Q4 2020 Earnings Call
Ladies and gentlemen, please standby your conference call will begin at approximately two minutes. Once again. Please standby your conference call will begin at approximately two minutes. Thank you for your patience at least continue to hold.
[music].
To turn the conference call over to Dave.
President of corporate strategy in Investor Relations at Joseph Please go ahead.
Thank you Jonathan and good afternoon, everybody. Thank you for joining the Agilysys fiscal 2024th quarter Conference call.
We will get started and just a minute with management's comments, but before doing so let me read the safe Harbor language.
Some statements made on today's call will be predictive and are intended to be made as forward looking within the safe Harbor protections of the private Securities Litigation Reform Act of 1995, including statements regarding our financial guidance. Although the company believes that its forward looking statements are based on reason.
<unk> assumptions such statements are subject to risks and uncertainties.
I would cause results to differ materially.
Important factors that could cause actual results could differ materially from these in the forward looking statements include the effect of the code at 19 pandemic on our business.
The success of any measures we have taken for may take in the future in response to the code in 19 endemic and the risks set forth and the company's reports on form 10-K, and thank you and other reports filed with the Securities and Exchange Commission.
With that I'd now like to turn the call over to Mr. re mastering the Boston, President and Chief Executive officer over much of a josias for mass. Please go ahead.
Thank you, Dave and good afternoon, everyone.
Welcome to want to fiscal Twentytwenty fourth quarter earnings call.
Joining Dave in me on the call today, it's Tony Pritchett My CFO.
I'm participating in this call from my home base in Las Vegas, while Tony India Hot in Atlanta.
We hope on a few and your families and colleagues are doing well and staying healthy during these incredibly challenging times.
[music].
Like many other organizations across multiple industries have reported.
Fiscal Twentytwenty fourth quarter, the PDR, John would be too much.
Well, it's very much a tale of two quarters' within one.
We started the quarter on a high note.
Adding on the momentum of seven consecutive record revenue quarters before that.
It then got even better without in spite of user conference during February.
And that rolls in hotels, and just thoughts in Orlando.
The conference was highlighted by the highest got somebody attendance, we have seen that the location I did it in Las Vegas.
I didn't bins of cost somebody who's us from the hotel and the thoughts about degree was up 45% Yodle what do you.
The overall number of cost somebody who those attending additional training classes and setting up meetings with our technical staff will further product discussions.
Two crucial user conference call somebody engagement metrics what else.
Was up 44, Zito was up 40% Yodle, what do you.
<unk> increased product innovation velocity during the last couple of yours was on full display.
Let me know then that many additional modules like mobile chicken checkout.
<unk> said it was an on demand.
You bet discussed in fact confidence rooms during the conference wouldn't move from being nice to have more deals to become must have one just a couple of months later.
And then everything temporarily change doing much.
In spite of the hospitality industry virtually shutting down completely.
About 32% of five sales during the quarter.
Actually happened during much.
To put that in context during the previous fourth quarter.
The average person digital sales, which happened during the last month off the quarter was about 43%.
While this much.
Well, it's much less than a typical month of much what else.
It was still reasonably good under the circumstances.
One part of out of Q4 sales happening doing much under such extraordinarily tough circumstances, what's a good remind them that the solutions, we provide a mission critical for the industry.
I wouldn't mind.
Please note that unlike many other organizations, we use the Tom said revenue and seems to indicate to different business metrics.
Revenue is of course that could nice revenue based on automotive revenue recognition rules, which have Motorola standard across the enterprise software companies like us.
We use the thumb sales however to refer to actual new sale agreement signed with current and prospective customers <unk> products and services.
We measure the sales in terms of annual contract value of sale agreements fine.
We also tend to use the Tom sales selling activity and bookings to all that if what are the same thing I knew contract value since.
There's obviously a time lag involved.
In the conversion of sales to revenue.
No switching back to lot of partisan additive.
We made a very long out away towards that eighth consecutive record revenue quarter.
Men the drastic modest changes happened.
Causing us to Miss our revenue guidance for fiscal <unk> Twentytwenty.
Q4 revenue was $39.7 million.
And 8% increase over Q4 off last fiscal year.
Fiscal twentytwenty fully on revenue.
Whether that could $160.8 million that as $160.8 million, representing a 14.114 0.1, representing a 14.1% increase over fiscal 2019.
Q4 that getting revenue of 22.3 million.
Wasn't another new record.
Subscription revenue was up 9.1 person sequentially or what are the third quarter.
And was up 29.8 worsened well what Q4 last fiscal year.
Professional services revenue in Q4 fiscal Twentytwenty.
It was up 25% over Q4 off last fiscal year.
Despite a significant slowdown during much due to travel restrictions and site closures.
Adjusted EBITDA during Q4 fiscal Twentytwenty was $3.6 million.
Compared to 2.4 million during Q4 off last year.
Overall for the full year fiscal Twentytwenty adjusted EBITDA was 13, one cleat was 13 million increasing 27% over fiscal 2019.
