Core Insights - The 2023 UK Hospitality Impact Study indicates that only 27% of UK travelers rebooked a hotel in the past year, with 85% altering their holiday plans due to the cost-of-living crisis [1][2] - Economic concerns have led to a significant decrease in leisure spending, with 44% of UK consumers reporting reduced spending and 41% stating they traveled less [2][3] - Enhancing guest retention by just 5% could potentially increase profits by up to 25%, highlighting the importance of understanding guest behavior [3] Guest Preferences and Expectations - Key factors influencing rebooking include: - 64% desire reduced wait times across all touchpoints - 62% prefer tailored experiences - 62% value strong loyalty programs - 61% want flexibility in managing their stay - 58% appreciate small surprises during their stay [3][4] - For guests who did rebook, 48% cited exceptional end-to-end experiences as a primary reason, while 42% highlighted friendly and courteous staff [4] Industry Trends and Recommendations - The survey underscores the necessity for hotels to create exceptional experiences at every opportunity, with a focus on personalization and flexibility [5] - Investing in technology is crucial for empowering staff to enhance guest experiences and build lasting connections [5] - Small adjustments to business models can significantly boost profitability, with loyalty being a critical factor for success [5]

Core Insights - Analysts project Agilysys (AGYS) will report quarterly earnings of $0.23 per share, reflecting an 11.5% decline year over year, while revenues are expected to reach $60.03 million, marking a 20.2% increase from the same quarter last year [1] - The consensus EPS estimate has remained unchanged over the last 30 days, indicating analysts have reassessed their initial estimates [1] Revenue Projections - Analysts estimate 'Net revenue- Products' will be $12.51 million, representing a 17% increase from the year-ago quarter [2] - The projected 'Net revenue- Subscription and maintenance' is $35.68 million, indicating an 18.3% increase from the prior-year quarter [2] - 'Net revenue- Professional services' is expected to reach $11.84 million, reflecting a 30.6% increase from the year-ago quarter [2] Stock Performance - Agilysys shares have shown a return of -14.2% over the past month, contrasting with the Zacks S&P 500 composite's +1.2% change [3] - With a Zacks Rank 3 (Hold), AGYS is anticipated to perform in line with the overall market in the near future [3]

Industry Insights - More than one-third of adults expect to visit a casino in the next 12 months, indicating a strong potential market for the gaming industry [1] - The American Gaming Association Outlook highlights the competitive landscape with over 1,000 casinos available across the United States [1] Company Initiatives - Grand Casino Hotel Resort is investing in advanced hospitality technology from Agilysys to enhance guest experience and retention [1] - The investment includes a cloud-based application for restaurant reservations that allows patrons to choose their own seats, optimizing space utilization [1] - An award-winning point-of-sale (POS) system has been implemented to improve transaction efficiency and security across the property [2] - A contactless mobile self-service food and beverage ordering system has been introduced to enhance the ordering experience for guests [2] - The resort has adopted a commission-free web booking system for rooms and activities, promoting upselling of amenities [2] - An innovative procure-to-pay system has been implemented to enhance productivity and optimize vendor relationships [3] - A spa management application has been introduced to ensure an exclusive experience for guests while optimizing resource utilization [3] - A golf course management application has been developed to deliver personalized experiences and streamline operations [3] Operational Benefits - The integration of Agilysys solutions has improved both hotel and casino operations, allowing for seamless use of player club points and gift cards [3] - The technology investment has reduced the need for maintaining proprietary infrastructure, making it a cost-effective solution for the resort [3] - Agilysys emphasizes that technology empowers gaming and hospitality players to differentiate themselves in a competitive market [4]

Company Announcement - Agilysys, Inc. will release its fiscal 2024 third quarter results after the market closes on January 22, 2024 [1] - A conference call and webcast will be hosted at 4:30 p.m. ET on the same day, open to the public [1] - Participants must register for the call to receive dial-in instructions and a unique PIN number [1] Company Overview - Agilysys provides state-of-the-art software solutions and services aimed at achieving High Return Hospitality by maximizing Return on Experience (ROE) [2] - The company serves a diverse customer base, including hotels, resorts, casinos, dining providers, and more, focusing on enhancing guest experiences and operational efficiency [2] - Agilysys' offerings include Property Management Systems (PMS), Point-of-Sale (POS) solutions, and Inventory and Procurement (I&P) systems [2]

