Q4 2022 Agilysys Inc Earnings Call
Ladies and gentlemen that France is scheduled to begin shortly please continue to standby and thank you for your patience.
[music].
Okay.
Okay.
Good day, ladies and gentlemen, and welcome to a jealousy.
Fiscal 2022 fourth quarter conference call.
As a reminder, todays conference maybe recorded.
I would now like to turn the conference over to Jackson.
Senior director of corporate strategy and Investor Relations at <unk>.
Genesis Ma'am you may begin.
Thank you Linda and good afternoon, everybody. Thank you for joining me are jealous is fiscal 2022 fourth quarter conference call. We will get started in just a minute with management's comments, but before doing so let me read the safe Harbor language.
Some statements made on today's call 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.
<unk> 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 and other global economic factors on our business global supply chain challenges and our ability to manage through that and the risks set forth in the company's report on Form 10-K.
In 10-Q, and other reports filed with the Securities and Exchange Commission I.
I would also like to note that any references to record or best ever financial and business levels. During this call refer only to the time period. After a Joseph made the transformation to an entirely hospitality focused software solutions company in fiscal year 2014 with that.
Now I'd like to turn the call over to Mr. Ramesh Srinivasan, President and CEO of adult for mesh. Please go ahead.
Thank you Jess.
Good evening.
Welcome to our fiscal 2022 fourth quarter and full year earnings call.
Joining Jeff and me on the call today in our Atlanta headquarters is Dave Wood, our CFO .
All of the details of the results we are about to color.
It should be understood keeping in mind the following context.
We tend to think about current business, that's made up of seven major market verticals.
APAC and EMEA up two regional verticals and.
And in the U S hotel chains cruise ships gaming casinos, multi amenity resorbs and managed food services.
Three of those verticals Asia, Europe , and U S manage food services.
<unk> to be adversely affected by lingering pandemic related and other business environment challenges and have nowhere close to being the kind of same center revenue drivers for us they used to be during calendar 2019.
The hotel chains and cruise ship verticals are showing promising signs of recovery, but not fully back to pre pandemic levels with respect to technology with us.
The gaming casino simpler software vehicles, which typically the percent about 70% of our business. That's seven zero represent about 70% of our business continued to show exceptional spin.
We continue to perform very well in these two verticals.
To use the wagon followed by horses metaphor, we abuse before.
The seven horse wagon, you still being poodle.
My only two full extent horses.
Two other horses, which are recovering well, but not yet to full strength and.
And three others, which are still way off normal levels.
Despite all such partial weaknesses in the business environment.
Fact that we still produced all time record numbers is a testimony to our increasing competitive strength driven by our pace of product innovation and world class customer service levels.
We have positioned ourselves well for the future.
Then the hospitality industry has recovered fully across the globe.
And technology investments to return to pre pandemic levels, and then start growing upward from there.
Let me cover sales first before moving to revenue.
All of the sales numbers, we will discuss in this call are measured in annual contract value of dose.
Despite the various business environment challenges overall global sales level.
During fiscal 2022.
44% higher than the previous year at.
96% of our best previous year.
Fiscal 2020, just before the onset of the pandemic.
Due to various levels of on and off lockdowns across countries practically throughout the year.
Sales in the APAC region decreased by 15% that is one side decreased by 15% compared to last year and.
And by about 50 person that is five zero by about 50% compared to the pre pandemic fiscal 2020.
Sales in EMEA showed that 74% improvement over the prior year.
And was only slightly better than fiscal 2020.
Global subscription sales set a new record.
Beating the previous best year, which happened to be last year.
By a whopping 47%.
Our current stable of integrated end to end cloud native software solutions are empowering and making it more efficient for customer teams to deliver exceptional exceptional guest experiences.
<unk> enable revenue upsell opportunities.
That in ton is increasing our software deal sizes and subscription sales.
Fiscal 2022 was our best years with respect to subscription software sales of Pms and related modules 50.
53% higher than the previous best year.
With respect to signed sales agreements during Q4 January to March.
We added 21, new customers with.
Six of them, including our core property management system Pms product in the list of products chosen.
All but one of the 21, new customers signed this quarter.
<unk> the SaaS option.
At least one of the products they licensed.
We also added 58, new properties, which did not have any of our products before but the parent company was already our customers.
