Q1 2021 Agilysys Inc Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
And gentlemen, and welcome to the Agilysys fiscal 2021 first quarter conference call.
As a reminder, today's conference maybe recorded.
I would now like to turn the conference over to Jessica Hennessy Senior manager corporate strategy and Investor Relations at Agilysys you may begin.
[music]. Thank you ladies and good afternoon everybody.
Thank you for joining the Agilysys physical 2021 first quarter conference call. We will get started in 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 well the predictive and are intended to be made as forward looking within the safe Harbor protection Other 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 reasonable assumptions such statements are subject to risks and uncertainties.
Could cause results to differ materially.
Important factors that could cause actual results to differ materially from needs in the forward. Looking statements include the effect of the cousin 19 pandemic on our business and the success of any measures we have taken or may take in the future in response to the cover 19 pandemic and the risks set forth in the company's reports on form 10-K and 10.
You and other reports filed with the Securities Exchange Commission.
With that I would now like to turn the call over to Mr. remain true to Boston, President and CEO of Agilysys Ramesh. Please go ahead.
Thank you Jessica and good afternoon, good evening everyone.
Welcome to our fiscal 22 anyone fourth quarter earnings call.
Joining just pick on me on the call today is a divorce, our chief financial Officer.
I'm participating in this call for my home base in Las Vegas, well, Dave and Jessica odd in Atlanta.
We hope on if you want your families and colleagues are doing well and staying healthy.
I first want to assure you that we've taken every step possible to keep our employees safe and healthy.
We've also done not very best using our growing product research and development strength to help our customers with social distancing, enabling and other product enhancements and innovation to enable and ensure the safety and comfort of guess visiting that properties.
Before not update as a reminder, please note that unlike many other organizations, we use the Tom's revenue and seems to indicate to different business metrics.
Revenue was of course recognize the revenue based on nominal revenue recognition rooms, we kept standards across public into play software companies.
We use the dumb sales however, do referred to new sale agreements signed with current and new customers for products and services.
Be measures that sales in terms of Nick I knew a contract value Upsale agreement signed.
They also tend to use the dumped fails selling activity and bookings do all deferred to the same thing net annual contract value since.
That is a time like involved in progression from same store revenue. Some happened relatively quickly why latonia, especially those involving subscription based licensees happened on what time after the implementations are complete.
Q1 fiscal 2021 revenue was $29.8 million.
22 person decline compared to Q1 fiscal twentytwenty.
This was likely the most challenging quarter ever faced by the hospitality industry and out of business.
Considering the extraordinarily tough circumstances, we have lease that Q1 revenue turned out to be better then out earlier expectations.
Now looking back on the portal, we think the fact, we faced such stuff circumstances, I'm still came off a reasonably well had a lot to do without increasing base a product improvements that innovation.
Growing reputation as a world class customer so it was augmentation and the strength of the backlog before the crisis.
Apart from the tough business conditions affecting all our revenue radius.
Recurring revenue was additionally affected by various one time covert related financial relief provided to customers to help them. During this time of need.
Recurring revenue increased 2% theater or what are your compared to Q1 of last fiscal year.
Despite.
This onetime cost relief provided.
We expect this relief to also affect future quarters of this fiscal year, but to a lesser extent in each quarter.
We continue to do very well with customer attention.
The recurring revenue challenges this quarter are only due to the onetime cost relief.
I have nothing to do with any customer retention issues.
Product and services revenues went down 52% and 45% respectively. Yodle what are your compared to Q1 of last fiscal year.
Mainly due to delayed purchase and product receiving deficiency cost by site closures.
The amount special sales seem to incentive during April.
For our new food and beverage online ordering software module called on demand.
The incentives included a 90 day free fast trial, a north services installation charges for the first food outlet at the property.
My any measure of the off it was a big success and multiple hundreds of sites signed up for it.
Assuming a majority of the customer sites, who signed up for the free trial. She was to continue using the product they should help out of fast fees growth stopping around the September October November timeframe.
Regarding services in general.
After hitting a low in April the number of product implementation projects has increased each month over the prior month during May June and July.
No about sales.
The extent of sale agreements closed during the quarter was about 66 veto was about 60% in value Toms compared to the same quarter last year.
Most of the decline has been due to poor spawned technology investment decisions.
I've been loss they shouldn't be submit a competitive decision has reached continues to be impressively height.
As one would expect the sales deals one in value tons he to low during April.
But since April each of the following three months has been an improvement over the previous month.
Be close small deals in may in value Tom that enable.
More in June compared to me and July has been better than June even with a few more business days left to go in the month.
Do we have not yet back to normal sales levels, we are progressing into right direction.
The business expansion program during the past three months has been encouraging.
With about three business days remaining in July.
You have sale agreements of on in close during July it's so far 45% higher than during all of Paypal.
Both the July in April.
First months in the quarter, that's you know I'm not comparable.