Oh, it actually 61% improvement if you take out the benefit of capitalized software in fiscal 2019.
During fiscal Twentytwenty, Besides sales agreements, which added 55 new customers.
61, new properties, which did not have any of our products before.
And 152, new instances of selling a product the sites.
Rich bad news for that property.
Of these sale agreements 17, one seven new customers.
17, again, one seven new properties and 35, new products that closed or signed during the January to March Q4 quarter.
The AG Pos sales when with the team San Jose into sports and entertainment sector.
The ought to get state B.M.S. and hygiene Pos win but cyberark the thought in the British Virgin Islands.
The ought to get steep BMS win at hotel 166 in Chicago.
The huge 19th site I GPU is when they come well the thoughts in Denmark.
The Argus bike kiosks and on demand when I see find the thoughts in South Carolina.
The <unk> Pos win at the Intercontinental, Los Angeles, and I EG property that among the sales when highlights of the quarter.
Before we move onto other topics one quick update on customer attention.
Fiscal Twentytwenty without a best you had in recent memory with respect to customer attention success.
Got somebody addition was again well over 95% and how to best percentage in many years.
We measure customer, Sean and that we were still fit customer attention in the old fashion Conservative way.
We measure the customer churn as a simple division of annual recurring revenue lost during the year.
As a percentage of total annual recurring revenue.
And customer.
The report customer attention as hundred minus custom of Chung person pitch.
Therefore by definition, our customer attention measure of cannot be more than 100%.
Please note that we measure customer churn as a percentage of only recurring revenue.
And not as a percentage of total revenue.
Given how are they getting revenue was about half our total revenue Sean and it's a good customer attention is even better if you think of it as a percentage of total revenue.
We had a bad that many software companies express cuts customer attention in dollar retention Toms using a variety of different formally designed to make the numbers look great and often to report them to be higher than 100%.
If we use any of those methods.
Our dollar retention rates would also be significantly higher than 100%.
Because the extent of repeat business, we get from current customers in terms of new properties sites and new products.
Far exceeds the extent of recurring revenue loss during the.
However, we continue to believe that the old fashioned method of calculating customer attention as a percentage of recurring revenue if the lights measure.
We continue to retain well more than 95% off our recurring revenue base and also for that I too would significantly through business expansion. As you can do live by out of consistent increases in reckoning revenue you it off to the yes.
Going back to the subject of failed measured by annual contract value of sale agreements close during a period.
Sales during January and February this year.
It was about 40% that is four zero, 40% higher.
Then the January February average or what are the Pos 40 years.
Despite a february slowdown in international sales.
Why fields during March slow down as wants to be expected.
And was not the typically high end to a quarter in fiscal year ought to be are used to it was still close to 80%, 80% to 80% of the February 11.
Sales during April and me in Q1 fiscal two anyone that has a current quarter so far.
Has been at about 60%, 62% off the average of the boss four quarters.
At the same comparable time during the quarter.
To reiterate that point.
In spite of this global pandemic, causing virtually.
Everything to shut down.
We are still able to close about 60% of the value of deals we would normally expect.
These products out of mission critical and product innovation engine continues to churn out additional modules and quote enhancements, which will help our valued customers manage kadant realities beta.
I think you've discussed with you before we've introduced many new software modules to the marketplace. During the past couple of years, especially during the past here.
Many of these modules have already been implemented in multiple customer sites.
These models include.
One.
I guess Experis mobile a b you Miss solution, enabling checking in and checking out of hotels without any need for human contact entirely based on one smartphone.
Including the use of digital Keith.
Two.
I guess express kiosk, a similar BMS solution, which can be used to chicken and checkout and for other purposes.
We have now that stood out these kiosk to be essentially touch fleet using personnel or throw away stylus spins.
Guess can print keys, if they so desire to through the kiosk or through the use of our new mobile concierge module.
And what we ought to get started with a p. you Miss module, which enables management and optimization of all operations in the hotel, including housekeeping and preventive maintenance of crucial assets.
This along with the two way sammis and other communication between hotel stuff, including hotel staff at the reception.
I guess enables less need for frequent checks with the reception desk on room readiness and other matters. There do you think crowding out on the reception desk.
For.
I guess on demand for Pos This is the software module and not be always family of products, which was introduced during the last year.
It enables the remote ordering on foot off food and beverage items from a mobile phone for takeout or delivery using a website at <unk> or QR code and it's completely integrated.
That infogenesis Pos backend.
Five agilysys auto device for both the U.S.N.P.M.S.
This module enables counting a QR code.
On a food and beverage or other seat <unk>.
To initiate payment or charge to a room.
Through the guess mobile device, but no human touch or contact necessary.
This was introduced recently.
Eliciting cdis interest from many customers.
One of these customers.
Signed up for use of this module.
Across more than 77 zero across more than 70 profit centers just this week.
Number six contactless payments. We've also introduced other forms of contactless payments.
Number seven Argus book.
The need for Dedic Channel Zero Commission online booking engine has become even more important for our customer base now.
