Q1 2023 Agilysys Inc Earnings Call

July 26, 2022

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Good day, ladies and gentlemen, and welcome to the <unk> fiscal 2023 first quarter Conference call. As a reminder, todays conference maybe recorded.

Now I'd like to turn the conference over to Jessica Hennessy Senior director of corporate strategy and Investor Relations at Agilis, Sir you may begin.

Jessica Hennessy, Senior Director of Corporate Strategy and Investor Relations at Agilisis. May it begin.

Thank you Justin and good afternoon, everybody. Thank you for joining the agenda.

2023 first quarter conference call, we will get started in just a minute with management's comments, but before doing so let me read the safe Harbor language.

Thank you, Justin, and good afternoon, everybody. Thank you for joining the Adilisis Fiscal 2023 First Quarter Conference Call. We will get started in just a minute with management's comments, but before doing so, let me read the Safe Harbor language. Some statements made on today's call will be predictive and are intended to be made as forward-looking within the Safe Harbor protection of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial guidance.

Some statements made on today's call will be predictive and are intended to be made as forward looking within the safe Harbor protection 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 and other global economic factors on our business, our ability to continue profitable growth, and our ability to continue to improve our business.

Important factors that could cause actual results to vary materially from these forward. Looking statements include the continued effect of the COVID-19 pandemic and other global economic factors on our business our ability to continue profitable growth and the risks set forth in the company's reports on Form 10-K.

10-Q, and other reports filed with the Securities and Exchange Commission.

and the RISS set forth in the company's reports on form 10K and 10Q and other reports filed with the Securities and Exchange Commission. As a reminder, any references to record financial and business levels during this call refer only to the time period after a Joseph made the transformation to an entirely hospitality focus software solutions company in fiscal year 2014.

As a reminder, any references to record financial and business levels. During this call refer only to the time period after jealous.

Made the transformation to an entirely hospitality focused software solutions company in fiscal year 2014.

With that I'd now like to turn the call over to Mr. Ramesh Srinivasan, President and Chief Executive Officer Joseph <unk>. Please go ahead.

With that, I'd now like to come to call over to Mr. Ramesh Shreeney-Vasin, President and Chief Executive Officer of Ajilziz. Mr. Ramesh, please go ahead. Mr. Ramesh, please go ahead.

Thank you Jess good evening.

Welcome to the fiscal 2023 first quarter earnings call.

Thank you, Jess. Good evening.

Joining just send me on the call today at our Atlanta headquarters is Dave Wood, our CFO .

Welcome to the fiscal 2023 first quarter earnings call.

Joining Justin me on the call today at our Atlanta headquarters is Dave Wood, RCA4.

Let's call it a sales first before moving to revenue and other meetings.

We've had five consecutive quarters of solid sales results.

Let's cover sales first before moving to revenue and other details.

We've had five consecutive quarters of solid good sales results measured in annual contract value terms.

And annual contract value terms.

We continue to have good success in the gaming casinos and let's talk about the keys.

Business levels, some hotel chains and cruise ship verticals are improving.

We continue to have good success in the gaming casinos and result verticals.

Sales from the managed foodservice division, especially within the higher education and healthcare areas of managed services.

Business levels from hotel chains and cruise ship verticals are improving.

Sales from the Managed Food Services Division, especially within the higher education and healthcare areas of managed food services are recovering and improving well.

Recovering and improving win.

Business from Europe from EMEA is okay, but not growing as much as we would like it to.

Business from Europe , from Emiya, is okay, but not growing as much as we would like it to.

While the hospitality industry in Asia continues to struggle with various levels of Lockdowns and travel restrictions across several countries.

While the hospitality industry in Asia continues to struggle with various levels of lockdowns and tribal restrictions across several countries.

So the sharp somebody would be.

Improving business environment across all avs other than in Asia.

So the short summary would be.

Improving business environment across all areas other than in Asia.

Our service levels have remained solid and consistent at a good level for more than a year now.

Our sales levels have remained solid and consistent at a good level for more than a year now.

Sales win loss ratios would make any enterprise software business unit.

Our sales win loss ratios would make any enterprise software business unit proud.

We are investing in sales and marketing to get ourselves more opportunities and add beds and.

We are investing in sales and marketing to get ourselves more opportunities and at-bats.

And we have plenty of reasons to be happy with that progress.

Having said all of that given the several sizable sales opportunities that we are currently working on.

And we have plenty of reasons to be happy with our progress.

Having said all that, given the several sizable sales opportunities that we are currently working on,

More than a bit impatient to breakthrough to the next gear of growth.

We are more than a bit impatient to break through to the next year of growth.

With respect to sales deals won during Q1 fiscal 2023 April to June .

We added 22 new customers.

With respect to sales deals, one during Q1 fiscal 2023 April to June .

Three of them, including our core Pms product in their list of chosen products.

We add a 22 new customers.

with three of them including a core PMS product in their list of chosen products.

20 of the 22, new customers chose the SaaS option.

For at least one of the licensed products.

20 of the 22 new customers chose the SAS option.

We also added 66, new properties, which did not have any of our products before but the parent company was already at our customers.

for at least one of the license products.

We also added 66 new properties which did not have any of our products before, but the parent company was already our customer.

Of these 66 new properties.

More than 88 zero more than 80% of that either partially or fully subscription fee based.

Of these 66 new properties, more than 80 percent were either partially or fully subscription fee based.

In addition, there were 74 instances of selling at least one additional product to properties, which already had one of our other products.

In addition, there were 74 instances.

of selling at least one additional product to properties which already had one of our other products. which already had one of our other products.

The number of new product sales instances 74 is lower than usual for us.

The number of new product sales instances, 74, is lower than usual for us.

But wasn't well nader by bigger deal sizes and.

And seven of them involve sales of core Pms products.

but was well made up by bigger deal sizes.

So no cause for concern there.

and seven of them involved sales of core PMS products.

About 66 zero, 60% of software sales this fiscal year, thus far in annual contract value of tons has been subscription sales.

For more costs for Kanshan Day.

About 60, 60, 60% of software sales this risk earlier, thus far, in annual contract value terms, has been subscription sales.

Product modernization efforts over the past few years have given us the flexibility to offer most of the software solutions across both cloud and on premise implementations of the same code base, giving us the ability to provide customers the full benefit of ongoing innovation, regardless of their installation equivalents.

Product modernization efforts over the past few years have given us the flexibility to offer most of the software solutions across both cloud and on-premise implementations of the same code base, giving us the ability to provide customers the full benefit of ongoing innovation regardless of their installation preference.

A few highlights among the new customers signed during the quarter.

Thank you.

One high Bullen Hotel UK. This beautiful 125 acre estate property in Southern England selected stay Pms, Rguest book and express mobile check in checkout to offer their guests to seamlessly arrival and arrival experience.

A few highlights among the new customers signed during the quarter. One high-bullen hotel UK. This beautiful 125 acre estate property in southern England.

Selected state PMS, Argus book and express mobile check-in checkout to offer that guest a seamless pre-arrival experience. And arrival experience.

They also selected info Genesis point of sale seat on demand and the pay module to manage their food and beverage operations better and provide exceptional experiences for their guests across the property.

They also selected Infogenesis point of sale, seat, on demand, and the pay module to manage their food and beverage operations better and provide exceptional experiences for their guests across the property.

The hybrid <unk> hotel, which will soon be branded and marketed at the mall is one of the properties in the portfolio of private real estate and leisure investment firm based in London.

The high bull in hotel, which will soon be branded and marketed as the mole, is one of the properties in the portfolio of a private real estate and leisure investment firm based in London. The investment firm based in London.

This firm is one of the largest privately held principal investors in Europe .

Forming private equity style investments in direct property and asset backs operating businesses.

This firm is one of the largest privately held principal investors in Europe , performing private equity style investments in direct property and asset-packed operating businesses. The firm is one of the largest investors in direct property and asset-packed operating businesses.

This is an important breakthrough sales for us with this larger firm, which controls several properties.

This is an important breakthrough sale for us with this larger firm which controls several properties.

But to the modern hotel the historic this historic hotel in downtown Billings, Montana selected steep pms and Rguest book to manage that luxurious recently renovated rooms.

But two, the Northern Hotel. The historic, this historic hotel in downtown Billings, Montana, selected state PMS and Argus Book to manage their luxurious, recently renovated rooms.

And info Genesis point of sale sales and catering and the pay module to provide that gets mixed level food and beverage and even experiences.

and Infogenesis Point of Sale, Sales and Catering, and the Pay module to provide their guests next level food and beverage and event experiences.

Number three the US club London.

The iconic Arts club in the heart of the mere fact district of London is an exclusive and private members only club they selected <unk> for Genesis and pay for managing that F&B operations, while providing their members a unique experience they have come to expect.

Number three, the Arch Club London.

The iconic arts club in the heart of the Mayfair District of London is an exclusive and private members only club. They selected Info Genesis, TOS and pay for managing the affinity operations.

Number four.

while providing their members a unique experience they have come to expect.

Correctional in the managed foodservice verticals. This is an interesting one.

Number four, Tiger Correctional in the Managed Food Services Vertically. This is an interesting one.

Correctional is an all inclusive provider for correctional facilities across the U S.

Tiger Correctional is an all-inclusive provider for Correctional facilities across the US.

<unk> selected the epoch spelled E T as in Tom EC <unk> inventory procurement product to manage inventory needs across many of their locations to help manage that foodservice operations efficiently and cost effectively.

They selected the E-TECH, E-A-T as in Tom, E-C, E-TECH, inventory procurement product to manage inventory needs across many of their locations to help manage their food service operations efficiently and cost-effectively.

Thank you.

Paul Farmer in a luxury spa resort in Franklin, Tennessee.

Five, South Hall Farm and Inn, a luxury spa resort in Franklin, Tennessee, selected the E-Tech Inventory Procurement Product to track and manage their FNB program, based on readily available ingredients from vendors and their own 325 acre farm, which supplies many of their needs.

Selected the <unk> inventory procurement product to track and manage the F&B program based on readily available ingredients from vendors and their own 325 acre farm, which supplies many of their needs.

These five sample wins should give you an idea of the wide breath of the hospitality market. We are capable of covering with the product sets we have today.

