Agilysys(AGYS)2023-01-25 02:14Financial Data and Key Metrics Changes - Fiscal 2023 Q3 revenue reached a record 39.5 million in the prior year quarter and a sequential increase of 4.6% from Q2 [22][26] - Recurring revenue grew to 8.1 million, representing 16.1% of revenue, in line with the fiscal year plan [31] Business Line Data and Key Metrics Changes - Product revenue increased by 32% and professional services revenue rose by 45.7% compared to the prior year quarter [26] - The company added 18 new customers in Q3, with 16 being fully subscription-based, and the average deal size was more than 50% higher than the previous quarter [12][14] - Services revenue crossed the 9 million mark for the first time, indicating strong sales momentum [22][27] Market Data and Key Metrics Changes - Sales in the gaming casinos, resorts, and EMEA verticals are operating at exceptionally high levels, while APAC and managed food services sales are still below pre-pandemic levels [8][9] - The company reported a significant increase in prospective customer meetings and product demo requests in Asia, although actual sales results have not yet materialized due to delayed decision-making [9][10] Company Strategy and Development Direction - The company is focused on expanding its presence in the property management system (PMS) space, with expectations to triple the number of rooms connected to its PMS products over the next three years [20][52] - The recent selection by Marriott as a PMS provider is seen as a transformational win, enhancing the company's credibility and opening up significant subscription revenue growth opportunities [19][36] - The company is investing in R&D and infrastructure to support its growth as a cloud-based SaaS provider, which may lead to short-term margin compression [21][56] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the future, citing a large total addressable market and the hospitality industry's long-standing need for integrated technology solutions [33][34] - The company believes that pent-up demand in the hospitality sector is driven by the need for modern technology rather than just recovery from pandemic-related travel restrictions [48] - Management anticipates that the infrastructure investments will prepare the company for significant growth in subscription revenue, despite potential short-term margin impacts [41][56] Other Important Information - The company expects full fiscal year 2023 revenue to be between 195 million and $198 million, exceeding initial guidance [22][32] - The gross profit margin decreased slightly to 61.7% due to a shift in revenue mix as product and professional services revenue increased [29] Q&A Session Summary Question: Clarification on the Marriott deal and potential margin headwinds - Management outlined three phases of work related to the Marriott deal, with the first two phases expected to be profitable, while the third phase may incur margin compression due to infrastructure investments [40][41] Question: Visibility on the number of rooms and future opportunities - Management emphasized the focus on delivering the selected PMS for Marriott and acknowledged the potential for future opportunities as other large operators consider RFPs [45][52] Question: Impact of business travel recovery on momentum - Management indicated that pent-up demand is driven by the need for integrated technology solutions rather than solely by travel recovery [46][48] Question: OpEx spend and capacity for increased demand - Management stated that while sales and marketing expenses will remain stable as a percentage of revenue, they are monitoring capacity levels to ensure they can meet demand [61][65] Question: Inclusion of add-on modules in the Marriott contract - Management clarified that the current RFP was specifically for PMS, and there is no information on the inclusion of add-on modules at this time [66][68]