Without new modernized Argus spine golf models already installed in multiple customer sites customers cannot provide that gets the ability to book rooms Spa and cost was emissions all from one place.
This includes the ability to handle group positions as well.
Number eight ought to get seat despotic, no supports booking and managing the situations across any outlet off a property.
Guess can see adult house view of the outlet and reserve a specific seat in the restaurant.
On a specific loans chance.
Our cabana in a pool area or a seat in a performance center.
Properties have an opportunity to promote social distancing light at the booking process, providing data guess an increased level of comfort as they make their decisions.
The application not this application now also supports eating of seats, giving our operators additional tools to monetize their assets.
Not that list, there's only a subset of all the new modules. We have introduced during the recent past, which enable social distancing and improve operational efficiencies, enabling hospitality operators to do more with less.
Such models with nice to have two recently and have now for the most spot become must have models.
Core Pos B.M.S. and inventory management solutions have always enabled operators to be highly efficient, but in the cut Cincinnati will be solutions have become mission critical as our customers look to maximize revenue while minimizing variable costs.
While the number of feel agreements close during March April and May.
Have clearly been down compared to previous quarters.
We've been surprised to find the number of product demos, we have been involved in during April and may, especially regarding our emerging products and software modules.
It's been almost double the level.
That we saw during January and February.
The current trend is unmistakably I don't mobility and contact list service solutions and we are fortunate to have been busy but precisely that kind of product innovation for a couple of years now.
Well that food and beverage Pos and lodging Pms solutions now enable affliction listen contact less experience end to end all across the greatest journey through a property all the way down from order initiation.
Bill payment.
One of the detail to not.
Revenue from gaming casinos constitutes more than 50% of our revenue.
The interest from out of gaming casino customers, you're not emerging software modules has been particularly high during the past month or so.
Many of them are likely to be early adopters of the emerging software modules as they finalize plans to reopen.
With respect to our balance sheet.
We ended Q4 fiscal twentytwenty with the cash balance off $46.7 million are the highest level since June calendar 2017, Q1 fiscal 2018.
We've been fortunate to come into the crisis with the position of strength.
The recent 35 million dollar convertible preferred investment by my capital.
Provide additional balance sheet strength I.
As is well known the CEO of my capital Mr., Mike Kaufman. He is also the chairman of hardboard.
I cannot think of anyone who knows that business better than him.
His vote of confidence in us, let's say a lot.
On improved and record levels of financial performance in fiscal Twentytwenty.
As a lot to do without an increase in R&D and product innovation strength and passionate focus on customer service.
The number for the sources involved in product development has tripled since January calendar 2017.
That increase has resulted in our current their ability to provide customers with end to end solutions to enable the kind of contactless safe and comfortable gets journey, our customers have no haven't enhance need to provide.
We are determined to keep the innovation and customer service engines going.
Through this current situation and expect to reach the other side of this crisis with an even better competitive differentiation and positioning.
Why do we have been forced to take multiple cost reduction steps like most other organizations.
Taken care of to ensure such steps have minimal to no impact on our product development and customer service radius.
Due to the drastic change and uncertainty and macroeconomic conditions and the lack of clarity with future sales revenue and profitability predictions byproduct.
Then wasn't assist impediment off most of the capitalized software development costs on our balance sheet.
As you're aware, we discontinued the practice of capitalizing software development costs as of January calendar, 2018, or Q1 fiscal 2019.
This impairment action does not affect our ongoing and future product investment strategies in anyway.
This pandemic and the related closures have been particularly hard on all the customers.
We have strive to be responsible business partner and have tried our best to help them with various forms of onetime credits and product to concessions.
Among the concessions provider is three use of the odd guest on demand, but Arctic for 90 days.
About 60 customer sites have executed contracts for the use of this product and another 250 sites out in the process of signing up.
Such onetime credits and product use concessions provided is going to hurt our short term revenue level.
It will help us in the medium and long term once the recovery begins to take shape.
We expect our April through June Q1.
Skill 2021 revenue to be down year over year, my possible, 35% due to two reasons.
A significant portion of that decline will be due to the onetime concessions provider to customers.
The remainder will be due to short term declines in sales and business limbs.
These declines are almost entirely due to postponements in buying decisions.
With respect to the onetime concessions provided to customers. We expect about two third of that effect to be felt during Q1.
And the remaining one third to be spread out almost equally across Q2, Q3, and Q4 of fiscal 2000 to anyone.
Please note these actions to help customers will show up as declines in multiple revenue areas, including recurring revenue during Q1.
Such declines are expected to be strictly temporary and one time and should not be interpreted as having anything to do with customer attention.
We continue to do well with customer retention.
We are beginning to see signs of recovery process already starting with sites the opening.
Assuming the pandemic recovery process continues to keep improving steadily thereafter.
We expect the 35% year over year revenue decline in the April through June Q1 quarter to be the low point.
Q2, Q3, and Q4 should be brokers simply better.