They're not many customers who are moving forward now with strategic projects they need to get done for the long term.
Many of the salt operations and hotels, and just talk tones seem to be sustaining themselves with modest a good occupancy levels and continue to invest in technology solutions.
These are the thoughts have many amenities and options available I'm not benefiting from guests who are driving to that destination.
In a few months back the same guess would have probably boarded a plane to get there.
Hotels, which catoe to business travelers seem to be struggling the most.
Gaming casino, especially the regional just thoughts and fiber gaming casinos have made decently bones and continue to make radius kinds of technology investments.
Well, how badly the cruise industry has been affected as well documented by now they too are somewhat bullish about the comedy and out of working on radius projects, taking advantage of this downtime.
With respect to manage foodservice healthcare segment, it isn't doing reasonably well for us.
And the higher education segment is involved in a reasonable amount of technology investment decisions.
After the big decline for a couple of months, the APAC and EMEA businesses have started picking up in July.
For customers, who are continuing to make technology investments.
Oh, I explained in Chile product improvements and new product innovation progress is making on selling proposition increasingly more compelling.
During Q1, we find seems agreements, which added 10 new customers.
32, new properties, which did not have any of our products before but the parent company was already out of customer.
And then we had 113 113 113 instances of selling at least one additional product the sites, which already had one not more of out of other products.
Maybe just seems highlights during the quarter included.
A new customer essentially world in Stevens point, Wisconsin, choosing Agilysys T. P. M S.
The Argus booking engine.
Express Infogenesis Pos be under new costs module with retail for that hotel.
And there is all but trend Jones junior designed golf course.
The Agilysys state B.M.S., when I Palm Garden Hotel in thousand Oaks, California, an independent hundred and 47 room hotel.
The Infogenesis flex on demand quickly and bike kiosk win with La Cantera Hotel in San Antonio, Texas, One of the Premier luxury resorts in San Antonio with 496 rooms, and 34 boutique style villus.
The on demand, but she's across four outlets to enable social distancing by a long time use of Infogenesis Hyatt Regency Chesapeake Bay, the sought an spa in Cambridge, Maryland.
They have reported outstanding on demand adoption rates and reviews by that I guess.
Then the Infogenesis, Pos I'd flex and even with the cannot be hotel by Hilton in Austin, Texas.
B M Hotel group property.
And.
The Rochester Institute of Technology in Rochester, New York, choosing Infogenesis, Pos I'd flex by me and on demand for protein locations.
One three.
The other major highlight of the quarter was up BMS implementation across three prestigious hotels owned by the chalk donation.
Well LMS BMS replaced a well established competitors.
Property management system.
Chuck Casino and resort located about on the out of North of Dallas in South Eastern Oklahoma is a AAA four diamond to sought an entertainment destination.
Our longstanding infogenesis Pos customer they have no life with LMS B.M.S. across the three properties had Durant, who call up and grant Oklahoma, taking advantage of the recently modernized LMS features.
Ashok Dutta, the imagine that new guest experience they have extended that partnership with us to add the guest centric booking engine Argus book, which should be replacing that existing booking engine. During the next few weeks.
They will be using the group featured in August book to provide a personalized booking experience for that group guess.
In addition, as part of the new guest experience chalked always know accelerating their rollout of August ex this mobile to allow that gets to check in and checkout directly from their phones, including by using digital Keith.
By allowing guests to completely bypass the friend, thus the front desk if they choose to.
In addition, chalk, though opened their new 277 seat Guy fear These American kitchen, and Bob maybe they wanted to provide guess a true omni channel frictionless.
And contact list ordering and payment experience has it is felt they chose the idea on demand suite of applications to allow guests to order and bait tableside using their own mobile devices.
For the bear some us they decided to enable enable mobility threw out but I'd flex tablets to offer guess the next level of hospitality service.
We are truly honored to partner with the chalk donation as they drive forward innovation and new guest experiences.
One of the significant highlights of sales success during the quarter was 17 oneseven, 17% of total sales in value tons was comprised only off new software modules created during the recent past.
Against only 1% of sales for attending to projects, which we had new then during the same quarter last fiscal year.
In absolute value Toms sales of new products, we had about eight times higher.
In Q1 fiscal Twentytwenty one.
Compared to Q1 last year.
Especially given the circumstances, we've been facing during this quarter.
This is quite if this is quite a testament to not only the base a product innovation now, but also to the fact that the new models more deals being developed I didnt, good sync with and focused on immediate customer needs.
This also gives us a venue confidence that our objective to be an end to end industry focus technology solutions provider all based on modern cloud SaaS native and on Prem ready technology will eat good shot them and long term financial business.
This industry is clearly hungry for such cutting edge modern technology based solutions backed up by World class customer service.
V clearly out on that I track.
