Agilysys, Inc.

Good day, ladies and gentlemen, and welcome to the Agilisys fiscal 2024 quarter conference call. As a reminder, today's conference is being recorded. I would now like to turn the conference call over to Dave Wood, Vice President of Corporate Strategy and Investor Relations at Agilisys. Please go ahead.

Thank you, Jonathan, and good afternoon, everybody. Thank you for joining the Agilisys fiscal 2020 fourth 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. Some statements made on today's call will be predictive and are intended to be made as forward-looking within the safe harbor protections of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial guidance. Although the company believes that its forward-looking statements are based on reasonable assumptions, Such statements are subject to risk and uncertainties that could cause results to differ materially. Important factors that could cause actual results to differ materially from these in the forward-looking statements include the effect of the COVID-19 pandemic on our business and the success of any measures we have taken or may take in the future in response to the COVID-19 pandemic and the risks set forth in the company's reports on Form 10-K and 10-Q. and other reports filed with the Securities and Exchange Commission. 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 fourth quarter earnings call. Joining Dave and me on the call today is Tony Pritchett, our CFO. I am participating in this call from my home base in Las Vegas while Tony and Dave are in Atlanta. We hope all of you and your families and colleagues are doing well and staying healthy during these incredibly challenging times. Like many other organizations across multiple industries have reported, our fiscal 2020 fourth quarter, the period January through March, was very much a tale of two quarters within one. Thank you very much. was up 45% year over year. The overall number of customer users attending additional training classes and setting up meetings with our technical staff for further product discussions, two crucial user conference customer engagement metrics for us, was up 40%, year over year. Our increased product innovation velocity during the last couple of years was on full display. Little did we know then that many additional modules like mobile check-in, check-out, Argus service, and on-demand, which were discussed in packed conference rooms during the conference, would move from being nice-to-have modules to become must-have ones just a couple of months later. And then, everything temporarily changed during March. In spite of the hospitality industry virtually shutting down completely, About 32% of our sales during the quarter actually happened during March. To put that in context, during the previous four quarters, the average percentage of sales which happened during the last month of the quarter was about 43%. While this March was much less than a typical month of March for us, it was still reasonably good under the circumstances. One third of our Q4 sales happening during March under such extraordinarily tough circumstances was a good reminder that the solutions we provide are mission critical for the industry. As a reminder, please note that unlike many other organizations, we use the terms revenue and sales to indicate two different business metrics. Revenue is, of course, recognized revenue based on normal revenue recognition rules which are more or less standard across enterprise software companies like us. We use the term sales, however, to refer to actual new sale agreements signed with current and prospective customers for products and services. We measure such sales in terms of annual contract value of sale agreements signed. We also tend to use the term sales, selling activity, and bookings to all refer to the same thing, annual contract value sales. There is obviously a time lag involved in the conversion of sales to revenue. Now switching back to our quarter narrative. We were well on our way towards our eighth consecutive record revenue quarter when the drastic March changes happened. Causing us to miss our revenue guidance for fiscal 2020. Q4 revenue was $39.7 million, an 8% increase over Q4 of last fiscal year. Fiscal 2020 full year revenue was a record $160.8 million, that is $160.8 million. Representing a 14.1% increase over fiscal 2019. Q4 recurring revenue of $22.3 million was another new record. Subscription revenue was up 9.1% sequentially over the third quarter and was up 29.8% over Q4 of last fiscal year. Professional services revenue in Q4 fiscal 2020 was up 25% over Q4 of last fiscal year, despite a significant slowdown during March due to travel restrictions and site closures. Adjusted EBITDA during Q4 fiscal 2020 was $3.6 million compared to $2.4 million during Q4 of last year. Overall, for the full year fiscal 2020, adjusted EBITDA was 13 million, increasing 27% over fiscal 2019, or actually a 61% improvement if you take out the benefit of capitalized software in fiscal 2019. During fiscal 2020, we signed sales agreements which added 55 new customers, 61 new properties which did not have any of our products before and 152 new instances of selling a product to sites which were new for that property. Of these sale agreements, 17 won 7 new customers, 17 again won 7 new properties and 35 new products were closed or signed during the January to March Q4 quarter. The IGPOS sales win with Team San Jose in the sports and entertainment sector. The Argeste PMS and IGPOS win with Sabah Rock Resort in the British Virgin Islands. The Argeste PMS win at Hotel 166 in Chicago. The huge 19-site IGPOS win with Comwell Resorts in Denmark. The Argus by Chaos and On Demand win at Sea Pine Resorts in South Carolina and the IGPOS win at the Intercontinental Los Angeles and IHG property were among the sales win highlights of the quarter. Before we move on to other topics, one quick update on customer retention. Fiscal 2020 was our best year in recent memory with respect to customer retention success. Customer retention was again well over 95% and our best percentage in many years. We measure customer churn and the reverse of it, customer retention, in the old-fashioned, conservative way. We measure customer churn as a simple division of annual recurring revenue lost during the year as a percentage of total annual recurring revenue. And we report customer retention Thank you very much. Thank you very much. Thank you very much. and many more. Thank you for watching. has been at about 60% of the average of the past four quarters at the same comparable time during the quarter. To reiterate that point, in spite of this global pandemic causing virtually everything to shut down, we are still able to close about 60% of the value of deals we would normally expect. These products are mission