Financial Data and Key Metrics Changes - Fiscal 2023 Q1 revenue reached a record $47.5 million, a 22.7% increase from $38.7 million in the prior year [23] - Recurring revenue grew to $27.7 million, with a nearly 30% year-over-year increase in subscription revenue [13][24] - Adjusted EBITDA for the quarter was $6.7 million, representing 14.1% of revenue, consistent with expectations [20][26] - GAAP net income was $3 million, or $0.10 per diluted share, marking the best quarter in a while [20] Business Line Data and Key Metrics Changes - Product revenue increased by 25%, while professional services revenue rose by 30.9% compared to the prior year [23] - Subscription revenue comprised approximately 47% of total recurring revenue, down from about 48% in the previous quarter [24] - Add-on software modules accounted for 15% of subscription revenue, up from 10% in the prior year [25] Market Data and Key Metrics Changes - Sales from the managed food services division, particularly in higher education and healthcare, showed significant recovery [6] - Business from Europe (EMEA) is stable but not growing as desired, while the hospitality industry in Asia continues to face challenges due to lockdowns [6] Company Strategy and Development Direction - The company is focused on increasing sales and marketing investments to drive growth and capitalize on sizable sales opportunities [7][29] - There is a commitment to product innovation and customer service to create a competitive advantage [15][30] - The company expects fiscal 2023 annual revenue to be in the range of $190 million to $195 million, driven by a 30% year-over-year subscription revenue growth [22] Management's Comments on Operating Environment and Future Outlook - Management noted that customers are confident and making long-term technology decisions despite economic concerns [33][34] - The company is experiencing delays in technology adoption as customers transition from old to new products, but overall progress is being made [41][42] - Management expressed optimism about future growth, citing strong customer retention rates and ongoing demand for technology solutions [15][29] Other Important Information - The company reported a gross margin of 60%, consistent with the previous quarter, and expects margins to remain in the high 50s to low 60s range [18] - Cash and marketable securities as of June 30, 2022, were $94.9 million, a decrease from $97 million on March 31, 2022, primarily due to timing of payments [26] Q&A Session Summary Question: Insights on customer sentiment regarding future projects - Management indicated that customers are confident and have good visibility on bookings, continuing to make significant technology investments [33][34] Question: Feedback on new cloud-based PMS products - Early feedback on the new PMS products has been positive, with installations settling well and contributing to sales momentum [36][37] Question: Pipeline and purchase decision delays - Management acknowledged delays in purchase decisions due to the transition from old to new products but noted that many customers are making the switch [41][42] Question: Customization requirements for new deals - There is no significant customization required; instead, different customer requirements are being integrated into the base product [45][46] Question: Customer retention and subscription growth breakdown - Management confirmed a strong customer retention rate of over 95% and noted that subscription growth is a combination of new and existing customers [48][51]

Revenue Performance - Total net revenue increased by $25.5 million, or 18.6%, in fiscal 2022 compared to fiscal 2021, reaching $162.6 million[143] - Products revenue rose by $9.2 million, or 34.6%, driven by higher sales as customers reopened their locations[147] - Support, maintenance, and subscription services revenue grew by $10.4 million, or 11.7%, with subscription-based revenue increasing by 28.0%[147] - Total net revenue decreased by $23.6 million, or 14.7%, in fiscal 2021 compared to fiscal 2020, with product revenue down by $17.5 million, or 39.6%[165] - Revenue from international operations accounted for 7% of total revenue in fiscal 2022, down from 8% in 2021 and 9% in 2020[203] Profitability - Operating income improved to $6.3 million in fiscal 2022 from a loss of $20.96 million in fiscal 2021, marking a significant turnaround[144] - Gross profit increased by $12.2 million, or 13.6%, but gross profit margin decreased from 65.2% to 62.4%[148] - Gross profit increased by $8.4 million, or 10.4%, in fiscal 2021, with gross profit margin rising from 50.4% to 65.2%[166] - Operating loss for fiscal 2021 was $20.96 million, improving by $13.1 million or 38.5% compared to fiscal 2020[162] Operating