Q2 2022 Agilysys Inc Earnings Call
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Today's conference is scheduled to begin shortly in two minutes. Please continue to standby and thank you for your patience.
[music].
Yeah.
Good day, ladies and gentlemen, and welcome to the Agilis fiscal 2022 second quarter Conference call. As a reminder, todays conference maybe recorded I would now like to turn the conference over to Jessica Hennessey director of corporate strategy and Investor Relations at Agilis.
You may begin.
Thank you Justin and good afternoon, everybody. Thank you for joining <unk> fiscal 2022 second quarter conference call. We will get started in just a minute with management's comments, but before doing so let me read the safe Harbor language.
<unk> 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 995, 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.
Important factors that could cause actual results to vary materially from these forward. Looking statements include the continued effects of the COVID-19 pandemic on our business global supply chain challenges and the risks set forth in the company's reports on Form 10-K, and 10-Q and other reports filed with the securities and exchange.
Yeah.
With that I'd like to now turn the call over to Mr. Ramesh Srinivasan, President and CEO of Johnson Rice.
Please go ahead.
Thank you Jess good evening welcome to our fiscal 2022 second quarter earnings call, joining Jessica Hennessey and me on the call today.
Our Atlanta office is Dave Wood, our CFO.
As stated in the last earnings call, we are going to do our best to continue offering comparisons to historical quarters, one with the comparable quarter from a year ago and one from two years ago.
While more sales and revenue comparisons with the prior fiscal year, we'll obviously look good.
Think comparisons with comparable pre pandemic periods from two years ago will provide a better gauge of business progress for the remainder of this fiscal year.
We will provide the same comparisons for profitability measures like EBITDA as well.
Last year was a higher than normal due to artificial salary reductions and other one time cost saving measures.
Yeah.
Our sales success narrative has remained more or less the same as the reported from the previous quarter.
We continue to see excellent recovery in the U S gaming and resort market verticals.
A partial recovery in the hotel chain and cruise ship verticals.
While managed food services.
And international regions remains significantly affected by the lingering effects of the pandemic.
Despite all of the remaining short term marketplace challenges our sales levels measured in annual contract value ACD tons have increased for two consecutive quarters and have again reached levels similar to the pre pandemic fiscal year 2020.
Please note that all data pertaining to sales in this and other matters.
Based on annual contract value HCV off one and closed sales agreements.
Subscription sales have increased significantly over three consecutive quarters.
This July to September quarter, Q2 fiscal 2022.
Was the best ever subscription same quarter by a fair distance and.
And in line with our increasing expectations.
21% higher than the previous best subscription same quarter.
Which was the preceding Q1 of fiscal 2022.
The steady increase in subscription themes during the past few quarters.
He is possibly due to both an increasing preference among customers for cloud applications.
And the current availability with us of such cloud native software solutions across virtually every hospitality need.
This is a long awaited and welcome change for the business. Despite both these situations, resulting in delayed conversions of sales success to revenue compared to on premise perpetual license sales in the past.
The other sales success highlight is the growing momentum in property management assistance Pms sales.
Total <unk> Vms sales for the second quarter.
Have increased 115% compared to fiscal 2022 years ago.
Within that total number.
Subscription only pms sales were up more than 145% for the.
The second quarter compared with fiscal 2022 years ago.
Yes.
The product modernization efforts over the past few years have given us cloud native subscription sales options across all of our hospitality software solution offerings.
But when this industry a small portion of customers still prefer on premise implementations for good reasons.
A recently modernized products give us the capability of supporting both on premise and cloud installations, including mixed environments are both with the same code base, which is a significant competitive advantage.
We no longer need to turn down sales and revenue opportunities due to any kind of technology limitation.
With respect to signed sales agreements during Q2 July to September.
We added 16, one six we added 16 new customers.
58, new properties, which did not have any of our products before but the parent company was already out of customer.
And then when 82 instances of selling at least one additional product two properties, which already had one of our other products.
