Q3 2021 Agilysys Inc Earnings Call
Yeah.
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Good day, ladies and gentlemen, and welcome to the a jealous of fiscal 2021 third quarter conference call.
As a reminder, todays conference maybe recorded.
I would now like to turn the conference over to Jessica Hennessy Senior manager of corporate strategy and Investor Relations, Eddie jealous Us and you may begin.
Thank you Liz and good afternoon, everybody. Thank you for joining via telephone and fiscal 'twenty and 'twenty, One third 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 far as 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 reasonable assumptions such statements are subject to risks and uncertainties that could cause results to differ materially and.
Factors that could cause actual results to vary materially from me and the forward looking statements could include the continued effects of the COVID-19 pandemic on our business and the hospitality industry. The success of any measures. We have taken on may take in the future and response to the COVID-19 pandemic.
Funding of the reopening phase of the hospitality industry.
And the risks set forth and the company's reports on form 10-K, and 10-Q and other reports filed with the Securities and Exchange Commission.
I'd now like to turn the call over to Mr. Ramesh Srinivasan, President and CEO of agilis that.
Please go ahead.
Thank you Jessica.
Good afternoon, and good evening, everyone welcome to our fiscal 'twenty and 'twenty, one third quarter earnings call.
Joining Jessica and me on the call today is David Ward CFO.
For the third consecutive quarter I'm participating in this call from our Las Vegas Office, while Dave is an Atlanta office and Jessica isn't Dallas.
And we hope to get back to a pre pandemic routine and conduct the next Q4 and fiscal yearend earnings call sometime around mid may and with all of us in one place and our favorite at Atlanta Conference room.
And we hope all of you and your families and colleagues are doing well during these challenging times.
Knock on wood and we've managed to work through the past 10 months with a steadfast focus on the health and safety of all our employees and everyone. We serve with good results.
The work from home arrangements have worked out well with no compromise on our pace of product innovation and level of customer service.
During this time many of our employees have continued to travel to customer sites when customers have requested such hip.
For many different reasons, we are eagerly looking forward to a return to near normalcy hopefully no later than the second half of this calendar year.
The global hospitality industry continued to face difficult headwinds due to the pandemic as calendar 2021 down to and and <unk>.
<unk> on sales and revenue levels.
Fiscal 'twenty 'twenty, one Q3 revenue grew about 7% sequentially over Q2 to $36 $7 million or 30.
13 that is one three up 13% year over year decline compared to Q3 on fiscal year 2020.
Product and services revenue grew 16, and 13 that is one six and one three.
Product and services revenue grew 16 and 13% respectively.
Oh, and Chile, compared to Q2, but remained at 63% and 77 zero percent year over ear off the levels achieved during Q3 of last fiscal year.
Both product and services revenue levels continue to also be affected by the reluctance of customers to accept product deliveries and start services implementations. They have already signed up for.
The number of implementations on our services teams have been involved and per month, how does it remain steady for the past couple of quarters.
With only slight improvements during recent months.
Despite Q3 revenue being your over your 5.3 million less than Q3 of last fiscal year.
GAAP gross profit was $3.1 million higher.
Almost all of the $3 1 million increase and gross profit cash.
Can be attributed to the amortization of previously capitalized software development costs, which affected Q3 of last fiscal year and was not applicable this Q3.
That would imply gross profit was flat year over year, when we compare to Q3 of this year versus last year.
Despite a $5 3 million revenue decrease.
Lots of cost profit from about $7 2 million, a decrease and products and services revenue.
It's compensated by gross margin gains from the one 9 million increase in year over year recurring revenue.
Given the pandemic cost hospitality industry business headwinds, we've battled with during the past three quarters. The one 9 million increase in year over year recurring revenue is remarkable.
Our current pace of adding about half a million per quarter sequentially to recurring revenue should increase significantly once business levels return to normal fee and growth resumes.
While on the subject of recurring revenue.
Recurring revenue reached a new quarterly record level of $22 $8 million on.
And 2.4% sequential increase over Q2, and a 9% year over year increase compared to Q3 of last fiscal year.
Subscription revenue growth levels continue to outpace all other revenue categories growing 18, one 818% year over year, and reaching 41% of total recurring revenue.
Despite considerable pressure from an increased level of property closures, resulting in a significantly higher level of customer churn and associated loss of recurring revenue.
And the string of requests from customers for more one time or recurring fees relief and credits.
And despite all those challenges the overall year over year recurring revenue growth of 9% and subscription revenue growth of 18% are good indicators of the mission critical nature of our software applications and.
And the continuing steady migration of our customer base to subscription based licenses.
Thanks to our improving pace of product innovation and the increased availability of newly created cloud native SaaS applications, which address.
Current compelling hospitality industry needs, we've been successful and maintaining good subscription recurring revenue growth year over year.
Such modern software applications on already playing a major role and helping hospitality operators reopened and safely.
And will become must have during the full reopening phase and beyond to make guest experiences attractive safe and comforting.
Superior customer service from Hartford from Technology partners like US has never been more important for our hospitality customers and that fits well with what has become a natural DNA during recent years.
Now with respect to sale success levels.