Expenses - Operating expenses decreased by $14.9 million, or 13.9%, as a percentage of total revenue fell by 21.5%[149] - Product development expenses decreased by $9.0 million, or 16.3%, due to a reduction in share-based compensation expenses[149] - Sales and marketing expenses increased by $0.5 million, or 3.8%, reflecting investments in sales teams and marketing activities[151] - General and administrative expenses decreased by $5.5 million, or 16.6%, primarily due to lower share-based compensation expenses[152] - Operating expenses, excluding legal settlements and impairments, increased by $16.8 million, or 18.5%, in fiscal 2021 compared to fiscal 2020[167] - Product development expenses rose by $13.9 million, or 33.5%, in fiscal 2021 due to expansion of R&D teams and share-based compensation charges[167] Legal and Tax Matters - Legal settlements increased by $0.8 million during fiscal 2022 compared to fiscal 2021, attributed to more settlements related to employment and business matters[153] - The effective tax rate for fiscal 2022 was 0.5%, down from 1.0% in the previous year[156] - The effective tax rate for fiscal 2021 was 1.0%, compared to (0.6)% in 2020, primarily due to adjustments to deferred tax assets[175] Cash Flow and Liquidity - For fiscal 2022, cash flows provided by operating activities were $28.5 million, primarily due to a net income of $6.5 million adjusted for $17.7 million in non-cash expenses[180] - As of March 31, 2022, the company had $97.0 million in cash on hand, with 93% of it located in the United States[179] - Cash flows used in investing activities for fiscal 2022 were $25.7 million, mainly due to $24.5 million for business combinations[182] - Cash flows used in financing activities for fiscal 2022 were $4.9 million, primarily for share repurchases of $3.0 million and $1.8 million in preferred stock dividends[184] - The company believes that cash flow from operating activities and access to capital markets will adequately meet its liquidity requirements[179] Federal Net Operating Loss Carryforwards - At March 31, 2022, the company had $196.3 million of federal net operating loss carryforwards expiring between fiscal years 2031 to 2038[160] - The company recorded $199.1 million of federal net operating loss carryforwards that expire between fiscal years 2031 to 2038, and $46.8 million that can be carried forward indefinitely[178] Other Financial Information - The company has not entered into any off-balance sheet arrangements that could affect its financial condition[187] - The cash surrender value of corporate-owned life insurance policies was recorded at $1.0 million as of the balance sheet date[186] - Total other expense, net, was $251,000 in fiscal 2021, compared to a loss of $195,000 in fiscal 2020, reflecting a change of $446,000[173] - Interest income decreased by $273,000, or 71.8%, in fiscal 2021 compared to fiscal 2020[173] - The company recorded no impairments in fiscal 2021, following $23.7 million in impairments in fiscal 2020[171]

Financial Data and Key Metrics Changes - Fiscal 2022 Q4 revenue reached a record $46.6 million, an 18% sequential increase and a 28% increase year-over-year [12][27] - Fiscal 2022 full year revenue was a record $162.6 million, slightly ahead of the annual revenue level achieved during fiscal 2020 [17] - Adjusted EBITDA for Q4 was $7.5 million, approximately 16.1% of revenue, and for the full year, it was $27.3 million [19][20] - Gross margin for Q4 was 59.5%, lower than the previous year due to increased product and services revenue [14][30] Business Line Data and Key Metrics Changes - Subscription revenue grew to 48% of total recurring revenue, the highest level thus far, with a 33% year-over-year increase [13][29] - Subscription software sales of PMS and related modules were 53% higher than the previous best year [11] - Product revenue increased by 60% in Q4 compared to the prior year, while professional services revenue was up 35.4% [27][30] Market Data and Key Metrics Changes - Sales in the APAC region decreased by 15% compared to last year and by about 50% compared to fiscal 2020 [9] - EMEA sales showed a 74% improvement over the prior year, slightly better than fiscal 2020 [9] - The gaming casinos and resort verticals, which represent about 70% of the business, continue to show exceptional strength [7] Company Strategy and Development Direction - The company is focused on transitioning to a cloud SaaS-based business model while maintaining strong product margins [15][16] - The acquisition of ResortSuite is expected to enhance product offerings and customer engagement [22][23] - The company aims to achieve annual revenue in the range of $190 million to $195 million for fiscal 2023, driven by