However at this stage, we are unable to predict how steep that improvement club will be.
On the one hand, we find that product and services backlog and sales pipeline remaining at high levels now while on the other hand, the decision, making and sales finalization processes have slowed down considerably.
We are therefore, not in a position now to provide any meaningful guidance on overall fiscal twentytwenty, one revenue and profitability levels.
Regarding profitability given all the cost reduction steps currently in place even with the possible revenue reductions we face in the first quarter fiscal 22 anyone we expect Q1 fiscal 22 anyone adjusted EBITDA to be approximately breakeven for the quarter.
While the current circumstances, a definite setback we have every reason to believe we will come out of the face in reasonably good shape.
We remain relatively small player in this huge hospitality industry and even a partial recovery in the industry will be sufficient to fuel our growth.
We are keeping our focus on keeping up the pace of product innovation and customer service.
There was a good possibility.
That the reduced overall industry business levels in the short term.
Could be compensated by an increase need for technology solutions to make hospitality guest experience a safer and more comfortable.
We expect to be in the front line of providing such much needed high quality technology solutions.
And that should some of our financial performance well.
With that let me hand over to Tony for further color on financials and other business details Tony.
Thank you very much.
I cover meshes Commons, although the impact of 'cause it nice because it 19 situation has been dramatic to our customers in our short term progress.
We remain confident in the long term plan, we put in place three and a half years ago.
To become a profitable revenue growth company that leads the market with product innovation.
This strategy is now paying off with a flurry of customer activity around our new software modules that remains to talk through.
Taking a look at our financial results beginning with our income statement.
Fourth quarter fiscal 2020 revenue was $39.7 million and 8.3% increase from total net revenue of $36.6 million in the comparable prior year period.
The increase in topline largely reflects a 26.3% increase in professional services revenue into 15.2% increase in recurring revenue offset by a 14.3% drop in our product revenue due to the sudden shutdown our customers were faced with in the last half of March.
On an annual basis, we're pleased to see growth across all three of our revenue line items, including a record 8.2 million dollar increase in recurring revenue in the 6.5 million dollar increase in professional services revenue.
Total recurring revenue represented 56.2% of total net revenues for the fiscal fourth quarter and 52.1 person for the full year compared to 52.9% and 53.6 person of total net revenues in the fourth quarter and full year fiscal 2019.
We're also pleased with our robust subscription revenue growth, which grew at 29.8% for the fourth quarter fiscal 2020, and 24.3 person for the full fiscal year.
Subscription revenues comprised around 39% of total recurring revenues compared to 34% of total recurring revenues in the fourth quarter fiscal 2019.
With regard to endpoints. We currently service about 274400 rooms, and have approximately 62100 terminal endpoints or a one person and 16% increase respectively compared to how we exited Q4 up last year.
We're continuing to give this metric no more and more our revenue growth is not dependent on endpoint grow.
Our AD on software modules that build out our ecosystem of products are adding scale quickly.
As an example, so far just in the month of April and May we've closed deals for our guests on demand and Argus authorized that once liven billing will be worth nearly $700000 of annual recurring revenue for us.
These are two of our newer products to help our customers and they will social distancing initiatives in are great examples to point out.
We're best mentioned the possible significant reduction in our June 2020 quarter, our first fiscal quarter compared to our first fiscal quarter of last year.
This reduction will be mostly impactful to our onetime nonrecurring services and product line revenues.
The majority of the reduction is expected to be allocated to onetime product and services revenue.
Recurring revenue was only expected to be down by two percentage points from Q1 fiscal 2020.
Once we get through the first fiscal quarter, our recurring revenue should be back near our Q4 fiscal 20 levels.
As for products and services revenue. We currently have a backlog of hardware software and services that are near record levels.
As operation start to open back up we will accelerate the deployment of the backlog.
And given we're at about 60% of our normal levels of closing new deals in April and May as soon as we get back to historic levels, we should see revenue start to normalize.
Given the uncertainty everyone faces right now it is just hard to predict when that will happen.
Moving down the income statement gross profit of $19.7 million compared to $19.6 million in the fourth quarter fiscal 2019.
Gross profit margin decreased to 49.6 per cent compared to 53.5 person in the fourth quarter fiscal 2019.
This gross profit was negatively impacted by $600000 of credits related to covert 19 reserves.
In addition, the professional services team realize the sharp drop in serviceable installations. During the last half of March for obvious reasons, resulting in a negative margin impact for the quarter.
Looking at operating expenses, excluding charges for legal settlements impairment and restructuring severance and other charges fourth quarter saw 1.8% decrease in operating expenses to $22.7 million compared to $23.1 million in the prior year period.
This decrease in operating expenses is mainly due to decrease incentive compensation negatively impacted by cobot 19.
Combined.
Our three main operating expense line items product development expense.
Sales and marketing spend and general and administrative expense were 53% of revenue this fiscal year for the full year.
The lowest in the past four years, not even accounting for the fact that in the prior two three years, we had some levels of capitalized software removed from the income statement.