These five sample wins should give you an idea of the wide breadth of the hospitality market we are capable of covering with the pronic sets we have today.

Now on to revenue.

Fiscal 2023, Q1 revenue was a record $47 $5 million.

not on to revenue.

Fiscal 2023 Q1 revenue was a record $47.5 million.

The second consecutive record revenue quarter.

And close to 23% higher than the comparable prior year quarter.

The second consecutive rected revenue quarter.

We started this fiscal year, well and have given us a good start towards the fiscal 2023 revenue target.

and close to 23% higher than the comparable priorier quarter.

We've started the fiscal year well and have given our sense of good start towards the fiscal 2023 revenue target. Thank you.

Recurring revenue during Q1 fiscal 2023 grew to $27 $7 million driven.

Recurring revenue during Q1 fiscal 2023 grew to $27.7 million.

Driven by a close to 33 zero driven by close to 30% year over year subscription revenue increase over the comparable prior year quarter.

Driven by a close to 30, 30, driven by a close to 30% year-over-year subscription revenue increase over the comparable prior year quarter.

Subscription revenue was 47, 4% of total recurring revenue.

Subscription revenue from add on software modules.

Subscription revenue was 47.4% of total recurring revenue.

Most of which were developed ground up during the past few years.

Subscription revenue from add-on software modules.

Constituted about 15, one five about 15% of total subscription revenue this quarter.

Most of which were developed ground up during the past few years.

constituted about 1515, about 15% of total subscription revenue of the squatter compared to 11% during the full previous year of fiscal 2022.

Back to 11% during the previous year fiscal 2022.

These innovative software modules, which are well integrated with the core point of sale.

These innovative software modules, which are well integrated with the core point of sale, hotel property management, and inventory procurement systems, continue to make operations simpler for hospitality staff, reducing the need for working through complex integrations across multiple technology providers, which they have struggled with for a long time.

Property management and inventory procurement systems continued to make operations simpler for hospitality staff, reducing the need for working through complex integrations across multiple technology providers, which they have struggled with for a long time.

These add on modules also greatly help in creating wonderful experiences for their guests.

These add-on modules also greatly help in creating wonderful experiences for their guests.

Overall recurring revenue was about 4% sequentially higher than the previous quarter.

Close to 20% higher than the comparable prior year quarter.

overall recurring revenue was about 4% sequentially higher than the previous quarter and close to 20% higher than the comparable prior year quarter.

This is the first time in our history.

As a solely hospitality focused software solutions technology provider.

This is the first time in our history.

We have had three consecutive quarters with quarterly recurring revenue has increased sequentially by more than $1 million each time.

as a solely hospitality focused software solutions technology provider, that we have had three consecutive quarters.

where quarterly recurring revenue has increased sequentially by more than a million dollars each time.

Quarterly recurring revenue has increased by about $3 7 million over the last three quarters.

Quarter recurring revenue has increased by about 3.7 million over the last three quarters.

To place this in context.

During the three quarters before the pandemic settled.

to place this in context.

Between April calendar 2019 in December calendar 2019.

During the three quarters before the pandemic settled.

When our business was improving each passing quarter.

between April , calendar, 2019 and December , calendar, 2019.

The increase in quarter recurring revenue was only $1 6 million over those three quarters.

when our business was improving each passing quarter.

The increase in quarter recurring revenue was only 1.6 million over those three quarters.

Well less than half of the recent three quarters.

We've increased our annual recurring revenue run rate by about 25%.

well less than half of the recent three quarters.

Since the onset of the pandemic.

We have increased our annual recurring revenue run rate by about 25%.

Despite all the challenges of the past two years have created for the only industry. We are focused on.

since the onset of the pandemic.

Despite all the challenges the past two years have created for the only industry we have focused on.

I cannot help but take a moment to be proud of the extraordinary work are supremely talented and tirelessly hard working teams have achieved under very difficult circumstances.

I cannot help but take a moment to be proud of the extraordinary work our supremely talented and tirelessly hardworking teams have achieved under very difficult circumstances.

We placed a bet on increasing the pace of product innovation, even during these challenging times to create a competitive gap and that crucial decisions and a steadfast focus on world class customer service have worked out well for us.

We placed a bet on increasing the pace of product innovation even during these challenging times.

to create a competitive gap and that crucial decision and our steadfast focus on world-class customer service have worked out well for us.

Customer retention continuing to be at excellent levels is one of the contributing factors to increasing the pace of recurring revenue growth we've seen in the recent past.

Customer attention continues to be at excellent levels is one of the contributing factors in increasing the pace of recurring revenue growth we've seen in the recent past.

The previous fiscal year 2022.

As you know was a record year with respect to customer retention.

The previous fiscal year 2022.

Which we measure as a simple metric of annual recurring revenue lost as.

As you know, was a record year with respect to customer retention.

As a percentage of current total annual recurring revenue.

which we measure as a simple metric of annual recurring revenue lost.

We do not take into account additional recurring revenue one from current customers, which we've been a lot of obviously.

as a percentage of current total annual recurring revenue.

We do not take into account additional recurring revenue from current customers which we have been a lot of obviously.

Do not take that into account like most software companies do to add up their retention ratios and report numbers above 100 questions.

We do not take that into account like most software companies do to add up their retention ratios and report numbers above 100%.

We also considered all lost as Sean.

Even if such loss is due to the reduction of the number of endpoints.

We also consider all ARR lost as shown.

The site or outlet continue using our products.

Even if such loss is due to reduction of the number of endpoints.

And the contract is a loss even if the site is closed.

while the site or outlet continues using our products.

And not lost to a competitor.

And the counter does a loss even if the site is closed.

We remain conservative in how we measure churn and of course, the reverse of customer retention.

and not lost to a competitor.

We remain ultra conservative in how we measure churn and of course the reverse of it customer attention.

<unk> lost divided by total EBITDA by.

By mathematical definition cannot be more than 100% for us.

ARR lost divided by total ARR by mathematical definition cannot be more than 100% for us.

Last year fiscal 2022 was our best customer retention years ever.

Last year, fiscal 2022 was our best customer retention year ever, well north of 95%.

North of 95%.

We have further improved from last year's level this fiscal year and that helps to grow recurring revenue at a faster rate.

We have further improved from last year's level this fiscal year, and that helps to grow recurring revenue at a faster rate. And that helps to grow recurring revenue at a faster rate.

Similar to the sequential it preceding Q4 fiscal 2022 quarter product and services revenue added up to close to $20 million.

Similar to the sequentially preceding Q4 fiscal 2022 quarter, product and services revenue added up to close to $20 million.

About 28% higher than the comparable prior year period.

Our best ever quarter of product and services revenue taken together was a little more than $21 million during one of the calendar of 19 quarters.

about 28% higher than the comparable prior year period.

Our best ever quarter of product and services revenue taken together was a little more than 21 million during one of the calendar nineteen quarters

Another reference point.

During the full 2022 fiscal year <unk>.

Which was an overall record revenue year at close to $163 million.

Another reference point.

During the full 2022 fiscal year, which was an overall record revenue year at close to 163 million,

The product and services revenue was a little less than $64 million.

An average of close to 16, one six close to $16 million per quarter.

The product and services revenue total was a little less than $64 million.

Compared to that.

an average of close to 1616, close to 16 million per quarter.

We've made a good start this fiscal year with close to $20 million between product and services revenue in the first quarter.

Compared to that.

We've made a good start this fiscal year with close to 20 million between product and services revenue in the first quarter.

That's another good point or to improving business momentum and supports our confidence level in the annual revenue guidance range provided.

That's another good point to improving business momentum and suppose our confidence level in the annual revenue guidance range provider.

Fiscal 2023, Q1 gross margin was 60%, 60% at the same level as last quarter.

Fiscal 2023 Q1 gross margin was 60%, 60, 60% at the same level as last quarter.

We expect overall gross margin percentages to remain in the high <unk> low <unk> range for the foreseeable future.

We expect overall gross margin percentages to remain in the high 50s, low 60s range for the foreseeable future.

Our finance and operations teams continue to handle supply chain management well.

Our finance and operation teams continue to handle Topry Ping? management, well.

After ending fiscal 2022 with about six times the inventory we had at the end of fiscal 2021.

After ending fiscal 2022, with about six times the inventory we had at the end of fiscal 2021. 2021.

Inventory levels remain flat at the same level at the end of Q1 fiscal 2023.

We plan on streamlining our purchase levels into a more regular with them going forward and keep inventory at close to the current high levels for the foreseeable future.

We plan on streamlining our purchase levels into a more regular rhythm going forward and keep inventory at close to the current high levels for the foreseeable future.

As evidenced by the nine quarter run of sequential increase in quarters, we reported pre pandemic.

Most aspects of our business are not cyclical.

But evidenced by the 9.4 run of sequential increasing quarters, we reported pre-pandemic.

The one exception to this is cash balance changes.

Most aspects of our business are not cyclical.

Due to the timing of annual maintenance invoices, tradeshows incentive bonus payments and various other reasons Q1, and Q2 quarters in each fiscal year tend to be challenging for cash balance improvement and it tends to get balanced out during Q3 and Q4.

The one exception to this is cash balance changes.

Due to the timing of annual maintenance invoices, trade shows, incentive bonus payments, and various other reasons.

Q1 and Q2 quarters in each fiscal year tend to be challenging for cash balance improvement and it tends to get balanced out during Q3 and Q4. Q2 and Q4.

Q1 fiscal 'twenty three free cash flow was affected by these normal operating items as well as payments for the investments made to increase inventory levels previously mentioned.

Q-1 fiscal 23 pre-cash flow was affected by these normal operating items, as well as payments for the investments made to increase inventory levels previously mentioned.

Cash collections continue to be at record levels with the last three quarters being our top quarters for cash collections.

Cash collections continue to be at record levels with the last three quarters being our top quarters of cash collections.

Free cash flow will get back to normal levels.

And approximately be equal into EBITDA less capital expenditures on an annual basis.

cash flow will get back to normal levels.

and approximately be equivalent to EBITDA less capital expenditures on an annual basis.

Adjusted EBITDA for the quarter was $6 7 million and 14, 1% of revenue. That's 114, 1% of revenue in line with expectations provided for the first half of fiscal 2023.