subscription revenue growth of around 30% [25][33] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovery in the hospitality industry, particularly in hotel chains and cruise ships [35] - The company is confident in achieving subscription revenue growth of 30% without needing dramatic increases in bookings [56][58] - Management highlighted the importance of modern technology and integrated solutions as competitive advantages [51] Other Important Information - The company ended fiscal 2022 with a cash balance of $97 million, slightly down from the previous year due to the ResortSuite acquisition [32] - Customer retention levels were reported to be excellent, marking the best year in many years [19] Q&A Session Summary Question: On the PMS side, are there more conversations and demand from hotel customers? - Management confirmed increased conversations and sizable sales opportunities in PMS across hotels, resorts, and gaming customers [40] Question: How is the recovery in Europe and Asia compared to the US market? - Management indicated that Europe is recovering faster than Asia, with significant opportunities emerging in both regions [44] Question: Were there any one-time impacts influencing the year-end results? - Management clarified that there were no one-time impacts; sales were steady throughout the fiscal year [47][48] Question: What is the competitive advantage in terms of product offerings? - Management emphasized the integration of modern technology and end-to-end solutions as key competitive advantages [51] Question: What type of bookings growth is needed to achieve the subscription growth guidance? - Management stated that no dramatic bookings growth is needed, as steady growth will suffice to meet the subscription revenue target [56][58]

Revenue Recognition - Revenue recognized at a point in time totaled $8.1 million and $24.2 million for the three and nine months ended December 31, 2021, compared to $7.6 million and $19.4 million for the same periods in 2020[42]. - Revenue recognized over time totaled $31.4 million and $91.8 million for the three and nine months ended December 31, 2021, compared to $29.1 million and $81.4 million for the same periods in 2020[42]. - Total net revenue for the three months ended December 31, 2021, was $39.46 million, an increase of 7.6% compared to $36.68 million for the same period in 2020[89]. - Total net revenue increased by $15.2 million, or 15.1%, during the first nine months of fiscal 2022 compared to the same period in fiscal 2021[106]. Income and Expenses - Net income for the three months ended December 31, 2021, was $1,542,000, compared to a net loss of $2,070,000 for the same period in 2020[61]. - For the nine months ended December 31, 2021, net income was $4,496,000, an increase from $3,280,000 in the prior year[61]. - Operating income for the three months ended December 31, 2021, was $1.61 million, a significant improvement from an operating loss of $1.81 million in the same period of 2020[89]. - Operating income for the first nine months of fiscal 2022 was $4.8 million, representing an operating income percentage of 4.1%[104]. - Total gross profit increased by $7.9 million, or 12.1%, for the first nine months of fiscal 2022, while gross profit margin decreased from 65.3% to 63.6%[108]. Tax and Legal Matters - The effective tax rate for the three months ended December 31, 2021, was 1.5%, compared to (9.6)% for the same period in 2020[54]. - The effective tax rate for the nine months ended December 31, 2021, was 5.6%, down from 8.7% in the same period of fiscal 2020[114]. - Legal settlements increased by $0.3 million in the first nine months of fiscal 2022 due to a lawsuit settlement involving a former employee[111]. Share-Based Compensation - Total share-based compensation expense for the three months ended December 31, 2021, was $3,839,000, down from $6,630,000 in the same period of 2020[66]. - As of December 31, 2021, total unrecognized share-based compensation expense related to non-vested service condition SSARs was $6.3 million, expected to be recognized over a weighted-average vesting period of 1.2 years[68]. - As of December 31, 2021, total unrecognized share-based compensation expense related to unvested restricted stock was $5.4 million, expected to be recognized over 2.3 years[71]. Operating Costs and Liabilities - Total accrued liabilities decreased from $11.233 million as of March 31, 2021, to $8.385 million as of December 31, 2021[49]. - The company recorded cash payments for operating leases of $3,676,000 for the nine months ended December 31, 2021, down from $4,039,000 in the same period of 2020[51]. - Operating expenses increased by $8.2 million, or 13.9%, in the first nine months of fiscal 2022 compared to the