Fiscal year, 19 was 57% while fiscal year 18 in fiscal year 17 were 55% compared to this year's 53%.
Even without the impact of coated 19. This trend would have been about the same it is a good reflection of the steady progress, we're making with our operating leverage.
Our operating loss for the fourth quarter of $26.9 million net loss of $27 million and loss per diluted share of $1.16. All compare negatively to the prior years fourth quarter losses of 3.8 million 3.6 million in 16 cents.
Due to the impairment charge taken this quarter.
Adjusted net income in adjusted diluted earnings per share most compare favorably to the prior year fourth quarter.
Adjusted net income of 1.3 million compares favorably to 700000 hours in the prior year fourth quarter.
And adjusted diluted earnings per share of five cents compares favorably to Greece and in the prior year fourth quarter, when normalizing for certain noncash or nonrecurring charges, including this impairment charge.
As we must come in at this impairment charge was a write off of the majority of the previously capitalized software development costs.
The impairment was strictly due to the current economic conditions in the lack of clarity with our ability to predict future sales and profitability with respect to these products.
Impairment does not affect our ongoing of future product investment strategies in anyway.
For the 2024th quarter, adjusted EBITDA was $3.6 million compared to $2.4 million in a year ago quarter.
For the full year fiscal 2020 adjusted EBITDA.
It was $13 million compared to $10.3 million.
The growth in adjusted EBITDA for the full fiscal year represents 27% growth.
And if you normalize for the for the effect of capitalized software development costs in the prior year.
Would be comparing $13 million to $8.1 million or 61% growth.
Moving to the balance sheet and cash flow statement.
Cash and marketable securities as of March 31st 2020 was $46.7 million compared to $40.8 million on March 31st 2019.
Importantly, our cash balance at the end of the day yesterday, it was approximately 43 and a half million dollars.
And that does not include the 35 million dollar convertible investment by my capital, which should close soon.
We're pleased with our ability to manage our liquidity as we navigate these challenging times.
As it relates to our free cash flow I'm pleased to see an increase for but the quarter in the full fiscal year.
Free cash flow in the quarter was $4.9 million compared to $3.9 billion in the prior year quarter.
$7.2 million for the full fiscal year compared to $1.7 million in the prior year driving our cash balance increase.
As I mentioned revenue in her first fiscal quarter 2021 could be down by as much as 35% due to the customer concessions, we're giving along with the slowdown and sales weve experience.
We do expect us to be a low point and assuming a recovery process continues from this point on the remaining quarters should be progressively better.
Given these revenue levels adjusted EBITDA for the first quarter should be around breakeven in the trend for adjusted EBITDA should follow revenue and be progressively better for the rest of the here.
Otherwise given the uncertainty over global markets, we're not providing any further guidance now.
In closing, we're pleased with our 2020 financial results and with the financial stability, we have to navigate through our current economic environment.
We are fortunate enough to have a good recurring revenue base built on a foundation a mission critical products.
Our backlog and sales pipeline are both at historically high levels.
As the economy make progress we feel confident our financial results will react in concert, we just can't predict the exact shaping the recovery.
With that I'll now turn the call over to the operator Jonathan.
Thank you and thank you ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to move yourself from the Q. Please press the pound <unk>. Our first question comes from the line of Matt Bylin from BTG. Your question. Please.
Hi, guys. Thanks for taking my question nice job on the on the quarter, all things considered especially at the beginning of the year.
Getting the pipeline built out there I.
I guess digging in on on some of the trends that you saw it not only through the quarter and into the and but somebody concessions that you talked about could use dig a little deeper for us here in terms of.
You know how much of a delayed fuse our arms. Some of those did that 90 day I'm free window start sort of the day. They agreed to it or is that you know conditional on you know when properties reopen one businesses you know at least put in motion plans to reopen help us think about what that.
Look like on a sort of time series basis moving forward.
Hi, Yes, hi, Matt.
Thanks for that turning the call so via via hospitality to Matt Soviet I'd also add on so badly affected by this.
So that limits to how much we could have bought out to customers. There will be tied out at best and I don't want to get into all the specifics Mac, but this much I can tell you we break it up into two separate things outside of the product concession goes.
This is like giving a 90 day free trial, if they sign up for a much longer period of time for customers, who have signed it was sort of one particular product like we mentioned for on demand. So if they sign up for a longer period of time, which is how customers normally sign up the first 90 days.
That is no charge on the fast fees and it starts from the day. They go live and so obviously, the only got somebody signing up for that.
Customers, who are just about opening now ought to have definite plans to open and the trial period in terms of when they have to sign up by is only part of certain period of time, which is only for a couple of months kind of thing. So that is on the product transition.
Which is basically for the use of up an Arctic, but they get the first say three months free after they go live with it.
Now in terms of the other concessions it takes various forms with each customer it just depends on the customer.
