Q4 2021 Agilysys Inc Earnings Call
Ladies and gentlemen, todays conference is scheduled to begin shortly please from continued just standby. Thank you for your patience.
[music].
Okay.
Yeah.
Yeah.
Okay.
Good day, ladies and gentlemen, and welcome to the Genesis fiscal 2021 fourth quarter and year end conference call. As a reminder, today's conference may be recorded I would now like to turn the conference over to Jessica Hennessy Senior manager of corporate strategy and Investor Relations out of jealousy you may begin.
Thank you Sarah and good afternoon, everybody. Thank you for joining the adult that fiscal 2021 fourth quarter and year end 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 will be predictive and are intended to be made as forward looking within the safe Harbor protections of the private.
Securities Litigation Reform Act of 1995, including statements regarding our financial guidance for fiscal 'twenty 'twenty two.
The company believes that its forward looking statements are based on reasonable assumptions such statements are subject to risks and uncertainties that could cut costs for all results to differ materially.
Important factors that could cause actual results to differ materially from the forward. Looking statements include the continued impact on our business and the hospitality industry from the COVID-19 pandemic, the timing and extent of the COVID-19 recovery period and the risk factors detailed in the company's reports on form 10-K.
<unk> and 10-Q and other reports filed with the Securities and Exchange Commission.
With that I'd now like to turn the call over to Mr. Ramesh Srinivasan, President and Chief Executive Officer of adult day for mesh. Please go ahead.
Thank you Jessica.
Good evening, everyone welcome to our fiscal 'twenty, 'twenty, one and fourth quarter and year end earnings call.
Joining just you got me on the call today is Dave Wood obviously.
Fearful.
Finally, we've been able to return to what we plan to make routine and conduct this call together somebody Atlanta office.
We hope all of you and your families are doing well and staying safe and healthy.
We would like to dedicate this called TWA talented courageous committed and determined global teams located in the U S. U K Asia, and then the India Development Center.
Who have helped us navigate through an extraordinary fiscal 2021, a lot better than we were imagining last April.
Among other things all of them have helped us keep our focus on product innovation and world class customer service fighting through all the tough circumstances.
While the U S and U K seem well on their way back to normalcy.
Many countries in Asia continue to be seriously challenged by the virus.
Especially India.
The last couple of months have been particularly difficult.
For the 950, <unk>, India Development Center personnel.
Several of them have lost family members.
And have faced extremely difficult family situations.
How about could be three zero about 30 of them out there.
<unk> is currently recovering after testing COVID-19 positive.
Through all of this day.
Have worked incredibly hard to keep our pace of product innovation moving forward working together with our experienced talented and hardworking U S based R&D personnel.
The productivity and quality of execution levels, all thought of worldwide workforce has been an inspiration for all of us.
We continue to treat the good health happiness, and well being of all our agilis teammates.
And customer and partner personnel as I thought.
For the oddity.
While most of our employees still remain in our book from home mode, which has worked well for us during the past 14 months.
We are beginning to slowly trickled back to working from out of areas office locations as the <unk>.
Number of fully vaccinated personnel continues to increase.
Right.
January and the first three weeks of February.
But I think the continuing difficult challenges and uncertainties for the hospitality industry, resulting in a slight miss about origin as revenue expectations for the quarter.
Customers remained uncertain about the short term future during the first couple of months of calendar 2021.
Fiscal 2021 Q for January through March quarter revenue, what's likely less than flat sequentially.
At $36 $3 million and represented an 8% yield or what are you a decline compared to Q for fiscal 2020.
Product and services revenue decreased sequentially by approximately 3% compared to Q3.
And we're at 78 and 76 per cent of Q4 fiscal 2020 levels respectively.
Recurring revenue grew slightly over Q3.
And by three per cent compared to the comparable prior year Q for.
To a record $22 9 million.
It seems like getting revenue subscription revenue grew by 11, 6% compared to Q4 of last year.
And comprised 42 per cent of total recurring revenues.
The consistent growth in subscription based recurring revenue all through the pandemic affected years, He's a big Testament to our pace of product innovation and the availability of an increasing number of software modules, which are cloud native compared to a year or two ago.
Quite remarkably ahead.
Even our own best expectations for.
Fiscal 2021 was a record sales here with respect to subscription sales.
And particularly by the P O S and P. M S add on modules many of which were created during the past couple of years.
However, many of these SaaS projects are yet to be implemented.
Causing a temporary relatively slower growth pace in subscription recurring revenue.
Yeah.
For the sake of clarity.
To reiterate what we have mentioned during previous earnings calls. Please note that we use the term sales and revenue as two different things.
Revenue for the first to recognize revenue for GAAP and other accounting rules and.
Happen with respect to recurring revenue.
After a software module is installed at the customer site and is ready for production use.