The new products, which constituted most of the 17% of total sales. During Q1 included the following one I'd on demand on demand is a contact list self service FNB ordering solution, which offers and in Q2 guest facing ordering and pay experience.
This application allows guests to place and B for auto to using their own device phone tablet or laptop.
This application also includes a smart many option, which provides a touchless menu display on a guess on mobile device.
The displayed venue menu is linked directly to the actual items in the on demand system and does not do a PDF auto website link.
We've also updated a full service option to this application, which is a completely contact less multi Pos self service FNB solution that offers an intuitive guest facing table side autumn and pay experience.
He supports ordering for multiple gets set the table over the course of for me using their own devices.
Number two.
I expect this application allows guests to use their own mobile device Scana QR code on the Infogenesis check they view it digitally copy of the check I had a tip and initiate payment maintaining a fully touchless guests payment experience.
But three August express this application anybody's guess to chicken and checkout via mobile device auto lobby kiosk, which support for digital Keith I'd verification and key and coating.
And before I guess book a commission free Dedic channel easy to use online reservation system that is designed to move guess easily through the book booking process for roombas emissions spot appointments and caused the times.
Given that seamless seamless tight integration without P.M. as applications.
It enables the real time availability and the ability to upsell room upgrades and service enhancements, helping drive increased revenue.
Number five agilysys authorize.
This morning will provide support for fully automated and secure online payments for any room deposits third party guarantees and folio charges, while eliminating the need for manual credit card authorization farms.
Payments that seamlessly authorized and posted appropriately in real time.
Fully integrated without P.M. as applications. This module now enables gets to authorize at hotel stay away from that personal device, preventing the need to provide credit card details over the phone to end agent.
This helps all white the previously cumbersome process of the employee having to click a button to enable surveillance to check for Uncaptured any fraudulence steps.
The six August service.
Application is an easy to use hospitality native platform that monitors evens across various stuff and guests touchpoints.
As a configurable service optimization solution, it and able to stop assignment context based guest location and top details and optimize the voting of tasks and approvals, which support for smartphones tablets laptops and vegetables.
This application contains modules for a housekeeping preventive maintenance and to where it gets communication.
Number seven Agilysys Spa. This is a modern spot management solution for independent hotel and resort baseball operators.
Built in mobility options helped deliver in effortless chicken and stop scheduling process, while intuitive drag and drop appointment management helps maximise therapist and treatment room utilization.
Built in E management insights, which include real time availability and optimized pricing.
As well as the ability to book group services and manage the retail items can help grow revenue for property.
This application comes integrated without P.M.S., Npos solutions, making it easy to share data across the enterprise number eight agilysys golf. This is a broader shop and golf course management solution for independent hotel and resort courses.
Guest centric technology that helps build personalized experience for players guests and members on the course again integrations without P.M.S. Npos solutions makes it easy to share data across the enterprise and access split information, including personal preferences play histories and how.
Andy caps.
In addition, there not a couple of other recently developed software modules, which had in the process of being released.
Agilysys sales in catering, which is a comprehensive sales and even management system and you'd have seen the press release onto this today and number two as you listen to engage loyalty and promotions, which will help operators leverage guest appearances for targeted promotions and offers.
No. None of these modules that are available for sale system for our sales team to sell as recently as two years ago.
On a majority of them better not available, even a year or six months ago.
All these new software solutions have been created cloud SaaS native.
And also on Prem enabled.
Leaving the choice to the customer with no technology limitations.
Most of the customers are choosing the cloud SAS option, now, which augurs well for accelerated fast fees growth in the future.
In addition, the projects underway to strengthen and modernize our feature rich core products continue to make excellent progress.
Each recent devotion to lease of the code products apart from a continuous stream of enhanced and new features.
Has also included good technology modernization program.
Adjusted EBITDA during the quarter was 3.4 million better than our original expectations.
What does notable about the EBITDA level achieved is that we did not in any way compromise the pace of product innovation and customer service levels during the quarter.
Our current velocity of product improvements and innovation is the best it's ever been.
It does help create expanded market opportunities even under the current tough market conditions.
R&D team size, not including the technical services team, which is focused on customer specific custom technical work.
It's not all about 720 person strong.
Which is about 25% higher than at the end of Q1 last fiscal year.
With about 40% of does R&D team, that's four zero with about 40% off to the R&D team, having being with us for more than two years now.
We are currently at the level of quality and productivity, we've not seen before.
They do use level of product development spend the Q1 BNL shows is mainly due to salary reductions in place for the six month April through September period.
Lower incentive compensation accruals compared to last year.
And consistently improving R&D cost efficiencies.
Regardless of what the spend indicates the current level of product development and innovation output is at least 25% higher than at the same time last year.
We continue to increase our ability to provide end to end solutions, which enabled the kind of contact less safe and comfortable guess journey our customers now have an enhanced need for.
We are committed and determined to increase the peso product innovation, even through the current business conditions and back that up with superior and improving customer service levels.