Once again more than 99 zero more than 90% of the 16, new customers and 58, new properties added during the quarter, but either fully or partially subscription license based.
While the number of new customers signed during the quarter is only more or less in line with previous quarters.
Q2 fiscal 2022 was our best quarter in five years.
For new customer sales measured in HCV tums.
What that implies is the size of each new customer win in value terms has expanded due to the increased availability of world class cloud Native software solutions.
Once we break through and win new customers, what would have possibly been a single product sale a couple of years ago, most probably info Genesis P O S.
So often a multi product sale.
To cite a few examples.
Britain to thoughts on hotel selected ideal office to provide multiple cloud applications, including stay Pms Rguest service and idealistic spirit to manage their properties in Myrtle Beach, along the coast of South Carolina.
Big Cedar.
Who offer rustic luxury and a variety of amenities across multiple properties in the Missouri Ozark Mountains.
<unk> stay Pms.
Some catering on demand and <unk> to manage their operations.
Eaton Hall, and whole Cross Hall selected import Genesis kiosk across two properties in the U K and are actively looking at purchasing other additional ideal assist products.
And her Majesty's Naval base at Clyde U K chose <unk>, Pms and sales and catering for one of the three operating 11 basis points.
The Royal Navy.
Such multi product sales wins have become more frequent and regular occurrences during recent quarters.
Despite the same folks assist during the past couple of quarters, especially pertaining to subscription sales.
Revenue for the July to September 2nd quarter of fiscal 2022 was at the low end of our guidance at $37 $9 million slightly below the sequence really preceding Q1 10.
10% higher than the comparable quarter last fiscal year, and 7% below Q2 from fiscal 2022 years ago.
While the recurring revenue, including subscription revenue continued to grow to record levels.
One time revenue consisting of hardware and software product revenue and services revenue was at the low end of our guidance range.
And was sequentially down $1 7 million compared to Q1.
Q2 product revenue of $7 3 million was 11% higher than Q2 of last fiscal year, but 39% below Q2 of fiscal 2020.
Global supply chain issues caused delays in P. O S terminal and payment device shipments from hardware partners.
<unk> hardware and associated software product delivery to customers.
While we continue to work with our partners have increased inventory levels and have chosen expedited shipment methods.
<unk> product revenue is dependent on receiving the promised shipments during the coming months and uncertainties do remain.
Recent increases in sales of Pms and related software solutions have been timely and valuable since they have no hardware shipment dependencies.
Services revenue of $6 6 million remained sequentially flat compared to Q1 this fiscal year.
Increased 19, one nine increased 19% over the comparable prior fiscal year quarter.
<unk> decreased by 23% compared to Q2 from two years ago.
Customers are continuing to manage through labor shortages and are forced to make hard choices in prioritizing various required software implementations and other operational high demand projects as best as they can.
In addition, our recently created and re engineered products I've needing extra levels of support in the field.
Q2 recurring revenue of $24 million was a record.
Recurring revenue during Q2 last fiscal year was $22 3 million.
$20 3 million during Q2 of fiscal 2020.
Within the recurring revenue line subscription revenue was also a record crossing the 11 million Mark for the first time.
Q2 subscription revenue, what's sequin, Chile 900 key hires.
In Q1 this year.
An impressive 9% quarter over quarter sequential increase.
Despite all of the customer site closures and hospitality industry damage caused by the pandemic during the past few quarters.
Q2 subscription revenue was 22% higher than Q2 last fiscal year.
And more than 55 zero more than 50% higher than Q2 two years ago.
Q2 subscription revenue comprised a record 46% of total recurring revenue compared to 41% during Q2 last year and 36% during Q2 two years ago.
Adjusted EBITDA for the quarter was $6 3 million and about 17% of revenue that was $1 717% of revenue.
From $8 6 million in Q2 last fiscal year, but an improvement of 110% from $3 million during fiscal 2022 years ago.
Cash collection trends continue to be increasing.