The other hand.
Sales, which we typically measured in annual contract value tons for the first two sale agreements closed and signed by customers.
Such sales get converted to revenue over time, depending on when licensed products are shipped.
Timing of services project execution and.
And start of software for use in production and weapons.
Before we go into some extra color on the increased sales momentum we have been seeing since the last week of February.
A few other details on revenue and gross profit.
Despite Q4 revenue levels, ending up slightly below our expectations.
Q4, GAAP gross profit increased by $3.8 million or 19, one 919% compared to Q4 for fiscal 2020.
Consistent with the rest of the fiscal year.
3.1 million of previously capitalized software amortization costs per cent.
In fiscal 2020 did not impact the current quarter.
For the same thing in a comparative increase of approximately $700000 in gross profit on $3 3 million less revenue.
The growth of gross profit percentage is attributable to the continued growth of recurring revenue as a proportion of total revenue.
Recurring revenue, especially subscription based recurring revenue held up well during fiscal 2021 wildly.
Product and services revenue suffered declines.
Fiscal 2021 period from April.
Calendar 'twenty 'twenty to March 2021 was obviously, a very challenging year for the hospitality industry.
And the fact fiscal 2021 was still a record year for recurring revenue.
Thanks for the mission critical nature of our products.
The continued levels of product innovation, where customers are increasingly looking to us to provide solutions, which can meet and exceed the increasing technology and ease of use demands of their guests.
And the trust customers have placed in us to help them prepare for a safe and efficient reopening.
Q4 profitability was along expected lines adjusted EBITDA was seven 1 million slightly lower than Q3 fiscal 2021, and 98% higher than Q4 of last fiscal year.
We remain focused on maintaining and carrying forward for internal operational efficiencies, we've been able to achieve last year.
We've worked hard to ensure our focus areas do not get scattered across too many lofty objectives.
We've become a lot better at doing more with less while also never compromising on our world class customer service calls.
Yeah.
Now turning to recent sales success levels.
Sales measured in annual contract value of customer purchase agreements, one signed and closed during the quarter during the quarter.
Group with just over 75% of sales levels during the comparable Q for fiscal 2020.
This was an improvement compared to the entire fiscal year.
Sales for added approximately two thirds the levels seen in fiscal 2020.
Sales activity and the most continued to be at high levels.
We've seen a major pick up in sales closing success.
During the past 12 weeks beginning.
Beginning the last week of February.
Making this one of our best periods of selling success.
In the annual contract value Toms global sales during these 12 weeks.
Increased to about 85 per cent of the Bes 12 week period during the past five years.
Customers are clearly beginning to make long pending decisions and the product improvements we have continued to make.
Through the past years.
Placing us in an excellent competitive position to win a high majority of deals. We are currently competing for them.
And additional contributing factor for a lot of optimism.
Is the increasing average size of sales teams. We're currently pulling through.
What would have been only a basic in for Genesis B O S sale when a couple of years ago.
No often involves a considerably greater number of products, including additional software modules like on demand and quick way.
Along with our core Pms products like C. P M S.
Additional PMA software modules like the booking engine spot gold sales and catering express mobile and servers to name a few.
That's selling success momentum.
Currently concentrated mainly in the gaming and resort segments of the U S domestic market.
And the remaining backlog of already sold software, which have not yet been implemented.
Other products sold but not yet shipped.
And services agreement signed but projects not to get started.
All of that together.
Our solid confidence with respect to whole, we think fiscal 2022 will shape up.
We expect fiscal 2020 to annual revenue for work out to be between 160 million and $170 million.
That is 160 and 170 between 160 million and 170 million, making it a record revenue year.
We expect the pent up demand for superior guest centric hospitality technology solutions to grow throughout this fiscal year.
Making the second half of the fiscal year better than the first.
We expect the momentum to gradually increase during the year.
When more of the same segments, including EMEA APAC and managed foodservice providers stop seeing business improvements to join the current major progress we have seen in the U S domestic gaming and the sub segments.
[laughter] excuse me.
We expect adjusted EBITDA during fiscal 2022.
Could be slightly better than 15, one five better than 15% of revenue as we continue to invest in growth, especially in sales and marketing.
For fiscal 'twenty to 'twenty, two will be a higher cost year compared to fiscal 'twenty or 'twenty, one in several areas, including increased incentive compensation travel higher fiscal 2021, ending run rate in areas like R&D has to be that hiring additional resources throughout the past year.
Increased need for implementation services and customer support personnel.
And restoration of a few previously suspended employee benefit items like photo one can't match.
Even with such expected cost increases the additional operational efficiencies we've achieved in the business. During the past 14 months should enable us to maintain adjusted EBITDA profitability levels at slightly north of the 15% of revenue Mark.