Of these 58, new properties added during the quarter more than 90% that is nine zero more than 90 person, but either partially or fully subscription fee base.
There have been also 112 instances of selling at least one additional product two properties, which already had one of our other products.
They're on subscription sales for the last few quarters have become 77 zero, 70% of our software sales during each period.
We expect this shift in software sales mix to continue.
Now on to revenue.
Fiscal 2022, Q4 revenue was a record 46 $6 million.
18% that is one 818% sequentially higher than Q3 earlier this year.
And 28% higher than the comparable prior year quarter.
$46 $6 million is about 11% higher than the previous best 42 million level achieved during Q3 of fiscal 2020 October to December calendar 2019 quarter, just before the onset of the pandemic.
We've been on a run of nine consecutive sequentially, increasing quarters battle of which seven were record setting at the time.
Record revenue during Q4 fiscal 2022 grew to $26 $6 million driven by a 33% year over year increase and a 10% sequential increase in subscription revenue.
Subscription revenue grew to 48% of total recurring revenue the highest level thus far.
Overall recurring revenue was 16% that is one 616% higher than the comparable quarter last year, and 6% sequentially higher than the previous quarter.
Database also significant sequential increases in product and services revenue this quarter.
Quarter of product and services revenue, well, well north of 90% nine zero, well north of 90% of previous best level.
Both achieved during Q3 fiscal 2020 October to December calendar 2019.
Our operations team continues to do excellent work, improving our supply chain management function.
With respect to implementation services, we have seen significant improvements in stock availability at customer sites.
And that product implementations are getting close to normal levels now driving services revenue back close to pre pandemic levels.
Implementation processes of the newer software modules are steadily becoming more efficient.
Q4 fiscal 2022 gross margin was 59, 5%.
Higher than pre pandemic levels, but less than the comparable quarter last fiscal year.
Due to increased levels of product and services revenue.
Gross margin was also affected by the decreasing level of one time high margin perpetual software licenses.
As an overwhelming majority of customers continued to opt for subscription fee based cloud with loans.
We continue to have good success in maintaining our product margins.
We should expect gross margin percentages remain in the high <unk> to low sixties range for the foreseeable future and increase gradually in the long term as a proportion of recurring revenue increases.
The sequential decrease in gross margin as only to do with revenue mix and the decrease in one time perpetual software licenses in favor of subscription fee based arrangements.
We expect one time perpetual license related software revenue to remain at about current levels.
We continue to manage the gradual but accelerating shift from being a company that was once be strong on premise perpetual software licenses to our cloud SaaS base business without any significant short term decline.
Most enterprise software companies, which go through this paradigm shift tend to go through a J curve with our financial performance featuring short to medium term declines hopefully followed by long term increases.
Sitting outside humidity for a minute I think we should take a little bit of credit for managing a J code without the G. As one of our board members accurately described it recently.
We are managing to achieve revenue gains while simultaneously managing this transition.
Why is that is a clear preference among new customers for cloud solutions. The modernization efforts over the past few years have also given us the flexibility to offer the same software solutions of the same code base across both cloud and on premise implementations, which is a distinct competitive advantage.
In this investor.
Some major hospitality customers continue to prefer on premise implementations and there isn't a good position to satisfy their requirements as well with the same modern world class products.
Fiscal 2022 full year revenue was a record $162 $6 million slightly ahead of the annual revenue level achieved during fiscal 2020 before the pandemic.
Subscription revenue was about 15 million that is one five was about $15 million higher in fiscal 2022 compared to fiscal 2020.
Thanks to increasing subscription revenue levels.
He used to have achieved a record annual revenue level in fiscal 2022, despite the business environmental challenges faced during the year, which depressed product and services revenue levels during a couple of quarters.
In addition to the 11 core software products across point of sale.
Property management systems inventory procurement for food and beverage and document management, which.
We have modernized during the past few years to be cloud native solutions.
We've also added about 20 additional add on cloud native software modules around the core products in recent years.
These add on modules, which work well integrated with the core modules.
Revenue upsell generating and drive operational efficiencies for customers.
Subscription revenue from these 20 add on modules was about one 3% of total subscription revenue in fiscal 2020.
Grew to four 8% in fiscal 'twenty or 'twenty one.
Now at 11% of subscription revenue in fiscal 2022.
In absolute value terms subscription revenue from these add on modules alone.
During fiscal 2022 was close to three times higher.