Along similar lines, our sales and marketing spend during Q1 was down mainly due to the six month salary reductions in place.
Spend on trade shows.
Lower commissions and incentive compensation levels and limited travel.
We expect nottamun spend levels to get restored and increased as market conditions continue to improve.
Lastly, and the most important detail of them. All we continue to be intensely focused on securing the safety and health of our employees customers and the communities Vseven.
We are deeply grateful for all the personal sacrifices.
Our team members worldwide have made to secure the financial health of the company during this crisis period.
I would be about kind of way through the cotton business environment significant marketplace uncertainties remain.
This fiscal year, two will be a tale of four quarters for us.
But even then for continue to provide guidance one quarter of at a time for the remainder of this fiscal years.
And then switch to have normal annual guidance cadence starting the next fiscal year, if flight Twentytwenty too.
All aspects of out of business, including cash balance on hand continued to improve.
We remain well positioned for good financial performance, even as various parts of the industry. The open and begin their recovery process.
Meanwhile.
We expect revenue during Q2 fiscal 2021, the July to September quarter to be about 15, one fight to be about 15% sequentially higher.
Then the 29.8 million revenue level during Q1.
We also expect that to translate to a 25% corresponding improvement.
Hi, good EBITDA in Q2 compared to the $3.4 million during Q1.
While the current macro economic circumstances, a definite set back to the business progress Veeva, making three covert we have every reason to believe we will come out of the space without all business helped intact and improve.
We remain relatively small player in this huge hospitality industry and even a partial recovery in various areas of the industry will be sufficient to fuel our growth.
We continue to see solid evidence that the short term reduction in overall industry business levels will be increasingly compensated by an increase need for technology solutions to make hospitality guest experience a safer and more comfortable.
We expect to increasingly beat a leading provider of such much needed high quality technology solutions.
We remain cautiously optimistic about our near term future and bullish about our long term growth and profitability improvement prospects.
We have good reasons to believe our competitive advantage and overall business helped will be better on the other side of this crisis than it was before.
With that let me handle to Dave for further color on our financials and other business deepens Dave.
Thank you very mess, there's no doubt the effects of the have in 19 pandemic have deeply affected our industry in the short term.
We remain more confident than ever and our long term financial health and ability to execute on our growth and profitability improvement plan.
Deliver mission critical solutions to our customers backed up by World class customer service and to do whatever it takes to support their ever changing business needs.
We're pleased with the strength of our cash position along with our ability to deliver cost effective product innovation.
This should allow us to pick back up with a business momentum we achieved prior to the pandemic.
Taking a look at our financial results beginning with the income statement first quarter fiscal 2021 revenue was $29.8 million a 22% decrease from total net revenue of $38.4 million in the comparable prior year period.
Topline decrease largely reflects a 52% decrease in product revenue.
45% decrease and professional services revenue due to that delayed delivery and buying decisions throughout the industry as well as the one time, because it really given to customers, which for the most part impacted the first quarter.
The decrease in products and services revenue was offset by slight increase and recurring revenue.
Total recurring revenue represented 68.8% of total net revenues for the fiscal first quarter.
Compared to 52.3% of total net revenues and the comparable prior year period.
The increase in recurring revenue as a percentage of total revenue.
It's primarily due to the lower product and professional services revenue levels.
We're pleased with our subscription revenue growth, which grew at 8.6% for the force first quarter.
So 2021, despite the one Tom really given to our customers.
Subscription revenues comprised around 37% of total recurring revenue.
Compared to 35%.
Total recurring revenue and the first quarter fiscal 2020.
With respect to endpoints. We currently serve is about 274600 rooms and have approximately 63100 terminal.
Like we said on the last call we're continuing to provide this metric.
Increasing amount of our revenue is now less dependent on endpoint, but.
Our AD software modules that built out our ecosystem where products are adding scale.
As for products and services revenue. We currently have a backlog of hardware software and professional services that remain near record levels.
As our customers customers operations open back up and start to return to normal we hope to accelerate the deployment of that backlog.
And that sales have increased every month since April in Q1 fiscal 2021 was better than expected. We should soon get back to normal revenue levels. However, given the uncertainty everyone continues to face it is impossible possible to predict exactly in which future quarter that will happen.
Moving down the income statement, we achieved gross profit of 18.6 million compared to 20 million in the first quarter fiscal 2012.
Gross profit margin increased to 62.2%.
There are 252.1% in the first quarter.
The gross profit margin increased due to a couple of factors recurring revenue was a larger portion of total.
And our first quarter of 2021 was the first quarter not impacted by roughly $3.2 million.
Capitalized software amortization.
Looking at operating expense, but excluding charges for legal settlements impairments and restructuring.
In other charges.
First quarter saw a 16.7%.
And operating expense.
To 17.8.
Compared to 21.3 million in the prior year.