Sales measured in annual contract value of agreements, one signed and closed during the quarter remained at only about two thirds of prior fiscal year levels.
This has been a consistent factor throughout the nine months of this fiscal year compared to last year.
After the major dip in April and up.
Promising recovery during the June July timeframe sales success has remained more or less stagnant since then.
Sales related product demos continue at a healthy rate with many customers, both big and small impressed surprised and even intrigued by our product innovation pace and our ability to be and effective end to end modular and integrated hospitality software solutions provide us but.
The decision, making process and the final technology enlist meant actions continue to be very delayed.
We remain optimistic that there will be a point in time this calendar year, when the pent up demand for better technology will break through and a big way, but not sure yet.
And when exactly that will happen.
One silver lining and our sales success.
During the past couple of quarters has been fast subscription licenses related sales holding up well in comparison to last fiscal year levels with only slight year over year declines.
As of the beginning of this calendar year, we ended on a seven year a partnership with a major point of sale product resellers, who had represented us in certain market segments in Europe, and and all of Australia.
This action was based on a preference to handle all aspects of customer interaction, including sales implementation and support directly which is abnormal practice and all other regions.
We've had a direct presence and the EMEA region for many years channel.
We took steps to strengthen our team and EMEA recently.
And we are on the process of establishing a derrick persons and Australia, starting with a couple of recent new hires.
During the quarter, we increased started out and be the sole strength by 9%, bringing the total number of R&D resources to about 850.
That's 850.
Although the R&D resources, who have accepted their job offers are and the process of joining us during the coming weeks and months.
And we expect R&D strength to reach about 1000 person Mark sometime before June and then stay at that level for the foreseeable future.
We don't expect to require any further significant R&D resource increase for the next 100 million or so of additional revenue growth during the coming years.
We expect to increase our sales and marketing spend starting later this calendar year.
And then our product sets will be where our aspirations have been that for a long time now and we will then be all set to launch a new.
More sales and marketing driven growth oriented business face backed up by an experienced and site civil R&D team and implementation services and support personnel, who are dedicated to a world class service culture.
During the quarter, we made substantial progress with our core product improvement efforts.
While the task of improving products never really gets completely done in an enterprise software company dedicated to continuous improvement like us.
The huge core product modernization projects. We got started on a few years ago should be getting completed one by one at various times throughout this calendar year.
We expect to see absolutely no trace of any all technology in any of our into and hospitality software solutions product demos beginning the second half of this calendar year.
One of the crucial implementations recently completed feed.
Featured the first completely modernized info Genesis P. O S terminal, we've released and multiple decades.
Which can now support devices across all major operating systems.
Like Windows, iOS and Android all from a single code base.
We'll open up a significantly large hardware and payment device selection for our customers to choose from a.
A few weeks ago. This new Iga 12, UX modernized terminal went live on iPad devices at a prestigious restaurant and Hong Kong.
This is the very first time, we have installed and I G. P O S dominant on iPad devices.
We expect this calendar year to feature several such crucial groundbreaking implementations all fight various modernized cloud SaaS native on Prem capable core products setting ourselves up for a promising future.
Okay.
Apart from the core products and the many add on software modules continue to perform well from a sales standpoint, as an increasing number of customers have adopted them to work with the new contactless and other guest requirements.
New modules like Rguest Express mobile check in checkout and the remote auditing application on demand continues to continue to see strong sales activity.
Other major new software applications like Angelus golf Spa and sales and catering have also increase have also seen increased customer interest.
Beyond all such details what I have found to be most encouraging during the past few months.
Has it been the positive customer reactions to our various into and guest journey product demos.
As we work hard to establish <unk> as the leading.
Modern technology based solutions provider for the hospitality industry than us and increasing acknowledgment of how to improve standing by many customers, including major corporations, who have known us for quite a while.
Being able to deliver on multiple products all across the guest journey has now put us in a unique position to offer the features like single ITT visibility for both gifts.
Through the booking engine Rguest book and for customers across many of the property management system and other display touch points they use frequently.
And aspects like the common profile capability, which provides algorithmic driven and recognition of our guest and their likes and dislikes and upcoming plans to use various resort amenities.
And provide guests the kind of personal acknowledgment offers and promotions that will play a big role and increasing guest loyalty in the future.
But we have had three different customers sign up for the newly launched agile list of engaged software module.
And the past six weeks.
And then this is engaged helps customers manage their loyalty offers and promotions across all the amenities they provide to guess.
This product has the enormous advantage of being aware of all the transactions and data.
From all the other point of sale property management system golf, and Spa and other modules and bring everything together.
Our customer to help them manage their various marketing initiatives.
It will be difficult for many of our competitors, who do not have the strength of being into and with their offerings to compete effectively with such product offerings.
During Q3, we signed sales agreements, which added eight new customers.
And 42, new properties, which did not have any of our products before but the parent company was already out of customer and.
And they've got 53 instances of selling at least one additional product to sites, which already had one automotive and other products.
These numbers are consistent with the number of such wins, we have seen during the earlier two quarters this fiscal year.
Included among the sales wins during the quarter on a little bit before and after the following listed in no particular order.
One.