During the previous year.
The hospitality industry remains hungry.
To implement such long.
Overdue value, adding innovative software modules.
To make their operations simpler and more enriching and empowering for their stuff.
And also help create great experiences for their guests.
Our customer retention levels continue to be excellent.
2022 was our best year with respect to customer retention going back many years.
Adjusted EBITDA for the quarter was $7 $5 million.
At 16.1% of revenue that is one six of about 16.1% of revenue more or less at the same levels as the previous couple of quarters.
6% higher than the comparable prior year quarter.
And 110% better than Q4 in fiscal 2020, a couple of years ago.
Adjusted EBITDA for fiscal 2022 full year was $27 3 million at about the same level as the previous years and again, 110% higher than fiscal 2022 years ago.
EBITDA numbers for fiscal 2021, the period from April 2020 to March 'twenty or 'twenty one.
That helped by artificial onetime salary cuts staff reductions and other temporary cost cutting measures to help us work through the pandemic phase.
While fiscal 2022 was a normal cost level here for us.
Fiscal 2022 was also our first full year with positive GAAP net income.
Fiscal 2014.
Okay.
Had the best couple of quarters of cash collections.
Q4 cash collections being even better than Q3, which was by itself a record.
That's a good indicator of the overall health of the business.
We continue to remain disciplined in everything we do and.
Not go after the low quality or low margin business just to keep revenue levels up.
Cash balance decreased by only $2 2 million during fiscal 2022, despite the approximately $25 million all cash result sweep acquisition transaction.
Close during Q4.
And the significant increase in inventory levels throughout the U S to give us the required cushion to guard against any short term supply chain related supplies us.
As you can see in our balance sheet. We ended fiscal 2022 with about six times the amount of inventory we had at the end of fiscal 2021.
Speaking of the Sop suite.
The <unk> acquisition continues to exceed our expectations.
The people culture match has been an almost perfect fit.
Frank Pizzicato lists the former founder and CEO of the Salt Sweet and current VP of strategy at a delicious has been a terrific addition to our management team.
And customer conversations continue to make excellent progress.
Customers have been well coming of the merger and are beginning to take a more detailed and wider look at future product conversion possibilities.
We are in discussions now with about 20% of the acquired customers.
To either adding for Genesis is to that existing product suite at <unk>.
Why not more of Pms related products to agile is cloud native solutions.
Why is the equivalent agilis is products that are cloud native cloud based from a more modern technology stack and our wider and deeper with respect to feature sets.
Several areas, where there is sub suite products provide better features.
We are in the process of filling those product gaps and be agile assist product sets.
We expect product conversion efforts to pick up pace as we make progress with ensuring feature parity.
Overall, we could not be happier with this merger of two of the very few software providers and hospitality.
We will have the products and the expertise to offer robust end to end integrated CT property management solutions.
And the supporting value, adding additional modules.
Yeah.
In summary, we are pleased with our Q4 results.
Fiscal 2022, being a record revenue year.
Given by good subscription revenue growth.
First GAAP positive net income year in about eight years.
We're also happy that our financial defense results became less complicated and a lot of cleanup during fiscal 'twenty to 'twenty two compared to previous years.
Giving us a good basis for comparison during fiscal 2023 and beyond.
People stop at fiscal 2022 practice of providing comparisons across the previous two years and return to normal comparisons versus the previous year beginning fiscal 2023.
The combined product recurring revenue and services backlog levels.
We remain close to record levels.
At about 98% of the record levels, we ended the previous quarter with.
We expect fiscal 2023 annual revenue to be in the range of 190 to $1 $95 million driven among other factors by year over year subscription revenue growth.
Around 30% that is three zero.
30%.
We also expect adjusted EBITDA for the full year to remain greater than 15% of revenue that is one 515% of revenue.
Though the EBITDA levels may fall slightly below 15% during Q1, and Q2 due to incentive comp accrual increases but.
But you shouldn't balance related accounting adjustments, which are significant and typically affect Q1 cost levels employee.
Employee salary merit increases.
Accounting and other professional fees, which tend to occur in Q1.
Additional participation in trade shows, including and all expense paid hospitality consultants autumn being conducted this week to update the industry influences of our current product and services trends.
Additional hiring, especially in the sales and marketing areas.
And additional spend related to internal it infrastructure improvements.