With this we are switching back to our pre pandemic normal annual guidance cadence and will stop quarterly guidance, we've been providing during fiscal 2021.
Now with respect to R&D and product innovation.
We are not close to reaching the peak off at R&D day, So strength of housing personnel, we have been working towards during the past few years.
We expect R&D day, so central to mean that that level for the foreseeable future.
Our product modernization efforts now complete in several areas and is close to completion and others.
We are now well positioned to increase the pace of product innovation with the enormous R&B simple already built up and the modern technology base established across all our product offerings.
Our sales and revenue growth assumes in growth. During this fiscal year, we will be focused on growing our sales and marketing expense.
Since our last call. We've added a couple of personnel to our quota carrying sales teams and are close to finalizing all for us for a couple more.
We are also in the process of Relaunching, our marketing messaging more than all of that be like the increased enthusiasm among our current sales force as they represent a modernized products and new modules with renewed pride and self confidence.
Our sales win loss ratio is that interest high level currently.
Now it is a matter of increasing our participation level in the various hospitality technology selection processes out there.
I have a participation in significant rfps.
Specially with respect to the property management system product sets has increased significantly during recent months.
We expect such RFP participation invitations to increase gradually over the next few quarters as the word spreads through our increased marketing efforts and word of mouth within the industry.
Changing our reputation from being a legacy product provider to one of our world class Cloud Native technology solutions.
And the fastest and most broad based product innovation pace in the industry.
That change in reputation will not happen overnight, but we'll have a flywheel exponential effect once it takes hold.
We've now done the hard work to get all the basics right and now we're moving to the next phase of this evolution.
Our recent monthly Webinars on product progress across D. O S. P. M S inventory procurement and document management have been well attended by customers with a good level of follow up activity.
Customer interest and interest continue to increase especially regarding state P. M S.
The in for Genesis P. O S 12, UX version, which now supports devices across all operating systems, iOS Android and Windows.
The remote auditing application on demand.
Quick pay for easier contactless payment options at restaurants.
Golf Spa.
Sales in catering for managing groups of guests in conferences and conventions.
Booking engine, which now enables book came up room rooms for appointments golf Tee times, and we're still on table reservations all from one direct channel web site with a one car shopping experience.
Our comprehensive promotions and loyalty management module engage that a couple of customers have already made sizable investments per license.
The modernized data imagine a document management solution.
The modernized E tech and sat in water and inventory procurement solutions.
The modernized L. M S BMS, which continues to do well supporting some of the biggest hotels in the world.
The modernized visual one P. M. S solution, which is scheduled to be released end of July that were already conducting demos on at all.
The new seat solution, which enables reservations across all of the thought that many of these not just tabled reservations.
Contactless mobile kiosk based check in checkout modules, which include digital key options.
The service module to optimize the management of all areas of cost management within our hotel of assault, including two way communication.
I could just keep going on for a while describing these but I will stop here.
All of these products have been built on an open API architecture, which makes them easy to connect to both within our own comprehensive ecosystem.
As well as an external ecosystem customers choose to put together themselves.
During the January through March quarter, He signed sales agreements, which added 21, new customers to our family.
41, new property, which did not have any of our products before but the parent company was already out of customer.
And then about 81 instances of selling at least one additional product to sites, which already had one off model for the products.
While the number of new sites added this quarter was consistent with the rest of fiscal 2020 one.
The number of new customers and new product agreements signed during the quarter increased significantly from Q3.
Included among the sales wins highlights during the quarter.
They are the following listed in no particular order.
One located at the age of the hottest at nearby Seattle.
Hotel America Snoqualmie selected ideal is to stay Pms and August book to help for White gets the better booking experience and improve operational efficiencies.
Two.
196 Bishopsgate.
Judy apartment style hotel located in the heart of London's Financial District.
Idealistic agility stay Pms and expense mobile check in checkout to manage their property.
For me.
Townhall hotel in London's East end.
To install in for Genesis P O S T.
<unk> P M S ideally for sales and catering and execute its mobile check in checkout to provide that it gets a superior all around experience.
Before.
Classic hotels into such a premier boutique hotel company focused on providing luxury escapes with unique amenities in iconic locations has chosen stay Pms Rguest book.
I believe for speed for five update upscale locations, including two locations in Laguna Beach and the newest property off Historic Route 66 and that is all.
Anna.
Five and iconic property at the base of the mountain in Vail, Colorado, the manner of whale recently selected in for Genesis on demand and to manage their point of sale and food and beverage related needs across their property six.
<unk> among the redwoods on the Pacific Coast in Northern California, and just South of Auto book Lucky Seven casino will be using E tic and in for Genesis to manage their inventory needs and handle transactions across the property.
And seven.
Last and certainly not the least.
As a final note on recent customer wins if MGM.