Revenue Growth - Total net revenue increased by $10.9 million, or 22.8%, during the second quarter of fiscal 2024 compared to the same period in fiscal 2023[79] - Total net revenue increased by $19.4 million, or 20.4%, in the first half of fiscal 2024 compared to the same period in fiscal 2023, reaching $114.7 million[95] - Products revenue rose by $2.1 million, or 19.8%, driven by higher sales to new and existing customers[79] - Products revenue rose by $3.8 million, or 17.7%, driven by higher sales to new and existing customers[95] - Subscription and maintenance revenue grew by $5.2 million, or 18.0%, with subscription-based service revenue increasing by 29.1%[79] - Subscription and maintenance revenue grew by $9.6 million, or 16.9%, with subscription-based service revenue increasing by 28.3%[95] - Professional services revenue surged by $3.6 million, or 43.8%, due to increased sales and service activity[79] - Professional services revenue increased by $6.0 million, or 35.5%, due to heightened sales and service activity[95] Profitability - Gross profit increased by $5.7 million, or 19.5%, while gross profit margin decreased from 61.5% to 59.9%[81] - Gross profit increased by $10.3 million, or 17.8%, while gross profit margin decreased from 60.7% to 59.4%[96] Operating Expenses - Operating expenses, excluding other charges, rose by $5.0 million, or 18.8%, compared to the second quarter of fiscal 2023[82] - Operating expenses, excluding other charges, rose by $11.0 million, or 21.4%, compared to the first half of fiscal 2023[97] - Product development expenses increased by $2.0 million, or 15.9%, due to higher salaries and benefits[82] - Sales and marketing expenses grew by $1.1 million, or 20.3%, attributed to increased marketing activities and commissions[83] - General and administrative expenses increased by $1.2 million, or 16.1%, due to higher salaries and benefits[84] Cash Flow and Financial Position - Cash flow from operating activities was $5.5 million, attributed to cash-based earnings of $14.5 million[110] - Cash on hand as of September 30, 2023, was $107.4 million, with 93% located in the United States[109] - Interest income increased significantly to $2.3 million from $0.5 million in the prior year[101] Tax Rate - The effective tax rate for the three months ended September 30, 2023, was 6.1%, compared to (4.6)% for the same period in 2022[90] - The effective tax rate for the first half of fiscal 2024 was 9.6%, up from 3.5% in the same period last year[104]

Financial Data and Key Metrics Changes - Fiscal 2024 Q2 revenue reached a record $58.6 million, a 22.8% increase from $47.7 million in the prior year period, marking the seventh consecutive record revenue quarter [17][23][29] - Recurring revenue grew 18% year-over-year, with subscription revenue increasing by 29.1% [17][25] - Adjusted EBITDA for the quarter was $8.1 million, representing 13.7% of revenue, which is ahead of expectations [22][28] Business Line Data and Key Metrics Changes - Product revenue increased by 19.8% to $12.6 million, while professional services revenue surged by 43.8% to a record $11.7 million [23][24] - Subscription revenue constituted 53.6% of total recurring revenue, up from 48.9% in the same quarter last year [18][25] - Services revenue improved to $11.7 million, with services margins at 23.6%, slightly below the 25% target [20][26] Market Data and Key Metrics Changes - Sales from non-gaming resorts, hotels, and cruise ships showed significant growth, with international sales in Europe and APAC also performing well [10][11] - The company added 17 new customers in Q2, with 76% being fully subscription agreements, and 70 new properties added [15][16] - The average deal size for new property deals was approximately 25% higher than previous quarters [15] Company Strategy and Development Direction - The company is focused on enhancing its product offerings and expanding its market share, particularly in the Property Management System (PMS) segment [14][31] - Continued investment in sales and marketing is planned to maintain business momentum and capitalize on growth opportunities [31] - The company aims to improve service margins while ensuring customer satisfaction remains high [20][31] Management's Comments on Operating Environment and Future Outlook - Management noted no signs of slowdown in business momentum despite macroeconomic challenges, emphasizing the hospitality industry's ongoing need for technology solutions [11][30] - The company expects subscription revenue growth for the full fiscal year 2024 to be 28%, up from previous guidance of 25% [21][29] - Management remains optimistic about the future, citing strong sales momentum and a robust backlog [30][31] Other Important Information - The company raised its full-year fiscal 2024 revenue guidance to $235 million to $238 million, reflecting better-than-expected project implementations and sales performance [21][29] - Cash and marketable securities as of September 30, 2023, were $107.4 million, indicating a stable financial position [29] Q&A Session Summary Question: Growth rate breakdown between new logo wins, expansion with existing clients, and full expansion - Management indicated that new customer sales have significantly increased compared to the previous year, contributing to growth alongside existing customer expansions and larger deal sizes [35][36] Question: Margin expansion breakdown - Management noted that gross margins were ahead of expectations due to higher revenue levels, with subscription revenue contributing positively to margin expansion [38][39] Question: Impact of the Marriott contract on sales - Management highlighted that superior marketing efforts and product demonstrations are driving opportunities, with a focus on establishing more reference customers [43][44] Question: Headcount additions and capacity for service delivery - Management confirmed that while headcount is settled, there is still room for incremental investments if market conditions warrant [46][47] Question: Playing offense versus defense in sales - Management explained that the company is now focused on sharing positive customer success stories rather than addressing complaints, indicating a shift in customer engagement strategy [49][51] Question: Cybersecurity impacts on sales - Management stated that while cybersecurity incidents are common in hospitality, they have not directly impacted sales, and the company is well-prepared to assist customers [52][54] Question: Performance of managed food service - Management noted that while the FSM business is recovering, resorts and cruise ships have been standout performers in recent sales [58] Question: Opportunities with mid-size management companies - Management indicated that progress with mid-size management companies is ongoing, primarily focusing on point-of-sale solutions [60][62] Question: Growth potential for POS and PMS - Management expressed confidence in the growth potential for both POS and PMS, with POS being more established but still having low market share [64][65]