Just a little bit for the quarter was $6.7 million and 14.1% of revenue, that's 14, 14.1% of revenue in line with expectations provided for the first half of fiscal 2023. The rest of you here, Hezbollah, do not go ongoing.

GAAP net income was three point was 3 million about 10 cents per diluted share.

Cap net income was 3 million, about 10 cents per diluted share, our best quarter in a while, with the exception of the July-September calendar 2020 quarter, which was helped by artificial one-time salary cuts, staff reductions, and other temporary cost-cutting measures to manage through the early pandemic days.

Our best quarter in a while with the exception of the July September calendar, 2020 quarter, which was helped by artificial onetime salary cut staff reductions and other temporary cost cutting measures to manage through the early pandemic base.

Share based compensation was five 2% of revenue this quarter lower than during recent quarters due to the timing of annual share allotment.

Share-based compensation was 5.2% of revenue this quarter, lower than during recent quarters due to the timing of annual shares allotment.

We expect share based compensation to increase slightly as we move through the rest of the fiscal year due to the timing of share awards.

We expect share-based compensation to increase slightly as we move through the rest of the fiscal year due to the timing of share awards.

So the swap sweep merger is moving forward on plan B.

We continue to make good progress with filling some of the product gaps in the agility product set.

The desktop suite merger is moving forward on plan.

And we'll be in a good position to speed up customer conversion efforts to the equivalent cloud native annulus products, a few quarters from now.

We continue to make good progress with filling some of the product gaps in the Agilis's product set.

and will be in a good position to speed up customer conversion efforts to the equivalent cloud native agilist products of few quarters from now.

Overall.

We're pleased with the Q1 April to June quarter results.

Overall,

Fiscal 2023 is progressing on plan.

We are pleased with the Q1 April to June quarter of essence.

The combined product recurring revenue and services backlogs have come down slightly as customers make progress catching up with pending implementations.

fiscal 2023 is progressing on plan.

The combined product, recurring revenue and services backlogs have come down slightly as customers make progress catching up with pending implementations.

Total backlog is now at about 85% of peak levels.

And more than 10% higher than at the end of the comparable prior year quarter.

The total backlog is now at about 85% of peak levels.

Product implementations at having a better more natural floor to them now and the current backlog is that a good healthy level.

and more than 10% higher than at the end of the comparable priorier quarter.

Product implementations are having a better, more natural flow to them now, and the current backlog is at a good, healthy level. Not too high as it was in the recent past with many delayed deliveries and projects, and not too low either.

Not too high as it wasn't the recent past with many delayed deliveries and projects and not too low either.

This is a good backlog level higher than during the pre pandemic Allen.

In line with previous guidance provided.

This is a good backlog level higher than during the pre-pandemic era.

Fiscal 2023 annual revenue to be in the range of $190 million to $195 million driven by year over year subscription revenue growth of around 30% three zero to 30%.

In line with previous guidance provided, we expect fiscal 2023 annual revenue to be in the range of $190 to $195 million.

Driven by year over year, subscription revenue growth around 30 persons, 33,000, 30 persons. Thank you. Thank you.

We also continue to expect EBITDA levels for the full year to be better than 15, one five to be better than 15% of revenue.

We also continue to expect EBITDA levels for the full year to be better than 15, one fight to be better than 15% of revenue despite Q1 and Q2 being challenging for profitability as discussed during the last turning scorer.

Despite Q1, and Q2 being challenging for profitability as discussed during the last earnings call.

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 first quarter fiscal 2023 revenue was a quarterly record of $47 5 million a 22, 7% increase from total net revenue of $38 $7 million in the comparable prior year period.

with that, let me hand the call over today. there.

Thank you, Ramesh.

Taking a look at our financial results, beginning with the income statement. First quarter fiscal 2023 revenue was a quarterly record of 47.5 million, a 22.7% increase from total net revenues of 38.7 million in the comparable prior year period. 32, 00 ????? lashes in a full and wide range of 3. gases per gallon driven away 27,6%. 28, 00, 50, activeably calculated from stops here high 22, fuels 50, does ?h lapos of 38.7 million worker suitable for price?? 50,uti out, or images of 48.7 million base of days 6067 1987 rate of assets of July said the start of session time time time time You can try to make yourself secure and perfect.

All three product lines increased compared to the prior year period with product revenue up 25% and professional services revenue up 39% over the prior year as we continue to return to a more normal implementation schedule.

All three product lines increase compared to the prior year period with product revenue of 25% and professional services revenue of 30.9% over the prior year as we continue to return to a more normal implementation schedule.

Recurring revenue was also up 19, 5% with subscription up 29, 5% over the prior year period.

Recurring revenue was also up 19.5% with subscription of 29.5% over the prior year period.

Fiscal 2023 first quarter total sales have remained at consistent levels with FY 'twenty two.

This goal 2023, first quarter total sales have remained at consistent levels with FY22. We expect to see momentum from our sales and marketing investments start to pick up throughout the years our new marketing efforts take hold and our recently hired additional sales team members continue to ramp and add incremental bookings.

We expect to see momentum from our sales and marketing investments start to pick up throughout the year as our new marketing efforts take hold and our recently hired additional sales team members continue to ramp and add incremental bookings subscription sales remained well above pre pandemic levels and we expect that current subscription sales level will become the <unk>.

Subscription sales remain well above pre-pandemic levels, and we expect that current subscription sales level will become the new baseline moving forward.

New baseline moving forward.

Total recurring revenue represented 58, 3% of total net revenue for the fiscal first quarter compared to 59, 9% of total net revenue in the first quarter of fiscal 2022.

Total recurring revenue represented 58.3% of total net revenue for the fiscal first quarter, compared to 59.9% of total net revenue in the first quarter of fiscal 2022.

Increased revenue from professional services implementations and product revenue coming back into the business drove the change in revenue mix and the drop in recurring as a percentage of total revenue compared to the prior fiscal year.

Increased revenue from professional service implementations and product revenue coming back into the business drove the change in 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 29, 5% during the first quarter of fiscal 2023.

We are also happy with our continued subscription revenue growth, which grew 29.5% during the first quarter of fiscal 2023.

Subscription revenue comprised around 47% of total quarter recurring revenue compared to about 48% of total recurring revenue in the fourth quarter of fiscal 2022.

Add on software modules comprised 15% of <unk>.

Subscription revenue in Q1 fiscal year 2023, compared to 10% in the comparative prior year quarter and they continue to be a meaningful contributor.

Add-on software modules comprise 15% of subscription revenue in Q1 fiscal year 2023 compared to 10% in the comparative prior year quarter, and they continue to be a meaningful contributor to subscription revenue.

Subscription revenue.

Moving down the income statement.

Gross profit was $28 5 million compared to $24 9 million in the first quarter of fiscal 2022.

Moving down the income statement.

Rose Prophet was 28.5 million compared to 24.9 million in the first quarter of this 2020-22.

Gross profit margin decreased to 60% compared to 64, 2% in the first quarter of fiscal 2022.

Rose profit margin decreased to 60% compared to 64.2% and the first quarter of this goal 2022.

The gross profit margin decrease was primarily due to product and professional service revenue coming back into the business.

The Gris profit margin decrease is primarily due to product and professional service revenue coming back into the business. The Gris profit margin decrease is primarily due to product The Gris profit margin decrease is primarily due to product

Combined the three main operating expense line items product development sales and marketing and general and administrative expenses, excluding stock based compensation were 46% of revenue and in line with our FY 'twenty three plan.

Combined, the three main operating expense line items, product development, sales and marketing, and general and administrative expenses, excluding stock-based compensation, were 46% of revenue and in-lines with our FWAT23 plan. Title

Operating income for the first quarter of $3 million and gain per diluted share of <unk> <unk>.

Operating income for the first quarter of $3 million and gain per diluted share of 10 cents compares favorably to the prior year's first quarter gain of $2.06 per diluted share.

Compares favorably to the prior year's first quarter gain of $2 million and <unk> <unk> per diluted share.

Adjusted net income normalizing for certain noncash and nonrecurring charges of $5 2 million.

Adjusted net income, normalizing for certain non-cash and non-recurring charges, a 5.2 million and adjusted diluted earnings per share of 21 cents is consistent with adjusted net income of 5.2 million and diluted earnings per share of 21 cents in the prior year first quarter. 1.2 million and diluted earnings per share of 21 cents in the prior year first quarter.

Adjusted diluted earnings per share of <unk> 21.

As consistent with adjusted net income of $5 2 million and diluted earnings per share of <unk> 21 in the prior year first quarter.

For the for the 2023 first quarter adjusted EBITDA was $6 7 million compared to $6 9 million in the year ago quarter.

For the 2023 first quarter adjusted EBITDA was $6.7 million compared to $6.9 million in the year ago quarter.

As we discussed on our last call we expected adjusted EBITDA will be lower in the first half of the year with the first quarter coming in around 14% adjusted.

As we discussed on the last call, we expected adjusted EBITDA will be lower in the first half of the year, with the first quarter coming in around 14%.

Adjusted EBIT this quarter was 14, 1% of revenue.

Moving to the balance sheet and cash flow statements.

Adjusted even in this quarter was 14.1% of revenue.

Cash and marketable securities as of June 32022 was <unk> 49, or $94 9 million compared to $97 million on March 31 2022.

Moving to the balance sheet and cash flow statements.

Cash and marketable securities as of June 30th, 2022 was $44.9 million compared to $97 million March 31st, 2022.

The primary reason for the cash balance decrease.

Despite our profitability.

Due to timing of payments in Q1 related to bonus.

The primary reason for the cash balance decrease.

Dividends and inventory payments, which came due during the April to June timeframe.

despite our profitability, we're due to timing of payments in Q1 related to bonus.

dividends and inventory payments which came due during the April to June conference.

Free cash flow in the quarter was $0 compared to $7 7 million in the prior year quarter.

Free cash flow in the quarter was $0 compared to $7.7 million in the prior year quarter.

As we've stated in the past free cash flow in the first half of the year is significantly.

Impacted by working capital fluctuations.

As we've stated in the past, free cash flow in the first half of the year is significantly impacted by working capital fluctuations. It is significantly impacted by working capital fluctuations.