You can pick up a public announcement on this which just came out yesterday by MGM.
They have not implemented and have lived with on demand for the whole site auditing.
Means pool goes at MGM resorts, Las Vegas strip properties can auto their cocktail build our book it on a smartphone.
Hover delivered directly to that loan share or David.
Seven of the Vegas properties with six smaller properties to go live during the next few weeks.
Overall.
Despite all the challenges faced fiscal 'twenty or 'twenty, one was a successful year for us.
We took the gamble of doubling down on R&D product modernization efforts. Despite the extreme uncertainties of the pandemic caused for a business like ours, which is focused entirely on hospitality and we are happy that conviction paid off well.
We are just beginning to see the benefits of that tough decision be made about a year ago.
With that let me handle the call today for further color on how the business and financials.
I'll be back for a few closing remarks before opening up the call for questions.
Okay.
Thank you Ramesh taking a look at our financial results beginning with the income statement for.
Quarter of fiscal 2021 revenue was $36 3 million and $8 four per cent decrease from total net revenue of $39 $7 million in the comparable prior year period.
The expected decrease in top line revenue largely reflects a 21, 8% product revenue decline and a $23 seven per cent decrease in professional services revenue.
Offset by a two 8% increase in recurring revenue.
On an annual basis, we saw a slowdown in projects with large upfront capital expenditures, resulting in lower product and professional services revenue.
<unk> revenue declined $17 5 million for 39, 6%, while professional services revenue declined $11 million for $33 three per cent.
Product and professional services revenue.
The year finished the year, a combined 44% higher Inc.
Q4 fiscal 2021 compared to Q1 fiscal 2021, while Q4 revenue was still impacted by the pandemic. We are pleased with the continuing signs of recovery exiting the fiscal fourth quarter.
Throughout the year total sales continued in the 60% to 70% range for FIS.
For 2020 cells with subscription sales at record levels. We currently have a backlog of hardware software and services that continue to remain at healthy levels to achieve our fiscal year 2022 plant.
The improved sales activity, we have seen during Q1 of fiscal 2022 should continue to grow that backlog and help return our professional services and product revenues for normal solid levels.
We are pleased to see growth on an annual basis and recurring revenue recurring revenue during fiscal 2021 was $4 9 million higher than fiscal year 2020.
Recurring revenue despite the headwinds created early in the year by the pandemic and various one time credit given to customers to do our best towards helping them get through these challenging times.
Total recurring revenue represented 63, 1% of total net revenues for the fiscal fourth quarter.
And $64 six per cent for the full year.
Compared to 56, 2% and 52, one percentage of total net revenue in the fourth quarter and full year fiscal 2020, respectively.
We are pleased with our continued subscription revenue growth, which grew at 11, 6% for the fourth quarter of fiscal 2021 and $15 five per cent for the full fiscal year.
For the tough industry circumstances.
Subscription revenue comprised around 42% book.
Total recurring revenue compared to 39% of total recurring revenue in the fourth quarter of fiscal 2020.
The highlight of the year was our continued annual subscription revenue growth of 15% compared to fiscal 2020 would add with add on software modules growing at 325 per cent compared to the prior fiscal year.
I don't software modules in fiscal year, 2021 comprised 5% of total subscription revenue compared to 1% in the prior fiscal year.
Moving down the income statement.
Gross profit was $23 5 million compared to $19 7 million in the fourth quarter of fiscal 2020.
Gross profit margin increased to 64, 6% compared to 49, 6% in the fourth quarter of fiscal 2020.
Gross profit margin increase in Q4, FY 'twenty was 57.5% if you remove the impact for capitalized software amortization that concluded at the end of fiscal year 2012.
The gross profit margin increase was primarily due to the increase in higher margin recurring revenue and the reduction in product and professional services revenue compared to the prior year.
Moving down to operating expenses.
For fiscal Q4, we had a one time best thing event related to stock based compensation.
Orderly stock based compensation was $28 7 million higher than Q4 fiscal 2020, as we pulled forward several quarters of expense in the fiscal fourth quarter of 2021.
Stock based compensation will return to more customary levels and remain in the 8% to 12 per cent of revenue range for fiscal year 2022.
Looking at operating expenses, excluding charges for legal settlements impair.
Impairment and severance and other charges for fourth quarter saw an increase in operating expense to $48 3 million.
Per $222 7 million in the prior year period.
This increase in operating expense is mainly due to the stock based compensation Best thing you mentioned about removing the increase in stock based compensation operating expense would have decreased by $3 1 million compared to Q4 of fiscal 2020.
Combined the three main operating line items product development sales and marketing and general and administrative expenses, excluding stock based compensation for 46% of revenue this year, which was the lowest in the past five years.
This continues to be a good reflection of the steady progress we are making with our operating leverage.