A brand new state of the art property in Orland Park, Illinois.
And the artist suddenly hotel and resort plans on opening its doors mid 2021 with the comprehensive solution set of Agila sustained P. M S.
And info Genesis P O S for their core operations.
While also utilizing Rguest express mobile check in checkout.
Keith Rguest book, and agile as the space to provide contactless capabilities and great experiences for their guests.
And but to the five star, Colorado, Wyoming luxury retreat three folks range selected at Elisa stay Pms Info Genesis U S and.
And E Tic inventory and procurement management core products as well as additional modules has elisa speed and agility for seat to help improve their guest service and.
Three after several successful years running there was sought and casino with on premise LMS BMS Grattan resort and casino located and run at Park, California.
Great and their LMS solution to the cloud and added the booking engine and Rguest book to manage that operations.
Before Chris.
Crystal Springs resort is and expansive new Jersey property offering a variety of amenities.
And after several years of success with our info Genesis solution.
As well as previous editions of atlas's seat and on demand.
Their ownership decided to complete their suite of Angelus products to offer their guests the best possible experience by adding Rguest book.
Replacing a competitive pms system with visual one P M S, including mobile check in checkout and SMS messaging for gifts communications and in addition, as Elisa Spa and sales and catering.
Number five.
Located on a private peninsula on the Chesapeake Bay, the tides in luxury the sot selected our new cloud native annulus, the spa and golf along with retail and.
And the Rguest book to manage guests activities throughout the resort.
Number six.
La Valencia hotel located on the Pacific Coast with panoramic views of La Jolla Cove and.
And just up the street from a prestigious golf course selected and for Genesis P. O S and agile SSP to process transactions across that property.
And number seven.
A very new very special new customers.
World Central kitchen and <unk>.
Not for profit organization dedicated to providing meals to areas of need after natural disasters selected <unk>, our inventory and procurement application to manage their needs across the globe.
Eight and last and certainly not the least we've made substantial improvements to our cloud, but also the based data and analytics software module agilis analyze launching a licensed professional version, which pulls and point of sale property management system and other third party data.
And it into a single data lake to help customers make comprehensive data driven decisions from anywhere at any time.
Professional version was purchased by four major customers just during the last four months.
We expect analytes to become another significant contributor to our increasing subscription recurring revenue base in the future.
No.
Moving on to financial guidance.
While various pockets of the industry continued to show signs of strength through the pandemic and that's performing quite well.
Overall global hospitality industry remains very challenged and continues to struggle with the ongoing impacts of the prolonged pandemic.
Since that on the June calendar, 'twenty and 'twenty timeframe. It has unfortunately been a story of two steps forward and two steps back showing promise of improvement at various times, but quickly retreating due to the distressing state of this pandemic.
We believe the light at the end of the tunnel has been ignited now, but the timing on when we will reach that light is still unclear.
We expect the environment to continue to remain tough.
During at least the next couple of quarters.
With this upcoming January through March Q4 fiscal quarter being potentially the most uncertain that we have faced yet.
So far and January we've seen no improvement and not say.
<unk> success closely.
Good promising product the most continue to happen to various customers with excellent customer feedback about our products.
Integration into and capabilities excitement.
Around the contactless data management, and common profile and simple like Nitty type possibilities, which will help them greatly but no change and the decision making slowdown we have struggled with for more than three quarters now.
Given the tough circumstances, we expect revenue during Q4 to be only sequentially flat compared to Q3.
We anticipate assuming annual guidance beginning with fiscal year 2022.
Now turning to profitability levels achieved during the quarter.
EBITDA for Q3 fiscal 2021 was $7.6 million about 10% higher than our original expectations and 135% year over year at a higher than Q3 of last fiscal year.
Made good progress during the past few quarters with improving our internal operational efficiencies.
And shifting our focus areas do not get too scattered.
Operating efficiently.
Turning to do more with less while also not compromising on our crucial world class customer service goals.
Being accountable for getting things done and as higher quality level with efficient use of resources as possible.
All of that and more constitutes a profitability mindset that we are becoming a lot better net.
We took on that culture shift challenge a few years ago and now we are quite close to where we want to be.
We had a few residue and one time cost saving items, which positively impacted the Q3 quarter.
We expect our adjusted EBITDA during Q4 to be around $7 million level, just around just under 10% lower than Q3, mainly due to a couple of pending cost items coming back into the business and additional hiring mainly and the product development R&D area.
For the past few quarters have been extraordinarily challenging we like our competitive and other business positioning now.
Look forward to getting through the next couple of quarters with positive resilience and then actively participating and what should be a major growth phase for the industry.
There is significant pent up demand out there and we have done the hard and smart work during the past couple of years to deserve to gain a good chunk of it.
With that let me handover the call to Dave for further color on our financials and other business details and I will then be back for a few closing remarks before opening up the call for questions Dave.
Thank you Ramesh.
And <unk> meshes comments. Despite these challenging times, we remain confident and the strength of our business and specifically our team members, who are continuing to push the company and innovation levels four despite unusual our remote working conditions.