We expect better operating leverage to kick in during the second half of the fiscal years bring.
Bringing the overall full year, adjusted EBITDA to higher than 15% of women.
With that.
Let me hand, the call over to Deb Deb.
Thank you Ramesh taking a look at our financial results beginning with the income statement fourth quarter fiscal 'twenty 'twenty. Two revenue was a quarterly record of $46 6 million or 28, 1% increase from total net revenue of $36 $3 million in the comparable prior year period.
All three product lines increased compared to the prior year period with product revenue up 60%, mostly due to strong sales within the quarter.
Professional services was up 35, 4% over the prior year as we continue to return to a more normal implementation schedule.
Recurring revenue was also up 16% with subscription up 32, 8% over the prior year period.
Throughout the year total sales improved back to almost pre COVID-19 levels compared to fiscal 2020 sales with subscription sales at record levels.
Subscription sales in fiscal 2022 was 47% higher than the prior record in fiscal year 2021.
We currently have a backlog of products and professional services significantly higher than our prior year exit and remains at healthy levels to achieve our fiscal year 2023.
The improved sales activity, we have seen during fiscal year 2022 left us with an exit total backlog of 38% higher than our prior year FY 'twenty, one exit with all three product lines significantly increased.
As a result of the continued momentum momentum in our business. We are pleased to see 18, 6% total annual revenue growth year over year with all three product lines, increasing over the prior fiscal year, despite certain aspects of our business continuing to be negatively impacted throughout the beginning of fiscal 2022.
Product revenue increased 34, 6% over the prior fiscal year profession.
Professional services increased 26, 6% over the prior fiscal year and recurring revenue during fiscal 2022 was up 11, 7% over the prior fiscal year.
Total record recurring revenue represented 57, 1% of total net revenue for the fourth fiscal quarter and 68% for the full year.
Compared to $63, one and 64, 6% of total net revenue in the fourth quarter.
Full year fiscal 2020 one.
Increased revenue from professional services implementations and product revenue coming back into the business drove drove the change in the revenue mix and the drop in recurring as a percentage of total revenue compared to the prior fiscal year.
We are also happy with our continued subscription revenue growth, which grew 32, 8% during the fourth quarter of fiscal 2022, and 28% for the full fiscal year, despite tough industry circumstances, and a view of our business verticals and delays in professional services implementations.
During the first three quarters of the fiscal year.
Subscription revenue comprised around 48% of total recurring revenue compared to 42% of total recurring revenue in the fourth quarter of fiscal 2021.
Software modules and the fiscal year 2022 comprised 11% of subscription revenue compared to 5% in the prior fiscal year.
Add on software module sales contributed over $1 million in subscription <unk> for the eighth quarter in a row.
Moving down the income statement gross profit was $27 7 million compared to $23 5 million in the fourth quarter of fiscal 2021.
Gross profit margin decreased to 59, 5% compared to 64, 6% in the fourth quarter of fiscal 2021. The gross profit margin decrease was primarily due to product and professional services revenue coming back closer to normal levels compared to Q4 of fiscal 'twenty one.
For the fiscal year gross profit margin was 62, 4% compared to 65, 2% in the prior year period for the same reasons previously mentioned.
All three of our product lines remain at or above pre pre COVID-19 margin levels.
Combined the three main operating expense line items product development sales and marketing and general and administrative expenses, excluding stock based compensation were 45, 7% of revenue this quarter, which is the lowest in the past five years. This continues to be a good reflection of the steady progress we are making with our <unk>.
Leverage.
Our operating income for the fourth quarter of $1 5 million net income of $1 5 million and gain per diluted share of six cents all compare favorably to the prior year's fourth quarter loss of $24 8 million.
$24 7 million and $1 <unk> per diluted share.
Adjusted net income normalizing for certain noncash and nonrecurring charges of $6 1 million compares favorably to adjusted net income of $5 2 million in the prior year fourth quarter and adjusted diluted earnings per share of <unk> 24 compares favorably to 21 cents.
For the 2022 fourth quarter, adjusted EBITDA was $7 5 million compared to $7 1 million in the year ago quarter.
And for the full year fiscal 2022, adjusted EBITDA was $27 3 million compared to $26 7 million, we're pleased with our profitability levels with adjusted EBITDA coming in at 16, 8% of revenue for fiscal 2022.