Our operating loss for the fourth quarter of $24 8 million net loss of $24 7 million and loss per diluted share of $1.05 all compare favorably to the prior year fourth quarter losses of $26 9 million.
$27 million.
And $1 16, respectively.
Adjusted net income normalizing for certain noncash and nonrecurring charges of $5 2 million compares favorably to adjusted net income of $1 3 million in the prior year fourth quarter and adjusted diluted earnings per share of 21.
Compares favorably to Boston.
For for the 2021 fourth quarter, adjusted EBITDA was $7 1 million compared to $3 6 million in the year ago quarter.
For the full year fiscal 2021, adjusted EBITDA was $26 7 million compared to 13 day.
The growth in adjusted EBITDA for the for the full fiscal year represents 105, 4% growth. We are pleased with our profitability levels with adjusted EBITDA coming in at $19 four per cent of revenue for fiscal 2021.
Moving down to the balance sheet and cash flow statement cash and marketable securities as of March 31, 2021 was $99 2 million compared to $46 7 million on March 31 2020.
We are pleased with our ability to manage and improve our liquidity throughout the last 12 months as we move past these challenging times for the year, we collected 93 per cent of the cash collected in the prior years. Despite a reduction in revenue. We feel this speaks to the strength of our customer relationships and the quality and nature of the products.
And for Bob.
As it relates to free cash flow I am pleased to see an increase for both the quarter and for fiscal year free cash flow in the quarter was $12 million compared to $4 9 million in the prior year quarter.
And $27 million for the full fiscal year compared to $7 2 million in the prior year, which is driving our cash balance increase.
As we have mentioned on previous calls they were mesh had mentioned earlier, we're going back to providing only annual guidance for our fiscal year 2022, we expect revenue to be in the $160 million to $170 million range with adjusted EBITDA slightly above 15% for total revenue.
In closing we are pleased with our 2021 for the financial results and the proven financial stability.
Abigail through one of the most trying times for the hospitality industry. We are fortunate enough to have a good recurring revenue base built on a foundation of mission critical problems.
While revenue levels suffered in fiscal 2021 due the impact of the pandemic on our customers our profitability levels allowed us to continue the product innovation necessary for the future of agilis.
With that I will now turn the call back over to Ramesh.
Good day.
One quick personal note that possibly does not have a place in an earnings call like this but let me go ahead and say it anyway for the sake of greater clarity.
Everyone already knows I'm, a big believer in the future of agility and have been a buyer for stock during past years.
The original set of stock options granted to me when I joined Agilis is January calendar 2017 are set to expire at the end of June and I have no choice, but to exercise those options and convert them to share during the next few weeks.
While processing that Nic transaction, a bunch of shares that are going to be sold to pay for the taxes.
When you picked that news up across various outlets. Please do not interpret that as me selling ideally for shares.
It's just a standard practice and part of the options exercise, which I have no choice, but to get done.
Okay back to a lot of business all.
All things considered we like that position low.
The book through an extremely difficult fiscal year and have good reasons to believe that we have come out of it much stronger.
BMO better set for profitable growth than we've ever been.
Fatality industry is showing every sign of being in the early stages of a solid for coty.
And need the kind of technology and solutions, we have painstakingly built over the past few years.
We started fiscal 2022 on a great note with increasing sales levels and are bullish about our short term and long term prospects.
It does seem like a perfect positive storm is brewing.
When is it coding industry eager to provide great service to guests who.
Who are demanding better and easier to use contactless technology.
But it's such a coding industry meats and starts to life for hospitality focused world class technology providers like Genesis.
<unk> invested heavily during the past few years to create just that kind of guest centric cloud native software solutions.
The result of that should be a big win win for all concerned.
We cannot wait to see how the next few months and years unfold.
With that let me open up the call for Q&A setup.
Thank you.
As a reminder to ask a question you will need to press Star then one on your telephone to withdraw your question. Please press the pound key.
Our first question comes from the line of Allen Klee with Maxim Group. Your line is now open.
Hi, good afternoon.
I'm, sorry to hear about the challenges of your employees and.
In India.
How do you feel about.
What impact that's going to have on productivity, there and and and all your goals related to that.
Hi, Alan.
Thanks for the concern I appreciate it so far.
Only minimal impact.
Everyone has been working from home anyway.
A couple of product releases did get delayed by a couple of weeks.
So for example, the Spa and golf module. There are certain releases planned that had to be delayed by two or three weeks, but other than that no major impact to our business, but our progress with product innovation Island, and we are being very supportive many of them their family members have been affected badly.
And we as a company out of helping them out as much as we can so there are some slight impacts here and there some product releases get delayed by a week or two but nothing to be concerned of the book we don't see.
Our product innovation pace letting up at all so we should be progressing as well as we have in the past year or two.
