics, I remain optimistic about the investment case for Agilisys at the current share price level given the many opportunities we have in our hands to continue to grow shareholder value. I look forward to talking to all of you again in about three months from now to report on the Q2 September quarter which given our current sales momentum should be our sixth consecutive record revenue quarter. With that, let me hand the call over to our CFO, Tony Pritchett for more color on our financial results and future outlook. Tony. Thanks, Ramesh.