With respect to our financial results beginning with our income statement third quarter fiscal 2021 revenue was $36 7 million a six 7% sequential increase over the fiscal second quarter of 2021 with all three product lines, increasing sequentially over the prior quarter.
The third fiscal quarter represented a sequential 13, 3% increase and professional services.
A 15, 9% increase and product revenue.
As well as a 2.4% increase and recurring revenue over fiscal second quarter of 2021.
As expected third quarter fiscal 2021 revenue was a 12, 7% year over year decrease from total net revenue of 42 million and the comparable prior year period due to the current economic environment, resulting in lower product and professional services sales.
Recurring revenue continues to increase on the back of our subscription growth and represented.
And increase of 9% over the prior year.
Total recurring revenue represented 62, 3% of total net revenue for the fiscal third quarter compared to 49, 9% of total net revenues and the comparable prior year period.
Recurring revenue of $22 8 million is at record levels, and $1 9 million higher than the prior year.
We're also very pleased with our subscription revenue growth, which grew year over year 18, 1% during the third quarter of fiscal 2021 to a record $9 3 million.
Subscription revenue comprised about 41% of total recurring revenue compared to 37, 7% of total recurring revenue and the third quarter of fiscal 2020.
Add on software modules that built out our product ecosystem beyond the core point of sale.
Pretty management and inventory procurement offerings are adding scale quickly with roughly 23% of sales deals and value terms during the third quarter containing at least one of these products compared to 3% and the same period last year.
We continue to add well over $1 million and AAR are for these new product and each.
Quarter of fiscal year 2021.
As for product and services revenue. We currently have a backlog of hardware software and services that remain at healthy levels sales.
Sales continue to remain and the 60% to 70% range year over year as the hospitality industry continues to struggle with shutdowns and travel restrictions given the uncertainty hospitality operators continue to face it remains difficult to predict when sales will return to normal booking levels.
Timing of the return to pre pandemic booking levels is anticipated to coincide with the return of competitive rip and replace type wins.
We believe these decisions will return when customers are comfortable making the big technology investment decisions that will come with the reopening phase B and.
Certainty lies with when exactly this will begin.
Moving down to Inc. To the income statement gross profit was $24 2 million compared to $21 1 million and the third quarter of fiscal 2020.
Gross profit margin increased to 66%.
Compared to 52% and the prior year period.
This gross profit increase despite a $5 3 million decrease and revenue was primarily due to a couple of factors.
Recurring revenue was a larger portion of total revenue and unlike the third fiscal quarter of 2020. This quarter was not impacted by roughly $3 1 million and capitalized software amortization costs.
Overall product mix shift to higher margin recurring revenue offset a reduction of revenue and third party products and services moving.
Moving to operating expense.
Had additional stock based compensation that resulted in a significant increase and GAAP operating expense.
Due to the valuation of stock appreciation right options granted to a broad array of key personnel this fiscal quarter.
No additional options were granted to the CEO, our chairman of the board. During this cycle the extent of the options granted to the management team and other crucial technical and Nontechnical key employees were higher than has been normal for us during the past.
But we're far less than and norm.
And normal other software and technology public companies.
We have significantly expanded our talent base during the past couple of years, both and quality and increased number of resources.
Our executive management senior leadership and other key key teams have remained stable during the past few years and that has been one of the reasons for our good performance despite serious industry headwinds faced during the recent quarters.
We have hired the best and the brightest often competing against other technology organizations not dependent on the hospitality industry and therefore, not as badly affected.
Want to retain employees through the most challenging time, the hospitality industry has ever experienced.
Our medium and long term future is going to be based on the software. We have created during the recent two to three years and retaining the personnel and I've been involved and the creation implementation sales and support of such software and technology and General management of the company is going to be an important element of our future growth and success.
Though the extent of the options granted was nothing too extraordinary the stock based compensation expense turning out to be much higher than expected was mainly due to the options valuation being driven high due to the timing and the shareholders' approval and the share price performance during that time.
This is a much larger than usual noncash charge, which will linger and our GAAP operating expense for the next four to five quarters as we continue to recognize the expense. According.
To the appropriate accounting standards.
This has no operating impact on the company and will have little to no effect on other metrics like adjusted EBITDA free cash flow and adjusted EPS.
Looking further at operating expenses, excluding charges for legal settlements impairment and restructuring severance and other charges.
Third quarter saw a slight sequential increase over Q2 fiscal 2021.
Compared to the prior year period operating expense saw a 3% increase to $24 5 million from $23 8 million.
This year over year increase and operating expense.
It was due to a non operating cash increase of $5 3 million related to stock comp.
Stock based compensation.
Without the impact of stock based compensation, our normal operating expenses decreased by $4 6 million over the prior year due to lesser incentive compensation and other more permanent cost saving initiatives.
Product development sales and marketing and general and administrative expenses were 63, 3% of revenue this quarter compared to 53, 1% of revenue during Q3 of fiscal 2020.
The impact of increased stock based compensation product development sales and marketing and general and administrative expenses were 48, 8% of revenue this quarter.
Our net loss of $2 5 million is a slight improvement to the prior year third quarter loss of $2 6 million.
And while loss per share for both periods was consistent at 11%.