Cash balance increase of $7 2 million during the first half of fiscal 2022 does it put a fence best cash increased during the first half of our fiscal year in more than seven years.
Excluding the convertible investment cash gain last year.
The inputs and high Tech show in Dallas, and <unk>, two we show in Las Vegas on recent back to back weeks were encouraging.
I was there in person myself, but both of those shows.
I had a significantly increased marketing presence in both the shows thanks to new sponsorship of land yet for all participants and displaced in a couple of strategically positioned physical locations.
Both the foot traffic.
Well, it's considerably lower than previous pre pandemic shows during calendar 2019.
Our booth was busy throughout the shortest.
The quantity of conversations with current and prospective customers was high.
Cause somebody users who attended the shores came with focus and purpose.
Despite the relatively low attendance the number of quality leads we generated were comparable to prior years.
During the high Tech show, we announced the completion of a multiyear modernization effort.
Of the V. One pms platform.
After being an on premise only pms solution for multiple decades.
The completely re engineered <unk> Pms is now cloud native and can also support on premise implementations of the same code base.
Around this time, we also announced further the leases of the completely the engineers and modernized info Genesis terminal, which is now pound for pound the best point of sale enterprise system out there.
And can support Windows, iOS, and Android operating systems, which is a major improvement over the past when we were able to support only windows 10 minutes.
Well our display isn't announcements during the high Tech and GTO ensures we have the first steps in our current endeavor to launch idealist stood at all as a company, which has retained the functionality strengths of the solutions, which have been trusted and relied on for mission critical requirements in the hospitality industry for multiple decades.
And now also featured modern cloud native technology architectures.
And many additional software modules, which serve end to end industry needs, making it easy on customers, who now don't need to go to multiple vendors.
Why is the hospitality industry recovery from the pandemic continues to make steady progress across the globe with increasing vaccination rates.
Significant challenges remain in radius international regions.
And in domestic managed foodservice market due to the work from home practices two remaining predominant across many businesses.
While the current challenges to one time revenue are yet to be fully resolved.
We remain bullish about our medium and long term prospects due to the breadth of cloud native applications. We now have available our continued momentum in the marketplace.
Current record backlog levels.
And our expectation that the lingering pandemic challenge portions of the hospitality industry will turn the corner so.
We remain cautiously optimistic and are maintaining the range of fiscal 2022 revenue guidance of 160 160 million to $170 million and adjusted EBITDA levels of slightly above 15% that is one $515.
We came into this fiscal year, we're expecting the second half of the fiscal year to be significantly better than the first half and that expectation has not changed.
The speed at which we can overcome the current short term one time revenue challenges will determine how successful we are with our overall results this fiscal year.
Despite all the current business environment challenges, we are making great progress toward a promising medium and long term and that remains the main pit.
Now that our products have more or less where we have always wanted them to be.
We are well underway with increasing our sales and marketing focus.
We expect the recently selected additional VP of sales entirely focused on the hotels and the subdivision to join us in about a month from now.
We are in the process of expanding our quota carrying sales force with six additional hires during the next few months.
And we have just kicked off the recruitment process.
Quite a head of marketing.
While we will always remain a disciplined growth company at.
Current answer to what's really every sales and marketing expansion need is yes just.
Like how it has been for R&D during the past few years.
We like our current win loss backing ratio in sales deals we participate in.
And now most of our focus is on increasing the number of at bats.
Right.
With that let me handle the call today would for detailed commentary on the financial results and additional color on our business progress.
Steve.
Thank you Ramesh.
Taking a look at our financial results beginning with the income statement second quarter of fiscal 2022 revenue was $37 9 million a 10, 3% increase from total net revenue of $34 $4 million in the comparable prior year period.
The increase in topline revenue largely reflects.
An 11, 3% increase in product revenue and a 19, 4% increase in professional services revenue.
Onetime product revenue dropped 17% below first quarter levels.