Depends on what kind of preferred and they have and walked we could afford and so you just took radius shapes and forms with each customer, but you will effect for the most part about two thirds of it will affect Q1 and the remainder of it will get spread it over to Q2 Q3 Q4, so that does how much glad to see I can give on that for you in my time, Saudi I can get into this.
Specifics because it involves a confidential details with various customers.
I totally understand thank you got its great detail, but help us here and then I guess looking at your overall customer portfolio.
Curious what you've looked at in terms of geographic dispersion and types of industries that your covering specifically and made you know some assumptions around what might come back sooner or later, you mentioned gaming might be.
Sort of pushing the envelope to open a little sooner versus you know something like some of the cruise lines that you Ben and I think are going to it was for my opinion would would be longer term to through sort of reopened but.
What what's the risk in terms of some of the smaller operators that you might deal with or some some locations that may or may not open again or may be extremely delayed and in terms of reopening.
Have you had conversations with customers is there any kind of expectation of sort of permanent churn that you could have.
Or is it still currently operating where it's more of a when not if that the majority of your customers in particular will we'll look to be reopening.
Yeah.
So good question, Matt So yes the out.
Obviously, we had in touch with all our customer base and we are constantly talking to them.
Not just in terms of endeavor to Europe, and also helping them at that he opening night, so I will come to that in a second.
The one thing about how to customer portfolio the customer profile, Matt is that.
Generally all customers out of the bigger size light. We don't we don't have much if a play into smaller retail listed on so that is not the space to be playing at all so virtually all out of customer bases in the bigger customer segment, we had an enterprise software. The company. We don't compete much in the small of issuance space a lot in fact, we don't compete that at all.
So to a certain extent a lot of thought of customers.
Have much more concrete plan, so reopening compared to walk you might find in the smaller vista than space.
So that is one aspect to them and what about on customer portfolio.
That's really odd inside of customer.
80 of all our customers have plans to reopen it is only a matter off when David reopen not if there will be open because these are all big customers, who have various access access to capital and they all have different plans to reopen so that's one thing to keep in mind. The second thing to keep in mind is we had a fairly small players like we always said.
Total addressable market runs into billions I mean, depending on which study you believe you call. It 3.5 billion EUR 4.5 billion. It runs into billions in terms of the recurring revenue off the industry well out of it getting revenue is still less than 100 million. So if he had a smaller player. So even if portions of the off.
The industry you open later than the others, even a portion of the codis pretty should be enough to drive outgrowth forward right. So that's the second aspect to keep in mind.
The third thing to keep in mind at least what we have noticing a is that if we've got quite surprised ourselves we didn't expect this.
The number of product demos of via have done in April and May have been twice as much as January and February which in a lot of it doesn't make sense, but that is what we've been seeing so what that means is the fact that part of the industry is one of the cover slaughter gonna be open slow and for us and all of them out of gonna be open put us.
He is going to be made up for the fact, possibly going to be made up by the fact that they have a great does need for a lot of the technology solutions that we had been very fortunate we had been in the process of developing for the last couple of years, even if you look up the earnings call script in the last couple of years, we have always hopped on all these additional modules, which we believe at strain.
It's to be missing Pos and they want it must have no I mean, the on demand product that out more than 300 sites talking about no and all of them in the last couple of months. So the fact that business is going to be affected by a slower recovery.
We think could be made up by the fact could be made up by the fact that there's a higher need for all these technology solutions.
That's the way I look at the customer profile, it's mostly because the customers out of customers. So they will be open sooner or later.
And that they have a high didnt need for technology solutions that help it social distancing and all that and the fact, 50% of out of revenue as gaming also helps because.
They are making quicker plans of what technology solutions they need to reopen.
Great. Thank you for taking my question was really appreciate it.
Thank you Matt I appreciate it.
Thank you. Our next question comes from a line of George Sutton from Craig Hallum. Your question. Please.
Thank you remember I appreciate you're going through there for module or additions I thought that was helpful. So as you think about the mobility part of the equation.
When you're talking to existing customers and they decide to move forward with that and I'm speaking mobility and more broadly the.
The safe distancing applications that you have what does that due to the Tam opportunity with that specific counter the ARPU opportunity without account and then how much influences that having on the deals you're working on right now I assume it's relatively significant.
Hi, Hi job shop, good to talk to you it's been a while yeah now as far as the software modules that are concerned that job just mobility, but a lot of fitness mobility I understand what you're saying.
This is what it does that sort of how we analyze agilysys right we have so far.
Hi, you know via focused a lot on the number of rooms and the number of terminal endpoints. Those are still important like those that still reasonable indicators off how we're growing the business, but now award is becoming of even more importance is the fact that the rooms that we have and the terminal finds that we support there's a lot more products to feed into that so that does differ.
In Italy, increasing the revenue per unit off room and of terminal volumes, because you have a lot more products to feed into that and it's not just products. These are all software products that are going to drive when it getting revenue and all these products are designed to work both on put them in size and of course, more and more of the industry and outperform sassower on for them, but some customers wanted on Prem.
The products have designed to support that as well.
So at the moment, what we have seen in the month of April and May.