Mainly due to amortization of annual maintenance invoices.

Timing of bonus payments and accounts payable.

Mainly due to amortization of angel maintenance invoices.

In closing we are pleased with our first quarter financial results and remain on track to meet our FY 'twenty three plan.

Time-iga bonus payments and accounts pay off.

closing we are pleased with our first quarter financial results and remain on track to meet our FY 23 plan.

With that I'll now turn the call back over to rich.

Thank you Deb.

In summary.

With that, I'll now turn the call back to the refresh.

As evidenced by our second consecutive record revenue quarter, we announced solidifying our business at a higher revenue level than before the pandemic.

Thank you, Dave.

In summary...

As evidenced by our second consecutive record revenue quarter, we are now solidifying our business at a higher revenue level than before the pandemic. We've added more to recurring revenue during the last three quarters than during any other three quarters in our history.

We've added more to recurring revenue during the last three quarters than during any other three quarter stretch in our history.

The combination of product and services revenue at close to $20 million. This quarter is close to the previous record level of $21 million during one of the calendar 2019 quarters.

The combination of product and services revenue at close to 20 million this quarter is close to the previous record level of 21 million during one of the calendar 2019 quarters.

Despite lingering pandemic related industry challenges in a few business verticals.

Sales levels have been a solid good levels.

This height lingering pandemic related industry challenges in a few business verticals.

During the past five quarters.

Sales levels have been at solid good levels.

We have witnessed a few prolonged and delayed technology purchase decisions during the past few months, but nothing that would cost much anxiety.

during the past five quarters.

We have witnessed a few prolonged and delayed technology purchase decisions during the past few months, but nothing that would cause much anxiety.

If anything the current macro economic circumstances have created a greater need for technology solutions, which help in improving operational efficiencies.

If anything, the current macroeconomic circumstances.

have created a greater need for technology solutions.

<unk> enhance guest experiences.

And provide hospitality industry operators, the tools necessary to compete better part.

with help in improving operational efficiencies.

Enhance guest experiences.

and provide hospitality industry operators the tools necessary to complete better for, attract and retain guests, as consumers become more careful and calculated about their spend and the value they get for it.

Jack and retain guests.

As consumers become more careful and calculated about their spend and the value they get product.

We continue to invest in sales and marketing efforts to move sales levels to the next higher gear.

We continue to invest in sales and marketing efforts to move sales levels to the next higher of the marketing and professional service system.

We are managing through the current cost pressures of increased sales marketing and professional services spend.

with good balance decision making, optimizing between being disciplined on the one hand.

Good balanced decision, making optimizing between being disciplined on the one hand.

and not missing out on driving future revenue growth on the other.

Im not missing out on driving future revenue growth on the other.

Product development spend this quarter was roughly the same level as it was pre-COVID, close to three years ago.

Product development spend this quarter was roughly the same level as it was pre COVID-19 close to three years ago.

While we are facing demands to increase our R&D resource strength to meet the additional innovation requirements of several sizable new growth opportunities.

While we are facing demands to increase our R&D resource strength to meet the additional innovation requirements of several sizable new growth opportunities, we are also facing

We remain confident no major increase in product development spend will be required, like during previous years.

<unk> remained confident no major increase in product development spend will be required like during previous years.

Some measures increases may be required during the short term, but we do expect product development as a percentage of revenue to continue declining over the medium and long term. can continue to continue declining over the medium and long term.

Some measured increases may be required during the short term, but we do expect product development as a percentage of revenue to continue declining over the medium and long term.

So in conclusion, we are pleased with our overall business focus we.

So in conclusion, they are pleased with our overall business progress.

We have every reason to be bullish about our future.

<unk> every reason to be bullish about our future.

With that, Justin, let's open up the call for questions.

With that Justin let's open up the call for questions.

Thank you. As a reminder to ask a question, you'll need to press STOR-11 on your telephone. Please stand by. We'll be compiled to Q&A roster. Please stand by. We'll be compiled to Q&A roster.

Thank you as a reminder to ask a question you will need to press star one one on your telephone please.

These standby will be compile the Q&A roster.

One moment for questions.

And our first question comes from Matt Van Vleek from BTIG. Your line is now open.

And our first question comes from Matt Van Vliet from <unk>. Your line is now open.

Okay, good afternoon. Thanks for taking my question. I guess first, Hermesh, curious what you're hearing from customers. As they look towards the back half of the calendar year here, with sort of the cross currents we're seeing in the economy, obviously business travel starting to come back a little bit, but it seems like maybe leisure travel might be under pressure both from inflation, but also people's concern about the economy slowing. So. So.

Hey, good afternoon, Thanks for taking my question.

I guess first for mesh curious what youre hearing from customers.

I look towards the back half of the calendar year here.

Sort of the cross currents were seeing in the economy, obviously business travel is starting to come back a little bit.

But it seems like maybe leisure travel might be under pressure both from inflation, but also people's concern about the economy slowing so curious what you're hearing from customers what they are thinking about.

curious what you're hearing from customers, what they're thinking about on sort of multi-year plans and some of bigger projects as they balance the return of some travel but concerns that things might slow.

Multi year plans and some are bigger projects.

As they balance the return of some travel but concerns that things might slow.

Yes, Hi, Matt.

Yeah, hi, Matt.

So what is the one thing to keep in mind Matt as I work through my answer is We only work with medium and higher level

So what I'll tell you one thing to keep in mind, Matt as I walk through my answer is we only work with medium and higher level.

Hotel properties, and just thoughts on chains and managed with service providers and so on.

hotel properties and resorts and chains and managed food service providers and so on.

So, the customers who we deal with

So those are the customers, who we deal with.

are seeing very good visibility and they have good clarity on bookings going into the summer months and beyond.

We're seeing very good visibility and they have good clarity on bookings going into the summer months and beyond.

So they seem quite confident to us, but then again our customer base does not represent the entire hospitality customer base, we are dealing with the medium to the higher level customers and they are not feeling.

So they seem quite confident to us, but then again, our customer base does not represent the entire hospitality customer base. We are dealing with the medium to the higher level customers and they are not feeling.

If any there is no anxiety in them they are continuing to make good positions.

There is no anxiety in them. We are continuing to make good decisions.

anxiety in them, they are continuing to make good decisions.

And Ah.

According to what we are hearing, all travel is coming back quite well. And the headlines about inflation and possible recession and all that don't seem to be affecting them much so far as far as we can tell.

According to what we are hearing all travel is coming back quite well.

And the headlines about inflation and possible deficient on all that don't seem to be affecting them much so far.

Well as we can tell.

They are continuing to make big multi-year technology changes. Multi-year relevant technology changes. There are some pretty big opportunities we are working on now. Where customers now are under pressure.

They are continuing to make big multiyear technology chain multiyear.

Relevant technology changes there are some pretty big opportunities. We are working on now where customers now are under pressure.

that they need better technology now.

That they need better technology now.

because their Gets have higher expectations of technology and for driving operational efficiency is working through staff shortages, they just need better products. They cannot.

Because that gets have higher expectations of technology and for driving operational efficiencies working through staff shortages. They just need better products. They cannot survive with the products. They have had for the last 10 20 years.

Survived with the products they have had for the last 10-20 years.

But our main challenge in terms of driving greater revenue growth is how quickly can we facilitate the transfer from the old to the new? Because even though the newer technology has a lot of additional features and additional help for them, it has a lot of additional features and additional help for them.

But our main challenge in terms of driving greater revenue growth is how quickly can we facilitate the transfer from the oil to the new.

Because even though the newer technology has a lot of additional features and additional a help for them.

There are still some particulars of the old products that have to be built into the new products, and each of their requirements are different. So if anything, that is the challenge. So the quick summary, yes, we are working with customers.

There are still some particulars of the oil products that we have used that have to be built into the new products in each of their requirements are different. So if anything that is the challenge. So the quick summary, yes. We are looking we are working with customers.

who are looking at long-term technology decisions.

Who are looking at long term technology decisions.

to provide themselves the kind of technology they need for the next five, 10 years. We are working with those opportunities and we are seeing plenty of them out there. And most of the customers we are talking to have good visibility clarity on bookings for the months to come and for the rest of the calendar year. For the months to come and for the rest of the calendar year.

To provide themselves the kind of technology they need for the next 510 years, we are working with those opportunities and we are seeing plenty of them out there and most of the customers. We're talking to have good visibility clarity on bookings for the months to come and for the rest of the calendar year.

All right, that's very helpful. And then with the fairly recent launch of the cloud-based PMS products, widely available, you highlighted a couple of new wins for both state PMS and Infogenesis. Just curious in terms of what the feedback early on from some of those customers have been, and how is that helping with new sales cycles as other companies maybe didn't want to be the earliest adopters but are willing to jump on that...

Alright, that's very helpful and then with the fairly recent launch of the cloud base.

EMS products widely available.

Highlighted a couple of new wins.

Both stay Pms and for Genesis.

Just curious in terms of what the feedback early on from some of those customers customers have been how is that helping with new sales cycles as other companies, maybe you didn't want to be.

The earliest adopters, but are willing to jump on that product as they see it scale and work effectively.

Some larger.

Deployments. Thanks.

Yes. So they are going well is the short answer for you, especially if you are referring to be recently modernized visual one the product recall, we won product. It's now live in about six installs or so and all of them have settled down quite where they do they did go through a few months of a settling down process.

But theyre all settled down well and.

but they all settled down well, and they are beginning to work well now. And with that, we have plans to expand the sales. Of V1, WildStay continues to do well as well. Stay is in the front end of many big opportunities we are working on now. So the PMS and additional modules, if you add the core PMS and the additional modules into one bucket, Q1-FY23 is the best quarter we've had. But that number is still not big enough for us. We still have to grow it a lot more. And so far, so good. We are making good progress.

They are beginning to work well now and with that we have we have plans to expand the sales of <unk>, whilst <unk> continues to do well as well as stays in the front end of many big opportunities. We are working on now.

So the Pms and additional modules if you add the core pms and the additional modules into one bucket Q1, FY 'twenty three is the best quarter, we ever had but that number is still not big enough for us we still have to grow it a lot more and so far so good we are making good progress the new modules modernize we won.

