Agilysys(AGYS) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Fiscal 2024 Q3 revenue reached a record $60.6 million, representing a 21.3% increase from$ 49.9 million in the prior year [19][25] - Product revenue was $12.7 million, up 18.5% year-over-year, while services revenue was a record$ 12.8 million, increasing by 41% [19][20] - Subscription revenue grew 29.9% year-over-year to a record $19.5 million, constituting 55.6% of total recurring revenue compared to 49.8% in Q3 of the previous fiscal year [20][28] Business Line Data and Key Metrics Changes - Sales in the Asia Pacific region and U.S. hotels, resorts, and cruise ship verticals showed significant year-over-year improvements [7][8] - The average deal size for new customers increased by approximately 30% compared to the previous fiscal year [11] - The company added 18 new customers in Q3, with 90% of new properties being subscription-based [10][12] Market Data and Key Metrics Changes - Fiscal 2024 Q3 was the best quarter for revenue from international regions, indicating encouraging progress with potential for future growth [22] - The company reported a strong backlog, with total backlog increasing by 6% over the prior year, despite a decrease in product backlog [26] Company Strategy and Development Direction - The company is transitioning from a product re-engineering phase to focusing on customer acquisition and enhancing competitive advantages [35][36] - Investments have been made in product development to ensure competitiveness in international markets, with a focus on creating successful implementations and reference customers [45][46] - The company aims to leverage its low market share in the property management system (PMS) space for future growth opportunities [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the full fiscal year 2024 revenue guidance of$ 235 million to $238 million, with solid subscription revenue growth expected [23][33] - The company anticipates continued improvement in profitability, with adjusted EBITDA expected to be 15% of revenue for the full fiscal year [24][33] - Management highlighted the importance of establishing credibility and generating customer success stories to drive future growth [36][66] Other Important Information - The release of a tax-related valuation allowance of$ 65 million allowed the company to recognize existing U.S. federal net operating losses as deferred tax assets [31] - The company reported a free cash flow gain of $11.3 million for the quarter, slightly down from$ 11.7 million in the prior year [33] Q&A Session Summary Question: Outlook for Q4 and margin guidance - Management expects a sequential increase in revenue for Q4, despite a slight pullback in product revenue due to operational costs returning to normal levels [40][42] Question: Investments for international success - The company has focused on product improvements and is now investing in services and marketing to create successful implementations and reference customers in international markets [45][46] Question: PMS pipeline and credibility from the Marriott deal - The Marriott deal has enhanced the company's credibility in the PMS space, contributing to increased interest and momentum in sales [50][52] Question: Free cash flow expectations - Free cash flow is expected to remain consistent, with no changes to expectations despite some timing headwinds [72][74]