Moving to the balance sheet and cash flow statement cash and marketable securities as of March 31, 2022 was $97 million compared to $99 2 million on March 31 2021.
The primary reason for the cash balance decrease despite our profitability was the all cash resort suite acquisition as well as our increased inventory stocking levels.
As it relates to free cash flow I am pleased to see an increase for the full fiscal year free cash flow in the quarter was $6 5 million compared to 13 million in the prior year quarter and $27 3 million for the full fiscal year compared to $27 million in the prior year.
For our fiscal year 2023, we expect revenue to be in the $190 million to $195 million range inclusive of subscription revenue growth of approximately 30%.
Operating expense for product development sales and marketing and G&A should remain relatively consistent with current operating ranges with a slight increase in sales and marketing.
This results in adjusted EBIT North of 15% of total revenue for the full fiscal year.
In closing we are pleased with our 2022 financial results and the ability to grow the business. Despite some of our regions and customers still recovering from the effects of Covid and other economic factors.
With that I will now turn the call back over to Ramesh.
Thank you Dave.
We operate in a huge total addressable market relative to our current sites.
We've done the hard work during the past years of making our products cloud native and World class.
At high levels of caring customer service continues to be a differentiator in the marketplace.
We remain one of the less than a handful of technology vendors, who can provide end to end solutions to impart hospitality teams to deliver exceptional integrated guest experiences.
Teddy all handle and a seasoned enterprise software marketing veteran who has made a huge difference.
Too many world class technology companies.
Joining us recently as our Chief marketing Officer.
We are making good progress with increasing our sales and marketing strengths.
Our season, the hospitality sales veteran Andrea joined.
Joined Us last week as our new head of the U S Hotel and resort sales team.
Our win loss ratio and average deal sizes continue to be high.
We are hopeful of a complete recovery in hospitality across Asia and Europe during the coming months.
The hotel chain and crew ship verticals are already showing good signs of recovery and could exceed 2019 levels before the end of this calendar year.
How well we're doing in the gaming and resort verticals as good proof point.
How well we can do in the future.
The results of our successful and continuing product innovation efforts meet good business environments, which have compelling needs to keep up with modern technology demands of both their employees and their guests.
Even within U S managed services, we are having good success, expanding our business levels within the health care and higher education portions of this vertical.
In the business and industry portion of U S managed food services I've recent mobility, driven innovations are well set to meet the changing needs of customers.
Basic business parameters like free cash flow remain healthy.
We remain committed to continued disciplined profitable revenue growth.
All things considered we have solid good reasons to be bullish about our future.
This is the beginning of a new and exciting era in our history.
We have successfully worked through difficult circumstances during the past couple of years.
Without sacrificing product innovation and customer service progress in anyway.
We are extremely grateful to our hard and smart working colleagues for their continued dedication to angeles's and their extraordinary accomplishments during the past few years.
This journey is only getting started.
With that too.
<unk> can be open up the call for questions. Please.
Yes.
Thank you.
Ladies and gentlemen, as a reminder to ask a question you will need.
Further I'm wondering your telephone.
So withdraw your question press the pound key.
Again, Thats star one to ask a question please.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Matt Van Light with BT <unk>. Your line is open.
Yeah. Good afternoon, Thanks for taking my question.
Yes.
First on the Pms side, you mentioned, one big new logo win and maybe some inclusion on some of the other expansion deals.
Maybe just as you think about the especially in the U S. On the hotel side of things or are you having more conversations how is the overall kind of activity been especially as business travel seems to be starting to come back in and a greater volume.
And just maybe how much demand is out there from your hotel customers.
Both from all three Matt.
Hotel, the thoughts and the gaming customers.
There are definitely increased conversations about BMS.
We are working through many sizable big size sales opportunities on the Pms side of the equation and the odd being booked through the process. So our progress with.
Modern ice BMS solutions.
<unk> P M S, which is a cloud only modernized we won the visual one product being stalled three major hubs with a modernized version, which can work both on Prem and cloud and LMS continues to be the preferred solution for many of the Big Hotel properties.
So good progress with BMS I would say not only in hotel, but with the sorts and gaming customers as well.
And there are a couple of very encouraging big opportunities that we are talking with at the moment.
Alright, that's great. Thank you and then Russia as you look at them, both Europe and and Asia.
I guess, where do you feel like you're at in terms of the recovery.