Revenue Growth - Total net revenue increased by $8.6 million, or 18.0%, during the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023[82] - Products revenue increased by $1.7 million, or 15.7%, driven by higher sales and deliveries to new customers and expansion with existing customers[84] - Subscription and maintenance revenue rose by $4.4 million, or 15.9%, attributed to continued growth in subscription-based service revenue, which increased by 27.4%[84] - Professional services revenue increased by $2.4 million, or 27.7%, due to higher sales and service activity from new and existing customers[84] Profitability and Expenses - Total gross profit increased by $4.6 million, or 16.0%, while gross profit margin decreased from 60.0% to 59.0%[85] - Operating expenses increased by $6.1 million, or 24.1%, during the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023[86] - Product development expenses rose by $1.8 million, or 15.3%, due to increased hiring and salary costs[86] - Sales and marketing expenses increased by $1.9 million, or 34.9%, driven by higher marketing activity and commission expenses[87] - General and administrative expenses increased by $2.0 million, or 27.4%, due to higher salaries and cloud computing subscription charges[88] Cash Management - Interest income increased significantly to $1.1 million from $0.1 million, reflecting improved cash management[89] - As of June 30, 2023, the company had cash and cash equivalents of $107.1 million, with 92% located in the United States[96][97] - Cash flow from operating activities for the three months ended June 30, 2023, was $22 thousand, a decrease from $101 thousand in the same period of 2022[98] - Cash-based earnings were $5.9 million, with net income of $1.5 million and non-cash expenses of $4.4 million[99] - Cash flow used in investing activities was $(3,067) thousand, primarily for property and equipment purchases[100] - Cash flow used in financing activities was $(2,702) thousand, including $1.8 million for share repurchases and $0.9 million in preferred stock dividends[100] Financial Position and Risks - There were no significant changes to contractual obligations as of June 30, 2023, except for new operating leases[101] - The company has not entered into any off-balance sheet arrangements that could affect its financial condition[102] - There have been no material changes in significant accounting policies since March 31, 2023[103] - Forward-looking statements indicate management's expectations but involve risks and uncertainties that could lead to different outcomes[104] - There have been no material changes in market risk exposures since March 31, 2023[105]