This decrease in operating expense is mainly due to reduced incentive compensation temporary salary reductions and other cost saving initiatives.
Combined remain operating line item.
And development expense.
Sales and marketing expense in general and administrative expense.
The 6% of revenue this quarter compared to 53% of revenue.
During Q1 fiscal 2012.
However.
Expenses. These three lines were down $3.9 million compared to the same period of last year.
Our net loss.
1.7.
And loss per diluted share of seven cents are comparable to the prior years first quarter loss per diluted share of seven cents.
Adjusted net income of 1.9 million.
And adjusted diluted earnings per share of eight cents.
Compares to eight cents and the prior year first quarter, when normalizing for certain noncash and nonrecurring charges.
For the spring for the 2021 first quarter, adjusted EBITDA improved $3.4 million compared to $3.2 million in the year ago quarter. We're pleased with the adjusted EBITDA for.
Q1, 2021, which represent the overall health business and available costs, though for sustainable long term profitability.
Moving to the balance sheet and cash flow stake.
Cash and marketable securities as of June Thirtyth 2020 was 74.6.
Fair to 46.7 million on March 30, Onest 2001.
More importantly, our cash balance at the end of day yesterday was approximately 80.6 me.
Our strategic initiatives to increase liquidity in the quarter allowed us to pay down nearly $9 million and accounts payable keeping us in good standing with our vendors, we're pleased with our ability to manage our liquidity as we navigate these challenging times.
Assuming hospitality business trends continue to be on an improved path and there are no major economic revert reverses and no major M&A type onetime activities.
Back to end this fiscal year at higher cash balance levels.
And our ending Q1 fiscal 2021 balance of 74.6.
As it relates to free cash flow.
Cash flow in the quarter was negative 5.2 million compared to negative 2.5 million in the prior year.
The free cash flow reduction was primarily due to working capital and paying down our vendor bonuses.
As we mentioned mentioned.
Bags revenue to increase 15% in our second fiscal quarter of 2021 compared to the first fiscal quarter of 2021.
Our industry regain strain and begin finalizing buying decisions and accessing product deliveries.
Given these revenue levels adjusted EBITDA for the second quarter should improve 25% and remain above first fiscal quarter of 2021 levels.
The point format.
Otherwise given the uncertainty or the global markets, we're not providing any further guidance now.
In closing our business continues to improve.
As reflected by the strength of our profitability and cash.
Along with a new products, we have released over the last year.
We have spent much of the past couple of years working towards building a company to deliver world class solutions and services that is second to none.
And we hope you can see the results of our efforts coming through our financials.
The current slowdown in sales, we have been laser focused on improving the company overall.
And specifically the great set of products, we have and remain confident our efforts will continue to pay off in the medium and long.
That.
I would now like to turn the call back over to Tom Brugger Liz.
Ladies and gentlemen, if you'd like to ask a question at this time. Please press. The Star then the number one key on your touched on telephone.
To withdraw your question press the pound key.
Again that is star then one if you'd like to ask a question at this time.
Please standby only compiled acuity roster.
Our first question comes from that then leave with BTG. Your line is now open.
Hi, guys. Thanks, taking my question well done in the quarter, given the very difficult operating environment. Your find yourselves and I guess first you highlighted a lot of the good wins I'm, especially with some of the newer products that you mentioned you know weren't even available two years ago.
I wanted to dig in there a little bit and just kind of get a sense of.
You know the bookings trends within the quarter and even into July what what level of mix are from.
Guess existing customers buying some of these sort of new normal social distancing elements and how much of the sort of pipeline rebuild is from those versus you know just sort of ongoing discussions that you had about a broader pure was modernization or rpms upgrades with.
Existing customers.
Yeah, Hi, Thanks for the question I mean on thanks for participating in the call.
We normally monitor sales in four categories.
One this existing products.
As a customer buys an addition of terminal or by services things like that where that is an existing product and that is more business at owned.
Now what we call us comp due to the sales is the other three categories. The first one is new logos red and new customer the signs up. The next one is a new site that somewhat as all of these sign the already out of customers, but they go live in the new site without product and the third categories that you should projects of new products.
Bad a site already has at least one off our products.
By at least one another project.
What we have found envy of as we have all the of ourselves being a bit surprised since April.
At the new logos business and the new logos opportunities. We had looking at you said reasonably healthy I wouldn't compared it to the peak time like last January February also.
But it just quite high and we were surprised by the number of new logos number of new customers, who are talking to us about system replacements in fact that as a seven digit there's a big deal that we signed recently with a new customers. So the new customer business is doing better than we expected it would enable that's number one.
Number two what does it really doing well for us as new products and what we mean by new products is additional products that a customer has one of hot products and that actually buying the other products. Many of them out of these new products that help it social distancing and the other current needs and also when they look at those products they have surprised.