The new modules, modernize V1, is settling down well, stay continues to improve. So we are placing ourselves in a good position to keep pushing this PMS. I think every quarter now will be a new record with respect to both PMS sales and PMS revenue. It's progressing well, but it is gonna reach that flywheel effect, which is what we are impatient for. When it really drives growth into the next year, right? That is the stage that has not come, but steady progress is definitely happening well.

<unk> Tic is settling down well stay continues to improve so we are placing ourselves in a good position to keep pushing the pms I think every quarter now will be a new record with respect to both pms sales and Pms revenue is progressing well, but it is going to reach that flywheel effect, which is what we are impatient for many it really drives growth.

For the next year that is the state that has not come but steady progress is definitely happening.

All right, great. Thank you for taking the questions.

Alright, great. Thank you for taking my questions. Thank you Matt.

questions. Thank you Matt.

And thank you.

Thank you.

And one moment for questions.

And our next question comes from George Sutton from Craig Hallum. Your line is now open.

And our next question comes from George Sutton from Craig Hallum. The line is not open. The line is not open.

Thank you. Ramesh, my questions are all around the pipeline.

Thank you Ramesh my questions are all around the pipe loans so.

There is some impatience relative to breaking through to some of the pipeline opportunities I wondered if you could give some.

There is some impatience relative to breaking through to some of the pipeline opportunities. I wondered if you could give some additional perspective there. I think it relates to the prolonged and delayed purchase. I think it relates to the prolonged and delayed purchase.

Additional perspective, there I think it relates to the prolonged and delayed purchases.

So there, I think it relates to the prolonged and delayed purchase decision you mentioned some have made, but can you give us a little bit more of a picture into that? So, I think it relates to the prolonged purchase decision you mentioned some have made,

So there I think it relates to the prolonged and delayed purchase decisions. You mentioned some have made but can you give us a little bit more of a picture into that.

Yes, yes sure.

Yeah, yeah sure.

So it all comes down to George if I can just summarize it down to one thing

So it all comes down to George if I can just summarize it down to one thing.

It is the time it takes to move from the all to the new.

It is the time it takes to move from the old to the new.

Right. If you look at cost pressures on our business. The main cost pressures we face in this business.

If you look at cost pressures on our business, the main cost pressure we face in this business.

is we have to maintain and continue improving all the old versions of the products.

Is we have to maintain and continue improving all the old versions of the products.

and also continue to improve the newer versions of the products. It's almost like maintaining two sets of products.

And also continued to improve the new evolutions of the products, it's almost like maintaining.

Two sets of products.

Till the customers move to the newer products.

Until the customers more to the newer products not what happened and what we refer to as a little bit of in patients is that the customers love the new products. They like the fact it is for the first time, a hospitality window is actually providing end to end technology. We're starting from direct channel booking engine all the way to the end of the restaurant.

Now, what happens is and what we refer to as a little bit of impatience is that the customers love the new products.

They liked the fact that it is for the first time a hospitality vendor is actually providing end-to-end technology. We are starting from a direct channel booking engine all the way to the end of the restaurant. Now you can meet.

Now you can meet most of you have needs through one vendors they love that.

most of your needs through one vendor, they love that.

But when you have to replace old products and even when we replace our own products

But when you have to replace all products and even when we replaced our own products are for example, we go to the <unk> suite customers when they want to move to the cloud native products in all of these well established products that have been there for a long time, there are always a set of nuances and each one has different there'll always be a set of 10 things.

Or for example, we go to resource suite customers and they want to move to the cloud native products. In all these well-established products that have been there for a long time, there are always a set of nuances, and each one is different. They'll always be a set of 10 things that they want it done exactly the way they are used to for many years, while they also want the benefit of the 100 new things that the product gets them, and they want to move to the cloud as well. So getting those 10 things done causes delays.

That they wanted done exactly the way they are used to for many years, while they also want the benefit of the 100, new things that the product gets them and they want to move to the cloud as well so getting those 10 things done causes delays.

Whether it is replacing a competitive product, whether it is replacing our own old product with a new one, whether it is replacing the soft sweet products with our new one, it all comes down to the same thing. That transferring, we are now moving this industry from the old to the new. There are many well established vendors like you know that have been doing the same product for a decade, two decades. Customers want to replace those products. They are talking to us in bigger and bigger numbers, but there are a few things to get done before they are willing to make the switch.

Whether it is replacing a competitive product whether it is replacing our own oil product with a new one whether it is replacing the <unk> III products with a new one it all comes down to the same thing that plant sitting we are now moving this industry from the old to the new that are many well established vendors like <unk> that have been doing the same.

Product for a decade two decades custom.

Customers want to replace those products, they're talking to us and bigger and bigger numbers, but there are a few things to get done before they are willing to make the switch. So that is in patients I'm, referring to now is that process going well. It is going well many customers are making the switch our products are improving its happening well, but we would likely to be faster that's what I mean.

So that is the impatience I'm referring to. Now, is that process going well? It is going well. Many customers are making the switch. Our products are improving. It's happening well. But we would like it to be faster. That's what I mean by that impatience.

By that Inflations.

So one other follow-up question there. You mentioned that you have several sizable new growth opportunities that could cause some increased R&D spend, and I think separately you said that each of your customer requirements are different. How much customization are you required to be doing right now to win some of these deals? And once you're doing any sort of customization, can that be added in to the broader platform and offered to other customers as well? Thanks.

So one other follow up question. There you mentioned that you have several sizable new growth opportunities that could cause some increased R&D spend and I think separately you said that each of your customer requirements are different.

Much customization are you required to be doing right now to win some of these deals and once youre doing any sort of customization can that be added in to the broader platform and offered to other customers as well.

Yes, yes, Josh no customization, what I mean, it's each customer has a slightly different set of requirements to be added to the base planning so I'm sorry, if I if.

Yeah, yeah, George, no customization. What I mean is each customer has a slightly different set of requirements to be added to the base product. So I'm sorry if I didn't say it correctly, there's no customization. There is no customization issue in this business. We are a product company and we're going to be improving our products.

If I didn't say it correctly there is no customization. There is no customization issue in this business. We are a product company and we're going to be improving our products, but the next set of product improvements that are required.

But the next set of products improvements that are required, there are different ideas that come from different customers, and they are slightly different. There's a new report, there's a new screen, there is a new integration point, all of which needs to be done to the product. It is not as if we're going to do it custom only for them.

And ideas that come from different customers and they are slightly different so theres a new report is a new screen. There is a new integration point, all if we can and should be done to the product. It does not assume we are going to do it custom only for them.

And also, all I was trying to say as with respect to R&D, there could be some minor increases. There is no major R&D expansion like we had to do a couple of years ago before the pandemic. There's no such requirement, but there are some pressures to do a little bit more so that we finish this process of helping customers to move to the newer products. But all their requirements are product requirements. There are no, it's not customization I'm talking about George.

Also all I was trying to say is with respect to R&D is there could be some minor increases there is no major R&D expansion like we had to do a.

Couple of years ago before the pandemic there is no such requirement, but there is some pressure to do a little bit more so that we finish this process of helping customers to move to the newer products, but all of their requirements of product requirements. There are no. It's not customization im talking about Josh.

Each of them require a slightly different set of requirements that have to be done, and we are working through all of them pretty quickly. They're all progressing well. Many customers are making the switch, as you see, right? Records revenue comes from all of that. But we can, you know, it is gonna reach a stage where it is gonna become much faster, and most of the requirements are already gonna be built into the product. No major R&D increase. We are not expecting anything spectacular, but some slight increases could be possible here and there.

For each of them require a slightly different set of requirements that have to be done and we are working through all of them pretty quickly. They are all progressing well many customers that are making the switch as you see rate record revenue comes from all of that but we can it is going to reach a stage, where it is going to become much faster than most of the requirements are already going to be built into the product no major R&D increase.

We are not expecting anything spectacular, but some slight increases could be possibly hilton.

Alright, I appreciate the clarity.

All right, I appreciate the clarity.

Thanks, Sean.

Thanks, Joe.

and thank you.

Thank you.

And one moment for questions.

And our next question comes from Meehaw Choksi from Northland Capital.

And our next question comes from Nihon <unk> from Northland capital.

Yep, thank you. Congratulations on the results. I heard the data point on a strong 95% customer attached to the rig.

Yes. Thank you.

Congrats on a solid set of results.

I heard the data point on a strong 95 plus percent customer attach rates and the strict definition around that I think that is a new metric you guys are.

and the strict definition around that. I think that is a new metric to you guys here. I think that is a new metric to you guys here.

Is that correct?

Is that correct.

No, it's a that's a metric we've given in the past. We've. We've we've it's consistent. We've always taken the. The definition that gave of 95% or greater.

No, that's a metric we've given in the past. We've, it's consistent. We've always taken the definition that Ramesh gave of 95% or greater. So it's a question and message. Plus, everything we vote for. you

No.

That's a metric we've given in the past.

<unk>.

It's consistent we've always taken the the definition that we're mesh gave of 95% or greater.

Got it.

And then are you able to provide some visibility to the breakout address 30% subscription growth between new customers versus upsell? first video we present this live

Okay.

And then.

Are you able to provide some visibility to that.

Take out 30% subscription subscription growth between new customers versus upsell.

I don't think we break it down that way, Nihal. The 30% subscription growth is just a direct map of M

I don't think we break it down that way.

The 30% subscription growth is just a direct math off the.

The subscription value that was there, the total subscription revenue we had last Q1 versus this Q1.

The subscription value that was the total subscription revenue we had last Q1 versus this Q1.

We have not broken that down into subscription from new customers versus current customers.

We've not broken that down into subscription from new customers versus current customers.

It's a combination of the two, but I don't think we have an exact breakup of that between the two. Both the factors contribute to that, right? So custom new customers, most of them are choosing cloud-based products anyway. So that absolutely helps the number.

A combination of the two but I don't think we have an exact breakup of that between the two both the factors contribute to that site. So custom new customers. Most of them are choosing cloud based products anyway, so that absolutely helps the number.

and current customers by new products.

And current customers by new products, so that definitely helps the number as well on.

So that definitely helps the number as well.