Financial Data and Key Metrics Changes - Fiscal 2024 Q1 revenue reached a record $56.1 million, an 18% increase from $47.5 million in the prior year [11][18] - Adjusted EBITDA for the quarter was $6.3 million, representing 11.2% of net revenue, slightly ahead of expectations but the lowest EBITDA percentage in three years [15][23] - Free cash flow was a loss of $3 million compared to breakeven in the prior year quarter, affected by working capital adjustments typical in the first half of the year [16][24] Business Line Data and Key Metrics Changes - Software subscription revenue grew by 27.4%, constituting 52.2% of total recurring revenue [11][20] - Professional services revenue increased by 27.7% to a record $11.2 million, with expectations for continued sequential growth [12][19] - Product revenue increased by 15.7% to $12.8 million, expected to level out around $12 million per quarter for the remainder of the year [19] Market Data and Key Metrics Changes - The best sales quarter in APAC in about 3.5 years, with strong performance in the U.S. Hotels, Resorts, and Cruise Ships vertical [7][24] - Total backlog across products, services, and recurring revenue was 96% of record levels, 46% higher than the end of Q1 last fiscal year [8][18] Company Strategy and Development Direction - The company is focused on enhancing its end-to-end hospitality-focused software solutions, with a strong emphasis on cloud-native technology [6][14] - Management highlighted the importance of improving services implementation efficiency to match sales success, indicating a positive outlook for future growth [8][13] - The company aims to maintain competitive pricing while ensuring value through its comprehensive software solutions [48][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving fiscal 2024 revenue and profitability guidance, citing strong sales momentum and backlog levels [27][24] - The company noted that the first half of the fiscal year tends to be more challenging for cash management and profitability, with expectations for improved performance in the second half [15][17] - Management acknowledged the competitive landscape, particularly in the APAC region, but indicated a bullish outlook following recent sales successes [62] Other Important Information - The company has added 20 new customers in Q1, with 18 signing full subscription SaaS agreements [9] - The average tenure of sales personnel is above 7.5 years, with a significant contribution from newer team members [10] Q&A Session Summary Question: Commentary on PMS pipeline and larger deals - Management indicated that there are several significant deals in progress, not limited to hotel chains, but also multi-property opportunities [30] Question: Details on professional services team headcount - Management confirmed that hiring has gone well, with the team nearly at the target headcount for the fiscal year [33] Question: Updates on the Marriott deal - Management reported that hiring for the services team is on track, and deliverables for the Marriott project are progressing according to plan [38] Question: Record sales quarter and go-to-market strategy - Management attributed the record sales to a combination of new customers, new properties, and upselling to existing customers, supported by enhanced marketing efforts [41][44] Question: Pricing strategy in the market - Management stated that they remain competitive in pricing but are not the lowest vendor, focusing on the value of their comprehensive solutions [48][49] Question: Guidance for the fiscal year - Management reiterated that they are on track for the fiscal year, with Q1 performance slightly above plan, but guidance remains unchanged [51][70]

Revenue Growth - Total net revenue increased by $35.4 million, or 21.8%, in fiscal 2023 compared to fiscal 2022, reaching $198.1 million[167] - Products revenue rose by $7.7 million, or 21.4%, driven by higher sales to new and existing customers[168] - Subscription and maintenance revenue grew by $19.3 million, or 19.5%, with subscription-based revenue increasing by 27.5%[168] - Professional services revenue increased by $8.4 million, or 30.4%, due to heightened sales and service activity[168] - Total net revenue for fiscal 2022 increased by $25.5 million, or 18.6%, compared to fiscal 2021, reaching $162.6 million[185] - Product revenue rose by $9.2 million, or 34.6%, driven by higher sales as customers reopened their locations[186] - Subscription and maintenance revenue grew by $10.4 million, or 11.7%, with subscription-based revenue increasing by 28.0%[186] Profitability - Gross profit increased by $19.3 million, or 19.0%, with a gross profit margin of 61.0%, down from 62.4%[169] - Operating income rose to $12.9 million, with an operating income percentage of 6.5%, up from 3.9%[167] - Operating income improved to $6.3 million in fiscal 2022 from a loss of $20.96 million in fiscal 2021, marking a 130.2% increase[185] - Gross profit increased by $12.2 million, or 13.6%, while gross profit margin decreased from 65.2% to 62.4%[187] Operating Expenses - Operating expenses, excluding legal settlements and other charges, increased by $14.5 million, or 15.6%[170] - Sales and marketing expenses surged by $8.0 million, or 54.2%, due to increased marketing activities and key hires[172] - Operating expenses decreased by $14.9 million, or 13.9%, compared to fiscal 2021, representing a 21.5% reduction as a percentage of total revenue[188] Cash Flow and Liquidity - Cash flow from operating activities was $34.5 million in fiscal 2023, up from $28.5 million in fiscal 2022[205] - As of March 31, 2023, the company had $112.8 million in cash on hand, providing adequate funds for liquidity requirements[204] - Cash flows provided by operating activities were $28.4 million in fiscal 2021, primarily due to an operating loss of $21.0 million adjusted for $44.0 million in non-cash expenses[207] - Cash flows used in investing activities in fiscal 2023 were $6.9 million, which included $7.3 million in purchases of property and equipment[208] - Cash flows used in investing activities in fiscal 2022 were $25.7 million, primarily due to $24.5 million in cash paid for business combinations[209] - Cash flows used in financing activities in fiscal 2023 were $11.1 million, consisting of $9.3 million in share repurchases and $1.8 million in preferred stock dividends[210] Tax and Deferred Assets - The effective tax rate for fiscal 2023 was 7.5%, significantly higher than the previous year's 0.5%[181] - The company recorded $132.0 million in federal net operating loss carryforwards expiring between fiscal years 2033 to 2039[201] - Valuation allowances for deferred tax assets may be released within the next 12 months, potentially resulting in significant income tax benefits[184] Revenue Recognition - The company recognizes subscription service revenue over a one-month period based on typical monthly invoicing and renewal cycles[223] - Professional services revenues are recognized over time as the services are performed, reflecting the simultaneous receipt and consumption of benefits by the customer[225] - The company utilizes the market approach to determine standalone selling prices for its goods and services based on observable data points from customer contracts[226] International Operations - Revenue from international operations represented 7% of total revenue for fiscal years 2023 and 2022, and 8% for fiscal year 2021[231] Other Financial Information - The cash surrender value of corporate-owned life insurance policies was recorded at $1.0 million, with future proceeds owed to beneficiaries approximating $0.1 million[213] - The company has not entered into any off-balance sheet arrangements that could affect its financial condition[214] - Interest income significantly increased to $2.2 million from $59, reflecting higher earnings on cash equivalents[177]