same period in fiscal 2021[109]. Revenue Streams - Products revenue increased by 6.6% to $8.10 million from $7.60 million year-over-year[89]. - Support, maintenance, and subscription services revenue rose by 10.0% to $25.14 million from $22.85 million year-over-year[89]. - Subscription revenue increased by $2.3 million, or 10.0%, during the third quarter of fiscal 2022, driven by sales of newer cloud-native add-on modules[102]. - Professional services revenue increased by $3.7 million, or 23.2%, as customers resumed service activity[106]. Investments and Acquisitions - The company completed the acquisition of ResortSuite Inc. for approximately $25 million, enhancing its offerings in the multi-amenity and resort market[75]. - The company expects to acquire ResortSuite for approximately $25 million, with $22.7 million already paid in January 2022[117]. - The company plans to invest a portion of its cash on hand to enhance existing software products and develop new ones, focusing on customer-first strategies and international expansion[84]. Cash Flow and Debt - Cash flow from operating activities was $21.8 million in the first nine months of fiscal 2022, up from $15.1 million in the same period of fiscal 2021[118]. - Total debt remained approximately $0.1 million as of December 31, 2021, primarily consisting of finance lease obligations[117].

Financial Data and Key Metrics Changes - Total revenue for Q3 fiscal 2022 was $39.5 million, a 7.6% increase from $36.7 million in the same period last year [28] - Recurring revenue increased by 10% year-over-year, reaching $25.1 million, which represented 63.7% of total net revenue [29] - Subscription revenue grew by 24.9% year-over-year to a record $11.7 million, comprising about 46% of total recurring revenue [29] Business Line Data and Key Metrics Changes - Sales in the gaming and destination resort markets, which constitute over 70% of overall sales, have seen record highs [7][10] - Managed food services sales were at only around 60% of pre-pandemic levels, while hotel chains and cruise ships showed partial recovery [10][12] - Total sales of property management systems (PMS) products surpassed pre-pandemic levels during the first three quarters of fiscal 2022 [15] Market Data and Key Metrics Changes - Sales levels in the APAC region were about 40% of pre-pandemic levels, while EMEA performed better, operating at pre-pandemic levels [12] - Overall global sales across all verticals during the first three quarters of fiscal 2022 were at more than 90% of the levels seen during pre-pandemic fiscal 2020 [12] Company Strategy and Development Direction - The company is focusing on cloud SaaS solutions, with over 90% of new customers preferring this model, leading to a reduction in perpetual license sales [8][14] - The acquisition of ResortSuite is expected to enhance the company's product offerings and create revenue synergies by upselling to ResortSuite's customer base [25][27] Management's Comments on Operating Environment and Future Outlook - Management described the current business environment as a "rollercoaster recovery," with expectations for Q4 to be the best revenue quarter yet [6][35] - The company anticipates continued sequential improvement in subscription recurring revenue and overall recurring revenue, with services revenue expected to improve [35] Other Important Information - Adjusted EBITDA for the quarter was $6.6 million, about 17% of revenue, and cash collections have increased significantly, marking the best nine-month cash collection period in history [24][34] - The company has increased its sales capacity by about 20% over the past year and plans to continue hiring in sales and marketing [68] Q&A Session Summary Question: Commentary on delayed project backlog and project initiation - Management noted positive signs in January with services staff booked for implementation projects, indicating a pickup in project activity [39][40] Question: Competitive positioning of PMS products - Management expressed confidence in the competitiveness of their PMS products, highlighting modernization efforts and integration capabilities [43][45] Question: Future business outlook and the "flywheel effect" - Management expects improvements in other business segments over the next two to three quarters as the market recovers, with a virtuous cycle of product installations and increased sales [49][51] Question: Revenue synergies from the ResortSuite acquisition - Management confirmed that the acquisition is primarily about revenue synergies, with significant opportunities to upsell Agilysys products to ResortSuite's customer base [57][64] Question: Sales capacity and performance metrics - Management indicated that sales capacity has increased significantly, with expectations for continued growth in sales per representative due to improved product offerings [71][72]