Due mostly to supply chain and logistical challenges and the initial impacts of the delta in the U S.
These challenges have been ever changing and throughout the second quarter, we have taken steps to mitigate risks for the second half of the year.
While we are uncertain when the expected short term challenges will be completely resolved.
We believe the actions we have taken some.
Such as investments in incremental inventory levels, electing airfreight for more reliable delivery options and longer term purchase level commitments with our vendors have positioned us to serve customers in a timely manner and support our expected revenue levels for the second half of the fiscal year.
Recurring revenue increased by seven 7% compared to the prior year period and represented 63, 4% of total net revenue for the fiscal second quarter compared to 64, 9% of total net revenue in the comparable prior year period.
Recurring revenue of $24 million is $1 7 million higher than the prior year.
$820000 sequentially.
We are also pleased with our subscription revenue growth, which grew year over year 21, 7% during the second quarter of fiscal 2022 to a record $11 1 million and 9% sequentially over the first quarter.
Subscription revenue comprised about 46% of total recurring revenue compared to 41% of total recurring revenue in the second quarter of fiscal 2021.
Add on software modules that build out our product ecosystem beyond the core Pos Pms and inventory procurement offerings are adding scale quickly and are now contributing to 6% of total sales this quarter when less than two years ago. The add on modules, we're not a measurable contributor in sales.
<unk>.
We have added over $1 million.
Our <unk> for these new products in each of the last six quarters.
Add on software modules made up nine 7% of our subscription revenue in our second fiscal quarter of 2022.
Moving down the income statement.
Gross profit was $24 3 million compared to $23 2 million in the second quarter of fiscal 2021.
Gross profit margin decreased to 64% compared to 67, 4% in the prior year period.
The change in gross profit was primarily due to a change in revenue mix as product and professional services revenue come back into the P&L compared to the prior year.
Recurring revenue continues at record levels.
And professional services revenue have not yet fully return to pre pandemic levels.
Moving to operating expenses.
Operating expenses, excluding charges for legal settlements severance and other charges and other charges for the second quarter was relatively flat with a slight decrease of 2% over Q1 fiscal 2022, mostly due to a slight reduction in G&A costs from some one time items in fiscal Q1.
Compared to the prior year period operating expense saw a 30% increase to $22 2 million from $17 million.
This year over year increase in operating expense is due to slightly inflated stock based compensation expense from our previous brands and some temporary reductions which were in place last year.
Costs, such as travel and trade show expenses are also beginning to come back into the business, especially here in the U S post COVID-19.
Product development sales and marketing and general and administrative expenses were 56% of revenue compared to 46% of revenue in the second quarter of fiscal 2021.
For the remainder of the year.
We expect product development, and general and administrative expense to remain constant or slightly down as a percentage of revenue while sales and marketing expense continue to increase by one or 2% from Q2 levels with the additional incremental investments we have mentioned before.
Our net income of <unk> 5 million is a decrease from the prior quarter net income of $1 5 million with earnings per share also dropping to <unk>.
Compared to six in the first quarter of fiscal 2022.
Adjusted net income and adjusted diluted earnings per share both show a decrease over the prior year second quarter as more costs are coming back into the business.
Adjusted net income of $4 6 million is down from $6 8 million in the prior year second quarter.
And adjusted diluted earnings per share of <unk> 18.
Kris from 29.
In the prior year second quarter.
When normalizing for certain noncash and nonrecurring charges.
This reduction is mostly due to increased increase in operating expense coming back in the business and the additional stock based compensation expense.
For the fiscal 2022 second quarter, adjusted EBIT was $6 3 million compared to $8 6 million in the year ago quarter adjusted.
Adjusted EBIT remains a strength of the company as we continued to invest in our sales and marketing efforts and appropriately staff our service teams to complete project.
And implementations as our customers worked through resource constraints to implement our solutions.
Moving to the balance sheet and cash flow statement.
Cash and marketable securities improved by $2 5 million in the second fiscal quarter of 2022 to an ending balance of a $106 4 million.