By the how many things we now have to offer and then they take a look at that entire line up even projects that I'm not necessarily directly related to social distances.
No what has not done well walk has gone down more than you would have a bargain for his new sites. Many if not a big customers, who let's say in calendar 2019 were going live without products in many new sites that business has definitely slowed down.
But what has picked up his new products and new customers looking at our systems now.
Got it and are very helpful. There I guess as you also look at.
The on demand free trials that you rolled out and really wanted to.
Support customers in a difficult time, but also kind of open opened to rise to a lot of these new products I guess as you think about what 15% sequential growth next quarter looks like and hopefully improvement throughout the rest of the year, what kind of conversion rates are you assuming or thinking about.
For all those customers that that have taken your up on that off for and kind of what that is adding to the pipeline from your expectations.
Yeah, So the 15% guidance of revenue with secret should increase do you want to Q2 and the 25% EBITDA increase is based on general business trends I. It is not based on one particular thing now the let me answer the on demand part of it first the 90 day free trial.
He is going reasonably well yeah, many customers loved the product and so we expect a good portion of those customers to continue using that so we are optimistic bullish about the fact that that product is going to be.
Revenue generated officially SAS fees generated for us for the long thought. So this is just not a shot dumb thing. This product is going to be there to stay on it is going to be one of the bottom for laterals in our Pos kiddy right. So that's going to be helpful. And we expect a majority of the customer that big a majority of the customers to continue using the product. So data we have no doubts.
But our guidance off a 15% revenue increase in Q2 over Q1 is not based on any one particular thing I would not base. It just on on demand. It is a it is we monitor pipeline and we monitor sales opportunities on a weekly basis and currently opportunities all alone including.
Picking up of business in APAC, and EMEA is pointing to that kind of sequential growth.
Got it and then lastly from me if I can supplement or in here historically, you've had a lot of strength in gaming you know you've talked about Las Vegas being a huge market for you, but also highlighted some of the regional casinos I'm, having a lot of success recently.
It is there a push and they're move to open as early as possible and a lot is areas and being located often times and maybe less.
Prevalent hot spots at least some U.S. from case counts.
Would you expect over the next several quarters for that mix of revenue coming from from gaming to actually ticked back up even you know as you've had a lot of efforts in diversifying away from that or are you seeing strength.
In various pockets in all the different verticals that you've really shown some good success and recently.
Yeah. So let me answer the question in two separate bought so number one that site as gaming is concerned.
VR be have noticed a pickup.
Mostly in the regional just thoughts and then tribal casinos.
But like you said they have not in the center of the hot spots and they also have a bit more freedom to operate the way they want to so the interested enough products and a willingness to invest in technology has been higher with the regional we thought casinos than they have been with the destination to start casinos. If you will if you.
Make that difference so gaming is a big market for us I would not say that the.
The kind of business pick up datas anywhere close to peak levels, but it is doing reasonably well, especially in the region of the thoughts and especially with tribal casinos as they look at the radius new product options.
Regardless of the vertical segment I will assure you that we are doing reasonably well and our sales activity is this high mainly because of out of product innovation over the last year, I mean, I shudder to think walked whatever happened to us if the product innovation and all the new products and all that we have not bad I like they are today that has really helped and a lot up.
People are looking at it including the of is focusing.
No.
I wouldn't say, if you're trying to diversify away from gaming, we just have great opportunities and hits out to sea and manage foot. So it was because we have such low market shares there and the industry. So huge especially in hotel this thoughts and cruise ships, what we call it out to see hotels in the thoughts is a huge market and we have very little market share now all these new put.
Not except we have and not improving pms offering that ought to get staying all phone football and feature for feature can stand against any other leading vms product out there and we have the additional all these additional modules supporting it. So if you had a very competitive on pms and I feel as offerings, how to getting better with on demand. So we have a long runway.
Going hits out to sea and that is beginning to show how to see is done, particularly well during the last four months relative relative to the past unmanaged foot services in health care and in higher education that new markets for US we have very low market share and there was a partner who we work with is really bringing us a number of deals. So those two businesses that expanding.
Making up for the temporary shutdown lag in destination to Soc gaming.
Got it thank you.
Welcome. Thank you.
Our next question comes from George Sutton with Craig Hallum. Your line is now open.
Thank you remember you read through a series of new offerings, which I. Appreciate I'm wondering if you could talk about that relative to what you're seeing from competitors or are you, bringing these newer offerings into the customers and they are evaluating it as a either the option they go with or not.
Third there aren't comparable offerings, that's our belief I just wanted to generally confirm that.
Yeah, I mean, I, John Hi, Josh I never want to I never want me autos illness is to be overconfident about anything.
In General you are right.
One.
One good hospitality solutions providers like us.
Who provides both the core products and the additional modules is lacking.
