Agilysys, Inc.

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

Thank you, Sarah, and good afternoon, everybody. Thank you for joining the Agilisys Fiscal 2020 Second 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 other 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 revenue, recurring revenue, and subscription revenue growth, continued sales and business momentum, and increasing investments and resources in R&D, SaaS operations, professional services, and customer support. 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 demands for products and solutions and the risks described in today's news announcement and in the company's filings within the Securities 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 speaks only as of the date on which it was made. We undertake no obligation to publicly update any forward-looking statements that may have been 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 SEC Regulation G. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures 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, and good afternoon, everyone. Welcome to our fiscal 2020 second quarter earnings call. Joining me on the call today is Tony Pritchett, our CFO. We are pleased to report that we completed yet another strong quarter, highlighted by revenue of $40.7 million. Thank you for joining us. The fact that this was a record professional services revenue quarter, exceeding the $8 million mark for the first time, augurs well for future recurring revenue growth, especially subscription revenue growth, given a majority of the installs we are currently working on are subscription revenue related. Recurring revenue was a record $20.3 million, driven by a 1616. 16% year-over-year increase in subscription revenue. Regarding overall quarterly revenue, this quarter marked the eighth consecutive sequential revenue increase, sixth consecutive record revenue, and fifth consecutive double digit year-over-year revenue increase. Fiscal 2020 second quarter was also a record quarter In terms of value of major competitive replacements won. In summary, we are improving with respect to almost all business indicators every quarter. In addition, our cash balance increased by $1.7 million during fiscal 2020 second quarter, a significant improvement over the $2.2 million cash loss during the same period last year. The cash balance at the end of fiscal 2020 second quarter is about $6 million higher compared to the end of the second quarter last year. That is our largest year-over-year cash balance increase during a 12-month period since Q1 of fiscal 2015, which was only better due to the effect of the sale of the retail solutions group. We continue to expect fiscal 2020 to be a significantly better free cash flow positive year compared to fiscal 2019. We remain committed to both being disciplined in driving revenue growth in a profitable manner and supporting strategic investments that will help drive profitable revenue growth. In terms of selling success, fiscal 2020 second quarter was our second best quarter ever. In fact, the past recent four quarters have been four of our five best quarters since we transformed to a pure play hospitality software solutions company in fiscal 2014. Our best quarter ever was back in fiscal 2016 and included a major hardware refresh project that skewed the number upwards. So in terms of consistent, successful sales activity, This trailing 12-month period is a new high mark for us. In addition, our last five quarters are all record quarters for close deals involving software subscription services. We are confident the year-over-year growth in quarterly subscription revenue will remain in the 20s in percentage terms for the full fiscal year 2020 and during most quarters for the foreseeable future. Our selling and revenue momentum are not only at record levels now, but just as important, or also much more broad-based than before, providing us with added future growth areas and further diversifying and de-risking our revenue streams. Our strong presence in the gaming and casinos vertical continues to expand, as evidenced by our growing partnership with Choctaw Casinos and Resorts, Well-known for their top-rated casinos and the AAA four-diamond hotel in Durant, California, Durant, Oklahoma. During Q2, Choctaw selected our PMS property management system suite of products, including subscription-based versions of LMS, Argus Book, and Argus Express Mobile for all three of their hotel properties in Oklahoma. Another well-known regional gaming operator, Maverick Gaming, joined our family of customers during Q2, purchasing subscription-based versions of Infogenesis, Infogenesis Flex, and Argus Pay for their properties in Nevada, Colorado, and Washington State. Outside of gaming, we are particularly encouraged by our increased selling momentum across the hotels, resorts, and cruise ships vertically. We expanded our partnership this quarter with the Kessler Collection Hotel Group, who purchase Infogenesis, Argest Pay, and Argest Analyze, all subscription-based, for a few of their properties, including for the Beaver Creek Lodge, a Marriott autograph collection ski-in, ski-out hotel in Colorado. Also, in the hotel resorts category, Jackson Hole Mountain Resort, in Teton Village, Wyoming, purchase subscription-based versions of Infogenesis, Infogenesis Flex, Argus Pay, and Argus Seat for all their on-mountain ski resort fine dining and quick-serve restaurants. In the cruise vertical, we expanded our partnership with Carnival UK during the quarter. Carnival UK is now looking to expand their deployment of Infogenesis and Infogenesis Flex on to their 5,200 passenger cruise ship, Iona, the