Cash collections continues to be a stream is cash has now increased by $7 2 million.
Since the beginning of the fiscal year.
Free cash flow in the quarter was $3 2 million compared to $11 3 million in the prior year quarter.
The recovery in our markets continue through the fiscal second quarter translating into record subscription sales for the second consecutive quarter.
We are pleased to see our pms solutions contributing with an increase of 115%.
Our terms compared to pre pandemic levels in Q2 fiscal 'twenty.
With the addition of new add on software modules and the strengthening of our existing solutions, we remain confident in our ability for long term sustained growth.
We believe our profitability and business fundamentals have us well positioned to continue to manage through the current environment and short term challenges we are continuing to see in our markets.
Without with that I'd now like to open up the call for Q&A Justin.
And thank you.
As a reminder to ask a question you will need to press star one on your telephone.
So all your question question Alky, please standby will compile the Q&A roster.
And our first question is going to come from Allen Klee from Maxim Group.
Your line is now open.
Good afternoon can you point to.
What data points you have as of now that gives you confidence in <unk>.
Stronger fiscal second half.
Yeah, Hi, Allen.
Like we said.
Backlogs are at record level.
Some of the supply chain issues, we had in some of the product delivery issues we had.
We are seeing circumstances improve during the last few weeks or so that's what gives us the confidence that the second half will be significantly better than the first half.
<unk>.
Product backlog.
Our services backlog, our recurring revenue backlog when you add up all the three were at record levels at the highest levels they've ever been.
The gap between how much we are able to sell and what the environment is allowing us to deliver we are seeing that improving and is coming much better in the second half and our recurring revenue and subscription revenue of course will continue to improve and contribute a lot more in the second half compared to the first steps.
That's great. Thank you so much.
Thanks Allen.
And thank you.
Our next question comes from George Sutton from Craig Hallum. Your line is now open.
Thank you.
Coming off a high tech and <unk>.
Also honing in on your discussion around your win loss ratio can you just talk about your view on your competitive position.
Some of the recent shows and sort of what youre seeing in the market.
<unk>.
Hi, Josh we are encouraged by our competitive position improving compared to the positive, especially in the Pms and related solutions area, we have not even a significant player in pms to say a few months ago.
Now we'll be at a major project spend to be are invited to the table on many pms.
And of course, <unk>, which is the latest version of the re engineered terminal.
If it's competitively far better than anything that is there competition wise.
So in terms of competitive environment, George I would say things have improved.
Though the one thing I should mention is if you have not walking around with more of a target on our back right. So people are taking us more seriously and there are pricing challenges right. There are some desperate competitors, who do win based on price. There's nothing much we can do about that.
This is a high barrier to entry business.
Many of our smaller competitors continue to struggle to scale.
In the U S. I would say our competitive positioning has really improved there'll be have some base to go international markets I would say the competition remains quite severe in both Europe and Asia.
Because of our name and the fact, we have done all of these improvements is not yet.
Part of the dialogue there so I would say internationally, our competitive positioning has only improved slightly while in the U S. As competition positioning has improved significantly and the Pms solutions, it's improved dramatically.
Perfect.
So you mentioned that you've now support all the platforms not just Microsoft.
And can you just give us a picture of what that means in terms of the market opportunity that you may have been not addressing before.
Yes.
So as far as I've input Genesis Pos Wisconsin.
Before we go into the fact that we support multiple operating systems. It is also a completely reengineer terminal.
With.
Hardly improved functionality features so even if we don't support multiple operating systems. It is by far the best system out there. So every time, we have done a demo.
And it has already gone live in about 10 sites already customers.
Much more pleased with it than previous solutions.
So if we just get an add back and if the customer sees <unk> latest version of the terminal. The probability is very high that we will win the day.
No Adam Additionally, but a very significant advantage is the fact that supports multiple multiple operating systems contaminants.