And many of the hotel chains and food service providers kind of big customers you have when they go to a new site, when they take our product to a new site, we don't count it as a new customer, but for all practical purposes it is, they generally tend to be subscription based. And there are many customers who are moving from our old products.

And many of the hotel chains, and foodservice providers kind of big customers that you have when they go to a new site when they take our product to a new site, we don't counted as a new customer but for all practical purposes. It is they generally tend to be subscription base and there are many customers who are moving from out of older products.

two are newer products which are more cloud-based. It's a combination of all of them together that are subscription revenue is 30% higher. We've never broken it down to each of those categories. We've never broken it down to each of those categories.

Our newer products, which are more cloud based it is a combination of all of them together that our subscription revenue was 30% higher we've never broken it down into each of those categories.

Okay, you're still...

Okay understood.

stick.

And.

and 2.

For multiple quarters, you've been talking about the strong.

Momentum you're seeing in the property management.

Market.

market.

Is that translating to increased wind rates or resulting in increased at-bats? Does that have to do with the add-on module work as well?

Is that translating to increased win rates.

Resulting in an increase to FX.

Please go ahead.

I'm going to do with the add on module work as well.

Absolutely. PMS is definitely contributing to increase wind rates. And when we talk about wind loss ratios, we talk about it across all our products. That is PMS point of sale, inventory procurement, all our products. And it's at very impressive high levels. I've been in enterprise software for three plus decades now. And I've not seen wind loss ratios like this. So now really it is a challenge of marketing and getting more at touch.

Absolutely Pms is definitely contributing to increase win rates and when we when we talk about win loss ratios, we talk about it across all our products that is pms point of sale inventory procurement, all our products and it's had very impressive high levels I've been in enterprise software for <unk> III.

Plus decades, now and I've not seen win loss ratios like this so now really it is a challenge of marketing and getting more at bats, and getting more visibility.

and getting more visibility. So to answer your PMS question, absolutely. PMS is also contributing to those wins. And PMS is playing a greater and greater role for us. Now that modernized V1, Visual One is settled down, that also helps us. So now we have three world class PMS products in our getting. So all that is definitely helping our moment of life.

Pms question, absolutely Pms is also contributing to those to those wins and Pms is playing a greater and greater role for US now that modernize V. One visual one settled down that also helps us. So now we have three world class Pms products and marketing. So all of that is definitely helping on momentum ahead.

Okay, Great and then.

Okay, great. Then, you guys have talked about in the past that you're adjusting the $5 billion ARR margin to $5 billion ARR margin. So, I'm just going to go ahead and bring up the next slide.

You guys have talked about in the past that you're adjusting the $5 billion.

Okay.

Is that inclusive of the value of the add on modules or does that not include the add on modules? If it doesn't, then...

Is that inclusive of the value of the add on modules or does that time could add on modules if it doesn't.

or what that might be worth.

Okay.

What that might be worth.

Yeah, it does include the add-on modules and of course in your previous question you had also asked about add-on modules that I missed, I'm sorry. So the PMS and to a large extent the point of sale momentum has a lot to do with the add-on modules. Like for example with our Infogenesis point of sale system the fact we have the remote ordering on-demand product is a big strength for us.

Yes. It does include the add on modules and of course in a previous question. You had also asked about add on modules that I missed them, sorry, so the pms and to a large extent the point of sale momentum has a lot to do with the add on modules like for example, with our info Genesis point of sale system. The fact, we have.

Remote auditing on demand product is a big strength for us. The fact, we have the Baie kiosk that helped with guest facing functionality as well is a big strength all of that together helps info Genesis sales as well. So similarly on the Pms side all the additional products that we have built around it the mobile check in.

The fact we have the buy kiosk that helps with guest facing functionality as well is a big strength. All that together helps Infogenesis sales as well. So similarly on the PMS side, all the additional products that we have built around it, the mobile check in, check out and the R-Guest service and all these products make our PMS a more compelling proposition. So it definitely helps. Thank you for joining us.

Checkout and the Rguest service and all these products make our pms are more compelling proposition. So it definitely helps as far as the total addressable market question.

Now as far as a total addressable market question

We think it is somewhere between three, four, five billion NEHAL. We always struggle with putting an exact number on it. All we know is we are only a hundred million ARR unit, so we have a long way to go. And the add-on modules during the last three years have definitely expanded our total addressable market, no question about it. And we have not even started selling them standalone NEHAL. At the moment, most of our sales is along with our core product. At this point, we want to etceteraerie change our customers'

It is somewhere between 345 billion the hand, we always struggle with putting an exact number on it all we notice we are only $100 million add on our company.

Units. So we have a long way to go.

The add on modules during the last three years have definitely expanded our total addressable market no question about it and we have not even started selling them standalone at the moment most of our sales is along with our core product the process of selling some of these add on modules standalone connected to.

The process of selling some of these add-on modules stand alone connected to other core products we have not even started the process yet.

Other core products, we have not even started the processes yet so definitely the $5 billion total evidence of a market you are talking about includes our add on modules.

So definitely the five billion total leverage will market you are talking about includes or add-on moumules aswell.

And it is becoming bigger as we go along.

Okay. Thank you.

Thanks, Dan.

Thank you.

And I am showing no further questions I would now like to turn the call back to <unk> CEO for closing remarks.

Yes.

Thank you Justin Thank you all for your interest and attention. Please enjoy the rest of the summer we look forward to talking to you again in about three months from now when we will report on fiscal 2023 second quarter results towards the end of the second quarter results towards this concludes today's conference call. Thank you for participating you may now disconnect.

The conference will begin shortly to raise your hand during Q&A you can dial one one.

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Good day, ladies and gentlemen, and welcome to the fiscal.

In 2023 first quarter conference call as a reminder, todays conference maybe recorded.

I'd now like to turn the conference over to Jessica Hennessy Senior director of corporate strategy and Investor Relations at <unk> you may begin.

Thank you Justin and good afternoon, everybody. Thank you for joining via telephone fiscal 2023 first quarter conference call. We will get started in just a minute with management's comments, but before doing so let me read the safe Harbor language. Some statements made on today's call will be predictive and are intended to be made as forward looking within the <unk>.

Safe Harbor protection.

<unk> Securities Litigation Reform Act of 1095, 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 effect of the Covid.

<unk> pandemic and other global economic factors on our business, our ability to continue profitable growth 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 Commission.

As a reminder, any references to record financial and business levels. During this call refer only to the time period. After jealousy made the transformation to an entirely hospitality focused software solutions company in fiscal year 2014.

With that I'd now like to turn the call over to Mr. Ramesh Srinivasan, President and Chief Executive Officer Joseph <unk>. Please go ahead.

Thank you Jess good evening.

Welcome to the fiscal 2023 first quarter earnings call.

Joining me on the call today at our Atlanta headquarters is Dave Wood <unk> CFO .

Let's call it a sales first before moving to revenue and other details.

We've had five consecutive quarters of solid good sales results measured in annual contract value terms.

We continue to have good success in the gaming casinos and rich talked about vehicles.

Business level, some hotel chains and cruise ship verticals are improving.

Sales from the managed foodservice division, especially within the higher education and healthcare areas of managed services are recovering and improving well.

Business from Europe from EMEA is okay, but not growing as much as we would like it to.

While the hospitality industry in Asia continues to struggle with various levels of Lockdowns and travel restrictions across several countries.

So the short summary would be.

Improving business environment across all avs other than in Asia.

Our sales levels have remained solid and consistent at a good level for more than a year now.

Sales win loss ratios would make any enterprise software business unit.

We are investing in sales and marketing to get ourselves more opportunities and add backs.

And we have plenty of reasons to be happy with that progress.

Having said all of that given the several sizable sales opportunities that we are currently working on.

More than a bit impatient to breakthrough to the next gear of growth.

With respect to sales teams one during Q1 fiscal 2023 April to June .

We added 22 new customers.

Three of them, including our core Pms product in their list of chosen products.

20 of the 22, new customers chose the SaaS option.

For at least one of the licensed products.

We also added 66, new properties, which did not have any of our products before but the parent company was already at our customers.

Of these 66 new properties.

More than 88 zero more than 80% of that either partially or fully subscription fee based.

In addition, there were 74 instances of selling at least one additional product to properties, which already had one of our other products.

The number of new product sales in Sensus 74 is lower than usual for us.

But wasn't well made up by bigger deal sizes and.

And seven of them involve sales of core Pms products.

So no cause for concern there.

About 66 zero, 60% of software sales this fiscal year, thus far in annual contract value terms has been subscription sales.

A few highlights among the new customers signed during the quarter.

One high Bullen Hotel UK. This beautiful 125 acre estate property in Southern England selected stay Pms, Rguest book and express mobile check in checkout to offer that gets to seamlessly arrival and arrival experience.

They also selected <unk> point of sale seat on demand and the pay module to manage their food and beverage operations better and provide exceptional experiences for their guests across the property.

The hybrid <unk> hotel, which will soon be branded and marketed as the mall is one of the properties in the portfolio of private real estate and leisure investment firm based in London.

This firm is one of the largest privately held principal investors in Europe .

<unk> private equity style investments in direct property and asset back operating businesses.

This is an important breakthrough sale for us with this larger firm, which control several properties.

But to the modern hotel the historic this historic hotel in downtown Billings, Montana selected Steve Pms, and Rguest book to manage that luxurious recently renovated rooms.

And info Genesis point of sale sales and catering and the pay module to provide that guests next level food and beverage and even experiences.

Number three the odds club London.

The iconic odds club in the heart of the May Fab District of London is an exclusive and private members only club they selected info Genesis Pos and pay for managing that F&B operations, while providing their members a unique experience they have come to expect.

Number four.

Correctional in the managed foodservice verticals. This is an interesting one.

Correctional is an all inclusive provider for correctional facilities across the U S.

<unk> selected the E Tic spelled E T as in Tom EC <unk> inventory procurement product to manage inventory needs across many of their locations to help manage that foodservice operations efficiently and cost effectively.

Hi.

<unk> pharma and in a luxury spa resort in Franklin, Tennessee.

Selected the <unk> inventory procurement product to track and manage their it can be program based on readily available ingredients from vendors and data on 325 acre farm, which supplies many of their needs.