Adjusted net income and adjusted diluted earnings per share.
And both showed significant improvement over the prior year third quarter adjusted net income of $5 5 million compares.
Compares favorably to $1 3 million and the prior year third quarter and adjusted diluted earnings per share of <unk> 23.
Compares favorably to five.
And the prior year third quarter, when normalizing for certain noncash and nonrecurring charges for.
For the 2021 third quarter.
Adjusted EBITDA was $7 6 million compared to $3 2 million and the year ago quarter.
Adjusted EBITDA improvement continues to represent the overall health of the business and the available cost styles for sustainable long term profitability.
Moving to the balance sheet and cash flow statement cash and marketable securities improved by $6 9 million and the third fiscal quarter of 2021.
Cash collections has consistently been a highlight of our business and a tough environment on.
On an absolute dollar basis, we have accumulated and 92% of the cash collections through the same period of fiscal 2020 on a lower revenue base. We continue to be pleased with our ability to manage our liquidity as we navigate these challenging times.
Cash and marketable securities as of December 31, 2020 was $92 6 million compared to 46 7 million on.
On March 31 2020.
Free cash flow and the quarter was positive $7 8 million compared to $3 million and the prior year quarter.
As Ramesh mentioned, we expect revenue to flatten out and remained near the same level and our fourth fiscal quarter of 2021 compared to the third quarter of 2021, with a corresponding $7 million and adjusted EBITDA and certain one time cost reductions come back into the business and the R&D expansion.
And is nearing completion.
With that I'd now like to turn the call back over to refresh.
Thank you Dave.
Being an entirely hospitality industry focused software solutions company. The last few quarters have tested us and every way possible.
And we have good reasons to believe that has only made us stronger and better.
White, President and short term challenges and temporarily disrupting our growth. The recent circumstances have made on organizational culture.
And mindset change process happen quicker.
We have navigated through this pandemic without reducing our capability in any aspect of our business, which will be crucial for future medium term and long term growth.
It is also likely that we gained significantly with respect to our various competitive advantage aspects.
As Dave mentioned, one of the highlights of our last three quarters.
Has it been the discipline across all departments and strong results shown in areas like cash collections.
That cash collection discipline has cost us some lost revenue and increased customer churn.
But has improved the quality of our business content.
That kind of extra discipline and good new muscle memory, and how we do things how we stay on the right track and always find the right balance between growth and profitability will be valuable for us in the future.
We've also successfully turned the corner with respect to profitability and in this tough first off times have demonstrated the future earnings potential of this business.
You should continue to expect us to maintain a 15, one five a 15% plus adjusted EBITDA to revenue ratio during the next few quarters.
And then improve on it in the future when the revenue growth faced slowdowns.
The second half of fiscal 2022 should be the time when the business growth stars start aligning well.
And that should be about the time when virtually all of on heavy lifting.
The product development efforts will be completed.
We will have a confident and expedient steam and ready to take us to the next level.
And we will have the cost room to increase on sales and marketing spend and the hospitality industry headwinds will be turning to be tailwind with the ballooning pent up demand for better and more integrated and comprehensive software solutions.
The post pandemic stage in this industry is most likely going to require significant energy and investments devoted to guest centric solutions and we have prepared ourselves well for that stage.
We have kept our feet firmly on the product innovation and customer service gas pedals and Meanwhile.
While also vastly improving all out of business and organizational culture fundamentals.
But that list.
Liz Please open up the call for Q&A.
Ladies and gentlemen, if you'd like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone to withdraw your question press the pound key.
And again Thats Star then one if you'd like to ask a question.
Our first question comes from the line of Matt Vanvliet with BTG. Your line is now open.
Yes, hi, Thanks for taking my question and good afternoon.
I guess.
First wanted to dig in a little bit on some of the comments you made around.
Existing customers seem low.
Lot more cross sell upsell opportunities.
Is that where you're focusing the majority of your attention now as bigger projects are either being put on hold or just kind of on the back burner and.
Really kind of how are you and directing the sales team and the overall go to market motion and <unk>.
Terms of kind of allocation of resources over the next several months.
Yes, Hi, Matt Yeah. Thank you for the question I Wouldnt say, we are only focusing on existing customers Matt.
But among the four major categories of sales areas that we focus on new logo.
New site, meaning major customers, who now use us for a new site new products, meaning products, we sell to cut on sites and of course other existing customers.
Sales categories like services and others. We do we are focusing on all of them, but we are having less success with new sites. So some of our major customers, who typically over the past couple of years have taken us from one new site to another matter. We have gained hundreds of new sites in the previous couple of fiscal years.
Has definitely slowed down because of those major customers are struggling and the pandemic now. So this is not the time for them to take us to new sites. So that part has slowed down but the other three areas. We have kept our focus on that new logos like we told you that on eight new customers, who signed up this quarter and that is because of a very focused sales effort.
And the good news about all of those eight customers all of them on SaaS customers all of them chose out of SaaS products and some of them are very at least a couple of them, but a very big deals involving P. O S BMS and all our additional products. So we are keeping the focus on new customers as well and we also are keeping focus on new products because we just have so many.