Before it would only support of Windows terminal and in terms of handheld devices that have only so many windows options out there.
Now that we support iOS and Android, let's take iOS for instance, it now runs natively on an iPad, it's not a different code base like many of our competitors do that.
<unk> code base is not managed by a third party windows. He does the same court that runs in the main terminal that also runs in the iPad. So you can make a change here the change happens there as well.
That gives our customers tremendous options to deal with.
Slightly off site meeting at a beach audit of swimming pool.
Now can caveat around an iPad that easily connects to the base system and those kinds of options that are used for struggled with in all of our competitors are still struggling with today and then you add the Android tablet facilities as well.
Now looking to the future George what this gives US is a code base that supports any device.
So, let's say a year from now we develop a sleek device and all in one device like many of the players with retail restaurants, and other places do those kinds of devices become a possibility for us because the software is there. It is just a matter of finding appropriately devise that does that so it opens up the model.
<unk> for Us and currently it is competitively superior position superior product to what is there in the marketplace.
Yeah.
Got you.
One other quick one if I could you mentioned there was some.
Obviously, we know of labor challenges at some of your customers and you mentioned that your new products require extra levels of support in the field.
We thought the opposite so I just wanted to make sure I clarified.
What you said there.
Yeah, so in terms of our backlog being at record levels charge.
And focusing on the services and revenue recurring revenue portion of it.
Yeah.
The number of services projects implementation projects that have not started at the numbers are still pending to get done and those projects that is at a record level now.
A good portion of it has to do with the fact that customers are unable to get the project started that they know they need which is why they signed the sale deal before so all these sales dealers sign but the projects have not yet started.
So that is why our services backlog is at record levels now.
Those projects will start getting done at a faster phase, which also in turn will increase our recurring revenue at a faster pace when the labor shortages get sorted out and customers don't have too many conflicting priorities to work out and prioritize and currently they are just a lot of those conflicting priorities Ben.
Now an additional contributor to our services backlog is also the fact.
That's a portion of our services personnel will have to support our new products.
Which are settling down in defeat now we've done a lot of reengineering, we have created a lot of new products in the last two three years.
And they are all now hitting the market.
Many of them have obviously not been established for multiple years. So each of them are requiring a bit more handholding a bit more training.
With more time working with the customers now that is also delaying other services projects that.
In the in the pipeline to be delivered.
I understand.
Thank you very much.
Sure Jonathan.
And thank you and our next question comes from Matt Van Vliet from BP.
Your line is now open.
Yes, thanks for taking the question.
I guess kind of on on the last couple of questions there.
A little bit of a follow up here in terms of the.
Hardware supply issues caused income constraints do you feel like this is going to further accelerate the adoption of just the off the shelf hardware and now with your software advances you can especially on the Pos side.
Go in with a.
Just sort of a software only sales process or your buyers still wanting to buy.
Kind of the full solution from you and even if thats you reselling, an iPad or something for that instance.
Yes, hi, good afternoon, Matt so as far as the Pms and other software solutions.
Being purchased and installed that have no supply chain issues or anything bad all we need is.
The labor shortages at our customer sites to become progressively less acute.
And also our own newer pms products settling in the field faster those too will contribute to the pms portion of our business expanding faster, which is already happening so theyre not more hardware issues outside of the software solutions that concept.
Where does the hardware issues do come and Matt the hardware delivery issues that as is with respect to what Pos solutions now.
Now what is it solutions are concerned. The fact, we have additional iPad like options helps a little bit, but a major portion of it the supply chain issues have to be sorted out because customers who are moving from a competing system to us still required at the terminals to run the restaurant, even though a few additional iPad help them.
With order, taking when the personnel are moving around the restaurant, but you'll still need those based terminals to be there. So our supply chain and hardware issues will have to get sorted out they looked like they are already in the process of getting sorted out based on the current deliverables that we are beginning to get into this quarter they should get.
Chartered out, but for the hardware and some of the perpetual license software delivery.