These five sample wins should give you an idea of the wide breath of the hospitality market. We are capable of covering with the product sets we have today.

Now onto revenue.

Fiscal 2023, Q1 revenue was a record $47 $5 million.

The second consecutive record revenue quarter.

And close to 23% higher than the comparable prior year quarter.

We have started this fiscal year, well and have given ourselves a good start towards the fiscal 2023 revenue target.

Does that cutting revenue during Q1 fiscal 2023 grew to $27 $7 million driven.

Driven by a close to 33 zero driven by close to 30% year over year subscription revenue increase over the comparable prior year quarter.

Subscription revenue was 47, 4% of total recurring revenue.

Subscription revenue from add on software modules.

Most of which were developed ground up during the past few years.

Constituted about 15, one five about 15% of total subscription revenue this quarter compared to 11% during the full previous year fiscal 2022.

These innovative software modules, which are well integrated with the core point of sale Hotel property management and inventory procurement systems continue to make operations simpler for hospitality staff, reducing the need for working through complex integrations across multiple technology providers.

They have struggled with for a long time.

These add on modules also greatly help in creating wonderful experiences for their guests.

Okay.

Overall recurring revenue was about 4% sequentially higher than the previous quarter and close to 20% higher than the comparable prior year quarter.

This is the first time in our history.

Solely hospitality focused software solutions technology provider.

That we have had three consecutive quarters, where quarterly recurring revenue has increased sequentially by more than a $1 million each time.

Quarter recurring revenue has increased by about $3 7 million over the last three quarters.

To place this in context.

During the three quarters before the pandemic settled.

Between April calendar 2019 in December calendar 2019.

When our business was improving each passing quarter.

The increase in quarter recurring revenue was only $1 6 million over those three quarters.

Well less than half of the recent three quarters.

We've increased our annual recurring revenue run rate by about 25%.

Since the onset of the pandemic.

Despite all the challenges of the past two years have created for the only industry. We are focused on.

I cannot help but take a moment to be proud of the extraordinary work are supremely talented and tirelessly hardworking teams have achieved under very difficult circumstances.

We placed a bet on increasing the pace of product innovation, even during these challenging times to create a competitive gap and that crucial decision and a steadfast focus on world class customer service have worked out well for us.

Customer retention continuing to be at excellent levels is one of the contributing factors to increasing the pace of recurring revenue growth we've seen in the recent past.

The previous fiscal year 2022.

As you know was a record year with respect to customer retention.

Which we measure as a simple metric of annual recurring revenue lost.

As a percentage of current total annual recurring revenue we.

We do not take into account additional recurring revenue one from current customers, which we've been a lot of obviously b.

We do not take that into account like most software companies do to pad up their retention ratios and report numbers above 100 questions.

We also considered all lost as Sean.

Even if such loss is due to the reduction of the number of endpoints.

While the size of our outlet continue using our products.

And the content is a loss even if the site is closed.

And not lost to a competitor.

We remain ultra conservative in how we measure churn and of course, the reverse of customer retention.

<unk> lost divided by total EBITDA by mathematical definition cannot be more than 100% for us.

Last year fiscal 2022 was our best customer retention year ever.

Well north of 95%.

We have further improved from last year's level this fiscal year and that helps to grow recurring revenue at a faster rate.

Similar to the secret Chile preceding Q4 fiscal 2022 quarter product and services revenue added up to close to $20 million.

About 28% higher than the comparable prior year period.

Our best ever quarter of product and services revenue taken together was a little more than $21 million during one of the calendar of 19 quarters.

Another reference point.

During the full 2022 fiscal year, which was an overall record revenue year at close to $163 million.

Product and services revenue quarter was a little less than $64 million.

An average of close to 16, one six close to $16 million per quarter.

Third to that Bill.

Made a good start this fiscal year with close to $20 million between product and services revenue in the first quarter.

That's another good point or to improving business momentum and supports our confidence level in the annual revenue guidance range provided.

Fiscal 2023, Q1 gross margin was 60% figure of 60% at the same level as last quarter.

We expect overall gross margin percentages to remain in the high <unk> low <unk> range for the foreseeable future.

Our finance and operations teams continue to handle supply chain management well.

After ending fiscal 2022 with about six times the inventory we had at the end of fiscal 2021.

Inventory levels remain flat at the same level at the end of Q1 fiscal 2023.

We plan on streamlining our purchase levels into a more regular with them going forward and keep inventory at close to the current high levels for the foreseeable future.

As evidenced by the nine quarter run of sequential increasing quarters, we reported pre pandemic most.

Most aspects of our business are not cyclical.

The one exception to this is cash balance changes.

Due to the timing of annual maintenance invoices, tradeshows incentive bonus payments and various other reasons Q1, and Q2 quarters in each fiscal year tend to be challenging for our cash balance improvement and it tends to get balanced out during Q3 and Q4.

Q1 fiscal 'twenty three free cash flow was affected by these normal operating items as well as payments for the investments made to increase inventory levels previously mentioned.

Cash collections continue to be at record levels with the last three quarters being our top quarters for cash collections.

Free cash flow will get back to normal levels.

Approximately be equal into EBITDA less capital expenditures on an annual basis.

Adjusted EBITDA for the quarter was $6 7 million and 14, 1% of revenue. That's one 414, 1% of revenue in line with expectations provided for the first half of fiscal 2023.

GAAP net income was three <unk> was 3 million about 10 cents per diluted share our best quarter in a while with the exception of the July September calendar, 2020 quarter, which was helped by artificial onetime salary cut staff reductions and other temporary cost cutting measures.

To manage through the early pandemic base.

Share based compensation was five 2% of revenue this quarter lower than during recent quarters due to the timing of annual shared a lot with <unk>.

We expect share based compensation to increase slightly as we move through the rest of the fiscal year due to the timing of share awards.

So the swap suite merger is moving forward on plan.

We continue to make good progress with filling some of the product gaps in the <unk> product set.

And we'll be in a good position to speed up customer conversion efforts to the equivalent cloud native annulus products, a few quarters from now.

Overall.

We're pleased with the Q1 April to June quarter results.

Fiscal 2023 is progressing on plan.

The combined product recurring revenue and services backlogs have come down slightly as customers make progress catching up with pending implementations.

Total backlog is now at about 85% of peak levels.

And more than 10% higher than at the end of the comparable prior year quarter.

Product implementations at having a better more natural floor to them now and the current backlog is that a good healthy level.

Not too high as it wasn't the recent past with many delayed deliveries and projects and not too low either.

This is a good backlog level higher than during the pre pandemic Allen.

In line with previous guidance provided.

Fiscal 2023 annual revenue to be in the range of $190 million to $195 million driven by year over year subscription revenue growth of around 30% three zero, 30%.

We also continue to expect EBITDA levels for the full year to be better than 15, one five to be better than 15% of revenue.

Despite Q1, and Q2 being challenging for profitability as discussed during the last earnings call.

With that let me hand, the call over Covid deaths.

Recurring revenue was also up 19, 5% with subscription up 29, 5% over the prior year period.

Fiscal 2023 first quarter total sales have remained at consistent levels with FY 'twenty two.

New baseline moving forward.

Total recurring revenue represented 58, 3% of total net revenue for the fiscal first quarter compared to 59, 9% of total net revenue in the first quarter of fiscal 2022.

We are also happy with our continued subscription revenue growth, which grew 29, 5% during the first quarter of fiscal 2023.

Subscription revenue comprised around 47% of total quarter recurring revenue compared to about 48% of total recurring revenue in the fourth quarter of fiscal 2022.

Add on software modules comprised 15% of <unk>.

Subscription revenue in Q1 fiscal year 2023, compared to 10% in the comparative prior year quarter and they continue to be a meaningful contributor.

Subscription revenue.

Moving down the income statement.

Most profit was $28 5 million compared to $24 9 million in the first quarter of fiscal 2022.

Gross profit margin decreased to 60% compared to 64, 2% in the first quarter of fiscal 2022.

The gross profit margin decrease was primarily due to product and professional service revenue coming back into the business.

Operating income for the first quarter of $3 million and gain per diluted share of <unk> <unk>.

Compares favorably to the prior year's first quarter gain of $2 million and <unk> <unk> per diluted share.

Adjusted net income normalizing for certain noncash and nonrecurring charges of $5 2 million and adjusted diluted earnings per share of <unk> 21.

As consistent with adjusted net income of $5 2 million and diluted earnings per share of <unk> 21 in the prior year first quarter.

For the for the 2023 first quarter adjusted EBITDA was $6 7 million compared to $6 9 million in the year ago quarter.

As we discussed on our last call we expected adjusted EBITDA will be lower in the first half of the year with the first quarter coming in around 14% adjust.

Adjusted EBIT this quarter was 14, 1% of revenue.

Moving to the balance sheet and cash flow statements.

Cash and marketable securities as of June 32022 was <unk> 49, or $94 9 million compared to $97 million on March 31 2022.

The primary reason for the cash balance decrease.

Despite our profitability.

Due to timing of payments in Q1 related to bonus.

Dividends and inventory payments, which came due during the April to June timeframe.

Free cash flow in the quarter was $0 compared to $7 7 million in the prior year quarter.

As we've stated in the past free cash flow in the first half of the year is significantly.

Impacted by working capital fluctuations.

Mainly due to amortization of annual maintenance invoices.

Timing of bonus payments and accounts payable.

In closing we are pleased with our first quarter financial results and remain on track to meet our FY 'twenty three plan.

With that I'll now turn the call back over to rich.

Thank you Deb.

In summary.

As evidenced by our second consecutive record revenue quarter, we announced solidifying our business at a higher revenue level than before the pandemic.

We've added more to recurring revenue during the last three quarters than during any other three quarter stretch in our history.

The combination of product and services revenue at close to $20 million. This quarter is close to the previous record level of $21 million during one of the calendar 2019 quarters.

Despite lingering pandemic related industry challenges in a few business verticals.

Sales levels have been a solid good levels.

During the past five quarters.

We have witnessed a few prolonged and delayed technology purchase decisions during the past few months, but nothing that would cause much anxiety.

If anything the current macro economic circumstances have created a greater need for technology solutions, which help in improving operational efficiencies.