Yes, basically feeding into the customer base, we already have part of the most spot.
Did I will also instances, we have seen like via the number of new logo or new customers, we are talking too.
Has increased more than we thought to be toward in April and may.
Because these additional modules now become drivers of the core product as well well I mean, if you need these additional modules to enable social dispensing and everything else, we need and your core product needs for supported it has to integrate well with the core product for example.
Just introduced the protocol Agilysys off device, which I told you in the prepared remarks that one particular customer signed up for more than 70 profit centers, but that has to work well with the core Pos product I didn't even have to work well with the P.M.S.
Because venue Golar Charger room, and you just Scana QR code and with your mobile phone you can just bad the table, we still need to make sure. If your job just to your room that that by mistake, you're not putting it on room. There. That's something so you have to cook, we have to talk to the P.M.S. as well.
So to a certain extent these additional modules will start driving our core products forward as well, but at the moment I would say a lot of the interest as an additional modules.
That is some amount of driving the core products forward as well I suspect that will happen more and more in the future.
And that does expand out of time opportunity to answer your question. The total addressable market does get expanded by the fact that these products are not even data you ought to go so to that extent it does serve the purpose of expanding them up.
Yeah to add to that just a bit expansion of the market or expansion of ARPU you.
The way to think about these modules is any individual module can add somewhere in the 20% to 50% range of the core products. So for example is the core product is worth a dollar or cost of dollar.
These additional modules individually can add somewhere in the 20 to 50 cents range. So if we sell somewhere from two to five of these additional modules.
Depending on the module you're talking about we could have double double the revenue from that particular you.
That's perfect.
One other question relative to the concessions, you're making as you look at your competitors do you find that they're making similar type concessions I would have to imagine the hardest call in the world is the call Larry Ellison into asked for a concession.
Any [laughter], yeah, Oh, I mean, we only know it through customers and some other friends, we have even in not competing companies I think to be honest with you jobs, everyone is making an honest attempt.
It appears as a company does than everyone else is doing the best to help so he got to give them credit for that I think each company's doing it's best to help.
Because the hospitality industry is badly affected in the all or two out of custom wants to do the best weekend and that I've limits to how much we can do as well we have not that big companies, but I think George I think each of the company that is trying to help in their own way I think the concessions that similar but not the same.
But I think everyone is trying to help Josh.
Perfect. Thank you.
Thanks Roger.
Thank you. Our next question comes from a line of Taylor would from Northland Securities. Your question. Please.
And thank you all did build off of George as last question on the competitive environment. When you. When you think about the longer term in back on kind of the competitive dynamics.
Yeah, and all the changes that are happening in the last few months.
Are you guys kind of positioning yourself, there and you know what do you what do you expect some of the lasting changes to be competitively progress. Thank you.
Yeah, So hi, Tyler good to talk to you up so basically Tyler following up on George's question. The onetime confessions. It's just that I think right that is not about building competitive positioning or anything like that it is just the lighting to do for customers and all of us hospitality vendor that trying to do the best Buddy Tom.
So off Vance, we feel we had a gaining in terms of competitive positioning.
It's odd continuing investments in product innovation and customer sentiment.
And also I think where did the greatest advantageously building up for us isn't the fact.
In terms of an end to end provide us so you take the Pos BMS any mentally procurement products.
And then all the additional modules, we are adding to it so in terms of helping a customer to manage the entire guess journey from the time, they do that as their missions in a Derek Channel Zero Commission website.
All the way through the chicken process, where they can chicken without going to the reception desk.
All the way through how they manage themselves within a room, where that is easy communication or what data quite in the room all the way through when they go to a question on so every which way end to end via enabling the guest journey with modern technology products.
So when you think office as an end to end hospitality technology software solutions that is where the competitive positioning is building.
Because we have some competitors are pretty strong and Pos BMS, but I'm not doing the additional modules like we're doing they have just pointing to third party vendors to do it.
Then we have another big company you thought it was very strong in one of the 280 SP MSP U.S., but not so much in the other then we have a bunch of smaller size company does what pretty good in each of the products. They do but don't have end to end solutions.
So when you think off van <unk> competitive advantage, we feel is increasing.
And we'll really be will shine once the crisis is or isn't the fact end to end software solutions, enabling the entire guess journey.
I have a feeling I believe is now increasing dilo, that's what I see.
Hi, Thanks, that's helpful I'll get back into queue.
Thank you Don Kim.
Thank you and as a reminder, ladies and gentlemen, if you have a question at this time. Please press Star then one our next question comes in the line of Allen Klee from.
National Securities Your question please.
Yes, I can and any insight on your plans of.
Growing or what rate you plan to grow your or your operating expenses for the year.
Alan Hey, this is Tony how you doing now and good to talk to you.
You know as we as we made commentary on the call we're not giving full year guidance you know for any aspect of the piano. The one thing that you can keep in mind, though is that you know we've indicated we could have revenue in the first quarter, that's down as much as 35.