Revenue Recognition - Revenue recognized at a point in time totaled $7.3 million and $16.1 million for the first three months ended September 30, 2021 and 2020, respectively[42]. - Revenue recognized over time totaled $30.6 million and $60.5 million for the three months ended September 30, 2021 and 2020, respectively[42]. - Contract liabilities at the beginning of the period resulted in revenue recognized of $12.2 million for the three months ended September 30, 2021[44]. - Total net revenue increased by $3.5 million, or 10.3%, in Q2 FY2022 compared to Q2 FY2021, driven by higher sales as customers reopened their locations[91]. - Total net revenue increased by $12.5 million, or 19.4%, during the first half of fiscal 2022 compared to the first half of fiscal 2021[106]. Income and Expenses - For the three months ended September 30, 2021, net income attributable to common shareholders was $523,000, a decrease of 90.2% compared to $5,314,000 for the same period in 2020[62]. - The company recorded a net income of $2,954,000 for the six months ended September 30, 2021, compared to $5,350,000 for the same period in 2020, representing a decline of 44.4%[62]. - Operating income decreased by $2.5 million, or 43.8%, resulting in an operating income percentage of 4.1%[103]. - Total gross profit increased by $1.1 million, or 4.8%, but gross profit margin decreased from 67.4% to 64.0% due to changes in revenue composition[92]. - Total gross profit increased by $7.4 million, or 17.8%, while gross profit margin decreased from 65.0% to 64.1%[107]. - Operating expenses, excluding legal settlements and severance, rose by $5.2 million, or 30.3%, in Q2 FY2022 compared to Q2 FY2021[93]. - Operating expenses, excluding legal settlements and severance, rose by $10.0 million, or 28.6%, during the first half of fiscal 2022[108]. Share-Based Compensation - Total share-based compensation expense for the three months ended September 30, 2021, was $3,342,000, an increase of 166.5% from $1,256,000 in the same period of 2020[67]. - As of September 30, 2021, total unrecognized share-based compensation expense related to non-vested service condition SSARs was $8.9 million, expected to be recognized over a weighted-average vesting period of 1.5 years[69]. - Product development expenses increased by $3.1 million, or 37.8%, due to restored base pay and higher share-based compensation[93]. - Sales and marketing expenses increased by $1.1 million, or 45.7%, due to restored base pay, increased share-based compensation, and higher advertising costs[93]. Taxation - The effective tax rate for the three months ended September 30, 2021, was 4.7%, compared to 2.0% for the same period in 2020[53]. - For the six months ended September 30, 2021, the effective tax rate was 7.5%, significantly higher than 2.3% for the same period in 2020[113]. - The company maintains a valuation allowance offsetting substantially all of its deferred tax assets in the U.S. due to prior period losses[54]. Cash Flow and Liquidity - Cash flow from operating activities was $11.7 million for the first six months of fiscal 2022, an increase from $6.6 million in the same period of fiscal 2021[117]. - Cash and cash equivalents totaled $106.4 million as of September 30, 2021, with 96% located in the United States[115]. - The net increase in cash and cash equivalents was $7.2 million for the first six months of fiscal 2022, compared to $39.1 million in the same period of fiscal 2021[117]. - Cash flow used in investing activities was $(788,000) for the first six months of fiscal 2022, compared to $(473,000) in the same period of fiscal 2021[117]. - Cash flow used in financing activities was $(3.6 million) for the first six months of fiscal 2022, primarily due to share repurchases and preferred stock dividends[118]. Operating Leases and Obligations - Cash payments for operating leases were $2.3 million for the six months ended September 30, 2021, compared to $3.0 million in the same period of 2020[51]. - The company has additional operating leases of approximately $11.8 million that will commence between fiscal year 2022 and fiscal year 2023[58]. - There were no significant changes to contractual obligations as of September 30, 2021, compared to the previous annual report[119]. - The company has not entered into any off-balance sheet arrangements that could affect its financial condition[120]. Market Conditions and Risks - The ongoing impact of COVID-19 on the company's financial condition remains uncertain and may not be fully reflected for some time[26]. - There have been no material changes in market risk exposures since March 31, 2021[124].