That's good to hear my other question is I thought I heard you hear that the interest in your property management system solutions has been picking.
Picking up could could you just talk about that a little bit.
Yes Alan.
Interest in BMS has been picking up especially in the last day.
Four to six months or so.
For example, the state Pms side of the cloud Native property management system platforms, we've ever had more wins with that product in the last say.
For months or six months or so than the previous couple of years combined so that has definitely been a significant pick up.
In P. M. S. Interest. We've also won a couple of crucial deals without a L. M. S. P. M S product and visual one completely modernized is about to be released end of July and Theres a lot of interest in that product as well.
And the number of Rfps.
That we are participating without stay Pms product has also increased so there could be some good news coming on that during the next few months. So overall, yes.
Core Pms product interest has definitely picked up and the already built all the supporting modules like mobile check in checkout and service and all of those and the booking engine that booking website that Eric channel booking website, all that were already built up over the last couple of years.
So now we have reached a stage with our Pms products hit Island.
All we need is a shot to do a demo.
And if a customer takes the trouble to look at I guess, Jeremy the Pms guests journey.
That.
That they can use in their restart we have a 70, 80% chance of winning the deal that's the level of confidence with which we are going into P. M. S. RFP smell and other participation levels have increased during the last four to six months.
That's great. Thank you so much.
Thanks Alan.
Thank you. Our next question comes from the line of Matt Vanvliet with B T. I G. Your line is now open.
Yeah. Thanks. Good afternoon. Thanks for taking my question I guess first you mentioned that the majority of maybe capex related projects, especially those with with a lot of product and services revenue.
Have been the most impacted are the slowest to come back.
You also mentioned that you felt like those were going to come back to normalized levels. So wanted to dig in a little bit there in terms of your level of confidence and sort of what the discussions with customers have been that would give you that confidence.
There isn't going to want to return to something that is a product based rather than moving to.
More of just the cloud native products.
Yeah.
Yeah. So.
Hi, Matt So just to break up that answer into a couple of pieces.
Even when a customer chooses to have cloud only cloud native solution smart he does involve services as well.
So all our projects whether they are on Prem projects are all SaaS cloud based project doesn't all services. So in terms of services revenue coming back to normal levels. It just a matter of.
An increase in the number of implementation projects and that is bound to pick up because it has to keep.
It has to keep in line with the level of sales activity that is going on now.
Customers are signing up for products and then finding themselves dealing with multiple priorities that they have to work through.
So some of these projects are getting pushed back outside of the implementation of this kind of stuff. So the first point I would make is services revenue does not have anything to do with whether customer tools cloud SaaS products are on trend products. Both of those require a lot of implementation services personnel that was one.
For product revenue part of it has not picked up as yet because the hardware the fresh portion of the product revenue has not picked up so fun for customers that are buying software modules and really needed software modules for now and I think the hardware refresh.
The purchases will follow in a few months from now once everything picks up.
The last point I will make Matt is in terms of coming back to a normalized state the real pick up we have seen since about the end of February and it's been week after week consistent throughout the last 12 weeks.
Have mostly been in U S. Dennis domestic gaming and restart sectors, which have really started doing well.
APAC EMEA and managed food service providers, because employee cafeterias and all that have really not made a comeback as yet once those segments of the market also make a comeback.
Could see even better sales progress than what we are doing now so which is why we are very optimistic about.
For fiscal year as it goes along it is bound to continue to improve because currently it is mainly gaming and resorts pulling the wagon through one day APAC EMEA manage for service providers also make that kind of momentum increase we should be in good shape throughout this fiscal year.
And maybe a follow up on that I'm, just curious on how the new EMEA leadership.
Is it sort of building out the team there.
What kind of progress, they're making I presume, it's more from a pipeline standpoint at this point given your commentary around that that region, but just curious what they've been able to do so far after joining them sort of right at the beginning of the year.
Yes. Good question, Matt, we're making excellent progress there really making excellent progress we're very very happy that they joined US and also to remember it is.
No managed.
By Don Day maintenance Hulu also had sales in the Americas as well so Don is leading that team as well and they are making excellent progress in fact are.
In my list of major customer wins.
You would have noticed there are a couple of them from EMEA.
<unk> P M S. What's being sold for the first time there. So pms is also making good progress in EMEA and overall, we are very happy with how EMEA has progressed from the start of this calendar year.
Alright, great. Thank you for taking my questions.
Thank you Matt.
Thank you. Our next question comes from the line of George Sutton with Craig Hallum. Your line is now open.
Thank you very much one of the statements you've made on this call and also in your press release.
Was that we currently go into every product sale discussion with a high degree of confidence and Ramesh Im just curious if you can compare today and making that statement versus even a year ago I'm not sure you'd make that statement.