New products to sell that is also a part of our sales success that has done reasonably well and the existing customers of course continue to do business with us in terms of buying extra licenses.
Involving us and our services related project and things like that so of the four categories. Matt. The only thing that has slowed down as new sites. There's no lack of focus and new logo selling new products to current sites or other miscellaneous sales at existing customers tend to do with us.
Okay. That's very helpful. And then you also mentioned a few I guess projects that you've gotten contracts signed and its just kind of TBD on when the project actually starts could you give us a little more detail around maybe the size and scope of some of these maybe what what the revenue impact.
Either was or could be once those projects get started.
And then any clarity or any information you have around.
Projected time timelines around those and so much as you have some.
Yeah.
And so typically those kinds of decisions where customers initially sign up for and.
And then things go a bit south for them again, they are forced to close down for a while or are there business goes down.
Would say affects us by a few million dollars every quarter right by a couple of million dollars kind of thing that kind of revenue impact, we do feel right each quarter.
In terms of timeline when that will pick up again is difficult because with different customers. The part of it did pick up last quarter. So some of what was held up before between the April and September timeframe. Some of those customers did pick it up in the October through December but still it is slow it is still we have more on the backlog.
<unk>, which we should be able to ship to customers and get services projects going on.
It is delayed because customers. They think one thing when they are signing the deal. They are really intrigued by the products. They want to get going but then things don't go well for them. So they slow it down that that fixes I would say by by a couple of million a few million dollars every quarter and once that starts picking up I think it's going to be a flat right. It really is going to be a flood.
It is going to be like the dam breaks out and then the pent up demand really kicks in the pent up demand will be not only with respect to the backlog, but it will be irrespective with respect to the rest of the business as well so that backlog of customers not picking up projects that they have signed up for it is a small one the bigger part of it is <unk>.
Sales demos that go very successfully and customers and the middle management Senior management.
On a very promising with their feedback, but then it gets stuck up and the approval queue.
And our approvals have to go to a very high level and it gets delayed and that is the bigger portion of the business pick up that we are eagerly looking forward to and my guess matters. I think we had a couple of quarters away before it really starts picking up and when it picks up I think it's going to pick up big time.
Alright, great. Thank you.
Our next question comes from George Sutton with Craig Hallum.
Thank you I think my first question is a little bit of a follow up on what you were just saying we're mesh and that is.
You talk about a major growth phase ahead and.
Hey.
Ballooning pent up demand.
Is there any way to quantify that is there any way to talk about when and the reopening phase we would really start to see that impact.
Yeah, so tough to quantify that charge.
It's not easy to quantify that because.
A lot of demos and go very well and some of those deals are pretty big size deals.
And then we hear it's going to happen. This week, it's going to happen next week and it keeps pushing forward.
On the one answer and I will struggle to help you with is how do you quantify that we don't know how to quantify that it's going to be.
Major growth when it happens mainly because of the feedback we are seeing without new products. Many customers that are surprised how well our products can help them. So tough to quantify that now in terms of when the growth phase will come and my own guess is that the growth phase and will start happening a little bit before the reopening phase.
So I don't think it will wait for the reopening phase and then happened a few months later I have a feeling it'll happen a few weeks or a couple of months before that.
And that is because once we got a clear day light is at the end of the tunnel and we know when that light. We are gonna have each customers will start making these decisions. They will start conforming vs. Because a lot of this technology and need for the reopening and then growth thereafter.
So to answer your question George quantifying that is difficult.
Know how to put a number on it but when the growth phase will start it will happen a little bit before the reopening phase not after.
Scott You mentioned you were moving away from a large reseller relationship from war.
Wondering if you could talk about the logic of that a and b the financial impact both short and long term that you are expecting from that move.
Yeah. So what happened I think it was sometime in the 'twenty calendar 'twenty 14 timeframe, George when we sort of walked away from the EMEA market and we handled a total of resellers and a pretty good reseller and so they've had and they did do and effective job of reselling of info Genesis Pos product.
Especially in the stadium and entertainment market and the U K and other markets same thing in Australia in EMEA, we had a presence and walked away and handed it over to the reseller, while and Australia. We've never had a presence we just handed it over to the resellers directly somewhere around that timeframe. This is well before my time.
And then the first according to the contract and agreements we had with them. The first opportunity we really had to.
And to sort of and that reseller agreement was the end of calendar 2020, and therefore, we decided to and it then.
Vs. He established a presence in EMEA and in about the 2016 timeframe and we have grown our team since then and the last few years, but there are certain segments of the market that we sell it has been selling.
And so by definition based on how the agreement is being the reseller agreement has resulted in very low pricing for us extremely low pricing for us and that is just how the agreement was done right. Our margins were very low on that.
So number one we have presence and number two we have hired and Australia now and we've already talked to many of those customers who were dealing with the reseller, but will now be dealing with us. So what you should expect and the short term is a slight revenue bump because instead of some of the customers paying to them and we're getting a portion of it.
The customers will be paying to us directly while on the other hand, some of the customers might move away from us because they don't have a relationship with us. They don't know about a recent improvements so there will be some customer losses as well.
But we believe that the gain we get from revenue by the customer paying us directly will be slightly higher than the loss of certain customers.