We do need the supply chain issues to get started on the Pms software increasing helps us a bit Matt helps us significantly the fact that ipads app that helps us a bit but fundamentally we do need the supply chain issues to get sorted out quickly and then we are seeing signs of that.
Understood very helpful.
And when you talk about record backlog and just really strong sales performance.
And I guess sales leads from that perspective are you seeing any new areas emerging strength are we are you seeing any urban hotels now looking to.
Finally, reopen with higher capacity and expectations of business travel comes back.
Or any areas that haven't seen as much conference traffic yet.
Or is it still the core gaming and warmer weather resort areas that are seeing the most strength.
Yes.
So Matt in terms of new areas for us before I answer your.
Sales vertical related part of the question.
In terms of product areas Pms and related solutions is becoming a big strength for us so compared to a year ago compared to two years ago. We are up like 100% plus with respect to pms sales compared to two years ago. So from a product vertical standpoint from a product segmentation standpoint, Pms and Pms related solutions are doing.
Very well for us and we are only getting started with those those products have all hit the market only recently a few months ago and now with Veeva. Pms also available is a modernized pms, we are going to go from strength to strength. There. So that is from a product vertical standpoint.
But I understand your question is more about the geography and more of the sales verticals.
That negative Unfortunately, hasnt changed much Matt.
Compared to Q1 gaming and gaming casinos, the non gaming part of gaming casinos and resorts are still doing phenomenally well.
We just take the soft sales in gaming sales be Adam well ahead of us.
Fiscal 2020 levels before the pandemic. So those two are doing very well and they are all the new products, we have and increasing competitive advantage is really shining well deb because when you compared to the past our sales to the gaming sector and resource sector is at record levels now.
But the issue still is like it was at Q1 that there is only a partial recovery with cruise ship politically they are just getting their feet.
Back now hotel chains are sort of recovering but it is still.
Sort of sideways kind of Recoding is not doing as well as gaming and results.
International regions had definitely not doing all that well Asia, especially international tourism and the border still being close to <unk>, It's still a challenge in Asia and.
Europe is sort of okay to sort of flat compared to two years ago.
So we've got our sales is doing very well compared to fiscal 2022 years ago. It was almost at that level now.
Get all the challenges we have with international regions.
Partially the coding hotel chain sector.
Sector, partially recurring cruise ship sector.
Biggest challenge remains the domestic managed foodservice sector, because a lot of the <unk> and all of that part of which we are a major supplier have just not come back do too many.
Many people still working from home so that narrative has not changed much from Q1 other than the fact that we are doing even better in the gaming and resource sectors.
Very helpful. And then lastly on the pricing commentary that you made.
You mentioned a number of competitors may be getting.
Pretty irrational or at least competing solely on price when we think about where.
The latest model of the Pos is.
You touched on a number of areas where it's superior.
Should we think about the product being priced in the market in terms of actual RFP terms are you coming in.
Close to some of those competitors are you significantly priced higher and for that the customer has to see that significant value increase how should we think about that maybe now in terms of what's actually happening in the market.
Yeah, So Matt I've been in this.
<unk> enterprise software on the vendor side for well more than I think two decades now and this has always been a problem that are always a few desperate vendors and sometimes they even happened to be the bigger vendors in the space and whether it is in supply chain execution gaming systems are now in hospitality solutions that challenge has always been there that are always.
A few disparate vendors, who will give it away.
That challenge is always going to be there in this business. So that's no different.
In terms of us they have always been in an RFP typically the highest priced windows, we've always been disciplined about our pricing levels. So we have always sort of been a little bit more pricing wise than our other competitors, but now the difference is we have the product to back it up we have we always.
Had the features and products to back it up before but now we have the technology and products to back it up as well.
So when you combine it with trusted solutions and modern technology via able to defend that pricing a lot better today than we were able to say a year or so ago. So we continue to remain quite disciplined with our pricing.
Wonderful thanks for taking all the questions.