Unequivocally across your product platform.
Is that reasonable.
Yeah now we can make that statement clearly across all our product platforms George no question about that.
No we are surprised if a customer looks at a product demo.
Especially across the entire guest journey, how they can manage their entire guest journey with a comprehensive set of products. We have on the Pos side on the BMS side and now the inventory procurement products and data imagine I've also been modernized we do go in with a good degree of confidence.
For the recent win loss ratio that we measure George internally for the last for months.
Starting from December or so.
When we look at the percentage of wins in the deals that we participate in and we are close to they either have been not a lot a big majority of them. We are winning now so yes jobs, we do go into sales.
Sales demos and all that with a high degree of confidence in the customer feedback also is extremely encouraging because theyre not seeing that.
This kind of a modern technology based comprehensive set of products that serves the entire set.
Net of needs. They have they don't see this from others as well so yes, there's no comparison between 12 months from now 12 months before and now George There's absolutely no comparison, our confidence is much much higher than what it was even 12 months ago.
So we were very impressed with the new Pms a L. M. S that you came out with in the last couple of months.
I'm curious if you've started to do demos for some of the larger players in the market or when would you anticipate that to start.
A lot of the larger players in the market.
Also looking at T. P M S now.
Element has a major presence mostly in the gaming sector.
So most of the customers currently looking at the modernized L. M. S. P. M. S. I would say our current customers who.
Who are planning to upgrade to that modernized version and also take advantage of all the other add on modules we have.
A couple of bigger customers and corporations are currently looking at C. P. M S and they are extremely impressed.
Super Thanks very much.
Thanks, Sean.
Okay.
Thank you.
Last question comes from the line of Knowhow helps.
<unk> with Northland Capital. Your line is now open.
Alright, thank you.
Solid results.
You had some.
Very encouraging set of metrics.
Metrics that you share it here.
Now 85% of the COVID-19 period.
The past five years. So when you say now at 85% you're talking about the past 12 week period, meaning from February 23rd May 18th is that correct.
Yeah, So I I thought like I confused you a little bit not a country wish everyone a little bit with that stat. So basically we have seen a major pick up since the last week of February up to this past weekend. So that's that's the set of 12 weeks. So what we did was we added up at a global.
The phase that we measured in annual contract ACB dumps, we added up our global sales.
That number we had the total number of obese past 12 weeks.
And we compared it with the best 12 week stretch we've had in the last five years. So in the last five years, we went and analyzed the numbers and looked at what is the best 12 week stretch we ever had in sales and this current 12 weeks was about close to 85 per cent of that peak 12 week number.
Got it and one was the 12 week period over the past five years.
We'd.
It should be noted the tone from that in 2018.
For 2017.
So it was I'd be doing a weekend when we talk to you later than they have been share with you. The exact time period, but it was somewhere in that range of about three years ago or so.
Okay.
So you also made another statement here during the conference call that.
I think sales were at 75 per cent of comparable fiscal for Q 'twenty levels. I believe you were talking about sales or ACD bookings in this most recent March quarter is that 75 per cent of comparable fiscal for Q3.
So is that correct yeah.
Yeah, that's correct. So for the year, we were in the we were about 65, 67% and for Q4, we had an uptick to around 75 per cent of previous year bookings levels, but that was on the sales bookings not the revenue side.
Yeah understood and so the fiscal for Q 'twenty levels.
How does that compare to that 12 week period that you're referencing that now 85 per cent of.
So there's 85 per cent was compared to the Bes 12 week period, we've ever had.
That was sometime in the 2017 2018 timeframe.
Right. So we just wanted to express to you that this last 12 weeks have gone well for us. So we are noticing a big uptick in gaming and resort space in the U S domestic market and we just compared to the best peak period, we ever had we didn't compare it to every other 12 week period for that.
Yep Yep, I guess, what I'm trying to get.
Get out here or is it it sounds like that the ACB bookings that you've been experiencing over the past 12 weeks.
Yes.
At least 20%, maybe 30 or 40% better than what you saw for the March quarter is that.
A correct interpretation here.
Yeah, I mean, you just saw.
Two campaign.
I think this 12 weeks falls across both Q4 and this current Q1.
But I can tell you just talked to make that comparison because part of these 12 weeks did fall in Q4 as well.
So, let's not complicated further by comparing it with that right. So this 12 week.
One about five weeks up that was in queue for the remaining seven weeks of that or six weeks of that was in Q1. So it kind of silent startled across both those quarters, but I will tell you that the current pace of sales is a definite pickup or what have you ever had in the last 12 to 14.
Okay very good.
And then Dave do you characterize the overall backlog was healthy.
Does this mean that overall backlog has increased Q over Q or is.
Is it a or are you now able to implement faster than what you're booking at this point in time.