Financial Data and Key Metrics Changes - Fiscal 2023 full year revenue reached $198.1 million, a 22% increase from $162.6 million in fiscal 2022, which was 19% higher than $137.2 million in fiscal 2021 [17][33] - Q4 fiscal 2023 revenue was $52.9 million, a 13.6% increase from $46.6 million in Q4 fiscal 2022 [32] - Recurring revenue for fiscal 2023 was approximately $118 million, with subscription revenue increasing 27.5% year-over-year to $58.2 million [18][35] Business Line Data and Key Metrics Changes - Global software subscription sales in fiscal 2023 were 18% higher than fiscal 2022, marking a record year [10] - Managed food services sales approached pre-pandemic levels, indicating a strong recovery [9] - APAC sales increased but remained below pre-pandemic levels, with ongoing challenges in decision-making processes [9][10] Market Data and Key Metrics Changes - EMEA region saw a 46% increase in sales during fiscal 2023 [8] - The gaming casino sales vertical in EMEA and the hotels, resorts, and cruise ships vertical achieved record sales in fiscal 2023 [9] - APAC remains a challenging market, but there are expectations for improved sales in fiscal 2024 [10][63] Company Strategy and Development Direction - The company is focused on expanding its product portfolio and enhancing its cloud-native technologies to maintain competitive advantages [6][7] - Significant investments are planned for fiscal 2024 to support growth opportunities, particularly in cloud management and product development [29][30] - The company aims to triple its current PMS install base of about 300,000 rooms over the next three to four years, driven by the Marriott project [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning for solid revenue growth despite macroeconomic volatility [6][7] - The company anticipates fiscal 2024 revenue growth of 16% to 19%, driven by subscription revenue growth of 25% [28][41] - Management noted that technology investment decisions in the hospitality sector are less impacted by economic conditions compared to lower-end markets [45] Other Important Information - Fiscal 2023 was a record year for services revenue, exceeding previous highs [12] - The company entered fiscal 2024 with record backlog levels across all revenue lines, indicating strong future revenue potential [23] - Cash and marketable securities as of March 31, 2023, were $112.8 million, up from $97 million a year earlier [39] Q&A Session Summary Question: Impact of Marriott announcement on HRC pipeline - Management noted that the Marriott announcement has increased credibility and participation in PMS deals, leading to improved sales momentum [49][51] Question: Timing of revenue recognition for Marriott project - Management indicated that the rollout for the Marriott project is expected to begin in early fiscal 2026, with ongoing product enhancements throughout fiscal 2024 [54] Question: Increase in expenses for growth initiatives - Management explained that the increase in expenses is necessary to support large projects and expand product development teams, particularly for the Marriott project [58][59] Question: Performance of managed food services and APAC market - Management highlighted improvements in managed food services due to recovery in healthcare and education sectors, while APAC remains a challenging market with expected improvements in fiscal 2024 [61][63] Question: Backlog growth and revenue guidance - Management confirmed that backlog growth is expected to exceed revenue growth due to implementation delays, with a strong sales momentum anticipated [66][78]