And especially in Australia on revenue has been very low now we have the products. We think there will be a short term bump during this calendar year, but thereafter, it will contribute to very good revenue growth because we will establish direct relationships with the customers and now they will come to know about all the other additional modules we have so slight share.
And bump this calendar year and revenue and significant revenue growth in calendar 'twenty and 'twenty.
All makes sense. Thank you very much.
Thanks, John appreciate it.
Thank you.
Our next question comes from the line of Neil Chatterji with Northern capital markets.
Yes, Thank you and good to speak with you guys discuss noon.
So it's.
Not surprisingly low all that you guys are guiding for flat revenue Q over Q given the.
Relatively.
Poor traveled data that's out there on a near term basis low.
Could you give us a sense as far as how you would expect that to parse out between recurring and nonrecurring elements.
David and Dave you undertake that or should I.
Yeah, I can take that so hey, Neil we expect recurring too to continue to tick up slightly we think it'll be.
Close to the the increases that youre used to seeing subscription will probably still drag and slightly less than the 20% because of the credits and some of the other one time things.
And associated with churn, but recurring revenue will continue to increase and where youll see a little bit of compression is on the product and services line, but all.
All three product lines will stay.
Fairly similar to what they are today with a little increase and the recurring line.
Okay great.
And then on the December quarter results of subscription revenue that was up.
Just $2 million to requeue and aside from the June Q numbers.
And I think one of the smaller sequential increases that you've seen on the subscription revenue was there.
And the headwinds or is there just seasonality and the December quarter or was it just simply a very slow rate of new and upsell of the subscriptions.
Yeah. It is still good growth year over years and anyhow.
It's about 18% year over growth under the current circumstances that is still good growth. Some one time credits did temporarily affect that number right.
There is still considerable pressure from customers for onetime and recurring revenue relief and credits and much of it and world subscription payment as well.
It is not out of our recurring revenue is not transaction based and they are like you know, but still we have to help customers out because this reopening is getting delayed.
That is one reason the one time credits given to customize it did affect that number to a certain extent and also lower sales this year and delays and implementation of what has been sold are also contributing factors right.
But with respect to this like with all other aspects outside of business, we are setting ourselves up for a much better growth.
In the post spend to make future and a lot more products that are subscription based on a lot more products compared to two years ago, we have.
But 10 to 15 more products that are all subscription base and also some of the modernization efforts, we had finishing of our core products he's going to make many customers moved from on Prem installed to subscription base installs and the cloud and on and all that is going to happen. So I think the subscription revenue growth number is going to be a bit lower for the next couple of quarters and then.
It is going to be assumed to be in the mid twenty's like we've added before and then go higher from there.
But this quarter was affected by some one time credits and the fact that our sales has been low for the last couple of quarters.
And kind of caught up with them.
Right Okay.
And I look at the historical subscription number two.
2017, you did have a point 1 million cubic feet a decline.
December 18, and you hit a point and 1 million cubic you decline December 19, Hollywood was $6 million increase so that's why I asked I mean is there some seasonality here and it goes on and the December quarter with respect to subscription.
There is no seasonality and Netherlands status.
And then for cash collections certain quarters are better than the others. There is really no seasonality and our business at all.
Okay, and then you did mention that there are pockets of strength.
Could you detail what those pockets are.
And then many like I think we have set and the last couple of quarters as well and there are many of them are thoughts on many of the casinos that we cater to that are doing well that arca, especially the tribal gaming casinos and a lot of the what I would call drivable the thoughts that people can drive to many of the golf resort.
And are all doing quite well and they are continuing to make technology decisions in.
In fact that on two major of his thoughts on the east coast that within the next few weeks should be live with virtually all of our products.
OSP and Miss and all the other additional modules they should be live and both of them on regional kind of the thoughts where people can easily drive too, they're all continuing to do well and many tribal gaming casinos regional casinos are continuing to do and so those pockets of strength out of there and the business. However, like managed foodservice.
Providers are really struggling right because the employee cafeterias and all that have not yet opened up and we all know the story about cruise ships still.
Some aspects of the business is struggling but many aspects of the business are showing pockets of strength, which is what has sort of kept us going during these last three quarters.
Okay, great I'll get back into queue.
Thank you now.
As a reminder, ladies and gentlemen, and that is star then one if you'd like to ask a question.
Our next question comes from the line of Allen Klee with Maxim Group.
Good afternoon.
Last quarter, you mentioned that your new demand software product.
Could add a few percentage points to revenue in calendar 'twenty. One could you just give us an update on.
How that's been doing.
Pay on yes, so last quarter, we said that the on demand product could add 3% to 5% of the subscription revenue growth. So the product is going well, we're still seeing very low cancellations through the free trial period and as of right now of the 200 properties.
And roughly 500 profit centers, we mentioned on the call last quarter roughly half slightly less than half are are currently live and using the product.
So still it's still significant ramp ahead for that one.
That's great and then.
You also talked about your full service Pms offering.
Youre working on that and I guess by the end of the year that that should be.
And pretty good shape.
Could you tell in the past you used to talk about that you had some beta trials from some large hotels.