Enhance guest experiences.

And provide hospitality industry operators, the tools necessary to compete better part.

Jack and retain guests.

As consumers become more careful and calculated about their spend and the value they get for it.

We continue to invest in sales and marketing efforts to move sales levels to the next higher gear.

We are managing through the current cost pressures of increased sales marketing and professional services spend.

Good balanced decision, making optimizing between being disciplined on the one hand.

I am not missing out on driving future revenue growth on the other.

Product development spend this quarter was roughly the same level as it was pre COVID-19 close to three years ago.

While we are facing demands to increase our R&D resource strength to meet the additional innovation requirements of several sizable new growth opportunities.

We remain confident no major increase in product development spend will be required like during previous years.

Some measured increases may be required during the short term, but we do expect product development as a percentage of revenue to continue declining over the medium and long term.

So in conclusion, we are pleased with our overall business focus.

Have every reason to be bullish about our future.

With that Justin let's open up the call for questions.

Thank you as a reminder to ask a question you will need to press star one one on your telephone please standby will be compile the Q&A roster.

One moment for questions.

And our first question comes from Matt Van Vliet from <unk>. Your line is now open.

Hey, good afternoon, Thanks for taking my question.

I guess first for mesh curious what youre hearing from customers.

As they look toward the back half of the calendar year here.

With sort of the cross currents were seeing in the economy, obviously the business travel is starting to come back a little bit.

Multiyear plans and some are bigger projects.

As they balance the return of some travel but concerns that things might slow.

Yes, Hi, Matt.

So what is the one thing to keep in mind, Matt as I walk through my answer is we only work with medium and higher level.

Hotel properties in results unchanged.

Managed with service providers and so on.

So those are the customers, who we deal with.

We are seeing very good visibility and they have good clarity on bookings.

Going into the summer months and beyond.

So they seem quite confident to us, but then again.

Customer base does not represent the entire hospitality customer base, we are dealing with the medium to the higher level customers and they are not feeling.

If any there is no anxiety and then they are continuing to make good decisions.

And.

According to what we are hearing all travel is coming back quite well.

And the headlines about inflation and possible recession, and all that don't seem to be affecting them much so far as far as we can tell.

They are continuing to make big multiyear technology chain multiyear.

Relevant technology changes there are some pretty big opportunities. We are working on now where customers now are under pressure.

That they need better technology now.

Because that gets have higher expectations of technology and for driving operational efficiencies working through stock shortages. They just need better products. They cannot survive with the products. They have had for the last 10 20 years.

But our main challenge in terms of driving greater revenue growth is how quickly can we facilitate the transfer from the oil to the new.

Because even though the newest technology has a lot of additional features and additional a help for them.

There are still some particulars of the oil products that they have used that have to be built into the new products in each of their requirements are different. So if anything that is the challenge. So the quick summary, yes. We are looking we are working with customers.

Who are looking at long term technology decisions.

Alright, that's very helpful and then with the fairly recent launch of the cloud base.

EMS products widely available.

Highlighted a couple of new wins.

Both stay Pms and for Genesis.

Just curious in terms of what the feedback early on from some of those customers customers have been how is that helping with new sales cycles as other companies, maybe you didn't want to be.

The earliest adopters, but are willing to jump on that product as they see it scale and work effectively.

Some larger.

Deployments. Thanks.

But theyre all settled down well and they are beginning to work well now and with that we have we have plans to expand the sales of the one wild state continues to do well as well as stays in the front end of many big opportunities. We are working on now.

The Pms and additional modules, if you add the core pms and the additional modules into one bucket Q1, FY 'twenty three is the best quarter, we ever had but that number is still not big enough for us we still have to grow it a lot more and so far so good we are making good progress the new modules modernized we won.

<unk> is settling down well stay continues to improve so we are placing ourselves in a good position to keep pushing the CMS I think every quarter now will be a new record with respect to both pms sales and Pms revenue is progressing well, but it is going to reach that flywheel effect, which is what we are impatient for many it really drives growth.

The next year that is the state that has not come but steady progress is definitely happening.

Alright, great. Thank you for taking my questions.

Thank you Matt.

Thank you.

And one moment for questions.

And our next question comes from George Sutton from Craig Hallum. Your line is now open.

Thank you Ramesh my questions are all around the pipe loans so.

There is some impatience relative to breaking through to some of the pipeline opportunities I wondered if you could give some.

Additional perspective, there I think it relates to the prolonged and delayed purchases.

Is there I think it relates to the prolonged and delayed purchase decisions. You mentioned some have made but can you give us a little bit more of a picture into that.

Yes, yes sure.

So it all comes down to George if I can just summarize it down to one thing.

It is the time it takes to move from the all to the new.

Right. If you look at cost pressures on our business. The main cost pressures we face in this business.

Is we have to maintain and continue improving all the old versions of the products.

And also continue to improve the newer versions of the products, it's almost like maintaining.

Two sets of products.

Until the customers more to the newer products not what happened and what we refer to as a little bit of in patients is that the customers love the new products. They like the fact it is for the first time, a hospitality window is actually providing end to end technology, we're starting from Derek channel booking engine all the way to the end of the restaurant.

Now you can meet.

Most of you have needs through one vendor they love that.

Whether it is replacing a competitive product.

It is replacing our own oil product with the new one whether it is replacing the <unk> III products without me one it all comes down to the same thing.

So im sitting we are now moving this industry from the oil to the new debt at many well established vendors like you know that I've been doing the same product for a decade two decades cut.

Customers want to replace those products, they're talking to us and bigger and bigger numbers, but there are a few things to get done before they are willing to make the switch. So that is the impatient I'm, referring to now is that process going well. It is going well many customers are making the switch our products are improving its happening well, but we would like it to be faster, that's what I mean.

By that Inflations.

So one other follow up question. There you mentioned that you have several sizable new growth opportunities that could cause some increased R&D spending I think separately you said that each of your customer requirements are different.

Yes, yes, Josh no customization, what I mean, it's each customer has a slightly different set of requirements to be added to the base product. So I'm sorry, if I if.

Tenant ideas that come from different customers or they are slightly different there's a new report, there's a new screen or there is a new integration point, all of which needs to be done to the product. It does not assets, we're going to do it custom only for them.

And also all I was trying to say is with respect to R&D is there could be some minor increases there is no major R&D expansion like we had to do a.

Couple of years ago before the pandemic there is no such requirement, but there are some pressures to do a little bit more so that we finish this process of helping customers to more to the newer products, but all of the requirements of product requirements. There are no its hard customization im talking about Josh.

Each of them require a slightly different set of requirements that have to be done and we are working through all of them pretty quickly. There are all progressing well many customers that are making the switch as you see right record revenue comes from all of that but we can it is going to reach a stage, where it is going to become much faster than most of the requirements are already going to be built into the product no major R&D increase.

So we are not expecting anything spectacular, but some slight increases could be possibly hilton.

Alright, I appreciate the clarity.

Thanks, Joe.

Thank you.

And one moment for questions.

And our next question comes from Nihon <unk> from Northland capital.

Yes. Thank you.

Congrats on a solid set of results.

I heard the data point on a strong 95 plus percent customer attach rates and the strict definition around that I think that is a new metric you guys are.

Is that correct.

No.

That's a metric we've given in the past.

<unk>.

It's consistent we've always taken the the definition that we're mesh gave of 95% or greater.

Got it.

Okay.

And then.

Are you able to provide some visibility.

Take out 30% subscription subscription growth between new customers versus upsell.

I don't think we break it down that way.

The 30% substitution, but growth is a direct math off the.

The subscription value that was the total subscription revenue we had last Q1 versus this Q1.

We've not broken that down into subscription from new customers versus current customers.

And current customers by new products, so that definitely helps the number as well on.

And many of the hotel chains, and foodservice providers kind of big customers that you have when they go to a new site when they take our product to a new site, we don't count it as a new customer but for all practical purposes. It is they generally tend to be subscription based and there are many customers who are moving from out of older products.

Our newer products, which have more cloud based it's a combination of all of them together that our subscription revenue was 30% higher we've never broken it down into each of those categories.

Okay understood.

And.

For multiple quarters, you've been talking about the strong.

Momentum you're seeing in the property management.

Market.

Is that translating to increased win rates.

The resulting increased at that.

Is that going to do with the add on module work as well.

Absolutely Pms is definitely contributing to increase win rates and when the when we talk about win loss ratios, we talk about it across all our products that is pms point of sale inventory procurement, all our products and it's had very impressive high levels I've been in enterprise software for three.

Decades, now and I've not seen win loss ratios like this so now really it is a challenge of marketing and getting more at bats, and getting more visibility.

Pms question, absolutely Pms is also contributing to those to those wins and Pms is playing a greater and greater role for US now that modernize V. One visual one settled down that also helps us. So now we have three world class Pms products and allocating so all of that is definitely helping our momentum.

Okay, Great and then.

You guys have talked about in the past that you're addressing a $5 billion.

Okay.

Is that inclusive of the value of the add on modules or does that include the add on modules if it doesn't.

Okay.

What that might be worth.

Yes. It does include the add on modules and of course in a previous question. You had also asked about add on modules that I missed in Saudi so.

Pms and to a large extent the point of sale momentum has a lot to do with the add on modules like for example, with our info Genesis point of sale system. The fact, we have the remote auditing on demand product is a big strength for us. The fact, we have the baie kiosk that helped with guest facing functionality as well.

A big strength all of that together helps info Genesis sales as well. So similarly on the Pms side all the additional products that we have built around it the mobile check in checkout and the Rguest service and all these products may cause pms are more compelling proposition. So it definitely helps now as far as a total addressable market.

Question, we think it is somewhere between 345 billion the Highland we always struggle with putting an exact number on it all we notice we are only $100 million add on of the company.

So we have a long way to go.

Other core products, we have not even started their processes, yet so definitely the $5 billion total evidence of market Youre talking about includes our add on modules.

And it is becoming bigger as we go along.

Okay. Thank you.

Thanks, Dan.

Thank you.

And I am showing no further questions I would now like to turn the call back to <unk> CEO for closing remarks.

Yes.

Q1 2023 Agilysys Inc Earnings Call

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