Either you know relative to where they were prior or maybe what you saw in different components of the U S market.
And kind of what gives you confidence that those two regions will ultimately come back sooner than later.
Sure.
Truly shoot this one is.
Many countries have gone on and off.
Closing the borders opening the borders and that's gone back and forth.
With the exception of China and all the other countries are pretty much have been opened up Singapore, New Zealand, Australia and the rest of the countries Malaysia are all in various stages of full two complete opening now.
Our issue in Asia for the last couple of years have been that have been pretty significant opportunities that we have been in conversations with but the deals tend to get stalled because you can't expect these customers to make decision when they are facing such uncertain business environment, which is understandable. So that's one issue we have in Asia.
The other issue is we don't have much name recognition data in.
In defense, we have not had major presence in Asia before so what we have done in the last few months six months or so as we now have a full fledged sales team across all the country across all the regions. There. So we are well represented sales wise.
Work hard to improve name recognition and the more they see product demos of the more interesting yet so that part of the equation. We are beginning to resolve quite well, but the environment has to improve data in all the countries. So that's the shoe with Asia.
Europe is a much better environment things are doing much better they are working through a lot more opportunities not just in.
In the main Europe , but also in the middle Eastern region, where we are beginning to establish a presence there.
In Dubai to work on a whole lot of middle East opportunities. We have so that is opening up quite well there. It is a matter of just getting our name established there.
A reasonable alternative for one or two vendors, who have dominated that space for quite a while and the more they see our product demos. The more we are able to be successful with that.
So I would say I think Europe will recover for us faster than a shovel, but the issue is also showing promising signs of recovery with all the countries opening up their borders for international tours.
Alright wonderful thank you.
Thank you Matt.
Our next question comes from the line of George Sutton with Craig Hallum. Your line is open.
Thank you our remiss great quarter I'm curious since we're coming out of a fiscal year I know there are some year end incentives for folks too.
So by the end of the year.
How much influence was that obviously given the backlog coming out it doesn't look like he pulled much out of backlog Gucci, whose very good numbers. So I'm just curious if there are any onetime kind of impacts.
Hi, George its a quick answer is no jobs. There was no particular, one time thing that happened towards the end of the year.
If you break up out of things during fiscal 'twenty two it was pretty even across Q1, Q2, Q3 and Q4.
If you divide it by four it was almost the same sort of number that we centered around.
So there was no special one time effect that happened during Q4, although I will tell you is it is steadily improving the business environment is improving our products are improving so sales is looking better and better as we go along but there was no special pick up at the end of the fiscal year.
We didn't notice any special pickup in fact Q4 was not our best sales quarter compared to a couple of previous quarters, but they were more or less all in range.
So that is one so there were no major incentives that drove this number.
Like you said the backlog pretty much remains the same 98% is lets just assume it's 100%. It's almost the same as we ended the previous quarter with and what is more crucial job is close to its about 38%, 40% more than we ended the previous fiscal year with so when you look at our backlog now products services and <unk>.
<unk> revenue.
And you compare where we were on.
On April 1st this year with April 1st last year, we had about 38% of head backlog wise. So there was no particular pulling and not increase sales during the quarter or anything like that George just gradual improvement that finally hit the kind of pace that we were expecting a quarter of our tool portfolio.
Got you and I have talked for a long time and I think we agree you have very good product relative to your competitors. The challenge has been getting more at bats.
Can you just give us an update on the.
The number of at bats, you think youre getting now versus previously.
Yes, so just two things we've always been known for good feature sets and products like one.
Additional attribute we did not have for quite a while with modern technology.
Our marketing tagline, all pretty much phased it trusted solutions be but always dead, but modern technology was absent. So now that modern technology has been added to that article.
Competitive strength has increased dramatically so that is one aspect of it.
Another aspect is these add on modules. So we have a whole bunch of add on modules that add value to point of sale and to our property management system.
And there are.
There are very few windows, you can count them in one hand, and you will still have a couple of angles.
Remaining in the cone, who can provide end to end starting from the booking engine direct channel web site.
All the way to the end there are very few windows with BARDA to do that kind of integrated solutions and that's a tremendous competitive advantage for us now so that increasing deal size because of the customer that comes to look at two products and end up buying seven is really propelling our sales effort slow and not only that it is attracting more.
Customers, who come to us because they are all dealt with the integration issues for a while.