What a lot of the leading providers do like our peers out of competitors. What they do is they point to third party vendors for the most spot, saying Oh, you want the ticking up checkout mobile auto ticking checkout kiosk option on an obvious service go to that partner I'll go to the spot.
That's the way they do their business, which works I mean, there's nothing terribly wrong with that other than the fact integrations and the lack of one next to choke and all that become challenging for the customer on what we have noticed thing now is that soon as a customer even comes to realize that we have all these additional modules and that is the main challenge for us jobs the.
That.
We need customers to understand that we have no longer that oil company that we used to be that we have all these offerings. Once they understand that the fact that all this comes integrated from one window. They have been tested together they add value to each other and now we have a single demo environment in which we can demo all the products that this I think a big.
But your do advantage for us Josh and I think that competitive advantage is growing as bad month over month.
So you referred early on to the social distance, enabling offerings that you have I believe those are things like a Joe Signoff guest service at Express mobile can you talk about.
What what kind of demand on a relative basis, you're seeing crude for those kinds of products. Specifically is that is that mostly just affecting your existing customers taking on more product or is this your trojan horse entre into new accounts.
Yeah, I wouldn't call it Trojan horse each of them have their own markets like the sales and catering module that came out yesterday that that market itself. You can argue runs into billions and we're not using that necessarily as Trojan horse because sales and catering by itself can be a product that could be a 2030 40.
<unk> million dollar product for us might save even if that got somebody doesn't by any of our other BMS products and so on and we are talking to a major leading golf course, now just about the golf product and there was one customer was about the signed with us and that dealers got delayed who had just looking at the spot product and a few things around that.
Not necessarily connected to pms. So each of these products do catty do play in a market of their own and each of them can be double digits millions of dollars as we go along.
Each of them have good potential by themselves, but taken together.
It does provide us a chance to sell more two out of big cut and customer bases, but.
We have not necessarily viewing it as a Trojan horse kind of strategy. It is just that we have a lot more product offerings now each of them, having individually big market and taken together. They are also very useful for all our big customers.
Gotcha last question, if I could you mentioned that you're covered really was really a one time.
Adam I'm curious.
Your confidence in that there might not be an extended need to help.
Again at some point and as you thought through that.
Oh, yes. Good question, Josh I mean that that is part of the uncertainties that we had working with.
I want to be mean by the funniest onetime is that it applies.
Only for one time like this is not a extended discount or anything like that.
On.
So far so good I mean, it feels like it as onetime but like VR. Another way. It's like you out that there may be future needs as well right. It is very possible. It all depends on how small then how straightforward the recoveries.
Whatever it is even if we make any other future that Leif offers they will again be onetime for that likes its still possible Jones I would not ruled that out.
Okay. Thanks very much appreciate you are welcome. Thank you.
As a reminder, ladies and gentlemen that is star then one if you'd like to ask a question at this time.
Our next question comes from Allen Klee with National Securities Corporation. Your line is now open.
Hello, Good afternoon, a question on the temporary discounts.
You could you quantify and like you every one of those customers started paying you when the time period was over how much quarterly revenue would that represent.
Hey, I'll say, so we're not quantifying the the amount of discount, but the way to look at it I mean, you can see that our exit rate.
Recurring revenue was about 22.3 million in Q4, and our endpoints that continues to grow.
We're at a little over 20 million this quarter, so that the onetime discounts really affected.
Affected the growth rates on recurring revenue.
To that extent and without the credit without the onetime release credits our growth rates would have been similar to what you stand Pat.
Okay and then.
Six months temporary discount of discounts the wrong, we're sorry.
Okay cut in compensation costs.
Is there way to think about dollar wise, how much that is on a quarterly basis.
So on a quarterly basis, it's I mean, the way I would look at it Alan is.
Is our operating expense as a percentage of revenue.
And we have historically said for Gener DNA that will remain in the 14% to 16% of revenue.
Product development will remain in the 25% to 27% of product development.
Our sales and marketing will stay in the 12% to 14% of revenue.
All of those are slightly down this quarter based on.
All of the temporary and.
Long term cost savings initiatives for the way I would look at it is this year will be a little bumpy and some level will be outside of range, but as we get into next year. So start to return to the normal levels are used to.
Yes.
Okay and then just.
Bigger picture.
As.
Recovery in some of the hospitality areas, maybe going to be a little slower than what.
Was originally expected.
It's very tricky, because that's going to affect the number of.
Some of your demand, while you're doing very well with new products.
How does that affect I guess, you're just your confidence and in the recovery and your ability to return to.
Growth.
Yeah, so of I would.
Hi, Alan I would think of a couple of things that right number one like we keep repeating it's a huge market than we had a small player like so out of that cutting revenue. If you take the 20 or 22 million, but a quarter of multiplied by four vs somewhere in the eighties Tonight.
And the low Eightys too high a these is bad annual recurring revenue run rate. This.
Compared to the overall total addressable market that runs literally in 2 billion side. So we are still a small player.