Is there anything that you did mentioned about that of anyone who's kind of working with it now that could potentially be a large opportunity.
Vertuno D R.
Thank you.
Yeah. So when I listed a list of about seven or eight particular wins.
And you would have noticed a couple of them at least three of them also involve BMS as well.
And <unk> Pms product now is is absolutely competitive it is on par with any other BMS product data and.
And technology wise and because it's truly modern product. It's ahead of the other competing BMS products as well. So on when you think about the number of demos, we do and our sales pipeline BMS has fought about what it used to be say 12 months 24 months ago is just a lot more.
Major BMS opportunities that we're currently involved and unfortunately, our pms resurgence coincided with the pandemic. So even though in terms of number of demos and in terms of how customers view. It we have come a long way a lot more competitive and pms. Unfortunately, those decisions have got slowed down a bit but V F.
Definitely broken through like Crystal Springs, and the thought that I that I talked about during the script is a major pms win for us and before that I also mentioned a couple of other Stephens and that we had and that's one aspect of it. The other aspect also Atlanta is the fact that the add on modules are on Pms have also seen a lot of success during the last few.
Months, and mobile check in checkout, and Rguest service and all of those products have done pretty well for us sales wise and in fact, that's what has really kept our flag flying even during these tough times and then some of the Pms supporting products like Spa.
And the model, the new golf module, and the new sales and catering modules and then the agility of engage product have all seen success. During the past few weeks, so pms and related products why is L. N V on it and far better exponentially higher position than we were 12 to 24 months ago, but it is not yet fully this.
Felt it and the kind of improved numbers, you would like to see because of the sale decision slowing down because of the pandemic.
Great. Thank you so much.
Thanks, Alan and I appreciate it.
We have a follow up question from the line of Neil <unk> with Northland capital markets.
Yeah. Thanks.
So you guys talked about how bookings have been on two thirds of prior fiscal year levels and yet when we look at and markets I think they are down 50%. So.
And that looks very good. So my question is is that is this low linearly translatable to net bookings level, where zoom to when the industry returns I E.
Or what are you going to be.
And provide the industry returns to prior pre pandemic levels does this reflect.
Joseph businesses actually 30% better and that was on a normalized basis or does this reflect more of the mission critical nature.
Those solutions and that Theres, basically and elastic demand sort of you're jealous of solutions.
I mean, it's tough to put a number on it but the fact that our sales has been to touch says as good as the previous year.
Under the current circumstances is encouraging though we are not satisfied that we tend to feel bad about it that we have not and we should be able to maintain our sales levels no matter. What the circumstances is kind of out of ambition. So two thirds and we have not thrilled about but you're absolutely right in relative terms versus what the market has done the fact that on.
Sales has kept up two thirds of previous year isn't crazy right is definitely increasing.
And yes, we should do much better than the market. Once it assumes just because I think we have improved our competitive positioning a lot more during these last 18 months than the previous 18 months. So can I put a 30% number on it I'm not sure, but we are very bullish about sale.
The ones that are covered in the opening.
It starts happening.
We will do much better than the market and how the market us. That's what we think we will do but don't want to make a promise on that and they don't want to get too ahead of us.
Sure understood and then it sounds like the level of optimism on a go forward basis when the pre pandemic.
Pre pandemic.
Post pandemic.
Spending that.
That optimism remains the same as it was a quarter ago, it's just uncertainty as to when it will happen correct.
And he does actually and it has increased a bit from two quarters ago and the main reason for why it has increased is products that are moving forward right the pace at which our products are improving every month.
And is better than previous months, just because the R&D team has a lot more experience and now we have hundreds of people who have been with us safe on at least a couple of years, where no other products inside and out on.
And also as a core product modernization efforts.
Entering sort of the ninth inning, now the eighth or ninth inning and.
And like I told you the first modernized and full Genesis P. O S them and then actually went live and is being actively used and a prestigious vistaprint and Hong Kong and fact that at three levels to that restaurant and.
And we have not yet allowed to use the name of the restaurant.
And they are on ipads, so that kind of product improvement is really helping us.
In terms of increased confidence and other products right. So in fact, many of our selling activities and Asia actually happens and that restaurant and a couple of customers who have seen the AG is work on those ipads.
Stunned by how well it is working and host leak. It is so all of that increases our confidence that we will do better. So if you asked me on our confidence level is higher than two line.
The last quarter over the quarter before that however, the negative is the timing still discourages us.
Every time, we think we are close to the lighter the day end of the tunnel it seems to be pushing back by another three to six months. So that part of it is a little bit of a downer, but auto and confidence is definitely increasing with every passing month, mostly because of how our products are being driven forward.
Great. Okay. Thank you very much.
Thank you and now.
I'm showing no further questions in queue at this time I'd like to turn the call back to Mr. Srinivasan for closing remarks.
Thank you Liz.
Thank you for your all your continued interest and atlases and your support and guidance on behalf of our board our management team and the 1300 plus team members I'm very grateful for your attendance today and investments and Angeles look forward to talking to you again around mid may when we will be reporting on Q4.
And full fiscal year 2021 versus diligent till then take good care and thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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