critical and our product innovation engine continues to churn out additional modules and core enhancements which will help our valued customers manage current realities better. As we have discussed with you before, we have introduced many new software modules to the marketplace during the past couple of years, especially during the past year. Many of these modules have already been implemented in multiple customer sites. These modules include 1. Our Guest Express Mobile, a PMS solution enabling checking in and checking out of hotels without any need for human contact, entirely based on one smartphone, including the use of digital keys. 2. Our Guest Express Kiosk, a similar PMS solution which can be used to check in and check out and for other purposes. We have now tested out these kiosks to be essentially touch-free using personal or throw-away stylus pens. Guests can print keys if they so desire through the kiosk or through the use of our new mobile concierge module. Number three, our guest service, a PMS module which enables management and optimization of all operations in a hotel, including housekeeping and preventive maintenance of crucial assets. This, along with two-way SMS and other communication between hotel staff, including hotel staff at the reception, and guests, enables less need for frequent checks with the reception desk on room readiness and other matters, reducing crowding around the reception desk. Four, our guests on demand for POS. This is a software module in our POS family of products, which was introduced during the last year. It enables remote ordering of food and beverage items from a mobile phone for takeout or delivery using a website, app, or QR code and is completely integrated with our InfoGenesis POS backend. 5. Agilis is authorized for both POS and PMS. This module enables scanning a QR code on a food and beverage or other receipt. Thank you very much. Thank you. 6. Contactless Payments We've also introduced other forms of contactless payments. 7. Our Guest Book The need for a direct-channel, zero-commission online booking engine has become even more important for our customer base now. With our new, modernized Argus spa and golf modules, already installed in multiple customer sites, customers can now provide their guests the ability to book rooms, spa, and golf reservations online. All from one place. This includes the ability to handle group reservations as well. Number eight, our guest seat. This product now supports booking and managing reservations across any outlet of a property. Guests can see a dollhouse view of the outlet and reserve a specific seat in a restaurant or a specific lounge chair or cabana in a pool area or a seat in a performance center. Properties have an opportunity to promote social distancing right at the booking process, providing their guests an increased level of comfort as they make their reservations. This application now also supports yielding of seats, giving our operators additional tools to monetize their assets. Now that list is only a subset of all the new modules we've introduced during the recent past. Thank you very much. While minimizing variable costs. While the number of sale agreements closed during March, April, and May have clearly been down compared to previous quarters, we've been surprised to find the number of product demos we have been involved in during April and May, especially regarding our emerging products and software modules, it's been almost double the level that we saw during January and February. All the way down from order initiation till payment. Revenue from gaming casinos constitutes more than 50% of our revenue. The interest from our gaming casino customers in our emerging software modules has been particularly high during the past month or so. Many of them are likely to be early adopters of the emerging software modules as they finalize plans to reopen. With respect to our balance sheet, We ended Q4 fiscal 2020 with a cash balance of $46.7 million, our highest level since June, calendar 2017, Q1 of fiscal 2018. We were fortunate to come into the crisis with a position of strength. The recent $35 million convertible preferred investment by Mac Capital will provide additional balance sheet strength. As is well known, The CEO of Mac Capital, Mr. Mike Kaufman, is also the chairman of our board. I cannot think of anyone who knows our business better than him. His vote of confidence in us does say a lot. Our improved and record levels of financial performance in fiscal 2020 has a lot to do with our increase in R&D and product innovation strength and our passionate focus on customer service. The number of resources involved in product development Thank you very much. With an even better competitive differentiation and positioning. While we have been forced to take multiple cost reduction steps like most other organizations, we have taken care to ensure such steps have minimal to no impact on our product development and customer service areas. Due to the drastic change in uncertainty in macroeconomic conditions and the lack of clarity With future sales, revenue, and profitability projections by product, there was an assessed impairment of most of the capitalized software development costs on our balance sheet. As you are aware, we discontinued the practice of capitalizing software development costs as of January calendar 2018 or Q1 fiscal 2019. This impairment action does not affect our ongoing and future product investment strategies in any way. This pandemic and the related closures have been particularly hard on our customers. We have strived to be a responsible business partner and have tried our best to help them with various forms of one-time credits and product concessions. Among the concessions provided is free use of the Our Guest on-demand product for 90 days. About 60 customer sites have executed contracts for the use of this product, and another 250 sites are in the process of signing up. Thank you very much. Thank you very much. Q2, Q3, and Q4 of fiscal 2021. Please note these actions to help customers will show up as declines in multiple revenue areas including recurring revenue during Q1. Such declines are expected to be strictly temporary and one time and should not be interpreted as having anything to do with customer retention. We continue to do well with customer retention. Thank you. Thank you. Thank you. Thank you very much. Revenue and profitability levels. Regarding profitability, given all the cost reduction steps currently in place, even with the possible revenue reductions we face in the first quarter of fiscal 2021, we expect Q1 fiscal 2021 adjusted EBITDA to be approximately break-even for the quarter. While the current circumstance is a definite setback, Thank you very much. and other business details. Tony? Tony? Thank you, Ramesh.