So what that gives us is even if bops off even portions of the hospitality industry.
The colors that should so as the wet so the tribal casinos doing reasonably well a number of casinos, making technology decisions, even the cruise industry, making use of this downtime to do upgrades a whole lot of hotels to the thoughts in regional areas doing reasonably well so as pockets of the model.
Get to the color I think we can do reasonably went right. It is not as good as the whole market humming, we understand that but even pockets. So fit opening up we should be able to do reasonably well.
Right, So and the fact that we have all these new products and when a customer really takes a look at US we have now becoming a more and more compelling proposition that also helps out to win loss ratio increasing also helps so if I bet you Alan I mean, we out of I don't want to get to ahead of ourselves, which is why we have only providing quarterly guidance now.
Now.
I'm not saying next quarter, we are projecting will improve 15% now as you can do them at that gets us into sort of the region. We used to be about a year you had into half ago, Sylvia getting Dan if that trend continues we should get back to anonymously. So right. Then if fytwenty two should be a sort of an automotive growth year.
Yes.
Okay. Thank you so much yes. Thank you so much Helen.
Our next question comes from East about food with Sidoti and company. Your line is now open.
Hi, Good afternoon, guys. Thank you for taking my questions I'll first of all Romesh.
Thanks, a lot for some of the governors that you gave with respect to the onetime credits and concessions.
In particular can you give us me a sense for like you know how what's the number of maybe customers who have accepted your offshore and maybe how many are in the process off a you know executing those contracts I think the last time, you said there was around 300 or so customer sites, who are in the mix.
Hi shot up so two separate things the shock as far as the concessions go.
To the various kinds of concessions in each one.
Chose one some of them just shows to extend that payment time period and not take any particular recurring revenue onetime credits they decided not to do that some customers took that getting revenue credits.
And the accounting Fatah fit some portion of it we have to applied for the whole young that is why you will see effects of that in the next three quarters as well not that is one kind of core would really felt also a different kind of what we offer.
Was this offer for this on demand project, which we knew what is going to be really required by them immediately and it turned out to be true hundreds of sites I think it's something like 300 400 sites.
Picked it up and they added the offer was to do the installation of the first outlet for free that'd be don't stop them for services, which I think that services revenue this quarter and will affect services revenue in the next quarter as well and also 90 day north fast fees. So that was another part of the concessions we get so two different things. One this is that giving revenue onetime.
Credit and the other is for use of an Arctic for 90 days.
Both of them different customers pick it up in different degrees flights. So we can go into the details of that but overall when you look at Q1 off this year versus Q1 of last year was a 22% decline.
Good portion of that have to do with these kinds of.
Thats extremely helpful Ramesh and in terms of.
The number of customers you mentioned that you know if decreased 400 sites converted to being customers.
In the maybe in the December quarter.
Could you give a sense for maybe what the dollar volume off off all of these customers subscribe would be.
Yeah, I don't want to maybe you don't want to get into those kinds of detail dish back on it is important too.
Look at us a little bit more holistically them, that's tied our revenue is going to be driven.
Both in the short term and the long gone by a whole lot of such products does not only this product so I would not get.
Who held up with just this one product then what it's going to contribute the fast fees, but one thing I can generally tell you is truck.
Our SaaS offerings have really increased snuff.
Virtually all our products now of big majority of products that available both sasson on for them on most customers that's picking up fast. So they are quite bullish about how all these products that are going to help SAS fees in the future, especially those on demand from it.
Okay and on the on the you know anew ultimate already touched on this in terms of you know steed off some of the casinos you said, a regional and driving casinos are doing well.
On Ramesh UBI being based out of Nevada, and Nevada opened in early June casinos are you. What are you seeing in terms of SMIC foot traffic for.
Casinos and casinos and maybe our some of the the last Vegas abuse casinos looking to are you seeing more inquiries from that strip.
Yes, I mean, a lot of the major cost spread gaming customers are looking at radius products, we have the out having discussions with them.
I don't want to comment on one but generally the foot traffic is reasonably picking up in Vegas, because I tend to go on drives I get in the cotton just drive through the strip and about two Saturdays ago, I wasn't really stuck in a bad traffic jam that and I was really thrilled about it.
So the topic is picking up in Vegas, but in terms of sales efficiency technology investment decisions.
We are noticing it to be relatively more with tribal casinos.
And our region of the thoughts non casino to thoughts.
Those are the kinds of 80 as various seeing more investment decisions being picked.
And I think that is only a short term phenomena mishawaka to change quickly.
Wonderful. Thank you so much guys for asking my formats from my questions. Thank you.
That concludes our Q unable to call I'd now like to turn the call. Let me turn much for closing remarks.
Thank you live. Thank you all for joining us on the call today and for your continuity interest and support we look forward to talking with you to report out progress in the next quarter at about three months from now please take good care. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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