Agilysys, Inc.

Ladies and gentlemen, thank you for sending by. Your call will begin momentarily. Once again, your call will begin momentarily. Good day, ladies and gentlemen, and welcome to the AGILISIS 2026 Fourth Quarter and Full Fiscal Year Conference Call. As a reminder, today's conference may be recorded. I will now turn the conference over to Jessica Hennessy, Vice President of Operations and Investor Relations at AGILISIS. You may begin.

Thank you, Victor, and good afternoon, everybody. Thank you for joining the AGILISIS 2026 Fourth Quarter and Full Fiscal Year 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 U.S. 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 risks and uncertainties that could cause results to differ materially. Important factors that could cause actual results to vary materially from these forward-looking statements include our ability to achieve the provided guidance levels, increase implementation and operational efficiencies, the company's ability to maintain retention rates, utilize AI to continue to increase competitive advantages, and the risks set forth in the company's reports on Forms 10-K and 10-Q and other reports filed with the Securities and Exchange Commission. As a reminder, any references to record financial and business levels during this call refer only to the time period after Agilisys made the transformation to an entirely hospitality-focused software solutions company in fiscal year 2014. With that, I'd now like to turn the call over to Mr. Ramesh Srinivasan, President and CEO of Agilisys. Ramesh, please go ahead.

Thank you, Jess. Good evening. Welcome to the fiscal 2026 fourth quarter and full year earnings call. Joining Jess and me on the call today at our Alpharetta, Atlanta headquarters is Dave Wood, our CFO. Fiscal 2026 Q4 was an excellent overall business quarter for Agilisys, including with respect to sales, revenue, and profitability, each of which set a new quarter record. We measure sales and selling success in annual contract value terms, and fiscal 2026 fourth quarter was the highest sales quarter on record. All sales and backlog values mentioned here for Q4 and full fiscal year 2026 do not include anything from the Marriott Property Management System PMS project. Fiscal 2026, the year ending March 2026, was a record global sales year overall. It was a record best sales year and well more than double the previous year's sales level for the managed food services, FSM vertical. A record best sales here for international sales. A record sales here by a good distance for subscription SaaS sales, 29% higher than the previous best prior year, including gaming subscription sales, which were 27% higher than the previous best gaming subscription sales here. It was a record high sales year for both point of sale POS and POS related modules, and for property management systems, PMS and PMS related modules. While the PMS side of our business obviously continues to make great progress, fiscal year 2026 was a particularly excellent year for POS, making a fantastic recovery from the challenges faced during the previous couple of years. and finishing as the best year for the POS product set in our history. With the modernized and unified POS ecosystem now working well at hundreds of sites, we are back to being a very strong POS player in hospitality with growing product-driven competitive advantages. Addition of AI-driven voice and chat ordering features, which are context-aware, like ordering inside Microsoft Teams for our business and industry customers in FSM who serve corporate left areas, with support for Slack coming up soon, ordering through Amazon Alexa for our senior living customers, ordering on a concierge app or tablet for hotel guests. Such additions are bringing home with greater emphasis the competitive advantages of a unified POS ecosystem. Fiscal 2026 full-year retained recurring bookings. Annual 12-month value of SaaS fees plus maintenance for perpetual licenses sold during the year. Net of ARR lost through customer churn. This net number, which is a crucial leading indicator of future recurring revenue growth and a metric we constantly monitor internally, was an all-time record by a long distance. during fiscal 2026, exceeding the previous best prior year by an impressive 43%. While our recurring fee sales bookings are at the highest levels we've ever seen, the customer retention rate also being at better than world-class levels makes it a virtuous double benefit combination, driving recurring revenue levels forward at an excellent rate. Overall, the January to March period, fourth quarter of fiscal 2026, was a blockbuster best sales quarter ever, beating the previous best level which was achieved during Q4 last fiscal year. It was the highest ever sales quarter for the managed food services, FSM vertical. Gaming sales during the quarter improved sequentially by nearly 60%, that is 6-0. improved sequentially by nearly 60% over Q3 of fiscal 2026 and was also an excellent sales period for every other sales vertical. This was an excellent overall business quarter in various ways, breaking records all over the place. However, it is always best to judge our business progress on an annual basis. There is no guarantee that each upcoming quarter will be a record. We can however state with a fair degree of certainty that next year fiscal 2027 is well positioned to be a record best year for sales revenue and profitability this is a business that should be judged on annual results and full year guidance levels with respect to signed sales agreements during january to march q4 fiscal 2026 We added 20 new customers, excluding Book for Time Spa. These new customer deals averaged seven products each, and 19 of the 20 were subscription-based. We also added 85 new properties during the quarter, which did not have any of our products before, but the parent company was already a customer. Of the 105 new properties added during the quarter across new and current customers, excluding the 22 new customer properties who purchased Book4Time SPA, 103 were either partially or fully subscription software license-based. There were also 129 instances of selling at least one additional product to properties already running one or more of our other products. These 129 instances involve sales of a total of 345 products. Both