Agilysys(AGYS)2023-10-23 23:21Financial Data and Key Metrics Changes - Fiscal 2024 Q2 revenue reached a record 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 12.6 million, while professional services revenue surged by 43.8% to a record 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 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]