No we're still seeing an increase in the backlog, especially in professional services and our subscription backlog for waiting for products to go live.
The hardware the product backlog has has leveled off a bit it's still definitely at healthy levels, but as more customers are choosing subscription.
That backlog is increasing faster than the product backlog, but all three are are at very very healthy levels.
Okay great.
Then, let's move to the full year guidance for 16, and 24% year over year growth.
Is it fair to say that the level of outperformance that you've been seeing for subscription relative to overall revenue will continue.
What about the I think around 2000 basis point premium relative to overall revenue.
Yeah, we expect subscription revenue to continue to grow in the 20 per cent range.
Okay, so not necessarily for faster than overall revenue then.
Well for for fiscal 'twenty, two it'll be a little bit faster because keep in mind. There was the one time credits that created a little bit of a drag on the subscription revenue.
Gotcha Okay.
Okay.
And then there was another statement during the prepared remarks.
You guys said that you expect momentum to increase through the year does that mean your gross will continue to increase through the year or do you just simply mean that Q2 revenue trajectory well continue to improve and are you talking about revenue or are you talking about inc.
Sales for what I would call ACD bookings.
Yeah. So that statement is more about revenue, though it is related to sales as well because sales is what drives at least a portion of the revenue.
So what we meant to say was when you take our guidance of 160 to $1 70, we expect.
A higher proportion of that to happen in the second year than in the in the.
Second part of the year than in the first part of the year.
So that we have given an annual guidance, but we expect it to be sequentially increasing.
Revenue quarters as we go along we expect second half to be better than the first half and that was a statement about the revenue statement that we made now that is going to be driven by the fact that we expect sales bookings to continue to increase the low teens.
Got it okay.
And then the free cash flow exceptionally strong this quarter.
Does that take from free cash flow generation capability for fiscal year 'twenty two.
Yeah.
No. It doesn't I mean, you know the way we've always talked about free cash flow is you know theres, some seasonality with billings and contract liabilities, but if you look over a 12 month period.
It's a pretty it's usually pretty close to our adjusted EBITDA levels. So what youre seeing is.
You'll see the same cycle next year, where in the first half of the year, we have bonus payments in the second half of the year, you will see more billings with our annual our annual recurring revenue so.
No it's not taking from the next fiscal 2022, which is kind of average out over a 12 month period.
Okay, Great and then my final question is that the last quarter, you talked about you're starting to look at some acquisitions, presumably that would be to potentially enter some adjacent markets.
But what's your ability to enter adjacent markets without acquisitions and what are those just for markets you would look at.
Yeah. So.
So.
In terms of adjacent to waste adjacent products as well that on certain adjacent products that we can look at through acquisitions.
We are remaining conservative and we have listening to opportunities as they come along and we're taking a look at them and.
We'll make the right decision when we come to it in terms of your question about going to adjacent markets. We do have the ability to get there even without acquisitions in calendar 2022.
Because when you think about a 1000 strong RMB the source trains now.
We are now completing all the modernization projects and virtually all of them should get done by the September October timeframe. Many of them are already done.
So when we say that what we mean is all the R&D resources, who are focused on modernization, meaning.
Meaning reengineering current products are all going to be freed up to now carry the products forward.
And also these modern products that a lot easier to enhance and change they're not all products with.
So towards the end of this calendar year. It is almost like they're adding to our R&D strength without adding any resources because they don't get freed up to actually carry the ball forward.
So we expect to be able to enter adjacent markets starting in calendar 2022.
About doing any acquisitions, but if a good acquisition comes along that we feel will be accretive quickly and will add you know will add for the shareholder value. We are creating now absolutely. We will look at that as well, but starting calendar 'twenty 'twenty. Two we have the ability to enter adjacent markets without needing acquisitions to do that.
Just quickly how do you define accretive.
[laughter] like crazy with that.
Debt to EBITDA levels will go up within a short period of time.
Okay. That's great that's even after the Yankees.
So maybe a 12 to 18 month period of time.
Right. Okay. Thank you.
Meaning acquisitions with a free shipping cost synergies and good revenue synergies.
What do you mean.
Okay understood alright. Thank.
Thank you that's it for me, which was a lot of questions sorry about that.
Nobody's anytime thank you.
Thank you for.
Further questions I will now turn the call back over to <unk> for closing remarks.
Thank you Sandra thank.
Thank you for all your continued interest in that analysis and all your support and guidance.
On behalf of our board management team and close to 1400 team members.
I'm very grateful for your attendance today, and your continued investments and agile as.
We look forward to talking to you again in a couple of months from now when we will be reporting on our Q1 fiscal 2022 results till then please take great care of yourself and everyone around me. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
[music].
Yes.
Sure.
Hum.
[music].
Yes.
[music].