biggest ever ship purpose-built for the UK market that will launch in May 2020. This will be our second ship with Carnival UK after a successful pilot on their 3,000 plus passenger grand class cruise ship, Ventura. We look forward to a long and successful partnership with Carnival UK supporting their food and beverage point of sale needs. In the food service management vertical, we continue to expand our existing relationships and add new customer sites. We closed sale agreements and implemented our point of sale software at several outlets in multiple major airports during the quarter, leveraging a relatively new customer relationship that has evolved quickly Over the last few quarters, as we continue to successfully install and support software in these high-volume, quick-turn food and beverage locations. Outside of these customer segments that represent the majority of our current revenue, we also recently closed a major new Logo Stadium sales agreement in the sports and entertainment vertical. Within the food service management vertical, we also continue to make good progress in the areas of healthcare, senior living, and higher education. Another recent new logo win in a sector in which we have had no other installations before is Virgin Trains USA, the only privately owned and operated intercity passenger railroad in the United States. Virgin Trains purchased Infogenesis, Argus by Kiosk, Argus by Mobile, Argus Pay, E-Tech, and Argus Analyze all subscription-based for one of their trains between Miami and West Palm Beach. These are just a few notable examples of the recent success we've had winning new customers and new kinds of customers while expanding our partnerships with current customers. During our fiscal 2020 first quarter call in May earlier this year, We guided that the full-year fiscal 2020 revenue would be about 11% higher than the full-year fiscal 2019 revenue level of about $141 million. Given our increased business momentum, we feel it prudent now to increase that revenue growth guidance to 14% for the full-year fiscal 2020. We continue to make good progress with our product development initiatives with respect to property management systems and related additional software modules and also recently announced a major PMS win against TIFF competition. However, our revenue growth continues to be largely dependent on point of sale side of our business. Alongside our star performer Infogenesis, Argus Buy continues to build good momentum in the marketplace. with increasing instances of Argus Buy replacing competitor systems in cafterias in multiple large prestigious campuses all across the US. While POS by itself is good enough to keep driving our revenue and profitability levels forward at a significant pace, we are steadily reaching the stage where our growth will be driven by both major product segments, point of sale and property management systems. The hospitality industry is in need of a world-class PMS technology provider who can create value by improving guest experience and increasing guest loyalty with well-integrated solutions that are able to incorporate modules like direct channel web booking systems, mobile check-in checkout, kiosk check-in checkout, and service optimization to better manage tasks and operations across an increased number of property initiatives. We now have multiple examples of customers who have implemented such additional value-adding software modules offered by us around our PMS offerings. Given the demand we see in the market, we will be bringing to market an additional software module called the Agilisys Customer Engagement Suite during fiscal Q3. This module will serve as a launching pad for our proprietary offering that will provide customers the platform for loyalty programs, stored value, gift card, and meal card type applications. We are excited to be one of the very few hospitality solution providers to be focused on developing and offering fully integrated guest self-service solutions. Encouraged by our successes during the past couple of years, we continue to increase our R&D resources and continue to do so without significantly increasing R&D costs as a percentage of revenue to ensure we drive our increasing competitive advantage and top line growth down to increasing profitability levels. Our R&D teams, including technical services, are currently about 650 people strong compared to approximately 230 at the beginning of calendar 2017. This increase has afforded us the ability to strengthen and modernize our core products more quickly and effectively, while also increasing innovation levels. We recently leased additional space at our India Development Center and will staff it in line with how our business momentum continues to evolve. In addition, we continue to increase our R&D resources and capabilities in the U.S., In addition to increasing our SAS operations support, professional services, technical services, and customer support, U.S.-based staff. In summary, we are operating in an industry with a total addressable market, which is a couple of orders of magnitude larger than our current relatively modest annual revenue size, providing us with ample runway for growth. The hospitality industry continues to grow. Thank you very much. which help improve operational efficiencies and attract and manage guests better. During challenging economic times, there is often an increased need for tools to attract and retain guests. We look forward to talking to all of you again in about three months from now to report on the December ending Q3 fiscal 2020 quarter which given our current selling momentum should be Our seventh 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.