Thank you.
And thank you and our next question comes from Nihon <unk> from Northland Capital. Your line is now open.
Thank you.
Clearly very strong bookings demand, especially given the context of tough sales quarter ever in terms of annual contract value.
Our subscription sales quarter.
<unk> sales quarter in five years, and the total backlog of truck drivers, but what I'd really like to know.
What is the actual subscription sales or what I would call bookings in terms of year ago levels of two year ago levels.
So.
As far as bookings are concerned <unk> good.
Good evening book.
Bookings go in there.
We don't.
We don't provide the full annual contract value levels, but what I can tell you.
The Q1, and Q2 sales bookings levels, which we always measure of an annual contract value terms are more or less.
In line with fiscal 2022 years ago.
If you take our Q1 and Q2 the first two quarters, we have completed this fiscal year with.
With Q1, and Q2 of fiscal 2022 years ago, we had obviously better than last year, but that doesn't mean much when you compare it with two years ago. They are more or less in line. So the bookings in the first half have been more or less in line with the bookings are equal to bookings in Q1 and Q2 of last year.
Two years ago, Saudi of fiscal 2020 now.
Another way to interpret that data is.
Q1, and Q2 of fiscal 2022 years ago did not have any pandemic challenges and.
And all our sales verticals, we're working quite well as part of the market environment is cancer gaming with thoughts.
Hotels hotel chains, and cruise ships, and Asia, and EMEA were all doing quite well and manage with service providers.
Here, we have gaming and restarts are doing well, but the other ones have varying degrees of difficulty in spite of that are.
Sales levels have comparable are almost equal when you compare the first half of this year to first half of two years ago. So that's one data point, we can definitely give you the.
The other data point like you mentioned is subscription sales are substantially up compared to two years ago, just because more and more customers preferred cloud native applications and all our products that now are supported by cloud native application. So every time a customer wants to go to the cloud our answer is yes, but those two are contributing and those that come in as we can.
About our bookings.
That's awesome great.
And.
Yes.
You were not.
Sorry.
So what are the bookings level that you've seen over the past two quarters.
Consistent with what your expectations were when you initially set out the $161 million.
Revenue guidance.
Because obviously you've had.
Some surprises on the delivery.
The actual products and services to turn on incremental.
Okay.
Yes, Ned so.
The quick answer to your question is.
The sales bookings.
Off Q1 and Q2.
Were in line with ours.
Great expectations in order to meet the revenue guidance go items. They were in line as far as the sales bookings have come from.
Where we have fallen short and we feel we added the low end of the guidance now is with respect to onetime revenue.
Which has more to do with the delivery challenges we've had in the market environment, which we believe will get improved enough. During the second half of the year, which is why we are maintaining our guidance as it is now as far as bookings have can suddenly Hal David.
David in line with our expectations when we provided the revenue guidance.
Okay. That's helpful.
And then and then the kits arguably driven.
Acceleration.
New solutions, new solution adoption, but kyocera arena.
Potentially until the majority of opportunities how would you compare the.
The completion of opportunities within the hospitality industry go to Joseph the surveying relative to that.
Rate of adoption.
We are seeing in the <unk> industry.
The customers looking for more modern solutions.
And adopting them quickly.
<unk> has been quite high in the hospitality industry as well.
Firstly in the gaming and the sub segments that we have.
Managed foodservice providers, obviously need people to come back work from home. So there we are not looking for anything new and therefore I can't comment on their option rate, but the two markets that are doing well for us Gamings and results. They are looking for more modern cloud native applications that come well into.
Created with each other which is why our deal sizes increase.
That expectation is high in those industries and once they make the decision they're also adopting it fairly quickly as well.
Got it okay great.
Thank you very much for taking my questions.
Thank you.
And thank you and I am showing no further questions I would now like to turn the call back over to <unk> for closing comments.
Thank you Justin Thank you all for your continued interest and investments in <unk> and for your participation today. Please take good care. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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