these numbers, 129 new product wins and 345 new products sold in those wins, are quarter record levels. There is ample evidence that our business levels and market share gains are operating at the best levels we've ever seen. To reiterate, while this was a record quarter in many ways, The more crucial fact is fiscal 2026 was a record year. It is best to judge our business on an annual basis. Sales win-loss ratios remained remarkably impressive during the quarter and during the entire fiscal year. The record sales performance during fiscal 2026 reflects the compounding competitive advantage of our product ecosystem, and AI has become a powerful accelerant on top of that solid foundation. The AI-based capabilities we've introduced during recent months and those planned for deployment in the quarters ahead are only possible because of two durable, hard-to-replicate assets. A modern cloud-native product ecosystem built over the last several years and deep hospitality domain knowledge accumulated over decades as the industry's trusted systems of record for mission-critical business operations. This distinction matters. AI tools are widely available. What is not widely available is the combination of AI domain expertise and a comprehensive trusted data foundation structured by the governance, information security, and personally identifiable information, PII, controls that are critical for hospitality enterprise operations. In an industry where guest identity, preference, and transaction data flows across every touchpoint, from check-in to spa to dining to golf to activities to loyalty promotion systems and much more, data privacy and governance are not just compliance checkboxes. They are the basis of guest trust and, by extension, operator trust in us. Our AI strategy is built on that foundation, responsible, governed, and grounded in real mission-critical hospitality data. We have defined four distinct pillars in understanding how our customers will use AI. Agentic AI, multimodal interfaces, hyper-personalization, and intelligent revenue optimizations. We have now crossed an important threshold. Our systems of record are becoming intelligent systems of action. We are in the process of introducing an AI-powered revenue intelligence layer woven across the full product ecosystem that converts transactional data from across the entire hospitality enterprise into proactive, real-time operational decisions. What makes this possible is not just the intelligence layer itself, it is the architecture beneath it. Our ecosystem is not just a collection of integrations or marketplace solutions. It is built with interoperability by design, from PMS and POS to spa, golf, activities, and inventory. That architecture allows us to optimize for what matters most at the property level, total revenue per guest. not just room revenue and isolation, not just F&B revenue as a separate metric, but the full economic value of every guest interaction across every department. That is a fundamentally different optimization target and value proposition, which requires the kind of last mile system of action products that only a natively integrated ecosystem can deliver. We are also deploying AI agents directly inside our products. The front desk agent in our PMS, for example, functions as the digital twin of the front desk employee, handling routine operational tasks so that the hotel staff are freed to focus entirely on the guest in front of them. That is the philosophy underlying our agentic AI pillar, not automation for its own sake, but removing the cognitive overhead of routine operations so that hospitality professionals can deliver the human experience guests remember and will come back for. At our recently concluded Inspire Customer User Conference, we saw record customer attendance and featured eight main stage sessions led by customers sharing measurable operational gains achieved through use of Agilis' products. We launched two entirely AI-native modules, revenue intelligence, and CRS. The first beta implementations of these modules at customer sites are expected to happen later this fiscal year. The revenue intelligence tool has been designed to enable true operational intelligence across all sections of a property and is not just about room rates. Such a tool can only be built on top of a modern ecosystem of software solutions that covers the entire gamut of property operations. We also believe that a well-integrated CRS PMS set of solutions will become vital for hotel operations in the future and we are well on our way towards making that possible. As the initial launch of these modules is only for current customers, these two solutions may not play a major part in our $300 million to $500 million annual revenue growth journey that is becoming increasingly more visible and real for us now, but could play a major role in future years as we work through the growth path from $500 million to a billion dollar annual revenue level. What would historically have taken years to develop will now get delivered in a matter of months. Like other enterprise software companies, we are seeing meaningful AI-driven improvements in development efficiency. But our situation carries an additional multiplier. The ecosystem foundation, the domain logic, the shared data fabric, the interoperability built across every product acts as a compounding base that amplifies those efficiency gains with each release cycle. The result? is an accelerating innovation velocity and one that supports our ability to sustain product pricing at levels that are both fair to us and to our customers. While on the subject of pricing, our software licensing models have never been user-based. They are based on parameters like number of hotel rooms, number of POS terminal endpoints, number of spa treatment rooms, golf courses, dining venues, retail outlets, and sites, each of which do not decrease when user efficiency is improved through use of AI or due to any other reason. With that, onto a few details on revenue and profitability. Fiscal 2026 fourth quarter revenue was a record $82.9 million. This was the 17th consecutive record revenue quarter. Q4 subscription revenue was a record $36.9 million and grew by 24.1% from the comparable prior year quarter. This was the 18th consecutive quarter of year-over-year subscription growth