Even though you provide world class Api's, you still have to integrate the products and then I'll refer the solution at all because it comes integrated and it's a lot easier to deal with one window. So I would say both those factors George one is the fact that modern technology as well now and two is the fact that we provide end to end solutions both of them together are giving us.
Very noticeably increased competitive advantage, though.
Perfect nice job.
Thank you John .
Thank you.
Our next question comes from the line of Nihon Celski with Northland. Your line is open.
Yep. Thank you congrats on the great quarter.
What type of bookings growth needs to be achieved.
To achieve.
That's a 30% subscription.
Right.
Okay.
Now how do you have to speak up a bit a little bit slower little bit louder. Please we didn't catch that question sorry.
Hold on.
Okay. Hopefully you can hear me better now.
Much better.
Great.
What type of bookings growth needs to be achieved throughout fiscal year 'twenty three in order to achieve the impressive 30% subscription growth guidance given that you can probably drain some of your backlog here.
Yes, I think from a subscription growth on bookings I mean.
But really the continued minimum momentum we're seeing I mean, if you think about from a sales rep standpoint, we increased our sales rep in the fiscal year by almost 40% and we're increasing our sales reps again in fiscal year 2023 by almost 20% and most of them are starting to contribute to bookings they have.
We have a lot more products to sell.
And most of those products people are choosing subscription base.
I think you'll see the continued momentum is the same way its been the last couple of quarters and then we are not expecting any dramatic increases in bookings.
Justify.
The subscription revenue growth of 30%.
And also in terms of the revenue growth of 20% that we are guiding for approximately 20%, we're not expecting any dramatic increases in booking in order to achieve that now than they had last year fiscal 2022 was our best year with respect to recurring bookings and much of it was subscription revenue. So we had a terrific year to fiscal 'twenty two.
With respect to subscription bookings and we are expecting reasonable growth as we go along we are not expecting any dramatic bookings growth in order to achieve this subscription revenue growth of 30%. We are fairly confident we will achieve those cuts.
Got it I guess.
What I'm trying to drive that though is that.
Given what appears to be some pretty strong bookings growth in fiscal year, 'twenty, two and an elevated backlog.
You don't need to achieve even 20% bookings growth to hit the overall number 30% bookings growth to hit the subscription guidance is that correct and how much less.
Do you need to go in order to hit that level.
Yes, you are correct, we don't need any bookings growth, but that kind of extent, we just need bookings growth to grow consistent.
Like it has been growing now, but it does not need to be something as dramatic as 25 or 30 personal growth.
Got it but like you said our backlog is very helpful and last year, we had an excellent year with respect to recurring bookings, especially subscription fees. So as long as that momentum generally keeps up and keeps growing steadily and we will be in good shape with our subscription revenue of $30.
Okay, and then just to be clear there.
Reason why backlog isn't coming down more substantially as because you are still resource constrained or is it that your customers are resource constrained.
No I mean, the backlog is mostly increasing just because of general sales momentum right, we haven't flushed the backlog.
We've seen actually in Q4, if you look at our services number a lot of the customer strength restraint have.
<unk> have lessened. So it's really just general sales momentum that the backlog is increasing.
Okay, Great and then can you give us some color as far as how it has property management with some done relative point of sale for especially within the subscription line.
Property management systems relative to a lot of history right.
In fact, I said CMS and additional modules.
Had a dramatic increase of the theater or something that like more than 50% of that set of subscription sales goes so property management system has had a good year.
Two it's bust, but still it is less of a compared to point of sale because that is still a dominant product.
Property management systems are becoming more and more important.
We said 21, new customers six of them chose our core pms products that is at the higher level of where we have been before.
And what is promising about property management systems is that we are working through.
Few pretty big sized opportunities and we are hoping one of them I think he is one of them two of them come through quickly.
So BMS has tremendous momentum, but we are still only scratching the surface there.
Great Congrats.
Thank you.
Thank you.
I'm showing no further questions in the queue I would now like turn the call back over to Mitch for closing remarks.
Thank you Amanda.
Thank you for joining us on the call today and for your continued interest in that deal with this.
We look forward to discussing our fiscal 2023 first quarter results with you in a couple of months from now somewhere near the end of July .
Until then please enjoy a terrific summer stay healthy and well thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now Nick.
[music].
Thanks.
Okay.
Okay.