Person from last Q1.
And at the same time, if we do realize that type of revenue our adjusted EBITDA for the first quarter would be about breakeven.
And then from that point forward, we expect revenue to go up and adjusted EBITDA would go up from there as well so while we're not giving specific guidance on operating expense line items or any other aspect of the piano you can make some assumptions and that's how you know I would build the model.
Okay. Thank you.
Absolutely. Thank you know.
Thank you. Our next question. Thank you. Our next question comes the line. It is for Q through from Sidoti and company. Your question. Please.
Hi, Good afternoon, guys a couple of questions from me.
First of all up you know.
Ramesh you said you know you're seeing a lot more deals.
Still closing in April and May you know and also you also beside you touched on some of your social and distancing products are you seeing like much more interest in unison if youre a.
Products that cater to that like Argus seed Argus to express is that is that's what's happening now this new environment.
Yes, Hi, Chuck good to talk to you so just to be clear Ishfaque about my comments earlier.
The sales activity in terms of number of demos and all that during April and May has surprised even us. It. It is almost double what we did in January February and we Didnt expect this much sales activity in April may I mean, given the circumstances. The sales activity has increased however.
The closure of agreements, reaching a decision those that definitely delayed.
So a lot of customers about kicking the tires, but they tend to be sales is closing is definitely fallen March April and may is much lower which is why.
It'll be a project in Q1 will be a 35% decline and all that onetime concessions as part of the reason, but the bodies and also is the fact that the business and sales levels that declining the activities that everyone is intrigue everybody like we held to webinars to explain the projects and hundreds of customer uses that into them one on the 14 than one earlier today.
So there's a lot of interest, but the rate at which these that getting close it's still quite slow because everybody is making plans to reopen and data being very circumspect with how they signed deals. So I want to be clear about that distinction that's number one and that the interest is definitely in the products that enable them to.
To put a white they had a guess food safety and comfort. So yes August express is definitely part of it.
The mobile both the August six this mobile in the kiosk I definitely part of it but probably the biggest once we are seeing is an on demand, which is an extension of our Pos product set which enables you to remote auto and eight or pick up on it connects to a delivery mechanism of the delivery company that can be alluded to you that is great interest in that.
Then we recently introduced the authorized sporadic basically when you get done FNB they seat.
You can scana QR code, that's on the receipt and pretty much before it through your mobile phone itself, which is the best form of being able to be can provide there's a lot of interest in that.
And there's a lot of interest in seat like you mentioned because that helps you plan out.
When you want to book like when you. When you use for example, if you want to keep it for the alternate Cabana occupied you have a V of managing that I'm not just cabana even alone Chad you can created as emission system, there by which you make sure devotee alternate launch it is occupied there's lots of different things you can do with seat.
Current interest is definitely those kinds of projects you are right, but he does having a drag on effect on our core product as well that is that afflicted effect on the core products as well because they have so well integrated with Oems.
Got it guarded that's that's very helpful. Our promotions and.
Also on the professional services segment I told you briefly touched on that that's you know and around the end of March professional services or sort of came to Oh, you know activity decline significantly but are you seeing some pickup in maybe mid may or any other.
Color on professional services segment for the for your first fiscal quarter.
Yes, so yes that slowdown in March was quite significant because of travel restrictions and obviously a lot of almost all the sites so getting closed.
So there was a lot of cancellations. So that wed be has got a personal ready to go to customer sites.
And we bet amazed that some of the go lives even the implementations even happened there was one towards the end of March in Memphis, which was even surprising to us so but more or less everything did slow down in March and that did affect services revenue in March no question about it on April was quite bad April we didnt have too many implementations.
Going on we had the implementations, but much much introduce level and what we have noticed in the last three weeks is things out of picking up.
Really weak the amount of services bookings has increased over the but I had weak in the last three weeks or so so we are seeing definite signs of picking up but im not Q1 versus you should expect a significant decline in services revenue because we've been working at record levels before.
And so obviously that I'm going to implementations. We were doing was at record levels. So Q1 is definitely going to be a slowdown so that 35%.
A decrease in revenue we talked about you should expect a lot of that I'd like to being suddenly says, but in the last three unique sort of Soviets seeing every sign off at picking up Pan out of service. This person a lot of getting booked and in fact June is pretty much getting close to getting fully booked not if you are seeing improvements there.
But unfortunately for Q1 ish pockets to let it is going to yeah, yeah, absolutely. That's very very helpful room as thank you so much.
Thank you Chuck.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to remain Srinivasan for any further remarks.
Thank you Jonathan Thank you all for joining us on the call today and for your continued interest and support.
Mrs continues to be well positioned to increase shareholder value. This is a great value creation opportunity, we're determined to make good on put out employees customers and shareholders.
Also want to take this opportunity to give a special thanks to all our team members all across the globe.
Who have been working very hard who had been very brave through all these circumstances and we're working hard every day to make Agilysys, a world class company and of course to our customers and all that investors, who trust us with their investments more now than ever before thank you.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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