Financial Data and Key Metrics Changes - Revenue for Q2 fiscal 2022 was $37.9 million, a 10.3% increase from $34.4 million in the comparable prior year period [19] - Recurring revenue increased by 7.7% year-over-year, representing 63.4% of total net revenue [20] - Adjusted EBITDA for the quarter was $6.3 million, down from $8.6 million in the prior year second quarter [23] Business Line Data and Key Metrics Changes - Subscription revenue reached a record $11.1 million, a 21.7% increase year-over-year [20] - Total ARR of Property Management Systems (PMS) sales increased 115% compared to fiscal 2020 [25] - Add-on software modules contributed 6% of total sales, a significant increase from less than 2 years ago [21] Market Data and Key Metrics Changes - The US gaming and resorts market showed excellent recovery, while managed food services and international regions remained significantly affected by the pandemic [6] - The hotel chain and cruise ship verticals experienced only partial recovery [6] - International regions, particularly Asia, faced challenges due to ongoing travel restrictions [44] Company Strategy and Development Direction - The company is focusing on increasing sales and marketing efforts, with plans to expand the sales force and hire a head of marketing [17] - The modernization of products, including the V1 PMS platform and InfoGenesis POS, aims to enhance competitive positioning [15] - The company is maintaining a revenue guidance range of $160 million to $170 million for fiscal 2022, expecting the second half to be significantly better than the first half [16] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about medium and long-term prospects due to record backlog levels and improving market conditions [16] - The company is seeing improvements in supply chain issues, which are expected to enhance product delivery in the second half of the fiscal year [27] - Labor shortages at customer sites are impacting project implementations, but management anticipates these challenges will ease [36] Other Important Information - Cash and marketable securities improved by $2.5 million to $106.4 million, with cash collections remaining strong [24] - The company reported a net income of $0.5 million, a decrease from the prior quarter [23] Q&A Session Summary Question: What data points give confidence in a stronger fiscal second half? - Management noted record backlogs and improvements in supply chain issues as key indicators for confidence in the second half [27] Question: How is the competitive position after recent shows? - Management indicated an improved competitive position in the PMS area, with increased recognition and participation in deals [29] Question: Are hardware supply issues accelerating the adoption of off-the-shelf hardware? - Management clarified that while there are hardware delivery issues, the PMS and software solutions are not significantly affected [39] Question: What are the emerging strengths in sales verticals? - Management highlighted strong performance in gaming and resort sectors, while hotel chains and cruise ships are recovering more slowly [43] Question: How does the company defend its pricing in the market? - Management stated that they remain disciplined with pricing, supported by superior product features and technology [46] Question: What are the subscription sales levels compared to previous years? - Management indicated that subscription sales are substantially up compared to two years ago, driven by customer preference for cloud-native applications [50]

Agilysys, Inc. (NASDAQ:AGYS) Q1 2022 Earnings Conference Call July 27, 2021 4:30 PM ET Company Participants Jessica Hennessy – Director-Corporate Strategy and Investor Relations Ramesh Srinivasan – President and Chief Executive Officer Dave Wood – Chief Financial Officer Conference Call Participants Matt VanVliet – BTIG Nehal Chokshi – Northland Capital George Sutton – Craig-Hallum Allen Klee – Maxim Group Operator Good day, ladies and gentlemen, and welcome to the Agilysys Fiscal 2022 First Quarter Confere ...