of at least 23%. Q4 subscription revenue was also a record 68% of total recurring revenue. Overall recurring revenue, including maintenance fees for perpetual licenses, was a record 54.4 million and 65.5% of total revenue. Fiscal 2026 fourth quarter subscription revenue pertaining to POS and POS-related modules increased by 19%, that is one nine, increased by 19% year-over-year, while subscription revenue pertaining to PMS and PMS-related modules increased by 34%. Add-on modules across both PMS and POS, including book for times par, constituted 38% of total subscription revenue. Fiscal year 2026 Q4 services revenue of $18.2 million was tied with Q2 as the best services revenue quarter so far, despite a significant decline in services revenue pertaining to customer-paid product development efforts. Those development projects have, for the most part, gone past the product development stages and are in the deployment phase now. Fiscal 2026 Q4 was the highest services quarter with respect to revenue only from software implementation services. The sum of product, services, and recurring revenue backlog levels grew to record levels despite a record implementation services quarter and the volume of installation success during the quarter because it was an even better sales success quarter. We continue to exclude the Marriott PMS project from our backlog numbers. We are starting fiscal 2027 with excellent visibility into the year. Total subscription ARR installed during fiscal year 2026 was 32% higher than during fiscal year 2025. The increased velocity of project implementations and resulting recurring revenue growth has a lot to do with the modernized products becoming exponentially easier to implement, greater use of AI tools to improve implementation efficiencies, and higher staffing levels compared to the past. We are currently, for the most part, sufficiently well staffed in various business areas, including product development, sales, and professional services, to fuel continued business expansion during the short and medium term. After starting the year with a full year revenue guidance level of $308 million to $312 million, Full fiscal year 2026 revenue ended up at a record 319.3 million, 15.9% higher than the previous full fiscal year, despite one-time product revenue consisting of perpetual software licenses and hardware resold remaining flat year over year at $41.2 million. We expect one-time product revenue to remain at these levels as customers continue to augment traditional hardware needs with consumer market-available mobile devices taking advantage of the modernized POS terminals that allow it and their preference for cloud-based SaaS software solutions continuing to dominate demand and reduce need for perpetual software licenses. Lack of growth in the product revenue bucket is in fact a good positive indicator of our growth as a cloud-native, SaaS-based enterprise software business unit. Full fiscal year 2026 services revenue was a record $72.2 million, 12.4% higher than the previous year. Traditional implementations-related services revenue increased impressively year over year. We expect services revenue to remain on a steady growth path each year. Full fiscal year 2026 revenue included a record $205.9 million in recurring revenue, 21.1% higher than the previous year. Of this recurring revenue, subscription revenue was a record $137.1 million, 30.2%, that is three zero, 30.2%, higher than the previous year, well ahead of the beginning of the year guidance level of 25%. Fiscal 2026 was the fifth consecutive year of organic subscription revenue growth of at least 25% and total subscription growth of at least 27%. Fiscal year 2026 full year maintenance-related recurring revenue was a record $68.9 million. Our subscription revenue growth continues to come from, for the most part, from new customer, new site, and new product sales success, and is not dependent on cannibalization of annual maintenance generating on-premises installations. The Marriott PMS project continues to make good progress and is on plan. All personnel involved in this complex technology transformation project across all parties involved continue to do great work and execute extremely well. We are proud to be associated with this project. One of the biggest and most complex, if not the biggest, technology transformation project ever undertaken in this industry. Having been effective thus far in contributing to the success of such a massive project, we have good reasons to believe that no future achievement in this hospitality industry will be beyond our reach. We expect full year fiscal 2027 revenue to be in the range of $365 million to $370 million, with product revenue remaining flat and steady growth in services revenue. We expect fiscal year 2027 to be the third consecutive year of subscription revenue growth of at least 30%. That is three zeros. of at least 30%. Apart from increasing the pace of competitive product differentiation of our hospitality-focused software solutions ecosystem, sweeping AI-related changes across the entire organization are also helping us improve operating leverage across several business areas. We expect adjusted EBITDA by revenue to grow from 21.2% in fiscal 2026 to 24% in fiscal 2027. Q1 is always a heavy cost period for us, with several one-time expenses happening during the quarter, including the high-cost customer user conference. We expect adjusted EBITDA by revenue during Q1 to be only 16% to 17%, that is 1.6% to 1.7%. We expect adjusted EBITDA by revenue during Q1 to be only 16% to 17% and build upwards from there, as was the case during fiscal 2026. And we expect to exit fiscal 2027 at a rate well above the annual expectation of 24%. A 30% full year adjusted EBITDA by revenue profitability level is not too far off for our business now as we continue to shift the product mix increasingly towards recurring revenue and also improve operating leverage thanks to various factors, including judicious use of AI to increase efficiencies. Fiscal 2027 should be the first year when product development-related operating expenses, excluding share-based compensation, should be down to the high teens after being around the 22% mark a few years ago. With that, let me hand over the call to Dave for further color on our financial results and operational execution.